REGISTRATION STATEMENT
                                                       REGISTRATION NO. 333-
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               -----------------

                                    FORM S-4
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
                               -----------------

                           CONTINENTAL AIRLINES, INC.
             (Exact name of registrant as specified in its charter)

         DELAWARE                   4512                    74-2099724
     (State or other         (Primary Standard           (I.R.S. Employer
     jurisdiction of      Industrial Classification     Identification Number)
    incorporation or            Code Number)
      organization)

                         1600 Smith Street, Dept. HQSEO
                              Houston, Texas 77002
                                 (713) 324-2950

    (Address, including zip code, and telephone number, including area code,
                  of registrant's principal executive offices)
                                -----------------

                             Jennifer L. Vogel, Esq.
                  Vice President, General Counsel and Secretary
                           Continental Airlines, Inc.
                         1600 Smith Street, Dept. HQSLG
                              Houston, Texas 77002
                                 (713) 324-2950
           (Name, address, including zip code, and telephone number,
                   including area code, of agent for service)

                          COPIES OF CORRESPONDENCE TO:

                               John K. Hoyns, Esq.
                            Hughes Hubbard & Reed LLP
                             One Battery Park Plaza
                          New York, New York 10004-1482
                                 (212) 837-6000
                               -----------------

     Approximate date of commencement of proposed sale to the public: As soon as
practicable  after  this  Registration  Statement  becomes  effective.

     If the  securities  being  registered  on this  Form are being  offered  in
connection  with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|

     If this Form is filed to  register  additional  securities  for an offering
pursuant to Rule 462(b) 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 this form is a  post-effective  amendment  filed pursuant to Rule 462(d)
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. |_|
                                  --------

                        CALCULATION OF REGISTRATION FEE

=====================================================================================================
                                             PROPOSED MAXIMUM     PROPOSED MAXIMUM
TITLE OF EACH CLASS OF        AMOUNT TO BE    OFFERING PRICE     AGGREGATE OFFERING       AMOUNT OF
SECURITES TO BE REGISTERED     REGISTERED        PER UNIT               PRICE         REGISTRATION FEE(1)
- ------------------------------------------------------------------------------------------------------
Floating Rate Secured Notes
Due 2007                      $200,000,000         100%             $200,000,000          $16,180(2)



- ----------

(1)  Pursuant to Rule 457(f)(2),  the registration fee has been calculated using
     the book value of the securities being registered.

(2)  The Commission has informed Continental Airlines,  Inc. that it may set off
     an amount equal to $12,740.53 against the registration fee payable for this
     registration  statement due to a post-filing adjustment of the registration
     fee for the Continental  Airlines,  Inc.  registration statment on Form S-3
     (File No.  333-71906),  originally filed with the Commission on October 19,
     2001.

     THE REGISTRANT  HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT 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 COMMISSION,  ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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




                  SUBJECT TO COMPLETION, DATED APRIL __, 2003
PROSPECTUS

The  information  in this  preliminary  prospectus  is not  complete  and may be
changed.  We may not  sell  these  securities  or  accept  offers  to buy  these
securities  until the  registration  statement  filed  with the  Securities  and
Exchange Commission is effective. This preliminary prospectus is not an offer to
sell these  securities and we are not soliciting  offers to buy these securities
in any jurisdiction where the offer or sale is not permitted.

                                  $200,000,000

                           CONTINENTAL AIRLINES, INC.

                                OFFER TO EXCHANGE
                      FLOATING RATE SECURED NOTES DUE 2007,
          WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
        FOR ANY AND ALL OUTSTANDING FLOATING RATE SECURED NOTES DUE 2007

     We are offering to issue the new notes to satisfy our obligations contained
in the registration  rights agreement  entered into when the old notes were sold
in  transactions  exempt  from,  or  not  subject  to,  registration  under  the
Securities Act.

     The terms of the new notes will be substantially  identical to the terms of
the old notes, except that the new notes will be registered under the Securities
Act of 1933, the transfer  restrictions,  registration rights and provisions for
additional  interest  relating to the old notes will not apply to the new notes,
and the new notes will be available only in book-entry form.

     There is no  existing  market for the new notes.  The new notes will not be
listed on any national securities exchange.

     All old notes that are validly  tendered and not validly  withdrawn will be
exchanged.

     The exchange  offer  expires at 5:00 p.m.,  New York City time, on _______,
2003, unless the exchange offer is extended.

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

     THE NOTES AND THE EXCHANGE OFFER INVOLVE RISKS.  SEE "RISK FACTORS" ON PAGE
20.
                               -----------------


       PRINCIPAL                    INTEREST                    FINAL SCHEDULED
         AMOUNT                      RATE(1)                     PAYMENT DATE
      ------------          -------------------------          ----------------

      $200,000,000          USD 3-Month LIBOR + 0.90%          December 6, 2007


- ----------

(1)  Subject to a maximum  rate of 12%  applicable  only for periods as to which
     Continental has failed to pay accrued  interest when due and failed to cure
     such nonpayment.

NEITHER  THE  SECURITIES  AND  EXCHANGE  COMMISSION  NOR  ANY  STATE  SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS  IS TRUTHFUL OR  COMPLETE.  ANY  REPRESENTATION  TO THE CONTRARY IS A
CRIMINAL OFFENSE.

                  The date of this Prospectus is _______, 2003





                                TABLE OF CONTENTS


                               PAGE                                         PAGE

PRESENTATION OF INFORMATION......3           DESCRIPTION OF THE NOTES.........45
FORWARD-LOOKING STATEMENTS.......3              General.......................45
WHERE YOU CAN FIND MORE                         Payments of Principal
    INFORMATION..................3                 and Interest...............45
INCORPORATION OF CERTAIN                        Determination of LIBOR........46
    DOCUMENTS BY REFERENCE.......4              Break Amount..................47
PROSPECTUS SUMMARY...............5              Redemption....................47
   The Exchange Offer............5              Collateral....................48
   Summary of Terms of Notes.....8              Event of Default..............52
   Collateral....................9              Remedies......................53
   Cash Flow Structure..........10              Controlling Party.............55
   The Notes....................11              Priority of Distributions.....55
   Summary Financial and                        Possible Issuance of
      Operating Data............16                 Subordinated Notes.........57
RISK FACTORS....................20              Modifications and Waiver
   Terrorist Attacks and                          of the Indenture and
      International                               Certain Other Agreements....57
      Hostilities...............20              Merger, Consolidation and
   Risk Factors Relating                           Transfer of Assets.........58
      to the Company............20              Indemnification...............59
   Risk Factors Relating                        Governing Law.................59
      to the Airline Industry...23              The Trustee...................59
   Risk Factors Relating                        Book Entry; Delivery
      to the Notes and                             and Form...................59
      the Exchange Offer........24           DESCRIPTION OF THE
   Risk Factors Relating                         LIQUIDITY FACILITY...........62
      to the Policy Provider....27              General.......................62
USE OF PROCEEDS.................27              Drawings......................62
RATIO OF EARNINGS TO                            Reimbursement of Drawings.....64
    FIXED CHARGES...............28              Liquidity Events of Default
THE COMPANY.....................29                 and Termination............66
   Domestic Operations..........29              Liquidity Provider............66
   International Operations.....30           DESCRIPTION OF THE POLICY
   Outlook......................31               AND THE POLICY
DESCRIPTION OF THE POLICY                        PROVIDER AGREEMENT...........67
    PROVIDER....................35              The Policy....................67
   General......................35              General.......................69
   MBIA Financial Information...35              Definitions...................69
   Financial Strength Rating                    The Policy Provider
      of MBIA...................36                 Agreement..................70
THE EXCHANGE OFFER..............37           DESCRIPTION OF THE APPRAISAL.....71
   Terms of the Exchange                     CERTAIN U.S. FEDERAL INCOME
      Offer.....................37               TAX CONSEQUENCES.............73
   Interest on the New Notes....39              Exchange of Old Notes
   Procedures for Tendering.....40                 for New Notes..............73
   Acceptance of Old Notes                   PLAN OF DISTRIBUTION.............73
      for Exchange; Delivery                 LEGAL MATTERS....................74
      of New Notes..............41           EXPERTS..........................74
   Book-Entry Transfer..........42           INDEX OF TERMS...........APPENDIX I
   Guaranteed Delivery                       APPRAISAL LETTER........APPENDIX II
      Procedures................42
   Withdrawal of Tenders........42
   Conditions...................43
   Exchange Agent...............43
   Fees and Expenses............44

     YOU SHOULD RELY ONLY ON THE  INFORMATION  CONTAINED IN THIS  DOCUMENT OR TO
WHICH WE HAVE  REFERRED YOU. WE HAVE NOT  AUTHORIZED  ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT.  THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES.  THE INFORMATION IN THIS DOCUMENT MAY BE ACCURATE ONLY
ON THE DATE OF THIS DOCUMENT.





                          PRESENTATION OF INFORMATION

     We have given certain  capitalized  terms specific meanings for purposes of
this Prospectus.  The "Index of Terms" attached as Appendix I to this Prospectus
lists the page on which we have defined each such term.

     At various  places in this  Prospectus,  we refer you to other  sections of
this document for additional  information  by indicating the caption  heading of
such other sections.  The page on which each principal  caption included in this
Prospectus can be found is listed in the Table of Contents.

                           FORWARD-LOOKING STATEMENTS

     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 in our Commission reports incorporated in this Prospectus by reference or
as stated in "Risk Factors".

     All forward-looking  statements  attributable to us are expressly qualified
in their entirety by the cautionary statements above.

                       WHERE YOU CAN FIND MORE INFORMATION

     Continental files annual,  quarterly and special reports,  proxy statements
and other  information with the Commission under the Securities  Exchange Act of
1934. You may read and copy this information at the Public Reference Room of the
Commission,  Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed  rates.  You may obtain  information  on the  operation of the Public
Reference Room by calling the Commission at (800) SEC-0330.

     The Commission  also maintains an internet web site that contains  reports,
proxy statements and other information about issuers, like Continental, who file
reports  electronically  with  the  Commission.  The  address  of  that  site is
HTTP://WWW.SEC.GOV.

     You may also inspect reports,  proxy statements and other information about
Continental  at the  offices  of the New York  Stock  Exchange,  Inc.,  20 Broad
Street, New York, New York 10005.

       Continental's  annual report on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K, as well as any amendments and exhibits to those
reports,  are  available  free  of  charge  through   Continental's  website  at
HTTP://WWW.CONTINENTAL.COM/COMPANY/INVESTOR  as soon as  reasonably  practicable
after it files them with, or furnishes them to, the Commission.

     This Prospectus  constitutes a part of a registration statement on Form S-4
(together  with all  amendments,  exhibits  and  appendices,  the  "Registration
Statement")  filed by Continental  with the  Securities and Exchange  Commission
(the  "Commission")  under the Securities Act. This Prospectus  omits certain of
the information contained in the Registration Statement, and reference is hereby
made to the  Registration  Statement  for further  information  with  respect to
Continental and the securities offered hereby.  Although  statements  concerning
and summaries of certain documents are included herein, reference is made to the
copy of such  document  filed as an exhibit  to the  Registration  Statement  or
otherwise filed with the Commission.





                 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     The Commission allows us to incorporate by reference  information into this
prospectus.  This means that we can  disclose  important  information  to you by
referring you to another  document filed  separately  with the  Commission.  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.



     This  Prospectus  includes by reference the documents  listed below that we
previously  have filed with the  Commission and that are not delivered with this
document. They contain important information about our company and its financial
condition.

     FILING                                                     DATE FILED
     ------                                                     ----------
   Amended Annual Report on Form 10-K/A-1
   for the year ended December 31, 2002......................   April 22, 2003

   Quarterly Report on Form 10-Q
   for the Quarter ended March 31, 2003......................   April 16, 2003

   Current Report on Form 8-K................................   January 3, 2003

   Current Report on Form 8-K................................   January 15, 2003

   Current Report on Form 8-K................................   February 4, 2003

   Current Report on Form 8-K................................   February 4, 2003

   Current Report on Form 8-K................................   March 4, 2003

   Amendment to Current Report on Form 8-K...................   March 4, 2003

   Current Report on Form 8-K................................   March 4, 2003

   Current Report on Form 8-K................................   March 19, 2003

   Current Report on Form 8-K................................   March 20, 2003

   Current Report on Form 8-K................................   April 2, 2003

   Current Report on Form 8-K................................   April 15, 2003


     Our Commission file number is 1-10323.

     We incorporate by reference  additional documents that we may file with the
Commission  between  the  date of this  Prospectus  and the  termination  of the
Exchange Offer.  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    from   our   website
WWW.CONTINENTAL.COM  or 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
                            Telephone: (713) 324-2950






                               PROSPECTUS SUMMARY

     THIS SUMMARY HIGHLIGHTS  SELECTED  INFORMATION FROM THIS PROSPECTUS AND MAY
NOT CONTAIN ALL OF THE  INFORMATION  THAT IS IMPORTANT TO YOU. FOR MORE COMPLETE
INFORMATION ABOUT THE NOTES AND CONTINENTAL AIRLINES, INC., YOU SHOULD READ THIS
ENTIRE  PROSPECTUS,  AS WELL AS THE MATERIALS FILED WITH THE COMMISSION THAT ARE
CONSIDERED  TO BE  PART  OF  THIS  PROSPECTUS.  SEE  "INCORPORATION  OF  CERTAIN
DOCUMENTS BY REFERENCE".

THE EXCHANGE OFFER

The Notes....................  On  December  6,  2002,   Continental  issued  an
                               aggregate of  $200,000,000  Floating Rate Secured
                               Notes due 2007 in transactions exempt from or not
                               subject to the  registration  requirements of the
                               Securities Act.

                               When  we  use  the  term  "Old   Notes"  in  this
                               Prospectus,  we mean the  Floating  Rate  Secured
                               Notes due 2007 which were  issued on  December 6,
                               2002  and  which  were  not  registered  with the
                               Commission.

                               When  we  use  the  term  "New   Notes"  in  this
                               Prospectus,  we mean the  Floating  Rate  Secured
                               Notes due 2007 registered with the Commission and
                               offered hereby in exchange for the Old Notes.

                               When we use the term "Notes" in this  Prospectus,
                               the related  discussion  applies  both to the Old
                               Notes and the New Notes.

Registration Rights
   Agreement.................  On December 6, 2002,  Continental  entered into a
                               Registration  Rights  Agreement  with the Initial
                               Purchaser providing,  among other things, for the
                               Exchange   Offer  being  made  pursuant  to  this
                               Prospectus.

The Exchange Offer...........  Continental is offering New Notes in exchange for
                               an equal principal  amount of Old Notes.  The New
                               Notes  will be  issued to  satisfy  Continental's
                               obligations   under   the   Registration   Rights
                               Agreement.  As of the  date of  this  Prospectus,
                               $200,000,000  aggregate  principal  amount of Old
                               Notes are outstanding.  Old Notes may be tendered
                               only in integral multiples of $1,000.

Resale of New Notes..........  We believe that you can offer for resale,  resell
                               or  otherwise  transfer  the  New  Notes  without
                               complying  with the  registration  and prospectus
                               delivery requirements of the Securities Act if:

                               o   you  acquire  the New  Notes in the  ordinary
                                   course of your business;

                               o   you have no arrangement or understanding with
                                   any person to participate in the distribution
                                   of the New Notes; and

                               o   you are not an "affiliate", as defined in the
                                   Rule  405  under  the   Securities   Act,  of
                                   Continental or a  broker-dealer  who acquired
                                   Old Notes directly from  Continental for your
                                   own account.

                               If any of these  conditions  is not satisfied and
                               you transfer  any New Note  without  delivering a
                               proper  prospectus  or without  qualifying  for a
                               registration  exemption,  you may incur liability


                               under the Securities  Act.  Continental  does not
                               assume or indemnify you against such liability.

                               Each  broker-dealer  that  receives  New Notes in
                               exchange  for Old Notes held for its own  account
                               as a result  of  market-making  or other  trading
                               activities must  acknowledge that it will deliver
                               a  prospectus  in  connection  with any resale of
                               such  New  Notes.  A  broker-dealer  may use this
                               prospectus  for an offer  to  resell,  resale  or
                               other  transfer of such New Notes issued to it in
                               the Exchange Offer.

Conditions to the Exchange
   Offer.....................  The Exchange  Offer is not  conditioned  upon any
                               minimum  principal  amount  of  Old  Notes  being
                               tendered  for  exchange.  However,  the  Exchange
                               Offer is subject to certain customary conditions,
                               which may be waived by Continental.

Expiration Date of the
   Exchange Offer............  [__________],   2003,  subject  to  Continental's
                               right to extend the Expiration Date.

Procedures for Tendering
   Old Notes.................  If you wish to accept  the  Exchange  Offer,  you
                               must deliver your Old Notes to the Exchange Agent
                               for  exchange  no later than 5:00 p.m.,  New York
                               City time, on the Expiration Date.

                               You must also  deliver  a  completed  and  signed
                               Letter  of  Transmittal  together  with  the  Old
                               Notes. A Letter of  Transmittal  has been sent to
                               Noteholders  and a form is attached as an exhibit
                               to the Registration Statement.

                               If you hold  Old  Notes  through  DTC and wish to
                               accept the Exchange Offer,  you may do so through
                               DTC's   Automated   Tender  Offer   Program.   By
                               accepting   the  Exchange   Offer   through  such
                               program, you will agree to be bound by the Letter
                               of  Transmittal  as  though  you had  signed  the
                               Letter of  Transmittal  and  delivered  it to the
                               Exchange Agent.

Guaranteed Delivery
   Procedures................  If you wish to tender your Old Notes and your Old
                               Notes are not immediately  available,  you cannot
                               deliver  your Old Notes and a properly  completed
                               Letter  of  Transmittal  or  any  other  document
                               required  by the  Letter  of  Transmittal  to the
                               Exchange  Agent prior to the  Expiration  Date or
                               you  cannot  complete  the  book-entry   transfer
                               procedures  prior to the Expiration Date, you may
                               tender your Old Notes according to the guaranteed
                               delivery  procedures  set forth in "The  Exchange
                               Offer--Guaranteed Delivery Procedures".

Withdrawal Rights............  You may  withdraw  a tender  of Old  Notes at any
                               time prior to 5:00 p.m.,  New York City time,  on
                               the Expiration  Date. To withdraw a tender of Old
                               Notes,  the Exchange Agent must receive a written
                               or facsimile  transmission notice requesting such
                               withdrawal  at its  address  set forth under "The
                               Exchange  Offer--Exchange  Agent"  prior  to 5:00
                               p.m., New York City time, on the Expiration Date.

Acceptance of Old Notes
   and Delivery of New
   Notes.....................  Subject  to certain  conditions,  any and all Old
                               Notes which are properly tendered in the Exchange
                               Offer prior to 5:00 p.m.,  New York City time, on
                               the   Expiration   Date  will  be  accepted   for



                               exchange.  The New Notes  issued  pursuant to the
                               Exchange   Offer  will  be   delivered   promptly
                               following the Expiration Date.

Registration, Clearance
   and Settlement............  The New Notes will be  represented by one or more
                               permanent global notes,  which will be registered
                               in the name of the  nominee  of DTC.  The  global
                               notes  will be  deposited  with  the  Trustee  as
                               custodian for DTC.

Consequences of Failure
   to Exchange Old Notes.....  Once the Exchange  Offer has been  completed,  if
                               you do not exchange  your Old Notes for New Notes
                               in the  Exchange  Offer,  you will no  longer  be
                               entitled to  registration  rights and will not be
                               able to offer or sell your Old Notes,  unless (i)
                               such Old Notes are subsequently  registered under
                               the  Securities  Act  (which,  subject to certain
                               limited  exceptions,  Continental  will  have  no
                               obligation  to do) or (ii)  your  transaction  is
                               exempt  from,  or  otherwise  not subject to, the
                               Securities  Act and applicable  state  securities
                               laws.

Certain Federal Income Tax
   Consequences..............  The  exchange of Old Notes for New Notes will not
                               be a sale or  exchange  or  otherwise  a  taxable
                               event for federal income tax purposes.

Exchange Agent...............  Wilmington  Trust  Company is serving as Exchange
                               Agent in connection with the Exchange Offer.

Fees and Expenses............  All    expenses    incident   to    Continental's
                               consummation of the Exchange Offer and compliance
                               with the  Registration  Rights  Agreement will be
                               borne by Continental.

Use of Proceeds..............  Continental  will not receive  any cash  proceeds
                               from the  exchange  of the Old  Notes for the New
                               Notes.





SUMMARY OF TERMS OF NOTES

Principal Amount..................                  $200,000,000
Loan to Collateral Value (1)......                      42.8%
Interest Payment Dates............   March 6, June 6, September 6 and December 6
Final Scheduled Payment Date......                 December 6, 2007
Final Legal Maturity Date.........                 December 6, 2009
Minimum Denomination..............                     $1,000
Section 1110 Protection (2).......                       Yes
Liquidity Facility Coverage (3)...                   8 quarterly
                                                  interest payments
Policy Provider Coverage (3)......          Interest when due and principal
                                     no later than the Final Legal Maturity Date


(1)  This percentage has been  determined by dividing the outstanding  principal
     amount of the Notes (minus Cash  Collateral) by the appraised  value of the
     Collateral  determined as of December 25, 2002.  Continental is required to
     provide to the Policy  Provider and the Trustee a  semiannual  appraisal of
     the Collateral. If any such subsequent appraisal indicates that the loan to
     Collateral  value is greater than 45%,  Continental  is required to provide
     additional   collateral  or  to  reduce  the  principal   amount  of  Notes
     outstanding  so that the loan to Collateral  value is not greater than 45%.
     Continental  deposited  $13,056,950  as  Cash  Collateral  at  the  initial
     issuance  of the Old Notes so that the  initial  loan to  Collateral  value
     would not exceed 45%,  based on the  appraisal  determined as of August 25,
     2002. The loan to Collateral  value,  determined  using the appraisal as of
     December  25, 2002,  would have been 45.8%  without  giving  effect to such
     deposit  of  Cash  Collateral.  Continental  expects  to  satisfy  the  45%
     requirement  at the time of the next  appraisal  due in August 2003,  based
     upon its projected purchases of spare parts, in which case Continental will
     be entitled to withdraw such Cash Collateral.  However, no assurance can be
     given that such 45%  requirement  will be satisfied.  An appraised value is
     only an estimate and reflects certain assumptions.  See "Description of the
     Appraisal".

(2)  Section 1110 of the U.S.  Bankruptcy  Code will be  applicable to the spare
     parts of the types  initially  subject to the lien securing the Notes,  but
     will not be applicable to Cash Collateral. In addition, in order to satisfy
     the semiannual loan to collateral value requirement referred to in note (1)
     above, Continental may add other collateral that may not be entitled to the
     benefits of Section 1110, subject to certain limitations.

(3)  The amounts  available under the Liquidity  Facility and the Policy for the
     payment of  accrued  interest  have been  calculated  utilizing  the Capped
     Interest  Rate,  which is the maximum  interest  rate  applicable  only for
     periods as to which Continental has failed to pay accrued interest when due
     and failed to cure such nonpayment.







COLLATERAL

     The Notes are secured by a lien on spare parts (including appliances) first
placed in service  after  October  22,  1994 and owned by  Continental  that are
appropriate  for  installation  on or  use  in

     o    one or more of the following  aircraft  models:  Boeing model 737-700,
          737-800,  737-900,  757-200,  757-300,  767-200,  767-400  or  777-200
          aircraft,

     o    any engine utilized on any such aircraft or

     o    any other spare part included in the Collateral,

and not  appropriate  for  installation on or use in any other model of aircraft
currently  operated by Continental or engine utilized on any such other model of
aircraft. The lien will not apply for as long as a spare part is installed on or
being used in any  aircraft,  engine or other spare part so  installed  or being
used. In addition, the lien will not apply to a spare part not located at one of
the designated locations specified pursuant to the security agreement applicable
to the spare parts.

     The spare  parts  included  in the  Collateral  fall  into two  categories,
"rotables" and "expendables".  Rotables are parts that wear over time and can be
repeatedly restored to a serviceable  condition over a period  approximating the
life of the flight equipment to which they relate.  Expendables consist of parts
that can be restored to a  serviceable  condition  but have a life less than the
related  flight  equipment  and parts that  generally  are used once and thereby
consumed  or  thereafter  discarded.  Spare  engines  are  not  included  in the
Collateral.  Set forth  below is  certain  information  about  the  spare  parts
included in the Collateral as of December 25, 2002:

                             SPARE PARTS QUANTITY(1)
                             -----------------------
  AIRCRAFT MODEL          EXPENDABLES  ROTABLES    TOTAL   APPRAISED VALUE(2)
  --------------          -----------  --------   -------  ------------------
737-700................       877         24         901
737-700/800............   278,912      6,942     285,854
737-800................     3,777        191       3,968
737-900................       821         10         831
                          -------    -------     -------
737-7/8/9 Subtotal.....   284,387      7,167     291,554      $185,972,600

757-200................   185,731      3,391     189,122        69,352,800
757-300................    10,946         96      11,042         3,116,700
767-200................    25,485        227      25,712         8,946,700
767-400................    51,147      1,586      52,733        55,741,200
777-200................   111,210      3,006     114,216       113,712,000
                          -------    -------     -------      ------------
Total..................   668,906     15,473     684,379      $436,841,900


- ----------

(1)  This  quantity of spare parts used in  preparing  the  appraised  value was
     determined as of December 25, 2002.  Since spare parts are regularly  used,
     refurbished, purchased, transferred and discarded in the ordinary course of
     Continental's  business,  the  quantity  of  spare  parts  included  in the
     Collateral and their appraised value will change over time.  Continental is
     required to provide to the Policy  Provider  and the  Trustee a  semiannual
     appraisal of the Collateral.

(2)  The  appraised  value  reflects the opinion of Simat,  Helliesen & Eichner,
     Inc., an independent  aviation  appraisal and consulting  firm, of the fair
     market value of the spare parts.  A letter  summarizing  such  appraisal is
     annexed to this  Prospectus  as Appendix  II. The  appraisal  is subject to
     number of  assumptions  and  limitations  and was prepared based on certain
     specified  methodologies.  An  appraisal  is only an  estimate of value and
     should not be relied upon as a measure of realizable value.






CASH FLOW STRUCTURE

     Set forth below is a diagram  illustrating  the  structure  of certain cash
flows applicable to the Notes.

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

(1)  The Liquidity  Facility is sufficient to cover eight consecutive  quarterly
     interest  payments,  but does not cover any other  amounts  payable  on the
     Notes.

(2)  The Policy covers regular  interest  payments and outstanding  principal no
     later  than the Final  Legal  Maturity  Date,  but does not cover any other
     amounts payable on the Notes.






THE NOTES

Issuer.......................  Continental Airlines, Inc.

Notes Offered................  Floating Rate Secured Notes due 2007.

Use of Proceeds..............  The proceeds  from the sale of the Old Notes were
                               used for general corporate purposes.  Continental
                               will not receive any  proceeds  from the exchange
                               of the New Notes for the Old Notes.

Trustee and Paying Agent.....  Wilmington Trust Company.

Liquidity Provider...........  Morgan Stanley Capital Services.

Policy Provider..............  MBIA Insurance Corporation.

Final Scheduled Payment
   Date......................  The  entire  principal  amount  of the  Notes  is
                               scheduled for payment on December 6, 2007.

Final Legal Maturity Date....  December 6, 2009.

Interest.....................  The Notes will accrue interest at a variable rate
                               per annum  set  forth on the  cover  page of this
                               Prospectus.  The interest rate will be subject to
                               a maximum  equal to the Capped  Interest  Rate of
                               12% per annum  applicable  only for periods as to
                               which  Continental  has  failed  to  pay  accrued
                               interest   when  due  and  failed  to  cure  such
                               nonpayment.  For all other periods,  the interest
                               rate on the Notes will not be capped. Interest is
                               calculated  on the basis of the actual  number of
                               days  elapsed  over  a  360-day  year.  LIBOR  is
                               determined  from  time to  time by the  Reference
                               Agent  as  described  in   "Description   of  the
                               Notes--Determination of LIBOR".

Interest Payment Dates.......  March 6,  June 6,  September  6 and  December  6,
                               commencing on March 6, 2003.

Record Dates.................  The fifteenth day preceding the related  Interest
                               Payment Date.

Optional Redemption..........  Continental  may elect to redeem  all or (so long
                               as  no  Payment   Default  has  occurred  and  is
                               continuing)  some of the Notes at any time  prior
                               to maturity.  The  redemption  price in such case
                               will  be  the  principal  amount  of  the  Notes,
                               together with accrued and unpaid interest,  LIBOR
                               break amount,  if any, and, if redeemed  prior to
                               the  third   anniversary  of  the  Issuance  Date
                               (except  in  connection   with  a  redemption  to
                               satisfy the maximum  Collateral  Ratio or minimum
                               Rotable  Ratio  requirement),  a Premium equal to
                               the following  percentage of the principal amount
                               prepaid:

                                   IF REDEEMED DURING THE YEAR
                                 PRIOR TO THE ANNIVERSARY OF THE
                                  ISSUANCE DATE INDICATED BELOW        PREMIUM
                                  -----------------------------        -------
                                               1st                      1.50%
                                               2nd                      1.00
                                               3rd                      0.50




                               If  Continental  gives notice of  redemption  but
                               fails to pay when due all  amounts  necessary  to
                               effect such redemption,  such redemption shall be
                               deemed  revoked  and no amount  shall be due as a
                               result of notice of redemption having been given.

Collateral...................  The Notes are  secured  by a lien on spare  parts
                               (including  appliances)  first  placed in service
                               after  October 22, 1994 and owned by  Continental
                               that are appropriate  for  installation on or use
                               in

                               o   one or more of the following aircraft models:
                                   Boeing  model  737-700,   737-800,   737-900,
                                   757-200, 757-300, 767-200, 767-400 or 777-200
                                   aircraft,

                               o   any engine utilized on any such aircraft or

                               o   any  other   spare  part   included   in  the
                                   Collateral,

                               and not appropriate for installation on or use in
                               any other model of aircraft currently operated by
                               Continental or engine  utilized on any such other
                               model of aircraft. The lien will not apply for as
                               long as a spare  part is  installed  on or  being
                               used in any aircraft,  engine or other spare part
                               so installed or being used. In addition, the lien
                               will not apply to a spare part not located at one
                               of the designated locations specified pursuant to
                               the security  agreement  applicable  to the spare
                               parts.

Maintenance of Collateral
   Ratio.....................  Continental  is required to provide to the Policy
                               Provider and the Trustee a  semiannual  appraisal
                               of  the   Collateral.   If  any  such   appraisal
                               indicates that the loan to collateral value ratio
                               is greater  than 45% or the ratio of the value of
                               Rotables  included in the  Collateral to the loan
                               is less than 150%,  Continental  is  required  to
                               provide  additional  collateral  or to reduce the
                               principal amount of Notes outstanding so that the
                               loan to  collateral  value  ratio is not  greater
                               than 45% and the Rotables  value to loan ratio is
                               not less than 150%.

Section 1110 Protection......  Continental's  outside  counsel has  provided its
                               opinion to the  Trustee  and the Policy  Provider
                               that the  benefits  of  Section  1110 of the U.S.
                               Bankruptcy Code will be available with respect to
                               the lien on the spare parts collateral.

Liquidity Facility...........  Under  the  Liquidity  Facility,   the  Liquidity
                               Provider will, if necessary,  make advances in an
                               aggregate  amount  sufficient  to pay interest on
                               the  Notes  on up to eight  successive  quarterly
                               Interest   Payment  Dates.   Drawings  under  the
                               Liquidity  Facility  cannot  be  used  to pay any
                               other amount in respect of the Notes.

                               Upon each drawing under the Liquidity Facility to
                               pay  interest  on the  Notes,  the  Trustee  will
                               reimburse the  Liquidity  Provider for the amount
                               of such drawing.  Such  reimbursement  obligation
                               and all interest, fees and other amounts owing to
                               the  Liquidity   Provider   under  the  Liquidity
                               Facility and certain other  agreements  will rank
                               senior to the Notes in right of payment.



Policy Coverage..............  Under the Policy, the Policy Provider is required
                               to honor  drawings to cover:

                               o   Any  shortfall  on any  Distribution  Date in
                                   funds to be distributed  as accrued  interest
                                   on the Notes.

                               o   Any  shortfall  on the Final  Legal  Maturity
                                   Date in funds to be  distributed as principal
                                   of, and accrued interest on, the Notes.

                               o   Any   shortfall   in  the   proceeds  of  the
                                   disposition of the remaining  Collateral from
                                   the amount  required to pay principal of, and
                                   accrued   interest   on,  the  Notes  on  the
                                   Distribution  Date  established in connection
                                   with such disposition.

                               o   If certain payments with respect to the Notes
                                   are  by  court  order   determined  to  be  a
                                   "preferential   transfer"   under   the  U.S.
                                   Bankruptcy  Code or otherwise  required to be
                                   returned, the amount of such payments.

                               o   After the  continuance  of a Payment  Default
                                   for eight consecutive  Interest Periods,  any
                                   shortfall in funds  required to pay principal
                                   of, and accrued interest on, the Notes on the
                                   Distribution  Date  established in connection
                                   with   such   Payment   Default.    If   such
                                   Distribution  Date would  occur  prior to the
                                   Final  Scheduled  Payment  Date,  instead  of
                                   paying such  shortfall  on such  Distribution
                                   Date, the Policy  Provider may, so long as no
                                   Policy Provider Default is continuing,  elect
                                   to pay:

                                   o Any shortfall on such  Distribution Date in
                                     funds  required to pay accrued  interest on
                                     the Notes.

                                   o Thereafter,  on each Distribution  Date, an
                                     amount equal to the scheduled principal (on
                                     the  Final  Scheduled   Payment  Date)  and
                                     interest    (without    regard    to    any
                                     acceleration  thereof) payable on the Notes
                                     on such Distribution Date.

                               Notwithstanding   such  election  by  the  Policy
                               Provider,   the  Policy   Provider  may,  on  any
                               Business Day (which shall be a Distribution Date)
                               elected  by the  Policy  Provider  upon 20  days'
                               notice, cause the Trustee to make a drawing under
                               the  Policy  for an  amount  equal  to  the  then
                               outstanding  principal  balance  of the Notes and
                               accrued  and unpaid  interest  thereon.  Further,
                               notwithstanding   such  election  by  the  Policy
                               Provider,   upon  the   occurrence  of  a  Policy
                               Provider  Default,  the  Trustee  shall,  on  any
                               Business Day elected by the Trustee upon 20 days'
                               written  notice to the  Policy  Provider,  make a
                               drawing  under the Policy for an amount  equal to
                               the then  outstanding  principal  balance  of the
                               Notes and accrued and unpaid interest thereon.



                               Any  shortfall  for  which a  drawing  under  the
                               Policy  may be made as  described  above  will be
                               calculated   after  the   application   of  funds
                               available  through  drawings  under the Liquidity
                               Facility and withdrawals from the Cash Collateral
                               Account.

                               The Policy Provider is required to honor drawings
                               under the Policy by the  Trustee on behalf of the
                               Liquidity  Provider for all outstanding  drawings
                               under  the  Liquidity  Facility,   together  with
                               interest  thereon,  on or after the  Business Day
                               which is 24 months from the  earliest to occur of
                               (1) the date on which an Interest  Drawing  shall
                               have been made under the  Liquidity  Facility and
                               remain   unreimbursed   from   payments  made  by
                               Continental  at the end of such 24-month  period,
                               (2) the  date on  which  any  Downgrade  Drawing,
                               Non-Extension  Drawing or Final  Drawing that was
                               deposited into the Cash Collateral  Account shall
                               have been applied to pay any scheduled payment of
                               interest  on the  Notes and  remain  unreimbursed
                               from payments made by  Continental  at the end of
                               such  24-month  period  and (3) the date on which
                               all of the Notes have been accelerated and remain
                               unpaid by Continental at the end of such 24-month
                               period,    in   each   case    disregarding   any
                               reimbursements   from   payments  by  the  Policy
                               Provider  and  from  proceeds  from  the  sale of
                               Collateral distributed by the Trustee during such
                               24-month period.

                               The  reimbursement  of drawings  under the Policy
                               ranks  junior  to  further  distributions  on the
                               Notes.

Control of Trustee...........  The  "Controlling  Party" will direct the Trustee
                               in taking  action under the  Indenture  and other
                               agreements  relating to the Notes,  including  in
                               amending  such  agreements  and granting  waivers
                               thereunder,  except for certain  provisions  that
                               cannot be amended or waived  without  the consent
                               of each Noteholder  affected thereby. If an Event
                               of Default is continuing, the "Controlling Party"
                               will direct the Trustee in  exercising  remedies,
                               such as accelerating the Notes or foreclosing the
                               lien on the collateral securing the Notes.

                               The Controlling Party will be:

                               o   The Policy  Provider or, if a Policy Provider
                                   Default is  continuing,  the  holders of more
                                   than 50% in aggregate unpaid principal amount
                                   of the Notes then outstanding.

                               o   Under  certain  circumstances,  the Liquidity
                                   Provider.



                                                                     STANDARD &
                                                         MOODY'S       POOR'S
                                                         -------     ----------

Threshold Rating for
the Liquidity Provider.......    Short Term............    P-1          A-1

Liquidity Provider Rating....    Morgan  Stanley,  the parent  company of Morgan
                                 Stanley Capital  Services,  meets the Threshold
                                 Rating  requirement  and has guaranteed  Morgan
                                 Stanley Capital Services' obligations under the
                                 Liquidity Facility.

                                                                       MOODY'S
                                                                       -------

Policy Provider Rating.......    Financial Strength................      Aaa




                      SUMMARY FINANCIAL AND OPERATING DATA

     The following  tables  summarize  certain  consolidated  financial data and
certain  operating  data with respect to  Continental.  The  following  selected
consolidated financial data for the years ended December 31, 2002, 2001 and 2000
are derived from the audited  consolidated  financial  statements of Continental
(including   certain   reclassifications   to  conform  to  the   current   year
presentation)  including  the notes  thereto  incorporated  by reference in this
Prospectus and should be read in conjunction  with those  financial  statements.
The following selected consolidated  financial data for the years ended December
31, 1999 and 1998 are derived  from the  selected  financial  data  contained in
Continental's  Annual Report on Form 10-K for the year ended  December 31, 2002,
incorporated  by  reference  in this  Prospectus,  and the audited  consolidated
financial  statements of  Continental  for the years ended December 31, 1999 and
1998 and should be read in conjunction  therewith.  The  consolidated  financial
data of  Continental  for the three  months  ended  March 31,  2003 and 2002 are
derived from the unaudited  consolidated  financial  statements  of  Continental
incorporated  by reference in this  Prospectus,  which  include all  adjustments
(consisting  solely of normal  recurring  accruals,  except for fleet impairment
losses and other special charges) that Continental  considers  necessary for the
fair presentation of the financial  position and results of operations for these
periods.  Operating  results for the three  months  ended March 31, 2003 are not
necessarily  indicative  of the results that may be expected for the year ending
December 31, 2003.

                                           THREE MONTHS                        YEAR ENDED DECEMBER 31,
                                          ENDED MARCH 31,
                                          2003        2002        2002         2001        2000        1999        1998
                                        --------    -------    ----------    --------    --------    --------    ------
                                           (IN MILLIONS OF DOLLARS, EXCEPT OPERATING DATA, PER SHARE DATA AND RATIOS)

FINANCIAL DATA--OPERATIONS:(1)
Operating Revenue....................   $ 2,042     $ 1,993     $ 8,402      $ 8,969     $ 9,899     $  8,639     $ 7,927
Operating Expenses...................     2,266       2,180       8,714        8,825       9,170        8,024       7,226
                                       ---------    --------    --------     --------    --------    --------    ---------
Operating Income (Loss)..............      (224)       (187)       (312)         144         729          615         701
Non-operating Income (Expense), net..       (86)        (67)       (303)        (258)       (167)         183         (59)
                                       ---------    --------    --------     --------    --------    --------    ---------
Income (Loss) before Income Taxes
   and Cumulative Effect of Changes
   in Accounting Principles..........      (310)       (254)       (615)        (114)        562          798         642
Net Income (Loss)....................   $  (221)    $  (166)    $  (451)     $   (95)    $   342     $    455     $   383
                                        ========    ========     =======      =======     =======     =======     ========
Earnings (Loss) per Share:
   Basic.............................   $ (3.38)     $(2.61)     $(7.02)      $(1.72)     $ 5.62      $  6.54      $ 6.34
                                        ========    ========     =======      =======     =======     =======     ========
   Diluted...........................   $ (3.38)     $(2.61)     $(7.02)      $(1.72)     $ 5.45      $  6.20      $ 5.02
                                        ========    ========     =======      =======     =======     =======     ========
Shares used for Computation:
   Basic.............................     65.3        63.5         64.2         55.5        60.7         69.5        60.3
   Diluted...........................     65.3        63.5         64.2         55.5        62.8         73.9        80.3

Ratio of Earnings to Fixed Charges
(2)..................................        --          --          --           --       1.51x        1.80x       1.93x
                                        ========    ========     =======      =======     =======     =======     ========






                                               THREE MONTHS
                                               ENDED MARCH 31,                  YEAR ENDED DECEMBER 31,
                                            -------------------   -------------------------------------------------------
                                              2003       2002        2002       2001        2000        1999       1998
                                            --------   --------   ----------  --------    --------    --------   ------
                                              (IN MILLIONS OF DOLLARS, EXCEPT OPERATING DATA, PER SHARE DATA AND RATIOS)
OPERATING DATA:
MAINLINE JET STATISTICS:
Revenue passengers (thousands)........        9,245     10,057      41,016      44,238     46,896      45,540     43,625
Revenue passenger miles
  (millions) (3)......................       13,274     14,032      59,349      61,140     64,161      60,022     53,910
Cargo ton miles (millions)............          233        208         908         917      1,096       1,000        856
Available seat miles (millions) (4)...       19,076     18,951      80,122      84,485     86,100      81,946     74,727
Passenger load factor (5).............         69.6%      74.0%       74.1%       72.4%      74.5%       73.2%      72.1%
Passenger revenue per available
  seat mile (cents)...................         8.45       8.77        8.61        8.98       9.84        9.12       9.23
Total revenue per available seat mile
  (cents).............................         9.31       9.40        9.27        9.58      10.52        9.75       9.85
Operating cost per available seat mile
  (cents) (6).........................        10.25      10.09        9.53        9.22       9.68        9.07       9.03
Special items per available seat mile.         0.34       0.48        0.31      (0.36)        N/A        0.09       0.14
Average yield per revenue passenger mile
  (cents) (7).........................        12.14      11.84       11.63       12.42      13.20       12.45      12.79
Average price per gallon of fuel,
  excluding fuel taxes (cents)........        98.50      60.17       69.97       78.24      84.21       46.56      46.83
Average price per gallon of fuel,
  including fuel taxes (cents)........       102.87      64.39       74.01       82.48      88.54       50.78      51.20
Fuel gallons consumed (millions)......          305        308       1,296       1,426      1,533       1,536      1,487
Average fare per revenue passenger....      $174.27    $165.21     $168.25     $171.59    $180.66     $164.11    $158.02
Average length of aircraft flight (miles)     1,257      1,191       1,225       1,185      1,159       1,114      1,044
Average daily utilization of each
  aircraft (hours) (8)................         9:19       9:31        9:31       10:19      10:36       10:29      10:13
Actual aircraft in fleet at end of
  period (9)..........................          362        364         366         352        371         363        363

REGIONAL JET AND TURBOPROP STATISTICS
(10):
Revenue passenger miles
  (millions) (3)......................        1,078        835       3,952       3,388      2,947       2,149      1,564
Available seat miles (millions) (4)...        1,767      1,424       6,219       5,437      4,735       3,431      2,641
Passenger load factor (5).............         61.0%      58.6%       63.5%       62.3%      62.2%       62.6%      59.2%

CONSOLIDATED STATISTICS:
Consolidated passenger load factor....         68.9%      73.0%       73.3%       71.8%      73.9%       72.8%      71.7%
Consolidated breakeven passenger load
  factor (11).........................         84.5%      87.4%       82.5%       73.5%      67.9%       64.0%      63.6%




                                                                           MARCH 31,         DECEMBER 31,
                                                                              2003               2002
                                                                        ------------         ------------
                                                                            (IN MILLIONS OF DOLLARS)
FINANCIAL DATA--BALANCE SHEET:
ASSETS:
     Cash, Cash Equivalents and Short-Term Investments................  $      1,181        $      1,342
     Other Current Assets.............................................         1,079                 935
     Total Property and Equipment, net................................         6,824               6,968
     Routes and Airport Operating Rights, net.........................         1,003               1,009
     Other Assets.....................................................           503                 486
                                                                        ------------        ------------
           Total Assets...............................................  $     10,590        $     10,740
                                                                        ============        ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
     Current Liabilities..............................................  $      3,137        $      2,926
     Long-Term Debt and Capital Leases................................         5,096               5,222
     Deferred Credits and Other Long-Term Liabilities.................         1,546               1,572
     Minority Interest................................................            19                   7
     Mandatorily Redeemable Preferred Securities of Subsidiary
        Trust Holding Solely Convertible Subordinated Debentures
        of Continental (12)...........................................           241                 241
     Redeemable Preferred Stock of Subsidiary (13)....................             5                   5
     Stockholders' Equity.............................................           546        $        767
                                                                        ------------        ------------
           Total Liabilities and Stockholders' Equity.................  $     10,590        $     10,740
                                                                        ============        ============
- --------------
(1) Includes the following special expense (income) items (in millions):


                                                     THREE MONTHS
                                                     ENDED MARCH 31,              YEAR ENDED DECEMBER 31,
                                                    -----------------    ----------------------------------------------
                                                     2003       2002      2002      2001      2000      1999      1998
                                                    ------     ------    ------    ------    ------    ------    ------
       Operating expense (income):
         Fleet impairment and restructuring
           charges...............................   $  65      $  90      $242     $  61      $ --     $  81      $122
         Air Transportation Safety and System
           Stabilization Act grant...............      --         --        12      (417)       --        --        --
         Severance and other special charges.....      --         --        --        63        --        --        --

       Nonoperating expense (income):
         Gain on sale of assets..................      --         --        --        --        (9)     (326)       --
         Impairment of investments...............      --         --        --        22        --        --        --

       Cumulative effect of change in accounting,
         net of taxes............................      --         --        --        --        --        33        --

(2)   For purposes of calculating this ratio,  earnings consist of income before
      income taxes and  cumulative  effect of changes in  accounting  principles
      plus interest expense (net of capitalized interest), the portion of rental
      expense  representative of interest expense and amortization of previously
      capitalized  interest.  Fixed charges  consist of interest  expenses,  the
      portion of rental expense  representative of interest expense,  the amount
      amortized  for debt  discount,  premium and issuance  expense and interest
      previously capitalized. For the three months ended March 31, 2003 and 2002
      and the years ended December 31, 2002 and 2001,  earnings were  inadequate
      to cover fixed charges and the coverage deficiency was $307 million,  $257
      million, $616 million and $143 million, respectively.

