Document:

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                              AMENDED AND RESTATED

                                    INDENTURE

                             Dated as of May 9, 2003

                                      Among

                           CONTINENTAL AIRLINES, INC.

                            WILMINGTON TRUST COMPANY,
                                   as Trustee

                      MORGAN STANLEY CAPITAL SERVICES INC.,
                              as Liquidity Provider

                                       and

                           MBIA INSURANCE CORPORATION,
                               as Policy Provider

                                  $300,000,000

                      Floating Rate Secured Notes due 2007

                                       and

                Floating Rate Secured Subordinated Notes due 2007

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                                TABLE OF CONTENTS

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                                   ARTICLE 1.

                      DEFINITIONS AND RULES OF CONSTRUCTION

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

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

                                   ARTICLE 2.

                                 THE SECURITIES

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

Section 2.2   Restrictive Legends..............................................4

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

Section 2.4   Transfer and Exchange............................................6

Section 2.5   Book-Entry Provisions for Restricted Global Securities and
              Regulation S Global Securities...................................7

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

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

Section 2.8   Registrar and Paying Agent......................................12

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

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

Section 2.11  Noteholder Lists................................................14

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

Section 2.13  Treasury Notes..................................................15

Section 2.14  Temporary Notes.................................................15

Section 2.15  Cancellation....................................................16

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

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

                                   ARTICLE 2A.

                           THE SUBORDINATED SECURITIES

Section 2A.1  Title, Form, Denomination and Execution of Subordinated
              Securities......................................................17

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Section 2A.2  Restrictive Legends.............................................19

Section 2A.3  Authentication of Subordinated Securities.......................20

Section 2A.4  Transfer and Exchange...........................................20

Section 2A.5  Book-Entry Provisions for Restricted Global Subordinated
              Securities and Regulation S Global Subordinated Securities......21

Section 2A.6  Special Transfer Provisions.....................................23

Section 2A.7  Terms of Subordinated Securities................................26

                                   ARTICLE 3.

       LIQUIDITY PROVIDER AND POLICY PROVIDER; PRIORITY OF DISTRIBUTIONS

Section 3.1   Written Notice of Distribution..................................27

Section 3.2   Priority of Distributions; Subordination........................28

Section 3.3   Other Payments..................................................30

Section 3.4   Payments to Liquidity Provider and Policy Provider..............31

Section 3.5   Liquidity Facility..............................................31

Section 3.6   The Policy......................................................38

Section 3.7   Designated Representatives......................................42

Section 3.8   Controlling Party...............................................43

Section 3.9   Company's Payment Obligations...................................44

Section 3.10  Execution of Support Documents..................................44

Section 3.11  Right of Subordinated Securityholders to Direct Policy
              Provider........................................................44

                                   ARTICLE 4.

                                   REDEMPTIONS

Section 4.1   Optional Redemption.............................................46

Section 4.2   Redemption Notice to Trustee....................................46

Section 4.3   Selection of Notes to be Redeemed...............................47

Section 4.4   Notice of Redemption............................................47

Section 4.5   Effect of Notice of Redemption..................................48

Section 4.6   Deposit of Redemption Price.....................................48

Section 4.7   Notes Redeemed in Part..........................................48

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                                   ARTICLE 5.

                                    COVENANTS

Section 5.1   Payment of Notes................................................48

Section 5.2   Maintenance of Office or Agency.................................49

Section 5.3   Corporate Existence.............................................49

Section 5.4   Company Not to Consolidate, Merge, Convey or Transfer Except
              Under Certain Conditions........................................50

Section 5.5   Reports by the Company..........................................51

                                   ARTICLE 6.

                                 INDEMNIFICATION

Section 6.1   General Indemnity...............................................51

Section 6.2   Separate Agreement..............................................54

Section 6.3   Notice..........................................................54

Section 6.4   Notice of Proceedings; Defense of Claims; Limitations...........54

Section 6.5   Information.....................................................55

Section 6.6   Subrogation; Further Assurances.................................55

Section 6.7   Refunds.........................................................56

                                   ARTICLE 7.

                              DEFAULT AND REMEDIES

Section 7.1   Events of Default...............................................56

Section 7.2   Acceleration....................................................57

Section 7.3   Other Remedies..................................................58

Section 7.4   Waiver of Past Defaults.........................................58

Section 7.5   Control of Remedies.............................................59

Section 7.6   Limitation on Suits.............................................59

Section 7.7   Rights of Holders to Receive Payment............................60

Section 7.8   Collection Suit by Trustee......................................60

Section 7.9   Trustee May File Proofs of Claim................................60

Section 7.10  Application of Proceeds.........................................61

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Section 7.11  Undertaking for Costs...........................................61

Section 7.12  Restoration of Rights on Abandonment of Proceedings.............61

Section 7.13  Powers and Remedies Cumulative; Delay or Omission Not Waiver
              of Default......................................................62

Section 7.14  Certain Limits on Remedies by Policy Provider...................62

                                   ARTICLE 8.

                                     TRUSTEE

Section 8.1   Duties of Trustee...............................................63

Section 8.2   Rights of Trustee...............................................64

Section 8.3   Individual Rights of Trustee....................................64

Section 8.4   Trustee's Disclaimer............................................64

Section 8.5   Notice of Defaults..............................................65

Section 8.6   Reports by Trustee to Holders...................................65

Section 8.7   Compensation and Indemnity......................................65

Section 8.8   Replacement of Trustee..........................................66

Section 8.9   Successor Trustee by Merger, etc................................67

Section 8.10  Eligibility; Disqualification...................................67

Section 8.11  Preferential Collection of Claims Against Company...............67

Section 8.12  Other Capacities................................................67

Section 8.13  Trust Accounts..................................................68

Section 8.14  Deposits to the Collection Account..............................69

Section 8.15  Certain Payments................................................69

                                   ARTICLE 9.

                             DISCHARGE OF INDENTURE

Section 9.1   Discharge of Liability on Notes.................................69

Section 9.2   Application of Trust Money......................................70

Section 9.3   Repayment to Company............................................70

Section 9.4   Reinstatement...................................................70

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                                   ARTICLE 10.

                       AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 10.1  Without Consent of the Controlling Party or Holders.............71

Section 10.2  With Consent of the Controlling Party, Liquidity Provider
              and Holders.....................................................72

Section 10.3  Compliance with Trust Indenture Act.............................74

Section 10.4  Revocation and Effect of Consents...............................74

Section 10.5  Notation on or Exchange of Notes................................75

Section 10.6  Trustee to Sign Amendments, etc.................................75

Section 10.7  Effect of Supplement and/or Amendment...........................75

                                   ARTICLE 11.

                                    SECURITY

Section 11.1  Other Operative Documents.......................................75

Section 11.2  Opinions, Certificates and Appraisals...........................76

Section 11.3  Authorization of Actions to be Taken by the Trustee Under
              the Operative Documents.........................................77

Section 11.4  Authorization of Receipt of Funds by the Trustee Under the
              Operative Documents and the Support Documents...................77

Section 11.5  Agreement as to Fair Market Value...............................77

                                   ARTICLE 12.

                                  MISCELLANEOUS

Section 12.1  Conflict with Trust Indenture Act of 1939.......................78

Section 12.2  Notices; Waivers................................................78

Section 12.3  Communications By Holders With Other Holders....................80

Section 12.4  Certificate and Opinion as to Conditions Precedent..............80

Section 12.5  Statements Required In Certificate or Opinion...................80

Section 12.6  Rules By Trustee, Paying Agent, Registrar.......................81

Section 12.7  Effect of Headings..............................................81

Section 12.8  Governing Law...................................................81

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Section 12.9  Quiet Enjoyment.................................................82

Section 12.10 No Recourse Against Others......................................82

Section 12.11 Benefits of Indenture and the Securities Restricted.............82

Section 12.12 Successors and Assigns..........................................82

Section 12.13 Counterpart Originals...........................................82

Section 12.14 Severability....................................................82

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

<PAGE>

     AMENDED AND RESTATED  INDENTURE dated as of May 9, 2003, among  CONTINENTAL
AIRLINES,  INC.,  a  Delaware  corporation  (the  "COMPANY"),  WILMINGTON  TRUST
COMPANY, a Delaware banking corporation  ("WTC"), not in its individual capacity
but solely as Trustee (the  "TRUSTEE"),  MORGAN STANLEY CAPITAL SERVICES INC., a
Delaware  corporation  ("MSCS"),  as  Liquidity  Provider,  and  MBIA  INSURANCE
CORPORATION,  a New York insurance company, as Policy Provider, which amends and
restates the Indenture, dated as of December 6, 2002 (the "ORIGINAL INDENTURE"),
among the Company, the Trustee, the Liquidity Provider and the Policy Provider.

     Pursuant to the Original Indenture,  the Company issued,  authenticated and
delivered  the  Initial  Securities.  Now,  the  Company  has  elected to issue,
authenticate and deliver a series of Subordinated Securities as permitted by the
Original  Indenture,  and in connection  with such issuance,  the parties hereto
wish to amend and  restate  the  Original  Indenture  as set forth  herein.  The
Company has obtained  Ratings  Confirmation  with  respect to such  issuance and
amendment.

     Each party  agrees as follows for the benefit of the other  parties and for
the equal and ratable  benefit of the Holders of the Notes  (except as otherwise
provided herein).

                                   ARTICLE 1.

                      DEFINITIONS AND RULES OF CONSTRUCTION

     Section 1.1 DEFINITIONS.

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

     Section 1.2 RULES OF CONSTRUCTION.

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

                                   ARTICLE 2.

                                 THE SECURITIES

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

     (a) The Initial  Securities  shall be known as the "INITIAL  FLOATING  RATE
SECURED  NOTES  DUE  2007"  and the  Exchange  Securities  shall be known as the
"EXCHANGE  FLOATING RATE SECURED NOTES DUE 2007",  in each case, of the Company.
Each Security shall be  substantially in the form set forth as Exhibit A hereto,
with such appropriate insertions, omissions,  substitutions and other variations

<PAGE>

as are  required  or  permitted  by this  Indenture  and may have such  letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any  securities  exchange
or as may,  consistently  herewith, be determined by the Company or the Officers
executing  the  Securities,  as  evidenced  by the  Company's  or the  Officers'
execution of the Securities.

     (b) The Initial  Securities  shall be issued only in fully  registered form
without coupons and only in denominations  of $100,000 or integral  multiples of
$1,000 in excess thereof,  except that one Security may be issued in a different
denomination.  The Exchange Securities will be issued in denominations of $1,000
or  integral  multiples  thereof,  except that one  Security  may be issued in a
different   denomination.   Each  Security  shall  be  dated  the  date  of  its
authentication.  The  aggregate  principal  amount  of  Securities  which may be
authenticated  and  delivered  under this  Indenture is limited to  $200,000,000
except for Securities  authenticated and delivered upon registration of transfer
of, or in exchange  for, or in lieu of,  other  Securities  pursuant to Sections
2.4, 2.6, 2.12, 2.14 or 10.5. The issuance of the Securities  hereunder shall be
collectively considered a single extension of credit to the Company.

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

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

<PAGE>

Security may from time to time be increased or decreased by adjustments  made on
the records of the Trustee,  as custodian for DTC for such Global  Security,  as
provided in Section 2.6 hereof,  which adjustments shall be conclusive as to the
aggregate  principal amount of any such Global Security.  The Restricted  Global
Security and Regulation S Global Security are sometimes collectively referred to
herein as the "GLOBAL SECURITIES".

     (e) Initial  Securities  offered and sold to any  Institutional  Accredited
Investor that is not a QIB in a transaction  exempt from registration  under the
Securities  Act (and other than as described in Section  2.1(d)) shall be issued
substantially  in the form of Exhibit A hereto in definitive,  fully  registered
form without interest  coupons with such applicable  legends as are provided for
in Section 2.2 (the  "RESTRICTED  DEFINITIVE  SECURITIES")  duly executed by the
Company and duly  authenticated  by the Trustee as herein  provided.  Securities
issued  pursuant to Section  2.5(b) in exchange for  interests in a Regulation S
Global  Security shall be issued in definitive,  fully  registered  form without
interest  coupons (the  "REGULATION S DEFINITIVE  SECURITIES").  The  Restricted
Definitive  Securities and the Regulation S Definitive  Securities are sometimes
collectively referred to herein as the "DEFINITIVE SECURITIES".

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

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

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

<PAGE>

     Section 2.2 RESTRICTIVE LEGENDS.

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

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

<PAGE>

     REFUSE TO REGISTER  ANY  TRANSFER  OF THIS  SECURITY  IN  VIOLATION  OF THE
     FOREGOING RESTRICTIONS."

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

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

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

     Section 2.3 AUTHENTICATION OF SECURITIES.

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

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

     (b) No Security shall be entitled to any benefit under this Indenture or be
valid or  obligatory  for any purpose,  unless there  appears on such Security a
certificate  of  authentication  substantially  in the form  provided for herein

<PAGE>

executed  by  the  Trustee  by the  manual  signature  of one of its  authorized
signatories,  and  such  certificate  upon  any  Security  shall  be  conclusive
evidence, and the only evidence,  that such Security has been duly authenticated
and delivered hereunder.

     Section 2.4 TRANSFER AND EXCHANGE.

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

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

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

<PAGE>

registration  of  transfer  or  exchange  shall  be  canceled  and  subsequently
destroyed by the Trustee.

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

     (a) Members of, or  participants  in, DTC ("AGENT  MEMBERS")  shall have no
rights under this  Indenture  with respect to any Global  Security held on their
behalf by DTC,  or the Trustee as its  custodian,  and DTC may be treated by the
Company,  the Trustee and any agent of the Trustee as the absolute owner of such
Global  Security for all purposes  whatsoever.  Notwithstanding  the  foregoing,
nothing  herein  shall  prevent  the  Company,  the  Trustee or any agent of the
Trustee  from  giving  effect  to any  written  certification,  proxy  or  other
authorization  furnished  by DTC or shall  impair,  as between DTC and its Agent
Members,  the  operation of customary  practices  governing  the exercise of the
rights of a holder of any  Security.  Upon the issuance of any Global  Security,
the  Registrar or its duly  appointed  agent shall record DTC as the  registered
holder of such Global Security.

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

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

     (d) In connection with the transfer of an entire Restricted Global Security
or an entire  Regulation  S Global  Security to the  beneficial  owners  thereof
pursuant to paragraph (b) of this Section 2.5, such  Restricted  Global Security
or  Regulation  S Global  Security,  as the case may be,  shall be  deemed to be
surrendered to the Trustee for cancellation,  and the Company shall execute, and

<PAGE>

the Trustee shall  authenticate,  to each beneficial  owner identified by DTC in
exchange  for its  beneficial  interest in such  Restricted  Global  Security or
Regulation S Global Security,  as the case may be, an equal aggregate  principal
amount  of   Restricted   Definitive   Securities  or  Regulation  S  Definitive
Securities,  as the  case  may  be,  of  authorized  denominations.  None of the
Company, the Registrar,  the Paying Agent or the Trustee shall be liable for any
delay in delivery of such  instructions and may conclusively  rely on, and shall
be protected in relying on, such registration instructions. Upon the issuance of
Definitive Securities, the Company and the Trustee shall recognize the Person in
whose  name  the  Definitive  Securities  are  registered  in  the  Register  as
Securityholders hereunder.

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

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

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

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

     Section 2.6 SPECIAL TRANSFER PROVISIONS.

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

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

          (i) The Registrar shall register the transfer of any Security, whether
     or not bearing the Restricted Legend, only if (x) the requested transfer is
     at least two years after the later of the (A) Closing Date and (B) the last
     date on which such Security was held by the Company or any affiliate of the
     Company  or (y) the  proposed  transferor  is an Initial  Purchaser  who is
     transferring  Securities  purchased  under the Purchase  Agreement  and the
     proposed  transferee has delivered to the Registrar a letter  substantially
     in the form of Exhibit C hereto and the aggregate  principal  amount of the
     Securities  being  transferred is at least $100,000.  Except as provided in
     the foregoing  sentence,  the Registrar  shall not register the transfer of

<PAGE>

     any Security to any Institutional Accredited Investor that is neither a QIB
     nor a Non-U.S. Person.

          (ii)  If  the  proposed  transferor  is  an  Agent  Member  holding  a
     beneficial  interest in a Restricted  Global Security,  upon receipt by the
     Registrar of (x) the documents,  if any,  required by paragraph (i) and (y)
     instructions given in accordance with DTC's and the Registrar's procedures,
     the  Registrar  shall  reflect  on its  books and  records  the date of the
     transfer and a decrease in the principal  amount of such Restricted  Global
     Security  in an amount  equal to the  principal  amount  of the  beneficial
     interest in such  Restricted  Global  Security to be  transferred,  and the
     Company shall execute and the Trustee shall authenticate and deliver to the
     transferor  or  at  its  direction,   one  or  more  Restricted  Definitive
     Securities of like tenor and amount.

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

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

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

     (c)  TRANSFERS  OF  INTERESTS  IN  THE  REGULATION  S  GLOBAL  SECURITY  OR
REGULATION S  DEFINITIVE  SECURITIES.  After the  expiration  of the  Restricted

<PAGE>

Period, the Registrar shall register any transfer of interests in any Regulation
S Global  Security or  Regulation S Definitive  Security  without  requiring any
additional  certification.  Until  the  expiration  of  the  Restricted  Period,
interests  in the  Regulation S Global  Security may only be held through  Agent
Members acting for and on behalf of Euroclear and Clearstream.

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

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

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

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

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

     (f) GENERAL.  By acceptance of any Security bearing the Restricted  Legend,
each Holder of such Security  acknowledges  the restrictions on transfer of such
Security set forth in such Restricted Legend and otherwise in this Indenture and

<PAGE>

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

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

     Section 2.7 TERMS OF SECURITIES.

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

<PAGE>

     Section 2.8 REGISTRAR AND PAYING AGENT.

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

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

     The Company initially appoints WTC as Registrar and Paying Agent.

     Section 2.9 PAYING AGENT TO HOLD PAYMENTS IN TRUST.

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

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

<PAGE>

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

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

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

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

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

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

     Section 2.10 RECORD DATES.

     The Person in whose name any Note is registered at the close of business on
any Record Date with respect to any  Interest  Payment Date shall be entitled to
receive  the  interest  payable  on such  Interest  Payment  Date to the  extent
provided by such Note,  except if and to the extent the Company shall default in
the payment of the interest due on such  Interest  Payment  Date,  in which case
defaulted  interest  shall be paid to the Person in whose  name the  Outstanding
Note is registered at the close of business on the subsequent record date (which
shall be not less than five (5)  Business  Days  prior to the date of payment of
such defaulted interest)  established by notice given by mail by or on behalf of
the Company to the  Holders of Notes of the Series  suffering  such  default not

<PAGE>

less than fifteen (15) days  preceding such  subsequent  record date (a "SPECIAL
RECORD DATE") pursuant to Section 2.16.

     Section 2.11 NOTEHOLDER LISTS.

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

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

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

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

     Every  substitute Note issued pursuant to the provisions of this Section by
virtue of the fact that any Note is apparently  destroyed,  lost or stolen shall
constitute an additional contractual  obligation of the Company,  whether or not
the apparently  destroyed,  lost or stolen Note shall be at any time enforceable
by anyone  and shall be  entitled  to all the  benefits  of (but  shall  also be
subject to all the  limitations of rights set forth in) this  Indenture  equally

<PAGE>

and  proportionately  with  any and all  other  Notes of the  same  Series  duly
authenticated and delivered hereunder.  Every substitute Note issued pursuant to
the  provisions  of this  Section  2.12 by  virtue  of the fact that any Note is
mutilated or defaced shall  constitute an additional  contractual  obligation of
the  Company  and shall be  entitled  to all the  benefits of (but shall also be
subject to all the  limitations of rights set forth in) this  Indenture  equally
and  proportionately  with  any and all  other  Notes of the  same  Series  duly
authenticated  and delivered  hereunder.  All Securities shall be held and owned
upon the express  condition that, to the extent  permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of mutilated
or defaced or apparently destroyed, lost or stolen Securities and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter  enacted to the contrary with respect to the replacement or payment
of negotiable instruments or other securities without their surrender.

     Section 2.13 TREASURY NOTES.

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

     Section 2.14 TEMPORARY NOTES.

     Until  definitive  Notes of any Series are ready for delivery,  the Company
may  prepare,  and,  upon  written  order  of the  Company,  the  Trustee  shall
authenticate,  temporary Notes of such Series, in any authorized  denominations.
Temporary  Notes  of any  Series  shall  be  substantially  of the  tenor of the
definitive  Notes of such  Series in lieu of which  they are issued but may have
variations that the Company considers  appropriate for temporary Notes.  Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate

<PAGE>

and  deliver  definitive  Notes  in  exchange  for  temporary  Notes.  Until  so
exchanged, the temporary Notes shall be entitled to the same benefits under this
Indenture as definitive Notes of the same Series.

     Section 2.15 CANCELLATION.

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

     Section 2.16 DEFAULTED INTEREST.

     If any payment of interest on the Notes due on any  Interest  Payment  Date
becomes an Overdue  Scheduled  Payment,  the  Company  shall pay such  defaulted
interest,  plus interest on the defaulted interest,  at the Payment Due Rate (in
the case of the Securities) or the Subordinated Payment Due Rate (in the case of
the  Subordinated  Securities)  to the  extent  permitted  by law and the  terms
thereof, to the persons who are Noteholders of the Series suffering such default
on a subsequent  Special  Record Date.  The Company shall fix the Special Record
Date and payment date. If there is an Overdue  Scheduled Payment with respect to
both  Series  of  Notes  attributable  to  interest  originally  due on the same
Interest  Payment Date, the Special  Record Date and payment date  applicable to
each Series  shall be the same.  At least  fifteen  (15) days before the Special
Record Date, the Company shall mail to each  Noteholder of the Series  suffering
such default a notice that states the Special  Record Date, the payment date and
the amount of defaulted interest to be paid.

     Section 2.17 CUSIP NUMBERS.

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

<PAGE>

                                   ARTICLE 2A.

                           THE SUBORDINATED SECURITIES

     Section  2A.1 TITLE,  FORM,  DENOMINATION  AND  EXECUTION  OF  SUBORDINATED
SECURITIES.

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

     (b) The  Initial  Subordinated  Securities  shall be  issued  only in fully
registered  form  without  coupons  and only in  denominations  of  $100,000  or
integral  multiples of $1,000 in excess  thereof,  except that one  Subordinated
Security may be issued in a different  denomination.  The Exchange  Subordinated
Securities  will be issued in  denominations  of  $1,000 or  integral  multiples
thereof,  except  that one  Subordinated  Security  may be issued in a different
denomination.  Each  Subordinated  Security  shall  be  dated  the  date  of its
authentication.  The aggregate principal amount of Subordinated Securities which
may  be  authenticated   and  delivered  under  this  Indenture  is  limited  to
$100,000,000 except for Subordinated Securities authenticated and delivered upon
registration  of  transfer  of,  or in  exchange  for,  or  in  lieu  of,  other
Subordinated Securities pursuant to Sections 2.12, 2.14, 2A.4, 2A.6 or 10.5. The
issuance  of  the  Subordinated   Securities  hereunder  shall  be  collectively
considered a single extension of credit to the Company.

     (c) The  Initial  Subordinated  Securities  offered and sold in reliance on
Rule 144A shall be  issued,  and will only be  available,  in the form of one or
more  global  Subordinated  Securities  substantially  in the form of  Exhibit D
hereto with such applicable legends as are provided for in Section 2A.2 (each, a
"RESTRICTED GLOBAL SUBORDINATED SECURITY") duly executed by the Company and duly
authenticated  by  the  Trustee  as  herein  provided.   The  Restricted  Global
Subordinated  Securities  shall be in definitive,  fully registered form without
interest  coupons and be registered  in the name of DTC and  deposited  with the
Trustee,  at its  Corporate  Trust  office,  as custodian for DTC. The aggregate
principal amount of any Restricted Global Subordinated Security may from time to
time be  increased  or  decreased  by  adjustments  made on the  records  of the
Trustee, as custodian for DTC for such Restricted Global Subordinated  Security,
as provided in Section 2A.6 hereof,  which adjustments shall be conclusive as to
the aggregate principal amount of any such Global Subordinated Security.

