<PAGE>
 
    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 19, 2001
 
                                                     REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                             ---------------------
 
                                    FORM S-3
            REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
 
                             ---------------------
 

<Table>
<S>                                                          <C>
                                                                                CONTINENTAL AIRLINES
                CONTINENTAL AIRLINES, INC.                                        FINANCE TRUST III
  (Exact name of registrant as specified in its charter)       (Exact name of registrant as specified in its charter)
</Table>

 

<Table>
<S>                             <C>                              <C>                             <C>
           DELAWARE                       74-2099724                        DELAWARE                       76-6175450
   (State of incorporation)     (I.R.S. Employer Identification      (State of organization)            (I.R.S. Employer
                                             No.)                                                      Identification No.)
</Table>

 
                               1600 SMITH STREET
                              HOUSTON, TEXAS 77002
                                 (713) 324-5000
    (Address, including zip code and telephone number, including area code,
                  of registrant's principal executive offices)
 
                                   COPIES TO:
 

<Table>
<S>                                                 <C>
              JENNIFER L. VOGEL, ESQ.                                 KEVIN P. LEWIS
        VICE PRESIDENT AND GENERAL COUNSEL                        VINSON & ELKINS L.L.P.
                 1600 SMITH STREET                                 2300 FIRST CITY TOWER
                 DEPARTMENT HQSLG                                HOUSTON, TEXAS 77002-6760
               HOUSTON, TEXAS 77002                                   (713) 758-2222
                  (713) 324-5000
 (Name, address, including zip code, and telephone
                      number,
    including area code, of agent for service)
</Table>

 
     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:  From time
to time after the registration statement becomes effective.
 
     If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.  [ ]
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box.  [X]
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]
 
                                                        (Continued on next page)
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>
 
(Continued from previous page)
 
                        CALCULATION OF REGISTRATION FEE
 

<Table>
<Caption>
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
                                                                              PROPOSED MAXIMUM
              TITLE OF EACH CLASS OF                     AMOUNT TO BE        AGGREGATE OFFERING         AMOUNT OF
            SECURITIES TO BE REGISTERED              REGISTERED(1)(2)(3)     PRICE(1)(2)(3)(4)       REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>                    <C>                    <C>
Debt Securities....................................
------------------------------------------------------------------------------------------------------------------------
Class B Common Stock(5)............................
------------------------------------------------------------------------------------------------------------------------
Preferred Stock....................................
------------------------------------------------------------------------------------------------------------------------
Stock Purchase Contracts...........................
------------------------------------------------------------------------------------------------------------------------
Stock Purchase Units...............................
------------------------------------------------------------------------------------------------------------------------
Depositary Shares(6)...............................
------------------------------------------------------------------------------------------------------------------------
Warrants...........................................
------------------------------------------------------------------------------------------------------------------------
Trust Preferred Securities of Continental Airlines
  Finance Trust III................................
------------------------------------------------------------------------------------------------------------------------
Guarantees of Trust Preferred Securities of
  Continental Airlines Finance Trust III(7)........
------------------------------------------------------------------------------------------------------------------------
Junior Subordinated Trust Debentures(8)............
------------------------------------------------------------------------------------------------------------------------
          Total....................................                           $500,000,000(9)            $125,000
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
</Table>

 
(1) Not specified as to each class of securities to be registered pursuant to
    General Instruction II(D) to Form S-3.
 
(2) This registration statement also covers an indeterminate amount of
    securities that may be issued in exchange for, or upon conversion, exercise
    or settlement of, as the case may be, any securities registered hereunder
    that provide for conversion, exercise or exchange. Any securities registered
    hereunder may be sold separately or as units with other securities
    registered hereunder.
 
(3) Estimated solely for the purpose of calculating the registration fee
    pursuant to Rule 457(o).
 
(4) The proposed maximum offering price per unit will be determined from time to
    time by the registrants in connection with, and at the time of, the issuance
    by the registrants of the securities registered hereunder.
 
(5) Each share of common stock registered hereunder includes an associated
    preferred share purchase right, which are not exercisable and are not
    separately tradable until certain events occur. No separate consideration
    will be received for the preferred share purchase rights.
 
(6) The depositary shares registered hereunder will be evidenced by depositary
    receipts issued pursuant to a deposit agreement. If the registrants elect to
    offer to the public fractional interests in shares of preferred stock, then
    depositary receipts will be distributed to those persons purchasing the
    fractional interests and the shares will be issued to the depositary under
    the deposit agreement.
 
(7) Includes the rights of holders of the trust preferred securities under the
    guarantee of trust preferred securities and back-up undertakings, consisting
    of obligations by Continental Airlines, Inc., as set forth in the
    declaration of trust, the applicable indenture and any supplemental
    indenture thereto, in each case as further described in the registration
    statement. No separate consideration will be received for any guarantee or
    any back-up undertaking.
 
(8) Trust debentures may be issued and sold to Continental Airlines Finance
    Trust III, and the trust debentures may later be distributed to the holders
    of trust preferred securities.
 
(9) The aggregate principal amount of the debt securities may be increased if
    any debt securities are issued at an original issue discount by an amount
    such that the gross proceeds to be received by the registrants shall be
    equal to the above amount to be registered. Any offering of debt securities
    denominated other than in U.S. dollars will be treated as the equivalent of
    U.S. dollars based on the exchange rate applicable to the purchase of such
    debt securities at the time of initial offering. In no event will the
    aggregate initial offering price of all securities issued from time to time
    pursuant to this registration statement exceed $500,000,000, or the
    equivalent thereof in foreign currencies or composite currencies. The
    aggregate amount of common stock is further limited to that which is
    permissible under Rule 415(a)(4).
 
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

<PAGE>
 
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT THAT CONTAINS THIS
PROSPECTUS AND THAT HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THOSE SECURITIES AND IT IS
NOT SOLICITING AN OFFER TO BUY THOSE SECURITIES IN ANY STATE WHERE THE OFFER OR
SALE IS NOT PERMITTED.
 
                 SUBJECT TO COMPLETION, DATED OCTOBER 19, 2001
 
PROSPECTUS
 
                                  $500,000,000
 
                           CONTINENTAL AIRLINES LOGO
 
                           CONTINENTAL AIRLINES, INC.
 
                         DEBT SECURITIES, COMMON STOCK,
        PREFERRED STOCK, STOCK PURCHASE CONTRACTS, STOCK PURCHASE UNITS,
       DEPOSITARY SHARES, WARRANTS, JUNIOR SUBORDINATED TRUST DEBENTURES
                       AND GUARANTEE OF TRUST SECURITIES
 
                     CONTINENTAL AIRLINES FINANCE TRUST III
 
                           TRUST PREFERRED SECURITIES
         GUARANTEED, AS DESCRIBED HEREIN, BY CONTINENTAL AIRLINES, INC.
 
     Continental Airlines, Inc. may offer and sell the securities listed above
from time to time in one or more classes or series and in amounts, at prices and
on terms that we will determine at the time of the offering. Continental
Airlines Finance Trust III, a Delaware business trust, may offer and sell, from
time to time, trust preferred securities representing undivided beneficial
interests in the assets of Continental Airlines Finance Trust III. The aggregate
initial public offering prices of the securities offered under this prospectus
will not exceed $500,000,000.
 
     We will provide specific terms of these securities and the manner in which
we will sell them in supplements to this prospectus. You should read this
prospectus and any prospectus supplement carefully before you invest.
 
     Our common stock is listed for trading on the New York Stock Exchange under
the symbol "CAL."
 
                             ---------------------
 
     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED ANY OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
 
                             ---------------------
 
                The date of this prospectus is           , 2001.

<PAGE>
 
                               TABLE OF CONTENTS
 

<Table>
<S>                                                           <C>
ABOUT THIS PROSPECTUS.......................................    1
WHERE YOU CAN FIND MORE INFORMATION.........................    2
FORWARD-LOOKING STATEMENTS..................................    2
INCORPORATION BY REFERENCE..................................    2
CONTINENTAL AIRLINES, INC. .................................    4
THE TRUST...................................................    4
USE OF PROCEEDS.............................................    5
RATIO OF EARNINGS TO FIXED CHARGES..........................    5
DESCRIPTION OF DEBT SECURITIES..............................    5
DESCRIPTION OF TRUST SECURITIES.............................   15
DESCRIPTION OF TRUST DEBENTURES.............................   26
DESCRIPTION OF GUARANTEE....................................   33
RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES,
THE TRUST DEBENTURES AND THE GUARANTEE......................   36
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK.............   37
DESCRIPTION OF DEPOSITARY SHARES............................   43
DESCRIPTION OF WARRANTS.....................................   45
DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE
  UNITS.....................................................   45
PLAN OF DISTRIBUTION........................................   46
LEGAL MATTERS...............................................   47
EXPERTS.....................................................   48
</Table>

 
     We have not authorized any dealer, salesman or other person to give any
information or to make any representation other than those contained or
incorporated by reference in this prospectus and the accompanying prospectus
supplement. You must not rely upon any information or representation not
contained or incorporated by reference in this prospectus or the accompanying
prospectus supplement as if we had authorized it. This prospectus and the
accompanying prospectus supplement are not an offer to sell or the solicitation
of an offer to buy any securities other than the registered securities to which
they relate. This prospectus and the accompanying prospectus supplement are not
an offer to sell or the solicitation of an offer to buy securities in any
jurisdiction to any person to whom it is unlawful to make an offer or
solicitation in that jurisdiction. The information contained in this prospectus
and the accompanying prospectus supplement is accurate as of the dates on their
covers. When we deliver this prospectus or a supplement or make a sale pursuant
to this prospectus, we are not implying that the information is current as of
the date of the delivery or sale.
 
                             ABOUT THIS PROSPECTUS
 
     This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission, which we refer to as the "SEC", utilizing a
"shelf" registration process. Under this shelf registration process, we may
offer and sell any combination of the securities described in this prospectus in
one or more offerings up to a total dollar amount of $500,000,000. This
prospectus provides you with a general description of the securities we may
offer. Each time we offer securities, we will provide a prospectus supplement
and attach it to this prospectus. The prospectus supplement will contain
specific information about the terms of the offering and the securities being
offered at that time. The prospectus supplement also may add, update or change
information contained in this prospectus. In this prospectus, "Continental,"
"we, "us," our" and the "company" each refers to Continental Airlines, Inc. and
not to Continental Airlines Finance Trust III, unless the context indicates
otherwise.
 
                                        1

<PAGE>
 
     To the extent information in this prospectus is inconsistent with
information contained in a prospectus supplement, you should rely on the
information in the prospectus supplement. You should read both this prospectus
and any prospectus supplement, together with additional information described
under the heading "Where You Can Find More Information," and any additional
information you may need to make your investment decision.
 
                      WHERE YOU CAN FIND MORE INFORMATION
 
     We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may read
and copy this information, or obtain copies (at prescribed rates) by mail from,
the Public Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549. You may obtain information on the operation of the Public Reference Room
by calling the SEC at (800) SEC-0330. The SEC also maintains an internet world
wide web site that contains reports, proxy statements and other information
about issuers, like us, who file reports electronically with the SEC. The
address of that site is http://www.sec.gov. You may also inspect reports, proxy
statements and other information about us at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
 
                           FORWARD-LOOKING STATEMENTS
 
     This prospectus, any prospectus supplement delivered with this prospectus
and the documents we incorporate by reference may contain statements that
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include any statements that predict, forecast,
indicate or imply future results, performance or achievements, and may contain
the words "believe," "anticipate," "expect," "estimate," "project," "will be,"
"will continue," "will result," or words or phrases of similar meaning.
 
     Any such forward-looking statements are not assurances of future
performance and involve risks and uncertainties. Actual results may vary
materially from anticipated results for a number of reasons, including those
stated under the caption "Risk Factors" in our SEC reports incorporated in this
prospectus by reference.
 
     All forward-looking statements attributable to us are expressly qualified
in their entirety by the cautionary statements above.
 
                           INCORPORATION BY REFERENCE
 
     The SEC allows us to incorporate by reference the information we file with
the SEC into this prospectus. This means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered to be part of
this prospectus, except for any information that is superseded by subsequent
incorporated documents or by information that is included directly in this
prospectus or any prospectus supplement.
 
     This prospectus incorporates by reference the documents listed below that
we previously have filed with the SEC and that are not delivered with this
prospectus. They contain important information about us and our financial
condition.
 
     - Our Annual Report on Form 10-K for the year ended December 31, 2000.
 
     - Our Quarterly Reports on Form 10-Q for the quarter ended March 31, 2001
       and for the quarter ended June 30, 2001.
 
     - Our Current Reports on Form 8-K, filed with the SEC on January 19, 2001,
       February 5, 2001, March 8, 2001, March 20, 2001, April 17, 2001, May 3,
       2001, May 4, 2001, May 10, 2001, June 1, 2001, June 4, 2001, July 3,
       2001, July 10, 2001, July 11, 2001, July 13, 2001 (as amended on Form
       8-K/A, filed with the SEC on July 13, 2001), July 17, 2001, August 2,
       2001, August 9, 2001, August 10, 2001, September 4, 2001, September 7,
       2001, September 17, 2001, September 19, 2001,
                                        2

<PAGE>
 
       September 21, 2001, September 21, 2001, September 24, 2001, October 1,
       2001, October 2, 2001, October 15, 2001 and October 15, 2001.
 
     - The description of our common stock contained in our Registration
       Statement on Form 8-A/A#3, as filed with the SEC on February 6, 2001.
 
     - The description and terms of the preferred share purchase rights
       associated with our outstanding common stock contained in our
       registration statement on Form 8A/A, as filed with the SEC on January 22,
       2001.
 
     Our SEC file number is 0-9781.
 
     We incorporate by reference additional documents that we may file with the
SEC under Sections 13(a), 13(c), 14 or 15(a) of the Securities Exchange Act
between the date of this prospectus and the termination of the offering of
securities under this prospectus. These documents include our periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as our proxy statements.
 
     You may obtain any of these incorporated documents from us without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference in such document. You may obtain documents
incorporated by reference in this prospectus by requesting them from us in
writing or by telephone at the following address:
 
                           Continental Airlines, Inc.
                               1600 Smith Street,
                                  Dept. HQSEO
                              Houston, Texas 77002
                              Attention: Secretary
                                 (713) 324-2950
 
                                        3

<PAGE>
 
                           CONTINENTAL AIRLINES, INC.
 
     We are a major U.S. air carrier engaged in the business of transporting
passengers, cargo and mail. We are the fifth largest U.S. airline, as measured
by 2000 revenue passenger miles, and, together with our wholly-owned
subsidiaries, ExpressJet Airlines, Inc. (formerly Continental Express, Inc.) and
Continental Micronesia, Inc., served 211 airports worldwide at October 7, 2001.
As of October 7, 2001, we flew to 120 domestic and 91 international destinations
and offered additional connecting service through alliances with domestic and
foreign carriers. We directly served 15 European cities, eight South American
cities, Tel Aviv and Tokyo and are one of the leading airlines providing service
to Mexico and Central America, serving more destinations there than any other
U.S. airline. Through our Guam hub, Continental Micronesia provides extensive
service in the western Pacific, including service to more Japanese cities than
any other U.S. carrier.
 
     We operate our route system primarily through domestic hubs at Newark
International Airport, George Bush Intercontinental Airport in Houston, Hopkins
International Airport in Cleveland, and a Pacific hub on the island of Guam. We
are the primary carrier at each of these hubs, accounting for 56%, 77%, 44% and
70% of average daily jet departures from these locations, respectively, as of
October 7, 2001 (in each case excluding regional jets). Each of our domestic
hubs is located in a large business and population center, contributing to a
high volume of "origin and destination" traffic. The Guam hub is strategically
located to provide service from Japanese and other Asian cities to popular
resort destinations in the western Pacific.
 
     We are a Delaware corporation, with executive offices located at 1600 Smith
Street, Houston, Texas 77002. Our telephone number is (713) 324-2950.
 
                                   THE TRUST
 
     Continental Airlines Finance Trust III, which we refer to as the "trust,"
is a statutory business trust created under Delaware law through the filing of a
certificate of trust with the Delaware Secretary of State on October 18, 2001.
The trust's business is defined in a declaration of trust, dated as of October
18, 2001, executed by us, as sponsor, and the trustees. The declaration of trust
will be amended and restated in its entirety as of the date trust preferred
securities are initially issued. The declaration of trust, as amended and
restated, is referred to in this prospectus as the "trust agreement." The trust
agreement has been qualified under the Trust Indenture Act of 1939.
 
     The trust exists for the exclusive purposes of:
 
     - issuing and selling trust preferred securities and trust common
       securities;
 
     - using the proceeds from the sale of trust preferred securities and trust
       common securities to acquire from us junior subordinated debentures,
       referred to in this prospectus as "trust debentures;" and
 
     - engaging in only those other activities necessary or incidental to these
       purposes.
 
     The trust's business and affairs will be conducted by its trustees, as
provided in the trust agreement. Unless otherwise indicated in the applicable
accompanying prospectus supplement, at the time of the issuance of trust
preferred securities, the initial trustees for the trust will be Bank One
Delaware, Inc., as Delaware trustee, Bank One Trust Company, N.A., as the
property trustee, and two or more individuals, who may be our employees, as
administrative trustees. The property trustee and the Delaware trustee, together
with the administrative trustees, are collectively referred to as the "trustees"
in this prospectus. We, as the holder of the common securities of the trust, or,
if an event of default under the trust agreement has occurred and is continuing,
the holders of not less than a majority in liquidation amount of the trust
preferred securities, will be entitled to appoint, remove or replace the
property trustee and the Delaware trustee. In no event will the holders of the
preferred securities have the right to vote to appoint, remove or replace the
administrative trustees. Such voting rights will be vested exclusively in us as
the holder of the common securities of the trust. The trust will have no assets
other than the trust debentures. The trust will have no revenue other than
payments under the trust debentures. We will pay all expenses of the trust.
 
                                        4

<PAGE>
 
     We will, directly or indirectly, acquire all of the trust common securities
of the trust, which will have an aggregate liquidation amount equal to at least
3% of the total capital of the trust.
 
     The rights of the holders of the trust preferred securities are set forth
in the trust agreement and the Delaware Business Trust Act. The term of the
trust will be set forth in the applicable prospectus supplement. The location of
the principal executive office of the trust is c/o Continental Airlines, Inc.,
1600 Smith Street, Houston, Texas 77002, and the telephone number is (713)
324-2950.
 
                                USE OF PROCEEDS
 
     Unless otherwise indicated in an accompanying prospectus supplement, we
intend to use the proceeds from the sale of the securities for general corporate
purposes, which may include repayment of indebtedness, selective acquisitions,
additions to our working capital, repurchases of our capital stock and capital
expenditures.
 
                       RATIO OF EARNINGS TO FIXED CHARGES
 
     The ratios of our "earnings" to our "combined fixed charges and preferred
stock dividends" for the six months ended June 30, 2001 and for each of the
years 1996 through 2000 were:
 

<Table>
<Caption>
                       YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED   --------------------------------
 JUNE 30, 2001     2000   1999   1998   1997   1996
----------------   ----   ----   ----   ----   ----
<S>                <C>    <C>    <C>    <C>    <C>
      1.13         1.51   1.80   1.90   2.01   1.75
</Table>

 
     The ratios of earnings to combined fixed charges and preferred stock
dividends are based on continuing operations. For purposes of the ratios,
"earnings" means the sum of:
 
     - our pre-tax income; and
 
     - our fixed charges, net of interest capitalized.
 
     "Combined fixed charges and preferred stock dividends" represent:
 
     - the interest we pay on borrowed funds;
 
     - the amount we amortize for debt discount, premium and issuance expense
       and interest previously capitalized;
 
     - that portion of rentals considered to be representative of the interest
       factor; and
 
     - preferred stock dividend requirements.
 
                         DESCRIPTION OF DEBT SECURITIES
 
     The following description sets forth certain general terms and provisions
of our debt securities, consisting of notes, debentures or other evidences of
indebtedness, that we may offer by this prospectus. We will describe the
particular terms of debt securities, and provisions that vary from those
described below, in one or more prospectus supplements. Our junior subordinated
trust debentures that may be issued to Continental Airlines Finance Trust III in
connection with an offering of trust preferred securities are separately
described in this prospectus under the caption "Description of Trust
Debentures."
 
     We may offer under this prospectus up to $500 million total principal
amount of debt securities, or its equivalent if debt securities are issued at a
discount or in a foreign currency or currency units. We may issue the debt
securities in registered or bearer form. The debt securities we offer pursuant
to this prospectus will be unsecured obligations unless otherwise specified in
the applicable prospectus supplement. We may issue the debt securities as
unsubordinated or senior debt securities, or as subordinated debt securities.
The senior debt securities will rank equally with all current and future
unsecured and unsubordinated indebtedness, and the
 
                                        5

<PAGE>
 
subordinated debt securities will be subordinated in right of payment to all our
senior indebtedness, as described below under "-- Subordination of Subordinated
Debt Securities."
 
     As required by U.S. law, debt securities are governed by a document called
an "indenture." The indenture is a contract between us and an entity named in a
prospectus supplement which acts as trustee. The trustee has two main roles:
 
     - the trustee can enforce your rights, including rights you have against us
       if we default; and
 
     - the trustee performs administrative duties for us, such as sending you
       interest payments, transferring your debt securities to a new buyer if
       you sell and sending you notices.
 
     Senior debt securities will be issued under a senior debt indenture entered
into between us and Bank One, N.A., as trustee, dated as of July 15, 1997.
Subordinated debt securities will be issued under a subordinated debt indenture
between us and a trustee we name when the subordinated debt securities are
issued. The senior debt indenture and the subordinated debt indenture are
sometimes collectively referred to in this prospectus as the "indentures." We
have filed the senior indenture and a form of the subordinated indenture as
exhibits to this registration statement of which this prospectus is a part.
 
     The following description is a summary of selected provisions relating to
the debt securities and the indentures. The summary is not complete. You should
not rely on this summary, because the indentures define your rights as a holder
of the debt securities.
 
GENERAL
 
     The indentures do not limit the total principal amount of debt securities
that may be issued and provide that debt securities may be issued from time to
time in one or more series. We will set forth in a prospectus supplement a
description of the series of debt securities being offered, including some or
all of the following:
 
     - the title of such debt securities;
 
     - any limit upon the aggregate principal amount of such debt securities;
 
     - the date or dates on which principal will be payable or how to determine
       such dates;
 
     - the rate or rates of interest or the method of determination of interest
       rate; the date from which interest will accrue or the method by which
       such date may be determined; the dates on which interest will be payable
       ("Interest Payment Dates"); and any record dates for the interest payable
       on such Interest Payment Dates;
 
     - any obligation or option we may have to redeem, purchase or repay debt
       securities, or any option of the holder to require us to redeem or
       repurchase debt securities, and the terms and conditions upon which such
       debt securities will be redeemed, purchased or repaid;
 
     - any rights of the holders of the debt securities to convert the debt
       securities into other securities or property and the terms and conditions
       governing such conversion or exchange;
 
     - the denominations in which such debt securities will be issuable (if
       other than denominations of $1,000 and any integral multiple thereof for
       registered securities or if other than denominations of $5,000 for bearer
       securities);
 
     - whether such debt securities are to be issued in whole or in part in the
       form of one or more global debt securities and, if so, the identity of
       the depositary for such global debt securities;
 
     - the currency and denominations of the debt securities;
 
     - the principal amount of the debt securities payable upon declaration of
       the acceleration of the maturity of the debt securities, if other than
       100% of the principal amount;
 
     - the person to whom any interest on any debt security will be payable, if
       other than the person in whose name the debt security is registered on
       the applicable record date;
 
                                        6

<PAGE>
 
     - any addition to, or modification or deletion of, any event of default or
       any covenant with respect to the debt securities;
 
     - the application, if any, of defeasance or covenant defeasance discussed
       below;
 
     - any provisions relating to the registration and exchange of the debt
       securities; and
 
     - any other terms of the series of debt securities.
 
     The holders of our debt securities (whether senior or subordinated debt
securities) will be effectively subordinated to the creditors of our
subsidiaries because such creditors will have a direct claim against any assets
of such subsidiaries upon their liquidation or reorganization. By contrast, as a
holder of our debt securities (whether senior or subordinated debt securities),
you will have only an indirect claim against the assets of our subsidiaries that
derives through our ownership of the capital stock of our subsidiaries.
Consequently, as a holder of debt securities, your right to participate in those
assets will be effectively subordinated to the claims of that subsidiary's
creditors (including trade creditors).
 
     Except as may be set forth in a prospectus supplement, the indentures also
do not limit the aggregate amount of unsecured indebtedness that we or our
subsidiaries may incur.
 
     Unless we indicate differently in a prospectus supplement, the debt
securities will not be listed on any securities exchange and will be issued in
fully registered form without coupons. If debt securities are issued in bearer
form, we will set forth the special restrictions and considerations applicable
to such debt securities in a prospectus supplement. Bearer debt securities will
be transferable by delivery of the security by the transferring holder to the
new holder, and the transfer will not be registered or recorded by the trustee
or us.
 
     We may sell the debt securities for an amount less than their stated
principal amount, bearing no interest or bearing a below market rate of
interest. We will provide you with information on the federal income tax
consequences and other special considerations applicable to any of these debt
securities in a prospectus supplement.
 
     If the purchase price of any debt securities is payable in one or more
foreign currencies or currency units or if any debt securities are denominated
in one or more foreign currencies or currency units or if the principal of,
premium and/or interest, if any, on any debt securities is payable in one or
more foreign currencies or currency units, the restrictions, elections, federal
income tax considerations, specific terms and other information with respect to
the debt securities and such foreign currency or currency units will be set
forth in a prospectus supplement.
 
DENOMINATIONS, PAYMENT, REGISTRATION, TRANSFER AND EXCHANGE
 
     We will issue registered debt securities in denominations of $1,000 and
multiples of $1,000, and we will issue bearer debt securities in $5,000
denominations or, in each case, in such other denominations and currencies
established by the terms of the debt securities of any particular series. Unless
we provide otherwise in a prospectus supplement, we will make payments in
respect of the debt securities, subject to any applicable laws and regulations,
in the designated currency and at the office or agency as we may designate from
time to time. At our option, however, we may make interest payments on debt
securities in registered form:
 
     - by checks mailed by the trustee to the holders of the debt securities
       entitled to payment at their registered addresses; or
 
     - by wire transfer to an account maintained by the person entitled to
       payment as specified in the register of the debt securities maintained by
       the trustee.
 
     We will pay installments of interest on debt securities:
 
     - in registered form to the person in whose name the debt security is
       registered at the close of business on the regular record date for such
       interest, unless otherwise provided in a prospectus supplement; or
 
                                        7

<PAGE>
 
     - in bearer form at such paying agencies outside the United States as we
       may appoint from time to time, in the currency and in the manner
       designated in a prospectus supplement, subject to any applicable laws and
       regulations.
 
     The paying agents outside the United States, if any, whom we initially
appoint for a series of debt securities will be named in a prospectus
supplement. We may at any time designate additional paying agents or rescind the
designation of any paying agents, provided that, in the case of:
 
     - registered debt securities, we will be required to maintain at least one
       paying agent in each place of payment for any series; and
 
     - bearer debt securities, we will be required to maintain a paying agent in
       a place of payment outside the United States where debt securities of any
       series and any related coupons may be presented and surrendered for
       payment.
 
     We will have the right to require a holder of any debt security, in
connection with the payment of the principal of, premium and/or interest, if
any, on any debt security, to certify certain information to us for tax
purposes. In the absence of such certification, we will be entitled to rely on
any legal presumption to enable us to determine our duties and liabilities, if
any, to deduct or withhold taxes, assessments or governmental charges from such
payment.
 
     Unless we provide otherwise in a prospectus supplement, you may transfer
debt securities in registered form at the agency we designate from time to time.
You will not be required to pay a service charge to transfer or exchange the
debt securities, but you may be required to pay for any tax or other
governmental charge imposed in connection with the transfer or exchange.
 
     If we redeem only part of the debt securities of any series, we will not be
required to:
 
     - issue, register the transfer of, or exchange debt securities of that
       series during a period beginning at the opening of business 15 days
       before any selection of debt securities of that series to be redeemed and
       ending at the close of business on (A) the day of mailing of the relevant
       notice of redemption, if debt securities of the series are issuable only
       as registered debt securities, and (B) the day of the first publication
       of the relevant notice of redemption, if debt securities of the series
       are issuable as bearer debt securities, or the mailing of the relevant
       notice of redemption, if debt securities of the series are also issuable
       as registered debt securities and there is no publication;
 
     - register the transfer of or exchange any registered debt securities
       called for redemption or otherwise surrendered for repayment, except the
       unredeemed or unrepaid portion of any registered security being redeemed
       or repaid in part; or
 
     - exchange any bearer security called for redemption, except to exchange
       such bearer security for a registered security of that series and like
       tenor which is immediately surrendered for redemption.
 
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
 
     Unless otherwise indicated in the applicable prospectus supplement, the
following provisions will apply to the subordinated debt securities.
 
     The payment of the principal of, premium, and/or interest, if any, on, and
the redemption or repurchase of, the subordinated debt securities and coupons
will be subordinated and junior in right of payment, as set forth in the
subordinated indenture, to the prior payment in full of all our "senior
indebtedness" (as defined below). Generally, the subordinated debt securities
will rank pari passu with all of our existing and future subordinated
indebtedness other than any future subordinated indebtedness or other
subordinated obligations which we specify will rank junior to the subordinated
debt securities. Notwithstanding the foregoing, payment from the money or the
proceeds of U.S. government obligations held in any defeasance trust described
under "-- Defeasance" below is not subordinate to any senior indebtedness or
subject to the restrictions described herein.
 
                                        8

<PAGE>
 
     Senior indebtedness consists of the following types of obligations, in each
case subject to the exceptions enumerated below:
 
     - the principal, premium, if any, interest and other amounts in respect of
       (A) our indebtedness for money borrowed and (B) our indebtedness
       evidenced by securities, debentures, bonds or other similar instruments
       issued by us, in each case that is not, by its terms, subordinated to
       other indebtedness;
 
     - all of our capital lease obligations;
 
     - all of our obligations issued or assumed as the deferred purchase price
       of property;
 
     - all of our conditional sale obligations;
 
     - all of our obligations under any title retention agreement (excluding
       trade accounts payable arising in the ordinary course of business);
 
     - all of our obligations for the reimbursement on any letter of credit,
       bankers acceptance, security purchase facility or similar credit
       transaction;
 
     - all obligations (of the type referred to in the first six bullet points
       above) of other persons for which we are responsible or liable as
       obligor, guarantor or otherwise; and
 
     - all obligations (of the type referred to in the first six bullet points
       above) of other persons secured by any lien on any of our properties or
       assets (whether or not such obligation is assumed by us).
 
     Except as set forth in the applicable prospectus supplement, senior
indebtedness will not include the following:
 
     - indebtedness that is subordinated to or pari passu with the subordinated
       debt securities;
 
     - indebtedness between or among us and our affiliates that ranks pari passu
       with, or junior to the subordinated debt securities;
 
     - our guarantee of certain payments under the 6% Convertible Preferred
       Securities, Term Income Deferrable Equity Securities (TIDES) of
       Continental Airlines Finance Trust II;
 
     - our 6% Convertible Junior Subordinated Debentures due 2030; and
 
     - the trust debentures and the trust preferred securities registered
       hereunder.
 
     The senior indebtedness will continue to be entitled to the benefits of the
subordination provisions irrespective of any amendment, modification or waiver
of any term of the senior indebtedness. Except as set forth in the applicable
prospectus supplement, the payment of the principal of, premium, if any, and
interest, if any on the subordinated debt securities and coupons will rank
senior in right of payment to our guarantee of certain payments under the 6%
Convertible Preferred Securities, Term Income Deferrable Equity Securities
(TIDES) of Continental Airlines Finance Trust II, our 6% Convertible Junior
Subordinated Debentures due 2030 and the trust debentures and the trust
preferred securities registered hereunder.
 
     No payment on account of principal of, premium, if any, or interest on, or
redemption or repurchase of, the subordinated debt securities or any coupon or
any deposit pursuant to the provisions described under "-- Defeasance" below may
be made by us if there is a default in the payment of principal, premium, if
any, sinking funds or interest (including a default under any repurchase or
redemption obligation) or other amounts with respect to any senior indebtedness.
Similarly, no payment may be made if any other event of default with respect to
any senior indebtedness, permitting the holders of senior indebtedness to
accelerate the maturity thereof, shall have occurred and shall not have been
cured, waived or ceased to exist after written notice to us and the trustee by
any holder of senior indebtedness. Upon any acceleration of the principal due on
the subordinated debt securities or payment or distribution of our assets to
creditors upon any dissolution, winding up, liquidation or reorganization, all
principal, premium, if any, sinking funds and interest or other amounts due on
all senior indebtedness must be paid in full before the holders of the
subordinated debt securities are entitled to receive any payment. Because of
such subordination, if we become insolvent, our creditors who are holders of
senior indebtedness may recover more, ratably, than the holders of the
                                        9

<PAGE>
 
subordinated debt securities. Furthermore, such subordination may result in a
reduction or elimination of payments to the holders of the subordinated debt
securities.
 
     The subordinated indenture does not limit our ability to incur senior
indebtedness or any other indebtedness.
 
GLOBAL DEBT SECURITIES
 
     The debt securities of a series may be issued in whole or in part in global
form that will be deposited with a depositary or with a nominee for the
depositary identified in a prospectus supplement. In such case, one or more
registered global securities will be issued in a denomination or aggregate
denominations equal to the portion of the total principal amount of outstanding
debt securities of the series to be represented by such registered global
security or securities. Unless and until it is exchanged in whole or in part for
debt securities in definitive form, a registered global security may not be
registered for transfer or exchange except as a whole by the depositary, the
depositary's nominee or their respective successors as described in the
applicable prospectus supplement.
 
     The specific terms of the depositary arrangement with respect to any
portion of a series of debt securities to be represented by a registered global
security will be described in a prospectus supplement. We expect that the
following provisions will apply to depositary arrangements.
 
     Upon the issuance of any registered global security, and the deposit of
such security with or on behalf of the appropriate depositary, the depositary
will credit, on its book-entry registration and transfer system, the respective
principal amounts of the debt securities represented by such registered global
security to the accounts of institutions or participants that have accounts with
the depositary or its nominee. The accounts to be credited will be designated by
the underwriters or agents engaging in the distribution of the debt securities
or by us, if we offer and sell such debt securities directly.
 
     Ownership of beneficial interests in a registered global security will be
limited to participants of the depositary (which are usually large investment
banks, retail brokerage firms, banks and other large financial institutions) and
persons that hold interests through participants. Ownership of beneficial
interests by participants in a registered global security will be shown on, and
the transfer of that ownership interest will be effected only through, records
maintained by the depositary for that security or its nominee. Ownership of
beneficial interests in a registered global security by persons who hold through
participants will be shown on, and the transfer of that ownership interest
within that participant will be effected only through, records maintained by
that participant. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of securities in certificated form. The
foregoing limitations and such laws may impair the ability to transfer
beneficial interests in registered global securities.
 
     So long as the depositary for a registered global security, or its nominee,
is the registered owner of a registered global security, that depositary or
nominee, as the case may be, will be considered the sole owner or holder of the
debt securities represented by that registered global security. Unless otherwise
specified in a prospectus supplement and except as specified below, owners of
beneficial interests in a registered global security will not:
 
     - be entitled to have the debt securities of the series represented by the
       registered global security registered in their names;
 
     - receive or be entitled to receive physical delivery of the debt
       securities of such series in certificated form; or
 
     - be considered the holders of the debt securities for any purposes under
       the indentures.
 
     Accordingly, each person owning a beneficial interest in a registered
global security must rely on the procedures of the depositary and, if such
person is not a participant, on the procedures of the participant through which
such person owns its interest, to exercise any rights of a holder under the
indentures.
 
                                        10

<PAGE>
 
     The depositary may grant proxies and otherwise authorize participants to
give or take any request, demand, authorization, direction, notice, consent,
waiver or other action which a holder is entitled to give or take under the
indentures. Unless otherwise specified in a prospectus supplement, payments with
respect to principal, premium and/or interest, if any, on debt securities
represented by a registered global security registered in the name of a
depositary or its nominee will be made to such depositary or its nominee, as the
case may be, as the registered owner of such registered global security.
 
     We expect that the depositary for any debt securities represented by a
registered global security, upon receipt of any payment of principal, premium or
interest, will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of a registered global security as shown on the records of such
depositary. We also expect that payments by participants to owners of beneficial
interests in a registered global security held through participants will be
governed by standing instructions and customary practices in the securities
industry, as is now the case with the securities held for the accounts of
customers registered in "street names," and will be the responsibility of such
participants. Neither we nor the trustee or any agent of ours will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of a registered
global security, or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests.
 
     Unless otherwise specified in a prospectus supplement, if the depositary
for any debt securities represented by a registered global security is at any
time unwilling or unable to continue as depositary and a successor depositary is
not appointed by us within 90 days, we will issue debt securities in
certificated form in exchange for a registered global security. In addition, we
may at any time and in our sole discretion determine not to have any of the debt
securities of a series represented by one or more registered global securities
and, in such event, will issue debt securities of such series in certificated
form in exchange for all of the registered global securities representing debt
securities. Further, if we so specify with respect to the debt securities of a
series, an owner of a beneficial interest in a registered global security
representing such series of debt securities may receive, on terms acceptable to
us and the depositary for such registered global security, debt securities of
such series in certificated form registered in the name of such beneficial owner
or its designee.
 
CONSOLIDATION, MERGER AND CONVEYANCE OF ASSETS AS AN ENTIRETY
 
     Each indenture provides that we will not consolidate with or merge into any
other entity or sell, convey, transfer, lease or otherwise dispose of all or
substantially all our properties and assets unless:
 
     - the entity formed by such consolidation or into which we are merged or
       the entity which acquires or which leases our property and assets
       substantially or as an entirety is a corporation organized and existing
       under the laws of the United States of America or any state thereof or
       the District of Columbia, and expressly assumes by supplemental
       indenture, all our obligations under the debt securities, any related
       coupons and our obligations under the indenture;
 
     - immediately after giving effect to such transactions, no Event of Default
       or Default shall have occurred and be continuing; and
 
     - certain other conditions are met.
 
     If a successor corporation assumes our obligations, the successor will
succeed to and be substituted for us under the indentures, the debt securities
and any related coupons. Consequently, all of our obligations will terminate. If
any such permitted consolidation, merger, sale, conveyance, disposition or other
change of control transaction occurs, the holders of the debt securities will
not have the right to require redemption of their securities or similar rights
unless otherwise provided in a prospectus supplement.
 
                                        11

<PAGE>
 
EVENTS OF DEFAULT
 
     An "Event of Default" occurs with respect to debt securities of any series
if any of the following occurs:
 
     - we fail to pay any interest on any debt securities of the applicable
       series or any related coupon or any other amount applicable to such
       series as specified in the applicable prospectus supplement within 30
       days of the due date;
 
     - we fail to pay principal or premium on any debt securities of the
       applicable series on its due date;
 
     - we fail to deposit any sinking fund payment when and as due by the terms
       of the debt securities of that series;
 
     - we default for 60 days after notice to us by the trustee for such series,
       or by the holders of 25% in aggregate principal amount of the debt
       securities of such series then outstanding, in the performance of any
       other agreement applicable to the debt securities of that series; and
 
     - certain events in bankruptcy, insolvency or reorganization occur; or
 
     - any other Event of Default specified in the prospectus supplement
       applicable to such series occurs.
 
     An Event of Default with respect to a particular series of debt securities
will not necessarily be an Event of Default with respect to any other series of
debt securities.
 
     The indentures provide that, if an Event of Default occurs with respect to
the debt securities of any series and is continuing, the trustee for the series
or the holders of 25% in aggregate principal amount of all of the outstanding
debt securities of that series, by written notice to us (and to the trustee for
such series, if notice is given by the holders of debt securities), may declare
the principal (or, if the debt securities of that series are original issue
discount debt securities or indexed debt securities, such portion of the
principal amount specified in the prospectus supplement) of all the debt
securities of that series to be due and payable.
 
     The indentures provide that the trustee for any series of debt securities
will give to the holders of the debt securities of that series notice of all
uncured Defaults (as defined below) within 90 days after the occurrence of a
Default. However, such notice will not be given until 60 days after the
occurrence of a Default with respect to the debt securities of that series
involving a failure to perform a covenant other than the obligation to pay
principal, premium, and/or interest, if any, or make a mandatory sinking fund
payment. Further, except in the case of default in payment on the debt
securities of that series, the trustee may withhold the notice if and so long as
a committee comprised of certain officers of the trustee determines in good
faith that withholding such notice is in the interest of the holders of the debt
securities of that series. "Default" means any event which is, or, after notice
or passage of time or both, would be, an Event of Default.
 
     Under the indentures, the trustee is under no obligation to exercise any of
its rights or powers at the request of any of the holders, unless such holders
have offered to the trustee reasonable indemnity. Subject to such provision for
indemnification, the indentures provide that the holders of not less than a
majority in aggregate principal amount of the debt securities of each series
affected with each series voting as a class, may direct the time, method and
place of conducting any proceeding for any remedy available to the trustee for
such series, or exercising any trust or power conferred on such trustee. We are
required to file annually with the trustee a certificate as to our compliance
with all conditions and covenants under indentures, except an Event of Default
based on the payment of the principal of, premium, if any, or interest, if any,
on any debt security of a series and certain other defaults.
 
     By notice to the trustee, the holders of not less than a majority in total
principal amount of any series of debt securities may waive any past Default or
Event of Default with respect to that series and its consequences. Further, such
majority holders may rescind and annul a declaration of acceleration with
respect to that series (unless a judgment or decree based on such acceleration
has been obtained and entered), except an acceleration based on an Event of
Default in the payment of the principal of, premium, if any, or interest, if
any, on any debt security (and any resulting acceleration) and certain other
defaults.
 
                                        12

<PAGE>
 
MODIFICATION OF INDENTURE
 
     Without Holder Consent.  Without the consent of any holders of debt
securities, we and the trustee may enter into one or more supplemental
indentures for any of the following purposes:
 
     - to evidence the succession of another entity to our company and the
       assumption of our covenants by a successor; or
 
     - to add one or more covenants or other provisions for the benefit of the
       holders of all or any series or tranche of debt securities, or to
       surrender any right or power conferred upon us; or
 
     - to add any additional Events of Default for all or any series of debt
       securities; or
 
     - to add or change any provisions to such extent as necessary to permit or
       facilitate the issuance of debt securities in bearer or in global form;
       or
 
     - to provide security for the debt securities of any series; or
 
     - to establish the form or terms of debt securities of any series bearer or
       in global form; or
 
     - to provide for the issuance of bearer securities; or
 
     - to evidence and provide for the acceptance of appointment of a separate
       or successor trustee; or
 
     - under certain circumstances to add to, change or eliminate any provision
       affecting debt securities not yet issued; or
 
     - to cure any ambiguity, defect, correct or inconsistency or to make any
       other changes that do not adversely affect the interests of the holders
       of debt securities of any series issued under such indenture in any
       material respect.
 
     If the Trust Indenture Act is amended after the date of the indenture so as
to require changes to the indentures or so as to permit changes to, or the
elimination of, provisions which, at the date of the indentures or at any time
thereafter, were required by the Trust Indenture Act to be contained in the
indentures, the indentures will be deemed to have been amended so as to conform
to such amendment or to effect such changes or elimination, and we and the
trustee may, without the consent of any holders, enter into one or more
supplemental indentures to effect or evidence such amendment.
 
     With Holder Consent.  Except as provided above, the consent of the holders
of at least a majority in aggregate principal amount of the debt securities of
each series affected by such supplemental indenture is generally required for
the purpose of adding to, or changing or eliminating any of the provisions of,
the debt securities pursuant to a supplemental indenture. However, no amendment
or modification may, without the consent of the holder of each outstanding debt
security directly affected thereby,
 
     - change the stated maturity of the principal or interest on any debt
       security (other than pursuant to the terms thereof), or reduce the
       principal amount, interest or premium payable or change the currency in
       which any debt security is payable, or impair the right to bring suit to
       enforce any payment; or
 
     - reduce the percentages of holders whose consent is required to modify or
       amend the indentures of compliance with certain provisions of the
       indentures or for waiver of certain defaults; or
 
     - reduce the premium, if any, upon redemption of any debt security; or
 
     - reduce principal payable upon acceleration of the maturity of an original
       issue discount debt security; or
 
     - change our obligation to maintain an office or agency in the places and
       for the purposes specified in the indentures; or
 
     - modify any of the foregoing provisions.
 
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<PAGE>
 
     A supplemental indenture which changes or eliminates any provision of the
indenture expressly included solely for the benefit of holders of debt
securities of one or more particular series or tranches will be deemed not to
affect the rights under the indenture of the holders of debt securities of any
other series or tranche.
 
DEFEASANCE
 
     If indicated in the applicable prospectus supplement, we will have two
options to discharge our obligations under a series of debt securities before
their maturity date. We may elect either:
 
     - to defease and be discharged from any and all obligations with respect to
       the debt securities of or within any series (except as described below)
       ("defeasance"); or
 
     - to be released from our obligations with respect to certain covenants
       applicable to the debt securities of or within any series ("covenant
       defeasance").
 
     To elect either option, we must deposit with the trustee for such series an
amount of money and/or government obligations sufficient to pay the principal
of, premium and/or interest, if any, on such debt securities to maturity or
redemption, as the case may be, and any mandatory sinking fund or analogous
payments.
 
     Upon the occurrence of a defeasance, we will be deemed to have paid and
discharged the entire indebtedness represented by the debt securities and any
related coupons and to have satisfied all of our obligations, except for:
 
     - the rights of holders of the debt securities to receive, solely from the
       trust funds deposited to defease such debt securities, payments in
       respect of the principal of, premium, and/or interest, if any, on the
       debt securities or any related coupons when such payments are due; and
 
     - certain other obligations as provided in the indentures.
 
     Upon the occurrence of a covenant defeasance, we will:
 
     - be released only from our obligations to comply with certain covenants
       contained in the indentures;
 
     - continue to be obligated in all other respects under the debt securities;
       and
 
     - continue to be contingently liable with respect to the payment of
       principal, premium and/or interest, if any, with respect to the debt
       securities.
 
     Unless otherwise specified in the applicable prospectus supplement and
except as described below, the conditions to both defeasance and covenant
defeasance are as follows:
 
     - the defeasance or covenant defeasance must not result in a breach or
       violation of, or constitute a default or event of default under, the
       applicable indenture;
 
     - certain bankruptcy related defaults or events of default must not have
       occurred and be continuing during the period commencing on the date of
       the deposit of the trust funds to defease the debt securities and ending
       on the 91st day after such date;
 
     - we must deliver to the trustee an opinion of counsel to the effect that
       the holders of the debt securities will not recognize income, gain or
       loss for federal income tax purposes as a result of the defeasance or
       covenant defeasance and will be subject to federal income tax on the same
       amounts and in the same manner and at all the same times as would have
       been the case if the defeasance or covenant defeasance had not occurred;
       and
 
     - any additional conditions to the defeasance or covenant defeasance which
       may be imposed on us pursuant to the applicable indenture.
 
     A nationally recognized firm of independent public accountants must deliver
a written certification to the trustee as to the sufficiency of the trust funds
deposited for the defeasance or covenant defeasance of the debt securities. As
holders of the debt securities, you will not have any recourse against such
firm. If government
 
                                        14

<PAGE>
 
obligations deposited with the trustee for the defeasance of the debt securities
decrease in value or default subsequent to their being deposited, we will have
no further obligation, and you will have no additional recourse against us, as a
result of such decrease in value or default.
 
     We may exercise our defeasance option notwithstanding our prior exercise of
our covenant defeasance option. If we exercise our defeasance option, payment of
the debt securities may not be accelerated because of a Default or an Event of
Default. If we exercise our covenant defeasance option, payment of the debt
securities may not be accelerated by reason of a Default or an Event of Default
with respect to the covenants to which such covenant defeasance is applicable.
However, if such acceleration were to occur, the realizable value at the
acceleration date of the money and government obligations in the defeasance
trust could be less than the principal and interest, if any, then due on such
debt securities, because the required deposit in the defeasance trust is based
upon scheduled cash flow rather than market value, which will vary depending
upon interest rates and other factors.
 
     A prospectus supplement may further describe the provisions, if any,
applicable to defeasance or covenant defeasance with respect to debt securities
of a particular series.
 
THE TRUSTEE
 
     The initial trustee under the senior debt indenture is Bank One, N.A. The
trustee under the subordinated debt indenture will be named when the
subordinated debt securities are issued. If more than one series of debt
securities is outstanding under an indenture, a trustee may serve as trustee
with respect to the debt securities of one or more of such series. If more than
one series of debt securities is outstanding under an indenture, the holders of
a majority in total principal amount of each such series at any time outstanding
may remove the trustee with respect to such series (but not as to any other
series) by notifying the trustee and us and may appoint a successor trustee for
such series with our consent.
 
                        DESCRIPTION OF TRUST SECURITIES
 
     The trust may issue trust preferred securities and trust common securities,
which we refer to collectively as the "trust securities," under the terms of the
trust agreement. The trust preferred securities will represent undivided
beneficial interests in the assets of the trust. We will own all of the trust
common securities. Selected provisions of the trust agreement are summarized
below. This summary is not complete and contains only a general description of
the trust preferred securities. Any of the following terms may be changed, as
set forth in a prospectus supplement. A form of trust agreement has been filed
with the SEC, and you should read the trust agreement for provisions that may be
important to you. A definitive form of trust agreement will be filed with the
SEC when we issue trust preferred securities. The trust agreement will be
qualified under the Trust Indenture Act. You should also refer to the Trust
Indenture Act for provisions that apply to the trust preferred securities.
Wherever particular defined terms of the trust agreement are referred to, such
defined terms are incorporated herein by reference.
 
GENERAL
 
     The trust preferred securities and trust common securities issued by the
trust will be substantially the same except that, if there is an event of
default under the trust agreement, as described below, the rights of the holders
of the trust preferred securities will be entitled to priority in right of
payment over our rights as holders of the trust common securities.
 
     The trust will invest the proceeds from any issuance of the trust preferred
securities, together with the consideration we pay for the trust common
securities to purchase trust debentures from us. Legal title in the trust
debentures will be held by the property trustee in trust for the benefit of
holders of the trust securities.
 
     In accordance with the trust agreement, the trust may not, among other
things, borrow money, issue debt or any securities other than the trust
securities, execute mortgages or pledge any of its assets.
 
                                        15

<PAGE>
 
     We will guarantee distributions on the trust preferred securities on a
limited basis to the extent described under the caption "Description of
Guarantee." The guarantee will not guarantee payment of distributions or amounts
payable on redemption of the trust preferred securities or liquidation of the
trust when the trust does not have funds on hand legally available for such
payments. In such event, a remedy of a holder of trust preferred securities is
to direct the property trustee to enforce its rights under the trust debentures.
If the property trustee fails to enforce its rights with respect to the trust
debentures held by the trust, any record holder of the trust preferred
securities may, to the fullest extent permitted by law, institute legal
proceedings directly against us to enforce the property trustee's rights under
such trust debentures without first instituting any legal proceedings against
the property trustee or any other person or entity. In addition, a holder of the
trust preferred securities may institute a legal proceeding directly against us
for enforcement of payment to such holder of principal of, premium, if any, or
interest on the trust debentures having a principal amount equal to the
aggregate liquidation amount of the trust preferred securities of such holder on
or after the due date specified in the trust debentures.
 
     Holders of the trust preferred securities will have no preemptive or
similar rights.
 
DISTRIBUTIONS
 
     Distributions on the trust preferred securities will be payable on the
dates and at the rates set forth in a prospectus supplement. The distribution
rate and the relevant distribution date for the trust securities will correspond
to the payments and payment dates on the trust debentures. The revenue of the
trust available for distribution to holders of the trust preferred securities
will be limited to payments under the trust debentures in which the trust will
invest the proceeds from the issuance and sale of the trust securities. If we
fail to make interest payments on the trust debentures, the property trustee
will not have funds available to pay distributions on the trust preferred
securities.
 
     Unless otherwise specified in the applicable prospectus supplement, we may
defer the payment of interest on the trust debentures on one or more occasions
for a period not exceeding 10 consecutive semi-annual periods (or the equivalent
thereof), unless a debenture event of default has occurred and is continuing.
However, no deferral period shall extend beyond the stated maturity date.
Distributions on the trust preferred securities will be deferred by the trust
during any such deferral period. Distributions to which holders of the trust
preferred securities are entitled during any such deferral period will
accumulate additional distributions at the rate per annum set forth in the
prospectus supplement.
 
     Upon the termination of any deferral period and the payment of all amounts
then due on any interest payment date, we may elect to begin a new deferral
period, subject to the requirements described above. No interest shall be due
and payable during any deferral period, except at the end of the period.
 
     We must give the property trustee, the debenture trustee and the
administrative trustees notice of our election to defer the payment of interest
on the trust debentures at least one business day prior to the earlier of:
 
     - the date the distributions on the trust preferred securities would have
       been payable except for the election to begin such deferral period; or
 
     - the date the administrative trustees are required to give notice to any
       securities exchange or to holders of trust preferred securities of the
       record date or the date such distributions are payable, but in any event
       not less than one business day prior to such record date.
 
     There is no limitation on the number of times that we may elect to begin a
deferral period. Accordingly, there could be multiple deferral periods of
varying lengths throughout the term of the trust preferred securities. See
"Description of Trust Debentures -- Option to Extend Interest Payment Date."
 
     Unless otherwise specified in the applicable prospectus supplement, during
any deferral period, we may not do any of the following:
 
     - declare or pay any dividends or distributions on, or redeem, purchase,
       acquire, or make a liquidation payment with respect to, any of our
       capital stock -- subject to certain exceptions described under
       "Description of Trust Debentures -- Restrictions on Certain Payments";
                                        16

<PAGE>
 
     - make any payment of principal of or premium, if any, or interest on or
       repay, repurchase or redeem any of our debt securities that rank pari
       passu with or junior in right of payment to the trust debentures; or
 
     - make any guarantee payments (other than payments under the guarantee)
       with respect to any guarantee by us of the debt securities of any of our
       subsidiaries if such guarantee ranks pari passu with or junior in right
       of payment to the trust debentures.
 
CONVERSION OR EXCHANGE
 
     If and to the extent indicated in the applicable prospectus supplement, the
trust securities of any series may be convertible or exchangeable into other
debt or equity securities or property. The specific terms on which the trust
securities may be so converted or exchanged will be set forth in the applicable
prospectus supplement. Such terms may include provisions for conversion or
exchange, either mandatory, at the option of the holder, or at our option, in
which case the number or amount of securities or property to be received by the
holders of the trust securities would be calculated as of a time and in the
manner stated in the applicable prospectus supplement.
 
ADDITIONAL SUMS
 
     Except as set forth in the applicable prospectus supplement, we will pay as
additional amounts in the trust debentures such additional amounts as may be
necessary in order that the amount of distributions then due and payable by the
trust on the outstanding trust securities will not be reduced as a result of any
additional taxes, duties and other governmental charges.
 
REDEMPTION
 
     Whenever the trust debentures are repaid, other than following the
distribution of the trust debentures to the holders of the trust securities,
whether at maturity or earlier redemption, the property trustee will apply the
proceeds to redeem a like amount of the trust securities at the applicable
redemption price specified in the applicable prospectus supplement.
 
     "Like amount" means:
 
     - with respect to a redemption of the trust securities, trust securities
       having a liquidation amount equal to the principal amount of trust
       debentures to be paid in accordance with their terms; and
 
     - with respect to a distribution of trust debentures upon the dissolution
       and liquidation of the trust, trust debentures having a principal amount
       equal to the liquidation amount of the trust securities of the holder to
       whom such trust debentures are being distributed.
 
REDEMPTION PROCEDURES
 
     If applicable, trust securities will be redeemed at the applicable
redemption price with the proceeds from the contemporaneous repayment or
prepayment of the trust debentures. Any redemption of trust securities will be
made and the applicable redemption price will be payable on the redemption date
only to the extent that the trust has funds legally available for the payment of
the applicable redemption price. See also "-- Subordination of Trust Common
Securities."
 
     If the trust gives a notice of redemption in respect of the trust preferred
securities, then, by 12:00 noon, New York City time, on the redemption date, to
the extent funds are legally available, with respect to the trust preferred
securities held by DTC or its nominees, the property trustee will deposit with
DTC funds sufficient to pay the applicable redemption price. See "-- Form,
Denomination, Book-Entry Procedures and Transfer." With respect to the trust
preferred securities held in certificated form, the property trustee, to the
extent funds are legally available, will pay the applicable redemption price to
the holders of trust preferred securities upon surrender of the security. See
"-- Payment and Paying Agency." Notwithstanding the foregoing, distributions
payable on or prior to the redemption date shall be payable to the holders of
such trust preferred securities on the relevant record dates for the related
distribution dates. If notice of redemption has been given and funds
 
                                        17

<PAGE>
 
are deposited as required, then on the date of such deposit, all rights of the
holders of the trust preferred securities called for redemption will cease,
except the right of the holders of the trust preferred securities to receive the
applicable redemption price, and the trust preferred securities will cease to be
outstanding.
 
     If any redemption date of trust preferred securities is not a business day,
then the redemption price will be paid on the next day that is a business day.
If the next business day falls in the next calendar year, then the required
payment will be made on the immediately preceding business day.
 
     Subject to applicable law, our subsidiaries or we may, from time to time
purchase outstanding trust preferred securities by tender, in the open market or
by private agreement.
 
     The trust may not redeem fewer than all of the outstanding trust preferred
securities unless all accumulated and unpaid distributions have been paid on all
trust preferred securities for all distribution periods terminating on or prior
to the redemption date. If less than all of the issued trust preferred
securities and trust common securities are to be redeemed on a redemption date,
then the aggregate amount of such trust preferred securities and trust common
securities to be redeemed shall be allocated pro rata among the trust preferred
securities and the trust common securities. The property trustee will select on
a pro rata basis the particular outstanding trust preferred securities to be
redeemed not more than 60 days prior to the redemption date, by such method as
the property trustee shall deem fair and appropriate. The property trustee will
promptly notify the trust registrar in writing of the trust preferred securities
selected for redemption and, in the case of any trust preferred security
selected for partial redemption, the liquidation amount to be redeemed. For all
purposes of the trust agreement, unless the context otherwise requires, all
provisions relating to the redemption of trust preferred securities will relate,
in the case of any trust preferred security redeemed or to be redeemed only in
part, to the portion of the aggregate liquidation amount of trust preferred
securities which has been or is to be redeemed.
 
     Notice of any redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of trust securities at its
registered address. Unless we default in payment of the applicable redemption
price on, or in the repayment of, the trust debentures, on and after the
redemption date distributions will cease to accrue on the trust securities
called for redemption.
 
CANCELLATION
 
     If at any time we or any of our affiliates hold any trust preferred
securities, we may deliver to the property trustee all or any portion of such
trust preferred securities as we elect and receive, in exchange therefore, a
like amount of debentures. After the exchange, such trust preferred securities
will be cancelled and will no longer be deemed to be outstanding and all rights
of ours or our affiliates with respect to such trust preferred securities will
cease.
 
LIQUIDATION OF THE TRUST AND DISTRIBUTION OF TRUST DEBENTURES
 
     The trust will automatically dissolve upon the first to occur of:
 
     - our bankruptcy, dissolution or liquidation or revocation of our charter
       without reinstatement for 90 days;
 
     - the expiration of the term of the trust;
 
     - the entry of an order for dissolution of the trust by a court of
       competent jurisdiction;
 
     - if we direct the property trustee in writing to dissolve the trust and
       distribute a like amount of the trust debentures to the holders of the
       trust securities; and
 
     - redemption, or conversion or exchange, if applicable, of all of the trust
       securities.
 
     Unless otherwise specified in the prospectus supplement, we have the right
at any time to dissolve the trust and, after satisfaction of liabilities to
creditors of the trust, cause the trust debentures to be distributed to the
holders of the trust securities in liquidation of the trust.
 
                                        18

<PAGE>
 
     If a dissolution occurs as described in bullet points one through three
above, the trust will be liquidated by the administrative trustees as
expeditiously as possible. After satisfaction of liabilities to the trust's
creditors, the administrative trustees will distribute to the holders of the
trust securities a like amount of the trust debentures, unless such distribution
is determined by the property trustee not to be practicable. In such case, the
holders will be entitled to receive pro rata out of the assets of the trust
legally available for distribution to holders an amount equal to the aggregate
of the liquidation amount plus accumulated and unpaid distributions thereon to
the date of payment. If this liquidation distribution can be paid only in part
because the trust has insufficient assets on hand legally available to pay in
full the aggregate liquidation distribution, then the amount payable directly by
the trust on the trust securities will be paid on a pro rata basis, except that
if a debenture event of default has occurred and is continuing, the trust
preferred securities shall have a priority over the trust common securities. See
"-- Subordination of Trust Common Securities."
 
     If we elect not to redeem the trust debentures before maturity in
accordance with their terms and either elect not to or are unable to dissolve
and liquidate the trust and distribute the trust debentures to holders of the
trust securities, the trust securities will remain outstanding until the
repayment of the trust debentures on the stated maturity date.
 
     After the liquidation date is fixed for any distribution of trust
debentures to holders of the trust securities,
 
     - the trust securities will no longer be deemed to be outstanding;
 
     - DTC or its nominee will receive, in respect of each registered global
       certificate, if any, representing trust securities and held by it, a
       registered global certificate or certificates representing the trust
       debentures to be delivered upon such distribution; and
 
     - any certificates representing trust securities not held by DTC or its
       nominee will be deemed to represent trust debentures having a principal
       amount equal to the liquidation amount of such trust securities until
       such certificates are presented to the administrative trustees or their
       agent for cancellation. We will then issue to such holder, and the
       debenture trustee will authenticate, a certificate representing such
       trust debentures.
 
SUBORDINATION OF TRUST COMMON SECURITIES
 
     Payment of distributions on, and the redemption price of, the trust
securities will be made pro rata based on the liquidation amount of the trust
securities. However, if on any distribution date or redemption date a debenture
event of default has occurred and is continuing, no payment of any distribution
on, or applicable redemption price of, any of the trust common securities, and
no other payment on account of the redemption, liquidation or other acquisition
of the trust common securities, will be made unless payment in full in cash of
all accumulated and unpaid distributions on all of the outstanding trust
preferred securities for all distribution periods terminating on or prior
thereto, or in the case of payment of the applicable redemption price the full
amount of such redemption price, shall have been made or provided for, and all
funds available to the property trustee shall first be applied to the payment in
full in cash of all distributions on, or redemption price of, the trust
preferred securities then due and payable.
 
     In the case of any event of default under the trust agreement, we, as
holder of the trust common securities, will be deemed to have waived any right
to act with respect to such event of default until the effect of such event of
default with respect to the trust preferred securities is cured, waived or
otherwise eliminated. Until any such event of default is so cured, waived or
otherwise eliminated, the property trustee will act solely on behalf of the
holders of the trust preferred securities and not on behalf of us, as holder of
the trust common securities, and only the holders of the trust preferred
securities will have the right to direct the property trustee to act on their
behalf.
 
EVENTS OF DEFAULT; NOTICE
 
     The occurrence of a debenture event of default constitutes an event of
default under the trust agreement. See "Description of Trust
Debentures -- Debenture Events of Default."
 
                                        19

<PAGE>
 
     Within five business days after the occurrence of any trust agreement event
of default actually known to the property trustee, the property trustee will
transmit notice of such default to the holders of the trust preferred
securities, the administrative trustees and us, unless such default is cured or
waived. We and the administrative trustee are required to file annually with the
property trustee a certificate as to whether or not we are in compliance with
all the conditions and covenants under the trust agreement.
 
     Upon the occurrence of a trust agreement event of default, the debenture
trustee or the property trustee as the holder of the trust debentures will have
the right under the junior subordinated indenture to declare the principal of
and interest on the trust debentures to be immediately due and payable.
 
     If a trust agreement event of default has occurred and is continuing and
such event is attributable to our failure to pay interest, principal or other
required payments on the trust debentures issued to the trust on the date such
interest, principal or other payment is otherwise payable, then a record holder
of trust preferred securities may, on or after the respective due dates
specified in the trust debentures, institute a proceeding directly against us
for enforcement of payment on trust debentures having a principal amount equal
to the aggregate liquidation amount of the trust preferred securities held by
such holder. In connection with such an action, we will be subrogated to the
rights of such record holder of trust preferred securities to the extent of any
payment made by us to such record holder of trust preferred securities.
 
     If a debenture event of default has occurred and is continuing, the trust
preferred securities shall have a preference over the trust common securities as
described under "-- Liquidation of the Trust and Distribution of Trust
Debentures" and "-- Subordination of Trust Common Securities."
 
REMOVAL OF TRUSTEES
 
     Unless a debenture event of default occurs and is continuing, any
administrative trustee may be removed at any time by the holder of the trust
common securities. If a debenture event of default has occurred and is
continuing, the property trustee and the Delaware trustee may be removed at such
time by the holders of a majority in liquidation amount of the outstanding trust
preferred securities. In no event will the holders of the trust preferred
securities have the right to vote to appoint, remove or replace the
administrative trustees, which voting rights are vested exclusively in the
holder of the trust common securities. No resignation or removal of a trustee
and no appointment of a successor trustee shall be effective until the
acceptance of appointment by the successor trustee in accordance with the
provisions of the trust agreement.
 
MERGERS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS OF THE TRUST
 
     The trust may not merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to any corporation or
other person, except as described below or as otherwise described under
"-- Liquidation of the Trust and Distribution of Trust Debentures." The trust
may, at our request and with the consent of the administrative trustees but
without the consent of the holders of the trust preferred securities, the
Delaware trustee or the property trustee, merge with or into, convert into,
consolidate, amalgamate, or be replaced by or convey, transfer or lease its
properties and assets as an entirety or substantially as an entirety to a trust
organized as such under the laws of any state of the United States or the
District of Columbia; provided that:
 
     - such successor entity either:
 
      - expressly assumes all of the obligations of the trust with respect to
        the trust securities and the trust agreement; or
 
      - substitutes for the trust securities other securities having
        substantially the same terms as the trust securities (the "Successor
        Securities") so long as the Successor Securities rank the same as the
        trust securities rank in priority with respect to distributions and
        payments upon liquidation, redemption and otherwise;
 
     - we expressly appoint a trustee of such successor entity possessing the
       same powers and duties as the property trustee as the holder of the trust
       debentures;
 
                                        20

<PAGE>
 
     - the Successor Securities are listed, or any Successor Securities will be
       listed upon notification of issuance, on any national securities exchange
       or other organization on which the trust securities are then listed or
       quoted, if any;
 
     - if the trust preferred securities (including any Successor Securities)
       are rated by any nationally recognized statistical rating organization
       prior to such transaction, such merger, conversion, consolidation,
       amalgamation, replacement, conveyance, transfer or lease does not cause
       the trust preferred securities (including any Successor Securities) or,
       if the trust debentures are so rated, the trust debentures, to be
       downgraded by any such nationally recognized statistical rating
       organization;
 
     - such merger, conversion, consolidation, amalgamation, replacement,
       conveyance, transfer or lease does not adversely affect the rights,
       preferences and privileges of the holders of the trust securities
       (including any Successor Securities) in any material respect;
 
     - such successor entity has a purpose substantially identical to that of
       the trust;
 
     - prior to such merger, conversion, consolidation, amalgamation,
       replacement, conveyance, transfer or lease, we have received an opinion
       from independent counsel to the trust experienced in such matters to the
       effect that:
 
      - such merger, conversion, consolidation, amalgamation, replacement,
        conveyance, transfer or lease does not adversely affect the rights,
        preferences and privileges of the holders of the trust securities
        (including any Successor Securities) in any material respect (other than
        by reason of dilution); and
 
      - following such merger, conversion, consolidation, amalgamation,
        replacement, conveyance, transfer or lease,
 
        - neither the trust nor such successor entity will be required to
          register as an investment company under the Investment Company Act of
          1940; and
 
        - the trust or the successor entity will continue to be classified as a
          grantor trust for United States federal income tax purposes; and
 
     - we or any permitted successor or assignee own all of the trust common
       securities of such successor entity and guarantee the obligations of such
       successor entity under the Successor Securities at least to the extent
       provided by the guarantee and the common guarantee.
 
     Notwithstanding the foregoing, the trust will not, except with the consent
of holders of 100% in liquidation amount of the trust securities, consolidate,
convert into, amalgamate, merge with or into, convert into, or be replaced by or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other entity or permit any other entity to
consolidate, convert into, amalgamate, merge with or into, or replace it if such
consolidation, conversion, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the trust or the successor entity not to be
classified as a grantor trust for United States federal income tax purposes or
would cause the holders of the trust securities not to be treated as owning an
undivided interest in the trust debentures.
 
VOTING RIGHTS; AMENDMENT OF THE TRUST AGREEMENT
 
     Except as provided below and under "-- Mergers, Consolidations,
Amalgamations or Replacements of the Trust" and "Description of
Guarantee -- Amendments and Assignment" and as otherwise required by law and the
trust agreement, the holders of the trust preferred securities will have no
voting rights.
 
     The trust agreement may be amended from time to time by us and the
administrative trustees, without the consent of the holders of the trust
securities:
 
     - to cure any ambiguity, correct or supplement any provisions in the trust
       agreement that may be inconsistent with any other provision, or to make
       any other provisions with respect to matters or questions arising under
       the trust agreement, which shall not be inconsistent with the other
       provisions of the trust agreement;
 
                                        21

<PAGE>
 
     - to modify, eliminate or add to any provisions of the trust agreement to
       such extent as shall be necessary to ensure that the trust will be
       classified for United States federal income tax purposes as a grantor
       trust at all times that any trust securities are outstanding or to ensure
       that the trust will not be required to register as an "investment
       company" under the Investment Company Act;
 
     - to provide for a successor trustee; or
 
     - to add to the covenants or obligations of us as sponsor;
 
provided, however, that in the case of the first two bullet points, the
interests of the holders of the trust securities shall not be adversely affected
in any material respect. Any amendments of the trust agreement pursuant to the
foregoing shall become effective once notice is given to the holders of the
trust securities.
 
     We and the administrative trustees may otherwise amend the trust agreement
with the consent of holders representing a majority (based upon liquidation
amount) of the outstanding trust securities upon receipt by the trustees of an
opinion of counsel experienced in such matters to the effect that such amendment
or the exercise of any power granted to the trustees in accordance with such
amendment will not affect the trust's status as a grantor trust for United
States federal income tax purposes or the trust's exemption from status as an
investment company under the Investment Company Act; provided that, without the
consent of each holder of trust securities, the trust agreement may not be
amended to:
 
     - change the amount or timing of any distribution on the trust securities
       or otherwise adversely affect the amount of any distribution required to
       be made in respect of the trust securities as of a specified date; or
 
     - restrict the right of a holder of trust securities to institute suit for
       the enforcement of any such payment on or after such date.
 
     Subject to the requirements discussed below, holders of a majority in
liquidation amount of trust preferred securities may, and so long as any trust
debentures are held by the trust, the trustees will not, without obtaining the
prior approval of the holders of a majority in liquidation amount of all
outstanding trust preferred securities:
 
     - direct the time, method and place of conducting any proceeding for any
       remedy available to the debenture trustee, or executing any trust or
       power conferred on the debenture trustee with respect to the trust
       debentures;
 
     - waive any past defaults under the indenture;
 
     - exercise any right to rescind or annul a declaration of acceleration of
       the maturity of the principal of the trust debentures; or
 
     - consent to any amendment, modification or termination of the indenture or
       the trust debentures, where such consent shall be required.
 
     However, where a consent under the indenture would require the consent of
each holder of trust debentures affected thereby, no such consent shall be given
by the property trustee without the prior consent of each holder of the trust
preferred securities. The trustees will not revoke any action previously
authorized or approved by a vote of the holders of the trust preferred
securities except pursuant to a subsequent vote of such holders. The property
trustee shall notify each holder of trust preferred securities of any notice of
default that it receives with respect to the trust debentures. In addition to
obtaining the foregoing approvals of the holders of the trust preferred
securities, prior to taking any of the foregoing actions, the trustees shall
obtain an opinion of counsel experienced in such matters to the effect that the
trust will not fail to be classified as a grantor trust for United States
federal income tax purposes on account of such action.
 
     Any required approval of holders of trust preferred securities may be given
at a meeting of such holders convened for such purpose or pursuant to written
consent (without prior notice). The property trustee will cause a notice of any
meeting at which holders of trust preferred securities are entitled to vote to
be given to each holder of record of trust preferred securities in the manner
set forth in the trust agreement.
 
                                        22

<PAGE>
 
     No vote or consent of the holders of trust preferred securities will be
required for the trust to redeem and cancel the trust preferred securities in
accordance with the trust agreement.
 
     Notwithstanding that holders of the trust preferred securities are entitled
to vote or consent under any of the circumstances described above, any of the
trust preferred securities that we own or any of our affiliates shall not be
entitled to vote or consent and shall, for purposes of such vote or consent, be
treated as if they were not outstanding.
 
PAYMENT AND PAYING AGENCY
 
     Payments in respect of trust preferred securities held in global form will
be made to the depositary, which shall credit the relevant accounts at the
depositary on the applicable distribution dates, or in respect of trust
preferred securities that are not held by the depositary, such payments shall be
made by check mailed to the address of the holder entitled thereto as such
address shall appear on the register. The paying agent will initially be the
property trustee or an affiliate of the property trustee and any co-paying agent
chosen by the property trustee and acceptable to the administrative trustees and
us. The paying agent will be permitted to resign as paying agent upon 30 days'
written notice to the property trustee, the administrative trustees and us. If
the property trustee or an affiliate of the property trustee is no longer the
paying agent, the administrative trustees will appoint a successor (which will
be a bank or trust company acceptable to the administrative trustees and us) to
act as paying agent.
 
FORM, DENOMINATION, BOOK-ENTRY PROCEDURES AND TRANSFER
 
     Unless otherwise specified in the applicable prospectus supplement, the
trust preferred securities will be in registered, global form, and the global
trust preferred securities will be deposited upon issuance with DTC, in New
York, New York, and registered in the name of DTC or its nominee, in each case
for credit to an account of a direct or indirect participant in DTC as described
below.
 
     A global preferred security may not be transferred as a whole except by DTC
to another nominee of DTC or to a successor of DTC or its nominee. Beneficial
interests in the global trust preferred securities shall be transferred and
exchanged through the facilities of DTC. Beneficial interests in the global
trust preferred securities may not be exchanged for trust preferred securities
in certificated form except in the limited circumstances described below. See
"-- Exchange of Book-Entry Trust Preferred Securities for Certificated Trust
Preferred Securities."
 
DEPOSITARY PROCEDURES
 
     DTC has advised the trust and us that DTC is a limited-purpose trust
company organized under the New York banking law, a "banking organization"
within the meaning of the New York banking law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934. DTC holds securities
deposited with it by its participants and facilitates the settlement of
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of security certificates. DTC's participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations. Indirect access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust companies
that clear through or maintain a custodial relationship with a participant,
either directly or indirectly. Persons who are not participants may beneficially
own securities held by or on behalf of DTC only through the participants or the
indirect participants of DTC. The ownership interest and transfer of ownership
interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the participants and indirect participants.
 
                                        23

<PAGE>
 
     DTC has also advised the trust and us that it has established procedures to
provide that:
 
     - upon deposit of the global trust preferred securities, DTC will credit
       the accounts of participants designated by the exchange agent with
       portions of the liquidation amount of the global trust preferred
       securities; and
 
     - ownership of such interests in the global trust preferred securities will
       be shown on, and the transfer of that ownership will be effected only
       through, records maintained by DTC (with respect to the participants) or
       by the participants and indirect participants (with respect to other
       owners of beneficial interests in the global trust preferred securities).
 