(3)   The number of scheduled miles flown by revenue passengers.

(4)   The number of seats available for passengers  multiplied by the number of
      scheduled miles those seats are flown.

(5)   Revenue passenger miles divided by available seat miles.

(6)   Includes applicable special items noted in (1).

(7)   The average revenue received for each mile a revenue passenger is  carried.

(8)   The  average  number of hours per day that an  aircraft  flown in  revenue
      service is operated (from gate departure to gate arrival).

(9)   Excludes aircraft that are either temporarily or permanently  removed  rom
      service.

(10)  These statistics reflect operations of Continental Express (as operated by
      ExpressJet). In April 2002, ExpressJet's parent company Holdings completed
      an initial public offering,  and  Continental's  ownership in Holdings was
      reduced to 53.1% of its outstanding  common stock.  Pursuant to a capacity
      purchase  agreement,  Continental  currently purchases all of ExpressJet's
      available seat miles for a negotiated price.




(11)  The percentage of seats that must be occupied by revenue passengers for us
      to break  even on a net  income  basis.  The  special  items  noted in (1)
      included in the consolidated  breakeven  passenger load factor account for
      3.0, 4.9, 3.3, (3.0),  (0.1),  (2.3) and 1.6 percentage  points in each of
      the periods, respectively.

(12)  The sole  assets  of the  Trust are  convertible  subordinated  debentures
      issued by Continental with an aggregate  principal amount of $250 million,
      which bear interest at the rate of 6% per annum and mature on November 15,
      2030. Upon repayment,  the Mandatorily  Redeemable Preferred Securities of
      Subsidiary Trust will be mandatorily redeemed.

(13)  In connection with an internal  reorganization by Holdings,  Continental's
      53.1%  majority  owned   subsidiary,   a  subsidiary  of  Holdings  issued
      non-voting  preferred  stock  which  has a  liquidation  preference  of $5
      million,  is mandatorily  redeemable in 2012, and is callable beginning in
      2005. The preferred stock was sold to a  non-affiliated  third party for a
      note in the original principal amount of $5 million and is included on our
      balance sheet as redeemable preferred stock of subsidiary.





                                  RISK FACTORS

TERRORIST ATTACKS AND INTERNATIONAL HOSTILITIES

  THE 2001  TERRORIST  ATTACKS AND THE  MILITARY  ACTION IN IRAQ HAVE  ADVERSELY
  AFFECTED,  AND ANY ADDITIONAL  TERRORIST  ATTACKS OR  HOSTILITIES  MAY FURTHER
  ADVERSELY AFFECT, CONTINENTAL'S FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
  PROSPECTS

     As described in greater  detail below under "The  Company--Outlook"  and in
Continental's  filings with the Commission,  the terrorist  attacks of September
11,  2001  involving   commercial  aircraft  adversely  affected   Continental's
financial  condition,  results of  operations  and  prospects,  and the  airline
industry  generally.  Those effects continue,  although they have been mitigated
somewhat  by  increased   traffic,   the  Stabilization  Act  and  Continental's
cost-cutting measures. Moreover,  additional terrorist attacks, even if not made
directly on the airline industry,  or the fear of such attacks,  particularly in
light of the war in Iraq, could further  negatively  affect  Continental and the
airline  industry.  The  current  hostilities  in the Middle  East have  further
decreased  demand for air travel,  which could have a material adverse impact on
Continental's financial condition, liquidity and results of operations.

     Among the  effects  Continental  experienced  from the  September  11, 2001
terrorist attacks were significant flight disruption costs caused by the Federal
Aviation Administration ("FAA") imposed grounding of the U.S. airline industry's
fleet,   significantly   increased   security,   insurance   and  other   costs,
significantly higher ticket refunds, significantly reduced load factors (defined
as revenue  passenger miles divided by available seat miles),  and significantly
reduced yields.  Further  terrorist  attacks against  commercial  aircraft could
result in another  grounding of Continental's  fleet, and would likely result in
significant  reductions in load factor and yields,  along with increased  ticket
refunds and security,  insurance and other costs. In addition, terrorist attacks
not involving commercial  aircraft,  the war in Iraq or other world events could
result in  decreased  load factors and yields and could also result in increased
costs for Continental and the airline  industry.  For instance,  fuel costs rose
significantly  during 2002 and the first quarter of 2003 and until recently have
been  at  historically   high  levels.   Even  though   Continental  has  hedged
approximately  80% of its fuel  requirements for the second quarter of 2003, the
continued  military  action  in Iraq,  post war  unrest in that  country,  other
conflicts in the Middle East,  political  events in  Venezuela  and Nigeria,  or
significant  events in other  oil-producing  nations  could cause fuel prices to
increase further and may reduce the availability of fuel.  Premiums for aviation
insurance have increased  substantially,  and could escalate further, or certain
aviation  insurance  could  become  unavailable  or  available  only for reduced
amounts of coverage that are insufficient to comply with the levels of insurance
coverage  required  by aircraft  lenders  and lessors or required by  applicable
government regulations. Additionally, war-risk coverage or other insurance might
cease to be available to  Continental's  vendors,  or might be available only at
significantly increased premiums or for reduced amounts of coverage, which could
adversely impact Continental's operations or costs.

     Due in part to the lack of predictability  of future traffic,  business mix
and yields,  Continental is currently unable to estimate the long-term impact on
it of the events of  September  11, 2001 or the impact of any further  terrorist
attacks or the war in Iraq.  However,  given the magnitude of the  unprecedented
events of September 11, 2001 and their continuing aftermath,  the adverse impact
to  Continental's  financial  condition,  results of  operations,  liquidity and
prospects may continue to be material,  and  Continental's  financial  resources
might not be sufficient to absorb it or that of any further terrorist attacks or
continued military action in Iraq.

RISK FACTORS RELATING TO THE COMPANY

  CONTINENTAL CONTINUES TO EXPERIENCE SIGNIFICANT LOSSES

     Since  September 11, 2001,  Continental  has incurred  significant  losses.
Continental  recorded  losses of $451  million  in 2002 and $221  million in the
first quarter of 2003, and expects to incur a significant loss for the full year
2003.  Passenger revenue per available seat mile for Continental's  mainline jet
operations has continued to decline since September 11, 2001,  dropping 4.1% for
the year ended  December 31, 2002 versus the same period in 2001 and 3.6% in the
first  quarter of 2003  versus  the first  quarter  of 2002.  Overall  passenger
revenue  declined 7.0% during 2002  compared to 2001,  and was flat in the first
quarter of 2003  compared to the same period in 2002.  Business  traffic in most



markets  continues to be weak,  and carriers  continue to offer reduced fares to
attract passengers,  which lowers Continental's passenger revenue and yields and
raises  Continental's  break-even load factor.  Continental  cannot predict when
business traffic or yields will increase.  Further,  the long-term impact of any
changes in fare  structures,  most  importantly  in relation to business  fares,
booking patterns,  low-cost competitor growth, increased usage of regional jets,
competitor  bankruptcies  and other  changes in industry  structure and conduct,
cannot be predicted at this time,  but could have a material  adverse  effect on
Continental's financial condition, liquidity and results of operations. See "The
Company--Outlook".

     In addition,  Continental's  capacity  purchase  agreement with  ExpressJet
provides that Continental  purchase,  in advance, all of ExpressJet's  available
seat miles for a negotiated  price, and Continental is at risk for reselling the
available  seat miles at market  prices.  Continental  previously  announced its
intention to sell or otherwise dispose of its remaining interests in ExpressJet.
If Continental does so, then Continental would report greater fixed costs, which
could result in lower or more volatile  earnings or both.  For example,  for the
year ended December 31, 2002,  Continental's  net loss of $451 million  included
net income for ExpressJet of $84 million.  For the quarter ended March 31, 2003,
Continental's net loss of $221 million included net income for ExpressJet of $26
million.

  CONTINENTAL'S  HIGH LEVERAGE MAY AFFECT ITS ABILITY TO SATISFY ITS SIGNIFICANT
  FINANCING NEEDS OR MEET ITS OBLIGATIONS

     As is the  case  with its  principal  competitors,  Continental  has a high
proportion of debt compared to its equity  capital.  During 2002,  the amount of
Continental's  long-term debt increased 26%.  Continental  also has  significant
operating  leases and facility rental costs. In addition,  Continental has fewer
cash resources than some of its principal  competitors and  substantially all of
Continental's  property and equipment is subject to liens securing indebtedness.
Accordingly,  Continental  may be less  able  than  some of its  competitors  to
withstand a prolonged  recession  in the airline  industry or respond as well to
changing economic and competitive  conditions.  Moreover,  competitors  emerging
from  bankruptcy  will likely have lower cost  structures and greater  operating
flexibility after reorganizing their companies in bankruptcy.

     As of March 31, 2003, Continental had approximately:

     o    $5.6 billion  (including  current  maturities)  of long-term  debt and
          capital lease obligations.

     o    $248 million liquidation amount of  Continental-obligated  mandatorily
          redeemable   preferred  securities  of  trust  ($241  million  net  of
          unamortized discount).

     o    $546 million of stockholders' equity.

     o    $1.18 billion in cash, cash equivalents and short-term investments.

     Continental has substantial commitments for capital expenditures, including
for the acquisition of new aircraft. As of March 31, 2003,  Continental had firm
commitments for 67 aircraft from Boeing, with an estimated cost of approximately
$2.5 billion.  The 67 aircraft are  scheduled to be delivered  between late 2003
and mid 2008,  with four Boeing 737-800  aircraft  scheduled for delivery in the
fourth  quarter of 2003.  Continental  has been offered  backstop  financing for
approximately  12 firm aircraft and is currently in  negotiations  regarding the
offer.  Continental  does not have  backstop  financing  or any other  financing
currently in place for the remainder of the aircraft.  In addition, at March 31,
2003,  Continental had firm  commitments to purchase 13 spare engines related to
the new Boeing aircraft for approximately $80 million. Continental does not have
any financing currently in place for such spare engines. These spare engines are
scheduled to be delivered  through March 2005.  Further financing will be needed
to   satisfy   Continental's   capital   commitments   for  its   aircraft   and
aircraft-related  expenditures  such as engines,  spare parts and related items.
There can be no assurance  that  sufficient  financing will be available for the
aircraft on order and other capital expenditures.

     As of March 31, 2003,  ExpressJet had firm commitments for an additional 74
regional jets from Empresa Brasileira de Aeronautica S.A.  ("Embraer"),  with an
estimated  aggregate  cost  of  $1.5  billion.   Effective  February  26,  2003,



ExpressJet  and  Embraer  amended  the  purchase  agreement  to slow the pace of
regional  jet  deliveries.  ExpressJet  will take  delivery of 24 regional  jets
during the remainder of 2003 (for a total of 36 in 2003), down from its original
plan for 48 deliveries,  and will take 21 aircraft deliveries in 2004, down from
36. As a result,  ExpressJet  will  increase its aircraft  deliveries  to 21 and
eight for 2005 and 2006,  up from two and zero for  these  years,  respectively.
ExpressJet  does not have any obligation to take any of these firm aircraft that
are  not  financed  by  a  third  party  and  leased  either  to  ExpressJet  or
Continental.  In addition,  ExpressJet  expects to purchase 15 spare engines for
approximately  $41 million through 2006.  ExpressJet does not have any financing
currently in place for such spare engines.  ExpressJet  would have no obligation
to acquire the spare  engines if the firm order  aircraft are not  delivered for
any reason.

     Continental  also has  significant  operating  lease  and  facility  rental
obligations.  For the year ended December 31, 2002, annual aircraft and facility
rental expense under operating leases approximated $1.3 billion.

      Additional  financing  will be needed  to  satisfy  Continental's  capital
commitments.  Continental  cannot predict whether  sufficient  financing will be
available.  On several  occasions  subsequent  to September  11,  2001,  each of
Moody's,  Standard and Poor's and Fitch, Inc. downgraded the credit ratings of a
number of major airlines,  including  Continental's  credit ratings.  Additional
downgrades were made in March and April 2003 and further downgrades are possible
due to the impact of the war in Iraq. Reductions in Continental's credit ratings
have  increased the interest  Continental  pays on new issuances of debt and may
increase the cost and reduce the availability of financing to Continental in the
future.

     Continental  does not have debt  obligations that would be accelerated as a
result of a credit rating downgrade,  but under two letters of credit facilities
securing our worker's  compensation  program,  Continental  could be required to
substitute  approximately  $67 million of cash collateral for spare engines that
currently  serve as  collateral  if the rating of its senior  unsecured  debt is
lowered below CCC- by Standard  &  Poor's or Caa3 by Moody's.  Continental's
senior  unsecured debt is currently  rated "CCC+" on  CreditWatch  with negative
implications  by  Standard  &  Poor's and "Caa2"  with  negative  outlook by
Moody's.

  SIGNIFICANT  CHANGES OR  EXTENDED  PERIODS  OF HIGH FUEL COSTS OR FUEL  SUPPLY
  DISRUPTIONS WOULD MATERIALLY AFFECT CONTINENTAL'S OPERATING RESULTS

     Until  recently,  fuel  costs  have been at  historically  high  levels and
constitute a significant portion of Continental's  operating expense. Fuel costs
represented approximately 11.7% of Continental's operating expenses for the year
ended December 31, 2002 and 13.9% of  Continental's  operating  expenses for the
year ended December 31, 2001.  Fuel costs  represented  approximately  15.3% and
9.5% of  Continental's  operating  expenses for the three months ended March 31,
2003  and  2002,   respectively.   Fuel  prices  and  supplies  are   influenced
significantly by international political and economic circumstances, such as the
political crises in Venezuela and Nigeria and the war in Iraq. From time to time
Continental  enters  into  petroleum  swap  contracts,   petroleum  call  option
contracts  and/or  jet fuel  purchase  commitments  to provide  some  short-term
protection  (generally three to six months) against a sharp increase in jet fuel
prices.  Depending upon the hedging method employed,  Continental's strategy may
limit its ability to benefit  from  declines  in fuel  prices.  Continental  has
hedged approximately 80% of its fuel requirements for the second quarter of 2003
with petroleum call options at approximately $33 per barrel. Continental has not
hedged its fuel requirements  beyond the end of the second quarter of 2003. If a
future fuel supply shortage were to arise from OPEC production  curtailments,  a
disruption  of oil imports,  the  continued  military  action in Iraq,  post war
unrest in that country, other conflicts in the Middle East, or otherwise, higher
fuel prices or further  reduction of scheduled  airline  service  could  result.
Significant  changes  in  fuel  costs  would  materially  affect   Continental's
operating results.

  LABOR COSTS IMPACT CONTINENTAL'S RESULTS OF OPERATIONS

     Labor costs  constitute a  significant  percentage of  Continental's  total
operating  costs.  Continental's  mechanics,  represented  by the  International
Brotherhood  of  Teamsters,  ratified  a  new  four-year  collective  bargaining
agreement in December  2002.  The  mechanics  agreement  makes an  adjustment to
current pay and  recognizes  current  industry  conditions  with a provision  to
re-open negotiations regarding wages, pension and health insurance provisions in
January 2004. Work rules and other contract items are established  through 2006.
Collective  bargaining agreements between Continental and its pilots and between
ExpressJet  and its pilots (both of whom are  represented by the Air Line Pilots
Association)  became  amendable in October 2002. After being deferred due to the
economic  uncertainty  following  the  September  11,  2001  terrorist  attacks,
negotiations  recommenced  in  September  2002  and  are  continuing.   Although
Continental  may incur  increased labor costs in connection with the negotiation
of the  pilot  collective  bargaining  agreements,  the labor  cost  uncertainty
associated with recent major hub-and-spoke carrier bankruptcies makes predicting



the  outcome of  negotiations  more  difficult.  US  Airways  Group,  Inc.  ("US
Airways") and United Air Lines,  Inc.  ("United") have  significantly  decreased
their labor costs during their bankruptcy cases, and United may further decrease
them and may emerge from  bankruptcy with  significantly  lower labor costs than
Continental's.  Delta and Northwest  Airlines have each recently  announced that
they are seeking to  decrease  their labor  costs  significantly,  and  American
Airlines,  Inc.  ("American  Airlines") has recently agreed with its major labor
groups on labor cost reductions, although two of the labor groups have announced
that  they  intend  to call a new vote  regarding  these  recently  agreed  cost
reductions.  In addition,  Northwest Airlines has publicly  acknowledged that it
may file for bankruptcy unless it renegotiates its outstanding labor agreements.
Although  Continental enjoys generally good relations with its employees,  there
can be no assurance that Continental  will not experience  labor  disruptions in
the future.

RISK FACTORS RELATING TO THE AIRLINE INDUSTRY

  THE AIRLINE INDUSTRY IS HIGHLY COMPETITIVE

     The  airline  industry  is  highly  competitive  and  susceptible  to price
discounting.  Carriers use discount fares to stimulate traffic during periods of
slack  demand,  to generate  cash flow and to  increase  market  share.  Some of
Continental's  competitors have  substantially  greater  financial  resources or
lower cost structures  than  Continental,  or both. In recent years,  the market
share held by low cost carriers has increased significantly.

     Airline profit levels are highly  sensitive to changes in fuel costs,  fare
levels and passenger demand. Passenger demand and fare levels are influenced by,
among other things, the state of the global economy,  domestic and international
events,  airline  capacity and pricing actions taken by carriers.  The weak U.S.
economy,  turbulent  international  events and extensive  price  discounting  by
carriers  contributed  to  unprecedented  losses for U.S.  airlines from 1990 to
1993. Since September 11, 2001, these same factors, together with the effects of
the terrorist  attacks and the war in Iraq, have resulted in dramatic losses for
Continental and the airline industry generally.  Continental cannot predict when
conditions will improve.  US Airways,  United and several small competitors have
filed for bankruptcy protection,  although US Airways emerged from bankruptcy on
March 31, 2003.  Other  carriers,  including  American  Airlines  and  Northwest
Airlines, could follow. These carriers could operate under bankruptcy protection
in a manner  that  would be  adverse  to  Continental,  and  could  emerge  from
bankruptcy as more vigorous competitors with substantially lower costs.

     In recent  years,  the major U.S.  airlines  have sought to form  marketing
alliances  with other U.S. and foreign air carriers.  Such  alliances  generally
provide for codesharing,  frequent flyer reciprocity,  coordinated scheduling of
flights of each alliance member to permit convenient connections and other joint
marketing  activities.  Such  arrangements  permit an airline to market  flights
operated by other alliance members as its own. This increases the  destinations,
connections and frequencies offered by the airline, which provide an opportunity
to  increase  traffic on its  segment of flights  connecting  with its  alliance
partners.  Continental's  alliance with Northwest  Airlines and its new alliance
with  Delta and  Northwest  Airlines  are  examples  of such  arrangements,  and
Continental has existing alliances with numerous other air carriers. Other major
U.S.   airlines  have  alliances  or  planned   alliances  more  extensive  than
Continental's.  Continental  cannot  predict  the  extent  to  which  it will be
disadvantaged by competing alliances.

     Since its  deregulation  in 1978, the U.S.  airline  industry has undergone
substantial  consolidation,  and  it may in  the  future  experience  additional
consolidation.   Continental  routinely  monitors  changes  in  the  competitive
landscape  and engages in  analysis  and  discussions  regarding  its  strategic
position, including alliances and business combination transactions. Continental
has had,  and  expects to  continue  to have,  discussions  with  third  parties
regarding  strategic  alternatives.  The impact of any consolidation  within the
U.S. airline industry cannot be predicted at this time.

  THE AVIATION  SECURITY ACT WILL IMPOSE  ADDITIONAL  COSTS AND MAY CAUSE SEVERE
  DISRUPTIONS

     In  November  2001,  the  President   signed  into  law  the  Aviation  and
Transportation  Security Act (the "Aviation Security Act"). This law federalized
substantially   all  aspects  of  civil  aviation   security,   creating  a  new
Transportation  Security  Administration  under the Department of Transportation
(the "TSA").  Among other things,  the law required that all checked  baggage be
screened by explosive  detection  systems by December 31, 2002 (although  during
the  implementation  phase,  other  permitted  methods  of  screening  are being
utilized and federal law permits  individual  airports to request  extensions of
such deadline).  At some airports,  the TSA has provided for temporary  security
measures which are less than optimal.  Implementation of the requirements of the
Aviation  Security Act has resulted in increased costs for the airline  industry



and may result in  additional  costs,  delays  and  disruptions  in air  travel,
although pursuant a supplemental  appropriations bill approved by both houses of
Congress and signed by the President in April 2003,  some of these costs will be
reimbursed by the U.S. government. See "The Company--Outlook".

  CONTINENTAL'S BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION

     As evidenced by the enactment of the Aviation  Security  Act,  airlines are
subject to extensive regulatory and legal compliance requirements that result in
significant  costs.  The FAA  from  time to time  issues  directives  and  other
regulations  relating to the  maintenance and operation of aircraft that require
significant  expenditures.  Some FAA  requirements  cover,  among other  things,
retirement of older aircraft,  security measures,  collision  avoidance systems,
airborne windshear  avoidance systems,  noise abatement and other  environmental
concerns,  commuter  aircraft  safety and increased  inspections and maintenance
procedures to be conducted on older  aircraft.  Continental  expects to continue
incurring expenses to comply with the FAA's regulations.

     Additional laws, regulations, taxes and airport rates and charges have been
proposed from time to time that could significantly increase the cost of airline
operations or reduce  revenue.  Additionally,  because of  significantly  higher
security and other costs  incurred by airports  since  September  11, 2001,  and
because  reduced  landing weights since September 11, 2001 have reduced the fees
airlines pay to airports, many airports are significantly increasing their rates
and charges to air  carriers,  including  to  Continental.  Restrictions  on the
ownership and transfer of airline routes and takeoff and landing slots have also
been proposed.  The ability of U.S. carriers to operate  international routes is
subject to change because the applicable  arrangements between the United States
and foreign governments may be amended from time to time, or because appropriate
slots or facilities are not made available. Continental cannot provide assurance
that current laws and regulations, or laws or regulations enacted in the future,
will not adversely affect it.

  CONTINENTAL'S  OPERATIONS ARE AFFECTED BY THE SEASONALITY  ASSOCIATED WITH THE
  AIRLINE INDUSTRY

     Due to greater demand for air travel during the summer  months,  revenue in
the airline  industry in the second and third  quarters of the year is generally
stronger than revenue in the first and fourth quarters of the year for most U.S.
air  carriers.  Continental's  results  of  operations  generally  reflect  this
seasonality,  but have also been impacted by numerous other factors that are not
necessarily seasonal,  including the extent and nature of competition from other
airlines, fare actions, excise and similar taxes, security fees, changing levels
of  operations,  fuel  prices,  weather,  air traffic  control  delays,  foreign
currency exchange rates and general economic conditions.

RISK FACTORS RELATING TO THE NOTES AND THE EXCHANGE OFFER

  CONSEQUENCES OF FAILURE TO EXCHANGE

     If you fail to deliver the proper  documentation to the Exchange Agent in a
timely fashion, your tender of Old Notes will be rejected. The New Notes will be
issued in exchange for the Old Notes only after  timely  receipt by the Exchange
Agent of the Old Notes, a properly  completed and executed Letter of Transmittal
(or an Agent's Message in lieu thereof) and all other required documentation. If
you wish to tender your Old Notes in exchange  for New Notes,  you should  allow
sufficient  time to ensure  timely  delivery.  None of the Exchange  Agent,  the
Trustee  or  Continental  is  under  any  duty  to  give  holders  of Old  Notes
notification of defects or  irregularities  with respect to tenders of Old Notes
for exchange.

     If you do not  exchange  your  Old  Notes  for New  Notes  pursuant  to the
Exchange Offer,  or if your tender of Old Notes is not accepted,  your Old Notes
will continue to be subject to the restrictions on transfer of such Old Notes as
set forth in the legend thereon. In general, you may not offer or sell Old Notes
unless they are  registered  under the  Securities  Act,  except  pursuant to an
exemption  from,  or in a  transaction  not subject to, the  Securities  Act and
applicable state securities laws. Continental does not currently anticipate that
it will register the Old Notes under the Securities  Act. To the extent that Old
Notes are tendered and accepted in the Exchange  Offer,  the trading  market for
untendered and tendered but unaccepted Old Notes could be adversely affected.



  APPRAISAL AND REALIZABLE VALUE OF COLLATERAL

     Simat, Helliesen & Eichner, Inc., an independent aviation appraisal and
consulting  firm  ("SH&E"),  has  prepared an  appraisal  of the spare parts
included in the Collateral as of December 25, 2002. A letter,  dated January 24,
2003,  summarizing  such appraisal is annexed to this Prospectus as Appendix II.
The  appraisal is subject to a number of  assumptions  and  limitations  and was
prepared based on certain specified  methodologies.  In preparing its appraisal,
SH&E  conducted only a limited physical  inspection of certain  locations at
which  Continental  maintains the spare parts.  An appraisal  that is subject to
other assumptions and limitations and based on other methodologies may result in
valuations  that are  materially  different  from those  contained in SH&E's
appraisal. See "Description of the Appraisal".

     Continental is required to provide to the Policy Provider and the Trustee a
semiannual  appraisal  of the  Collateral.  If  any  such  subsequent  appraisal
indicates that the loan to Collateral value is greater than 45%,  Continental is
required to provide  additional  collateral or to reduce the principal amount of
Notes  outstanding so that the loan to Collateral value is not greater than 45%.
Continental  deposited $13,056,950 as Cash Collateral at the initial issuance of
the Old Notes so that the initial loan to Collateral value would not exceed 45%,
based on the appraisal  determined as of August 25, 2002. The loan to Collateral
value,  determined  using the appraisal as of December 25, 2002, would have been
45.8%,  without  giving effect to such deposit of Cash  Collateral.  Continental
expects  to  satisfy  the 45%  requirement  at the time the  next  appraisal  is
required  based  upon its  projected  purchases  of spare  parts,  in which case
Continental  will be entitled  to withdraw  such Cash  Collateral.  However,  no
assurance  can be  given  that  such  45%  requirement  will be  satisfied.  See
"Description of the Notes--Collateral".

     An  appraisal  is only an estimate  of value.  An  appraisal  should not be
relied upon as a measure of realizable  value. The proceeds realized upon a sale
of any  Collateral  may be less  than  its  appraised  value.  The  value of the
Collateral if remedies are exercised  under the Indenture  will depend on market
and economic conditions,  the supply of similar spare parts, the availability of
buyers,  the condition of the Collateral and other factors.  In addition,  since
spare  parts  are  regularly  used,  refurbished,   purchased,  transferred  and
discarded  in the  ordinary  course of  business,  the  quantity  of spare parts
included  in the  Collateral  and their  appraised  value will change over time.
Accordingly,  Continental  cannot assure you that the proceeds realized upon any
such exercise of remedies would be sufficient to satisfy in full payments due on
the  Notes.  If a Policy  Provider  Default  occurs  and such  proceeds  are not
sufficient  to repay all such  amounts  due on the Notes,  then  holders (to the
extent not repaid from the proceeds of the sale of  Collateral)  would have only
unsecured claims against Continental and the Policy Provider.

     As  discussed  under "Risk  Factors  Relating to the Airline  Industry--The
Airline Industry is Highly  Competitive",  since September 11, 2001, the airline
industry has suffered substantial losses. Two major air carriers, US Airways and
United, have filed for bankruptcy  protection,  although US Airways emerged from
bankruptcy on March 31, 2003. Northwest Airlines has publicly  acknowledged that
it may  file  for  bankruptcy  unless  it  renegotiates  its  outstanding  labor
agreements,  and other  airlines  may file for  bankruptcy  protection  as well.
Moreover,  recent  reports have  suggested the  possibility  of  liquidation  by
United. In response to adverse market conditions, many air carriers have reduced
the  number of  aircraft  in  operation,  and there may be  further  reductions,
particularly by air carriers in bankruptcy or liquidation. Any such reduction of
aircraft  of the same  models as the models of aircraft on which the spare parts
included in the Collateral may be installed or used could  adversely  affect the
value of the Collateral.

  CONTROL OVER AMENDMENTS, WAIVERS AND SALE OF COLLATERAL

     The "Controlling  Party" will direct the Trustee in taking action under the
Indenture and other agreements relating to the Notes, including in amending such
agreements and granting waivers  thereunder,  except for certain provisions that
cannot be amended or waived  without  the  consent of each  Noteholder  affected
thereby.  If an Event of Default is  continuing,  the  "Controlling  Party" will
direct the Trustee in exercising remedies under the Indenture and the Collateral
Agreements,  including  accelerating  the Notes or  foreclosing  the lien on the
Collateral securing the Notes. See "Description of the Notes--Remedies".

     The Controlling Party will be:

     o    The Policy  Provider or, if a Policy  Provider  Default is continuing,
          the holders of more than 50% in aggregate  unpaid  principal amount of
          the Notes then outstanding.



     o    Under certain circumstances, the Liquidity Provider.

  MAXIMUM INTEREST RATE IF CONTINENTAL DEFAULTS

     If  Continental  fails to pay  accrued  interest on the Notes when due on a
Distribution  Date and fails to cure such nonpayment,  the interest rate for the
interest due on such Distribution Date will be subject to a maximum equal to the
Capped Interest Rate. If Continental  cures such  nonpayment,  such maximum rate
will not apply.  However, the amounts available under the Liquidity Facility and
the Policy for the payment of accrued  interest  are limited by the same maximum
rate.  Accordingly,  if Continental fails to make a payment of interest when due
and the interest rate then  applicable  exceeds the Capped  Interest  Rate,  the
amount that the Trustee may draw under the Liquidity Facility and Policy (or, if
applicable, withdraw from the Cash Collateral Account) to make such payment will
be calculated at the Capped  Interest Rate. If Continental  subsequently  cures,
Continental  will be obligated to pay the accrued  interest  calculated  without
regard to such maximum rate. If Continental  fails to cure, the Noteholders will
not have a claim for  interest  due on such  Distribution  Date above the amount
calculated at the Capped Interest Rate.

  CERTAIN LIMITATIONS WITH RESPECT TO THE COLLATERAL

     The  Notes  are  secured  by  a  lien  on  the  Pledged  Spare  Parts.  See
"Description of the  Notes--Collateral".  However,  the lien will not apply to a
spare  part for as long as it is  installed  on or being  used in any  aircraft,
engine or other spare part so installed or being used. In addition,  since spare
parts are regularly used, refurbished,  purchased,  transferred and discarded in
the  ordinary  course of  Continental's  business,  the  quantity of spare parts
included in the Collateral and their appraised value will change over time.

     Continental  is  required  to keep  the  Pledged  Spare  Parts  at  certain
Designated  Locations,  subject to certain  exceptions.  See "Description of the
Notes--Collateral--Designated  Locations".  The lien of the Notes will not apply
to any spare part not located at a Designated Location.

     Upon initial issuance of the Old Notes,  Continental made a cash collateral
deposit  with the  Security  Agent of  $13,056,950  so that the initial  loan to
Collateral  value would not exceed 45%. In addition,  Continental is required to
provide to the Policy  Provider  and the Trustee a  semiannual  appraisal of the
Collateral.  If any  such  subsequent  appraisal  indicates  that  the  loan  to
Collateral  value is  greater  than 45%,  Continental  is  required  to  provide
additional  collateral or to reduce the principal amount of Notes outstanding so
that the loan to  Collateral  value is not greater than 45%. In order to satisfy
this  requirement,  Continental  may grant a lien on additional  Qualified Spare
Parts, cash or certain investment securities. In addition, Continental may grant
a lien on other  collateral,  provided that the Policy  Provider agrees and each
Rating  Agency  confirms  that the use of such  additional  collateral  will not
result in a reduction of the rating of the Notes below the then  current  rating
for the Notes  (determined  without  regard to the  Policy) or a  withdrawal  or
suspension   of   the   rating   of  the   Notes.   See   "Description   of  the
Notes--Collateral".  Section 1110 of the U.S.  Bankruptcy  Code,  which provides
special  rights to  holders of liens with  respect  to  certain  equipment  (see
"Description  of the  Notes--Remedies"),  would  apply  to any  such  additional
Qualified  Spare  Parts  but  would  not  apply to any such  cash or  investment
securities.  In addition,  Section 1110 may not apply to such other  collateral,
depending on the circumstances.

  LIMITED ABILITY TO RESELL THE NOTES

     Prior to the Exchange Offer, there has been no public market for the Notes.
Continental  does not intend to apply for  listing of the Notes on any  national
securities  exchange or otherwise.  Morgan Stanley & Co.  Incorporated  (the
"Initial  Purchaser")  has  previously  made a  market  in  the  Old  Notes  and
Continental has been advised by the Initial  Purchaser that it presently intends
to make a  market  in the  New  Notes,  as  permitted  by  applicable  laws  and
regulations,  after consummation of the Exchange Offer. The Initial Purchaser is
not obligated,  however, to make a market in the Old Notes or the New Notes, and
any such  market-making  activity may be discontinued at any time without notice
at the sole discretion of the Initial Purchaser. There can be no assurance as to
the  liquidity  of the public  market  for the Notes or that any  active  public
market for the Notes will develop or continue.  If an active  public market does
develop,  it might not continue or it might not be sufficiently  liquid to allow
you to resell any of your Notes.



RISK FACTORS RELATING TO THE POLICY PROVIDER

  IF THE FINANCIAL CONDITION OF THE POLICY PROVIDER DECLINES,  THE RATING OF THE
  NOTES MAY DECLINE

     The Aaa  rating  by  Moody's  of the  Notes  is  based,  primarily,  on the
existence of the Policy that insures the complete and timely payment of interest
relating  to the  Notes  on  each  Interest  Payment  Date  and the  payment  of
outstanding  principal  no later  than  the  Final  Legal  Maturity  Date.  MBIA
Insurance Corporation, the Policy Provider, has issued the Policy. If the Policy
Provider's financial condition declines or if it becomes insolvent,  the Trustee
may be unable to recover the full amount due under the Policy. In addition, such
a decline or insolvency could lead Moody's to downgrade the ratings of the Notes
because of a concern that the Policy  Provider may be unable to make payments to
the holders of the Notes  under the Policy.  For  information  on the  financial
information   generally   available   relating  to  the  Policy  Provider,   see
"Description  of the Policy  Provider"  and  "Description  of the Policy and the
Policy Provider Agreement--The Policy".

  POLICY PROTECTION IS LIMITED

     Although  the  Trustee  may make  drawings  under the Policy  for  interest
payments on each Interest  Payment  Date,  the Trustee may not make drawings for
principal payments until the Final Legal Maturity Date except in certain limited
circumstances.  This limits the  protection  afforded to holders of Notes by the
Policy.

                                 USE OF PROCEEDS

     There will be no cash proceeds  payable to Continental from the issuance of
the New Notes pursuant to the Exchange Offer.  The proceeds from the sale of the
Old Notes were used by Continental for general corporate purposes.



                       RATIO OF EARNINGS TO FIXED CHARGES

     The ratios of our  "earnings" to our "fixed  charges" for each of the years
1998 through 2002 and for the three months ended March 31, 2003 were:

        THREE MONTHS ENDED
          MARCH 31, 2003                      YEAR ENDED DECEMBER 31,
        ------------------     ------------------------------------------------
                                  2002      2001     2000     1999      1998
                                  ----      ----     ----     ----      ----
              --(1)               --(1)    --(1)     1.51     1.80      1.93

- ----------

(1)  For the three months ended March 31, 2003 and the years ended  December 31,
     2002 and 2001,  earnings  were  inadequate  to cover fixed  charges and the
     coverage  deficiency  was $307  million,  $616  million  and $143  million,
     respectively.


     For purposes of the ratios, "earnings" means the sum of:

     o    our pre-tax income (loss); and

     o    our fixed charges, net of interest capitalized.

     "Fixed charges" represent:

     o    the interest we pay on borrowed  funds;

     o    the amount we amortize for debt discount, premium and issuance expense
          and interest previously capitalized; and

     o    that portion of rentals  considered to be  representative  of interest
          expense.



                                   THE COMPANY

     Continental  Airlines,  Inc.  ("Continental"  or the  "Company") is a major
United States air carrier  engaged in the business of  transporting  passengers,
0cargo and mail.  Continental  is the fifth largest  United  States  airline (as
measured by the number of scheduled miles flown by revenue passengers,  known as
revenue  passenger miles, in 2002) and,  together with its indirect  53.1%-owned
subsidiary,  ExpressJet  Airlines,  Inc.  (operating as Continental  Express and
referred to in this Prospectus as "ExpressJet") and its wholly owned subsidiary,
Continental Micronesia, Inc. ("CMI"), served 225 airports worldwide at March 31,
2003.  As  of  March  31,  2003,   Continental  flew  to  130  domestic  and  95
international  destinations and offered  additional  connecting  service through
alliances with domestic and foreign  carriers.  Continental  directly  served 16
European cities,  seven South American cities,  Tel Aviv, Hong Kong and Tokyo as
of March 31,  2003,  and is one of the  leading  airlines  providing  service to
Mexico and Central America,  serving 28 cities, more destinations than any other
United States airline.  Through its Guam hub, CMI provides  extensive service in
the western  Pacific,  including  service to more Japanese cities than any other
United States carrier. The Company's executive offices are located at 1600 Smith
Street, Houston, Texas 77002. The Company's telephone number is (713) 324-2950.

DOMESTIC OPERATIONS

     Continental  operates its domestic route system primarily  through its hubs
in the New  York  metropolitan  area at  Newark  Liberty  International  Airport
("Liberty  International"  or  "Newark"),  in  Houston,  Texas  at  George  Bush
Intercontinental   Airport  ("Bush   Intercontinental"   or  "Houston")  and  in
Cleveland,  Ohio at Hopkins  International  Airport  ("Hopkins  International").
Continental's  hub  system  allows it to  transport  passengers  between a large
number of destinations  with  substantially  more frequent  service than if each
route were  served  directly.  The hub system  also  allows  Continental  to add
service to a new  destination  from a large number of cities using only one or a
limited number of aircraft.  As of March 31, 2003,  Continental  operated 67% of
the average daily jet departures from Liberty International,  84% of the average
daily jet departures  from Bush  Intercontinental,  and 67% of the average daily
jet  departures  from Hopkins  International  (in each case  including  regional
jets).  Each of  Continental's  domestic hubs is located in a large business and
population  center,  contributing  to a high volume of "origin and  destination"
traffic.

EXPRESSJET

     Continental's  mainline  jet service at each of its  domestic hub cities is
coordinated with  ExpressJet,  which operates  new-generation  regional jets. In
April 2002, ExpressJet Holdings,  Inc.  ("Holdings"),  Continental's then wholly
owned subsidiary and the sole stockholder of ExpressJet,  sold 10 million shares
of its common stock in an initial  public  offering and used the net proceeds to
repay $147 million of ExpressJet's  indebtedness  to  Continental.  In addition,
Continental  sold 20  million  of its  shares of  Holdings  common  stock in the
offering for net proceeds of $300  million.  In  connection  with the  offering,
Continental's  ownership  of  Holdings  fell  to  53.1%.  Continental  does  not
currently intend to remain a stockholder of Holdings over the long term. Subject
to market conditions,  Continental  expects to sell or otherwise dispose of some
or all of its shares of Holdings common stock in the future.

     Effective  January 1, 2001,  Continental  entered into a capacity  purchase
agreement with ExpressJet pursuant to which Continental  currently purchases all
of  ExpressJet's  available  seat  miles  for  a  negotiated  price.  Under  the
agreement,   ExpressJet   has  the  right  through   December  31,  2006  to  be
Continental's  sole  provider of regional jet service from  Continental's  hubs.
Continental is responsible for all scheduling,  pricing and seat  inventories of
ExpressJet's  flights  and is  entitled  to all  revenue  associated  with those
flights.  Continental  pays ExpressJet based on scheduled block hours (the hours
from  departure gate to arrival gate) in accordance  with a formula  designed to
provide  ExpressJet with an operating margin of approximately  10% before taking
into  account   variations  in  some  costs  and  expenses  that  are  generally
controllable by ExpressJet.  ExpressJet's  overall operating margin was 13.6% in
2002.  Continental assumes the risk of revenue volatility  associated with fares
and passenger traffic, price volatility for specified expense items such as fuel
and  the  cost of all  distribution  and  revenue-related  costs.  The  capacity
purchase agreement replaced Continental's prior revenue-sharing arrangement.

     As of March 31, 2003,  ExpressJet  served 97  destinations  in the U.S., 13
cities in Mexico and five cities in Canada.  Since December  2002,  ExpressJet's
fleet  has been  comprised  entirely  of  regional  jets.  Continental  believes
ExpressJet's  regional  jet  service  complements  Continental's  operations  by
carrying  traffic that  connects onto  Continental's  mainline jets and allowing



more frequent flights to smaller cities than could be provided economically with
larger jet  aircraft.  Continental  believes  that  ExpressJet's  regional  jets
provide  greater  comfort and enjoy better  customer  acceptance  than turboprop
aircraft.  The regional jets also allow  ExpressJet to serve certain routes that
cannot be served by  turboprop  aircraft.  Additional  commuter  feed traffic is
currently provided to Continental by other codesharing partners.

DOMESTIC CARRIER ALLIANCES

     Continental has entered into alliance  agreements,  which are also referred
to as codeshare  agreements  or  cooperative  marketing  agreements,  with other
carriers.  These  relationships may include (a) codesharing (one carrier placing
its name and flight number, or "code", on flights operated by the other carrier)
and (b) reciprocal  frequent  flyer program  participation,  reciprocal  airport
lounge  access  and  other  joint  activities  (such  as  seamless  check-in  at
airports). Some relationships may include other cooperative undertakings such as
joint purchasing, joint corporate sale contracts,  airport handling,  facilities
sharing or joint technology development.

     Continental has a long-term global alliance with Northwest  Airlines,  Inc.
("Northwest  Airlines") through 2025,  subject to earlier  termination by either
carrier in the event of certain changes in control of either Northwest  Airlines
or  Continental.  The alliance with Northwest  provides for each carrier placing
its code on a large number of the flights of the other,  reciprocity of frequent
flyer programs and airport lounge access, and other joint marketing  activities.
Northwest  Airlines  and  Continental  also  have  joint  contracts  with  major
corporations  and travel agents  designed to create access to a broader  product
line encompassing the route systems of both carriers.

     Continental  also  has  domestic  codesharing  agreements  with  Gulfstream
International Airlines,  Inc., Mesaba Aviation,  Inc., Hawaiian Airlines,  Inc.,
Alaska Airlines,  Inc.,  Horizon Airlines,  Inc.,  Champlain  Enterprises,  Inc.
(CommutAir),  Hyannis Air Service,  Inc. (Cape Air) and American Eagle Airlines,
Inc. In 2002,  Continental  introduced the first train-to-plane  alliance in the
United States with Amtrak.

     In response to the  dramatic  changes  occurring  in the airline  industry,
including a marketing alliance between United and US Airways, Continental signed
a marketing  agreement with Northwest  Airlines and Delta Air Lines ("Delta") in
August 2002 to permit it to compete  more  effectively  with other  carriers and
alliance  groups.  As with the alliance with Northwest  Airlines,  this alliance
involves codesharing,  reciprocal frequent flyer benefits and reciprocal airport
lounge  privileges.  Implementation  of this  marketing  alliance is planned for
Summer 2003, subject to satisfaction of certain conditions.

INTERNATIONAL OPERATIONS

     Continental directly serves destinations throughout Europe, Canada, Mexico,
Central and South America and the  Caribbean as well as Tel Aviv,  Hong Kong and
Tokyo.  Continental also provides service to numerous other destinations through
codesharing arrangements with other carriers and has extensive operations in the
western  Pacific  conducted  by CMI. As measured by 2002  available  seat miles,
approximately 39% of Continental's mainline jet operations,  including CMI, were
dedicated to international traffic.

     Continental's New York/Newark hub is a significant  international  gateway.
From Liberty International,  at March 31, 2003 Continental and ExpressJet served
16 European  cities,  five  Canadian  cities,  six Mexican  cities,  six Central
American cities,  four South American  cities,  14 Caribbean  destinations,  Tel
Aviv,  Hong Kong (though  service  between Hong Kong and Newark was suspended in
April 2003) and Tokyo.

     Continental's  Houston  hub is the focus of its  operations  in Mexico  and
Central America. As of March 31, 2003, Continental and ExpressJet flew from Bush
Intercontinental to 20 cities in Mexico,  every country in Central America,  six
cities in South  America,  three cities in Canada,  three cities in Europe,  two
Caribbean destinations and Tokyo.

     From  Continental's  Cleveland  hub,  Continental  and  ExpressJet  flew to
Montreal,  Toronto,  London, Cancun, Mexico, Nassau and San Juan, Puerto Rico as
of March 31, 2003.



   CONTINENTAL MICRONESIA

     From its hub operations  based on the island of Guam, as of March 31, 2003,
CMI provided service to eight cities in Japan, more than any other United States
carrier,  as well as other  Pacific  Rim  destinations,  including  Taiwan,  the
Philippines, Hong Kong, Australia and Indonesia.

     CMI is the  principal  air  carrier in the  Micronesian  Islands,  where it
pioneered  scheduled  air service in 1968.  CMI's route  system is linked to the
United States market  through Hong Kong,  Tokyo and Honolulu,  each of which CMI
serves  non-stop  from Guam.  CMI and  Continental  also  maintain a codesharing
agreement and coordinate  schedules on certain flights from the United States to
Honolulu, and from Honolulu to Guam, to facilitate travel from the United States
into CMI's route system.