<PAGE>

     (d) The Initial Subordinated Securities offered and sold outside the United
States in reliance on Regulation S shall be issued,  and will only be available,
in the form of one or more global Subordinated  Securities  substantially in the
form of Exhibit D hereto (each, a "REGULATION S GLOBAL  SUBORDINATED  SECURITY")
duly  executed by the Company  and duly  authenticated  by the Trustee as herein
provided.   The  Regulation  S  Global  Subordinated   Securities  shall  be  in
definitive,  fully registered form without interest coupons and be registered in
the name of DTC and deposited with the Trustee,  at its Corporate  Trust Office,
as custodian for DTC, for credit  initially and during the Restricted  Period to
the respective accounts of beneficial owners of such Subordinated Securities (or
to such other  accounts as they may direct) at Morgan  Guaranty Trust Company of
New York,  Brussels  office,  as operator of Euroclear or  Clearstream.  As used
herein,  the term "RESTRICTED  PERIOD",  with respect to the Regulation S Global
Subordinated  Securities offered and sold in reliance on Regulation S, means the
period of 40  consecutive  days  beginning on and including the later of (i) the
day on which the Subordinated Securities are first offered to persons other than
distributors  (as defined in  Regulation S) in reliance on Regulation S and (ii)
the Subordinated  Closing Date. The aggregate principal amount of any Regulation
S Global  Subordinated  Security may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for DTC for such
Global  Subordinated  Security,  as  provided  in  Section  2A.6  hereof,  which
adjustments shall be conclusive as to the aggregate principal amount of any such
Global Subordinated  Security.  The Restricted Global Subordinated  Security and
Regulation S Global Subordinated Security are sometimes collectively referred to
herein as the "GLOBAL SUBORDINATED SECURITIES".

     (e) Initial  Subordinated  Securities offered and sold to any Institutional
Accredited  Investor that is not a QIB in a transaction exempt from registration
under the Securities Act (and other than as described in Section  2A.1(d)) shall
be issued  substantially  in the form of Exhibit D hereto in  definitive,  fully
registered form without  interest  coupons with such  applicable  legends as are
provided  for  in  Section  2A.2  (the   "RESTRICTED   DEFINITIVE   SUBORDINATED
SECURITIES") duly executed by the Company and duly  authenticated by the Trustee
as herein provided.  Subordinated  Securities issued pursuant to Section 2A.5(b)
in exchange for interests in a Regulation S Global  Subordinated  Security shall
be issued in definitive,  fully  registered form without  interest  coupons (the
"REGULATION S DEFINITIVE  SUBORDINATED  SECURITIES").  The Restricted Definitive
Subordinated  Securities and the Regulation S Definitive Subordinated Securities
are sometimes  collectively  referred to herein as the "DEFINITIVE  SUBORDINATED
SECURITIES".

     (f) The Exchange Subordinated Securities shall be issued in the form of one
or more global  Subordinated  Securities  substantially in the form of Exhibit D
hereto (each, a "GLOBAL EXCHANGE  SUBORDINATED  SECURITY"),  except that (i) the
Restricted Legend shall be omitted and (ii) the Exchange Subordinated Securities
shall contain such appropriate  insertions,  omissions,  substitutions and other
variations from the form set forth in Exhibit D hereto relating to the nature of
the Exchange  Subordinated  Securities as the Officers of the Company  executing
such Exchange Subordinated Securities on behalf of the Company may determine, as
evidenced by such Officers'  execution on behalf of the Company of such Exchange
Subordinated Securities. The Global Exchange Subordinated Securities shall be in
registered  form and be  registered  in the name of DTC and  deposited  with the

<PAGE>

Trustee,  at its  Corporate  Trust  Office,  as custodian for DTC. The aggregate
principal amount of any Global Exchange  Subordinated  Security may from time to
time be  increased  or  decreased  by  adjustments  made on the  records  of the
Trustee,  as custodian for DTC for such Global Exchange  Subordinated  Security,
which  adjustments  shall be conclusive as to the aggregate  principal amount of
any such Global Exchange Subordinated Security.  Subject to clauses (i) and (ii)
of the first sentence of this Section  2A.1(f),  the terms hereof  applicable to
the  Global   Subordinated   Securities  shall  apply  to  the  Global  Exchange
Subordinated  Securities,   MUTATIS  MUTANDIS,   unless  the  context  otherwise
requires.

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

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

     Section 2A.2 RESTRICTIVE LEGENDS.

     All Initial Subordinated Securities issued pursuant to this Indenture shall
be "RESTRICTED SUBORDINATED SECURITIES" and shall bear the Restricted Legend.

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

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

          TRANSFERS  OF THIS GLOBAL  SECURITY  SHALL BE LIMITED TO  TRANSFERS IN
     WHOLE,  BUT NOT IN PART,  TO NOMINEES  OF DTC OR TO A SUCCESSOR  THEREOF OR
     SUCH SUCCESSOR'S  NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY

<PAGE>

     SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE  RESTRICTIONS SET
     FORTH IN SECTIONS 2A.5 AND 2A.6 OF THE INDENTURE REFERRED TO HEREIN."

     Section 2A.3 AUTHENTICATION OF SUBORDINATED SECURITIES.

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

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

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

     Section 2A.4 TRANSFER AND EXCHANGE.

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

     A  Subordinated  Securityholder  may transfer a Subordinated  Security,  or
request that a Subordinated  Security be exchanged for  Subordinated  Securities
(including,  without  limitation,  subject  to the  proviso  to  this  sentence,
Exchange  Subordinated   Securities)  in  authorized  denominations  and  in  an
aggregate  principal amount equal to the principal  amount of such  Subordinated
Security  surrendered  for  exchange  of  other  authorized  denominations,   by
surrender of such Subordinated Security to the Trustee with the form of transfer
notice  thereon duly  completed and executed,  and otherwise  complying with the
terms of this  Indenture,  including  providing  evidence of compliance with any
restrictions on transfer,  in form satisfactory to the Company,  the Trustee and
the Registrar;  PROVIDED that exchanges of Initial  Subordinated  Securities for
Exchange  Subordinated  Securities  shall  occur  only after an  Exchange  Offer
Registration  Statement shall have been declared effective by the SEC (notice of

<PAGE>

which shall be provided to the Trustee by the  Company)  and  otherwise  only in
accordance  with the terms of the  Exchange  Offer.  No such  transfer  shall be
effected  until,   and  such  transferee  shall  succeed  to  the  rights  of  a
Subordinated  Securityholder only upon, final acceptance and registration of the
transfer by the  Registrar in the  Register.  Prior to the  registration  of any
transfer of a Subordinated Security by a Subordinated Securityholder as provided
herein, the Company, the Registrar,  the Paying Agent and the Trustee shall deem
and treat the person in whose name the  Subordinated  Security is  registered on
the  Register  as the  absolute  owner and  holder  thereof  for the  purpose of
receiving  payment of all  amounts  payable  with  respect to such  Subordinated
Security and for all other purposes, and none of the Company, the Registrar, the
Paying  Agent or the Trustee  shall be  affected by any notice to the  contrary.
Furthermore,  DTC shall, by acceptance of a Global Subordinated Security,  agree
that transfers of beneficial interests in such Global Subordinated  Security may
be effected  only through a book-entry  system  maintained by DTC (or its agent)
and that ownership of a beneficial  interest in the Subordinated  Security shall
be required to be reflected in a book-entry.  When  Subordinated  Securities are
presented to the Registrar with a request to register the transfer thereof or to
exchange them for other authorized denominations of a Subordinated Security in a
principal  amount  equal  to the  aggregate  principal  amount  of  Subordinated
Securities  surrendered for exchange,  the Registrar shall register the transfer
or make the exchange as requested if its requirements for such  transactions are
met.

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

     Section 2A.5  BOOK-ENTRY  PROVISIONS  FOR  RESTRICTED  GLOBAL  SUBORDINATED
SECURITIES AND REGULATION S GLOBAL SUBORDINATED SECURITIES.

     (a) Agent Members shall have no rights under this Indenture with respect to
any Global Subordinated  Security held on their behalf by DTC, or the Trustee as
its custodian,  and DTC may be treated by the Company, the Trustee and any agent
of the Trustee as the absolute  owner of such Global  Subordinated  Security for
all purposes  whatsoever.  Notwithstanding  the foregoing,  nothing herein shall
prevent the Company,  the Trustee or any agent of the Trustee from giving effect
to any written certification,  proxy or other authorization  furnished by DTC or
shall impair,  as between DTC and its Agent Members,  the operation of customary
practices  governing the exercise of the rights of a holder of any  Subordinated
Security.  Upon the issuance of any Global Subordinated  Security, the Registrar
or its duly appointed  agent shall record DTC as the  registered  holder of such
Global Subordinated Security.

<PAGE>

     (b)  Transfers  of any  Global  Subordinated  Security  shall be limited to
transfers of such Restricted Global Subordinated Security or Regulation S Global
Subordinated Security in whole, but not in part, to DTC. Beneficial interests in
the  Restricted  Global  Subordinated  Security  and  any  Regulation  S  Global
Subordinated  Security  may be  transferred  in  accordance  with the  rules and
procedures of DTC and the provisions of Section 2A.6.  Beneficial interests in a
Restricted Global  Subordinated  Security or a Regulation S Global  Subordinated
Security  shall be delivered  to all  beneficial  owners  thereof in the form of
Restricted  Definitive   Subordinated  Securities  or  Regulation  S  Definitive
Subordinated  Securities,  as the case may be, if (i) DTC  notifies  the Trustee
that it is unwilling  or unable to continue as  depositary  for such  Restricted
Global Subordinated  Security or Regulation S Global Subordinated  Security,  as
the case may be, and a  successor  depositary  is not  appointed  by the Trustee
within 90 days of such  notice,  and (ii)  after the  occurrence  and during the
continuance of an Event of Default,  owners of beneficial  interests in a Global
Subordinated  Security  with a  principal  amount  aggregating  not less  than a
majority of the outstanding principal amount of the Global Subordinated Security
advise the Trustee,  the Company and DTC through  Agent  Members in writing that
the  continuation  of a  book-entry  system  through DTC or its  successor is no
longer in their best interests.

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

     (d)  In  connection  with  the  transfer  of an  entire  Restricted  Global
Subordinated  Security or an entire Regulation S Global Subordinated Security to
the beneficial  owners  thereof  pursuant to paragraph (b) of this Section 2A.5,
such Restricted Global Subordinated Security or Regulation S Global Subordinated
Security,  as the case may be, shall be deemed to be  surrendered to the Trustee
for  cancellation,  and  the  Company  shall  execute,  and  the  Trustee  shall
authenticate,  to each  beneficial  owner  identified by DTC in exchange for its
beneficial  interest  in  such  Restricted  Global   Subordinated   Security  or
Regulation  S  Global  Subordinated  Security,  as the  case  may be,  an  equal
aggregate principal amount of Restricted Definitive  Subordinated  Securities or
Regulation  S  Definitive  Subordinated  Securities,  as the  case  may  be,  of
authorized  denominations.  None of the Company, the Registrar, the Paying Agent
or the Trustee  shall be liable for any delay in  delivery of such  instructions
and may  conclusively  rely on,  and shall be  protected  in  relying  on,  such
registration   instructions.   Upon  the  issuance  of  Definitive  Subordinated
Securities, the Company and the Trustee shall recognize the Person in whose name
the  Definitive  Subordinated  Securities  are  registered  in the  Register  as
Subordinated Securityholders hereunder.

     (e) Any  Definitive  Subordinated  Security  delivered  in exchange  for an
interest in the Restricted  Global  Subordinated  Security pursuant to paragraph

<PAGE>

(b) of this Section 2A.5 shall, except as otherwise provided by paragraph (e) of
Section 2A.6, bear the Restricted Legend.

     (f) Prior to the  expiration of the  Restricted  Period,  any  Regulation S
Definitive  Subordinated  Security  delivered  in exchange  for an interest in a
Regulation S Global  Subordinated  Security  pursuant to  paragraph  (b) of this
Section 2A.5 shall bear the Restricted Legend.

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

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

     Section 2A.6 SPECIAL TRANSFER PROVISIONS.

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

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

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

          (ii)  If  the  proposed  transferor  is  an  Agent  Member  holding  a
     beneficial  interest in a Restricted  Global  Subordinated  Security,  upon
     receipt  by the  Registrar  of (x)  the  documents,  if  any,  required  by
     paragraph (i) and (y)  instructions  given in accordance with DTC's and the

<PAGE>

     Registrar's  procedures,  the  Registrar  shall  reflect  on its  books and
     records the date of the transfer and a decrease in the principal  amount of
     such  Restricted  Global  Subordinated  Security in an amount  equal to the
     principal  amount of the  beneficial  interest  in such  Restricted  Global
     Subordinated Security to be transferred,  and the Company shall execute and
     the Trustee  shall  authenticate  and deliver to the  transferor  or at its
     direction,  one or more Restricted  Definitive  Subordinated  Securities of
     like tenor and amount.

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

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

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

     (c) TRANSFERS OF INTERESTS IN THE REGULATION S GLOBAL SUBORDINATED SECURITY
OR REGULATION S DEFINITIVE SUBORDINATED SECURITIES.  After the expiration of the
Restricted Period, the Registrar shall register any transfer of interests in any
Regulation   S  Global   Subordinated   Security  or   Regulation  S  Definitive
Subordinated Security without requiring any additional certification.  Until the

<PAGE>

expiration  of the  Restricted  Period,  interests  in the  Regulation  S Global
Subordinated  Security may only be held through Agent Members  acting for and on
behalf of Euroclear and Clearstream.

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

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

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

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

     (e)  RESTRICTED  LEGEND.  Upon the  transfer,  exchange or  replacement  of
Subordinated  Securities not bearing the Restricted  Legend, the Registrar shall
deliver Subordinated Securities that do not bear the Restricted Legend. Upon the
transfer,  exchange  or  replacement  of  Subordinated  Securities  bearing  the
Restricted Legend, the Registrar shall deliver only Subordinated Securities that
bear the Restricted Legend unless either (i) the  circumstances  contemplated by
paragraph  (d)(ii) of this  Section 2A.6 exist or (ii) there is delivered to the
Registrar  an opinion of counsel to the effect that  neither such legend nor the
related  restrictions  on transfer are required in order to maintain  compliance
with the provisions of the Securities Act.

     (f)  GENERAL.  By  acceptance  of any  Subordinated  Security  bearing  the
Restricted Legend,  each Holder of such Subordinated  Security  acknowledges the
restrictions  on  transfer  of such  Subordinated  Security  set  forth  in such

<PAGE>

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

     Until  such time as no  Subordinated  Securities  remain  Outstanding,  the
Registrar  shall  retain  copies  of all  letters,  notices  and  other  written
communications  received  pursuant to Section  2A.5 or this  Section  2A.6.  The
Trustee,  if not the Registrar at such time, shall have the right to inspect and
make copies of all such letters,  notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.

     Section 2A.7 TERMS OF SUBORDINATED SECURITIES.

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

<PAGE>

                                   ARTICLE 3.

        LIQUIDITY PROVIDER AND POLICY PROVIDER; PRIORITY OF DISTRIBUTIONS

     Section 3.1 WRITTEN NOTICE OF DISTRIBUTION.

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

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

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

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

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

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

     (d) In the  event  the  Trustee  shall  not  receive  from any  Person  any
information  set forth in  paragraph  (a) above  which is required to enable the
Trustee to make a  distribution  to such  Person  pursuant to Section  3.2,  the
Trustee  shall  request  such  information  and,  failing  to  receive  any such
information,  the Trustee shall not make such distribution(s) to such Person. In
such event,  the Trustee shall make  distributions  pursuant to clauses  "FIRST"
through  "ELEVENTH"  of  Section  3.2 to the  extent  it shall  have  sufficient

<PAGE>

information to enable it to make such distributions,  and shall continue to hold
any funds remaining,  after making such  distributions,  until the Trustee shall
receive  all  necessary  information  to  enable it to  distribute  any funds so
withheld.

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

     Section 3.2 PRIORITY OF DISTRIBUTIONS; SUBORDINATION.

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

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

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

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

<PAGE>

     Liquidity  Provider all outstanding  Drawings and interest thereon owing to
     the Liquidity  Provider  under the Liquidity  Facility,  the amount of such
     payments made to the Liquidity Provider attributable to interest accrued on
     Drawings  under  the  Liquidity  Facility,  shall  be  distributed  to  the
     Liquidity Provider and the Policy Provider, as the case may be, pro rata on
     the basis of the  amounts  owed to the  Liquidity  Provider  and the Policy
     Provider under subclauses (i), (ii) and (iii) of this clause "third";

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

          FIFTH,  if  any  amounts  are to be  distributed  pursuant  to  either
     subclause  (i)(A) or (i)(B) of clause  "fourth"  above,  then the Liquidity
     Provider shall be paid the excess of (x) the aggregate  outstanding  amount
     of  unreimbursed  Advances  (whether  or not then due) under the  Liquidity
     Facility over (y) the Required Amount (less the amount of any repayments of
     Interest Drawings under the Liquidity Facility while subclause (i)(A)(1) or
     (i)(B)(1), as the case may be, of clause "fourth" above is applicable);

<PAGE>

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

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

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

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

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

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

     Section 3.3 OTHER PAYMENTS.

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

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

<PAGE>

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

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

     Section 3.4 PAYMENTS TO LIQUIDITY PROVIDER AND POLICY PROVIDER.

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

     Section 3.5 LIQUIDITY FACILITY.

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

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

<PAGE>

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

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

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

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

<PAGE>

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

<PAGE>

     withdrawals, including such withdrawal, does not exceed the Required Amount
     for such Distribution Date);

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

<PAGE>

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

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

     (o) CONSENT TO ISSUANCE OF SUBORDINATED SECURITIES. The Liquidity Provider,
by its execution and delivery of this Indenture, (i) consents to the issuance of
the  Subordinated  Securities  hereunder  and the  amendments  to the  Operative
Documents in connection therewith, and (ii) confirms that all of its obligations
under the Liquidity Facility remain unchanged and in full force and effect.

     Section 3.6 THE POLICY.

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

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

<PAGE>

the Policy  Account)  in an amount  sufficient  to enable the Trustee to pay the
Outstanding  Amount and (ii) upon receipt  shall pay such amount from the Policy
Account to the Securityholders in payment of the Outstanding Amount.

     (c)  NON-PERFORMANCE  DRAWING.  If  a  Payment  Default  exists  under  the
Securities  (without  giving effect to any  Acceleration  or any payments by the
Liquidity  Provider or the Policy  Provider)  for a period of eight  consecutive
Interest  Periods (such period,  the  "NON-PERFORMING  PERIOD")  (regardless  of
whether any proceeds  from the sale of any  Collateral  are  distributed  by the
Trustee during such period) and continues to exist on the Interest  Payment Date
on which such eighth  Interest  Period ends (or, if such  Interest  Payment Date
falls within the applicable period specified in the proviso to the definition of
"Non-Performing",  continues to exist on the Business Day immediately  following
such period (the "RELEVANT DATE")),  and on the 25th day following such Interest
Payment Date or, if applicable, the Relevant Date (or, if such 25th day is not a
Business Day, the next Business Day) (the "NON-PERFORMANCE  PAYMENT DATE") after
giving  effect  to  the  subordination  provisions  of  Section  3.2  and to the
application  of Prior  Funds,  the Trustee does not then have  sufficient  funds
available  for  the  payment  in  full  of  the  Outstanding  Amount  as of  the
Non-Performance Payment Date, then unless the Policy Provider shall have paid on
any day prior thereto the Outstanding  Amount as of such day pursuant to Section
3.6(b) or 3.6(e) of this Indenture,  the Trustee (i) prior to the 1:00 p.m. (New
York City time) on the  Non-Performance  Payment Date shall deliver a Notice for
Payment,  as provided in the Policy, to the Policy Provider or its fiscal agent,
requesting a Policy  Drawing (the  "NON-PERFORMANCE  DRAWING")  under the Policy
(for  payment  into the Policy  Account) in an amount  sufficient  to enable the
Trustee to pay such  Outstanding  Amount,  and (ii) upon receipt  shall pay such
amount  from the  Policy  Account  to the  Securityholders  in  payment  of such
Outstanding  Amount.  If the  Non-Performance  Payment Date is established,  the
Trustee shall send to the Securityholders  Written Notice thereof promptly,  but
no later than three Business Days,  after the occurrence of the Interest Payment
Date on which the  Non-Performing  Period ends or, if  applicable,  the Relevant
Date.

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

<PAGE>

ELECTION  DISTRIBUTION  DATE")  or (B)  following  the  occurrence  of a  Policy
Provider Default,  on any Business Day specified by the Trustee upon at least 20
days'  Written  Notice to the Policy  Provider  (such  Business Day an "ELECTION
DISTRIBUTION  DATE") permit the Trustee,  in each case, to make a Policy Drawing
under the Policy for an amount equal to the Outstanding Amount as of such Policy
Election  Distribution Date or Election  Distribution  Date, as applicable.  The
Trustee  shall  (i)  prior to 1:00  p.m.  (New  York  City  time)  on each  such
Distribution  Date  referred to in the  preceding  sentence  deliver a Notice of
Payment,  as provided in the Policy,  to the Policy Provider or its fiscal agent
requesting a Policy Drawing under the Policy for payment into the Policy Account
to pay the amount  then due under this  paragraph  and (ii) upon  receipt of the
proceeds  thereof  pay  the  amount  thereof  from  the  Policy  Account  to the
Securityholders in payment of such amount.

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

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

<PAGE>

     (f)  AVOIDANCE  DRAWINGS.  If at any time the  Trustee  shall  have  actual
knowledge of the issuance of any Final Order,  the Trustee  shall  promptly give
notice thereof to the Liquidity  Provider and the Policy  Provider.  The Trustee
shall thereupon  calculate the relevant Avoided Payments resulting therefrom and
shall promptly: (a) send to the Securityholders a Written Notice of such amounts
and (b) prior to the expiration of the Policy, deliver to the Policy Provider or
its fiscal agent a Notice of Avoided  Payment under the Policy,  together with a
copy  of  the  documentation  required  by  the  Policy  with  respect  thereto,
requesting  a  Policy   Drawing   thereunder   (for  payment  to  the  receiver,
conservator,  debtor-in-possession,  trustee in  bankruptcy  or the Trustee (for
deposit  into the Policy  Account),  as  applicable)  in an amount  equal to the
amount of  relevant  Avoided  Payment.  To the extent  that any  portion of such
Avoided Payment is to be paid to the Trustee, such Written Notice shall also set
the date for the  distribution  of such  portion of the  proceeds of such Policy
Drawing which date shall constitute a Distribution Date and shall be the earlier
of three  Business  Days after the date of the  expiration of the Policy and the
Business  Day that  immediately  follows  the 25th  day  after  the date of such
Written  Notice.  Upon  receipt,  the  Trustee  shall  pay the  proceeds  of the
specified  Policy  Drawing  under  the  Policy  to  the  Securityholders  or the
Liquidity Provider, as applicable on such Distribution Date.

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

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

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

<PAGE>

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

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

     (l) CONSENT TO ISSUANCE OF SUBORDINATED SECURITIES. The Policy Provider, by
its  execution and delivery of this  Indenture,  (i)  consents,  as  Controlling
Party,  to the  issuance  of  the  Subordinated  Securities  hereunder  and  the
amendments to the Operative Documents in connection therewith, and (ii) confirms
that all of its obligations  under the Policy remain unchanged and in full force
and effect.