     Investors in the global trust preferred securities may hold their interests
therein directly through DTC if they are participants in such system, or
indirectly through organizations that are participants in such system. All
interests in a global preferred security will be subject to the procedures and
requirements of DTC. The laws of some states require that certain persons take
physical delivery in certificated form of securities that they own.
Consequently, the ability to transfer beneficial interests in a global preferred
security to such persons will be limited to that extent. Because DTC can act
only on behalf of participants, which in turn act on behalf of indirect
participants and certain banks, the ability of a person having beneficial
interests in a global preferred security to pledge such interests to persons or
entities that do not participate in the DTC system, or otherwise take actions in
respect of such interests, may be affected by the lack of a physical certificate
evidencing such interests. For certain other restrictions on the transferability
of the trust preferred securities, see "-- Exchange of Book-Entry Trust
Preferred Securities for Certificated Trust Preferred Securities."
 
     Except as described below, owners of interests in the global trust
preferred securities will not have trust preferred securities registered in
their name, will not receive physical delivery of trust preferred securities in
certificated form and will not be considered the registered owners or holders
thereof under the trust agreement for any purpose.
 
     Payments in respect of each global preferred security registered in the
name of DTC or its nominee will be payable by the property trustee to DTC in its
capacity as the registered holder under the trust agreement. Under the terms of
the trust agreement, the property trustee will treat the persons in whose names
the trust preferred securities, including the global trust preferred securities,
are registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the
property trustee nor any agent thereof has or will have any responsibility or
liability for:
 
     - any aspect of DTC's records or any participant's or indirect
       participant's records relating to or payments made on account of
       beneficial ownership interests in the global trust preferred securities,
       or for maintaining, supervising or reviewing any of DTC's records or any
       participant's or indirect participant's records relating to the
       beneficial ownership interests in the global trust preferred securities;
       or
 
     - any other matter relating to the actions and practices of DTC or any of
       its participants or indirect participants.
 
     DTC has advised the trust and us that its current practice, upon receipt of
any payment in respect of securities such as the trust preferred securities, is
to credit the accounts of the relevant participants with the payment on the
payment date, in amounts proportionate to their respective holdings in
liquidation amount of beneficial interests in the relevant security as shown on
the records of DTC unless DTC has reason to believe it will not receive payment
on such payment date. Payments by the participants and the indirect participants
to the beneficial owners of trust preferred securities represented by global
trust preferred securities will be governed by standing instructions and
customary practices and will be the responsibility of the participants or the
indirect participants and will not be the responsibility of DTC, the property
trustee, the trust or us. None of us, the trust or the property trustee will be
liable for any delay by DTC or any of its participants in identifying the
beneficial owners of the trust preferred securities, and we, the trust and the
property trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
 
                                        24

<PAGE>
 
     Interests in the global trust preferred securities will trade in DTC's
Same-Day Funds Settlement System and secondary market trading activity in such
interests will therefore settle in immediately available funds, subject in all
cases to the rules and procedures of DTC and its participants. Transfers between
participants in DTC will be effected in accordance with DTC's procedures, and
will be settled in same-day funds.
 
     DTC has advised the trust and us that it will take any action permitted to
be taken by a holder of trust preferred securities only at the direction of one
or more participants to whose account with DTC interests in the global trust
preferred securities are credited and only in respect of such portion of the
liquidation amount of the trust preferred securities as to which such
participant or participants has or have given such direction. However, if there
is an event of default under the trust agreement, DTC reserves the right to
exchange the global trust preferred securities for trust preferred securities in
certificated form and to distribute such trust preferred securities to its
participants.
 
     The information in this section concerning DTC and its book-entry system
has been obtained from sources that the trust and we believe to be reliable, but
neither the trust nor we take responsibility for the accuracy thereof.
 
     Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the global trust preferred securities among participants in DTC,
DTC is under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. None of us, the trust or
the property trustee will have any responsibility for the performance by DTC or
their respective participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
 
EXCHANGE OF BOOK-ENTRY TRUST PREFERRED SECURITIES FOR CERTIFICATED TRUST
PREFERRED SECURITIES
 
     Unless otherwise specified in the applicable prospectus supplement, a
global preferred security is exchangeable for trust preferred securities in
certificated form if:
 
     - DTC notifies the trust that it is unwilling or unable to continue as
       depositary for the global preferred security or has ceased to be a
       clearing agency registered under the Exchange Act, and the trust fails to
       appoint a successor depositary within 90 days; or
 
     - we, on behalf of the trust, in our sole discretion elect to cause the
       issuance of the trust preferred securities in certificated form.
 
     In all cases, certificated trust preferred securities delivered in exchange
for any global preferred security or beneficial interests therein will be
registered in the names, and issued in any approved denominations, requested by
or on behalf of the depositary (in accordance with its customary procedures).
 
REGISTRAR AND TRANSFER AGENT
 
     The property trustee will act as registrar and transfer agent for the trust
preferred securities.
 
     Registration of transfers of the trust preferred securities will be
effected without charge by or on behalf of the trust, but upon payment of any
tax or other governmental charges that may be imposed in connection with any
transfer or exchange. The trust will not be required to register or cause to be
registered the transfer of the trust preferred securities after they have been
called for redemption.
 
INFORMATION CONCERNING THE PROPERTY TRUSTEE
 
     The property trustee, other than during the occurrence and continuance of a
trust agreement event of default, will perform only such duties as are
specifically set forth in the trust agreement and, during the existence of a
trust agreement event of default, must exercise the same degree of care and
skill as a prudent person would exercise or use in the conduct of his or her own
affairs. The property trustee is under no obligation to exercise any of the
powers vested in it by the trust agreement at the request of any holder of trust
securities unless it is offered reasonable indemnity against the costs, expenses
and liabilities that might be incurred thereby. If no trust agreement event of
default has occurred and is continuing and the property trustee is required to
decide between alternative courses of action, construe ambiguous provisions in
the trust
                                        25

<PAGE>
 
agreement or is unsure of the application of any provision of the trust
agreement, and the matter is not one on which holders of the trust preferred
securities or the trust common securities are entitled under the trust agreement
to vote, then the property trustee shall take such action as is directed by us
and, if not so directed, shall take such action as it deems advisable and in the
best interests of the holders of the trust securities and will have no liability
except for its own bad faith, negligence or willful misconduct.
 
MISCELLANEOUS
 
     The administrative trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that the trust will not be
deemed to be an "investment company" required to be registered under the
Investment Company Act or classified as an association taxable as a corporation
for United States federal income tax purposes and so that the trust debentures
will be treated as our indebtedness for United States federal income tax
purposes. In this connection, we and the administrative trustees are authorized
to take any action, not inconsistent with applicable law, the certificate of
trust of the trust or the trust agreement, that we and the administrative
trustees determine in our discretion is necessary or desirable for such
purposes.
 
     The trust agreement and the trust preferred securities will be governed by
and construed in accordance with the internal laws of the State of Delaware.
 
                        DESCRIPTION OF TRUST DEBENTURES
 
     The trust will purchase trust debentures issued by us with the proceeds
from the sale of the trust securities under an indenture, which we refer to as
the "junior subordinated indenture," between us and Bank One Trust Company,
N.A., as trustee. Selected provisions of the junior subordinated indenture are
summarized below. This summary is not complete and contains only a general
description of the trust debentures and the junior subordinated indenture. Any
of the following terms may be changed, as set forth in a prospectus supplement.
A form of the junior subordinated indenture has been filed with the SEC, and you
should read the junior subordinated indenture for provisions that may be
important to you. A definitive form of the junior subordinated indenture will be
filed with the SEC when we issue trust debentures. The junior subordinated
indenture will be qualified as an indenture under the Trust Indenture Act. You
should also refer to the Trust Indenture Act for provisions that apply to the
trust debentures. Wherever particular defined terms of the junior subordinated
indenture are referred to, such defined terms are incorporated herein by
reference.
 
GENERAL
 
     The trust will invest the proceeds obtained from any issuance of trust
preferred securities, together with the consideration paid by us for the trust
common securities, in trust debentures issued by us. The trust debentures will
bear interest at the same rate as the distribution rate of the trust preferred
securities specified in the applicable prospectus supplement, and interest on
the trust debentures and in the trust preferred securities accrue from the same
date. It is anticipated that, until the liquidation, if any, of the trust, each
trust debenture will be held in the name of the property trustee in trust for
the benefit of the holders of the trust securities.
 
     Except as otherwise stated in the applicable prospectus supplement, the
trust debentures will be issued in denominations of $1,000 and integral
multiples thereof. The trust debentures will mature on the date specified in the
applicable prospectus supplement.
 
     The trust debentures issued by us will be unsecured, subordinate and junior
in right of payment to all Senior Indebtedness (as defined below) to the extent
and in the manner set forth in the junior subordinated indenture. See
"-- Subordination."
 
SUBORDINATION
 
     The junior subordinated indenture provides that any trust debentures issued
under the junior subordinated indenture will be subordinate and junior in right
of payment to all Senior Indebtedness. Upon any payment or distribution of
assets to creditors upon any liquidation, dissolution, winding up,
reorganization, or
                                        26

<PAGE>
 
in connection with any insolvency, receivership or bankruptcy proceeding with
respect to our company, all Senior Indebtedness must be paid in full before the
holders of trust debentures will be entitled to receive or retain any payment in
respect thereof.
 
     In the event of the acceleration of the maturity of trust debentures, the
holders of all Senior Indebtedness outstanding at the time of such acceleration
will first be entitled to receive payment in full of such Senior Indebtedness
before the holders of trust debentures will be entitled to receive or retain any
payment in respect of the trust debentures.
 
     No payments on account of principal, or premium, or interest, if any, in
respect of the trust debentures may be made if a default in any payment with
respect to Senior Indebtedness has occurred and is continuing, or an event of
default has occurred with respect to any Senior Indebtedness resulting in the
acceleration of the maturity thereof, or if any judicial proceeding shall be
pending with respect to any such default.
 
     "Indebtedness" means:
 
     - all of our obligations for money borrowed;
 
     - all of our obligations evidenced by bonds, debentures, notes or other
       similar instruments, including obligations incurred in connection with
       the acquisition of property, assets or businesses;
 
     - all of our reimbursement obligations with respect to letters of credit,
       banker's acceptances or similar facilities issued for our account;
 
     - all of our obligations issued or assumed as the deferred purchase price
       of property or services (but excluding trade accounts payable or accrued
       liabilities arising in the ordinary course of business);
 
     - all of our capital lease obligations;
 
     - all our indebtedness whether incurred on or prior to the date of the
       junior subordinated indenture or thereafter incurred, for claims in
       respect of derivative products, including interest rate, foreign exchange
       rate and commodity forward contracts, options and swaps and similar
       arrangements; and
 
     - every obligation of the type referred to in the preceding bullet points
       of another person and all dividends of another person the payment of
       which, in either case, we have guaranteed or are responsible or liable,
       directly or indirectly, as obligor or otherwise.
 
     "Indebtedness Ranking on a Parity with the Trust Debentures" means:
 
     - Indebtedness, whether outstanding on the date of execution of the junior
       subordinated indenture or thereafter created, assumed or incurred, to the
       extent such Indebtedness specifically by its terms ranks equally with and
       not prior to the trust debentures in right of payment upon the happening
       of the dissolution or winding-up or liquidation or reorganization of us;
       and
 
     - all other debt securities, and guarantees in respect of those debt
       securities (including other debentures and other guarantees), issued to
       any other trust, or a trustee of such trust, partnership or other entity
       affiliated with us that is our financing vehicle in connection with the
       issuance by such financing vehicle of equity securities that are similar
       to the trust preferred securities or other securities guaranteed by us.
 
     The securing of any Indebtedness otherwise constituting Indebtedness
Ranking on a Parity with the Trust Debentures will not be deemed to prevent such
Indebtedness from constituting Indebtedness Ranking on a Parity with the Trust
Debentures.
 
     "Indebtedness Ranking Junior to the Trust Debentures" means any
Indebtedness, whether outstanding on the date of execution of the junior
subordinated indenture or thereafter created, assumed or incurred, to the extent
such Indebtedness specifically by its terms ranks junior to and not equally with
or prior to the trust debentures (and any other Indebtedness Ranking on a Parity
with the Trust Debentures) in right of payment upon the happening of the
dissolution or winding-up or liquidation or reorganization of us. The securing
of any Indebtedness otherwise constituting Indebtedness Ranking Junior to the
Trust Debentures will not be deemed to prevent such Indebtedness from
constituting Indebtedness Ranking Junior to the Trust Debentures.
 
                                        27

<PAGE>
 
     "Senior Indebtedness" means all Indebtedness, whether outstanding on the
date of execution of the junior subordinated indenture or thereafter created,
assumed or incurred, except Indebtedness Ranking on a Parity with the Trust
Debentures or Indebtedness Ranking Junior to the Trust Debentures, and any
deferrals, renewals or extensions of such Senior Indebtedness.
 
     Holders of trust debentures should look only to us for payments on the
trust debentures.
 
OPTION TO EXTEND INTEREST PAYMENT DATE
 
     Except as otherwise described in an applicable prospectus supplement, so
long as no debenture event of default has occurred and is continuing, we will
have the right under the junior subordinated indenture at any time and from time
to time during the term of the trust debentures to defer the payment of interest
for a period not exceeding 10 consecutive semi-annual periods (or the equivalent
thereof). However, no deferral period shall extend beyond the stated maturity
date. At the end of such deferral period, we must pay all interest then accrued
and unpaid. During the deferral period we will be restricted from making certain
payments described below under "-- Restrictions on Certain Payments."
 
     Prior to the termination of any deferral period, we may further extend such
deferral period, so long as such extension does not cause such deferral period
to exceed 10 consecutive semi-annual periods or extend beyond the stated
maturity date. Upon the termination of any deferral period and the payment of
all amounts then due on any interest payment date, we may elect to begin a new
deferral period, subject to the above requirements. No interest shall be due and
payable during a deferral period, except at the end thereof. We must give the
property trustee, the administrative trustees and the debenture trustee notice
of our election to defer payment of interest on the trust debentures at least
one business day prior to the earlier of:
 
     - the date the distributions on the trust securities would have been
       payable except for the election to begin or extend such deferral period;
       or
 
     - the date the administrative trustees are required to give notice to any
       securities exchange or to holders of capital securities of the record
       date or the date such distributions are payable, but in any event not
       less than one business day prior to such record date.
 
     The property trustee shall give notice of our election to begin or extend a
new deferral period to the holders of the trust preferred securities. There is
no limitation on the number of times that we may elect to begin a deferral
period. Accordingly, there could be multiple deferral periods of varying lengths
throughout the term of the trust debentures.
 
CONVERSION OR EXCHANGE
 
     If and to the extent indicated in the applicable prospectus supplement, the
trust debentures may be convertible or exchangeable into other debt or equity
securities or property. The specific terms on which trust debentures may be so
converted or exchanged will be set forth in the applicable prospectus
supplement. Such terms may include provisions for conversion or exchange, either
mandatory, at the option of the holder, or at our option, in which case the
number or amount of securities or other property to be received by the holders
of the trust debentures would be calculated as of a time and in the manner
stated in the applicable prospectus supplement.
 
RESTRICTIONS ON CERTAIN PAYMENTS
 
     Except as otherwise specified in the applicable prospectus supplement, if
(1) any event has occurred, of which we have actual knowledge, that with the
giving of notice or the lapse of time, or both, would be a debenture event of
default and in respect of which we have not taken reasonable steps to cure, (2)
a debenture event of default has occurred and is continuing, (3) if the trust
debentures are held by the property trustee, we are in default with respect to
our payment of any obligations under the guarantee or (4) we have given notice
 
                                        28

<PAGE>
 
of our election of a deferral period as provided in the junior subordinated
indenture, or such deferral period, or any extension thereof, has commenced and
is continuing, then we will not do any of the following:
 
     - declare or pay any dividends or distributions on, or redeem, purchase,
       acquire, or make a liquidation payment with respect to, any of our
       capital stock other than the following:
 
      - dividends or distributions in shares of, or options, warrants or rights
        to subscribe for or purchase shares of, common stock;
 
      - any declaration of a dividend in connection with the implementation of a
        stockholders' rights plan, or the issuance of stock under any such plan
        in the future, or the redemption or repurchase of any such rights
        pursuant thereto;
 
      - as a result of a reclassification of our capital stock or the exchange
        or conversion of one class or series of our capital stock for another
        class or series of our capital stock;
 
      - the purchase of fractional interests in shares of our capital stock
        pursuant to the conversion or exchange provisions of such capital stock
        or the security being converted or exchanged; and
 
      - purchases of common stock related to the issuance of common stock or
        rights under any of our benefit plans for our directors, officers or
        employees or any of our dividend reinvestment plans;
 
     - make any payment of principal, interest or premium, if any, on or repay
       or repurchase or redeem any of our debt securities (including other
       debentures) that rank equal to or junior in right of payment to the trust
       debentures; or
 
     - make any guarantee payments (other than payments under the guarantee of
       the trust securities) with respect to any guarantee by us of the debt
       securities of any of our subsidiaries, if such guarantee ranks pari passu
       or junior in right of payment to the trust debentures.
 
REDEMPTION
 
     To the extent set forth in an applicable prospectus supplement, we may, or
may be required to, redeem the trust debentures at the prices and on the terms
set forth in such prospectus supplement. If the trust debentures are so
redeemable only on or after a specified date or event or upon the satisfaction
of additional conditions, the applicable prospectus supplement will specify such
date or event or describe such conditions.
 
     If set forth in the applicable prospectus supplement, a series of trust
debentures may be redeemable in the event of certain changes in tax law
affecting our ability to deduct, for federal income tax purposes, the interest
payable on the trust debentures. The applicable prospectus supplement will
describe the terms of any such right and the status of any then pending changes
in tax law relevant to such right.
 
     For so long as the trust is the holder of the trust debentures, the
proceeds of any redemption of such debentures will be used by the trust to
redeem the related trust securities in accordance with their terms.
 
     Except as set forth in the applicable prospectus supplement, notice of any
redemption will be mailed at least 30 days but not more than 60 days before the
redemption date to each holder of the trust debentures to be redeemed at its
registered address. Unless we default in payment of the redemption price, on and
after the redemption date interest will cease to accrue on the trust debentures
or portions thereof called for redemption.
 
CERTAIN COVENANTS
 
     Except as otherwise specified in the applicable prospectus supplement, if
and so long as the trust is the holder of all trust debentures, we, as borrower,
will pay to the trust all fees and expenses related to the trust and the
offering of the trust securities and will pay, directly or indirectly, all
ongoing costs, expenses and liabilities of the trust (including any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States or any domestic taxing authority
upon the trust but excluding obligations under the trust securities).
 
                                        29

<PAGE>
 
     Except as otherwise specified in an applicable prospectus supplement, so
long as the trust securities remain outstanding, we also covenant:
 
     - to maintain 100% direct or indirect ownership of the trust common
       securities; provided, however, that any successor of our company
       permitted under the indenture may succeed to our ownership of such trust
       common securities; and
 
     - to use reasonable efforts to cause the trust:
 
      - to remain a business trust, except in connection with the distribution
        of trust debentures to the holders of trust securities in liquidation of
        the trust, the redemption of all of the trust securities, or certain
        mergers, consolidations or amalgamations, each as permitted by the trust
        agreement; and
 
      - to otherwise continue to be treated as a grantor trust for United States
        federal income tax purposes; and
 
     - to use our reasonable efforts to cause each holder of trust securities to
       be treated as owning an undivided beneficial interest in the trust
       debentures.
 
ADDITIONAL SUMS
 
     Except as set forth in the applicable prospectus supplement, we will be
obligated to pay as additional amounts on the trust debentures such additional
amounts as may be necessary in order that the amount of distributions then due
and payable by the trust on the outstanding trust securities shall not be
reduced as a result of any such additional taxes, duties and other governmental
charges.
 
MODIFICATION OF INDENTURE
 
     From time to time and without the consent of the holders of trust
debentures, we and the debenture trustee may amend the junior subordinated
indenture for specified purposes, including, among other things, to cure any
ambiguity or to correct or supplement any provision contained in the junior
subordinated indenture or any supplemental indenture which is defective or
inconsistent with any other provision contained therein (provided that any such
action does not materially adversely affect the interests of the holders of
trust debentures) and qualifying, or maintaining the qualification of, the
junior subordinated indenture under the Trust Indenture Act.
 
     The junior subordinated indenture contains provisions permitting us and the
debenture trustee, with the consent of the holders of a majority in aggregate
principal amount of trust debentures, to amend the junior subordinated indenture
in a manner affecting the rights of the holders of trust debentures. However,
except as set forth in the applicable prospectus supplement, no such
modification may, without the consent of the holders of each outstanding trust
debenture so affected:
 
     - change the stated maturity, or reduce the rate of interest or extend the
       time of payment of interest thereon except pursuant to our right under
       the junior subordinated indenture to defer the payment of interest as
       provided therein (see "-- Option to Extend Interest Payment Date") or
       reduce the amount of any premium payable on the trust debentures or
       reduce the amount payable on redemption thereof or make the principal of,
       or interest or premium on, the trust debentures payable in any coin or
       currency other than that provided in the trust debentures, or impair or
       affect the right of any holder of trust debentures to institute suit for
       the payment thereof or, if applicable, to convert or exchange such
       holder's trust debenture as set forth in the junior subordinated
       indenture;
 
     - modify the provisions of the junior subordinated indenture with respect
       to the subordination of the trust debentures in a manner adverse to the
       holders;
 
                                        30

<PAGE>
 
     - reduce the percentage of principal amount of trust debentures, the
       holders of which are required to consent to any such modification of the
       junior subordinated indenture, or are required to consent to any waiver
       provided for in the junior subordinated indenture; or
 
     - modify certain other provisions of the junior subordinated indenture
       relating to amendments and waivers of holders.
 
     Notwithstanding the foregoing, if the trust holds the trust debentures, an
amendment requiring consent of holders of a majority in principal amount of the
trust debentures will not be effective until the holders of a majority in
liquidation amount of the trust securities have consented to the amendment.
Further, if the consent of the holders of each trust debenture is required, an
amendment will not be effective until each holder of the trust securities has
consented to such amendment.
 
DEBENTURE EVENTS OF DEFAULT
 
     Except as set forth in the applicable prospectus supplement, the junior
subordinated indenture provides that any one or more of the following described
events with respect to the trust debentures constitute a debenture event of
default:
 
     - failure to pay any interest on the trust debentures when due for 30 days
       (subject to the deferral of any due date in the case of an Extension
       Period); or
 
     - failure to pay any principal or premium, if any, on the trust debentures
       when due whether at maturity, upon redemption, by declaration of
       acceleration of maturity or otherwise; or
 
     - failure to perform, or breach of, any other covenant or warranty of our
       company contained in the junior subordinated indenture for 90 days after
       written notice to our company from the debenture trustee or the holders
       of at least 25% in aggregate outstanding principal amount of trust
       debentures; or
 
     - certain events of bankruptcy, insolvency or reorganization of our
       company.
 
     Within five business days after the occurrence of a debenture event of
default actually known to the indenture trustee, the indenture trustee must
transmit notice of such debenture event of default to the debenture holders,
unless such debenture event of default has been cured or waived. The junior
subordinated indenture requires that we file annually with the debenture trustee
of a certificate as to the absence of certain defaults under the indenture.
 
     The holders of a majority in aggregate outstanding principal amount of the
trust debentures generally have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the debenture trustee
or to exercise any trust or power conferred upon the debenture trustee under the
junior subordinated indenture, with certain exceptions set forth in the junior
subordinated indenture. If a debenture event of default has occurred and is
continuing, the debenture trustee or the holders of not less than 25% in
aggregate outstanding principal amount of the trust debentures may declare the
principal amount on all trust debentures due and payable immediately upon such
debenture event of default. The holders of a majority in aggregate outstanding
principal amount of the trust debentures may annul such declaration and waive
the default if the default (other than the non-payment of the principal of the
trust debentures which has become due solely by such acceleration) has been
cured and a sum sufficient to pay all matured installments of interest and
principal of, and premium, if any, due otherwise than by acceleration (with any
compounded interest due thereon) has been deposited with the debenture trustee.
 
     Prior to the declaration accelerating the maturity of the trust debentures,
the holders of a majority in aggregate outstanding principal amount of the trust
debentures may, on behalf of the holders of all the trust debentures, waive any
past default or debenture event of default and its consequences, except a
continuing default in the payment of principal (or premium, if any) or interest
or a default in respect of a covenant or provision which under the junior
subordinated indenture cannot be modified or amended without the consent of the
holder of each outstanding trust debenture affected.
 
                                        31

<PAGE>
 
     In case a payment related debenture event of default shall occur and be
continuing, the property trustee will have the right to declare the principal of
and the interest on such trust debentures and any other amounts payable under
the junior subordinated indenture, to be forthwith due and payable and to
enforce its other rights as a creditor with respect to such trust debentures.
 
ENFORCEMENT OF CERTAIN RIGHTS BY HOLDERS OF TRUST PREFERRED SECURITIES
 
     If a debenture event of default has occurred and is continuing and is
attributable to our failure to pay the principal of (or premium, if any), or
interest on the trust debentures on the date such payment is otherwise required,
a holder of trust preferred securities may institute a direct action against us
for such failure to pay. We may not amend the junior subordinated indenture to
remove the foregoing right to bring a direct action without the prior written
consent of the holders of all of the trust preferred securities. Notwithstanding
any payments made to a holder of trust preferred securities by us in connection
with a direct action, we will be subrogated to the rights of the holder of such
trust preferred securities with respect to payments on the trust preferred
securities to the extent of any payments made by us to such holder in any direct
action.
 
     The holders of the trust preferred securities will not be able to exercise
directly any remedies, other than those set forth in the preceding paragraph,
available to the holders of the trust debentures unless there shall have been an
event of default under the trust agreement. See "Description of Trust
Securities -- Events of Default; Notice."
 
SATISFACTION AND DISCHARGE
 
     The junior subordinated indenture provides that when, among other things,
all trust debentures not previously cancelled or delivered to the debenture
trustee for cancellation (i) have become due and payable or (ii) will become due
and payable at maturity or called for redemption within one year, and we deposit
or cause to be deposited with the debenture trustee funds, in trust, for the
purpose and in an amount sufficient to pay on the stated maturity date or upon
redemption of all the trust debentures not previously delivered to the debenture
trustee for cancellation, the principal (and premium, if any) and interest due
or to become due on the stated maturity date, or the redemption date, as the
case may be, then the junior subordinated indenture will cease to be of further
effect (with limited exceptions), and we will be deemed to have satisfied and
discharged the junior subordinated indenture.
 
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
 
     The junior subordinated indenture does not prevent us from consolidating
with or merging into any other person or conveying, transferring or leasing our
properties as an entirety or substantially as an entirety to any person, as long
as:
 
     - either we are the surviving person or the successor person is organized
       and existing under the laws of the United States or any state or the
       District of Columbia, and such successor person expressly assumes our
       obligations on the trust debentures and the junior subordinated
       indenture, including with respect to conversion matters, if applicable;
 
     - immediately after giving effect thereto, no debenture event of default,
       and no event which, after notice or lapse of time or both, would become a
       debenture event of default, has occurred and is continuing; and
 
     - certain other procedural conditions prescribed in the junior subordinated
       indenture are met.
 
FORM, REGISTRATION AND TRANSFER
 
     If the trust debentures are distributed to the holders of the trust
securities, the trust debentures may be represented by one or more global
certificates registered in the name of the DTC or its nominee. Under such
circumstances, the depositary arrangements for the trust debentures would be
expected to be substantially similar to those in effect for the preferred
securities. For a description of DTC and the terms of the depositary
arrangements relating to payments, transfers, voting rights, redemptions and
other notices and other matters,
                                        32

<PAGE>
 
see "Description of Preferred Securities -- Form, Denomination, Book-Entry
Procedures and Transfer" and "-- Depositary Procedures."
 
PAYMENT AND PAYING AGENTS
 
     Payment of principal of (and premium, if any) and interest on trust
debentures will be made at the office of the debenture trustee or at the office
of such paying agent or paying agents as we may designate from time to time,
except that at our option payment of any interest may be made, except in the
case of trust debentures in global form, (i) by check mailed to the address of
the holder thereof as such address shall appear in the register for trust
debentures or (ii) by transfer to an account maintained by the holder thereof,
provided that proper transfer instructions have been received by the relevant
record date. Payment of any interest on any trust debenture will be made to the
person in whose name such trust debenture is registered at the close of business
on the record date for such interest. We may at any time designate additional
paying agents or rescind the designation of any paying agent; however we will at
all times be required to maintain a paying agent in each place of payment for
the trust debentures.
 
GOVERNING LAW
 
     The junior subordinated indenture and the trust debentures will be governed
by and construed in accordance with the laws of the State of New York.
 
INFORMATION CONCERNING THE DEBENTURE TRUSTEE
 
     The debenture trustee will be subject to all the duties and
responsibilities specified with respect to an indenture trustee under the Trust
Indenture Act of 1939. Subject to such provisions, the debenture trustee is
under no obligation to exercise any of the powers vested in it by the indenture
at the request of any holder of trust debentures, unless offered reasonable
indemnity by such holder against the costs, expenses and liabilities which might
be incurred thereby. The debenture trustee is not required to expend or risk its
own funds or otherwise incur personal financial liability in the performance of
its duties if the debenture trustee reasonably believes that repayment or
adequate indemnity is not reasonably assured to it. Bank One Trust Company, N.A.
is the trustee under the junior subordinated indenture. Bank One, N.A. is the
trustee under our senior debt indenture, which is described under the section
entitled "Description of Debt Securities."
 
                            DESCRIPTION OF GUARANTEE
 
     Set forth below is a summary of information concerning the guarantee, which
will be executed and delivered by us for the benefit of the holders from time to
time of trust preferred securities. The guarantee will be qualified under the
Trust Indenture Act of 1939. The guarantee trustee, Bank One Trust Company,
N.A., will hold the guarantee for the benefit of the holders of the trust
preferred securities. The following summary is not necessarily complete, and
reference is hereby made to the copy of the form of the guarantee (including the
definitions therein of certain terms), which is filed as an exhibit to the
registration statement of which this prospectus forms a part, and to the Trust
Indenture Act of 1939. We will describe the particular terms of the guarantee,
and any provisions that vary from those described below, in one or more
prospectus supplements. We will also file the definitive guarantee with the SEC
when we issue trust preferred securities.
 
GENERAL
 
     We will irrevocably and unconditionally agree to pay in full on a
subordinated basis the payments described below to the holders of the trust
preferred securities, as and when due, regardless of any defense, right of
setoff or counterclaim that the trust may have or assert other than the defense
of payment. The following payments with respect to the trust preferred
securities, to the extent not paid by or on behalf of the trust, will be subject
to the guarantee:
 
     - any accumulated and unpaid distributions required to be paid on the trust
       preferred securities, to the extent that the trust has funds on hand
       legally available therefor at such time;
 
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     - the applicable redemption price with respect to the trust preferred
       securities called for redemption, to the extent that the trust has funds
       on hand legally available therefor at such time; and
 
     - upon a voluntary or involuntary dissolution, winding-up or liquidation of
       the trust (other than in connection with the distribution of the trust
       debentures to holders of the trust preferred securities), the lesser of:
 
      - the liquidation distribution, to the extent the trust has funds legally
        available therefor at the time; or
 
      - the amount of assets of the trust remaining available for distribution
        to holders of trust preferred securities after satisfaction of
        liabilities to creditors of the trust as required by applicable law.
 
     Our obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by us to the holders of the trust preferred
securities or by causing the trust to pay such amounts to such holders.
 
     The guarantee will be a guarantee of the guarantee payments with respect to
the trust preferred securities from the time of issuance of the trust preferred
securities, but will not apply to distributions and other payments on the trust
preferred securities when the trust does not have sufficient funds legally and
immediately available to make such distributions or other payments. Therefore,
if we do not make interest payments on the trust debentures held by the property
trustee, the trust will not make distributions on the trust preferred securities
and we will not make payments under the guarantee.
 
     Through the guarantee, the trust agreement, the trust debentures and the
junior subordinated indenture, taken together, we will fully, irrevocably and
unconditionally guarantee all of the trust's obligations under the trust
preferred securities. No single document standing alone or operating in
conjunction with fewer than all of the other documents constitutes such
guarantee. It is only the combined operation of these documents that has the
effect of providing a full, irrevocable and unconditional guarantee of the
trust's obligations under the trust preferred securities. See "Relationship
Among the Preferred Securities, the Trust Debentures and the Guarantee."
 
STATUS OF THE GUARANTEE
 
     The guarantee will constitute our unsecured obligation and will rank
subordinate and junior in right of payment to all Senior Indebtedness in the
same manner as the trust debentures. See "Description of Trust
Debentures -- Subordination."
 
     The guarantee will rank equally with our guarantee of the 6% Convertible
Preferred Securities, Term Income Deferrable Equity Securities (TIDES) of
Continental Airlines Finance Trust II and all other guarantees issued by us
after the issue date with respect to trust preferred securities, if any, issued
by other trusts. The guarantee will constitute a guarantee of payment and not of
collection. The guarantee will be held by the guarantee trustee for the benefit
of the holders of the trust preferred securities. The guarantee will not be
discharged except by payment of the guarantee payments in full to the extent not
paid by the trust or upon distribution to the holders of the trust preferred
securities of the trust debentures.
 
     The guarantee does not limit the incurrence or issuance of other secured or
unsecured debt by us or any of our subsidiaries, including Senior Indebtedness,
whether under the junior subordinated indenture, any other indenture that we may
enter into in the future or otherwise.
 
EVENTS OF DEFAULT
 
     An event of default under the guarantee will occur upon our failure to
perform any of our payment or other obligations thereunder; provided, however,
that with respect to a default other than a default in payment of any guarantee
payment, we have received notice of such default and shall not have cured such
default within 60 days after receipt of such notice. The holders of not less
than a majority in liquidation amount of the trust preferred securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the guarantee trustee in respect of the guarantee or
to direct the exercise of any trust or power conferred upon the guarantee
trustee under the guarantee.
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     Any holder of the trust preferred securities may institute a legal
proceeding directly against us to enforce its rights under the guarantee without
first instituting a legal proceeding against the trust, the guarantee trustee or
any other person or entity.
 
     As guarantor, we will be required to file annually with the guarantee
trustee a certificate as to whether or not we are in compliance with all the
conditions and covenants applicable to us under the guarantee.
 
     Upon the occurrence of a default under the guarantee, we will not be
allowed to make certain payments as described under "Description of Trust
Debentures -- Restrictions on Certain Payments."
 
AMENDMENTS AND ASSIGNMENTS
 
     Except with respect to any changes that do not materially adversely affect
the rights of holders of the trust preferred securities (in which case no vote
will be required), the guarantee may be amended only with the prior approval of
the holders of a majority of the liquidation amount of such outstanding trust
preferred securities. The manner of obtaining any such approval will be as set
forth under "Description of Trust Securities -- Voting Rights; Amendment of the
Trust Agreement." All guarantees and agreements contained in the guarantee shall
bind our successors, assigns, receivers, trustees and representatives and shall
inure to the benefit of the holders of the trust preferred securities then
outstanding.
 
TERMINATION OF THE GUARANTEE
 
     The guarantee will terminate and be of no further force and effect upon:
 
     - full payment of the applicable redemption price of the trust preferred
       securities; or
 
     - upon liquidation of the trust, the full payment of the liquidation
       distribution or the distribution of the trust debentures to the holders
       of the trust preferred securities or, if applicable, the conversion or
       exchange of all trust preferred securities in accordance with their
       terms.
 
     The guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any holder of the trust preferred securities must
restore payment of any sums paid under the trust preferred securities or the
guarantee.
 
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
 
     Other than during the occurrence and continuance of a default by us in
performance of the guarantee, the guarantee trustee will undertake to perform
only such duties as are specifically set forth in the guarantee and, in case a
default with respect to the guarantee has occurred, must exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, the guarantee
trustee will be under no obligation to exercise any of the powers vested in it
by the guarantee at the request of any holder of the trust preferred securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
 
GOVERNING LAW
 
     The guarantee will be governed by and construed in accordance with the laws
of the State of New York.
 
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               RELATIONSHIP AMONG THE TRUST PREFERRED SECURITIES,
                     THE TRUST DEBENTURES AND THE GUARANTEE
 
FULL AND UNCONDITIONAL GUARANTEE
 
     Payments of distributions and other amounts due on the trust preferred
securities, to the extent the trust has funds on hand legally available for the
payment of such distributions, are irrevocably guaranteed by us as and to the
extent set forth under "Description of Guarantee." Taken together, our
obligations under the trust debentures, the junior subordinated indenture, the
trust agreement and the guarantee provide, in the aggregate, a full, irrevocable
and unconditional guarantee of payments of distributions and other amounts due
on the trust preferred securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents constitutes
such guarantee. It is only the combined operation of these documents that has
the effect of providing a full, irrevocable and unconditional guarantee of the
trust's obligations under the trust preferred securities. If and to the extent
that we do not make the required payments on the trust debentures, the trust
will not have sufficient funds to make the related payments, including
distributions, on the trust preferred securities. The guarantee will not cover
any such payment when the trust does not have sufficient funds on hand legally
available therefor. In such event, the remedy of a holder of trust preferred
securities is to institute a direct action against us to enforce such holders'
rights under the trust debentures. Our obligations under the guarantee are
subordinate and junior in right of payment to all Senior Indebtedness.
 
SUFFICIENCY OF PAYMENTS
 
     As long as payments of interest and other payments are made when due on the
trust debentures, such payments will be sufficient to cover distributions and
other payments due on the trust securities, primarily because:
 
     - the aggregate principal amount or prepayment price of the trust
       debentures will be equal to the sum of the liquidation amount or
       redemption price, as applicable, of the trust securities;
 
     - the interest rate and interest and other payment dates on the trust
       debentures will match the distribution rate and distribution and other
       payment dates for the trust securities;
 
     - we will pay for all and any costs, expenses and liabilities of the trust
       except the trust's obligations to holders of trust securities under such
       trust securities; and
 
     - the trust agreement will provide that the trust is not authorized to
       engage in any activity that is not consistent with the limited purposes
       thereof.
 
     Notwithstanding anything to the contrary in the junior subordinated
indenture, we have the right to set-off any payment we are otherwise required to
make with and to the extent we have theretofore made, or are concurrently on the
date of such payment making, a payment under the guarantee.
 
ENFORCEMENT RIGHTS OF HOLDERS OF TRUST PREFERRED SECURITIES
 
     A holder of any preferred trust security may institute a legal proceeding
directly against us to enforce its rights under the guarantee without first
instituting a legal proceeding against the guarantee trustee, the trust or any
other person or entity. A holder of trust preferred securities will also have a
direct right to proceed against us to enforce such holder's rights under the
trust debentures in the event of a payment default on the trust debentures.
 
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<PAGE>
 
LIMITED PURPOSE OF THE TRUST
 
     The trust preferred securities represent preferred undivided beneficial
interests in the assets of the trust, and the trust exists for the sole purpose
of:
 
     - issuing and selling the trust securities;
 
     - using the proceeds from the sale of the trust securities to acquire the
       trust debentures; and
 
     - engaging in only those other activities necessary, advisable or
       incidental thereto.
 
     A principal difference between the rights of a holder of a preferred
security and a holder of a trust debenture is that a holder of a trust debenture
will be entitled to receive from us the principal amount of, and premium, if
any, and interest on trust debentures held, while a holder of trust preferred
securities is entitled to receive distributions from the trust (or, in certain
circumstances, from us under the guarantee) if and to the extent the trust has
funds on hand legally available for the payment of such distributions.
 
RIGHTS UPON DISSOLUTION
 
     Unless the trust debentures are distributed to holders of the trust
securities, upon any voluntary or involuntary dissolution and liquidation of the
trust, after satisfaction of liabilities to creditors of the trust as required
by applicable law, the holders of the trust securities will be entitled to
receive, out of assets held by the trust, the liquidation distribution in cash.
See "Description of Trust Securities -- Liquidation of the Trust and
Distribution of Trust Debentures." Upon any voluntary or involuntary liquidation
or bankruptcy of our company, the property trustee, as holder of the trust
debentures, would be a subordinated creditor of our company, subordinated in
right of payment to all Senior Indebtedness as set forth in the junior
subordinated indenture, but entitled to receive payment in full of principal,
and premium, if any, and interest, before any of our stockholders receive
payments or distributions. Since we will be the guarantor under the guarantee
and will agree to pay for all costs, expenses and liabilities of the trust
(other than the trust's obligations to the holders of its trust securities), the
positions of a holder of trust preferred securities and a holder of trust
debentures relative to other creditors and to our stockholders in the event of
our liquidation or bankruptcy are expected to be substantially the same.
 
                DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
 
     Our authorized capital stock currently consists of 200 million shares of
Class B common stock, which we refer to as the common stock, and 10 million
shares of preferred stock. As of October 5, 2001, we had outstanding 55,420,915
shares of Class B common stock and one share of Series B preferred stock.
 
     This section contains a description of our common stock and preferred stock
that we may offer by this prospectus as well as the terms of our Series B
preferred stock which may affect our common stock and preferred stock that we
may offer by this prospectus. The following discussion is not meant to be
complete and is qualified by reference to our certificate of incorporation,
bylaws and the rights agreement that we describe in this section. For more
information, you should read "Where You Can Find More Information."
 
DESCRIPTION OF COMMON STOCK
 
     Rights to Dividends and on Liquidation, Dissolution or Winding Up.  Common
stockholders participate ratably in any dividends or distributions on the common
stock. In the event of any liquidation, dissolution or winding up of our
company, common stockholders are entitled to share ratably in our assets
available for distribution to the stockholders, subject to the prior rights of
holders of any outstanding preferred stock.
 
     Preemptive and Other Subscription Rights.  Common stockholders do not have
preemptive, subscription, conversion or redemption rights (other than the
anti-dilution rights described under "-- Corporate Governance and Control"), and
are not subject to further capital calls or assessments.
 
     No Cumulative Voting Rights.  Common stockholders do not have the right to
cumulate their votes in the election of directors.
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<PAGE>
 
     Voting.  Holders of common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders, except that voting rights of
non-U.S. citizens are limited as described under "-- Limitation on Voting by
Foreign Owners."
 
DESCRIPTION OF PREFERRED STOCK
 
     The following summary describes certain general terms of our authorized
preferred stock.
 
     We may issue preferred stock from time to time in one or more series.
Subject to the provisions of our certificate of incorporation and limitations
prescribed by law, our board of directors may adopt resolutions to issue the
shares of preferred stock in one or more series, to fix the number of shares of
the series and to establish the designations, powers, preferences and relative,
participating, optional or other special rights of the preferred stock. Our
board of directors may also fix the qualifications, limitations or restrictions,
if any, of the preferred stock, including dividend rights (including whether
dividends are cumulative), dividend rates, terms of redemption (including
sinking fund provisions), redemption rights and prices, conversion or exchange
rights and liquidation preferences of the shares of the series, in each case
without any further action or vote by our stockholders.
 
     If we offer preferred stock, a description will be filed with the SEC and
the specific terms of the preferred stock will be described in the prospectus
supplement, including the following terms:
 
     - the series, the number of shares offered and the liquidation value of the
       preferred stock;
 
     - the price at which the preferred stock will be issued;
 
     - the dividend rate, the dates on which the dividends will be payable and
       other terms relating to the payment of dividends on the preferred stock;
 
     - the voting rights of the preferred stock;
 
     - the liquidation preference of the preferred stock;
 
     - whether the preferred stock is redeemable or subject to a sinking fund,
       and the terms of any such redemption or sinking fund;
 
     - whether the preferred stock is convertible into or exchangeable for any
       other securities, and the terms of any such conversion or exchange; and
 
     - any additional rights, preferences, qualifications and limitations of the
       preferred stock.
 
LIMITATION ON VOTING BY FOREIGN OWNERS
 
     Our certificate of incorporation provides that shares of capital stock may
not be voted by or at the direction of persons who are not citizens of the
United States unless the shares are registered on a separate stock record.
Applicable restrictions currently require that no more than 25% of our voting
stock be owned or controlled, directly or indirectly, by persons who are not
U.S. citizens, and that our president and at least two-thirds of our directors
or other managing officers be U.S. citizens. For purposes of the certificate of
incorporation, "U.S. citizen" means:
 
     - an individual who is a citizen of the United States; or
 
     - a partnership each of whose partners is an individual who is a citizen of
       the United States, or a corporation or association organized under the
       laws of the United States or a state, the District of Columbia, or a
       territory or possession of the United States, of which the president and
       at least two-thirds of the board of directors and other managing officers
       are citizens of the United States, and in which at least 75% of the
       voting interest is owned or controlled by persons that are citizens of
       the United States.
 
     Our bylaws provide that no shares will be registered on the foreign stock
record if the amount so registered would exceed the restrictions described above
or adversely affect our operating certificates or
 
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<PAGE>
 
authorities. Registration on the foreign stock record is made in chronological
order based on the date we receive a written request for registration.
 
     An affiliate of AXA Financial, Inc. has requested that all shares
beneficially owned by AXA Financial, Inc. and its affiliates be included on our
foreign stock record. Although we have not to date limited the registration of
any shares on this record, subject to certain factors, the registration of the
shares beneficially owned by AXA Financial, Inc. will preclude the registration,
and thus the voting of, any shares owned by any other stockholders that are not
U.S. citizens.
 
PREFERRED STOCK PURCHASE RIGHTS
 
     General.  One preferred stock purchase right is currently associated with
each outstanding share of our common stock. Each of these preferred stock
purchase rights entitles the registered holder to purchase from us one
one-thousandth of a share of our Series A junior participating preferred stock
at a purchase price of $200 per one one-thousandth of a share, subject to
adjustment.
 
     The preferred stock purchase rights will have anti-takeover effects. The
preferred stock purchase rights could cause substantial dilution to a person or
group that attempts to acquire us and effect a change in the composition of our
board of directors on terms not approved by our board of directors, including by
means of a tender offer at a premium to the market price. Subject to
restrictions and limitations contained in our charter, the preferred stock
purchase rights should not interfere with any merger or business combination
approved by our board of directors, because we may redeem the preferred stock
purchase rights at the redemption price prior to the time that a person has
become an acquiring person or amend the preferred stock purchase rights to make
them inapplicable to the approved transaction.
 
     The following summary of the material terms of the preferred stock purchase
rights is not meant to be complete and is qualified by reference to the rights
agreement that governs the issuance of the rights. See "Where You Can Find More
Information."
 
     Evidence and Transferability of Preferred Stock Purchase Rights.  The
preferred stock purchase rights will be evidenced by the certificates
representing shares of common stock until the earlier to occur of:
 
     - 10 days following a public announcement or public disclosure of facts
       made by us or an acquiring person that a person or group of affiliated or
       associated persons has become an acquiring person, which occurs,
       generally, when that person or group has acquired beneficial ownership of
       common stock representing 15% or more of the total number of votes
       entitled to be cast by the holders of common stock then outstanding; and
 
     - 10 business days, or a later date established by our board of directors
       before the time any person or group becomes an acquiring person,
       following the commencement of, or the first public announcement of an
       intention of any person or group to make, a tender offer or exchange
       offer that, if completed, would result in the beneficial ownership by a
       person or group of shares of common stock representing 15% or more of
       such number of votes.
 
     Until the rights distribution date or the earlier redemption or expiration
of the preferred stock purchase rights:
 
     - the preferred stock purchase rights will be transferred only with the
       transfer of shares of common stock;
 
     - certificates representing shares of common stock which become outstanding
       after the record date for the initial distribution of the rights, will
       contain a notation incorporating the terms of the preferred stock
       purchase rights by reference; and
 
     - the surrender for transfer of any certificate representing shares of
       common stock will also constitute the transfer of the preferred stock
       purchase rights associated with the shares of common stock represented by
       that certificate.
 
     As soon as practicable following the rights distribution date, separate
certificates evidencing the preferred stock purchase rights will be mailed to
holders of record of the shares of common stock as of the close of
                                        39

<PAGE>
 
business on the rights distribution date and those separate preferred stock
purchase rights certificates alone will evidence the rights.
 
     Exempt Persons.  We and certain persons affiliated with us are exempt from
the definition of acquiring person. An exception to the definition of acquiring
person in the rights agreement permits an institutional investor to be or become
the beneficial owner of our common stock representing 15% or more of the voting
power of the common stock then outstanding, subject to certain limitations
described below, without becoming an acquiring person, as long as the
institutional investor continues to be an institutional investor. Generally, an
institutional investor is a person who, as of January 31, 2000:
 
     - beneficially owned more than 14% of the voting power of our common stock
       then outstanding;
 
     - had a Schedule 13G on file with the SEC with respect to its holdings;
 
     - is principally engaged in the business of managing investment funds for
       unaffiliated securities investors;
 
     - acquires the common stock pursuant to trading activities undertaken in
       the ordinary course of such person's business not with the purpose or
       effect of exercising or influencing control over us; and
 
     - is not obligated to and does not file a Schedule 13D with respect to our
       securities.
 
     If our board of directors determines that a person is no longer an
institutional investor, then this person will be required to divest itself as
promptly as practicable of a sufficient number of shares of common stock so that
this person beneficially owns less than 15% of the voting power of our common
stock then outstanding.
 
     If our board of directors determines that this person does not divest
itself of common shares as required, then this person will be or become an
acquiring person under the rights agreement.
 
     AXA Financial, Inc., as an institutional investor under the rights
agreement, is permitted to beneficially own, without triggering the rights under
the rights agreement, so long as it retains its status as a passive
institutional investor, up to 47% of the outstanding shares of common stock
through December 31, 2001, and, after December 31, 2001, the lesser of 47% of
the outstanding shares of common stock and the percentage of common stock
reported as beneficially owned by it in any Schedule 13G filed with the SEC
after December 31, 2001 (such that the percentage permitted to be beneficially
owned by it will be reduced (down to 25% of the outstanding shares of common
stock) to reflect reductions in its beneficial ownership percentage resulting
from subsequent sales of common stock or increases in the total number of shares
of common stock outstanding).
 
     Exercisability of Rights.  The preferred stock purchase rights are not
exercisable until the preferred stock purchase rights distribution date. The
preferred stock purchase rights will expire on November 20, 2008, unless the
expiration date is extended or unless the preferred stock purchase rights are
earlier redeemed or exchanged by us, in each case, as described below.
 
     If any person becomes an acquiring person, each holder of a preferred stock
purchase right (other than preferred stock purchase rights beneficially owned by
the acquiring person, which will be void) will, after the date that any person
became an acquiring person, have the right to receive, upon exercise of those
preferred stock purchase rights at the then current exercise price, that number
of shares of common stock, or cash or other securities or assets in certain
circumstances, having a market value of two times the exercise price of the
preferred stock purchase right. If, at any time on or after the date that any
person has become an acquiring person, we are acquired in a merger or other
business combination transaction or 50% or more of our consolidated assets or
earning power are sold, each holder of a preferred stock purchase right will,
after the date of that transaction, have the right to receive, upon the exercise
of those preferred stock purchase rights at the then current exercise price of
the preferred stock purchase right, that number of shares of common stock of the
acquiring company which at the time of that transaction will have a market value
of two times the exercise price of the preferred stock purchase right.
 
     The purchase price payable, and the number of shares of junior preferred
stock or other securities or property issuable, upon exercise of the preferred
stock purchase rights are subject to adjustment from time to time to prevent
dilution in some circumstances.
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     Until a preferred stock purchase right is exercised, the holder of a
preferred stock purchase right will have no rights as a stockholder of our
company, including the right to vote or to receive dividends.
 
     From and after the occurrence of an event described in Section 11(a)(ii) of
the rights agreement, if rights are or were, at any time on or after the earlier
of (1) the date of such event and (2) the distribution date, acquired or
beneficially owned by an acquiring person or an associate or affiliate of an
acquiring person, such rights shall become void, and any holder of such rights
shall thereafter have no right to exercise such rights.
 
     Terms of Junior Preferred Stock.  Shares of junior preferred stock, which
may be purchased upon exercise of the preferred stock purchase rights, will not
be redeemable. Each share of junior preferred stock will be entitled to receive
when, as and if declared by the board of directors, out of funds legally
available for the purpose, an amount per share equal to 1,000 times the cash or
non-cash dividend declared per share of common stock. In the event of
liquidation, the holders of the junior preferred stock will be entitled to
receive an aggregate payment equal to 1,000 times the payment made per share of
common stock. Each share of junior preferred stock will have 1,000 votes,
together with the common stock. Finally, in the event of any merger,
consolidation or other transaction in which the common stock is exchanged, each
share of junior preferred stock will be entitled to receive an amount equal to
1,000 times the amount received per share of common stock. The rights are
protected by customary antidilution provisions.
 
     Exchange or Redemption.  At any time after any person becomes an acquiring
person, and prior to the acquisition by any person or group of a majority of the
voting power, our board of directors may exchange the rights (other than rights
owned by such acquiring person which have become void), in whole or in part, at
an exchange ratio of one share of common stock per right (subject to
adjustment). We may, at our option, substitute preferred shares or common stock
equivalents for common stock, at the rate of one one-thousandth of a preferred
share for each share of common stock (subject to adjustment). No fractional
share of common stock will be issued and in lieu thereof, an adjustment in cash
will be made based on the market price of the share of common stock on the last
trading day prior to the date of exchange.
 
     At any time prior to any person becoming an acquiring person, our board of
directors, by the required board vote, may redeem the rights in whole, but not
in part, at a redemption price of $.001 per right. The redemption of the rights
may be made effective at the time, on any basis and subject to the conditions
which our board of directors may establish. Immediately upon any redemption of
the rights (or upon a later date specified by our board of directors in the
resolution approving a redemption), the right to exercise the rights will
terminate and the only right of the holders of rights will be to receive the
redemption price. The redemption of the rights may be subject to certain
restrictions and limitations contained in our charter.
 
     Our board of directors, by the required board vote, may amend the terms of
the rights without the consent of the holders of the rights, except that from
the time any person becomes an acquiring person, no amendment may adversely
affect the interests of the holders of the rights (other than the acquiring
person and its affiliates and associates). The right of our board of directors
to amend the rights agreement may be subject to certain restrictions and
limitations contained in our charter.
 
SERIES B PREFERRED STOCK
 
     We have one outstanding share of Series B preferred stock, which is owned
by Northwest Airlines, Inc. Set forth below is a description of some of the
material provisions of the Series B preferred stock.
 
     Ranking.  The Series B preferred stock ranks junior to all classes of our
capital stock other than our common stock upon liquidation, dissolution or
winding up of our company.
 
     Dividends.  No dividends are payable on our Series B preferred stock.
 
     Voting Rights.  The holder of the Series B preferred stock has the right to
block certain actions we may seek to take including:
 
     - certain business combinations and similar changes of control transactions
       involving us and a third party major air carrier;
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     - certain amendments to our rights plan (or redemption of those rights);
 
     - any dividend or distribution of all or substantially all of our assets;
       and
 
     - certain reorganizations and restructuring transactions involving us.
 
     Redemption.  The Series B preferred stock is redeemable by us at a nominal
price under the following circumstances:
 
     - Northwest Airlines transfers or encumbers the Series B preferred stock;
 
     - there is a change of control of Northwest involving a third party major
       air carrier;
 
     - the Northwest Alliance terminates or expires (other than as a result of a
       breach by us); or
 
     - Northwest materially breaches its standstill obligations to us or
       triggers our rights agreement (described below under "Description of
       Common Stock").
 
CORPORATE GOVERNANCE AND CONTROL
 
     Our certificate of incorporation provides that our board of directors will
consist of a number of directors as may be determined from time to time by the
board of directors in accordance with the bylaws. Our board of directors
currently consists of 13 directors elected by common stockholders, subject to
the rights of preferred stockholders to elect additional directors as set forth
in any preferred stock designations.
 
BUSINESS COMBINATIONS
 
     Our certificate of incorporation provides that we are not governed by
Section 203 of the General Corporation Law of Delaware which, in the absence of
such provisions, would have imposed additional requirements regarding mergers
and other business combinations.
 
PROCEDURAL MATTERS
 
     Our bylaws require stockholders seeking to nominate directors or propose
other matters for action at a stockholders' meeting to give us notice within
specified periods in advance of the meeting and to follow certain other
specified procedures.
 
CHANGE OF CONTROL
 
     Because a separate class vote is required pursuant to the terms of the
Series B preferred stock in connection with some changes of control requiring
stockholder approval as described under "-- Series B Preferred Stock -- Voting
Rights," a change of control of our company could be delayed, deferred or
prevented.
 
     In addition, the existence of the preferred stock purchase rights may have
the effect of delaying or preventing a change of control of our company. See
"-- Preferred Stock Purchase Rights" above.
 
LIMITATION OF DIRECTOR LIABILITY AND INDEMNIFICATION
 
     Our certificate of incorporation provides, to the full extent permitted by
Delaware law, that directors will not be liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director. As required under
current Delaware law, our certificate of incorporation and bylaws currently
provide that this waiver may not apply to liability:
 
     - for any breach of the director's duty of loyalty to us or our
       stockholders;
 
     - or acts or omissions not in good faith or that involve intentional
       misconduct or a knowing violation of law;
 
                                        42

<PAGE>
 
     - under Section 174 of the Delaware General Corporation Law (governing
       distributions to stockholders); or
 
     - for any transaction from which the director derived any improper personal
       benefit.
 
     However, in the event the Delaware General Corporation Law is amended to
authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of any of our directors will be
eliminated or limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. Our certificate of incorporation further
provides that we will indemnify each of our directors and officers to the full
extent permitted by Delaware law and may indemnify certain other persons as
authorized by the Delaware General Corporation Law. These provisions do not
eliminate any monetary liability of directors under the federal securities laws.
 
                        DESCRIPTION OF DEPOSITARY SHARES
 
     We may offer fractional shares of preferred stock, rather than full shares
of preferred stock. If we decide to offer fractional shares of preferred stock,
we will issue receipts for depositary shares. Each depositary share will
represent a fraction of a share of a particular series of preferred stock, and
the prospectus supplement will indicate that fraction. The shares of preferred
stock represented by depositary shares will be deposited under a deposit
agreement between our company and a depositary that is a bank or trust company
that meets certain requirements and is selected by us. The depositary will be
specified in the applicable prospectus supplement. Each owner of a depositary
share will be entitled to all of the rights and preferences of the preferred
stock represented by the depositary share. The depositary shares will be
evidenced by depositary receipts issued pursuant to the deposit agreement.
Depositary receipts will be distributed to those persons purchasing the
fractional shares of preferred stock in accordance with the terms of the
offering.
 
     We have summarized selected provisions of the deposit agreement and the
depositary receipts, but the summary is qualified by reference to the provisions
of the depositary agreement and the depositary receipts. The particular terms of
any series of depositary shares will be described in the applicable prospectus
supplement. If so indicated in the prospectus supplement, the terms of any such
series may differ from the terms set forth below.
 
DIVIDENDS
 
     The depositary will distribute all cash dividends or other cash
distributions received by it in respect of the preferred stock to the record
holders of depositary shares relating to such preferred shares in proportion to
the numbers of depositary shares held on the relevant record date. The amount
made available for distribution will be reduced by any amounts withheld by the
depositary or us on account of taxes.
 
     In the event of a distribution other than in cash, the depositary will
distribute securities or property received by it to the record holders of
depositary shares in proportion to the numbers of depositary shares held on the
relevant record date, unless the depositary determines that it is not feasible
to make such distribution. In that case, the depositary may make the
distribution by such method as it deems equitable and practicable. One such
possible method is for the depositary to sell the securities or property and
then distribute the net proceeds from the sale as provided in the case of a cash
distribution.
 
WITHDRAWAL OF SHARES
 
     Upon surrender of depositary receipts representing any number of whole
shares at the depositary's office, unless the related depositary shares
previously have been called for redemption, the holder of the depositary shares
evidenced by the depositary receipts will be entitled to delivery of the number
of whole shares of the related series of preferred stock and all money and other
property, if any, underlying such depositary shares. However, once such an
exchange is made, the preferred stock cannot thereafter be redeposited in
exchange for depositary shares. Holders of depositary shares will be entitled to
receive whole shares of the related series of preferred stock on the basis set
forth in the applicable prospectus supplement. If the depositary receipts
delivered by the holder evidence a number of depositary shares representing more
than the number of whole
                                        43

<PAGE>
 
shares of preferred stock of the related series to be withdrawn, the depositary
will deliver to the holder at the same time a new depositary receipt evidencing
the excess number of depositary shares.
 
REDEMPTION OF DEPOSITARY SHARES
 
     Whenever we redeem the preferred stock, the depositary will redeem a number
of depositary shares representing the same number of shares of preferred stock
so redeemed. If fewer than all of the depositary shares are to be redeemed, the
depositary shares to be redeemed will be selected by lot, pro rata or by any
other equitable method as the depositary may determine.
 
VOTING OF UNDERLYING SHARES
 
     Upon receipt of notice of any meeting at which the holders of the preferred
stock of any series are entitled to vote, the depositary will mail the
information contained in the notice of the meeting to the record holders of the
depositary shares relating to that series of preferred shares. Each record
holder of the depositary shares on the record date will be entitled to instruct
the depositary as to the exercise of the voting rights represented by the number
of shares of preferred stock underlying the holder's depositary shares. The
depositary will endeavor, to the extent it is practical to do so, to vote the
number of whole shares of preferred stock underlying such depositary shares in
accordance with such instructions. We will agree to take all action that the
depositary may deem reasonably necessary in order to enable the depositary to do
so. To the extent the depositary does not receive specific instructions from the
holders of depositary shares relating to such preferred shares, it will abstain
from voting such shares of preferred stock.
 
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
 
     The form of depositary receipt evidencing the depositary shares and any
provision of the applicable deposit agreement may at any time be amended by
agreement between us and the depositary. We may, with the consent of the
depositary, amend the deposit agreement from time to time in any manner that we
desire. However, if the amendment would materially and adversely alter the
rights of the existing holders of depositary shares, the amendment would need to
be approved by the holders of at least a majority of the depositary shares then
outstanding.
 
     The deposit agreement may be terminated by us or the depositary if:
 
     - all outstanding depositary shares have been redeemed; or
 
     - there has been a final distribution in respect of the shares of preferred
       stock of the applicable series in connection with our liquidation,
       dissolution or winding up and such distribution has been made to the
       holders of depositary receipts.
 
RESIGNATION AND REMOVAL OF DEPOSITARY
 
     The depositary may resign at any time by delivering to us notice of its
election to do so. We may remove a depositary at any time. Any resignation or
removal will take effect upon the appointment of a successor depositary and its
acceptance of appointment.
 
CHARGES OF DEPOSITARY
 
     We will pay all transfer and other taxes and governmental charges arising
solely from the existence of any depositary arrangements. We will pay all
charges of each depositary in connection with the initial deposit of the
preferred shares of any series, the initial issuance of the depositary shares,
any redemption of such preferred shares and any withdrawals of such preferred
shares by holders of depositary shares. Holders of depositary shares will be
required to pay any other transfer taxes.
 
                                        44

<PAGE>
 
NOTICES
 
     Each depositary will forward to the holders of the applicable depositary
shares all notices, reports and communications from us which are delivered to
such depositary and which we are required to furnish the holders of the
preferred shares.
 
LIMITATION OF LIABILITY
 
     The deposit agreement contains provisions that limit our liability and the
liability of the depositary to the holders of depositary shares. Both the
depositary and we are also entitled to an indemnity from the holders of the
depositary shares prior to bringing, or defending against, any legal proceeding.
We or any depositary may rely upon written advice of counsel or accountants, or
information provided by persons presenting preferred shares for deposit, holders
of depositary shares or other persons believed by us or it to be competent and
on documents believed by us or them to be genuine.
 
                            DESCRIPTION OF WARRANTS
 
     We may issue warrants to purchase any of our securities. We may issue
warrants independently or together with any other securities offered by any
prospectus supplement and the warrants may be attached to or separate from those
securities. Each series of warrants will be issued under a separate warrant
agreement, to be entered into between us and a warrant agent specified in a
prospectus supplement. The warrant agent will act solely as our agent in
connection with the warrants of such series and will not assume any obligation
or relationship of agency or trust with any of the holders of the warrants. We
will set forth further terms of the warrants and the applicable warrant
agreements in the applicable prospectus supplement relating to the issuance of
any warrants, including, where applicable, the following:
 
     - the title of the warrants;
 
     - the aggregate number of the warrants;
 
     - the number and type of securities purchasable upon exercise of the
       warrants;
 
     - the designation and terms of the securities, if any, with which the
       warrants are issued and the number of the warrants issued with each such
       offered security;
 
     - the date, if any, on and after which the warrants and the related
       securities will be separately transferable;
 
     - the price at which each security purchasable upon exercise of the
       warrants may be purchased;
 
     - the date on which the right to exercise the warrants shall commence and
       the date on which the right shall expire;
 
     - the minimum or maximum amount of the warrants which may be exercised at
       any one time;
 
     - any circumstances that will cause the warrants to be deemed to be
       automatically exercised; and
 
     - any other material terms of the warrants.
 
        DESCRIPTION OF STOCK PURCHASE CONTRACTS AND STOCK PURCHASE UNITS
 
     We may issue stock purchase contracts, including contracts obligating
holders to purchase from us, and obligating us to sell to the holders, a
specified number of shares of common stock or other securities at a future date
or dates, which we refer to in this prospectus as "stock purchase contracts."
The price per share of the securities and the number of shares of the securities
may be fixed at the time the stock purchase contracts are issued or may be
determined by reference to a specific formula set forth in the stock purchase
contracts. The stock purchase contracts may be issued separately or as part of
units consisting of a stock purchase contract and debt securities, preferred
securities, warrants or debt obligations of third parties, including U.S.
treasury securities, securing the holders' obligations to purchase the
securities under the stock purchase contracts,
                                        45

<PAGE>
 
which we refer to herein as "stock purchase units." The stock purchase contracts
may require holders to secure their obligations under the stock purchase
contracts in a specified manner. The stock purchase contracts also may require
us to make periodic payments to the holders of the stock purchase units or vice
versa, and those payments may be unsecured or refunded on some basis.
 
     The applicable prospectus supplement will describe the terms of the stock
purchase contracts or stock purchase units. The description in the prospectus
supplement will not necessarily be complete, and reference will be made to the
stock purchase contracts, and, if applicable, collateral or depositary
arrangements, relating to the stock purchase contracts or stock purchase units,
which will be filed with the SEC each time we issue stock purchase contracts or
stock purchase units. Material United States federal income tax considerations
applicable to the stock purchase units and the stock purchase contracts will
also be discussed in the applicable prospectus supplement.
 
                              PLAN OF DISTRIBUTION
 
     Any of the securities being offered hereby may be sold in any one or more
of the following ways from time to time:
 
     - through agents;
 
     - to or through underwriters;
 
     - through dealers;
 
     - directly by us; or
 
     - in the case of trust preferred securities, by the trust to purchasers.
 
     The distribution of the securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices.
 
     Offers to purchase securities may be solicited by agents designated by us
from time to time. Any such agent involved in the offer or sale of the
securities in respect of which this prospectus is delivered will be named, and
any commissions payable by us or the trust to such agent will be set forth, in
the applicable prospectus supplement. Unless otherwise indicated in such
prospectus supplement, any such agent will be acting on a reasonable best
efforts basis for the period of its appointment. Any such agent may be deemed to
be an underwriter, as that term is defined in the Securities Act of 1933, of the
securities so offered and sold.
 
     If securities are sold by means of an underwritten offering, we and, in the
case of an offering of trust preferred securities, the trust will execute an
underwriting agreement with an underwriter or underwriters at the time an
agreement for such sale is reached, and the names of the specific managing
underwriter or underwriters, as well as any other underwriters, the respective
amounts underwritten and the terms of the transaction, including commissions,
discounts and any other compensation of the underwriters and dealers, if any,
will be set forth in the applicable prospectus supplement which will be used by
the underwriters to make resales of the securities in respect of which this
prospectus is being delivered to the public. If underwriters are utilized in the
sale of any securities in respect of which this prospectus is being delivered,
such securities will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions, including
negotiated transactions, at fixed public offering prices or at varying prices
determined by the underwriters at the time of sale. Securities may be offered to
the public either through underwriting syndicates represented by managing
underwriters or directly by one or more underwriters. If any underwriter or
underwriters are utilized in the sale of securities, unless otherwise indicated
in the applicable prospectus supplement, the underwriting agreement will provide
that the obligations of the underwriters are subject to certain conditions
precedent and that the underwriters with respect to a sale of such securities
will be obligated to purchase all such securities if any are purchased.
 
     We or the trust, as applicable, may grant to the underwriters options to
purchase additional securities, to cover over-allotments, if any, at the initial
public offering price (with additional underwriting commissions or
                                        46

<PAGE>
 
discounts), as may be set forth in the prospectus supplement relating thereto.
If we or the trust, as applicable, grants any over-allotment option, the terms
of such over-allotment option will be set forth in the prospectus supplement for
such securities.
 
     If a dealer is used in the sale of the securities in respect of which this
prospectus is delivered, we or the trust, as applicable, will sell such
securities to the dealer as principal. The dealer may then resell such
securities to the public at varying prices to be determined by such dealer at
the time of resale. Any such dealer may be deemed to be an underwriter, as such
term is defined in the Securities Act, of the securities so offered and sold.
The name of the dealer and their terms of the transaction will be set forth in
the prospectus supplement relating thereto.
 
     Offers to purchase securities may be solicited directly by us or the trust,
as applicable, and the sale thereof may be made by us or the trust directly to
institutional investors or others, who may be deemed to be underwriters within
the meaning of the Securities Act of 1933 with respect to any resale thereof.
The terms of any such sales will be described in the prospectus supplement
relating thereto.
 
     Securities may also be offered and sold, if so indicated in the applicable
prospectus supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("remarketing firms") acting as principals for their own
accounts or as agents for us or the trust, as applicable. Any remarketing firm
will be identified and the terms of its agreement, if any, with us or the trust
and its compensation will be described in the applicable prospectus supplement.
Remarketing firms may be deemed to be underwriters, as that term is defined in
the Securities Act of 1933, in connection with the securities remarketed
thereby.
 
     If so indicated in the applicable prospectus supplement, we or the trust,
as applicable, may authorize agents and underwriters to solicit offers by
certain institutions to purchase securities from us or the trust at the public
offering price set forth in the applicable prospectus supplement pursuant to
delayed delivery contracts providing for payment and delivery on the date or
dates stated in the applicable prospectus supplement. Such delayed delivery
contracts will be subject to only those conditions set forth in the applicable
prospectus supplement. A commission indicated in the applicable prospectus
supplement will be paid to underwriters and agents soliciting purchases of
securities pursuant to delayed delivery contracts accepted by us or the trust,
as applicable.
 
     Agents, underwriters, dealers and remarketing firms may be entitled under
relevant agreements with us or the trust, as applicable, to indemnification by
us or the trust against certain liabilities, including liabilities under the
Securities Act, or to contribution with respect to payments which such agents,
underwriters, dealers and remarketing firms may be required to make in respect
thereof.
 
     Each series of securities will be a new issue and will have no established
trading market. We may elect to list any series of securities on an exchange
but, unless otherwise specified in the applicable prospectus supplement, we
shall not be obligated to do so. No assurance can be given as to the liquidity
of the trading market for any of the securities.
 
     Agents, underwriters, dealers and remarketing firms may be customers of,
engage in transactions with, or perform services for, us and our subsidiaries in
the ordinary course of business.
 
                                 LEGAL MATTERS
 
     Unless otherwise specified in the applicable prospectus supplement, the
validity of the securities (other than the preferred securities of the trust)
will be passed upon for us by Vinson & Elkins L.L.P., Houston, Texas, and will
be passed upon for any agents, dealers or underwriters by counsel named in the
applicable prospectus supplement. The validity of the trust preferred securities
of the trust under Delaware law will be passed upon for us and the trust by
Morris, Nichols, Arsht & Tunnell, special Delaware counsel to us and the trust.
 
                                        47

<PAGE>
 
                                    EXPERTS
 
     Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 2000 as set forth in their reports, which are
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
 
                                        48

<PAGE>
 

                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 14.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
 
     The following table sets forth the estimated expenses in connection with
the distribution of the securities covered by this Registration Statement.
Continental Airlines, Inc. (the "company") will bear all of these expenses
except as otherwise indicated.
 

<Table>
<S>                                                           <C>
Registration fee............................................  $125,000
Fees and expenses of accountants............................    30,000
Fees and expenses of legal counsel..........................   150,000
Fees and expenses of trustee and counsel....................    10,000
Fees of rating agencies.....................................    75,000
Blue Sky fees and expenses (including counsel)..............     5,000
Printing and engraving expenses.............................    75,000
Miscellaneous...............................................    10,000
                                                              --------
          Total.............................................  $480,000
                                                              ========
</Table>

 
ITEM 15.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.
 
     As permitted by Section 102 of the Delaware General Corporation Law (the
"DGCL"), our Amended and Restated Certificate of Incorporation provides that, to
the fullest extent permitted by Delaware law, no director shall be liable to us
or our stockholders for monetary damages for breach of fiduciary duty as
director. By virtue of these provisions, a director is not personally liable for
monetary damages for breach of such director's fiduciary duty except for
liability for (i) breach of duty of loyalty, (ii) acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law,
(iii) dividends or stock repurchases or redemptions that are unlawful under the
DGCL and (iv) any transaction from which such director receives an improper
personal benefit. In addition, our Amended and Restated Certificate of
Incorporation provides that if the DGCL is amended to authorize the further
elimination or limitation of the liability of a director, then the liability of
the directors will be eliminated or limited to the fullest extent permitted by
the DGCL, as amended. As a result, our rights and our stockholders' rights to
obtain monetary damages for acts or omissions of directors will be more limited
than they would be in the absence of the limitation of liability provision. The
limitation of liability provision does not limit or affect a stockholder's
ability to seek and obtain relief under the federal securities laws.
 
     Section 145 of the DGCL permits indemnification upon a determination that
an officer or director has met the applicable standard of conduct. Such officer
or director is required to have acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of a corporation and,
with respect to any criminal action, without reasonable cause to believe his
conduct was unlawful. Section 145 does not authorize indemnification in actions
brought by or in the right of a corporation with respect to any claim, issue or
matter as to which a director or officer is adjudged to be liable to the
corporation, unless specifically authorized by the Delaware Court of Chancery or
the court in which such action is brought. Our Amended and Restated Certificate
of Incorporation provides for the mandatory indemnification of officers and
directors to the fullest extent permitted under the DGCL. Section 145 also
expressly provides that the power to indemnify authorized thereby is not
exclusive of any rights granted under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise.
 
     The above discussion of our Amended and Restated Certificate of
Incorporation and of Sections 102 and 145 of the DGCL is not intended to be
exhaustive and is qualified in its entirety by our Amended and Restated
Certificate of Incorporation and the DGCL.
 
                                       II-1

<PAGE>
 
     We have purchased liability insurance policies covering our directors and
officers to insure against certain losses incurred by them.
 
     The form of Amended and Restated Declaration of Trust provides that we will
indemnify, to the fullest extent permitted by law, any administrative trustee,
any officer, director, shareholder, member, partner, employee, representative,
agent or affiliate thereof and any officer, employee or agent of the trust or
our affiliates (each a "Company Indemnified Person"), who is or was a party to
any threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of the trust) by reason of the fact the he is or was a
Company Indemnified Person against expenses (including attorneys' fees and
expenses), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the trust, and with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The Amended and Restated Declaration of Trust provides that no
indemnification will be made in respect of any claim, issue or matter as to
which a Company Indemnified Person is adjudged liable to the Trust unless the
Court of Chancery of Delaware or the court in which such action or suit was
brought determines that such Company Indemnified Person is entitled to indemnity
for such expenses as such Court of Chancery or other court deems proper. To the
extent that a Company Indemnified Person is successful on the merits or
otherwise in defense of any action, suit or proceeding, he shall be indemnified,
to the full extent permitted by law, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith. Expenses
incurred by a Company Indemnified Person in defending an action, suit or
proceeding may be advanced by us in certain circumstances.
 