   FOREIGN CARRIER ALLIANCES

     Continental  seeks to develop  international  alliance  relationships  that
complement  Continental's  own route system and permit expanded  service through
its hubs to major  international  destinations.  International  alliances assist
Continental in the development of its route structure by enabling Continental to
offer more frequencies in a market,  provide passengers  connecting service from
Continental's  international  flights to other  destinations  beyond an alliance
partner's  hub,  and expand the  product  line that  Continental  may offer in a
foreign destination.

     In October  2001,  Continental  announced  that it had signed a cooperative
marketing  agreement  with  KLM  Royal  Dutch  Airlines  ("KLM")  that  includes
extensive  codesharing and reciprocal  frequent flyer program  participation and
airport lounge access. In January 2002,  Continental placed its code on selected
flights  operated  by KLM and KLM  Cityhopper  from  Amsterdam  to more  than 40
destinations  in Europe,  Africa and the Middle East, and KLM placed its code on
selected  flights to U.S.  destinations  operated by Continental  beyond its New
York and Houston hubs. In addition,  members of each  carrier's  frequent  flyer
program are able to earn mileage  anywhere on the other's  global route network,
as well as the global network of Northwest Airlines. The agreement terminates in
May 2003, unless extended by the parties.

     Continental also currently has  international  codesharing  agreements with
Air Europa,  Air China,  EVA Airways  Corporation  (an airline based in Taiwan),
British  European,  Virgin Atlantic Airways  ("Virgin") and Compania Panamena de
Aviacion,  S.A. ("Copa").  Continental owns 49% of the common equity of Copa. In
February 2003,  Continental  launched an air/rail  codeshare  agreement with the
French high speed rail provider SNCF TGV.

OUTLOOK

     The current U.S. domestic airline environment is the worst in Continental's
history, and may deteriorate further if hostilities in the Middle East continue.
Prior to September  2001,  Continental  was  profitable,  although many U.S. air
carriers were losing money and Continental's  profitability  was declining.  The
terrorist  attacks of September  11, 2001 and the war in Iraq have  dramatically
worsened the  difficult  financial  environment  and  presented  new and greater
challenges  for the  airline  industry.  Since the  terrorist  attacks,  several
airlines,  including United and US Airways, have filed for bankruptcy,  although
US Airways  emerged from  bankruptcy on March 31, 2003.  Northwest  Airlines has
publicly acknowledged that it may file for bankruptcy unless it renegotiates its
outstanding  labor  agreements,  and  other  airlines  may file  for  bankruptcy
protection  as  well.  Although  Continental  has been  able to  raise  capital,
downsize its operations and reduce its expenses  significantly,  Continental has
reported  significant losses since the terrorist attacks,  and current trends in
the airline  industry  make it likely  that  Continental  will  continue to post
significant losses for the foreseeable future. The revenue environment continues
to be weak in light of changing  pricing models,  excess capacity in the market,
reduced corporate travel spending and other issues. In addition,  until recently
fuel prices had  significantly  escalated  due to the war in Iraq and  political
tensions in Venezuela and Nigeria.  Absent adverse factors outside Continental's
control such as those described herein,  Continental believes that its liquidity




and access to cash will be  sufficient  to fund its current  operations  through
2003 (and beyond if  Continental  is successful in  implementing  its previously
announced  revenue-generating and cost cutting measures).  However,  Continental
believes that the economic  environment must improve for Continental to continue
to operate at its current size and expense  level beyond that time.  Continental
may find it necessary  to further  downsize its  operations,  ground  additional
aircraft  and further  reduce its  expenses.  Continental  anticipates  that its
previously  announced  capacity and cost reductions,  together with the capacity
reductions  announced by other carriers and capacity  reductions that could come
from  restructurings  within the industry,  should result in a better  financial
environment by the end of 2003,  absent adverse  factors  outside  Continental's
control such as a further  economic  recession,  additional  terrorist  attacks,
continued  military action in Iraq or another conflict elsewhere in the world, a
significant spread of Severe Acute Respiratory  Syndrome,  or "SARS",  decreased
consumer demand or sustained high fuel prices.  However,  Continental expects to
incur a significant  loss for the full year in 2003,  regardless of such adverse
factors.

     Due in part to the lack of predictability  of future traffic,  business mix
and yields,  Continental is currently unable to estimate the long-term effect on
it of the events of September 11, 2001,  or the impact of any further  terrorist
attacks or the  military  action in Iraq.  However,  given the  magnitude of the
unprecedented events of September 11, 2001 and their continuing  aftermath,  the
adverse  impact to  Continental's  financial  condition,  results of operations,
liquidity and prospects may continue to be material, and Continental's financial
resources might not be sufficient to absorb it or that of any further  terrorist
attacks or continued military action in Iraq.

     Among the many factors that threaten  Continental and the airline  industry
generally  are  the  following:

     o    A  weak  global  and  domestic  economy  has  significantly  decreased
          Continental's revenue. Business traffic, Continental's most profitable
          source of  revenue,  and  yields  are down  significantly,  as well as
          leisure traffic and yields.  Several of Continental's  competitors are
          significantly changing all or a portion of their pricing structures in
          a manner that is revenue dilutive to Continental. Although Continental
          has been  successful in  decreasing  its unit cost as its unit revenue
          has declined, Continental currently expects its net cash flows for the
          second quarter of 2003, excluding amounts expected to be received from
          the U.S.  government  discussed in the third bullet point below, to be
          slightly  negative at  approximately  $0.5 million per day,  including
          required  debt  payments  and  capital   expenditures.   In  addition,
          Continental  expects to incur  significant  losses in that quarter and
          for the full year 2003.

     o    Continental  believes that reduced demand persists not only because of
          the weak economy,  but also because of some customers'  concerns about
          further terrorist attacks and reprisals. The war in Iraq significantly
          reduced  Continental's  bookings  and lowered  passenger  traffic.  In
          addition,  the  spread of SARS in China  and  elsewhere  has  caused a
          further  decline in passenger  traffic,  particularly to Hong Kong and
          certain other cities in Asia that  Continental  serves.  Both of these
          events have  disproportionately  affected Continental's  international
          passenger traffic. Continental has responded to the reduced actual and
          anticipated  demand by  announcing  temporary  capacity  reductions on
          certain   trans-Atlantic  and  trans-Pacific   routes  (including  the
          suspension  of its  flights  between  Hong  Kong  and  Newark)  and by
          reducing  its summer  schedule.  Continental  believes  that demand is
          further  weakened  by  customer  dissatisfaction  with the hassles and
          delays of heightened airport security and screening procedures.

     o    Fuel costs rose  significantly  at the end of 2002 and until  recently
          have been at  historically  high levels.  Even though  Continental has
          hedged  approximately  80% of its  fuel  requirements  for the  second
          quarter  of 2003,  the  continued  military  action in Iraq,  post war
          unrest in that country,  other conflicts in the Middle East, political
          events  in  Venezuela  or  Nigeria,  or  significant  events  in other
          oil-producing  nations could cause fuel prices to increase further and
          may impact the  availability  of fuel.  Based on gallons  consumed  in
          2002,  for  every  one  dollar  increase  in the  price of crude  oil,
          Continental's  annual fuel expense would be approximately  $40 million
          higher.

     o    The terrorist  attacks of 2001 have caused  security costs to increase
          significantly, many of which have been passed on to airlines. Security
          costs are likely to continue rising for the foreseeable future. In the
          current  environment of lower consumer demand and discounted  pricing,



          these costs cannot  effectively  be passed on to customers.  Insurance
          costs have also risen sharply,  in part due to greater perceived risks
          and in part due to the reduced  availability  of  insurance  coverage.
          Continental  must  absorb  these  additional  expenses  in the current
          pricing environment. Under a supplemental appropriations bill approved
          by both houses of Congress and signed by the  President in April 2003,
          Continental  and other U.S.  carriers will be  reimbursed  for certain
          security fees paid or collected by such carriers and  compensated  for
          other  security  related costs.  Although  Continental is still in the
          process of estimating  the amount of  reimbursement  and  compensation
          that  it will  receive,  Continental  believes  that it will be in the
          range of $175 million to $200 million.

     o    Although  Continental  reduced  some of its costs during the last year
          and continues to implement  cost-cutting measures, its costs cannot be
          decreased as quickly as its revenue has declined.  In addition,  as is
          the  case  with  many  of  its  competitors,   Continental  is  highly
          leveraged, and has few assets that remain unpledged to support any new
          debt. Combined with reduced access to the capital markets,  themselves
          already  weakened by the state of the economy,  there is the potential
          for insufficient liquidity if current conditions continue unabated for
          a  sufficiently  long period of time.  Continental  had  approximately
          $1.18 billion of cash, cash equivalents and short-term  investments at
          March 31, 2003. Continental continues to hold 53.1% of the outstanding
          stock of  Holdings,  the  publicly  traded  parent of its regional jet
          subsidiary,  which  stock is not  pledged  to  creditors.  Continental
          intends to sell or otherwise dispose of some or all of its interest in
          Holdings, subject to market conditions.

     o    The  nature  of the  airline  industry  is  changing  dramatically  as
          business   travelers  change  their  spending  patterns  and  low-cost
          carriers continue to gain market share.  Continental has announced and
          is  implementing  plans to modify its product for the large segment of
          its  customers  who are not willing to pay for a premium  product,  to
          reduce costs and to generate additional  revenue.  Other carriers have
          announced  similar plans to create  lower-cost  products,  or to offer
          separate  low cost  products  (such as a low cost  "airline  within an
          airline").  In addition,  carriers  emerging from bankruptcy will have
          significantly reduced cost structures and operational flexibility that
          will allow them to compete more effectively.

     o    Current  conditions may cause  consolidation of the airline  industry,
          domestically and globally.  The extremity of current  conditions could
          result  in  a  reduction  of  some  of  the  regulatory  hurdles  that
          historically  have limited  consolidation.  Depending on the nature of
          the  consolidation,  Continental could benefit from it or be harmed by
          it.  Continental  continues  to monitor  developments  throughout  the
          industry and has entered into a marketing alliance  (implementation of
          which is subject to certain  conditions)  with Northwest  Airlines and
          Delta to permit  Continental  to compete more  effectively  with other
          carriers and alliance groups.

     o    Continental   is  engaged  in  labor   negotiations   with  the  union
          representing  its pilots.  Continental  cannot  predict the outcome of
          these  negotiations or the financial  impact on Continental of any new
          labor  contract  with  its  pilots.   Recent  significant   concession
          agreements  with labor  groups at US Airways  and United  have had the
          effect of lowering industry standard wages and benefits.  In addition,
          American  Airlines has recently  agreed with its major labor groups on
          labor cost reductions, although two of the labor groups have announced
          that they intend to call a new vote regarding  these  recently  agreed
          cost reductions. Continental's negotiations may be influenced by these
          and other labor cost developments.

     o    Continental has several noncontributory defined benefit plans covering
          substantially all of Continental's employees. As of December 31, 2002,
          these plans were underfunded by approximately $1.2 billion as measured
          by  SFAS  87,  "Employers  Accounting  for  Pensions".   Continental's
          contributions for the remainder of 2003 are expected to be $89 million
          as of March 31,  2003.  Absent any changes to the plans (which in most
          cases are subject to collective bargaining agreements with our unions)



          or a waiver of required  payments from the Internal  Revenue  Service,
          the   minimum   funding   requirement   in  2004  is  expected  to  be
          significantly greater than in 2003.

     o    At April 15, 2003, under the most  restrictive  provisions of a credit
          facility  agreement  with an  outstanding  balance of $165  million at
          March  31,  2003,  Continental  is  required  to  maintain  a  minimum
          unrestricted  cash balance of $600  million.  Also, a separate  credit
          facility agreement with an outstanding balance of $43 million at March
          31, 2003 requires, beginning in June 2003, Continental to maintain a 1
          to 1  ratio  of  EBITDAR  (earnings  before  interest,  income  taxes,
          depreciation and aircraft rentals) to fixed charges,  which consist of
          interest expense,  aircraft rental expense, cash income taxes and cash
          dividends,  for the previous four quarters.  Continental believes that
          it will be able to meet both of these  covenants  for the remainder of
          2003.



                       DESCRIPTION OF THE POLICY PROVIDER

GENERAL

     The  information  set  forth  in  this  section,  including  any  financial
statements incorporated by reference herein, has been provided by MBIA Insurance
Corporation  ("MBIA" or the "Policy Provider") for inclusion in this Prospectus,
and such  information has not been  independently  verified by Continental,  the
Initial  Purchaser,   the  Trustee  or  the  Liquidity  Provider.   Accordingly,
notwithstanding  anything  to the  contrary  herein,  none of  Continental,  the
Initial   Purchaser,   the  Trustee  or  the  Liquidity   Provider  assumes  any
responsibility  for  the  accuracy,   completeness,  or  applicability  of  such
information.

     MBIA is the principal  operating  subsidiary of MBIA Inc., a New York Stock
Exchange  listed  company  (the  "Parent  Company").  The Parent  Company is not
obligated to pay the debts of or claims  against MBIA.  MBIA is domiciled in the
State of New York and licensed to do business in and subject to regulation under
the laws of all 50 states, the District of Columbia,  the Commonwealth of Puerto
Rico, the Commonwealth of the Northern  Mariana  Islands,  the Virgin Islands of
the United States and the Territory of Guam. MBIA has three branches, one in the
Republic of France,  one in the Republic of Singapore  and one in the Kingdom of
Spain.  New York has laws  prescribing  minimum capital  requirements,  limiting
classes and concentrations of investments,  and requiring the approval of policy
rates and forms.  State laws also  regulate the amount of both the aggregate and
individual risks that may be insured,  the payment of dividends by MBIA, changes
in control, and transactions among affiliates. Additionally, MBIA is required to
maintain  contingency  reserves on its  liabilities  in certain  amounts and for
certain periods of time.

     MBIA does not accept any responsibility for the accuracy or completeness of
this Prospectus or any information or disclosure  contained  herein,  or omitted
herefrom,  other than with respect to the accuracy of the information  regarding
the Policy  Provider  set forth  under the  heading  "Description  of the Policy
Provider" or  incorporated  by  reference  herein.  Additionally,  MBIA makes no
representation  regarding  the Notes or the  advisability  of  investing  in the
Notes.

     The Policy is not covered by the Property/Casualty  Insurance Security Fund
specified in Article 76 of the New York Insurance Law.

MBIA FINANCIAL INFORMATION

     The following  document  filed by the Parent Company with the Commission is
incorporated  herein by reference:

     o    the  Parent  Company's  Annual  Report on Form 10-K for the year ended
          December 31, 2002.

     Any  documents  filed by the Parent  Company  pursuant to  Sections  13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
Prospectus  and prior to the  termination of the offering of the New Notes shall
be deemed to be  incorporated  by reference in this  Prospectus and to be a part
hereof.  Any  statement  contained  in a document  incorporated  or deemed to be
incorporated  by reference  herein,  or contained in this  Prospectus,  shall be
deemed to be modified or  superseded  for  purposes  of this  Prospectus  to the
extent  that a statement  contained  herein or in any other  subsequently  filed
document  which  also is or is deemed to be  incorporated  by  reference  herein
modifies  or  supersedes  such  statement.  Any such  statement  so  modified or
superseded  shall  not be  deemed,  except  as so  modified  or  superseded,  to
constitute a part of this Prospectus.

     The consolidated financial statements of MBIA, a wholly owned subsidiary of
the Parent  Company,  and its  subsidiaries as of December 31, 2002 and December
31, 2001 and for each of the three years in the period ended  December 31, 2002,
prepared in accordance with generally accepted accounting  principles,  included
in the  Annual  Report on Form 10-K of the  Parent  Company  for the year  ended
December 31, 2002 are hereby  incorporated by reference into this Prospectus and
shall be deemed to be a part hereof.  All  financial  statements of MBIA and its
subsidiaries  included  in  documents  filed by the Parent  Company  pursuant to
Section  13(a),  13(c),  14 or  15(d)  of the  Securities  Exchange  Act of 1934



subsequent to the date of this  Prospectus  and prior to the  termination of the
offering of the New Notes shall be deemed to be  incorporated  by reference into
this Prospectus and to be a part hereof from the respective dates of filing such
documents.

     The  Parent  Company  files  annual,   quarterly,   and  special   reports,
information  statements and other information with the Commission under File No.
1-9583.  Copies of the Commission filings (including the Parent Company's Annual
Report on Form 10-K for the year ended December 31, 2002) are available (i) over
the  Internet  at the  Commission  web site at  HTTP://WWW.SEC.GOV;  (ii) at the
Commission's  public  reference  room in Washington  D.C.; and (iii) at no cost,
upon request to MBIA Insurance  Corporation,  113 King Street,  Armonk, New York
10504. The telephone number of MBIA is (914) 273-4545.

     The tables below present selected financial  information of MBIA determined
in accordance  with statutory  accounting  practices  prescribed or permitted by
insurance   regulatory   authorities  ("SAP")  as  well  as  generally  accepted
accounting principles ("GAAP"):

                                                     SAP
                                  ------------------------------------------
                                  DECEMBER 31,                 DECEMBER 31,
                                      2002                         2001
                                  ------------------------------------------
                                   (AUDITED)                    (AUDITED)
                                                (IN MILLIONS)

Admitted Assets                       $9,212                      $8,545
Liabilities                            6,054                       5,688
Capital and Surplus                    3,158                       2,857


                                                     GAAP
                                  ------------------------------------------
                                  DECEMBER 31,                 DECEMBER 31,
                                      2002                         2001
                                  ------------------------------------------
                                   (AUDITED)                    (AUDITED)
                                                (IN MILLIONS)

Assets                               $10,588                      $9,460
Liabilities                            4,679                       4,234
Shareholders' Equity                   5,909                       5,226



FINANCIAL STRENGTH RATING OF MBIA

     Moody's rates the financial strength of MBIA "Aaa".

     The  above  rating  reflects  the  current  assessment  by  Moody's  of the
creditworthiness  of MBIA and its  ability  to pay  claims  on its  policies  of
insurance.  Any further  explanation as to the  significance of the above rating
may be obtained only from Moody's.  The above rating is not a recommendation  to
buy,  sell,  or hold any Notes,  and such  rating may be subject to  revision or
withdrawal  at any time by Moody's.  Any downward  revision or withdrawal of the
above rating may have an adverse  effect on the market price of the Notes.  MBIA
does not guaranty  the market  price of the Notes nor does it guaranty  that the
rating on the Notes will not be revised or withdrawn.




                               THE EXCHANGE OFFER

     The following summary describes all material provisions of the Registration
Rights Agreement (the "Registration  Rights Agreement")  between Continental and
the  Initial  Purchaser.  The summary  does not  purport to be  complete  and is
qualified  in  its  entirely  by  reference  to all  of  the  provisions  of the
Registration  Rights  Agreement,  which  has  been  filed as an  exhibit  to the
Registration  Statement  and copies of which are  available  as set forth  under
"Where You Can Find More Information".

TERMS OF THE EXCHANGE OFFER

     GENERAL

     In connection with the issuance of the Old Notes, the Initial Purchaser and
its  assignees  became  entitled  to the  benefits  of the  Registration  Rights
Agreement.

     Under the Registration  Rights  Agreement,  Continental is obligated to use
its best efforts to:

     o    file the Registration Statement of which this Prospectus is a part for
          a  registered  exchange  offer  with  respect to an issue of new notes
          identical  in all  material  respects to the Old Notes within 120 days
          after December 6, 2002,  which is the date on which the Old Notes were
          issued (the "Issuance Date");

     o    cause  the  Registration  Statement  to  become  effective  under  the
          Securities Act within 180 days after the Issuance Date;

     o    cause the Registration Statement to remain effective until the closing
          of the Exchange Offer; and

     o    consummate  the  Exchange  Offer  within 210  calendar  days after the
          Issuance Date.

     Continental will keep the Exchange Offer open for a period of not less than
30 days.  The Exchange  Offer being made hereby,  if commenced  and  consummated
within  the  time  periods  described  in this  paragraph,  will  satisfy  those
requirements under the Registration Rights Agreement.

     Upon the terms and subject to the conditions  set forth in this  Prospectus
and in the Letter of Transmittal (which together constitute the Exchange Offer),
all Old Notes validly  tendered and not withdrawn  prior to 5:00 p.m.,  New York
City time, on the Expiration Date will be accepted for exchange.  New Notes will
be issued in exchange for an equal face amount of outstanding Old Notes accepted
in the Exchange Offer.  Old Notes may be tendered only in integral  multiples of
$1,000. This Prospectus,  together with the Letter of Transmittal, is being sent
to all registered  holders of Old Notes as of [_____],  2003. The Exchange Offer
is not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange.  However, the obligation to accept Old Notes for exchange pursuant
to the  Exchange  Offer is subject to certain  conditions,  as set forth  herein
under "--Conditions".

     Old Notes shall be deemed to have been accepted as validly  tendered  when,
as and if  Continental  has given oral or written notice thereof to the Exchange
Agent.  The Exchange  Agent will act as agent for the  tendering  holders of Old
Notes for the purposes of receiving  the New Notes and  delivering  New Notes to
such holders.

     Based on  interpretations  by the staff of the Commission,  as set forth in
no-action  letters  issued to third parties,  Continental  believes that the New
Notes  issued  pursuant to the  Exchange  Offer in exchange for Old Notes may be
offered for resale,  resold or otherwise  transferred by holders  thereof (other
than (i) a broker-dealer  who acquired such Old Notes directly from  Continental
for resale pursuant to Rule 144A under the Securities Act or any other available
exemption  under the Securities Act or (ii) any holder that is an "affiliate" of
Continental as defined in Rule 405 under the Securities Act), without compliance
with the registration and prospectus  delivery provisions of the Securities Act,
provided  that  such New  Notes  are  acquired  in the  ordinary  course of such
holders'  business  and such  holders  are not  engaged in, and do not intend to
engage in, a  distribution  of such New Notes and have no  arrangement  with any
person to participate in a distribution of such New Notes.



     By tendering  the Old Notes in exchange for New Notes,  each holder,  other
than a broker-dealer, will represent to Continental that:

     o    it is not an  affiliate of  Continental  (as defined in Rule 405 under
          the Securities Act) nor a  broker-dealer  tendering Old Notes acquired
          directly from Continental for its own account;

     o    any New Notes to be received  by it will be  acquired in the  ordinary
          course of its business; and

     o    it is not engaged in, and does not intend to engage in, a distribution
          of  such  New  Notes  and  has  no  arrangement  or  understanding  to
          participate in a distribution of the New Notes.

     If a  holder  of  Old  Notes  is  engaged  in or  intends  to  engage  in a
distribution  of the New  Notes or has any  arrangement  or  understanding  with
respect to the  distribution  of the New Notes to be  acquired  pursuant  to the
Exchange Offer,  such holder may not rely on the applicable  interpretations  of
the staff of the Commission and must comply with the registration and prospectus
delivery  requirements  of the Securities  Act in connection  with any secondary
resale  transaction.  Each  broker-dealer  that  receives  New Notes for its own
account pursuant to the Exchange Offer (a  "Participating  Broker-Dealer")  must
acknowledge  that it will deliver a prospectus in connection  with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus,  a  Participating  Broker-Dealer  will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus,  as it may be amended or supplemented from time to time, may be used
by a  Participating  Broker-Dealer  in  connection  with  resales  of New  Notes
received  in exchange  for Old Notes where such Old Notes were  acquired by such
Participating  Broker-Dealer  as a result of  market-making  activities or other
trading activities. Continental has agreed that, starting on the Expiration Date
and ending on the close of business 180 days after the Exp+iration  Date, it will
make this Prospectus  available to any  Participating  Broker-Dealer  for use in
connection with any such resale. See "Plan of Distribution".

     In the event that any changes in law or the applicable  interpretations  of
the staff of the  Commission  do not permit  Continental  to effect the Exchange
Offer,  if the  Registration  Statement  is not  declared  effective  within 180
calendar  days  after the  Issuance  Date  under  certain  circumstances  or the
Exchange Offer is not consummated  within 210 days after the Issuance Date under
certain  other  circumstances,  at the  request  of a  holder  not  eligible  to
participate in the Exchange Offer or under certain other circumstances described
in the Registration Rights Agreement, Continental will, in lieu of effecting the
registration of the New Notes pursuant to the  Registration  Statement and at no
cost to the holders of Old Notes:

     o    as  promptly  as   practicable   file  with  the  Commission  a  shelf
          registration  statement (the "Shelf Registration  Statement") covering
          resales of the Old Notes;

     o    use its best efforts to cause the Shelf  Registration  Statement to be
          declared  effective under the Securities Act by the 180th calendar day
          after the Issuance  Date; and

     o    use  its  best  efforts  to  keep  effective  the  Shelf  Registration
          Statement for a period of two years after its  effective  date (or for
          such shorter  period as shall end when all of the Old Notes covered by
          the Shelf  Registration  Statement have been sold pursuant  thereto or
          may be freely sold pursuant to Rule 144 under the Securities Act).

     In the event that neither the  consummation  of the Exchange  Offer nor the
declaration  by  the  Commission  of  the  Shelf  Registration  Statement  to be
effective  (each,  a  "Registration  Event")  occurs  on or prior  to the  210th
calendar day following the Issuance  Date,  the interest rate per annum borne by
the Notes shall be increased by 0.50% from and  including  such 210th day to but
excluding the earlier of (i) the date on which a  Registration  Event occurs and
(ii)  the  date on which  all of the  Notes  otherwise  become  transferable  by
Noteholders (other than affiliates or former affiliates of Continental)  without
further  registration  under the  Securities  Act.  In the event  that the Shelf
Registration  Statement  ceases to be  effective  at any time  during the period
specified by the Registration Rights Agreement for more than 60 days, whether or
not consecutive,  during any 12-month period,  the interest rate per annum borne
by the Notes  shall be  increased  by 0.50% from the 61st day of the  applicable
12-month period such Shelf  Registration  Statement ceases to be effective until



such time as the Shelf  Registration  Statement again becomes  effective (or, if
earlier, the end of such period specified by the Registration Rights Agreement).

     Upon  consummation  of the Exchange Offer,  subject to certain  exceptions,
holders  of Old Notes who do not  exchange  their Old Notes for New Notes in the
Exchange Offer will no longer be entitled to registration rights and will not be
able to offer or sell their Old Notes,  unless  such Old Notes are  subsequently
registered  under  the  Securities  Act  (which,   subject  to  certain  limited
exceptions,  the Company will have no obligation to do),  except  pursuant to an
exemption  from,  or in a  transaction  not subject to, the  Securities  Act and
applicable state securities  laws. See "Risk  Factors--Risk  Factors Relating to
the Notes and the Exchange Offer--Consequences of Failure to Exchange".

     EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION

     The term "Expiration  Date" shall mean  [________],  2003 (30 calendar days
following the  commencement of the Exchange Offer),  unless the Company,  in its
sole discretion,  extends the Exchange Offer, in which case the term "Expiration
Date"  shall  mean the  latest  date to which the  Exchange  Offer is  extended.
Notwithstanding  any extension of the Exchange  Offer,  if the Exchange Offer is
not consummated by July 4, 2003, the interest rate borne by the Notes is subject
to increase. See "--General".

     In order to  extend  the  Expiration  Date,  Continental  will  notify  the
Exchange  Agent of any extension by oral or written  notice and will mail to the
record holders of Old Notes an  announcement  thereof,  each prior to 9:00 a.m.,
New York City time,  on the next  business  day after the  previously  scheduled
Expiration  Date. Such  announcement may state that the Company is extending the
Exchange Offer for a specified period of time.

     Continental reserves the right:

     o    to delay  acceptance of any Old Notes, to extend the Exchange Offer or
          to terminate the Exchange Offer and not permit acceptance of Old Notes
          not  previously  accepted if any of the  conditions  set forth  herein
          under  "--Conditions"  shall  have  occurred  and  shall not have been
          waived by the Company, by giving oral or written notice of such delay,
          extension or termination to the Exchange Agent; and

     o    to amend the terms of the Exchange Offer in any manner deemed by it to
          be advantageous to the holders of the Old Notes.

     Any such delay in acceptance,  extension,  termination or amendment will be
followed as promptly as  practicable  by oral or written  notice  thereof to the
Exchange  Agent.  If the  Exchange  Offer is amended in a manner  determined  by
Continental to constitute a material change,  Continental will promptly disclose
such  amendment in a manner  reasonably  calculated to inform the holders of the
Old Notes of such amendment.

     Without limiting the manner in which  Continental may choose to make public
announcement of any delay,  extension,  amendment or termination of the Exchange
Offer,  Continental shall have no obligation to publish,  advertise or otherwise
communicate any such public announcement,  other than by making a timely release
to an appropriate news agency.

INTEREST ON THE NEW NOTES

     The New Notes will bear interest at the Stated  Interest Rate from the most
recent  date to which  interest  has been  paid on the Old  Notes.  Accordingly,
registered  holders  of New  Notes on the  relevant  record  date for the  first
interest  payment date  following  the  completion  of the  Exchange  Offer will
receive  interest  accruing from the most recent date to which interest has been
paid.  Old Notes  accepted for exchange  will cease to accrue  interest from and
after the date of completion of the Exchange  Offer.  Holders of Old Notes whose
Old Notes are  accepted  for  exchange  will not receive any payment for accrued
interest on the Old Notes  otherwise  payable on any  Interest  Payment Date the
record date for which occurs on or after  completion  of the Exchange  Offer and
will be deemed to have waived  their  rights to receive the accrued  interest on
the Old Notes.



PROCEDURES FOR TENDERING

     To tender in the Exchange Offer, a holder must complete,  sign and date the
Letter of Transmittal, or a facsimile thereof (or, if the Old Notes are tendered
in accordance  with the procedure for book-entry  transfer  described  below, an
Agent's  Message  in lieu of the  Letter of  Transmittal),  have the  signatures
thereon  guaranteed  if  required  by the  Letter  of  Transmittal  and  mail or
otherwise  deliver  such Letter of  Transmittal  or such  facsimile  or have the
Agent's Message delivered,  together with any other required  documents,  to the
Exchange Agent prior to 5:00 p.m.,  New York City time, on the Expiration  Date.
In addition,  either

     o    certificates for such Old Notes must be received by the Exchange Agent
          along with the Letter of Transmittal;

     o    a  timely   confirmation  of  a  book-entry  transfer  (a  "Book-Entry
          Confirmation") of such Old Notes, if such procedure is available, into
          the Exchange  Agent's account at The Depository  Trust Company ("DTC")
          pursuant to the procedure for  book-entry  transfer  described  below,
          must be received by the Exchange Agent prior to the  Expiration  Date;
          or

     o    the  holder  must  comply  with  the  guaranteed  delivery  procedures
          described below.

     The method of delivery of Old Notes,  Letters of Transmittal  and all other
required documents is at the election and risk of the holders.  If such delivery
is by mail, it is recommended  that  registered  mail,  properly  insured,  with
return  receipt  requested,  be used.  In all cases,  sufficient  time should be
allowed to assure timely delivery. No Letters of Transmittal or Old Notes should
be sent to  Continental.  Delivery of all documents must be made to the Exchange
Agent at one of the addresses as set forth below. Holders may also request their
respective  brokers,  dealers,  commercial banks, trust companies or nominees to
effect such tender for such holders.

     The tender by a holder of Old Notes will  constitute  an agreement  between
such  holder and  Continental  in  accordance  with the terms and subject to the
conditions set forth in the Prospectus and in the Letter of Transmittal.

         Only a holder of Old Notes may  tender  such Old Notes in the  Exchange
Offer.  The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are  registered  on the books of  Continental  or any other
person  who has  obtained a properly  completed  bond power from the  registered
holder.

     Any  beneficial  owner,  whose Old Notes  are  registered  in the name of a
broker,  dealer,  commercial bank, trust company or other nominee and who wishes
to tender,  should  contact such  registered  holder  promptly and instruct such
registered  holder to tender on such owner's behalf.  If such  beneficial  owner
wishes to tender on such owner's behalf,  such beneficial  owner must,  prior to
completing and executing the Letter of Transmittal  and delivering  such owner's
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such  owner's name or obtain a properly  completed  bond power from the
registered  holder.  The transfer of registered  ownership may take considerable
time.

     Signatures on a Letter of  Transmittal  or a notice of  withdrawal,  as the
case may be,  must be  guaranteed  by any member firm of a  registered  national
securities exchange or of the National Association of Securities Dealers,  Inc.,
a commercial  bank or trust  company  having an office or  correspondent  in the
United States or an "eligible guarantor  institution" within the meaning of Rule
17Ad-15 under the Exchange Act (each, an "Eligible  Institution") unless the Old
Notes tendered  pursuant thereto are tendered (i) by a registered holder who has
not  completed  the box entitled  "Special  Issuance  Instructions"  or "Special
Delivery  Instructions"  on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.

     If the  Letter  of  Transmittal  is  signed  by a  person  other  than  the
registered  holder  of any Old Notes  listed  therein,  such Old  Notes  must be
endorsed or accompanied by bond powers and a proxy which  authorizes such person
to tender the Old Notes on behalf of the registered  holder, in each case as the
name of the registered holder or holders appears on the Old Notes.



     If the Letter of  Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators,  guardians, attorneys-in-fact,  officers of
corporations or others acting in a fiduciary or  representative  capacity,  such
persons  should so indicate  when  signing,  and unless  waived by  Continental,
evidence  satisfactory  to  Continental  of  their  authority  to so act must be
submitted with the Letter of Transmittal.

     All  questions as to the validity,  form,  eligibility  (including  time of
receipt) and  withdrawal  of the tendered  Old Notes will be  determined  by the
Company in its sole discretion,  which  determination will be final and binding.
The  Company  reserves  the  absolute  right to reject any and all Old Notes not
properly tendered or any Old Notes the acceptance of which would, in the opinion
of counsel for Continental, be unlawful.  Continental also reserves the absolute
right to waive any  irregularities  or conditions of tender as to particular Old
Notes. Continental's  interpretation of the terms and conditions of the Exchange
Offer  (including the  instructions in the Letter of Transmittal)  will be final
and binding on all parties.  Unless  waived,  any defects or  irregularities  in
connection  with  tenders  of Old  Notes  must  be  cured  within  such  time as
Continental  shall determine.  Neither  Continental,  the Exchange Agent nor any
other  person  shall  be under  any  duty to give  notification  of  defects  or
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such  notification.  Tenders of Old Notes will
not be deemed to have been made  until  such  irregularities  have been cured or
waived.  Any Old Notes  received  by the  Exchange  Agent that are not  properly
tendered  and as to which the defects or  irregularities  have not been cured or
waived will be returned without cost to such holder by the Exchange Agent to the
tendering  holders  of Old Notes,  unless  otherwise  provided  in the Letter of
Transmittal, as soon as practicable following the Expiration Date.

     In addition, Continental reserves the right in its sole discretion, subject
to the provisions of the  Indenture,  to (i) purchase or make offers for any Old
Notes that remain outstanding subsequent to the Expiration Date or, as set forth
under  "--Conditions",  to terminate the Exchange  Offer in accordance  with the
terms of the  Registration  Rights Agreement and (ii) to the extent permitted by
applicable law, purchase Old Notes in the open market,  in privately  negotiated
transactions  or  otherwise.  The terms of any such  purchases  or offers  could
differ from the terms of the Exchange Offer.


ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES

     Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Notes properly  tendered will be accepted  promptly after the Expiration
Date,  and the New Notes will be issued  promptly  after  acceptance  of the Old
Notes. See  "--Conditions"  below. For purposes of the Exchange Offer, Old Notes
shall be deemed to have been accepted for exchange  when, as and if  Continental
has given oral or written notice thereof to the Exchange Agent.

     In all cases,  issuance  of New Notes for Old Notes that are  accepted  for
exchange  pursuant to the Exchange  Offer will be made only after timely receipt
by the Exchange Agent of:

     o    certificates for such Old Notes or a timely Book-Entry Confirmation of
          such Old Notes into the Exchange Agent's account at DTC;

     o    a properly  completed and duly executed  Letter of  Transmittal  or an
          Agent's Message in lieu thereof; and

     o    all other required documents.

     If any  tendered Old Notes are not accepted for any reason set forth in the
terms and  conditions of the Exchange  Offer or if Old Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
nonexchanged  Old Notes will be returned without expense to the tendering holder
thereof  (or,  in the case of Old  Notes  tendered  by the  book-entry  transfer
procedures  described below,  such nonexchanged Old Notes will be credited to an
account  maintained with DTC) as promptly as practicable after the expiration or
termination of the Exchange Offer.



BOOK-ENTRY TRANSFER

     The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC for purposes of the  Exchange  Offer within two business
days after the date of this  Prospectus.  The Exchange  Agent has confirmed that
any  financial  institution  that is a  participant  in  DTC's  systems  (a "DTC
Participant")  may use DTC's Automated Tender Offer program ("ATOP")  procedures
to  tender  Old  Notes  in the  Exchange  Offer.  Any DTC  Participant  may make
book-entry  delivery of Old Notes by causing DTC to transfer such Old Notes into
the Exchange Agent's account at DTC in accordance with DTC's ATOP procedures for
transfer.  However,  although  delivery  of Old  Notes may be  effected  through
book-entry  transfer  into the  Exchange  Agent's  account at DTC, the Letter of
Transmittal (or facsimile thereof) with any required signature guarantees, or an
Agent's  Message in lieu of the Letter of  Transmittal,  and any other  required
documents  must,  in any case,  be  transmitted  to and received by the Exchange
Agent at one of the  addresses  set forth below under  "--Exchange  Agent" on or
prior to 5:00 p.m., New York City time, on the Expiration Date or the guaranteed
delivery  procedures  described  below must be complied  with. The term "Agent's
Message" means a message,  transmitted by DTC and received by the Exchange Agent
and forming part of a Book-Entry Confirmation, that states that DTC has received
an express  acknowledgment  from a DTC Participant  tendering Old Notes that are
the  subject  of such  Book-Entry  Confirmation  that such DTC  Participant  has
received and agrees to be bound by the terms of the Letter of  Transmittal,  and
that  Continental  may  enforce  the  Letter  of  Transmittal  against  such DTC
Participant.

GUARANTEED DELIVERY PROCEDURES

     If a registered  holder of Old Notes desires to tender such Old Notes,  and
(i) the Old Notes are not  immediately  available,  or (ii) time will not permit
such  holder's  Old  Notes,  the  Letter of  Transmittal  or any other  required
documents to reach the Exchange Agent before the  Expiration  Date, or (iii) the
procedures  for  book-entry  transfer  cannot be completed on a timely basis,  a
tender may be effected if:

     o    the tender is made through an Eligible Institution;

     o    prior to the  Expiration  Date,  the Exchange Agent receives from such
          Eligible  Institution a properly completed and duly executed Letter of
          Transmittal  (or a  facsimile  thereof  or  Agent's  Message  in  lieu
          thereof) and Notice of Guaranteed Delivery,  substantially in the form
          provided  by  Continental  (by  facsimile  transmission,  mail or hand
          delivery),  setting  forth the name and  address  of the holder of Old
          Notes and the amount of Old Notes tendered, stating that the tender is
          being made thereby and  guaranteeing  that within three New York Stock
          Exchange  trading  days after the date of  execution  of the Notice of
          Guaranteed Delivery,  the certificates for all physically tendered Old
          Notes in proper form for transfer,  or a Book-Entry  Confirmation,  as
          the case may be, a  properly  completed  and duly  executed  Letter of
          Transmittal  (or a  facsimile  thereof  or  Agent's  Message  in  lieu
          thereof) and any other documents required by the Letter of Transmittal
          will be deposited by the Eligible Institution with the Exchange Agent;
          and

     o    the certificates for all physically  tendered Old Notes in proper form
          for  transfer,  or a  Book-Entry  Confirmation,  as the case may be, a
          properly  completed  and duly  executed  Letter of  Transmittal  (or a
          facsimile  thereof or Agent's  Message in lieu  thereof) and all other
          documents  required by the Letter of  Transmittal  are received by the
          Exchange Agent within three New York Stock Exchange trading days after
          the date of execution of the Notice of Guaranteed Delivery.

WITHDRAWAL OF TENDERS

     Tenders of Old Notes may be withdrawn  at any time prior to 5:00 p.m.,  New
York City time, on the Expiration Date.

     For a withdrawal to be effective,  a written  notice of withdrawal  must be
received by the Exchange  Agent prior to 5:00 p.m.,  New York City time,  on the
Expiration  Date at one of the  addresses  set  forth  below  under  "--Exchange
Agent". Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be  withdrawn,  identify the Old Notes to be withdrawn



(including the principal  amount of such Old Notes) and (where  certificates for
Old Notes have been  transmitted)  specify  the name in which such Old Notes are
registered,  if different from that of the withdrawing  holder.  If certificates
for Old Notes have been delivered or otherwise identified to the Exchange Agent,
then,  prior to the release of such  certificates,  the withdrawing  holder must
also submit the serial  numbers of the particular  certificates  to be withdrawn
and a signed  notice of  withdrawal  with  signatures  guaranteed by an Eligible
Institution  unless such holder is an  Eligible  Institution.  If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal  must specify the name and number of the account at DTC
to be  credited  with the  withdrawn  Old Notes and  otherwise  comply  with the
procedures  of  such  facility.  All  questions  as to the  validity,  form  and
eligibility  (including  time of receipt) of such notices will be  determined by
Continental,  whose determination shall be final and binding on all parties. Any
Old Notes so  withdrawn  will be deemed not to have been  validly  tendered  for
exchange  for  purposes  of the  Exchange  Offer.  Any Old Notes which have been
tendered  for  exchange  but  which are not  exchanged  for any  reason  will be
returned to the holder  thereof  without cost to such holder (or, in the case of
Old Notes tendered by book-entry  transfer into the Exchange  Agent's account at
DTC pursuant to the book-entry  transfer  procedures  described above,  such Old
Notes will be credited to an account  maintained  with DTC for the Old Notes) as
soon as practicable after withdrawal,  rejection of tender or termination of the
Exchange Offer.  Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "--Procedures for Tendering" and "--Book-Entry
Transfer"  above at any time  prior to 5:00  p.m.,  New York City  time,  on the
Expiration Date.

CONDITIONS

     Notwithstanding any other term of the Exchange Offer, Old Notes will not be
required to be accepted for  exchange,  nor will New Notes be issued in exchange
for, any Old Notes, and Continental may terminate or amend the Exchange Offer as
provided  herein  before the  acceptance  of such Old  Notes,  if because of any
change  in  law,  or  applicable  interpretations  thereof  by  the  Commission,
Continental  determines  that it is not permitted to effect the Exchange  Offer,
and Continental has no obligation to, and will not, knowingly, permit acceptance
of tenders of Old Notes from  affiliates  of the Company  (within the meaning of
Rule 405 under the  Securities  Act) or from any other holder or holders who are
not  eligible to  participate  in the  Exchange  Offer under  applicable  law or
interpretations thereof by the Commission, or if the New Notes to be received by
such holder or holders of Old Notes in the Exchange  Offer,  upon receipt,  will
not be tradable by such holder without  restriction under the Securities Act and
the  Exchange  Act and  without  material  restrictions  under the "blue sky" or
securities laws of substantially all of the states of the United States.

EXCHANGE AGENT

     Wilmington  Trust  Company  has  been  appointed  as  exchange  agent  (the
"Exchange Agent") for the Exchange Offer.  Questions and requests for assistance
and  requests  for  additional  copies of this  Prospectus  or of the  Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:


              BY MAIL:                      BY OVERNIGHT DELIVERY OR HAND:
      Wilmington Trust Company                 Wilmington Trust Company
       DC-1615 Reorg Services               Corporate Trust Reorg Services
             PO Box 8861                       1100 North Market Street
   Wilmington, Delaware 19899-8861         Wilmington, Delaware 19890-1615


                           FACSIMILE TRANSMISSION:
                               (302) 636-4145


                            CONFIRM BY TELEPHONE:
                               (302) 636-6472



FEES AND EXPENSES

     The expenses of soliciting  tenders  pursuant to the Exchange Offer will be
borne by Continental.  The principal  solicitation  for tenders  pursuant to the
Exchange Offer is being made by mail; however,  additional  solicitations may be
made by  telephone,  telecopy,  electronic  mail or in  person by  officers  and
regular employees of Continental.

     Continental will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. Continental, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the  Exchange  Agent for its  reasonable  out-of-pocket  expenses in  connection
therewith.  Continental  may also pay  brokerage  houses  and other  custodians,
nominees and fiduciaries the reasonable  out-of-pocket expenses incurred by them
in forwarding  copies of the Prospectus and related  documents to the beneficial
owners of the Old Notes, and in handling or forwarding tenders for exchange.

     The expenses to be incurred in connection  with the Exchange  Offer will be
paid by  Continental,  including fees and expenses of the Exchange Agent and the
Trustee and accounting, legal, printing and related fees and expenses.

     Continental will pay all transfer taxes, if any, applicable to the exchange
of  Old  Notes  pursuant  to  the  Exchange  Offer.  If,  however,  certificates
representing  New Notes or Old Notes  for  principal  amounts  not  tendered  or
accepted for exchange are to be delivered  to, or are to be registered or issued
in the name of, any person  other  than the  registered  holder of the Old Notes
tendered,  or if  tendered  Old Notes are  registered  in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed  for any reason  other than the  exchange  of Old Notes  pursuant to the
Exchange Offer,  then the amount of any such transfer taxes (whether  imposed on
the  registered  holder or any other  persons)  will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not  submitted  with the Letter of  Transmittal,  the amount of such transfer
taxes will be billed directly to such tendering holder.



                            DESCRIPTION OF THE NOTES

     The  following  summary  describes  the  material  terms of the Notes.  The
summary  does not purport to be complete and is qualified in its entirety by all
provisions of the Notes, the Indenture,  the Security Agreement,  the Collateral
Maintenance  Agreement and the Reference  Agency  Agreement  (collectively,  the
"Operative  Documents"),  each of which  has been  filed  as an  exhibit  to the
Registration  Statement  and copies of which are  available  as set forth  under
"Where You Can Find More Information". The references to Sections in parentheses
in the following  summary are to the relevant  Sections of the Indenture  unless
otherwise indicated.

GENERAL

     The Old Notes were, and the New Notes will be, issued by Continental  under
an Indenture (the "Indenture") among Continental,  Wilmington Trust Company,  as
trustee (the "Trustee"), the Policy Provider and the Liquidity Provider.