     Section 3.7 DESIGNATED REPRESENTATIVES.

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

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

<PAGE>

     Section 3.8 CONTROLLING PARTY.

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

     (b) The Person who shall be the "CONTROLLING PARTY" shall be (x) the Policy
Provider  (or,  if any  Policy  Provider  Default  shall  have  occurred  and be
continuing, (i) the Required Holders or (ii) if the Securities have been paid in
full,  the  Required  Subordinated  Holders) and (y) upon payment in full of the
Securities,  the  Policy  Expenses  and the  Policy  Provider  Obligations,  the
Required Subordinated Holders.

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

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

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

<PAGE>

     Section 3.9 COMPANY'S PAYMENT OBLIGATIONS.

     The Company  agrees to pay to the Trustee for  distribution  in  accordance
with  Section  3.2  hereof:  (a)(i) an amount  equal to the fees  payable to the
Liquidity  Provider under Section 2.03 of the Liquidity Facility and the related
Fee Letter;  (ii) the amount equal to interest on any Downgrade  Advance  (other
than any Applied Downgrade  Advance) payable under Section 3.07 of the Liquidity
Facility minus Investment Earnings from such Downgrade Advance; (iii) the amount
equal  to  interest  on  any  Non-Extension  Advance  (other  than  any  Applied
Non-Extension  Advance)  payable under  Section 3.07 of the  Liquidity  Facility
minus Investment Earnings from such Non-Extension  Advance;  (iv) if any payment
default shall have  occurred and be  continuing  with respect to interest on any
Securities, the excess, if any, of (1) an amount equal to interest on any Unpaid
Advance,  Applied  Downgrade  Advance or Applied  Non-Extension  Advance payable
under  Section 3.07 of the Liquidity  Facility  (or, if the Policy  Provider has
made a payment  equivalent to such an Advance,  as would have been payable under
Section 3.07 of the Liquidity  Facility had such Advance been made) over (2) the
sum of Investment Earnings from any Final Advance plus any amount of interest at
the  Payment  Due Rate  actually  payable  (whether  or not in fact paid) by the
Company on the overdue scheduled  interest on the Securities in respect of which
such Unpaid Advance,  Applied Downgrade Advance or Applied Non-Extension Advance
was made by the Liquidity  Provider (or an equivalent payment made by the Policy
Provider);  (v) any other amounts owed to the Liquidity  Provider by the Trustee
as borrower under the Liquidity  Facility other than amounts due as repayment of
advances  thereunder  or as  interest  on such  advances,  except to the  extent
payable  pursuant to clause (ii),  (iii) or (iv) above, and (vi) an amount equal
to the fees payable to the Policy  Provider under Section  3.02(d) of the Policy
Provider  Agreement and all other compensation and reimbursement of expenses and
disbursements  (but excluding  reimbursement of advances)  payable to the Policy
Provider  under the Policy  Provider  Agreement  (but excluding all such amounts
actually paid by the Company to the Policy  Provider  under the Policy  Provider
Agreement or the Policy Fee Letter).  The Trustee shall  immediately  deposit in
the Collection  Account all payments from the Company received  pursuant to this
Section.

     Section 3.10. EXECUTION OF SUPPORT DOCUMENTS.

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

     Section  3.11  RIGHT  OF  SUBORDINATED  SECURITYHOLDERS  TO  DIRECT  POLICY
PROVIDER.

     (a)  Subject to the  provisions  of Section  3.11 (b) below and Section 3.8
hereof,  the  Subordinated  Securityholders  shall  have the right to direct the
Policy  Provider in taking (or refraining from taking) any action as Controlling
Party  during  the  continuance  of an  Event  of  Default  if the  Subordinated
Securityholders:

<PAGE>

          (i) deposit with the Policy  Provider  cash in United  States  tender,
     U.S. Government  Obligations or other investments  acceptable to the Policy
     Provider  (or any  combination  thereof) in the amount  specified in clause
     (ii) below as collateral security for amounts owed to and to become due and
     payable  to the  Policy  Provider  under the  Operative  Documents  and the
     Support Documents; and

          (ii) deliver to the Policy  Provider a  certificate  from a nationally
     recognized firm of independent  certified public accountants  acceptable to
     the Policy Provider expressing their opinion that the payments of principal
     and  interest  when due and  without  reinvestment  on the  deposited  U.S.
     Government  Obligations  or  other  investments  plus any  deposited  money
     without investment will provide cash sufficient to pay: (i) all accrued and
     unpaid Policy  Expenses and Policy  Provider  Obligations as of the date of
     such deposit, (ii) the then outstanding principal amount of the Securities,
     (iii) interest accruing and payable on the Securities from the date of such
     deposit to the Final Legal Maturity Date (or,  alternatively,  the interest
     calculated  at the rate of  interest  of 12% per  annum  for a period of 24
     months  (or, if  shorter,  the period from the date of such  deposit to the
     Final Legal  Maturity  Date)) and (iv) the premium  payable with respect to
     the Policy for a period of 24 months from the date of such  deposit (or, if
     shorter,  the  period  from the date of such  deposit  to the  Final  Legal
     Maturity Date).

     (b) In order to participate in such deposit, a Subordinated  Securityholder
must  contribute  its  proportionate  share of such  deposit  which  will be the
proportion that the principal amount of its Subordinated Securities bears to the
principal   amount  of  the   Subordinated   Securities   of  all   Subordinated
Securityholders  participating  in such deposit.  A Subordinated  Securityholder
shall  not  be  obligated  to  contribute  to  such  deposit.  The  Subordinated
Securityholders  contributing their proportionate share of such deposit shall be
entitled,  subject to the provisions of Section 3.8 hereof, to direct the Policy
Provider in taking action (or refraining  from taking action) as the Controlling
Party  during  the  continuance  of an  Event  of  Default  by  consent  of  the
contributing Subordinated Securityholders holding more than 50% of the aggregate
unpaid  principal  amount  of the  Subordinated  Securities  held  by  all  such
contributing  Subordinated  Securityholders.  If  the  Company  or  any  of  its
Affiliates is a Subordinated  Securityholder,  such Person shall not be entitled
to participate in making such deposit or directing the Controlling Party.

     (c) The Policy  Provider may apply the deposited cash and the cash from the
U.S. Government Obligations and other investments to the reimbursement of Policy
Expenses and Policy Provider Obligations outstanding from time to time. From and
after such  application  and after the Policy  Provider  shall have been paid in
full all amounts then due and payable to it under the  Operative  Documents  and
the Support  Documents,  amounts otherwise  distributable to the Policy Provider
under Section 3.2 hereof shall be distributed to such contributing  Subordinated
Securityholders in the same proportion as their respective contributions to such
deposit until their  proportionate  share of such deposit not otherwise returned
by the Policy Provider hereunder shall have been repaid in full.

<PAGE>

     (d) The  Policy  Provider  shall  promptly  turn  over to the  contributing
Subordinated   Securityholders  in  the  same  proportion  as  their  respective
contributions  to such deposit,  upon the request  accompanied  by a certificate
from a nationally recognized firm of independent  accountants  acceptable to the
Policy  Provider  expressing  their  opinion  that any money or U.S.  Government
Obligations or other  investments then held by the Policy Provider are in excess
of the amounts sufficient to pay the amounts referred to in Section 3.11 (a)(ii)
above, any such excess money or investments held by it.

     (e) Upon a Policy Provider  Default (in which case, the  Controlling  Party
shall be determined in accordance  with Section 3.8 hereof),  such deposit shall
be immediately released to the contributing Subordinated Securityholders and the
Policy  Provider  hereby   indemnifies  and  holds  harmless  each  contributing
Subordinated  Securityholders  for any and all costs and  expenses  incurred  in
connection with such deposit and release.

                                   ARTICLE 4.

                                   REDEMPTIONS

     Section 4.1 OPTIONAL REDEMPTION.

     The Notes may be  redeemed  at any time in whole or (so long as no  Payment
Default has occurred  and is  continuing)  in part (in any integral  multiple of
$1,000) by the Company at its sole option at a redemption price equal to the sum
of 100% of the principal amount of, accrued and unpaid interest on, and Premium,
if any, and Break  Amount,  if any,  with respect to, the redeemed  Notes to and
including the Redemption Date, PROVIDED that the Subordinated Securities may not
be redeemed at the option of the Company  prior to May 9, 2004.  Notwithstanding
the foregoing,  so long as the Policy  Provider is the  Controlling  Party,  the
Company shall not redeem any Subordinated  Securities (i) if an Event of Default
has  occurred and is  continuing  as of the  Redemption  Date or (ii) unless the
Company shall have furnished to the Policy  Provider within 60 days prior to the
Redemption  Date a certificate  of an Officer  certifying  that,  based upon the
Pledged Spare Parts included in the Collateral determined as of a date within 10
days prior to the date of such  certificate  valued using the Appraised Value of
such Pledged Spare Parts (but without  requiring a new  Independent  Appraiser's
Certificate),  the  Maximum  Collateral  Ratio  and  Minimum  Rotable  Ratio are
satisfied (after giving effect to any scheduled redemption of Securities on such
Redemption Date), PROVIDED that the Policy Provider may, in its sole discretion,
waive compliance with the requirements of this sentence.

     Section 4.2 REDEMPTION NOTICE TO TRUSTEE.

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

<PAGE>

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

     Section 4.3 SELECTION OF NOTES TO BE REDEEMED.

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

     Section 4.4 NOTICE OF REDEMPTION.

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

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

          (1) the Redemption Date;

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

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

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

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

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

<PAGE>

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

     Section 4.5 EFFECT OF NOTICE OF REDEMPTION.

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

     Section 4.6 DEPOSIT OF REDEMPTION PRICE.

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

     Section 4.7 NOTES REDEEMED IN PART.

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

                                   ARTICLE 5.

                                    COVENANTS

     Section 5.1 PAYMENT OF NOTES.

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

     The principal of, interest on, Premium,  if any, Break Amount,  if any, and
other amounts due under any of the Notes or hereunder will be payable in Dollars
by wire transfer of immediately  available  funds not later than 12:30 p.m., New
York  time,  on the due date of payment to the  Trustee at the  Corporate  Trust

<PAGE>

Office for  distribution  in the manner provided  herein.  The Trustee will make
funds deposited in the Collection Account on a Distribution Date and required to
be distributed  to  Noteholders  pursuant to Section 3.2 available to the Paying
Agent for such  distribution.  The Paying Agent shall distribute amounts payable
to each Noteholder by check mailed to such  Noteholder at its address  appearing
in the Register,  except that with respect to Notes registered on the applicable
Record Date in the name of a Clearing Agency (or its nominee), such distribution
shall be made by wire  transfer in  immediately  available  funds to the account
designated by such Clearing Agency (or such nominee). The Company shall not have
any responsibility for the distribution of such payments to any Noteholder.  Any
payment made hereunder shall be made without any presentment or surrender of any
Notes,  except  that,  in the case of the final  payment in respect of any Note,
such Note shall be  surrendered  to the Paying  Agent for  cancellation  against
receipt of such payment.

     Section 5.2 MAINTENANCE OF OFFICE OR AGENCY.

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

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

     Section 5.3 CORPORATE EXISTENCE.

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

<PAGE>

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

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

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

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

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

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

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

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

<PAGE>

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

     Section 5.5 REPORTS BY THE COMPANY.

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

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

                                   ARTICLE 6.

                                 INDEMNIFICATION

     Section 6.1 GENERAL INDEMNITY.

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

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

          (ii) The Spare Parts Collateral,  including,  without limitation, with
     respect  thereto,  (A)  the  manufacture,   design,  purchase,  acceptance,
     nonacceptance  or  rejection,   ownership,  delivery,  nondelivery,  lease,
     sublease, assignment,  possession, use or non-use, operation,  maintenance,

<PAGE>

     testing, repair, overhaul, condition, alteration,  modification,  addition,
     improvement,    storage,   airworthiness,    replacement,   repair,   sale,
     substitution,  return, abandonment,  redelivery or other disposition of any
     Spare Parts Collateral,  (B) any claim or penalty arising out of violations
     of  applicable  Laws by the Company  (or any  Permitted  Lessee),  (C) tort
     liability,  whether or not arising out of the  negligence of any Indemnitee
     (whether  active,  passive or  imputed),  (D) death or  property  damage of
     passengers,  shippers  or  others,  (E)  environmental  control,  noise  or
     pollution and (F) any Liens in respect of the Spare Parts Collateral;

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

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

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

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

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

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

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

          (v) To the extent  attributable to the  incorrectness or breach of any
     representation  or warranty of such  Indemnitee  or any related  Indemnitee

<PAGE>

     contained  in or made  pursuant  to any  Operative  Document or any Support
     Document;

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

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

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

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

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

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

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

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

<PAGE>

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

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

     Section 6.2 SEPARATE AGREEMENT.

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

     Section 6.3 NOTICE.

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

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

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

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

<PAGE>

Company or its insurers to conduct such proceedings,  interfere with the defense
of such case.

     (c) In no event  shall any  Indemnitee  enter  into a  settlement  or other
compromise  with respect to any Expense without the prior written consent of the
Company,  which consent shall not be  unreasonably  withheld or delayed,  unless
such Indemnitee  waives its right to be indemnified with respect to such Expense
under this Article 6.

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

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

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

     Section 6.5 INFORMATION.

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

     Section 6.6 SUBROGATION; FURTHER ASSURANCES.

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

<PAGE>

     Section 6.7 REFUNDS.

     If an Indemnitee  receives any refund, in whole or in part, with respect to
any  Expense  paid by the Company  hereunder,  it will  promptly  pay the amount
refunded  (but not an amount in excess of the amount  the  Company or any of its
insurers  has paid in respect of such  Expense)  over to the  Company  unless an
Event of  Default  shall have  occurred  and be  continuing,  in which case such
amounts  shall be paid over to the  Security  Agent to hold as security  for the
Company's obligations under the Operative Documents and the Support Documents to
which the Company is a party or, if requested by the Company, applied to satisfy
such obligations.

                                   ARTICLE 7.

                              DEFAULT AND REMEDIES

     Section 7.1 EVENTS OF DEFAULT.

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

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

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

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

<PAGE>

excess of 30 days from and after the date of written notice thereof from Trustee
to the Company;

     (d) the Company shall consent to the appointment of or taking possession by
a receiver,  trustee or  liquidator  of itself or of a  substantial  part of its
property,  or the Company  shall admit in writing its inability to pay its debts
generally as they come due or shall make a general assignment for the benefit of
its creditors, or the Company shall file a voluntary petition in bankruptcy or a
voluntary  petition or an answer  seeking  reorganization,  liquidation or other
relief under any bankruptcy laws or insolvency laws (as in effect at such time),
or an answer  admitting the material  allegations of a petition filed against it
in any such case, or the Company shall seek relief by voluntary petition, answer
or  consent,  under  the  provisions  of any other  bankruptcy  or  similar  law
providing for the  reorganization or winding-up of corporations (as in effect at
such time),  or the Company shall seek an agreement,  composition,  extension or
adjustment  with  its  creditors  under  such  laws or the  Company's  board  of
directors shall adopt a resolution  authorizing  corporate action in furtherance
of any of the foregoing;

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

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

     Section 7.2 ACCELERATION.

     If an Event of Default (other than an Event of Default specified in Section
7.1(d), (e) or (f) with respect to the Company) occurs,  and is continuing,  the
Controlling Party may, by notice to the Company and the Trustee, and the Trustee
shall, upon the request of such Controlling Party,  declare all unpaid principal
of, accrued but unpaid interest on, and Premium,  if any, Break Amount,  if any,
with  respect  to the Notes  Outstanding  and other  amounts  otherwise  payable
hereunder,  if any, to the date of  acceleration  to be due and payable and upon
any such declaration,  the same shall become and be immediately due and payable.
If an Event of Default  specified  in  Section  7.1(d),  (e) or (f) occurs  with
respect to the Company, all unpaid principal of, accrued but unpaid interest on,
and  Premium,  if any,  Break  Amount,  if  any,  with  respect  to,  the  Notes
Outstanding  and  other  amounts  otherwise  payable  hereunder,  if any,  shall

<PAGE>

automatically  become and be immediately due and payable without any declaration
or  other  act  on the  part  of  the  Trustee,  the  Controlling  Party  or any
Noteholder.  Upon payment of such principal amount,  interest,  Premium, if any,
Break Amount, if any, and other amounts, all of the Company's  obligations under
the Notes and this Indenture, other than obligations under Article 6 and Section
8.7, shall terminate. The Controlling Party by notice to the Trustee may rescind
an  acceleration  and its  consequences  if (a) all existing  Events of Default,
other than the non-payment as to the Notes of the principal,  interest, Premium,
if any,  and Break  Amount,  if any,  with  respect  thereto  and other  amounts
otherwise  payable  hereunder,  if any,  which  has  become  due  solely by such
declaration of  acceleration,  have been cured or waived,  (b) to the extent the
payment of such interest is permitted by law,  interest on overdue  installments
of interest and on overdue principal which has become due otherwise than by such
declaration  of  acceleration,  has been  paid,  (c) the  rescission  would  not
conflict with any judgment or decree of a court of competent  jurisdiction,  and
(d) all payments due to the Trustee and any  predecessor  Trustee  under Section
8.7 have been made. No such  rescission  shall affect any subsequent  default or
impair any right arising from any subsequent default.

     Section 7.3 OTHER REMEDIES.

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

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

     Section 7.4 WAIVER OF PAST DEFAULTS.

     Subject to Sections 7.7, 10.2 and 10.6, the Controlling  Party by notice to
the Trustee may authorize  the Trustee to waive an existing  Default or Event of
Default  and its  consequences,  except a Default or Event of Default (i) in the
payment of principal of,  interest on, or Premium,  if any, or Break Amount,  if
any, with respect to, any Note as specified in Section  7.1(a) that has not been
paid from funds provided by the Policy Provider,  the Liquidity  Provider or the
Cash  Collateral  Account or (ii) in respect of a covenant or  provision  hereof
which  cannot be  modified  or amended  without  the  consent  of the  Liquidity
Provider,  the Policy  Provider  and the  Holder of each  Security  affected  or
without the consent of the Holder of each Subordinated Security affected. When a

<PAGE>

Default  or Event of  Default  is so  waived,  it is cured and  ceases,  and the
Company,  the  Liquidity  Provider,  the Policy  Provider,  the  Holders and the
Trustee  shall be  restored  to their  former  positions  and  rights  hereunder
respectively; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.

     Section 7.5 CONTROL OF REMEDIES.

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

     Section 7.6 LIMITATION ON SUITS.

     A Noteholder  may not pursue any remedy with  respect to this  Indenture or
the Notes unless:

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

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

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

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

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

<PAGE>

     (f) in  the  case  of a  Subordinated  Securityholder,  the  principal  of,
interest on, and Premium,  if any,  Break Amount,  if any, and all other amounts
payable under this Indenture  with respect to the  Securities  have been paid in
full.

     A Noteholder  may not use this Indenture to prejudice the rights of another
Noteholder  or to obtain a  preference  or priority  over such other  Noteholder
(except  for  the   preferences  and  priorities  of  the  Securities  over  the
Subordinated Securities provided for in this Indenture).

     Section 7.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.

     Notwithstanding  any other  provision of this  Indenture,  the right of any
Holder of a Note to receive  payment of principal of,  interest on, and Premium,
if any, and Break Amount, if any, with respect to, the Note in cash, on or after
the  respective  due  dates  expressed  in the  Note,  or to bring  suit for the
enforcement of any such payment on or after such respective dates,  shall not be
impaired or affected without the consent of the Holder.

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

     Section 7.8 COLLECTION SUIT BY TRUSTEE.

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

     Section 7.9 TRUSTEE MAY FILE PROOFS OF CLAIM.

     The Trustee may file such proofs of claim and other  papers or documents as
may be  necessary  or  advisable  in  order to have the  claims  of the  Trustee
(including any claim for the reasonable  compensation,  expenses,  disbursements
and advances of the Trustee, its agents and counsel) and the Noteholders allowed
in any judicial  proceedings  relative to the Company (or any other obligor upon

<PAGE>

the Notes), its creditors or its property and shall be entitled and empowered to
collect and receive any moneys or other  property  payable or deliverable on any
such claims and to distribute  the same,  and any Custodian in any such judicial
proceedings is hereby authorized by each Noteholder to make such payments to the
Trustee and, in the event that the Trustee  shall  consent to the making of such
payments directly to the Noteholders, to pay to the Trustee any amount due to it
for the reasonable  compensation,  expenses,  disbursements  and advances of the
Trustee,  its agent and  counsel,  and any other  amounts due the Trustee  under
Section 8.7, and unless  prohibited by law or applicable  regulations to vote on
behalf of the Holders of Notes for the  election of a trustee in  bankruptcy  or
other person  performing  similar  functions.  Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Noteholder any plan of reorganization,  arrangement, adjustment or
composition  affecting  the Notes or the  rights of any  Holder  thereof,  or to
authorize  the Trustee to vote in respect of the claim of any  Noteholder in any
such  proceeding  except,  as  aforesaid,  for  the  election  of a  trustee  in
bankruptcy or person performing similar functions.

     Section 7.10 APPLICATION OF PROCEEDS.

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

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

     Section 7.11 UNDERTAKING FOR COSTS.

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

     Section 7.12 RESTORATION OF RIGHTS ON ABANDONMENT OF PROCEEDINGS.

     In case the Trustee  shall have  proceeded  to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned for any

<PAGE>

reason,  or shall have been  determined  adversely to the  Trustee,  then and in
every such case the Company,  the Trustee and the Noteholders  shall be restored
respectively  to their former  positions and rights  hereunder,  and all rights,
remedies  and powers of the  Company,  the  Trustee  and the  Noteholders  shall
continue as though no such proceedings had been taken.

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

     No right or remedy herein  conferred  upon or reserved to the Trustee or to
any  Noteholder  is intended to be exclusive  of any other right or remedy,  and
every right and remedy shall, to the extent  permitted by law, be cumulative and
in addition to every other right and remedy given  hereunder or now or hereafter
existing at law or in equity or  otherwise.  The  assertion or employment of any
right or remedy  hereunder,  or  otherwise,  shall not  prevent  the  concurrent
assertion or employment of any other appropriate right or remedy.

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

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

     Section 7.14 CERTAIN LIMITS ON REMEDIES BY POLICY PROVIDER.

     The  Policy  Provider   agrees,   for  the  benefit  of  the   Subordinated
Securityholders,  that, so long as the Policy Provider is the Controlling Party,
if the Company is a debtor in a proceeding  under  Chapter 11 of the  Bankruptcy
Code and (i) the 60-day period under  Section  1110(a)(2)(A)  of the  Bankruptcy
Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy
Code) shall expire  without the Company  having entered into an agreement of the
kind  described  in Section  1110(a)(2)(A)  of the  Bankruptcy  Code (a "SECTION
1110(A)  AGREEMENT")  with  respect  to the  Indenture  and the other  Operative
Documents,  (ii) the Company shall have entered into a Section 1110(a) Agreement
and thereafter shall have failed to perform its obligations thereunder such that
the Security  Agent is entitled to take  possession  of the Pledged  Spare Parts
pursuant to the Security Agreement, or (iii) a plan of reorganization shall have
been confirmed in such proceeding that does not provide for the  continuation of
the terms and conditions of the Operative  Documents in full force and effect in
accordance with their original stated terms without  modification or impairment,
the Policy  Provider  shall not permit  (and will not permit the  Trustee or any
Collateral  Agent to  permit)  the sale or  lease of all or any  portion  of the
Collateral to the Company or any of its  Affiliates  for an amount less than the

<PAGE>

then current fair market value thereof (as determined by a nationally recognized
appraiser  selected by the Trustee and acceptable to the Policy  Provider).  The
Policy Provider further agrees to give the Subordinated Securityholders at least
30 days'  prior  written  notice  of its  intention  to sell or lease all or any
portion of the Collateral.