     The form of Amended and Restated Declaration of Trust also provides that we
will indemnify the property trustee, the Delaware trustee and any officer,
director, shareholder, member, partner, employee, representative, custodian,
nominee, agent or affiliate thereof (each a "Fiduciary Indemnified Person"), for
and to hold each Fiduciary Indemnified Person harmless against, any and all
loss, liability, damage, claim or expense including taxes incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of the trust.
 
ITEM 16.  EXHIBITS.
 

<Table>
<C>       <S>  <C>
  **1.1   --   Form of Underwriting Agreement.
    4.1   --   Amended and Restated Certificate of Incorporation of the
               company (incorporated by reference to Exhibit 3.1 to the
               company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 2000).
    4.2   --   Certificate of Designation of Series A Junior Participating
               Preferred Stock (incorporated by reference to Exhibit 3.1(a)
               to the company's Annual Report on Form 10-K for the fiscal
               year ended December 31, 2000).
    4.3   --   Certificate of Designation of Series B Preferred Stock
               (incorporated by reference to Exhibit 3.1(b) to the
               company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 2000).
    4.4   --   Bylaws of Continental to date (incorporated by reference to
               Exhibit 3.2 to the company's Annual Report on Form 10-K for
               the fiscal year ended December 31, 2000).
    4.5   --   Amended and Restated Rights Agreement, dated as of November
               15, 2000, between Continental and ChaseMellon Shareholder
               Services, LLC (incorporated by reference to Exhibit 99.11 to
               Continental's Current Report on Form 8-K dated November 16,
               2000).
    4.6   --   Form of Rights Certificate, included as Exhibit B to Exhibit
               4.5 (incorporated by reference to Exhibit 99.11 to the Form
               8-K dated November 16, 2000).
    4.7   --   Warrant Agreement dated as of April 27, 1993, between the
               Company and the Company, as warrant agent (incorporated by
               reference to Exhibit 4.7 to the Company's Form 8-K filed
               with the SEC on April 16, 1993).
    4.8   --   Senior Debt Indenture by and between the Company and Bank
               One, N.A., dated as of July 15, 1997 (incorporated by
               reference to Exhibit 4.2 of the Company's Current Report on
               Form 8-K filed with the SEC on December 10, 1998).
</Table>

 
                                       II-2

<PAGE>

<Table>
<C>       <S>  <C>
    4.9   --   Form of Subordinated Debt Indenture (incorporated by
               reference to Exhibit 4.2 to the Company's Registration
               Statement on Form S-3 filed with the SEC on June 16, 1997).
  **4.10  --   Form of Debt Securities.
    4.11  --   Specimen Class B Common Stock Certificate of the company
               (incorporated by reference to Exhibit 4.1 to Continental's
               Form S-1 Registration Statement (No. 333-68870).
  **4.12  --   Form of Preferred Stock Certificate.
  **4.13  --   Form of Depositary Agreement.
  **4.14  --   Form of Depositary Receipt.
  **4.15  --   Form of Warrants.
   *4.16  --   Certificate of Trust of Continental Airlines Finance Trust
               III.
   *4.17  --   Declaration of Trust of Continental Airlines Finance Trust
               III.
   *4.18  --   Form of Amended and Restated Declaration of Trust of
               Continental Airlines Finance Trust III.
   *4.19  --   Form of Trust Preferred Security Certificate for Continental
               Airlines Finance Trust III (included in Exhibit 4.18).
   *4.20  --   Form of Junior Subordinated Indenture between the Company
               and Bank One Trust Company, N.A.
   *4.21  --   Form of Trust Debentures of the Company (included in Exhibit
               4.20).
   *4.22  --   Form of Preferred Securities Guarantee in respect of
               Continental Airlines Finance Trust III, with respect to the
               Trust Preferred Securities.
  **4.23  --   Form of Stock Purchase Contracts.
  **4.24  --   Form of Stock Purchase Units.
   *5.1   --   Opinion of Vinson & Elkins L.L.P., as to the validity of the
               securities (other than the trust preferred securities).
   *5.2   --   Opinion of Morris, Nichols, Arsht & Tunnell, as to the
               validity of the trust preferred securities.
  *12.1   --   Calculation of Ratio of Earnings to Fixed Charges.
  *23.1   --   Consent of Ernst & Young LLP.
  *23.2   --   Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
  *23.3   --   Consent of Morris, Nichols, Arsht & Tunnell (included in
               Exhibit 5.2).
  *24.1   --   Powers of Attorney.
  *25.1   --   Form T-1 Statement of Eligibility and Qualification under
               the Trust Indenture Act of 1939 of the trustee under the
               Senior Debt Indenture.
***25.2   --   Form T-1 Statement of Eligibility and Qualification under
               the Trust Indenture Act of 1939 of the trustee under the
               Subordinated Debt Indenture.
  *25.3   --   Form T-1 Statement of Eligibility and Qualification under
               the Trust Indenture Act of 1939 of the debenture trustee
               under Junior Subordinated Indenture.
  *25.4   --   Form T-1 Statement of Eligibility and Qualification under
               the Trust Indenture Act of 1939 of the guarantee trustee
               under the Preferred Securities Guarantee.
  *25.5   --   Form T-1 Statement of Eligibility and Qualification of the
               property trustee under the Amended and Restated Declaration
               of Trust of Continental Airlines Finance Trust III under the
               Trust Indenture Act of 1939.
</Table>

 
---------------
 
  * Filed herewith.
 
 ** To be filed by amendment or in a Current Report on Form 8-K.
 
*** To be filed in accordance with section 305(b)(2) of the Trust Indenture Act
    and Rules 5b-1 through 5b-2 thereunder.
 
Note: Continental Airlines, Inc. hereby agrees to furnish to the SEC, upon
      request, copies of certain instruments defining the rights of holders of
      long-term debt of the kind described in Item 601(b)(4)(iii)(A) of
      Regulation S-K.
 
                                       II-3

<PAGE>
 
ITEM 17.  UNDERTAKINGS
 
     The undersigned registrants hereby undertake:
 
     1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
 
          a. To include any prospectus required by Section 10(a)(3) of the
     Securities Act of 1933;
 
          b. To reflect in the prospectus any facts or events arising after the
     effective date of the registration statement (or the most recent
     post-effective amendment thereof) which, individually or in the aggregate,
     represent a fundamental change in the information set forth in the
     registration statement; notwithstanding the foregoing, any increase or
     decrease in the volume of securities offered (if the total dollar value of
     securities offered would not exceed that which was registered) and any
     deviation from the low or high end of the estimated maximum offering range
     may be reflected in the form of prospectus filed with the Commission
     pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
     price represent no more than a 20% change in the maximum aggregate offering
     price set forth in the "Calculation of Registration Fee", table in the
     effective registration statement; and
 
          c. To include any material information with respect to the plan of
     distribution not previously disclosed in the registration statement or any
     material change to such information in the registration statement;
 
provided, however, that the undertakings set forth in clauses a and b above do
not apply if information required to be included in a post-effective amendment
by those clauses is contained in periodic reports filed with the Securities and
Exchange Commission by the registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934, that are incorporated by reference in the
registration statement.
 
     2. That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
 
     3. To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
 
     4. That, for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
 
     5. That, for purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
 
     6. To file an application for the purpose of determining the eligibility of
the trustee to act under subsection (a) of Section 310 of the Trust Indenture
Act ("Act") in accordance with the rules and regulations prescribed by the SEC
under Section 305(b)(2) of the Act.
 
     The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
 
                                       II-4

<PAGE>
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933, may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions set forth in response to Item 15, or
otherwise, the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
                                       II-5

<PAGE>
 

                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, the registrants
certify that they have reasonable grounds to believe that they meet all of the
requirements for filing on Form S-3 and have duly caused this registration
statement to be signed on their behalf by the undersigned, thereunto duly
authorized in the City of Houston, State of Texas, October 19, 2001.
 
                                          CONTINENTAL AIRLINES, INC.
 
                                          By:     /s/ JEFFREY J. MISNER
                                            ------------------------------------
                                            Name: Jeffrey J. Misner
                                            Title:   Senior Vice
                                                     President -- Finance
 
                                          CONTINENTAL AIRLINES FINANCE TRUST III
 
                                          By:     /s/ JACQUES LAPOINTE
                                            ------------------------------------
                                            Name: Jacques Lapointe
                                            Title:   Administrative Trustee
 
     Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on behalf of the following persons in the
capacities indicated, on October 19, 2001.
 

<Table>
<Caption>
                    SIGNATURE                                              TITLE
                    ---------                                              -----
<S>     <C>                                          <C>

                        *                             Chairman of the Board, Chief Executive Officer
-------------------------------------------------       (Principal Executive Officer) and Director
                Gordon M. Bethune

 
                        *                                    Senior Vice President -- Finance
-------------------------------------------------              (Principal Financial Officer)
                Jeffrey J. Misner

 
                        *                                   Staff Vice President and Controller
-------------------------------------------------             (Principal Accounting Officer)
                  Chris T. Kenny

 
                        *                                                Director
-------------------------------------------------
              Thomas J. Barrack, Jr.

 
                        *                                                Director
-------------------------------------------------
                 David Bonderman

 
                        *                                                Director
-------------------------------------------------
               Kirbyjon H. Caldwell

 
                        *                                                Director
-------------------------------------------------
                  Patrick Foley
</Table>

 
                                       II-6

<PAGE>
 

<Table>
<Caption>
                    SIGNATURE                                              TITLE
                    ---------                                              -----
 
<S>     <C>                                          <C>

                        *                                                Director
-------------------------------------------------
               Lawrence W. Kellner

 
                        *                                                Director
-------------------------------------------------
             Douglas H. McCorkindale

 
                        *                                                Director
-------------------------------------------------
               George G. C. Parker

 
                        *                                                Director
-------------------------------------------------
                 Richard W. Pogue

 
                        *                                                Director
-------------------------------------------------
               William S. Price III

 
                        *                                                Director
-------------------------------------------------
                 Donald L. Sturm

 
                        *                                                Director
-------------------------------------------------
              Karen Hastie Williams

 
                        *                                                Director
-------------------------------------------------
               Charles A. Yamarone

 
 *By:             /s/ JENNIFER L. VOGEL
        ------------------------------------------
                 Name: Jennifer L. Vogel
                     Attorney-in-Fact
</Table>

 
     Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on behalf of Continental Airlines Finance
Trust III by the following persons in the capacities indicated, on October 19,
2001.
 

<Table>
<Caption>
                    SIGNATURE                                              TITLE
                    ---------                                              -----
<S>     <C>                                          <C>

               /s/ JACQUES LAPOINTE                                Administrative Trustee
 ------------------------------------------------
                 Jacques Lapointe

 
              /s/ JEFFREY J. MISNER                                Administrative Trustee
 ------------------------------------------------
                Jeffery J. Misner
</Table>

 
                                       II-7

<PAGE>
 

                                 EXHIBIT INDEX
 

<Table>
<Caption>
EXHIBIT
  NO.                                  DESCRIPTION
-------                                -----------
<C>       <S>  <C>
  **1.1   --   Form of Underwriting Agreement.
    4.1   --   Amended and Restated Certificate of Incorporation of the
               company (incorporated by reference to Exhibit 3.1 to the
               company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 2000).
    4.2   --   Certificate of Designation of Series A Junior Participating
               Preferred Stock (incorporated by reference to Exhibit 3.1(a)
               to the company's Annual Report on Form 10-K for the fiscal
               year ended December 31, 2000).
    4.3   --   Certificate of Designation of Series B Preferred Stock
               (incorporated by reference to Exhibit 3.1(b) to the
               company's Annual Report on Form 10-K for the fiscal year
               ended December 31, 2000).
    4.4   --   Bylaws of Continental to date (incorporated by reference to
               Exhibit 3.2 to the company's Annual Report on Form 10-K for
               the fiscal year ended December 31, 2000).
    4.5   --   Amended and Restated Rights Agreement, dated as of November
               15, 2000, between Continental and ChaseMellon Shareholder
               Services, LLC (incorporated by reference to Exhibit 99.11 to
               Continental's Current Report on Form 8-K dated November 16,
               2000).
    4.6   --   Form of Rights Certificate, included as Exhibit B to Exhibit
               4.5 (incorporated by reference to Exhibit 99.11 to the Form
               8-K dated November 16, 2000).
    4.7   --   Warrant Agreement dated as of April 27, 1993, between the
               Company and the Company, as warrant agent (incorporated by
               reference to Exhibit 4.7 to the Company's Form 8-K filed
               with the SEC on April 16, 1993).
    4.8   --   Senior Debt Indenture by and between the Company and Bank
               One, N.A., dated as of July 15, 1997 (incorporated by
               reference to Exhibit 4.2 of the Company's Current Report on
               Form 8-K filed with the SEC on December 10, 1998).
    4.9   --   Form of Subordinated Debt Indenture (incorporated by
               reference to Exhibit 4.2 to the Company's Registration
               Statement on Form S-3 filed with the SEC on June 16, 1997).
  **4.10  --   Form of Debt Securities.
    4.11  --   Specimen Class B Common Stock Certificate of the company
               (incorporated by reference to Exhibit 4.1 to Continental's
               Form S-1 Registration Statement (No. 333-68870).
  **4.12  --   Form of Preferred Stock Certificate.
  **4.13  --   Form of Depositary Agreement.
  **4.14  --   Form of Depositary Receipt.
  **4.15  --   Form of Warrants.
   *4.16  --   Certificate of Trust of Continental Airlines Finance Trust
               III.
   *4.17  --   Declaration of Trust of Continental Airlines Finance Trust
               III.
   *4.18  --   Form of Amended and Restated Declaration of Trust of
               Continental Airlines Finance Trust III.
   *4.19  --   Form of Trust Preferred Security Certificate for Continental
               Airlines Finance Trust III (included in Exhibit 4.18).
   *4.20  --   Form of Junior Subordinated Indenture between the Company
               and Bank One Trust Company, N.A.
   *4.21  --   Form of Trust Debentures of the Company (included in Exhibit
               4.20).
   *4.22  --   Form of Preferred Securities Guarantee in respect of
               Continental Airlines Finance Trust III, with respect to the
               Trust Preferred Securities.
  **4.23  --   Form of Stock Purchase Contracts.
  **4.24  --   Form of Stock Purchase Units.
   *5.1   --   Opinion of Vinson & Elkins L.L.P., as to the validity of the
               securities (other than the trust preferred securities).
   *5.2   --   Opinion of Morris, Nichols, Arsht & Tunnell, as to the
               validity of the trust preferred securities.
</Table>


<PAGE>
 

<Table>
<Caption>
EXHIBIT
  NO.                                  DESCRIPTION
-------                                -----------
<C>       <S>  <C>
  *12.1   --   Calculation of Ratio of Earnings to Fixed Charges.
  *23.1   --   Consent of Ernst & Young LLP.
  *23.2   --   Consent of Vinson & Elkins L.L.P. (included in Exhibit 5.1)
  *23.3   --   Consent of Morris, Nichols, Arsht & Tunnell (included in
               Exhibit 5.2).
  *24.1   --   Powers of Attorney.
  *25.1   --   Form T-1 Statement of Eligibility and Qualification under
               the Trust Indenture Act of 1939 of the trustee under the
               Senior Debt Indenture.
***25.2   --   Form T-1 Statement of Eligibility and Qualification under
               the Trust Indenture Act of 1939 of the trustee under the
               Subordinated Debt Indenture.
  *25.3   --   Form T-1 Statement of Eligibility and Qualification under
               the Trust Indenture Act of 1939 of the debenture trustee
               under Junior Subordinated Indenture.
  *25.4   --   Form T-1 Statement of Eligibility and Qualification under
               the Trust Indenture Act of 1939 of the guarantee trustee
               under the Preferred Securities Guarantee.
  *25.5   --   Form T-1 Statement of Eligibility and Qualification of the
               property trustee under the Amended and Restated Declaration
               of Trust of Continental Airlines Finance Trust III under the
               Trust Indenture Act of 1939.
</Table>

 
---------------
 
  * Filed herewith.
 
 ** To be filed by amendment or in a Current Report on Form 8-K.
 
*** To be filed in accordance with section 305(b)(2) of the Trust Indenture Act
    and Rules 5b-1 through 5b-2 thereunder.




<PAGE>
                                                                    EXHIBIT 4.16

                              CERTIFICATE OF TRUST

                                       OF

                     CONTINENTAL AIRLINES FINANCE TRUST III

         This Certificate of Trust is being executed as of October 18, 2001 for
the purpose of creating a business trust pursuant to the Delaware Business Trust
Act, 12 Del. C. Sections 3801 et seq. (the "Act").

         The undersigned hereby certify as follows:

         1. Name: The name of the business trust is Continental Airlines Finance
Trust III (the "Trust").

         2. Delaware Trustee. The name and business address of the Delaware
resident trustee of the Trust meeting the requirements of Section 3807 of the
Act are as follows:

                           Bank One Delaware, Inc.
                           3 Christiana Center
                           201 North Walnut Street
                           Wilmington, Delaware 19801

         3. Effective. The Certificate of Trust shall be effective immediately
upon filing in the Office of the Secretary of State of the State of Delaware.

         4. Counterparts. This Certificate of Trust may be executed in one or
more counterparts.



<PAGE>

         IN WITNESS WHEREOF, the undersigned, being all of the trustees of the
Trust, have duly executed this Certificate of Trust as of the day and year first
above written.

                                         bank one Delaware, inc.,
                                         as Delaware Trustee


                                         By:      /s/ Sandra L. Caruba
                                              ----------------------------------
                                              Name:      Sandra L. Caruba
                                              Title:     Vice President


                                                  /s/ Jacques Lapointe
                                              ----------------------------------
                                                Jacques Lapointe, as Trustee



                                                  /s/ Jeffrey J. Misner
                                              ----------------------------------
                                                Jeffrey J. Misner, as Trustee




                                      -2-


<PAGE>
                                                                    EXHIBIT 4.17

                              DECLARATION OF TRUST

         DECLARATION OF TRUST, dated as of October 18, 2001, between Continental
Airlines, Inc., a Delaware corporation, as sponsor (the "Sponsor"), Bank One
Delaware, Inc., a Delaware corporation, as Delaware trustee (the "Delaware
Trustee"), and Jacques Lapointe and Jeffrey J. Misner, as administrative
trustees (the "Administrative Trustees" and collectively with the Delaware
Trustee, the "Trustees"). The Sponsor and the Trustees hereby agree as follows:

         1. The trust created hereby (the "Trust") shall be known as
"Continental Airlines Finance Trust III", in which name the Trustees, or the
Sponsor to the extent provided herein, may conduct the business of the Trust,
make and execute contracts, and sue and be sued.

         2. The Sponsor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. The Trustees hereby acknowledge receipt of such amount
from the Sponsor, which amount shall constitute the initial trust estate. The
Trustees hereby declare that they will hold the trust estate for the Sponsor. It
is the intention of the parties hereto that the Trust created hereby constitute
a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
Sections 3801 et seq. (the "Business Trust
 Act"), and that this document
constitute the governing instrument of the Trust. The Trustees are hereby
authorized and directed to execute and file a certificate of trust in the office
of the Secretary of State of the State of Delaware in the form attached hereto.
The Trust is hereby established by the Sponsor and the Trustees for the purposes
of (i) issuing preferred securities ("Preferred Securities") representing
undivided beneficial interests in the assets of the Trust in exchange for cash
and investing the proceeds thereof in debt securities of the Sponsor, (ii)
issuing and selling common securities ("Common Securities") representing
undivided beneficial interests in the assets of the Trust to the Sponsor in
exchange for cash and investing the proceeds thereof in additional debt
securities of the Sponsor and (iii) engaging in such other activities as are
necessary, convenient or incidental thereto.

         3. The Sponsor and the Trustees will enter into an amended and restated
Declaration of Trust, satisfactory to each such party, to provide for the
contemplated operation of the Trust created hereby and the issuance of the
Preferred Securities and the Common Securities referred to therein. Prior to the
execution and delivery of such amended and restated Declaration of Trust, the
Trustees shall not have any duty or obligation hereunder or with respect to the
trust estate, except as otherwise required by applicable law or as may be
necessary to obtain, prior to such execution and delivery, any licenses,
consents or approvals required by applicable law or otherwise.

         4. The Sponsor and the Trustees hereby authorize and direct the
Sponsor, as the sponsor of the Trust, (i) to prepare and file a Registration
Statement (including the Prospectus included therein and any Prospectus
Supplement relating thereto) relating to the Preferred Securities meeting the
requirements of the Securities Act of 1933, as amended (the "1933 Act"), and
such other forms or filings as may be required by the 1933 Act, the Securities
Exchange Act of 1934, as amended, or the Trust Indenture Act of 1939, as
amended, in each case relating to the Preferred Securities of the Trust; (ii) to
file and execute on behalf of the Trust, such applications, reports, surety
bonds, irrevocable consents, appointments of attorney for service of process and
other papers and documents that shall be necessary or desirable to register or
establish the exemption from registration of the Preferred Securities of the
Trust under the securities or "Blue 

<PAGE>

Sky" laws of such jurisdictions as the Sponsor, on behalf of the Trust, may deem
necessary or desirable; (iii) to execute and file an application, and all other
applications, statements, certificates, agreements and other instruments that
shall be necessary or desirable, to the New York Stock Exchange or any other
national stock exchange or the Nasdaq National Market for listing or quotation
of the Preferred Securities of the Trust; (iv) to execute and deliver letters or
documents to, or instruments for filing with, a depository relating to the
Preferred Securities of the Trust; and (v) to execute, deliver and perform on
behalf of the Trust one or more underwriting agreements, purchase agreements,
dealer manager agreements, escrow agreements and other related agreements
providing for or relating to the sale of the Preferred Securities of the Trust.
It is hereby acknowledged and agreed that in connection with any execution,
filing or document referred to in clauses (i)-(iii) above, (A) any
Administrative Trustee (or his attorneys-in-fact and agents or the Sponsor as
permitted herein) is authorized on behalf of the Trust to file and execute such
document on behalf of the Trust and (B) the Delaware Trustee shall not be
required to join in any such filing or execute on behalf of the Trust any such
document unless required by the rules and regulations of the New York Stock
Exchange or any other national stock exchange or the Nasdaq National Market or
state securities or blue sky laws, and in such case only to the extent so
required.

         5. This Declaration of Trust may be executed in one or more
counterparts.

         6. The number of Trustees initially shall be three (3) and thereafter
the number of Trustees shall be such number as shall be fixed from time to time
by a written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
event be less than three (3); and provided, further, however, that to the extent
required by the Business Trust Act, one Trustee shall either be a natural person
who is a resident of the State of Delaware or, if not a natural person, an
entity that has its principal place of business in the State of Delaware and
meets any other requirements imposed by applicable law. Subject to the
foregoing, the Sponsor is entitled to appoint or remove without cause any
Trustee at any time. Any Trustee may resign upon 30 days prior notice to the
Sponsor; provided, however, that the Delaware Trustee may resign immediately
upon notice to the Sponsor if the Delaware Trustee is required to join in any
filing or execute on behalf of the Trust any document pursuant to the provisions
of paragraph 4 hereof and, upon giving such notice, the Delaware Trustee shall
not be required to join in any such filing or execute on behalf of the Trust any
such document; provided, further, however, that no resignation of the Delaware
Trustee shall be effective until a successor Delaware Trustee has been appointed
and has accepted such appointment by instrument executed by such successor
Delaware Trustee and delivered to the Trust, the Sponsor and the resigning
Delaware Trustee.

         7. To the fullest extent permitted by applicable law, the Sponsor
agrees to indemnify (i) the Delaware Trustee, (ii) any affiliate of the Delaware
Trustee, and (iii) any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the Delaware
Trustee (each of the persons or entities in (i) through (iii) being referred to
as an "Indemnified Person") for, and to hold each Indemnified Person harmless
against, any loss, liability or expense incurred without negligence or bad faith
on its part, arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against, or investigating, any claim or liability in connection with the
exercise or 



                                      -2-

<PAGE>

performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this paragraph 7 shall survive the termination of this
Declaration. The Delaware Trustee shall not have any of the powers or duties of
the trustees set forth herein, except as required under the Business Trust Act.
The Delaware Trustee shall be a trustee hereunder for the sole and limited
purpose of fulfilling the requirements of Section 3807(a) of the Business Trust
Act.

         8. The Trust may terminate without issuing any Trust Securities at the
election of the Sponsor.

         9. This Declaration shall be governed by the laws of the State of
Delaware, without regard to conflict of laws principles.




                                      -3-

<PAGE>
                  IN WITNESS WHEREOF, the parties hereto have caused this
Declaration of Trust to be duly executed as of the day and year first above
written.

                                   CONTINENTAL AIRLINES, INC.
                                   as Sponsor


                                   By:     /s/ Jennifer L. Vogel
                                       -----------------------------------------
                                       Name:  Jennifer L. Vogel
                                       Title: Vice President and General Counsel


                                   BANK ONE DELAWARE, INC.,
                                   as Delaware Trustee


                                   By:    /s/ Sandra L. Caruba
                                       -----------------------------------------
                                       Name:  Sandra L. Caruba
                                       Title: Vice President


                                          /s/ Jacques Lapointe
                                        ----------------------------------------
                                          Jacques Lapointe, as Trustee


                                          /s/ Jeffery J. Misner
                                        ----------------------------------------
                                          Jeffery J. Misner, as Trustee




                                      -4-


<PAGE>
                                                                    EXHIBIT 4.18

================================================================================







                     CONTINENTAL AIRLINES FINANCE TRUST III


                    AMENDED AND RESTATED DECLARATION OF TRUST








================================================================================


                         DATED AS OF __________, ______

<PAGE>

                                TABLE OF CONTENTS



<Table>
<S>                     <C>                                                                                       <C>
                                                      ARTICLE I
                                           DEFINITIONS AND INTERPRETATION

SECTION 1.1             Definitions...............................................................................1

                                                     ARTICLE II
                                                 TRUST INDENTURE ACT

SECTION 2.1             Trust Indenture Act; Application..........................................................7
SECTION 2.2             Lists of Holders of Securities............................................................7
SECTION 2.3             Reports by the Property Trustee...........................................................8
SECTION 2.4             Periodic Reports to Property Trustee......................................................8
SECTION 2.5             Evidence of Compliance with Conditions Precedent..........................................8
SECTION 2.6             Events of Default; Waiver.................................................................8
SECTION 2.7             Event of Default; Notice..................................................................9

                                                     ARTICLE III
                                                    ORGANIZATION

SECTION 3.1             Name.....................................................................................10
SECTION 3.2             Office...................................................................................10
SECTION 3.3             Purpose..................................................................................10
SECTION 3.4             Authority................................................................................11
SECTION 3.5             Title to Property of the Trust...........................................................11
SECTION 3.6             Powers and Duties of the Administrative Trustees.........................................11
SECTION 3.7             Prohibition of Actions by the Trust and the Trustees.....................................14
SECTION 3.8             Powers and Duties of the Property Trustee................................................15
SECTION 3.9             Certain Duties and Responsibilities of the Property Trustee..............................17
SECTION 3.10            Certain Rights of Property Trustee.......................................................18
SECTION 3.11            Delaware Trustee.........................................................................20
SECTION 3.12            Execution of Documents...................................................................20
SECTION 3.13            Not Responsible for Recitals or Issuance of Securities...................................20
SECTION 3.14            Duration of Trust........................................................................20

SECTION 3.15            Mergers..................................................................................20

                                                     ARTICLE IV
                                                       SPONSOR

SECTION 4.1             Sponsor's Purchase of Common Securities..................................................22
SECTION 4.2             Responsibilities of the Sponsor..........................................................22
SECTION 4.3             Right to Proceed.........................................................................23
</Table>



                                      -i-

<PAGE>


<Table>
<S>                     <C>                                                                                       <C>
                                                      ARTICLE V
                                                      TRUSTEES

SECTION 5.1             Number of Trustees: Appointment of Co-Trustee............................................23
SECTION 5.2             Delaware Trustee.........................................................................24
SECTION 5.3             Property Trustee; Eligibility............................................................24
SECTION 5.4             Certain Qualifications of Administrative Trustees and Delaware Trustee Generally.........25
SECTION 5.5             Administrative Trustees..................................................................25
SECTION 5.6             Delaware Trustee.........................................................................26
SECTION 5.7             Appointment, Removal and Resignation of Trustees.........................................26
SECTION 5.8             Vacancies Among Trustees.................................................................27
SECTION 5.9             Effect of Vacancies......................................................................27
SECTION 5.10            Meetings.................................................................................28
SECTION 5.11            Delegation of Power......................................................................28
SECTION 5.12            Merger, Conversion, Consolidation or Succession to Business..............................28

                                                     ARTICLE VI
                                                    DISTRIBUTIONS

SECTION 6.1             Distributions............................................................................29

                                                     ARTICLE VII
                                               ISSUANCE OF SECURITIES

SECTION 7.1             General Provisions Regarding Securities..................................................29
SECTION 7.2             Execution and Authentication.............................................................30
SECTION 7.3             Form and Dating..........................................................................30
SECTION 7.4             Registrar and Paying Agent [and Conversion Agent]........................................32
SECTION 7.5             Paying Agent to Hold Money in Trust......................................................32
SECTION 7.6             Replacement Securities...................................................................32
SECTION 7.7             Outstanding Preferred Securities.........................................................33
SECTION 7.8             Preferred Securities in Treasury.........................................................33
SECTION 7.9             Temporary Securities.....................................................................33
SECTION 7.10            Exchange.................................................................................34
SECTION 7.11            Cancellation.............................................................................35
SECTION 7.12            CUSIP Numbers............................................................................35

                                                    ARTICLE VIII
                                                DISSOLUTION OF TRUST

SECTION 8.1             Dissolution of Trust.....................................................................35

                                                     ARTICLE IX
                                                TRANSFER OF INTERESTS

SECTION 9.1             Transfer of Securities...................................................................36
SECTION 9.2             Transfer Procedures and Restrictions.....................................................37
SECTION 9.3             Deemed Security Holders..................................................................38
SECTION 9.4             Book Entry Interests.....................................................................38
SECTION 9.5             Notices to Clearing Agency...............................................................39
SECTION 9.6             Appointment of Successor Clearing Agency.................................................39
</Table>



                                      -ii-

<PAGE>


<Table>
<S>                     <C>                                                                                       <C>
                                                      ARTICLE X
                                             LIMITATION OF LIABILITY OF
                                      HOLDERS OF SECURITIES, TRUSTEES OR OTHERS

SECTION 10.1            Liability................................................................................39
SECTION 10.2            Exculpation..............................................................................40
SECTION 10.3            Fiduciary Duty...........................................................................40
SECTION 10.4            Indemnification..........................................................................41
SECTION 10.5            Outside Businesses.......................................................................43
SECTION 10.6            Compensation; Fees.......................................................................44

                                                     ARTICLE XI
                                                     ACCOUNTING

SECTION 11.1            Fiscal Year..............................................................................44
SECTION 11.2            Certain Accounting Matters...............................................................44
SECTION 11.3            Banking..................................................................................45
SECTION 11.4            Withholding..............................................................................45

                                                     ARTICLE XII
                                               AMENDMENTS AND MEETINGS

SECTION 12.1            Amendments...............................................................................45
SECTION 12.2            Meetings of the Holders; Action by Written Consent.......................................46

                                                    ARTICLE XIII
                                         REPRESENTATIONS OF PROPERTY TRUSTEE
                                                AND DELAWARE TRUSTEE

SECTION 13.1            Representations and Warranties of Property Trustee.......................................48
SECTION 13.2            Representations and Warranties of Delaware Trustee.......................................48

                                                     ARTICLE XIV
                                                    MISCELLANEOUS

SECTION 14.1            Notices..................................................................................49
SECTION 14.2            GOVERNING LAW............................................................................50
SECTION 14.3            Intention of the Parties.................................................................51
SECTION 14.4            Headings.................................................................................51
SECTION 14.5            Successors and Assigns...................................................................51
SECTION 14.6            Partial Enforceability...................................................................51
SECTION 14.7            Counterparts.............................................................................51
SECTION 14.8            No Recourse..............................................................................52
</Table>




                                      -iii-

<PAGE>


<Table>
<Caption>
                           SECTION OF
                    TRUST INDENTURE ACT OF 1939,                 SECTION OF
                            AS AMENDED                            INDENTURE
<S>                                                             <C>
310(a).....................................................     5.3
310(b).....................................................     5.3(c), 5.3(d)
311(a).....................................................     2.2(b)
311(b).....................................................     2.2(b)
312(a).....................................................     2.2(a)
312(b).....................................................     2.2(b)
313........................................................     2.3
314(a).....................................................     2.4; 3.6(j)
314(c).....................................................     2.5
315(a).....................................................     3.9
315(b).....................................................     2.7(a)
315(c).....................................................     3.9(a)
315(d).....................................................     3.9(b)
316(a).....................................................     2.6
316(c).....................................................     3.6(e)
317(a).....................................................     3.8(e); 3.8(h)
317(b).....................................................     3.8(i); 7.5
</Table>



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

*This Cross-Reference Table does not constitute part of the Declaration of Trust
and shall not affect the interpretation of any of its terms or provisions.


                                      -i-

<PAGE>

                          FORM OF AMENDED AND RESTATED

                              DECLARATION OF TRUST

                                       OF

                     CONTINENTAL AIRLINES FINANCE TRUST III

         AMENDED AND RESTATED DECLARATION OF TRUST (this "Declaration") dated
and effective as of _______, ___, by the Trustees (as defined herein), the
Sponsor (as defined herein) and by the holders, from time to time, of undivided
beneficial interests in the assets of the Trust to be issued pursuant to this
Declaration;

         WHEREAS, the Sponsor and certain of the Trustees established
Continental Airlines Finance Trust III (the "Trust"), a trust created under the
Delaware Business Trust Act pursuant to a Declaration of Trust dated as of
October __, 2001 (the "Original Declaration of Trust") and a Certificate of
Trust filed with the Secretary of State of the State of Delaware on October __,
2001 for the sole purpose of issuing and selling certain securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in certain Debentures of the Debenture Issuer (each as
hereinafter defined), and engaging in only those other activities necessary,
advisable or incidental thereto; and

         WHEREAS, the parties hereto, by this Declaration, amend and restate
each and every term and provision of the Original Declaration of Trust;

         NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a statutory business trust under the Business Trust Act
and that this Declaration constitute the governing instrument of such business
trust, the Trustees declare that all assets contributed to the Trust will be
held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration, and the
parties hereto hereby amend and restate each and every term and provision of the
original Declaration as follows:

                                   ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1 Definitions.

         Unless the context otherwise requires:

         (a) capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;

         (b) a term defined anywhere in this Declaration has the same meaning
throughout;

         (c) all references to "the Declaration" or "this Declaration" are to
this Declaration as modified, supplemented or amended from time to time;


<PAGE>


         (d) all references in this Declaration to "Articles" and "Sections" and
"Annexes" and "Exhibits" are to Articles and Sections of and Annexes and
Exhibits to this Declaration unless otherwise specified;

         (e) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or unless
the context otherwise requires; and

         (f) a reference to the singular includes the plural and vice versa.

         "Administrative Trustee" has the meaning set forth in Section 5.1(b).

         "Affiliate" has the same meaning as given to that term in Rule 405
under the Securities Act or any successor rule thereunder.

         "Agent" means any Paying Agent or Registrar.

         "Authorized Officer" of a Person means any other Person that is
authorized to legally bind such former Person.

         "Book Entry Interest" means a beneficial interest in a Global Preferred
Security registered in the name of a Clearing Agency or its nominee, ownership
and transfers of which shall be maintained and made through book entries by a
Clearing Agency as described in Section 9.4.

         "Business Day" means any day other than a Saturday or a Sunday or a day
on which banking institutions in New York, New York or Houston, Texas are
authorized or required by law or executive order to close.

         "Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code Section 3801 et seq., as it may be amended from time to time, or 
any successor legislation.

         "Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Preferred Securities and in whose name or in the name of a nominee of
that organization shall be registered the Global Preferred Securities and which
shall undertake to effect book entry transfers and pledges of the Preferred
Securities.

         "Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.

         "Closing Date" means the ["Time of Delivery"], as such term is defined
in the Underwriting Agreement.

         "Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.


                                      -2-

<PAGE>

         "Commission" means the United States Securities and Exchange Commission
as from time to time constituted, or if any time after the execution of this
Declaration such Commission is not existing and performing the duties now
assigned to it under applicable federal securities laws, then the body
performing such duties at such time.

         "Common Securities" has the meaning specified in Section 7.1(a).

         "Common Securities Guarantee" means the guarantee agreement dated as of
__________, _____ of the Sponsor in respect of the Common Securities.

         "Common Securities Subscription Agreement" means the subscription
agreement dated as of _____, ___ of the Sponsor in respect of the Common
Securities.

         "Company Indemnified Person" means (a) any Administrative Trustee; (b)
any Affiliate of any Administrative Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Administrative Trustee; or (d) any officer, employee or agent of the Trust or
its Affiliates.

         ["Conversion Agent" has the meaning set forth in Section 7.4.]

         "Corporate Trust Office" means the office of the Property Trustee at
which the corporate trust business of the Property Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at ______________.

         "Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.

         "Debenture Issuer" means Continental Airlines, Inc., a Delaware
corporation, or any successor entity resulting from any consolidation,
amalgamation, merger or other business combination, in its capacity as issuer of
the Debentures under the Indenture.

         "Debenture Subscription Agreement" means the subscription agreement
dated as of _______, __ of the Trust in respect of the Debentures.

         "Debenture Trustee" means _____________, a [national banking
association,] as trustee under the Indenture until a successor is appointed
thereunder, and thereafter means such successor trustee.

         "Debentures" means, collectively, the [ ____% Junior Subordinated
Debentures due _____] issued pursuant to the Indenture.

         "Default" means an event, act or condition that with notice or lapse of
time, or both, would constitute an Event of Default.

         "Definitive Preferred Securities" shall have the meaning set forth in
Section 7.3(c).

         "Delaware Trustee" has the meaning set forth in Section 5.2.


                                      -3-

<PAGE>

         "Direct Action" shall have the meaning set forth in Section 3.8(e).

         "Distribution" means a distribution payable to Holders in accordance
with Section 6.1.

         "DTC" means The Depository Trust Company, the initial Clearing Agency.

         "Event of Default" in respect of the Securities means an Event of
Default (as defined in the Indenture) that has occurred and is continuing in
respect of the Debentures.

         "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.

         "Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b).

         "Fiscal Year" has the meaning set forth in Section 11.1.

         "Global Preferred Security" has the meaning set forth in Section
7.3(a).

         "Holder" means a Person in whose name a Security is registered, such
Person being a beneficial owner within the meaning of the Business Trust Act.

         "Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.

         "Indenture" means the Indenture dated as of ______, ___, among the
Debenture Issuer and the Debenture Trustee, as amended from time to time.

         "Investment Company" means an investment company as defined in the
Investment Company Act.

         "Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.

         "Legal Action" has the meaning set forth in Section 3.6(g).

         "Like Amount" has the meaning set forth in Section 3 of Annex I.

         "Liquidation Amount" has the meaning set forth in Section 2(a) of Annex
I.

         "List of Holders" has the meaning set forth in Section 2.2(a).

         "Majority in Liquidation Amount" means, with respect to the Trust
Securities, except as provided in the terms of the Preferred Securities or by
the Trust Indenture Act, Holder(s) of outstanding Trust Securities voting
together as a single class or, as the context may require, Holders of
outstanding Preferred Securities or Holders of outstanding Common Securities
voting separately as a class, who are the record owners of more than 50% of the
aggregate Liquidation Amount of all outstanding Securities of the relevant
class.


                                      -4-

<PAGE>

         "Officers' Certificate" means, with respect to any Person, a
certificate signed by any of the Chairman of the Board, a Vice Chairman of the
Board, the Chief Executive Officer, the President or a Vice President and the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
such Person. Any Officers' Certificate delivered by the Trust shall be signed by
at least one Administrative Trustee. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Declaration shall include: (a) a statement that each officer signing the
Officers' Certificate has read the covenant or condition and the definitions
relating thereto; (b) a brief statement of the nature and scope of the
examination or investigation undertaken by each officer in rendering the
Officers' Certificate; (c) a statement that each such officer has made such
examination or investigation as, in such officer's opinion, is necessary to
enable such officer to express an informed opinion as to whether or not such
covenant or condition has been complied with; and (d) a statement as to whether,
in the opinion of each such officer, such condition or covenant has been
complied with.

         "Opinion of Counsel" means a written opinion of counsel, who may be an
employee of the Sponsor, and who shall be reasonably acceptable to the Property
Trustee.

         ["Option Closing Time" means any settlement date with respect to an
over-allotment option to purchase additional Preferred Securities granted to the
underwriters in the Underwriting Agreement.]

         "Paying Agent" has the meaning specified in Section 7.4.

         "Payment Amount" has the meaning specified in Section 6.1.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

         "Preferred Securities" has the meaning specified in Section 7.1(a).

         "Preferred Securities Guarantee" means the guarantee agreement dated as
of ______, ___, by the Sponsor in respect of Preferred Securities.

         "Preferred Security Beneficial Owner" means, with respect to a Book
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).

         "Property Trustee" has the meaning set forth in Section 5.3(a).

         "Property Trustee Account" has the meaning set forth in Section
3.8(c)(i).

         "Quorum" means a majority of the Administrative Trustees or, if there
are only two Administrative Trustees, both of them.


                                      -5-

<PAGE>

         "Registrar" has the meaning set forth in Section 7.4.

         "Responsible Officer" means any officer within the Corporate Trust
Office of the Property Trustee with direct responsibility for the administration
of this Declaration and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.

         "Rule 3a-5" means Rule 3a-5 under the Investment Company Act, or any
successor rule or regulation.

         "Securities" or "Trust Securities" means the Common Securities and the
Preferred Securities.

         "Securities Act" means the Securities Act of 1933, as amended from time
to time, or any successor legislation.

         "Securities Guarantees" means the Common Securities Guarantee and the
Preferred Securities Guarantee.

         "Special Event" has the meaning set forth in [Section 4(b)] of Annex I
hereto.

         "Sponsor" means Continental Airlines, Inc., a Delaware corporation, or
any successor entity resulting from any merger, conversion, consolidation,
amalgamation or other business combination, in its capacity as depositor of the
Trust.

         "Sponsor Affiliated Holder" has the meaning set forth in Section 7.10.

         "Successor Entity" has the meaning set forth in Section 3.15(b)(i).

         "Successor Property Trustee" has the meaning set forth in Section
3.8(f).

         "10% in Liquidation Amount" means, with respect to the Trust
Securities, except as provided in the terms of the Preferred Securities or by
the Trust Indenture Act, Holder(s) of outstanding Trust Securities voting
together as a single class or, as the context may require, Holders of
outstanding Preferred Securities or Holders of outstanding Common Securities
voting separately as a class, who are the record owners of 10% or more of the
aggregate Liquidation Amount of all outstanding Securities of the relevant
class.

         "Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

         "Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue as a trustee in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.


                                      -6-

<PAGE>

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.

         "Underwriting Agreement" means the Underwriting Agreement dated _______
among the Sponsor, the Trust, and ___________, as representatives of the several
underwriters named therein relating to the initial offering and sale of the
Preferred Securities.

                                   ARTICLE II
                               TRUST INDENTURE ACT

SECTION 2.1 Trust Indenture Act; Application.

         (a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration in order for this
Declaration to be qualified under the Trust Indenture Act and shall, to the
extent applicable, be governed by such provisions.

         (b) The Property Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.

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

         (d) The application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.

SECTION 2.2 Lists of Holders of Securities.

         (a) Each of the Sponsor and the Administrative Trustees on behalf of
the Trust shall provide the Property Trustee, unless the Property Trustee is
Registrar for the Securities, (i) within 14 days after each record date for
payment of Distributions, a list, in such form as the Property Trustee may
reasonably require, of the names and addresses of the Holders ("List of
Holders") as of such record date, provided that neither the Sponsor nor the
Administrative Trustees on behalf of the Trust shall be obligated to provide
such List of Holders at any time that the List of Holders does not differ from
the most recent List of Holders given to the Property Trustee by the Sponsor and
the Administrative Trustees on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Property Trustee. The Property Trustee shall preserve, in as current a
form as is reasonably practicable, all information contained in Lists of Holders
given to it or which it receives in the capacity as Paying Agent (if acting in
such capacity), provided that the Property Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders.

         (b) The Property Trustee shall comply with its obligations under 
Sections 311(a), 311(b) and 312(b) of the Trust Indenture Act.


                                      -7-

<PAGE>

SECTION 2.3 Reports by the Property Trustee.

         Within 60 days after _______ of each year, commencing _______, ___, the
Property Trustee shall provide to the Holders of the Preferred Securities such
reports as are required by Section 313 of the Trust Indenture Act, if any, in
the form and in the manner provided by Section 313 of the Trust Indenture Act.
The Property Trustee shall also comply with the requirements of Section 313(d) 
of the Trust Indenture Act.

SECTION 2.4 Periodic Reports to Property Trustee.

         Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such documents, reports and
information as are required by Section 314 (if any) of the Trust Indenture Act
and the compliance certificate required by Section 314 of the Trust Indenture
Act in the form, in the manner and at the times required by Section 314(a)(4) of
the Trust Indenture Act.

SECTION 2.5 Evidence of Compliance with Conditions Precedent.

         Each of the Sponsor and the Administrative Trustees on behalf of the
Trust shall provide to the Property Trustee such evidence of compliance with any
conditions precedent provided for in this Declaration that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate
or opinion required to be given by an officer pursuant to Section 314(c)(1) of
the Trust Indenture Act may be given in the form of an Officers' Certificate.

SECTION 2.6 Events of Default; Waiver.

         (a) The Holders of a Majority in Liquidation Amount of Preferred
Securities may, by vote, on behalf of the Holders of all of the Preferred
Securities, waive any past Event of Default in respect of the Preferred
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:

                  (i) is not waivable under the Indenture, the Event of Default
under this Declaration shall also not be waivable; or

                  (ii) requires the consent or vote of all holders of the
Debentures to be waived under the Indenture, the Event of Default under this
Declaration may be waived only by the vote of the Holders of all outstanding
Preferred Securities.

The foregoing provisions of this Section 2.6(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to have been cured, for
every purpose of this Declaration, but no such waiver shall extend to any
subsequent or other default or an Event of Default with respect to the Preferred
Securities or impair any right consequent thereon. Any waiver by the Holders of
the Preferred Securities of an Event of Default with respect to the Preferred
Securities shall also be deemed to constitute a waiver by the Holders of the
Common Securities of any such Event of Default with respect to the Common
Securities for all purposes of this Declaration without any further act, vote,
or consent of the Holders of the Common Securities.


                                      -8-

<PAGE>

         (b) The Holders of a Majority in Liquidation Amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:

                  (i) is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event of Default
under the Declaration as provided below in this Section 2.6(b), the Event of
Default under the Declaration shall also not be waivable; or

                  (ii) requires the consent or vote of all Debentures to be
waived, except where the Holders of the Common Securities are deemed to have
waived such Event of Default under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the Declaration may be waived only by
the vote of all Holders of outstanding Common Securities; provided further, the
Holders of Common Securities will be deemed to have waived any such Event of
Default and all Events of Default with respect to the Common Securities and
their consequences until all Events of Default with respect to the Preferred
Securities have been cured, waived or otherwise eliminated, and until such
Events of Default have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the Holders of
the Preferred Securities and only the Holders of the Preferred Securities will
have the right to direct the Property Trustee in accordance with the terms of
the Securities.

The foregoing provisions of this Section 2.6(b) shall be in lieu of Sections
316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act and such Sections
316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act are hereby expressly
excluded from this Declaration and the Securities, as permitted by the Trust
Indenture Act. Subject to the foregoing provisions of this Section 2.6(b), upon
such waiver, any such default shall cease to exist and any Event of Default with
respect to the Common Securities arising therefrom shall be deemed to have been
cured for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or Event of Default with respect to the Common
Securities or impair any right consequent thereon.

         (c) A waiver of an Event of Default under the Indenture by the Property
Trustee, at the direction of the Holders of the Preferred Securities,
constitutes a waiver of the corresponding Event of Default under this
Declaration. The foregoing provisions of this Section 2.6(c) shall be in lieu of
Section 316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of
the Trust Indenture Act is hereby expressly excluded from this Declaration and
the Securities, as permitted by the Trust Indenture Act.

SECTION 2.7 Event of Default; Notice.

         (a) The Property Trustee shall, within 90 days after the occurrence of
a Default actually known to a Responsible Officer, transmit by mail, first class
postage prepaid, to the Holders, notices of all such Defaults with respect to
the Securities, unless such Defaults have been cured before the giving of such
notice; provided that, except for a Default in the payment of principal of (or
premium, if any) or interest (including Compounded Interest and Additional Sums
(as such terms are defined in the Indenture), if any) on any of the Debentures,
the Property 


                                      -9-

<PAGE>

Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer in good faith determines that the withholding of such notice
is in the interests of the Holders.

         (b) The Property Trustee shall not be deemed to have knowledge of any
Default except:

                  (i) a default under Sections 5.01(a) or (b) of the Indenture;
or

                  (ii) any Default as to which the Property Trustee shall have
received written notice specifying such Default and stating that such notice is
a "Notice of Default" or of which a Responsible Officer charged with the
administration of the Declaration shall have actual knowledge.

         (c) Within five Business Days after the occurrence of any Event of
Default actually known to the Property Trustee, the Property Trustee shall
transmit notice of such Event of Default to the Holders of the Preferred
Securities, the Administrative Trustees and the Sponsor, unless such Event of
Default shall have been cured or waived. The Sponsor and the Administrative
Trustees shall file annually with the Property Trustee a certification as to
whether or not they are in compliance with all the conditions and covenants
applicable to them under this Declaration.

                                  ARTICLE III
                                  ORGANIZATION

SECTION 3.1 Name.

         The Trust is named "Continental Airlines Finance Trust III" as such
name may be modified from time to time by the Administrative Trustees following
written notice to the Delaware Trustee, the Property Trustee and the Holders.
The Trust's activities may be conducted under the name of the Trust or any other
name deemed advisable by the Administrative Trustees.

SECTION 3.2 Office.

         The address of the principal office of the Trust is c/o Continental
Airlines, Inc., 1600 Smith Street, Houston, Texas 77002. On ten Business Days
written notice to the Delaware Trustee, the Property Trustee and the Holders of
Securities, the Administrative Trustees may designate another principal office.

SECTION 3.3 Purpose.

         The exclusive purposes and functions of the Trust are (a) to issue and
sell Securities, (b) use the proceeds from the sale of the Securities to acquire
the Debentures, and (c) except as otherwise limited herein, to engage in only
those other activities necessary, advisable or incidental thereto.


                                      -10-

<PAGE>

SECTION 3.4 Authority.

         Subject to the limitations provided in this Declaration and to the
specific duties of the Property Trustee, the Administrative Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Administrative Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action taken by
the Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.

SECTION 3.5 Title to Property of the Trust.

         Except as provided in Section 3.8 with respect to the Debentures and
the Property Trustee Account or as otherwise provided in this Declaration, legal
title to all assets of the Trust shall be vested in the Trust. The Holders shall
not have legal title to any part of the assets of the Trust, but shall have an
undivided beneficial interest in the assets of the Trust.

SECTION 3.6 Powers and Duties of the Administrative Trustees.

         The Administrative Trustees shall have the exclusive power, duty and
authority to cause the Trust to engage in the following activities:

         (a) to execute, deliver, issue and sell the Securities in accordance
with this Declaration; provided, however, that except as contemplated in Section
7.1(a),

                  (i) the Trust may issue no more than one series of Preferred
Securities and no more than one series of Common Securities,

                  (ii) there shall be no interests in the Trust other than the
Securities, and

                  (iii) the issuance of Securities shall be limited to a
simultaneous issuance of both Preferred Securities and Common Securities at the
Closing Date [and, if applicable, at any Option Closing Time];

         (b) in connection with the issue and sale of the Preferred Securities,
at the direction of the Sponsor, to:

                  (i) file with the Commission a registration statement prepared
by the Sponsor on the appropriate form in relation to the Preferred Securities,
including any amendments thereto and including any supplements or amendments to
the form of prospectus included therein, as permitted by the rules and
regulations of the Commission;

                  (ii) execute and file any documents prepared by the Sponsor,
or take any acts as determined by the Sponsor to be necessary in order to
qualify or register all or part of the Preferred Securities in any state in
which the Sponsor has determined to qualify or register such Preferred
Securities for sale;


                                      -11-

<PAGE>

                  (iii) at the direction of the Sponsor, execute and file an
application, prepared by the Sponsor, to the New York Stock Exchange or any
other national stock exchange or the Nasdaq National Market for listing or
quotation of the Preferred Securities;

                  (iv) to execute and deliver letters, documents, or instruments
with DTC and any other Clearing Agencies relating to the Preferred Securities;

                  (v) if required, execute and file with the Commission a
registration statement on Form 8-A, including any amendments thereto, prepared
by the Sponsor, relating to the registration of the Preferred Securities under
Section 12(b) or 12(g) of the Exchange Act; and

                  (vi) to cause the Trust to enter into such agreements and
arrangements as may be necessary or desirable in connection with the sale of
Preferred Securities to the underwriters thereof and the consummation thereof,
and to take all action as may be necessary or desirable in connection with the
consummation thereof;

         (c) to acquire the Debentures with the proceeds of the sale of the
Preferred Securities and the Common Securities; provided, however, that the
Administrative Trustees shall cause legal title to the Debentures to be held of
record in the name of the Property Trustee for the benefit of the Holders;

         (d) to give the Sponsor and the Property Trustee prompt written notice
of the occurrence of a Special Event;

         (e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of Section 316(c) of the Trust Indenture Act, 
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders of Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;

         (f) to take all actions and perform such duties as may be required of
the Administrative Trustees pursuant to the terms of the Securities;

         (g) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Property Trustee has
the exclusive power to bring such Legal Action;

         (h) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such services;

         (i) to cause the Trust to comply with the Trust's obligations under the
Trust Indenture Act;

         (j) to give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Administrative Trustee;


                                      -12-

<PAGE>

         (k) to incur expenses that are necessary or incidental to carry out any
of the purposes of the Trust;

         (l) to act as, or appoint another Person to act as, Registrar for the
Securities or to appoint a Paying Agent [and Conversion Agent] for the
Securities as provided in Section 7.4 except for such time as such power to
appoint a Paying Agent [or Conversion Agent] is vested in the Property Trustee;

         (m) to give prompt written notice to the Property Trustee and to
Holders of any notice received from the Debenture Issuer of its election to
defer payments of interest on the Debentures by extending the interest payment
period under the Indenture;

         (n) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders or to enable the Trust
to effect the purposes for which the Trust was created;

         (o) to take any action, not inconsistent with this Declaration or with
applicable law, that the Administrative Trustees determine in their discretion
to be necessary or desirable in carrying out the activities of the Trust as set
out in this Section 3.6, including, but not limited to:

                  (i) causing the Trust not to be deemed to be an Investment
Company required to be registered under the Investment Company Act;

                  (ii) causing the Trust not to be classified for United States
federal income tax purposes as an association taxable as a corporation; and

                  (iii) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture Issuer for United
States federal income tax purposes;

         (p) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to the
Trust to be duly prepared and filed by the Administrative Trustees, on behalf of
the Trust; and

         (q) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing.

         The Administrative Trustees must exercise the powers set forth in this
Section 3.6 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Administrative Trustees shall not take
any action that is inconsistent with the purposes and functions of the Trust set
forth in Section 3.3.

         Subject to this Section 3.6, the Administrative Trustees shall have
none of the powers or the authority of the Property Trustee set forth in Section
3.8.


                                      -13-

<PAGE>

         The Administrative Trustees shall take all actions on behalf of the
Trust that are not specifically required by this Declaration to be taken by any
other Trustee.

         Any expenses incurred by the Administrative Trustees pursuant to this
Section 3.6 shall be reimbursed by the Debenture Issuer.

SECTION 3.7 Prohibition of Actions by the Trust and the Trustees.

         (a) The Trust shall not, and the Trustees (including the Property
Trustee) shall cause the Trust not to, engage in any activity other than as
required or authorized by this Declaration. The Trust shall not:

                  (i) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders pursuant to the
terms of this Declaration and of the Securities;

                  (ii) acquire any assets other than as expressly provided
herein;

                  (iii) possess Trust property for other than a Trust purpose;

                  (iv) make any loans or incur any indebtedness other than loans
represented by the Debentures;

                  (v) possess any power or otherwise act in such a way as to
vary the Trust assets or the terms of the Securities in any way whatsoever,
except as otherwise expressly provided herein;

                  (vi) issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the Securities;

                  (vii) other than as provided in this Declaration or Annex I,
(A) direct the time, method and place of conducting any proceeding with respect
to any remedy available to the Debenture Trustee, or exercising any trust or
power conferred upon the Debenture Trustee with respect to the Debentures, (B)
waive any past default that is waivable under the Indenture, (C) exercise any
right to rescind or annul any declaration that the principal of all the
Debentures shall be due and payable, or (D) consent to any amendment,
modification or termination of the Indenture or the Debentures where such
consent shall be required, unless in the case of any of (A), (B), (C), or (D),
the Trust shall have received an opinion of independent tax counsel experienced
in such matters to the effect that such amendment, modification or termination
will not cause more than an insubstantial risk that for United States federal
income tax purposes the Trust will not be classified as a grantor trust;

                  (viii) take any action that would result in the placement of a
pledge or mortgage on any of the Trust property; or

                  (ix) vary the investment (within the meaning of Treasury
Regulation Section 301.7701-4(c)) of the Trust or of the Holders of Securities.


                                      -14-

<PAGE>

SECTION 3.8 Powers and Duties of the Property Trustee.

         (a) The legal title to the Debentures shall be owned by and held of
record in the name of the Property Trustee in trust for the benefit of the Trust
and the Holders. The right, title and interest of the Property Trustee to the
Debentures shall vest automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section 5.7. Such vesting and
cessation of title shall be effective whether or not conveyancing documents with
regard to the Debentures have been executed and delivered.

         (b) The Property Trustee shall not transfer its right, title and
interest in the Debentures to the Administrative Trustees or to the Delaware
Trustee (if the Property Trustee does not also act as Delaware Trustee).

         (c) The Property Trustee shall:

                  (i) establish and maintain a segregated non-interest bearing
trust account (the "Property Trustee Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders and, upon the
receipt of payments of funds made in respect of the Debentures held by the
Property Trustee, deposit such funds into the Property Trustee Account and make
payments or cause the Paying Agent to make payments to the Holders from the
Property Trustee Account in accordance with Section 6.1. Funds in the Property
Trustee Account shall be held uninvested until disbursed in accordance with this
Declaration. The Property Trustee Account shall be an account that is maintained
with a banking institution the rating on whose long-term unsecured indebtedness
by a "nationally recognized statistical rating organization", as that term is
defined for purposes of Rule 436(g)(2) under the Securities Act, is at least
investment grade;

                  (ii) engage in such ministerial activities as shall be
necessary or appropriate to effect the redemption of the Trust Securities to the
extent the Debentures are redeemed or mature; and

                  (iii) upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the Securities, engage
in such ministerial activities as shall be necessary or appropriate to effect
the distribution of the Debentures to Holders upon the occurrence of certain
events.

         (d) The Property Trustee shall take all actions and perform such duties
as may be specifically required of the Property Trustee pursuant to the terms of
the Securities.

         (e) Subject to Section 3.9(a), the Property Trustee shall take any
Legal Action which arises out of or in connection with an Event of Default of
which a Responsible Officer of the Property Trustee has actual knowledge or the
Property Trustee's duties and obligations under this Declaration or the Trust
Indenture Act; provided, however, that if an Event of Default has occurred and
is continuing and such event is attributable to the failure of the Debenture
Issuer to pay the principal of or premium, if any, or interest on the Debentures
on the date such principal, premium, if any, or interest is otherwise payable
(or in the case of redemption, on the redemption date), then a Holder of
Preferred Securities may directly institute a proceeding for enforcement of
payment to such Holder of the principal of or premium, if any, or interest on
the Debentures 


                                      -15-

<PAGE>

having a principal amount equal to the aggregate Liquidation Amount of the
Preferred Securities of such Holder (a "Direct Action") on or after the
respective due date specified in the Debentures. Notwithstanding any payments
made to such Holder by the Debenture Issuer in connection with such Direct
Action, the Debenture Issuer shall be subrogated to the rights of such Holder of
Preferred Securities to the extent of any payment made by the Debenture Issuer
to such Holder of Preferred Securities in such Direct Action. Except as provided
in the preceding sentences, the Holders of Preferred Securities will not be able
to exercise directly any other remedy available to the Holders of the
Debentures.

         (f) The Property Trustee shall continue to serve as a Trustee until
either:

                  (i) the Trust has been completely liquidated and the proceeds
of the liquidation distributed to the Holders pursuant to the terms of the
Securities; or

                  (ii) a successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 5.7 (a "Successor Property
Trustee").

         (g) The Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Debentures under the Indenture
and, if an Event of Default actually known to a Responsible Officer occurs and
is continuing, the Property Trustee shall, for the benefit of Holders, enforce
its rights as holder of the Debentures subject to the rights of the Holders
pursuant to the terms of such Securities.

         (h) The Property Trustee shall be authorized to undertake any actions
set forth in Section 317(a) of the Trust Indenture Act.

         (i) For such time as the Property Trustee is the Paying Agent, the
Property Trustee may authorize one or more Persons to act as additional Paying
Agents and to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to all Securities and any such Paying Agent
shall comply with Section 317(b) of the Trust Indenture Act. Any such additional
Paying Agent may be removed by the Property Trustee at any time the Property
Trustee remains as Paying Agent and a successor Paying Agent or additional
Paying Agents may be (but are not required to be) appointed at any time by the
Property Trustee while the Property Trustee is so acting as Paying Agent.

         (j) Subject to this Section 3.8, the Property Trustee shall have none
of the duties, liabilities, powers or the authority of the Administrative
Trustees set forth in Section 3.6.

         Notwithstanding anything expressed or implied to the contrary in this
Declaration or any Annex or Exhibit hereto, (i) the Property Trustee must
exercise the powers set forth in this Section 3.8 in a manner that is consistent
with the purposes and functions of the Trust set out in Section 3.3, and (ii)
the Property Trustee shall not take any action that is inconsistent with the
purposes and functions of the Trust set out in Section 3.3.


                                      -16-

<PAGE>

SECTION 3.9 Certain Duties and Responsibilities of the Property Trustee.

         (a) The Property Trustee, before the occurrence of any Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration and in the Securities and no implied covenants shall be read into
this Declaration against the Property Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer has actual knowledge, the Property Trustee shall exercise
such of the rights and powers vested in it by this Declaration, 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 or her own affairs.

         (b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:

                  (i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have occurred: (A)
the duties and obligations of the Property Trustee shall be determined solely by
the express provisions of this Declaration and in the Securities and the
Property Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Declaration and in the
Securities, and no implied covenants or obligations shall be read into this
Declaration or the Securities against the Property Trustee; and (B) in the
absence of bad faith on the part of the Property Trustee, the Property Trustee
may conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon any certificates or opinions furnished to
the Property Trustee and conforming to the requirements of this Declaration;
provided, however, that in the case of any such certificates or opinions that by
any provision hereof are specifically required to be furnished to the Property
Trustee, the Property Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Declaration;

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

                  (iii) the Property Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a Majority in Liquidation Amount
of the Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee under this Declaration;

                  (iv) no provision of this Declaration shall require the
Property Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Declaration or indemnity reasonably
satisfactory to the Property Trustee against such risk or liability is not
reasonably assured to it;


                                      -17-

<PAGE>

                  (v) the Property Trustee's sole duty with respect to the
custody, safekeeping and physical preservation of the Debentures and the
Property Trustee Account shall be to deal with such property in a similar manner
as the Property Trustee deals with similar property for its own account, subject
to the protections and limitations on liability afforded to the Property Trustee
under this Declaration and the Trust Indenture Act;

                  (vi) the Property Trustee shall have no duty or liability for
or with respect to the value, genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or assessments levied thereon or in
connection therewith;

                  (vii) the Property Trustee shall not be liable for any
interest on any money received by it except as it may otherwise agree in writing
with the Sponsor. Money held by the Property Trustee need not be segregated from
other funds held by it except in relation to the Property Trustee Account
maintained by the Property Trustee pursuant to Section 3.8(c)(i) and except to
the extent otherwise required by law; and

                  (viii) the Property Trustee shall not be responsible for
monitoring the compliance by the Administrative Trustees or the Sponsor with
their respective duties under this Declaration, nor shall the Property Trustee
be liable for any default or misconduct of the Administrative Trustees or the
Sponsor.

SECTION 3.10 Certain Rights of Property Trustee.

         (a) Subject to the provisions of Section 3.9:

                  (i) the Property Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;

                  (ii) any direction or act of the Sponsor or the Administrative
Trustees contemplated by this Declaration may be sufficiently evidenced by an
Officers' Certificate;

                  (iii) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly delivered by
the Sponsor or the Administrative Trustees;

                  (iv) the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any financing or
continuation statement or any filing under tax or securities laws) or any
rerecording, refiling or reregistration thereof except for those required as a
result of any change in the name, address or identity of the Property Trustee;

                  (v) the Property Trustee may consult with counsel or other
experts of its selection or request an Opinion of Counsel be furnished by, or on
behalf of, the Sponsor and the 


                                      -18-

<PAGE>

advice or opinion of such counsel and experts with respect to legal matters or
advice within the scope of such experts' area of expertise or such Opinion of
Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion or Opinion of Counsel, such counsel may
be counsel to the Sponsor or any of its Affiliates, and may include any of its
employees. The Property Trustee shall have the right at any time to seek
instructions concerning the administration of this Declaration from any court of
competent jurisdiction;

                  (vi) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration at the
request or direction of any Holder, unless such Holder shall have provided to
the Property Trustee security and indemnity, reasonably satisfactory to the
Property Trustee, against the costs, expenses (including reasonable attorneys'
fees and expenses and the expenses of the Property Trustee's agents, nominees or
custodians) and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be requested by
the Property Trustee;

                  (vii) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Property Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit;

                  (viii) the Property Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through agents, custodians, nominees or attorneys and the Property Trustee shall
not be responsible for any misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder;

                  (ix) any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders, and the signature of the
Property Trustee or its agents alone shall be sufficient and effective to
perform any such action and no third party shall be required to inquire as to
the authority of the Property Trustee to so act or as to its compliance with any
of the terms and provisions of this Declaration, both of which shall be
conclusively evidenced by the Property Trustee's or its agent's taking such
action;

                  (x) whenever in the administration of this Declaration the
Property Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the Property
Trustee (i) may request instructions from the Holders which instructions may
only be given by the Holders of the same proportion in Liquidation Amount of the
Securities as would be entitled to direct the Property Trustee under the terms
of the Securities in respect of such remedy, right or action, (ii) may refrain
from enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in conclusively relying
on or acting in accordance with such instructions;

                  (xi) except as otherwise expressly provided by this
Declaration, the Property Trustee shall not be under any obligation to take any
action that is discretionary under the provisions of this Declaration; and


                                      -19-

<PAGE>

                  (xii) the Property Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith, without negligence,
and reasonably believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Declaration.

         (b) No provision of this Declaration shall be deemed to impose any duty
or obligation on the Property Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it, in any jurisdiction
in which it shall be illegal, or in which the Property Trustee shall be
unqualified or incompetent in accordance with applicable law, to perform any
such act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Property Trustee shall be
construed to be a duty.

SECTION 3.11 Delaware Trustee.

         Notwithstanding any other provision of this Declaration other than
Section 5.2, the Delaware Trustee shall not be entitled to exercise any powers,
nor shall the Delaware Trustee have any of the duties and responsibilities of
the Trustees (except as required under the Business Trust Act) described in this
Declaration. Except as set forth in Section 5.2, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Business Trust Act. No implied covenants or obligations 
shall be read into this Declaration against the Delaware Trustee.

SECTION 3.12 Execution of Documents.

         Except as otherwise required by the Business Trust Act or this
Declaration, any Administrative Trustee or, if there is only one, such
Administrative Trustee is authorized to execute on behalf of the Trust any
documents that the Administrative Trustees have the power and authority to
execute pursuant to Section 3.6; provided that any Registration Statement
referred to in Section 3.6(b)(i), including any amendments thereto, shall be
signed by all of the Administrative Trustees.

SECTION 3.13 Not Responsible for Recitals or Issuance of Securities.

         The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.

SECTION 3.14 Duration of Trust.

         The Trust, unless dissolved pursuant to the provisions of Article VIII
hereof, shall dissolve on __________, ____.

SECTION 3.15 Mergers.

         (a) The Trust may not merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets substantially as an entirety to 


                                      -20-

<PAGE>

any Person, except as described in Section 3.15(b) and (c) of this Declaration
and Section 3 of Annex I.

         (b) The Trust may, at the request of the Sponsor, with the consent of
the Administrative Trustees or, if there are more than two, a majority of the
Administrative Trustees and without the consent of the Holders, the Delaware
Trustee or the Property Trustee, merge with or into, convert into, consolidate,
amalgamate, or be replaced by, or convey, transfer or lease its properties and
assets as an entirety or substantially as an entirety to, a trust organized as
such under the laws of any State; provided that:

                  (i) such successor entity (the "Successor Entity") either: (A)
expressly assumes all of the obligations of the Trust under the Securities and
this Declaration; or (B) substitutes for the Securities other securities having
substantially the same terms as the Securities (the "Successor Securities") so
long as the Successor Securities rank the same as the Securities rank with
respect to Distributions and payments upon liquidation, redemption and
otherwise;

                  (ii) the Sponsor expressly appoints a trustee of the Successor
Entity that possesses the same powers and duties as the Property Trustee as the
holder of the Debentures;

                  (iii) the Successor Securities are listed, or any Successor
Securities will be listed upon notification of issuance, on any national
securities exchange or with another organization on which the Preferred
Securities are then listed or quoted, if any;

                  (iv) if the Preferred Securities (including any Successor
Securities) are rated by any nationally recognized statistical rating
organization prior to such transaction, such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not cause the
Preferred Securities (including any Successor Securities), or if the Debentures
are so rated, the Debentures, to be downgraded by any nationally recognized
statistical rating organization;

                  (v) such merger, conversion, consolidation, amalgamation,
replacement, conveyance, transfer or lease does not adversely affect the rights,
preferences and privileges of the Holders (including the holders of any
Successor Securities) in any material respect (other than with respect to any
dilution of such Holders' interests in the new entity);

                  (vi) such Successor Entity has a purpose substantially
identical to that of the Trust;

                  (vii) prior to such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease, the Sponsor has
received an opinion of an independent counsel to the Trust experienced in such
matters to the effect that: (A) such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease does not adversely
affect the rights, preferences and privileges of the Holders (including the
holders of any Successor Securities) in any material respect (other than with
respect to any dilution of the Holders' interest in the new entity); (B)
following such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease, neither the Trust nor the Successor Entity will
be required to register as an Investment Company; and (C) following such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Trust 


                                      -21-

<PAGE>

(or the Successor Entity) will continue to be classified as a grantor trust for
United States federal income tax purposes; and

                  (viii) the Sponsor or any permitted successor or assignee owns
all of the common securities of such Successor Entity and guarantees the
obligations of such Successor Entity under the Successor Securities at least to
the extent provided by the Preferred Securities Guarantee and the Common
Securities Guarantee.

         (c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in Liquidation Amount of the Securities,
consolidate, amalgamate, merge with or into, convert into, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to, any other Person or permit any other Person to
consolidate, convert into, amalgamate, merge with or into, or replace it if such
consolidation, conversion, amalgamation, merger, replacement, conveyance,
transfer or lease would cause the Trust or the Successor Entity not to be
classified as a grantor trust for United States federal income tax purposes or
would cause the Holders of the Securities not to be treated as owning an
undivided interest in the Debentures.

                                   ARTICLE IV
                                     SPONSOR

SECTION 4.1 Sponsor's Purchase of Common Securities.

         At the Closing Date [and any Option Closing Time, if applicable], the
Sponsor will purchase all of the Common Securities then issued by the Trust, in
an amount equal to at least 3% of the total capital of the Trust, at the same
time as the Preferred Securities are issued and sold.

SECTION 4.2 Responsibilities of the Sponsor.

         In connection with the issue and sale of the Preferred Securities, the
Sponsor shall have the exclusive right and responsibility to engage in the
following activities:

         (a) if deemed necessary by the Sponsor and not performed by the Sponsor
prior to the date of this Declaration pursuant to the Original Declaration, to
prepare for filing by the Trust with the Commission any Registration Statement
(including a Prospectus contained therein and any Prospectus Supplement relating
thereto), including any amendments thereto, as contemplated by Section
3.6(b)(i);

         (b) if deemed necessary by the Sponsor and not performed by the Sponsor
prior to the date of this Declaration pursuant to the Original Declaration, to
determine the States in which to take appropriate action to qualify or register
for sale all or part of the Preferred Securities and to do any and all such
acts, other than actions which must be taken by the Trust, and advise the Trust
of actions it must take, and prepare for execution and filing any documents to
be executed and filed by the Trust, as the Sponsor deems necessary or advisable
in order to comply with the applicable laws of any such States;


                                      -22-

<PAGE>

         (c) if deemed necessary or desirable by the Sponsor, to prepare for
filing by the Trust an application to permit the Preferred Securities to trade
or be quoted or listed in or on any other securities exchange, quotation system
or the Nasdaq Stock Market's National Market;

         (d) if deemed necessary or desirable by the Sponsor, to prepare for and
execute for filing by the Trust with the Commission a registration statement on
Form 8-A, including any amendments thereto, relating to the registration of the
Preferred Securities under Section 12(b) of the Exchange Act;

         (e) if deemed necessary by the Sponsor and not performed by the Sponsor
prior to the date of this Declaration pursuant to the Original Declaration, to
negotiate the terms of an Underwriting Agreement providing for the sale and
registration of the Preferred Securities; and

         (f) if deemed necessary by the Sponsor and not performed by the Sponsor
prior to the date of this Declaration pursuant to the Original Declaration, to
negotiate the terms of the Debenture Subscription Agreement and the Common
Securities Subscription Agreement.

SECTION 4.3 Right to Proceed.

         The Sponsor acknowledges the rights of the Holders of Preferred
Securities (as set forth in Section 3.8(e) of this Declaration and Sections 6(b)
and 7(c) of Annex I), in the event that a failure of the Trust to pay
Distributions on the Preferred Securities is attributable to the failure of the
Company to pay interest or principal on the Debentures, to institute a
proceeding directly against the Debenture Issuer for enforcement of its payment
obligations on the Debentures.

                                   ARTICLE V
                                    TRUSTEES

SECTION 5.1 Number of Trustees: Appointment of Co-Trustee.

         The number of Trustees initially shall be [five (5)], and:

         (a) at any time before the issuance of any Securities, the Sponsor may,
by written instrument, increase or decrease the number of Trustees; and

         (b) after the issuance of any Securities, the number of Trustees may be
increased or decreased by vote of the Holders of a Majority in Liquidation
Amount of the Common Securities voting as a class at a meeting of the Holders of
the Common Securities; provided, however, that, the number of Trustees shall in
no event be less than two (2); provided further that (1) one Trustee shall
satisfy the requirements of the Delaware Trustee pursuant to Section 5.2; (2)
there shall be at least one Trustee who is an officer of the Sponsor (an
"Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for
so long as this Declaration is required to qualify as an indenture under the
Trust Indenture Act, and such Trustee may also serve as Delaware Trustee if it
meets the applicable requirements. Notwithstanding the above, unless an Event of
Default shall have occurred and be continuing, at any time or times, for the
purpose of meeting the legal requirements of the Trust Indenture Act or of any
jurisdiction in which any part of the Trust's property may at the time be
located, the Holders of a Majority in Liquidation Amount of the Common
Securities acting as a class at a meeting of the Holders of the Common
Securities, 


                                      -23-

<PAGE>

and the Administrative Trustees shall have power to appoint one or more Persons
either to act as a co-trustee, jointly with the Property Trustee, of all or any
part of the Trust's property, or to act as separate trustee of any such
property, in either case with such powers as may be provided in the instrument
of appointment, and to vest in such Person or Persons in such capacity any
property, title, right or power deemed necessary or desirable, subject to the
provisions of this Declaration. In case an Event of Default has occurred and is
continuing, the Property Trustee alone shall have power to make any such
appointment of a co-trustee.