     The forms and terms of the New Notes are the same in all material  respects
as the form and terms of the Old  Notes,  except  that:

     o    the New Notes will be registered under the Securities Act;

     o    the New Notes will not contain  restrictions on transfer or provisions
          relating to registration rights or interest rate increases; and

     o    the New Notes will be available only in book-entry form.

     The New  Notes  will be  issued  only in  fully  registered  form,  without
coupons,   and  will  be  subject  to  the  provisions   described  below  under
"--Book-Entry;  Delivery and Form". The New Notes will be issued only in minimum
denominations of $1,000 or integral multiples thereof,  except that one Note may
be issued in a different denomination. (Section 2.1(b))

     The Notes are secured by a lien on the  Collateral.  The Notes rank equally
in right of payment with all of Continental's other unsubordinated  obligations,
except to the extent of the assets  subject to such lien,  as to which the Notes
effectively rank senior.

     On the  Issuance  Date,  the Trustee,  for the benefit of the  Noteholders,
entered into the Liquidity  Facility,  the fee letter with respect thereto,  the
Policy  and  the  Policy   Provider   Agreement   (collectively,   the  "Support
Documents"). (Section 3.10)

PAYMENTS OF PRINCIPAL AND INTEREST

     Continental has issued  $200,000,000 in aggregate  principal  amount of Old
Notes.  The Notes are limited to  $200,000,000  of principal  in the  aggregate.
Subject to the provisions of the Indenture,  the entire  principal amount of the
Notes is scheduled to be paid to the Noteholders on December 6, 2007 (the "Final
Scheduled Payment Date"). The "Final Legal Maturity Date" is December 6, 2009.

         Interest  accrues  on the unpaid  principal  amount of each Note at the
variable rate per annum set forth on the cover page of this Prospectus (plus, if
applicable,  0.50%  during  the  period  specified  in the  Registration  Rights
Agreement),  subject to a maximum equal to the Capped  Interest Rate  applicable
only for periods as to which Continental has failed to pay accrued interest when
due and failed to cure such nonpayment  (the "Stated  Interest  Rate").  For all
other  periods,  the  interest  rate on the Notes  will not be  capped.  Accrued
interest will be payable on March 6, June 6,  September 6 and December 6 of each
year (each, a "Scheduled  Interest Payment Date") or, if not a Business Day, the
next  succeeding  Business Day (each date on which interest is due, an "Interest
Payment Date" ), commencing on March 6, 2003. Such accrued interest will be paid
to holders of record on the 15th day preceding the applicable Scheduled Interest
Payment  Date.  Interest  on the Notes will  accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the Issuance
Date.  Interest on the Notes is  calculated on the basis of the actual number of



days  elapsed over a 360-day year and shall accrue with respect to the first but
not the last day of each Interest Period. If any date scheduled for a payment of
principal, interest, Premium, if any, or Break Amount, if any, is not a Business
Day, such payment will be made on the next succeeding Business Day, and interest
shall be added for such additional period. (Section 2.7)

     Payments  of interest on the Notes are  supported  by a Liquidity  Facility
provided by the Liquidity  Provider for the benefit of the holders of the Notes.
The Liquidity  Facility will provide an amount sufficient to pay interest on the
Notes at the Stated  Interest Rate on up to eight  successive  Interest  Payment
Dates.  The  Liquidity  Facility  does not  provide  for  drawings  or  payments
thereunder to pay for principal of, or Premium, if any, or Break Amount, if any,
with respect to, the Notes. See "Description of the Liquidity Facility".

     Except in specified  circumstances,  after use of any available funds under
the Liquidity Facility and the Cash Collateral Account,  the payment of interest
on the Notes at the Stated  Interest Rate is supported by the Policy provided by
the Policy  Provider.  Payment of principal of the Notes no later than the Final
Legal Maturity Date is also  supported by the Policy.  See  "Description  of the
Policy and the Policy Provider Agreement--The Policy".

     Payments of interest and principal  will be  distributed  by the Trustee on
the date  scheduled  for such payment  under the  Indenture or, if the money for
purposes of such payment has not been  deposited,  in whole or in part, with the
Trustee by  Continental,  the Liquidity  Provider or the Policy Provider on such
date,  on the next  Business  Day on  which  some or all of the  money  has been
deposited with the Trustee (a "Distribution  Date").  However, if some or all of
the money has not been  deposited  with the  Trustee  for  purposes of making an
interest  payment on the Notes within five days after the Interest  Payment Date
for such  payment,  Continental  is required to fix a special  payment  date and
special  record  date  for  such  payment  and to  give  written  notice  to the
Noteholders  of such special  dates and the amount of  defaulted  interest to be
paid.

DETERMINATION OF LIBOR

     LIBOR  ("LIBOR")  for the period  commencing  on and including the Issuance
Date and ending on but excluding the first  Interest  Payment Date (the "Initial
Interest Period" and an "Interest Period") was determined on the second Business
Day preceding  the Issuance Date as the rate for deposits in U.S.  dollars for a
period of three months that appeared on the display designated as page "3750" on
the Telerate Monitor.

     For the purpose of calculating  LIBOR for the periods from and including an
Interest Payment Date to but excluding the next succeeding Interest Payment Date
(each, also an "Interest Period"), Continental and the Trustee have entered into
a Reference Agency Agreement (the "Reference Agency  Agreement") with Wilmington
Trust Company, as reference agent (the "Reference  Agent").  The Reference Agent
will determine  LIBOR for each Interest  Period  following the Initial  Interest
Period,  on a date  (the  "Reference  Date")  that is two  London  banking  days
(meaning days on which commercial banks are open for general business in London,
England)  before  the  Interest  Payment  Date on  which  such  Interest  Period
commences.

     On each  Reference  Date, the Reference  Agent will determine  LIBOR as the
rate for  deposits in U.S.  dollars for a period of three months that appears on
the display  designated  as page "3750" on the  Telerate  Monitor (or such other
page or service as may replace it) as of 11:00 a.m., London time.

     If the rate  determined  as described in the foregoing  paragraph  does not
appear on the Telerate Page 3750, the Reference  Agent will  determine  LIBOR on
the basis of the rates at which deposits in U.S.  Dollars are offered by certain
reference banks as described in the Reference  Agency Agreement at approximately
11:00 a.m., London time, on the Reference Date for such Interest Period to prime
banks in the London interbank market for a period of three months  commencing on
the first day of such  Interest  Period and in an amount that is  representative
for a single  transaction in the London  interbank  market at the relevant time.
The  Reference  Agent will request the  principal  London  office of each of the
reference  banks to  provide  a  quotation  of its  rate.  If at least  two such
quotations  are  provided,  the  rate  for  that  Interest  Period  will  be the
arithmetic  mean of the  quotations.  If fewer than two quotations are provided,
the interest rate for the next Interest  Period shall be the arithmetic  mean of
the rates  quoted by major  banks in New York City,  selected  by the  Reference
Agent in good faith and in a commercially  reasonable  manner,  at approximately
11:00 a.m.,  New York City time,  on the first day of such  Interest  Period for
loans in U.S.  Dollars to leading  European  banks for a period of three  months
commencing  on the first day of such  Interest  Period and in an amount  that is



representative  for a single  transaction in the New York market at the relevant
time,  except  that,  if the banks so  selected by the  Reference  Agent are not
quoting as  mentioned  above,  LIBOR shall be the  floating  rate of interest in
effect for the last preceding Interest Period.

     The Reference Agent's determination of LIBOR (in the absence of negligence,
willful  default,  bad faith or manifest  error) will be conclusive  and binding
upon all parties.

     As  promptly  as  is  practicable  after  the  determination  thereof,  the
Reference Agent will give notice of its  determination of LIBOR for the relevant
Interest  Period to  Continental,  the Trustee,  the Liquidity  Provider and the
Policy  Provider.  Holders of the Notes  (the  "Noteholders")  may  obtain  such
information from the Trustee.

     Continental  reserves  the  right  to  terminate  the  appointment  of  the
Reference  Agent at any time on 30 days'  notice  and to  appoint a  replacement
reference agent in its place.  Notice of any such  termination  will be given to
the  Noteholders.  The  Reference  Agent may not be removed or resign its duties
without a successor having been appointed.

BREAK AMOUNT

     "Break Amount" means, as of any date of payment, redemption or acceleration
of any Note (the "Applicable Date"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the  Applicable  Date pursuant to
the formula set forth below.

     The Break Amount will be calculated as follows:

     Break Amount = Z-Y

     Where:

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

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

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

     No Break  Amount will be payable  (x) if the Break  Amount,  as  calculated
pursuant to the formula set forth above, is equal to or less than zero or (y) on
or in respect of any Applicable Date that is an Interest Payment Date.

REDEMPTION

     The Notes may be  redeemed  at any time in whole or (so long as no  Payment
Default has occurred  and is  continuing)  in part (in any integral  multiple of
$1,000) by the Company at its sole option at a redemption price equal to the sum
of 100% of the principal  amount of,  accrued and unpaid  interest on, and Break
Amount, if any, with respect to, the redeemed Notes to and including the date of
redemption.  In addition,  if a Note is redeemed before the third anniversary of
the Issuance Date (except in connection with a redemption to satisfy the maximum
Collateral   Ratio  or  minimum  Rotable  Ratio   requirement   discussed  under
"--Collateral--Appraisals  and Maintenance of Ratios"),  such  redemption  price
will include a premium (the "Premium") equal to the following  percentage of the
principal  amount of such Note: (i) if redeemed before the first  anniversary of
the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and
before the second  anniversary of the Issuance Date, 1.0%; and (iii) if redeemed
on or after such  second  anniversary  and before the third  anniversary  of the
Issuance Date, 0.5%. (Section 4.1)



     At least 15 days but not more than 60 days before any redemption  date, the
Trustee will send a notice of redemption to each  Noteholder  whose Notes are to
be  redeemed,  identifying  the Notes and the  principal  amount  thereof  to be
redeemed.  If less than all of the Notes are to be  redeemed,  the Trustee  will
select the Notes to be  redeemed  on either a pro rata basis or by lot or by any
other equitable manner determined by the Trustee in its sole discretion.  On the
redemption date,  interest will cease to accrue on the Notes or portions thereof
called for redemption,  unless  Continental fails to make the redemption payment
for such Notes. (Sections 4.3, 4.4 and 4.5)

     If  Continental  gives notice of  redemption  but fails to pay when due all
amounts  necessary to effect such  redemption,  such redemption  shall be deemed
revoked and no amount  shall be due as a result of notice of  redemption  having
been given.

COLLATERAL

     The Notes are secured by a lien on spare parts (including appliances) first
placed in service  after  October 22, 1994,  and owned by  Continental  that are
appropriate  for  installation  on or  use  in

     o    one or more of the following  aircraft  models:  Boeing model 737-700,
          737-800,  737-900,  757-200,  757-300,  767-200,  767-400  or  777-200
          aircraft,

     o    any engine utilized on any such aircraft or

     o    any other Qualified Spare Part,

and not  appropriate  for  installation on or use in any other model of aircraft
currently  operated by Continental or engine utilized on any such other model of
aircraft  ("Qualified  Spare Parts"),  together with certain records relating to
such spare parts, certain rights of Continental with respect to such spare parts
and certain proceeds of the foregoing (collectively, the "Collateral"). The lien
will not apply for as long as a spare part is  installed on or being used in any
aircraft,  engine or other spare part so installed  or being used.  In addition,
the lien will not apply if a spare part is not located at a Designated Location.
(Security  Agreement,  Section  2.01)  Spare  engines  are not  included  in the
Collateral.

     On the Issuance Date,  Continental  entered into a Security  Agreement (the
"Security  Agreement"  and,  together  with  any  other  agreement  under  which
Continental may grant a lien for the benefit of the Noteholders, the "Collateral
Agreements")  with the Trustee,  acting as security agent (the "Security  Agent"
and,  together with any collateral agent under any other  Collateral  Agreement,
the "Collateral Agents"), providing for the grant of the lien on the Collateral.
In  addition,  on the  Issuance  Date,  Continental  entered  into a  Collateral
Maintenance Agreement (the "Collateral  Maintenance  Agreement") with the Policy
Provider,  providing for appraisal  reports and certain other  requirements with
respect to the Collateral.  The following  summarizes  certain provisions of the
Security  Agreement and Collateral  Maintenance  Agreement relating to the spare
parts included in the Collateral (the "Pledged Spare Parts").

     APPRAISALS AND MAINTENANCE OF RATIOS

     Continental  is required to furnish to the Policy  Provider and the Trustee
by the fifth  Business Day of February  and the fifth  Business Day of August in
each year,  commencing in August 2003, so long as the Notes are  outstanding,  a
certificate of an independent appraiser. Such certificates are required to state
such  appraiser's  opinion of the fair market value of the Collateral and of the
Rotables  included in the Collateral,  determined on the basis of a hypothetical
sale negotiated in an arm's length free market transaction between a willing and
able  seller  and a  willing  and able  buyer,  neither  of whom is under  undue
pressure to complete the transaction,  under then current market conditions (the
"Fair Market  Value").  This  appraisal  will not apply to any cash or permitted
investment  securities (the "Cash  Collateral")  then held as collateral for the
Notes,  and such  securities  will be valued by the Trustee in  accordance  with
customary  financial  market  practices.  Such  valuations  will then be used to
calculate the  "Collateral  Ratio"  applicable to the Notes,  which shall mean a
percentage  determined  by dividing (i) the  aggregate  principal  amount of all
outstanding  Notes minus the sum of the Cash  Collateral  held by the Collateral
Agent by (ii) the  Fair  Market  Value  of all  Collateral  (excluding  any Cash
Collateral)  as set  forth in such  independent  appraiser's  certificate.  Such
valuations will also be used to calculate the "Rotable Ratio"  applicable to the
Notes, which shall mean a percentage  determined by dividing (i) the Fair Market
Value of the Rotables as set forth in such independent  appraiser's  certificate



by (ii) the aggregate principal amount of all outstanding Notes minus the sum of
the  Cash  Collateral  held by the  Collateral  Agent.  The  calculation  of the
Collateral  Ratio  and  Rotable  Ratio  will be set  forth in a  certificate  of
Continental. (Collateral Maintenance Agreement, Article 2)

     If the Collateral  Ratio as so determined is greater than 45%,  Continental
will be  required,  within 90 days after the date of  Continental's  certificate
calculating such Collateral Ratio, to:

     o    subject  additional  Qualified Spare Parts to the lien of the Security
          Agreement;

     o    grant a security  interest  in other  property to secure the Notes for
          the benefit of the Noteholders  (which  thereafter will be included as
          "Collateral"  for  purposes  of the  Notes),  but  only if the  Policy
          Provider   agrees  and   Continental   shall  have  received   written
          confirmation from each nationally recognized rating agency then rating
          the Notes at Continental's request (a "Rating Agency") that the use of
          such  additional  collateral and the related  agreements to reduce the
          Collateral  Ratio will not result in a reduction of the rating for the
          Notes  below  the then  current  rating  for the  Notes  (such  rating
          determined without regard to the Policy) or a withdrawal or suspension
          of the rating of the Notes;

     o    provide  additional  Cash  Collateral to the Security  Agent under the
          Security  Agreement   (provided  that  if  Continental's   cash,  cash
          equivalents  and  certain  other  marketable   securities  as  of  the
          applicable  determination  date was less than  $600,000,000,  then the
          total amount of Cash Collateral may not exceed $20,000,000);

     o    deliver Notes to the Trustee for cancellation; o redeem some or all of
          the Notes; or

     o    any combination of the foregoing;

such that the Collateral  Ratio,  as  recalculated  giving effect to such action
(but  otherwise  using the  information  most  recently  used to  determine  the
Collateral  Ratio),  would  not be  greater  than 45%.  (Collateral  Maintenance
Agreement, Section 3.1(a))

     If the Rotable Ratio as so determined is less than 150%,  Continental  will
be  required,  within  90  days  after  the  date of  Continental's  certificate
calculating such Rotable Ratio, to:

     o    subject additional Rotables to the lien of the Security Agreement;

     o    provide  additional  Cash  Collateral to the Security  Agent under the
          Security  Agreement   (provided  that  if  Continental's   cash,  cash
          equivalents  and  certain  other  marketable   securities  as  of  the
          applicable  determination  date was less than  $600,000,000,  then the
          total amount of Cash Collateral may not exceed $20,000,000);

     o    deliver Notes to the Trustee for cancellation;

     o    redeem some or all of the Notes; or

     o    any combination of the foregoing;

such that the Rotable Ratio, as  recalculated  giving effect to such action (but
otherwise  using the  information  most  recently  used to determine the Rotable
Ratio), would not be less than 150%. (Collateral Maintenance Agreement,  Section
3.1(b))



     If  Continental  provides  additional  Cash  Collateral to comply with such
maximum Collateral Ratio or minimum Rotable Ratio  requirement,  it must, within
90 days after providing such Cash Collateral, take additional action (other than
providing Cash Collateral) to cause the Collateral Ratio  (calculated to exclude
such Cash  Collateral) not to be greater than 45% and to cause the Rotable Ratio
(calculated  to  exclude  such  Cash  Collateral)  not  to be  less  than  150%.
(Collateral  Maintenance  Agreement,  Section 3.1(e)) If the Collateral Ratio is
less than the maximum Collateral Ratio and the Rotable Ratio is greater than the
minimum  Rotable  Ratio,  in each case as most recently  determined as described
above,  and  the  Security  Agent  held  Cash  Collateral  as  of  the  relevant
determination  date,  Continental  may withdraw Cash Collateral in excess of the
amount  necessary  to comply  with such  ratios.  (Security  Agreement,  Section
7.03(b)).

     Continental  deposited  Cash  Collateral of  $13,056,950  with the Security
Agent upon  initial  issuance  of the Old Notes,  which  resulted  in an initial
Collateral  Ratio of 45% based on the initial  appraisal  as of August 25, 2002,
prepared by SH&E. See  "Description of the Appraisal".  Without giving effect to
such  deposit,  the  initial  Collateral  Ratio  would have been 48%.  Using the
appraisal of the  Collateral  determined  as of December  25, 2002,  and without
giving effect to such deposit,  the Collateral  Ratio would have been 45.8%. See
"Description of the Appraisal".  The calculation of the Collateral  Ratio at the
time of the next  semiannual  appraisal  due in August 2003 will be made without
giving effect to such Cash Collateral  deposit.  Continental  expects to satisfy
the maximum  Collateral  Ratio  requirement  at that time based on its projected
purchases of spare parts, in which case Continental will be entitled to withdraw
such Cash  Collateral.  However,  no  assurance  can be given  that the  maximum
Collateral Ratio requirement will be satisfied based on such purchases. If it is
not,  Continental  will be  required  to take one or more of the  other  actions
described  above  (other  than  providing  Cash   Collateral)  to  satisfy  such
requirement.

     Continental is required to furnish to the Policy  Provider and the Trustee,
within ten Business Days after each May 1 and November 1, commencing with May 1,
2003, a report providing certain  information  regarding the quantity of Pledged
Spare Parts included in the Collateral and compliance with certain  requirements
of the Collateral Maintenance Agreement.

     FLEET REDUCTION

     The  Collateral   Maintenance   Agreement  requires  that  the  outstanding
principal  amount of Notes be reduced if the total  number of aircraft of any of
the four aircraft model groups listed below in  Continental's  in-service  fleet
during  any period of 60  consecutive  days is less than the  minimum  specified
below for such group (other than due to  restrictions on operating such aircraft
imposed by the FAA or any other U.S. Government agency):

     AIRCRAFT MODEL                                               MINIMUM
     --------------                                               -------
     o    Boeing 737-700, Boeing 737-800 and
          Boeing 737-900 Aircraft..............................   63.Aircraft
     o    Boeing 757-200 and Boeing 757-300 Aircraft...........   23.Aircraft
     o    Boeing 767-200 and Boeing 767-400 Aircraft...........   13.Aircraft
     o    Boeing 777-200 Aircraft..............................    9.Aircraft

     If any of the foregoing specified minimums is not so satisfied with respect
to any  aircraft  model  group,  then  within  90 days  after  such  occurrence,
Continental  must redeem Notes or deliver Notes to the Trustee for  cancellation
(or a combination  thereof) in a percentage of the outstanding  principal amount
of all Notes  determined  by dividing the  appraised  value of the Pledged Spare
Parts that are appropriate for  installation on, or use in, only the aircraft of
such  model  group,  or the  engines  utilized  only  on such  aircraft,  by the
appraised value of the Collateral.  (Collateral  Maintenance Agreement,  Section
3.3)

     LIENS

     Continental  is required to  maintain  the Pledged  Spare Parts free of any
liens,  other than the rights of the Trustee,  the  Noteholders  and Continental
arising under the Indenture or the other Operative  Documents  related  thereto,
and other than certain limited liens  permitted under such documents,  including
but not limited to (i) liens for taxes either not yet due or being  contested in
good faith by appropriate proceedings; (ii) materialmen's,  mechanics' and other
similar liens arising in the ordinary course of business that either are not yet
delinquent  for  more  than 60 days or are  being  contested  in good  faith  by
appropriate  proceedings;  (iii)  judgment  liens  so long as such  judgment  is



discharged or vacated within 60 days or the execution of such judgment is stayed
pending  appeal  or  discharged,  vacated  or  reversed  within  60  days  after
expiration  of such stay;  and (iv) any other lien as to which  Continental  has
provided a bond or other  security  adequate  in the  reasonable  opinion of the
Security Agent;  provided that in the case of each of the liens described in the
foregoing clauses (i), (ii) and (iii), such liens and proceedings do not involve
any material risk of the sale,  forfeiture or loss of the Pledged Spare Parts or
the  interest of the Security  Agent  therein or impair the lien of the Security
Agreement. (Collateral Maintenance Agreement, Section 3.4)

     MAINTENANCE

     Continental is required to maintain the Pledged Spare Parts in good working
order and condition, excluding (i) Pledged Spare Parts that have become worn out
or unfit for use and not reasonably  repairable or obsolete,  (ii) Pledged Spare
Parts  that are not  required  for  Continental's  normal  operations  and (iii)
expendable parts that have been consumed or used in Continental's operations. In
addition,  Continental  must  maintain  all  records,  logs and other  materials
required  by the FAA or under  the  Federal  Aviation  Act to be  maintained  in
respect of the Pledged Spare Parts.  (Collateral Maintenance Agreement,  Section
3.5)

     USE AND POSSESSION

     Continental  has the  right to deal  with the  Pledged  Spare  Parts in any
manner consistent with its ordinary course of business.  This includes the right
to install on, or use in, any aircraft, engine or Qualified Spare Part leased to
or owned by  Continental  any  Pledged  Spare  Part,  free  from the lien of the
Security Agreement. (Security Agreement Section 4.02(a))

     Continental may not sell, lease,  transfer or relinquish  possession of any
Pledged  Spare Part without the prior  written  consent of the Policy  Provider,
except as  permitted by the Security  Agreement  or the  Collateral  Maintenance
Agreement.  So long as no Event  of  Default  has  occurred  and is  continuing,
Continental  may sell,  transfer or dispose of Pledged Spare Parts free from the
Lien of the Security Agreement.  (Security Agreement,  Section 4.03(a)) However,
as of any date during the period  between the dates of  independent  appraiser's
certificates  delivered pursuant to the Collateral  Maintenance  Agreement,  the
aggregate  appraised value of all Pledged Spare Parts (x) previously during such
period sold, transferred or disposed of (with certain exceptions) may not exceed
2% of the appraised value of the Collateral, (y) then subject to leases or loans
may not exceed 2% of the appraised  value of the  Collateral  or (z)  previously
during such period moved from a Designated  Location to a location that is not a
Designated Location (with certain exceptions) may not exceed 2% of the appraised
value of the Collateral. (Collateral Maintenance Agreement, Section 3.2)

     Continental may, in the ordinary course of business, transfer possession of
any Pledged Spare Part to the manufacturer thereof or any other organization for
testing, overhaul, repairs, maintenance,  alterations or modifications or to any
person for the  purpose  of  transport  to any of the  foregoing.  In  addition,
Continental  may  dismantle  any Pledged  Spare Part that has become worn out or
obsolete or unfit for use and may sell or dispose of any such Pledged Spare Part
or any  salvage  resulting  from  such  dismantling,  free  from the lien of the
Security  Agreement.  Continental  also may subject any Pledged  Spare Part to a
pooling,  exchange,  borrowing or maintenance  servicing  agreement  arrangement
customary in the airline  industry  and entered  into in the ordinary  course of
business;  provided,  however,  that if Continental's  title to any such Pledged
Spare Part shall be  divested  under any such  agreement  or  arrangement,  such
divestiture  shall be deemed to be a sale with  respect  to such  Pledged  Spare
Part. (Collateral Maintenance Agreement, Section 3.6(a))

     So long as no Event of  Default  shall  have  occurred  and be  continuing,
Continental may enter into a lease with respect to any Pledged Spare Part to any
U.S.  air  carrier  that is not  then  subject  to any  bankruptcy,  insolvency,
liquidation,  reorganization,  dissolution  or similar  proceeding and shall not
have  substantially  all of its property in the  possession  of any  liquidator,
trustee,  receiver or similar person. In the case of any such lease, Continental
will  include in such  lease  appropriate  provisions  which (i) make such lease
expressly subject and subordinate to all of the terms of the Security Agreement,
including  the rights of the Security  Agent to avoid such lease in the exercise
of its rights to  repossession  of the  Pledged  Spare  Parts  thereunder;  (ii)
require the lessee to comply with the insurance  requirements  of the Collateral
Maintenance  Agreement;  and (iii)  require that the Pledged Spare Parts subject
thereto be used in accordance with the  limitations  applicable to the Company's
use,  possession  and  location  of such  Pledged  Spare  Parts  provided in the
Collateral Maintenance Agreement and the Security Agreement (including,  without





limitation,  that such  Pledged  Spare  Parts be kept at one or more  Designated
Locations). (Collateral Maintenance Agreement, Section 3.6(b))

     DESIGNATED LOCATIONS

     Continental  is required to keep the Pledged  Spare Parts at one or more of
the designated  locations specified in the Security Agreement or added from time
to  time  by  Continental  in  accordance  with  the  Security   Agreement  (the
"Designated  Locations"),  except as  otherwise  permitted  under  the  Security
Agreement and Collateral  Maintenance  Agreement.  (Security Agreement,  Section
4.02(b))  Continental  is entitled to hold  Qualified  Spare Parts at  locations
other than  Designated  Locations.  The lien of the Security  Agreement does not
apply to any spare part not located at a Designated Location.

     INSURANCE

     Continental is required to maintain  insurance  covering physical damage to
the Pledged Spare Parts.  Such insurance must provide for the  reimbursement  of
Continental's  expenditure  in repairing  or replacing  any damaged or destroyed
Pledged  Spare Part. If any such Pledged Spare Part is not repaired or replaced,
such  insurance  must  provide  for the  payment  of the amount it would cost to
repair or replace  such  Pledged  Spare Part,  on the date of loss,  with proper
deduction for  obsolescence  and physical  depreciation.  However,  after giving
effect to self-insurance permitted as described below, the amounts payable under
such insurance may be less.

     All  insurance  proceeds  paid  under  such  policies  as a  result  of the
occurrence  of an  "Event of Loss"  with  respect  to any  Pledged  Spare  Parts
involving  proceeds  in  excess  of $2  million,  up to 110% of the  outstanding
principal amount of the Notes (the "Debt Balance"), will be paid to the Security
Agent.  The entire amount of any  insurance  proceeds not involving an "Event of
Loss" with  respect to any  Pledged  Spare  Parts or  involving  proceeds  of $2
million or less,  and the  amount of  insurance  proceeds  in excess of the Debt
Balance,  will be paid to the  Company so long as no Payment  Default,  Event of
Default or Continental Bankruptcy Event shall be continuing. For these purposes,
"Event of Loss" means,  with respect to any Pledge Spare Part, its  destruction,
damage beyond repair,  damage that results in the receipt of insurance  proceeds
on the same basis as  destruction  or loss of  possession  by the Company for 90
consecutive days as a result of theft or  disappearance.  Any such proceeds held
by the Security  Agent will be disbursed to  Continental to reimburse it for the
purchase of additional  Qualified Spare Parts after the occurrence of such Event
of Loss.  In addition,  such proceeds  will be disbursed to  Continental  to the
extent it would not cause the Collateral Ratio, as subsequently  determined,  to
exceed the maximum Collateral Ratio.

     Continental  is also required to maintain third party  liability  insurance
with  respect  to  the  Pledged  Spare  Parts,  in an  amount  and  scope  as it
customarily maintains for equipment similar to the Pledged Spare Parts.

     Continental  may  self-insure  the risks required to be insured  against as
described  above in such  amounts as shall be  consistent  with normal  industry
practice.

EVENT OF DEFAULT

     Each of the following constitutes an "Event of Default" with respect to the
Notes:

     o    Failure  by  Continental  to pay (i)  principal  of,  interest  on, or
          Premium,  if any, or Break  Amount,  if any, with respect to, any Note
          when due, and such failure shall remain  unremedied  for more than ten
          Business Days (it being understood that any amount  distributed to the
          Noteholders  in respect of the  foregoing  from funds  provided by the
          Policy Provider, the Liquidity Provider or the Cash Collateral Account
          shall not be deemed to cure  such  Default)  or (ii) any other  amount
          payable  by it to the  Noteholders  under the  Indenture  or any other
          Operative  Document when due, and such failure shall continue for more
          than ten Business Days after  Continental has received  written notice
          from the Trustee of the failure to make such payment when due (without
          giving  effect  to  any  such  notice  or  grace  period,  a  "Payment
          Default").




     o    Failure by  Continental to observe or perform (or cause to be obtained
          and performed) in any material  respect any other covenant,  agreement
          or  obligation  set forth in the  Indenture or in any other  Operative
          Document,  and such failure shall  continue after notice and specified
          cure periods.

     o    Any representation or warranty made by Continental in the Indenture or
          any  Operative  Document  (a)  shall  prove  to have  been  untrue  or
          inaccurate  in any  material  respect  as of the date  made,  (b) such
          untrue or  inaccurate  representation  or  warranty is material at the
          time in question and (c) the same shall remain  uncured (to the extent
          of the adverse impact of such  incorrectness  on the Trustee) for more
          than 30 days  after the date of  written  notice  from the  Trustee to
          Continental.

     o    The  occurrence of certain  events of  bankruptcy,  reorganization  or
          insolvency of Continental  (each, a "Continental  Bankruptcy  Event").
          (Section 7.1)

     If an event occurs and is  continuing  which is, or after notice or passage
of time, or both, would be an Event of Default (a "Default") and if such Default
is known the Trustee,  the Trustee shall mail to each Noteholder,  the Liquidity
Provider  and the Policy  Provider a notice of the Default  within 90 days after
the occurrence thereof except as otherwise  permitted by the Trust Indenture Act
of 1939,  as amended (the "TIA").  Except in the case of a Default in payment of
principal of, or interest on, or Premium,  if any, or Break Amount, if any, with
respect to, any Note,  the Trustee may withhold the notice if and so long as it,
in good faith, determines that withholding the notice is in the interests of the
Noteholders. (Section 8.5)

REMEDIES

     If an Event of Default (other than a Continental  Bankruptcy  Event) occurs
and is continuing,  the Controlling  Party may, by notice to Continental and the
Trustee,  and the  Trustee  shall,  upon the request of the  Controlling  Party,
declare all unpaid principal of, accrued but unpaid interest on, and Premium, if
any, and Break Amount,  if any, with respect to, the outstanding Notes and other
amounts  otherwise  payable under the  Indenture,  if any, to be due and payable
immediately. If a Continental Bankruptcy Event occurs, such amounts shall be due
and payable without any declaration or other act on the part of the Trustee, the
Controlling Party or any Noteholder. (Section 7.2)

     The Controlling  Party by notice to the Trustee may rescind an acceleration
and its  consequences  if (a) all  existing  Events of  Default,  other than the
non-payment as to the Notes of the  principal,  interest,  Premium,  if any, and
Break Amount,  if any, with respect thereto and other amounts  otherwise payable
under the Indenture, if any, which have become due solely by such declaration of
acceleration,  have been cured or waived,  (b) to the extent the payment of such
interest is permitted by law,  interest on overdue  installments of interest and
on overdue  principal which has become due otherwise than by such declaration of
acceleration,  has been paid,  (c) the  rescission  would not conflict  with any
judgment or decree of a court of  competent  jurisdiction,  and (d) all payments
due to the  Trustee  and  any  predecessor  Trustee  have  been  made.  No  such
rescission shall affect any subsequent  default or impair any right arising from
any subsequent default. (Section 7.2)

     If an Event of Default occurs and is continuing, the Trustee may pursue any
available  remedy by  proceeding  at law or in equity to collect  the payment of
principal of,  interest on, or Premium,  if any, or Break  Amount,  if any, with
respect to, the Notes or other amounts otherwise payable under the Indenture, if
any,  or to  enforce  the  performance  of any  provision  of the  Notes  or the
Indenture,  including instituting  proceedings and exercising and enforcing,  or
directing  exercise and  enforcement  of, all rights and remedies of the Trustee
and the  Collateral  Agent  under the  Operative  Documents  and  directing  the
Collateral  Agent to deposit with the Trustee all cash or investment  securities
held by the Collateral  Agent.  The Trustee may maintain a proceeding even if it
does  not  possess  any of the  Notes  or does  not  produce  any of them in the
proceeding.  A delay or omission by the Trustee or any  Noteholder in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default.  No
remedy is exclusive of any other remedy.  All available remedies are cumulative.
(Section 7.3)

     The Controlling Party by notice to the Trustee may authorize the Trustee to
waive an  existing  Default or Event of Default and its  consequences,  except a
Default (i) in the payment of principal of, interest on, or Premium,  if any, or
Break  Amount,  if any,  with respect to, any Note that has not been paid to the
Noteholder from funds provided by the Policy Provider, the Liquidity Provider or



the Cash Collateral Account or (ii) in respect of a covenant or provision of the
Indenture  which  cannot be  modified  or  amended  without  the  consent of the
Liquidity  Provider,  the Policy  Provider and the holder of each Note affected.
When a Default or Event of Default is waived,  it is cured and  ceases,  and the
Company,  the Liquidity Provider,  the Policy Provider,  the Noteholders and the
Trustee  shall be  restored  to their  former  positions  and  rights  hereunder
respectively; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon. (Section 7.4)

     Except to  enforce  the right to  receive  payment  when due of  principal,
interest,  Premium,  if any, and Break  Amount,  if any, no holder of a Note may
institute  any remedy with  respect to the  Indenture  or the Notes  unless such
holder has previously  given to the Trustee written notice of a continuing Event
of Default, the holders of 25% or more of the principal amount of the Notes then
outstanding  have requested that the Trustee pursue the remedy,  such holder has
offered the Trustee indemnity against loss,  liability and expense  satisfactory
to the  Trustee,  the Trustee has failed so to act for 60 days after  receipt of
the same and during such 60-day period,  and the Controlling Party has not given
the Trustee a direction inconsistent with the request. (Section 7.6)

     The Controlling  Party may direct the time,  method and place of conducting
any proceeding for any remedy available to the Trustee (as Trustee or Collateral
Agent, subject, in the case of any actions based on the status of the Trustee as
Collateral  Agent, to any limitations  otherwise  expressly  provided for in the
Operative  Documents) or exercising any trust or power conferred on it; provided
that the Trustee may take any other action deemed proper by the Trustee which is
not  inconsistent  with such  direction.  The  Trustee  may refuse to follow any
direction or authorization  that conflicts with law or the Indenture or that the
Trustee determines may subject the Trustee to personal  liability.  In addition,
at any time after a Policy  Provider  Default,  the Trustee may refuse to follow
any  direction  or  authorization  that the  Trustee  determines  may be  unduly
prejudicial to the rights of another Noteholder. However, the Trustee shall have
no liability  for any actions or omissions to act which are in  accordance  with
any such direction or authorization. (Section 7.5)

     The Controlling  Party shall not direct the Trustee or any Collateral Agent
to sell or otherwise  dispose of any Collateral  unless all unpaid principal of,
accrued but unpaid interest on, and Premium,  if any, and Break Amount,  if any,
with respect to, the outstanding Notes and other amounts otherwise payable under
the  Indenture,  if any,  shall be declared or otherwise  become due and payable
immediately. (Section 7.5)

     In the case of Chapter 11 bankruptcy proceedings,  Section 1110 of the U.S.
Bankruptcy Code ("Section  1110") provides special rights to holders of security
interests  with  respect to  "equipment"  (defined as  described  below).  Under
Section 1110, the right of such holders to take  possession of such equipment in
compliance  with the  provisions of a security  agreement is not affected by any
provision of the U.S. Bankruptcy Code or any power of the bankruptcy court. Such
right to take  possession may not be exercised for 60 days following the date of
commencement of the reorganization  proceedings.  Thereafter, such right to take
possession may be exercised  during such proceedings  unless,  within the 60-day
period or any longer  period  consented to by the relevant  parties,  the debtor
agrees to  perform  its future  obligations  and cures all  existing  and future
defaults  on a timely  basis.  Defaults  resulting  solely  from  the  financial
condition,  bankruptcy,  insolvency or  reorganization of the debtor need not be
cured.

     "Equipment"  is defined in Section 1110, in part, as an aircraft,  aircraft
engine, propeller, appliance or spare part (as defined in Section 40102 of Title
49 of the U.S. Code) that is subject to a security  interest  granted by, leased
to, or  conditionally  sold to a debtor that,  at the time such  transaction  is
entered into,  holds an air carrier  operating  certificate  issued  pursuant to
chapter 447 of Title 49 of the U.S. Code for aircraft capable of carrying ten or
more individuals or 6,000 pounds or more of cargo.

     On the  Issuance  Date,  Hughes  Hubbard & Reed  LLP,  outside  counsel  to
Continental,  provided its opinion to the Trustee and the Policy  Provider  that
the Security Agent will be entitled to the benefits of Section 1110 with respect
to the  Pledged  Spare  Parts,  assuming  that,  at the  time  of the  issuance,
Continental held an air carrier operating certificate issued pursuant to chapter
447 of Title 49 of the U.S.  Code for  aircraft  capable of carrying ten or more
individuals or 6,000 pounds or more of cargo.




CONTROLLING PARTY

     The Trustee  and the  Security  Agent will be  directed by the  Controlling
Party in taking action under the Indenture and other agreements  relating to the
Notes,  including in amending such agreements and granting  waivers  thereunder,
except for  certain  provisions  that  cannot be amended or waived  without  the
consent of each Noteholder affected thereby. If an Event of Default has occurred
and is  continuing,  the  Controlling  Party  will  direct the  Trustee  and the
Security Agent in exercising remedies under the Indenture and under the Security
Agreement, subject to the limitations described below. (Section 3.8(a))

     The "Controlling Party" will be:

     o    The Policy  Provider or, if a Policy  Provider  Default is continuing,
          the holders of more than 50% in aggregate  unpaid  principal amount of
          the Notes then outstanding.

     o    Under the circumstances described in the next paragraph, the Liquidity
          Provider.

     At any time after the Liquidity  Provider  Reimbursement  Date, if a Policy
Provider  Default  attributable  to a  failure  to  make a  drawing  to pay  the
Liquidity Provider, as described under "Description of the Policy and the Policy
Provider Agreement--The  Policy--Liquidity Provider Drawing", is continuing, the
Liquidity  Provider (so long as the Liquidity  Provider has not defaulted in its
obligation  to make any advance  under the  Liquidity  Facility)  shall have the
right to become the  Controlling  Party,  provided  that if the Policy  Provider
subsequently pays to the Liquidity Provider all outstanding  drawings,  together
with accrued interest thereon owing under the Liquidity  Facility,  and no other
Policy Provider Default has occurred and is continuing, then the Policy Provider
shall be the  Controlling  Party so long as no Policy  Provider  Default  occurs
after the date of such payment. (Section 3.8(c))

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

PRIORITY OF DISTRIBUTIONS

     On each Distribution  Date, all payments received by the Trustee in respect
of the Notes will be promptly distributed in the following order:

     o    If an Event of Default  shall have  occurred and be continuing on such
          Distribution Date, to the Trustee, the Policy Provider,  the Liquidity
          Provider  and any  Noteholder  to the extent  required  to pay certain
          out-of-pocket  costs and expenses  actually incurred by the Trustee or
          the Policy Provider or to reimburse the Policy Provider, the Liquidity
          Provider or any  Noteholder in respect of payments made to the Trustee
          in connection  with the  protection or realization of the value of the
          Collateral.

     o    To the Liquidity  Provider to the extent required to pay the Liquidity
          Expenses and to the Policy Provider to pay the Policy Expenses.

     o    To the  Liquidity  Provider  to the extent  required  to pay  interest
          accrued on the  Liquidity  Obligations  (as  determined  after  giving
          effect to certain  payments by the Policy  Provider  to the  Liquidity
          Provider),  to the  Policy  Provider  to the  extent  required  to pay
          interest  accrued on certain Policy Provider  Obligations  and, if the




          Policy  Provider has paid to the  Liquidity  Provider all  outstanding
          drawings and interest thereon owing to the Liquidity Provider,  to the
          Policy  Provider  to the  extent  required  to  reimburse  the  Policy
          Provider for the amount of such payment made to the Liquidity Provider
          attributable to interest accrued on such drawings.

     o    To (i)  the  Liquidity  Provider  to the  extent  required  to pay the
          outstanding  amount of all Liquidity  Obligations (as determined after
          giving  effect to  certain  payments  by the  Policy  Provider  to the
          Liquidity   Provider),   (ii)  if  applicable,   unless  (x)  on  such
          Distribution Date the Notes are  Non-Performing  and a Liquidity Event
          of Default  shall have  occurred  and be  continuing  or (y) the Final
          Drawing shall have occurred,  to replenish the Cash Collateral Account
          up to the  Required  Amount  (less  the  amount of any  repayments  of
          Interest Drawings under the Liquidity Facility while sub-clause (x) of
          this clause is applicable)  and (iii) if the Policy  Provider has paid
          to the  Liquidity  Provider  all  outstanding  drawings  and  interest
          thereon owing to the Liquidity Provider, to the Policy Provider to the
          extent  required to  reimburse  the Policy  Provider for the amount of
          such payment made to the Liquidity Provider in respect of principal of
          drawings under the Liquidity Facility.

     o    If an Event of Default  shall have  occurred and be continuing on such
          Distribution Date and at all times  thereafter,  to the Trustee or any
          Noteholder, to the extent required to pay certain fees, taxes, charges
          and other amounts payable.

     o    To the  Noteholders to the extent  required to pay in full amounts due
          on such Distribution Date.

     o    To the Policy  Provider to the extent  required to pay Policy Provider
          Obligations  (other than  amounts  payable  pursuant to the first four
          clauses  above).

     o    To the  Trustee for the payment of certain  fees and  expenses  (other
          than amounts payable pursuant to the first and fifth clauses above).

     o    To the  Company  (unless  on such  Distribution  Date  (i) an Event of
          Default has occurred and is  continuing  or (ii) any amount due to the
          Liquidity  Provider  or the Policy  Provider  from the Company has not
          been paid). (Section 3.2)

     "Liquidity  Obligations"  means the  obligations to reimburse or to pay the
Liquidity Provider all principal,  interest,  fees and other amounts owing to it
under the Liquidity Facility or certain other agreements.

     "Liquidity  Expenses"  means  the  Liquidity  Obligations  other  than  any
interest  accrued  thereon  or the  principal  amount of any  drawing  under the
Liquidity Facility.

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

     "Policy Provider  Obligations"  means all  reimbursement and other amounts,
including fees and indemnities  (to the extent not included in Policy  Expenses)
due to the Policy  Provider  under the Policy  Provider  Agreement  and,  if the
Liquidity  Provider  has failed to honor any Interest  Drawing,  interest on any
Policy Drawing made to cover the shortfall  attributable  to such failure by the
Liquidity  Provider in an amount equal to the amount of interest that would have
accrued on such Interest  Drawing if such Interest  Drawing had been made at the
interest rate applicable to such Interest  Drawing until such Policy Drawing has
been repaid in full.  Except as provided in the  definition  of Policy  Provider
Obligations, no interest will accrue on any Policy Drawing.




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

     "Policy Drawing" means any payment of a claim under the Policy.

     Interest Drawings under the Liquidity  Facility,  withdrawals from the Cash
Collateral  Account and  drawings  under the Policy will be  distributed  to the
Trustee for  distribution to the  Noteholders,  notwithstanding  the priority of
distributions  set forth in the Indenture and otherwise  described  herein.  All
amounts  on  deposit in the Cash  Collateral  Account  that are in excess of the
Required Amount will be paid to the Liquidity Provider.

     If any  Distribution  Date is a  Saturday,  Sunday  or  other  day on which
commercial  banks are  authorized  or required  to close in New York,  New York,
Houston,  Texas, or Wilmington,  Delaware, or, which is not a day for trading by
and between banks in the London interbank Eurodollar market (any other day being
a "Business Day"),  distributions scheduled to be made on such Distribution Date
will be made on the next  succeeding  Business Day, and interest  shall be added
for such additional period.

POSSIBLE ISSUANCE OF SUBORDINATED NOTES

     Continental  may elect to issue  additional  notes under the Indenture that
are  subordinated  in the  right to  receive  distributions  to the  Notes  (the
"Subordinated  Notes").  The Indenture  provides that  Continental's  ability to
issue  any  Subordinated   Notes  is  contingent  upon  its  obtaining   written
confirmation from the Rating Agency that the issuance of such Subordinated Notes
will not  result  in a  withdrawal  or  downgrading  of the  rating of the Notes
(without regard to the Policy).