                                   ARTICLE 8.

                                     TRUSTEE

     Section 8.1 DUTIES OF TRUSTEE.

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

     Section 8.2 RIGHTS OF TRUSTEE.

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

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

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

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

     Section 8.3 INDIVIDUAL RIGHTS OF TRUSTEE.

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

     Section 8.4 TRUSTEE'S DISCLAIMER.

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

<PAGE>

     Section 8.5 NOTICE OF DEFAULTS.

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

     Section 8.6 REPORTS BY TRUSTEE TO HOLDERS.

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

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

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

     Section 8.7 COMPENSATION AND INDEMNITY.

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

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

<PAGE>

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

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

     Section 8.8 REPLACEMENT OF TRUSTEE.

     The  Trustee for any Series may resign by so  notifying  the  Company,  the
Liquidity Provider and the Policy Provider in writing. The Controlling Party may
remove the Trustee for any Series by so notifying the Trustee in writing and may
appoint a successor Trustee with the Company's consent,  which consent shall not
be unreasonably  refused or delayed.  The Company may remove the Trustee for any
Series if:

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

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

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

     (d) such Trustee becomes incapable of acting; or

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

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

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

<PAGE>

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

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

     Notwithstanding  replacement  of the Trustee  pursuant to this Section 8.8,
the Company's  obligations  under Section 8.7 shall  continue for the benefit of
the retiring  Trustee  (whether in its capacity as Trustee or Collateral  Agent)
which shall retain its claim pursuant to Section 8.7.

     The resignation,  removal and replacement of each Collateral Agent shall be
governed by the applicable Collateral Agreement.

     Section 8.9 SUCCESSOR TRUSTEE BY MERGER, ETC.

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

     Section 8.10 ELIGIBILITY; DISQUALIFICATION.

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

     Section 8.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.

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

     Section 8.12 OTHER CAPACITIES.

     If the Trustee shall serve as the Collateral  Agent,  the Person serving in
such capacities shall have and may effectively exercise all the rights, remedies

<PAGE>

and powers, and be entitled to all protections and indemnifications, provided to
such Person in whatever  capacities such Person then serves under any and all of
the  Indenture,  the  other  Operative  Documents  and  the  Support  Documents,
regardless  of the  capacity or  capacities  in which such Person may purport to
take or omit any action. The Trustee agrees to and shall have the benefit of all
provisions of the  Operative  Documents  stated  therein to be applicable to the
Trustee.

     Section 8.13 TRUST ACCOUNTS.

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

     (b) Funds on deposit in the Trust Accounts shall be invested and reinvested
by the  Trustee  in  Eligible  Investments  selected  by  the  Trustee  if  such
investments  are  reasonably  available  and have  maturities  no later than the
earlier  of (i) 90 days  following  the  date of such  investment  and  (ii) the
Business Day immediately  preceding the Interest Payment Date next following the
date of such  investment;  PROVIDED,  HOWEVER,  that  following  the making of a
Downgrade Drawing or a Non-Extension  Drawing under the Liquidity Facility,  the
Trustee  shall invest and reinvest such amounts in Eligible  Investments  at the
direction  of the Company  (or, if and to the extent so specified to the Trustee
by the Company,  the  Liquidity  Provider);  PROVIDED  FURTHER,  HOWEVER,  that,
notwithstanding  the foregoing proviso,  following the making of a Non-Extension
Drawing  under the initial  Liquidity  Facility,  the Trustee  shall  invest and
reinvest  the  amounts  in the Cash  Collateral  Account  with  respect  to such
Liquidity Facility in Eligible  Investments pursuant to the written instructions
of the Liquidity Provider;  PROVIDED FURTHER,  HOWEVER, that upon the occurrence
and during the continuation of an Event of Default, the Trustee shall invest and
reinvest  such  amounts  in  accordance  with the  written  instructions  of the
Controlling  Party.  Unless  otherwise  expressly  provided  in  this  Indenture
(including,  without limitation,  with respect to Investment Earnings on amounts
on deposit in the Cash  Collateral  Account  pursuant to Section 3.5(f) hereof),
any  Investment  Earnings  shall be  deposited  in the  Collection  Account when
received  by the  Trustee and shall be applied by the Trustee in the same manner
as the other amounts on deposit in the Collection  Account are to be applied and
any losses shall be charged against the principal amount invested,  in each case
net of the Trustee's  reasonable  fees and expenses in making such  investments.
The  Trustee  shall not be liable for any loss  resulting  from any  investment,
reinvestment or liquidation  required to be made under this Indenture other than

<PAGE>

by reason of its willful  misconduct or gross negligence.  Eligible  Investments
and any other  investment  required to be made hereunder  shall be held to their
maturities  except that any such  investment may be sold (without  regard to its
maturity) by the Trustee without instructions whenever such sale is necessary to
make  a  distribution  required  under  the  Indenture.  Uninvested  funds  held
hereunder shall not earn or accrue interest.

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

     Section 8.14 DEPOSITS TO THE COLLECTION ACCOUNT.

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

     Section 8.15 CERTAIN PAYMENTS.

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

                                   ARTICLE 9.

                             DISCHARGE OF INDENTURE

     Section 9.1 DISCHARGE OF LIABILITY ON NOTES.

     (a) When (i) the Company  delivers to the  Trustee  all  Outstanding  Notes
(other than Notes replaced  pursuant to Section 2.12) for  cancellation  or (ii)
all Outstanding  Notes have become due and payable,  whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 4 hereof and

<PAGE>

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

     (b)  Notwithstanding  clause (a) above,  the  provisions  of  Sections  2.1
through 2.17, inclusive,  2A.1 through 2A.7, inclusive,  6.1, 8.7 and 8.8 and in
this Article 9 shall survive until the Outstanding Notes have been paid in full.
Thereafter,  the Company's  obligations  in Sections 6.1, 8.7, 9.3 and 9.4 shall
survive.

     Section 9.2 APPLICATION OF TRUST MONEY.

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

     Section 9.3 REPAYMENT TO COMPANY.

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

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

     Section 9.4 REINSTATEMENT.

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

<PAGE>

reinstatement of its obligations,  the Company shall be subrogated to the rights
of the Holders of such Notes to receive  such  payment from the cash held by the
Trustee or Paying Agent.

                                   ARTICLE 10.

                       AMENDMENTS, SUPPLEMENTS AND WAIVERS

     Section 10.1 WITHOUT CONSENT OF THE CONTROLLING PARTY OR HOLDERS.

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

          (i) to provide for  uncertificated  Notes of any Series in addition to
     or in place of certificated Notes of such Series;

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

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

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

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

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

          (vii) to provide for any  successor  Collateral  Agent or Trustee with
     respect  to the Notes of one or more  Series and to add to or change any of
     the  provisions  of the  Indenture  as shall be  necessary  or advisable to
     provide for or facilitate  the  administration  of the trusts  hereunder by
     more than one Trustee;

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

<PAGE>

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

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

     (a) The Company and the Trustee or the  Collateral  Agent,  as the case may
be, may amend or supplement  this  Indenture,  the Notes and the other Operative
Documents  and,  upon  request  of the  Company,  the  Trustee  shall  amend  or
supplement the Support  Documents,  in each case without notice to or consent of
the  Liquidity  Provider  or the  Policy  Provider  and  without  notice  to any
Noteholder but with the written consent of the Controlling Party,  PROVIDED that
(i) Sections 3.5, 3.6, 3.8 and 3.9 of this Indenture may not be modified without
the  consent  of the  Liquidity  Provider  and the  Policy  Provider,  (ii)  the
Collateral  Maintenance  Agreement and the Support Documents may not be modified
other than in accordance  with the provisions  thereof,  (iii) Sections  3.8(b),
3.8(c) and 7.14 of this Indenture,  this clause (iii), the following clause (iv)
and the definition of "Event of Default" may not be modified without the consent
of the Required  Subordinated  Holders (it being  understood  that the foregoing
does not affect the right of the Controlling Party to waive an Event of Default)
and (iv) an  amendment of any defined  term used in the  definition  of "Maximum
Subordinated Collateral Ratio" or "Subordinated Collateral Ratio" or in any such
defined term will not be effective for purposes of the  definitions  of "Maximum
Subordinated  Collateral  Ratio"  or  "Subordinated   Collateral  Ratio"  unless
consented to by the Required Subordinated Holders.  Subject to Sections 7.4, 7.5
and 7.7,  unless  any Event of  Default  has  occurred  and is  continuing,  the
Controlling  Party may  authorize  the Trustee to, and the  Trustee,  subject to
Section 10.6, upon such  authorization  shall,  waive  compliance by the Company
with  any  provision  of  this  Indenture,  the  Notes  or the  other  Operative
Documents,  PROVIDED that  compliance by the Company with the  provisions of the
Collateral Maintenance Agreement may not be waived other than in accordance with
the provisions thereof. However, an amendment, supplement or waiver, including a
waiver  pursuant to any provision of Section 7.4, may not without the consent of
the Liquidity Provider, the Policy Provider and each Securityholder affected:

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

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

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

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

<PAGE>

          (v) change the  distribution  and application of payments as described
     in Section 3.2 of this Indenture;

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

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

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

In addition, an amendment,  supplement or waiver, including a waiver pursuant to
any  provision of Section 7.4, may not without the consent of each  Subordinated
Securityholder affected:

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

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

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

          (iv) change the definitions of "Maximum Subordinated Collateral Ratio"
     or "Subordinated Collateral Ratio";

          (v) increase the principal  amount of, or the rate of interest on, the
     Securities;

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

          (vii) change the distribution and application of payments as described
     in Section 3.2 of this Indenture;

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

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

<PAGE>

          (x)  impair  the  right  of any  Holder  to  institute  suit  for  the
     enforcement of any amount payable on any Subordinated Security when due;

PROVIDED that an  amendment,  supplement or waiver with respect to the foregoing
clauses  (i),  (ii),  (iii),  (iv),  (vi),  (viii) or (x) shall not  require the
consent of the Controlling Party or of the Liquidity Provider or Policy Provider
(if not then the Controlling Party).

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

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

     Section 10.3 COMPLIANCE WITH TRUST INDENTURE ACT.

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

     Section 10.4 REVOCATION AND EFFECT OF CONSENTS.

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

     (b) After an amendment,  supplement or waiver becomes  effective,  it shall
bind every Noteholder,  unless it makes a change described in any of clauses (i)
through  (viii) of the third  sentence of Section  10.2(a) or any of clauses (i)
through  (viii) of the  fourth  sentence  of Section  10.2(a).  In that case the
amendment,  supplement  or waiver  shall  bind (x) each  Holder of a Note  whose
consent was required under Section 10.2(a) and who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the  consenting  Holder's  Note and (y) each other Holder whose  consent was not
required under Section 10.2(a); PROVIDED, HOWEVER, that no amendment, supplement
or  waiver  relating  to any  impairment  of the  right  to  receive  principal,
interest,  Premium,  if any,  or Break  Amount,  if any,  when  due and  payable
consented to by a Holder shall be binding upon any  subsequent  Holder of a Note
or a portion of a Note that evidences the same debt as the  consenting  Holder's
Note  unless  notation  with  regard  thereto is made upon such Note or the Note
representing such portion.

<PAGE>

     Section 10.5 NOTATION ON OR EXCHANGE OF NOTES.

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

     Section 10.6 TRUSTEE TO SIGN AMENDMENTS, ETC.

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

     Section 10.7 EFFECT OF SUPPLEMENT AND/OR AMENDMENT.

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

                                   ARTICLE 11.

                                    SECURITY

     Section 11.1 OTHER OPERATIVE DOCUMENTS.

     (a) To secure the due and punctual  payment,  performance and observance of
the Obligations,  the Company  simultaneously with the execution of the Original
Indenture  entered  into the  Security  Agreement  and has  granted  a  security
interest on the Spare Parts  Collateral to the Security  Agent in the manner and
to the extent therein  provided and,  simultaneously  with the execution of this
Indenture, the Company has entered into Amendment No. 1 to Security Agreement to
secure,  among other  things,  the  Company's  obligations  with  respect to the
Subordinated Securities.  WTC was appointed as Security Agent and authorized and
directed to enter into the Security Agreement on the Original Closing Date. Each
Noteholder,  by accepting a Note,  agrees to all of the terms and  provisions of

<PAGE>

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

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

     Section 11.2 OPINIONS, CERTIFICATES AND APPRAISALS.

     (a) The Company shall furnish to the Trustee  promptly  after the execution
and delivery of the Original Indenture an Opinion of Counsel stating that in the
opinion of such counsel the Original  Indenture or Security  Agreement  has been
properly  recorded  and filed so as to make  effective  the Lien  intended to be
created  thereby and reciting the details of such  actions,  or stating that, in
the  opinion of such  counsel,  no such  action is  necessary  to make such Lien
effective. The Company shall furnish to the Trustee promptly after the execution
and delivery of this Indenture an Opinion of Counsel stating that in the opinion
of such counsel  Amendment No. 1 to Security  Agreement has been properly  filed
and recorded with the FAA and reciting the details of such actions.

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

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

<PAGE>

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

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

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

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

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

     Section 11.5 AGREEMENT AS TO FAIR MARKET VALUE.

     The Company and the Trustee  acknowledge  that the use of Fair Market Value
herein  or  in  the  other  Operative  Documents  is  strictly  and  solely  for
convenience  in  establishing  the amount of  Collateral  and any  substitutions
therefor under the Operative  Documents.  Accordingly,  the Fair Market Value of
any  Collateral  subjected  to the  Lien  of a  Collateral  Agreement  is not an
indication  of and shall not be deemed an  agreement by the parties as the basis
for valuation of such  Collateral for purposes of  determining  the value of the
Trustee's  secured  claim  against  the  Company,  adequate  protection  of  the
Trustee's interest in the Collateral or for any other purpose in any bankruptcy,
receivership  or  insolvency  proceeding  involving  the Company or any remedial
action  brought by the Trustee or  Collateral  Agent,  except to the extent such
valuations are mandated by applicable law, or any court with  jurisdiction  over

<PAGE>

such  proceedings,  in either case  without  regard to the use of the concept of
Fair Market Value by the parties hereto.

                                   ARTICLE 12.

                                  MISCELLANEOUS

     Section 12.1 CONFLICT WITH TRUST INDENTURE ACT OF 1939.

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

     Section 12.2 NOTICES; WAIVERS.

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

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

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

               Telecopier No.:  (713) 324-2447

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

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

               Telecopier No.:  (302) 651-8882

     (c) the Liquidity  Provider shall be sufficient for every purpose hereunder
if in writing and sent by personal  delivery,  by  telecopier,  by registered or

<PAGE>

certified mail or by nationally recognized overnight courier, postage or courier
charges, as the case may be, prepaid, to the Liquidity Provider at:

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

               Telecopier No.:  (212) 761-0350

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

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

               Telecopier No.:  (914) 765-3163

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

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

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

<PAGE>

     Section 12.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.

     Noteholders  may  communicate   pursuant  to  TIA  ss.  312(b)  with  other
Noteholders  with respect to their rights under this Indenture or the Notes. The
Company,  the  Trustee,  the  Registrar  and any  other  person  shall  have the
protection of TIA ss. 312(c).

     Section 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.

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

     Section 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.

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

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

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

<PAGE>

of such counsel,  such counsel may rely upon the opinion of counsel qualified in
such other jurisdiction or area of law.

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

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

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

     Section 12.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.

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

     Section 12.7 EFFECT OF HEADINGS.

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

     Section 12.8 GOVERNING LAW.

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

<PAGE>

     Section 12.9 QUIET ENJOYMENT.

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

     Section 12.10 NO RECOURSE AGAINST OTHERS.

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

     Section 12.11 BENEFITS OF INDENTURE AND THE SECURITIES RESTRICTED.

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

     Section 12.12 SUCCESSORS AND ASSIGNS.

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

     Section 12.13 COUNTERPART ORIGINALS.

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

     Section 12.14 SEVERABILITY.

     The  provisions  of this  Indenture  are  severable,  and if any  clause or
provision shall be held invalid, illegal or unenforceable in whole or in part in

<PAGE>

any jurisdiction,  then such invalidity or unenforceability shall affect in that
jurisdiction  only such clause or provision,  or part thereof,  and shall not in
any manner  affect such clause or  provision  in any other  jurisdiction  or any
other clause or provision of this  Indenture in any  jurisdiction,  and a Holder
shall have no claim therefor against any party hereto.

<PAGE>

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

                                       CONTINENTAL AIRLINES, INC.

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

                                       WILMINGTON TRUST COMPANY,
                                       as Trustee

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

                                       MORGAN STANLEY CAPITAL SERVICES INC.,
                                       as Liquidity Provider

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

                                       MBIA INSURANCE CORPORATION,
                                       as Policy Provider

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

<PAGE>

                                   Appendix I

                              DEFINITIONS APPENDIX

SECTION 1. DEFINED TERMS.

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

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

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

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

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

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

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

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

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

     "AMENDMENT NO. 1 TO COLLATERAL  MAINTENANCE  AGREEMENT" means Amendment No.
1, dated as of the  Subordinated  Issuance Date, to the  Collateral  Maintenance
Agreement.

     "AMENDMENT  NO. 1 TO REFERENCE  AGENCY  AGREEMENT"  means  Amendment No. 1,
dated as of the Subordinated Issuance Date, to the Reference Agency Agreement.

     "AMENDMENT NO. 1 TO SECURITY  AGREEMENT" means Amendment No. 1, dated as of
the Subordinated Issuance Date, to the Security Agreement.

     "ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral,  taking at least the following actions: (i)
reviewing the Parts Inventory Report

<PAGE>

prepared as of the applicable  Valuation  Date;  (ii) reviewing the  Independent
Appraiser's  internal  value database for values  applicable to Qualified  Spare
Parts included in the Spare Parts Collateral;  (iii) developing a representative
sampling of a reasonable number of the different  Qualified Spare Parts included
in Spare  Parts  Collateral  for which a market  check will be  conducted;  (iv)
checking other sources, such as manufacturers,  other airlines,  U.S. government
procurement  data and airline  parts  pooling  price lists,  for current  market
prices of the sample parts  referred to in clause  (iii);  (v)  establishing  an
assumed ratio of Serviceable  Parts to Unserviceable  Parts as of the applicable
Valuation  Date  based  upon  information   provided  by  the  Company  and  the
Independent  Appraiser's  limited  physical review of the Spare Parts Collateral
referred to in the following  clause (vi);  (vi) visiting at least two locations
selected by the Independent  Appraiser where the Pledged Spare Parts are kept by
the Company  (neither of which was  visited for  purposes of the last  appraisal
under Section 2.1 or 2.2 of the Collateral Maintenance Agreement,  whichever was
most recent),  PROVIDED that at least one such location  shall be one of the top
three  locations at which the Company keeps the largest  number of Pledged Spare
Parts, to conduct a limited physical  inspection of the Spare Parts  Collateral;
(vii) conducting a limited review of the inventory  reporting system  applicable
to the Pledged  Spare Parts,  including  checking  information  reported in such
system against  information  determined through physical  inspection pursuant to
the  preceding  clause  (vi) and (viii)  reviewing a sampling of the Spare Parts
Documents (including tear-down reports).

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

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

     "APPLICABLE MARGIN" means 0.90%.

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

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

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

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

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

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

<PAGE>

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

     "BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the  Applicable  Date pursuant to
the formula set forth  below;  PROVIDED,  HOWEVER,  that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below,  is equal to or less than zero or (y) on or in respect of any  Applicable
Date that is an Interest  Payment Date (or, if such an Interest  Payment Date is
not a Business Day, the next succeeding Business Day)

     Break Amount = Z-Y

     Where:

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

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

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

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

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

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

     "CASH COLLATERAL  ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if

<PAGE>

it shall so qualify,  into which all amounts drawn under the Liquidity  Facility
pursuant  to  Section  3.5(c),  3.5(d)  or  3.5(i)  of the  Indenture  shall  be
deposited.

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

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

     "CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.

     "CLOSING DATE" means the Issuance Date.

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

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

     "COLLATERAL AGENT" means the Security Agent and each other Person acting as
agent on behalf of the Holders under any other Collateral Agreement.

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

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

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

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

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

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

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

     "CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents  that would have been shown on the balance sheet of Continental  and

<PAGE>

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

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

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

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

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

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

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

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

     "DEFINITIVE  SUBORDINATED  SECURITIES" is defined in Section 2A.1(e) of the
Indenture.

<PAGE>

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

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

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

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

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

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

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

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

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

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

<PAGE>

right of recoupment),  and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.

     "ELIGIBLE  DEPOSIT  ACCOUNT" means either (a) a segregated  account with an
Eligible  Institution or (b) a segregated trust account with the corporate trust
department of a depository  institution  organized  under the laws of the United
States of America or any one of the states  thereof or the  District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository  institution has a long-term  unsecured debt rating or issuer
credit  rating,  as the  case  may  be,  from  Moody's  of at  least  A-3 or its
equivalent.  An Eligible  Deposit  Account may be maintained  with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution;  provided
that such  Liquidity  Provider  shall have  waived  all  rights of  set-off  and
counterclaim with respect to such account.

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

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

<PAGE>

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

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

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

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

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

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

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

     "EXCHANGE FLOATING RATE SECURED  SUBORDINATED NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.

     "EXCHANGE  OFFER"  means (i) with respect to the  Securities,  the exchange
offer  which  may be made  pursuant  to the  Registration  Rights  Agreement  to
exchange Initial Securities for Exchange Securities and (ii) with respect to the
Subordinated  Securities,  the exchange  offer which may be made pursuant to the
Subordinated   Security   Registration  Rights  Agreement  to  exchange  Initial
Subordinated Securities for Exchange Subordinated Securities.

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

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

     "EXCHANGE  SUBORDINATED  SECURITIES" means the securities  substantially in
the form of  Exhibit D to the  Indenture  issued  in  exchange  for the  Initial
Subordinated Securities pursuant to the

<PAGE>

Subordinated Security  Registration Rights Agreement and authenticated  pursuant
to the Indenture.

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

     "EXPENDABLES" means Qualified Spare Parts other than Rotables.

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

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

     "FAA FILED DOCUMENTS"  means the Security  Agreement and Amendment No. 1 to
Security Agreement.

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

     "GLOBAL  EXCHANGE  SUBORDINATED  SECURITY" is defined in Section 2A.1(f) of
the Indenture.

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

     "GLOBAL  SUBORDINATED  SECURITIES"  is defined  in  Section  2A.1(d) of the
Indenture.

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

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

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

     "INDENTURE"  means the Amended and  Restated  Indenture  dated as of May 9,
2003,  among the Company,  the Trustee,  the  Liquidity  Provider and the Policy
Provider under which the Notes are issued.

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

     "INDENTURE TRUSTEE" means the Trustee.

<PAGE>

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

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

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

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

     "INITIAL FLOATING RATE SECURED  SUBORDINATED  NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.

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

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

     "INITIAL   SUBORDINATED   SECURITIES"   means  the  securities  issued  and
authenticated pursuant to the Indenture and substantially in the form of Exhibit
D thereto, other than the Exchange Subordinated Securities.

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

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

     "INTEREST  PAYMENT DATE" means March 6, June 6,  September 6 and December 6
of each year so long as any Note is Outstanding (commencing March 6, 2003 in the
case of the  Securities  and  June  6,  2003  in the  case  of the  Subordinated
Securities),  PROVIDED  that if any such  day is not a  Business  Day,  then the
relevant Interest Payment Date shall be the next succeeding Business Day.

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

     "LIQUIDITY GUARANTOR" means Morgan Stanley.

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

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

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

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

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

     "MAXIMUM COLLATERAL RATIO" means 45%.

     "MAXIMUM SUBORDINATED COLLATERAL RATIO" means 67.5%.

     "MINIMUM ROTABLE RATIO" means 150%.

     "MINIMUM SUBORDINATED ROTABLE RATIO" means 100%.