SECTION 5.2 Delaware Trustee.

         If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:

         (a) a natural person who is a resident of the State of Delaware; or

         (b) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law, provided that, if the Property Trustee has its principal place
of business in the State of Delaware and otherwise meets the requirements of
applicable law, then the Property Trustee shall also be the Delaware Trustee and
Section 3.11 shall have no application.

SECTION 5.3 Property Trustee; Eligibility.

         (a) There shall at all times be one Trustee (the "Property Trustee")
which shall act as Property Trustee which shall:

                  (i) not be an Affiliate of the Sponsor; and

                  (ii) be a Person organized and doing business under the laws
of the United States of America or any State or Territory thereof or of the
District of Columbia, or a Person permitted by the Commission to act as an
institutional trustee under the Trust Indenture Act, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000), and subject to supervision or
examination by Federal, State, Territorial or District of Columbia authority. If
such Person publishes reports of condition at least annually, pursuant to law or
to the requirements of the supervising or examining authority referred to above,
then for the purposes of this Section 5.3(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.

         (b) If at any time the Property Trustee shall cease to be eligible to
so act under Section 5.3(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 5.7(c).

         (c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Property Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in Section 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture 
Act.


                                      -24-

<PAGE>

         (d) The Preferred Securities Guarantee and the Indenture shall be
deemed to be specifically described in this Declaration for purposes of clause
(i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.

         (e) The initial Property Trustee shall be:

         [NAME, ADDRESS]

         Attention: Corporate Trust Department
         Telecopy: _____



SECTION 5.4 Certain Qualifications of Administrative Trustees and Delaware
Trustee Generally.

         Each Administrative Trustee and the Delaware Trustee (unless the
Property Trustee also acts as Delaware Trustee) shall be either a natural person
who is at least 21 years of age or a legal entity that shall act through one or
more Authorized Officers.

SECTION 5.5 Administrative Trustees.

         The initial Administrative Trustees shall be:


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

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

         (a) Except as expressly set forth in this Declaration and except if a
meeting of the Administrative Trustees is called with respect to any matter over
which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.

         (b) An Administrative Trustee shall have the authority set forth in
Section 3.12 to execute on behalf of the Trust any documents that the
Administrative Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.6 provided that any Registration Statement
referred to in Section 3.6(b)(i), including any amendments thereto, shall be
signed by all of the Administrative Trustees.


                                      -25-

<PAGE>

SECTION 5.6 Delaware Trustee.

         The initial Delaware Trustee shall be:

         [NAME, ADDRESS]
         Attention: Corporate Trust Department
         Telecopy: ________


SECTION 5.7 Appointment, Removal and Resignation of Trustees.

         (a) Subject to Section 5.7(b) of this Declaration and to Section 7(b)
of Annex I hereto, Trustees may be appointed or removed without cause at any
time:

                  (i) until the issuance of any Securities, by written
instrument executed by the Sponsor;

                  (ii) unless an Event of Default shall have occurred and be
continuing after the issuance of any Securities, by vote of the Holders of a
Majority in Liquidation Amount of the Common Securities voting as a class at a
meeting of the Holders of the Common Securities; and

                  (iii) if an Event of Default shall have occurred and be
continuing after the issuance of the Securities, with respect to the Property
Trustee or the Delaware Trustee, by vote of Holders of a Majority in Liquidation
Amount of the Preferred Securities voting as a class at a meeting of Holders of
the Preferred Securities.

         (b) (i) The Trustee that acts as Property Trustee shall not be removed
in accordance with Section 5.7(a) until a Successor Property Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Property Trustee and delivered to the Administrative Trustees and
the Sponsor; and

                  (ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.7(a) until a successor Trustee possessing
the qualifications to act as Delaware Trustee under Sections 5.2 and 5.4 (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware Trustee
and delivered to the Administrative Trustees and the Sponsor.

         (c) A Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation. Any
Trustee may resign from office (without need for prior or subsequent accounting)
by an instrument in writing signed by the Trustee and delivered to the Sponsor
and the Trust, which resignation shall take effect upon such delivery or upon
such later date as is specified therein; provided, however, that:

                  (i) no such resignation of the Trustee that acts as the
Property Trustee shall be effective: (A) until a Successor Property Trustee has
been appointed and has accepted such appointment by instrument executed by such
Successor Property Trustee and delivered to 


                                      -26-

<PAGE>

the Trust, the Sponsor and the resigning Property Trustee; or (B) until the
assets of the Trust have been completely liquidated and the proceeds thereof
distributed to the Holders; and

                  (ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee.

         (d) The Holders of the Common Securities or, if an Event of Default
shall have occurred and be continuing after the issuance of the Securities, the
Holders of the Preferred Securities shall use their best efforts to promptly
appoint a Successor Delaware Trustee or Successor Property Trustee, as the case
may be, if the Property Trustee or the Delaware Trustee delivers an instrument
of resignation in accordance with this Section 5.7.

         (e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.7 within 60 days after delivery of an instrument of resignation or removal,
the Property Trustee or Delaware Trustee resigning or being removed, as
applicable, may petition any court of competent jurisdiction for appointment of
a Successor Property Trustee or Successor Delaware Trustee. Such court may
thereupon, after prescribing such notice, if any, as it may deem proper and
prescribe, appoint a Successor Property Trustee or Successor Delaware Trustee,
as the case may be.

         (f) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or Successor Delaware
Trustee, as the case may be.

SECTION 5.8 Vacancies Among Trustees.

         If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Administrative Trustees or, if
there are more than two, a majority of the Administrative Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 5.7.

SECTION 5.9 Effect of Vacancies.

         The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to dissolve, terminate or annul the Trust. Whenever a vacancy in the
number of Administrative Trustees shall occur, until such vacancy is filled by
the appointment of an Administrative Trustee in accordance with Section 5.7, the
Administrative Trustees in office, regardless of their number, shall have all
the powers granted to the Administrative Trustees and shall discharge all the
duties imposed upon the Administrative Trustees by this Declaration.


                                      -27-

<PAGE>

SECTION 5.10 Meetings.

         If there is more than one Administrative Trustee, meetings of the
Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee. Regular meetings of the Administrative Trustees may be
held at a time and place fixed by resolution of the Administrative Trustees.
Notice of any in-person meetings of the Administrative Trustees shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 24 hours before such meeting. Notice of
any telephonic meetings of the Administrative Trustees or any committee thereof
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of an Administrative Trustee at a meeting shall constitute a waiver
of notice of such meeting except where an Administrative Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
otherwise provided in this Declaration, any action of the Administrative
Trustees may be taken at a meeting by vote of a majority of the Administrative
Trustees present (whether in person or by telephone) and eligible to vote with
respect to such matter, provided that a Quorum is present, or without a meeting
by the unanimous written consent of the Administrative Trustees. In the event
there is only one Administrative Trustee, any and all action of such
Administrative Trustee shall be evidenced by a written consent of such
Administrative Trustee.

SECTION 5.11 Delegation of Power.

         (a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
3.6, including any registration statement or amendment thereto filed with the
Commission, or making any other governmental filing; and

         (b) the Administrative Trustees shall have power to delegate from time
to time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Administrative Trustees or otherwise as the Administrative
Trustees may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.

SECTION 5.12 Merger, Conversion, Consolidation or Succession to Business.

         Any Person into which the Property Trustee or the Delaware Trustee or
any Administrative Trustee that is not a natural person, as the case may be, may
be merged or converted or with which it may be consolidated, or any Person
resulting from any merger, conversion or consolidation to which the Property
Trustee or the Delaware Trustee or the Administrative Trustees, as the case may
be, shall be a party, or any Person succeeding to all or substantially all the
corporate trust business of the Property Trustee or the Delaware Trustee or the
Administrative Trustees, as the case may be, shall be the successor of the
Property Trustee or the Delaware Trustee or the Administrative Trustees, as the
case may be, hereunder, provided 


                                      -28-

<PAGE>

such Person shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.

                                   ARTICLE VI
                                  DISTRIBUTIONS

SECTION 6.1 Distributions.

         Holders shall receive Distributions in accordance with the applicable
terms of the relevant Holder's Securities as set forth herein and in Annex I. If
and to the extent that the Debenture Issuer makes a payment of interest
(including Compounded Interest and Additional Sums (as such terms are defined in
the Indenture)), premium and/or principal on the Debentures held by the Property
Trustee with respect to the Debentures held by the Property Trustee (the amount
of any such payment being a "Payment Amount"), the Property Trustee shall and is
directed, to the extent funds are available for that purpose, to make a
distribution (a "Distribution") of the Payment Amount to Holders.

                                  ARTICLE VII
                             ISSUANCE OF SECURITIES

SECTION 7.1 General Provisions Regarding Securities.

         (a) The Administrative Trustees shall on behalf of the Trust issue one
class of preferred securities representing undivided beneficial interests in the
assets of the Trust having such terms as are set forth in Annex I (the
"Preferred Securities") and one class of common securities representing
undivided beneficial interests in the assets of the Trust having such terms as
are set forth in Annex I (the "Common Securities"). Annex I is hereby
incorporated in and made a part of this Declaration. The Trust shall issue no
securities or other interests in the assets of the Trust other than the Trust
Securities.

         (b) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.

         (c) Upon issuance of the Securities as provided in this Declaration,
the Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable undivided beneficial interests in the assets of Trust.

         (d) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Declaration.

         (e) Holders of the Securities shall not have any preemptive or similar
rights.

         (f) At the Closing Date [and any Option Closing Time], an
Administrative Trustee, on behalf of the Trust, shall subscribe to and purchase
from the Debenture Issuer, Debentures registered in the name of the Property
Trustee on behalf of the Trust and having an aggregate principal amount equal to
the aggregate Liquidation Amount of the Preferred Securities and Common
Securities issued and sold on such date, and, in satisfaction of the purchase
price for 


                                      -29-

<PAGE>

such Debentures, the Property Trustee, on behalf of the Trust, shall deliver to
the Debenture Issuer the amount received on such date from the sale by the Trust
of the Preferred Securities and Common Securities issued on such date.

SECTION 7.2 Execution and Authentication.

         (a) The Securities shall be signed on behalf of the Trust by an
Administrative Trustee by manual or facsimile signature. In case any
Administrative Trustee of the Trust who shall have signed any of the Securities
shall cease to be such Administrative Trustee before the Securities so signed
shall be delivered by the Trust, such Securities nevertheless may be delivered
as though the person who signed such Securities had not ceased to be such
Administrative Trustee; and any Securities may be signed on behalf of the Trust
by such persons who, at the actual date of execution of such Security, shall be
the Administrative Trustees of the Trust, although at the date of the execution
and delivery of the Declaration any such person was not such an Administrative
Trustee.

         (b) One Administrative Trustee shall sign the Preferred Securities for
the Trust by manual or facsimile signature.

         A Preferred Security shall not be valid until authenticated by the
manual or facsimile signature of an authorized signatory of the Property
Trustee. The signature shall be conclusive evidence that the Preferred Security
has been authenticated under this Declaration.

         Upon a written order of the Trust signed by one Administrative Trustee,
the Property Trustee shall authenticate the Preferred Securities for original
issue. The aggregate number of Preferred Securities outstanding at any time
shall not exceed the number set forth in Annex I hereto except as provided in
Section 7.6.

         The Property Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Preferred Securities. An authenticating agent may
authenticate Preferred Securities whenever the Property Trustee may do so. Each
reference in this Declaration to authentication by the Property Trustee includes
authentication by such agent. An authenticating agent has the same rights as the
Property Trustee to deal with the Sponsor or an Affiliate.

SECTION 7.3 Form and Dating.

         The Preferred Securities and the Property Trustee's certificate of
authentication shall be substantially in the form of Exhibit A-1 and the Common
Securities shall be substantially in the form of Exhibit A-2, each of which is
hereby incorporated in and expressly made a part of this Declaration.
Certificates representing the Securities may be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Administrative Trustees, as evidenced by their execution thereof by one or
more of them. The Securities may have letters, CUSIP or other numbers, notations
or other marks of identification or designation and such legends or endorsements
required by law, stock exchange rule, agreements to which the Trust is subject,
if any, or usage (provided that any such notation, legend or endorsement is in a
form acceptable to the Trust). The Trust at the direction of the Sponsor shall
furnish any such legend not contained in Exhibit A-1 to the Property Trustee in
writing. Each Preferred Security shall be dated the date of its authentication.
The terms and provisions of the Securities set forth in Annex 


                                      -30-

<PAGE>

I and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the
terms of this Declaration and to the extent applicable, the Property Trustee and
the Sponsor, by their execution and delivery of this Declaration, expressly
agree to such terms and provisions and to be bound thereby.

         (a) Global Securities. Securities offered may be issued in the form of
one or more permanent global Securities in definitive, fully registered form
without distribution coupons with the appropriate global legends set forth in
Exhibit A-1 hereto (the "Global Preferred Securities"), which shall be deposited
on behalf of the purchasers of the Preferred Securities represented thereby with
the Property Trustee, as custodian for the Clearing Agency, and registered in
the name of the Clearing Agency or a nominee of the Clearing Agency, duly
executed by the Trust and authenticated by the Property Trustee as hereinafter
provided. The number of Preferred Securities represented by the Global Preferred
Security may from time to time be increased or decreased by adjustments made on
the records of the Property Trustee and the Clearing Agency or its nominee as
hereinafter provided.

         (b) Book-Entry Provisions. This Section 7.3(b) shall apply only to the
Global Preferred Securities.

         The Trust shall execute and the Property Trustee shall, in accordance
with this Section 7.3, authenticate and make available for delivery initially
one or more Global Preferred Securities that (i) shall be registered in the name
of Cede & Co. or other nominee of such Clearing Agency and (ii) shall be
delivered by the Trustee to such Clearing Agency or pursuant to such Clearing
Agency's written instructions or held by the Property Trustee as custodian for
the Clearing Agency.

         Members of, or participants in, the Clearing Agency ("Participants")
shall have no rights under this Declaration with respect to any Global Preferred
Security held on their behalf by the Clearing Agency or by the Property Trustee
as the custodian of the Clearing Agency or under such Global Preferred Security,
and the Clearing Agency may be treated by the Trust, the Property Trustee and
any agent of the Trust or the Property Trustee as the absolute owner of such
Global Preferred Security for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Trust, the Property Trustee or any
agent of the Trust or the Property Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Clearing Agency or
impair, as between the Clearing Agency and its Participants, the operation of
customary practices of such Clearing Agency governing the exercise of the rights
of a holder of a beneficial interest in any Global Preferred Security.

         (c) Definitive Preferred Securities. Except as provided in Section
7.9(b) or 9.2, owners of beneficial interests in a Global Preferred Security
will not be entitled to receive physical delivery of certificated Preferred
Securities. Preferred Securities not represented by a Global Preferred Security
may be issued in the form of individual certificates in definitive, fully
registered form without distribution coupons ("Definitive Preferred
Securities").

         (d) Authorized Denominations. The Preferred Securities are issuable
only in denominations of $__________ and any integral multiple thereof.


                                      -31-

<PAGE>

SECTION 7.4 Registrar and Paying Agent [and Conversion Agent].

         The Trust shall maintain in the Borough of Manhattan, The City of New
York, (i) an office or agency where Preferred Securities may be presented for
registration of transfer ("Registrar"), (ii) an office or agency where Preferred
Securities may be presented for payment ("Paying Agent") [and (iii) an office or
agency where securities may be presented for conversion or exchange (a
"Conversion Agent.")]. The Registrar shall keep a register of the Preferred
Securities and of their transfer. The Trust may appoint the Registrar, Paying
Agent [and Conversion Agent] and may appoint one or more co-registrars and one
or more additional paying agents [or conversion agents] in such other locations
as it shall determine. The term "Registrar" includes any additional registrar,
the term "Paying Agent" includes any additional paying agent [and the term
"Conversion Agent" includes any additional conversion agent.]. The Trust may
change any Paying Agent, Registrar or [Conversion Agent] without prior notice to
any Holder. The Paying Agent shall be permitted to resign as Paying Agent upon
30 days' written notice to the Property Trustee and the Sponsor. The Trust shall
notify the Property Trustee of the name and address of any Agent not a party to
this Declaration. If the Trust fails to appoint or maintain another entity as
Registrar, Paying Agent [or Conversion Agent], the Property Trustee shall act as
such. The Trust or any of its Affiliates may act as Paying Agent, Registrar [or
Conversion Agent]. The Trust shall act as Paying Agent, Registrar [and
Conversion Agent] for the Common Securities.

         The Trust initially appoints [the Property Trustee] as Registrar,
Paying Agent [and Conversion Agent] for the Preferred Securities.

         The Registrar, Paying Agent [and Conversion Agent] shall be entitled to
all of the rights, protections, immunities and indemnities afforded to the
Property Trustee hereunder.

SECTION 7.5 Paying Agent to Hold Money in Trust.

         The Trust shall require each Paying Agent other than the Property
Trustee to agree in writing that the Paying Agent will hold in trust for the
benefit of Holders or the Property Trustee all money held by the Paying Agent
for the payment of Liquidation Amounts or Distributions, and will notify the
Property Trustee if there are insufficient funds for such purpose. While any
such insufficiency continues, the Property Trustee may require a Paying Agent to
pay all money held by it to the Property Trustee. The Trust at any time may
require a Paying Agent to pay all money held by it to the Property Trustee and
to account for any money disbursed by it. Upon payment over to the Property
Trustee, the Paying Agent (if other than the Trust or an Affiliate of the Trust)
shall have no further liability for the money. If the Trust or the Sponsor or an
Affiliate of the Trust or the Sponsor acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.

SECTION 7.6 Replacement Securities.

         If a Holder claims that a Security owned by it has been lost, destroyed
or wrongfully taken or if such Security is mutilated and is surrendered to the
Trust or in the case of the Preferred Securities to the Property Trustee, the
Trust shall issue and the Property Trustee shall, upon written order of the
Trust, authenticate a replacement Security if the Property Trustee's and 


                                      -32-

<PAGE>

the Trust's requirements, as the case may be, are met. An indemnity bond must be
provided by the Holder which, in the judgment of the Property Trustee, is
sufficient to protect the Trustees, the Sponsor, the Trust or any authenticating
agent from any loss which any of them may suffer if a Security is replaced. The
Trust may charge such Holder for its expenses in replacing a Security. Every
replacement Security issued and authenticated in accordance with this Section
7.6 shall represent an undivided beneficial interest in the assets of the Trust.

SECTION 7.7 Outstanding Preferred Securities.

         The Preferred Securities outstanding at any time are all the Preferred
Securities authenticated by the Property Trustee except for those canceled by
it, those delivered to it for cancellation, and those described in this Section
as not outstanding.

         If a Preferred Security is replaced, paid or purchased pursuant to
Section 7.6 hereof, it ceases to be outstanding unless the Property Trustee
receives proof satisfactory to it that the replaced, paid or purchased Preferred
Security is held by a bona fide purchaser.

         If Preferred Securities are considered paid in accordance with the
terms of this Declaration, they cease to be outstanding and Distributions on
them shall cease to accumulate.

         A Preferred Security does not cease to be outstanding because one of
the Trust, the Sponsor or an Affiliate of the Sponsor holds the Security.

SECTION 7.8 Preferred Securities in Treasury.

         In determining whether the Holders of the required amount of Securities
have concurred in any direction, waiver or consent, Preferred Securities owned
by the Trust, the Sponsor or an Affiliate of the Sponsor, as the case may be,
shall be disregarded and deemed not to be outstanding, except that for the
purposes of determining whether the Property Trustee shall be fully protected in
relying on any such direction, waiver or consent, only Securities which a
Responsible Officer of the Property Trustee actually knows are so owned shall be
so disregarded.

SECTION 7.9 Temporary Securities.

         (a) Until Definitive Preferred Securities are ready for delivery, the
Trust may prepare and, in the case of the Preferred Securities, the Property
Trustee shall authenticate temporary Securities. Temporary Securities shall be
substantially in the form of Definitive Preferred Securities but may have
variations that the Trust considers appropriate for temporary Securities.
Without unreasonable delay, the Trust shall prepare and, in the case of the
Preferred Securities, the Property Trustee shall authenticate Definitive
Preferred Securities in exchange for temporary Securities.

         (b) A Global Preferred Security deposited with the Clearing Agency or
with the Property Trustee as custodian for the Clearing Agency pursuant to
Section 7.3 shall be transferred to the beneficial owners thereof in the form of
Definitive Preferred Securities only if such transfer complies with Section 9.2
and (i) the Clearing Agency notifies the Sponsor that it is unwilling or unable
to continue as Clearing Agency for such Global Preferred Security or if at any
time such Clearing Agency ceases to be a "clearing agency" registered under the
Exchange 


                                      -33-

<PAGE>

Act and a clearing agency is not appointed by the Sponsor within 90 days of such
notice, or (ii) the Administrative Trustees, on behalf of the Trust, at their
sole discretion elect to cause the issuance of Definitive Preferred Securities.

         (c) Any Global Preferred Security that is transferable to the
beneficial owners thereof in the form of Definitive Preferred Securities
pursuant to this Section 7.9 shall be surrendered by the Clearing Agency to the
Property Trustee, to be so transferred, in whole or from time to time in part,
without charge, and the Administrative Trustee shall prepare and the Property
Trustee shall authenticate and make available for delivery, upon such transfer
of each portion of such Global Preferred Security, an equal aggregate
Liquidation Amount of Securities of authorized denominations in the form of
certificated Preferred Securities. Any portion of a Global Preferred Security
transferred pursuant to this Section shall be registered in such names as the
Clearing Agency shall direct.

         (d) Subject to the provisions of Section 7.9(c), the Holder of a Global
Preferred Security may grant proxies and otherwise authorize any Person,
including Participants and Persons that may hold interests through Participants,
to take any action which such Holder is entitled to take under this Declaration
or the Securities.

         (e) In the event of the occurrence of any of the events specified in
Section 7.9(b), the Administrative Trustees on behalf of the Trust will promptly
make available to the Property Trustee a reasonable supply of certificated
Preferred Securities in fully registered form without distribution coupons.

SECTION 7.10 Exchange.

         (a) If at any time the Sponsor or any of its Affiliates (in either
case, a "Sponsor Affiliated Holder") is the Holder of any Preferred Securities,
such Sponsor Affiliated Holder shall have the right to deliver to the Property
Trustee all or such portion of its Preferred Securities as its elects and
receive, in exchange therefore, a like amount of Debentures. Such election (i)
shall be exercisable effective on any date of Distribution by such Sponsor
Affiliated Holder delivering to the Property Trustee a written notice of such
election specifying the Liquidation Amount of Preferred Securities with respect
to which such election is being made and the date of Distribution on which such
exchange shall occur, which Distribution date shall be not fewer than ten
Business Days after the date of receipt by the Property Trustee of such election
notice and (ii) shall be conditioned upon such Sponsor Affiliated Holder having
delivered or caused to be delivered to the Property Trustee or its designee the
Preferred Securities which are the subject of such election by 10:00 A.M. New
York time, on the date of Distribution on which such exchange is to occur. After
the exchange, such Preferred Securities will be canceled and will no longer be
deemed to be outstanding and all rights of the Sponsor or its Affiliates with
respect to such Preferred Securities will cease.

         (b) In the case of an exchange described in Section 7.10(a), the Trust
will, on the date of such exchange, exchange Debentures having a principal
amount equal to a proportional amount of the aggregate Liquidation Amount of the
outstanding Common Securities, based on the ratio of the aggregate Liquidation
Amount of the Preferred Securities exchanged pursuant to Section 7.10(a) divided
by the aggregate Liquidation Amount of the Preferred Securities 


                                      -34-

<PAGE>

outstanding immediately prior to such exchange, for such proportional amount of
Common Securities held by the Sponsor (which contemporaneously shall be canceled
and no longer be deemed to be outstanding); provided, that the Sponsor delivers
or caused to be delivered to the Property Trustee or its designee the required
amount of Common Securities to be exchanged by 10:00 A.M. New York time, on the
date of Distribution on which such exchange is to occur.

SECTION 7.11 Cancellation.

         The Trust at any time may deliver Preferred Securities to the Property
Trustee for cancellation. The Registrar and the Paying Agent shall forward to
the Property Trustee any Preferred Securities surrendered to them for
registration of transfer, redemption, exchange or payment. The Property Trustee
shall promptly cancel all Preferred Securities surrendered for registration of
transfer, redemption, exchange, payment, replacement or cancellation and shall
dispose of canceled Preferred Securities in accordance with its customary
procedures unless the Trust otherwise directs. The Trust may not issue new
Preferred Securities to replace Preferred Securities that it has paid or that
have been delivered to the Property Trustee for cancellation or that any Holder
has exchanged.

SECTION 7.12 CUSIP Numbers.

         The Trust in issuing the Preferred Securities may use "CUSIP" numbers
(if then generally in use), and, if so, the Property Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders of Preferred
Securities; provided that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Preferred
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 Preferred
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Sponsor will promptly notify the Property Trustee
of any change in the CUSIP numbers.

                                  ARTICLE VIII
                              DISSOLUTION OF TRUST

SECTION 8.1 Dissolution of Trust.

         (a) The Trust shall automatically dissolve:

                  (i) upon the bankruptcy of the Sponsor;

                  (ii) upon the filing of a certificate of dissolution or
liquidation or its equivalent with respect to the Sponsor; or the revocation of
the Sponsor's charter and the expiration of 90 days after the date of revocation
without a reinstatement thereof;

                  (iii) upon receipt of a written direction from the Sponsor
(which shall be at its sole discretion) while the Debentures are outstanding
requiring the Trustees to dissolve the Trust and, after satisfaction of the
liabilities of the Trust to the creditors of the Trust, to distribute a Like
Amount of the Debentures to Holders of the Securities pursuant to the terms
thereof;


                                      -35-

<PAGE>

                  (iv) upon the entry of a decree of judicial dissolution of the
Trust by a court of competent jurisdiction;

                  (v) when all of the Securities shall have been called for
redemption and the amounts necessary for redemption thereof shall have been paid
to the Holders in accordance with the terms of the Securities;

                  (vi) the expiration of the term of the Trust provided in
Section 3.14; [or]

                  (vii) [upon the distribution of the Sponsor's [other
securities] to all Holders of Securities upon a conversion or exchange of all
such Securities in accordance with the terms thereof].

         (b) As soon as is practicable after the occurrence of an event referred
to in Section 8.1(a), after the winding up of the affairs of the Trust is
completed, the Administrative Trustees shall execute and file a certificate of
cancellation with the Secretary of State of the State of Delaware.

         (c) The provisions of Section 3.9 and Article X shall survive the
termination of the Trust.

                                   ARTICLE IX
                              TRANSFER OF INTERESTS

SECTION 9.1 Transfer of Securities.

         (a) Securities may be transferred, in whole or in part, only in
accordance with the terms and conditions set forth in this Declaration and in
the terms of the Securities. To the fullest extent permitted by law, any
transfer or purported transfer of any Security not made in accordance with this
Declaration shall be null and void.

         (b) The Administrative Trustees shall provide for the registration of
Preferred Securities and of the transfer of Preferred Securities, which will be
effected without charge but only upon payment (with such indemnity as the
Administrative Trustees may require) in respect of any tax or other governmental
charges that may be imposed in relation to it. Upon surrender for registration
of transfer of any Preferred Securities, the Administrative Trustees shall cause
one or more new Preferred Securities to be issued in the name of the designated
transferee or transferees. Every Preferred Security surrendered for registration
of transfer shall be accompanied by a written instrument of transfer in form
satisfactory to the Administrative Trustees and the Registrar duly executed by
the Holder or such Holder's attorney duly authorized in writing. Each Preferred
Security surrendered for registration of transfer shall be canceled by the
Property Trustee. A transferee of a Preferred Security shall be entitled to the
rights and subject to the obligations of a Holder hereunder upon the receipt by
such transferee of a Preferred Security. By acceptance of a Preferred Security,
each transferee shall be deemed to have agreed to be bound by this Declaration.

         (c) For so long as the Trust Securities remain outstanding, the Sponsor
agrees (i) to directly or indirectly maintain 100% direct or indirect ownership
of the Common Securities; 


                                      -36-

<PAGE>

provided, however, that any permitted successor of the Sponsor under the
Indenture may succeed to the Sponsor's ownership of such Common Securities, (ii)
to use its reasonable efforts to cause the Trust (x) to remain a business trust,
except in connection with the distribution of Debentures to the Holders of Trust
Securities in dissolution and liquidation of the Trust, the redemption of all of
the Trust Securities, or certain mergers, conversions, consolidations or
amalgamations, each as permitted by this Declaration, and (y) to otherwise
continue to be classified as a grantor trust for United States federal income
tax purposes and (iii) to use its reasonable efforts to cause each Holder of
Trust Securities to be treated as owning an undivided beneficial interest in the
Debentures.

SECTION 9.2 Transfer Procedures and Restrictions.

         (a) Transfer and Exchange of Definitive Preferred Securities. When
Definitive Preferred Securities are presented to the Registrar or co-Registrar
(i) to register the transfer of such Definitive Preferred Securities, or (ii) to
exchange such Definitive Preferred Securities which became mutilated, destroyed,
defaced, stolen or lost for an equal number of Definitive Preferred Securities,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
provided, however, that the Definitive Preferred Securities surrendered for
registration of transfer or exchange shall be duly endorsed or accompanied by a
written instrument of transfer in form reasonably satisfactory to the
Administrative Trustees and the Registrar or co-registrar, duly executed by the
Holder thereof or his attorney duly authorized in writing.

         (b) Restrictions on Transfer of a Definitive Preferred Security for a
Beneficial Interest in a Global Preferred Security. A Definitive Preferred
Security may not be exchanged for a beneficial interest in a Global Preferred
Security except upon satisfaction of the requirements set forth below. Upon
receipt by the Property Trustee of a Definitive Preferred Security, duly
endorsed or accompanied by appropriate instruments of transfer, in form
satisfactory to the Property Trustee and the Administrative Trustees, together
with written instructions directing the Property Trustee to make, or to direct
the Clearing Agency to make, an adjustment on its books and records with respect
to the appropriate Global Preferred Security to reflect an increase in the
number of the Preferred Securities represented by such Global Preferred
Security, then the Property Trustee shall cancel such Definitive Preferred
Security and cause, or direct the Clearing Agency to cause, the aggregate number
of Preferred Securities represented by the appropriate Global Preferred Security
to be increased accordingly. If no Global Preferred Securities are then
outstanding, the Trust shall issue and the Property Trustee shall authenticate,
upon written order of any Administrative Trustee, an appropriate number of
Preferred Securities in global form.

         (c) Transfer and Exchange of Global Preferred Securities. The transfer
and exchange of Global Preferred Securities or beneficial interests therein
shall be effected through the Clearing Agency, in accordance with this
Declaration (including applicable restrictions on transfer set forth herein, if
any) and the procedures of the Clearing Agency therefor. Notwithstanding any
other provisions of this Declaration (other than the provisions set forth in
Section 7.9(b)), a Global Preferred Security may not be transferred as a whole
except by the Clearing Agency to a nominee of the Clearing Agency or another
nominee of the Clearing Agency or by the Clearing Agency or any such nominee to
a successor Clearing Agency or a nominee of such successor Clearing Agency.


                                      -37-

<PAGE>

         (d) Cancellation or Adjustment of Global Preferred Security. At such
time as all beneficial interests in a Global Preferred Security have either been
exchanged for Definitive Preferred Securities to the extent permitted by this
Declaration or redeemed, repurchased or canceled in accordance with the terms of
this Declaration, such Global Preferred Security shall be canceled by the
Property Trustee. At any time prior to such cancellation, if any beneficial
interest in a Global Preferred Security is exchanged for Definitive Preferred
Securities, Preferred Securities represented by such Global Preferred Security
shall be reduced and an adjustment shall be made on the books and records of the
Clearing Agency and the Registrar, to reflect such reduction.

         (e) Issuance of Definitive Preferred Securities in Exchange for Global
Securities. Definitive Preferred Securities will be issued in exchange for
Global Securities only as provided in Sections 7.9(b) and (c).

SECTION 9.3 Deemed Security Holders.

         The Trustees may treat the Person in whose name any Security shall be
registered on the books and records of the Trust as the sole owner of such
Security for purposes of receiving Distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Security on the part of any Person, whether
or not the Trust shall have actual or other notice thereof.

SECTION 9.4 Book Entry Interests.

         Global Preferred Securities shall initially be registered on the books
and records of the Trust in the name of Cede & Co., the nominee of the Clearing
Agency, and no Preferred Security Beneficial Owner will receive a definitive
Preferred Security Certificate representing such Preferred Security Beneficial
Owner's interests in such Global Preferred Securities, except as provided in
Section 9.2 and Section 7.9. Unless and until definitive, fully registered
Preferred Securities certificates have been issued to the Preferred Security
Beneficial Owners pursuant to Section 9.2 and Section 7.9:

         (a) the provisions of this Section 9.4 shall be in full force and
effect;

         (b) the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Declaration (including the payment of
Distributions on the Global Preferred Securities and receiving approvals, votes
or consents hereunder) as the Holder of the Preferred Securities and the sole
holder of the certificate or certificates representing Global Preferred
Securities and shall have no obligation to the Preferred Security Beneficial
Owners;

         (c) to the extent that the provisions of this Section 9.4 conflict with
any other provisions of this Declaration, the provisions of this Section 9.4
shall control; and

         (d) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Security Beneficial
Owners and the Clearing Agency and/or the Participants and the Clearing Agency
shall receive and transmit payments of Distributions on the Global Preferred
Securities to such Participants, provided, that solely for the purposes of


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<PAGE>

determining whether the Holders of the requisite amount of Preferred Securities
have voted on any matter provided for in this Declaration, so long as Definitive
Preferred Security certificates have not been issued, the Trustees may
conclusively rely on, and shall be protected in relying on, any written
instrument (including a proxy) delivered to the Trustees by the Clearing Agency
setting forth the Preferred Security Beneficial Owners' votes or assigning the
right to vote on any matter to any other Persons either in whole or in part. DTC
will make book entry transfers among the Participants.

SECTION 9.5 Notices to Clearing Agency.

         Whenever a notice or other communication to the Preferred Security
Holders is required under this Declaration, the Trustees shall give all such
notices and communications specified herein to be given to the Holders of Global
Preferred Securities to the Clearing Agency, and shall have no notice
obligations to the Preferred Security Beneficial Owners.

SECTION 9.6 Appointment of Successor Clearing Agency.

         If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Preferred Securities, the Administrative Trustees
may, in their sole discretion, appoint a successor Clearing Agency with respect
to such Preferred Securities.

                                   ARTICLE X
                           LIMITATION OF LIABILITY OF
                    HOLDERS OF SECURITIES, TRUSTEES OR OTHERS

SECTION 10.1 Liability.

         (a) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:

                  (i) personally liable for the return of any portion of the
capital contributions (or any return thereon) of the Holders which shall be made
solely from assets of the Trust; or

                  (ii) required to pay to the Trust or to any Holder any deficit
upon dissolution or termination of the Trust or otherwise.

         (b) The Debenture Issuer shall be liable for all of the debts and
obligations of the Trust (other than in respect of the payment of principal,
interest and premium, if any, on the Securities) to the extent not satisfied out
of the Trust's assets.

         (c) Pursuant to Section 3803(a) of the Business Trust Act, the Holders
shall be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.


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<PAGE>

SECTION 10.2 Exculpation.

         (a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Trust or any Covered Person for any loss, damage
or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's gross negligence (or, in the
case of the Property Trustee, negligence) or willful misconduct with respect to
such acts or omissions.

         (b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders might properly be paid.

SECTION 10.3 Fiduciary Duty.

         (a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Property Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.

         (b) Unless otherwise expressly provided herein:

                  (i) whenever a conflict of interest exists or arises between
any Covered Person and any Indemnified Person; or

                  (ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person shall act in
a manner that is, or provides terms that are, fair and reasonable to the Trust
or any Holder of Securities, the Indemnified Person shall resolve such conflict
of interest, take such action or provide such terms, considering in each case
the relative interest of each party (including its own interest) to such
conflict, agreement, transaction or situation and the benefits and burdens
relating to such interests, any customary or accepted industry practices, and
any applicable generally accepted accounting practices or principles. In the
absence of bad faith by the Indemnified Person, the resolution, action or term
so made, taken or provided by the Indemnified Person shall not constitute a
breach of this Declaration or any other agreement contemplated herein or of any
duty or obligation of the Indemnified Person at law or in equity or otherwise.


                                      -40-

<PAGE>

         (c) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:

                  (i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and factors
as it desires, including its own interests, and shall have no duty or obligation
to give any consideration to any interest of or factors affecting the Trust or
any other Person; or

                  (ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration.

SECTION 10.4 Indemnification.

         (a) (i) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Trust) by reason of the fact
that he is or was a Company Indemnified Person against expenses (including
attorneys' fees and expenses), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding except that no Company Indemnified Person shall be indemnified for
his own gross negligence or willful misconduct. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the Company Indemnified Person acted with gross negligence or willful
misconduct.

                  (ii) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Trust to procure a judgment in its favor by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees and expenses) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit except that no Company Indemnified Party shall be indemnified for such
Company Indemnified Party's own gross negligence or willful misconduct and
except that no such indemnification shall be made in respect of any claim, issue
or matter as to which such Company Indemnified Person shall have been adjudged
to be liable to the Trust unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such Person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or such
other court shall deem proper.

                  (iii) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an action without
prejudice or the settlement of an action without admission of liability) in
defense of any action, suit or proceeding referred to in paragraphs (i) and (ii)
of this Section 10.4(a), or in defense of any claim, issue or matter therein, he
shall be indemnified, to the full extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.


                                      -41-

<PAGE>

                  (iv) Any indemnification under paragraphs (i) and (ii) of this
Section 10.4(a) (unless ordered by a court) shall be made by the Debenture
Issuer only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the circumstances
because he has met the applicable standard of conduct set forth in paragraphs
(i) and (ii). Such determination shall be made (1) by the Administrative
Trustees by a majority vote of a Quorum consisting of such Administrative
Trustees who were not parties to such action, suit or proceeding, (2) if such a
Quorum is not obtainable, or, even if obtainable, if a Quorum of disinterested
Administrative Trustees so directs, by independent legal counsel in a written
opinion, or (3) by the Common Security Holder of the Trust.

                  (v) Expenses (including attorneys' fees and expenses) incurred
by a Company Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in paragraphs (i) and
(ii) of this Section 10.4(a) shall, to the fullest extent permitted by law, be
paid by the Debenture Issuer in advance of the final disposition of such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
Company Indemnified Person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Debenture Issuer as
authorized in this Section 10.4(a). Notwithstanding the foregoing, no advance
shall be made by the Debenture Issuer if a determination is reasonably and
promptly made (i) by the Administrative Trustees by a majority vote of a Quorum
of disinterested Administrative Trustees, (ii) if such a Quorum is not
obtainable, or, even if obtainable, if a Quorum of disinterested Administrative
Trustees so directs, by independent legal counsel in a written opinion or (iii)
the Common Security Holder of the Trust, that, based upon the facts known to the
Administrative Trustees, counsel or the Common Security Holder at the time such
determination is made, such Company Indemnified Person acted with gross
negligence or willful misconduct. In no event shall any advance be made in
instances where the Administrative Trustees, independent legal counsel or Common
Security Holder reasonably determine that such Person deliberately breached his
duty to the Trust or its Common or Preferred Security Holders.

                  (vi) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other paragraphs of this Section 10.4(a) shall
not be deemed exclusive of any other rights to which those seeking
indemnification and advancement of expenses may be entitled under any agreement,
vote of stockholders or disinterested directors of the Debenture Issuer or
Preferred Security Holders of the Trust or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office. All rights to indemnification under this Section 10.4(a) shall be deemed
to be provided by a contract between the Debenture Issuer and each Company
Indemnified Person who serves in such capacity at any time while this Section
10.4(a) is in effect. Any repeal or modification of this Section 10.4(a) shall
not affect any rights or obligations then existing.

                  (vii) The Debenture Issuer or the Trust may purchase and
maintain insurance on behalf of any Person who is or was a Company Indemnified
Person against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
Debenture Issuer would have the power to indemnify him against such liability
under the provisions of this Section 10.4(a).


                                      -42-

<PAGE>

                  (viii) For purposes of this Section 10.4(a), references to
"the Trust" shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in a
consolidation or merger, so that any person who is or was a director, trustee,
officer or employee of such constituent entity, or is or was serving at the
request of such constituent entity as a director, trustee, officer, employee or
agent of another entity, shall stand in the same position under the provisions
of this Section 10.4(a) with respect to the resulting or surviving entity as he
would have with respect to such constituent entity if its separate existence had
continued.

                  (ix) The indemnification and advancement of expenses provided
by, or granted pursuant to, this Section 10.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a Company Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a person.

         (b) The Debenture Issuer agrees to indemnify the (i) Property Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee or the
Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Property Trustee or the Delaware Trustee (each of the Persons in (i) through
(iv) being referred to as a "Fiduciary Indemnified Person") for, and to hold
each Fiduciary Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense including taxes (other than taxes based on the income
of such Fiduciary Indemnified Person) incurred without gross negligence (or, in
the case of the Property Trustee, negligence) or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against or investigating
any claim or liability in connection with the exercise or performance of any of
its powers or duties hereunder. The provisions of this Section 10.4(b) shall
survive the resignation or removal of the Property Trustee or the Delaware
Trustee and the satisfaction and discharge of this Declaration.

SECTION 10.5 Outside Businesses.

         Any Covered Person, the Sponsor, the Delaware Trustee and the Property
Trustee (subject to Section 5.3(c)) may engage in or possess an interest in
other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Trust, and the Trust and
the Holders shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Trust, shall
not be deemed wrongful or improper. No Covered Person, the Sponsor, the Delaware
Trustee, or the Property Trustee shall be obligated to present any particular
investment or other opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken by the Trust, and any
Covered Person, the Sponsor, the Delaware Trustee and the Property Trustee shall
have the right to take for its own account (individually or as a partner or
fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Covered Person, the Delaware Trustee and the Property Trustee
may engage or be interested in any financial or other transaction with the
Sponsor or any Affiliate of the Sponsor, or may act as depositary for, trustee
or agent for, or act on any committee or body of holders of, securities or other
obligations of the Sponsor or its Affiliates.


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<PAGE>

SECTION 10.6 Compensation; Fees.

         The Debenture Issuer agrees:

         (a) to pay to the Trustees from time to time such compensation for all
services rendered by them hereunder as the parties shall agree in writing from
time to time (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust); and

         (b) except as otherwise expressly provided herein, to reimburse the
Trustees upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustees in accordance with any provision of this
Declaration (including the reasonable compensation and the expenses and
disbursements of their respective agents and counsel), except any such expense,
disbursement or advance as may be attributable to its gross negligence (or, in
the case of the property trustee, negligence) or willful misconduct.

         The provisions of this Section 10.6 shall survive the dissolution of
the Trust and the termination of this Declaration and the removal or resignation
of any Trustee.

         No Trustee may claim any lien or charge on any property of the Trust as
a result of any amount due pursuant to this Section 10.6.

                                   ARTICLE XI
                                   ACCOUNTING

SECTION 11.1 Fiscal Year.

         The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year, or such other year as is required by the Code.

SECTION 11.2 Certain Accounting Matters.

         (a) At all times during the existence of the Trust, the Administrative
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail, each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The books of account and the records of the Trust shall be
examined by and reported upon as of the end of each Fiscal Year of the Trust by
a firm of independent certified public accountants selected by the
Administrative Trustees.

         (b) The Administrative Trustees shall cause to be duly prepared and
delivered to each of the Holders, any annual United States federal income tax
information statement, required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Administrative Trustees shall endeavor to
deliver all such information statements within 30 days after the end of each
Fiscal Year of the Trust.


                                      -44-

<PAGE>

         (c) The Administrative Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Administrative Trustees on behalf of the Trust with any state or
local taxing authority.

SECTION 11.3 Banking.

         The Trust may maintain one or more bank accounts in the name and for
the sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Property Trustee shall be made directly to
the Property Trustee Account and no other funds of the Trust shall be deposited
in the Property Trustee Account. The sole signatories for such accounts shall be
designated by the Administrative Trustees; provided, however, that the Property
Trustee shall designate the signatories for the Property Trustee Account.

SECTION 11.4 Withholding.

         The Trust and the Administrative Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably be
requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Administrative Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to Distributions or allocations to any Holder, the amount withheld shall
be deemed to be a Distribution in the amount of the withholding to the Holder.
In the event of any claimed over withholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual Distributions made, the Trust may reduce
subsequent Distributions by the amount of such withholding.

                                  ARTICLE XII
                             AMENDMENTS AND MEETINGS

SECTION 12.1 Amendments.

         (a) Except as otherwise provided in this Declaration (including Section
8 of Annex I hereto) or by any applicable terms of the Securities, this
Declaration may only be amended by a written instrument approved and executed by
the Administrative Trustees (or if there are more than two Administrative
Trustees a majority of the Administrative Trustees); and

                  (i) if the amendment affects the rights, powers, duties,
obligations or immunities of the Property Trustee, also by the Property Trustee;
and

                  (ii) if the amendment affects the rights, powers, duties,
obligations or immunities of the Delaware Trustee, also by the Delaware Trustee.


                                      -45-

<PAGE>

                  (iii) No amendment shall be made, and any such purported
amendment shall be void and ineffective unless the Property Trustee shall have
first received: (A) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities); and (B) an Opinion of
Counsel (who may be counsel to the Sponsor or the Trust) that such amendment is
permitted by, and conforms to, the terms of this Declaration (including the
terms of the Securities) and that all conditions precedent, if any, in this
Declaration to the execution and delivery of such amendment have been satisfied.

         (b) At such time after the Trust has issued any Securities that remain
outstanding, any amendment that would adversely affect the rights, privileges or
preferences of any Holder may be effected only with such additional requirements
as may be set forth in the terms of such Securities.

         (c) This Section 12.1 shall not be amended without the consent of all
of the Holders.

         (d) Article Four shall not be amended without the consent of the
Holders of a Majority in Liquidation Amount of the Common Securities.

         (e) The rights of the Holders of the Common Securities under Article
Five to increase or decrease the number of, and appoint and remove Trustees
shall not be amended without the consent of the Holders of a Majority in
Liquidation Amount of the Common Securities.

         (f) Notwithstanding Section 12.1(c), this Declaration may be amended
without the consent of the Holders to:

                  (i) cure any ambiguity, correct or supplement any provision in
this Declaration that may be inconsistent with any other provision of this
Declaration or to make any other provisions with respect to matters or questions
arising under this Declaration which shall not be inconsistent with the other
provisions of the Declaration;

                  (ii) modify, eliminate or add to any provisions of the
Declaration to such extent as shall be necessary to ensure that the Trust will
be classified for United States federal income tax purposes as a grantor trust
at all times that any Securities are outstanding or to ensure that the Trust
will not be required to register as an Investment Company under the Investment
Company Act;

                  (iii) evidence, pursuant to Section 5.7 hereof, the acceptance
of the appointment of a successor Trustee or to fill a vacancy created by an
increase in the number of Administrative Trustees; or

                  (iv) add to the covenants, restrictions or obligations of the
Sponsor;

provided, however, that in the case of clauses (i) or (ii) above, such action
shall not adversely affect in any material respect the interests of the Holders,
and any such amendments of this Declaration shall become effective when notice
thereof is given to the Holders.


                                      -46-

<PAGE>

SECTION 12.2 Meetings of the Holders; Action by Written Consent.

         (a) Meetings of the Holders of any class of Securities may be called at
any time by the Administrative Trustees (or as provided in the terms of the
Securities) to consider and act on any matter on which Holders of such class of
Securities are entitled to act under the terms of this Declaration, the terms of
the Securities or the rules of any stock exchange on which the Preferred
Securities are listed or admitted for trading. The Administrative Trustees shall
call a meeting of the Holders of such class if directed to do so by the Holders
of at least 25% in Liquidation Amount of such class of Securities. Such
direction shall be given by delivering to the Administrative Trustees one or
more notices in writing stating that the signing Holders wish to call a meeting
and indicating the general or specific purpose for which the meeting is to be
called. Any Holders calling a meeting shall specify in writing the Security
Certificates held by the Holders exercising the right to call a meeting and only
those Securities specified shall be counted for purposes of determining whether
the required percentage set forth in the second sentence of this paragraph has
been met.

         (b) Except to the extent otherwise provided in the terms of the
Securities, the following provisions shall apply to meetings of Holders:

                  (i) notice of any such meeting shall be given to all the
Holders having a right to vote thereat at least seven days and not more than 60
days before the date of such meeting. Whenever a vote, consent or approval of
the Holders is permitted or required under this Declaration or the rules of any
stock exchange on which the Preferred Securities are listed or admitted for
trading, such vote, consent or approval may be given at a meeting of the
Holders. Any action that may be taken at a meeting of the Holders may be taken
without a meeting and without prior notice if a consent in writing setting forth
the action so taken is signed by the Holders owning not less than the minimum
amount of Securities in Liquidation Amount that would be necessary to authorize
or take such action at a meeting at which all Holders having a right to vote
thereon were present and voting. Prompt notice of the taking of action without a
meeting shall be given to the Holders entitled to vote who have not consented in
writing. The Administrative Trustees may specify that any written ballot
submitted to the Security Holder for the purpose of taking any action without a
meeting shall be returned to the Trust within the time specified by the
Administrative Trustees;

                  (ii) each Holder may authorize any Person to act for it by
proxy on all matters in which a Holder is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting. No proxy
shall be valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Holder executing it. Except as otherwise provided herein, all matters
relating to the giving, voting or validity of proxies shall be governed by the
General Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Trust were a Delaware corporation
and the Holders were stockholders of a Delaware corporation;

                  (iii) each meeting of the Holders shall be conducted by the
Administrative Trustees or by such other Person that the Administrative Trustees
may designate; and

                  (iv) unless the Business Trust Act, this Declaration, the
terms of the Securities, the Trust Indenture Act or the listing rules of any
stock exchange on which the Preferred Securities are then listed or trading,
otherwise provides, the Administrative Trustees, in 


                                      -47-

<PAGE>

their sole discretion, shall establish all other provisions relating to meetings
of Holders, including notice of the time, place or purpose of any meeting at
which any matter is to be voted on by any Holders, waiver of any such notice,
action by consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with respect to
the exercise of any such right to vote.

                                  ARTICLE XIII
                       REPRESENTATIONS OF PROPERTY TRUSTEE
                              AND DELAWARE TRUSTEE

SECTION 13.1 Representations and Warranties of Property Trustee.

         The Trustee that acts as initial Property Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Property Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustee that:

         (a) The Property Trustee is a Delaware banking corporation, a national
banking association or a bank or trust company organized under the laws of any
State of the United States or the District of Columbia, in any case with trust
powers and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, this Declaration;

         (b) The execution, delivery and performance by the Property Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee. This Declaration has been duly executed and
delivered by the Property Trustee and constitutes a legal, valid and binding
obligation of the Property Trustee, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, reorganization, moratorium,
insolvency, and other similar laws affecting creditors' rights generally and to
general principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding in equity
or at law);

         (c) The execution, delivery and performance of this Declaration by the
Property Trustee does not conflict with or constitute a breach of the charter or
by-laws of the Property Trustee;

         (d) No consent, approval or authorization of, or registration with or
notice to, any applicable state or federal banking authority is required for the
execution, delivery or performance by the Property Trustee of this Declaration;
and

         (e) The Property Trustee satisfies the requirements set forth in
Section 5.3(a).

SECTION 13.2 Representations and Warranties of Delaware Trustee.

         The Trustee that acts as initial Delaware Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Delaware Trustee represents and warrants to the Trust and the
Sponsor at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee that:


                                      -48-

<PAGE>

         (a) The Delaware Trustee is a national banking association, duly
organized, validly existing and in good standing under the federal laws of the
United States, with power and authority to execute and deliver, and to carry out
and perform its obligations under the terms of, this Declaration;

         (b) The execution, delivery and performance by the Delaware Trustee of
this Declaration has been duly authorized by all necessary action on the part of
the Delaware Trustee. This Declaration has been duly executed and delivered by
the Delaware Trustee and constitutes a legal, valid and binding obligation of
the Delaware Trustee, enforceable against it in accordance with its terms,
subject to applicable bankruptcy, reorganization, moratorium, insolvency, and
other similar laws affecting creditors' rights generally and to general
principles of equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or at law);

         (c) No consent, approval or authorization of, or registration with or
notice to, any federal banking authority is required for the execution, delivery
or performance by the Delaware Trustee of this Declaration; and

         (d) The Delaware Trustee is a natural person who is a resident of the
State of Delaware or, if not a natural person, an entity which has its principal
place of business in the State of Delaware and is a Person that satisfies for
the Trust section 3807(a) of the Business Trust Act.

                                  ARTICLE XIV
                                  MISCELLANEOUS

SECTION 14.1 Notices.

         All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, overnight courier service or confirmed telecopy, as
follows:

         (a) if given to the Trust, in care of the Administrative Trustees at
the Trust's mailing address set forth below (or such other address as the Trust
may give notice of to the Property Trustee, the Delaware Trustee and the
Holders):

         Continental Airlines Finance Trust III
         c/o Continental Airlines, Inc.
         1600 Smith Street
         Department HQFSN
         Houston, Texas 77002
         Attention:  Senior Vice President -- Finance
         Telecopy:  (713) 324-2448

         (b) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders):


                                      -49-

<PAGE>

         [NAME, ADDRESS]
         Attention: Corporate Trust Department
         Telecopy: ________

         (c) if given to the Property Trustee, at the Property Trustee's mailing
address set forth below (or such other address as the Property Trustee may give
notice of to the Holders):

         [NAME, ADDRESS]
         Attention: Corporate Trust Department
         Telecopy: ________

         (d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder of
the Common Securities may give notice to the Property Trustee and the Trust):

         Continental Airlines, Inc.
         1600 Smith Street
         Department HQFSN
         Houston, Texas 77002
         Attention:  Senior Vice President -- Finance
         Telecopy:  (713) 324-2448

         (e) if given to any other Holder, at the address set forth on the books
and records of the Trust.

         All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

SECTION 14.2 GOVERNING LAW.

THIS DECLARATION AND THE RIGHTS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY
AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE AND ALL
RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICT OF LAWS OF THE STATE OF DELAWARE OR ANY OTHER
JURISDICTION THAT WOULD CALL FOR THE APPLICATION OF THE LAW OF ANY JURISDICTION
OTHER THAN THE STATE OF DELAWARE; PROVIDED, HOWEVER, THAT THERE SHALL NOT BE
APPLICABLE TO THE PARTIES HEREUNDER OR THIS DECLARATION ANY PROVISION OF THE
LAWS (STATUTORY OR COMMON) OF THE STATE OF DELAWARE PERTAINING TO TRUSTS THAT
RELATE TO OR REGULATE, IN A MANNER INCONSISTENT WITH THE TERMS HEREOF (A) THE
FILING WITH ANY COURT OR GOVERNMENTAL BODY OR AGENCY OF TRUSTEE ACCOUNTS OR
SCHEDULES OF TRUSTEE FEES AND CHARGES, (B) AFFIRMATIVE REQUIREMENTS TO POST
BONDS FOR TRUSTEES, OFFICERS, AGENTS OR EMPLOYEES OF A TRUST, (C) THE NECESSITY
FOR OBTAINING COURT OR OTHER GOVERNMENTAL 


                                      -50-

<PAGE>

APPROVAL CONCERNING THE ACQUISITION, HOLDING OR DISPOSITION OF REAL OR PERSONAL
PROPERTY, (D) FEES OR OTHER SUMS PAYABLE TO TRUSTEES, OFFICERS, AGENTS OR
EMPLOYEES OF A TRUST, (E) THE ALLOCATION OF RECEIPTS AND EXPENDITURES TO INCOME
OR PRINCIPAL, (F) RESTRICTIONS OR LIMITATIONS ON THE PERMISSIBLE NATURE, AMOUNT
OR CONCENTRATION OF TRUST INVESTMENTS OR REQUIREMENTS RELATING TO THE TITLING,
STORAGE OR OTHER MANNER OF HOLDING OR INVESTING TRUST ASSETS OR (G) THE
ESTABLISHMENT OF FIDUCIARY OR OTHER STANDARDS OF RESPONSIBILITY OR LIMITATIONS
ON THE ACTS OR POWERS OF TRUSTEES THAT ARE INCONSISTENT WITH THE LIMITATIONS OR
LIABILITIES OR AUTHORITIES AND POWERS OF THE TRUSTEES HEREUNDER AS SET FORTH OR
REFERENCED IN THIS TRUST AGREEMENT. SECTION 3540 OF TITLE 12 OF THE DELAWARE
CODE SHALL NOT APPLY TO THE TRUST.

SECTION 14.3 Intention of the Parties.

         It is the intention of the parties hereto that the Trust be classified
for United States federal income tax purposes as a grantor trust. The provisions
of this Declaration shall be interpreted to further this intention of the
parties.

SECTION 14.4 Headings.

         Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.

SECTION 14.5 Successors and Assigns.

         Whenever in this Declaration any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Declaration by the Sponsor
and the Trustees shall bind and inure to the benefit of their respective
successors and assigns, whether or not so expressed.

SECTION 14.6 Partial Enforceability.

         If any provision of this Declaration, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Declaration, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.

SECTION 14.7 Counterparts.

         This Declaration may contain more than one counterpart of the signature
page and this Declaration may be executed by the affixing of the signature of
each of the Trustees and the Sponsor to one of such counterpart signature pages.
All of such counterpart signature pages shall be read as though one, and they
shall have the same force and effect as though all of the signers had signed a
single signature page.


                                      -51-

<PAGE>

SECTION 14.8 No Recourse.

         The Trust's obligations hereunder are intended to be the obligations of
the Trust and no recourse for the payment of Distributions (including Additional
Distributions, if applicable) on, and the Redemption Price of, Securities, as
applicable, or for any claim upon the Securities or otherwise in respect
thereof, shall be had against any Holder of Preferred Securities or any
Affiliate of a Holder of Preferred Securities, solely by reason of such Person
being a Holder of Preferred Securities or an Affiliate of a Holder of Preferred
Securities, it being understood that the Holders of Preferred Securities, solely
by reason of being a Holder of Preferred Securities, have limited liability (in
accordance with the provisions of the Business Trust Act) for the liabilities
and obligations of the Trust. Nothing contained in this Section 14.8 shall be
construed to limit the exercise or enforcement, in accordance with the terms of
this Declaration, the Preferred Securities Guarantee, the Common Securities
Guarantee and the Indenture, of rights and remedies against the Trust or the
Sponsor.


                                      -52-

<PAGE>

         IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.


                                  ___________, as Administrative Trustee


                                  ______________________________________________
                                  
                                  ___________________, as Administrative Trustee


                                  ______________________________________________

                                  ___________________, as Administrative Trustee


                                  ________________________,
                                  
                                  AS DELAWARE TRUSTEE


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

                                  ________________________,
                                  
                                  AS PROPERTY TRUSTEE


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


                                  CONTINENTAL AIRLINES, INC.
                                  AS SPONSOR AND DEBENTURE ISSUER


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


                                      -53-

<PAGE>
                                     ANNEX I

                                    TERMS OF
                           ____% PREFERRED SECURITIES
                             ____% COMMON SECURITIES

         Pursuant to Section 7.1 of the Amended and Restated Declaration of
Trust, dated as of [__________] (as amended from time to time, the
"Declaration"), the designation, rights, privileges, restrictions, preferences
and other terms and provisions of the Preferred Securities and the Common
Securities (collectively, the "Securities") are set out below (each capitalized
term used but not defined herein has the meaning set forth in the Declaration
or, if not defined in such Declaration, as defined in the Indenture):

         1. Designation and Number.

                  (a) Preferred Securities. [______] Preferred Securities of the
Trust, with an aggregate Liquidation Amount with respect to the assets of the
Trust of [____________] dollars ($[__________]), and with a Liquidation Amount
with respect to the assets of the Trust of $____ per Security, are hereby
designated for the purposes of identification only as "[  ]% [Preferred
Securities]" (the "Preferred Securities"). The certificates evidencing the
Preferred Securities shall be substantially in the form of Exhibit A-1 to the
Declaration, with such changes and additions thereto or deletions therefrom as
may be required by ordinary usage, custom or practice or to conform to the rules
of any stock exchange or quotation system on which the Preferred Securities are
listed or quoted.

                  (b) Common Securities. [_______] Common Securities of the
Trust with an aggregate Liquidation Amount with respect to the assets of the
Trust of [________________] dollars ($[___________]) and a Liquidation Amount
with respect to the assets of the Trust of $[_____] per Security, are hereby
designated for the purposes of identification only as "[___]% Common Securities"
(the "Common Securities"). The certificates evidencing the Common Securities
shall be substantially in the form of Exhibit A-2 to the Declaration, with such
changes and additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice.

         2. Distributions.

                  (a) Distributions payable on each Security will be fixed at a
rate per annum of [  ]% (the "Coupon Rate") of the Liquidation Amount of
$[______] per Security (the "Liquidation Amount"), such rate being the rate of
interest payable on the Debentures to be held by the Property Trustee.
Distributions in arrears for more than one [semi-annual] period will bear
additional distributions thereon compounded [semi-annually] at the Coupon Rate
(to the extent permitted by applicable law). The term "Distributions", as used
herein, includes any such additional distributions unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the extent the Property
Trustee has funds on hand legally available therefor.

                  (b) Distributions on the Securities will be cumulative, will
accumulate from the most recent date to which Distributions have been paid or,
if no Distributions have been paid,


                                   Annex I-1

<PAGE>

from and including [_______], but excluding the related Distribution Date (as
defined below) or the date of redemption, and will be payable [semi-annually] in
arrears on [_______] and [________] of each year, commencing on
[__________________], except as otherwise described below. The amount of
Distributions payable for any period will be computed on the basis of a 360-day
year consisting of twelve 30-day months and for any period of less than a full
calendar month on the basis of the actual number of days elapsed in such month.
If any date on which Distributions are payable on the Securities is not a
Business Day, then payment of the Distribution payable on such date shall be
made on the next succeeding day that is a Business Day (and without any interest
or other payment in respect of any such delay), except that, if such Business
Day is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable (each date on which
Distributions are payable in accordance with the foregoing, a "Distribution
Date").

         [So long as no Event of Default (as defined in the Indenture) has
occurred and is continuing, the Debenture Issuer has the right under the
Indenture to defer the payment of interest on the Debentures by extending the
interest payment period at any time and from time to time for a period not
exceeding [___] consecutive [semi-annual] periods, including the first such
[semi-annual] period during such period (each an "Extension Period"), provided
that no Extension Period shall extend beyond the Maturity Date of the
Debentures. Distributions will be deferred during any Extension Period.
Notwithstanding such deferral, Distributions to which Holders are entitled shall
continue to accumulate additional Distributions thereon (to the extent permitted
by applicable law but not at a rate greater than the rate at which interest is
then accruing on the Debentures) at the Coupon Rate compounded [semi-annually]
from the relevant Distribution Dates during any Extension Period. Prior to the
expiration of any Extension Period, the Debenture Issuer may further defer
payments of interest by further extending such Extension Period; provided that
such Extension Period, together with all previous and further extensions, if
any, within such Extension Period, may not exceed [___] consecutive
[semi-annual] periods, including the first [semi-annual] period during such
Extension Period, or extend beyond the Maturity Date of the Debentures. Upon the
expiration of any Extension Period and the payment of all amounts then due, the
Debenture Issuer may commence a new Extension Period, subject to the above
requirements. [Payments of Distributions that have accumulated but not been paid
during any Extension Period will be payable to Holders as they appear on the
books and records of the Trust on the record date for the first scheduled
Distribution Date following the expiration of such Extension Period and prior to
the commencement of any new Extension Period.] The Debenture Issuer must give
the Property Trustee, the Administrative Trustees and the Debenture Trustee
notice of its election of any Extension Period or any extension thereof at least
one Business Day prior to the earlier of (i) the date the Distributions on the
Preferred Securities would have been payable except for the election to begin or
extend such Extension Period and (ii) the date the Administrative Trustees are
required to give notice to any securities exchange or to Holders of the
Preferred Securities of the record date or the date such Distributions are
payable, but in any event not less than one Business Day prior to such record
date. There is no limitation on the number of times that the Debenture Issuer
may elect to begin an Extension Period.]

                  (c) Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records of the Trust on the
record dates, which shall be [the


                                   Annex I-2

<PAGE>

Business Day prior to the relevant Distribution date as long as the Preferred
Securities are held in global form by a Clearing Agency, and the 15th day of the
last month in each distribution period (even if not a Business Day) if the
Preferred Securities are issued in certificated form]. Subject to any applicable
laws and regulations and the provisions of the Declaration, each such payment in
respect of the Preferred Securities will be made as follows: (i) if the
Preferred Securities are held in global form by a Clearing Agency (or its
nominee), in accordance with the procedures of the Clearing Agency; and (ii) if
the Preferred Securities are held in definitive form, by check mailed to the
address of the Holder thereof as reflected in the records of the Registrar
unless otherwise agreed by the Trust. The relevant record dates for the Common
Securities shall be the same as the record dates for the Preferred Securities.
Distributions payable on any Securities that are not punctually paid on any
Distribution Date will cease to be payable to the Holder on the relevant record
date, and such defaulted Distribution will instead be payable to the Person in
whose name such Securities are registered on the special record date or other
specified date determined in accordance with the Indenture.

                  [(d) In the event of an election by the Holder to convert its
Securities through the Conversion Agent into [securities] pursuant to the terms
of the Securities as set forth in this Annex I to the Declaration, no payment,
allowance or adjustment shall be made with respect to accumulated and unpaid
Distributions on such Securities, or be required to be made; provided that
Holders of Securities at the close of business on any record date for the
payment of Distributions will be entitled to receive the Distributions payable
on such Securities on the corresponding payment date notwithstanding the
conversion of such Securities into [securities] following such record date.]

                  (e) In the event that there is any money or other property
held by or for the Trust that is not accounted for hereunder, such property
shall be distributed Pro Rata (as defined herein) among the Holders of the
Securities.

         3. Liquidation Distribution Upon Dissolution.

         [The Debenture Issuer will have the right at any time to dissolve the
Trust and, after satisfaction of the liabilities of the Trust to creditors of
the Trust, cause the Debentures to be distributed to the Holders of the Trust
Securities in Liquidation of the Trust].

         In the event of any dissolution of the Trust pursuant to Sections
8.1(a)(i), (ii), (iv) or (vi) of the Declaration, the Trust shall be liquidated
by the Administrative Trustees as expeditiously as the Administrative Trustees
determine to be possible by distributing, after satisfaction of liabilities to
creditors of the Trust as provided by applicable law, to the Holders of the
Securities a Like Amount (as defined below) of the Debentures, unless such
Distribution is determined by the Property Trustee not to be practicable, in
which event such Holders will be entitled to receive out of the assets of the
Trust legally available for Distribution to Holders, after satisfaction of
liabilities to creditors of the Trust as provided by applicable law, an amount
equal to the aggregate of the Liquidation Amount of $_____ per Security plus
accumulated and unpaid Distributions thereon to the date of payment (such amount
being the "Liquidation Distribution").

         "Like Amount" means (i) with respect to a redemption of the Securities,
Securities having a Liquidation Amount equal to the principal amount of
Debentures to be paid in 


                                   Annex I-3

<PAGE>

accordance with their terms and (ii) with respect to a distribution of
Debentures upon the dissolution of the Trust, Debentures having a principal
amount equal to the Liquidation Amount of the Securities of the Holder to whom
such Debentures are distributed.

         On and from the date fixed by the Administrative Trustees for any
distribution of Debentures and dissolution of the Trust: (i) the Securities will
no longer be deemed to be outstanding; (ii) the Clearing Agency or its nominee,
as the Holder of the Securities, will receive a registered global certificate or
certificates representing the Debentures to be delivered upon such distribution;
and (iii) any Securities not held by the Clearing Agency or its nominee will be
deemed to represent beneficial interests in a Like Amount of Debentures, and
bearing accrued and unpaid interest in an amount equal to the accumulated and
unpaid Distributions on such Securities, until such Securities are presented to
the Registrar or its agent for cancellation, whereupon the Debenture Issuer will
issue, and the Debenture Trustee will authenticate, a certificate representing
such Debentures.

         If, upon any such liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets on hand legally available
to pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Securities shall be paid on a Pro Rata basis.

         4. Redemption and Distribution.

                  (a) Upon the repayment of the Debentures on the Maturity Date
thereof [or redemption thereof (in whole or in part) prior thereto in accordance
with the terms thereof], the proceeds from such repayment or redemption shall be
simultaneously applied by the Property Trustee (subject to the Property Trustee
having received notice no later than 45 days prior to such repayment or
redemption) to redeem a Like Amount of the Securities at a redemption price
equal to (i) in the case of the repayment of the Debentures on the Maturity
Date, the Maturity Redemption Price (as defined below), [(ii) in the case of the
optional redemption of the Debentures prior to [___________] upon the occurrence
and continuation of a [Special Event] (as defined below), the Special Event
Redemption Price (as defined below)] and [(iii) in the case of the optional
redemption of the Debentures other than as contemplated in clause (ii) above,
the Optional Redemption Price (as defined below)]. The [Maturity Redemption
Price, the Special Event Redemption Price and the Optional Redemption Price] are
referred to collectively as the "Redemption Price."

                  (b) (i) The "Maturity Redemption Price" shall mean a price
equal to 100% of the Liquidation Amount of the Securities to be redeemed plus
accumulated and unpaid Distributions thereon, if any, to the date of redemption.

                  [(ii) "Optional Redemption Price" shall mean a price equal to
the percentage of the Liquidation Amount of Securities to be redeemed plus
accumulated and unpaid Distributions thereon, if any, to the date of such
redemption if redeemed during the 12 month period beginning [______] of the
years indicated below:


                                   Annex I-4

<PAGE>


<Table>
<Caption>
                           Year                  Percentage
<S>                                              <C>
                                                         %
</Table>


         and thereafter at 100% of the Liquidation Amount of Securities to be
redeemed.].

                  [(iii) "Special Event Redemption Price" shall mean a price
equal to [__________], plus, in either case, accumulated and unpaid
Distributions thereon, if any, to the date of such redemption.]

         ["Special Event" shall mean _____________________________________.]

                  (c) The Trust may not redeem fewer than all the outstanding
Securities unless all accumulated and unpaid Distributions have been paid on all
Securities for all Distribution periods that expire on or before the date of
redemption.

                  (d) The procedure with respect to redemptions of Securities or
distributions of Debentures shall be as follows:

                           (i) Notice of any redemption of, or notice of
distribution of Debentures in exchange for, the Securities (a
"Redemption/Distribution Notice") will be given by the Trust by mail to each
Holder to be redeemed or exchanged not fewer than 30 nor more than 60 days
before the date fixed for redemption or exchange thereof which, in the case of a
redemption, will be the date fixed for repayment or redemption of the
Debentures. For purposes of the calculation of the date of redemption or
exchange and the dates on which notices are given pursuant to this Section
4(d)(i), a Redemption/Distribution Notice shall be deemed to be given on the day
such notice is first mailed by first-class mail, postage prepaid, to Holders.
Each Redemption/Distribution Notice shall be addressed to the Holders at the
address of each such Holder appearing in the books and records of the Trust. No
defect in the Redemption/Distribution Notice or in the mailing of either thereof
with respect to any Holder shall affect the validity of the redemption or
exchange proceedings with respect to any other Holder.

                           (ii) In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to be redeemed shall be redeemed
Pro Rata from each Holder, it being understood that, in respect of Preferred
Securities registered in the name of and held of record by a Clearing Agency or
its nominee, the distribution of the proceeds of such redemption will be made to
the Clearing Agency or its nominee and disbursed by such Clearing Agency in
accordance with the procedures applied by such agency or nominee.

                           (iii) If Securities are to be redeemed and the Trust
gives a Redemption/Distribution Notice, such notice shall be irrevocable and (A)
with respect to Preferred Securities registered in the name of or held of record
by a Clearing Agency or its nominee, by 12:00 noon, New York City time, on the
redemption date, provided that the Debenture Issuer has paid the Property
Trustee a sufficient amount of cash in connection with the related maturity or
redemption of the Debentures by 10:00 a.m., New York City time, on the Maturity
Date or the date of redemption, as the case may be, the Property Trustee or the
Paying Agent will pay to the Clearing Agency or its nominee funds sufficient to
pay the applicable 


                                   Annex I-5

<PAGE>

Redemption Price with respect to such Preferred Securities, and (B) with respect
to Preferred Securities issued in certificated form and Common Securities,
provided that the Debenture Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the related maturity or redemption of the
Debentures, the Property Trustee or the Paying Agent will pay the relevant
Redemption Price to the Holders of such Securities against presentation to the
Registrar of the certificates therefor. If a Redemption/Distribution Notice
shall have been given and funds deposited with the Property Trustee to pay the
Redemption Price (including all unpaid Distributions) with respect to the
Securities called for redemption, then immediately prior to the close of
business on the redemption date, Distributions will cease to accumulate on the
Securities so called for redemption and all rights of Holders of such Securities
so called for redemption will cease, except the right of the Holders of such
Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Securities shall cease to be outstanding.

                           (iv) Payment of accumulated and unpaid Distributions
on the redemption date of any Securities will be subject to the rights of
Holders of such Securities on the close of business on a regular record date in
respect of a Distribution Date occurring on or prior to such Redemption Date.

                           (v) Neither the Administrative Trustees nor the Trust
shall be required to register or cause to be registered the transfer of (A) any
Securities beginning on the opening of business 15 days before the day of
mailing of a Redemption/Distribution Notice or (B) any Securities selected for
redemption (except the unredeemed portion of any Security being redeemed). If
any date fixed for redemption of Securities is not a Business Day, then payment
of the Redemption Price payable on such date will be made on the next succeeding
day that is a Business Day (and without any interest or other payment in respect
of any such delay) except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date fixed
for redemption. If payment of the Redemption Price in respect of any Securities
is improperly withheld or refused and not paid on the date fixed for redemption
either by the Property Trustee or the Paying Agent or by the Sponsor as
guarantor pursuant to the Preferred Securities Guarantee, on the date fixed for
redemption, (A) Distributions on such Securities will continue to accumulate
from such redemption date to the actual date of payment, and (B) the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.

                           (vi) Subject to the foregoing and applicable law
(including, without limitation, United States federal securities laws), the
Sponsor or any of its Affiliates may at any time and from time to time purchase
outstanding Preferred Securities by tender, in the open market or by private
agreement.

         [5. Conversion Rights.

         The Holders shall have the right at any time, beginning ____________
through the close of business on ____________ (or, in the case of Securities
called for redemption, prior to the close of business on the Business Day prior
to the redemption date), at their option, to cause the Conversion Agent to
convert Securities, on behalf of the converting Holders, into [other securities]
in the manner described herein on and subject to the following terms and
conditions:


                                   Annex I-6

<PAGE>

                  (a) The Securities will be convertible or exchangeable at the
office of the Conversion Agent into fully paid and nonassessable [other
securities] pursuant to the Holder's direction to the Conversion Agent [in the
form of Exhibit ___ hereto] to exchange such Securities for a portion of the
Debentures theretofore held by the Trust on the basis of one Security per $____
principal amount of Debentures, and immediately convert such amount of
Debentures into fully paid and nonassessable [other securities] at an initial
rate of _______________ per $________ principal amount of Debentures (which is
equivalent to a conversion price of $ ____per [other Sponsor security], subject
to certain adjustments set forth in [Article XIII] of the Indenture (as so
adjusted, the "Conversion Price")).