MODIFICATIONS AND WAIVER OF THE INDENTURE AND CERTAIN OTHER AGREEMENTS

     The Company,  the Trustee and the Collateral  Agent may amend or supplement
the Indenture,  the Notes,  the other  Operative  Documents and, upon request of
Continental,  the Trustee shall amend or supplement  the Support  Documents,  in
each case without the consent of the Noteholders:

     o    To provide  for  uncertificated  Notes in  addition  to or in place of
          certificated Notes.

     o    To provide for the assumption of the Company's  obligations  under the
          Operative   Documents   and  the  Notes  in  the  case  of  a  merger,
          consolidation or conveyance, transfer or lease of all or substantially
          all of the assets of the Company.

     o    To comply with any  requirements  of the Commission in connection with
          the qualification of the Indenture under the TIA.

     o    To provide for a replacement Liquidity Provider.

     o    To  provide  for  the  effectiveness  of  any  additional   Collateral
          Agreement.

     o    To provide for the issuance of the Subordinated Notes.

     o    To comply with the requirements of DTC,  Euroclear Bank or Clearstream
          Banking or the Trustee with respect to the provisions of the Indenture
          or the Notes  relating  to  transfers  and  exchanges  of the Notes or
          beneficial interests therein.

     o    To provide for any successor Trustee or Collateral Agent.




     o    To cure any ambiguity, defect or inconsistency.

     o    To make any other change not inconsistent with the Indenture  provided
          that such action does not materially adversely affect the interests of
          any Noteholder. (Section 10.1)

     The Company and the Policy  Provider  can amend or modify any  provision of
the Collateral  Maintenance  Agreement (including the provisions described under
"--Appraisals  and  Maintenance  of  Ratios",  "--Fleet  Reduction",  "--Liens",
"--Maintenance",  "--Insurance" and "--Use and Possession")  without the consent
of the Trustee,  the  Collateral  Agent or any  Noteholders,  except for certain
limited  provisions.  The  Company,  the  Trustee and the  Collateral  Agent may
otherwise  amend or supplement the Indenture,  the Notes and the other Operative
Documents (other than the Collateral Maintenance  Agreement),  and, upon consent
of the Company, the Trustee shall amend or supplement the Support Documents,  in
each  case  only  with  the  written  consent  of  the  Controlling  Party.  The
Controlling  Party may  authorize  the  Trustee  to, and the  Trustee  upon such
authorization  shall,  waive compliance by the Company with any provision of the
Indenture,  the  Notes  or the  other  Operative  Documents.  However,  no  such
amendment,  supplement  or waiver may,  without  the consent of each  Noteholder
affected:

     o    Reduce the amount of Notes whose holders must consent to an amendment,
          supplement or waiver.

     o    Reduce the rate or extend  the time for  payment  of  interest  on any
          Note.

     o    Reduce the amount or extend the time for payment of  principal  of, or
          Premium,  if any, or Break  Amount,  if any,  with respect to (in each
          case, whether on redemption or otherwise), any Note.

     o    Change the place of payment  where,  or the coin or currency in which,
          any Note (or the  redemption  price  thereof),  interest  thereon,  or
          Premium,  if any, or Break Amount,  if any, with respect  thereto,  is
          payable.

     o    Change the  priority  of  distributions  and  application  of payments
          specified in the  Indenture  (except to provide for  distributions  on
          Subordinated Notes after the distribution to Noteholders as originally
          provided in the Indenture).

     o    Waive a default in the payment of the  principal  of,  interest on, or
          Premium, if any, or Break Amount, if any, with respect to, any Note.

     o    Make any  changes to  provisions  in the  Indenture  that  involve the
          waiver of defaults,  the right of  Noteholders  to receive  payment of
          principal of, interest on, and Premium,  if any, and Break Amount,  if
          any, with respect to, any Note on or after the respective due dates.

     o    Impair  the  right  of  any  Noteholder  to  institute  suit  for  the
          enforcement of any amount payable on any Note when due. (Section 10.2)

MERGER, CONSOLIDATION AND TRANSFER OF ASSETS

     Continental  is  prohibited  from  consolidating  with,  merging  into,  or
conveying, transferring or leasing substantially all of its assets to any Person
unless:

     o    The  resulting,  surviving,  transferee  or  lessee  Person  shall  be
          organized  under the laws of the United  States,  any state thereof or
          the District of Columbia and shall be a U.S. air carrier.

     o    The resulting,  surviving, transferee or lessee Person shall expressly
          assume  all  of  the  obligations  of  Continental  contained  in  the
          Indenture, the Notes and any other Operative Documents.

     o    Continental  shall  have  delivered  a  certificate  and an opinion of
          counsel stating that (i) such  transaction,  in effect,  complies with
          such  conditions  and (ii) the  Indenture,  the  Notes  and the  other




          Operative   Documents   constitute  the  valid  and  legally   binding
          obligations of the resulting, surviving, transferee or lessee Person.

     o    Immediately  after  giving  effect  to such  transaction,  no Event of
          Default shall have occurred and be continuing. (Section 5.4)

     The Indenture,  the Notes and the other Operative  Documents do not contain
any  covenants  or  provisions  which may  afford  the  Trustee  or  Noteholders
protection  in  the  event  of  a  highly   leveraged   transaction,   including
transactions  effected by management or affiliates,  which may or may not result
in a change in control of Continental.

INDEMNIFICATION

     Continental  is required to indemnify  the Liquidity  Provider,  the Policy
Provider,  the Trustee and the Collateral  Agent, but not the  Noteholders,  for
certain losses, claims and other matters. (Section 6.1)

GOVERNING LAW

     The  Indenture  and the Notes are  governed by the laws of the State of New
York. (Section 12.8)

THE TRUSTEE

     The Trustee is Wilmington  Trust Company.  Except as otherwise  provided in
the Indenture,  the Trustee, in its individual capacity,  will not be answerable
or  accountable  under the Indenture or under the Notes under any  circumstances
except,  among other things, for its own willful misconduct or gross negligence.
Continental  and its  affiliates  may from time to time enter into  banking  and
trustee relationships with the Trustee and its affiliates. The Trustee's address
is Wilmington  Trust  Company,  Rodney Square North,  1100 North Market  Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration.


BOOK ENTRY; DELIVERY AND FORM

     GENERAL

     The  New  Notes  will  be  represented  by one or  more  global  Notes,  in
definitive, fully registered form without interest coupons (the "Global Notes").
Each Global Note will be deposited  with the Trustee,  as custodian for DTC, and
registered in the name of Cede & Co. ("Cede"), as nominee for DTC.

     DTC has advised  Continental  as follows:  DTC is a limited  purpose  trust
company  organized  under  the  laws  of the  State  of  New  York,  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
Uniform  Commercial  Code and a  "clearing  agency"  registered  pursuant to the
provisions  of  Section  17A of the  Exchange  Act.  DTC  was  created  to  hold
securities for DTC  Participants  and facilitate the clearance and settlement of
securities  transactions between DTC Participants through electronic  book-entry
changes  in  accounts  of DTC  Participants,  thereby  eliminating  the need for
physical movement of certificates.  DTC Participants  include securities brokers
and dealers,  banks,  trust companies,  clearing  corporations and certain other
organizations.  DTC is owned by a number of DTC Participants and by the New York
Stock  Exchange,  Inc.,  the  American  Stock  Exchange  LLC,  and the  National
Association of Securities  Dealers,  Inc.  Indirect  access to the DTC system is
available to others such as banks,  brokers,  dealers and trust  companies  that
clear  through or  maintain a  custodial  relationship  with a DTC  Participant,
either directly or indirectly ("Indirect Participants").

     Ownership of beneficial interests in Global Notes is limited to persons who
have accounts with DTC  Participants  or persons who hold interests  through DTC
Participants. Ownership of beneficial interests in the Global Notes is shown on,
and the transfer of that ownership is effected only through,  records maintained
by DTC or its nominee  (with respect to interests of DTC  Participants)  and the
records of DTC Participants (with respect to interests of persons other than DTC
Participants).  The laws of some  states  require  that  certain  purchasers  of




securities take physical delivery of such securities.  Such limits and such laws
may limit the market for beneficial interests in the Global Notes.

     So long as DTC or its  nominee  is the  registered  owner or  holder of the
Global Notes,  DTC or such nominee,  as the case may be, will be considered  the
sole record  owner or holder of the Notes  represented  by such Global Notes for
all purposes  under the  Indenture.  No beneficial  owners of an interest in the
Global Notes will be able to transfer  that interest  except in accordance  with
DTC's  applicable  procedures,  in  addition  to those  provided  for  under the
Indenture.

     Beneficial   interests  in  the  Global  Notes  will  be   exchangeable  or
transferable, as the case may be, for Notes in definitive, fully registered form
("Definitive  Notes") only if (i) DTC notifies the Trustee that DTC is unwilling
or unable to continue as depositary  for such Notes and successor  depositary is
not  appointed  by the  Trustee  within 90 days of such notice or (ii) after the
occurrence  and  during  the  continuance  of an Event  of  Default,  owners  of
beneficial  interests in the Global Notes (the "Note  Owners")  with a principal
amount aggregating not less than a majority of the outstanding  principal amount
of the Global  Notes  advise the  Trustee,  Continental  and DTC through  Direct
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in their best interests.  (Section 2.5(b))
Upon  the  occurrence  of any  event  described  in  clauses  (i) or (ii) of the
immediately  preceding  sentence,  the  Trustee  will be  required to notify all
Direct  Participants  having a  beneficial  interest in the Global  Notes of the
availability of Definitive  Notes. Upon surrender by DTC of the Global Notes and
receipt of instructions for re-registration,  the Trustee will reissue the Notes
as Definitive Notes to Note Owners. (Section 2.5(d))

     Payments of the  principal  of,  interest  on,  Premium,  if any, and Break
Amount,  if any,  with  respect to, the Global  Notes will be made to DTC or its
nominee,  as  the  case  may  be,  as  the  registered  owner  thereof.  Neither
Continental,  the Trustee,  nor any paying agent will have any responsibility or
liability for any aspect of the records  relating to or payments made on account
of  beneficial  ownership  interests  in the  Global  Notes or for  maintaining,
supervising  or  reviewing  any records  relating to such  beneficial  ownership
interests.

     Continental expects that DTC or its nominee, upon receipt of any payment of
principal  of,  interest on,  Premium,  if any, and Break  Amount,  if any, with
respect to, a Global  Note,  will credit the accounts of DTC  Participants  with
payments in amounts  proportionate to their respective  beneficial  interests in
the principal  amount of such Global Note, as shown on the records of DTC or its
nominee. Continental also expects that payments by DTC Participants to owners of
beneficial interests in such Global Note held through such DTC Participants will
be governed by standing instructions and customary practices, as is now the case
with  securities  held for the accounts of customers  registered in the names of
nominees for such customers.  Such payments will be the  responsibility  of such
DTC Participants.

     Distributions of principal of, interest on, and Premium,  if any, and Break
Amount,  if any, with respect to,  Definitive  Notes will be made by the Trustee
directly  in  accordance  with the  procedures  set forth in the  Indenture,  to
holders in whose  names the  Definitive  Notes were  registered  at the close of
business on the applicable record date. Such distributions will be made by check
mailed to the address of such holder as it appears on the register maintained by
the  Trustee.  The final  payment on any Note,  however,  will be made only upon
presentation and surrender of such Note at the office or agency specified in the
notice of final distribution to Noteholders.

     Neither  Continental  nor  the  Trustee  has  any  responsibility  for  the
performance  by  DTC,  DTC  Participants  or  Indirect   Participants  of  their
respective   obligations   under  the  rules  and  procedures   governing  their
operations.

     SAME-DAY SETTLEMENT AND PAYMENT

     As long as the  Notes  are  registered  in the name of DTC or its  nominee,
Continental  will  make all  payments  to the  Trustee  under the  Indenture  in
immediately available funds. The Trustee will pass through to DTC in immediately
available  funds all payments  received  from  Continental,  including the final
distribution of principal with respect to the Notes.

     Any Notes  registered in the name of DTC or its nominee will trade in DTC's
Same-Day Funds  Settlement  System until  maturity.  DTC will require  secondary




market trading  activity in the Notes to settle in immediately  available funds.
Continental cannot give any assurance as to the effect, if any, of settlement in
same-day funds on trading activity in the Notes.




                      DESCRIPTION OF THE LIQUIDITY FACILITY

     The  following  summary  describes  the  material  terms  of the  Liquidity
Facility  and certain  provisions  of the  Indenture  relating to the  Liquidity
Facility.  The summary  does not purport to be complete  and is qualified in its
entirety by reference to all of the provisions of the Liquidity Facility and the
Indenture,  each of which  has  been  filed as an  exhibit  to the  Registration
Statement  and copies of which are  available  as set forth under "Where You Can
Find More Information".

GENERAL

     Morgan Stanley Capital Services Inc. (the "Liquidity Provider") has entered
into a revolving  credit  agreement (the "Liquidity  Facility") with the Trustee
with respect to the Notes. On any Distribution  Date, if, after giving effect to
the  subordination  provisions  of the  Indenture,  the  Trustee  does  not have
sufficient  funds for the  payment  of  interest  on the  Notes,  the  Liquidity
Provider is required to make an advance (an  "Interest  Drawing")  in the amount
needed to fund the interest shortfall (calculated assuming that Continental will
not cure the nonpayment of interest) up to the Maximum Available Commitment.

     The  maximum  amount of Interest  Drawings  available  under the  Liquidity
Facility  will  be  sufficient  to pay  interest  on the  Notes  on up to  eight
consecutive  quarterly  Interest  Payment  Dates  at the  Stated  Interest  Rate
(calculated assuming that Continental will not cure any nonpayment of interest).
If  interest  payment  defaults  occur  which  exceed the amount  covered by and
available  under  the  Liquidity  Facility,  the  Noteholders  will  bear  their
allocable  share of the  deficiencies  to the  extent  that  there  are no other
sources of funds. The initial Liquidity  Provider may be replaced by one or more
other entities under certain circumstances.

DRAWINGS

     The aggregate  amount  available  under the Liquidity  Facility at March 6,
2003,   the  first   Interest   Payment  Date  after  the  Issuance   Date,  was
$48,733,333.33.

     Except as otherwise  provided below, the Liquidity Facility will enable the
Trustee  to  make  Interest  Drawings   thereunder  promptly  on  or  after  any
Distribution Date if, after giving effect to the subordination provisions of the
Indenture, there are insufficient funds available to the Trustee to pay interest
on the Notes at the Stated Interest Rate  (calculated  assuming that Continental
will not cure any nonpayment of interest);  provided,  however, that the maximum
amount  available to be drawn under the Liquidity  Facility on any  Distribution
Date to fund any  shortfall  of  interest  on the Notes will not exceed the then
Maximum Available Commitment.

     The "Maximum  Available  Commitment"  at any time is an amount equal to the
then Required Amount of the Liquidity Facility less the aggregate amount of each
Interest Drawing outstanding thereunder at such time, provided that, following a
Non-Extension  Drawing,  a  Downgrade  Drawing or a Final  Drawing,  the Maximum
Available Commitment shall be zero.

     The  "Required  Amount"  will  be  equal,  on any  day,  to the  sum of the
aggregate amount of interest, calculated at the Capped Interest Rate, that would
be  payable  on the Notes on each of the eight  consecutive  quarterly  Interest
Payment  Dates  immediately  following  such day or, if such day is an  Interest
Payment Date, on such day and the succeeding  seven quarterly  Interest  Payment
Dates, in each case calculated on the outstanding  aggregate principal amount of
the  Notes on such  day and  without  regard  to  expected  future  payments  of
principal.

     "Capped Interest Rate" is 12% per annum.

     The Liquidity Facility does not provide for drawings  thereunder to pay for
principal of, or Premium,  if any, or Break Amount, if any, with respect to, the
Notes or any  interest  thereon  in  excess  of an  amount  equal to eight  full
quarterly  installments  of  interest  calculated  at the Capped  Interest  Rate
thereon. (Liquidity Facility, Section 2.02; Indenture, Section 3.5)




     Each  payment by the  Liquidity  Provider  reduces  by the same  amount the
Maximum Available Commitment, subject to reinstatement as hereinafter described.
With respect to any  Interest  Drawings,  upon  reimbursement  of the  Liquidity
Provider  in full or in part  for the  amount  of such  Interest  Drawings  plus
interest  thereon,  the Maximum  Available  Commitment  will be reinstated to an
amount not to exceed the then Required Amount.  However,  the Liquidity Facility
will not be so reinstated at any time if (i) the Notes are  Non-Performing and a
Liquidity  Event of Default  shall have  occurred and be  continuing or (ii) the
Liquidity  Provider  Reimbursement  Date has  occurred.  Any amounts paid by the
Policy  Provider to the Liquidity  Provider as described in  "Description of the
Notes--Controlling  Party" or "Description of the Policy and the Policy Provider
Agreement--Liquidity Provider Drawing" will not reinstate the Liquidity Facility
but any  reimbursement of such amounts received by the Policy Provider under the
distribution  provisions of the Indenture will reinstate the Liquidity  Facility
to the extent of such reimbursement  unless (i) the Notes are Non-Performing and
a Liquidity  Event of Default  shall have occurred and be continuing or (ii) the
Liquidity Provider  Reimbursement  Date has occurred.  With respect to any other
drawings under the Liquidity Facility,  amounts available to be drawn thereunder
are not subject to  reinstatement.  The  Required  Amount will be  automatically
reduced  from  time to time to an  amount  equal  to the next  eight  successive
quarterly  interest payments due on the Notes (without regard to expected future
payments of principal) at the Capped Interest Rate. (Liquidity Facility, Section
2.04(a);  Indenture,  Section  3.5(j))  Upon  the  occurrence  of the  Liquidity
Provider  Reimbursement  Date, no further drawings under the Liquidity  Facility
will be permitted.

     If at any  time the  short-term  unsecured  debt  rating  of the  Liquidity
Provider  Guarantor  then issued by either Moody's or Standard & Poor's is lower
than the Threshold Rating or the Liquidity Provider Guarantor's guarantee ceases
to be in full  force and  effect or  becomes  invalid  or  unenforceable  or the
Liquidity Provider Guarantor denies its liability thereunder,  and the Liquidity
Facility  is not  replaced  with a  Replacement  Facility  within ten days after
notice of such  downgrading  or such  event  and as  otherwise  provided  in the
Indenture,  the Liquidity  Facility will be drawn in full up to the then Maximum
Available  Commitment  (the  "Downgrade  Drawing").  The proceeds of a Downgrade
Drawing will be deposited into a cash collateral  account (the "Cash  Collateral
Account")  and used for the same purposes and under the same  circumstances  and
subject to the same  conditions as cash payments of Interest  Drawings under the
Liquidity  Facility  would  be  used.  (Liquidity  Facility,   Section  2.02(c);
Indenture,  Section 3.5(c)) If a qualified  Replacement Facility is subsequently
provided,  the  balance  of the Cash  Collateral  Account  will be repaid to the
replaced Liquidity Provider.

     A  "Replacement  Facility"  means an  irrevocable  liquidity  facility  (or
liquidity  facilities)  in  substantially  the  form of the  replaced  Liquidity
Facility,  including reinstatement  provisions, or in such other form (which may
include a letter of  credit) as shall  permit  the  Rating  Agency to confirm in
writing its ratings  then in effect for the Notes  (before  downgrading  of such
ratings,  if any, as a result of the  downgrading of the Liquidity  Provider but
without regard to the Policy),  which shall have been consented to by the Policy
Provider, which consent shall not be unreasonably withheld or delayed, in a face
amount (or in an aggregate face amount) equal to the amount of interest  payable
on the Notes (at the Capped  Interest Rate and without regard to expected future
payments of principal) on the eight Interest Payment Dates following the date of
replacement of the Liquidity Facility and issued by a person (or persons) having
unsecured  short-term  debt  ratings  issued by each of Moody's  and  Standard &
Poor's  which are  equal to or higher  than the  Threshold  Rating.  (Indenture,
Appendix I) The provider of any  Replacement  Facility will have the same rights
(including,  without  limitation,  priority  distribution  rights  and rights as
"Controlling Party") under the Indenture as the initial Liquidity Provider.

     "Threshold  Rating" means the  short-term  unsecured  debt rating of P-1 by
Moody's Investors Service, Inc. ("Moody's") and A-1 by Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's").

     The Liquidity Facility provides that the Liquidity  Provider's  obligations
thereunder  will expire on the earliest  of:

     o    364 days after the Issuance Date (counting  from,  and including,  the
          Issuance Date).

     o    The date on which the  Trustee  delivers to the  Liquidity  Provider a
          certification that all of the Notes have been paid in full.




     o    The date on which the  Trustee  delivers to the  Liquidity  Provider a
          certification  that a Replacement  Facility has been  substituted  for
          such Liquidity Facility.

     o    The  fifth  Business  Day  following  receipt  by  the  Trustee  of  a
          Termination  Notice  from the  Liquidity  Provider  (see  "--Liquidity
          Events of Default and Termination").

     o    The date on which no  amount is or may (by  reason  of  reinstatement)
          become available for drawing under the Liquidity Facility.

     o    The occurrence of the Liquidity Provider Reimbursement Date.

     The Liquidity Facility provides that it will be automatically  extended for
additional  364-day periods unless the Liquidity  Provider  notifies the Trustee
that it does not agree to such extension.

     The Indenture  provides for the  replacement  of the Liquidity  Facility if
such  Liquidity  Facility is scheduled to expire  earlier than 15 days after the
Final Legal Maturity Date and the Liquidity Facility is not extended at least 25
days prior to its then scheduled  expiration date. If the Liquidity  Facility is
not so  extended  or  replaced  by the  25th day  prior  to its  then  scheduled
expiration  date,  the  Liquidity  Facility will be drawn in full up to the then
Maximum Available Commitment (the "Non-Extension  Drawing"). The proceeds of the
Non-Extension  Drawing will be deposited in the Cash Collateral  Account as cash
collateral  to be used for the same  purposes and under the same  circumstances,
and subject to the same conditions,  as cash payments of Interest Drawings under
the Liquidity  Facility would be used.  (Liquidity  Facility,  Section  2.02(b);
Indenture, Section 3.5(d))

     Subject to certain limitations, Continental may, at its option, arrange for
a Replacement Facility at any time to replace the Liquidity Facility (including,
without  limitation,   any  Replacement  Facility  described  in  the  following
sentence).  In addition, if the Liquidity Provider shall determine not to extend
the Liquidity Facility,  then the Liquidity Provider may, at its option, arrange
for a  Replacement  Facility to replace the  Liquidity  Facility  (i) during the
period  no  earlier  than 40 days  and no later  than 25 days  prior to the then
scheduled  expiration date of the Liquidity  Facility and (ii) at any time after
such scheduled  expiration  date. The Liquidity  Provider may also arrange for a
Replacement  Facility  to replace  the  Liquidity  Facility  at any time after a
Downgrade  Drawing  thereunder.  If any Replacement  Facility is provided at any
time after a Downgrade Drawing or a Non-Extension  Drawing, the funds on deposit
in the Cash Collateral  Account will be returned to the Liquidity Provider being
replaced. (Indenture, Section 3.5 (e))

     Upon  receipt by the Trustee of a  Termination  Notice  from the  Liquidity
Provider,  the Trustee shall request a final drawing (a "Final  Drawing")  under
the  Liquidity  Facility  in an  amount  equal  to the  then  Maximum  Available
Commitment  thereunder.  The Trustee will hold the proceeds of the Final Drawing
in the  Cash  Collateral  Account  as cash  collateral  to be used  for the same
purposes and under the same  circumstances,  and subject to the same conditions,
as cash  payments of Interest  Drawings  under the Liquidity  Facility  would be
used. (Liquidity Facility, Section 2.02(d); Indenture, Section 3.5(i))

     Drawings  under the  Liquidity  Facility  will be made by  delivery  by the
Trustee of a certificate  in the form required by the Liquidity  Facility.  Upon
receipt of such a  certificate,  the  Liquidity  Provider is  obligated  to make
payment of the drawing  requested  thereby in immediately  available funds. Upon
payment by the Liquidity  Provider of the amount  specified in any drawing under
the Liquidity  Facility,  the Liquidity Provider will be fully discharged of its
obligations  under the Liquidity  Facility with respect to such drawing and will
not  thereafter  be obligated to make any further  payments  under the Liquidity
Facility in respect of such drawing to the Trustee or any other person.

REIMBURSEMENT OF DRAWINGS

     The Trustee must  reimburse  amounts drawn under the Liquidity  Facility by
reason of an Interest Drawing, Final Drawing, Downgrade Drawing or Non-Extension
Drawing and interest thereon,  but only to the extent that the Trustee has funds
available therefor.




  INTEREST DRAWINGS AND FINAL DRAWINGS

     Amounts  drawn by reason of an Interest  Drawing or Final Drawing under the
Liquidity  Facility will be immediately due and payable,  together with interest
on the amount of such drawing.  From the date of the drawing to (but  excluding)
the third business day following the Liquidity  Provider's receipt of the notice
of such Interest  Drawing,  interest will accrue at the Base Rate plus 2.00% per
annum.  Thereafter,  interest  will accrue at Liquidity  Facility  LIBOR for the
applicable  interest  period  plus  2.00%  per  annum.  In the case of the Final
Drawing,  however,  the Trustee may  convert  the Final  Drawing  into a drawing
bearing  interest  at the Base Rate  plus  2.00% per annum on the last day of an
interest period for such Drawing.

     "Base Rate" means a fluctuating interest rate per annum in effect from time
to time,  which rate per annum  shall at all times be equal to (a) the  weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers,  as published for such
day (or, if such day is not a business day, for the next preceding business day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day that is a business day, the average of the  quotations  for such day for
such  transactions  received by the Liquidity  Provider from three Federal funds
brokers of  recognized  standing  selected  by it, plus (b)  one-quarter  of one
percent (1/4 of 1%).

     "Liquidity  Facility LIBOR" means, with respect to any interest period, (i)
the  rate  per  annum   appearing   on  display  page  3750   (British   Bankers
Association--LIBOR)  of the Dow  Jones  Markets  Service  (or any  successor  or
substitute therefor) at approximately 11:00 A.M. (London time) two business days
before the first day of such interest  period,  as the rate for dollar  deposits
with a  maturity  comparable  to such  interest  period,  or  (ii)  if the  rate
calculated  pursuant to clause (i) above is not available,  the average (rounded
upwards,  if necessary,  to the next 1/16 of 1%) of the rates per annum at which
deposits in dollars are offered for the relevant  interest period by three banks
of  recognized  standing  selected  by the  Liquidity  Provider  in  the  London
interbank  market at  approximately  11:00 A.M.  (London time) two business days
before the first day of such interest period in an amount approximately equal to
the principal  amount of the LIBOR  Advance to which such interest  period is to
apply and for a period comparable to such interest period.

  DOWNGRADE DRAWINGS AND NON-EXTENSION DRAWINGS

     The amount  drawn  under the  Liquidity  Facility  by reason of a Downgrade
Drawing or a  Non-Extension  Drawing  will be treated as follows:

     o    Such amount will be released on any Distribution Date to the Liquidity
          Provider to the extent that such amount exceeds the Required Amount.

     o    Any portion of such amount withdrawn from the Cash Collateral  Account
          to pay  interest  on the  Notes  will be  treated  in the  same way as
          Interest Drawings.

     o    The  balance of such  amount  will be  invested  in certain  specified
          eligible investments.

     Any  Downgrade  Drawing,  other  than any  portion  thereof  applied to the
payment of interest on the Notes,  will bear  interest (x) subject to clause (y)
below, at a rate equal to Liquidity  Facility LIBOR for the applicable  interest
period plus a specified  margin on the  outstanding  amount from time to time of
such  Downgrade  Drawing and (y) from and after the date, if any, on which it is
converted into a Final Drawing as described below under  "--Liquidity  Events of
Default and  Termination",  at a rate equal to Liquidity  Facility LIBOR for the
applicable  interest  period  (or, as  described  in the first  paragraph  under
"--Interest Drawings and Final Drawings", the Base Rate) plus 2.00% per annum.

     Any  Non-Extension  Drawing,  other than any portion thereof applied to the
payment of interest on the Notes,  will bear  interest (x) subject to clause (y)
below, in an amount equal to the investment earnings on amounts deposited in the
Cash Collateral  Account plus a specified margin on the outstanding  amount from
time to time of such  Non-Extension  Drawing and (y) from and after the date, if
any, on which it is  converted  into a Final  Drawing as  described  below under
"--Liquidity  Events of Default and  Termination",  at a rate equal to Liquidity
Facility LIBOR for the applicable interest period (or, as described in the first




paragraph under  "--Interest  Drawings and Final Drawings",  the Base Rate) plus
2.00% per annum.

LIQUIDITY EVENTS OF DEFAULT AND TERMINATION

     Events of default under the Liquidity Facility (each, a "Liquidity Event of
Default")  consist of:

     o    The acceleration of the Notes.

     o    Certain bankruptcy or similar events involving Continental. (Liquidity
          Facility, Section 1.01)

     If any Liquidity  Event of Default has occurred and is  continuing  and the
Notes are Non-Performing,  the Liquidity Provider may, in its discretion, give a
notice of termination of the Liquidity  Facility (a "Termination  Notice").  The
Termination  Notice  will  have  the  following  consequences:

     o    The Liquidity Facility will expire on the fifth Business Day after the
          date on which such Termination Notice is received by the Trustee.

     o    The Trustee will promptly  request,  and the  Liquidity  Provider will
          make, a Final Drawing in an amount equal to the then Maximum Available
          Commitment.

     o    Any drawing remaining  unreimbursed as of the date of termination will
          be automatically converted into a Final Drawing.

     o    All amounts  owing to the  Liquidity  Provider  automatically  will be
          accelerated.

     Notwithstanding the foregoing, the Trustee will be obligated to pay amounts
owing to the Liquidity  Provider only to the extent of funds available  therefor
after giving effect to the payments in accordance  with the provisions set forth
under  "Description  of  the   Notes--Priority  of  Distributions".   (Liquidity
Facility,   Section  6.01)  Upon  the   circumstances   described   above  under
"Description  of the  Notes--Remedies",  the  Liquidity  Provider may become the
Controlling  Party with respect to the exercise of remedies under the Indenture.
(Indenture, Section 3.8(c))

     Upon the  occurrence  of the Liquidity  Provider  Reimbursement  Date,  the
Liquidity Facility will automatically expire, any drawing remaining unreimbursed
as of such date will be  automatically  converted  into a Final  Drawing and all
amounts owing to the Liquidity Provider  automatically  will be accelerated.  On
and after such date, no drawings under the Liquidity Facility will be permitted.

LIQUIDITY PROVIDER

     The initial  Liquidity  Provider  for the Notes is Morgan  Stanley  Capital
Services  Inc. The  obligations  of Morgan  Stanley  Capital  Services  Inc. are
guaranteed  by Morgan  Stanley,  its parent  company  (the  "Liquidity  Provider
Guarantor").  Morgan Stanley has  short-term  unsecured debt ratings of P-1 from
Moody's and A-1 from Standard & Poor's.




           DESCRIPTION OF THE POLICY AND THE POLICY PROVIDER AGREEMENT

     The  following  summary  describes  the  material  terms of the  Policy and
certain  provisions  of the Policy  Provider  Agreement.  The  summary  does not
purport to be complete  and is  qualified in its entirety by reference to all of
the  provisions  of the  Policy,  which  has  been  filed as an  exhibit  to the
Registration  Statement  and copies of which are  available  as set forth  under
"Where You Can Find More Information".

THE POLICY

     The Policy  Provider has issued a certificate  guarantee  insurance  policy
(the  "Policy") in favor of the Trustee for the benefit of the  Noteholders  and
the  Liquidity  Provider.  Drawings  under  the  Policy  may be made  under  the
following six circumstances:

  INTEREST DRAWINGS

     If on any Distribution  Date (other than the date on which a Policy Drawing
is made as  described in  "--Proceeds  Deficiency  Drawing",  "--Non-Performance
Drawing" or "--Final Policy  Drawing") after giving effect to the  subordination
provisions of the Indenture and to the application of any drawing paid under the
Liquidity  Facility in respect of interest due on the Notes on such Distribution
Date and any withdrawal of funds from the Cash Collateral  Account in respect of
such  interest  (collectively,  "Prior  Funds"),  the Trustee does not then have
sufficient  funds  available  for the  payment of all  amounts  due and owing in
respect of accrued  interest on the Notes at the Stated  Interest  Rate (without
giving effect to any acceleration and calculated  assuming that Continental will
not cure the nonpayment of interest), the Trustee is to request a Policy Drawing
under the  Policy in an amount  sufficient  to enable  the  Trustee  to pay such
accrued interest.

  PROCEEDS DEFICIENCY DRAWING

     If on any Distribution  Date (other than the date on which a Policy Drawing
is made as described in "--Non-Performance Drawing" or "--Final Policy Drawing")
established  by the Trustee by reason of its  receipt of a payment  constituting
the proceeds from the sale of Pledged Spare Parts  comprising all of the Pledged
Spare Parts  subject to the lien of the  Security  Agreement at the time of such
sale, after giving effect to the  subordination  provisions of the Indenture and
to the  application  of Prior Funds,  the Trustee does not then have  sufficient
funds available for the payment in full of the then outstanding principal amount
of the Notes  together  with accrued and unpaid  interest  thereon at the Stated
Interest Rate (calculated assuming that Continental will not cure the nonpayment
of  interest  and  excluding  any accrued  and unpaid  Premium or Break  Amount)
(collectively,  the  "Outstanding  Amount"),  the Trustee is to request a Policy
Drawing  under the Policy in an amount  sufficient  to enable the Trustee to pay
the Outstanding Amount.

  NON-PERFORMANCE DRAWING

     If a Payment  Default exists under the Notes (without  giving effect to any
acceleration or any payments by the Liquidity  Provider or the Policy  Provider)
for  eight  consecutive  Interest  Periods  (such  period,  the  "Non-Performing
Period") (regardless of whether any proceeds from the sale of any Collateral are
distributed  by the Trustee  during such  period) and  continues to exist on the
Interest  Payment  Date on which such eighth  Interest  Period ends (or, if such
Interest  Payment  Date falls  within the  applicable  period  specified  in the
proviso  to the  definition  of  "Non-Performing",  continues  to  exist  on the
Business Day immediately  following such period (the "Relevant  Date")),  and on
the 25th day  following  such  Interest  Payment  Date or,  if  applicable,  the
Relevant  Date (or, if such 25th day is not a Business  Day,  the next  Business
Day)  (the   "Non-Performance   Payment   Date")  after  giving  effect  to  the
subordination provisions of the Indenture and to the application of Prior Funds,
the Trustee does not then have  sufficient  funds  available  for the payment in
full of the Outstanding  Amount as of the  Non-Performance  Payment Date, unless
the Policy  Provider  shall have paid on any day prior  thereto the  Outstanding
Amount as of such day pursuant to a Policy  Drawing as described in  "--Proceeds
Deficiency  Drawing" or "--Final  Policy  Drawing",  the Trustee is to request a
Policy Drawing under the Policy in an amount sufficient to enable the Trustee to
pay such Outstanding Amount. If the Non-Performance Payment Date is established,
the Trustee shall send to the Noteholders  written notice thereof promptly,  but




no later than three Business Days,  after the occurrence of the Interest Payment
Date on which the  Non-Performing  Period ends or, if  applicable,  the Relevant
Date.

     Notwithstanding  the  foregoing,  if the  Non-Performance  Payment  Date is
scheduled to occur prior to the Final Scheduled Payment Date,  instead of paying
such amount on the  Non-Performance  Payment Date,  the Policy  Provider may, so
long as no Policy Provider  Default is continuing,  elect (the "Policy  Provider
Election"),  by  giving  notice  to the  Trustee  at least 10 days  prior to the
Non-Performance  Payment Date,  to pay:

     o    Any shortfall on the Non-Performance Payment Date in funds required to
          pay accrued interest on the Notes.

     o    Thereafter,  on  each  Distribution  Date,  an  amount  equal  to  the
          scheduled principal (on the Final Scheduled Payment Date) and interest
          (without regard to any  acceleration  thereof) payable on the Notes on
          such Distribution Date.

     Notwithstanding  the Policy Provider Election,  the Policy Provider may, on
any  Business  Day (which shall be a  Distribution  Date)  elected by the Policy
Provider  upon 20 days'  notice,  cause the Trustee to make a drawing  under the
Policy for an amount equal to the  Outstanding  Amount as of such day.  Further,
notwithstanding  the Policy Provider  Election,  upon the occurrence of a Policy
Provider Default,  the Trustee shall, on any Business Day elected by the Trustee
upon 20 days' notice to the Policy Provider, make a drawing under the Policy for
an amount equal to the Outstanding Amount as of such day.

  FINAL POLICY DRAWING

     If  on  the  Final  Legal  Maturity  Date,   after  giving  effect  to  the
subordination  provisions of the Indenture and to the  application  of any Prior
Funds,  unless the Policy  Provider shall have paid on any day prior thereto the
Outstanding  Amount  as of  such  day as  described  in  "--Proceeds  Deficiency
Drawing"  or  "--Non-Performance  Drawing",  the  Trustee  does  not  then  have
sufficient funds available for the payment in full of the Outstanding  Amount as
of such date,  the Trustee is to request a Policy Drawing under the Policy in an
amount sufficient to enable the Trustee to pay such Outstanding Amount.

  AVOIDANCE DRAWING

     If, at any time,  the Trustee has actual  knowledge  of the issuance of any
Final Order, the Trustee is to give prompt notice to the Liquidity  Provider and
the Policy  Provider of such Final  Order and,  prior to the  expiration  of the
Policy,  to request a Policy  Drawing for the  relevant  Avoided  Payment and to
deliver  to the  Policy  Provider a copy of the  documentation  required  by the
Policy with respect to such Final Order.  To the extent that any portion of such
Avoided  Payment  is to be  paid  to the  Trustee  (and  not  to  any  receiver,
conservator,  debtor-in-possession  or trustee in  bankruptcy as provided in the
Policy), the Trustee shall establish as a Distribution Date the date that is the
earlier of three  Business  Days after the date of the  expiration of the Policy
and the Business Day that immediately follows the 25th day after that notice for
distribution of such portion of the proceeds of such Policy Drawing.

  LIQUIDITY PROVIDER DRAWING

     On or after the  Business Day which is 24 months from the earliest to occur
of (1) the date on which an  Interest  Drawing  shall  have been made  under the
Liquidity Facility and remains unreimbursed from payments made by Continental at
the end of such 24-month  period,  (2) the date on which any Downgrade  Drawing,
Non-Extension  Drawing  or  Final  Drawing  that  was  deposited  into  the Cash
Collateral  Account  shall  have been  applied to pay any  scheduled  payment of
interest on the Notes and remains unreimbursed from payments made by Continental
at the end of such  24-month  period  and (3) the date on which all of the Notes
have  been  accelerated  and  remain  unpaid by  Continental  at the end of such
24-month period (in each case,  disregarding any reimbursements from payments by
the Policy Provider and from proceeds from the sale of Collateral distributed by
the Trustee  during such  24-month  period) (such  Business Day, the  "Liquidity
Provider  Reimbursement  Date"), the Policy Provider (upon 20 days' prior notice
from the Trustee on behalf of the Liquidity  Provider) will be required to honor
drawings under the Policy by the Trustee on behalf of the Liquidity Provider for




all outstanding  drawings under the Liquidity  Facility,  together with interest
thereon.

GENERAL

     All requests by the Trustee for a Policy  Drawing  under the Policy  (other
than a Policy Drawing as described in "--Liquidity  Provider Drawing") are to be
made by it no later than 1:00 p.m.  (New York City time) on (or,  in the case of
any Avoided  Payment,  at least  three  Business  Days prior to) the  applicable
Distribution  Date and in the form  required by the Policy and  delivered to the
Policy  Provider  in  accordance  with the  Policy.  All  proceeds of any Policy
Drawing  under  the  Policy  (other  than  a  Policy  Drawing  as  described  in
"--Liquidity  Provider  Drawing")  by the  Trustee  are to be  deposited  by the
Trustee  in a  separate  policy  account  and  from  there  distributed  to  the
Noteholders without regard to the subordination  provisions of the Indenture. In
the case of any Avoided  Payments,  however,  all or part of the Policy  Drawing
will   be   paid   directly   to   the   bankruptcy    receiver,    conservator,
debtor-in-possession or trustee to the extent such amounts have not been paid by
the Noteholders.  If any request for a Policy Drawing is rejected as not meeting
the requirements of the Policy, the Trustee is to resubmit such request so as to
meet such requirements.

     The Policy provides that if such a request for a Policy Drawing is properly
submitted  or  resubmitted  it will pay to the Trustee for deposit in a separate
policy account the  applicable  payment under the Policy no later than 3:00 p.m.
on the  later of the  relevant  Distribution  Date and the date the  request  is
received by the Policy Provider (if the request is received by 1:00 p.m. on such
date) or the next Business Day (if the request is received after that time).

     Once any  payment  under the  Policy  is paid to the  Trustee,  the  Policy
Provider will have no further obligation in respect of such payment.  THE POLICY
PROVIDER  SHALL NOT BE REQUIRED  TO MAKE ANY PAYMENT  EXCEPT AT THE TIMES AND IN
THE AMOUNTS AND UNDER THE CIRCUMSTANCES EXPRESSLY SET FORTH IN THE POLICY.

     The  Policy  does not cover (i)  shortfalls,  if any,  attributable  to the
liability of the Trustee for withholding  taxes, if any (including  interest and
penalties  in  respect of that  liability),  (ii) any  interest  on the Notes in
excess of the Capped  Interest  Rate,  (iii) any  Premium or other  acceleration
payment  payable  in  respect  of the  Notes,  (iv) any Break  Amount or (v) any
failure of the  Trustee to make any payment  due to the  Noteholders  from funds
received.

     The Policy Provider's obligation under the Policy will be discharged to the
extent  that  funds  are  received  by  the  Trustee  for  distribution  to  the
Noteholders, whether or not the funds are properly distributed by the Trustee.

     The Policy is noncancellable. The Policy expires and terminates without any
action on the part of the Policy  Provider or any other  person on the date (the
"Termination Date") that is one year and one day following the date on which the
Outstanding  Amount is paid on the Notes,  unless an Insolvency  Proceeding  has
commenced and has not been  concluded or dismissed on the  Termination  Date, in
which case on the later of (i) the date of the  conclusion  or dismissal of such
Insolvency  Proceeding  without  continuing  jurisdiction  by the  court in such
Insolvency  Proceeding  and (ii) the date on which the Policy  Provider has made
all  payments  required  to be made under the terms of such Policy in respect of
Avoided  Payments.  No portion of the premium under the Policy is refundable for
any reason including payment or provision being made for payment.

     The Policy is issued under and  pursuant to, and shall be construed  under,
the laws of the State of New York.

DEFINITIONS

     "Avoided  Payment"  means with  respect  to the  Policy any amount  paid or
required to be paid thereunder  that is voided under any applicable  bankruptcy,
insolvency,  receivership or similar law in an Insolvency Proceeding,  and, as a
result of which,  the  Trustee,  the  Liquidity  Provider or any  Noteholder  is
required  to return all or any  portion of such voided  payment  (including  any
disgorgement  from the Noteholders or the Liquidity  Provider  resulting from an
Insolvency  Proceeding  whether such  disgorgement  is determined on a theory of
preferential conveyance or otherwise) in accordance with a final, non-appealable
order of a court of competent jurisdiction.

     "Final  Order" means the order  referred to in the  definition  of the term
"Avoided Payment".




     "Insolvency Proceeding" means the commencement, after the Issuance Date, of
any bankruptcy, insolvency, readjustment of debt, reorganization, marshalling of
assets and liabilities or similar  proceedings by or against  Continental or the
Liquidity  Provider  and the  commencement,  after  the  Issuance  Date,  of any
proceedings  by  Continental  or the  Liquidity  Provider  for the winding up or
liquidation  of its affairs or the  consent,  after the  Issuance  Date,  to the
appointment of a trustee, conservator, receiver or liquidator in any bankruptcy,
insolvency,  readjustment  of debt,  reorganization,  marshalling  of assets and
liabilities  or  similar  proceedings  of or  relating  to  Continental  or  the
Liquidity Provider.

THE POLICY PROVIDER AGREEMENT

     The  Trustee,  Continental  and the Policy  Provider  have  entered into an
insurance and indemnity agreement (the "Policy Provider  Agreement") pursuant to
which  Continental  has agreed to reimburse the Policy Provider for amounts paid
pursuant  to claims  made under the  Policy.  Pursuant  to the  Policy  Provider
Agreement,  Continental has agreed to pay the Policy Provider a premium based on
the  outstanding  principal  of the  Notes  and a fee  in  connection  with  any
prepayment  of the  Notes and to  reimburse  the  Policy  Provider  for  certain
expenses.




                          DESCRIPTION OF THE APPRAISAL

     SH&E, an independent  aviation  appraisal and consulting firm, has prepared
an appraisal of the spare parts  included in the  Collateral  as of December 25,
2002. A letter, dated January 24, 2003, summarizing such appraisal is annexed to
this  Prospectus  as  Appendix  II.  The  appraisal  is  subject  to a number of
assumptions  and  limitations  and  was  prepared  based  on  certain  specified
methodologies.  In  preparing  its  appraisal,  SH&E  conducted  only a  limited
physical  inspection  of certain  locations at which  Continental  maintains the
spare parts.  An appraisal that is subject to other  assumptions and limitations
and based on other  methodologies  may result in valuations  that are materially
different from those contained in SH&E's appraisal.

     The spare  parts  included  in the  Collateral  fall  into two  categories,
"rotables" and "expendables".  Rotables are parts that wear over time and can be
repeatedly restored to a serviceable  condition over a period  approximating the
life of the flight  equipment  to which they relate  ("Rotables").  For example,
thrust  reversers,   auxiliary  power  units  and  landing  gear  are  Rotables.
Expendables consist of parts that can be restored to a serviceable condition but
have a life less than the related flight  equipment and parts that generally are
used once and thereby  consumed or  thereafter  discarded.  For example,  engine
cowlings,  engine blades and duct assemblies are repairable expendable parts and
bolts,  screws,  tubes and hoses are consumable  expendable parts. Spare engines
are not included in the Collateral. Set forth below is certain information about
the spare parts of the types included in the Collateral and the appraised  value
of such spare parts set forth in SH&E's appraisal referred to above:

                               SPARE PARTS QUANTITY(1)
                       -----------------------------------
  AIRCRAFT MODEL       EXPENDABLES    ROTABLES      TOTAL     APPRAISED VALUE
  --------------       -----------    ---------   -------     ---------------
737-700............         877            24         901
737-700/800........     278,912         6,942     285,854
737-800............       3,777           191       3,968
737-900............         821            10         831
                        -------      --------    --------
737-7/8/9
     Subtotal......     284,387         7,167     291,554       $185,972,600

757-200............     185,731         3,391     189,122         69,352,800
757-300............      10,946            96      11,042          3,116,700
767-200............      25,485           227      25,712          8,946,700
767-400............      51,147         1,586      52,733         55,741,200
777-200............     111,210         3,006     114,216        113,712,000
                        -------     ---------   ---------       ------------
Total..............     668,906        15,473     684,379       $436,841,900

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

(1)  This  quantity of spare parts used in  preparing  the  appraised  value was
     determined as of December 25, 2002.  Since spare parts are regularly  used,
     refurbished, purchased, transferred and discarded in the ordinary course of
     Continental's  business,  the  quantity  of  spare  parts  included  in the
     Collateral and their appraised value will change over time.  Continental is
     required to provide to the Policy  Provider  and the  Trustee a  semiannual
     appraisal of the Collateral. See "Description of the Notes--Collateral".