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

     "NOTES" means the Securities and the Subordinated Securities.

     "NOTEHOLDER" means any holder of one or more Notes.

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

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

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

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

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

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

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

     "OPINION OF COUNSEL"  means a written  opinion from the General  Counsel of
the  Company,  legal  counsel to the  Company or another  legal  counsel  who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the  Indenture.  The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days  following  receipt) of, or its action on,

<PAGE>

an opinion of counsel not  specifically  referred  to above shall be  sufficient
evidence that such counsel is acceptable to the Trustee.

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

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

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

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

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

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

     "ORIGINAL  INDENTURE"  has  the  meaning  set  forth  in  the  introductory
paragraph of the Indenture.

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

     "PREMIUM" means, with respect to any Note redeemed pursuant to Article 4 of
the Indenture,  the following  percentage of the principal  amount of such Note:
(a) with respect to a Security,  (i) if redeemed before the first anniversary of
the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and
before the second  anniversary of the Issuance Date, 1.0%; and (iii) if redeemed
on or after such  second  anniversary  and before the third  anniversary  of the
Issuance Date,  0.5%; and (b) with respect to a  Subordinated  Security,  (i) if
redeemed before the second anniversary of the Subordinated  Issuance Date, 3.0%;
(ii) if  redeemed  on or after  such  second  anniversary  and  before the third
anniversary of the Subordinated Issuance Date, 2.0%; and (iii) if redeemed on or
after  such  third  anniversary  and  before  the  fourth   anniversary  of  the
Subordinated  Issuance Date, 1.0%;  PROVIDED that no Premium shall be payable in
connection  with a  redemption  made  by the  Company  to  satisfy  the  Maximum
Collateral Ratio, Maximum  Subordinated  Collateral Ratio, Minimum Rotable Ratio
or Minimum Subordinated Rotable Ratio requirement pursuant to Section 3.1 of the
Collateral Maintenance Agreement.

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

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

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

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

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

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

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

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

     "RATING AGENCIES" means,  collectively,  at any time, and with respect to a
Series of Notes, each nationally  recognized rating agency which shall have been

<PAGE>

requested  by the  Company to rate such  Series of Notes and which shall then be
rating such Series of Notes.  The initial Rating Agency will be Moody's,  in the
case of the  Securities,  and Moody's and Standard & Poor's,  in the case of the
Subordinated Securities.

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

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

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

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

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

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

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

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

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

     "REGULATION  S DEFINITIVE  SUBORDINATED  SECURITIES"  is defined in Section
2A.1(e) of the Indenture.

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

     "REGULATION S GLOBAL  SUBORDINATED  SECURITY" is defined in Section 2A.1(d)
of the Indenture.

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

     "REPLACEMENT  LIQUIDITY  FACILITY"  means an irrevocable  revolving  credit
agreement (or agreements) in  substantially  the form of the replaced  Liquidity
Facility,  including reinstatement  provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating  Agencies with respect to
the Securities to confirm in writing their respective ratings then in effect for
the Securities (before  downgrading of such ratings,  if any, as a result of the
downgrading  of the  Liquidity  Provider),  and be  consented  to by the  Policy
Provider, which consent shall not be unreasonably withheld or delayed, in a face

<PAGE>

amount (or in an aggregate face amount) equal to the amount of interest  payable
on the Securities  (at the Capped  Interest Rate, and without regard to expected
future  principal  payments) on the eight Interest  Payment Dates  following the
date of replacement  of such Liquidity  Facility (or if such date is an Interest
Payment Date,  on such day and the seven  Interest  Payment Dates  following the
date of  replacement  of such  Liquidity  Facility)  and  issued by a Person (or
Persons) having unsecured short-term debt rating or issuer credit rating, as the
case may be,  issued by  Moody's  and  Standard  & Poor's  which are equal to or
higher  than  the  Threshold  Rating.  Without  limitation  of the  form  that a
Replacement  Liquidity  Facility  otherwise  may have  pursuant to the preceding
sentence, a Replacement  Liquidity Facility for the Securities may have a stated
expiration date earlier than 15 days after the Final Legal Maturity Date so long
as such Replacement  Liquidity Facility provides for a Non-Extension  Drawing as
contemplated by Section 3.5(d) of the Indenture.

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

     "REQUIRED  AMOUNT" means,  for any day, the sum of the aggregate  amount of
interest,  calculated at the Capped  Interest Rate, that would be payable on the
Securities on each of the eight successive  Interest  Payment Dates  immediately
following such day or, if such day is an Interest  Payment Date, on such day and
the succeeding  seven Interest  Payment  Dates,  in each case  calculated on the
basis of the  outstanding  principal  amount of the  Securities on such date and
without regard to expected future payments of principal on the Securities.

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

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

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

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

     "RESTRICTED  DEFINITIVE  SUBORDINATED  SECURITIES"  is  defined  in Section
2A.1(e) of the Indenture.

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

     "RESTRICTED GLOBAL SUBORDINATED  SECURITY" is defined in Section 2A.1(c) of
the Indenture.

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

<PAGE>

     "RESTRICTED  PERIOD"  is defined in  Section  2.1(d) of the  Indenture  for
purposes  of  the  Securities  and  in  Section  2A.1(d)  for  purposes  of  the
Subordinated Securities.

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

     "RESTRICTED  SUBORDINATED  SECURITIES"  are defined in Section  2A.2 of the
Indenture.

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

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

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

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

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

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

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

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

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

     "SECURITIES" means the Initial Securities and the Exchange Securities.

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

<PAGE>

     "SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement until a successor replaces
it in accordance  with the  provisions of the Security  Agreement and thereafter
means the successor.

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

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

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

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

     "SERIES"  means each of the  Securities  and the  Subordinated  Securities,
considered as a separate class.

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

     "SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be  required to be filed by the  Company  with the SEC  pursuant to (i) with
respect to Securities, the Registration Rights Agreement, other than an Exchange
Offer Registration Statement,  and (ii) with respect to Subordinated Securities,
the  Subordinated  Securities  Registration  Rights  Agreement,  other  than  an
Exchange Offer Registration Statement.

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

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

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

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

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

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

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

<PAGE>

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

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

     "SUBORDINATED APPLICABLE MARGIN" means 7.50%.

     "SUBORDINATED CLOSING DATE" means the Subordinated Issuance Date.

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

     "SUBORDINATED  DEBT RATE" means a rate per annum equal,  in the case of the
first Interest Period for the Subordinated Securities, to 8.78% and, in the case
of any subsequent Interest Period, LIBOR for such Interest Period, as determined
pursuant to the Reference Agency  Agreement,  plus the  Subordinated  Applicable
Margin,  PROVIDED that, solely in the event no Registration Event (as defined in
the Subordinated  Security  Registration Rights Agreement) occurs on or prior to
the 210th day after the Subordinated  Closing Date, the  Subordinated  Debt Rate
shall be increased by an  additional  margin equal to 0.50% per annum,  from and
including  such 210th day to and  excluding the earlier of (i) the date on which
such Registration Event occurs and (ii) the date on which there ceases to be any
Registrable  Securities (as defined in the  Subordinated  Security  Registration
Rights  Agreement));  or if the Shelf Registration  Statement (as defined in the
Subordinated  Security  Registration  Rights Agreement) (if it is filed),  after
being declared  effective by the SEC,  ceases to be effective at any time during
the  period   specified  by  Section  2(b)(B)  of  the   Subordinated   Security
Registration Rights Agreement for more than 60 days, whether or not consecutive,
during any 12-month period,  the Subordinated Debt Rate shall be increased by an
additional  margin equal to 0.50% per annum from and  including  the 61st day of
the applicable  12-month period such Shelf  Registration  Statement ceases to be
effective to and  excluding the date on which the Shelf  Registration  Statement
again  becomes  effective  (or, if earlier,  the end of the period  specified by
Section 2(b)(B) of the Subordinated  Security  Registration  Rights  Agreement),
PROVIDED that the additional margin added to the Subordinated Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time.

     "SUBORDINATED DOCUMENTS" means the Indenture, Amendment No. 1 to Collateral
Maintenance  Agreement,  Amendment  No.  1 to  Reference  Agency  Agreement  and
Amendment No. 1 to Security Agreement.

     "SUBORDINATED  ISSUANCE  DATE"  means the date of initial  issuance  of the
Initial Subordinated Securities.

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

<PAGE>

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

     "SUBORDINATED SECURITIES" means the Initial Subordinated Securities and the
Exchange Subordinated Securities.

     "SUBORDINATED SECURITY OFFERING MEMO" means the Offering Memorandum,  dated
May 2,  2003  of  the  Company  relating  to the  offering  of the  Subordinated
Securities.

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

     "SUBORDINATED  SECURITY PURCHASE  AGREEMENT" means the Purchase  Agreement,
dated as of May 2, 2003, by and between the Initial Purchaser and the Company.

     "SUBORDINATED   SECURITY   REGISTRATION   RIGHTS   AGREEMENT"   means   the
Registration Rights Agreement dated as of the Subordinated Issuance Date, by and
between the Company and the Initial Purchaser.

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

     "TRUSTEE"  means the party named as such in the Indenture until a successor
replaces it in accordance  with the  provisions of the Indenture and  thereafter
means the successor Trustee and if, at any time, there is more than one Trustee,
"Trustee" as used with respect to the Notes of any Series shall mean the Trustee
with respect to the Notes of that Series.

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

     "WRITTEN  NOTICE" means,  from the Trustee,  the Liquidity  Provider or the
Policy Provider, a written instrument executed by the Designated  Representative
of such Person.  An invoice  delivered  by the  Liquidity  Provider  pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing  procedures
shall constitute Written Notice under such Section.

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

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

<PAGE>

                                                                       EXHIBIT A

                               [FORM OF SECURITY]

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

<PAGE>

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

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

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

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

*  To be included on the face of each Restricted Security.

** To be included on the face of each Global Security.

<PAGE>

No. [__]                                             CUSIP/Common Code No. [___]
                                                                        $ [____]

                        [[REGULATION S] GLOBAL SECURITY]*

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

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

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

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

* To be included on the face of each Global Security.

<PAGE>

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

*    To be used for Initial Securities.

**   To be used for Exchange Securities.

<PAGE>

Securities,  or any of the other  Operative  Documents  and, upon request of the
Company,  the Trustee shall amend or supplement the Support  Documents,  in each
case only with the  written  consent of the  Controlling  Party,  PROVIDED  that
certain amendments,  supplements and waivers may not be made without the consent
of each  Securityholder  affected thereby.  Any consent by the Securityholder of
this Security  shall be conclusive and binding on such  Securityholder  and upon
all future  Securityholders of this Security and of any Security issued upon the
transfer  hereof or in exchange hereof or in lieu hereof whether or not notation
of such  consent  is  made  upon  such  Security.  Without  the  consent  of the
Controlling  Party or any Holder,  the  Indenture,  the  Securities,  any of the
Operative  Documents  and any of the Support  Documents may be amended to, among
other things,  cure any ambiguity,  defect or inconsistency or to make any other
change not inconsistent with the provisions of the Indenture, provided that such
action does not materially adversely affect the interests of any Securityholder.

     10.  DEFAULTS AND REMEDIES.  Events of Default under the Indenture  include
the following:  (a) failure by the Company to pay (1) principal of, interest on,
Premium, if any, or Break Amount, if any, with respect to any Security when due,
and such failure  shall  continue  unremedied  for a period of 10 Business  Days
thereafter (it being understood that any amount  distributed to  Securityholders
in respect of the  foregoing  from funds  provided by the Policy  Provider,  the
Liquidity Provider or a Cash Collateral Account shall not be deemed to cure such
Default)  or (2)  any  other  amount  payable  by it to the  Holders  under  the
Indenture or any Operative  Document  when due, and such failure shall  continue
for a period in excess of 10  Business  Days  after  the  Company  has  received
written  notice from the Trustee of the failure to make such  payment  when due;
(b) failure by the Company to observe  and perform in any  material  respect any
other  covenant,  agreement or  obligation  set forth in the Indenture or in any
other  Operative  Documents,  with such  failure  continuing  after  notice  and
specified cure periods;  (c) any  representation or warranty made by the Company
in the  Indenture or any other  Operative  Document (1) shall prove to have been
untrue or  inaccurate  in any  material  respect as of the date  made,  (2) such
untrue or  inaccurate  representation  or  warranty  is  material at the time in
question and (3) the same shall remain  uncured  following  notice;  and (d) the
occurrence of certain events of bankruptcy,  reorganization or insolvency of the
Company. Subject to certain limitations in the Indenture, if an Event of Default
occurs and is continuing,  the  Controlling  Party may, by notice to Company and
the Trustee,  and the Trustee shall, upon the request of the Controlling  Party,
declare all unpaid principal of, accrued interest on, Premium, if any, and Break
Amount,  if any, with respect to the  Securities  Outstanding  and other amounts
otherwise  payable  under  the  Indenture,   if  any,  to  be  due  and  payable
immediately.  In the case of an Event of Default  arising from certain events of
bankruptcy,  reorganization  or  insolvency,  such amounts  shall  automatically
become and be  immediately  due and payable  without  further  action or notice.
Under certain  circumstance,  the Controlling Party by notice to the Trustee may
rescind an acceleration and its consequences.

     If an Event of Default occurs and is continuing, the Trustee may pursue any
available  remedy by  proceeding  at law or in equity to collect  the payment of
principal of,  interest on, or Premium,  if any, or Break  Amount,  if any, with
respect  to,  the  Securities  or other  amounts  otherwise  payable  under  the
Indenture,  if any. Subject to the Indenture, so long as an Event of Default has
occurred and is continuing,  the Controlling  Party by notice to the Trustee may
authorize  the Trustee to waive an existing  Default or Event of Default and its
consequences.  The  Controlling  Party may direct the time,  method and place of

<PAGE>

conducting any proceeding for any remedy available to the Trustee (as Trustee or
Collateral Agent, subject, in the case of any actions based on the status of the
Trustee as Collateral Agent, to any limitations otherwise expressly provided for
in the Operative  Documents) or exercising  any trust or power  conferred on it;
provided that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.  Securityholders  may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Securities.  The  Trustee  may  withhold  from  Securityholders  notice  of  any
continuing default (except a default in payment of principal,  interest, Premium
or Break Amount) if it determines  in good faith that  withholding  notice is in
their  interests.  The above  description  of Events of Default and  remedies is
qualified  by  reference,  and  subject  in its  entirety  to the more  complete
description thereof contained in the Indenture.

     11.  NO  RECOURSE  AGAINST  OTHERS.  A  director,   officer,   employee  or
stockholder,  as such, of the Company shall not have any personal  liability for
any obligations of the Company under the Securities,  the Indenture or the other
Operative  Documents by reason of his or her status as such  director,  officer,
employee or stockholder.  Each Securityholder by accepting a Security waives and
releases  all  such   liability.   The  waiver  and  release  are  part  of  the
consideration for the issue of the Securities.

     12.  AUTHENTICATION.  This  Security  shall not be  entitled to any benefit
under  the  Indenture  or be valid  or  obligatory  for any  purpose  until  the
certificate of  authentication  attached  hereto has been executed by the manual
signature of an authorized  signatory of the Trustee or an authenticating  agent
appointed by the Trustee.

     13.  UNCLAIMED  MONEY.  If money  deposited  with the Trustee or any Paying
Agent in trust for the payment of the principal of, interest on, or Premium,  if
any, or Break  Amount,  if any,  with respect to, any Security and unclaimed for
two (2) years after such principal,  interest, Premium, if any, or Break Amount,
if any, has become due and payable  shall be paid to the Company on its request,
subject  to any  applicable  abandoned  property  law,  and the  Holder  of such
Security shall thereafter,  as an unsecured  general creditor,  look only to the
Company for payment thereof.

     14.  ABBREVIATIONS.  Customary  abbreviations  may be used in the name of a
Holder or an  assignee,  such as:  TEN COM (=  tenants  in  common),  TEN ENT (=
tenants by the  entireties),  JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian),  and U/G/M/A (= Uniform Gifts
to Minors Act).

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

<PAGE>

     [16. REGISTRATION.  The Holder of this Security is entitled to the benefits
of the Registration  Rights Agreement.  In the event that no Registration  Event
(as  defined in the  Registration  Rights  Agreement)  occurs on or prior to the
210th day after the  Issuance  Date,  the Debt  Rate  shall be  increased  by an
additional  margin  equal to 0.50%,  from and  including  such  210th day to and
excluding the earlier of (i) the date on which a  Registration  Event occurs and
(ii) the date on which there ceases to be any Registrable Securities (as defined
in the Registration  Rights Agreement);  or if the Shelf Registration  Statement
(as defined in the Registration Rights Agreement) (if it is filed),  after being
declared  effective  by the SEC,  ceases to be  effective at any time during the
period  specified by Section 2(b)(B) of the  Registration  Rights  Agreement for
more than 60 days,  whether or not consecutive,  during any 12-month period, the
Debt Rate shall be  increased  by an  additional  margin equal to 0.50% from and
including the 61st day of the applicable 12-month period such Shelf Registration
Statement  ceases to be effective to and  excluding  the date on which the Shelf
Registration  Statement again becomes effective (or, if earlier,  the end of the
period  specified  by Section  2(b)(B) of the  Registration  Rights  Agreement);
PROVIDED  that the  additional  margin  added to the Debt Rate  pursuant to this
section shall never exceed 0.50% at any time.]*

     [17. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT. Each Holder of
a Security,  by acceptance hereof,  acknowledges and agrees to the provisions of
the  Registration  Rights  Agreement,   including,   without   limitation,   the
obligations   of  the  Holders   with   respect  to  a   registration   and  the
indemnification of the Company to the extent provided therein.]*

     18.  GOVERNING  LAW. THIS  SECURITY  SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     The  Company  will  furnish to any Holder of this  Security,  upon  written
request and without  charge,  a copy of the  Indenture.  Request may be made to:
Continental Airlines,  Inc., 1600 Smith Street, Houston, Texas 77002, Attention:
Corporate Secretary.

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

* To be included only on each Initial Security.

* To be included only on each Initial Security.

<PAGE>

     IN WITNESS  WHEREOF,  the  Company  has  caused  this  Security  to be duly
executed in its corporate name by its officer  thereunto duly  authorized on the
date hereof.

Dated:

                                       CONTINENTAL AIRLINES, INC.

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

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

<PAGE>

              [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]

                     This is one of the Securities referred
                              to in the Indenture.

                                       WILMINGTON TRUST COMPANY,
                                         not in its individual capacity
                                         but solely as Trustee

                                       By:
                                          --------------------------------------
                                                    Authorized Officer

<PAGE>

                             FORM OF TRANSFER NOTICE

          FOR VALUE RECEIVED the undersigned  registered  holder hereby sell(s),
assign(s) and transfer(s) unto

INSERT TAXPAYER IDENTIFICATION NO.

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

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

please print or typewrite name and address including zip code of assignee

----------------------------------
the within Security and all rights thereunder,  hereby irrevocably  constituting
and appointing

---------------------------------
attorney to transfer said Security on the books of the Registrar with full power
of substitution in the premises.

                     [THE FOLLOWING PROVISION TO BE INCLUDED

                               ON ALL SECURITIES,

                           EXCEPT REGULATION S GLOBAL,

           REGULATION S DEFINITIVE SECURITIES AND EXCHANGE SECURITIES]

          In connection with any transfer of this Certificate occurring prior to
the date that is the earlier of the date of an effective  Registration Statement
or the date two years after the later of the original  issuance of this Security
or the last date on which this Security was held by Continental  Airlines,  Inc.
or any affiliate of Continental  Airlines,  Inc., the undersigned  confirms that
without utilizing any general solicitation or general advertising that:

<PAGE>

                                   [CHECK ONE]

[__] (a) this Security is being  transferred  in  compliance  with the exemption
from registration under the Securities Act of 1933, as amended, provided by Rule
144A thereunder.

                                       OR

[__] (b) this Security is being  transferred  other than in accordance  with (a)
above and  documents  are being  furnished  that comply with the  conditions  of
transfer set forth in this Security and the Indenture.

If  neither  of the  foregoing  boxes is  checked,  the  Registrar  shall not be
obligated  to register  this  Security in the name of any Person  other than the
Holder  hereof  unless  and  until  the  conditions  to  any  such  transfer  of
registration  set forth  herein and in Section 2.6 of the  Indenture  shall have
been satisfied.

Date:[_________, ___]        [NAME OF TRANSFEROR]
                             --------------------------

                             NOTE: The signature must  correspond  with the name
                             as written  upon the face of the within-  mentioned
                             instrument in every particular  without  alteration
                             or any change whatsoever.

Signature Guarantee:
                     --------------------------

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

     The undersigned represents and warrants that it is purchasing this Security
for its own  account  or an account  with  respect  to which it  exercises  sole
investment  discretion  and  that  it  and  any  such  account  is a  "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended,  and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges  that it has received such information  regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request  such  information  and that it is aware that the  transferor  is
relying upon the undersigned's  foregoing  representations in order to claim the
exemption from registration provided by Rule 144A.

Dated:[___________, ___]
                            --------------------------
                            NOTE:  To be executed by an executive officer.

<PAGE>

                                                                       EXHIBIT B

             FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
                   TRANSFERS OF NOTES PURSUANT TO REGULATION S

                                                    [___________, ___]

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention:  Corporate Trust Administration

          Re: FLOATING RATE SECURED [SUBORDINATED] NOTES DUE 2007
              (THE "SECURITIES")

Ladies and Gentlemen:

     In connection with our proposed sale of US $[__] of the Securities, we
confirm that such sale has been effected pursuant to and in accordance with
Regulation S under the Securities Act of 1933, as amended, and, accordingly, we
represent that:

          (1) the offer of the Securities was not made to a person in the United
     States;

          (2) either (a) at the time the buy order was originated, the
     transferee was outside the United States or we and any person acting on our
     behalf reasonably believed that the transferee was outside the United
     States or (b) the transaction was executed in, on or through the facilities
     of a designated off-shore securities market and neither we nor any person
     acting on our behalf knows that the transaction has been pre-arranged with
     a buyer in the United States;

          (3) no directed selling efforts have been made in the United States in
     contravention of the requirements of Rule 903(a) or Rule 904(a) of
     Regulation S, as applicable; and

          (4) the transaction is not part of a plan or scheme to evade the
     registration requirements of the Securities Act.

     In addition, if the sale is made during a restricted period and the
provisions of Rule 903(b)(2) or Rule 904(b)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(b)(2) or Rule 904(b)(1), as the case may be.

<PAGE>

     You and Continental Airlines, Inc. are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.

                                       Very truly yours,

                                       [Name of Transferor]

<PAGE>
                                                                       EXHIBIT C

                FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
                           WITH TRANSFERS OF NOTES TO
                   NON-QIB INSTITUTIONAL ACCREDITED INVESTORS

                                                    [___________, ___]

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention:  Corporate Trust Administration

Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002

                              CONTINENTAL AIRLINES
     Floating Rate Secured [Subordinated] Notes due 2007 (the "Securities")

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

Ladies and Gentlemen:

     In  connection  with our  proposed  purchase  of U.S.  $[_____________]  of
Securities (the "Purchased Securities"), we confirm that:

          1.  We  understand  that  any  subsequent  transfer  of the  Purchased
     Securities is subject to certain  restrictions  and conditions set forth in
     the Amended and Restated Indenture, dated as of [___________],  2003, among
     Continental Airlines,  Inc. (the "Company"),  Wilmington Trust Company (the
     "Trustee"),  Morgan Stanley Capital  Services Inc., as Liquidity  Provider,
     and  MBIA  Insurance  Corporation,  as  Policy  Provider,  relating  to the
     Securities,  and we agree to be bound  by,  and not to  resell,  pledge  or
     otherwise transfer the Purchased Securities except in compliance with, such
     restrictions and conditions and the Securities Act of 1933, as amended (the
     "Securities Act").