                  (b) In order to convert Securities into [other securities] the
Holder shall submit to the Conversion Agent at the office referred to above an
irrevocable request to convert Securities on behalf of such Holder (the
"Conversion Request"), together, if the Securities are in certificated form,
with such certificates. The Conversion Request shall (i) set forth the number of
Securities to be converted and the name or names, if other than the Holder, in
which the [other securities] should be issued and (ii) direct the Conversion
Agent (a) to exchange such Securities for a portion of the Debentures held by
the Trust (at the rate of exchange specified in the preceding paragraph) and (b)
to immediately convert such Debentures on behalf of such Holder into [other
securities] (at the conversion rate specified in the preceding paragraph). The
Conversion Agent shall notify the Trust of the Holder's election to exchange
Securities for a portion of the Debentures held by the Trust (a "Notice of
Conversion") and the Trust shall, upon receipt of such notice, deliver to the
Conversion Agent the appropriate principal amount of Debentures for exchange in
accordance with this Section. The Conversion Agent shall thereupon notify the
Sponsor of the Holder's election to convert such Debentures into [other
securities]. Holders at the close of business on a Distribution record date will
be entitled to receive the [Distribution payable on such Securities on the
corresponding Distribution payment date notwithstanding the conversion of such
Securities following such record date but prior to such distribution payment
date. Except as provided above, neither the Trust nor the Sponsor will make, or
be required to make, any payment, allowance or adjustment upon any conversion on
account of any accumulated and unpaid Distributions accrued on the Securities
surrendered for conversion, or on account of any accumulated and unpaid
dividends on the [other securities] issued upon such conversion.] Securities
shall be deemed to have been converted immediately prior to the close of
business on the day on which a Notice of Conversion relating to such Securities
is received by the Trust in accordance with the foregoing provision (the
"Conversion Date"). The Person or Persons entitled to receive [other securities]
issuable upon conversion of the Debentures shall be treated for all purposes as
the record holder or holders of such [other securities] at such time. As
promptly as practicable on or after the Conversion Date, the Sponsor shall issue
and deliver at the office of the Conversion Agent a certificate or certificates
for the number of full [other securities] issuable upon such conversion,
together with the cash payment, if any, in lieu of any fraction of any share to
the Person or Persons entitled to receive the same, unless otherwise directed by
the Holder in the Notice of Conversion and the Conversion Agent shall distribute
such certificate or certificates to such Person or Persons.

                  (c) Each Holder of a Security by his acceptance thereof
appoints the Property Trustee as "Conversion Agent" for the purpose of effecting
the conversion or exchange of Securities in accordance with this Section. In
effecting the conversion or exchange and transactions described in this Section,
the Conversion Agent shall be acting as agent of the 


                                   Annex I-7

<PAGE>

Holders directing it to effect such conversion or exchange transactions. The
Conversion Agent is hereby authorized (i) to exchange Securities from time to
time for Debentures held by the Trust in connection with the conversion or
exchange of such Securities in accordance with this Section and (ii) to convert
all or a portion of the Debentures into [other securities] and thereupon to
deliver such [other securities] in accordance with the provisions of this
Section and to deliver to the Trust a new Debenture or Debentures for any
resulting unconverted principal amount.

                  (d) No fractional [other securities] will be issued as a
result of conversion or exchange, but in lieu thereof, such fractional interest
will be paid in cash by the Sponsor to the Conversion Agent, which in turn will
make such payment to the Holder or Holders so converted.

                  (e) The Sponsor shall at all times reserve and keep available
out of its authorized and unissued [other securities], solely for issuance upon
the conversion or exchange of the Debentures, free from any preemptive or other
similar rights, such number of [other securities] as shall from time to time be
issuable upon the conversion or exchange of all the Debentures then outstanding.
Notwithstanding the foregoing, the Sponsor shall be entitled to deliver upon
conversion or exchange of Debentures, [other securities] reacquired and held in
the treasury of the Sponsor (in lieu of the issuance of authorized and unissued
[other securities]), so long as any such treasury shares are free and clear of
all liens, charges, security interests or encumbrances. Any [other securities]
issued upon conversion or exchange of the Debentures shall be duly authorized,
validly issued and fully paid and nonassessable. The Trust shall deliver the
[other securities] received upon conversion or exchange of the Debentures to the
converting Holder free and clear of all liens, charges, security interests and
encumbrances, except for United States withholding taxes. Each of the Sponsor
and the Trust shall prepare and shall use its best efforts to obtain and keep in
force such governmental or regulatory permits or other authorizations as may be
required by law, and shall comply with all applicable requirements as to
registration or qualification of [other securities], in order to enable the
Sponsor to lawfully issue [other securities] to the Trust upon conversion or
exchange of the Debentures and the Trust to lawfully deliver [other securities]
to each Holder upon conversion or exchange of the Securities.

                  (f) The Sponsor will pay any and all taxes that may be payable
in respect of the issue or delivery of the [other securities] on conversion or
exchange of Debentures and the delivery of the [other securities] by the Trust
upon conversion or exchange of the Securities. The Sponsor shall not, however,
be required to pay any tax which may be payable in respect of any transfer
involved in the issue and delivery of the [other securities] in a name other
than that in which the Securities so converted were registered, and no such
issue or delivery shall be made unless and until the person requesting such
issue has paid to the Trust the amount of any such tax, or has established to
the satisfaction of the Trust that such tax has been paid.

                  (g) Nothing in the preceding paragraph (f) shall limit the
requirement of the Trust to withhold taxes pursuant to the terms of the
Securities or set forth in this Annex I to the Declaration or to the Declaration
itself or otherwise require the Property Trustee or the Trust to pay any amounts
on account of such withholdings.]


                                   Annex I-8

<PAGE>

         6. Voting Rights - Preferred Securities.

                  (a) Except as provided under Sections 6(b) and 8 and as
otherwise required by law and the Declaration, the Holders of the Preferred
Securities will have no voting rights.

                  (b) Subject to the requirements set forth in this paragraph,
the Holders of a Majority in Liquidation Amount of the Preferred Securities,
voting separately as a class may, and the Trustees shall not, without obtaining
the prior approval of the Holders of a Majority in Liquidation Amount of all
outstanding Preferred Securities, (i) direct the time, method and place of
conducting any proceeding for any remedy available to the Debenture Trustee, or
executing any trust or power conferred on such Debenture Trustee with respect to
the Debentures, (ii) waive any past default that is waivable under Section
[5.07] of the Indenture, (iii) exercise any right to rescind or annul a
declaration of acceleration of the maturity of the principal of the Debentures
or (iv) consent to any amendment, modification or termination of the Indenture
or the Debentures, where such consent shall be required, without, in each case,
obtaining the prior approval of the Holders of a Majority in Liquidation Amount
of all outstanding Preferred Securities; provided, that where a consent or other
action under the Indenture with respect to the Debentures would require the
consent or act of holders of all outstanding Debentures, no consent or act shall
be given or taken except by the Holders of all outstanding Preferred Securities.
The Trustees shall not revoke any action previously authorized or approved by a
vote of the Holders of the Preferred Securities except by subsequent vote of
such Holders. Subject to Section 2.7 of the Declaration, the Property Trustee
shall notify each Holder of Preferred Securities of any notice of default with
respect to the Debentures. In addition to obtaining the foregoing approvals of
such Holders of the Preferred Securities, prior to taking any of the foregoing
actions, the Trustees shall obtain an Opinion of Counsel experienced in such
matters to the effect that the Trust will not be classified as an association
taxable as a corporation for United States federal income tax purposes on
account of such action.

         If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on any due
date (including any Interest Payment Date or redemption date or the Maturity
Date), then a Holder of Preferred Securities may directly institute a legal
proceeding against the Debenture Issuer for enforcement of payment to such
Holder of the principal of or premium, if any, or interest on a Like Amount of
Debentures (a "Direct Action") on or after the respective due date specified in
the Debentures. In connection with such Direct Action, the rights of the Holders
of the Common Securities will be subrogated to the rights of such Holder of
Preferred Securities to the extent of any payment made by the Debenture Issuer
to such Holder of Preferred Securities in such Direct Action. Except as provided
in this paragraph, the Holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of the Debentures.

         Any approval or direction of Holders of Preferred Securities may be
given at a separate meeting of Holders of Preferred Securities convened for such
purpose, at a meeting of all of the Holders of Preferred Securities or pursuant
to written consent. The Property Trustee will cause a notice of any meeting at
which Holders of Preferred Securities are entitled to vote, or of any matter
upon which action by written consent of such Holders is to be taken, to be
mailed to each Holder of record of Preferred Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote 


                                   Annex I-9

<PAGE>

or of such matter upon which written consent is sought, and (iii) instructions
for the delivery of proxies or consent.

         No vote or consent of the Holders of the Preferred Securities will be
required for the Trust to redeem and cancel Preferred Securities or to
distribute the Debentures in accordance with the Declaration and the terms of
the Securities.

         Notwithstanding that Holders of Preferred Securities are entitled to
vote or consent under any of the circumstances described above, any of the
Preferred Securities that are owned by the Sponsor or any Affiliate of the
Sponsor shall not be entitled to vote or consent and shall, for purposes of such
vote or consent, be treated as if they were not outstanding.

         7. Voting Rights - Common Securities.

                  (a) Except as provided under Sections 7(b), 7(c), and 8 or as
otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.

                  (b) Unless an Event of Default shall have occurred and be
continuing, any Trustee may be removed at any time by the Holder of the Common
Securities. If an Event of Default has occurred and is continuing, the Property
Trustee and the Delaware Trustee may be removed at such time by the Holders of a
Majority in Liquidation Amount of the outstanding Preferred Securities. In no
event will the Holders of the Preferred Securities have the right to vote to
appoint, remove or replace the Administrative Trustees, which voting rights are
vested exclusively in the Sponsor as the Holder of the Common Securities. No
resignation or removal of a Trustee and no appointment of a successor trustee
shall be effective until the acceptance of appointment by the successor trustee
in accordance with the provisions of the Declaration.

                  (c) Subject to Section 2.6 of the Declaration and only after
the Event of Default with respect to the Preferred Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation amount
of the Common Securities, voting separately as a class, may, and the Trustees
will not, (i) direct the time, method and place of conducting any proceeding for
any remedy available to the Debenture Trustee, or executing any trust or power
conferred on such Debenture Trustee with respect to the Debentures, (ii) waive
any past default that is waivable under Section [5.07] of the Indenture, (iii)
exercise any right to rescind or annul a declaration of acceleration of the
maturity of the principal of the Debentures or (iv) consent to any amendment,
modification or termination of the Indenture or the Debentures, where such
consent shall be required, without, in each case, obtaining the prior approval
of the Holders of a Majority in Liquidation Amount of all outstanding Common
Securities; provided, that where a consent or other action under the Indenture
with respect to the Debentures would require the consent or act of holders of
all outstanding Debentures no consent or act shall be given or taken except by
the Holders of all outstanding Common Securities. The Trustees shall not revoke
any action previously authorized or approved by a vote of the Holders of the
Common Securities except by subsequent vote of such Holders. The Property
Trustee shall notify each Holder of Common Securities of any notice of default
with respect to the Debentures. In addition to obtaining the foregoing approvals
of such Holders of the Common Securities, prior to taking any of the 


                                   Annex I-10

<PAGE>

foregoing actions, the Trustees shall obtain an Opinion of Counsel experienced
in such matters to the effect that the Trust will not be classified as an
association taxable as a corporation for United States federal income tax
purposes on account of such action.

         If an Event of Default under the Declaration has occurred and is
continuing and such event is attributable to the failure of the Debenture Issuer
to pay principal of or premium, if any, or interest on the Debentures on the due
date (including any Interest Payment Date or redemption date or the Maturity
Date), then a Holder of Common Securities may institute a Direct Action for
enforcement of payment to such Holder of the principal of or premium, if any, or
interest on a Like Amount of Debentures on or after the respective due date
specified in the Debentures. Except as provided in this paragraph, the Holders
of Common Securities will not be able to exercise directly any other remedy
available to the holders of the Debentures.

         Any approval or direction of Holders of Common Securities may be given
at a separate meeting of Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Common Securities in the Trust or pursuant
to written consent. The Administrative Trustees will cause a notice of any
meeting at which Holders of Common Securities are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record of Common Securities. Each such notice will
include a statement setting forth (i) the date of such meeting or the date by
which such action is to be taken, (ii) a description of any resolution proposed
for adoption at such meeting on which such Holders are entitled to vote or of
such matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.

         No vote or consent of the Holders of the Common Securities will be
required for the Trust to redeem and cancel Common Securities or to distribute
the Debentures in accordance with the Declaration and the terms of the
Securities.

         8. Amendments to Declaration.

         In addition to the circumstances and requirements set out in Section
12.1 of the Declaration, the Declaration may be amended by the Trustees and the
Sponsor with (i) the consent of Holders representing a Majority in Liquidation
Amount of all outstanding Securities, and (ii) receipt by the Trustees of an
Opinion of Counsel to the effect that such amendment or the exercise of any
power granted to the Trustees in accordance with such amendment will not affect
the Trust's status as a grantor trust for United States federal income tax
purposes or the Trust's exemption from status as an investment company under the
Investment Company Act, provided that, without the consent of each Holder, the
Declaration may not be amended to (i) change the amount or timing of any
Distribution on the Securities or otherwise adversely affect the amount of any
Distribution required to be made in respect of the Securities as of a specified
date or (ii) restrict the right of a Holder to institute suit for the
enforcement of any such payment on or after such date.

         9. Pro Rata.

         A reference in these terms of the Securities to any payment,
distribution or treatment as being "Pro Rata" shall mean pro rata to each Holder
according to the aggregate Liquidation 


                                   Annex I-11

<PAGE>

Amount of the Securities held by the relevant Holder in relation to the
aggregate Liquidation Amount of all Securities outstanding unless, in relation
to any payment, an Event of Default under the Declaration has occurred and is
continuing, in which case any funds available to make such payment shall be paid
first to each Holder of the Preferred Securities pro rata according to the
aggregate Liquidation Amount of Preferred Securities held by the relevant Holder
relative to the aggregate Liquidation Amount of all Preferred Securities
outstanding, and only after satisfaction of all amounts owed to the Holders of
the Preferred Securities, to each Holder of Common Securities pro rata according
to the aggregate Liquidation Amount of Common Securities held by the relevant
Holder relative to the aggregate Liquidation Amount of all Common Securities
outstanding.

         10. Ranking.

         The Preferred Securities rank pari passu with the Common Securities and
payment thereon shall be made Pro Rata with the Common Securities, except that,
if an Event of Default under the Declaration occurs and is continuing, no
payments in respect of Distributions on, or payments upon liquidation,
redemption or otherwise with respect to, the Common Securities shall be made
until the Holders of the Preferred Securities shall be paid in full the
Distributions, Redemption Price, Liquidation Distribution and other payments to
which they are entitled at such time.

         11. Acceptance of Preferred Securities Guarantee and Indenture.

         Each Holder of Preferred Securities by the acceptance thereof, agrees
to the provisions of the Preferred Securities Guarantee, including the
subordination provisions therein and to the provisions of the Indenture.

         12. No Preemptive Rights.

         The Holders of the Securities shall have no preemptive or similar
rights to subscribe for any additional securities.

         13. Miscellaneous.

         These terms in this Annex I constitute a part of the Declaration. The
Sponsor will provide a copy of the Declaration, the Preferred Securities
Guarantee and the Indenture (including any supplemental indenture) to a Holder
without charge on written request to the Sponsor at its principal place of
business.


                                   Annex I-12

<PAGE>


                                   EXHIBIT A-1

                     FORM OF PREFERRED SECURITY CERTIFICATE
                           [FORM OF FACE OF SECURITY]

         [IF THIS PREFERRED SECURITY IS A GLOBAL PREFERRED SECURITY, INSERT:
THIS PREFERRED SECURITY IS A GLOBAL PREFERRED SECURITY WITHIN THE MEANING OF THE
DECLARATION HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY (THE "CLEARING AGENCY") OR A NOMINEE OF THE CLEARING
AGENCY. THIS PREFERRED SECURITY IS EXCHANGEABLE FOR PREFERRED SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE CLEARING AGENCY OR ITS NOMINEE
ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE TRUST AGREEMENT AND NO
TRANSFER OF THIS PREFERRED SECURITY (OTHER THAN A TRANSFER OF THIS PREFERRED
SECURITY AS A WHOLE BY THE CLEARING AGENCY TO A NOMINEE OF THE CLEARING AGENCY
OR BY A NOMINEE OF THE CLEARING AGENCY TO THE CLEARING AGENCY OR ANOTHER NOMINEE
OF THE CLEARING AGENCY) MAY BE REGISTERED EXCEPT IN LIMITED CIRCUMSTANCES.

         UNLESS THIS PREFERRED SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) TO THE TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY PREFERRED SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT HEREON IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]

Certificate No. _____                     Number of Preferred Securities _______

CUSIP NO. _____________

                                   CERTIFICATE

                   CERTIFICATE EVIDENCING PREFERRED SECURITIES

                                       OF

                     CONTINENTAL AIRLINES FINANCE TRUST III

                            ___% PREFERRED SECURITIES

              (LIQUIDATION AMOUNT $_______ PER PREFERRED SECURITY)


                                Exhibit A-1 - 1

<PAGE>

         Continental Airlines Finance Trust III, a statutory business trust
created under the laws of the State of Delaware (the "Trust"), hereby certifies
that ______________ (the "Holder") is the registered owner of [$_________ in
aggregate Liquidation Amount of Preferred Securities of the Trust](1) [the
aggregate Liquidation Amount of Preferred Securities of the Trust specified in
Schedule A hereto](2) representing undivided beneficial interests in the assets 
of the Trust designated the Series __ ___% Preferred Securities (Liquidation
Amount $_______ per Preferred Security) (the "Preferred Securities"). Subject to
the Declaration (as defined below), the Preferred Securities are transferable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer. The designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Preferred Securities represented hereby are
issued and shall in all respects be subject to the provisions of the Amended and
Restated Declaration of Trust of the Trust dated as of ______, __, as the same
may be amended from time to time (the "Declaration"), including the designation
of the terms of the Preferred Securities as set forth in Annex I to the
Declaration. Capitalized terms used but not defined herein shall have the
meaning given them in the Declaration. The Sponsor will provide a copy of the
Declaration, the Preferred Securities Guarantee, the Common Securities Guarantee
(as may be appropriate), and the Indenture (including any supplemental
indenture) to a Holder without charge upon written request to the Trust at its
principal place of business.

         Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Preferred Securities Guarantee to the extent provided therein.

         By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Preferred Securities
as evidence of indirect beneficial ownership in the Debentures.


----------

(1) Insert in Definitive Preferred Securities only.

(2) Insert in Global Preferred Securities only.


                                Exhibit A-1 - 2

<PAGE>


         IN WITNESS WHEREOF, the Trust has duly executed this certificate.

         Dated:
                --------------
                                          CONTINENTAL AIRLINES
                                          FINANCE TRUST III


                                          By: 
                                              ----------------------------------
                                          Name:
                                                --------------------------------
                                                Administrative Trustee



                                Exhibit A-1 - 3

<PAGE>

                PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION

         This is one of the Preferred Securities referred to in the within-
mentioned Declaration.

                                             ______________________,
                                             
                                             as Property Trustee


                                             By: 
                                                 -------------------------------
                                                 Authorized Signatory


                                Exhibit A-1 - 4

<PAGE>

                          [FORM OF REVERSE OF SECURITY]

         Distributions payable on each Preferred Security will be fixed at a
rate per annum of [  ]% (the "Coupon Rate") of the Liquidation Amount of $_____
per Preferred Security, such rate being the rate of interest payable on the
Debentures to be held by the Property Trustee. Distributions in arrears for more
than one [semi-annual period] will bear interest thereon compounded
[semi-annually] at the Coupon Rate (to the extent permitted by applicable law).
The term "Distributions", as used herein, includes such cash distributions and
any such interest payable unless otherwise stated. A Distribution is payable
only to the extent that payments are made in respect of the Debentures held by
the Property Trustee and to the extent the Property Trustee has funds on hand
legally available therefor.

         Distributions on the Preferred Securities will be cumulative, will
accumulate from and including the most recent date to which Distributions have
been paid or, if no Distributions have been paid, from and including [   ], [  ]
to but excluding the related Distribution Date or any date fixed for redemption,
and will be payable [semi-annually] in arrears on [   ] and [   ] of each year,
commencing on [   ], [  ], except as otherwise described below and in the
Declaration. Distributions will be computed on the basis of a 360-day year
consisting of twelve 30-day months and, for any period of less than a full
calendar month, the number of days elapsed in such month.

         [As long as no Event of Default (as defined in the Indenture) has
occurred and is continuing, the Debenture Issuer has the right under the
Indenture to defer the payment of interest on the Debentures at any time and
from time to time for a period not exceeding [____] consecutive calendar
[semi-annual] periods, including the first such [semi-annual period] during such
extension period (each, an "Extension Period"), provided that no Extension
Period shall extend beyond the Maturity Date of the Debentures. Distributions
will be deferred during any Extension Period. Notwithstanding such deferral,
[semi-annual] Distributions will continue to accumulate with interest thereon
(to the extent permitted by applicable law, but not at a rate exceeding the rate
of interest then accruing on the Debentures) at the Coupon Rate compounded
[semi-annually] during any Extension Period. Prior to the termination of any
Extension Period, the Debenture Issuer may further defer payments of interest by
further extending such Extension Period; provided that such Extension Period,
together with all previous and further extensions, if any, within such Extension
Period, may not exceed [____] consecutive [semi-annual] periods, including the
first semi-annual period during such Extension Period, or extend beyond the
Maturity Date of the Debentures. [Payments of Distributions that have
accumulated but not been paid during any Extension Period will be payable to
Holders as they appear on the books and records of the Trust on the record date
for the first scheduled Distribution payment date following the expiration of
such Extension Period and prior to the commencement of any new Extension Period.
Upon the expiration of any Extension Period and the payment of all amounts then
due, the Debenture Issuer may commence a new Extension Period, subject to the
above requirements.]

         [Subject to the conditions set forth in the Declaration and the
Indenture, the Property Trustee shall, at the direction of the Sponsor, at any
time dissolve the Trust and, upon satisfaction of the liabilities to creditors
of the Trust as provided by law, cause the Debentures to be distributed to the
holders of the Securities in liquidation of the Trust [or, simultaneously with


                                Exhibit A-1 - 5

<PAGE>

any redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.]

         [The Preferred Securities shall be redeemable as provided in the
Declaration.]

         [The Preferred Securities shall be convertible or exchangeable into
[___________] as provided in the Declaration.]


                                Exhibit A-1 - 6

<PAGE>

         ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers
this Preferred Security Certificate to: 
                                        ----------------------------------------

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

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

(Insert assignee's social security or tax identification number)
                                                                 ---------------

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

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

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

(Insert address and zip code of assignee) and irrevocably appoints 
                                                                   -------------

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

--------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.

Date: 
      -----------------------
Signature: 
           ------------------

(Sign exactly as your name appears on the other side of this Preferred Security 
Certificate)

Signature Guarantee***



----------

*** Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities and Exchange Act of 1934, as amended.


                                Exhibit A-1 - 7

<PAGE>

                                  SCHEDULE A*

         The initial number of Preferred Securities evidenced by the Certificate
to which this Schedule is attached is _______ (having an aggregate Liquidation
Amount of $______). The notations in the following table evidence decreases and
increases in the number of Preferred Securities evidenced by such Certificate.

         Number of Preferred Decrease in Number Increase in Number Securities
Remaining of Preferred of Preferred After Such Decrease Notation Securities or
Increase by Registrar
                      ----------------------------------------------------------

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

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

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


----------

* Append to Global Preferred Securities only.



                                Exhibit A-1 - 8

<PAGE>

                                   EXHIBIT A-2

                       FORM OF COMMON SECURITY CERTIFICATE

         THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY STATE SECURITIES LAWS OR ANY
OTHER APPLICABLE SECURITIES LAW. NEITHER THIS COMMON SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.

         THE COMMON SECURITIES ARE NOT TRANSFERABLE EXCEPT AS DESCRIBED IN THE
DECLARATION (AS DEFINED BELOW).

Certificate No. ______                    Number of Common Securities _______

CUSIP NO. ______________

                                   CERTIFICATE

                    CERTIFICATE EVIDENCING COMMON SECURITIES

                                       OF

                     CONTINENTAL AIRLINES FINANCE TRUST III

                             ___% COMMON SECURITIES

                (LIQUIDATION AMOUNT $_______ PER COMMON SECURITY)

         Continental Airlines Finance Trust III, a statutory business trust
created under the laws of the State of Delaware (the "Trust"), hereby certifies
that ______________ (the "Holder") is the registered owner of [$_________ in
aggregate Liquidation Amount of Common Securities of the Trust](3) [the
aggregate Liquidation Amount of Common Securities of the Trust specified in
Schedule A hereto](4) representing undivided beneficial interests in the assets
of the Trust designated the Series __ ___% Common Securities (Liquidation Amount
$_______ per Common Security) (the "Common Securities"). Subject to the
Declaration (as defined below), the Common Securities are transferable on the
books and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities represented hereby are issued and shall in
all respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of ______, __, as the same may be
amended from time to time (the "Declaration"), including the designation of the
terms of the Common Securities as set forth in Annex I to the Declaration.


----------

(3) Insert in Definitive Preferred Securities only.

(4) Insert in Global Preferred Securities only.



                                Exhibit A-2 - 1

<PAGE>

Capitalized terms used but not defined herein shall have the meaning given them
in the Declaration. The Sponsor will provide a copy of the Declaration, the
Common Securities Guarantee, the Common Securities Guarantee (as may be
appropriate), and the Indenture (including any supplemental indenture) to a
Holder without charge upon written request to the Trust at its principal place
of business.

         Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder and to the benefits of
the Common Securities Guarantee to the extent provided therein.

         By acceptance, the Holder agrees to treat, for United States federal
income tax purposes, the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.

         IN WITNESS WHEREOF, the Trust has executed this certificate this ___
day of __________, ____.

                                          Continental Airlines Finance Trust III


                                          By: 
                                              ----------------------------------
                                          Name: 
                                                --------------------------------
                                                Administrative Trustee


                                Exhibit A-2 - 2

<PAGE>

                          [FORM OF REVERSE OF SECURITY]

         Distributions payable on each Common Security will be fixed at a rate
per annum of [  ]% (the "Coupon Rate") of the Liquidation Amount of $______ per
Common Security, such rate being the rate of interest payable on the Debentures
to be held by the Property Trustee. Distributions in arrears for more than one
[semi-annual] period will bear interest thereon compounded semiannually at the
Coupon Rate (to the extent permitted by applicable law). The term
"Distributions", as used herein, includes such cash distributions and any such
interest payable unless otherwise stated. A Distribution is payable only to the
extent that payments are made in respect of the Debentures held by the Property
Trustee and to the extent the Property Trustee has funds available therefor.

         Distributions on the Common Securities will be cumulative, will
accumulate from and including the most recent date to which Distributions have
been paid or, if no Distributions have been paid, from and including [_____],
[___] to but excluding the related Distribution Date or any date fixed for
redemption, and will be payable [semi-annually] in arrears on [________] and
[_____] of each year, commencing on [________], [___], except as otherwise
described below and in the Declaration. Distributions will be computed on the
basis of a 360-day year consisting of twelve 30 day months and, for any period
of less than a full calendar month, the number of days elapsed in such month.

         [As long as no Event of Default (as defined in the Indenture) has
occurred and is continuing, the Debenture Issuer has the right under the
Indenture to defer the payment of interest on the Debenture at any time and from
time for a period not exceeding [___] consecutive calendar [semi-annual]
periods, including the first such semi-annual period during such extension
period (each an "Extension Period"), provided, that no Extension Period shall
extend beyond the Maturity Date of the Debentures. Distributions will be
deferred during any Extension Period. Notwithstanding such deferral,
Distributions will continue to accumulate with interest thereon (to the extent
permitted by applicable law, but not at a rate exceeding the rate of interest
then accruing on the Debentures) at the Coupon Rate compounded [semi-annually]
during any Extension Period. Prior to the termination of any Extension Period,
the Debenture Issuer may further defer payments of interest by further extending
such Extension Period; provided, that such Extension Period, together with all
previous and further extensions, if any, within such Extension Period, may not
exceed [___] consecutive [semi-annual] periods, including the first semi-annual
period during such Extension Period, or extend beyond the Maturity Date of the
Debentures. [Payments of Distributions that have accumulated but not been paid
during any Extension Period will be payable to Holders as they appear on the
books and records of the Trust on the record date for the first Distribution
Date following the expiration of such Extension Period. Upon the expiration of
any Extension Period and the payment of all amounts then due, the Debenture
Issuer may commence a new Extension Period, subject to the above requirements.]

         [Subject to the conditions set forth in the Declaration and the
Indenture, the Property Trustee shall, at the direction of the Sponsor, at any
time dissolve the Trust and, upon satisfaction of the liabilities to creditors
of the Trust as provided by law, cause the Debentures to be distributed to the
holders of the Securities in liquidation of the Trust [or, simultaneously with
any redemption of the Debentures, cause a Like Amount of the Securities to be
redeemed by the Trust.]


                                Exhibit A-2 - 3

<PAGE>

         [The Common Securities shall be redeemable as provided in the
Declaration.]

         [The Common Securities shall be convertible or exchangeable into
[_______] as provided in the Declaration.]



                                Exhibit A-2 - 4


<PAGE>
                                                                    EXHIBIT 4.20


================================================================================




                           CONTINENTAL AIRLINES, INC.



                                       AND



                         BANK ONE TRUST COMPANY, N.A.,




                                   AS TRUSTEE




                          JUNIOR SUBORDINATED INDENTURE












            RELATING TO [___% JUNIOR SUBORDINATED DEBENTURES DUE____]




================================================================================



                     DATED AS OF _______________ ___, _____




<PAGE>


                                TABLE OF CONTENTS


<Table>
<S>                        <C>                                                                                   <C>

                                                            ARTICLE I
                                    DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.01               Definitions............................................................................1
SECTION 1.02               Form of Documents Delivered to Trustee.................................................8
SECTION 1.03               Successors.............................................................................8
SECTION 1.04               Indenture and Securities Solely Corporate Obligations..................................8
SECTION 1.05               Addresses for Notices, etc. ...........................................................9
SECTION 1.06               GOVERNING LAW..........................................................................9
SECTION 1.07               Evidence of Compliance with Conditions Precedent.......................................9
SECTION 1.08               Business Days..........................................................................9
SECTION 1.09               Trust Indenture Act to Control........................................................10
SECTION 1.10               Table of Contents, Headings, etc. ....................................................10
SECTION 1.11               Execution in Counterparts.............................................................10
SECTION 1.12               Separability..........................................................................10

                                                           ARTICLE II
                                                           SECURITIES

SECTION 2.01               Forms Generally.......................................................................10
SECTION 2.02               Execution and Authentication..........................................................11
SECTION 2.03               Form and Payment......................................................................11
SECTION 2.04               Global Security.......................................................................11
SECTION 2.05               Interest..............................................................................13
SECTION 2.06               Transfer and Exchange.................................................................14
SECTION 2.07               Replacement Securities................................................................15
SECTION 2.08               Temporary Securities..................................................................15
SECTION 2.09               Cancellation..........................................................................15
SECTION 2.10               Defaulted Interest....................................................................16
SECTION 2.11               CUSIP Numbers.........................................................................17
SECTION 2.12               Right of Set Off......................................................................17
SECTION
 2.13               Extension of Interest Payment Period..................................................17

                                                          ARTICLE III
                                             PARTICULAR COVENANTS OF THE COMPANY

SECTION 3.01               Payment of Principal, Premium and Interest............................................18
SECTION 3.02               Offices for Notices and Payments, etc. ...............................................18
SECTION 3.03               Appointments to Fill Vacancies in Trustee's Office....................................18
SECTION 3.04               Provision as to Paying Agent [and Conversion Agent]...................................19
SECTION 3.05               Certificate to Trustee................................................................19
SECTION 3.06               Compliance with Consolidation Provisions..............................................20
SECTION 3.07               Limitation on Certain Payments........................................................20
SECTION 3.08               Covenants as to Continental Airlines Finance Trust III................................20
</Table>



                                      -i-



<PAGE>



<Table>
<S>                        <C>                                                                                   <C>
SECTION 3.09               Payment of Trust's Costs and Expenses.................................................21

                                                          ARTICLE IV
                               SECURITYHOLDERS' LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE

SECTION 4.01               Securityholders' Lists................................................................22
SECTION 4.02               Preservation and Disclosure of Lists..................................................22
SECTION 4.03               Reports by Company....................................................................22
SECTION 4.04               Reports by the Trustee................................................................23

                                                          ARTICLE V
                                         REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS

SECTION 5.01               Events of Default.....................................................................23
SECTION 5.02               Payment of Securities on Default; Suit Therefor.......................................25
SECTION 5.03               Application of Moneys Collected by Trustee............................................27
SECTION 5.04               Proceedings by Securityholders........................................................27
SECTION 5.05               Proceedings by Trustee................................................................28
SECTION 5.06               Remedies Cumulative and Continuing....................................................28
SECTION 5.07               Direction of Proceedings and Waiver of Defaults by Majority of Securityholders........29
SECTION 5.08               Notice of Defaults....................................................................29
SECTION 5.09               Undertaking to Pay Costs..............................................................30
SECTION 5.10               Waiver of Stay or Extension Laws......................................................30

                                                          ARTICLE VI
                                                    CONCERNING THE TRUSTEE

SECTION 6.01               Duties and Responsibilities of Trustee................................................30
SECTION 6.02               Reliance on Documents, Opinions, etc. ................................................31
SECTION 6.03               No Responsibility for Recitals, etc. .................................................32
SECTION 6.04               Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own 
                           Securities............................................................................33
SECTION 6.05               Moneys to be Held in Trust............................................................33
SECTION 6.06               Compensation and Expenses of Trustee..................................................33
SECTION 6.07               Officers' Certificate as Evidence.....................................................34
SECTION 6.08               Conflicting Interest of Trustee.......................................................34
SECTION 6.09               Eligibility of Trustee................................................................34
SECTION 6.10               Resignation or Removal of Trustee.....................................................35
SECTION 6.11               Acceptance by Successor Trustee.......................................................36
SECTION 6.12               Succession by Merger, etc. ...........................................................36
SECTION 6.13               Limitation on Rights of Trustee as a Creditor.........................................37
SECTION 6.14               Authenticating Agents.................................................................37
</Table>



                                      -ii-


<PAGE>



<Table>
<S>                        <C>                                                                                   <C>
                                                       ARTICLE VII
                                            CONCERNING THE SECURITYHOLDERS

SECTION 7.01               Action by Securityholders.............................................................38
SECTION 7.02               Proof of Execution by Securityholders.................................................38
SECTION 7.03               Who Are Deemed Absolute Owners........................................................39
SECTION 7.04               Securities Owned by Company Deemed Not Outstanding....................................39
SECTION 7.05               Revocation of Consents; Future Holders Bound..........................................39

                                                       ARTICLE VIII
                                    CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

SECTION 8.01               Company May Consolidate, etc., on Certain Terms.......................................40
SECTION 8.02               Successor Corporation to be Substituted for Company...................................40
SECTION 8.03               Opinion of Counsel to be Given Trustee................................................41

                                                        ARTICLE IX
                                                  SUPPLEMENTAL INDENTURES

SECTION 9.01               Without Consent of Securityholders....................................................41
SECTION 9.02               With Consent of Securityholders.......................................................42
SECTION 9.03               Compliance with Trust Indenture Act; Effect of Supplemental Indentures................43
SECTION 9.04               Notation on Securities................................................................43
SECTION 9.05               Evidence of Compliance of Supplemental Indenture to be Furnished Trustee..............44

                                                        ARTICLE X
                                                       REDEMPTION

SECTION 10.01              Special Event Redemption..............................................................44
SECTION 10.02              Optional Redemption by Company........................................................44
SECTION 10.03              No Sinking Fund.......................................................................45
SECTION 10.04              Notice of Redemption; Selection of Securities.........................................45
SECTION 10.05              Payment of Securities Called for Redemption...........................................45

                                                       ARTICLE XI
                                         SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 11.01              Discharge of Indenture................................................................46
SECTION 11.02              Deposited Moneys to be Held in Trust by Trustee.......................................47
SECTION 11.03              Paying Agent to Repay Moneys Held.....................................................47
SECTION 11.04              Return of Unclaimed Moneys............................................................47

                                                      ARTICLE XII
                                                     SUBORDINATION

SECTION 12.01              Agreement to Subordinate..............................................................48
SECTION 12.02              Default on Senior Indebtedness........................................................48
SECTION 12.03              Liquidation; Dissolution; Bankruptcy..................................................48
SECTION 12.04              Subrogation...........................................................................50
</Table>



                                     -iii-



<PAGE>



<Table>
<S>                        <C>                                                                                   <C>
SECTION 12.05              Trustee to Effectuate Subordination...................................................50
SECTION 12.06              Notice by the Company.................................................................50
SECTION 12.07              Rights of the Trustee; Holders of Senior Indebtedness.................................51
SECTION 12.08              Subordination May Not Be Impaired.....................................................52
SECTION 12.09              Article Applicable to Paying Agents...................................................52
SECTION 12.10              Trust Moneys Not Subordinated.........................................................53

                                                   ARTICLE XIII
                                            [CONVERSION OF SECURITIES

SECTION 13.01              Conversion Rights.....................................................................53
SECTION 13.02              Conversion Procedures.................................................................53
SECTION 13.03              Conversion Price Adjustments..........................................................55
SECTION 13.04              Reclassification, Consolidation, Merger or Sale of Assets.............................59
SECTION 13.05              Notice of Adjustments of Conversion Price.............................................60
SECTION 13.06              Prior Notice of Certain Events........................................................60
SECTION 13.07              Adjustments in Case of Fundamental Changes............................................61
SECTION 13.08              Dividend or Interest Reinvestment Plans...............................................64
SECTION 13.09              Certain Additional Rights.............................................................65     
SECTION 13.10              Restrictions on Common Stock Issuable Upon Conversion.................................65
SECTION 13.11              Trustee Not Responsible for Determining Conversion Price or Adjustments..............65]
</Table>



                                      -iv-



<PAGE>


         THIS INDENTURE, dated as of ______________, ____ between Continental
Airlines, Inc., a Delaware corporation (the "Company"), and ______________, a
national banking association, as trustee (the "Trustee"),

                                   WITNESSETH:

         In consideration of the premises, and the purchase of the Securities by
the holders thereof, the Company covenants and agrees with the Trustee for the
equal and proportionate benefit of the respective holders from time to time of
the Securities, as follows:

                                   ARTICLE I
             DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 1.01 Definitions.

         The terms defined in this Section 1.01 (except as herein otherwise
expressly provided or unless the context otherwise requires) for all purposes of
this Indenture shall have the respective meanings specified in this Section
1.01. All other terms used in this Indenture which are defined in the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), or which are by
reference therein defined in the Securities Act, shall (except as herein
otherwise expressly provided or unless the context otherwise requires) have the
meanings assigned to such terms in said Trust Indenture Act and in said
Securities Act as in force at the date of this Indenture as originally executed.
The following terms have the meanings given to them in the Trust Agreement: (i)
Clearing Agency; (ii) Delaware Trustee; (iii) Property Trustee; (iv)
Administrative Trustees; (v) Direct Action; and (vi) Distributions. All
accounting terms used herein and not expressly defined shall have the meanings
assigned to such terms in accordance with generally accepted accounting
principles and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted at the time of any computation.
The words "herein", "hereof" and "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
other subdivision. Headings are used for convenience of reference only and do
not affect interpretation. The singular includes the plural and vice versa.

         [See Section 13.07 for certain defined terms relating to the provisions
of Article XIII].

         "Additional Sums" shall have the meaning set forth in Section 2.05(c).

         "Affiliate" shall have the meaning given to that term in Rule 405 under
the Securities Act or any successor rule thereunder.

         "Authenticating Agent" shall mean any agent or agents of the Trustee
which at the time shall be appointed and acting pursuant to Section 6.14.

         "Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar federal
or state law for the relief of debtors.

         "Board of Directors" shall mean either the Board of Directors of the
Company or any duly authorized committee of that board.



                                       1

<PAGE>


         "Board Resolution" shall mean a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

         "Business Day" shall mean, with respect to any series of Securities,
any day other than a Saturday or a Sunday or a day on which banking institutions
in Houston, Texas or New York, New York are authorized or required by law or
executive order to close.

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

         "Common Securities" shall mean the common securities of the Trust
representing undivided beneficial interests in the assets of the Trust which
rank pari passu with Preferred Securities issued by the Trust; provided,
however, that if an Event of Default has occurred and is continuing, no payments
in respect of Distributions on, or payments upon liquidation, redemption or
otherwise with respect to, the Common Securities shall be made until the holders
of the Preferred Securities shall be paid in full the Distributions and the
liquidation, redemption and other payments to which they are entitled.

         "Common Securities Guarantee" shall mean any guarantee that the Company
may enter into with any Person or Persons that operates directly or indirectly
for the benefit of holders of Common Securities of the Trust.

         "Common Stock" shall mean the Common Stock, no par value, of the
Company or any other class of stock resulting from changes or reclassifications
of such Common Stock consisting solely of changes in par value, or from par
value to no par value, or from no par value to par value.

         "Company" shall mean Continental Airlines, Inc., a Delaware
corporation, and, subject to the provisions of Article VIII, shall include its
successors and assigns.

         "Company Request" or "Company Order" shall mean a written request or
order signed in the name of the Company by the Chairman of the Board, the Chief
Executive Officer, the President, a Vice Chairman of the Board or a Vice
President, and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary, and delivered to the Trustee.

         "Compounded Interest" shall have the meaning set forth in Section
2.13(a).

         "Custodian" shall mean any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.

         "Default" means any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.

         "Defaulted Interest" shall have the same meaning set forth in Section
2.10.


                                       2

<PAGE>


         "Deferred Interest" shall have the meaning set forth in Section
2.13(a).

         "Definitive Securities" shall mean those securities issued in fully
registered certificated form not otherwise in global form.

         "Depositary" shall mean, with respect to Securities issuable in whole
or in part in the form of one or more Global Securities, The Depository Trust
Company, New York, New York, another clearing agency, or any successor
registered as a clearing agency under the Exchange Act or other applicable
statute or regulation, which, in each case, shall be designated by the Company
pursuant to Section 2.04(d).

         "Dissolution Event" means the liquidation of the Trust pursuant to the
Trust Agreement, and the distribution of the Securities held by the Property
Trustee to the holders of the Trust Securities issued by the Trust pro rata in
accordance with the Trust Agreement.

         "Event of Default" shall mean any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.

         "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

         "Extended Interest Payment Period" shall have the meaning set forth in
Section 2.13(a).

         "Global Security" means, with respect to the Securities, a Security
executed by the Company and delivered by the Trustee to the Depositary or
pursuant to the Depositary's instruction, all in accordance with the Indenture,
which shall be registered in the name of the Depositary or its nominee.

         "Indebtedness" shall mean (i) every obligation of the Company for money
borrowed; (ii) every obligation of the Company evidenced by bonds, debentures,
notes or other similar instruments, including obligations incurred in connection
with the acquisition of property, assets or businesses; (iii) every
reimbursement obligation of the Company with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of the
Company; (iv) every obligation of the Company issued or assumed as the deferred
purchase price of property or services (but excluding trade accounts payable or
accrued liabilities arising in the ordinary course of business); (v) every
capital lease obligation of the Company; (vi) all indebtedness of the Company
whether incurred on or prior to the date of the Indenture or thereafter
incurred, for claims in respect of derivative products, including interest rate,
foreign exchange rate and commodity forward contracts, options and swaps and
similar arrangements; and (vii) every obligation of the type referred to in
clauses (i) through (vi) of another Person and all dividends of another Person
the payment of which, in either case, the Company has guaranteed or is
responsible or liable, directly or indirectly, as obligor or otherwise.

         "Indebtedness Ranking on a Parity with the Securities" shall mean (i)
Indebtedness, whether outstanding on the date of execution of this Indenture or
hereafter created, assumed or incurred, to the extent such indebtedness
specifically by its terms ranks equally with and not prior to the Securities in
the right of payment upon the happening of any dissolution or winding up or
liquidation 



                                       3

<PAGE>


or reorganization of the Company, and (ii) all other debt securities, and
guarantees in respect of those debt securities (including Other Debentures and
Other Guarantees), issued to any trust other than the Trust, or a trustee of
such trust, partnership or other entity affiliated with the Company that is a
financing vehicle of the Company (a "financing entity") in connection with the
issuance by such financing entity of equity securities that are similar to the
Preferred Securities or other securities guaranteed by the Company. The securing
of any Indebtedness, otherwise constituting Indebtedness Ranking on a Parity
with the Securities, shall not be deemed to prevent such Indebtedness from
constituting Indebtedness Ranking on a Parity with the Securities.

         "Indebtedness Ranking Junior to the Securities" shall mean any
Indebtedness, whether outstanding on the date of execution of this Indenture or
hereafter created, assumed or incurred, to the extent such indebtedness
specifically by its terms ranks junior to and not equally with or prior to the
Securities (and any other Indebtedness Ranking on a Parity with the Securities)
in right of payment upon the happening of any dissolution or winding up or
liquidation or reorganization of the Company. The securing of any Indebtedness,
otherwise constituting Indebtedness Ranking Junior to the Securities, shall not
be deemed to prevent such Indebtedness from constituting Indebtedness Ranking
Junior to the Securities.

         "Indenture" means this instrument as originally executed or as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this Indenture and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively.

         "Interest Payment Date" shall have the meaning set forth in Section
2.05(a).

         ["Investment Company Event" means the receipt by the Trust and the
Company of an opinion of counsel experienced in such matters to the effect that,
as a result of the occurrence of a change in law or regulation or a written
change (including any announced prospective change) in interpretation or
application of law or regulation by any legislative body, court, governmental
agency or regulatory authority, which amendment or change is effective or which
pronouncement or decision is announced on or after _____________, ____, there is
more than an insubstantial risk that the Trust is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which change or
prospective change becomes effective or would become effective, as the case may
be, on or after the date of the original issuance of the Preferred Securities.]

         "Maturity Date" shall mean __________, ____.

         "Mortgage" shall mean and include any mortgage, pledge, lien, security
interest, conditional sale or other title retention agreement or other similar
encumbrance.

         "Non Book-Entry Preferred Securities" shall have the meaning set forth
in Section 2.04(a)(ii).



                                       4

<PAGE>


         "Officers" shall mean any of the Chairman, a Vice Chairman, the Chief
Executive Officer, the President, a Vice President, the Comptroller, Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company.

         "Officers' Certificate" shall mean a certificate signed on behalf of
the Company, by the Chairman of the Board, Chief Executive Officer, a Vice
Chairman of the Board, the President or a Vice President, and by the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company,
and delivered to the Trustee. Any Officers' Certificate delivered with respect
to compliance with a condition or a covenant provided for in this Indenture
shall include the statements specified to be so included by Section 1.07 of this
Indenture.

         "Opinion of Counsel" shall mean a written opinion of counsel, who may
be an employee of the Company, and who shall be acceptable to the Trustee.

         ["Optional Redemption Price" means _____________.]

         ["Other Debentures" means all junior subordinated debentures issued by
the Company from time to time and sold to trusts to be established by the
Company (if any), in each case similar to the Trust.]

         ["Other Guarantees" means all guarantees to be issued by the Company
with respect to preferred securities (if any) and issued to other trusts to be
established by the Company (if any), in each case similar to the Trust.]

         The term "outstanding" when used with reference to Securities, shall,
subject to the provisions of Section 7.04, mean, as of any particular time, all
Securities authenticated and delivered by the Trustee or the Authenticating
Agent under this Indenture, except the following:

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

         (b) Securities, or portions thereof, for the payment or redemption of
which moneys in the necessary amount shall have been deposited in trust with the
Trustee or with any paying agent (other than the Company) or shall have been set
aside and segregated in trust by the Company (if the Company shall act as its
own paying agent); provided that, if such Securities, or portions thereof, are
to be redeemed prior to maturity thereof, notice of such redemption shall have
been given as in Article X provided or provision satisfactory to the Trustee
shall have been made for giving such notice; and

         (c) Securities which have been paid [or converted in accordance with
Article XIII] or in lieu of or in substitution for which other Securities shall
have been authenticated and delivered pursuant to the terms of Section 2.07
unless proof satisfactory to the Company and the Trustee is presented that any
such Securities are held by bona fide holders in due course.

         "Person" shall mean any individual, corporation, estate, partnership,
joint venture, association, joint-stock company, limited liability company,
trust, unincorporated organization or government or any agency or political
subdivision thereof.



                                       5

<PAGE>


         "Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt and as that evidenced by
such particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.07 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.

         "Preferred Securities" shall mean the [preferred securities]
representing undivided beneficial interests in the assets of the Trust which
rank pari passu with the Common Securities issued by the Trust; provided,
however, that if an Event of Default has occurred and is continuing, no payments
in respect of Distributions on, or payments upon liquidation, redemption or
otherwise with respect to, the Common Securities shall be made until the holders
of the Preferred Securities shall be paid in full the Distributions and the
liquidation, redemption and other payments to which they are entitled.

         "Preferred Securities Guarantee" shall mean any guarantee that the
Company may enter into with _______________, or other Persons that operates
directly or indirectly for the benefit of holders of Preferred Securities of the
Trust.

         "Principal Office of the Trustee", or other similar term, shall mean
the office of the Trustee, at which at any particular time its corporate trust
business shall be administered.

         "Property Trustee" shall have the same meaning as set forth in the
Trust Agreement.

         "Redemption Price" means when used with respect to any Security to be
redeemed, the price at which it is to be redeemed pursuant to this Indenture.

         "Responsible Officer" shall mean any officer of the Trustee with direct
responsibility for the administration of the Indenture and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.

         "Securities" means any debt securities authenticated and delivered
under this Indenture.

         "Securities Act" shall mean the Securities Act of 1933, as amended.

         "Securityholder", "holder of Securities", or other similar terms, shall
mean any Person in whose name at the time a particular Security is registered on
the register kept by the Company or the Trustee for that purpose in accordance
with the terms hereof.

         "Security Register" shall mean (i) prior to a Dissolution Event, the
list of holders provided to the Trustee pursuant to Section 4.01, and (ii)
following a Dissolution Event, any security register maintained by a security
registrar for the Securities appointed by the Company.

         "Security Registrar" shall have the meaning assigned to it in Section
2.06(a).

         "Senior Indebtedness" shall mean all Indebtedness, whether outstanding
on the date of execution of this Indenture or hereafter created, assumed or
incurred, except Indebtedness Ranking 



                                       6

<PAGE>


on a Parity with the Securities or Indebtedness Ranking Junior to the
Securities, and any deferrals, renewals or extensions of such Senior
Indebtedness.

         ["Special Event" means either an Investment Company Event or a Tax
Event.]

         ["Special Event Redemption Price" shall mean________________.]

         "Subsidiary" shall mean with respect to any Person, (i) any corporation
at least a majority of the outstanding voting stock of which is owned, directly
or indirectly, by such Person or by one or more of its Subsidiaries, or by such
Person and one or more of its Subsidiaries, (ii) any general partnership, joint
venture or similar entity, at least a majority of whose outstanding partnership
or similar interests shall at the time be owned by such Person, or by one or
more of its Subsidiaries, or by such Person and one or more of its Subsidiaries
and (iii) any limited partnership of which such Person or any of its
Subsidiaries is a general partner. For the purposes of this definition, "voting
stock" means shares, interests, participations or other equivalents in the
equity interest (however designated) in such Person having ordinary voting power
for the election of a majority of the directors (or the equivalent) of such
Person, other than shares, interests, participations or other equivalents having
such power only by reason of the occurrence of a contingency.

         ["Tax Event" shall mean the receipt by the Trust and the Company of an
opinion of counsel experienced in such matters to the effect that, as a result
of any amendment to, or change (including any announced prospective change) in,
the laws or any regulations thereunder of the United States or any political
subdivision or taxing authority thereof or therein or as a result of any
official administrative pronouncement or judicial decision interpreting or
applying such laws or regulations, which amendment or change is effective or
which pronouncement or decision is announced on or after _____________, ____,
there is more than an insubstantial risk that (i) the Trust is, or will be
within 90 days of the date of such opinion, subject to United States Federal
income tax with respect to income received or accrued on the Securities, (ii)
interest payable by the Company on the Securities is not, or within 90 days of
the date of such opinion, will not be, deductible by the Company, in whole or in
part, for United States Federal income tax purposes, or (iii) the Trust is, or
will be within 90 days of the date of such opinion, subject to more than a de
minimis amount of other taxes, duties or other governmental charges.]

         The "Trust" shall mean Continental Airlines Finance Trust III, a
Delaware business trust created for the purpose of issuing its undivided
beneficial interests in connection with the issuance of Securities under this
Indenture.

         "Trust Indenture Act of 1939" shall mean the Trust Indenture Act of
1939 as in force at the date of execution of this Indenture; provided, however,
that, in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act of 1939" shall mean, to the extent required by any such
amendment, the Trust Indenture Act of 1939 as so amended.

         "Trustee" shall mean the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder. The term "Trustee"
as used with respect to a particular series of the Securities shall mean the
trustee with respect to that series.



                                       7

<PAGE>


         "Trust Agreement" means the Amended and Restated Declaration of Trust
of Continental Airlines Finance Trust III, dated as of ___________, as amended
from time to time.

         "Trust Securities" shall mean the Preferred Securities and the Common
Securities, collectively.

SECTION 1.02 Form of Documents Delivered to Trustee.

         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.

         Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a 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 the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.

         Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.

SECTION 1.03 Successors.

         All the covenants, stipulations, promises and agreements in this
Indenture contained by the Company shall bind its successors and assigns whether
so expressed or not.

SECTION 1.04 Indenture and Securities Solely Corporate Obligations.

         No recourse for the payment of the principal of or premium, if any, or
interest on any Security, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in this Indenture, or in any Security, or because of the creation of
any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor Person to the Company, either directly or through
the Company or any successor Person to the Company, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Securities.


                                        8

<PAGE>


SECTION 1.05 Addresses for Notices, etc.

         Any notice or demand which by any provision of this Indenture is
required or permitted to be given or served by the Trustee or by the holders of
Securities on the Company may be given or served by being deposited postage
prepaid by first class mail, registered or certified mail, overnight courier
service or conformed telecopy addressed (until another address is filed by the
Company with the Trustee for the purpose) to the Company at
____________________________. Any notice, direction, request or demand by any
Securityholder to or upon the Trustee shall be deemed to have been sufficiently
given or made, for all purposes, if given or made in writing at the office of
the Trustee at_____________________ Attention: Corporate Trust Department
(unless another address is provided by the Trustee to the Company for such
purpose). Any notice or communication to a Securityholder shall be mailed by
first class mail to his or her address shown on the register kept by the
Security Registrar.

SECTION 1.06 GOVERNING LAW.

THIS INDENTURE AND EACH SECURITY SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE.

SECTION 1.07 Evidence of Compliance with Conditions Precedent.

         Upon any application or request by the Company to the Trustee to take
any action under any of the provisions of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that in the opinion of
the signers all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with and an Opinion of
Counsel stating that, in the opinion of such counsel, all such conditions
precedent have been complied with.

         Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture (except certificates delivered pursuant to
Section 3.05) shall include (1) a statement that the Person making such
certificate or opinion has read such covenant or condition; (2) 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; (3) 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 covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.

SECTION 1.08 Business Days.

         In any case where the date of payment of principal of or premium, if
any, or interest on the Securities [or the last day on which a holder may
convert such holder's Securities] will not be a Business Day, the payment of
such principal of or premium, if any, or interest on [or conversion of] the
Securities need not be made on such date but may be made on the next succeeding
Business Day, with the same force and effect as if made on the date of payment
[or on such last day for conversion] 



                                       9

<PAGE>


and no interest shall accrue for the period from and after such date, except
that if such next succeeding Business Day falls in the next succeeding calendar
year, then such payment shall be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on such date.

SECTION 1.09 Trust Indenture Act to Control.

         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 Trust Indenture Act of 1939, such imposed duties shall
control.

SECTION 1.10 Table of Contents, Headings, etc.

         The table of contents and the titles and headings of the articles and
sections of this Indenture have been inserted for convenience of reference only,
are not to be considered a part hereof, and shall in no way modify or restrict
any of the terms or provisions hereof.

SECTION 1.11 Execution in Counterparts.

         This Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.

SECTION 1.12 Separability.

         In case any one or more of the provisions contained in this Indenture
or in the Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Securities,
but this Indenture and the Securities shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.

                                   ARTICLE II
                                   SECURITIES

SECTION 2.01 Forms Generally.

         The Securities and the Trustee's certificate of authentication shall be
substantially in the form included in Exhibit A, the terms of which are
incorporated in and made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject or usage. The Securities shall be
issued in denominations of [$1,000] and integral multiples thereof.

         The Securities shall be redeemable as provided in Article X.

         The Securities shall be subordinated in right of payment to Senior
Indebtedness as provided in Article XII.

         [The Securities shall be convertible as set forth in Article XIII.]



                                       10

<PAGE>


SECTION 2.02 Execution and Authentication.

         The Securities shall be executed on behalf of the Company by its
Chairman of the Board, a Vice Chairman of the Board, its Chief Executive
Officer, its President or one of its Vice Presidents and attested by a
Treasurer, Assistant Treasurer, Secretary or an Assistant Secretary. The
signature of any such person on the Securities may be manual or facsimile. If an
Officer whose signature is on a Security no longer holds that office at the time
the Security is authenticated, the Security shall nevertheless be valid.

         A Security shall not be valid until authenticated by the manual or
facsimile signature of the Trustee. The signature of the Trustee shall be
conclusive evidence that the Security has been authenticated under this
Indenture. The form of Trustee's certificate of authentication to be borne by
the Securities shall be substantially as set forth in Exhibit A hereto.

         Upon a Company Order, the Trustee shall authenticate for original issue
up to, and the aggregate principal amount of Securities outstanding at any time
may not exceed $__________ aggregate principal amount of the Securities, except
as provided in Sections 2.07, 2.08 and 10.05.

         Each Security shall be dated the date of its authentication.

SECTION 2.03 Form and Payment.

         Except as provided in Section 2.04, the Securities shall be issued in
fully registered certificated form without interest coupons. Principal of,
premium, if any, and interest on the Securities issued in certificated form will
be payable, the transfer of such Securities will be registrable and such
Securities will be exchangeable for Securities bearing identical terms and
provisions at the office or agency of the Company maintained for such purpose
under Section 3.02; provided, however, that payment of interest with respect to
Securities (other than a Global Security) may be made at the option of the
Company (i) by check mailed to the holder at such address as shall appear in the
Security Register or (ii) by transfer to an account maintained by the Person
entitled thereto; provided that proper transfer instructions have been received
in writing by the relevant record date. Notwithstanding the foregoing, so long
as the holder of any Securities is the Property Trustee, the payment of the
principal of, premium, if any, and interest (including Compounded Interest and
Additional Sums, if any), on such Securities held by the Property Trustee will
be made at such place and to such account as may be designated by the Property
Trustee.

SECTION 2.04 Global Security.

         (a) In connection with a Dissolution Event,

              (i) if any Preferred Securities are held in book-entry form, the
related Definitive Securities shall be presented to the Trustee (if an
arrangement with the Depositary has been maintained) by the Property Trustee in
exchange for one or more Global Securities (as may be required pursuant to
Section 2.06) in an aggregate principal amount equal to the aggregate principal
amount of all outstanding Securities, to be registered in the name of the
Depositary, or its nominee, and delivered by the Trustee to the Depositary for
crediting to the accounts of its participants 



                                       11

<PAGE>


pursuant to the instructions of the Administrative Trustees; the Company upon
any such presentation shall execute one or more Global Securities in such
aggregate principal amount and deliver the same to the Trustee for
authentication and delivery in accordance with this Indenture; and payments on
the Securities issued as a Global Security will be made to the Depositary; and

              (ii) if any Preferred Securities are held in certificated form,
the related Definitive Securities may be presented to the Trustee by the
Property Trustee and any Preferred Security certificate which represents
Preferred Securities other than Preferred Securities in book-entry form ("Non
Book-Entry Preferred Securities") will be deemed to represent beneficial
interests in Securities presented to the Trustee by the Property Trustee having
an aggregate principal amount equal to the aggregate liquidation amount of the
Non Book-Entry Preferred Securities until such Preferred Security certificates
are presented to the Security Registrar for transfer or reissuance, at which
time such Preferred Security certificates will be canceled and a Security,
registered in the name of the holder of the Preferred Security certificate or
the transferee of the holder of such Preferred Security certificate, as the case
may be, with an aggregate principal amount equal to the aggregate liquidation
amount of the Preferred Security certificate canceled, will be executed by the
Company and delivered to the Trustee for authentication and delivery in
accordance with this Indenture. Upon the issuance of such Securities, Securities
with an equivalent aggregate principal amount that were presented by the
Property Trustee to the Trustee will be canceled.

         (b) The Global Securities shall represent the aggregate amount of
outstanding Securities from time to time endorsed thereon; provided, that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Security to reflect the amount of any
increase or decrease in the amount of outstanding Securities represented thereby
shall be made by the Trustee, in accordance with instructions given by the
Company as required by this Section 2.04.

         (c) The Global Securities may be transferred, in whole but not in part,
only to the Depositary, another nominee of the Depositary, or to a successor
Depositary selected or approved by the Company or to a nominee of such successor
Depositary.

         (d) If at any time the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary or the Depositary has ceased to be
a clearing agency registered under the Exchange Act or any applicable statute or
regulation, and a successor Depositary is not appointed by the Company within 90
days after the Company receives such notice or becomes aware of such condition,
as the case may be, the Company will execute, and the Trustee, upon receipt of a
Company Order, will authenticate and make available for delivery the Definitive
Securities, in authorized denominations, and in an aggregate principal amount
equal to the principal amount of the Global Security in exchange for such Global
Security. If there is an Event of Default, the Depositary shall have the right
to exchange the Global Securities for Definitive Securities. In addition, the
Company may at any time determine that the Securities shall no longer be
represented by a Global Security. In the event of such an Event of Default or
such a determination, the Company shall execute, and subject to Section 2.06,
the Trustee, upon receipt of an Officers' Certificate evidencing such
determination by the Company and a Company Order, will authenticate and make
available for delivery the Definitive Securities, in authorized denominations,
and in an aggregate principal amount equal to the principal amount of the Global
Security in exchange for such Global Security. Upon 



                                       12

<PAGE>


the exchange of the Global Security for such Definitive Securities, in
authorized denominations, the Global Security shall be canceled by the Trustee.
Such Definitive Securities issued in exchange for the Global Security shall be
registered in such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Definitive Securities
to the Depositary for delivery to the Persons in whose names such Definitive
Securities are so registered.

SECTION 2.05 Interest.

         (a) Each Security will bear interest at the rate of ____% per annum
(the "Coupon Rate") from the most recent date to which interest has been paid or
duly provided for or, if no interest has been paid or duly provided for, from
_______________,____, until the principal thereof becomes due and payable, and
at the Coupon Rate on any overdue principal (and premium, if any) and (to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest, compounded semi- annually, payable (subject to
the provisions of Section 2.13) [semi-annually] in arrears on _________ and
_______ of each year (each, an "Interest Payment Date") commencing on
___________, ___, to the Person in whose name such Security or any predecessor
Security is registered, at the close of business on the regular record date for
such interest installment, [which shall be the fifteenth day of the month
immediately preceding the month in which the relevant Interest Payment Date
falls.]

         (b) Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months and, for any period of less than a full calendar month,
the number of days lapsed in such month. In the event that any Interest Payment
Date falls on a day that is not a Business Day, then payment of interest payable
on such date will be made on the next succeeding day which is a Business Day
(and without any interest or other payment in respect of any such delay), except
that if such next succeeding Business Day falls in the next succeeding calendar
year, then such payment shall be made on the immediately preceding Business Day,
in each case with the same force and effect as if made on the date such payment
is otherwise required.

         (c) During such time as the Property Trustee is the holder of any
Securities, the Company shall pay any additional amounts on the Securities as
may be necessary in order that the amount of Distributions then due and payable
by the Trust on the outstanding Trust Securities shall not be reduced as a
result of any additional taxes, duties and other governmental charges to which
the Trust has become subject as a result of a Tax Event ("Additional Sums").

         (d) Interest on any Security which is payable, and which is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person is whose name that Security (or one or more Predecessor Securities) is
registered at the close of business on the record date for such interest
installment.

         (e) [In the case of any Security which is converted on or after any
regular record date and on or prior to the next succeeding Interest Payment Date
(other than any Security whose maturity is prior to such Interest Payment Date),
interest whose due date is on such Interest Payment Date shall be payable on
such Interest Payment Date notwithstanding such conversion, and such interest
(whether or not punctually paid or duly provided for) shall be paid to the
Person in whose name that 


                                       13

<PAGE>


Security is registered at the close of business on such record date. Except as
otherwise expressly provided in the immediately preceding sentence, in the case
of any Security that is converted prior to any record date, interest whose due
date is after the date of conversion of such Security shall not be payable, and
the Company shall not make nor be required to make any other payment, adjustment
or allowance with respect to accrued but unpaid interest (including Additional
Sums or Compound Interest) on the Securities being converted, which shall be
deemed to be paid in full.]

SECTION 2.06 Transfer and Exchange.

         (a) The Company shall maintain an office or agency where the Securities
may be presented for registration of transfer or for exchange (the "Security
Registrar"). The Company initially appoints the Trustee as Security Registrar.

         (b) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Definitive Securities and
Global Securities in any authorized denomination and of a like aggregate
principal amount at the Security Registrar's request. All Definitive Securities
and Global Securities issued upon any registration of transfer or exchange of
Definitive Securities or Global Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same benefits under this
Indenture, as the Definitive Securities or Global Securities surrendered upon
such registration of transfer or exchange.

         Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed or be accompanied by a written instrument of transfer in a form that is
satisfactory to the Company and the Security Registrar duly executed by the
holder thereof or his attorney duly authorized in writing.

         No service charge shall be made to a holder for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith.

         The Company shall not be required to (i) issue, register the transfer
of or exchange Securities during a period beginning at the opening of business
15 days before the day of mailing of a notice of redemption or any notice of
selection of Securities for redemption under Article X hereof and ending at the
close of business on the day of such mailing; or (ii) register the transfer of
or exchange any Security so selected for redemption in whole or in part, except
the unredeemed portion of any Security being redeemed in part.

         The transfer and exchange of beneficial interests in a Global Security,
which does not involve the issuance of a Definitive Security or the transfer of
an interest to another Global Security, shall be effected through the Depositary
(but not the Trustee) in accordance with the procedures of the Depositary
therefor. The Trustee will not have any responsibility for the transfer and
exchange of beneficial interests in such Global Security that does not involve
the issuance of a Definitive Security or the transfer of interests to another
Global Security.

         Prior to due presentment for the registration of a transfer of any
Security, the Trustee, the Company and any agent of the Trustee or the Company
may deem and treat the Person in whose 



                                       14

<PAGE>


name any Security is registered as the absolute owner of such Security for the
purpose of receiving payment of principal of and premium, if any, and interest
on such Securities, neither the Trustee, nor the Company nor any agent of the
Trustee or the Company shall be affected by notice to the contrary.

SECTION 2.07 Replacement Securities.

         If any mutilated Security is surrendered to the Trustee, or the Company
and the Trustee receive evidence to their satisfaction of the destruction, loss
or theft of any Security, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements for
replacements of Securities are met. A holder requesting such replacement
Security shall supply an indemnity bond or other security that is sufficient in
the judgment of the Trustee and the Company to protect the Company, the Trustee,
any agent thereof or any authenticating agent from any loss that any of them may
suffer if a Security is replaced. The Company or the Trustee may charge for its
expenses in replacing a Security.

         Every replacement Security is an obligation of the Company and shall be
entitled to all of the benefits of this Indenture equally and proportionately
with all other Securities duly issued hereunder.

SECTION 2.08 Temporary Securities.

         Pending the preparation of Definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and make
available for delivery, temporary Securities that are printed, lithographed,
typewritten, mimeographed or otherwise reproduced, in any authorized
denomination, substantially of the tenor of the Definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as conclusively evidenced by their execution of such Securities.

         If temporary Securities are issued, the Company shall cause Definitive
Securities to be prepared without unreasonable delay. The Definitive Securities
shall be printed, lithographed or engraved, or provided by any combination
thereof, or in any other manner permitted by the rules and regulations of any
applicable securities exchange, all as determined by the officers executing such
Definitive Securities. After the preparation of Definitive Securities, the
temporary Securities shall be exchangeable for Definitive Securities upon
surrender of the temporary Securities at the office or agency maintained by the
Company for such purpose pursuant to Section 3.02 hereof, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Securities,
the Company shall execute, and the Trustee shall authenticate and make available
for delivery, in exchange therefor the same aggregate principal amount of
Definitive Securities of authorized denominations. Until so exchanged, the
temporary Securities shall in all respects be entitled to the same benefits
under this Indenture as Definitive Securities.

SECTION 2.09 Cancellation.

         The Company at any time may deliver Securities to the Trustee for
cancellation. The Trustee and no one else shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation and shall retain or destroy canceled Securities in accordance with
its 



                                       15

<PAGE>


normal practices (subject to the record retention requirement of the Exchange
Act) unless the Company directs them to be returned to it. The Company may not
issue new Securities to replace Securities that have been redeemed or paid or
that have been delivered to the Trustee for cancellation.

         All Securities surrendered for payment, redemption, [conversion,]
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee, and any such Securities and Securities surrendered
directly to the Trustee for any such purpose shall be promptly canceled by it.
Notwithstanding any other provision of this Indenture, the Company may at any
time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in any
manner whatsoever, and all Securities so delivered shall be promptly canceled by
the Trustee. No Securities shall be authenticated in lieu of or in exchange for
any Securities canceled as provided in this Section 2.9, except as expressly
permitted by this Indenture. All canceled Securities shall be destroyed by the
Trustee and the Trustee shall deliver to the Company a certificate of such
destruction.

SECTION 2.10 Defaulted Interest.

         Any interest on any Security that is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the holder on the
relevant regular record date by virtue of having been such holder; and such
Defaulted Interest shall be paid by the Company, at its election, as provided in
clause (a) or clause (b) below:

         (a) The Company may make payment of any Defaulted Interest on
Securities to the Persons in whose names such Securities (or their respective
Predecessor Securities) are registered at the close of business on a special
record date for the payment of such Defaulted Interest, which shall be fixed in
the following manner: the Company shall notify the Trustee in writing of the
amount of Defaulted Interest proposed to be paid on each such Security and the
date of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the proposed
payment, such money when deposited to be held in trust for the benefit of the
Persons entitled to such Defaulted Interest as in this clause provided.
Thereupon the Trustee shall fix a special record date for the payment of such
Defaulted Interest which shall not be more than 15 nor less than 10 days prior
to the date of the proposed payment and not less than 10 days after the receipt
by the Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such special record date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the special record date therefor to be mailed, first
class postage prepaid, to each Securityholder at his or her address as it
appears in the Security Register, not less than 10 days prior to such special
record date. Notice of the proposed payment of such Defaulted Interest and the
special record date therefor having been mailed as aforesaid, such Defaulted
Interest shall be paid to the Persons in whose names such Securities (or their
respective Predecessor Securities) are registered on such special record date
and shall be no longer payable pursuant to the following clause (b).



                                       16

<PAGE>


         (b) The Company may make payment of any Defaulted Interest on any
Securities in any other lawful manner not inconsistent with the requirements of
any securities exchange on which such Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.

SECTION 2.11 CUSIP Numbers.

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

SECTION 2.12 Right of Set Off.

         Notwithstanding anything to the contrary in this Indenture, the Company
shall have the right to set off any payment it is otherwise required to make
hereunder to the extent the Company has theretofore made, or is concurrently on
the date of such payment making, a payment under the Preferred Securities
Guarantee.

SECTION 2.13 Extension of Interest Payment Period.

         (a) So long as no Event of Default has occurred and is continuing, the
Company shall have the right, at any time and from time to time during the term
of the Securities, to defer payments of interest by extending the interest
payment period of such Securities for a period not exceeding [10] consecutive
[semi-annual] periods (or the equivalent thereof), including the first such
[semi-annual] period during such extension period (the "Extended Interest
Payment Period"); provided that no Extended Interest Payment Period shall extend
beyond the Maturity Date. To the extent permitted by applicable law, interest,
the payment of which has been deferred because of the extension of the interest
payment period pursuant to this Section 2.13(a), will bear interest thereon at
the Coupon Rate compounded [semi-annually] for each [semi-annual] period of the
Extended Interest Payment Period ("Compounded Interest"). At the end of the
Extended Interest Payment Period, the Company shall pay all interest accrued and
unpaid on the Securities, including any Additional Sums and Compounded Interest
(together, "Deferred Interest") that shall be payable to the holders of the
Securities in whose names the Securities are registered in the Security Register
on the first record date preceding the end of the Extended Interest Payment
Period. Before the termination of any Extended Interest Payment Period, the
Company may further defer payments of interest by further extending such period;
provided that such period, together with all such previous and further
extensions within such Extended Interest Payment Period, shall not exceed 10
consecutive [semi-annual] periods, including the first such [semi-annual] period
during such Extended Interest Payment Period or extend beyond the Maturity Date
of the Securities. Upon the termination of any Extended Interest Payment Period
and the payment of all Deferred Interest then due, the Company may commence a
new Extended Interest Payment Period, subject to the foregoing requirements. No


                                       17

<PAGE>


interest shall be due and payable during an Extended Interest Payment Period,
except at the end thereof.

         (b) The Company shall give written notice to the Administrative
Trustees, the Property Trustee and the Trustee of its selection of such Extended
Interest Payment Period one Business Day before the earlier of (i) the next
succeeding date on which Distributions on the Trust Securities issued by the
Trust are payable, or (ii) the date the Trust is required to give notice of the
record date, or the date such Distributions are payable, to any national
securities exchange or to holders of the Preferred Securities issued by the
Trust, but in any event at least one Business Day before such record date.

         The [semi-annual] period in which any notice is given pursuant to
paragraphs (a) or (b) of this Section 2.13(b) shall be counted as one of the
[10][semi-annual] periods permitted in the maximum Extended Interest Payment
Period permitted under Section 2.13(a).

                                  ARTICLE III
                       PARTICULAR COVENANTS OF THE COMPANY

SECTION 3.01 Payment of Principal, Premium and Interest.

         The Company covenants and agrees for the benefit of the holders of the
Securities that it will duly and punctually pay or cause to be paid the
principal of, premium, if any, and interest on the Securities at the place, at
the respective times and in the manner provided herein. The Company further
covenants to pay any and all amounts, including, without limitation, Additional
Sums, as may be required pursuant to Section 2.05(c) and Compounded Interest, as
may be required pursuant to Section 2.13(a).

SECTION 3.02 Offices for Notices and Payments, etc.

         So long as any of the Securities remain outstanding, the Company will
maintain in New York, New York, an office or agency where the Securities may be
presented for payment, an office or agency where the Securities may be presented
for registration of transfer and for exchange as in this Indenture provided and
an office or agency where notices and demands to or upon the Company in respect
of the Securities or of this Indenture may be served. The Company will give to
the Trustee written notice of the location of any such office or agency and of
any change of location thereof. Until otherwise designated from time to time by
the Company in a notice to the Trustee, any such office or agency for all of the
above purposes shall be the Principal Office of the Trustee. In case the Company
shall fail to maintain any such office or agency in New York, New York, or shall
fail to give such notice of the location or of any change in the location
thereof, presentations and demands may be made and notices may be served at the
Principal Office of the Trustee.

SECTION 3.03 Appointments to Fill Vacancies in Trustee's Office.