     In  connection  with  the  issuance  of the Old  Notes,  SH&E  prepared  an
appraisal,  dated as of  October  31,  2002,  of the  spare  parts of the  types
included in the Collateral owned by Continental as of August 25, 2002,  prepared
on  substantially  the same basis as the appraisal  described  above.  The total
appraised value of the spare parts according to such appraisal was $415,429,000.

     An  appraisal  is only an estimate  of value.  An  appraisal  should not be
relied upon as a measure of realizable  value. The proceeds realized upon a sale
of any  Collateral  may be less  than  its  appraised  value.  The  value of the
Collateral if remedies are exercised  under the Indenture  will depend on market
and economic conditions,  the supply of similar spare parts, the availability of
buyers,  the condition of the Collateral and other factors.  In addition,  since
spare  parts  are  regularly  used,  refurbished,   purchased,  transferred  and
discarded  in the  ordinary  course of  business,  the  quantity  of spare parts
included  in the  Collateral  and their  appraised  value will change over time.
Accordingly,  Continental  cannot assure you that the proceeds realized upon any
such exercise of remedies would be sufficient to satisfy in full payments due on
the  Notes.  If a Policy  Provider  Default  occurs  and such  proceeds  are not




sufficient  to repay all such  amounts  due on the Notes,  then  holders (to the
extent not repaid from the proceeds of the sale of  Collateral)  would have only
unsecured claims against Continental and the Policy Provider.





                  CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES

EXCHANGE OF OLD NOTES FOR NEW NOTES

     The following  summary  describes the material  generally  applicable  U.S.
federal income tax  consequences to Noteholders of the exchange of the Old Notes
for New Notes.  This  summary is intended to address  the  beneficial  owners of
Notes  that are  citizens  or  residents  of the  United  States,  corporations,
partnerships or other entities  created or organized in or under the laws of the
United States or any State,  or estates or trusts the income of which is subject
to U.S.  federal  income  taxation  regardless  of its source that will hold the
Notes as capital assets.  The summary does not address all of the federal income
tax  consequences  that may be  relevant  to all  Noteholders  in light of their
particular circumstances  (including,  for example, any special rules applicable
to  tax-exempt  organizations,   broker-dealers,  insurance  companies,  foreign
entities and persons who are not citizens or residents of the United States) and
does  not  address  any  tax   consequences   other  than  federal   income  tax
consequences.

     The  exchange of Old Notes for New Notes (the  "Exchange")  pursuant to the
Exchange Offer will be treated as a continuation  of the holder's  investment in
the Old Notes  and will not be a  taxable  event  for U.S.  federal  income  tax
purposes.  As a result, a holder of an Old Note whose Old Note is accepted in an
Exchange Offer will not recognize gain or loss on the Exchange. Similarly, there
would be no  federal  income  tax  consequences  to a  Noteholder  that does not
participate  in the Exchange  Offer.  A tendering  holder's tax basis in the New
Notes will be the same as such holder's tax basis in its Old Notes.  A tendering
holder's  holding  period for the New Notes  received  pursuant to the  Exchange
Offer will include its holding period for the Old Notes surrendered therefor.

     ALL  HOLDERS OF OLD NOTES ARE  ADVISED TO  CONSULT  THEIR OWN TAX  ADVISORS
REGARDING THE UNITED STATES FEDERAL,  STATE,  LOCAL AND FOREIGN TAX CONSEQUENCES
OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES AND OF THE OWNERSHIP AND  DISPOSITION
OF NEW NOTES  RECEIVED IN THE  EXCHANGE  OFFER IN LIGHT OF THEIR OWN  PARTICULAR
CIRCUMSTANCES.

                              PLAN OF DISTRIBUTION

     Each  broker-dealer that receives New Notes for its own account pursuant to
the  Exchange  Offer  must  acknowledge  that it will  deliver a  prospectus  in
connection  with any resale of such New  Notes.  This  Prospectus,  as it may be
amended or  supplemented  from time to time, may be used by a  broker-dealer  in
connection  with  resales of New Notes  received in exchange for Old Notes where
such Old Notes were  acquired as a result of  market-making  activities or other
trading activities. Continental has agreed that, starting on the Expiration Date
and ending on the close of business 180 days after the Expiration  Date, it will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in  connection  with any such resale.  In addition,  until such date all
broker-dealers  effecting  transactions  in the New  Notes  may be  required  to
deliver a prospectus.

     Continental  will not  receive any  proceeds  from any sale of New Notes by
broker-dealers.  New Notes  received  by  broker-dealers  for their own  account
pursuant  to the  Exchange  Offer  may be sold  from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the  writing  of options on the New Notes or a  combination  of such  methods of
resale,  at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated  prices. Any such resale may be made
directly  to  purchasers  or to or through  brokers or dealers  who may  receive
compensation   in  the  form  of  commissions  or  concessions   from  any  such
broker-dealer  and/or the  purchasers of any such New Notes.  Any  broker-dealer
that resells New Notes that were received by it for its own account  pursuant to
the Exchange Offer and any broker or dealer that  participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities  Act  and  any  profit  of any  such  resale  of New  Notes  and  any
commissions  or  concessions  received  by any such  persons may be deemed to be
underwriting  compensation  under the Securities  Act. The Letter of Transmittal
states  that  by  acknowledging  that  it  will  deliver  and  by  delivering  a
prospectus,  a  broker-dealer  will  not  be  deemed  to  admit  that  it  is an
"underwriter" within the meaning of the Securities Act.

     Starting on the Expiration Date,  Continental will promptly send additional
copies of this  Prospectus and any amendment or supplement to this Prospectus to
any  broker-dealer  that requests such  documents in the Letter of  Transmittal.




Continental has agreed to pay all expenses  incident to the Exchange Offer other
than  commissions or  concessions of any brokers or dealers,  fees of counsel to
the Holders and certain  transfer  taxes,  and will indemnify the Holders of the
New Notes (including any broker-dealers) against certain liabilities,  including
liabilities under the Securities Act.

                                  LEGAL MATTERS

     The  validity of the Notes is being passed upon for  Continental  by Hughes
Hubbard & Reed LLP, New York, New York.

                                     EXPERTS

     The consolidated  financial  statements  (including the financial statement
schedule) of  Continental  Airlines,  Inc.  appearing in  Continental  Airlines,
Inc.'s Annual Report (Form 10-K),  as amended,  for the year ended  December 31,
2002 have been audited by Ernst & Young LLP, independent  auditors, as set forth
in their reports thereon included therein and incorporated  herein by reference.
Such  consolidated  financial  statements  (including  the  financial  statement
schedule) are, and audited  consolidated  financial statements to be included in
subsequently  filed  documents  will be,  incorporated  herein by  reference  in
reliance upon such reports of Ernst & Young LLP pertaining to such  consolidated
financial  statements  (to  the  extent  covered  by  consents  filed  with  the
Commission)  given on the  authority of such firm as experts in  accounting  and
auditing.

     The  consolidated  balance  sheets of MBIA Inc. and  subsidiaries  and MBIA
Insurance  Corporation and subsidiaries as of December 31, 2002 and December 31,
2001 and the related consolidated statements of income, changes in shareholders'
equity,  and cash flows for each of the three years in the period ended December
31, 2002,  incorporated  herein by reference,  have been incorporated  herein in
reliance on the reports of PricewaterhouseCoopers  LLP, independent accountants,
given on the authority of that firm as experts in accounting  and auditing.  Any
other audited  financial  statements of such companies that are  incorporated or
that are deemed to be incorporated herein by reference that are the subject of a
report  by  PricewaterhouseCoopers  LLP,  independent  accountants,  will  be so
incorporated  by reference in reliance  upon such reports and upon the authority
of such firms as experts in  accounting  and  auditing to the extent  covered by
consents of PricewaterhouseCoopers LLP filed with the SEC.

     The references to SH&E, and to its appraisal  reports,  dated as of October
31,  2002 and  January  24,  2003,  are  included  herein in  reliance  upon the
authority of such firm as an expert with respect to the matters contained in its
appraisal reports.




                           APPENDIX I--INDEX OF TERMS

                              PAGE                                          PAGE

Agent's Message.................42         Final Scheduled Payment
American Airlines...............23           Date.......................... .45
Applicable Date.................47         Fixed charges.....................28
ATOP............................42         GAAP..............................36
Aviation Security Act...........23         Global Notes......................59
Avoided Payment.................69         holder............................40
Base Rate.......................65         Holdings..........................29
Book-Entry Confirmation.........40         Hopkins International.............29
Break Amount....................47         Houston...........................29
Bush Intercontinental...........29         Indenture.........................45
Business Day....................57         Indirect Participants.............59
Capped Interest Rate............62         Initial Interest Period...........46
Cash Collateral.................48         Initial Purchaser.................26
Cash Collateral Account.........63         Insolvency Proceeding.............70
Cede............................59         Interest Drawing..................62
CMI.............................29         Interest Payment Date.............45
Collateral......................48         Interest Period...................46
Collateral Agents...............48         Issuance Date.....................37
Collateral Agreements...........48         KLM...............................31
Collateral Maintenance                     Liberty International.............29
  Agreement.....................48         LIBOR.............................46
Collateral Ratio................48         Liquidity Event of Default........66
Commission.......................3         Liquidity Expenses................56
Company.........................29         Liquidity Facility................62
Continental.....................29         Liquidity Facility LIBOR..........65
Continental Bankruptcy                     Liquidity Obligations.............56
  Event.........................53         Liquidity Provider................62
Controlling Party...............55         Liquidity Provider Guarantor......66
Copa............................31         Liquidity Provider
Debt Balance....................52           Reimbursement Date..............68
Default.........................53         Maximum Available
Definitive Notes................60           Commitment......................62
Delta...........................30         MBIA..............................35
Designated Locations............52         Moody's...........................63
Distribution Date...............46         New Notes..........................5
Downgrade Drawing...............63         Newark............................29
DTC.............................40         Non-Extension Drawing.............64
DTC Participant.................42         Non-Performance Payment Date......67
earnings........................28         Non-Performing....................56
Eligible Institution............40         Non-Performing Period.............67
Embraer.........................21         Northwest Airlines................30
Equipment.......................54         Note Owners.......................60
Event of Default................52         Noteholders.......................47
Event of Loss...................52         Notes..............................5
Exchange........................73         Old Notes..........................5
Exchange Agent..................43         Operative Documents...............45
Exchange Offer...................5         Outstanding Amount................67
Expiration Date.................39         Parent Company....................35
ExpressJet......................29         Participating Broker-Dealer.......38
FAA.............................20         Payment Default...................52
Fair Market Value...............48         Pledged Spare Parts...............48
Final Drawing...................64         Policy............................67
Final Legal Maturity Date.......45         Policy Drawing....................57
Final Order.....................69





Policy Expenses.................57         SARS..............................32
Policy Provider.................35         Scheduled Interest Payment
Policy Provider Agreement.......70            Date...........................45
Policy Provider Default.........55         Section 1110......................54
Policy Provider Election........68         Security Agent....................48
Policy Provider Obligations.....56         Security Agreement................48
Premium.........................47         SH&E..............................25
Prior Funds.....................67         Shelf Registration Statement......38
Qualified Spare Parts...........48         Standard & Poor's.................63
Rating Agency...................49         Stated Interest Rate..............45
Reference Agency Agreement......46         Subordinated Notes................57
Reference Agent.................46         Support Documents.................45
Reference Date..................46         Termination Date..................69
Registration Event..............38         Termination Notice................66
Registration Rights Agreement...37         Threshold Rating..................63
Registration Statement...........3         TIA...............................53
Relevant Date...................67         Trustee...........................45
Replacement Facility............63         TSA...............................23
Required Amount.................62         United............................23
Rotable Ratio...................48         US Airways........................23
Rotables........................71         Virgin............................31
SAP.............................36




                          APPENDIX II--APPRAISAL LETTER

SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY





















                                        A FULL APPRAISAL OF SELECTED SPARE PARTS








                                                                   Prepared for:

                                                            CONTINENTAL AIRLINES




                                                                    Prepared by:
                                                                            SH&E


                                                                JANUARY 24, 2003




                                                          TABLE OF CONTENTS

1    1.0  INTRODUCTION, DETERMINATION &
ASSUMPTIONS....................................................................1
     1.1    Introduction.......................................................1
     1.2    Determination......................................................1
     1.3    Assumptions........................................................3
2    2.0  DESCRIPTION OF ASSETS................................................4
     2.1    Spare Parts Nomenclature...........................................4
     2.2    Summary of the Continental Inventory...............................7
     2.3    Comparison of the Two Appraisals...................................8
         2.3.1    Inventory Size Comparison....................................9
         2.3.2    Significant Changes in the Inventory........................10
         2.3.3    Other Observations..........................................11
3    3.0  METHODOLOGY.........................................................12
     3.1    Definition of Terms...............................................12
         3.1.1    Base Value..................................................12
         3.1.2    Current Market Value........................................12
     3.2    Spare Parts Appraisal Methodology.................................13
         3.2.1    Sampling Process............................................13
         3.2.2    Sample Valuation............................................14
         3.2.3    Current Market Value Determination..........................14
         3.2.4    Condition and Quantity Adjustment...........................15
4    4.0  THE MARKET FOR THE SUBJECT ASSETS...................................16
5    5.0  QUALIFICATIONS......................................................17
6    6.0  LIMITATIONS.........................................................18


Appendix A - Value by Aircraft Type by Material Class
Appendix B - Summary of Inventory Adjustments
Appendix C - Proportion of Serviceable & Unserviceable Parts




                                                 1.0 INTRODUCTION, DETERMINATION
                                                                   & ASSUMPTIONS




1.1  INTRODUCTION


Continental  Airlines,  Inc.  ("Continental"  the "Client") has retained  Simat,
Helliesen  & Eichner,  Inc.  ("SH&E") to prepare an update to its opinion of the
Current (or Fair) Market Value  ("CMV") of an inventory of selected  spare parts
owned by  Continental  (collectively  the "Subject  Assets").  This report is an
update to SH&E's previous report dated October 31, 2002.

As part  of the  appraisal,  SH&E  conducted  limited  physical  inspections  of
Continental's  warehouse  facilities  at Newark (3  locations),  Cleveland,  Los
Angeles (2  locations),  Houston - George Bush  Intercontinental  (4 locations),
Houston - Hobby, Honolulu (2 locations) and Orlando.  Together,  these locations
account for 80% of the subject asset value.


1.2  DETERMINATION


SH&E has  determined  the  aggregate  Adjusted(1)  Current  Market Value of  the
Subject Assets to be:

                                 $ 436.8 MILLION

As a point of reference,  this updated appraisal represents an increase of $21.4
million from the  valuation  provided in the previous  report dated  October 31,
2002 that was based on an inventory listing as of August 25, 2002.


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

(1)   Adjustments  were  made to the CMV to  reflect  serviceability  levels  and
     inventory accuracy




- --------------------------------------------------------------------------------
TABLE 1-1:  CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000)
- --------------------------------------------------------------------------------
                         UNADJUSTED CURRENT MARKET VALUE

                         Serviceable          Unserviceable               Total
- --------------------------------------------------------------------------------
737-7/8/9                 $157,991.7              $56,175.8          $214,167.6

757-200                    $62,373.7              $17,599.7           $79,973.4

757-300                     $2,944.5                 $434.0            $3,378.4

767-200                     $6,340.1               $7,193.2           $13,533.3

767-400                    $51,935.1               $9,576.8           $61,511.8

777-200                    $97,444.4              $32,665.2          $130,109.6
                           ---------              ---------          ----------
Total                     $379,029.5             $123,644.7          $502,674.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------





- --------------------------------------------------------------------------------
TABLE 1-2:  CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000)
- --------------------------------------------------------------------------------
                          ADJUSTED CURRENT MARKET VALUE
SH&E Value
Group                    Serviceable          Unserviceable               Total
- --------------------------------------------------------------------------------
737-7/8/9                 $157,991.7              $27,980.8          $185,972.6

757-200                    $62,373.7               $6,979.1           $69,352.8

757-300                     $2,944.5                 $172.2            $3,116.7

767-200                     $6,340.1               $2,606.6            $8,946.7

767-400                    $51,935.1               $3,806.1           $55,741.2

777-200                    $97,444.4              $16,267.6          $113,712.0
                           ---------              ---------          ----------

Total                     $379,029.5              $57,812.4          $436,841.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------




1.3  ASSUMPTIONS


SH&E relied on the following assumptions while performing this valuation:

     O    The global commercial  aviation industry and, more  specifically,  the
          aviation  spare parts  aftermarket  will  continue to recover from the
          financial distress experienced since early 2001.

     O    The  SH&E  values   assume  the  Subject   Assets  meet  all  relevant
          specifications and performance capabilities.

     O    SH&E relied upon Continental's  determination as to the serviceability
          or  unserviceability  of the Subject  Assets.  Any  variation in their
          status would affect the values referenced herein.

     O    SH&E has not addressed  any ownership  rights and has assumed that the
          Subject  Assets  are  owned by the  Client.

     O    The Subject Asset's records are in compliance with International Civil
          Aviation  Organization  (ICAO)  standards  and  furthermore,  all Life
          Limited Parts ("LLP's") records are traceable "back to birth"(2).

     O    All  normally  required   maintenance  has  been  performed  including
          compliance with all mandatory Airworthiness Directives.

     O    All of the data and information provided by Continental is an accurate
          representation  of  the  actual  conditions  or  circumstances  of the
          Subject Assets.

     O    The  Subject  Assets have not been  involved in any major  incident or
          accident that resulted in significant damage to the asset.

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

(2)  "Back-to-birth"   records  are  those  that   provide   operating   history
     information  for  each  LLP from  the  date of its  first  delivery  by the
     Original  Equipment  Manufacturer  (OEM) to its first operator and for each
     subsequent installation.




                                                      2.0  DESCRIPTION OF ASSETS


2.1  SPARE PARTS NOMENCLATURE


Aircraft and engine spare parts are generally categorized as follows:


ROTABLES


Rotable  parts are those  components  that can be  repeatedly  and  economically
restored to a serviceable  condition over a period approximating the life of the
flight  equipment to which they are related.  When in need of overhaul,  rotable
components  are  generally  worth 30-50% of new and,  after  overhaul,  they are
typically worth 70-85% of new depending on the age of the aircraft type.

Examples of rotable  parts  include  thrust  reversers,  auxiliary  power units,
landing gears, generators,  valves and actuators. Rotable parts normally have an
unique serial number.


REPAIRABLES


Repairables are those components or parts that can be economically restored to a
serviceable or overhauled  condition,  but that have a life that is considerably
less  than the  life of the  flight  equipment  to which  they are  related.  In
addition,  they can only be  overhauled  or repaired a limited  number of times.
When in need of overhaul or repair,  repairable parts are typically worth 30-50%
of new and, after overhaul 60-80 % of new.

In the Continental  system,  these parts are classified as Expendables  (because
they are  ultimately  consumed) with a notation in the part record that the part
is to be  "recovered"  and  inspected to  determine if repair is cost  effective
prior to being scrapped.

Examples of repairable or Recoverable  Expendable parts include engine cowlings,
fairings,  and engine blades,  flap track  assemblies,  certain  bearings,  duct
assemblies and fittings.




EXPENDABLES

Expendables are parts or material that, once used, cannot be re-used and, if not
serviceable, they generally cannot be overhauled or repaired.


LIFE LIMITED PARTS

Life limited parts (LLP) have a finite  operating life that is defined by hours,
cycles or  calendar  limit and are usually  found in engines  and  landing  gear
assemblies.  When a LLP  reaches  its life  limit,  it cannot be  overhauled  or
repaired and must be destroyed.






The condition of aircraft and engine parts is classified as follows:


NEW

New  parts  are  parts  that  have  never  been  used  and are  normally  in the
manufacturer's original packaging.


OVERHAULED

Overhauled  parts are rotable or  repairable  parts that have been  repaired and
tested to defined overhaul  standards that can be specified by the manufacturer,
an airline or the repair vendor.  The overhaul process restores the part to near
new service standard.


SERVICEABLE

Serviceable  parts are parts that have been inspected and tested and found to be
within prescribed service limits.




AS REMOVED

An 'As Removed' part is in the condition that it was when it was removed from an
operator's  aircraft  or  engine.  Such a part can be  installed,  if  operating
normally prior to removal, without prior testing on an aircraft or engine in the
same operator's  fleet. In all other cases, an As Removed part must be inspected
and tested in an approved manner before it can be declared serviceable.


UNSERVICEABLE

Unserviceable  (sometimes  referred to as  Repairable)  components or parts have
been either removed from service for not working  correctly or, upon  inspection
and testing, were found not to meet certain prescribed standards. Such parts can
be sent to suitably qualified facilities for repair or overhaul as required.


BEYOND ECONOMIC REPAIR

An  unserviceable  part that,  when  inspected  and tested,  is found to require
repairs  that are  estimated  to cost  more  than the part is worth is  declared
'Beyond Economic Repair' (BER) and is usually scrapped.


AIRWORTHINESS OF PARTS

All  parts,  regardless  of  whether  or  not  they  are  classified  as  'New',
'Overhauled'  or  'Serviceable'  only  remain  airworthy  as  long  as the  part
continues  to  comply  with  all  manufacturer's  storage,  maintenance  and FAA
Airworthiness Directives requirements.




2.2  SUMMARY OF THE CONTINENTAL INVENTORY


The Subject  Assets are  selected  airframe,  avionic and engine spare parts for
Continental's  in-service fleet of Boeing 737-700,  737-800 and 737-900 together
with  Boeing  757-200,  757-300,  767-200,  767-400 and  777-200  aircraft.  The
aircraft  inventories  include the total  inventory  population for all of those
aircraft except for the 757-200. The 757 parts include only those acquired after
October 1994.

SH&E was provided with an electronic  inventory listing from CO's  'SCEPTRE/ICS'
inventory  management system dated as of December 25, 2002. The inventory listed
each  Continental  part number  ("MEPN") and information for each MEPN by fleet,
category  (expendable  or rotable),  historic  average cost (also last  purchase
price and catalogue  price if available),  and the percentage  serviceable.  The
inventory  consisted  of 25,465  line items  with a total of 789,737  individual
parts.  A total of 2,110 line items  containing  105,358  parts (see Appendix B)
were excluded from this appraisal for the following reasons:

     1.   The  parts  are for an  aircraft  modification  program  that  will be
          completed by the next appraisal (cockpit doors).

     2.   The parts are assets  supplied and owned by vendors but tracked in the
          Continental maintenance system (brake and tire sets).

     3.   Or, are branded parts specific to Continental  and can only be used by
          the airline (seat covers, carpet and cushion, and fabric).

These parts except for the cockpit doors, which are new items, were also removed
from the previous appraisal.

The majority of the Subject  Assets were  assessed to be in a new or  overhauled
maintenance  condition.  Continental  claimed that the accuracy of the inventory
management systems found by SH&E at the inspected  facilities was representative
of other  stations in the system and SH&E found no  indications to the contrary.
It should be noted that SH&E did not  compare or  reconcile  the part cost basis
provided to SH&E with values reported on Continental's Balance Sheet.




- --------------------------------------------------------------------------------
TABLE 2-1:  SELECTED SPARE PARTS DISTRIBUTION
- --------------------------------------------------------------------------------

Value Group               Fleet               Expendable     Rotable       Total
- --------------------------------------------------------------------------------

                          737-700/800            278,912       6,942     285,854
                          737-800                  3,777         191       3,968
                          737-900                    821          10         831
                                                     ---          --         ---
737-7/8/900 Total                                284,387       7,167     291,554

757-200                   757-200                185,731       3,391     189,122
757-300                   757-300                 10,946          96      11,042
767-200                   767-200                 25,485         227      25,712
767-400                   767-400                 51,147       1,586      52,733
777-200                   777-200                111,210       3,006     114,216
                                                 -------       -----     -------

Grand Total                                      668,906      15,473     684,379
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*These  summary  tables  reflect  the  current  part count  after all  inventory
adjustments. See Appendix B for a detailed summary of inventory adjustments.


2.3      COMPARISON OF THE TWO APPRAISALS


For this  appraisal  SH&E  used  data as of  December  25,  2002;  in the  prior
appraisal, the inventory was dated as of August 25, 2002




     2.3.1     INVENTORY SIZE COMPARISON


The  inventory  as of December  25, 2002  contained  742 more  Continental  part
numbers  and  contained  59,454  more  individual  parts.  The  following  table
summarizes the differences.


- --------------------------------------------------------------------------------
TABLE 2-2:  INVENTORY AS OF DECEMBER 2002
- --------------------------------------------------------------------------------
Aircraft                                        Lines                     Parts
- --------------------------------------------------------------------------------
737-7/8/9                                       6,036                    335,753

757-200                                         7,568                    212,363

757-300                                           674                     12,662

767-200                                         1,298                     26,574

767-400                                         3,970                     67,597

777-200                                         5,919                    134,788
                                                -----                    -------

Grand Total                                    25,465                   789,737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------







- --------------------------------------------------------------------------------
TABLE 2-3:  INVENTORY AS OF AUGUST 2002
- --------------------------------------------------------------------------------
Aircraft                                        Lines                     Parts
- --------------------------------------------------------------------------------
737-7/8/9                                       5,756                    279,537

757-200                                         7,386                    212,424

757-300                                           659                     12,080

767-200                                         1,260                     26,418

767-400                                         3,867                     67,304

777-200                                         5,795                    132,520
                                                -----                    -------

Grand Total                                    24,723                    730,283
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------




- --------------------------------------------------------------------------------
TABLE 2-4:  INVENTORY - DIFFERENCES
- --------------------------------------------------------------------------------
Aircraft                                        Lines                     Parts
- --------------------------------------------------------------------------------
737-7/8/9                                         280                    56,216

757-200                                           182                       (61)

757-300                                            15                       582

767-200                                            38                       156

767-400                                           103                       293

777-200                                           124                     2,268
                                                  ---                     -----

Grand Total                                       742                    59,454
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

*THE COUNT OF PARTS AS OF JANUARY 2003 IS BEFORE ALL INVENTORY ADJUSTMENTS.  SEE
APPENDIX B FOR A DETAILED SUMMARY OF INVENTORY ADJUSTMENTS.




The change in inventory  represents  an increase in  unadjusted  current  market
value of approximately $47.9 Million.


     2.3.2     SIGNIFICANT CHANGES IN THE INVENTORY


SH&E  noted  that  the  proportion  of  unserviceable  parts  has  increased  by
approximately  $50 million (before  maintenance  adjustment)  since the previous
inventory.  This change was expected as it was noted during the prior  appraisal
that the proportion of unserviceable parts was relatively low compared with U.S.
industry average.

SH&E also noted that  Continental  acquired 4 new APUs(3)  with an  approximate
current market value of $2.5 million.


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

(3)  An APU is an Auxiliary Power Unit. It is a small jet engine used to provide
     electrical  and pneumatic  power to aircraft  system when on the ground and
     power for starting the main engines.  Certain of the engines can be used to
     provide emergency in-flight electrical power.




     2.3.3     OTHER OBSERVATIONS


     O    At Newark Liberty International Airport, Continental is building a new
          spare parts facility  which is due for completion in April 2003.  Once
          complete,  parts from the  current  hanger  location  and  off-airport
          warehouse will be consolidated into the single facility.

     O    The  Guam  station  holds  inventory  representing  approximately  $25
          million in value and was recently  damaged by a typhoon.  Accordingly,
          SH&E was unable to inspect this facility. Continental reports that the
          facility is being  repaired.  Continental  further informs us that the
          associated damage, to the spare parts was minimal,  and affected parts
          are  being  repaired.  SH&E  will  inspect  the  facility  at the next
          appraisal update.

     O    SH&E observed different packaging standards between different stations
          although all were acceptable by industry  standards.  SH&E recommended
          that all parts in excess of $2,500 be individually  packaged even when
          stored within a bin.

     O    Previously at the Houston - Morales (MOR)  location,  SH&E  discovered
          several  rotable  parts were reported as being present at the facility
          inventory   when  they  were   actually   installed  on  an  aircraft.
          Continental  was  aware  of the  problem  and  advised  it  was  being
          corrected.  SH&E  retested  samples of this  inventory and the problem
          appears to have been corrected.




                                                                 3.0 METHODOLOGY


3.1  DEFINITION OF TERMS


     3.1.1     BASE VALUE


The Base Value  ("BV") is the  appraiser's  opinion of the  underlying  economic
value of an asset in an open,  unrestricted and stable market environment with a
reasonable balance of supply and demand, and also assumes full considerations of
its "highest and best use". An asset's BV is founded in the historical  trend of
values and in the projection of value trends and presumes an arm's-length,  cash
transaction between willing, able and knowledgeable  parties,  acting prudently,
with an absence of duress and with a  reasonable  period of time  available  for
marketing.

Since BV pertains to a somewhat  idealized  asset and market  combination it may
not  necessarily  reflect the actual  value of the asset in  question,  but is a
nominal  starting  value to which  adjustments  may be applied to  determine  an
actual value.  Since BV is related to long-term market trends, the BV definition
is normally applied to analyses of historical values and projections of residual
values and lease rates.


     3.1.2     CURRENT MARKET VALUE


The Current (or Fair) Market Value ("CMV" or "FMV") is the  appraiser's  opinion
of the most likely  trading price that may be generated for an individual  asset
under  the  market  circumstances  that  are  perceived  to exist at the time in
question.  CMV assumes that the asset is valued for its highest,  best use, that
the parties to the hypothetical sale transaction are willing,  able, prudent and
knowledgeable.  Neither are under any unusual  pressure for a prompt  sale,  and
that the transaction  would be negotiated in an open and unrestricted  market on
an  arm's-length  basis,  for cash or  equivalent  consideration,  and  given an
adequate  amount of time for effective  exposure to prospective  buyers.  Unless
stated  otherwise,  the total CMV of multiple assets represents the aggregate of
the  individual  asset's  Current  Market  Values  were  they  to be  sold on an
asset-by-asset basis and not the value of the assets if sold in bulk.




3.2  SPARE PARTS APPRAISAL METHODOLOGY


SH&E's  standard  parts  appraisal  can be  summarized  as a  calculation  of an
adjustment to the owner's  internal  inventory value.  The  statistically  based
adjustment is achieved by the development of a representative,  dollar-weighted,
stratified  sample of the parts,  the  valuation  of that  sample and then,  the
application of a derived  adjustment factor to the sample and then to the entire
population of parts. That process is more fully described below.


     3.2.1     SAMPLING PROCESS


SH&E obtained an itemized  database of the parts to be valued from  Continental.
The data identified each part by aircraft type, rotable or expendable  category,
description,  manufacturer's part number, quantity, and percent serviceable. The
data also provided an average  acquisition  cost for each part.  Some parts were
listed with zero cost and those were handled separately.

SH&E  compiled a single  database of the  selected  Continental  inventory  that
contained  25,465 line items.  The  inventory  was then grouped by aircraft type
with common trading  characteristics  and  subsequently,  by category.  For this
valuation, SH&E initially grouped all 737 aircraft together but kept the 757 and
767 parts  separate.  It  should  be noted  that the  later  model  767-400  has
significant systems and parts commonality with the 777 aircraft.

Each of the  groupings  was then sorted by  descending  unit cost value and then
divided  into four to six  separate  strata of  approximately  equal total value
based on  Continental's  reported  cost or value for each line  item.  A further
stratum  was  created in some cases to  provide  consideration  for parts with a
reported zero average  acquisition  value.  Approximately  1,500 line items were
selected  for the initial  sampling and these served as the basis of the pricing
and  physical  sampling  process.  The pricing  sample was further  increased to
include all matching parts in SH&E's internal parts database.




     3.2.2     SAMPLE VALUATION


The CMV of the  individual  parts  that make up each  sample was  determined  by
investigating  the  current  sale price for new or  overhauled  parts,  based on
information from independent third parties,  manufacturers' parts lists and SH&E
files.

SH&E performed a detailed  pricing survey for the prior  appraisal and, for this
update,  spot  checked  values from each pool of parts and found no  significant
change in the  individual  part's  values.  New pricing was performed on a small
group of parts with higher  values to validate  their pricing  consistency  with
similar parts from the prior appraisal.  A small sample of new parts was sent to
several major parts vendors who provided current trading values. As before, most
of these  parts  are  associated  with new  production  aircraft  with a limited
secondary market and many of the returned vendor-provided values were new prices
or catalogue values.


     3.2.3     CURRENT MARKET VALUE DETERMINATION


SH&E applied the results of the sample pricing to each  appropriate  strata and,
in addition, applied price matches from other sources. Over 30 different sources
including price catalogs from the major manufacturers, US government procurement
data,  airline parts pooling price lists and inventory and purchase records from
seven major U.S. and European airlines files were reviewed in order to determine
additional current market values.  More than three million parts pricing records
were examined in order to match a part number and reference  price for each part
in the Continental inventory.

SH&E  obtained  a  market  price  for the  small  sample  of  parts  based on an
assumption  that each part would be purchased  independently,  as a single unit,
and  in a new or  overhauled  condition  for  rotables  and  new  condition  for
expendables.  In cases where more than one quote was obtained, SH&E attempted to
determine the most reasonable value.

This file matching procedure,  using both the initial sample and SH&E's internal
resources,  was successful in determining market price for approximately  17,500
line  items  representing  approximately  71% of the line  items  and 74% of the
historic cost.




     3.2.4     CONDITION AND QUANTITY ADJUSTMENT


The CMV of  unserviceable  parts was  calculated  using ratios of serviceable to
unserviceable  values  obtained from prior SH&E parts  appraisals and applied to
SH&E's findings made during the physical inspection and audit.

Continental  provided SH&E with a percentage  unserviceable by part number. This
statistic was tested against  internal  records but, during this  appraisal,  no
supplier audits or surveys' were made to validate the unserviceable  percentages
provided by the airline. Selected vendor audit will be performed during the next
full appraisal.

For this  update,  SH&E  revisited  Continental's  parts  facilities  in Newark,
Cleveland, Los Angeles and Houston (George Bush) and performed first time visits
to Honolulu,  Houston Hobby and Orlando to physically  inspect the assets and to
verify the accuracy of the inventory reporting system. As before the accuracy of
Continental's  inventory was above industry  standard and Honolulu and Cleveland
both had no discrepancies. SH&E's review of the associated records also revealed
no discrepancies.

The physical sample audit indicated accuracy above U.S. industry norms, however,
SH&E did note  that the  airline  creates a large  number of  "kits." A kit is a
package of parts,  either  multiple  units of the same part or a  collection  of
necessary parts needed to complete a certain maintenance task. Sometimes the kit
contains a rotable item along with the necessary  expendable material to perform
installation.  Almost  all the  material  was new.  It should be noted  that the
"kitting"  process makes the kit unique to Continental but the parts can be made
generic simply by  disassembling  the kit. For this valuation the kit parts were
treated as independent parts.




                                                  4.0 THE MARKET FOR THE SUBJECT
                                                                          ASSETS


The potential market for Continental  Airlines' spare parts remains positive. In
the main,  the parts are  associated  with aircraft that have enjoyed  extensive
production  runs and also have a wide operator  base. The two exceptions are the
757-300 and the 767-400;  these aircraft have both limited  production  runs and
small operator bases. There have been a total of 63 757-300 aircraft ordered for
7 operators and 37 767-400 aircraft  ordered for two operators,  Continental and
Delta. That said, there is very significant  commonality between the 757-200 and
757-300 aircraft and also between the 767-400 and the 777.

The parts  aftermarket,  generally  estimated  to exceed $1.3  billion in annual
revenues,  has obtained the majority of its product from either airline  surplus
sales or from  dismantled  aircraft.  There  have been no  significant  sales of
surplus  parts  for the  late  generation  aircraft  represented  by this  parts
inventory or for their associated engines.  Nor have any of these aircraft types
been dismantled for parts other than  incident-related  aircraft.  Consequently,
there is very little of this type of airframe  material  available  on the parts
aftermarket. The same is true for the engine market where the Original Equipment
Manufacturers  ("OEM")  have  maintained  a  tight  control  of any  aftermarket
relating to newer  generation  engines.  SH&E is of the opinion that the Subject
Assets, if offered for sale, would include some of the most marketable  material
in the commercial aviation parts aftermarket.




                                                              5.0 QUALIFICATIONS


Founded in 1963 and with  offices in New York,  Boston,  Washington,  London and
Amsterdam,   SH&E  is  the  world's  largest  consulting  firm  specializing  in
commercial aviation. Its staff of over 90 personnel encompasses expertise in all
disciplines  of the industry and the firm has  provided  appraisal,  consulting,
strategic  planning  and  technical  services to  airlines,  leasing  companies,
government   agencies,   airframe  and  engine   manufacturers,   and  financial
institutions.

SH&E's appraisal staff are all members of the International Society of Transport
Aircraft  Trading  (ISTAT),   the   internationally   recognized  body  for  the
certification of aircraft appraisers. SH&E performs all appraisals in accordance
with the  definitions,  guidelines  and  standards  set forth by  ISTAT.  SH&E's
officer responsible for all appraisals is an ISTAT Senior Appraiser.

SH&E annually  values  approximately  $20 billion of aviation  assets  including
commercial  and military  equipment,  airline fleets and lease  portfolios.  The
appraisals  range from full appraisals  involving  detailed  aircraft and record
inspections  conducted by SH&E's  technical  staff to the valuation of tax-based
leases.  SH&E's proprietary  aircraft residual value model is widely accepted by
the rating  agencies as a reliable  forecasting  tool.  In addition to the above
aircraft  valuations,  SH&E  annually  values in excess of $3  billion  worth of
aircraft spare parts and spare engines. SH&E routinely values flight simulators,
hangar tooling, ground equipment, gates, slots, maintenance facilities and Fixed
Base Operations.

A related  service  that SH&E offers its Clients is Asset  Management.  Over the
last few years,  SH&E has been the principal  asset manager  responsible for the
recovery and subsequent  remarketing of a number of individual aircraft and some
significant portfolios.

This active  participation  in the market place provides SH&E with practical and
first hand  knowledge  of the values and lease  rates of  aircraft,  engines and
parts.




                                                                 6.0 LIMITATIONS


SH&E used  information  supplied  by the  Client  together  with  in-house  data
accumulated through other recent studies of aircraft parts transactions.

SH&E's opinions are based upon historical relationships and expectations that it
believes are reasonable.

Some of the underlying assumptions, including those described above are detailed
explicitly or implicitly  elsewhere in this report, may not materialize  because
of  unanticipated  events and  circumstances.  SH&E's opinions could, and would,
vary materially, should any of the above assumptions prove to be inaccurate.

The  opinions  expressed  herein  are not  given  for,  or as an  inducement  or
endorsement for, any financial transaction.  They are prepared for the exclusive
use of the addressee.  SH&E accepts no responsibility for damages,  if any, that
result from decisions made or actions taken based on this report.

This report does not address  the  validity of title or  ownership  of the items
discussed herein.

This report  reflects  SH&E's expert  opinion and best  judgment  based upon the
information available to it at the time of its preparation.  SH&E does not have,
and does not expect to have, any financial interest in the appraised property.

For SH&E:

/s/ CLIVE G. MEDLAND
- ---------------------------
Clive G. Medland, FRAeS
Senior Vice President
Senior Appraiser
International Society of
Transport Aircraft Trading



January 24, 2003




SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY























                                                                      APPENDIX A
                                        VALUE BY AIRCRAFT TYPE BY MATERIAL CLASS




               SELECTED SPARE PARTS VALUATION SUMMARY BY MATERIAL
                                     CLASS


     Dollars in (000)

     ------------------------------------------------------------------------
      VALUE GROUP             ROTABLE         EXPENDABLE         GRAND TOTAL
     ------------------------------------------------------------------------
        737-7/8/9          $153,526.8          $32,445.7          $185,972.6
     ------------------------------------------------------------------------
        757-200             $49,898.8          $19,454.1          $69,352.8
     ------------------------------------------------------------------------
        757-300              $2,267.0             $849.7           $3,116.7
     ------------------------------------------------------------------------
        767-200              $6,611.4           $2,335.3           $8,946.7
     ------------------------------------------------------------------------
        767-400             $46,714.4           $9,026.8          $55,741.2
     ------------------------------------------------------------------------
        777-200             $88,442.0          $25,270.0         $113,712.0
     ------------------------------------------------------------------------
          TOTAL            $347,460.4          $89,381.5         $436,841.9
     ------------------------------------------------------------------------




SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY























                                                                      APPENDIX B
                                                SUMMARY OF INVENTORY ADJUSTMENTS




                                              SELECTED SPARE PARTS: SUMMARY OF INVENTORY
                                                             ADJUSTMENTS


- ------------------------   -------------------------------   ----------------------   ---------------------   ----------------------
 Starting CO Inventory      Less brakes, tires, cockpit        Less CO specific        Total Adjustments         Inventory After
                                       doors                         parts                to Inventory             Adjustments
- ------------------------   -------------------------------   ----------------------   ---------------------   ----------------------
Group     Lines     Qty    Group   Lines Qty       Reason    Group   Lines     Qty    Group   Lines    Qty    Group   Lines      Qty
- ------------------------   -------------------------------   ----------------------   ---------------------   ----------------------

737-7/8/9 6,036 335,753    737-7/8/9  1   50         DOOR    737-7/8/9 470  44,149    737-7/8/9471  44,199    737-7/8/5,565  291,554
757-200   7,568 212,363    757-200    3   99   BRAKE/TIRE    757-200   395  23,142    757-200  398  23,241    757-200 7,170  189,122
757-300     674  12,662    757-300    2   14   BRAKE/TIRE    757-300    46   1,606    757-300   48   1,620    757-300   626   11,042
767-200   1,298  26,574    767-200    2    9   BRAKE/TIRE    767-200    38     853    767-200   40     862    767-200 1,258   25,712
767-400   3,970  67,597    767-400    1   35   BRAKE/TIRE    767-400   282  14,829    767-400  283  14,864    767-400 3,687   52,733
777-200   5,919 134,788    777-200    3  294   BRAKE/TIRE    777-200   867  20,278    777-200  870  20,572    777-200 5,049  114,216
- ------------------------   -------------------------------   ----------------------   ---------------------   ----------------------
Total    25,465 789,737    Total     12  501                 Total   2,098 104,857    Total   2,110105,358    Total   23,355 684,379
- ------------------------   -------------------------------   ----------------------   ---------------------   ----------------------

*CO specific parts include:  seat covers, carpet, cushions, curtains, fabric, cloth, placards






SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY























                                                                      APPENDIX C
                                                   PROPORTION OF SERVICEABLE AND
                                                             UNSERVICEABLE PARTS




COMPARISON OF THE SELECTED PARTS INVENTORY VALUATIONS

DOLLARS IN (000)


- -----------------------------------------------------------------------------------------------------------------------
                   CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000) DECEMBER 2002
- -----------------------------------------------------------------------------------------------------------------------
                  UNADJUSTED CURRENT MARKET VALUE                        ADJUSTED CURRENT MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------------

Value Group  Serviceable   Unserviceable      Total       Serviceable    Unserviceable      Total             %
                                                                                                        Unserviceable
            -----------------------------------------------------------------------------------------------------------

737-7/8/9      $157,991.7    $56,175.8      $214,167.6     $157,991.7      $27,980.8      $185,972.6        15%
757-200         $62,373.7    $17,599.7       $79,973.4      $62,373.7       $6,979.1       $69,352.8        10%
757-300          $2,944.5       $434.0        $3,378.4       $2,944.5         $172.2        $3,116.7         6%
767-200          $6,340.1     $7,193.2       $13,533.3       $6,340.1       $2,606.6        $8,946.7        29%
767-400         $51,935.1     $9,576.8       $61,511.8      $51,935.1       $3,806.1       $55,741.2         7%
777-200         $97,444.4    $32,665.2      $130,109.6      $97,444.4      $16,267.6      $113,712.0        14%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL          $379,029.5   $123,644.7      $502,674.2     $379,029.5      $57,812.4      $436,841.9        13%
- -----------------------------------------------------------------------------------------------------------------------




- -----------------------------------------------------------------------------------------------------------------------
                    CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000) AUGUST 2002
- -----------------------------------------------------------------------------------------------------------------------
                  UNADJUSTED CURRENT MARKET VALUE                        ADJUSTED CURRENT MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------------
Value Group  Serviceable   Unserviceable      Total       Serviceable    Unserviceable      Total      % Unserviceable
            -----------------------------------------------------------------------------------------------------------

737-7/8/9      $158,726.5    $33,816.2      $192,542.7     $158,726.5      $16,811.8      $175,538.3        10%
757-200         $62,627.8    $15,171.1       $77,799.0      $62,627.8       $6,009.3       $68,637.2         9%
757-300          $2,927.8       $372.3        $3,300.1       $2,927.8         $147.6        $3,075.4         5%
767-200          $6,948.4     $4,070.4       $11,018.7       $6,948.4       $1,407.8        $8,356.1        17%
767-400         $50,651.2     $5,196.2       $55,847.3      $50,651.2       $2,056.1       $52,707.3         4%
777-200        $100,107.0    $14,129.3      $114,236.3     $100,107.0       $7,007.5      $107,114.6         7%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL          $381,988.8    $72,755.4      $454,744.2     $381,988.8      $33,440.2      $415,429.0         8%
- -----------------------------------------------------------------------------------------------------------------------



- -----------------------------------------------------------------------------------------------------------------------
                                   DIFFERENCES (DECEMBER 2002 - AUGUST 2002) ($000)
- -----------------------------------------------------------------------------------------------------------------------
                  UNADJUSTED CURRENT MARKET VALUE                ADJUSTED CURRENT MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------------
Value Group  Serviceable   Unserviceable      Total       Serviceable    Unserviceable      Total
- -----------------------------------------------------------------------------------------------------------------------

737-7/8/9         ($734.8)   $22,359.6       $21,624.9        ($734.8)     $11,169.0       $10,434.2
757-200           ($254.1)    $2,428.6        $2,174.5        ($254.1)        $969.8          $715.7
757-300             $16.6        $61.6           $78.3          $16.6          $24.6           $41.3
767-200           ($608.3)    $3,122.8        $2,514.5        ($608.3)      $1,198.8          $590.6
767-400          $1,283.9     $4,380.6        $5,664.5       $1,283.9       $1,750.0        $3,033.9
777-200         ($2,662.6)   $18,535.9       $15,873.3      ($2,662.6)      $9,260.0        $6,597.4
            -----------------------------------------------------------------------------------------------------------
TOTAL           ($2,959.3)   $50,889.3       $47,930.0      ($2,959.3)     $24,372.3       $21,413.0
- -----------------------------------------------------------------------------------------------------------------------






                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     The Company's  Certificate  of  Incorporation  and Bylaws  provide that the
Company will  indemnify  each of its  directors  and officers to the full extent
permitted by the laws of the State of Delaware and may  indemnify  certain other
persons as  authorized  by the  Delaware  General  Corporation  Law (the "GCL").
Section 145 of the GCL provides as follows:

               "(a) A  corporation  shall have power to indemnify any 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  corporation) by reason of the fact that the
          person  is or  was a  director,  officer,  employee  or  agent  of the
          corporation, or is or was serving at the request of the corporation as
          a  director,  officer,  employee  or  agent  of  another  corporation,
          partnership,   joint  venture,  trust  or  other  enterprise,  against
          expenses  (including  attorneys' fees),  judgments,  fines and amounts
          paid in settlement  actually and reasonably  incurred by the person in
          connection with such action, suit or proceeding if the person acted in
          good faith and in a manner the person reasonably  believed to be in or
          not  opposed  to the best  interests  of the  corporation,  and,  with
          respect to any criminal action or proceeding,  had no reasonable cause
          to believe the person's  conduct was unlawful.  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 person did not act in good faith
          and in a manner which the person  reasonably  believed to be in or not
          opposed to the best interests of the corporation, and, with respect to
          any criminal  action or proceeding,  had  reasonable  cause to believe
          that the person's conduct was unlawful.