          2. We are purchasing  Securities having an aggregate  principal amount
     of not less  than  $100,000  and  each  account  (if any) for  which we are
     purchasing   Securities  is  purchasing   Securities  having  an  aggregate
     principal amount of not less than $100,000.

          3.  We  understand  that  the  Purchased   Securities  have  not  been
     registered  under the  Securities  Act, that the Purchased  Securities  are
     being  sold to us in a  transaction  that is exempt  from the  registration
     requirements  of the Securities  Act and that the Purchased  Securities may
     not be offered or resold except as permitted in the following sentence.  We
     agree,  on our own  behalf and on behalf of any  accounts  for which we are
     acting  as  hereinafter  stated,  that,  if we  should  sell any  Purchased
     Securities  within two years  after the later of the  original  issuance of
     such  Purchased  Securities  and the  last  date on  which  such  Purchased
     Securities  are owned by the Company or any  affiliate of the  Company,  we
     will do so only (A) to the Company,  (B) in accordance with Rule 144A under

<PAGE>

     the  Securities  Act  to a  "qualified  institutional  buyer"  (as  defined
     therein),  (C) outside  the United  States in  accordance  with Rule 904 of
     Regulation S under the  Securities  Act, (D) pursuant to the exemption from
     registration  provided by Rule 144 under the Securities Act or (E) pursuant
     to an effective  registration  statement  under the Securities  Act, and we
     further  agree to  provide to any person  purchasing  any of the  Purchased
     Securities  from us a notice  advising such  purchaser  that resales of the
     Purchased Securities are restricted as stated herein.

          4.  We  understand  that,  on any  proposed  resale  of any  Purchased
     Securities,  we will be  required to furnish to the Company and the Trustee
     such  certifications,  legal opinions and other  information as the Company
     and the Trustee may  reasonably  require to confirm that the proposed  sale
     complies with the foregoing  restrictions.  We further  understand that the
     Purchased  Securities  purchased by us will bear a legend to the  foregoing
     effect.

          5. We are an institutional  "accredited  investor" (as defined in Rule
     501(a)(1),  (2), (3) or (7) of Regulation D under the  Securities  Act) and
     have such knowledge and experience in financial and business  matters as to
     be capable of  evaluating  the  merits and risks of our  investment  in the
     Purchased  Securities,  and we and any accounts for which we are acting are
     each able to bear the economic risk of our or their investments.

          6. We are acquiring the  Purchased  Securities  for our own account or
     for one or more  accounts  (each of which is an  institutional  "accredited
     investor") as to each of which we exercise sole  investment  discretion and
     not with a view to any distribution of the Purchased  Securities,  subject,
     nevertheless  to the  understanding  that the  disposition  of our property
     shall at all times be and remain within our control.

     You are entitled to rely upon this letter and are irrevocably authorized to
produce  this  letter  or  a  copy  thereof  to  any  interested  party  in  any
administrative  or legal  proceedings  or official  inquiry  with respect to the
matters covered hereby.

                                       Very truly yours,

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

<PAGE>

                                                                       EXHIBIT D

                         [FORM OF SUBORDINATED SECURITY]

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

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

* To be included on the face of each Restricted Subordinated Security.

<PAGE>

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

TRANSFERS OF THIS GLOBAL  SECURITY  SHALL BE LIMITED TO TRANSFERS IN WHOLE,  BUT
NOT IN PART,  TO NOMINEES OF DTC OR TO A SUCCESSOR  THEREOF OR SUCH  SUCCESSOR'S
NOMINEE AND  TRANSFERS OF PORTIONS OF THIS GLOBAL  SECURITY  SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE  WITH THE  RESTRICTIONS  SET FORTH IN SECTIONS 2A.5
AND 2A.6 OF THE INDENTURE REFERRED TO HEREIN.]**

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

** To be included on the face of each Global Subordinated Security.

<PAGE>

No. [__]                                             CUSIP/Common Code No. [___]
                                                                         $[____]

                 [[REGULATION S] GLOBAL SUBORDINATED SECURITY]*

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

          This note was issued with  "original  issue  discount."  The
          total  amount  of  original  issue  discount  is 5%  of  its
          principal  amount,  the issue date is May 9,  2003,  and the
          yield to  maturity  on the  issue  date  would  be  10.143%,
          compounded  quarterly,   assuming  LIBOR  remains  at  1.28%
          throughout the term of the note.

     CONTINENTAL  AIRLINES,   INC.,  a  Delaware  corporation  (the  "Company"),
promises  to pay  to  [__________],  or the  registered  assignee  thereof,  the
principal  sum of  $[_______]  Dollars (the  "Principal  Amount") on December 6,
2007,  subject to earlier  payment as  provided  in the  Indenture  referred  to
herein.  This Subordinated  Security shall bear interest on the unpaid Principal
Amount from time to time  outstanding from the most recent Interest Payment Date
to which  interest  has been paid (or,  if no  interest  has been paid under the
Indenture,  from May 9, 2003) at a rate per annum for each Interest Period equal
to the Subordinated Debt Rate for such Interest Period  (calculated on the basis
of a year of 360 days and actual days  elapsed  during the period for which such
amount accrues). The Company shall pay accrued interest in arrears on each March
6, June 6, September 6 and December 6 of each year, commencing June 6, 2003 (or,
if not a Business Day, the next succeeding  Business Day) (an "Interest  Payment
Date") until the Principal  Amount has been paid in full,  PROVIDED that if such
payment in full is not made on an Interest Payment Date,  accrued interest shall
be paid on the date of such  payment  in full  rather  than  the  next  Interest
Payment Date.  Interest  shall accrue with respect to the first but not the last
day of each Interest  Period.  This  Subordinated  Security shall bear interest,
payable on demand, at the Subordinated Payment Due Rate (calculated on the basis
of a year of 360 days and actual days  elapsed  during the period for which such
amount accrues) on any part of the Principal Amount and, to the extent permitted
by applicable  Law,  interest and any other amounts  payable  hereunder not paid
when due,  in each case for the period  the same is  overdue.  Amounts  shall be
overdue if not paid when due (whether at stated  maturity,  by  acceleration  or
otherwise).  Notwithstanding  anything to the contrary  contained herein, if any
date on which a payment under this Subordinated Security becomes due and payable
is not a Business  Day,  then such payment  shall not be made on such  scheduled
date but shall be made on the next  succeeding  Business Day, and such extension
of time shall be included in the computation of interest payable.

     1. GENERAL. This Subordinated Security is one of a duly authorized issue of
securities  of the Company  designated as  "[Initial]  [Exchange]  Floating Rate

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

* To be included on the face of each Global Subordinated Security.

<PAGE>

Secured   Subordinated  Notes  due  2007"  (herein,   called  the  "Subordinated
Securities"),  limited in aggregate  principal amount to  $100,000,000,  issued,
authenticated  and  delivered  pursuant to the Amended and  Restated  Indenture,
dated as of May 9, 2003 (the "Indenture"),  among the Company,  Wilmington Trust
Company,  as Trustee (the  "Trustee"),  Morgan Stanley Capital Services Inc., as
Liquidity Provider, and MBIA Insurance  Corporation,  as Policy Provider. To the
extent not otherwise defined herein,  the capitalized terms used herein have the
meanings  assigned  to them in the  Indenture.  This  Subordinated  Security  is
subject to the terms,  provisions and conditions of the Indenture and those made
applicable  to the  Indenture  by the TIA.  The  indebtedness  evidenced by this
Subordinated  Security is, to the extent provided in the Indenture,  subordinate
and subject in right of payment to the prior payment in full of the  Securities,
and this  Subordinated  Security is issued  subject to such  provisions.  To the
extent any provision of this  Subordinated  Security  conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling.  Reference is hereby made to the  Indenture,  the TIA, the Security
Agreement  and the other  Operative  Documents  for a complete  statement of the
rights  and  obligations  of the  holders  of,  and the nature and extent of the
security for, this Subordinated Security. By virtue of its acceptance hereof the
Subordinated  Securityholder of this Subordinated Security assents to and agrees
to be bound by the provisions of the Indenture.

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

     3.  OPTIONAL  REDEMPTION.  The  Company  may not  redeem  the  Subordinated
Securities  prior to May 9,  2004.  The  Company  may  redeem  the  Subordinated
Securities  on or after such date at any time in whole or (so long as no Payment
Default has occurred  and is  continuing)  in part (in any integral  multiple of
$1,000) at its sole option at a redemption price equal to the sum of 100% of the
principal  amount of, accrued and unpaid  interest on, and Premium,  if any, and
Break Amount, if any, with respect to, the redeemed  Subordinated  Securities to
and  including  the  Redemption  Date.  "Premium"  means,  with  respect  to any
Subordinated  Security  redeemed  pursuant  to  the  Indenture,   the  following
percentage  of the  principal  amount  of  such  Subordinated  Security:  (i) if
redeemed before the second anniversary of the Subordinated  Issuance Date, 3.0%;
(ii) if  redeemed  on or after  such  second  anniversary  and  before the third
anniversary of the Subordinated Issuance Date, 2.0%; and (iii) if redeemed on or
after  such  third  anniversary  and  before  the  fourth   anniversary  of  the
Subordinated  Issuance Date, 1.0%;  PROVIDED that no Premium shall be payable in
connection  with a  redemption  made  by the  Company  to  satisfy  the  Maximum
Subordinated   Collateral  Ratio  or  the  Minimum  Subordinated  Rotable  Ratio
requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement. The
Trustee shall mail a notice of any redemption at least 15 days but not more than
60 days before the Redemption Date to each Holder whose Subordinated  Securities
are to be redeemed at his  registered  address.  If the Trustee  gives notice of
redemption but the Company fails to pay when due all amounts necessary to effect
such redemption,  such redemption shall be deemed revoked and no amount shall be
due as a  result  of  notice  of  redemption  having  been  given.  Subordinated

<PAGE>

Securities  called for redemption  shall cease to bear interest on and after the
Redemption  Date (unless the Company  shall fail to pay the  redemption  price).
Upon surrender to the Paying Agent, such  Subordinated  Securities shall be paid
the redemption price.

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

     5. COLLATERAL. The Company's obligations with respect to the Securities and
the Subordinated Securities are secured by a lien on the Pledged Spare Parts and
certain other property of the Company.

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

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

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

* To be used for Initial Subordinated Securities.

** To be used for Exchange Subordinated Securities.

<PAGE>

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

     9.  AMENDMENTS  AND WAIVERS.  The Company and the Trustee or the Collateral
Agent,  as the  case  may  be,  may  amend  or  supplement  the  Indenture,  the
Subordinated  Securities,  or any of the other Operative Documents, in each case
only with the written  consent of the Controlling  Party,  PROVIDED that certain
amendments,  supplements and waivers relating to the Subordinated Securities may
not be made  without the consent of each  Subordinated  Securityholder  affected
thereby  and,  in  certain  cases,  may  be  made  without  the  consent  of the
Controlling  Party.  Any  consent  by the  Subordinated  Securityholder  of this
Subordinated  Security  shall be  conclusive  and  binding on such  Subordinated
Securityholder  and  upon  all  future  Subordinated   Securityholders  of  this
Subordinated  Security and of any Subordinated Security issued upon the transfer
hereof or in exchange  hereof or in lieu hereof  whether or not notation of such
consent is made upon such  Subordinated  Security.  Without  the  consent of the
Controlling Party or any Holder, the Indenture,  the Subordinated Securities and
any of the Operative  Documents may be amended to, among other things,  cure any
ambiguity,  defect or inconsistency or to make any other change not inconsistent
with the  provisions  of the  Indenture,  provided  that  such  action  does not
materially adversely affect the interests of any Subordinated Securityholder.

     10.  DEFAULTS AND REMEDIES.  Events of Default under the Indenture  include
the following:  (a) failure by the Company to pay (1) principal of, interest on,
Premium, if any, or Break Amount, if any, with respect to any Note when due, and
such  failure  shall  continue  unremedied  for a  period  of 10  Business  Days
thereafter (it being understood that any amount  distributed to  Securityholders
in respect of the  foregoing  from funds  provided by the Policy  Provider,  the
Liquidity Provider or a Cash Collateral Account shall not be deemed to cure such
Default)  or (2)  any  other  amount  payable  by it to the  Holders  under  the
Indenture or any Operative  Document  when due, and such failure shall  continue
for a period in excess of 10  Business  Days  after  the  Company  has  received
written  notice from the Trustee of the failure to make such  payment  when due;
(b) failure by the Company to observe  and perform in any  material  respect any
other  covenant,  agreement or  obligation  set forth in the Indenture or in any
other  Operative  Documents,  with such  failure  continuing  after  notice  and
specified cure periods;  (c) any  representation or warranty made by the Company
in the  Indenture or any other  Operative  Document (1) shall prove to have been
untrue or  inaccurate  in any  material  respect as of the date  made,  (2) such
untrue or  inaccurate  representation  or  warranty  is  material at the time in
question and (3) the same shall remain  uncured  following  notice;  and (d) the
occurrence of certain events of bankruptcy,  reorganization or insolvency of the
Company. Subject to certain limitations in the Indenture, if an Event of Default
occurs and is continuing,  the  Controlling  Party may, by notice to Company and
the Trustee,  and the Trustee shall, upon the request of the Controlling  Party,
declare all unpaid principal of, accrued interest on, Premium, if any, and Break
Amount,  if any,  with  respect  to the  Notes  Outstanding  and  other  amounts
otherwise  payable  under  the  Indenture,   if  any,  to  be  due  and  payable
immediately.  In the case of an Event of Default  arising from certain events of

<PAGE>

bankruptcy,  reorganization  or  insolvency,  such amounts  shall  automatically
become and be  immediately  due and payable  without  further  action or notice.
Under certain circumstances,  the Controlling Party by notice to the Trustee may
rescind an acceleration and its consequences.

     If an Event of Default occurs and is continuing, the Trustee may pursue any
available  remedy by  proceeding  at law or in equity to collect  the payment of
principal of,  interest on, or Premium,  if any, or Break  Amount,  if any, with
respect to, the Notes or other amounts otherwise payable under the Indenture, if
any.  Subject to the Indenture,  so long as an Event of Default has occurred and
is continuing,  the Controlling Party by notice to the Trustee may authorize the
Trustee to waive an existing  Default or Event of Default and its  consequences.
The  Controlling  Party may direct the time,  method and place of conducting any
proceeding  for any remedy  available  to the Trustee (as Trustee or  Collateral
Agent, subject, in the case of any actions based on the status of the Trustee as
Collateral  Agent, to any limitations  otherwise  expressly  provided for in the
Operative  Documents) or exercising any trust or power conferred on it; provided
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction.  Noteholders may not enforce the Indenture
or the Notes  except as  provided  in the  Indenture.  The  Trustee  may require
indemnity  satisfactory to it before it enforces the Indenture or the Notes. The
Trustee may withhold from Noteholders notice of any continuing default (except a
default in  payment  of  principal,  interest,  Premium  or Break  Amount) if it
determines  in good faith that  withholding  notice is in their  interests.  The
above  description  of Events of Default and remedies is qualified by reference,
and subject in its entirety to the more complete  description  thereof contained
in the Indenture.

     11.  NO  RECOURSE  AGAINST  OTHERS.  A  director,   officer,   employee  or
stockholder,  as such, of the Company shall not have any personal  liability for
any  obligations  of  the  Company  under  the  Securities,   the   Subordinated
Securities,  the Indenture or the other Operative  Documents by reason of his or
her status as such director, officer, employee or stockholder. Each Subordinated
Securityholder by accepting a Subordinated Security waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Subordinated Securities.

     12. AUTHENTICATION. This Subordinated Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory  for any purpose until the
certificate of  authentication  attached  hereto has been executed by the manual
signature of an authorized  signatory of the Trustee or an authenticating  agent
appointed by the Trustee.

     13.  UNCLAIMED  MONEY.  If money  deposited  with the Trustee or any Paying
Agent in trust for the payment of the principal of, interest on, or Premium,  if
any, or Break  Amount,  if any, with respect to, any  Subordinated  Security and
unclaimed for two (2) years after such principal,  interest, Premium, if any, or
Break Amount, if any, has become due and payable shall be paid to the Company on
its request, subject to any applicable abandoned property law, and the Holder of
such Subordinated  Security shall thereafter,  as an unsecured general creditor,
look only to the Company for payment thereof.

     14.  ABBREVIATIONS.  Customary  abbreviations  may be used in the name of a
Holder or an  assignee,  such as:  TEN COM (=  tenants  in  common),  TEN ENT (=

<PAGE>

tenants by the  entireties),  JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian),  and U/G/M/A (= Uniform Gifts
to Minors Act).

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

     [16. REGISTRATION.  The Holder of this Subordinated Security is entitled to
the benefits of the Subordinated Security Registration Rights Agreement.  In the
event  that no  Registration  Event (as  defined  in the  Subordinated  Security
Registration  Rights  Agreement)  occurs  on or prior to the 210th day after the
Subordinated  Issuance Date, the Subordinated Debt Rate shall be increased by an
additional  margin  equal to 0.50%,  from and  including  such  210th day to and
excluding the earlier of (i) the date on which a  Registration  Event occurs and
(ii) the date on which there ceases to be any Registrable Securities (as defined
in the Subordinated  Security  Registration  Rights Agreement);  or if the Shelf
Registration  Statement (as defined in the  Subordinated  Security  Registration
Rights Agreement) (if it is filed),  after being declared  effective by the SEC,
ceases to be  effective  at any time  during  the  period  specified  by Section
2(b)(B) of the Subordinated Security Registration Rights Agreement for more than
60  days,   whether  or  not  consecutive,   during  any  12-month  period,  the
Subordinated Debt Rate shall be increased by an additional margin equal to 0.50%
from and including  the 61st day of the  applicable  12-month  period such Shelf
Registration Statement ceases to be effective to and excluding the date on which
the Shelf  Registration  Statement again becomes effective (or, if earlier,  the
end of the period  specified  by Section  2(b)(B) of the  Subordinated  Security
Registration Rights Agreement); PROVIDED that the additional margin added to the
Subordinated  Debt Rate pursuant to this section shall never exceed 0.50% at any
time.]*

     [17. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT. Each Holder of
a Subordinated  Security,  by acceptance hereof,  acknowledges and agrees to the
provisions  of  the  Subordinated   Security   Registration   Rights  Agreement,
including,  without limitation, the obligations of the Holders with respect to a
registration  and the  indemnification  of the  Company to the  extent  provided
therein.]*

     18.  GOVERNING  LAW. THIS  SUBORDINATED  SECURITY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

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

* To be included only on each Initial Subordinated Security.

* To be included only on each Initial Subordinated Security.

<PAGE>

     The Company will furnish to any Holder of this Subordinated Security,  upon
written request and without charge, a copy of the Indenture. Request may be made
to:  Continental  Airlines,  Inc.,  1600 Smith  Street,  Houston,  Texas  77002,
Attention: Corporate Secretary.

<PAGE>

     IN WITNESS WHEREOF, the Company has caused this Subordinated Security to be
duly executed in its corporate name by its officers thereunto duly authorized on
the date hereof.

Dated:  May ___, 2003

                                       CONTINENTAL AIRLINES, INC.

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

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

<PAGE>

              [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]

               This is one of the Subordinated Securities referred
                              to in the Indenture.

                                       WILMINGTON TRUST COMPANY,
                                         not in its individual capacity
                                         but solely as Trustee

                                       By:
                                          --------------------------------------
                                                    Authorized Officer

<PAGE>

                            FORM OF TRANSFER NOTICE

          FOR VALUE RECEIVED the undersigned  registered  holder hereby sell(s),
assign(s) and transfer(s) unto

INSERT TAXPAYER IDENTIFICATION NO.

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

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

please print or typewrite name and address including zip code of assignee

----------------------------------
the within Subordinated  Security and all rights thereunder,  hereby irrevocably
constituting and appointing

----------------------------------
attorney to transfer  said  Subordinated  Security on the books of the Registrar
with full power of substitution in the premises.

                     [THE FOLLOWING PROVISION TO BE INCLUDED

                         ON ALL SUBORDINATED SECURITIES,

                           EXCEPT REGULATION S GLOBAL,

               REGULATION S DEFINITIVE SUBORDINATED SECURITIES AND
                        EXCHANGE SUBORDINATED SECURITIES]

            In connection with any transfer of this Certificate  occurring prior
to the  date  that  is the  earlier  of the  date of an  effective  Registration
Statement or the date two years after the later of the original issuance of this
Subordinated  Security or the last date on which this Subordinated  Security was
held by Continental  Airlines,  Inc. or any affiliate of  Continental  Airlines,
Inc., the undersigned  confirms that without utilizing any general  solicitation
or general advertising that:

<PAGE>

                                   [CHECK ONE]

[__] (a) this Subordinated  Security is being transferred in compliance with the
exemption  from  registration  under the  Securities  Act of 1933,  as  amended,
provided by Rule 144A thereunder.

                                       OR

[__]  (b)  this  Subordinated  Security  is  being  transferred  other  than  in
accordance with (a) above and documents are being furnished that comply with the
conditions  of  transfer  set  forth  in  this  Subordinated  Security  and  the
Indenture.

If  neither  of the  foregoing  boxes is  checked,  the  Registrar  shall not be
obligated to register this Subordinated Security in the name of any Person other
than the Holder hereof  unless and until the  conditions to any such transfer of
registration  set forth herein and in Section 2A.6 of the  Indenture  shall have
been satisfied.

Date:[___________, __]       [NAME OF TRANSFEROR]
                             ----------------------------------

                             NOTE: The signature must  correspond with
                             the name as written  upon the face of the
                             within-mentioned   instrument   in  every
                             particular,  without  alteration  or  any
                             change whatsoever.

Signature Guarantee:
                     ----------------------------------

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

     The  undersigned  represents  and warrants  that it is purchasing
this  Subordinated  Security  for its own  account or an account  with
respect to which it exercises sole  investment  discretion and that it
and any such account is a "qualified  institutional  buyer" within the
meaning of Rule 144A under the Securities Act of 1933, as amended, and
is aware  that the sale to it is being made in  reliance  on Rule 144A
and acknowledges  that it has received such information  regarding the
Company as the undersigned has requested  pursuant to Rule 144A or has
determined not to request such  information  and that it is aware that
the   transferor   is  relying   upon  the   undersigned's   foregoing
representations  in order to claim  the  exemption  from  registration
provided by Rule 144A.

Dated:[___________, __]
                            ----------------------------------
                            NOTE:  To be executed by an executive officer.AMENDMENT NO. 1 TO
                        COLLATERAL MAINTENANCE AGREEMENT

     AMENDMENT NO. 1, dated as of May 9, 2003 (this "AMENDMENT"), to Collateral
Maintenance Agreement, dated as of December 6, 2002 (the "AGREEMENT"), between
CONTINENTAL AIRLINES, INC., a Delaware corporation (the "COMPANY"), and MBIA
INSURANCE CORPORATION, a New York insurance company (the "POLICY PROVIDER").
Certain terms used herein have the defined meanings referred to in Section 1
hereof.

                              W I T N E S S E T H :
                              - - - - - - - - - -

     WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Notes due 2007 pursuant to the Original Indenture, the Company and
the Security Agent entered into the Agreement to set forth certain agreements
relating to the Spare Parts Collateral; and

     WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Subordinated Notes due 2007 pursuant to the Indenture, the Company
has requested that the Agreement be amended to provide, among other things, for
certain matters with respect to such Subordinated Securities; and

     WHEREAS, the Original Indenture, as amended and restated to provide for the
issuance of the Subordinated Securities, provides for the issuance of
$300,000,000 aggregate principal amount of the Notes.

     NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

     SECTION 1. DEFINITIONS. Unless otherwise defined or provided herein, terms
used herein that are defined in the Agreement, as amended by this Amendment,
have such respective defined meanings.