         The Company, whenever necessary to avoid or fill a vacancy in the
office of Trustee, will appoint, in the manner provided in Section 6.10, a
Trustee, so that there shall at all times be a Trustee hereunder.



                                       18

<PAGE>


SECTION 3.04 Provision as to Paying Agent [and Conversion Agent].

         (a) If the Company shall appoint a paying agent other than the Trustee
with respect to the Securities, it will cause such paying agent to execute and
deliver to the Trustee an instrument in which such agent shall agree with the
Trustee, subject to the provision of this Section 3.04,

              (i) that it will hold all sums held by it as such agent for the
payment of the principal of and premium, if any, or interest on the Securities
(whether such sums have been paid to it by the Company or by any other obligor
on the Securities) in trust for the benefit of the holders of the Securities and
comply with all provisions of the Trust Indenture Act applicable to it as paying
agent; and

              (ii) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Securities) to make any payment of the
principal of and premium or interest (including Additional Sums and Compounded
Interest, if any) on the Securities when the same shall be due and payable.

         (b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of and premium, if any, or interest on the
Securities, set aside, segregate and hold in trust for the benefit of the
holders of the Securities a sum sufficient to pay such principal, premium or
interest so becoming due and will notify the Trustee of any failure to take such
action and of any failure by the Company (or by any other obligor under the
Securities) to make any payment of the principal of and premium, if any, or
interest on the Securities when the same shall become due and payable.

         (c) Anything in this Section 3.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge with respect to the Securities hereunder, or for any other reason, pay
or cause to be paid to the Trustee all sums held in trust for such Securities by
the Trustee or any paying agent hereunder, as required by this Section 3.04,
such sums to be held by the Trustee upon the trusts herein contained.

         (d) Anything in this Section 3.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 3.04 is subject to
Sections 11.03 and 11.04.

         (e) The Trustee will initially act as paying agent, Security Registrar
[and Conversion Agent]. The Company may change any such entity without prior
notice. The Company or its Affiliates may act in any of the foregoing
capacities.

SECTION 3.05 Certificate to Trustee.

         The Company will deliver to the Trustee on or before 120 days after the
end of each fiscal year in each year, commencing with the first fiscal year
ending after the date hereof, so long as Securities are outstanding hereunder,
an Officers' Certificate, one of the signers of which shall be the principal
executive, principal financial or principal accounting officer of the Company,
stating that in the course of the performance by the signers of their duties as
officers of the Company they would normally have knowledge of any default by the
Company in the performance of any covenants 



                                       19

<PAGE>


contained herein, stating whether or not they have knowledge of any such default
and, if so, specifying each such default of which the signers have knowledge and
the nature thereof.

SECTION 3.06 Compliance with Consolidation Provisions.

         The Company will not, while any of the Securities remain outstanding,
consolidate with, or merge into, or merge into itself, or sell or convey all or
substantially all of its property to any other Person unless the provisions of
Article VIII hereof are complied with.

SECTION 3.07 Limitation on Certain Payments.

         The Company will not (i) declare or pay any dividends or distributions
on, or redeem, purchase, acquire, or make a liquidation payment with respect to,
any of the Company's capital stock (which includes common and preferred stock)
(other than (a) dividends or distributions in shares of, or options, warrants or
rights to subscribe for or purchase shares of, Common Stock of the Company, (b)
any declaration of a dividend in connection with the implementation of a
shareholder's rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
as a result of a reclassification of the Company's capital stock or the exchange
or the conversion of one class or series of the Company's capital stock for
another class or series of the Company's capital stock, (d) the purchase of
fractional interests in shares of the Company's capital stock pursuant to the
conversion or exchange provisions of such capital stock or the security being
converted or exchanged, and (e) purchases of Common Stock related to the
issuance of Common Stock or rights under any of the Company's benefit plans for
its directors, officers, employees or consultants or any of the Company's
dividend reinvestment plans), (ii) make any payment of principal, premium, if
any, or interest on or repay or repurchase or redeem any debt securities of the
Company (including Other Debentures) that rank pari passu with or junior in
right of payment to the Securities or (iii) make any guarantee payments with
respect to any guarantee by the Company (other than payments under the Preferred
Securities Guarantee) of the debt securities of any Subsidiary of the Company
(including Other Guarantees) if such guarantee ranks pari passu or junior in
right of payment to the Securities if at such time (1) there shall have occurred
any event of which the Company has actual knowledge that (a) with the giving of
notice or the lapse of time, or both, would constitute an Event of Default and
(b) in respect of which the Company shall not have taken reasonable steps to
cure, (2) an Event of Default hereunder shall have occurred and be continuing,
(3) if such Securities are held by the Property Trustee, the Company shall be in
default with respect to its payment obligations under the Preferred Securities
Guarantee or (4) the Company shall have given notice of its election of the
exercise of its right to extend the interest payment period pursuant to Section
2.13(a) and any such extension shall be continuing.

SECTION 3.08 Covenants as to Continental Airlines Finance Trust III.

         In the event Securities are issued to the Trust or a trustee of such
trust in connection with the issuance of Trust Securities by the Trust, for so
long as such Trust Securities remain outstanding, the Company (i) will maintain
100% direct or indirect ownership of the Common Securities of the Trust;
provided, however, that any successor of the Company, permitted pursuant to
Article VIII, may succeed to the Company's ownership of such Common Securities,
(ii) will use its reasonable efforts to cause the Trust (a) to remain a business
trust, except in connection with a distribution of 



                                       20

<PAGE>


Securities to the holders of Trust Securities in liquidation of the Trust, the
redemption of all of the Trust Securities of the Trust or certain mergers,
consolidations or amalgamations, each as permitted by the Trust Agreement of the
Trust, and (b) to otherwise continue to be treated as a grantor trust and not an
association taxable as a corporation for United States federal income tax
purposes and (iii) use its reasonable efforts to cause each holder of Trust
Securities to be treated as owning an undivided beneficial interest in the
Securities.

SECTION 3.09 Payment of Trust's Costs and Expenses.

         In connection with the offering, sale and issuance of the Securities to
the Trust and in connection with the sale of the Trust Securities by the Trust,
the Company, in its capacity as borrower with respect to the Securities, shall:

         (a) pay all costs and expenses relating to the offering, sale and
issuance of the Securities and compensation of the Trustee in accordance with
the provisions of Section 6.06;

         (b) pay all costs and expenses of the Trust (including, but not limited
to, costs and expenses relating to the organization of the Trust, the offering,
sale and issuance of the Trust Securities (including commissions to the initial
purchaser in connection therewith), the fees and expenses of the Property
Trustee and the Delaware Trustee, the costs and expenses relating to the
operation of the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses for
printing and engraving and computing or accounting equipment, paying agent(s),
registrar(s), transfer agent(s), duplicating, travel and telephone and other
telecommunications expenses and costs and expenses incurred in connection with
the acquisition, financing, and disposition of assets of the Trust;

         (c) be primarily and fully liable for any indemnification obligations
arising with respect to the Trust Agreement;

         (d) pay any and all taxes, duties, assessments or governmental charges
of whatever nature (other than United States withholding taxes attributable to
the Trust or its assets) imposed on the Trust by the United States, or any other
taxing authority, and all liabilities, costs and expenses with respect to such
taxes of the Trust; and

         (e) pay all other fees, expenses, debts and obligations (other than in
respect of distributions or other amounts payable with respect to the Trust
Securities) related to the Trust.

         The foregoing obligations of the Company are for the benefit of, and
shall be enforceable by, any person to whom any such debt, obligations, costs,
expenses and taxes are owed (each, a "Creditor") whether or not such Creditor
has received notice thereof. Any such Creditor may enforce such obligations of
the Company directly against the Company, and the Company irrevocably waives any
right or remedy to require that any such Creditor take any action against the
Trust or any person before proceeding against the Company. The Company shall
execute such additional agreements as may be necessary or desirable to give full
effect to the foregoing.



                                       21

<PAGE>


                                   ARTICLE IV
                    SECURITYHOLDERS' LISTS AND REPORTS BY THE
                             COMPANY AND THE TRUSTEE

SECTION 4.01 Securityholders' Lists.

         The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee:

         (a) on a [semi-annual] basis on each regular record date for the
Securities, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Securityholders as of such record date; and

         (b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company, of any such request, a list of similar
form and content as of a date not more than 15 days prior to the time such list
is furnished, except that, no such lists need be furnished so long as the
Trustee is in possession thereof by reason of its acting as Security Registrar.

SECTION 4.02 Preservation and Disclosure of Lists.

         (a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the holders of the
Securities (1) contained in the most recent list furnished to it as provided in
Section 4.01 or (2) received by it in the capacity of Securities registrar (if
so acting) hereunder. The Trustee may destroy any list furnished to it as
provided in Section 4.01 upon receipt of a new list so furnished.

         (b) The rights of holders of Securities to communicate with other
holders with respect to their rights under this Indenture or under the
Securities, and the corresponding rights and duties of the Trustee, shall be as
provided by the Trust Indenture Act.

         (c) Every holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of holders made pursuant to
the Trust Indenture Act.

SECTION 4.03 Reports by Company.

         (a) In accordance with the Trust Indenture Act, the Company covenants
and agrees to file with the Trustee, within 15 days after the date on which the
Company is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such
portions of any of the foregoing as said Commission may from time to time by
rules and regulations prescribe) which the Company may be required to file with
the Commission 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 such sections, then to file with the Trustee and the
Commission, in accordance with rules and regulations prescribed from time to
time by the Commission, such of the supplementary and periodic information,
documents and reports which may be required pursuant to Section 13 of the
Exchange Act in respect of a security



                                       22

<PAGE>


listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.

         (b) The Company covenants and agrees to file with the Trustee and the
Commission, in accordance with the rules and regulations prescribed from time to
time by said Commission, such additional information, documents and reports with
respect to compliance by the Company with the conditions and covenants provided
for in this Indenture as may be required from time to time by such rules and
regulations.

         (c) Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).

SECTION 4.04 Reports by the Trustee.

         (a) The Trustee shall transmit to Securityholders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto. If required by Section 313(a) of the Trust Indenture Act, the
Trustee shall, within sixty days after each ___________ following the date of
this Indenture, commencing _____________, ____, deliver to Securityholders a
brief report, dated as of such __________, which complies with the provisions of
such Section 313(a).

         (b) A copy of each such report shall, at the time of such transmission
to Securityholders, be filed by the Trustee with each stock exchange, if any,
upon which the Securities are listed, with the Commission and with the Company.
The Company will promptly notify the Trustee when the Securities are listed on
any stock exchange.

                                   ARTICLE V
                   REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS
                               ON EVENT OF DEFAULT

SECTION 5.01 Events of Default.

         "Event of Default", wherever used herein with respect to Securities,
means any one of the following events (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):

         (a) default in the payment of any interest (including Compounded
Interest or Additional Sums, if any), upon any Security when it becomes due and
payable, and continuance of such default for a period of 30 days; provided,
however, that a valid extension of an interest payment period by the Company in
accordance with the terms hereof shall not constitute a default in the payment
of interest for this purpose; or



                                       23

<PAGE>


         (b) default in the payment of all or any part of the principal of (or
premium, if any, on) any Security as and when the same shall become due and
payable either at maturity, upon redemption, by declaration of acceleration of
maturity or otherwise; or

         (c) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with), and continuance of such default or breach for a period of 90 days
after there has been given, by registered or certified mail, to the Company by
the Trustee or to the Company and the Trustee by the holders of at least 25% in
aggregate principal amount of the outstanding Securities a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or

         (d) a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Company in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or similar official) of the Company or for any substantial part of
its property, or ordering the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of 90
consecutive days; or

         (e) the Company shall commence a voluntary case under any applicable
bankruptcy, insolvency, reorganization or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary case
under any such law, or shall consent to the appointment of or taking possession
by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Company or of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due[; or

         (f) the failure by the Company to deliver Common Stock upon an election
to convert the Securities into Common Stock.]

         If an Event of Default with respect to Securities at the time
outstanding occurs and is continuing, then in every such case the Trustee or the
holders of not less than 25% in aggregate principal amount of the Securities
then outstanding may declare the principal amount of all Securities to be due
and payable immediately, by a notice in writing to the Company (and to the
Trustee if given by the holders of the outstanding Securities), and upon any
such declaration the same shall become immediately due and payable. Payment of
principal and interest (including any Compounded Interest and Additional Sums to
the extent permitted by applicable law) on such Securities shall remain
subordinated to the extent provided in Article XII notwithstanding that such
amount shall become immediately due and payable as herein provided.

         The foregoing provisions, however, are subject to the condition that
if, at any time after the principal of the Securities shall have been so
declared due and payable, and before any judgment or decree for the payment of
the moneys due shall have been obtained or entered as hereinafter provided, (i)
the Company shall pay or shall deposit with the Trustee a sum sufficient to pay
(A) all matured installments of interest (including Compounded Interest and
Additional Sums, if any) upon all the Securities and the principal of and
premium, if any, on any and all Securities which shall have 



                                       24

<PAGE>


become due otherwise than by acceleration (with interest upon such principal and
premium, if any, and, to the extent that payment of such interest is enforceable
under applicable law, on overdue installments of interest, at the same rate as
the rate of interest specified in the Securities to the date of such payment or
deposit) and (B) such amount as shall be sufficient to cover compensation due to
the Trustee and each predecessor Trustee, their respective agents, attorneys and
counsel, pursuant to Section 6.06, and (ii) any and all Events of Default under
the Indenture, other than the non-payment of the principal of the Securities
which shall have become due solely by such declaration of acceleration, shall
have been cured, waived or otherwise remedied as provided herein, then, in every
such case, the holders of a majority in aggregate principal amount of the
Securities then outstanding, by written notice to the Company and to the
Trustee, may rescind and annul such declaration and its consequences, but no
such waiver or rescission and annulment shall extend to or shall affect any
subsequent default or shall impair any right consequent thereon.

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

SECTION 5.02 Payment of Securities on Default; Suit Therefor.

         The Company covenants that (a) in case default shall be made in the
payment of any installment of interest (including Compounded Interest and
Additional Sums, if any) upon any of the Securities as and when the same shall
become due and payable, and such default shall have continued for a period of 30
days, or (b) in case default shall be made in the payment of the principal of or
premium, if any, on any of the Securities as and when the same shall have become
due and payable, whether at maturity of the Securities or upon redemption or by
declaration or otherwise, then, upon demand of the Trustee, the Company will pay
to the Trustee, for the benefit of the holders of the Securities, the whole
amount that then shall have become due and payable on all such Securities for
principal and premium, if any, or interest (including Compounded Interest and
Additional Sums, if any) or both, as the case may be, with interest upon the
overdue principal and premium, if any, and (to the extent that payment of such
interest is enforceable under applicable law and, if the Securities are held by
the Trust or a trustee of such trust, without duplication of any other amounts
paid by the Trust or a trustee in respect thereof) upon the overdue installments
of interest (including Compounded Interest and Additional Sums, if any) at the
rate borne by the Securities; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
any other amount due to the Trustee pursuant to Section 6.06.

         In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the
Securities and collect in 



                                       25

<PAGE>


the manner provided by law out of the property of the Company or any other
obligor on the Securities wherever situated the moneys adjudged or decreed to be
payable.

         In case there shall be pending proceedings for the bankruptcy or for
the reorganization of the Company or any other obligor on the Securities under
Title 11, United States Code, or any other applicable law, or in case a receiver
or trustee shall have been appointed for the property of the Company or such
other obligor, or in the case of any other similar judicial proceedings relative
to the Company or other obligor upon the Securities, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 5.02,
shall be entitled and empowered, by intervention in such proceedings or
otherwise, to take any or all of the following actions:

         (A) to file and prove a claim or claims for the whole amount of
principal, premium, if any, and interest (including Compounded Interest and
Additional Sums, if any) owing and unpaid in respect of the Securities;

         (B) in case of any judicial proceedings, to 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 amounts due to the Trustee
pursuant to 6.06) and of the Securityholders allowed in such judicial
proceedings relative to the Company or any other obligor on the Securities, or
to the creditors or property of the Company or such other obligor;

         (C) unless prohibited by applicable law and regulations, to vote on
behalf of the holders of the Securities in any election of a trustee or a
standby trustee in arrangement, reorganization, liquidation or other bankruptcy
or insolvency proceedings or person performing similar functions in comparable
proceedings; and

         (D) to collect and receive any moneys or other property payable or
deliverable on any such claims, and to distribute the same after the deduction
of its charges and expenses.

         Any receiver, assignee or trustee in bankruptcy or reorganization is
hereby authorized by each of the Securityholders to make such payments to the
Trustee, and, in the event that the Trustee shall consent to the making of such
payments directly to the Securityholders, to pay to the Trustee such amounts as
shall be sufficient to cover reasonable compensation to the Trustee, each
predecessor Trustee and their respective agents, attorneys and counsel, and all
other amounts due to the Trustee pursuant to Section 6.06.

         Nothing herein contained shall be construed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any holder thereof or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.

         The Trustee may enforce all rights of action and of asserting claims
under this Indenture, or under any of the Securities, without the possession of
any of the Securities, or the production thereof on any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the holders of the
Securities.

         In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the holders
of the Securities, and it shall not be necessary to make any holders of the
Securities parties to any such proceedings.



                                       26

<PAGE>


SECTION 5.03 Application of Moneys Collected by Trustee.

         Any moneys collected by the Trustee shall be applied in the order
following, at the date or dates fixed by the Trustee for the distribution of
such moneys, upon presentation of the Securities in respect of which moneys have
been collected, and stamping thereon the payment, if only partially paid, and
upon surrender thereof if fully paid:

         FIRST: To the payment of costs and expenses of collection applicable to
the Securities and all other amounts due to the Trustee under Section 6.06;

         SECOND: To the payment of all Senior Indebtedness of the Company if and
to the extent required by Article XII;

         THIRD: To the payment of the amounts then due and unpaid upon
Securities for principal of (and premium, if any) and interest (including
Compounded Interest and Additional Sums, if any) on the Securities, in respect
of which or for the benefit of which money has been collected, ratably, without
preference or priority of any kind, according to the amounts due on such
Securities for principal (and premium, if any) and interest, respectively; and

         FOURTH: To the Company.

SECTION 5.04 Proceedings by Securityholders.

         No holder of any Security shall have any right by virtue of or by
availing of any provision of this Indenture to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless such holder previously shall have given to the Trustee written
notice of an Event of Default and of the continuance thereof with respect to the
Securities specifying such Event of Default, as hereinbefore provided, and
unless also the holders of not less than 25% in aggregate principal amount of
the Securities then outstanding shall have made written request upon the Trustee
to institute such action, suit or proceeding in its own name as Trustee
hereunder and shall have offered to the Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby, and the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity shall have failed to institute any such action,
suit or proceeding, it being understood and intended, and being expressly
covenanted by the taker and holder of every Security with every other taker and
holder and the Trustee, that no one or more holders of Securities shall have any
right in any manner whatever by virtue of or by availing of any provision of
this Indenture to affect, disturb or prejudice the rights of any other holder of
Securities, or to obtain or seek to obtain priority over or preference to any
other such holder, or to enforce any right under this Indenture, except in the
manner herein provided and for the equal, ratable and common benefit of all
holders of Securities.

         Notwithstanding any other provisions in this Indenture, however, the
right of any holder of any Security, which right is absolute and unconditional,
to receive payment of the principal of (premium, if any) and interest (including
Compounded Interest and Additional Sums, if any) on such Security, on or after
the same shall have become due and payable, or to institute suit for the



                                       27

<PAGE>


enforcement of any such payment, shall not be impaired or affected without the
consent of such holder. By accepting a Security hereunder it is expressly
understood, intended and covenanted by the taker and holder of every Security
with every other such taker and holder and the Trustee, that no one or more
holders of Securities shall have any right in any manner whatsoever by virtue or
by availing of any provision of this Indenture to affect, disturb or prejudice
the rights of the holders of any other Securities, or to obtain or seek to
obtain priority over or preference to any other such holder, or to enforce any
right under this Indenture, except in the manner herein provided and for the
equal, ratable and common benefit of all holders of Securities. For the
protection and enforcement of the provisions of this Section, each and every
Securityholder and the Trustee shall be entitled to such relief as can be given
either at law or in equity.

         The Company acknowledges that, with respect to any Securities held by
the Trust or a trustee of such trust, if the Property Trustee of such Trust
fails to enforce its rights under this Indenture as the holder of the Securities
held as the assets of the Trust, any holder of Preferred Securities may, to the
full extent permitted by law, institute legal proceedings directly against the
Company to enforce such Property Trustee's rights under this Indenture without
first instituting any legal proceedings against such Property Trustee or any
other person or entity. Notwithstanding the foregoing, if an Event of Default
has occurred and is continuing and such event is attributable to the failure of
the Company to pay principal of or premium, if any, or interest on the
Securities when due, the Company acknowledges that a holder of Preferred
Securities may directly institute a proceeding for enforcement of payment to
such holder of the principal of or premium, if any, or interest on the
Securities having a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the respective due date
specified in the Securities.

SECTION 5.05 Proceedings by Trustee.

         In case an Event of Default occurs with respect to Securities and is
continuing, the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.

SECTION 5.06 Remedies Cumulative and Continuing.

         All powers and remedies given by this Article V to the Trustee or to
the Securityholders shall, to the extent permitted by law, be deemed cumulative
and not exclusive of any other powers and remedies available to the Trustee or
the holders of the Securities, by judicial proceedings or otherwise, to enforce
the performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to the Securities, and no delay
or omission of the Trustee or of any holder of any of the Securities to exercise
any right or power accruing upon any Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.04, every power and remedy given by this Article V or by
law to the Trustee 



                                       28

<PAGE>


or to the Securityholders may be exercised from time to time, and as often as
shall be deemed expedient, by the Trustee or by the Securityholders.

SECTION 5.07 Direction of Proceedings and Waiver of Defaults by Majority of
Securityholders.

         The holders of a majority in aggregate principal amount of the
Securities at the time outstanding shall have the right to direct the time,
method, and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee; provided,
however, that such direction shall not be in conflict with any rule or law or
with this Indenture and, (subject to the provisions of Section 6.01) the Trustee
shall have the right to decline to follow any such direction if the Trustee
shall determine that the action so directed would be unjustly prejudicial to the
holders not taking part in such direction or if the Trustee being advised by
counsel determines that the action or proceeding so directed may not lawfully be
taken or if the Trustee in good faith by its board of directors or trustees,
executive committee, or a trust committee of directors or trustees and/or
Responsible Officers shall determine that the action or proceedings so directed
would involve the Trustee in personal liability.

         Prior to any declaration accelerating the maturity of the Securities,
the holders of a majority in aggregate principal amount of the Securities at the
time outstanding may on behalf of the holders of all of the Securities waive any
past default or Event of Default and its consequences except (a) a continuing
default in the payment of principal of or premium, if any, or interest
(including Compounded Interest and Additional Sums, if any) on any of the
Securities or (b) a default in respect of covenants or provisions hereof which
cannot be modified or amended without the consent of the holder of each Security
(or Preferred Security) affected. Upon any such waiver, the default covered
thereby shall be deemed to be cured for all purposes of this Indenture and the
Company, the Trustee and the holders of the Securities shall be restored to
their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or impair any right consequent
thereon. Whenever any default or Event of Default hereunder shall have been
waived as permitted by this Section 5.07, said default or Event of Default shall
for all purposes of the Securities and this Indenture be deemed to have been
cured and to be not continuing.

SECTION 5.08 Notice of Defaults.

         (a) The Trustee shall, within 90 days after the occurrence of a default
with respect to the Securities known to a Responsible Officer of the Trustee,
mail to all Securityholders, as the names and addresses of such holders appear
upon the Security Register, notice of all defaults known to the Trustee, unless
such defaults shall have been cured before the giving of such notice (the term
"defaults" for the purpose of this Section 5.08 being hereby defined to be the
events specified in clauses (a), (b), (c), (d) and (e) of Section 5.01, not
including periods of grace, if any, provided for therein, and irrespective of
the giving of written notice specified in clause (c) of Section 5.01); and
provided that, except in the case of default in the payment of the principal of
or premium, if any, or interest (including Compounded Interest or Additional
Sums, if any) on any of the Securities, the Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or Responsible Officers of the
Trustee in good faith determines that the withholding of such notice is in the
interests of the Securityholders;



                                       29

<PAGE>


and provided further, that in the case of any default of the character specified
in Section 5.01(c) no such notice to Securityholders shall be given until at
least 60 days after the occurrence thereof but shall be given within 90 days
after such occurrence.

         (b) Within five Business Days after the occurrence of any Event of
Default actually known to the Trustee, the Trustee shall transmit notice of such
Event of Default to all Securityholders, unless such Event of Default shall have
been cured or waived.

SECTION 5.09 Undertaking to Pay Costs.

         All parties to this Indenture agree, and each holder of any Security by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion 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 such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section 5.09 shall not apply to any suit instituted by
the Company or the Trustee; to any suit instituted by any Securityholder, or
group of Securityholders, holding in the aggregate more than 25% in aggregate
principal amount of the Securities outstanding; or to any suit instituted by any
Securityholder for the enforcement of the payment of the principal of (or
premium, if any) or interest (including Compounded Interest and Additional Sums,
if any) on any Security against the Company on or after the same shall have
become due and payable.

SECTION 5.10 Waiver of Stay or Extension Laws.

         The Company covenants (to the extent that it may lawfully do so) that
it will not any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force which may affect the covenants or the
performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.

                                   ARTICLE VI
                             CONCERNING THE TRUSTEE

SECTION 6.01 Duties and Responsibilities of Trustee.

         With respect to the holders of the Securities issued hereunder, the
Trustee, prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default which may have occurred, undertakes to perform
such duties and only such duties as are specifically set forth in this
Indenture. In case an Event of Default has occurred (which has not been cured or
waived) 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 man would exercise or use under the circumstances in the conduct of
his own affairs.



                                       30

<PAGE>


         No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act or its own willful misconduct, except that:

         (a) prior to the occurrence of an Event of Default and after the curing
or waiving of all Events of Default which may have occurred,

              (i) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Indenture and the Trust Indenture Act,
and the Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Indenture or in the Trust
Indenture Act, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and

              (ii) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture;
but, in the case of any such certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture;

         (b) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer or Officers, unless it shall be proved that
the Trustee was negligent in ascertaining the pertinent facts; and

         (c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith, in accordance with the direction of the
Securityholders pursuant to Section 5.07, relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this Indenture.

         None of the provisions contained in this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur personal financial
liability in the performance of any of its duties or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or liability is not reasonably assured to it under the
terms of this Indenture or adequate indemnity against such risk is not
reasonably assured to it.

SECTION 6.02 Reliance on Documents, Opinions, etc.

         Except as otherwise provided in Section 6.01:

         (a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, bond, note, debenture or other paper or
document believed by it to be genuine and to have been signed or presented by
the proper party or parties;

         (b) prior to acting or refraining from acting, the Trustee may require
an Officers' Certificate or Opinion of Counsel to be furnished by, or on behalf
of, the Company;



                                       31

<PAGE>


         (c) any request, direction, order or demand of the Company mentioned
herein may be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of the Company;

         (d) the Trustee may consult with counsel of its selection and any
advice or Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken or suffered omitted by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;

         (e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Securityholders, pursuant to the provisions of this
Indenture, unless such Securityholders shall have offered to the Trustee
reasonable and sufficient security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby;

         (f) the Trustee shall not be liable for any action taken or omitted by
it in good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture;

         (g) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, approval, bond, debenture,
coupon or other paper or document;

         (h) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents (including
any Authenticating Agent) or attorneys, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any such agent or attorney
appointed by it with due care;

         (i) the Trustee shall not be charged with knowledge of any Default or
Event of Default with respect to the Securities unless a Responsible Officer
shall have actual knowledge of such Default or Event of Default or written
notice of such Default or Event of Default shall have been given to the Trustee
by the Company or any other obligor on the Securities or by any holder of the
Securities; and

         (j) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith, without negligence or willful misconduct and
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Indenture.

SECTION 6.03 No Responsibility for Recitals, etc.

         The recitals contained herein and in the Securities (except in the
certificate of authentication of the Trustee or the Authenticating Agent) shall
be taken as the statements of the Company and the Trustee and the Authenticating
Agent assume no responsibility for the correctness of the same. The Trustee and
the Authenticating Agent make no representations as to the validity or
sufficiency of this Indenture or of the Securities. The Trustee and the
Authenticating Agent shall not be accountable



                                       32

<PAGE>


for the use or application by the Company of any Securities or the proceeds of
any Securities authenticated and delivered by the Trustee or the Authenticating
Agent in conformity with the provisions of this Indenture.

SECTION 6.04 Trustee, Authenticating Agent, Paying Agents, Transfer Agents or
Registrar May Own Securities.

         The Trustee or any Authenticating Agent or any paying agent or any
transfer agent or any Security Registrar, in its individual or any other
capacity, may become the owner or pledgee of Securities with the same rights it
would have if it were not Trustee, Authenticating Agent, paying agent, transfer
agent or Security Registrar.

SECTION 6.05 Moneys to be Held in Trust.

         Subject to the provisions of Section 11.04, all moneys received by the
Trustee or any paying agent shall, until used or applied as herein provided, be
held in trust for the purpose for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
and any paying agent shall be under no liability for interest on any money
received by it hereunder except as otherwise agreed in writing with the Company.
So long as no Event of Default shall have occurred and be continuing, all
interest allowed on any such moneys shall be paid from time to time upon the
written order of the Company, signed by the Chairman of the Board of Directors,
the President, a Vice President, the Treasurer or an Assistant Treasurer of the
Company.

SECTION 6.06 Compensation and Expenses of Trustee.

         The Company, as issuer of Securities under this Indenture, covenants
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, such compensation as shall be agreed to in writing between the
Company and the Trustee (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust), and the Company
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith. The Company also covenants to indemnify
each of the Trustee or any predecessor Trustee (and its officers, agents,
directors and employees) for, and to hold it harmless against, any and all loss,
damage, claim, liability or expense including taxes (other than taxes based on
the income of the Trustee) incurred without negligence or bad faith on the part
of the Trustee and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability in the premises. The obligations of the
Company under this Section 6.06 to compensate and indemnify the Trustee and to
pay or reimburse the Trustee for expenses, disbursements and advances shall
constitute additional indebtedness hereunder. Such additional indebtedness shall
be secured by a lien prior to that of the Securities upon all property and funds
held or collected by the Trustee as such, except funds held in trust for the
benefit of the holders of particular Securities.



                                       33

<PAGE>


         When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 5.01(d) or Section 5.01(e), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable federal or state bankruptcy, insolvency or
other similar law.

         The provisions of this Section shall survive the resignation or removal
of the Trustee and the defeasance or other termination of this Indenture.

SECTION 6.07 Officers' Certificate as Evidence.

         Except as otherwise provided in Sections 6.01 and 6.02, whenever in the
administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, such matter (unless other evidence in respect
thereof is herein specifically prescribed) may, in the absence of negligence or
bad faith on the part of the Trustee, be deemed to be conclusively proved and
established by an Officers' Certificate delivered to the Trustee, and such
certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken or omitted by
it under the provisions of this Indenture upon the faith thereof.

SECTION 6.08 Conflicting Interest of Trustee.

         If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and the
Company shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.

SECTION 6.09 Eligibility of Trustee.

         The Trustee hereunder shall at all times be a corporation organized and
doing business under the laws of the United States of America or any state or
territory thereof or of the District of Columbia or a corporation or other
Person permitted to act as trustee by the Commission authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least 50 million U.S. dollars ($50,000,000) and subject to supervision or
examination by federal, state, territorial, or District of Columbia authority.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 6.09 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.

         The Company may not, nor may any Person directly or indirectly
controlling, controlled by, or under common control with the Company, serve as
Trustee.

         In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 6.09, the Trustee shall resign
immediately in the manner and with the effect specified in Section 6.10.



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<PAGE>


SECTION 6.10 Resignation or Removal of Trustee.

         (a) The Trustee, or any trustee or trustees hereafter appointed, may at
any time resign by giving written notice of such resignation to the Company and
by mailing notice thereof to the holders of the Securities at their addresses as
they shall appear on the Security register. Upon receiving such notice of
resignation, the Company shall promptly appoint a successor trustee or trustees
by written instrument, in duplicate, one copy of which instrument shall be
delivered to the resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted appointment
within 60 days after the mailing of such notice of resignation to the affected
Securityholders, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Securityholder
who has been a bona fide holder of a Security for at least six months may,
subject to the provisions of Section 5.09, on behalf of himself and all others
similarly situated, petition any such court for the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor trustee.

         (b) In case at any time any of the following shall occur:

              (i) the Trustee shall fail to comply with the provisions of
Section 6.08 after written request therefor by the Company or by any
Securityholder who has been a bona fide holder of a Security or Securities for
at least six months, or

              (ii) the Trustee shall cease to be eligible in accordance with the
provisions of Section 6.09 and shall fail to resign after written request
therefor by the Company or by any such Securityholder, or

              (iii) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or control
of the Trustee or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, then, in any such case, the Company may remove the
Trustee and appoint a successor trustee by written instrument, in duplicate, one
copy of which instrument shall be delivered to the Trustee so removed and one
copy to the successor trustee, or, subject to the provisions of Section 5.09,
any Securityholder who has been a bona fide holder of a Security for at least
six months may, on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper, remove the Trustee and appoint a successor
trustee.

         (c) The holders of a majority in aggregate principal amount of the
Securities at the time outstanding may at any time remove the Trustee and
nominate a successor trustee, which shall be deemed appointed as successor
trustee unless within 10 days after such nomination the Company objects thereto
or if no successor trustee shall have been so appointed and shall have accepted
appointment within 30 days after such removal, in which case the Trustee so
removed or any Securityholder, upon the terms and conditions and otherwise as in
subsection (a) of this Section 6.10 provided, may petition any court of
competent jurisdiction for an appointment of a successor trustee.



                                       35

<PAGE>


         (d) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 6.10 shall
become effective only upon acceptance of appointment by the successor trustee as
provided in Section 6.11.

SECTION 6.11 Acceptance by Successor Trustee.

         Any successor trustee appointed as provided in Section 6.10 shall
execute, acknowledge and deliver to the Company and to its predecessor trustee
an instrument accepting such appointment hereunder, and thereupon the
resignation or removal of the retiring trustee shall become effective and such
successor trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as trustee herein; but,
nevertheless, on the written request of the Company or of the successor trustee,
the trustee ceasing to act shall, upon payment of any amounts then due it
pursuant to the provisions of Section 6.06, execute and deliver an instrument
transferring to such successor trustee all the rights and powers of the trustee
so ceasing to act and shall duly assign, transfer and deliver to such successor
trustee all property and money held by such retiring trustee thereunder. Upon
request of any such successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act
shall, nevertheless, retain a lien upon all property or funds held or collected
by such trustee to secure any amounts then due it pursuant to the provisions of
Section 6.06.

         No successor trustee shall accept appointment as provided in this
Section 6.11 unless at the time of such acceptance such successor trustee shall
be qualified under the provisions of Section 6.08 and eligible under the
provisions of Section 6.09.

         Upon acceptance of appointment by a successor trustee as provided in
this Section 6.11, the Company shall mail notice of the succession of such
trustee hereunder to the holders of Securities at their addresses as they shall
appear on the Security register. If the Company fails to mail such notice within
10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.

SECTION 6.12 Succession by Merger, etc.

         Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder without
the execution or filing of any paper or any further act on the part of any of
the parties hereto provided such corporations shall be otherwise qualified and
eligible under this Article.

         In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any Securities shall have been authenticated
but not delivered, any such successor to the Trustee may adopt the certificate
of authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of 



                                       36

<PAGE>


any predecessor hereunder or in the name of the successor trustee; and in all
such cases such certificates shall have the full force which the Securities or
this Indenture elsewhere provides that the certificate of the Trustee shall
have; provided, however, that the right to adopt the certificate of
authentication of any predecessor Trustee or authenticate Securities in the name
of any predecessor Trustee shall apply only to its successor or successors by
merger, conversion or consolidation.

SECTION 6.13 Limitation on Rights of Trustee as a Creditor.

         The Trustee shall comply with Section 311(a) of the Trust Indenture
Act. A Trustee who has resigned or been removed shall be subject to Section
311(a) of the Trust Indenture Act to the extent included therein.

SECTION 6.14 Authenticating Agents.

         There may be one or more Authenticating Agents appointed by the Trustee
upon the request of the Company with power to act on its behalf and subject to
its direction in the authentication and delivery of Securities issued upon
exchange or transfer thereof as fully to all intents and purposes as though any
such Authenticating Agent had been expressly authorized to authenticate and
deliver Securities; provided, that the Trustee shall have no liability to the
Company for any acts or omissions of the Authenticating Agent with respect to
the authentication and delivery of Securities. Any such Authenticating Agent
shall at all times be a corporation organized and doing business under the laws
of the United States or of any state or territory thereof or of the District of
Columbia authorized under such laws to act as Authenticating Agent, having a
combined capital and surplus of at least $50,000,000 and being subject to
supervision or examination by federal, state, territorial or District of
Columbia authority. If such corporation publishes reports of condition at least
annually pursuant to law or the requirements of such authority, then for the
purposes of this Section 6.14 the combined capital and surplus of such
corporation shall be deemed to be its combined capital and surplus as set forth
in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect herein specified in this Section.

         Any corporation into which any Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authenticating Agent
shall be a party, or any corporation succeeding to the corporate trust business
of any Authenticating Agent, shall be the successor of such Authenticating Agent
hereunder, if such successor corporation is otherwise eligible under this
Section 6.14 without the execution or filing of any paper or any further act on
the part of the parties hereto or such Authenticating Agent.

         Any Authenticating Agent may at any time resign by giving written
notice of resignation to the Trustee and to the Company. The Trustee may at any
time terminate the agency of any Authenticating Agent by giving written notice
of termination to such Authenticating Agent and to the Company. Upon receiving
such a notice of resignation or upon such a termination, or in case at any time
any Authenticating Agent shall cease to be eligible under this Section 6.14, the
Trustee may, and upon the request of the Company shall, promptly appoint a
successor Authenticating Agent eligible under this Section 6.14, shall give
written notice of such appointment to the Company and 



                                       37

<PAGE>


shall mail notice of such appointment to all Securityholders as the names and
addresses of such holders appear on the Security Register. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all rights, powers, duties and responsibilities of its predecessor
hereunder, with like effect as if originally named as Authenticating Agent
herein.

         The Company, as borrower, agrees to pay to any Authenticating Agent
from time to time reasonable compensation for its services. Any Authenticating
Agent shall have no responsibility or liability for any action taken by it as
such in accordance with the directions of the Trustee.

                                  ARTICLE VII
                         CONCERNING THE SECURITYHOLDERS

SECTION 7.01 Action by Securityholders.

         Whenever in this Indenture it is provided that the holders of a
specified percentage in aggregate principal amount of the Securities may take
any action (including the making of any demand or request, the giving of any
notice, consent or waiver or the taking of any other action) the fact that at
the time of taking any such action the holders of such specified percentage have
joined therein may be evidenced by any instrument or any number of instruments
of similar tenor executed by such Securityholders in person or by agent or proxy
appointed in writing.

         If the Company shall solicit from the Securityholders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, as evidenced by an Officers' Certificate, fix in
advance a record date for the determination of Securityholders entitled to give
such request, demand, authorization, direction, notice, consent, waiver or other
action, but the Company shall have no obligation to do so. If such a record date
is fixed, such request, demand, authorization, direction, notice, consent,
waiver or other action may be given before or after the record date, but only
the Securityholders of record at the close of business on the record date shall
be deemed to be Securityholders for the purposes of determining whether
Securityholders of the requisite proportion of outstanding Securities have
authorized or agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other action, and for that purpose the
outstanding Securities shall be computed as of the record date; provided,
however, that no such authorization, agreement or consent by such
Securityholders on the record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Indenture not later than six
months after the record date.

SECTION 7.02 Proof of Execution by Securityholders.

         Subject to the provisions of Section 6.01 and 6.02, proof of the
execution of any instrument by a Securityholder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The ownership of Securities shall be proved by the Security
Register or by a certificate of the Security Registrar. The Trustee may require
such additional proof of any matter referred to in this Section as it shall deem
necessary.



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<PAGE>


SECTION 7.03 Who Are Deemed Absolute Owners.

         Prior to due presentment for registration of transfer of any Security,
the Company, the Trustee, any Authenticating Agent, any paying agent, any
transfer agent and any Security Registrar may deem the person in whose name such
Security shall be registered upon the Security Register to be, and may treat him
as, the absolute owner of such Security (whether or not such Security shall be
overdue) for the purpose of receiving payment of or on account of the principal
of and premium, if any, and (subject to Section 2.05) interest on such Security
and for all other purposes; and neither the Company nor the Trustee nor any
Authenticating Agent nor any paying agent nor any transfer agent nor any
Security Registrar shall be affected by any notice to the contrary. All such
payments so made to any holder for the time being or upon his order shall be
valid, and, to the extent of the sum or sums so paid, effectual to satisfy and
discharge the liability for moneys payable upon any such Security.

SECTION 7.04 Securities Owned by Company Deemed Not Outstanding.

         In determining whether the holders of the requisite aggregate principal
amount of Securities have concurred in any direction, consent, notice or waiver
under this Indenture, Securities which are owned by the Company or any other
obligor on the Securities or any Affiliate of the Company (other than the Trust)
or any other obligor on the Securities shall be disregarded and deemed not to be
outstanding for the purpose of any such determination; provided that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, consent or waiver, only Securities which a Responsible Officer
of the Trustee actually knows are so owned shall be so disregarded. Securities
so owned which have been pledged in good faith may be regarded as outstanding
for the purposes of this Section 7.04 if the pledgee shall establish to the
satisfaction of the Trustee the pledgee's right to vote such Securities and that
the pledgee is not the Company or any such other obligor or Affiliate of the
Company or any such other obligor. In the case of a dispute as to such right,
any decision by the Trustee taken upon the advice of counsel shall be full
protection to the Trustee.

SECTION 7.05 Revocation of Consents; Future Holders Bound.

         At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the holders of the
percentage in aggregate principal amount of the Securities specified in this
Indenture in connection with such action, any holder of a Security (or any
Security issued in whole or in part in exchange or substitution therefor),
subject to Section 7.01, the serial number of which is shown by the evidence to
be included in the Securities the holders of which have consented to such action
may, by filing written notice with the Trustee at its principal office and upon
proof of holding as provided in Section 7.02, revoke such action so far as
concerns such Security (or so far as concerns the principal amount represented
by any exchanged or substituted Security). Except as aforesaid any such action
taken by the holder of any Security shall be conclusive and binding upon such
holder and upon all future holders and owners of such Security, and of any
Security issued in exchange or substitution therefor, irrespective of whether or
not any notation in regard thereto is made upon such Security or any Security
issued in exchange or substitution therefor.



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<PAGE>


                                  ARTICLE VIII
                CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE

SECTION 8.01 Company May Consolidate, etc., on Certain Terms.

         Nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of the Company with or into any other Person
(whether or not affiliated with the Company, as the case may be), or successive
consolidations or mergers in which the Company or its successor or successors,
as the case may be, shall be a party or parties, or shall prevent any sale,
conveyance, transfer or lease of the property of the Company, or its successor
or successors as the case may be, as an entirety, or substantially as an
entirety, to any other Person (whether or not affiliated with the Company, or
its successor or successors, as the case may be) authorized to acquire and
operate the same; provided, that (a) the Company is the surviving Person, or the
Person formed by or surviving any such consolidation or merger (if other than
the Company) or to which such sale, conveyance, transfer or lease of property is
made is a Person organized and existing under the laws of the United States or
any State thereof or the District of Columbia, and (b) upon any such
consolidation, merger, sale, conveyance, transfer or lease, the due and punctual
payment of the principal of (and premium, if any) and interest on the Securities
according to their tenor and the due and punctual performance and observance of
all the covenants and conditions of this Indenture to be kept or performed by
the Company shall be expressly assumed, by supplemental indenture (which shall
conform to the provisions of the Trust Indenture Act, as then in effect)
satisfactory in form to the Trustee executed and delivered to the Trustee by the
Person formed by such consolidation, or into which the Company shall have been
merged, or by the Person which shall have acquired such property, as the case
may be[, which supplemental indenture shall provide for conversion rights in
accordance with Article XIII] and (c) after giving effect to such consolidation,
merger, sale, conveyance, transfer or lease, no Default or Event of Default
shall have occurred and be continuing.

SECTION 8.02 Successor Corporation to be Substituted for Company.

         In case of any such consolidation, merger, sale, conveyance, transfer
or lease and upon the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in form to the
Trustee, of the due and punctual payment of the principal of and premium, if
any, and interest (including any Additional Sums or Compounded Interest) on all
of the Securities and the due and punctual performance and observance of all of
the covenants and conditions of this Indenture to be performed or observed by
the Company, such successor Person shall succeed to and be substituted for the
Company, with the same effect as if it had been named herein as the party of the
first part, and the Company thereupon shall be relieved of any further liability
or obligation hereunder or upon the Securities. Such successor Person thereupon
may cause to be signed, and may issue either in its own name or in the name of
Continental Airlines, Inc. any or all of the Securities issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee or the Authenticating Agent; and, upon the order of such successor
Person instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee or the Authenticating
Agent shall authenticate and deliver any Securities which previously shall have
been signed and delivered by the officers of the Company to the Trustee or the
Authenticating Agent for authentication, and any Securities which such successor
Person thereafter shall cause to be signed and delivered to the Trustee or the
Authenticating Agent 



                                       40

<PAGE>


for that purpose. All the Securities so issued shall in all respects have the
same legal rank and benefit under this Indenture as the Securities theretofore
or thereafter issued in accordance with the terms of this Indenture as though
all of such Indentures had been issued at the date of the execution hereof.

SECTION 8.03 Opinion of Counsel to be Given Trustee.

         The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Opinion of Counsel as conclusive evidence that any consolidation,
merger, sale, conveyance, transfer or lease, and any assumption, permitted or
required by the terms of this Article VIII complies with the provisions of this
Article VIII.

                                   ARTICLE IX
                             SUPPLEMENTAL INDENTURES

SECTION 9.01 Without Consent of Securityholders.

         The Company, when authorized by a Board Resolution, and the Trustee may
from time to time and at any time enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, without the consent of the
Securityholders, for one or more of the following purposes:

         (a) to evidence the succession of another Person to the Company, or
successive successions, and the assumption by the successor Person of the
covenants, agreements and obligations of the Company herein and in the
Securities pursuant to Article VIII hereof;

         (b) to add to the covenants of the Company such further covenants,
restrictions or conditions for the protection of the Securityholders as the
Board of Directors and the Trustee shall consider to be for the protection of
the Securityholders, and to make the occurrence, or the occurrence and
continuance, of a default in any of such additional covenants, restrictions or
conditions a default or an Event of Default permitting the enforcement of all or
any of the remedies provided in this Indenture as herein set forth; provided,
however, that in respect of any such additional covenant, restriction or
condition such amendment may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;

         (c) to provide for the issuance under this Indenture of Securities in
coupon form (including Securities registrable as to principal only) and to
provide for exchangeability of such Securities with the Securities issued
hereunder in fully registered form and to make all appropriate changes for such
purpose;

         (d) to cure any ambiguity or to correct or supplement any provision
contained herein or in any supplemental indenture which may be defective or
inconsistent with any other provision contained herein or in any supplemental
indenture, or to make such other provisions in regard to matters or questions
arising under this Indenture; provided that any such action shall not materially
adversely affect the interests of the holders of the Securities;



                                       41

<PAGE>


         (e) to evidence and provide for the acceptance of appointment hereunder
by a successor trustee with respect to the Securities;

         (f) to make provision for transfer procedures, certification, book-
entry provisions, the form of restricted securities legends, if any, to be
placed on Securities, and all other matters required pursuant to Section 2.06 or
otherwise necessary, desirable or appropriate in connection with the issuance of
Securities to holders of Preferred Securities in the event of a distribution of
Securities by the Trust following a Dissolution Event;

         (g) to qualify or maintain qualification of this Indenture under the
Trust Indenture Act[; or

         (h) to make provision with respect to the conversion of Securities
pursuant to the requirements of Article XIII].

         The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture to effect such amendment, to make any
further appropriate agreements and stipulations which may be therein contained
and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.

         Any amendment to the Indenture authorized by the provisions of this
Section 9.01 may be executed by the Company and the Trustee without the consent
of the holders of any of the Securities at the time outstanding, notwithstanding
any of the provisions of Section 9.02.

SECTION 9.02 With Consent of Securityholders.

         With the consent (evidenced as provided in Section 7.01) of the holders
of a majority in aggregate principal amount of the Securities at the time
outstanding, the Company, when authorized by a Board Resolution, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the holders of the Securities; provided,
however, that no such amendment shall without the consent of the holders of each
Security then outstanding and affected thereby (i) change the Maturity Date of
any Security, or reduce the rate of interest (including Compounded Interest) or
extend the time of payment of interest thereon (except as contemplated by
Section 2.13), or reduce the principal amount thereof or the amount of premium
thereon, if any, or reduce any amount payable on redemption thereof, or make the
principal thereof or any interest or premium thereon payable in any coin or
currency other than that provided in the Securities, or impair or affect the
right of any Securityholder to institute suit for payment thereof [or adversely
affect the right to convert such Security as provided in Article XIII], (ii)
modify the provisions of this Indenture with respect to the subordination of the
Securities in a manner adverse to the holders of Securities, (iii) reduce the
aforesaid percentage of Securities the holders of which are required to consent
to any such amendment to the Indenture, or the consent of whose holders is
required for any waiver (of compliance with certain provisions of this Indenture
or certain defaults hereunder and their 



                                       42

<PAGE>


consequences) provided for in this Indenture or (iv) modify any of the
provisions of the first paragraph of this Section 9.02, or the second sentence
of Section 5.07, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived without
the consent of the holder of each outstanding Security affected thereby;
provided, however, that if the Securities are held by the Trust, such amendment
shall not be effective until the holders of a majority in liquidation amount of
Trust Securities shall have consented to such amendment; provided, further, that
if the consent of the holder of each outstanding Security is required, such
amendment shall not be effective until each holder of the Trust Securities shall
have consented to such amendment.

         Upon the request of the Company accompanied by a copy of a resolution
of the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any supplemental indenture affecting such
amendment, and upon the filing with the Trustee of evidence of the consent of
Securityholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion, but shall not be
obligated to, enter into such supplemental indenture.

         Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Trustee
shall transmit by mail, first class postage prepaid, a notice, prepared by the
Company, setting forth in general terms the substance of such supplemental
indenture, to the Securityholders as their names and addresses appear upon the
Security Register. Any failure of the Trustee to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.

         It shall not be necessary for the consent of the Securityholders under
this Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.

SECTION 9.03 Compliance with Trust Indenture Act; Effect of Supplemental
Indentures.

         Any supplemental indenture executed pursuant to the provisions of this
Article IX shall comply with the Trust Indenture Act. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article IX, this
Indenture 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 of the Trustee, the Company and the holders
of Securities shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.

SECTION 9.04 Notation on Securities.

         Securities authenticated and delivered after the execution of any
supplemental indenture affecting such series pursuant to the provisions of this
Article IX may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the 



                                       43

<PAGE>


Company or the Trustee shall so determine, new Securities so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any
modification of this Indenture contained in any such supplemental indenture may
be prepared and executed by the Company, authenticated by the Trustee or the
Authenticating Agent and delivered in exchange for the Securities then
outstanding.

SECTION 9.05 Evidence of Compliance of Supplemental Indenture to be Furnished
Trustee.

         The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive, in addition to the document required by Section 1.07, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant hereto complies with the requirements
of this Article IX.

                                   ARTICLE X
                                   REDEMPTION

SECTION 10.01 Special Event Redemption.

         [If, at any time, a Special Event has occurred and is continuing then,
notwithstanding Section 10.02(a), the Company shall have the right but not the
obligation, at any time within 90 days following the occurrence of such Special
Event, upon (i) not less than 45 days' written notice to the Trustee and (ii)
not less than 30 days' nor more than 60 days' written notice to the
Securityholders, to redeem the Securities, in whole (but not in part), at the
Special Event Redemption Price. Following a Special Event, if the Company wishes
to exercise its right of redemption pursuant to this Section 10.01, the Company
shall take such action as is necessary to promptly determine the Special Event
Redemption Price, including without limitation the appointment by the Company of
a Reference Treasury Dealer. The Company shall provide the Trustee with written
notice of the Special Event Redemption Price promptly after the calculation
thereof, which notice shall include any calculation made by the Reference
Treasury Dealer in connection with the determination of the Special Event
Redemption Price. The Special Event Redemption Price shall be paid prior to
12:00 noon, New York City time, on the date of such redemption or such earlier
time as the Company determines, provided that the Company shall deposit with the
Trustee an amount sufficient to pay the Special Event Redemption Price by 10:00
a.m., New York City time, on the date such Special Event Redemption Price is to
be paid.]

SECTION 10.02 Optional Redemption by Company.

         [Subject to the provisions of this Article X, the Company shall have
the right to redeem the Securities, in whole or in part, from time to time, at a
redemption price equal to the Optional Redemption Price.

         If the Securities are only partially redeemed pursuant to this Section
10.02, the Securities to be redeemed shall be selected on a pro rata basis not
more than 60 days prior to the date fixed for redemption from the outstanding
Securities not previously called for redemption; provided that any such
proration may be made on the basis of the aggregate principal amount of
Securities held by each Securityholder and may be made by making such
adjustments as the Company deems fair and appropriate in order that only
Securities in denominations of [$1,000] or integral multiples thereof 



                                       44

<PAGE>


shall be redeemed. The Optional Redemption Price shall be paid prior to 12:00
noon, New York City time, on the date of such redemption or at such earlier time
as the Company determines; provided that the Company shall deposit with the
Trustee an amount sufficient to pay the Optional Redemption Price by 10:00 a.m.,
New York City time, on the date such Optional Redemption Price is to be paid.]

SECTION 10.03 No Sinking Fund.

         The Securities are not entitled to the benefit of any sinking fund.

SECTION 10.04 Notice of Redemption; Selection of Securities.

         In case the Company shall desire to exercise the right to redeem all,
or, as the case may be, any part of the Securities in accordance with their
terms, it shall fix a date for redemption and shall mail a notice of such
redemption at least 30 and not more than 60 days prior to the date fixed for
redemption to the holders of Securities so to be redeemed as a whole or in part
at their last addresses as the same appear on the Security Register. Such
mailing shall be by first class mail. The notice if mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.

         Each such notice of redemption shall specify the CUSIP number of the
Securities to be redeemed, the date fixed for redemption, the redemption price
at which the Securities are to be redeemed (or the method by which such
redemption price is to be calculated), the place or places of payment that
payment will be made upon presentation and surrender of the Securities, that
interest accrued to the date fixed for redemption will be paid as specified in
said notice, [the date on which the right to convert the Securities to be
redeemed will terminate and the places where such Securities may be surrendered
for conversion,] and that on and after said date interest thereon or on the
portions thereof to be redeemed will cease to accrue. If less than all the
Securities are to be redeemed the notice of redemption shall specify the numbers
of the Securities to be redeemed. In case any Security is to be redeemed in part
only, the notice of redemption shall state the portion of the principal amount
thereof to be redeemed and shall state that on and after the date fixed for
redemption, upon surrender of such Security, a new Security or Securities in
principal amount equal to the unredeemed portion thereof will be issued.

         The Company will give the Trustee notice not less than 45 days prior to
the redemption date as to the aggregate principal amount of Securities to be
redeemed and the Trustee shall select, in such manner as in its sole discretion
it shall deem appropriate and fair, the Securities or portions thereof (in
integral multiples of [$1,000], except as otherwise set forth in the applicable
form of Security) to be redeemed.

SECTION 10.05 Payment of Securities Called for Redemption.

         By 12:00 noon New York City time on the redemption date specified in
the notice of redemption given as provided in this Section, the Company will
deposit with the Trustee or with one 



                                       45

<PAGE>


or more paying agents an amount of money sufficient to redeem on the redemption
date all the Securities so called for redemption at the appropriate Redemption
Price, together with accrued interest to the date fixed for redemption.

         [If any Security called for redemption is converted, any money
deposited with the Trustee or with any paying agent or so segregated and held in
trust for the redemption of such Security shall be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.]

         If notice of redemption has been given as provided in Section 10.04,
the Securities or portions of Securities with respect to which such notice has
been given shall become due and payable on the date and at the place or places
stated in such notice at the applicable Redemption Price, together with interest
accrued to the date fixed for redemption (subject to the rights of holders of
Securities on the close of business on a regular record date in respect of an
Interest Payment Date occurring on or prior to the redemption date), and on and
after said date (unless the Company shall default in the payment of such
Securities at the Redemption Price, together with interest accrued to said date)
interest (including Compounded Interest and Additional Sums, if any) on the
Securities or portions of Securities so called for redemption shall cease to
accrue. On presentation and surrender of such Securities at a place of payment
specified in said notice, the said Securities or the specified portions thereof
shall be paid and redeemed by the Company at the applicable Redemption Price,
together with interest (including Compounded Interest and Additional Sums, if
any) accrued thereon to the date fixed for redemption (subject to the rights of
holders of Securities on the close of business on a regular record date in
respect of an Interest Payment Date occurring on or prior to the redemption
date).

         Upon presentation of any Security redeemed in part only, the Company
shall execute and the Trustee shall authenticate and make available for delivery
to the holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations, in principal amount equal to the
unredeemed portion of the Security so presented.

                                   ARTICLE XI
                     SATISFACTION AND DISCHARGE OF INDENTURE

SECTION 11.01 Discharge of Indenture.

         When (a) the Company shall deliver to the Trustee for cancellation all
Securities theretofore authenticated (other than any Securities which shall have
been destroyed, lost or stolen and which shall have been replaced as provided in
Section 2.07) and not theretofore canceled, or (b) all the Securities not
theretofore canceled or delivered to the Trustee for cancellation shall have
become due and payable, or are by their terms to become due and payable within
one year or are to be called for redemption within one year under arrangements
satisfactory to the Trustee for the giving of notice of redemption, and the
Company shall deposit with the Trustee, in trust, funds sufficient to pay on the
Maturity Date or upon redemption all of the Securities (other than any
Securities which shall have been destroyed, lost or stolen and which shall have
been replaced as provided in Section 2.07) not theretofore canceled or delivered
to the Trustee for cancellation, including principal and premium, if any, and
interest (including Compounded Interest and Additional Sums, if any) due or 



                                       46

<PAGE>


to become due to the Maturity Date or redemption date, as the case may be, but
excluding, however, the amount of any moneys for the payment of principal of or
premium, if any, or interest (including Compounded Interest and Additional Sums,
if any) on the Securities (1) theretofore repaid to the Company in accordance
with the provisions of Section 11.04, or (2) paid to any State or to the
District of Columbia pursuant to its unclaimed property or similar laws, and if
in either case the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect except for the provisions of Sections 2.02, 2.06, 2.07, 6.10,
11.04 [and Article XIII] hereof, which shall survive until such Securities shall
mature and be paid [or are converted]. Thereafter, Sections 6.10 and 11.04 shall
survive, and the Trustee, on demand of the Company accompanied by any Officers'
Certificate and an Opinion of Counsel and at the cost and expense of the
Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture, the Company, however, hereby agreeing to reimburse
the Trustee for any costs or expenses thereafter reasonably and properly
incurred by the Trustee in connection with this Indenture or the Securities.

SECTION 11.02 Deposited Moneys to be Held in Trust by Trustee.

         Subject to the provisions of Section 11.04, all moneys deposited with
the Trustee pursuant to Sections 11.01 shall be held in trust and applied by it
to the payment, either directly or through any paying agent (including the
Company if acting as its own paying agent), to the holders of the particular
Securities for the payment of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal, premium, if
any, and interest.

SECTION 11.03 Paying Agent to Repay Moneys Held.

         Upon the satisfaction and discharge of this Indenture all moneys then
held by any paying agent of the Securities (other than the Trustee) shall, upon
written demand of the Company, be repaid to it or paid to the Trustee, and
thereupon such paying agent shall be released from all further liability with
respect to such moneys.

SECTION 11.04 Return of Unclaimed Moneys.

         Any moneys deposited with or paid to the Trustee or any paying agent
for payment of the principal of or premium, if any, or interest on Securities
and not applied but remaining unclaimed by the holders of Securities for two
years after the date upon which the principal of or premium, if any, or interest
(including Compounded Interest and Additional Sums, if any) on such Securities,
as the case may be, shall have become due and payable, shall be repaid to the
Company by the Trustee or such paying agent on written demand; and the holder of
any of the Securities shall thereafter look only to the Company for any payment
which such holder may be entitled to collect and all liability of the Trustee or
such paying agent with respect to such moneys shall thereupon cease. [All moneys
deposited with the Trustee pursuant to Section 11.01 (and held by it or any
paying agent) for the payment of Securities subsequently converted shall be
returned to the Company upon Company Request.]



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<PAGE>


                                  ARTICLE XII
                                 SUBORDINATION


SECTION 12.01 Agreement to Subordinate.

         The Company covenants and agrees, and each holder of Securities issued
hereunder likewise covenants and agrees, that the Securities shall be issued
subject to the provisions of this Article XII; and each holder of a Security,
whether upon original issue or upon transfer or assignment thereof, accepts and
agrees to be bound by such provisions.

         The payment by the Company of the principal of, premium, if any, and
interest (including Compounded Interest and Additional Sums, if any) on all
Securities issued hereunder shall, to the extent and in the manner hereinafter
set forth, be subordinated and junior in right of payment to all Senior
Indebtedness, whether outstanding at the date of this Indenture or thereafter
incurred.

         No provision of this Article XII shall prevent the occurrence of any
Default or Event of Default hereunder.

SECTION 12.02 Default on Senior Indebtedness.

         In the event and during the continuation of any default by the Company
in the payment of principal, premium, interest or any other payment due on any
Senior Indebtedness, or in the event that the maturity of any Senior
Indebtedness has been accelerated because of a default, then, in either case, no
payment shall be made by the Company with respect to the principal (including
redemption payments) of or premium, if any, or interest on the Securities until
such default shall have been cured or waived in writing or shall have ceased to
exist or such Senior Indebtedness shall have been discharged or paid in full.

         In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee or any Securityholder when such payment is prohibited by
the preceding paragraphs of this Section 12.02, such payment shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Indebtedness or their respective representatives, or to the trustee or
trustees under any indenture pursuant to which any of such Senior Indebtedness
may have been issued, as their respective interests may appear.

SECTION 12.03 Liquidation; Dissolution; Bankruptcy.

         Upon any payment by the Company or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
creditors upon any dissolution or winding-up or liquidation or reorganization of
the Company, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, all Senior Indebtedness of the Company shall
first be paid in full, or payment thereof provided for in money in accordance
with its terms, before any payment is made by the Company on account of the
principal (and premium, if any) or interest (including Compounded Interest and
Additional Sums, if any) on the Securities; and upon any such dissolution or
winding-up or liquidation or reorganization, any payment by the Company, or



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<PAGE>


distribution of assets of the Company of any kind or character, whether in cash,
property or securities, to which the Securityholders or the Trustee would be
entitled to receive from the Company, except for the provisions of this Article
XII, shall be paid by the Company or by any receiver, trustee in bankruptcy,
liquidating trustee, agent or other Person making such payment or distribution,
or by the Securityholders or by the Trustee under the Indenture if received by
them or it, directly to the holders of Senior Indebtedness of the Company (pro
rata to such holders on the basis of the respective amounts of Senior
Indebtedness held by such holders, as calculated by the Company) or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, to the extent
necessary to pay all such Senior Indebtedness in full, in money in accordance
with its terms, after giving effect to any concurrent payment or distribution to
or for the holders of such Senior Indebtedness, before any payment or
distribution is made to the Securityholders or to the Trustee.

         In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee or any Securityholder before all Senior Indebtedness is paid in full, or
provision is made for such payment in money in accordance with its terms, such
payment or distribution shall be held in trust for the benefit of and shall be
paid over or delivered to the holders of such Senior Indebtedness or their
representative or representatives, or to the trustee or trustees under any
indenture pursuant to which any instruments evidencing such Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to pay all such Senior Indebtedness in full in
money in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the benefit of the holders of such Senior
Indebtedness.

         For purposes of this Article XII only, the words "assets of the Company
of any kind or character, whether cash, property or securities" shall not be
deemed to include shares of stock of the Company as reorganized or readjusted,
or securities of the Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is subordinated at least to
the extent provided in this Article XII with respect to the Securities to the
payment of Senior Indebtedness that may at the time be outstanding; provided
that (i) such Senior Indebtedness is assumed by the new corporation, if any,
resulting from any such reorganization or readjustment, and (ii) the rights of
the holders of such Senior Indebtedness are not, without the consent of such
holders, altered by such reorganization or readjustment. The consolidation of
the Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the sale, conveyance,
transfer or lease of its property as an entirety, or substantially as an
entirety, to another Person upon the terms and conditions provided for in
Article VIII of this Indenture shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 12.03 if such
other Person shall, as a part of such consolidation, merger, sale, conveyance,
transfer or lease, comply with the conditions stated in Article VIII of this
Indenture. Nothing in Section 12.02 or in this Section 12.03 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 6.06 of this
Indenture.



                                       49

<PAGE>


         Nothing contained in this Article XII or elsewhere in this Indenture or
in the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Indebtedness of the Company, and the
holders of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of the Securities the principal of (and
premium, if any) and interest (including Compounded Interest and Additional
Sums, if any) on the Securities as and when the same shall become due and
payable in accordance with their terms, or is intended to or shall affect the
relative rights of the holders of the Securities and creditors of the Company,
as the case may be, other than the holders of Senior Indebtedness of the
Company, as the case may be, nor shall anything herein or therein prevent the
occurrence of an Event of Default under Article V or prevent the Trustee or the
holder of any Security from exercising all remedies otherwise permitted by
applicable law upon the occurrence of a Default or an Event of Default under the
Indenture, subject to the rights, if any, under this Article XII of the holders
of such Senior Indebtedness in respect of cash, property or securities of the
Company, as the case may be, received upon the exercise of any such remedy.

SECTION 12.04 Subrogation.

         Subject to the payment in full of all Senior Indebtedness, the rights
of the Securityholders shall be subrogated to the rights of the holders of such
Senior Indebtedness to receive payments or distributions of cash, property or
securities of the Company, as the case may be, applicable to such Senior
Indebtedness until the principal of (and premium, if any) and interest on the
Securities shall be paid in full; and, for the purposes of such subrogation, no
payments or distributions to the holders of such Senior Indebtedness of any
cash, property or securities to which the Securityholders or the Trustee would
be entitled except for the provisions of this Article XII, and no payment over
pursuant to the provisions of this Article XII to or for the benefit of the
holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as
between the Company, its creditors other than holders of Senior Indebtedness of
the Company, and the holders of the Securities, be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is understood that the
provisions of this Article XII are and are intended solely for the purposes of
defining the relative rights of the holders of the Securities, on the one hand,
and the holders of such Senior Indebtedness on the other hand.

SECTION 12.05 Trustee to Effectuate Subordination.

         Each Securityholder by such Securityholder's acceptance thereof
authorizes and directs the Trustee on such Securityholder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination
provided in this Article XII and appoints the Trustee such Securityholder's
attorney-in-fact for any and all such purposes.

SECTION 12.06 Notice by the Company.

         The Company shall give prompt written notice to a Responsible Officer
of the Trustee of any fact known to the Company that would prohibit the making
of any payment of monies to or by the Trustee in respect of the Securities
pursuant to the provisions of this Article XII. Notwithstanding the provisions
of this Article XII or any other provision of this Indenture, the Trustee shall
not be charged with knowledge of the existence of any facts that would prohibit
the making of any payment 



                                       50

<PAGE>


of monies to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article XII, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company or a holder
or holders of Senior Indebtedness or from any trustee therefor; and before the
receipt of any such written notice, the Trustee, subject to the provisions of
Article VI of this Indenture, shall be entitled in all respects to assume that
no such facts exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section 12.06 at least two Business
Days prior to the date upon which by the terms hereof any money may become
payable for any purpose (including, without limitation, the payment of the
principal of (or premium, if any) or interest (including Compounded Interest and
Additional Sums, if any) on any Security, then, anything herein contained to the
contrary notwithstanding, the Trustee shall have full power and authority to
receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.

         The Trustee, subject to the provisions of Article VI of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Indebtedness of the
Company (or a trustee on behalf of such holder), as the case may be, to
establish that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or holders. In the event
that the Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of such Senior Indebtedness to
participate in any payment or distribution pursuant to this Article XII, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of such Senior Indebtedness held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XII, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.

         Upon any payment or distribution of assets of the Company referred to
in this Article XII, the Trustee and the Securityholders shall be entitled to
rely upon any order or decree entered by any court of competent jurisdiction in
which such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other person making
such payment or distribution, delivered to the Trustee or to the
Securityholders, for the purpose of ascertaining the persons entitled to
participate in such payment or distribution, the holders of Senior Indebtedness
and other indebtedness of the Company, the amount thereof or payable thereon,
the amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XII.

SECTION 12.07 Rights of the Trustee; Holders of Senior Indebtedness.

         The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article XII in respect of any Senior Indebtedness at
any time held by it, to the same extent as any other holder of Senior
Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of
its rights as such holder.



                                       51

<PAGE>


         With respect to the holders of Senior Indebtedness of the Company, the
Trustee undertakes to perform or to observe only such of its covenants and
obligations as are specifically set forth in this Article XII, and no implied
covenants or obligations with respect to the holders of such Senior Indebtedness
shall be read into this Indenture against the Trustee. The Trustee shall not be
deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and,
subject to the provisions of Article VI of this Indenture, the Trustee shall not
be liable to any holder of such Senior Indebtedness if it shall pay over or
deliver to Securityholders, the Company or any other Person money or assets to
which any holder of such Senior Indebtedness shall be entitled by virtue of this
Article XII or otherwise.

         Nothing in this Article XII shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.06.

SECTION 12.08 Subordination May Not Be Impaired.

         No right of any present or future holder of any Senior Indebtedness of
the Company to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company, as the case may be, or by any act or failure to act, in good faith, by
any such holder, or by any noncompliance by the Company, as the case may be,
with the terms, provisions and covenants of this Indenture, regardless of any
knowledge thereof that any such holder may have or otherwise be charged with.

         Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness of the Company may, at any time and from time
to time, without the consent of or notice to the Trustee or the Securityholders,
without incurring responsibility to the Securityholders and without impairing or
releasing the subordination provided in this Article XII or the obligations
hereunder of the holders of the Securities to the holders of such Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company, as the case may be, and any other
Person.

SECTION 12.09 Article Applicable to Paying Agents.

         In case at any time any paying agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such paying agent within
its meaning as fully for all intents and purposes as if such paying agent were
named in this Article in addition to or in place of the Trustee.



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<PAGE>


SECTION 12.10 Trust Moneys Not Subordinated.

         Notwithstanding anything contained herein to the contrary, payments
from money held in trust under Section 11.02 of this Indenture by the Trustee
for the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article XII, and none of the Securityholders
shall be obligated to pay over any such amount to the Company or any holder of
Senior Indebtedness of the Company or any other creditor of the Company.

                                  ARTICLE XIII
                            [CONVERSION OF SECURITIES

SECTION 13.01 Conversion Rights.

         Subject to and upon compliance with the provisions of this Article, the
Securities are convertible, at the option of the holder, at any time prior to
5:00 p.m. New York City time on the Business Day immediately preceding
_____________ into [a number of fully paid and nonassessable shares of Common
Stock equal to the $____ principal amount per Security divided by the initial
conversion price of $___ (the "Initial Conversion Price") (equal to an initial
conversion ratio of approximately _____shares of Common Stock for each $___ in
aggregate principal amount of Securities).] The conversion price in effect at
any given time is known as the "Applicable Conversion Price" and is subject to
adjustment as described in this Article XIII. A holder of Securities may convert
any portion of the principal amount of the Securities into that number of fully
paid and nonassessable shares of Common Stock (calculated as to each conversion
to the nearest 1/100th of a share) obtained by dividing the principal amount of
the Securities to be converted by the Applicable Conversion Price. In case a
Security or portion thereof is called for redemption, such conversion right in
respect of the Security or portion so called shall expire at the close of the
Business Day immediately preceding the corresponding Redemption Date, unless the
Company defaults in making the payment due upon redemption.

SECTION 13.02 Conversion Procedures.

         (a) In order to convert all or a portion of the Securities, the holder
thereof shall deliver to the Conversion Agent an irrevocable Notice of
Conversion setting forth the principal amount of Securities to be converted,
together with the name or names, if other than the holder, in which the shares
of Common Stock should be issued upon conversion and, if such Securities are
definitive Securities, surrender to the Conversion Agent the Securities to be
converted, duly endorsed or assigned to the Company or in blank. In addition, a
holder of Preferred Securities may exercise its right under the Trust Agreement
to convert such Preferred Securities into Common Stock by delivering to the
Conversion Agent an irrevocable Notice of Conversion setting forth the
information called for by the preceding sentence and directing the Conversion
Agent (i) to exchange such Preferred Security for a portion of the Securities
held by the Trust (at an exchange rate of $____ principal amount of Securities
for each Preferred Security) and (ii) to immediately convert such Securities, on
behalf of such holder, into Common Stock of the Company pursuant to this Article
XIII and, if such Preferred Securities are in definitive form, surrendering such
Preferred Securities, duly endorsed or assigned to the Company or in blank. So
long as any Preferred Securities are 



                                       53

<PAGE>


outstanding, the Trust shall not convert any Securities except pursuant to a
Notice of Conversion duly executed and delivered to the Conversion Agent by a
holder of Preferred Securities.

         [If a Notice of Conversion is delivered on or after the regular record
date and prior to the subsequent Interest Payment Date, the holder will be
entitled to receive the interest payable on the subsequent Interest Payment Date
on the portion of Securities to be converted notwithstanding the conversion
thereof prior to such Interest Payment Date. Except as otherwise provided in the
immediately preceding sentence, in the case of any Security which is converted,
interest whose due date is after the date of conversion of such Security shall
not be payable, and the Company shall not make nor be required to make any other
payment, adjustment or allowance with respect to accrued but unpaid interest on
the Securities being converted, which shall be deemed to be paid in full.] Each
conversion shall be deemed to have been effected immediately prior to the close
of business on the day on which the Notice of Conversion was received (the
"Conversion Date") by the Conversion Agent from the holder or from a holder of
the Preferred Securities effecting a conversion thereof pursuant to its
conversion rights under the Trust Agreement, as the case may be. The Person or
Persons entitled to receive the Common Stock issuable upon such conversion shall
be treated for all purposes as the record holder or holders of such Common Stock
as of the Conversion Date and such Person or Persons will cease to be a record
holder or record holders of the Securities on that date; provided, however, that
if the transfer books of the Common Stock shall be closed on said Conversion
Date, the Company shall not be required to issue any shares on such conversion
until the date on which such transfer books shall be reopened and such Person or
Persons shall not be deemed to have become the holder or holders of record of
such shares until the date on which such transfer books shall be reopened, but
such conversion shall nevertheless be effected when such transfer books shall be
reopened at the Conversion Price in effect on and otherwise as the date on which
such Security shall have been surrendered to and such Notice of Conversion
received by the Company as aforesaid. As promptly as practicable on or after the
Conversion Date, the Company shall issue and deliver at the office of the
Conversion Agent, unless otherwise directed by the holder in the Notice of
Conversion, a certificate or certificates for the number of full shares of
Common Stock issuable upon such conversion, together with the cash payment, if
any, in lieu of any fraction of any share to the Person or Persons entitled to
receive the same. The Conversion Agent shall deliver such certificate or
certificates to such Person or Persons.