               (b) A  corporation  shall have power to indemnify  any 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  corporation  to procure a judgment  in its favor by reason of the
          fact that the person is or was a director,  officer, employee or agent
          of  the  corporation,  or is or was  serving  at  the  request  of the
          corporation  as a  director,  officer,  employee  or agent of  another
          corporation,  partnership,  joint venture,  trust or other  enterprise
          against expenses  (including  attorneys' fees) actually and reasonably
          incurred by the person in connection with the defense or settlement of
          such action or suit if the person  acted in good faith and in a manner
          the person  reasonably  believed  to be in or not  opposed to the best
          interests of the corporation and except that no indemnification  shall
          be made in  respect  of any  claim,  issue or matter as to which  such
          person shall have been adjudged to be liable to the corporation unless
          and only to the  extent  that the  Court of  Chancery  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 the Court of Chancery or
          such other court shall deem proper.

               (c) To the extent that a present or former director or officer of
          a  corporation  has been  successful  on the  merits or  otherwise  in
          defense of any action,  suit or proceeding  referred to in subsections
          (a) and (b) of this  section,  or in defense  of any  claim,  issue or
          matter  therein,  such person shall be  indemnified  against  expenses
          (including  attorneys' fees) actually and reasonably  incurred by such
          person in connection therewith.

               (d) Any  indemnification  under  subsections  (a) and (b) of this
          section  (unless  ordered by a court) shall be made by the corporation
          only as  authorized  in the specific  case upon a  determination  that
          indemnification of the present or former director,  officer,  employee
          or agent is proper in the circumstances because the person has met the
          applicable standard of conduct set forth in subsections (a) and (b) of
          this  section.  Such  determination  shall be made,  with respect to a
          person who is a director or officer at the time of such determination,
          (1) by a majority  vote of the  directors  who are not parties to such
          action, suit or proceeding,  even though less than a quorum, or (2) by




          a committee  of such  directors  designated  by majority  vote of such
          directors, even though less than a quorum, or (3) if there are no such
          directors,  or if such  directors  so  direct,  by  independent  legal
          counsel in a written opinion, or (4) by the stockholders.

               (e) Expenses  (including  attorneys' fees) incurred by an officer
          or  director  in  defending  any civil,  criminal,  administrative  or
          investigative   action,   suit  or  proceeding  may  be  paid  by  the
          corporation in advance of the final  disposition of such action,  suit
          or proceeding  upon receipt of an  undertaking by or on behalf of such
          director  or officer to repay such  amount if it shall  ultimately  be
          determined  that such person is not entitled to be  indemnified by the
          corporation  as authorized in this section.  Such expenses  (including
          attorneys'  fees)  incurred by former  directors and officers or other
          employees and agents may be so paid upon such terms and conditions, if
          any, as the corporation deems appropriate.

               (f) The  indemnification and advancement of expenses provided by,
          or granted  pursuant to, the other  subsections  of this section shall
          not be deemed  exclusive  of any other  rights to which those  seeking
          indemnification  or  advancement of expenses may be entitled under any
          bylaw,  agreement,  vote of stockholders or disinterested directors or
          otherwise, both as to action in such person's official capacity and as
          to action in another capacity while holding such office.

               (g) A  corporation  shall have  power to  purchase  and  maintain
          insurance  on behalf of any person who is or was a director,  officer,
          employee  or agent of the  corporation,  or is or was  serving  at the
          request of the corporation as a director,  officer,  employee or agent
          of another  corporation,  partnership,  joint venture,  trust or other
          enterprise  against any  liability  asserted  against  such person and
          incurred by such person in any such  capacity,  or arising out of such
          person's status as such, whether or not the corporation would have the
          power to  indemnify  such person  against  such  liability  under this
          section.

               (h) For purposes of this section, references to "the corporation"
          shall  include,  in  addition  to  the  resulting   corporation,   any
          constituent  corporation  (including any constituent of a constituent)
          absorbed in a consolidation or merger which, if its separate existence
          had  continued,  would have had power and  authority to indemnify  its
          directors,  officers,  and employees or agents, so that any person who
          is or was a director,  officer,  employee or agent of such constituent
          corporation,  or is or was serving at the request of such  constituent
          corporation  as a  director,  officer,  employee  or agent of  another
          corporation,  partnership,  joint venture,  trust or other enterprise,
          shall stand in the same  position  under this  section with respect to
          the resulting or surviving  corporation as such person would have with
          respect to such constituent  corporation if its separate existence had
          continued.

               (i)  For  purposes  of  this   section,   references   to  "other
          enterprises"  shall  include  employee  benefit  plans;  references to
          "fines"  shall  include  any excise  taxes  assessed  on a person with
          respect to any employee  benefit plan;  and  references to "serving at
          the  request  of the  corporation"  shall  include  any  service  as a
          director,  officer, employee or agent of the corporation which imposes
          duties on, or involves services by, such director,  officer,  employee
          or agent with respect to an employee benefit plan, its participants or
          beneficiaries;  and a person  who acted in good  faith and in a manner
          such  person  reasonably  believed  to  be  in  the  interest  of  the
          participants  and  beneficiaries  of an employee benefit plan shall be
          deemed to have acted in a manner "not opposed to the best interests of
          the corporation" as referred to in this section.

               (j) The  indemnification and advancement of expenses provided by,
          or granted pursuant to, this section shall,  unless otherwise provided
          when authorized or ratified, continue as to a person who has ceased to
          be a  director,  officer,  employee  or agent and  shall  inure to the
          benefit of the heirs, executors and administrators of such a person.

               (k) The  Court  of  Chancery  is  hereby  vested  with  exclusive
          jurisdiction  to hear and  determine  all actions for  advancement  of
          expenses or  indemnification  brought  under this section or under any
          bylaw, agreement,  vote of stockholders or disinterested directors, or
          otherwise.   The  Court  of  Chancery   may   summarily   determine  a
          corporation's  obligation to advance  expenses  (including  attorneys'
          fees)."

     The  Certificate  of  Incorporation  and  Bylaws  also  limit the  personal
liability of directors to the Company and its  stockholders for monetary damages
resulting from certain breaches of the directors'  fiduciary duties.  The bylaws
of the Company provide as follows:




     "No  Director  of  the  Corporation  shall  be  personally  liable  to  the
Corporation  or its  stockholders  for monetary  damages for breach of fiduciary
duty as a Director,  except for liability  (i) for any breach of the  Director's
duty of  loyalty  to the  corporation  or its  stockholders,  (ii)  for  acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation  of  law,  (iii)  under  Section  174 of the  GCL,  or  (iv)  for  any
transaction from which the Director derived any improper  personal  benefit.  If
the GCL is amended ... to authorize  corporate  action  further  eliminating  or
limiting the personal  liability of directors,  then the liability of a Director
of the  Corporation  shall  be  eliminated  or  limited  to the  fullest  extent
permitted by the GCL, as so amended."

     The Company maintains directors' and officers' liability insurance.

ITEM 21.  EXHIBITS.

     The Index to Exhibits to this Registration Statement is incorporated herein
by reference.

ITEM 22.  UNDERTAKINGS.

     The undersigned Registrant hereby undertakes:

          (1) To file,  during  any  period  in which  offers or sales are being
     made, a post-effective amendment to this registration statement:

               (i) To include any prospectus required by Section 10(a)(3) of the
          Securities Act of 1933;

               (ii) 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 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

               (iii) 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 paragraphs  (1)(i) and (1)(ii) shall not apply if
     the information  required to be included in a  post-effective  amendment by
     those  paragraphs is contained in periodic  reports filed with or furnished
     to the 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.

     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.

     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 foregoing provisions,  or otherwise, the registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such  indemnification  is against  public policy as expressed in the Act and is,
therefore,  unenforceable. In the event that 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 any 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  of whether or not such  indemnification  is against
public policy as expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.

     The  undersigned  registrant  hereby  undertakes to respond to requests for
information  that is incorporated  by reference into the prospectus  pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request,  and to send the  incorporated  documents  by first class mail or other
equally prompt means.  This includes  information  contained in documents  filed
subsequent to the effective date of the registration  statement through the date
of responding to the request.

     The  undersigned  registrant  hereby  undertakes  to  supply  by means of a
post-effective  amendment  all  information  concerning a  transaction,  and the
company  being  acquired  involved  therein,  that  was not the  subject  of and
included in the registration statement when it became effective.





                                   SIGNATURES

     Pursuant to the requirements of the Securities Act, the Registrant has duly
caused  this  Registration   Statement  to  be  signed  on  its  behalf  by  the
undersigned,  thereunto duly authorized, in the City of Houston, State of Texas,
on April 22, 2003.

                                             CONTINENTAL AIRLINES, INC.

                                             By:      /S/ JENNIFER L. VOGEL
                                                 -------------------------------
                                                 Jennifer L. Vogel
                                                 Vice President, General Counsel
                                                 and Secretary


     Pursuant  to  the   requirements  of  the  Securities  Act  of  1933,  this
Registration  Statement  has  been  signed  by  the  following  persons  in  the
capacities indicated, on April 22, 2003.



           SIGNATURE                                       TITLE
- ----------------------------------           -----------------------------------

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

       LAWRENCE W. KELLNER*                  President, Chief Operating Officer
- ----------------------------------           and Director
       Lawrence W. Kellner

       /S/ JEFFREY J. MISNER                 Senior Vice President and Chief
- ----------------------------------           Financial Officer
        Jeffrey J. Misner                    (Principal Financial Officer)

        /S/ CHRIS KENNY                      Vice President and Controller
- ----------------------------------           (Principal Accounting Officer)
           Chris Kenny

      THOMAS J. BARRACK, JR.*                Director
- ----------------------------------
      Thomas J. Barrack, Jr.

        DAVID BONDERMAN*                     Director
- ----------------------------------
        David Bonderman

        KIRBYJON CALDWELL*                   Director
- ----------------------------------
        Kirbyjon Caldwell

         PATRICK FOLEY*                      Director
- ----------------------------------
         Patrick Foley

     DOUGLAS H. MCCORKINDALE*                Director
- ----------------------------------
     Douglas H. McCorkindale

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

        RICHARD W. POGUE*                    Director
- ----------------------------------
        Richard W. Pogue




           SIGNATURE                                       TITLE
- ----------------------------------           -----------------------------------

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

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

      KAREN HASTIE WILLIAMS*                 Director
- ----------------------------------
     Karen Hastie Williams

      CHARLES A. YAMARONE*                   Director
- ----------------------------------
      Charles A. Yamarone

   *BY:  /S/ JENNIFER L. VOGEL
- ----------------------------------
         Jennifer L. Vogel
         Attorney-in-Fact





                                  EXHIBIT INDEX

EXHIBIT
NUMBER                         EXHIBIT DESCRIPTION
- ------                         -------------------

4.1       Indenture,  dated as of December 6, 2002, among Continental  Airlines,
          Inc.,  Wilmington  Trust Company,  as Trustee,  Morgan Stanley Capital
          Services Inc., as Liquidity Provider,  and MBIA Insurance Corporation,
          as Policy Provider, made with respect to the issuance of Floating Rate
          Secured Notes Due 2007

4.2       Form of Exchange  Floating  Rate  Secured  Note Due 2007  (included in
          Exhibit 4.1)

4.3       Collateral  Maintenance  Agreement,  dated  as of  December  6,  2002,
          between Continental Airlines, Inc. and MBIA Insurance Corporation

4.4       Spare Parts Security Agreement,  dated as of December 6, 2002, between
          Continental  Airlines,  Inc. and Wilmington Trust Company, as Security
          Agent

4.5       Reference  Agency  Agreement,  dated as of  December  6,  2002,  among
          Continental Airlines,  Inc., Wilmington Trust Company, as Trustee, and
          Wilmington Trust Company, as Reference Agent

4.6       Revolving  Credit  Agreement,  dated as of December  6, 2002,  between
          Wilmington  Trust  Company,  as Trustee,  and Morgan  Stanley  Capital
          Services Inc., as Liquidity Provider

4.7       Guarantee Agreement,  dated as of December 6, 2002, by Morgan Stanley,
          relating to the Revolving Credit Agreement

4.8       Financial   Guarantee   Insurance  Policy  #39753  of  MBIA  Insurance
          Corporation

4.9       Exchange and Registration  Rights  Agreement,  dated as of December 6,
          2002,  between  Continental  Airlines,  Inc. and Morgan  Stanley & Co.
          Incorporated

4.10      Purchase Agreement,  dated as of December 2, 2002, between Continental
          Airlines,  Inc.  and  Morgan  Stanley & Co.  Incorporated,  as Initial
          Purchaser

5.1       Opinion of Hughes  Hubbard & Reed LLP  relating to validity of the New
          Notes

12.1      Computation of Ratio of Earnings to Fixed Charges

23.1      Consent of Ernst & Young LLP

23.2      Consent of PricewaterhouseCoopers LLP

23.3      Consent of Hughes Hubbard & Reed LLP (included in its opinion filed as
          exhibit 5.1)

23.4      Consent of Simat, Helliesen & Eichner, Inc.

24.1      Powers of Attorney

25.1      Statement of Eligibility of Wilmington  Trust Company for the Floating
          Rate Secured Notes Due 2007, on Form T-1 (to be filed by amendment)

99.1      Form of Letter of Transmittal




EXHIBIT
NUMBER                         EXHIBIT DESCRIPTION
- ------                         -------------------

99.2      Form of Notice of Guaranteed Delivery

99.3      Form of Letter to Brokers, Dealers,  Commercial Banks, Trust Companies
          and Other Nominees

99.4      Form of Letter to Clients
================================================================================




                                    INDENTURE



                          Dated as of December 6, 2002



                                      Among



                           CONTINENTAL AIRLINES, INC.


                            WILMINGTON TRUST COMPANY,
                                   as Trustee


                      MORGAN STANLEY CAPITAL SERVICES INC.,
                             as Liquidity Provider


                                       and


                           MBIA INSURANCE CORPORATION,
                               as Policy Provider




                                  $200,000,000


                      Floating Rate Secured Notes due 2007




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

TABLE OF CONTENTS PAGE ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 Definitions.................................................1 Section 1.2 Rules of Construction.......................................1 ARTICLE 2. THE SECURITIES Section 2.1 Title, Form, Denomination and Execution of Securities.......1 Section 2.2 Restrictive Legends.........................................3 Section 2.3 Authentication of Securities................................5 Section 2.4 Transfer and Exchange.......................................5 Section 2.5 Book-Entry Provisions for Restricted Global Securities and Regulation S Global Securities..............................6 Section 2.6 Special Transfer Provisions.................................8 Section 2.7 Terms of Securities........................................11 Section 2.8 Registrar and Paying Agent.................................11 Section 2.9 Paying Agent to Hold Payments In Trust.....................12 Section 2.10 Record Dates...............................................13 Section 2.11 Securityholder Lists.......................................13 Section 2.12 Mutilated, Defaced, Destroyed, Lost and Stolen Securities..14 Section 2.13 Treasury Securities........................................15 Section 2.14 Temporary Securities.......................................15 Section 2.15 Cancellation...............................................15 Section 2.16 Defaulted Interest.........................................16 Section 2.17 CUSIP Numbers..............................................16 Section 2.18 Issuance of Subordinated Securities........................16 ARTICLE 3. LIQUIDITY PROVIDER AND POLICY PROVIDER Section 3.1 Written Notice of Distribution.............................17

TABLE OF CONTENTS (CONTINUED) PAGE Section 3.2 Priority of Distributions; Subordination...................18 Section 3.3 Other Payments.............................................20 Section 3.4 Payments to Liquidity Provider and Policy Provider.........21 Section 3.5 Liquidity Facility.........................................21 Section 3.6 The Policy.................................................28 Section 3.7 Designated Representatives.................................32 Section 3.8 Controlling Party..........................................32 Section 3.9 Company's Payment Obligations..............................33 Section 3.10 Execution of Support Documents.............................34 ARTICLE 4. REDEMPTIONS Section 4.1 Optional Redemption........................................34 Section 4.2 Redemption Notice to Trustee...............................34 Section 4.3 Selection of Securities to be Redeemed.....................35 Section 4.4 Notice of Redemption.......................................35 Section 4.5 Effect of Notice of Redemption.............................36 Section 4.6 Deposit of Redemption Price................................36 Section 4.7 Securities Redeemed in Part................................36 ARTICLE 5. COVENANTS Section 5.1 Payment of Securities......................................36 Section 5.2 Maintenance of Office or Agency............................37 Section 5.3 Corporate Existence........................................37 Section 5.4 Company Not to Consolidate, Merge, Convey or Transfer Except Under Certain Conditions............................37 Section 5.5 Reports by the Company.....................................39 ARTICLE 6. INDEMNIFICATION Section 6.1 General Indemnity..........................................39

TABLE OF CONTENTS (CONTINUED) PAGE Section 6.2 Separate Agreement.........................................42 Section 6.3 Notice.....................................................42 Section 6.4 Notice of Proceedings; Defense of Claims; Limitations......42 Section 6.5 Information................................................43 Section 6.6 Subrogation; Further Assurances............................43 Section 6.7 Refunds....................................................43 ARTICLE 7. DEFAULT AND REMEDIES Section 7.1 Events of Default..........................................44 Section 7.2 Acceleration...............................................45 Section 7.3 Other Remedies.............................................46 Section 7.4 Waiver of Past Defaults....................................46 Section 7.5 Control of Remedies........................................47 Section 7.6 Limitation on Suits........................................47 Section 7.7 Rights of Holders to Receive Payment.......................47 Section 7.8 Collection Suit by Trustee.................................48 Section 7.9 Trustee May File Proofs of Claim...........................48 Section 7.10 Application of Proceeds....................................49 Section 7.11 Undertaking for Costs......................................49 Section 7.12 Restoration of Rights on Abandonment of Proceedings........49 Section 7.13 Powers and Remedies Cumulative; Delay or Omission Not Waiver of Default..........................................49 ARTICLE 8. TRUSTEE Section 8.1 Duties of Trustee..........................................50 Section 8.2 Rights of Trustee..........................................51 Section 8.3 Individual Rights of Trustee...............................51 Section 8.4 Trustee's Disclaimer.......................................52 Section 8.5 Notice of Defaults.........................................52

TABLE OF CONTENTS (CONTINUED) PAGE Section 8.6 Reports by Trustee to Holders..............................52 Section 8.7 Compensation and Indemnity.................................52 Section 8.8 Replacement of Trustee.....................................53 Section 8.9 Successor Trustee by Merger, etc...........................54 Section 8.10 Eligibility; Disqualification..............................54 Section 8.11 Preferential Collection of Claims Against Company..........54 Section 8.12 Other Capacities...........................................55 Section 8.13 Trust Accounts.............................................55 Section 8.14 Deposits to the Collection Account.........................56 Section 8.15 Certain Payments...........................................56 ARTICLE 9. DISCHARGE OF INDENTURE Section 9.1 Discharge of Liability on Securities.......................57 Section 9.2 Application of Trust Money.................................57 Section 9.3 Repayment to Company.......................................57 Section 9.4 Reinstatement..............................................58 ARTICLE 10. AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 10.1 Without Consent of The Controlling Party or Holders........58 Section 10.2 With Consent of the Controlling Party, Liquidity Provider and Holders................................................59 Section 10.3 Compliance with Trust Indenture Act........................60 Section 10.4 Revocation and Effect of Consents..........................60 Section 10.5 Notation on or Exchange of Securities......................61 Section 10.6 Trustee to Sign Amendments, etc............................61 Section 10.7 Effect of Supplement and/or Amendment......................61 ARTICLE 11. SECURITY Section 11.1 Other Operative Documents..................................61

TABLE OF CONTENTS (CONTINUED) PAGE Section 11.2 Opinions, Certificates and Appraisals......................62 Section 11.3 Authorization of Actions to be Taken by the Trustee Under the Operative Documents....................................63 Section 11.4 Authorization of Receipt of Funds by the Trustee Under the Operative Documents and the Support Documents..............63 Section 11.5 Agreement as to Fair Market Value..........................63 ARTICLE 12. MISCELLANEOUS Section 12.1 Conflict with Trust Indenture Act of 1939..................64 Section 12.2 Notices; Waivers...........................................64 Section 12.3 Communications By Holders With Other Holders...............65 Section 12.4 Certificate and Opinion as to Conditions Precedent.........66 Section 12.5 Statements Required In Certificate or Opinion..............66 Section 12.6 Rules By Trustee, Paying Agent, Registrar..................67 Section 12.7 Effect of Headings.........................................67 Section 12.8 Governing Law..............................................67 Section 12.9 Quiet Enjoyment............................................68 Section 12.10 No Recourse Against Others.................................68 Section 12.11 Benefits of Indenture and the Securities Restricted........68 Section 12.12 Successors and Assigns.....................................68 Section 12.13 Counterpart Originals......................................68 Section 12.14 Severability...............................................68 APPENDIX I Definitions EXHIBIT A Form of Security EXHIBIT B Form of Certificate to Request Removal of Restricted Legend EXHIBIT C Form of Certificate to be Delivered by an Institutional Accredited Investor

INDENTURE dated as of December 6, 2002, among CONTINENTAL AIRLINES, INC., a Delaware corporation (the "COMPANY"), WILMINGTON TRUST COMPANY, a Delaware banking corporation ("WTC"), not in its individual capacity but solely as Trustee (the "TRUSTEE"), MORGAN STANLEY CAPITAL SERVICES INC., a Delaware corporation ("MSCS"), as Liquidity Provider, and MBIA INSURANCE CORPORATION, a New York insurance company, as Policy Provider. Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Securities. ARTICLE 1. DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 DEFINITIONS. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall be a part of this Indenture as if fully set forth in this place. Section 1.2 RULES OF CONSTRUCTION. The rules of construction for this Indenture are set forth in Section 2 of the Definitions Appendix. ARTICLE 2. THE SECURITIES Section 2.1 TITLE, FORM, DENOMINATION AND EXECUTION OF SECURITIES. (a) The Initial Securities shall be known as the "INITIAL FLOATING RATE SECURED NOTES DUE 2007" and the Exchange Securities shall be known as the "EXCHANGE FLOATING RATE SECURED NOTES DUE 2007", in each case, of the Company. Each Security shall be substantially in the form set forth as Exhibit A hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the Company or the Officers executing the Securities, as evidenced by the Company's or the Officers' execution of the Securities. (b) The Initial Securities shall be issued only in fully registered form without coupons and only in denominations of $100,000 or integral multiples of $1,000 in excess thereof, except that one Security may be issued in a different denomination. The Exchange Securities will be issued in denominations of $1,000

or integral multiples thereof, except that one Security may be issued in a different denomination. Each Security shall be dated the date of its authentication. The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture is limited to $200,000,000 except for Securities authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Securities pursuant to Sections 2.4, 2.6, 2.12, 2.14 or 10.5. The issuance of the Securities hereunder shall be collectively considered a single extension of credit to the Company. (c) The Initial Securities offered and sold in reliance on Rule 144A shall be issued, and will only be available, in the form of one or more global Securities substantially in the form of Exhibit A hereto with such applicable legends as are provided for in Section 2.2 (each, a "RESTRICTED GLOBAL SECURITY") duly executed by the Company and duly authenticated by the Trustee as herein provided. The Restricted Global Securities shall be in definitive, fully registered form without interest coupons and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust office, as custodian for DTC. The aggregate principal amount of any Restricted Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Restricted Global Security, as provided in Section 2.6 hereof, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Security. (d) The Initial Securities offered and sold outside the United States in reliance on Regulation S shall be issued, and will only be available, in the form of one or more global Securities substantially in the form of Exhibit A hereto (each, a "REGULATION S GLOBAL SECURITY") duly executed by the Company and duly authenticated by the Trustee as herein provided. The Regulation S Global Securities shall be in definitive, fully registered form without interest coupons and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC, for credit initially and during the Restricted Period to the respective accounts of beneficial owners of such Securities (or to such other accounts as they may direct) at Morgan Guaranty Trust Company of New York, Brussels office, as operator of Euroclear or Clearstream. As used herein, the term "RESTRICTED PERIOD", with respect to the Regulation S Global Securities offered and sold in reliance on Regulation S, means the period of 40 consecutive days beginning on and including the later of (i) the day on which the Securities are first offered to persons other than distributors (as defined in Regulation S) in reliance on Regulation S and (ii) the Closing Date. The aggregate principal amount of any Regulation S Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Security, as provided in Section 2.6 hereof, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Security. The Restricted Global Security and Regulation S Global Security are sometimes collectively referred to herein as the "GLOBAL SECURITIES". (e) Initial Securities offered and sold to any Institutional Accredited Investor that is not a QIB in a transaction exempt from registration under the Securities Act (and other than as described in Section 2.1(d)) shall be issued substantially in the form of Exhibit A hereto in definitive, fully registered form without interest coupons with such applicable legends as are provided for

in Section 2.2 (the "RESTRICTED DEFINITIVE SECURITIES") duly executed by the Company and duly authenticated by the Trustee as herein provided. Securities issued pursuant to Section 2.5(b) in exchange for interests in a Regulation S Global Security shall be issued in definitive, fully registered form without interest coupons (the "REGULATION S DEFINITIVE SECURITIES"). The Restricted Definitive Securities and the Regulation S Definitive Securities are sometimes collectively referred to herein as the "DEFINITIVE SECURITIES". (f) The Exchange Securities shall be issued in the form of one or more global Securities substantially in the form of Exhibit A hereto (each, a "GLOBAL EXCHANGE SECURITY"), except that (i) the Restricted Legend shall be omitted and (ii) the Exchange Securities shall contain such appropriate insertions, omissions, substitutions and other variations from the form set forth in Exhibit A hereto relating to the nature of the Exchange Securities as the Officers of the Company executing such Exchange Securities on behalf of the Company may determine, as evidenced by such Officers' execution on behalf of the Company of such Exchange Securities. The Global Exchange Securities shall be in registered form and be registered in the name of DTC and deposited with the Trustee, at its Corporate Trust Office, as custodian for DTC. The aggregate principal amount of any Global Exchange Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for DTC for such Global Exchange Security, which adjustments shall be conclusive as to the aggregate principal amount of any such Global Exchange Security. Subject to clauses (i) and (ii) of the first sentence of this Section 2.1(f), the terms hereof applicable to the Global Securities shall apply to the Global Exchange Securities, MUTATIS MUTANDIS, unless the context otherwise requires. (g) The definitive Securities shall be in registered form and shall be typed, printed, lithographed or engraved or produced by any combination of these methods or may be produced in any other manner, all as determined by the Officers executing such Securities, as evidenced by their execution of such Securities. (h) The Securities shall be signed for the Company by the manual or facsimile signatures of two Officers. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. Section 2.2 RESTRICTIVE LEGENDS. All Initial Securities issued pursuant to this Indenture shall be "RESTRICTED SECURITIES" and shall bear a legend to the following effect (the "RESTRICTED LEGEND") except as provided in Section 2.6 or unless the Company and the Trustee determine otherwise consistent with applicable law: "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR

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

EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.5 AND 2.6 OF THE INDENTURE REFERRED TO HEREIN." Section 2.3 AUTHENTICATION OF SECURITIES. (a) Subject to the limits set forth herein, the Trustee shall authenticate Securities for original issue upon written order of the Company signed by two Officers. The order shall specify the amount of Securities to be authenticated and the date on which the original issue of Securities is to be authenticated, shall provide instructions with respect to the delivery thereof and shall be accompanied by the documents specified in Section 12.4. The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Securities. An authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as an Agent to deal with the Company or any Affiliate of the Company. (b) No Security shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by the manual signature of one of its authorized signatories, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder Section 2.4 TRANSFER AND EXCHANGE. All Securities issued upon any registration of transfer or exchange of Securities shall be valid obligations of the Company, evidencing the same interest therein, and entitled to the same benefits under this Indenture, as the Securities surrendered upon such registration of transfer or exchange.

A Securityholder may transfer a Security, or request that a Security be exchanged for Securities (including, without limitation, subject to the proviso to this sentence, Exchange Securities) in authorized denominations and in an aggregate principal amount equal to the principal amount of such Security surrendered for exchange of other authorized denominations, by surrender of such Security to the Trustee with the form of transfer notice thereon duly completed and executed, and otherwise complying with the terms of this Indenture, including providing evidence of compliance with any restrictions on transfer, in form satisfactory to the Company, the Trustee and the Registrar; PROVIDED that exchanges of Initial Securities for Exchange Securities shall occur only after an Exchange Offer Registration Statement shall have been declared effective by the SEC (notice of which shall be provided to the Trustee by the Company) and otherwise only in accordance with the terms of the Exchange Offer. No such transfer shall be effected until, and such transferee shall succeed to the rights of a Securityholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. Prior to the registration of any transfer of a Security by a Securityholder as provided herein, the Company, the Registrar, the Paying Agent and the Trustee shall deem and treat the person in whose name the Security is registered on the Register as the absolute owner and holder thereof for the purpose of receiving payment of all amounts payable with respect to such Security and for all other purposes, and none of the Company, the Registrar, the Paying Agent or the Trustee shall be affected by any notice to the contrary. Furthermore, DTC shall, by acceptance of a Global Security, agree that transfers of beneficial interests in such Global Security may be effected only through a book-entry system maintained by DTC (or its agent) and that ownership of a beneficial interest in the Security shall be required to be reflected in a book-entry. When Securities are presented to the Registrar with a request to register the transfer thereof or to exchange them for other authorized denominations of a Security in a principal amount equal to the aggregate principal amount of Securities surrendered for exchange, the Registrar shall register the transfer or make the exchange as requested if its requirements for such transactions are met. To permit registrations of transfers and exchanges in accordance with the terms, conditions and restrictions hereof, the Company shall execute, and the Trustee shall authenticate, Securities at the Registrar's request. No service charge shall be made to a Securityholder for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Securities. All Securities surrendered for registration of transfer or exchange shall be canceled and subsequently destroyed by the Trustee. Section 2.5 BOOK-ENTRY PROVISIONS FOR RESTRICTED GLOBAL SECURITIES AND REGULATION S GLOBAL SECURITIES. (a) Members of, or participants in, DTC ("AGENT MEMBERS") shall have no rights under this Indenture with respect to any Global Security held on their behalf by DTC, or the Trustee as its custodian, and DTC may be treated by the Company, the Trustee and any agent of the Trustee as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Trustee from giving effect to any written certification, proxy or other

authorization furnished by DTC or shall impair, as between DTC and its Agent Members, the operation of customary practices governing the exercise of the rights of a holder of any Security. Upon the issuance of any Global Security, the Registrar or its duly appointed agent shall record DTC as the registered holder of such Global Security. (b) Transfers of any Global Security shall be limited to transfers of such Restricted Global Security or Regulation S Global Security in whole, but not in part, to DTC. Beneficial interests in the Restricted Global Security and any Regulation S Global Security may be transferred in accordance with the rules and procedures of DTC and the provisions of Section 2.6. Beneficial interests in a Restricted Global Security or a Regulation S Global Security shall be delivered to all beneficial owners thereof in the form of Restricted Definitive Securities or Regulation S Definitive Securities, as the case may be, if (i) DTC notifies the Trustee that it is unwilling or unable to continue as depositary for such Restricted Global Security or Regulation S Global Security, as the case may be, and a successor depositary is not appointed by the Trustee within 90 days of such notice, and (ii) after the occurrence and during the continuance of an Event of Default, owners of beneficial interests in a Global Security with a principal amount aggregating not less than a majority of the outstanding principal amount of the Global Security advise the Trustee, the Company and DTC through Agent Members in writing that the continuation of a book-entry system through DTC or its successor is no longer in their best interests. (c) Any beneficial interest in one of the Global Securities that is transferred to a Person who takes delivery in the form of an interest in another Global Security will, upon such transfer, cease to be an interest in such Global Security and become an interest in the other Global Security and, accordingly, will thereafter be subject to all transfer restrictions, if any, and other procedures applicable to beneficial interests in such other Global Security for as long as it remains such an interest. (d) In connection with the transfer of an entire Restricted Global Security or an entire Regulation S Global Security to the beneficial owners thereof pursuant to paragraph (b) of this Section 2.5, such Restricted Global Security or Regulation S Global Security, as the case may be, shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate, to each beneficial owner identified by DTC in exchange for its beneficial interest in such Restricted Global Security or Regulation S Global Security, as the case may be, an equal aggregate principal amount of Restricted Definitive Securities or Regulation S Definitive Securities, as the case may be, of authorized denominations. None of the Company, the Registrar, the Paying Agent or the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such registration instructions. Upon the issuance of Definitive Securities, the Company and the Trustee shall recognize the Person in whose name the Definitive Securities are registered in the Register as Securityholders hereunder.

(e) Any Definitive Security delivered in exchange for an interest in the Restricted Global Security pursuant to paragraph (b) of this Section 2.5 shall, except as otherwise provided by paragraph (e) of Section 2.6, bear the Restricted Legend. (f) Prior to the expiration of the Restricted Period, any Regulation S Definitive Security delivered in exchange for an interest in a Regulation S Global Security pursuant to paragraph (b) of this Section 2.5 shall bear the Restricted Legend. (g) The registered holder of any Restricted Global Security or Regulation S Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (h) Neither the Company nor the Trustee shall be liable if the Trustee or the Company is unable to locate a qualified successor clearing agency. Section 2.6 SPECIAL TRANSFER PROVISIONS. Unless and until (i) an Initial Security is sold under an effective Shelf Registration Statement, or (ii) an Initial Security is exchanged for an Exchange Security pursuant to an effective Exchange Offer Registration Statement, in each case pursuant to the terms of the Registration Rights Agreement, the following provisions shall apply to such Initial Securities: (a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The following provisions shall apply with respect to the registration of any proposed transfer of a Security to any Institutional Accredited Investor that is neither a QIB nor a Non-U.S. Person: (i) The Registrar shall register the transfer of any Security, whether or not bearing the Restricted Legend, only if (x) the requested transfer is at least two years after the later of the (A) Closing Date and (B) the last date on which such Security was held by the Company or any affiliate of the Company or (y) the proposed transferor is an Initial Purchaser who is transferring Securities purchased under the Purchase Agreement and the proposed transferee has delivered to the Registrar a letter substantially in the form of Exhibit C hereto and the aggregate principal amount of the Securities being transferred is at least $100,000. Except as provided in the foregoing sentence, the Registrar shall not register the transfer of any Security to any Institutional Accredited Investor that is neither a QIB nor a Non-U.S. Person. (ii) If the proposed transferor is an Agent Member holding a beneficial interest in a Restricted Global Security, upon receipt by the Registrar of (x) the documents, if any, required by paragraph (i) and (y) instructions given in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of the transfer and a decrease in the principal amount of such Restricted Global Security in an amount equal to the principal amount of the beneficial interest in such Restricted Global Security to be transferred, and the

Trustee shall execute, authenticate and deliver to the transferor or at its direction, one or more Restricted Definitive Securities of like tenor and amount. (b) TRANSFERS TO QIBS. The following provisions shall apply with respect to the registration of any proposed transfer of an Initial Security to a QIB (excluding Non-U.S. Persons): (i) If the Security to be transferred consists of a Restricted Definitive Security, or of an interest in any Regulation S Global Security during the Restricted Period, the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Initial Security stating, or has otherwise advised the Company, the Trustee and the Registrar in writing, that the sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Initial Security stating, or has otherwise advised the Company, the Trustee and the Registrar in writing, that it is purchasing the Initial Security for its own account or an account with respect to which it exercises sole investment discretion and that it, or the Person on whose behalf it is acting with respect to any such account, is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A. (ii) Upon receipt by the Registrar of the documents required by clause (i) above and instructions given in accordance with DTC's and the Registrar's procedures therefor, the Registrar shall reflect on its books and records the date of such transfer and an increase in the principal amount of a Restricted Global Security in an amount equal to the principal amount of the Restricted Definitive Securities or interests in such Regulation S Global Security, as the case may be, being transferred, and the Trustee shall cancel such Definitive Securities or decrease the amount of such Regulation S Global Security so transferred. (c) TRANSFERS OF INTERESTS IN THE REGULATION S GLOBAL SECURITY OR REGULATION S DEFINITIVE SECURITIES. After the expiration of the Restricted Period, the Registrar shall register any transfer of interests in any Regulation S Global Security or Regulation S Definitive Security without requiring any additional certification. Until the expiration of the Restricted Period, interests in the Regulation S Global Security may only be held through Agent Members acting for and on behalf of Euroclear and Clearstream. (d) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following provisions shall apply with respect to any registration of any transfer of an Initial Security to a Non-U.S. Person:

(i) Prior to the expiration of the Restricted Period, the Registrar shall register any proposed transfer of an Initial Security to a Non-U.S. Person upon receipt of a certificate substantially in the form set forth as Exhibit B hereto from the proposed transferor. (ii) After the expiration of the Restricted Period, the Registrar shall register any proposed transfer to any Non-U.S. Person if the Security to be transferred is a Restricted Definitive Security or an interest in a Restricted Global Security, upon receipt of a certificate substantially in the form of Exhibit B from the proposed transferor. The Registrar shall promptly send a copy of such certificate to the Company. (iii) Upon receipt by the Registrar of (x) the documents, if any, required by clause (ii) and (y) instructions in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date of such transfer and a decrease in the principal amount of such Restricted Global Security in an amount equal to the principal amount of the beneficial interest in such Restricted Global Security to be transferred, and, upon receipt by the Registrar of instructions given in accordance with DTC's and the Registrar's procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Regulation S Global Security in an amount equal to the principal amount of the Restricted Definitive Security or the Restricted Global Security, as the case may be, to be transferred, and the Trustee shall cancel the Definitive Security, if any, so transferred or decrease the amount of such Restricted Global Security. (e) RESTRICTED LEGEND. Upon the transfer, exchange or replacement of Securities not bearing the Restricted Legend, the Registrar shall deliver Securities that do not bear the Restricted Legend. Upon the transfer, exchange or replacement of Securities bearing the Restricted Legend, the Registrar shall deliver only Securities that bear the Restricted Legend unless either (i) the circumstances contemplated by paragraph (d)(ii) of this Section 2.6 exist or (ii) there is delivered to the Registrar an opinion of counsel to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act. (f) GENERAL. By acceptance of any Security bearing the Restricted Legend, each Holder of such Security acknowledges the restrictions on transfer of such Security set forth in such Restricted Legend and otherwise in this Indenture and agrees that it will transfer such Security only as provided in such Restricted Legend and otherwise in this Indenture. The Registrar shall not register a transfer of any Security unless such transfer complies with the restrictions on transfer, if any, of such Security set forth in such Restricted Legend and otherwise in this Indenture. In connection with any transfer of Securities, each Securityholder agrees by its acceptance of the Securities to furnish the Registrar or the Trustee such certifications, legal opinions or other information as either of them may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or a transaction not subject to, the registration requirements of the Securities Act and in accordance with the terms and provisions of this Article 2; PROVIDED that the

Registrar shall not be required to determine the sufficiency of any such certifications, legal opinions or other information. Until such time as no Securities remain Outstanding, the Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.5 or this Section 2.6. The Trustee, if not the Registrar at such time, shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar. Section 2.7 TERMS OF SECURITIES. The outstanding principal amount of the Securities shall be due on December 6, 2007. The Securities shall bear interest on the unpaid principal amount thereof from time to time outstanding from the most recent Interest Payment Date to which interest has been paid (or, if no interest has been paid, from the Closing Date) at the rate per annum for each Interest Period equal to the Debt Rate for such Interest Period (calculated on the basis of a year of 360 days and actual days elapsed during the period for which such amount accrues). Accrued interest on the Securities shall be payable in arrears on each Interest Payment Date, until the principal amount of the Securities has been paid in full, PROVIDED that if such payment in full is not made on an Interest Payment Date, accrued interest shall be paid on the date of such payment in full rather than the next Interest Payment Date. Interest on the Securities shall accrue with respect to the first but not the last day of each Interest Period. The Securities shall bear interest, payable on demand, at the Payment Due Rate (calculated on the basis of a year of 360 days and actual days elapsed during the period for which such amount accrues) on any part of the principal amount, and, to the extent permitted by applicable Law, interest and any other amounts payable thereunder not paid when due, in each case for the period the same is overdue. Amounts under any Security shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise). Notwithstanding anything to the contrary contained herein, if any date on which a payment under any Security becomes due and payable is not a Business Day then such payment shall not be made on such scheduled date but shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest payable thereunder. Section 2.8 REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Securities eligible for transfer or exchange may be presented for registration of transfer or for exchange ("REGISTRAR") and an office or agency where Securities may be presented for payment ("PAYING AGENT"). The Registrar shall keep a register of the Securities and of their transfer and exchange ("REGISTER"). Such Register shall be in written form in the English language. At all reasonable times such Register shall be open for inspection by the Trustee. The Company may have one or more co-Registrars and one or more additional paying agents. The term "Paying Agent" includes any additional paying agent.