     SECTION 2. AMENDMENTS. Effective as of the date hereof, the Agreement is
hereby amended as follows:

     Section 2.1 CERTAIN REFERENCES TO SECURITIES. Each reference to
"Securities" in the first sentence of Section 2.1 and the first sentence of
Section 2.2 is deleted and replaced with "Notes".

     Section 2.2 ANNUAL APPRAISAL. Section 2.1 is amended as follows:

          (a) The second sentence of the second paragraph is amended to delete
     the phrase "and the Rotable Ratio" and to replace it with the following: ",
     the Subordinated Collateral Ratio, the Rotable Ratio and the Subordinated
     Rotable Ratio".

<PAGE>

          (b) The second sentence of the second paragraph is further amended to
     delete "and" before the phrase "the principal amount of the Securities
     Outstanding" and to insert following such phrase the following: "and the
     principal amount of the Subordinated Securities Outstanding".

     Section 2.3 SEMIANNUAL APPRAISAL. Section 2.2 is amended as follows:

          (a) The first sentence of the second paragraph is amended to delete
     the phrase "and Minimum Rotable Ratio" and to replace it with the
     following: ", the Maximum Subordinated Collateral Ratio, Minimum Rotable
     Ratio and Minimum Subordinated Rotable Ratio".

          (b) The second sentence of the second paragraph is amended to delete
     the phrase "and the Rotable Ratio" in the two instances where such phrase
     appears and to replace it with the following: ", the Subordinated
     Collateral Ratio, the Rotable Ratio and the Subordinated Rotable Ratio".

          (c) The second sentence of the second paragraph is further amended to
     delete "and" before the phrase "the principal amount of the Securities
     Outstanding" and to insert following such phrase the following: "and the
     principal amount of the Subordinated Securities Outstanding".

     Section 2.4 INFORMATION FROM THE TRUSTEE. Section 2.5 is amended to insert
in the second sentence after "Securities Outstanding" the following: ", the
principal amount of the Subordinated Securities Outstanding".

     Section 2.5 COLLATERAL RATIO. Subsections (a) and (b) of Section 3.1 are
amended and restated to read in their entirety as follows:

          "(a) If the Collateral Ratio, as most recently determined pursuant to
     an Appraisal Compliance Report, is greater than the Maximum Collateral
     Ratio or the Subordinated Collateral Ratio, as most recently determined
     pursuant to an Appraisal Compliance Report, is greater than the Maximum
     Subordinated Collateral Ratio, the Company shall within 90 days after the
     date of the Appraisal Compliance Report setting forth the calculation of
     such Collateral Ratio or Subordinated Collateral Ratio:

               (i) subject additional Qualified Spare Parts (the "ADDITIONAL
          PARTS") to the Lien of the Security Agreement in accordance with
          Section 3.1(c);

               (ii) grant a security interest to a Collateral Agent in other
          property to secure the Obligations for the benefit of the Holders and
          the Indemnitees, provided that the Company shall have received, with
          respect to the use for purposes of this Section 3.1(a) of such
          additional collateral and the applicable Collateral Agreement, (x)
          approval of the Policy Provider and (y) Rating Agency Confirmation
          with respect to the Securities and the Subordinated Securities;

               (iii) provide additional cash and/or Investment Securities to the
          Collateral Agent under the Security Agreement, provided that if the

<PAGE>

          Continental Cash Balance as of the applicable Valuation Date was less
          than $600,000,000, then the amount of Cash Collateral included in the
          Collateral, after giving effect to the action taken pursuant to
          Sections 3.1(a) and 3.1(b) with respect to such Valuation Date, shall
          not exceed $20,000,000;

               (iv) deliver Notes to the Trustee for cancellation;

               (v) redeem some or all of the Notes pursuant to Article 4 of the
          Indenture; or

               (vi) any combination of the foregoing;

such that, the Collateral Ratio and the Subordinated Collateral Ratio, as
recalculated giving effect to such action taken pursuant to this Section 3.1(a)
and, in the case of clauses (i), (ii) and (iii) of this Section 3.1(a), using
the Fair Market Value of any such additional Collateral determined pursuant to
Section 3.1(d) (but otherwise using the information used to determine the
Collateral Ratio and the Subordinated Collateral Ratio as most recently
determined pursuant to Article 2), would not be greater than the Maximum
Collateral Ratio or the Maximum Subordinated Collateral Ratio, respectively.

     (b) If the Rotable Ratio, as most recently determined pursuant to an
Appraisal Compliance Report, is less than the Minimum Rotable Ratio or the
Subordinated Rotable Ratio, as most recently determined pursuant to an Appraisal
Compliance Report, is less than the Minimum Subordinated Rotable Ratio, the
Company shall within 90 days after the date of the Appraisal Compliance Report
setting forth the calculation of such Rotable Ratio or Subordinated Rotable
Ratio:

               (i) subject additional Rotables (the "ADDITIONAL ROTABLES") to
          the Lien of the Security Agreement in accordance with Section 3.1(c);

               (ii) provide additional cash and/or Investment Securities to the
          Collateral Agent under the Security Agreement; PROVIDED that if the
          Continental Cash Balance as of the applicable Valuation Date was less
          than $600,000,000, then the amount of Cash Collateral included in the
          Collateral, after giving effect to the action taken pursuant to
          Sections 3.1(a) and 3.1(b) with respect to such Valuation Date, shall
          not exceed $20,000,000;

               (iii) deliver Notes to the Trustee for cancellation;

               (iv) redeem some or all of the Notes pursuant to Article 4 of the
          Indenture; or

               (v) any combination of the foregoing.

such that, the Rotable Ratio and the Subordinated Rotable Ratio, as recalculated
giving effect to such action taken pursuant to this Section 3.1(b) and, in the
case of clauses (i) and (ii) of this Section 3.1(b), using the Fair Market Value
of any such additional Collateral determined pursuant to Section 3.1(d) (but
otherwise using the information used to determine the Rotable Ratio and the

<PAGE>

Subordinated Rotable Ratio as most recently determined pursuant to Article 2),
would not be less than the Minimum Rotable Ratio or the Minimum Subordinated
Rotable Ratio, respectively."

     Section 2.6 FLEET REDUCTION. Section 3.3 is amended to insert after the
first sentence the following:

          "If at any time after the Subordinated Closing Date so long as any
     Subordinated Securities are Outstanding the total number of Aircraft of any
     Aircraft Model (as defined below) in the Company's in-service fleet during
     any period of 60 consecutive days is less than the Specified Minimum (as
     defined below) for such Aircraft Model (other than due to restrictions on
     operating such Aircraft imposed by the FAA or any other instrumentality or
     agency of the United States), then within 90 days after such occurrence the
     Company shall redeem Subordinated Securities pursuant to Article 4 of the
     Indenture or deliver Subordinated Securities to the Trustee for
     cancellation, or a combination of the foregoing, in an aggregate principal
     amount not less than the principal amount of the Subordinated Securities
     Outstanding at the end of such 60 day period multiplied by a fraction, the
     numerator of which shall be the Appraised Value of the Pledged Spare Parts
     that are appropriate for incorporation in, installation on, attachment or
     appurtenance to, or use in only Aircraft of such Aircraft Model or Engines
     utilized only on such Aircraft, and the denominator of which shall be the
     Appraised Value of the Collateral."

     Section 2.7 BENEFITS OF AGREEMENT RESTRICTED. Section 4.1 is amended to
insert at the end of the first sentence the following:

          ", PROVIDED, FURTHER, that the Trustee on behalf of the Subordinated
     Securityholders is an intended third-party beneficiary of the following
     provisions of this Agreement (collectively, the "SUBORDINATED SECURITY
     PROVISIONS"): (i) the requirement that appraisals of the Collateral be
     obtained for purposes of determining the Maximum Subordinated Collateral
     Ratio by the fifth Business Day of February and the fifth Business Day of
     August in each year, commencing in August 2003; (ii) the requirement that
     the Maximum Subordinated Collateral Ratio be complied with in connection
     with such appraisals; (iii) the second sentence of Section 3.3; and (iv)
     clause (z) of the proviso to Section 4.4 (it being understood that the
     other provisions of this Agreement not expressly included within clauses
     (i), (ii), (iii) and (iv) of this proviso, including without limitation
     defined terms, are not Subordinated Security Provisions). Upon payment in
     full of the Securities, the Policy Expenses and the Policy Provider
     Obligations, if any Subordinated Securities are then Outstanding, Sections
     3.4, 3.5, 3.6, 3.7 and 3.8 and Appendix IV, as then in effect, shall at
     such time become Subordinated Security Provisions, except that each
     reference therein to the Policy Provider shall be deemed changed to the
     Trustee."

     Section 2.8 AMENDMENTS. Section 4.4 is amended (i) to insert after
"PROVIDED that" the following: "(x)"; (ii) to insert after "as the case may be"
the following: "(y) the Subordinated Security Provisions may not be amended,
supplemented or waived by the Company and the Policy Provider but may be
amended, supplemented or waived by the Company and the Trustee, with the consent
of the Required Subordinated Holders and without the consent of the Policy

<PAGE>

Provider and (z) if Section 3.2 is amended or supplemented, or compliance
therewith waived, any transaction entered into subsequent thereto that would not
be in compliance with the provisions of such sentence as in effect on the
Subordinated Closing Date shall not be permitted if the Subordinated Collateral
Ratio, as recalculated giving effect to such transaction but otherwise using the
information used to determine the Subordinated Collateral Ratio as most recently
determined pursuant to Article 2, would be greater than the Maximum Subordinated
Collateral Ratio."

     Section 2.9 DEFINITIONS APPENDIX. Appendix I to the Agreement is amended by
deleting existing Appendix I and substituting therefor new Appendix I attached
as Appendix I hereto.

     Section 2.10 APPRAISAL COMPLIANCE REPORT. Appendix II to the Agreement is
amended by deleting existing Appendix II and substituting therefor new Appendix
II attached as Appendix II hereto.

     SECTION 3. CONSTRUCTION. All references in the Agreement to the "Agreement"
shall be deemed to refer to the Agreement as amended by this Amendment, and the
parties hereto confirm their respective obligations thereunder. The Agreement is
hereby ratified by the parties hereto and shall remain in all respects unchanged
(except as otherwise expressly specified in this Amendment) and in full force
and effect.

     SECTION 4. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.

     SECTION 5. COUNTERPARTS. This Amendment may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.

                       [Remainder of this page is blank.]

<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized, as of the
date and year first above written.

                                       CONTINENTAL AIRLINES, INC.

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

                                       MBIA INSURANCE CORPORATION

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

<PAGE>

                                   Appendix I

                              DEFINITIONS APPENDIX

SECTION 1. DEFINED TERMS.

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

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

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

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

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

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

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

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

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

     "AMENDMENT NO. 1 TO COLLATERAL  MAINTENANCE  AGREEMENT" means Amendment No.
1, dated as of the  Subordinated  Issuance Date, to the  Collateral  Maintenance
Agreement.

     "AMENDMENT  NO. 1 TO REFERENCE  AGENCY  AGREEMENT"  means  Amendment No. 1,
dated as of the Subordinated Issuance Date, to the Reference Agency Agreement.

     "AMENDMENT NO. 1 TO SECURITY  AGREEMENT" means Amendment No. 1, dated as of
the Subordinated Issuance Date, to the Security Agreement.

     "ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral,  taking at least the following actions: (i)
reviewing the Parts Inventory Report

<PAGE>

prepared as of the applicable  Valuation  Date;  (ii) reviewing the  Independent
Appraiser's  internal  value database for values  applicable to Qualified  Spare
Parts included in the Spare Parts Collateral;  (iii) developing a representative
sampling of a reasonable number of the different  Qualified Spare Parts included
in Spare  Parts  Collateral  for which a market  check will be  conducted;  (iv)
checking other sources, such as manufacturers,  other airlines,  U.S. government
procurement  data and airline  parts  pooling  price lists,  for current  market
prices of the sample parts  referred to in clause  (iii);  (v)  establishing  an
assumed ratio of Serviceable  Parts to Unserviceable  Parts as of the applicable
Valuation  Date  based  upon  information   provided  by  the  Company  and  the
Independent  Appraiser's  limited  physical review of the Spare Parts Collateral
referred to in the following  clause (vi);  (vi) visiting at least two locations
selected by the Independent  Appraiser where the Pledged Spare Parts are kept by
the Company  (neither of which was  visited for  purposes of the last  appraisal
under Section 2.1 or 2.2 of the Collateral Maintenance Agreement,  whichever was
most recent),  PROVIDED that at least one such location  shall be one of the top
three  locations at which the Company keeps the largest  number of Pledged Spare
Parts, to conduct a limited physical  inspection of the Spare Parts  Collateral;
(vii) conducting a limited review of the inventory  reporting system  applicable
to the Pledged  Spare Parts,  including  checking  information  reported in such
system against  information  determined through physical  inspection pursuant to
the  preceding  clause  (vi) and (viii)  reviewing a sampling of the Spare Parts
Documents (including tear-down reports).

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

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

     "APPLICABLE MARGIN" means 0.90%.

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

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

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

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

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

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

<PAGE>

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

     "BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the  Applicable  Date pursuant to
the formula set forth  below;  PROVIDED,  HOWEVER,  that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below,  is equal to or less than zero or (y) on or in respect of any  Applicable
Date that is an Interest  Payment Date (or, if such an Interest  Payment Date is
not a Business Day, the next succeeding Business Day)

     Break Amount = Z-Y

     Where:

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

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

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

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

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

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

     "CASH COLLATERAL  ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if

<PAGE>

it shall so qualify,  into which all amounts drawn under the Liquidity  Facility
pursuant  to  Section  3.5(c),  3.5(d)  or  3.5(i)  of the  Indenture  shall  be
deposited.

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

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

     "CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.

     "CLOSING DATE" means the Issuance Date.

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

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

     "COLLATERAL AGENT" means the Security Agent and each other Person acting as
agent on behalf of the Holders under any other Collateral Agreement.

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

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

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

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

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

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

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

     "CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents  that would have been shown on the balance sheet of Continental  and

<PAGE>

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

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

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

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

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

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

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

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

     "DEFINITIVE  SUBORDINATED  SECURITIES" is defined in Section 2A.1(e) of the
Indenture.

<PAGE>

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

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

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

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

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

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

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

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

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

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

<PAGE>

right of recoupment),  and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.

     "ELIGIBLE  DEPOSIT  ACCOUNT" means either (a) a segregated  account with an
Eligible  Institution or (b) a segregated trust account with the corporate trust
department of a depository  institution  organized  under the laws of the United
States of America or any one of the states  thereof or the  District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository  institution has a long-term  unsecured debt rating or issuer
credit  rating,  as the  case  may  be,  from  Moody's  of at  least  A-3 or its
equivalent.  An Eligible  Deposit  Account may be maintained  with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution;  provided
that such  Liquidity  Provider  shall have  waived  all  rights of  set-off  and
counterclaim with respect to such account.

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

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

<PAGE>

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

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

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

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

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

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

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

     "EXCHANGE FLOATING RATE SECURED  SUBORDINATED NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.

     "EXCHANGE  OFFER"  means (i) with respect to the  Securities,  the exchange
offer  which  may be made  pursuant  to the  Registration  Rights  Agreement  to
exchange Initial Securities for Exchange Securities and (ii) with respect to the
Subordinated  Securities,  the exchange  offer which may be made pursuant to the
Subordinated   Security   Registration  Rights  Agreement  to  exchange  Initial
Subordinated Securities for Exchange Subordinated Securities.

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

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

     "EXCHANGE  SUBORDINATED  SECURITIES" means the securities  substantially in
the form of  Exhibit D to the  Indenture  issued  in  exchange  for the  Initial
Subordinated Securities pursuant to the

<PAGE>

Subordinated Security  Registration Rights Agreement and authenticated  pursuant
to the Indenture.

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

     "EXPENDABLES" means Qualified Spare Parts other than Rotables.

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

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

     "FAA FILED DOCUMENTS"  means the Security  Agreement and Amendment No. 1 to
Security Agreement.

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

     "GLOBAL  EXCHANGE  SUBORDINATED  SECURITY" is defined in Section 2A.1(f) of
the Indenture.

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

     "GLOBAL  SUBORDINATED  SECURITIES"  is defined  in  Section  2A.1(d) of the
Indenture.

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

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

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

     "INDENTURE"  means the Amended and  Restated  Indenture  dated as of May 9,
2003,  among the Company,  the Trustee,  the  Liquidity  Provider and the Policy
Provider under which the Notes are issued.

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

     "INDENTURE TRUSTEE" means the Trustee.

<PAGE>

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

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

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

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

     "INITIAL FLOATING RATE SECURED  SUBORDINATED  NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.

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

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

     "INITIAL   SUBORDINATED   SECURITIES"   means  the  securities  issued  and
authenticated pursuant to the Indenture and substantially in the form of Exhibit
D thereto, other than the Exchange Subordinated Securities.

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

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

     "INTEREST  PAYMENT DATE" means March 6, June 6,  September 6 and December 6
of each year so long as any Note is Outstanding (commencing March 6, 2003 in the
case of the  Securities  and  June  6,  2003  in the  case  of the  Subordinated
Securities),  PROVIDED  that if any such  day is not a  Business  Day,  then the
relevant Interest Payment Date shall be the next succeeding Business Day.

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

<PAGE>

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

     "LIQUIDITY GUARANTOR" means Morgan Stanley.

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

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

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

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

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

     "MAXIMUM COLLATERAL RATIO" means 45%.

     "MAXIMUM SUBORDINATED COLLATERAL RATIO" means 67.5%.

     "MINIMUM ROTABLE RATIO" means 150%.

     "MINIMUM SUBORDINATED ROTABLE RATIO" means 100%.

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

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

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

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

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

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

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

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

<PAGE>

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

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

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

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

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

     "NOTES" means the Securities and the Subordinated Securities.

     "NOTEHOLDER" means any holder of one or more Notes.

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

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

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

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

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

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

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

     "OPINION OF COUNSEL"  means a written  opinion from the General  Counsel of
the  Company,  legal  counsel to the  Company or another  legal  counsel  who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the  Indenture.  The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days  following  receipt) of, or its action on,

<PAGE>

an opinion of counsel not  specifically  referred  to above shall be  sufficient
evidence that such counsel is acceptable to the Trustee.

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

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

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

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

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

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

     "ORIGINAL  INDENTURE"  has  the  meaning  set  forth  in  the  introductory
paragraph of the Indenture.

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

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

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

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

<PAGE>

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

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

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

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

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

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

     "PERSON" means any individual, corporation,  partnership, limited liability
company,  joint  venture,  association,  joint-stock  company,  trust,  trustee,
unincorporated  organization,  government or any agency or political subdivision
thereof or any other entity.

     "PLEDGED  SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.

<PAGE>

     "POLICY"  means MBIA Insurance  Corporation  Financial  Guaranty  Insurance
Policy No. 39753,  issued as of the Closing Date,  as amended,  supplemented  or
otherwise modified from time to time in accordance with its respective terms.

     "POLICY  ACCOUNT"  means the Eligible  Deposit  Account  established by the
Trustee  pursuant to Section  8.13(a) of the  Indenture  which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.

     "POLICY DRAWING" means any payment of a claim under the Policy.

     "POLICY  ELECTION  DISTRIBUTION  DATE" is defined in Section  3.6(c) of the
Indenture.

     "POLICY  EXPENSES"  means all  amounts  (including  amounts  in  respect of
premiums,  fees,  expenses or indemnities)  due to the Policy Provider under the
Policy Provider  Agreement other than (i) any Policy Drawing,  (ii) any interest
accrued on any  Policy  Provider  Obligations,  and (iii)  reimbursement  of and
interest on the Liquidity  Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider;  provided that if, at the time
of  determination,  a Policy Provider Default exists,  Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.

     "POLICY FEE LETTER"  means the fee  letter,  dated as of the Closing  Date,
from the Policy Provider to the Company and acknowledged by the Trustee, setting
forth the fees and premiums payable with respect to the Policy.

     "POLICY  PROVIDER" means MBIA Insurance  Corporation,  a New York insurance
company, and its successors and permitted assigns.

     "POLICY  PROVIDER  AGREEMENT"  means the Insurance and Indemnity  Agreement
dated as of the  Closing  Date,  among the  Trustee,  the Company and the Policy
Provider,  as amended,  supplemented or otherwise  modified from time to time in
accordance with its terms.

     "POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events:  (a) the  Policy  Provider  fails to make a payment  required  under the
Policy in accordance with its terms and such failure remains  unremedied for two
Business Days  following  the delivery of Written  Notice of such failure to the
Policy  Provider or (b) the Policy  Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy,  rehabilitation,  liquidation or reorganization, (ii)
makes a general  assignment  for the  benefit of its  creditors  or (iii) has an
order for relief  entered  against it under any federal or state law relating to
insolvency,  bankruptcy,  rehabilitation,  liquidation or reorganization that is
final and nonappealable,  or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material  portion of
its  property  or (ii)  authorizing  the taking of  possession  by a  custodian,
trustee,  agent or receiver of the Policy  Provider (or taking of  possession of
all or any material portion of the Policy Provider's property).

     "POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.

<PAGE>

     "POLICY  PROVIDER  INTEREST  OBLIGATIONS"  means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity  Facility in an amount equal to the amount of interest that would have
accrued on such  Interest  Drawing  if such  Interest  Drawing  had been made in
accordance with Section  2.02(e) of the Liquidity  Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.

     "POLICY PROVIDER  OBLIGATIONS"  means all  reimbursement and other amounts,
including,  without limitation, fees and indemnities (to the extent not included
in Policy  Expenses),  due to the  Policy  Provider  under the  Policy  Provider
Agreement  but shall not include  any  interest  on Policy  Drawings  other than
Policy Provider Interest Obligations.

     "PREMIUM" means, with respect to any Note redeemed pursuant to Article 4 of
the Indenture,  the following  percentage of the principal  amount of such Note:
(a) with respect to a Security,  (i) if redeemed before the first anniversary of
the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and
before the second  anniversary of the Issuance Date, 1.0%; and (iii) if redeemed
on or after such  second  anniversary  and before the third  anniversary  of the
Issuance Date,  0.5%; and (b) with respect to a  Subordinated  Security,  (i) if
redeemed before the second anniversary of the Subordinated  Issuance Date, 3.0%;
(ii) if  redeemed  on or after  such  second  anniversary  and  before the third
anniversary of the Subordinated Issuance Date, 2.0%; and (iii) if redeemed on or
after  such  third  anniversary  and  before  the  fourth   anniversary  of  the
Subordinated  Issuance Date, 1.0%;  PROVIDED that no Premium shall be payable in
connection  with a  redemption  made  by the  Company  to  satisfy  the  Maximum
Collateral Ratio, Maximum  Subordinated  Collateral Ratio, Minimum Rotable Ratio
or Minimum Subordinated Rotable Ratio requirement pursuant to Section 3.1 of the
Collateral Maintenance Agreement.

     "PRIOR FUNDS" means, on any  Distribution  Date, any Drawing paid under the
Liquidity  Facility on such  Distribution  Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.

     "PROCEEDS   DEFICIENCY  DRAWING"  is  defined  in  Section  3.6(b)  of  the
Indenture.

     "PROPELLER" includes a part, appurtenance, and accessory of a propeller.

     "PROVIDER  INCUMBENCY  CERTIFICATE"  is defined  in  Section  3.7(b) of the
Indenture.

     "PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

     "PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.

     "QIB" means a qualified institutional buyer as defined in Rule 144A.

     "QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.

     "RATING AGENCIES" means,  collectively,  at any time, and with respect to a
Series of Notes, each nationally  recognized rating agency which shall have been

<PAGE>

requested  by the  Company to rate such  Series of Notes and which shall then be
rating such Series of Notes.  The initial Rating Agency will be Moody's,  in the
case of the  Securities,  and Moody's and Standard & Poor's,  in the case of the
Subordinated Securities.