         (b) Subject to any right of the holder of such Security or any
Predecessor Security to receive interest as provided in Section 2.05(e) and the
second paragraph of clause (a) of Section 13.02, the Company's delivery upon
conversion of the whole number of shares of Common Stock into which the
Securities are convertible (together with the cash payment, if any, in lieu of
fractional shares) shall be deemed to satisfy the Company's obligation to pay
the principal amount at maturity of the portion of Securities so converted and
any unpaid interest (including Additional Payments) accrued on such Securities
at the time of such conversion.

         (c) No fractional shares of Common Stock will be issued as a result of
conversion, but in lieu thereof, the Company shall pay to the Conversion Agent a
cash adjustment in an amount equal to the same fraction of the Closing Price of
such fractional interest on the date on which the Securities or Preferred
Securities, as the case may be, were duly surrendered to the Conversion Agent
for conversion, or, if such day is not a Trading Day, on the next Trading Day,
and the Conversion



                                       54

<PAGE>
Agent in turn will make such payment, if any, to the holder of the Securities or
the holder of the Preferred Securities so converted.

         (d) In the event of the conversion of any Security in part only, a new
Security or Securities for the unconverted portion thereof will be issued in the
name of the holder thereof upon the cancellation thereof in accordance with
Section 3.06.

         (e) In effecting the conversion transactions described in this Section,
the Conversion Agent is acting as agent of the holders of Preferred Securities
(in the exchange of Preferred Securities for Securities) and as agent of the
holders of Securities (in the conversion of Securities into Common Stock), as
the case may be, directing it to effect such conversion transactions. The
Conversion Agent is hereby authorized (x) if the Trust exists, (i) to exchange
Securities held by or on behalf of the Trust from time to time for Preferred
Securities in connection with the conversion of such Preferred Securities in
accordance with this Article XIII and (ii) to convert all or a portion of the
Securities into Common Stock and thereupon to deliver such shares of Common
Stock in accordance with the provisions of this Article XIII and to deliver to
the Trust a new Security or Securities for any Securities held by the holders
and not converted in connection with the conversion of such Securities in
accordance with this Article XIII and (y) if the Trust has been dissolved and
the Securities have been distributed to the holders of the Preferred Securities,
to convert all or a portion of the Securities into Common Stock and thereupon to
deliver such shares of Common Stock in accordance with the provisions of this
Article XIII and to deliver to such holders a new Security or Securities for any
resulting unconverted principal amount.

SECTION 13.03 Conversion Price Adjustments.

         The Applicable Conversion Price shall be subject to adjustment (without
duplication) from time to time as follows:

              (i) In case the Company shall pay a dividend or make a
distribution on the Common Stock exclusively in Common Stock, the Applicable
Conversion Price in effect at the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Applicable
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination. For the
purposes of this subparagraph (i), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Company.
The Company shall not pay any dividend or make any distribution exclusively in
Common Stock on shares of any class or series of capital stock of the Company
held in the treasury of the Company. In the event that such dividend or
distribution is not so paid or made, the Applicable Conversion Price shall again
be adjusted to be the Applicable Conversion Price which would then be in effect
if such dividend or distribution had not occurred.

              (ii) In case the Company shall pay or make a dividend or other
distribution on its Common Stock consisting exclusively of, or shall otherwise
issue to all holders of its Common 



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<PAGE>


Stock, rights or warrants, in each case entitling the holders thereof to
subscribe for or purchase shares of Common Stock at a price per share less than
the current market price per share (determined as provided in subparagraph
(vii)) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights or warrants, the Applicable
Conversion Price in effect at the opening of business on the day following the
date fixed for such determination shall be reduced by multiplying such
Applicable Conversion Price by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
current market price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately prior
to the opening of business on the day following the date fixed for such
determination. To the extent that rights are not so issued or shares of Common
Stock are not so delivered after the expiration of such rights or warrants, the
Applicable Conversion Price shall be readjusted to the Applicable Conversion
Price which would then be in effect if such date fixed for the determination of
stockholders entitled to receive such rights or warrants had not been fixed. For
the purposes of this subparagraph (ii), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company. In case any rights or warrants referred to in this subparagraph (ii) in
respect of which an adjustment shall have been made shall expire unexercised
within 45 days after the same shall have been distributed or issued by the
Company, the Applicable Conversion Price shall be readjusted at the time of such
expiration to the conversion price that would have been in effect if no
adjustment had been made on account of the distribution or issuance of such
expired rights or warrants.

              (iii) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Applicable
Conversion Price in effect at the opening of business on the day following the
day upon which such subdivision becomes effective shall be proportionately
reduced and, conversely, in case outstanding shares of Common Stock shall each
be combined into a smaller number of shares of Common Stock, the Applicable
Conversion Price in effect at the opening of business on the day following the
day upon which such combination becomes effective shall be proportionately
increased, such reduction or increase, as the case may be, to become effective
immediately prior to the opening of business on the day following the day upon
which such subdivision or combination becomes effective.

              (iv) Subject to the last sentence of this subparagraph (iv), in
case the Company shall, by dividend or otherwise, distribute to all holders of
its Common Stock evidences of its indebtedness, shares of any class or series of
capital stock, cash or assets (including securities, but excluding any rights or
warrants referred to in subparagraph (ii) of this Section 13.03, any dividend or
distribution paid exclusively in cash and any dividend or distribution referred
to in subparagraph (i) of this Section 13.03), the Applicable Conversion Price
shall be reduced so that the same shall equal the price determined by
multiplying the Applicable Conversion Price in effect immediately prior to the
effectiveness of the Applicable Conversion Price reduction contemplated by this
subparagraph (iv) by a fraction of which the numerator shall be the current
market price per share (determined as provided in subparagraph (vii) of this
Section 13.03) of the Common Stock on the 



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<PAGE>


date fixed for the determination of stockholders entitled to receive such
distribution (the "Reference Date") less the fair market value (as determined in
good faith by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors), on the Reference Date,
of the portion of the evidences of indebtedness, shares of capital stock, cash
and assets so distributed applicable to one share of Common Stock and the
denominator shall be such current market price per share of the Common Stock,
such reduction to become effective immediately prior to the opening of business
on the day following the Reference Date. In the event that such dividend or
distribution is not so paid or made, the Applicable Conversion Price shall again
be adjusted to be the Applicable Conversion Price which would then be in effect
if such dividend or distribution had not occurred. For purposes of this
subparagraph (iv), any dividend or distribution that includes shares of Common
Stock or rights or warrants to subscribe for or purchase shares of Common Stock
shall be deemed instead to be (1) a dividend or distribution of the evidences of
indebtedness, shares of capital stock, cash or assets other than such shares of
Common Stock or such rights or warrants (making any Applicable Conversion Price
reduction required by this subparagraph (iv)) immediately followed by (2) a
dividend or distribution of such shares of Common Stock or such rights or
warrants (making any further Applicable Conversion Price reduction required by
subparagraph (i) or (ii) of this Section 13.03), except any shares of Common
Stock included in such dividend or distribution shall not be deemed "outstanding
at the close of business on the date fixed for such determination" within the
meaning of subparagraph (i) of this Section 13.03.

              (v) In case the Company shall pay or make a dividend or other
distribution on its Common Stock exclusively in cash (excluding (x) cash
dividends to the extent that they do not exceed the per share amount of the
smallest of the immediately four preceding quarterly cash dividends (as adjusted
to appropriately reflect any of the events referred to in subparagraphs (i),
(ii), (iii), (iv), (v) and (vi) of this Section 13.03), and (y) cash dividends
to the extent that the annualized per share amount thereof does not exceed 15%
of the current market price per share of the Common Stock on the Trading Day
next preceding the date of declaration of such dividend, the Applicable
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Applicable Conversion Price in effect immediately
prior to the effectiveness of the Applicable Conversion Price reduction
contemplated by this subparagraph (v) by a fraction of which the numerator shall
be the current market price per share (determined as provided in subparagraph
(vii) of this Section 13.03) of the Common Stock on the date fixed for the
payment of such distribution less the amount of cash so distributed and not
excluded as provided applicable to one share of Common Stock and the denominator
shall be such current market price per share of the Common Stock, such reduction
to become effective immediately prior to the opening of business on the day
following the date fixed for the payment of such distribution; provided,
however, that in the event the portion of the cash so distributed applicable to
one share of Common Stock is equal to or greater than the current market price
per share (as defined in subparagraph (vii) of this Section 13.03) of the Common
Stock on the record date mentioned above, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of Securities shall have
the right to receive upon conversion the amount of cash such holder would have
received had such holder converted each Security immediately prior to the record
date for the distribution of the cash. In the event that such dividend or
distribution is not so paid or made, the Applicable Conversion Price shall again
be adjusted to be the Applicable Conversion Price which would then be in effect
if such record date had not been fixed.



                                       57

<PAGE>


              (vi) In case a tender or exchange offer (other than an odd-lot
offer) made by the Company or any Subsidiary of the Company for all or any
portion of the Company's Common Stock shall expire and such tender or exchange
offer shall involve the payment by the Company or such Subsidiary of
consideration per share of Common Stock having a fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) at the last
time (the "Expiration Time") tenders or exchanges may be made pursuant to such
tender or exchange offer (as it shall have been amended) that exceeds 110% of
the current market price per share (determined as provided in subparagraph (vii)
of this Section 13.03) of the Common Stock on the Trading Day next succeeding
the Expiration Time, the Applicable Conversion Price shall be reduced so that
the same shall equal the price determined by multiplying the Applicable
Conversion Price in effect immediately prior to the effectiveness of the
Applicable Conversion Price reduction contemplated by this subparagraph (vi) by
a fraction of which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered or exchanged shares) at the Expiration Time
multiplied by the current market price per share (determined as provided in
subparagraph (vii) of this Section 13.03) of the Common Stock on the Trading Day
next succeeding the Expiration Time and the denominator shall be the sum of (x)
the fair market value (determined as aforesaid) of the aggregate consideration
payable to stockholders based on the acceptance (up to any maximum specified in
the terms of the tender or exchange offer) of all shares validly tendered or
exchanged and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased Shares")
and (y) the product of the number of shares of Common Stock outstanding (less
any Purchased Shares) at the Expiration Time and the current market price per
share (determined as provided in subparagraph (vii) of this Section 13.03) of
the Common Stock on the Trading Day next succeeding the Expiration Time, such
reduction to become effective immediately prior to the opening of business on
the day following the Expiration Time. In the event that such tender or exchange
offer is not made, the Applicable Conversion Price shall again be adjusted to be
the Applicable Conversion Price which would then be in effect if such record
date had not been fixed.

              (vii) For the purpose of any computation under subparagraphs (ii),
(iv), (v) and (vi) of this Section 13.03, the current market price per share of
Common Stock on any date in question shall be deemed to be the average of the
daily Closing Prices of the Common Stock for the ten consecutive Trading Days
prior to the earlier of the day in question and, if applicable, the day before
the "ex" date with respect to the issuance or distribution requiring such
computation; provided, however, that if another event occurs that would require
an adjustment pursuant to subparagraphs (i) through (vi) of this Section 13.03,
inclusive, the Board of Directors may make such adjustments to the Closing
Prices during such five Trading Day period as it deems appropriate to effectuate
the intent of the adjustments in this Section 13.03, in which case any such
determination by the Board of Directors shall be set forth in a Board Resolution
and shall be conclusive. For purposes of this paragraph, the term "ex" date, (1)
when used with respect to any issuance or distribution, means the first date on
which the Common Stock is quoted regular way on the New York Stock Exchange
Composite Tape or on such successor securities exchange on which the Common
Stock may be quoted or listed or in the relevant market from which the Closing
Prices were obtained without the right to receive such issuance or distribution,
and (2) when used with respect to any tender or exchange offer means the first
date on which the Common Stock is quoted regular way on such securities exchange
or in such market after the Expiration Time of such offer.



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<PAGE>


              (viii) The Company may make such reductions in the Applicable
Conversion Price, in addition to those required by subparagraphs (i), (ii),
(iii), (iv), (v) and (vi) of this Section 13.03, as it considers to be advisable
to avoid or diminish any income tax to holders of Common Stock or rights to
purchase Common Stock resulting from any dividend or distribution of stock (or
rights to acquire stock) or from any event treated as such for income tax
purposes.

              (ix) There shall also be no adjustment of the Applicable
Conversion Price in case of the issuance of any Common Stock (or securities
convertible into or exchangeable for Common Stock), except as specifically
described above. If any action would require adjustment of the Applicable
Conversion Price, pursuant to more than one of the anti-dilution provisions set
forth in this Article XIII, only one adjustment shall be made and such
adjustment shall be the amount of adjustment that has the highest absolute value
to holders. Furthermore, no adjustment in the Applicable Conversion Price shall
be required unless such adjustment would require an increase or decrease of at
least 1% in the Applicable Conversion Price; provided, however, that any
adjustments which by reason of this sentence are not required to be made shall
be carried forward and taken into account in determining whether any subsequent
adjustment shall be required.

SECTION 13.04 Reclassification, Consolidation, Merger or Sale of Assets.

         In the event that the Company shall be a party to any transaction
(including without limitation (a) any recapitalization or reclassification of
the Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (b) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (c) any sale or transfer of all or substantially all of the assets
of the Company or (d) any compulsory share exchange) (each of the events in the
preceding clauses (a) through (d) being referred to as a "Company Transaction"),
in each case, as a result of which shares of Common Stock shall be converted
into the right to receive other securities, cash or other property, then lawful
provision shall be made as part of the terms of such Company Transaction whereby
the holder of each Security then outstanding shall have the right thereafter to
convert such Security only into (i) in the case of any Company Transaction other
than a Common Stock Fundamental Change, the kind and amount of securities, cash
and other property receivable upon the consummation of the Company Transaction
by a holder of that number of shares of Common Stock into which such Security
was convertible immediately prior to such transaction, after giving effect to
any adjustment in the Applicable Conversion Price required by the provisions of
Section 13.07(a)(i), and (ii) in the case of a Company Transaction involving a
Common Stock Fundamental Change, common stock of the kind received by holders of
Common Stock as a result of such Common Stock Fundamental Change in an amount
determined pursuant to the provisions of Section 13.07(a)(ii). holders of the
Securities shall have no voting rights with respect to any Company Transaction
described in this Section 13.04.

         The Company or the Person formed by such consolidation or resulting
from such merger or which acquired such assets or which acquires the Company's
shares, as the case may be, shall make provision in its certificate or articles
of incorporation or other constituent document to establish such right. Such
certificate or articles of incorporation or other constituent document shall
provide for 



                                       59

<PAGE>


adjustments which, for events subsequent to the effective date of such
certificate or articles of incorporation or other constituent document, shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article XIII. The above provisions shall similarly apply to successive
transactions of the foregoing type.

SECTION 13.05 Notice of Adjustments of Conversion Price.

         Whenever the Applicable Conversion Price is adjusted as herein
provided:

         (a) the Company shall compute the adjusted Applicable Conversion Price
and shall prepare a certificate signed by the Chief Financial Officer or the
Treasurer of the Company setting forth the adjusted Applicable Conversion Price
and showing in reasonable detail the facts upon which such adjustment is based,
and such certificate shall forthwith be filed with the Trustee, the Conversion
Agent, the Property Trustee and the transfer agent for the Preferred Securities
and the Securities; and

         (b) a notice stating the Applicable Conversion Price has been adjusted
and setting forth the adjusted Applicable Conversion Price shall as soon as
practicable be mailed by the Company to all record holders of Preferred
Securities and the Securities at their last addresses as they appear upon the
stock transfer books of the Company and the books and records of the Trust,
respectively.

SECTION 13.06 Prior Notice of Certain Events.

         In case:

              (i) the Company shall (1) declare any dividend (or any other
distribution) on its Common Stock, other than (A) a dividend payable in shares
of Common Stock or (B) a dividend payable in cash that would not require an
adjustment pursuant to Section 13.03(iv) or (v) or (2) authorize a tender or
exchange offer that would require an adjustment pursuant to Section 13.03(vi);

              (ii) the Company shall authorize the granting to all holders of
Common Stock of rights or warrants to subscribe for or purchase any shares of
stock of any class or series or of any other rights or warrants;

              (iii) of any reclassification of Common Stock (other than a
subdivision or combination of the outstanding Common Stock, or a change in par
value, or from par value to no par value, or from no par value to par value), or
of any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company shall be required, or of the sale or
transfer of all or substantially all of the assets of the Company or of any
compulsory share exchange whereby the Common Stock is converted into other
securities, cash or other property; or

              (iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;

then the Company shall (a) if any Preferred Securities are outstanding, cause to
be filed with the transfer agent for the Preferred Securities, and shall cause
to be mailed to the holders of record of the Preferred Securities, at their last
addresses as they shall appear upon the books and records of the



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<PAGE>


Trust, or (b) shall cause to be mailed to all holders at their last addresses as
they shall appear in the Security Register, at least fifteen days prior to the
applicable record or effective date hereinafter specified, a notice stating (x)
the date on which a record (if any) is to be taken for the purpose of such
dividend, distribution, rights or warrants or, if a record is not to be taken,
the date as of which the holders of Common Stock of record to be entitled to
such dividend, distribution, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer,
share exchange, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect therein or in
the mailing thereof shall affect the validity of the corporate action required
to be specified in such notice).

SECTION 13.07 Adjustments in Case of Fundamental Changes.

         (a) Notwithstanding any other provision in this Article XIII to the
contrary, in the case of any Company Transaction involving a Fundamental Change,
the Applicable Conversion Price will be adjusted immediately after such
Fundamental Change as follows:

              (i) in the case of a Non-Stock Fundamental Change, the Applicable
Conversion Price of the Securities shall thereupon become the lower of (A) the
Applicable Conversion Price in effect immediately prior to such Non-Stock
Fundamental Change, but after giving effect to any other prior adjustments
effected pursuant to this Article XIII, and (B) the result obtained by
multiplying the greater of the Relevant Price or the then applicable Reference
Market Price by the Optional Redemption Ratio (such product shall hereinafter be
referred to as the "Adjusted Relevant Price" or the "Adjusted Reference Market
Price", as the case may be); and

              (ii) in the case of a Common Stock Fundamental Change, the
Applicable Conversion Price of the Securities in effect immediately prior to
such Common Stock Fundamental Change, but after giving effect to any other prior
adjustments effected pursuant to this Article XIII, shall thereupon be adjusted
by multiplying such Applicable Conversion Price by a fraction of which the
numerator shall be the Purchaser Stock Price and the denominator shall be the
Relevant Price; provided, however, that in the event of a Common Stock
Fundamental Change in which (A) 100% of the value of the consideration received
by a holder of Common Stock is common stock of the successor, acquiror or other
third party (and cash, if any, is paid only with respect to any fractional
interests in such common stock resulting from such Common Stock Fundamental
Change) and (B) all of the Common Stock shall have been exchanged for, converted
into or acquired for common stock (and cash with respect to fractional
interests) of the successor, acquiror or other third party, the Applicable
Conversion Price of the Securities in effect immediately prior to such Common
Stock Fundamental Change shall thereupon be adjusted by multiplying such
Applicable Conversion Price by a fraction of which the numerator shall be one
and the denominator shall be the number of shares of common stock of the
successor, acquiror, or other third party received by a stockholder for one
share of Common Stock as a result of such Common Stock Fundamental Change.



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         (b) Definitions. The following definitions shall apply to terms used in
this Article XIII:

                  (1) "Adjusted Reference Market Price" has the meaning
specified in Section 13.07(a)(i).

                  (2) "Adjusted Relevant Price" has the meaning specified in
Section 13.07(a)(i).

                  (3) "Applicable Conversion Price" has the meaning specified in
Section 13.01.

                  (4) "Closing Price" of any security on any day shall mean on
any day the last reported sale price of such security on such day, or in case no
sale takes place on such day, the average of the closing bid and asked prices in
each case on the principal national securities exchange on which such securities
are listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, on the NNM or, if such securities are not
listed or admitted to trading on any national securities exchange or quoted on
the NNM, the average of the closing bid and asked prices in the over-the-counter
market as furnished by any New York Stock Exchange member firm selected by the
Company Common Stock" means common stock, par value $.01 per share, of the
Company (or shares of any class or classes resulting from any reclassification
or reclassifications thereof).

                  (5) "Common Stock Fundamental Change" shall mean any
Fundamental Change in which more than 50% of the value (as determined in good
faith by the Board of Directors) of the consideration received by holders of
Common Stock consists of common stock that for each of the ten consecutive
Trading Days immediately prior to the Entitlement Date has been admitted for
listing or admitted for listing subject to notice of issuance on a national
securities exchange or quoted on the NNM; provided, however, that a Fundamental
Change shall not be a Common Stock Fundamental Change unless either (i) the
Company continues to exist after the occurrence of such Fundamental Change and
the outstanding Preferred Securities continue to exist as outstanding Preferred
Securities, or (ii) not later than the occurrence of such Fundamental Change,
the outstanding Securities are converted into or exchanged for debentures of a
corporation succeeding to the business of the Company, which debentures have
terms substantially similar to those of the Securities.

                  (6) "Company Transaction" has the meaning specified in Section
13.04.

                  (7) "Conversion Agent" means the Person appointed to act on
behalf of the holders of Preferred Securities in effecting the conversion of
Preferred Securities as and in the manner set forth in the Trust Agreement and
Section 13.02 hereof.

                  (8) "Conversion Date" has the meaning specified in Section
13.02.for such purpose.



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<PAGE>


                  (9) "Entitlement Date" shall mean the record date for
determination of the holders of Common Stock entitled to receive securities,
cash or other property in connection with a Non-Stock Fundamental Change or a
Common Stock Fundamental Change or, if there is no such record date, the date
upon which holders of Common Stock shall have the right to receive such
securities, cash or other property.

                  (10) "Fundamental Change" shall mean the occurrence of any
transaction or event in connection with a plan pursuant to which all or
substantially all of the Common Stock shall be exchanged for, converted into,
acquired for or constitute solely the right to receive securities, cash or other
property (whether by means of an exchange offer, liquidation, tender offer,
consolidation, merger, combination, reclassification, recapitalization or
otherwise); provided, however, in the case of a plan involving more than one
such transaction or event, for purposes of adjustment of the Applicable
Conversion Price, such Fundamental Change shall be deemed to have occurred when
substantially all of the Common Stock of the Company shall be exchanged for,
converted into, or acquired for or constitute solely the right to receive
securities, cash or other property, but the adjustment shall be based upon the
highest weighted average per share consideration that a holder of Common Stock
could have received in such transactions or events as a result of which more
than 50% of the Common Stock of the Company shall have been exchanged for,
converted into, or acquired for or constitute solely the right to receive
securities, cash or other property.

                  (11) "Initial Conversion Price" has the meaning specified in
Section 13.01.

                  (12) "NNM" means the National Market System of the National
Association of Securities Dealers, Inc., or any successor national automated
interdealer quotation system.

                  (13) "Non-Stock Fundamental Change" shall mean any Fundamental
Change other than a Common Stock Fundamental Change.

                  (14) "Notice of Conversion" means the notice to be given by a
holder of Preferred Securities to the Conversion Agent directing the Conversion
Agent to exchange such Preferred Securities for Securities and to convert such
Securities into Common Stock on behalf of such holder.

                  (15) "Optional Redemption Ratio" means a fraction of which the
numerator shall be $_____ and the denominator will be the then current Optional
Redemption Price or, prior to _____________, an amount per Security determined
by the Company in its sole discretion, after consultation with an investment
banking firm, to be the equivalent of the hypothetical redemption price that
would have been applicable if the Securities had been redeemable during such
period.

                  (16) "Purchaser Stock Price" shall mean, with respect to any
Common Stock Fundamental Change, the average of the daily Closing Prices of the
common stock received in such 



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<PAGE>


Common Stock Fundamental Change for the ten (10) consecutive Trading Days prior
to and including the Entitlement Date, as adjusted in good faith by the Board of
Directors to appropriately reflect any of the events referred to in
subparagraphs (i), (ii), (iii), (iv), (v) and (vi) of Section 13.03.

                  (17) "Reference Date" has the meaning specified in Section
13.03(iv).

                  (18) "Reference Market Price" shall initially mean on the date
of original issuance of the Securities, $___________ (which is an amount equal
to __________% of the last reported sale price for the Common Stock on the New
York Stock Exchange Composite Tape on ___________) and, in the event of any
adjustment to the Applicable Conversion Price, other than as a result of a
Non-Stock Fundamental Change, the Reference Market Price shall also be adjusted
so that the ratio of the Reference Market Price to the Applicable Conversion
Price after giving effect to any such adjustment shall always be the same as the
ratio of $__________ to the Initial Conversion Price.

                  (19) "Relevant Price" shall mean (i) in the event of a
Non-Stock Fundamental Change in which the holders of the Common Stock receive
only cash, the amount of cash received by a stockholder for one share of Common
Stock and (ii) in the event of any other Non-Stock Fundamental Change or any
Common Stock Fundamental Change, the average of the daily Closing Prices of the
Common Stock for the ten (10) consecutive Trading Days prior to and including
the Entitlement Date, in each case, as adjusted in good faith by the Company to
appropriately reflect any of the events referred to in subparagraphs (i), (ii),
(iii), (iv), (v) and (vi) of Section 13.03.

                  (20) "Trading Day" shall mean a day on which securities are
traded on the national securities exchange or quotation system used to determine
the Closing Price.

         SECTION 13.08 Dividend or Interest Reinvestment Plans.

         (a) Notwithstanding the foregoing provisions, the issuance of any
shares of Common Stock pursuant to any present or future plan providing for the
reinvestment of dividends or interest payable on securities of the Company and
the investment of additional optional amounts in shares of Common Stock under
any such plan, and the issuance of any shares of Common Stock or options or
rights to purchase such shares pursuant to any employee benefit plan or program
of the Company or pursuant to any option issued, shall not be deemed to
constitute an issuance of Common Stock or exercisable, exchangeable or
convertible securities by the Company to which any of the adjustment provisions
described above applies.

         (b) There shall also be no adjustment of the Applicable Conversion
Price in case of the issuance of any stock (or securities convertible into or
exchangeable for stock) of the Company except as specifically described in this
Article XIII.



                                       64

<PAGE>


         SECTION 13.09 Certain Additional Rights.

         Notwithstanding any other provision of this Article XIII to the
contrary, rights, warrants, evidences of indebtedness, other securities, cash or
other assets (including, without limitation, any rights distributed pursuant to
any stockholder rights plan) shall be deemed not to have been distributed for
purposes of this Article XIII if the Company makes proper provision so that each
holder who converts a Security (or any portion thereof) after the date fixed for
determination of stockholders entitled to receive such distribution shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, the amount and kind of such distributions
that such holder would have been entitled to receive if such holder had,
immediately prior to such determination date, converted such Security into
Common Stock.

         SECTION 13.10 Restrictions on Common Stock Issuable Upon Conversion.

         If shares of Common Stock to be issued upon conversion of a Security in
respect of Preferred Securities are to be registered in a name other than that
of the holder of such Preferred Security, then the Person in whose name such
shares of Common Stock are to be registered must deliver to the Conversion Agent
a certificate satisfactory to the Company and signed by such Person, as to
compliance with the restrictions on transfer applicable to such Preferred
Security. Neither the Trustee nor any Conversion Agent or Registrar shall be
required to register in a name other than that of the holder shares of Common
Stock or such Preferred Securities issued upon conversion of any such Security
in respect of such Preferred Securities not so accompanied by a properly
completed certificate.

         SECTION 13.11 Trustee Not Responsible for Determining Conversion Price
or Adjustments.

         Neither the Trustee nor any Conversion Agent shall at any time be under
any duty or responsibility to any holder of any Security to determine whether
any facts exist which may require any adjustment of the Applicable Conversion
Price, or with respect to the nature or extent of any such adjustment when made,
or with respect to the method employed, or whether any supplemental indenture
needs to be entered into. Neither the Trustee nor any Conversion Agent shall be
accountable with respect to the validity or value (or the kind or amount) of any
shares of Common Stock or of any securities or property, which may at any time
be issued or delivered upon the conversion of any Security; and neither the
Trustee nor any Conversion Agent makes any representation with respect thereto.
Neither the Trustee nor any Conversion Agent shall be responsible for any
failure of the Company to make any cash payment or to issue, transfer or deliver
any shares of Common Stock or stock certificates or other securities or property
upon the surrender of any Security for the purpose of conversion, or, except as
expressly herein provided, to comply with any of the covenants of the Company
contained in Article X or this Article XIII.]



                                   * * * * * *




                                       65

<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers thereunto duly authorized, as of the
day and year first above written.


                                                CONTINENTAL AIRLINES, INC.


                                                By:
                                                   -----------------------------

                                                -------------------------,
                                                AS TRUSTEE


                                                By:
                                                   -----------------------------




                                       66

<PAGE>


                                    EXHIBIT A
                           (FORM OF FACE OF SECURITY)

         [Include if a Global Security: THIS SECURITY IS A GLOBAL SECURITY
WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN
THE NAME OF THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY" OR "DTC") OR A
NOMINEE OF THE DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITARY TO
A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY
OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN LIMITED
CIRCUMSTANCES.

         UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (55 WATER STREET, NEW YORK, NEW YORK) TO CONTINENTAL AIRLINES, INC. OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS 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 THE
INDENTURE REFERRED TO BELOW.]


                                                       [CUSIP NO:______________]


No._____________                                       Principal Amount:________


                           CONTINENTAL AIRLINES, INC.
                     ________% JUNIOR SUBORDINATED DEBENTURE
                            DUE ______________, ____

         Continental Airlines, Inc., a Delaware corporation (the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
____________________, as Property Trustee for Continental Airlines Finance Trust
III or registered assigns, the principal sum of __________________ DOLLARS
($__________) [Reference Schedule A if Global Security] on _________, ___ (the
"Maturity Date"), unless previously redeemed, and to pay interest on the
outstanding principal amount hereof from 



                                      A-1

<PAGE>


___________, ____, or from the most recent interest payment date (each such
date, an "Interest Payment Date") to which interest has been paid or duly
provided for, [semi-annually] (subject to deferral as set forth herein) in
arrears on __________ and __________ of each year, commencing ______________,
____, at the rate of ____% per annum until the principal hereof shall have
become due and payable, and on any overdue principal and premium, if any, and
(without duplication and to the extent that payment of such interest is
enforceable under applicable law) on any overdue installment of interest at the
same rate per annum compounded [semi-annually]. The amount of interest payable
on any Interest Payment Date shall be computed on the basis of a 360-day year of
twelve 30-day months and, for any period less than a full calendar month, the
number of days elapsed in such month. In the event that any date on which the
principal of (or premium, if any) or interest on this Security is payable is not
a Business Day, then the payment payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that if such next succeeding Business Day
falls in the next calendar year, then such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment is otherwise required. Pursuant to the
Indenture, in certain circumstances the Company will be required to pay
Additional Sums and Compounded Interest (each as defined in the Indenture) with
respect to this Security.

         The interest installment so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in the Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities, as defined in said Indenture) is registered at the close of business
on the regular record date for such interest installment, which shall be at the
close of business on the _____ day of the month preceding the month in which the
relevant interest payment date falls. Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to the
holders on such regular record date and may be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is registered at the close
of business on a special record date to be fixed by the Trustee for the payment
of such defaulted interest, notice whereof shall be given to the holders of
Securities not less than 10 days prior to such special record date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Securities may be listed,
and upon such notice as may be required by such exchange, all as more fully
provided in the Indenture.

         The principal of (and premium, if any) and interest (including
Compounded Interest and Additional Sums, if any) on this Security shall be
payable at the office or agency of the Trustee maintained for that purpose in
any coin or currency of the United States of America that at the time of payment
is legal tender for payment of public and private debts; provided, however,
that, payment of interest may be made at the option of the Company by (i) check
mailed to the holder at such address as shall appear in the Security Register or
(ii) by transfer to an account maintained by the Person entitled thereto;
provided that proper written transfer instructions have been received by the
relevant record date. Notwithstanding the foregoing, so long as the Holder of
this Security is the Property Trustee, the payment of the principal of (and
premium, if any) and interest (including Compounded Interest and Additional
Sums, if any) on this Security will be made at such place and to such account as
may be designated by the Property Trustee.


                                      A-2

<PAGE>


         The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinate and junior in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her
attorney-in-fact for any and all such purposes. Each holder hereof, by his or
her acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained herein and in the Indenture by each holder of
Senior Indebtedness, whether now outstanding or hereafter incurred, and waives
reliance by each such holder upon said provisions.

         This Security shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.

         The provisions of this Security are continued on the reverse side
hereof and such provisions shall for all purposes have the same effect as though
fully set forth at this place.



                                      A-3

<PAGE>


         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed and sealed.


Dated:  _____________, ____



                                                CONTINENTAL AIRLINES, INC.


                                                By:
                                                   -----------------------------

                                                Attest:


                                                By:
                                                   -----------------------------




                                      A-4

<PAGE>


                     (FORM OF CERTIFICATE OF AUTHENTICATION)
                          CERTIFICATE OF AUTHENTICATION

         This is one of the Securities referred to in the within-mentioned
Indenture.


                                                ---------------------------,
                                                as Trustee



                                                By:
                                                   ----------------------------
                                                   Authorized Signatory





                                      A-5

<PAGE>


                          (FORM OF REVERSE OF SECURITY)

         This Security is one of the Securities of the Company (herein sometimes
referred to as the "Securities"), specified in the Indenture, all issued or to
be issued under and pursuant to an Indenture, dated as of ___________, ___ (the
"Indenture"), duly executed and delivered between the Company and
___________________, as Trustee (the "Trustee"), to which Indenture reference is
hereby made for a description of the rights, limitations of rights, obligations,
duties and immunities thereunder of the Trustee, the Company and the holders of
the Securities.

         [Upon the occurrence and continuation of a Special Event at any time,
the Company shall have the right, at any time within 90 days following the
occurrence of such Special Event, to redeem this Security in whole (but not in
part) at the Special Event Redemption Price. "Special Event Redemption Price"
shall mean, with respect to any redemption of the Securities following a Special
Event, an amount in cash equal to ________.]

         [In addition, the Company shall have the right to redeem this Security,
in whole or in part, at any time (an "Optional Redemption"), at a redemption
price (the "Optional Redemption Price") equal to ________.]

         [The Optional Redemption Price or the Special Event Redemption Price,
as the case requires, shall be paid prior to 12:00 noon, New York City time, on
the date of such redemption or at such earlier time as the Company determines;
provided, that the Company shall deposit with the Trustee an amount sufficient
to pay the applicable Redemption Price by 10:00 a.m., New York City time, on the
date such Redemption Price is to be paid. Any redemption pursuant to this
paragraph will be made upon not less than 30 days nor more than 60 days notice.
If the Securities are only partially redeemed by the Company pursuant to an
Optional Redemption, the particular Securities to be redeemed shall be selected
on a pro rata basis not more than 60 days prior to the date fixed for redemption
from the outstanding Securities not previously called for redemption; provided,
however, that any such proration may be made on the basis of the aggregate
principal amount of Securities held by each Securityholder thereof and may be
made by making such adjustments as the Company deems fair and appropriate in
order that only Securities in denominations of [$1,000] or integral multiples
thereof shall be redeemed.

         [The holder of any Security has the right, exercisable at any time
prior to 5:00 p.m., New York City time, on _____________, to convert the
principal amount thereof (or any portion thereof that is an integral multiple of
$____) into [a number of fully paid and nonassessable shares of Common Stock
equal to the $____ principal amount per Security divided by the initial
conversion price of $___ (the "Initial Conversion Price") (equal to an initial
conversion ratio of approximately _____shares of Common Stock for each $___ in
aggregate principal amount of Securities).] The conversion price and equivalent
conversion ratio are subject to adjustment under certain circumstances. If a
Security is called for redemption, the conversion right will terminate at the
close of business on the Business Day immediately preceding the corresponding
Redemption Date, unless the Company defaults in making the payment due upon
redemption.

         To convert a Security, a holder must (1) complete and sign a conversion
notice substantially in the form attached hereto, (2) surrender the Security to
a Conversion Agent, (3) furnish appropriate 



                                      A-6

<PAGE>


endorsements or transfer documents if required by the Security Registrar or
Conversion Agent and (4) pay any transfer or similar tax, if required. Upon
conversion, no adjustment or payment will be made for interest or dividends, but
if any holder surrenders a Security for conversion after the close of business
on the regular record date for the payment of an installment of interest and
prior to the opening of business on the next Interest Payment Date, then,
notwithstanding such conversion, the interest payable on such Interest Payment
Date will be paid to the registered holder of such Security on such regular
record date. In such event, such Security, when surrendered for conversion, need
not be accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the portion so converted. The number of shares issuable
upon conversion of a Security is determined by dividing the principal amount of
the Security converted by the Applicable Conversion Price in effect on the
Conversion Date. No fractional shares will be issued upon conversion but a cash
adjustment will be made for any fractional interest. The outstanding principal
amount of any Security shall be reduced by the portion of the principal amount
thereof converted into shares of Common Stock.]

         In the event of redemption of this Security in part only, a new
Security or Securities for the unredeemed portion hereof will be issued in the
name of the holder hereof upon the cancellation hereof.

         In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Securities may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.

         The Indenture contains provisions for satisfaction and discharge of the
entire indebtedness of this Security upon compliance by the Company with certain
conditions set forth in the Indenture.

         The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of a majority in aggregate principal
amount of the Securities at the time outstanding, as defined in the Indenture,
to execute supplemental indentures for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of modifying in any manner the rights of the holders of the Securities;
provided, however, that no such supplemental indenture shall, without the
consent of each holder of Securities then outstanding and affected thereby, (i)
change the Maturity Date of any Securities, or reduce the principal amount
thereof, or reduce any amount payable on redemption thereof, or reduce the rate
or extend the time of payment of interest thereon (subject to Section 2.13 of
the Indenture), or make the principal of, or interest or premium on, the
Securities payable in any coin or currency other than U.S. dollars, or impair or
affect the right of any holder of Securities to institute suit for the payment
thereof [or adversely affect the right to convert such Security], or (ii) reduce
the aforesaid percentage of Securities, the holders of which are required to
consent to any such supplemental indenture. The Indenture also contains
provisions permitting the holders of a majority in aggregate principal amount of
the Securities at the time outstanding affected thereby, on behalf of all of the
holders of the Securities, to waive any past default in the performance of any
of the covenants contained in the Indenture, or established pursuant to the
Indenture, and its consequences, except a continuing default in the payment of
the principal of or premium, if any, or interest on any of the Securities or a
default in respect of any covenant or provision under which the Indenture cannot
be modified or amended



                                      A-7

<PAGE>


without the consent of each holder of Securities then outstanding. Any such
consent or waiver by the holder of this Security (unless revoked as provided in
the Indenture) shall be conclusive and binding upon such Holder and upon all
future holders and owners of this Security and of any Security issued in
exchange herefor or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Security.

         No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and premium, if any, and
interest (including Compounded Interest and Additional Sums, if any) on this
Security at the time and place and at the rate and in the money herein
prescribed [or to convert this Security as provided in the Indenture].

         So long as no Event of Default shall have occurred and be continuing,
the Company shall have the right, at any time and from time to time during the
term of the Securities, to defer payments of interest by extending the interest
payment period of such Securities for a period not exceeding 10 consecutive
[semi-annual] periods, including the first such [semi-annual] period during such
extension period, and not extending beyond the Maturity Date of the Securities
(an "Extended Interest Payment Period"), at the end of which period the Company
shall pay all interest then accrued and unpaid (together with interest thereon
at the rate specified for the Securities to the extent that payment of such
interest is enforceable under applicable law). Before the termination of any
such Extended Interest Payment Period, the Company may further defer payments of
interest by further extending such Extended Interest Payment Period; provided
that such Extended Interest Payment Period, together with all such previous and
further extensions within such Extended Interest Payment Period, shall not
exceed 10 consecutive [semi-annual] periods, including the first [semi-annual]
period during such Extended Interest Payment Period and shall not extend beyond
the Maturity Date of the Securities. Upon the termination of any such Extended
Interest Payment Period and the payment of all accrued and unpaid interest and
any additional amounts then due, the Company may commence a new Extended
Interest Payment Period, subject to the foregoing requirements. The Company has
agreed that it will not make certain payments on its capital stock and certain
other instruments during an Extension Period.

         The Company will have the right at any time to liquidate the the Trust
and cause the Securities to be distributed to the holders of the Trust
Securities in liquidation of the Trust.

         The Securities are issuable only in registered form without coupons in
denominations of [$1,000] and any integral multiple thereof. As provided in the
Indenture and subject to the transfer restrictions limitations as may be
contained herein and therein from time to time, this Security is transferable by
the holder hereof on the Security Register of the Company, upon surrender of
this Security for registration of transfer at the office or agency of the
Company in the City and State of New York accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company or the Trustee duly
executed by the holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities of authorized denominations and for the
same aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such
registration of transfer, but the Company may require 



                                      A-8

<PAGE>


payment of a sum sufficient to cover any tax or other governmental charge
payable in relation thereto.

         Prior to due presentment for registration of transfer of this Security,
the Company, the Trustee, any authenticating agent, any paying agent, any
transfer agent and the registrar may deem and treat the holder hereof as the
absolute owner hereof (whether or not this Security shall be overdue and
notwithstanding any notice of ownership or writing hereon made by anyone other
than the Security Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and (subject to the
Indenture) interest due hereon and for all other purposes, and neither the
Company nor the Trustee nor any authenticating agent nor any paying agent nor
any transfer agent nor any registrar shall be affected by any notice to the
contrary.

         No recourse shall be had for the payment of the principal of or
premium, if any, or interest on this Security, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor Person, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.

         All terms used in this Security that are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

         THE INDENTURE AND THE SECURITIES SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.




                                      A-9

<PAGE>


                                 ASSIGNMENT FORM

          To assign this Security, fill in the form below: (I) or (we)
                      assign and transfer this Security to


--------------------------------------------------------------------------------
                  (Insert assignee's soc. sec. or tax I.D. no.)


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


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


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


--------------------------------------------------------------------------------
              (Print or type assignee's name, address and zip code)


and irrevocably appoint
                       ---------------------------------------------------------

to transfer this Security on the books of the Company. The agent may substitute
another to act for him.

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

Date:

Your Signature:
               -----------------------------------------------------------------
                (Sign exactly as your name appears on the face of this Security)


                              SIGNATURE GUARANTEE(1)


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




(1) (Signature must be guaranteed by an "eligible guarantor institution" that is
a bank, stockbroker, savings and loan association or credit union meeting the
requirements of the Registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Registrar in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)



                                      A-10

<PAGE>


[TO BE ATTACHED TO GLOBAL SECURITIES]



                                   SCHEDULE A

                     The initial principal amount of this Global
                     Security shall be $_______. The following
                     increases or decreases in the principal
                     amount of this Global Security have been
                     made:



<Table>
<Caption>

                  AMOUNT OF DECREASE
                  IN PRINCIPAL AMOUNT
                  OF THIS GLOBAL                                          PRINCIPAL AMOUNT OF
                  SECURITY INCLUDING          AMOUNT OF INCREASE          THIS GLOBAL SECURITY        SIGNATURE OF
                  INCREASE UPON               IN PRINCIPAL AMOUNT         FOLLOWING SUCH              AUTHORIZED SIGNATORY
                  EXERCISE OF                 OF THIS GLOBAL              DECREASE (OR                OF TRUSTEE OR
DATE MADE         OVER-ALLOTMENT OPTION       SECURITY                    INCREASE)                   SECURITIES CUSTODIAN
---------         ---------------------       -------------------         --------------------        --------------------
<S>               <C>                         <C>                         <C>                         <C>
</Table>









                                      A-11

<PAGE>


                               ELECTION TO CONVERT


         To:  Continental Airlines, Inc.

         The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security, or the portion below designated, into Common
Stock of Continental Airlines, Inc. in accordance with the terms of the
Indenture referred to in this Security, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for fractional
shares, be issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the undersigned will
pay all transfer taxes payable with respect thereto.

         Any holder, upon the exercise of its conversion rights in accordance
with the terms of the Indenture and the Security, agrees to be bound by the
terms of the Registration Rights Agreement relating to the Common Stock issuable
upon conversion of the Securities.


Date: __________________
      


in whole __

Portions of Security to be converted ($____ or integral multiples thereof):
$___________________ 

____________________________________ Signature (for conversion only)


Please Print or Typewrite Name and Address, Including Zip Code, and Social

Security or Other Identifying Number______________________________________

__________________________________________________________________________


Signature Guarantee:(2)


__________________________________________________________________________




(2) (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union meeting
the requirements of the Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the Registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)




                                      A-12


<PAGE>
                                                                    EXHIBIT 4.22
--------------------------------------------------------------------------------



                    PREFERRED SECURITIES GUARANTEE AGREEMENT


                           CONTINENTAL AIRLINES, INC.


                                       AND


                         BANK ONE TRUST COMPANY, N.A.,

                    AS PREFERRED SECURITIES GUARANTEE TRUSTEE






                          ___% PREFERRED SECURITIES OF

                     CONTINENTAL AIRLINES FINANCE TRUST III


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

                             DATED AS OF ______, ___



<PAGE>


                                TABLE OF CONTENTS


<Table>
<S>             <C>                                                                                   <C>
                                                ARTICLE I
                                      DEFINITIONS AND INTERPRETATION
SECTION 1.1     Definitions and Interpretation.........................................................1

                                                ARTICLE II
                                           TRUST INDENTURE ACT

SECTION 2.1     Trust Indenture Act; Application.......................................................5
SECTION 2.2     Lists of Holders of Securities.........................................................5
SECTION 2.3     Reports by the Preferred Securities Guarantee Trustee..................................6
SECTION 2.4     Periodic Reports to Preferred Securities Guarantee Trustee.............................6
SECTION 2.5     Evidence of Compliance with Conditions Precedent.......................................6
SECTION 2.6     Events of Default; Waiver..............................................................6
SECTION 2.7     Event of Default; Notice...............................................................6
SECTION 2.8     Conflicting Interests..................................................................7

                                               ARTICLE III
                                        POWERS, DUTIES AND RIGHTS
                                OF PREFERRED SECURITIES GUARANTEE TRUSTEE

SECTION 3.1     Powers and Duties of the Preferred Securities Guarantee Trustee........................7
SECTION 3.2     Certain Rights of Preferred Securities Guarantee Trustee...............................8
SECTION 3.3     Not Responsible for Recitals or Issuance of Preferred Securities Guarantee............10

                                               ARTICLE IV
                                 PREFERRED SECURITIES GUARANTEE TRUSTEE

SECTION 4.1     Preferred Securities
 Guarantee Trustee; Eligibility...................................11
SECTION 4.2     Appointment, Removal and Resignation of Preferred Securities Guarantee Trustee........11
SECTION 4.3     Compensation and Expenses of Trustee..................................................12

                                                ARTICLE V
                                                GUARANTEE

SECTION 5.1     Guarantee.............................................................................12
SECTION 5.2     Waiver of Notice and Demand...........................................................13
SECTION 5.3     Obligations Not Affected..............................................................13
SECTION 5.4     Rights of Holders.....................................................................14
SECTION 5.5     Guarantee of Payment..................................................................14
SECTION 5.6     Subrogation...........................................................................14
SECTION 5.7     Independent Obligations...............................................................15
</Table>



                                      -i-

<PAGE>


<Table>
<S>                                                                                                   <C>
                                               ARTICLE VI
                               LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.1     Limitation of Transactions............................................................15
SECTION 6.2     Ranking...............................................................................15

                                              ARTICLE VII
                                              TERMINATION

SECTION 7.1     Termination...........................................................................16

                                             ARTICLE VIII
                                           INDEMNIFICATION

SECTION 8.1     Exculpation...........................................................................16
SECTION 8.2     Indemnification.......................................................................16

                                              ARTICLE IX
                                            MISCELLANEOUS

SECTION 9.1     Successors and Assigns................................................................17
SECTION 9.2     Amendments............................................................................17
SECTION 9.3     Notices...............................................................................17
SECTION 9.4     Benefit...............................................................................18
SECTION 9.5     GOVERNING LAW.........................................................................18
</Table>



                                      -ii-

<PAGE>


                    PREFERRED SECURITIES GUARANTEE AGREEMENT

         THIS GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated
as of ______, ___, is executed and delivered by Continental Airlines, Inc., a
Delaware corporation (the "Guarantor"), and ______________________, a national
banking association, as trustee (the "Preferred Securities Guarantee Trustee"),
for the benefit of the Holders (as defined herein) from time to time of the
Preferred Securities (as defined herein) of Continental Airlines Finance Trust
III, a Delaware statutory business trust (the "Issuer").

         WHEREAS, pursuant to the Declaration (as defined herein) the Issuer is
issuing on the date hereof $______ aggregate liquidation amount of its ____%
Preferred Securities (collectively the "Preferred Securities") liquidation
amount $____ per Preferred Security.

         WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders the Guarantee Payments (as defined below) and to make certain other
payments on the terms and conditions set forth herein.

         WHEREAS, the Guarantor is executing and delivering a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this Preferred Securities Guarantee, for the benefit of the holders of
the Common Securities (as defined herein), except that if an Event of Default
(as defined in the Declaration) has occurred and is continuing, the rights of
holders of the Common Securities to receive Guarantee Payments under the Common
Securities Guarantee are subordinated, to the extent and in the manner set forth
in the Common Securities Guarantee, to the rights of holders of Preferred
Securities to receive Guarantee Payments under this Preferred Securities
Guarantee.

         NOW, THEREFORE, in consideration of the purchase by each Holder, which
purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the
Guarantor executes and delivers this Preferred Securities Guarantee for the
benefit of the Holders.

                                   ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1 Definitions and Interpretation.

         In this Preferred Securities Guarantee, unless the context otherwise
requires:

         (a) capitalized terms used in this Preferred Securities Guarantee but
not defined in the preamble above have the respective meanings assigned to them
in this Section 1.1;

         (b) terms defined in the Declaration as at the date of execution of
this Preferred Securities Guarantee have the same meaning when used in this
Preferred Securities Guarantee unless otherwise defined in this Preferred
Securities Guarantee;

         (c) a term defined anywhere in this Preferred Securities Guarantee has
the same meaning throughout;



                                      -1-

<PAGE>


         (d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;

         (e) all references in this Preferred Securities Guarantee to Articles
and Sections are to Articles and Sections of this Preferred Securities
Guarantee, unless otherwise specified;

         (f) a term defined in the Trust Indenture Act has the same meaning when
used in this Preferred Securities Guarantee, unless otherwise defined in this
Preferred Securities Guarantee or unless the context otherwise requires; and

         (g) a reference to the singular includes the plural and vice versa.

         "Affiliate" has the same meaning as given to that term in Rule 405
under the Securities Act of 1933, as amended, or any successor rule thereunder.

         "Business Day" means any day other than a Saturday or a Sunday, or a
day on which banking institutions in New York, New York or Houston, Texas are
authorized or required by law or executive order to close.

         "Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.

         "Corporate Trust Office" means the office of the Preferred Securities
Guarantee Trustee at which the corporate trust business of the Preferred
Securities Guarantee Trustee shall, at any particular time, be principally
administered, which office at the date of execution of this Agreement is located
at __________________________________.

         "Covered Person" means any Holder or beneficial owner of Preferred
Securities.

         "Debentures" means the series of subordinated debt securities of the
Guarantor designated the[ ____% Debentures due _____,] ___, held by the Property
Trustee (as defined in the Declaration) of the Issuer.

         "Declaration" means the Amended and Restated Declaration of Trust,
dated as of ______, ___, as amended, modified or supplemented from time to time,
among the trustees of the Issuer named therein, the Guarantor, as sponsor, and
the holders from time to time of undivided beneficial ownership interests in the
assets of the Issuer.

         "Event of Default" means [(a)] a default by the Guarantor on any of its
payment or other obligations under this Preferred Securities Guarantee [or (b)
if applicable, the failure by the Guarantor to deliver [other securities of
Guarantor] upon an appropriate election by the Holders of Preferred Securities
to convert the Preferred Securities into [such securities]]; provided, however,
that with respect to a default other than a default in payment of any Guarantee
Payment, the Guarantor shall have received notice of such default and shall not
have cured such default within 60 days after receipt of such notice.


                                      -2-

<PAGE>


         "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by the Issuer: (i) any accumulated and unpaid Distributions (as
defined in the Declaration) that are required to be paid on such Preferred
Securities to the extent the Issuer has funds on hand legally available therefor
at such time, (ii) the redemption price, including all accumulated and unpaid
Distributions to the date of redemption (the "Redemption Price") to the extent
the Issuer has funds on hand legally available therefor at such time, with
respect to any Preferred Securities called for redemption by the Issuer, and
(iii) upon a voluntary or involuntary dissolution, windingup or liquidation of
the Issuer (other than in connection with the distribution of Debentures to the
Holders in exchange for Preferred Securities [or a conversion of all the Trust
Securities into [other securities of the Guarantor] as provided in the
Declaration), the lesser of (a) the aggregate of the liquidation amount and all
accumulated and unpaid Distributions on the Preferred Securities to the date of
payment, to the extent the Issuer has funds on hand legally available therefor,
and (b) the amount of assets of the Issuer remaining available for distribution
to Holders in liquidation of the Issuer after satisfaction of liabilities to
creditors of the Issuer as required by applicable law. If an Event of Default
has occurred and is continuing, no Guarantee Payments under the Common
Securities Guarantee with respect to the Common Securities or any guarantee
payment under any Other Common Securities Guarantees shall be made until the
Holders shall be paid in full the Guarantee Payments to which they are entitled
under this Preferred Securities Guarantee.

         "Holder" shall mean any holder, as registered on the books and records
of the Issuer, of any Preferred Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Person known to a Responsible Officer of
the Preferred Securities Guarantee Trustee to be an Affiliate of the Guarantor
and provided further, that in determining whether the Holders of the requisite
liquidation amount of Preferred Securities have voted on any matter provided for
in the Guarantee, then for the purpose of such determination only (and not for
any other purposes hereunder), if the Preferred Securities remain in the form of
one or more Global Certificates (as defined in the Declaration), the term
"Holders" shall mean the holder of the Global Certificate acting at the
direction of the Preferred Security Beneficial Owners (as defined in the
Declaration).

         "Indemnified Person" means the Preferred Securities Guarantee Trustee,
any Affiliate of the Preferred Securities Guarantee Trustee, or any officers,
directors, shareholders, members, partners, employees, representatives,
nominees, custodians or agents of the Preferred Securities Guarantee Trustee.

         "Indenture" means the Indenture dated as of _______, ___, among the
Guarantor (the "Debenture Issuer") and ______________________, as trustee (the
"Indenture Trustee"), and any indenture supplemental thereto, pursuant to which
the Debentures are to be issued to the Property Trustee (as defined in the
Declaration) of the Issuer.

         "Indenture Event of Default" shall mean any event specified in Section
5.01 of the Indenture.


                                      -3-

<PAGE>


         "Majority in liquidation amount of the Preferred Securities" means,
except as provided by the Declaration or by the Trust Indenture Act, a vote by
Holder(s) of more than 50% of the aggregate liquidation amount of all
outstanding Preferred Securities voting separately as a class. In determining
whether the Holders of the requisite amount of the Preferred Securities have
voted, Preferred Securities which are owned by the Guarantor or any Affiliate of
the Guarantor shall be disregarded for the purpose of any such determination
period.

         "Officers' Certificate" means, with respect to the Guarantor, a
certificate signed by any of the Chairman of the Board, a Vice Chairman of the
Board, the Chief Executive Officer, the President or a Vice President and by the
Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary of
the Guarantor. Any Officers' Certificate delivered with respect to compliance
with a condition or covenant provided for in this Preferred Securities Guarantee
(other than pursuant to Section 314(d)(4) of the Trust Indenture Act) shall
include:

         (a) a statement that each officer signing the Officers' Certificate has
read the covenant or condition and the definitions relating thereto;

         (b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer on behalf of such Person in rendering
the Officers' Certificates.

         (c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and

         (d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.

         "Other Common Securities Guarantees" shall have the same meaning as
"Other Guarantees" as defined in the Common Securities Guarantee.

         "Other Debentures" means all junior subordinated debentures issued by
the Guarantor from time to time and sold to trusts to be established by the
Guarantor (if any), in each case similar to the Issuer.

         "Other Guarantees" means all guarantees to be issued by the Guarantor
with respect to capital securities (if any) similar to the Preferred Securities
issued by other trusts to be established by the Guarantor (if any), in each case
similar to the Issuer.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

         "Preferred Securities Guarantee Trustee" means ______________________,
a national banking association, until a Successor Preferred Securities Guarantee
Trustee has been appointed and has accepted such appointment pursuant to the
terms of this Preferred Securities Guarantee and thereafter means each such
Successor Preferred Securities Guarantee Trustee.


                                      -4-

<PAGE>


         "Responsible Officer" means, with respect to the Preferred Securities
Guarantee Trustee, any officer within the Corporate Trust Office of the
Preferred Securities Guarantee Trustee with direct responsibility for the
administration of this Preferred Securities Guarantee and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.

         "Successor Preferred Securities Guarantee Trustee" means a successor
Preferred Securities Guarantee Trustee possessing the qualifications to act as
Preferred Securities Guarantee Trustee under Section 4.1.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.

         "Trust Securities" means the Common Securities and the Preferred
Securities, collectively.

                                   ARTICLE II
                               TRUST INDENTURE ACT

SECTION 2.1 Trust Indenture Act; Application.

         (a) This Preferred Securities Guarantee is subject to the provisions of
the Trust Indenture Act that are required to be part of this Preferred
Securities Guarantee and shall, to the extent applicable, be governed by such
provisions; and

         (b) if and to the extent that any provision of this Preferred
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.

SECTION 2.2 Lists of Holders of Securities.

         (a) The Guarantor shall provide the Preferred Securities Guarantee
Trustee (unless the Preferred Securities Guarantee Trustee is otherwise the
registrar of the Preferred Securities) with a list, in such form as the
Preferred Securities Guarantee Trustee may reasonably require, of the names and
addresses of the Holders ("List of Holders") as of such date, (i) within 14 days
after each record date for payment of Distributions (as defined in the
Declaration), and (ii) at any other time within 30 days of receipt by the
Guarantor of a written request for a List of Holders as of a date no more than
14 days before such List of Holders is given to the Preferred Securities
Guarantee Trustee, provided, that the Guarantor shall not be obligated to
provide such List of Holders at any time that the Guarantor certifies in writing
to the Preferred Securities Guarantee Trustee that the List of Holders does not
differ from the most recent List of Holders given to the Preferred Securities
Guarantee Trustee by the Guarantor. The Preferred Securities Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.

         (b) The Preferred Securities Guarantee Trustee shall comply with its
obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust
Indenture Act.


                                      -5-

<PAGE>

SECTION 2.3 Reports by the Preferred Securities Guarantee Trustee.

         Within 60 days after _______ of each year, commencing ___ __, ____, the
Preferred Securities Guarantee Trustee shall provide to the Holders such reports
as are required by Section 313 of the Trust Indenture Act, if any, in the form
and in the manner provided by Section 313 of the Trust Indenture Act. The
Preferred Securities Guarantee Trustee shall also comply with the other
requirements of Section 313 of the Trust Indenture Act.

SECTION 2.4 Periodic Reports to Preferred Securities Guarantee Trustee.

         The Guarantor shall provide to the Preferred Securities Guarantee
Trustee such documents, reports and information as required by Section 314 (if
any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act. Delivery of such reports, information and
documents to the Preferred Securities Guarantee Trustee is for informational
purposes only and the Preferred Securities Guarantee Trustee's receipt of such
shall not constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Guarantor's
compliance with any of its covenants hereunder (as to which the Preferred
Securities Guarantee Trustee is entitled to rely exclusively on Officers'
Certificates).

SECTION 2.5 Evidence of Compliance with Conditions Precedent.

         The Guarantor shall provide to the Preferred Securities Guarantee
Trustee such evidence of compliance with any conditions precedent, if any,
provided for in this Preferred Securities Guarantee that relate to any of the
matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate
or opinion required to be given by an officer pursuant to Section 314(c)(1) may
be given in the form of an Officers' Certificate.

SECTION 2.6 Events of Default; Waiver.

         The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of all Holders, waive any past Event of Default and its
consequences. Upon such waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Preferred Securities Guarantee, but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon.

Section 2.7 Event of Default; Notice.

         (a) The Preferred Securities Guarantee Trustee shall, within 90 days
after the occurrence of an Event of Default with respect to this Preferred
Securities Guarantee actually known to a Responsible Officer, mail by first
class postage prepaid, to all Holders, notices of all such Events of Default,
unless such defaults have been cured before the giving of such notice, provided,
that, except in the case of default in the payment of any Guarantee Payment, the
Preferred Securities Guarantee Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee, or a
trust committee of directors and/or a 


                                      -6-

<PAGE>


Responsible Officer in good faith determines that the withholding of such notice
is in the interests of the Holders.

         (b) The Preferred Securities Guarantee Trustee shall not be deemed to
have knowledge of any Event of Default unless the Preferred Securities Guarantee
Trustee shall have received written notice from the Guarantor, or a Responsible
Officer charged with the administration of this Preferred Securities Guarantee
shall have obtained actual knowledge, of such Event of Default.

SECTION 2.8 Conflicting Interests.

         The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.

                                  ARTICLE III
                            POWERS, DUTIES AND RIGHTS
                    OF PREFERRED SECURITIES GUARANTEE TRUSTEE

SECTION 3.1 Powers and Duties of the Preferred Securities Guarantee Trustee.

         (a) This Preferred Securities Guarantee shall be held by the Preferred
Securities Guarantee Trustee for the benefit of the Holders, and the Preferred
Securities Guarantee Trustee shall not transfer this Preferred Securities
Guarantee to any Person except a Holder exercising his or her rights pursuant to
Section 5.4(b) or to a Successor Preferred Securities Guarantee Trustee on
acceptance by such Successor Preferred Securities Guarantee Trustee of its
appointment to act as Successor Preferred Securities Guarantee Trustee. The
right, title and interest of the Preferred Securities Guarantee Trustee shall
automatically vest in any Successor Preferred Securities Guarantee Trustee, and
such vesting and succession of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Preferred Securities Guarantee Trustee.

         (b) If an Event of Default actually known to a Responsible Officer has
occurred and is continuing, the Preferred Securities Guarantee Trustee shall
enforce this Preferred Securities Guarantee for the benefit of the Holders.

         (c) The Preferred Securities Guarantee Trustee, before the occurrence
of any Event of Default and after the curing of all Events of Default that may
have occurred, shall undertake to perform only such duties as are specifically
set forth in this Preferred Securities Guarantee, and no implied covenants shall
be read into this Preferred Securities Guarantee against the Preferred
Securities Guarantee Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.6) and is actually known to a
Responsible Officer, the Preferred Securities Guarantee Trustee shall exercise
such of the rights and powers vested in it by this Preferred Securities
Guarantee, and use the same degree of care and skill in its exercise thereof, as
a prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.


                                      -7-

<PAGE>


         (d) No provision of this Preferred Securities Guarantee shall be
construed to relieve the Preferred Securities Guarantee Trustee from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:

                  (i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:

                           (A) the duties and obligations of the Preferred
Securities Guarantee Trustee shall be determined solely by the express
provisions of this Preferred Securities Guarantee, and the Preferred Securities
Guarantee Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Preferred Securities
Guarantee, and no implied covenants or obligations shall be read into this
Preferred Securities Guarantee against the Preferred Securities Guarantee
Trustee; and

                           (B) in the absence of bad faith on the part of the
Preferred Securities Guarantee Trustee, the Preferred Securities Guarantee
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any certificates or opinions
furnished to the Preferred Securities Guarantee Trustee and conforming to the
requirements of this Preferred Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof are specifically required
to be furnished to the Preferred Securities Guarantee Trustee, the Preferred
Securities Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this Preferred
Securities Guarantee;

                  (ii) the Preferred Securities Guarantee Trustee shall not be
liable for any error of judgment made in good faith by a Responsible Officer,
unless it shall be proved that the Preferred Securities Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment was made;

                  (iii) the Preferred Securities Guarantee Trustee shall not be
liable with respect to any action taken or omitted to be taken by it in good
faith in accordance with the direction of the Holders of a Majority in
liquidation amount of the Preferred Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the Preferred
Securities Guarantee Trustee, or exercising any trust or power conferred upon
the Preferred Securities Guarantee Trustee under this Preferred Securities
Guarantee; and

                  (iv) no provision of this Preferred Securities Guarantee shall
require the Preferred Securities Guarantee Trustee to expend or risk its own
funds or otherwise incur personal financial liability in the performance of any
of its duties or in the exercise of any of its rights or powers, if the
Preferred Securities Guarantee Trustee shall have reasonable grounds for
believing that the repayment of such funds or liability is not reasonably
assured to it under the terms of this Preferred Securities Guarantee or
indemnity, reasonably satisfactory to the Preferred Securities Guarantee
Trustee, against such risk or liability is not reasonably assured to it.

SECTION 3.2 Certain Rights of Preferred Securities Guarantee Trustee.

         (a) Subject to the provisions of Section 3.1:


                                      -8-

<PAGE>


                  (i) The Preferred Securities Guarantee Trustee may
conclusively rely, and shall be fully protected in acting or refraining from
acting, upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed, sent or presented by the proper party or parties.

                  (ii) Any direction or act of the Guarantor contemplated by
this Preferred Securities Guarantee may be sufficiently evidenced by an
Officers' Certificate.

                  (iii) Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Securities Guarantee Trustee shall deem it
desirable that a matter be proved or established before taking, suffering or
omitting any action hereunder, the Preferred Securities Guarantee Trustee
(unless other evidence is herein specifically prescribed) may, in the absence of
bad faith on its part, request and conclusively rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly delivered by
the Guarantor.

                  (iv) The Preferred Securities Guarantee Trustee shall have no
duty to see to any recording, filing or registration of any instrument (or any
rerecording, refiling or registration thereof).

                  (v) The Preferred Securities Guarantee Trustee may consult
with counsel of its selection, and the advice or opinion of such counsel with
respect to legal matters shall be full and complete authorization and protection
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in accordance with such advice or opinion. Such counsel may be counsel
to the Guarantor or any of its Affiliates and may include any of its employees.
The Preferred Securities Guarantee Trustee shall have the right at any time to
seek instructions concerning the administration of this Preferred Securities
Guarantee from any court of competent jurisdiction.

                  (vi) The Preferred Securities Guarantee Trustee shall be under
no obligation to exercise any of the rights or powers vested in it by this
Preferred Securities Guarantee at the request or direction of any Holder, unless
such Holder shall have provided to the Preferred Securities Guarantee Trustee
such security and indemnity, reasonably satisfactory to the Preferred Securities
Guarantee Trustee, against the costs, expenses (including attorneys' fees and
expenses and the expenses of the Preferred Securities Guarantee Trustee's
agents, nominees or custodians) and liabilities that might be incurred by it in
complying with such request or direction, including such reasonable advances as
may be requested by the Preferred Securities Guarantee Trustee; provided that,
nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the
Preferred Securities Guarantee Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in it by
this Preferred Securities Guarantee.

                  (vii) The Preferred Securities Guarantee Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Preferred Securities Guarantee


                                      -9-

<PAGE>


Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.

                  (viii) The Preferred Securities Guarantee Trustee may execute
any of the trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents, nominees, custodians or attorneys, and the
Preferred Securities Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with due
care by it hereunder.

                  (ix) Any action taken by the Preferred Securities Guarantee
Trustee or its agents hereunder shall bind the Holders, and the signature of the
Preferred Securities Guarantee Trustee or its agents alone shall be sufficient
and effective to perform any such action. No third party shall be required to
inquire as to the authority of the Preferred Securities Guarantee Trustee to so
act or as to its compliance with any of the terms and provisions of this
Preferred Securities Guarantee, both of which shall be conclusively evidenced by
the Preferred Securities Guarantee Trustee's or its agent's taking such action.

                  (x) Whenever in the administration of this Preferred
Securities Guarantee the Preferred Securities Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy or right
or taking any other action hereunder, the Preferred Securities Guarantee Trustee
(i) may request instructions from the Holders of a Majority in liquidation
amount of the Preferred Securities, (ii) may refrain from enforcing such remedy
or right or taking such other action until such instructions are received, and
(iii) shall be protected in conclusively relying on or acting in accordance with
such instructions.

                  (xi) The Preferred Securities Guarantee Trustee shall not be
liable for any action taken, suffered, or omitted to be taken by it in good
faith, without negligence, and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this Preferred
Securities Guarantee.

         (b) No provision of this Preferred Securities Guarantee shall be deemed
to impose any duty or obligation on the Preferred Securities Guarantee Trustee
to perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Preferred Securities Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power or
authority available to the Preferred Securities Guarantee Trustee shall be
construed to be a duty.

SECTION 3.3 Not Responsible for Recitals or Issuance of Preferred Securities
            Guarantee.

         The recitals contained in this Preferred Securities Guarantee shall be
taken as the statements of the Guarantor, and the Preferred Securities Guarantee
Trustee does not assume any responsibility for their correctness. The Preferred
Securities Guarantee Trustee makes no representation as to the validity or
sufficiency of this Preferred Securities Guarantee.


                                      -10-

<PAGE>


                                   ARTICLE IV
                     PREFERRED SECURITIES GUARANTEE TRUSTEE

SECTION 4.1 Preferred Securities Guarantee Trustee; Eligibility.

         (a) There shall at all times be a Preferred Securities Guarantee
Trustee which shall:

                  (i) not be an Affiliate of the Guarantor; and

                  (ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Securities and
Exchange Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars ($50,000,000),
and subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then, for the purposes of
this Section 4.1(a)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published.

         (b) If at any time the Preferred Securities Guarantee Trustee shall
cease to be eligible to so act under Section 4.1(a), the Preferred Securities
Guarantee Trustee shall immediately resign in the manner and with the effect set
out in Section 4.2(c).

         (c) If the Preferred Securities Guarantee Trustee has or shall acquire
any "conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Securities Guarantee Trustee and Guarantor shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.

SECTION 4.2 Appointment, Removal and Resignation of Preferred Securities
            Guarantee Trustee.

         (a) Subject to Section 4.2(b), the Preferred Securities Guarantee
Trustee may be appointed or removed without cause at any time by the Guarantor
except during an Event of Default.

         (b) The Preferred Securities Guarantee Trustee shall not be removed in
accordance with Section 4.2(a) until a Successor Preferred Securities Guarantee
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Preferred Securities Guarantee Trustee and
delivered to the Guarantor.

         (c) The Preferred Securities Guarantee Trustee shall hold office until
a Successor Preferred Securities Guarantee Trustee shall have been appointed or
until its removal or resignation. The Preferred Securities Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Preferred Securities Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Preferred Securities Guarantee Trustee has been appointed and has
accepted such


                                      -11-

<PAGE>


appointment by instrument in writing executed by such Successor Preferred
Securities Guarantee Trustee and delivered to the Guarantor and the resigning
Preferred Securities Guarantee Trustee.

         (d) If no Successor Preferred Securities Guarantee Trustee shall have
been appointed and accepted appointment as provided in this Section 4.2 within
60 days after delivery of an instrument of removal or resignation, the Preferred
Securities Guarantee Trustee resigning or being removed may petition any court
of competent jurisdiction for appointment of a Successor Preferred Securities
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Preferred Securities Guarantee
Trustee.

         (e) No Preferred Securities Guarantee Trustee shall be liable for the
acts or omissions to act of any Successor Preferred Securities Guarantee
Trustee.

         (f) Upon termination of this Preferred Securities Guarantee or removal
or resignation of the Preferred Securities Guarantee Trustee pursuant to this
Section 4.2, the Guarantor shall pay to the Preferred Securities Guarantee
Trustee all amounts due to the Preferred Securities Guarantee Trustee accrued to
the date of such termination, removal or resignation.

SECTION 4.3 Compensation and Expenses of Trustee.

         The Guarantor covenants and agrees to pay to the Preferred Securities
Guarantee Trustee from time to time, and the Preferred Securities Guarantee
Trustee shall be entitled to, such compensation as shall be agreed to in writing
between the Guarantor and the Preferred Securities Guarantee Trustee (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust), and the Guarantor will pay or reimburse the
Preferred Securities Guarantee Trustee upon its request for all reasonable
expenses, disbursements and advances incurred or made by the Preferred
Securities Guarantee Trustee in accordance with any of the provisions of this
Preferred Securities Guarantee (including the reasonable compensation and the
expenses and disbursements of its counsel and of all persons not regularly in
its employ) except any such expense, disbursement or advance as may arise from
its negligence or bad faith. The Guarantor also covenants to indemnify each of
the Preferred Securities Guarantee Trustee or any predecessor Preferred
Securities Guarantee Trustee (and its officers, agents, directors and employees)
for, and to hold it harmless against, any and all loss, damage, claim, liability
or expense including taxes (other than taxes based on the income of the
Preferred Securities Guarantee Trustee) incurred without negligence or bad faith
on the part of the Preferred Securities Guarantee Trustee and arising out of or
in connection with the acceptance or administration of this guarantee, including
the costs and expenses of defending itself against any claim of liability in the
premises.

                                   ARTICLE V
                                   GUARANTEE

SECTION 5.1 Guarantee.

         The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense, right of set
off or counterclaim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct


                                      -12-

<PAGE>


payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.

SECTION 5.2 Waiver of Notice and Demand.

         The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Issuer or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands. Notwithstanding anything to the contrary herein, the
Guarantor retains all of its rights under the Indenture to extend the interest
payment period on the Subordinated Debentures and the Guarantor shall not be
obligated hereunder to make any Guarantee Payment during any extended Interest
Payment Period (as defined in the Indenture) with respect to the Distributions
(as defined in the Declaration) on the Preferred Securities.

SECTION 5.3 Obligations Not Affected.

         The obligations, covenants, agreements and duties of the Guarantor
under this Preferred Securities Guarantee shall be absolute and unconditional
and shall remain in full force and effect until the entire liquidation amount of
all outstanding Preferred Securities shall have been paid and such obligation
shall in no way be affected or impaired by reason of the happening from time to
time of any of the following:

         (a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;

         (b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Preferred Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures permitted by the Indenture);

         (c) any failure, omission, delay or lack of diligence on the part of
the Property Trustee or the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Property Trustee or the Holders
pursuant to the terms of the Preferred Securities, or any action on the part of
the Issuer granting indulgence or extension of any kind;

         (d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;

         (e) any invalidity of, or defect or deficiency in, the Preferred
Securities;


                                      -13-

<PAGE>


         (f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or

         (g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor with respect to the
Guarantee Payments shall be absolute and unconditional under any and all
circumstances.

         There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 5.4 Rights of Holders.

         (a) The Holders of a Majority in liquidation amount of the Preferred
Securities have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Preferred Securities Guarantee
Trustee in respect of this Preferred Securities Guarantee or exercising any
trust or power conferred upon the Preferred Securities Guarantee Trustee under
this Preferred Securities Guarantee.

         (b) If the Preferred Securities Guarantee Trustee fails to enforce such
Preferred Securities Guarantee, any Holder may institute a legal proceeding
directly against the Guarantor to enforce its rights under this Preferred
Securities Guarantee, without first instituting a legal proceeding against the
Issuer, the Preferred Securities Guarantee Trustee or any other person or
entity. Notwithstanding the foregoing, if the Guarantor has failed to make a
Guarantee Payment, a Holder may directly institute a proceeding in such Holder's
own name against the Guarantor for enforcement of the Preferred Securities
Guarantee for such payment. The Guarantor waives any right or remedy to require
that any action be brought first against the Issuer or any other person or
entity before proceeding directly against the Guarantor.

SECTION 5.5 Guarantee of Payment.

         This Preferred Securities Guarantee creates a guarantee of payment and
not of collection.

SECTION 5.6 Subrogation.

         The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Preferred Securities Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Preferred Securities Guarantee, if, at the time
of any such payment, any amounts are due and unpaid under this Preferred
Securities Guarantee. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.


                                      -14-

<PAGE>


SECTION 5.7 Independent Obligations.

         The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Preferred
Securities Guarantee notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.3 hereof.

                                   ARTICLE VI
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.1 Limitation of Transactions.