     "RATINGS  CONFIRMATION"  means,  with respect to any action  proposed to be
taken, a written  confirmation  from each of the Rating Agencies with respect to
the  applicable  Series of Notes  that  such  action  would not  result in (i) a
reduction of the rating for such Series of Notes below the then  current  rating
for such  Series  of Notes  (such  rating,  in the  case of the  Securities,  as
determined  without  regard to the Policy) or (ii) a withdrawal or suspension of
the rating of such Series of Notes.

     "RECORD  DATE"  means the  fifteenth  (15th) day  preceding  any  Scheduled
Interest Payment Date, whether or not a Business Day.

     "REDEMPTION DATE", when used with respect to any Note to be redeemed, means
the date fixed for such  redemption  by or  pursuant to the  Indenture  and such
Note.

     "REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.

     "REGISTER" has the meaning provided in Section 2.8 of the Indenture.

     "REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.

     "REGISTRATION  RIGHTS  AGREEMENT" means the  Registration  Rights Agreement
dated as of  December  6, 2002,  by and  between  the  Company  and the  Initial
Purchaser.

     "REGULATION S" means Regulation S under the Securities Act.

     "REGULATION S DEFINITIVE  SECURITIES"  is defined in Section  2.1(e) of the
Indenture.

     "REGULATION  S DEFINITIVE  SUBORDINATED  SECURITIES"  is defined in Section
2A.1(e) of the Indenture.

     "REGULATION  S  GLOBAL  SECURITY"  is  defined  in  Section  2.1(d)  of the
Indenture.

     "REGULATION S GLOBAL  SUBORDINATED  SECURITY" is defined in Section 2A.1(d)
of the Indenture.

     "RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.

     "REPLACEMENT  LIQUIDITY  FACILITY"  means an irrevocable  revolving  credit
agreement (or agreements) in  substantially  the form of the replaced  Liquidity
Facility,  including reinstatement  provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating  Agencies with respect to
the Securities to confirm in writing their respective ratings then in effect for
the Securities (before  downgrading of such ratings,  if any, as a result of the
downgrading  of the  Liquidity  Provider),  and be  consented  to by the  Policy
Provider, which consent shall not be unreasonably withheld or delayed, in a face

<PAGE>

amount (or in an aggregate face amount) equal to the amount of interest  payable
on the Securities  (at the Capped  Interest Rate, and without regard to expected
future  principal  payments) on the eight Interest  Payment Dates  following the
date of replacement  of such Liquidity  Facility (or if such date is an Interest
Payment Date,  on such day and the seven  Interest  Payment Dates  following the
date of  replacement  of such  Liquidity  Facility)  and  issued by a Person (or
Persons) having unsecured short-term debt rating or issuer credit rating, as the
case may be,  issued by  Moody's  and  Standard  & Poor's  which are equal to or
higher  than  the  Threshold  Rating.  Without  limitation  of the  form  that a
Replacement  Liquidity  Facility  otherwise  may have  pursuant to the preceding
sentence, a Replacement  Liquidity Facility for the Securities may have a stated
expiration date earlier than 15 days after the Final Legal Maturity Date so long
as such Replacement  Liquidity Facility provides for a Non-Extension  Drawing as
contemplated by Section 3.5(d) of the Indenture.

     "REQUEST" means a written request for the action therein  specified  signed
on behalf of the Company by any  Officer  and  delivered  to the  Trustee.  Each
Request shall be  accompanied  by an Officers'  Certificate if and to the extent
required by Section 12.4 of the Indenture.

     "REQUIRED  AMOUNT" means,  for any day, the sum of the aggregate  amount of
interest,  calculated at the Capped  Interest Rate, that would be payable on the
Securities on each of the eight successive  Interest  Payment Dates  immediately
following such day or, if such day is an Interest  Payment Date, on such day and
the succeeding  seven Interest  Payment  Dates,  in each case  calculated on the
basis of the  outstanding  principal  amount of the  Securities on such date and
without regard to expected future payments of principal on the Securities.

     "REQUIRED  HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.

     "REQUIRED SUBORDINATED HOLDERS" means from time to time the holders of more
than 50% in aggregate unpaid  principal  amount of the  Subordinated  Securities
then Outstanding.

     "RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the  corporate  trust  administration  department  of the  Trustee  or any other
officer  customarily  performing  functions  similar to those  performed  by the
Persons who at the time shall be such  officers or to whom any  corporate  trust
matter is referred  because of his or her  knowledge of and  familiarity  with a
particular subject, (ii) with respect to the Liquidity Provider,  any authorized
officer  of the  Liquidity  Provider,  and  (iii)  with  respect  to the  Policy
Provider, any authorized officer of the Policy Provider.

     "RESTRICTED  DEFINITIVE  SECURITIES"  is defined  in Section  2.1(e) of the
Indenture.

     "RESTRICTED  DEFINITIVE  SUBORDINATED  SECURITIES"  is  defined  in Section
2A.1(e) of the Indenture.

     "RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.

     "RESTRICTED GLOBAL SUBORDINATED  SECURITY" is defined in Section 2A.1(c) of
the Indenture.

     "RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.

<PAGE>

     "RESTRICTED  PERIOD"  is defined in  Section  2.1(d) of the  Indenture  for
purposes  of  the  Securities  and  in  Section  2A.1(d)  for  purposes  of  the
Subordinated Securities.

     "RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.

     "RESTRICTED  SUBORDINATED  SECURITIES"  are defined in Section  2A.2 of the
Indenture.

     "ROTABLE"  means a  Qualified  Spare  Part that  wears over time and can be
repeatedly restored to a serviceable  condition over a period  approximating the
life of the flight equipment to which it relates.

     "ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market  Value of the  Rotables,  as set  forth in the  most  recent  Independent
Appraiser's  Certificate  delivered by the Company  pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities  Outstanding  minus the sum of the Cash Collateral held
by the Collateral Agent.

     "RULE 144A" means Rule 144A under the Securities Act.

     "SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.

     "SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.

     "SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable  thereto,  (ii) with respect to any payment
of defaulted  interest,  the payment date established  pursuant to Section 2.16,
(iii) with respect to amounts due on the  redemption of any Note, the Redemption
Date  applicable  thereto,  and (iv) with  respect to the final  maturity of the
Notes, December 6, 2007.

     "SEC" means the  Securities  and  Exchange  Commission  and any  government
agency succeeding to its functions.

     "SECTION 1110" means Section 1110 of the Bankruptcy Code.

     "SECTION 1110 PERIOD" means the continuous  period of (i) 60 days specified
in Section  1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period,  if any,  commencing  with the trustee or  debtor-in-possession  in such
proceeding agreeing,  with court approval,  to perform its obligations under the
Operative  Documents  within  such 60 days (or  longer  period  as  agreed)  and
continuing  until such time as such  trustee or  debtor-in-possession  ceases to
fully perform its obligations  thereunder with the result that the period during
which the Collateral Agent is prohibited from  repossessing the collateral under
any Collateral Agreement comes to an end.

     "SECURITIES" means the Initial Securities and the Exchange Securities.

     "SECURITIES  ACT" means the Securities Act of 1933, as amended from time to
time.

<PAGE>

     "SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement until a successor replaces
it in accordance  with the  provisions of the Security  Agreement and thereafter
means the successor.

     "SECURITY  AGREEMENT" means the Spare Parts Security  Agreement dated as of
the Issuance Date between the Company and the Security Agent.

     "SECURITYHOLDER" means any holder of one or more Securities.

     "SEMIANNUAL  METHODOLOGY" means the Annual  Methodology,  excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.

     "SEMIANNUAL  VALUATION  DATE" is defined in Section  2.2 of the  Collateral
Maintenance Agreement.

     "SERIES"  means each of the  Securities  and the  Subordinated  Securities,
considered as a separate class.

     "SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation  in,  installation on,  attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.

     "SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be  required to be filed by the  Company  with the SEC  pursuant to (i) with
respect to Securities, the Registration Rights Agreement, other than an Exchange
Offer Registration Statement,  and (ii) with respect to Subordinated Securities,
the  Subordinated  Securities  Registration  Rights  Agreement,  other  than  an
Exchange Offer Registration Statement.

     "SPARE  PART"  means an  accessory,  appurtenance,  or part of an  Aircraft
(except an Engine or  Propeller),  Engine  (except a Propeller),  Propeller,  or
Appliance,  that is to be  installed  at a later  time in an  Aircraft,  Engine,
Propeller or Appliance.

     "SPARE PARTS  COLLATERAL" has the meaning  specified in Section 2.01 of the
Security Agreement.

     "SPARE  PARTS  DOCUMENTS"  has the  meaning  set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.

     "SPECIAL  DEFAULT"  means a Payment  Default  or a  Continental  Bankruptcy
Event.

     "SPECIAL  RECORD  DATE" has the  meaning  provided  in Section  2.10 of the
Indenture.

     "SPECIAL  VALUATION  DATE" is  defined  in  Section  2.4 of the  Collateral
Maintenance Agreement.

     "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.

<PAGE>

     "STATED  AMOUNT" means the Maximum  Commitment (as defined in the Liquidity
Facility).

     "STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.

     "SUBORDINATED APPLICABLE MARGIN" means 7.50%.

     "SUBORDINATED CLOSING DATE" means the Subordinated Issuance Date.

     "SUBORDINATED  COLLATERAL  RATIO"  shall mean a  percentage  determined  by
dividing (i) the aggregate  principal amount of all Notes  Outstanding minus the
sum of the Cash Collateral held by the Collateral  Agent by (ii) the Fair Market
Value of all  Collateral  (excluding any Cash  Collateral),  as set forth in the
most  recent  Independent  Appraiser's  Certificate  delivered  by  the  Company
pursuant to Article 2 of the Collateral Maintenance  Agreement,  as supplemented
pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable.

     "SUBORDINATED  DEBT RATE" means a rate per annum equal,  in the case of the
first Interest Period for the Subordinated Securities, to 8.78% and, in the case
of any subsequent Interest Period, LIBOR for such Interest Period, as determined
pursuant to the Reference Agency  Agreement,  plus the  Subordinated  Applicable
Margin,  PROVIDED that, solely in the event no Registration Event (as defined in
the Subordinated  Security  Registration Rights Agreement) occurs on or prior to
the 210th day after the Subordinated  Closing Date, the  Subordinated  Debt Rate
shall be increased by an  additional  margin equal to 0.50% per annum,  from and
including  such 210th day to and  excluding the earlier of (i) the date on which
such Registration Event occurs and (ii) the date on which there ceases to be any
Registrable  Securities (as defined in the  Subordinated  Security  Registration
Rights  Agreement));  or if the Shelf Registration  Statement (as defined in the
Subordinated  Security  Registration  Rights Agreement) (if it is filed),  after
being declared  effective by the SEC,  ceases to be effective at any time during
the  period   specified  by  Section  2(b)(B)  of  the   Subordinated   Security
Registration Rights Agreement for more than 60 days, whether or not consecutive,
during any 12-month period,  the Subordinated Debt Rate shall be increased by an
additional  margin equal to 0.50% per annum from and  including  the 61st day of
the applicable  12-month period such Shelf  Registration  Statement ceases to be
effective to and  excluding the date on which the Shelf  Registration  Statement
again  becomes  effective  (or, if earlier,  the end of the period  specified by
Section 2(b)(B) of the Subordinated  Security  Registration  Rights  Agreement),
PROVIDED that the additional margin added to the Subordinated Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time.

     "SUBORDINATED DOCUMENTS" means the Indenture, Amendment No. 1 to Collateral
Maintenance  Agreement,  Amendment  No.  1 to  Reference  Agency  Agreement  and
Amendment No. 1 to Security Agreement.

     "SUBORDINATED  ISSUANCE  DATE"  means the date of initial  issuance  of the
Initial Subordinated Securities.

     "SUBORDINATED  PAYMENT DUE RATE" means (a) the Subordinated  Debt Rate plus
2% or, if less, (b) the maximum rate permitted by applicable law.

<PAGE>

     "SUBORDINATED ROTABLE RATIO" shall mean a percentage determined by dividing
(i) the Fair  Market  Value of the  Rotables,  as set  forth in the most  recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance  Agreement,  as supplemented pursuant to Section
3.1  of the  Collateral  Maintenance  Agreement,  if  applicable,  by  (ii)  the
aggregate  principal amount of all Notes  Outstanding  minus the sum of the Cash
Collateral held by the Collateral Agent.

     "SUBORDINATED SECURITIES" means the Initial Subordinated Securities and the
Exchange Subordinated Securities.

     "SUBORDINATED SECURITY OFFERING MEMO" means the Offering Memorandum,  dated
May 2,  2003  of  the  Company  relating  to the  offering  of the  Subordinated
Securities.

     "SUBORDINATED  SECURITY  PROVISIONS"  is  defined  in  Section  4.1  of the
Collateral Maintenance Agreement.

     "SUBORDINATED  SECURITY PURCHASE  AGREEMENT" means the Purchase  Agreement,
dated as of May 2, 2003, by and between the Initial Purchaser and the Company.

     "SUBORDINATED   SECURITY   REGISTRATION   RIGHTS   AGREEMENT"   means   the
Registration Rights Agreement dated as of the Subordinated Issuance Date, by and
between the Company and the Initial Purchaser.

     "SUBORDINATED  SECURITYHOLDER" means any holder of one or more Subordinated
Securities.

     "SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.

     "SUPPLEMENTAL  SECURITY  AGREEMENT"  means  a  supplement  to the  Security
Agreement substantially in the form of Exhibit A to the Security Agreement.

     "SUPPORT  DOCUMENTS" means the Liquidity  Facility,  the Policy, the Policy
Provider Agreement and the Fee Letters.

     "TAX" and "TAXES" mean any and all taxes,  fees, levies,  duties,  tariffs,
imposts,  and other  charges of any kind  (together  with any and all  interest,
penalties,  loss, damage,  liability,  expense,  additions to tax and additional
amounts or costs incurred or imposed with respect  thereto) imposed or otherwise
assessed  by the United  States of  America  or by any  state,  local or foreign
government  (or any  subdivision or agency  thereof) or other taxing  authority,
including,  without  limitation:  taxes or other  charges on or with  respect to
income, franchises,  windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment  compensation,  or net worth and  similar  charges;  taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added,  taxes on goods and  services,  gains taxes,  license,  registration  and
documentation fees, customs duties, tariffs, and similar charges.

     "TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.

     "THRESHOLD AMOUNT" means $2,000,000.

<PAGE>

     "THRESHOLD  RATING" means the  short-term  unsecured  debt rating of P-1 by
Moody's  and A-1 by  Standard  & Poor's;  PROVIDED  that so long as the  initial
Liquidity Provider is the Liquidity  Provider,  the Threshold Rating shall apply
to the Liquidity Guarantor.

     "TIA"  means  the  Trust  Indenture  Act  of  1939  (15  U.S.  Code  ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is  amended  after such date,  "TIA"  means,  to the extent
required by any such amendment, the TIA as so amended.

     "TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.

     "TRUST OFFICER" means any officer in the corporate trust  department of the
Trustee,  or any other officer or assistant  officer of the Trustee  assigned by
the Trustee to administer its corporate trust matters.

     "TRUSTEE"  means the party named as such in the Indenture until a successor
replaces it in accordance  with the  provisions of the Indenture and  thereafter
means the successor Trustee and if, at any time, there is more than one Trustee,
"Trustee" as used with respect to the Notes of any Series shall mean the Trustee
with respect to the Notes of that Series.

     "TRUSTEE  INCUMBENCY  CERTIFICATE"  is  defined  in  Section  3.7(a) of the
Indenture.

     "TRUSTEE   PROVISIONS"   is  defined  in  Section  4.1  of  the  Collateral
Maintenance Agreement.

     "TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.

     "UCC"  means the  Uniform  Commercial  Code as in effect in any  applicable
jurisdiction.

     "UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility.

     "UNSERVICEABLE  PARTS" means Pledged  Spare Parts that are not  Serviceable
Parts.

     "U.S." or "UNITED STATES" means the United States of America.

     "U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating  certificate  issued pursuant
to chapter  447 of title 49 of the United  States Code for  aircraft  capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.

     "U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.

     "U.S.  GOVERNMENT  OBLIGATIONS"  means direct  obligations (or certificates
representing an ownership  interest in such obligations) of the United States of
America  (including  any agency or  instrumentality  thereof) for the payment of
which the full faith and credit of the United  States of America is pledged  and
which are not callable at the option of the issuer thereof.

     "U.S.  PERSON"  means any Person  described in Section  7701(a)(30)  of the
Code.

<PAGE>

     "VALUATION  DATES" is defined in Section 2.4 of the Collateral  Maintenance
Agreement.

     "WARRANTIES"  is  defined in clause  (2) of  Section  2.01 of the  Security
Agreement.

     "WRITTEN  NOTICE" means,  from the Trustee,  the Liquidity  Provider or the
Policy Provider, a written instrument executed by the Designated  Representative
of such Person.  An invoice  delivered  by the  Liquidity  Provider  pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing  procedures
shall constitute Written Notice under such Section.

     "WTC" has the meaning specified in the first paragraph of the Indenture.

SECTION 2. RULES OF CONSTRUCTION.  Unless the context  otherwise  requires,  the
following  rules of  construction  shall apply for all purposes of the Operative
Documents  (including  this appendix) and of such  agreements as may incorporate
this appendix by reference.

          (a) In each Operative Document, unless otherwise expressly provided, a
reference to:

     (i)   each of the Company,  the Trustee, the Collateral Agent, the Security
           Agent  or  any  other  person  includes,  without  prejudice  to  the
           provisions of any Operative Document, any successor in interest to it
           and  any  permitted  transferee,  permitted  purchaser  or  permitted
           assignee of it;

     (ii)  words  importing the plural include the singular and words  importing
           the singular include the plural;

     (iii) any  agreement,  instrument  or  document, or any annex,  schedule or
           exhibit  thereto,  or  any  other  part  thereof,  includes,  without
           prejudice  to  the  provisions  of  any  Operative   Document,   that
           agreement,  instrument or document, or annex, schedule or exhibit, or
           part, respectively, as amended, modified or supplemented from time to
           time  in  accordance  with  its  terms  and in  accordance  with  the
           Operative  Documents,  and  any  agreement,  instrument  or  document
           entered into in substitution or replacement therefor;

     (iv)  any  provision  of any Law  includes  any such  provision as amended,
           modified, supplemented,  substituted,  reissued or reenacted prior to
           the Closing Date, and thereafter from time to time;

     (v)   the  words  "Agreement",   "this  Agreement",   "hereby",   "herein",
           "hereto",  "hereof" and  "hereunder" and words of similar import when
           used in any Operative  Document refer to such Operative Document as a
           whole and not to any particular provision of such Operative Document;

     (vi)  the words "including",  "including, without limitation",  "including,
           but not limited to", and terms or phrases of similar import when used
           in any Operative Document,  with respect to any matter or thing, mean
           including, without limitation, such matter or thing; and

<PAGE>

     (vii) a"Section", an "Exhibit",  an "Annex",  an "Appendix" or a "Schedule"
           in any Operative Document, or in any annex thereto, is a reference to
           a section of, or an exhibit,  an annex, an appendix or a schedule to,
           such Operative Document or such annex, respectively.

          (b) Each  exhibit,  annex,  appendix  and  schedule to each  Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.

          (c) Unless otherwise  defined or specified in any Operative  Document,
all   accounting   terms  therein   shall  be  construed   and  all   accounting
determinations thereunder shall be made in accordance with GAAP.

          (d) Headings used in any Operative  Document are for convenience  only
and  shall  not  in any  way  affect  the  construction  of,  or be  taken  into
consideration in interpreting, such Operative Document.

          (e) For  purposes  of each  Operative  Document,  the  occurrence  and
continuance of a Default or Event of Default referred to in Section 7.1(d),  (e)
or (f) of the Indenture  shall not be deemed to prohibit the Company from taking
any action or exercising any right that is  conditioned  on no Special  Default,
Default or Event of Default  having  occurred and be  continuing if such Special
Default,   Default  or  Event  of  Default   consists  of  the   institution  of
reorganization  proceedings  with respect to the Company under Chapter 11 of the
Bankruptcy  Code and the  trustee or  debtor-in-possession  in such  proceedings
shall have agreed to perform its obligations under the Operative  Documents with
the approval of the  applicable  court and  thereafter  shall have  continued to
perform such obligations in accordance with Section 1110.

<PAGE>

                                                              Appendix II to the
                                                Collateral Maintenance Agreement

Address to Policy Provider and
to the Trustee]

                APPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL
                              MAINTENANCE AGREEMENT

Ladies and Gentlemen:

     We refer to the Collateral Maintenance Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance
Corporation (as amended, the "AGREEMENT"). Terms defined in the Agreement and
used herein have such respective defined meanings. The Company hereby certifies
that:

1.   This Compliance Report is accompanied by an Independent Appraiser's
     Certificate (the "RELEVANT APPRAISAL") dated [___________]. The Valuation
     Date for purposes of the Relevant Appraisal was [___________] (the
     "RELEVANT VALUATION DATE").

2.   The following sets forth the calculation of the Collateral Ratio as of the
     Relevant Valuation Date:

               a.   The aggregate principal amount of all
                    Securities Outstanding as of the
                    Relevant Valuation Date                    $[_______]

               b.   The Fair Market Value of the Cash
                    Collateral as of the Relevant Valuation
                    Date                                       $[_______]

               c.   The Fair Market Value of the Collateral
                    (excluding Cash Collateral) as of the
                    Relevant Valuation Date, as set forth in
                    the accompanying Independent Appraiser'
                    Certificate                                $[_______]

               d.   The Collateral Ratio
                    ((a - b) / c)                               [_______]%
<PAGE>

3.   The following sets forth the calculation of the
     Subordinated Collateral Ratio as of the Relevant
     Valuation Date:

               a.   The aggregate principal amount of all
                    Notes Outstanding as of the Relevant
                    Valuation Date                             $[_______]

               b.   The Fair Market Value of the Cash
                    Collateral as of the Relevant Valuation
                    Date                                       $[_______]

               c.   The Fair Market Value of the Collateral
                    (excluding Cash Collateral) as of the
                    Relevant Valuation Date, as set forth in
                    the accompanying Independent Appraiser's
                    Certificate                                $[_______]

               d.   The Subordinated Collateral
                    Ratio ((a - b) / c)                         [_______]%

4.   The following sets forth the calculation of the Rotable
     Ratio as of the Relevant Valuation Date:

               a.   The Fair Market Value of the Rotables as
                    of the Relevant Valuation Date, as set
                    forth in the accompanying Independent
                    Appraiser's Certificate                    $[_______]

               b.   The aggregate principal amount of all
                    Securities Outstanding as of the
                    Relevant Valuation Date                    $[_______]

               c.   The Fair Market Value of the Cash
                    Collateral as of the Relevant Valuation
                    Date                                       $[_______]

               d.   The Rotable Ratio
                    (a / b - c)                                 [_______]%

<PAGE>

5.   The following sets forth the calculation of the
     Subordinated Rotable Ratio as of the Relevant Valuation
     Date:

               a.   The Fair Market Value of the Rotables as
                    of the Relevant Valuation Date, as set
                    forth in the accompanying Independent
                    Appraiser's Certificate                    $[_______]

               b.   The aggregate principal amount of all
                    Notes Outstanding as of the Relevant
                    Valuation Date                             $[_______]

               c.   The Fair Market Value of the Cash
                    Collateral as of the Relevant Valuation
                    Date                                       $[_______]

               d.   The Subordinated Rotable Ratio
                    (a / b - c)                                 [_______]%

6.   The Continental Cash Balance as of the Relevant
     Valuation Date was $[___________].

Dated:     [__________]

                                       Very truly yours,

                                       CONTINENTAL AIRLINES, INC.

                                       By:
                                          ----------------------------------
                                          Name:
                                          Title:

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