         So long as any Preferred Securities remain outstanding, the Guarantor
shall not (i) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of the
Guarantor's capital stock (which includes common and preferred stock) (other
than (a) dividends or distributions in shares of, or options, warrants, rights
to subscribe for or purchase shares of, common stock of the Guarantor, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
as a result of a reclassification of the Guarantor's capital stock or the
exchange or the conversion of one class or series of the Guarantor's capital
stock for another class or series of the Guarantor's capital stock, (d) the
purchase of fractional interests in shares of the Guarantor's capital stock
pursuant to the conversion or exchange provisions of such capital stock or the
security being converted or exchanged, and (e) purchases of the Guarantor's
common stock related to the issuance of the Guarantor's common stock or rights
under any of the Guarantor's benefit plans for its directors, officers,
employees or any of the Guarantor's dividend reinvestment plans), (ii) make any
payment of principal of, or premium, if any, or interest on or repay, repurchase
or redeem any debt securities of the Guarantor (including any Other Debentures)
that rank pari passu with or junior in right of payment to the Debentures or
(iii) make any guarantee payments with respect to any guarantee (other than
payments under the Preferred Securities Guarantee) by the Guarantor of the debt
securities of any subsidiary of the Guarantor (including Other Guarantees) if
such guarantee ranks pari passu with or junior in right of payment to the
Debentures if at such time (1) there shall have occurred any event of which the
Guarantor has actual knowledge that (a) with the giving of notice or the lapse
of time, or both, would constitute an Indenture Event of Default and (b) in
respect of which the Guarantor shall not have taken reasonable steps to cure,
(2) an Indenture Event of Default shall have occurred and be continuing, (3) if
such Debentures are held by the Property Trustee, the Guarantor shall be in
default with respect to its payment of any obligations under this Preferred
Securities Guarantee or (4) the Guarantor shall have given notice of its
election of the exercise of its right to extend the interest payment period
pursuant to Section 2.13 of the Indenture or such extension period, or any such
extension shall have commenced and be continuing.

SECTION 6.2 Ranking.

         This Preferred Securities Guarantee will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to Senior Indebtedness (as


                                      -15-

<PAGE>


defined in the Indenture), to the same extent and in the same manner that the
Debentures are subordinated to Senior Indebtedness pursuant to the Indenture,
and (ii) pari passu with the Debentures and any Other Guarantee.

                                  ARTICLE VII
                                  TERMINATION

SECTION 7.1 Termination.

         This Preferred Securities Guarantee shall terminate and be of no
further force and effect (i) upon full payment of the Redemption Price (as
defined in the Declaration) of all Preferred Securities, or (ii) upon
liquidation of the Issuer, the full payment of the amounts payable in accordance
with the Declaration or the distribution of the Debentures to the Holders and
the holders of the Common Securities [or conversion of all the Trust Securities
in [other securities of the Guarantor as provided in the Declaration]].
Notwithstanding the foregoing, this Preferred Securities Guarantee will continue
to be effective or will be reinstated, as the case may be, if at any time any
Holder must restore payment of any sums paid under the Preferred Securities or
under this Preferred Securities Guarantee.

                                  ARTICLE VIII
                                 INDEMNIFICATION

SECTION 8.1 Exculpation.

         (a) No Indemnified Person shall be liable, responsible or accountable
in damages or otherwise to the Guarantor or any Covered Person for any loss,
damage or claim incurred by reason of any act or omission performed or omitted
by such Indemnified Person in good faith in accordance with this Preferred
Securities Guarantee and in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by this Preferred Securities Guarantee or by law, except that an
Indemnified Person shall be liable for any such loss, damage or claim incurred
by reason of such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions.

         (b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders might properly be paid.

SECTION 8.2 Indemnification.

         The Guarantor agrees to indemnify each Indemnified Person for, and to
hold each Indemnified Person harmless against, any and all loss, liability,
damage, claim or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of the
trust or trusts hereunder, including the costs and expenses


                                      -16-

<PAGE>


(including reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The provisions in this
Section 8.2 shall survive the termination of this Preferred Securities Guarantee
or the resignation or removal of the Preferred Securities Guarantee Trustee.

                                   ARTICLE IX
                                  MISCELLANEOUS

SECTION 9.1 Successors and Assigns.

         All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
then outstanding.

SECTION 9.2 Amendments.

         Except with respect to any changes that do not materially adversely
affect the rights of Holders (in which case no consent of Holders will be
required), this Preferred Securities Guarantee may only be amended with the
prior approval of the Holders of a Majority in liquidation amount of the
Preferred Securities (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined). The provisions of
the Declaration with respect to consents to amendments thereof (whether at a
meeting or otherwise) shall apply to the giving of such approval.

SECTION 9.3 Notices. 

         All notices provided for in this Preferred Securities Guarantee shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:

         (a) If given to the Issuer, in care of the Administrative Trustee at
the mailing address set forth below (or such other address as the Issuer may
give notice of to the Holders and the Preferred Securities Guarantee Trustee):

         Continental Airlines Finance Trust III
         c/o Continental Airlines, Inc.
         1600 Smith Street
         Houston, Texas 77002
         Attention:  Chief Financial Officer
         Telecopy:  (713) 324-2950

         (b) If given to the Preferred Securities Guarantee Trustee, at the
Preferred Securities Guarantee Trustee's mailing address set forth below (or
such other address as the Preferred Securities Guarantee Trustee may give notice
of to the Holders and the Issuer):


                                      -17-

<PAGE>


         -----------------------
         -----------------------
         -----------------------
         -----------------------
         Attention: Corporate Trust Department
         Telecopy: (___) ___-____

         (c) If given to the Guarantor, at the Guarantor's mailing address set
forth below (or such other address as the Guarantor may give notice of to the
Holders and the Preferred Securities Guarantee Trustee):

         Continental Airlines, Inc.
         1600 Smith Street
         Houston, Texas 77002
         Attention:  Chief Financial Officer
         Telecopy:  (302) 651-8813

         (d) If given to any Holder, at the address set forth on the books and
records of the Issuer.

         All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

SECTION 9.4 Benefit.

         This Preferred Securities Guarantee is solely for the benefit of the
Holders and, subject to Section 3.1(a), is not separately transferable from the
Preferred Securities.

SECTION 9.5 GOVERNING LAW.

         THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.


                                      -18-

<PAGE>


         THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.

                                           CONTINENTAL AIRLINES, INC.,
                                           AS GUARANTOR


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


                                           __________________________

                                           AS PREFERRED SECURITIES GUARANTEE
                                           TRUSTEE


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


                                      -19-


<PAGE>
                                                                     EXHIBIT 5.1


                       [VINSON & ELKINS L.L.P. LETTERHEAD]


                                October 19, 2001


Continental Airlines, Inc.
1600 Smith Street
Houston, Texas  77002

Ladies and Gentlemen:

         We have acted as counsel for Continental Airlines, Inc., a Delaware
corporation (the "Company"), with respect to certain legal matters in connection
with the registration by the Company and Continental Airlines Finance Trust III,
a Delaware statutory business trust (the "Trust"), under the Securities Act of
1933, as amended (the "Securities Act"), of the offer and sale (a) by the
Company from time to time, pursuant to Rule 415 under the Securities Act, of (i)
unsecured debt securities, in one or more series, consisting of notes,
debentures or other evidences of indebtedness (the "Debt Securities"), (ii)
shares of preferred stock of the Company, in one or more series (the "Preferred
Stock"), which may be issued in the form of depositary shares evidenced by
depositary receipts (the "Depositary Shares"), (iii) shares of Class B common
stock of the Company (the "Common Stock"), (iv) securities warrants (the
"Warrants") to purchase Debt Securities, Preferred Stock, Depositary Shares or
Common Stock, (v) stock purchase contracts (the "Stock Purchase Contracts") to
purchase shares of Common Stock or other securities
 of the Company at a future
date, (vi) stock purchase units (the "Stock Purchase Units") consisting of a
Stock Purchase Contract and debt securities, preferred securities, warrants or
debt obligations of third parties securing the holders' obligations to purchase
the securities under the Stock Purchase Contracts, (vii) in addition to the Debt
Securities, junior subordinated debentures (the "Trust Debentures") to be
purchased by the Trust with the proceeds from the sale of preferred securities
(the "Preferred Securities") and (viii) a guarantee of the Preferred Securities
(the "Preferred Securities Guarantee"), and (b) by the Trust from time to time
pursuant to Rule 415 under the Securities Act of the Trust's Preferred
Securities. The Company has advised us that the aggregate initial offering
prices of the Debt Securities, Preferred Stock, Depositary Shares, Common Stock,
Warrants, Stock Purchase Contracts, Stock Purchase Units and Preferred
Securities (excluding the aggregate initial offering price of the Trust
Debentures) offered by the Company and the Trust (collectively, including the
Trust Debentures, the "Securities") will not exceed $500,000,000 or, if
applicable, the equivalent thereof in any other currency or currency unit. The
Company has advised us that the Securities will be offered in amounts, at prices
and on terms to be determined in light of market conditions at the time of sale




<PAGE>

Continental Airlines, Inc.
Page 2
October 19, 2001


and to be set forth in supplements to the Prospectus contained in the Company's
and the Trust's Registration Statement on Form S-3 to which this opinion is an
exhibit.

         We have examined originals or copies, certified or otherwise identified
to our satisfaction, of (i) the Amended and Restated Certificate of
Incorporation and Bylaws of the Company, each as amended to the date hereof;
(ii) the Indenture between the Company and Bank One Trust Company, National
Association, as trustee, dated July 15, 1997 (the "Senior Indenture") relating
to the Senior Debt Securities; (iii) a form of the Indenture for Subordinated
Debt Securities (the "Subordinated Indenture") to be entered into between the
Company and a trustee to be named when subordinated debt securities are issued,
in the form incorporated as an exhibit to the Registration Statement; (iv) a
form of Preferred Securities Guarantee Agreement (the "Guarantee Agreement") to
be entered into by the Company, in the form included as an exhibit to the
Registration Statement; (v) a form of Junior Subordinated Indenture relating to
the Trust Debentures (the "Junior Subordinated Indenture," and together with the
Senior Indenture and the Subordinated Indenture, the "Indentures," and each, an
"Indenture") to be entered into between the Company and Bank One Trust Company,
N.A., in the form included as an exhibit to the Registration Statement; and (vi)
such other certificates, statutes and other instruments and documents as we
considered appropriate for purposes of the opinions hereafter expressed. In
addition, we reviewed such questions of law, as we considered appropriate.

         As to any facts material to our opinion, we have made no independent
investigation of such facts and have relied, to the extent that we deem such
reliance proper, upon certificates of public officials and officers or other
representatives of the Company.

         In rendering the opinions set forth below, we have assumed that (i) all
information contained in all documents reviewed by us is true and correct; (ii)
all signatures on all documents examined by us are genuine; (iii) all documents
submitted to us as originals are authentic and all documents submitted to us as
copies conform to the originals of those documents; (iv) each natural person
signing any document reviewed by us had the legal capacity to do so; (v) each
person signing in a representative capacity (other than on behalf of the
Company) any document reviewed by us had authority to sign in such capacity;
(vi) the Registration Statement, and any amendments thereto (including
post-effective amendments) will have become effective and comply with all
applicable laws; (vii) a prospectus supplement will have been prepared and filed
with the Securities and Exchange Commission describing the Securities offered
thereby; (viii) all Securities will be issued and sold in compliance with
applicable federal and state securities laws and in the manner stated in the
Registration Statement and the applicable prospectus supplement; (ix) the Senior
Indenture, the Subordinated Indenture and the Junior Subordinated Indenture,
together with any supplemental indenture or other instruments establishing a
series of Debt Securities or Trust Debentures, as the case may be, to be issued
under any of the Indentures, will each be duly authorized, executed and
delivered by the parties thereto in substantially the form reviewed by us or
with changes that do not affect the opinions given hereunder; (x) a definitive
purchase, underwriting or similar agreement with respect to any Securities
offered will have been duly authorized and validly executed and delivered by the
Company and the other parties thereto; and (xi) any Securities issuable upon
conversion, exchange or exercise of any Security being 


<PAGE>

Continental Airlines, Inc.
Page 3
October 19, 2001


offered will have been duly authorized, created and, if appropriate, reserved
for issuance upon such conversion, exchange or exercise.

         Based on the foregoing, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:

         1. With respect to Debt Securities to be issued under the Senior
Indenture, when (i) the Senior Indenture has been duly qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"); (ii) the Board of Directors of
the Company (or a committee thereof) has taken all necessary corporate action to
approve the issuance and terms of the Debt Securities, the terms of the offering
thereof and related matters; (iii) the terms of the Debt Securities and of their
issuance and sale have been established so as not to violate any applicable law
or result in a default under or breach of any agreement or instrument binding
upon the Company and so as to comply with any requirement or restriction imposed
by any court or governmental body having jurisdiction over the Company; and (iv)
the Debt Securities have been duly executed, authenticated, issued and delivered
in accordance with the provisions of the Senior Indenture and in accordance with
the applicable definitive purchase, underwriting or similar agreement approved
by the Board of Directors of the Company (or a committee thereof), then upon
payment of the consideration provided for therein, the Debt Securities will be
legally issued and will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and will be
entitled to the benefits of the Senior Indenture.

         2. With respect to Debt Securities to be issued under the Subordinated
Indenture, when (i) the Subordinated Indenture has been duly qualified under the
TIA; (ii) the Board of Directors of the Company (or a committee thereof) has
taken all necessary corporate action to approve the issuance and terms of the
Debt Securities, the terms of the offering thereof and related matters; (iii)
the terms of the Debt Securities and their issuance and sale and the terms of
the Subordinated Indenture have been established so as not to violate any
applicable law or result in a default under or breach of any agreement or
instrument binding upon the Company and so as to comply with any requirement or
restriction imposed by any court or governmental body having jurisdiction over
the Company; and (iv) the Debt Securities have been duly executed,
authenticated, issued and delivered in accordance with the provisions of the
Subordinated Indenture and in accordance with the applicable definitive
purchase, underwriting or similar agreement approved by the Board of Directors
of the Company (or a committee thereof), then upon payment of the consideration
provided for therein, the Debt Securities will be legally issued and will
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms and will be entitled to the benefits of
the Subordinated Indenture.

         3. With respect to the Warrants, when (i) the Board of Directors of the
Company (or a committee thereof) has taken all necessary corporate action to
approve the creation of and the issuance and terms of the Warrants, the terms of
the offering thereof and related matters; (ii) the warrant agreement or
agreements relating to the Warrants have been duly authorized and validly
executed and delivered by the Company and the warrant agent appointed by the
Company; and (iii) the Warrants or certificates representing the Warrants have
been duly executed, 


<PAGE>


Continental Airlines, Inc.
Page 4
October 19, 2001


countersigned, registered and delivered in accordance with the appropriate
warrant agreement or agreements and the applicable definitive purchase,
underwriting or similar agreement approved by the Board of Directors of the
Company (or a committee thereof), then upon payment of the consideration
provided for therein, the Warrants will be legally issued.

         4. With respect to Trust Debentures, when (i) the Junior Subordinated
Indenture has been duly qualified under the TIA, (ii) the Board of Directors of
the Company (or a committee thereof) has taken all necessary corporate action to
approve the issuance and terms of any Trust Debentures, the terms of the
offering thereof and related matters, (iii) the terms of the Trust Debentures
and their issuance and sale and the terms of the Junior Subordinated Indenture
have been duly established so as not to violate any applicable law or result in
a default under or breach of any agreement or instrument binding upon the
Company and so as to comply with any requirement or restriction imposed by any
court or governmental body jurisdiction over the Company, and (iv) the Trust
Debentures been duly executed, authenticated, issued and delivered in accordance
with the provisions of the Junior Subordinated Indenture and in accordance with
the applicable definitive purchase agreement, underwriting or similar agreement
approved by the Board of Directors (or a committee thereof), then upon payment
of the consideration provided for therein, the Trust Debentures will be legally
issued and will constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms and will be
entitled to the benefits of the Junior Subordinated Indenture.

         5. With respect to the Preferred Securities Guarantee, when (i) the
Guarantee Agreement has been duly authorized, executed and delivered by the
Company to the guarantee trustee; (ii) the Guarantee Agreement has been duly
qualified under the TIA; (iii) the Board of Directors of the Company (or a
committee thereof) has taken all necessary corporate action to approve and
establish the terms of the Guarantee Agreement and the Preferred Securities
Guarantee and to authorize and approve the issuance thereof, the terms of the
offering and related matters; (iv) the Guarantee Agreement has been duly
executed, issued and delivered in accordance with the provisions of the
Guarantee Agreement approved by the Board of Directors of the Company (or a
committee thereof), then upon payment for and delivery of the Preferred
Securities in accordance with the applicable purchase agreement, the Preferred
Securities Guarantee will constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms.

         6. With respect to Stock Purchase Contracts, when (i) the purchase
agreement for the Stock Purchase Contracts has been duly authorized and validly
executed by the parties thereto; (ii) the Board of Directors of the Company (or
a committee thereof) has taken all necessary corporate action to approve and
establish the terms of the Stock Purchase Contracts and to authorize and approve
the issuance thereof, the terms of the offering and related matters; and (iii)
the Stock Purchase Contracts have been duly executed and delivered in accordance
with the purchase agreement and the applicable definitive purchase, underwriting
or similar agreement approved by or on behalf of the Board of Directors of the
Company (or a committee thereof), then upon payment of the consideration
therefore provided for therein, the Stock Purchase Contracts will be legally
issued.


<PAGE>


Continental Airlines, Inc.
Page 5
October 19, 2001


         7. With respect to Stock Purchase Units, when (i) the purchase
agreement for the Stock Purchase Units has been duly authorized and validly
executed by the parties thereto, (ii) the Board of Directors of the Company (or
a committee thereof) has taken all necessary corporate action to approve and
establish the terms of the Stock Purchase Units and to authorize and approve the
issuance thereof, the terms of the offering and related matters; and (iii) the
Stock Purchase Units have been duly executed and delivered in accordance with
the purchase agreement and the applicable definitive purchase, underwriting or
similar agreement approved by or on behalf of the Board of Directors of the
Company (or a committee thereof), then upon payment of the consideration
therefor provided therein, the Stock Purchase Units will be legally issued.

         The foregoing opinions are qualified to the extent that the
enforceability of any document, instrument or Security may be limited by or
subject to (i) bankruptcy, insolvency, fraudulent transfer or conveyance,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally, and general equitable or public policy principles,
and (ii) with respect to any Debt Securities denominated in a currency other
than United States dollars, the requirement that a claim (or a foreign currency
judgment in respect of such a claim) with respect to such Securities be
converted to United States dollars at a rate of exchange prevailing on a date
determined pursuant to applicable law or governmental authority.

         We express no opinions concerning (i) the validity or enforceability of
any provisions contained in Indentures that purport to waive or not give effect
to rights to notices, defenses, subrogation or other rights or benefits that
cannot be effectively waived under applicable law or (ii) the enforceability of
indemnification provisions to the extent they purport to relate to liabilities
resulting from or based upon negligence or any violation of federal or state
securities or blue sky laws.

         The foregoing opinions are limited in all respects to the laws of the
Delaware General Corporation Law (including the applicable provisions of the
Delaware Constitution and the reported judicial decisions interpreting these
laws) and the laws of the State of New York and the federal law of the United
States of America, and we do not express any opinions as to the laws of any
other jurisdiction.

         We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. By giving such consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act or the rules and regulations of the Securities and Exchange
Commission issued thereunder.



                              Very truly yours,



                              Vinson & Elkins L.L.P.


<PAGE>

                [Letterhead of Morris, Nichols, Arsht & Tunnell]


                                                                     EXHIBIT 5.2





                                October 19, 2001



Continental Airlines Finance Trust III
c/o Continental Airlines, Inc.
1600 Smith Street
Houston, Texas  77002

         Re:   Continental Airlines Finance Trust III

Ladies and Gentlemen:

                  We have acted as special Delaware counsel to Continental
Airlines Finance Trust III, a Delaware statutory business trust (the "Trust"),
in connection with certain matters of Delaware law relating to the formation of
the Trust and the proposed issuance of Preferred Securities thereof to
beneficial owners pursuant to and as described in the Registration Statement
(and the prospectus forming a part thereof) on Form S-3 filed with the
Securities and Exchange Commission by Continental Airlines, Inc., a Delaware
corporation (the "Company"), and the Trust on October 19, 2001 (the
"Registration Statement"). Capitalized terms used herein and not otherwise
herein defined are used as defined in the form of Amended and Restated
Declaration of Trust of the Trust attached as an exhibit to the Registration
Statement (the "Form Governing Instrument").

                  In rendering this opinion, we have examined copies of the
following documents in the forms provided to us: the Certificate of
 Trust of the
Trust as filed in the Office of the Secretary of State of the State of Delaware
(the "State Office") on October 18, 2001 (the "Trust Certificate"); the
Declaration of Trust of the Trust dated as of October 18, 2001 (the "Original
Governing Instrument"); the Form Governing Instrument; the form of Preferred
Securities Guarantee Agreement to be entered into by and between the Company and
Bank One Trust Company, N.A., as trustee (the "Guarantee"); the Registration
Statement; and a certification of good standing of the Trust obtained as of a
recent date from the State Office. In such examinations, we have assumed the
genuineness of all signatures, the conformity to original documents of all
documents submitted to us as drafts or copies or forms of documents to be
executed and the legal capacity of natural persons to complete the execution of
documents. We


<PAGE>

Continental Airlines Finance Trust III
October 19, 2001
Page 2


have further assumed for purposes of this opinion: (i) the due formation or
organization, valid existence and good standing of each entity (other than the
Trust) that is a party to any of the documents reviewed by us under the laws of
the jurisdiction of its respective formation or organization; (ii) the due
authorization, execution and delivery by, or on behalf of, each of the parties
thereto of the above-referenced documents; (iii) that the Company and Trustees
will duly authorize, execute and deliver an amended and restated declaration of
trust in the form of the Form Governing Instrument (the "Governing Instrument")
and all other documents contemplated thereby or by the Registration Statement to
be executed in connection with the formation of the Trust and the issuance by
the Trust of Preferred Securities, in each case prior to the first issuance of
Preferred Securities; (iv) that the Preferred Securities will be offered and
sold pursuant to the prospectus forming a part of the Registration Statement and
a prospectus supplement thereto (collectively, the "Prospectus") that will be
consistent with, and accurately describe, the terms of the Governing Instrument
and the Guarantee relating to the Trust and all other relevant documents; (v)
that no event has occurred subsequent to the filing of the Trust Certificate, or
will occur prior to the issuance of all Preferred Securities, that would cause a
dissolution or liquidation of the Trust under the Original Governing Instrument
or the Governing Instrument, as applicable; (vi) that the activities of the
Trust have been and will be conducted in accordance with the Original Governing
Instrument or the Governing Instrument, as applicable, and the Delaware Business
Trust Act, 12 Del. C. Sections 3801 et seq. (the "Delaware Act"); (vii) that
prior to the first issuance of Preferred Securities, payment of the required
consideration therefor will have been made in accordance with the terms and
conditions of the Governing Instrument and as described in the Prospectus, and
that the Preferred Securities are otherwise issued and sold in accordance with
the terms, conditions, requirements and procedures set forth in the Governing
Instrument and as described in the Prospectus; (viii) that the Sponsor has
directed, or will direct prior to the issuance of the Preferred Securities, the
Administrative Trustees to take the actions contemplated by Section 3.6(b) of
the Governing Instrument; and (ix) that the documents examined by us, or
contemplated hereby, express the entire understanding of the parties thereto
with respect to the subject matter thereof and have not been, and, prior to the
issuance of all Preferred Securities will not be, amended, supplemented or
otherwise modified, except as herein referenced. No opinion is expressed with
respect to the requirements of, or compliance with, federal or state securities
or blue sky laws. We express no opinion as to, and assume no responsibility for,
the Registration Statement or any other offering materials relating to the
Preferred Securities. As to any fact material to our opinion, other than those
assumed, we have relied without independent investigation on the
above-referenced documents and on the accuracy, as of the date hereof, of the
matters therein contained.

                  Based on and subject to the foregoing, and limited in all
respects to matters of Delaware law, it is our opinion that:

                  1.   The Trust is a duly formed and validly existing business
trust in good standing under the laws of the State of Delaware.



<PAGE>

Continental Airlines Finance Trust III
October 19, 2001
Page 3

                  2.   The Preferred Securities, upon issuance, will constitute
validly issued, fully paid and nonassessable beneficial interests in the assets
of the Trust. We note that pursuant to Section 11.4 of the Governing Instrument,
the Trust may withhold amounts otherwise distributable to a Preferred Securities
Holder and pay over such amounts to the applicable jurisdictions in accordance
with federal, state and local law and any amount withheld will be deemed to have
been distributed to such Preferred Securities Holder and that, pursuant to the
Governing Instrument, the Preferred Securities Holders may be obligated to make
payments or provide indemnity or security under the circumstances set forth
therein.

                  3.   Under the Delaware Act and the terms of the Governing
Instrument, each Preferred Securities Holder, in such capacity, will be entitled
to the same limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware; provided, however, we express no opinion with respect to the
liability of any Preferred Securities Holder who is, was or may become a named
Trustee of the Trust.

                  We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the use of our name and reference to our
opinion under the heading "LEGAL MATTERS" in the prospectus forming a part
thereof. In giving this consent, we do not thereby admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission thereunder. This opinion speaks only as of the date hereof
and is based on our understandings and assumptions as to present facts, and on
our review of the above-referenced documents and the application of Delaware law
as the same exist as of the date hereof, and we undertake no obligation to
update or supplement this opinion after the date hereof for the benefit of any
person or entity with respect to any facts or circumstances that may hereafter
come to our attention or any changes in facts or law that may hereafter occur or
take effect. This opinion is intended solely for the benefit of the addressee
hereof in connection with the matters contemplated hereby and may not be relied
on by any other person or entity or for any other purpose without our prior
written consent.


                                       Very truly yours,

                                       MORRIS, NICHOLS, ARSHT & TUNNELL


                                       /s/ Jonathan I. Lessner    
                                       -----------------------------------------
                                       Jonathan I. Lessner


<PAGE>
                                                                    EXHIBIT 12.1

CONTINENTAL AIRLINES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 
(Including TOPRS and Pref. Dividends)
(IN MILLIONS)
INCLUDING AMERICA WEST GAIN


<Table>
<Caption>
                                                             6 Mo's Ended               
                                                               6/30/2001      2000          1999  
                                                             ------------    ------        ------ 
<S>                                                          <C>             <C>           <C>    
Earnings:
           Earnings (Loss) Before Income Taxes,
                     Minority Interest and
                     Extraordinary Items                           100          570           798 
           Plus: 
                     Interest Expense (a)                          143          251           233 
                     Capitalized Interest                          (30)         (57)          (55)
                     Amortization of Capitalized Interest            9           16            13 
                     Portion of Rent Expense
                               Representative of Interest
                               Expense (b) @ 65%                   409          778           714 
                                                                ------       ------        ------ 
                                                                   631        1,558         1,703 
                                                                ------       ------        ------ 

Fixed Charges:
           Preferred Sock Dividends (Grossed Up)                    --           --            -- 
           TIDES Dividends (Net of Tax)                              5            1
           TOPRS Dividends (net of tax)                             --           --            -- 
           Interest Expense (a)                                    143          251           233 
           Portion of Rent Expense
                     Representative of Interest
                     Expense (a)                                   409          778           714 
                                                                ------       ------        ------ 
Total Fixed Charges                                                557        1,030           947 
                                                                ------       ------        ------ 

Coverage Adequacy (Deficiency)                                      74          528           756 
                                                                ======       ======        ====== 

Coverage Ratio                                                    1.13         1.51          1.80 
                                                                ======       ======        ====== 

<Caption>
                                                                1998          1997          1996   
                                                               ------        ------        ------  
<S>                                                            <C>           <C>           <C>     
Earnings:
           Earnings (Loss) Before Income Taxes,
                     Minority Interest and
                     Extraordinary Items                          648           639           428  
           Plus:
                     Interest Expense (a)                         178           166           165  
                     Capitalized Interest                         (55)          (35)           (5) 
                     Amortization of Capitalized Interest           5             3             3  
                     Portion of Rent Expense
                               Representative of Interest
                               Expense (b) @ 65%                  461           400           359  
                                                               ------        ------        ------  
                                                                1,237         1,173           950  
                                                               ------        ------        ------  


Fixed Charges:
           Preferred Sock Dividends (Grossed Up)
                   --             3             6  
           TIDES Dividends (Net of Tax)                      
           TOPRS Dividends (net of tax)                            13            14            14  
           Interest Expense (a)                                   178           166           165  
           Portion of Rent Expense
                     Representative of Interest
                     Expense (a)                                  461           400           359  
                                                               ------        ------        ------  
Total Fixed Charges                                               652           583           544  
                                                               ------        ------        ------  

Coverage Adequacy (Deficiency)                                    585           590           406  
                                                               ======        ======        ======  

Coverage Ratio                                                   1.90          2.01          1.75  
                                                               ======        ======        ======  
</Table>





                                     Page 1


<PAGE>

                                                                    EXHIBIT 23.1



                         CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Continental
Airlines, Inc. (the "Company") for the registration of $500,000,000 of the
Company's Debt Securities, Common Stock, Preferred Stock, Stock Purchase
Contracts, Stock Purchase Units, Depositary Shares, Warrants, Junior
Subordinated Trust Debentures and Guarantee of Trust Securities and Trust
Preferred Securities of Continental Airlines Finance Trust III and to the
incorporation by reference therein of our reports dated January 16, 2001 (except
Note 16, as to which the date is January 22, 2001) with respect to the
consolidated financial statements and schedule of the Company included in its
Annual Report (Form 10-K) for the year ended December 31, 2000, filed with the
Securities and Exchange Commission.

 
                                              /s/ Ernst & Young LLP

Houston, Texas
October 16, 2001





<PAGE>
                                                                    EXHIBIT 24.1

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all
 amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Gordon M. Bethune
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Gordon M. Bethune
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Jeffrey J. Misner
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Jeffrey J. Misner
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Chris T. Kenny
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Chris T. Kenny
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Thomas J. Barrack, Jr.
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Thomas J. Barrack, Jr.
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ David Bonderman
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: David Bonderman
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Kirbyjon H. Caldwell
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Kirbyjon H. Caldwell
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Patrick Foley
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Patrick Foley
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Lawrence W. Kellner
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Lawrence W. Kellner
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Douglas H. McCorkindale
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Douglas H. McCorkindale
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ George G. C. Parker
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: George G. C. Parker
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Richard W. Pogue
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Richard W. Pogue
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ William S. Price III
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: William S. Price III
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Donald L. Sturm
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Donald L. Sturm
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Karen Hastie Williams
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Karen Hastie Williams
                                                    ----------------------------



Dated and effective as of February 6, 2001




<PAGE>

                                POWER OF ATTORNEY

         The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain universal
shelf Registration Statement on Form S-3 relating to an offering of up to $500
million of debt and/or equity securities of the Company (the "Registration
Statement"), including specifically, but not limited to, power and authority to
sign for the undersigned in the capacity as a director and/or officer of the
Company the Registration Statement, and any and all amendments thereto,
including post-effective amendments, and the undersigned does hereby ratify and
confirm all that such person or persons shall do or cause to be done by virtue
hereof.



                                                    /s/ Charles A. Yamarone
                                                    ----------------------------
                                                             (Signature)

                                       Printed Name: Charles A. Yamarone
                                                    ----------------------------



Dated and effective as of February 6, 2001


<PAGE>
                                                                    EXHIBIT 25.1

                                   ----------

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM T-1

       STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939, AS
             AMENDED, OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

          CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
                        PURSUANT TO SECTION 305(b)(2) ___

                                 BANK ONE, N.A.

       Not Applicable                                      31-4148768
       (State of Incorporation                          (I.R.S. Employer
       if not a U.S. National Bank)                     Identification No.)

                100 East Broad Street, Columbus, Ohio 43271-0181
          (Address of trustee's principal executive offices) (Zip Code)

                         c/o Bank One Trust Company, NA
                100 East Broad Street, Columbus, Ohio 43271-0181
                                 (614) 248-6229
            (Name, address and telephone number of agent for service)

                           CONTINENTAL AIRLINES, INC..
               (Exact name of obligor as specified in its charter)

        Delaware                                           74-2099724
        (State or other jurisdiction of                (I.R.S.Employer
        incorporation or organization)                 Identification No.)

        1600 Smith Street                                    77002
        Houston, TX                                       (Zip Code)
        (Address of principal executive office)


                                 Debt Securities
                       (Title of the indenture securities)



<PAGE>


                                     GENERAL


1.       GENERAL INFORMATION.
         FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:

         (a)      NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO
         WHICH IT IS SUBJECT.

                  Comptroller of the Currency, Washington, D.C.

                  Federal
 Reserve Bank of Cleveland, Cleveland, Ohio

                  Federal Deposit Insurance Corporation, Washington, D.C.

                  The Board of Governors of the Federal Reserve System,
                  Washington, D.C.

         (b)      WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.

                  The trustee is authorized to exercise corporate trust powers.

2.       AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS. 
         IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
         AFFILIATION.

         The obligor is not an affiliate of the trustee.

16.      LIST OF EXHIBITS.
         (EXHIBITS IDENTIFIED IN PARENTHESES, ON FILE WITH THE COMMISSION, ARE
         INCORPORATED HEREIN BY REFERENCE AS EXHIBITS HERETO.)

Exhibit 1 - A copy of the Articles of Association of the trustee as now in
effect. (Incorporated by reference to Exhibit 1 to Form T-1 filed with
Registration Statement on Form S-3, File No. 333-44532, filed August 25, 2000.)

Exhibit 2 - A copy of the Certificate of Authority of the trustee to commence
business. (Incorporated by reference to Exhibit 2 to Form T-1 filed with
Registration Statement on Form S-3, File No. 333-44532, filed August 25, 2000.)

Exhibit 3 - A copy of the Authorization of the trustee to exercise corporate
trust powers. (Included in Exhibit 2.)

Exhibit 4 - A copy of the Bylaws of the trustee as now in effect. (Incorporated
by reference to Exhibit 4 to Form T-1 filed with Registration Statement on Form
S-3, File No. 333-44532, filed August 25, 2000.)

Exhibit 5 - Not applicable.

Exhibit 6 - The consent of the U.S. institutional trustee required by Section
321(b) of the Trust Indenture Act of 1939, as amended. (Incorporated by
reference to Exhibit 6 to Form T-1 filed with Registration Statement on Form
S-3, File No. 333-44532, filed August 25, 2000.)



<PAGE>


Exhibit 7 - Report of Condition of the trustee as of the close of business on
June 30, 2001, published pursuant to the requirements of the Comptroller of the
Company, see attached.

Exhibit 8 - Not applicable.

Exhibit 9 - Not applicable.

Items 3 through 15 are not answered pursuant to General Instruction B which
requires responses to Item 1, 2 and 16 only, if the obligor is not in default.


                                    SIGNATURE

         Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, Bank One, NA, a national banking association organized
under the laws of the United States, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Columbus and the State of Ohio, on October 19,
2001.


                                                Bank One, NA


                                                By: /s/ DAVID B. KNOX
                                                    ----------------------------
                                                    Name: David B. Knox
                                                    Title: Authorized Signer


<PAGE>

                                     CONSENT


The undersigned, designated to act as Trustee under the Indenture for
CONTINENTAL AIRLINES, INC. described in the attached Statement of Eligibility
and Qualification, does hereby consent that reports of examinations by Federal,
State, Territorial, or District Authorities may be furnished by such authorities
to the Commission upon the request of the Commission.

This Consent is given pursuant to the provision of Section 321(b) of the Trust
Indenture Act of 1939, as amended.



                                                Bank One, NA

Dated:                                          By: David B. Knox
                                                

                                                Authorized Signer




<PAGE>

<Table>
<Caption>
<S>                                          <C>                    <C>
                                                                    FFIEC 041
                                                                    RC-1

                                                                    ---------
                                                                       10
                                                                    ---------
BANK ONE, NA
-------------------------------------------------------------
Legal Title of Bank

COLUMBUS
-------------------------------------------------------------
City

OH                                           43271
-------------------------------------------------------------
State                                        Zip Code

Transmitted to EDS as 0142024 on 07/30/01 at 12:08:03 CST

FDIC Certificate Number - 06559
</Table>

 
CONSOLIDATED REPORT OF CONDITION FOR INSURED
COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 2001
 
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE
QUARTER.
 
SCHEDULE RC - BALANCE SHEET   
 

<Table> 
<Caption>                                                       
                                                                                                    ------------------
                                                                     Dollar Amounts in Thousands    RCON  Bil Mil Thou
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>     <C>          <C>
ASSETS
  1. Cash and balances due from depository institutions (from Schedule RC-A):
     a.   Noninterest-bearing balances and currency and coin(1).................................    0081    2,117,162    1.a
     b.   Interest bearing balances(2)..........................................................    0071        8,938    1.b
  2. Securities:
     a.   Held-to-maturity securities (from Schedule RC-B, column A)............................    1754            0    2.a
     b.   Available-for-sale securities (from Schedule RC-B, column D)..........................    1773    3,887,290    2.b
  3. Federal funds sold and securities purchased under agreements to resell.....................    1350    1,860,044    3

  4. Loans and lease financing receivables (from Schedule RC-C):
     a.   LOANS AND LEASES HELD FOR SALE........................................................    5369      781,928    4.a
     b.   LOANS AND LEASES, NET OF UNEARNED INCOME........................ B528       29,751,071                         4.b
     c.   LESS: Allowance for loan and lease losses....................... 3123          466,690                         4.c
     d.   LOANS AND LEASES, NET OF UNEARNED INCOME AND ALLOWANCE (ITEM 4.b MINUS 4.c)...........    B529   29,284,381    4.d
  5. Trading assets (from Schedule RC-D)........................................................    3545       44,255    5
  6. Premises and fixed assets (including capitalized leases)...................................    2145      299,092    6
  7. Other real estate owned (from Schedule RC-M)...............................................    2150       22,630    7
  8. Investments in unconsolidated subsidiaries and associated companies (from Schedule
     RC-M)......................................................................................    2130      531,310    8
  9. Customers' liability to this bank on acceptances outstanding...............................    2155            0    9
 10. Intangible assets 
     a. GOODWILL................................................................................    3163       57,031   10.a
     b. OTHER INTANGIBLE ASSETS (FROM SCHEDULE RC-M)............................................    0426       12,636   10.b
 11. Other assets (from Schedule RC-F)..........................................................    2160    2,337,553   11
 12. Total assets (sum of items 1 through 11)...................................................    2170   41,244,250   12
</Table>


---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.

                                                                               


<PAGE>


<Table>
<Caption>
<S>                   <C>                                      <C>                 <C>             <C>
                                                                    FFIEC 041
                                                                    RC-2

                                                                    ---------
                                                                       11
                                                                    ---------
BANK ONE, NA
-------------------------------------------------------------
Legal Title of Bank:  

Transmitted to EDS as 0142024 on 07/30/01 at 12:08:03 CST

FDIC Certificate Number -- 06559               
</Table>

 
SCHEDULE RC -- CONTINUED
 

<Table>
<Caption>
                                                             Dollar Amounts in Thousands   RCON   Bil Mil Thou
---------------------------------------------------------------------------------------------------------------------
                                                                           
<S>                                                                                   <C>           <C>           <C>
LIABILITIES
13.  Deposits:
     a. In domestic offices (sum of totals of columns A and C from Schedule RC-E....       2200    16,517,151     13.a
        (1) Noninterest-bearing(1)...........................     6631     6,261,608                              13.a.1
        (2) Interest-bearing.................................     6636    10,255,543                              13.a.2
     b. Not applicable
14.  Federal funds purchased and securities sold under agreements to repurchase.....       2800     5,364,612     14
15.  Trading liabilities (from Schedule RC-D).......................................       3548        53,900     15
16.  OTHER BORROWED MONEY (INCLUDES MORTGAGE INDEBTEDNESS AND OBLIGATIONS UNDER
     CAPITALIZED LEASES) (FROM SCHEDULE RC-M):......................................       3190    13,225,259     16
17.  Not applicable
18.  Bank's liability on acceptances executed and outstanding.......................       2920             0     18
19.  Subordinated notes and debentures(2)...........................................       3200     1,460,000     19
20.  Other liabilities (from Schedule RC-G).........................................       2930     1,567,443     20
21.  Total liabilities (sum of items 13 through 20).................................       2948    38,188,365     21
22.  MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES.................................       3000       300,258     22
EQUITY CAPITAL
23.  Perpetual preferred stock and related surplus..................................       3838             0     23
24.  Common stock...................................................................       3230       127,044     24
25.  Surplus (exclude all surplus related to preferred stock).......................       3839     1,844,558     25
26.  a. Retained earnings...........................................................       3632       803,236     26.a
     b. ACCUMULATED OTHER COMPREHENSIVE INCOME(3)...................................       B530      (19,211)     26.b
27.  OTHER EQUITY CAPITAL COMPONENTS(4).............................................       A130             0     27
28.  Total equity capital (sum of items 23 through 27)..............................       3210     2,755,627     28
29.  Total liabilities, minority interest, and equity capital (sum of items 21, 
     22, and 28)....................................................................       3300    41,244,250     29

Memorandum
TO BE REPORTED WITH THE MARCH REPORT OF CONDITION.
 1. Indicate in the box at the right the number of the statement below that best
     describes the most comprehensive level of auditing work performed for the bank        RCON       Number
     by independent external auditors as of any date during 2000....................       6724         N/A       M.1

</Table>




<Table>
<CAPTION>
<S>                                                                <C>
1 = Independent audit of the bank conducted in accordance          4 = Directors' examination of the bank conducted in
    with generally accepted auditing standards by a certified          accordance with generally accepted auditing standards
    public accounting firm which submits a report on the bank          by a certified public accounting firm (may be required
2 = Independent audit of the bank's parent holding company             by state chartering authority)
    conducted in accordance with generally accepted auditing       5 = Directors' examination of the bank performed by other
    standards by a certified public accounting firm which              external auditors (may be required by state chartering
    submits a report on the consolidated holding company               authority)
    (but not on the bank separately)                               6 = Review of the bank's financial statements by external
3 = ATTESTATION ON BANK MANAGEMENT'S ASSERTION ON THE                  auditors
    EFFECTIVENESS OF THE BANK'S INTERNAL CONTROL OVER FINANCIAL    7 = Compilation of the bank's financial statements by external
    REPORTING BY A CERTIFIED PUBLIC ACCOUNTING FIRM                    auditors
                                                                   8 = Other audit procedures (excluding tax preparation work)
                                                                   9 = No external audit work
</Table>


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

(1) Includes total demand deposits and noninterest-bearing time and savings
    deposits.
(2) Includes limited-life preferred stock and related surplus.
(3) Includes net unrealized holding gains (losses) on available-for-sale 
    securities, accumulated net gains (losses) on cash flow hedges, and 
    minimum pension liability adjustments.
(4) Includes treasury stock and unearned Employee Stock Ownership Plan shares.




<PAGE>
                                                                    EXHIBIT 25.3

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM T-1

                            STATEMENT OF ELIGIBILITY
                      UNDER THE TRUST INDENTURE ACT OF 1939
                  OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

                CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
                   OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)

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

                  BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
               (EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                                    <C>
 A NATIONAL BANKING ASSOCIATION                                        31-0838515
                                                                       (I.R.S. EMPLOYER
                                                                       IDENTIFICATION NUMBER)

100 EAST BROAD STREET, COLUMBUS, OHIO                                  43271-0181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                               (ZIP CODE)
</TABLE>


                          BANK ONE TRUST COMPANY, N.A.
                                1 BANK ONE PLAZA
                             CHICAGO, ILLINOIS 60670
    ATTN: SANDRA L. CARUBA, FIRST VICE PRESIDENT AND COUNSEL, (312) 336-9436
            (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

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

                           CONTINENTAL AIRLINES, INC.
               (EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                                    <C>
DELAWARE                                                               74-2099724
(STATE OR OTHER JURISDICTION OF                                        (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                                         IDENTIFICATION NUMBER)

1600 SMITH STREET, DEPT. HQSEO                                         77002
HOUSTON, TEXAS                                                         (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>



                               DEBT SECURITIES AND
        GUARANTEE OF TRUST PREFERRED SECURITIES OF CONTINENTAL AIRLINES
                               FINANCE TRUST III
                         (TITLE OF INDENTURE SECURITIES)

ITEM
 1.  GENERAL INFORMATION.  FURNISH THE FOLLOWING
                  INFORMATION AS TO THE TRUSTEE:

                  (a)   NAME AND ADDRESS OF EACH EXAMINING OR
                  SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.

                  Comptroller of Currency, Washington, D.C.;

<PAGE>

                  Federal Deposit Insurance Corporation,
                  Washington, D.C.; The Board of Governors of
                  the Federal Reserve System, Washington D.C.

                  (b)      WHETHER IT IS AUTHORIZED TO EXERCISE
                  CORPORATE TRUST POWERS.

                  The trustee is authorized to exercise corporate 
                  trust powers.

ITEM 2.  AFFILIATIONS WITH THE OBLIGOR.  IF THE OBLIGOR
                  IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
                  SUCH AFFILIATION.

                  No such affiliation exists with the trustee.

ITEM 16.          LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART
                  OF THIS STATEMENT OF ELIGIBILITY.

                  1.  A copy of the articles of association of the
                      trustee now in effect.*

                  2.  A copy of the certificate of authority of the
                      trustee to commence business.*

                  3.  A copy of the authorization of the trustee to
                      exercise corporate trust powers.*

                  4.  A copy of the existing by-laws of the trustee.*

                  5.  Not Applicable.

                  6.  The consent of the trustee required by
                      Section 321(b) of the Act.



<PAGE>

                  7.  A copy of the latest report of condition of the
                      trustee published pursuant to law or the
                      requirements of its supervising or examining
                      authority.

                  8.  Not Applicable.

                  9.  Not Applicable.

         Pursuant to the requirements of the Trust Indenture Act of 1939, as
         amended, the trustee, Bank One Trust Company, National Association, a
         national banking association organized and existing under the laws of
         the United States of America, has duly caused this Statement of
         Eligibility to be signed on its behalf by the undersigned, thereunto
         duly authorized, all in the City of Chicago and State of Illinois, on
         the 18th day of October, 2001.


                                   BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
                                   TRUSTEE


                                   BY  /s/ SANDRA L. CARUBA
                                       SANDRA L. CARUBA
                                       FIRST VICE PRESIDENT






* Exhibits 1, 2, 3, and 4 are herein incorporated by reference to Exhibits
bearing identical numbers in Item 16 of the Form T-1 of Bank One Trust Company,
National Association, filed as Exhibit 25 to the Registration Statement on Form
S-3 of Burlington Northern Santa Fe Corporation, filed with the Securities and
Exchange Commission on May 10, 2000 (Registration No. 333-36718).

<PAGE>
                                    EXHIBIT 6



                       THE CONSENT OF THE TRUSTEE REQUIRED
                          BY SECTION 321(b) OF THE ACT


                                              October 18, 2001



Securities and Exchange Commission
Washington, D.C. 20549

Ladies and Gentlemen:

In connection with the qualification of an indenture between Continental
Airlines, Inc. and Bank One Trust Company, National Association, as Trustee, the
undersigned, in accordance with Section 321(b) of the Trust Indenture Act of
1939, as amended, hereby consents that the reports of examinations of the
undersigned, made by Federal or State authorities authorized to make such
examinations, may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.


                                   Very truly yours,

                                   BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION


                                   BY:  /s/ SANDRA L. CARUBA
                                        SANDRA L. CARUBA
                                        FIRST VICE PRESIDENT




<PAGE>


<Table>
<Caption>
<S>                   <C>                                      <C>                 <C>             <C>
Legal Title of Bank:  Bank One Trust Company, N.A.             Call Date:          ST-BK:          FFIEC  041
Address:                                                                                            Page RC-1
City, State   Zip:    Columbus, OH 43271                                                                     
FDIC Certificate No.: 21377                                                                                10
</Table>

 
CONSOLIDATED REPORT OF CONDITION FOR INSURED
COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 2001
 
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE
QUARTER.
 
SCHEDULE RC - BALANCE SHEET   
 

<Table> 
<Caption>                                                       
                                                                     Dollar Amounts in Thousands    RCON  Bil Mil Thou
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>     <C>          <C>
ASSETS
  1. Cash and balances due from depository institutions (from Schedule RC-A):
     a.   Noninterest-bearing balances and currency and coin(1).................................    0081      212,836    1.a
     b.   Interest-bearing balances(2)..........................................................    0071            0    1.b
  2. Securities:
     a.   Held-to-maturity securities (from Schedule RC-B, column A)............................    1754            0    2.a
     b.   Available-for-sale securities (from Schedule RC-B, column D)..........................    1773        1,700    2.b
  3. Federal funds sold and securities purchased under agreements to resell.....................    1350    1,160,732    3.
  4. Loans and lease financing receivables (from Schedule RC-C):
     a.   Loans and leases held for sale........................................................    5369            0    4.a
     b.   Loans and leases, net of unearned income............................. 8528     224,872                         4.b
     c.   LESS: Allowance for loan and lease losses............................ 3123         253                         4.c
     d.   Loans and leases, net of unearned income and allowance (item 4.b minus 4.c)...........    8528      224,619    4.d
  5. Trading assets (from Schedule RC-D)........................................................    3545            0    5.
  6. Premises and fixed assets (including capitalized leases)...................................    2145       19,688    6.
  7. Other real estate owned (from Schedule RC-M)...............................................    2150            0    7.
  8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)...    2130            0    8.
  9. Customers' liability to this bank on acceptances outstanding...............................    2155            0    9.
 10. Intangible assets
     a.   Goodwill..............................................................................    3163            0    10.a
     b.   Other intangible assets (from Schedule RC-M)..........................................    0426       12,246    10.b
 11. Other assets (from Schedule RC-F)..........................................................    2160      235,123    11.
 12. Total assets (sum of items 1 through 11)...................................................    2170    1,866,944    12.
</Table>


---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.

                                                                               


<PAGE>


<Table>
<Caption>
<S>                   <C>                                      <C>                 <C>             <C>
Bank One Trust Company, N.A.
----------------------------------------------------
Legal Title of Bank:                                                                               FFIEC  041
                                                                                                   RC-2

FDIC Certificate No.: 21377                                                                                11
</Table>

 
SCHEDULE RC -- CONTINUED
 

<Table>
<Caption>
                                                       Dollar Amounts in Thousands    RCON  Bil Mil Thou
--------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>     <C>           <C>
LIABILITIES
13.  Deposits:
     a. In domestic offices (sum of totals of columns A and C from Schedule RC-E).... 2200     1,674,033     13.a.
        (1) Noninterest-bearing(1)................................ 6631     1,078,249                        13.a.1
        (2) Interest-bearing...................................... 6636       595,784                        13.a.2
     b. Not applicable
14.  Federal funds purchased and securities sold under agreements to repurchase...... 2800             0     14.
15.  Trading liabilities (from Schedule RC-D)........................................ 3548             0     15.
16.  Other borrowed money (includes mortgage indebtedness and obligations under
     capitalized leases) (from Schedule RC-M):....................................... 3190             0     16.
17.  Not applicable
18.  Bank's liability on acceptances executed and outstanding........................ 2920             0     18.
19.  Subordinated notes and debentures(2)............................................ 3200             0     19.
20.  Other liabilities (from Schedule RC-G).......................................... 2930        53,279     20.
21.  Total liabilities (sum of items 13 through 20).................................. 2948     1,727,312     21.
22.  Minority Interest in consolidated subsidiaries.................................. 3000             0     22.
EQUITY CAPITAL
23.  Perpetual preferred stock and related surplus................................... 3838             0     23.
24.  Common stock.................................................................... 3230           800     24.
25.  Surplus (exclude all surplus related to preferred stock)........................ 3839        45,157     25.
26.  a. Retained earnings............................................................ 3632        93,650     26.a.
     b. Accumulated other comprehensive income (3)................................... B530            25     26.b.
27.  Other equity capital components (4)............................................. A130             0     27.
28.  Total equity capital (sum of items 23 through 27)............................... 3210       139,632     28.
29.  Total liabilities, minority interest, and equity capital (sum of items
     21, 22, and 28)................................................................. 3300     1,866,944     29.

Memorandum
To be reported with the March Report of Condition.
 1. Indicate in the box at the right the number of the statement below that best      RCON         Number
     describes the most comprehensive level of auditing work performed for the bank   -------------------
     by independent external auditors as of any date during 2000....................  6724           N/A     M.1
</Table>




<Table>
<CAPTION>
<S>                                                                <C>
1 = Independent audit of the bank conducted in accordance          4 = Directors' examination of the bank conducted in
    with generally accepted auditing standards by a certified          accordance with generally accepted auditing standards
    public accounting firm which submits a report on the bank          by a certified public accounting firm (may be required
2 = Independent audit of the bank's parent holding company             by state chartering authority)
    conducted in accordance with generally accepted auditing       5 = Directors' examination of the bank performed by other
    standards by a certified public accounting firm which              external auditors (may be required by state chartering
    submits a report on the consolidated holding company               authority)
    (but not on the bank separately)                               6 = Review of the bank's financial statements by external
3 = Attestation on bank management's assertion on the                  auditors
    effectiveness of the bank's internal control over financial    7 = Compilation of the bank's financial statements by external
    reporting by a certified public accounting firm                    auditors
                                                                   8 = Other audit procedures (excluding tax preparation work)
                                                                   9 = No external audit work
</Table>

 
---------------
 
(1) Includes total demand deposits and noninterest-bearing time and savings
    deposits.
(2) Includes limited-life preferred stock and related surplus.
(3) Includes net unrealized holding gains (losses) on available-for-sale
    securities, accumulated net gains (losses) on cash flow hedges, and minimum
    pension liability adjustments.
(4) Includes treasury stock and unearned Employee Stock Ownership Plan shares.



<PAGE>
                                                                    EXHIBIT 25.4

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM T-1

                            STATEMENT OF ELIGIBILITY
                      UNDER THE TRUST INDENTURE ACT OF 1939
                  OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

                CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
                   OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)

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

                  BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
               (EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                                    <C>
 A NATIONAL BANKING ASSOCIATION                                        31-0838515
                                                                       (I.R.S. EMPLOYER
                                                                       IDENTIFICATION NUMBER)

100 EAST BROAD STREET, COLUMBUS, OHIO                                  43271-0181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                               (ZIP CODE)
</TABLE>


                          BANK ONE TRUST COMPANY, N.A.
                                1 BANK ONE PLAZA
                             CHICAGO, ILLINOIS 60670
    ATTN: SANDRA L. CARUBA, FIRST VICE PRESIDENT AND COUNSEL, (312) 336-9436
            (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

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

                           CONTINENTAL AIRLINES, INC.
               (EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                                    <C>
DELAWARE                                                               74-2099724
(STATE OR OTHER JURISDICTION OF                                        (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                                         IDENTIFICATION NUMBER)

1600 SMITH STREET, DEPT. HQSEO                                         77002
HOUSTON, TEXAS                                                         (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>



                               DEBT SECURITIES AND
        GUARANTEE OF TRUST PREFERRED SECURITIES OF CONTINENTAL AIRLINES
                               FINANCE TRUST III
                         (TITLE OF INDENTURE SECURITIES)

ITEM
 1.  GENERAL INFORMATION.  FURNISH THE FOLLOWING
                  INFORMATION AS TO THE TRUSTEE:

                  (a)   NAME AND ADDRESS OF EACH EXAMINING OR
                  SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.

                  Comptroller of Currency, Washington, D.C.;

<PAGE>

                  Federal Deposit Insurance Corporation,
                  Washington, D.C.; The Board of Governors of
                  the Federal Reserve System, Washington D.C.

                  (b)      WHETHER IT IS AUTHORIZED TO EXERCISE
                  CORPORATE TRUST POWERS.

                  The trustee is authorized to exercise corporate 
                  trust powers.

ITEM 2.  AFFILIATIONS WITH THE OBLIGOR.  IF THE OBLIGOR
                  IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
                  SUCH AFFILIATION.

                  No such affiliation exists with the trustee.

ITEM 16.          LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART
                  OF THIS STATEMENT OF ELIGIBILITY.

                  1.  A copy of the articles of association of the
                      trustee now in effect.*

                  2.  A copy of the certificate of authority of the
                      trustee to commence business.*

                  3.  A copy of the authorization of the trustee to
                      exercise corporate trust powers.*

                  4.  A copy of the existing by-laws of the trustee.*

                  5.  Not Applicable.

                  6.  The consent of the trustee required by
                      Section 321(b) of the Act.



<PAGE>

                  7.  A copy of the latest report of condition of the
                      trustee published pursuant to law or the
                      requirements of its supervising or examining
                      authority.

                  8.  Not Applicable.

                  9.  Not Applicable.

         Pursuant to the requirements of the Trust Indenture Act of 1939, as
         amended, the trustee, Bank One Trust Company, National Association, a
         national banking association organized and existing under the laws of
         the United States of America, has duly caused this Statement of
         Eligibility to be signed on its behalf by the undersigned, thereunto
         duly authorized, all in the City of Chicago and State of Illinois, on
         the 18th day of October, 2001.


                      BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
                      TRUSTEE


                      BY  /s/ SANDRA L. CARUBA
                          SANDRA L. CARUBA
                          FIRST VICE PRESIDENT






* Exhibits 1, 2, 3, and 4 are herein incorporated by reference to Exhibits
bearing identical numbers in Item 16 of the Form T-1 of Bank One Trust Company,
National Association, filed as Exhibit 25 to the Registration Statement on Form
S-3 of Burlington Northern Santa Fe Corporation, filed with the Securities and
Exchange Commission on May 10, 2000 (Registration No. 333-36718).

<PAGE>
                                    EXHIBIT 6



                       THE CONSENT OF THE TRUSTEE REQUIRED
                          BY SECTION 321(b) OF THE ACT


                                              October 18, 2001



Securities and Exchange Commission
Washington, D.C. 20549

Ladies and Gentlemen:

In connection with the qualification of an indenture between Continental
Airlines, Inc. and Bank One Trust Company, National Association, as Trustee, the
undersigned, in accordance with Section 321(b) of the Trust Indenture Act of
1939, as amended, hereby consents that the reports of examinations of the
undersigned, made by Federal or State authorities authorized to make such
examinations, may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.


                                   Very truly yours,

                                   BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION


                                   BY:  /s/ SANDRA L. CARUBA
                                        SANDRA L. CARUBA
                                        FIRST VICE PRESIDENT




<PAGE>


<Table>
<Caption>
<S>                   <C>                                      <C>                 <C>             <C>
Legal Title of Bank:  Bank One Trust Company, N.A.             Call Date:          ST-BK:          FFIEC  041
Address:                                                                                            Page RC-1
City, State   Zip:    Columbus, OH 43271                                                                     
FDIC Certificate No.: 21377                                                                                10
</Table>

 
CONSOLIDATED REPORT OF CONDITION FOR INSURED
COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 2001
 
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE
QUARTER.
 
SCHEDULE RC - BALANCE SHEET   
 

<Table> 
<Caption>                                                       
                                                                     Dollar Amounts in Thousands    RCON  Bil Mil Thou
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>     <C>          <C>
ASSETS
  1. Cash and balances due from depository institutions (from Schedule RC-A):
     a.   Noninterest-bearing balances and currency and coin(1).................................    0081      212,836    1.a
     b.   Interest-bearing balances(2)..........................................................    0071            0    1.b
  2. Securities:
     a.   Held-to-maturity securities (from Schedule RC-B, column A)............................    1754            0    2.a
     b.   Available-for-sale securities (from Schedule RC-B, column D)..........................    1773        1,700    2.b
  3. Federal funds sold and securities purchased under agreements to resell.....................    1350    1,160,732    3.
  4. Loans and lease financing receivables (from Schedule RC-C):
     a.   Loans and leases held for sale........................................................    5369            0    4.a
     b.   Loans and leases, net of unearned income............................. 8528     224,872                         4.b
     c.   LESS: Allowance for loan and lease losses............................ 3123         253                         4.c
     d.   Loans and leases, net of unearned income and allowance (item 4.b minus 4.c)...........    8528      224,619    4.d
  5. Trading assets (from Schedule RC-D)........................................................    3545            0    5.
  6. Premises and fixed assets (including capitalized leases)...................................    2145       19,688    6.
  7. Other real estate owned (from Schedule RC-M)...............................................    2150            0    7.
  8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)...    2130            0    8.
  9. Customers' liability to this bank on acceptances outstanding...............................    2155            0    9.
 10. Intangible assets
     a.   Goodwill..............................................................................    3163            0    10.a
     b.   Other intangible assets (from Schedule RC-M)..........................................    0426       12,246    10.b
 11. Other assets (from Schedule RC-F)..........................................................    2160      235,123    11.
 12. Total assets (sum of items 1 through 11)...................................................    2170    1,866,944    12.
</Table>


---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.

                                                                               


<PAGE>


<Table>
<Caption>
<S>                   <C>                                      <C>                 <C>             <C>
Bank One Trust Company, N.A.
----------------------------------------------------
Legal Title of Bank:                                                                               FFIEC  041
                                                                                                   RC-2

FDIC Certificate No.: 21377                                                                                11
</Table>

 
SCHEDULE RC -- CONTINUED
 

<Table>
<Caption>
                                                       Dollar Amounts in Thousands    RCON  Bil Mil Thou
--------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>     <C>           <C>
LIABILITIES
13.  Deposits:
     a. In domestic offices (sum of totals of columns A and C from Schedule RC-E).... 2200     1,674,033     13.a.
        (1) Noninterest-bearing(1)................................ 6631     1,078,249                        13.a.1
        (2) Interest-bearing...................................... 6636       595,784                        13.a.2
     b. Not applicable
14.  Federal funds purchased and securities sold under agreements to repurchase...... 2800             0     14.
15.  Trading liabilities (from Schedule RC-D)........................................ 3548             0     15.
16.  Other borrowed money (includes mortgage indebtedness and obligations under
     capitalized leases) (from Schedule RC-M):....................................... 3190             0     16.
17.  Not applicable
18.  Bank's liability on acceptances executed and outstanding........................ 2920             0     18.
19.  Subordinated notes and debentures(2)............................................ 3200             0     19.
20.  Other liabilities (from Schedule RC-G).......................................... 2930        53,279     20.
21.  Total liabilities (sum of items 13 through 20).................................. 2948     1,727,312     21.
22.  Minority Interest in consolidated subsidiaries.................................. 3000             0     22.
EQUITY CAPITAL
23.  Perpetual preferred stock and related surplus................................... 3838             0     23.
24.  Common stock.................................................................... 3230           800     24.
25.  Surplus (exclude all surplus related to preferred stock)........................ 3839        45,157     25.
26.  a. Retained earnings............................................................ 3632        93,650     26.a.
     b. Accumulated other comprehensive income (3)................................... B530            25     26.b.
27.  Other equity capital components (4)............................................. A130             0     27.
28.  Total equity capital (sum of items 23 through 27)............................... 3210       139,632     28.
29.  Total liabilities, minority interest, and equity capital (sum of items
     21, 22, and 28)................................................................. 3300     1,866,944     29.

Memorandum
To be reported with the March Report of Condition.
 1. Indicate in the box at the right the number of the statement below that best      RCON         Number
     describes the most comprehensive level of auditing work performed for the bank   -------------------
     by independent external auditors as of any date during 2000....................  6724           N/A     M.1
</Table>




<Table>
<CAPTION>
<S>                                                                <C>
1 = Independent audit of the bank conducted in accordance          4 = Directors' examination of the bank conducted in
    with generally accepted auditing standards by a certified          accordance with generally accepted auditing standards
    public accounting firm which submits a report on the bank          by a certified public accounting firm (may be required
2 = Independent audit of the bank's parent holding company             by state chartering authority)
    conducted in accordance with generally accepted auditing       5 = Directors' examination of the bank performed by other
    standards by a certified public accounting firm which              external auditors (may be required by state chartering
    submits a report on the consolidated holding company               authority)
    (but not on the bank separately)                               6 = Review of the bank's financial statements by external
3 = Attestation on bank management's assertion on the                  auditors
    effectiveness of the bank's internal control over financial    7 = Compilation of the bank's financial statements by external
    reporting by a certified public accounting firm                    auditors
                                                                   8 = Other audit procedures (excluding tax preparation work)
                                                                   9 = No external audit work
</Table>

 
---------------
 
(1) Includes total demand deposits and noninterest-bearing time and savings
    deposits.
(2) Includes limited-life preferred stock and related surplus.
(3) Includes net unrealized holding gains (losses) on available-for-sale
    securities, accumulated net gains (losses) on cash flow hedges, and minimum
    pension liability adjustments.
(4) Includes treasury stock and unearned Employee Stock Ownership Plan shares.



<PAGE>
                                                                    EXHIBIT 25.5

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM T-1

                            STATEMENT OF ELIGIBILITY
                      UNDER THE TRUST INDENTURE ACT OF 1939
                  OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE

                CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
                   OF A TRUSTEE PURSUANT TO SECTION 305(b)(2)

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

                  BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION
               (EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                                    <C>
 A NATIONAL BANKING ASSOCIATION                                        31-0838515
                                                                       (I.R.S. EMPLOYER
                                                                       IDENTIFICATION NUMBER)

100 EAST BROAD STREET, COLUMBUS, OHIO                                  43271-0181
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                               (ZIP CODE)
</TABLE>


                          BANK ONE TRUST COMPANY, N.A.
                                1 BANK ONE PLAZA
                             CHICAGO, ILLINOIS 60670
    ATTN: SANDRA L. CARUBA, FIRST VICE PRESIDENT AND COUNSEL, (312) 336-9436
            (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)

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

                     CONTINENTAL AIRLINES FINANCE TRUST III
               (EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                                    <C>
DELAWARE                                                               APPLIED FOR
(STATE OR OTHER JURISDICTION OF                                        (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION)                                         IDENTIFICATION NUMBER)

1600 SMITH STREET, DEPT. HQSEO                                         77002
HOUSTON, TEXAS                                                         (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>



                           TRUST PREFERRED SECURITIES
                         (TITLE OF INDENTURE SECURITIES)

ITEM 1.  GENERAL INFORMATION.  FURNISH THE FOLLOWING
                  INFORMATION
 AS TO THE TRUSTEE:

                  (a)      NAME AND ADDRESS OF EACH EXAMINING OR
                  SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.

                  Comptroller of Currency, Washington, D.C.;
                  Federal Deposit Insurance Corporation,

<PAGE>

                  Washington, D.C.; The Board of Governors of
                  the Federal Reserve System, Washington D.C.

                  (b)      WHETHER IT IS AUTHORIZED TO EXERCISE
                  CORPORATE TRUST POWERS.

                  The trustee is authorized to exercise corporate 
                  trust powers.

ITEM 2.  AFFILIATIONS WITH THE OBLIGOR.  IF THE OBLIGOR
                  IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
                  SUCH AFFILIATION.

                  No such affiliation exists with the trustee.

ITEM 16.          LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART
                  OF THIS STATEMENT OF ELIGIBILITY.

                  1.  A copy of the articles of association of the
                      trustee now in effect.*

                  2.  A copy of the certificate of authority of the
                      trustee to commence business.*

                  3.  A copy of the authorization of the trustee to
                      exercise corporate trust powers.*

                  4.  A copy of the existing by-laws of the trustee.*

                  5.  Not Applicable.

                  6.  The consent of the trustee required by
                      Section 321(b) of the Act.



<PAGE>

                  7.  A copy of the latest report of condition of the
                      trustee published pursuant to law or the
                      requirements of its supervising or examining
                      authority.

                  8.  Not Applicable.

                  9.  Not Applicable.

         Pursuant to the requirements of the Trust Indenture Act of 1939, as
         amended, the trustee, Bank One Trust Company, National Association, a
         national banking association organized and existing under the laws of
         the United States of America, has duly caused this Statement of
         Eligibility to be signed on its behalf by the undersigned, thereunto
         duly authorized, all in the City of Chicago and State of Illinois, on
         the 18th day of October, 2001.


                                   BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION,
                                   TRUSTEE


                                   BY  /s/ SANDRA L. CARUBA
                                       SANDRA L. CARUBA
                                       FIRST VICE PRESIDENT




* Exhibits 1, 2, 3, and 4 are herein incorporated by reference to Exhibits
bearing identical numbers in Item 16 of the Form T-1 of Bank One Trust Company,
National Association, filed as Exhibit 25 to the Registration Statement on Form
S-3 of Burlington Northern Santa Fe Corporation, filed with the Securities and
Exchange Commission on May 10, 2000 (Registration No. 333-36718).




<PAGE>
                                    EXHIBIT 6



                       THE CONSENT OF THE TRUSTEE REQUIRED
                          BY SECTION 321(b) OF THE ACT


                                              October 18, 2001



Securities and Exchange Commission
Washington, D.C. 20549

Ladies and Gentlemen:

In connection with the qualification of an amended and restated declaration of
trust between Continental Airlines Finance Trust III and Bank One Trust Company,
National Association, as Trustee, the undersigned, in accordance with Section
321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the
reports of examinations of the undersigned, made by Federal or State authorities
authorized to make such examinations, may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.


                                    Very truly yours,

                                    BANK ONE TRUST COMPANY, NATIONAL ASSOCIATION


                                    BY: /s/ SANDRA L. CARUBA
                                        SANDRA L. CARUBA
                                        FIRST VICE PRESIDENT




<PAGE>


<Table>
<Caption>
<S>                   <C>                                      <C>                 <C>             <C>
Legal Title of Bank:  Bank One Trust Company, N.A.             Call Date:          ST-BK:          FFIEC  041
Address:                                                                                            Page RC-1
City, State   Zip:    Columbus, OH 43271                                                                     
FDIC Certificate No.: 21377                                                                                10
</Table>

 
CONSOLIDATED REPORT OF CONDITION FOR INSURED
COMMERCIAL AND STATE-CHARTERED SAVINGS BANKS FOR JUNE 30, 2001
 
ALL SCHEDULES ARE TO BE REPORTED IN THOUSANDS OF DOLLARS. UNLESS OTHERWISE
INDICATED, REPORT THE AMOUNT OUTSTANDING AS OF THE LAST BUSINESS DAY OF THE
QUARTER.
 
SCHEDULE RC - BALANCE SHEET   
 

<Table> 
<Caption>                                                       
                                                                     Dollar Amounts in Thousands    RCON  Bil Mil Thou
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                                 <C>     <C>          <C>
ASSETS
  1. Cash and balances due from depository institutions (from Schedule RC-A):
     a.   Noninterest-bearing balances and currency and coin(1).................................    0081      212,836    1.a
     b.   Interest-bearing balances(2)..........................................................    0071            0    1.b
  2. Securities:
     a.   Held-to-maturity securities (from Schedule RC-B, column A)............................    1754            0    2.a
     b.   Available-for-sale securities (from Schedule RC-B, column D)..........................    1773        1,700    2.b
  3. Federal funds sold and securities purchased under agreements to resell.....................    1350    1,160,732    3.
  4. Loans and lease financing receivables (from Schedule RC-C):
     a.   Loans and leases held for sale........................................................    5369            0    4.a
     b.   Loans and leases, net of unearned income............................. 8528     224,872                         4.b
     c.   LESS: Allowance for loan and lease losses............................ 3123         253                         4.c
     d.   Loans and leases, net of unearned income and allowance (item 4.b minus 4.c)...........    8528      224,619    4.d
  5. Trading assets (from Schedule RC-D)........................................................    3545            0    5.
  6. Premises and fixed assets (including capitalized leases)...................................    2145       19,688    6.
  7. Other real estate owned (from Schedule RC-M)...............................................    2150            0    7.
  8. Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)...    2130            0    8.
  9. Customers' liability to this bank on acceptances outstanding...............................    2155            0    9.
 10. Intangible assets
     a.   Goodwill..............................................................................    3163            0    10.a
     b.   Other intangible assets (from Schedule RC-M)..........................................    0426       12,246    10.b
 11. Other assets (from Schedule RC-F)..........................................................    2160      235,123    11.
 12. Total assets (sum of items 1 through 11)...................................................    2170    1,866,944    12.
</Table>


---------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held for trading.

                                                                               


<PAGE>


<Table>
<Caption>
<S>                   <C>                                      <C>                 <C>             <C>
Bank One Trust Company, N.A.
----------------------------------------------------
Legal Title of Bank:                                                                               FFIEC  041
                                                                                                   RC-2

FDIC Certificate No.: 21377                                                                                11
</Table>

 
SCHEDULE RC -- CONTINUED
 

<Table>
<Caption>
                                                       Dollar Amounts in Thousands    RCON  Bil Mil Thou
--------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>     <C>           <C>
LIABILITIES
13.  Deposits:
     a. In domestic offices (sum of totals of columns A and C from Schedule RC-E).... 2200     1,674,033     13.a.
        (1) Noninterest-bearing(1)................................ 6631     1,078,249                        13.a.1
        (2) Interest-bearing...................................... 6636       595,784                        13.a.2
     b. Not applicable
14.  Federal funds purchased and securities sold under agreements to repurchase...... 2800             0     14.
15.  Trading liabilities (from Schedule RC-D)........................................ 3548             0     15.
16.  Other borrowed money (includes mortgage indebtedness and obligations under
     capitalized leases) (from Schedule RC-M):....................................... 3190             0     16.
17.  Not applicable
18.  Bank's liability on acceptances executed and outstanding........................ 2920             0     18.
19.  Subordinated notes and debentures(2)............................................ 3200             0     19.
20.  Other liabilities (from Schedule RC-G).......................................... 2930        53,279     20.
21.  Total liabilities (sum of items 13 through 20).................................. 2948     1,727,312     21.
22.  Minority Interest in consolidated subsidiaries.................................. 3000             0     22.
EQUITY CAPITAL
23.  Perpetual preferred stock and related surplus................................... 3838             0     23.
24.  Common stock.................................................................... 3230           800     24.
25.  Surplus (exclude all surplus related to preferred stock)........................ 3839        45,157     25.
26.  a. Retained earnings............................................................ 3632        93,650     26.a.
     b. Accumulated other comprehensive income (3)................................... B530            25     26.b.
27.  Other equity capital components (4)............................................. A130             0     27.
28.  Total equity capital (sum of items 23 through 27)............................... 3210       139,632     28.
29.  Total liabilities, minority interest, and equity capital (sum of items
     21, 22, and 28)................................................................. 3300     1,866,944     29.

Memorandum
To be reported with the March Report of Condition.
 1. Indicate in the box at the right the number of the statement below that best      RCON         Number
     describes the most comprehensive level of auditing work performed for the bank   -------------------
     by independent external auditors as of any date during 2000....................  6724           N/A     M.1
</Table>




<Table>
<CAPTION>
<S>                                                                <C>
1 = Independent audit of the bank conducted in accordance          4 = Directors' examination of the bank conducted in
    with generally accepted auditing standards by a certified          accordance with generally accepted auditing standards
    public accounting firm which submits a report on the bank          by a certified public accounting firm (may be required
2 = Independent audit of the bank's parent holding company             by state chartering authority)
    conducted in accordance with generally accepted auditing       5 = Directors' examination of the bank performed by other
    standards by a certified public accounting firm which              external auditors (may be required by state chartering
    submits a report on the consolidated holding company               authority)
    (but not on the bank separately)                               6 = Review of the bank's financial statements by external
3 = Attestation on bank management's assertion on the                  auditors
    effectiveness of the bank's internal control over financial    7 = Compilation of the bank's financial statements by external
    reporting by a certified public accounting firm                    auditors
                                                                   8 = Other audit procedures (excluding tax preparation work)
                                                                   9 = No external audit work
</Table>

 
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(1) Includes total demand deposits and noninterest-bearing time and savings
    deposits.
(2) Includes limited-life preferred stock and related surplus.
(3) Includes net unrealized holding gains (losses) on available-for-sale
    securities, accumulated net gains (losses) on cash flow hedges, and minimum
    pension liability adjustments.
(4) Includes treasury stock and unearned Employee Stock Ownership Plan shares.