The Company may enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. The Company initially appoints WTC as Registrar and Paying Agent. Section 2.9 PAYING AGENT TO HOLD PAYMENTS IN TRUST. Each Paying Agent shall hold in trust for the benefit of Securityholders all Payments held by the Paying Agent for the payment of principal of, interest on, and Premium, if any, and Break Amount, if any, with respect to, the Securities and shall notify the Trustee of any default by the Company in making any such payment. The Company at any time may require a Paying Agent to pay all Payments held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any Payment Default, upon written request to a Paying Agent, require such Paying Agent to pay all Payments held by it to the Trustee and to account for any Payments distributed. Upon receipt of such Payment, the Trustee shall immediately deposit all such amounts in the Collection Account. Upon doing so the Paying Agent shall have no further liability for the Payments. The Paying Agent, as agent for the Company, shall exclude and withhold at the appropriate rate from each payment of principal of, interest on, Premium, if any, Break Amount, if any, and other amounts due hereunder or under each Security (and such exclusion and withholding shall constitute payment in respect of such Security) any and all United States withholding taxes applicable thereto as required by Law. The Paying Agent agrees to act as such withholding agent and, in connection therewith, whenever any present or future United States taxes or similar charges are required to be withheld with respect to any amounts payable hereunder or in respect of the Securities, to withhold such amounts and timely pay the same to the appropriate authority in the name of and on behalf of the Securityholders, that it will file any necessary United States withholding tax returns or statements when due, and that as promptly as possible after the payment thereof it will deliver to each Securityholder (with a copy to the Company) appropriate receipts showing the payment thereof, together with such additional documentary evidence as any such Securityholder may reasonably request from time to time. The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will: (a) hold all Payments received by it as such agent for the payment of the principal of, interest on, Premium, if any, or Break Amount, if any, with respect to the Securities in trust for the benefit of the Persons entitled thereto until such Payments shall be paid to such Persons or otherwise disposed of as herein provided;

(b) promptly give the Trustee notice of any failure by the Company to make any payment of the principal of, interest on, Premium, if any, or Break Amount, if any, with respect to, the Securities when the same shall be due and payable; and (c) at any time during the continuance of any such failure, upon the written request of the Trustee, forthwith pay to the Trustee all Payments so held in trust by such Paying Agent. The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, direct any Paying Agent to pay to the Trustee all Payments held in trust by such Paying Agent, such Payments to be held by the Trustee upon the same trusts as those upon which such Payments were held by such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such Payments held by it as Paying Agent. Any Payments deposited with the Trustee or any Paying Agent in trust for the payment of the principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to, any Security and unclaimed for two (2) years after such principal, interest, Premium, if any, or Break Amount, if any, has become due and payable shall be paid to the Company on its request, unless otherwise required by mandatory provisions of applicable escheat or abandoned or unclaimed property law, and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof and all liability of the Trustee or such Paying Agent with regard to such Payments shall thereupon cease. Section 2.10 RECORD DATES. The Person in whose name any Security is registered at the close of business on any Record Date with respect to any Interest Payment Date shall be entitled to receive the interest payable on such Interest Payment Date to the extent provided by such Security, except if and to the extent the Company shall default in the payment of the interest due on such Interest Payment Date, in which case defaulted interest shall be paid to the Person in whose name the Outstanding Security is registered at the close of business on the subsequent record date (which shall be not less than five (5) Business Days prior to the date of payment of such defaulted interest) established by notice given by mail by or on behalf of the Company to the Holders of Securities not less than fifteen (15) days preceding such subsequent record date (a "SPECIAL RECORD DATE") pursuant to Section 2.16. Section 2.11 SECURITYHOLDER LISTS. The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee on or before each Distribution Date and at such other times as the Trustee may request in writing a list in such form and as of such date as

the Trustee may reasonably require of the names and addresses of Securityholders. Section 2.12 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN SECURITIES. In case any temporary or definitive Security shall become mutilated, defaced or be apparently destroyed, lost or stolen, subject to compliance with the following sentence and in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute, and the Trustee shall authenticate and deliver, a new Security, bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated or defaced Security, or in lieu of and substitution for the Security so apparently destroyed, lost or stolen. In every case the applicant for a substitute Security shall furnish to the Company and to the Trustee and any agent of the Company or the Trustee such security or indemnity as may be required by them to indemnify and defend and to save each of them harmless and, in every case of destruction, loss or theft, evidence to their satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Upon the issuance of any substitute Security pursuant to the preceding paragraph, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee) connected therewith. In case any Security which has matured or is about to mature, shall become mutilated or defaced or be apparently destroyed, lost or stolen, the Company may, instead of issuing a substitute Security, pay or authorize the payment of such Security (without surrender of such Security except in the case of a mutilated or defaced Security), as applicable, if the applicant for such payment shall furnish to the Company and to the Trustee and any agent of the Company or the Trustee such security or indemnity as any of them may require to save each of them harmless from all risks, however remote, and, in every case of apparent destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee and any agent of the Company or the Trustee evidence to their satisfaction of the apparent destruction, loss or theft of such Security and of the ownership thereof. Every substitute Security issued pursuant to the provisions of this Section by virtue of the fact that any Security is apparently destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the apparently destroyed, lost or stolen Security shall be at any time enforceable by anyone and shall be entitled to all the benefits of (but shall also be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities duly authenticated and delivered hereunder. Every substitute Security issued pursuant to the provisions of this Section 2.12 by virtue of the fact that any Security is mutilated or defaced shall constitute an additional contractual obligation of the Company and shall be entitled to all the benefits of (but shall also be subject to all the limitations of rights set forth in) this Indenture equally and proportionately with any and all other Securities of the same series duly authenticated and delivered hereunder. All Securities shall be held and owned upon the express condition that, to the extent permitted by law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated

or defaced or apparently destroyed, lost or stolen Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender. Section 2.13 TREASURY SECURITIES. In determining whether the Holders of the required principal amount of Securities have given or concurred in any amendment, request, demand, authorization, direction, notice, consent or waiver under this Indenture or any other Operative Document, Securities owned by the Company or any of its Affiliates shall be disregarded and deemed not to be Outstanding for the purpose of any such determination, except that, for the purposes of determining whether the Trustee shall be protected in relying on any such amendment, request, demand, authorization, direction, notice, consent or waiver, only Securities which the Trustee knows are so owned shall be so disregarded. Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee that neither the Company nor any of its majority-owned subsidiaries is affiliated with the pledgee or any Affiliate of the pledgee and that the pledgee has the present right (subject to no contrary obligation or understanding) so to act with respect to the Securities as a Holder independently of any direction by or interest of the Company or any of its Affiliates. In case of a dispute as to such right, the Trustee in good faith shall be entitled to rely upon the advice of counsel, including counsel for the Company. Upon request of the Trustee, the Company shall promptly furnish to the Trustee a certificate of an Officer listing and identifying all Securities, if any, known by the Company to be owned or held by or for the account of the Company or any of its Affiliates; and subject to Sections 8.1 and 8.2 herein, the Trustee shall be entitled to accept such certificate as conclusive evidence of the facts therein set forth and of the fact that all Securities not listed therein are Outstanding for the purpose of any such determination. Section 2.14 TEMPORARY SECURITIES. Until definitive Securities are ready for delivery, the Company may prepare, and, upon written order of the Company, the Trustee shall authenticate, temporary Securities in any authorized denominations. Temporary Securities shall be substantially of the tenor of the definitive Securities in lieu of which they are issued but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate and deliver definitive Securities in exchange for temporary Securities. Until so exchanged, the temporary Securities shall be entitled to the same benefits under this Indenture as definitive Securities of the same series. Section 2.15 CANCELLATION. The Company may at any time deliver Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for transfer, exchange or payment. The

Trustee and no one else shall cancel all Securities surrendered for transfer, exchange, payment or cancellation. The Company may not issue new Securities to replace Securities it has paid or which have been delivered to the Trustee for cancellation. The Trustee shall destroy all canceled Securities and, if requested, deliver a certificate of such destruction to the Company. If the Company shall acquire any of the Securities, such acquisition shall not operate as a satisfaction of the indebtedness represented by such Securities unless and until the same are delivered to the Trustee for cancellation. Section 2.16 DEFAULTED INTEREST. If any payment of interest on the Securities due on any Interest Payment Date becomes an Overdue Scheduled Payment, the Company shall pay such defaulted interest, plus interest on the defaulted interest, at the Payment Due Rate to the extent permitted by law and the terms thereof, to the persons who are Securityholders on a subsequent Special Record Date. The Company shall fix the Special Record Date and payment date. At least fifteen (15) days before the Special Record Date, the Company shall mail to each Securityholder a notice that states the Special Record Date, the payment date and the amount of defaulted interest to be paid. Section 2.17 CUSIP NUMBERS. The Company in issuing the Securities may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. Section 2.18 ISSUANCE OF SUBORDINATED SECURITIES. After the Closing Date, the Company shall be entitled to issue a second series of securities under this Indenture (the "SUBORDINATED SECURITIES") that shall have such terms as shall be set forth in an amendment to this Indenture, PROVIDED that in no event shall any such amendment (i) provide for a distribution to be made on such Subordinated Securities on a Distribution Date prior to all distributions having been made pursuant to clauses FIRST through SEVENTH, inclusive, of Section 3.2 or (ii) (x) provide such Subordinated Securities the benefit of any credit support similar to the Liquidity Facility or the Policy (unless claims for fees, interest, expenses, reimbursement of advances and other obligations arising from such credit support rank below clause SEVENTH of Section 3.2) or (y) amend or modify any of the provisions of Section 3.5, 3.6(d) or 3.8(c), unless, in the case of either clause (x) or (y), the prior written consent of the Liquidity Provider shall have been obtained. The Subordinated Securities shall not be issued, and no such amendment to this Indenture shall be made, unless the Controlling Party shall have consented in writing to such issuance and amendment and the Company shall have obtained Ratings Confirmation with respect to such issuance and amendment. Upon Request

of the Company, the Trustee shall execute and deliver an amendment to the Indenture permitted by this Section 2.18. ARTICLE 3. LIQUIDITY PROVIDER AND POLICY PROVIDER Section 3.1 WRITTEN NOTICE OF DISTRIBUTION. (a) No later than 3:00 p.m. (New York City time) on the Business Day immediately preceding each Distribution Date, each of the following Persons shall deliver to the Trustee a Written Notice setting forth the following information as at the close of business on such Business Day: (i) The Liquidity Provider shall set forth the amounts to be paid to it in accordance with clauses "first", "second", "third", "fourth" and "fifth" of Section 3.2; and (ii) The Policy Provider shall set forth the amounts to be paid to it in accordance with clauses "first", "second", "third", "fourth" and "eighth" of Section 3.2. The notices required under this Section 3.1(a) may be in the form of a schedule or similar document provided to the Trustee by the Persons referenced therein or by any one of them, which schedule or similar document may state that, unless there has been a prepayment of the Securities, such schedule or similar document is to remain in effect until any substitute notice or amendment shall be given to the Trustee by the Person providing such notice. Any amounts requested and received under the Policy Fee Letter or the Policy Provider Agreement or any amounts for which the Policy Provider is not entitled to be reimbursed pursuant to the provisions of the Policy Provider Agreement may not be requested by the Policy Provider under this Section 3.1(a) nor distributed to the Policy Provider under Section 3.2. (b) At such time as the Liquidity Provider or the Policy Provider shall have received all amounts owing to it pursuant to Section 3.2 hereof and its commitment or obligations under the Liquidity Facility or the Policy, as the case may be, shall have terminated or expired, such Person shall, by a Written Notice, so inform the Trustee. (c) The Trustee shall be fully protected in relying on any of the information set forth in a Written Notice provided by the Liquidity Provider or the Policy Provider pursuant to paragraphs (a) or (b) above and shall have no independent obligation to verify, calculate or recalculate any amount set forth in any Written Notice delivered in accordance with such paragraphs. (d) In the event the Trustee shall not receive from any Person any information set forth in paragraph (a) above which is required to enable the Trustee to make a distribution to such Person pursuant to Section 3.2, the

Trustee shall request such information and, failing to receive any such information, the Trustee shall not make such distribution(s) to such Person. In such event, the Trustee shall make distributions pursuant to clauses "FIRST" through "TENTH" of Section 3.2 to the extent it shall have sufficient information to enable it to make such distributions, and shall continue to hold any funds remaining, after making such distributions, until the Trustee shall receive all necessary information to enable it to distribute any funds so withheld. (e) On such dates (but not more frequently than monthly) as the Liquidity Provider or the Policy Provider shall request, but in any event automatically at the end of each calendar quarter, the Trustee shall send to such Person a written statement reflecting all amounts on deposit with the Trustee pursuant to Section 3.1(d) hereof. Section 3.2 PRIORITY OF DISTRIBUTIONS; SUBORDINATION. Except as otherwise provided in Sections 3.1(d), 3.3, 3.5(b), 3.5(k) and 3.6, amounts on deposit in the Collection Account on any Distribution Date shall be promptly distributed in the following order of priority and in accordance with the information provided to the Trustee pursuant to Section 3.1(a) hereof: FIRST, if an Event of Default shall have occurred and be continuing on such Distribution Date, such amount as shall be required to reimburse (i) the Trustee for any reasonable out-of-pocket costs and expenses actually incurred by it (to the extent not previously reimbursed) in the protection of, or the realization of the value of, the Collateral, shall be applied by the Trustee in reimbursement of such costs and expenses, (ii) the Policy Provider for any amounts of the nature described in clause (i) above actually incurred by it under the Policy Provider Agreement (to the extent not previously reimbursed), shall be distributed to the Policy Provider, and (iii) the Liquidity Provider, the Policy Provider or any Securityholder for payments, if any, made by it to the Trustee in respect of amounts described in clause (i) above, shall be distributed to the Liquidity Provider, the Policy Provider or to the Trustee for the account of such Securityholder, in each such case, pro rata on the basis of all amounts described in clauses (i) through (iii) above. SECOND, such amount as shall be required to pay (i) all accrued and unpaid Liquidity Expenses owed to the Liquidity Provider and (ii) all accrued and unpaid Policy Expenses owed to the Policy Provider, shall be distributed to the Liquidity Provider and the Policy Provider pro rata on the basis of the amount of Liquidity Expenses and Policy Expenses owed to the Liquidity Provider and the Policy Provider; THIRD, such amount as shall be required to pay (i) the aggregate amount of accrued and unpaid interest on all Liquidity Obligations (at the rate, or in the amount, provided in the Liquidity Facility and determined after application of the proceeds of any Policy Drawing pursuant to Section 3.6(d) or other payment by the Policy Provider to the Liquidity Provider in respect of any interest on Drawings in accordance with the provisions of Section 3.8(c)), (ii) the aggregate amount of accrued and unpaid Policy

Provider Interest Obligations and (iii) if the Policy Provider has paid pursuant to Section 3.6(d) or the proviso to Section 3.8(c) to the Liquidity Provider all outstanding Drawings and interest thereon owing to the Liquidity Provider under the Liquidity Facility, the amount of such payments made to the Liquidity Provider attributable to interest accrued on Drawings under the Liquidity Facility, shall be distributed to the Liquidity Provider and the Policy Provider, as the case may be, pro rata on the basis of the amounts owed to the Liquidity Provider and the Policy Provider under subclauses (i), (ii) and (iii) of this clause "third"; FOURTH, such amount as shall be required (i)(A) if the Cash Collateral Account had been previously funded as provided in Section 3.5(f), unless (1) on such Distribution Date the Securities are Non-Performing and a Liquidity Event of Default shall have occurred and be continuing or (2) the Final Drawing shall have occurred, to fund the Cash Collateral Account up to the Required Amount (less the amount of any repayments of Interest Drawings under the Liquidity Facility while subclause (i)(A)(1) above is applicable) shall be deposited in the Cash Collateral Account, (B) if the Liquidity Facility shall become a Downgraded Facility or a Non-Extended Facility at a time when unreimbursed Interest Drawings under the Liquidity Facility have reduced the Available Amount to zero, unless (1) on such Distribution Date the Securities are Non-Performing and a Liquidity Event of Default shall have occurred and be continuing or (2) the Final Drawing shall have occurred, to deposit into the Cash Collateral Account an amount equal to the Required Amount (less the amount of any repayments of Interest Drawings under the Liquidity Facility while subclause (i)(B)(1) above is applicable) shall be deposited in the Cash Collateral Account, and (C) if neither subclause (i)(A) nor subclause (i)(B) of this clause "fourth" is applicable, to pay or reimburse the Liquidity Provider in an amount equal to the amount of all Liquidity Obligations then due under the Liquidity Facility (other than amounts payable pursuant to Section 3.6(d) or clause "second" or "third" of this Section 3.2), net of any and all payments made by the Policy Provider to the Liquidity Provider with respect to the principal of any Interest Drawing, and (ii) if the Policy Provider has paid pursuant to the proviso to Section 3.8(c) to the Liquidity Provider all outstanding Drawings and interest thereon owing to the Liquidity Provider under the Liquidity Facility, the amount of such payments made to the Liquidity Provider in respect of principal of Drawings under the Liquidity Facility, shall be paid to the Policy Provider, pro rata on the basis of the amounts of all such deficiencies and/or unreimbursed Liquidity Obligations payable to the Liquidity Provider and the amount of such unreimbursed Policy Provider Obligations payable to the Policy Provider, in each instance, under this clause "fourth"; FIFTH, if any amounts are to be distributed pursuant to either subclause (i)(A) or (i)(B) of clause "fourth" above, then the Liquidity Provider shall be paid the excess of (x) the aggregate outstanding amount of unreimbursed Advances (whether or not then due) under the Liquidity Facility over (y) the Required Amount (less the amount of any repayments of

Interest Drawings under the Liquidity Facility while subclause (i)(A)(1) or (i)(B)(1), as the case may be, of clause "fourth" above is applicable); SIXTH, if an Event of Default shall have occurred and be continuing on such Distribution Date and at all times thereafter, such amount as shall be required to reimburse or pay (i) the Trustee for any Tax (other than Taxes imposed on compensation paid hereunder), expense, fee, charge or other loss incurred by or any other amount payable to the Trustee in connection with the transactions contemplated hereby (to the extent not previously reimbursed), shall be applied by the Trustee in reimbursement of such amount, and (ii) each Securityholder for payments, if any, made by it pursuant to an indemnity provided pursuant to Section 7.6(c) hereof in respect of amounts described in subclause (i) above, shall be distributed to the Trustee for the account of such Securityholder, in each such case, pro rata on the basis of all amounts described in subclauses (i) and (ii) of this clause "sixth"; SEVENTH, such amount as shall be required to pay in full amounts due to the Securityholders on such Distribution Date; EIGHTH, such amount as shall be required to pay the Policy Provider all Policy Provider Obligations then due and unpaid (other than amounts payable pursuant to clauses "first", "second", "third" and "fourth" of this Section 3.2) shall be paid to the Policy Provider; NINTH, such amount as shall be required to pay in full the aggregate unpaid amount of fees and expenses payable as of such Distribution Date to the Trustee pursuant to the terms of this Indenture (other than amounts payable pursuant to clauses "first" and "sixth" of this Section 3.2), shall be distributed to the Trustee; and TENTH, the balance, if any, of any such amount remaining thereafter shall be paid to the Company unless on such Distribution Date (i) an Event of Default has occurred and is continuing or (ii) any amount due to the Liquidity Provider or the Policy Provider from the Company has not been paid, in which case such amount shall be held in the Collection Account for later distribution in accordance with this Article 3 or paid to the Company upon discharge of the Indenture pursuant to Article 9. Section 3.3 OTHER PAYMENTS. (a) Any payments received by the Trustee for which no provision as to the application thereof is made in this Indenture shall be distributed by the Trustee in the order of priority specified in Section 3.2 hereof. (b) Notwithstanding the priority of payments specified in Section 3.2, in the event any Investment Earnings on amounts on deposit in the Cash Collateral Account resulting from an Unapplied Provider Advance are deposited in the

Collection Account, such Investment Earnings shall be used to pay interest payable in respect of such Unapplied Provider Advance to the extent of such Investment Earnings. (c) If the Trustee receives any Payment after the Scheduled Payment Date relating thereto, then the Trustee shall deposit such Payment in the Collection Account and distribute such Payment on the next Distribution Date in accordance with the priority of distributions set forth in Section 3.2 hereof. Section 3.4 PAYMENTS TO LIQUIDITY PROVIDER AND POLICY PROVIDER. Any amounts distributed hereunder to the Liquidity Provider or Policy Provider shall be paid to the Liquidity Provider or Policy Provider by wire transfer of funds to the address the Liquidity Provider or Policy Provider shall provide to the Trustee. The Trustee shall provide a Written Notice of any such transfer to the Liquidity Provider or Policy Provider, as the case may be, at the time of such transfer. Section 3.5 LIQUIDITY FACILITY. (a) INTEREST DRAWINGS. If on any Distribution Date, after giving effect to the subordination provisions of Section 3.2, the Trustee shall not have sufficient funds for the payment of any amounts due and owing in respect of accrued interest on the Securities (at the Debt Rate), then, prior to 12:30 p.m. (New York City time) on such Distribution Date, the Trustee shall request a drawing (each such drawing, an "INTEREST DRAWING") under the Liquidity Facility (and concurrently with the making of such request, the Trustee will give notice to the Policy Provider of such insufficiency of funds) in an amount equal to the lesser of (x) an amount sufficient to pay the amount of such accrued interest (at the Debt Rate) and (y) the Available Amount, and shall pay such amount to the Securityholders in accordance with the provisions of this Indenture in payment of such accrued interest. (b) APPLICATION OF INTEREST DRAWINGS. Notwithstanding anything to the contrary contained in this Indenture, all payments received by the Trustee in respect of an Interest Drawing under the Liquidity Facility and all amounts withdrawn by the Trustee from the Cash Collateral Account, and payable in each case to the Securityholders, shall be promptly distributed to the Securityholders in accordance with the provisions of this Indenture, PROVIDED that if (x) the Trustee shall receive any amount in respect of an Interest Drawing under the Liquidity Facility or a withdrawal from the Cash Collateral Account to pay Accrued Interest after such Accrued Interest has been fully paid to the Securityholders by a Policy Drawing under the Policy pursuant to Section 3.6(a) hereof or (y) the Trustee shall receive any amount in respect of a Policy Drawing under the Policy pursuant to Section 3.6(a) hereof to fully pay Accrued Interest after such Accrued Interest has been paid (in full or in part) to the Securityholders by an Interest Drawing under the Liquidity Facility or a withdrawal from the Cash Collateral Account, the Trustee, in the case of either clause (x) or (y), shall pay an amount equal to the amount of such Interest Drawing or withdrawal directly to the Policy Provider as reimbursement of such Policy Drawing rather than to the Securityholders.

(c) DOWNGRADE DRAWINGS. (i) A Downgrade Drawing under the Liquidity Facility shall be requested by the Trustee as provided in Section 3.5(c)(iii), if at any time, (x) so long as MSCS is the Liquidity Provider, the short-term unsecured debt rating of the Liquidity Guarantor is lower than the applicable Threshold Rating issued by either Moody's or Standard & Poor's or the related Liquidity Guarantee ceases to be in full force and effect or becomes invalid or unenforceable or the Liquidity Guarantor denies its liability thereunder, or (y) if MSCS is not the Liquidity Provider, the short-term unsecured debt rating of the Liquidity Provider is lower than the applicable Threshold Rating issued by either Moody's or Standard & Poor's (in each case, a "DOWNGRADE EVENT", and the Liquidity Facility, a "DOWNGRADED FACILITY"), unless an event described in Section 3.5(c)(ii) occurs. (ii) If at any time the Liquidity Facility becomes a Downgraded Facility, the Trustee shall not request a Downgrade Drawing thereunder in accordance with Section 3.5(c)(iii), if the Liquidity Provider or the Company has arranged for a Replacement Liquidity Provider to issue and deliver a Replacement Liquidity Facility to the Trustee within 10 days after receiving notice of a Downgrade Event (but not later than the expiration date of such Downgraded Facility). (iii) If the Trustee is required to request a Downgrade Drawing under Section 3.5(c)(i), the Trustee shall, on the 10th day referred to in Section 3.5(c)(ii) (or if such 10th day is not a Business Day, on the next succeeding Business Day) (or, if earlier, the expiration date of such Downgraded Facility), request a drawing in accordance with and to the extent permitted by such Downgraded Facility (such drawing, a "DOWNGRADE DRAWING") of the Available Amount. Amounts drawn pursuant to a Downgrade Drawing shall be maintained and invested as provided in Section 3.5(f) hereof. The Liquidity Provider may also arrange for a Replacement Liquidity Provider to issue and deliver a Replacement Liquidity Facility at any time after such Downgrade Drawing so long as such Downgrade Drawing has not been reimbursed in full to the Liquidity Provider. (d) NON-EXTENSION DRAWINGS. If the Liquidity Facility is scheduled to expire on a date (the "STATED EXPIRATION DATE") prior to the date that is 15 days after the Final Legal Maturity Date, then, no earlier than the 60th day and no later than the 40th day prior to the then Stated Expiration Date, the Trustee shall request that the Liquidity Provider extend the Stated Expiration Date until the earlier of (i) the date which is 15 days after the Final Legal Maturity Date and (ii) the date that is the day immediately preceding the 364th day occurring after the last day of the applicable Consent Period (unless the obligations of the Liquidity Provider under the Liquidity Facility are earlier terminated in accordance with the Liquidity Facility). Whether or not the Liquidity Provider has received a request from the Trustee, the Liquidity Provider shall advise the Trustee, no earlier than the 40th day (or, if earlier, the date of the Liquidity Provider's receipt of such request, if any, from the Trustee) and no later than the 25th day prior to the Stated Expiration Date then in effect (such period, the "CONSENT PERIOD"), whether, in its sole discretion, it agrees to extend such Stated Expiration Date. If (A) on or before the date on which such Consent Period ends, the Liquidity Facility shall not have been

replaced in accordance with Section 3.5(e) and (B) the Liquidity Provider fails irrevocably and unconditionally to advise the Trustee on or before the date on which such Consent Period ends that such Stated Expiration Date then in effect shall be so extended, the Trustee shall, on the date on which such Consent Period ends (or as soon as possible thereafter), in accordance with the terms of the expiring Liquidity Facility (a "NON-EXTENDED FACILITY"), request a drawing under such expiring Liquidity Facility (such drawing, a "NON-EXTENSION DRAWING") of all available and undrawn amounts thereunder. Notwithstanding the immediately preceding three sentences, so long as MSCS is the Liquidity Provider, the Stated Expiration Date shall be automatically extended, effective on the 25th day prior to such Stated Expiration Date (unless such Stated Expiration Date is on or after the date that is 15 days after the Final Legal Maturity Date), for a period of 364 days after the Stated Expiration Date (unless the obligations of the Liquidity Provider are earlier terminated in accordance with the Liquidity Facility) without the necessity of any act by the Trustee or the Liquidity Provider, unless the Liquidity Provider shall advise the Trustee, prior to such 25th day, that it does not agree to such extension of the Stated Expiration Date, in which event, the Trustee shall, on such 25th day (or as soon as possible thereafter), in accordance with and to the extent permitted by the terms of the Non-Extended Facility, request a Non-Extension Drawing under the Non-Extended Facility of all available and undrawn amounts thereunder. Amounts drawn pursuant to a Non-Extension Drawing shall be maintained and invested in accordance with Section 3.5(f) hereof. (e) ISSUANCE OF REPLACEMENT LIQUIDITY FACILITY. (i) At any time, the Company may, at its option, with cause or without cause, arrange for a Replacement Liquidity Facility to replace any Liquidity Facility (including any Replacement Liquidity Facility provided pursuant to Section 3.5(e)(ii) hereof); PROVIDED, HOWEVER, that the initial Liquidity Provider shall not be replaced by the Company as a Liquidity Provider without the consent of such initial Liquidity Provider unless (A) there shall have become due to such initial Liquidity Provider, or such initial Liquidity Provider shall have demanded, amounts pursuant to Section 3.01, 3.02 or 3.03 of the Liquidity Facility and the replacement of such initial Liquidity Provider would reduce or eliminate the obligation to pay such amounts or the Company determines in good faith that there is a substantial likelihood that such initial Liquidity Provider will have the right to claim any such amounts (unless such initial Liquidity Provider waives, in writing, any right it may have to claim such amounts), which determination shall be set forth in a certificate delivered by the Company to such initial Liquidity Provider setting forth the basis for such determination and accompanied by an opinion of outside counsel selected by the Company and reasonably acceptable to such initial Liquidity Provider verifying the legal conclusions, if any, of such certificate relating to such basis, PROVIDED that, in the case of any likely claim for such amounts based upon any proposed, or proposed change in, law, rule, regulation, interpretation, directive, requirement, request or administrative practice, such opinion may assume the adoption or promulgation of such proposed matter, (B) it shall become unlawful or impossible for such initial Liquidity Provider (or its Facility Office) to maintain or fund its LIBOR Advances as described in Section 3.10 of the Liquidity Facility, (C) the Liquidity Facility of the initial Liquidity Provider shall become a Downgraded Facility or a Non-Extended Facility or a Downgrade Drawing or a Non-Extension Drawing shall have occurred under the Liquidity

Facility of the initial Liquidity Provider or (D) the initial Liquidity Provider shall have breached any of its payment (including, without limitation, funding) obligations under the Liquidity Facility. If such Replacement Liquidity Facility is provided at any time after a Downgrade Drawing or Non-Extension Drawing has been made, all funds on deposit in the Cash Collateral Account will be returned to the Liquidity Provider being replaced. (ii) If the Liquidity Provider shall determine not to extend the Liquidity Facility in accordance with Section 3.5(d), then the Liquidity Provider may, at its option, arrange for a Replacement Liquidity Facility to replace the Liquidity Facility during the period no earlier than 40 days and no later than 25 days prior to the then effective Stated Expiration Date. In addition, so long as the initial Liquidity Provider is the Liquidity Provider, at any time after a Non-Extension Drawing has been made under the Liquidity Facility, the Liquidity Provider may, at its option, arrange for a Replacement Liquidity Facility to replace the Liquidity Facility. (iii) No Replacement Liquidity Facility arranged by the Company or a Liquidity Provider in accordance with clause (i) or (ii) above or pursuant to Section 3.5(c), respectively, shall become effective and no such Replacement Liquidity Facility shall be deemed a "Liquidity Facility" under the Operative Documents and the Support Documents, unless and until (A) each of the conditions referred to in sub-clauses (iv)(x) and (z) below shall have been satisfied, (B) if such Replacement Liquidity Facility shall materially adversely affect the rights, remedies, interests or obligations of the Securityholders under any of the Operative Documents or the Support Documents, the Trustee shall have consented, in writing, to the execution and issuance of such Replacement Liquidity Facility and (C) in the case of a Replacement Liquidity Facility arranged by a Liquidity Provider under Section 3.5(e)(ii) or pursuant to Section 3.5(c), such Replacement Liquidity Facility is acceptable to the Company. (iv) In connection with the issuance of each Replacement Liquidity Facility, the Trustee shall (x) prior to the issuance of such Replacement Liquidity Facility, obtain written confirmation from each Rating Agency that such Replacement Liquidity Facility will not cause a reduction of any rating then in effect for the Securities by such Rating Agency (without regard to any downgrading of any rating of any Liquidity Provider being replaced pursuant to Section 3.5(c) hereof and without regard to the Policy) or a withdrawal or suspension of the rating of the Securities by such Rating Agency and the written consent of the Policy Provider (which consent will not be unreasonably withheld or delayed), (y) pay all Liquidity Obligations then owing to the replaced Liquidity Provider (which payment shall be made first from available funds in the Cash Collateral Account as described in clause (iii) of Section 3.5(f) hereof, and thereafter from any other available source, including, without limitation, a drawing under the Replacement Liquidity Facility) and (z) cause the issuer of the Replacement Liquidity Facility to deliver the Replacement Liquidity Facility to the Trustee, together with a legal opinion opining

that such Replacement Liquidity Facility is an enforceable obligation of such Replacement Liquidity Provider. (v) Upon satisfaction of the conditions set forth in clauses (iii) and (iv) of this Section 3.5(e) with respect to a Replacement Liquidity Facility, (w) the replaced Liquidity Facility shall terminate, (x) the Trustee shall, if and to the extent so requested by the Company or the Liquidity Provider being replaced, execute and deliver any certificate or other instrument required in order to terminate the replaced Liquidity Facility, shall surrender the replaced Liquidity Facility to the Liquidity Provider being replaced and shall execute and deliver the Replacement Liquidity Facility and any associated Fee Letter, (y) each of the parties hereto shall enter into any amendments to this Indenture necessary to give effect to (1) the replacement of the applicable Liquidity Provider with the applicable Replacement Liquidity Provider and (2) the replacement of the applicable Liquidity Facility with the applicable Replacement Liquidity Facility and (z) the applicable Replacement Liquidity Provider shall be deemed to be a Liquidity Provider with the rights and obligations of a Liquidity Provider hereunder and under the other Operative Documents and the Support Documents and such Replacement Liquidity Facility shall be deemed to be a Liquidity Facility hereunder and under the other Operative Documents and the Support Documents. (f) CASH COLLATERAL ACCOUNT; WITHDRAWALS; INVESTMENTS. In the event the Trustee shall draw all available amounts under the Liquidity Facility pursuant to Section 3.5(c), 3.5(d) or 3.5(i) hereof, or in the event amounts are to be deposited in the Cash Collateral Account pursuant to subclause (i)(A) or (i)(B) of clause "fourth" of Section 3.2, amounts so drawn or to be deposited, as the case may be, shall be deposited by the Trustee in the Cash Collateral Account. All amounts on deposit in the Cash Collateral Account shall be invested and reinvested in Eligible Investments in accordance with Section 8.13(b) hereof. On each Interest Payment Date, Investment Earnings on amounts on deposit in the Cash Collateral Account shall be deposited in the Collection Account and applied on such Interest Payment Date in accordance with Section 3.2 or 3.3 (as applicable). The Trustee shall deliver a written statement to the Company, the Liquidity Provider and the Policy Provider one day prior to each Interest Payment Date setting forth the amount of Investment Earnings held in the Cash Collateral Account as of such date. In addition, from and after the date funds are so deposited, the Trustee shall make withdrawals from such accounts as follows: (i) on each Distribution Date, the Trustee shall, to the extent it shall not have received funds to pay accrued and unpaid interest due and owing on the Securities (at the Debt Rate) after giving effect to the subordination provisions of Section 3.2, withdraw from the Cash Collateral Account, and pay to the Securityholders, an amount equal to the lesser of (x) an amount necessary to pay accrued and unpaid interest (at the Debt Rate) on such Securities and (y) the amount on deposit in the Cash

Collateral Account (so long as the aggregate amount of unreplenished withdrawals, including such withdrawal, does not exceed the Required Amount for such Distribution Date); (ii) on each date on which principal of the Securities shall have been paid to the Securityholders pursuant to Section 3.2 hereof, the Trustee shall withdraw from the Cash Collateral Account such amount as is necessary so that, after giving effect to such payment of principal on such date (and any reduction in the amounts on deposit in the Cash Collateral Account resulting from a prior withdrawal of amounts on deposit in the Cash Collateral Account on such date) and any transfer of Investment Earnings from such Cash Collateral Account to the Collection Account on such date, an amount equal to the sum of the Required Amount (calculated for purposes of this clause (ii) on the basis of the Capped Interest Rate) plus (if on a Distribution Date not coinciding with an Interest Payment Date) Investment Earnings on deposit in the Cash Collateral Account (after giving effect to any such transfer of Investment Earnings) will be on deposit in the Cash Collateral Account and shall first, pay such withdrawn amount to the Liquidity Provider until the Liquidity Obligations owing to such the Liquidity Provider shall have been paid in full, and second, deposit any remaining withdrawn amount in the Collection Account; (iii) if a Replacement Liquidity Facility shall be delivered to the Trustee following the date on which funds have been deposited into the Cash Collateral Account, the Trustee shall withdraw all amounts on deposit in the Cash Collateral Account and shall pay such amounts to the replaced Liquidity Provider until all Liquidity Obligations owed to such Person shall have been paid in full, and shall deposit any remaining amount in the Collection Account; and (iv) following the payment of all sums payable with respect to the Securities, on the date on which the Trustee shall have been notified by the Liquidity Provider that the Liquidity Obligations owed to the Liquidity Provider have been paid in full, the Trustee shall withdraw all amounts on deposit in the Cash Collateral Account and shall distribute such amounts in accordance with the order of priority set forth in Section 3.2. (g) REINSTATEMENT. With respect to any Interest Drawing under the Liquidity Facility, upon the reimbursement of the Liquidity Provider for all or any part of the amount of such Interest Drawing, together with any accrued interest thereon, the Available Amount of the Liquidity Facility shall be reinstated by an amount equal to the amount of such Interest Drawing so reimbursed to the Liquidity Provider but not to exceed the Stated Amount; PROVIDED, HOWEVER, that the Liquidity Facility shall not be so reinstated in part or in full at any time if (x) the Securities are Non-Performing and a Liquidity Event of Default shall have occurred and be continuing or (y) the Final Drawing shall have occurred; PROVIDED FURTHER, that any payment by the Policy Provider to the Liquidity Provider of any amounts pursuant to the second proviso to Section 3.8(c) shall not reinstate the Liquidity Facility, but the Liquidity Facility (so long as the Liquidity Facility is in effect) shall be reinstated, PRO TANTO, to the extent the Policy Provider receives any reimbursement in respect of such payment under clause "FOURTH" of Section 3.2, unless (x) the Securities are Non-Performing and

a Liquidity Event of Default shall have occurred and be continuing or (y) the Final Drawing shall have occurred. In the event that (i) funds are withdrawn from the Cash Collateral Account pursuant to clause (i) of Section 3.5(f) hereof or (ii) the Liquidity Facility shall become a Downgraded Facility or a Non-Extended Facility at a time when unreimbursed Interest Drawings have reduced the Available Amount to zero, then funds received by the Trustee at any time other than (x) any time when the Securities are Non-Performing and Liquidity Event of Default shall have occurred and be continuing or (y) any time after the Final Drawing shall have occurred, shall be deposited in the Cash Collateral Account as and to the extent provided in clause "FOURTH" of Section 3.2, and applied in accordance with Section 3.5(f) hereof. (h) REIMBURSEMENT. The amount of each drawing under the Liquidity Facility shall be due and payable, together with interest thereon, on the dates and at the rate, respectively, provided in the Liquidity Facility. (i) FINAL DRAWING. Upon receipt from the Liquidity Provider of a Termination Notice, the Trustee shall, not later than the date specified in such Termination Notice, in accordance with the terms of the Liquidity Facility, request a drawing under the Liquidity Facility of all available and undrawn amounts thereunder (a "FINAL DRAWING"). Amounts drawn pursuant to a Final Drawing shall be maintained and invested in accordance with Section 3.5(f) hereof. (j) ADJUSTMENTS OF STATED AMOUNT. Promptly following each date on which the Required Amount is reduced as a result of a payment of the principal amount of the Securities, the Stated Amount shall automatically be adjusted to an amount equal to the Required Amount (as calculated by the Trustee after giving effect to such payment). (k) RELATION TO SUBORDINATION PROVISIONS. Subject to the proviso contained in Section 3.5(b), Interest Drawings under the Liquidity Facility and withdrawals from the Cash Collateral Account will be distributed to the Trustee, and the Trustee will distribute such Interest Drawings and withdrawals promptly to the Securityholders in accordance with the provisions of this Indenture, in each case, notwithstanding Section 3.2 hereof. (l) ASSIGNMENT OF LIQUIDITY FACILITY. The Trustee agrees not to consent to the assignment by the Liquidity Provider of any of its rights or obligations under the Liquidity Facility or any interest therein, unless (i) the Company shall have consented to such assignment and (ii) each Rating Agency shall have provided a Ratings Confirmation in respect of such assignment and (iii) the Policy Provider shall have consented to such assignment (which consent shall not be unreasonably withheld or delayed); PROVIDED, that the Trustee shall consent to such assignment if the conditions in the foregoing clauses (i), (ii) and (iii) are satisfied, and the foregoing is not intended to and shall not be construed to limit the rights of the initial Liquidity Provider under Section 3.5(e)(ii). (m) NO DISCHARGE OF THE COMPANY'S OBLIGATIONS. The payment of interest on the Securities with funds drawn under the Liquidity Facility or from the Cash

Collateral Account shall not be deemed to discharge the Company's obligation to make such payment, which obligation shall continue in full force and effect. (n) INTEREST COVERAGE. The interest payable by the Liquidity Provider under the Liquidity Facility shall include interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding. Section 3.6 THE POLICY. (a) INTEREST DRAWINGS. If on any Distribution Date (other than the Final Legal Maturity Date, the Election Distribution Date, the Policy Election Distribution Date, the Non-Performance Payment Date or a date on which a Policy Drawing is to be made pursuant to Section 3.6(b) of this Indenture), after giving effect to the subordination provisions of Section 3.2 and to the application of Prior Funds, the Trustee does not then have sufficient funds available for the payment of all amounts due and owing in respect of accrued and unpaid interest on the Securities at the Debt Rate (without giving effect to any Acceleration and calculated assuming that the Company will not cure the nonpayment of interest) ("ACCRUED INTEREST"), then the Trustee (i) prior to 1:00 p.m. (New York City time) on such Distribution Date shall deliver a Notice for Payment, as provided in the Policy, to the Policy Provider or its fiscal agent, requesting a Policy Drawing under the Policy (for payment into the Policy Account) in an amount sufficient to enable the Trustee to pay such Accrued Interest and (ii) upon receipt shall pay such amount from the Policy Account to the Securityholders in payment of such Accrued Interest. (b) PROCEEDS DEFICIENCY DRAWING. If on any Distribution Date (other than the Final Legal Maturity Date, the Election Distribution Date, the Policy Election Distribution Date or the Non-Performance Payment Date) established by the Trustee by reason of its receipt of a payment constituting the proceeds from the sale of Pledged Spare Parts comprising all of the Pledged Spare Parts subject to the Lien of the Security Agreement at the time of such sale, after giving effect to the subordination provisions of Section 3.2 and, if such payment is received prior to a Policy Provider Election, to the application of Prior Funds, the Trustee does not then have sufficient funds available for the payment in full of the then outstanding principal amount of the Securities together with accrued and unpaid interest thereon at the Debt Rate (excluding any accrued and unpaid Premium or Break Amount and calculated assuming that the Company will not cure the nonpayment of interest) (collectively, the "OUTSTANDING AMOUNT"), then the Trustee (i) prior to 1:00 p.m. (New York City time) on such Distribution Date shall deliver a Notice for Payment, as provided in the Policy, to the Policy Provider or its fiscal agent, requesting a Policy Drawing (the "PROCEEDS DEFICIENCY DRAWING") under the Policy (for payment into the Policy Account) in an amount sufficient to enable the Trustee to pay the Outstanding Amount and (ii) upon receipt shall pay such amount from the Policy Account to the Securityholders in payment of the Outstanding Amount. (c) NON-PERFORMANCE DRAWING. If a Payment Default exists under the Securities (without giving effect to any Acceleration or any payments by the

Liquidity Provider or the Policy Provider) for a period of eight consecutive Interest Periods (such period, the "NON-PERFORMING PERIOD") (regardless of whether any proceeds from the sale of any Collateral are distributed by the Trustee during such period) and continues to exist on the Interest Payment Date on which such eighth Interest Period ends (or, if such Interest Payment Date falls within the applicable period specified in the proviso to the definition of "Non-Performing", continues to exist on the Business Day immediately following such period (the "RELEVANT DATE")), and on the 25th day following such Interest Payment Date or, if applicable, the Relevant Date (or, if such 25th day is not a Business Day, the next Business Day) (the "NON-PERFORMANCE PAYMENT DATE") after giving effect to the subordination provisions of Section 3.2 and to the application of Prior Funds, the Trustee does not then have sufficient funds available for the payment in full of the Outstanding Amount as of the Non-Performance Payment Date, then unless the Policy Provider shall have paid on any day prior thereto the Outstanding Amount as of such day pursuant to Section 3.6(b) or 3.6(e) of this Indenture, the Trustee (i) prior to the 1:00 p.m. (New York City time) on the Non-Performance Payment Date shall deliver a Notice for Payment, as provided in the Policy, to the Policy Provider or its fiscal agent, requesting a Policy Drawing (the "NON-PERFORMANCE DRAWING") under the Policy (for payment into the Policy Account) in an amount sufficient to enable the Trustee to pay such Outstanding Amount, and (ii) upon receipt shall pay such amount from the Policy Account to the Securityholders in payment of such Outstanding Amount. If the Non-Performance Payment Date is established, the Trustee shall send to the Securityholders Written Notice thereof promptly, but no later than three Business Days, after the occurrence of the Interest Payment Date on which the Non-Performing Period ends or, if applicable, the Relevant Date. Notwithstanding the foregoing, if, and only if, the Non-Performance Payment Date is scheduled to occur prior to the Final Scheduled Payment Date, the Policy Provider has the right, by Written Notice to the Trustee given at least 10 days prior to the Non-Performance Payment Date, so long as no Policy Provider Default shall have occurred and be continuing, to elect (the "POLICY PROVIDER ELECTION") not to pay the deficiency necessary to pay the Outstanding Amount on the Non-Performance Payment Date pursuant to the preceding paragraph, in which case the Policy Provider shall (i) pay on the Non-Performance Payment Date any shortfall in funds required to pay accrued interest on the Securities (without regard to Acceleration and after giving effect to the subordination provisions of Section 3.2 and to the application of Prior Funds), (ii) thereafter, on each Distribution Date until the establishment of an Election Distribution Date or a Policy Election Distribution Date, pay an amount equal to the scheduled principal on the Final Scheduled Payment Date and interest (without regard to any Acceleration) payable on the Securities on such Distribution Date, and (iii) (A) on any Business Day elected by the Policy Provider upon at least 20 days' Written Notice to the Trustee, direct the Trustee (such Business Day a "POLICY ELECTION DISTRIBUTION DATE") or (B) following the occurrence of a Policy Provider Default, on any Business Day specified by the Trustee upon at least 20 days' Written Notice to the Policy Provider (such Business Day an "ELECTION DISTRIBUTION DATE") permit the Trustee, in each case, to make a Policy Drawing under the Policy for an amount equal to the Outstanding Amount as of such Policy Election Distribution Date or Election Distribution Date, as applicable. The Trustee shall (i) prior to 1:00 p.m. (New York City time) on each such

Distribution Date referred to in the preceding sentence deliver a Notice of Payment, as provided in the Policy, to the Policy Provider or its fiscal agent requesting a Policy Drawing under the Policy for payment into the Policy Account to pay the amount then due under this paragraph and (ii) upon receipt of the proceeds thereof pay the amount thereof from the Policy Account to the Securityholders in payment of such amount. (d) LIQUIDITY PROVIDER DRAWING. On or after the Business Day which is 24 months from the earliest to occur of (i) the date on which an Interest Drawing shall have been made under the Liquidity Facility and remains unreimbursed from payments made by the Company at the end of such 24-month period, (ii) the date on which any Downgrade Drawing, Non-Extension Drawing or Final Drawing that was deposited into the Cash Collateral Account shall have been applied to pay any scheduled payment of interest on the Securities and remains unreimbursed from payments made by the Company at the end of such 24-month period and (iii) the date on which all of the Securities have been accelerated and such Securities remain unpaid by the Company at the end of such 24-month period (in each case, disregarding any reimbursements from payments by the Policy Provider and from proceeds from the sale of Collateral distributed by the Trustee during such 24-month period) (such Business Day, the "LIQUIDITY PROVIDER REIMBURSEMENT DATE"), the Policy Provider (upon at least 20 days' prior notice from the Trustee on behalf of the Liquidity Provider, which notice can be given in advance of the expiry of such twenty-four month period) will be required to honor drawings under the Policy by the Trustee on behalf of the Liquidity Provider in an amount sufficient to repay all outstanding drawings under the Liquidity Facility, together with interest accrued thereon in accordance with the Liquidity Facility. The Liquidity Provider hereby appoints the Trustee as its agent for purposes of making the drawing pursuant to this clause (d) and clause (vii) of the definition of "Deficiency Amount" in the Policy and the Trustee hereby accepts such appointment and agrees to make such drawing at the direction of the Liquidity Provider and to promptly distribute all amounts received in respect of such drawing to the Liquidity Provider. (e) FINAL POLICY DRAWING. If on the Final Legal Maturity Date, after giving effect to the subordination provisions of Section 3.2 and to the application of Prior Funds, unless the Policy Provider shall have paid on any day prior thereto the Outstanding Amount as of such day pursuant to Section 3.6(b) or 3.6(c) of this Indenture, the Trustee does not then have sufficient funds available on such date for the payment in full of the Outstanding Amount as of such date, then the Trustee shall (i) prior to 1:00 p.m. (New York City time) on such date deliver a Notice for Payment, as provided in the Policy, to the Policy Provider or its fiscal agent, requesting a Policy Drawing under the Policy (for payment into the Policy Account) in an amount sufficient to enable the Trustee to pay such Outstanding Amount, and (ii) upon receipt pay such amount from the Policy Account to Securityholders in payment of such amount. (f) AVOIDANCE DRAWINGS. If at any time the Trustee shall have actual knowledge of the issuance of any Final Order, the Trustee shall promptly give notice thereof to the Liquidity Provider and the Policy Provider. The Trustee shall thereupon calculate the relevant Avoided Payments resulting therefrom and shall promptly: (a) send to the Securityholders a Written Notice of such amounts

and (b) prior to the expiration of the Policy, deliver to the Policy Provider or its fiscal agent a Notice of Avoided Payment under the Policy, together with a copy of the documentation required by the Policy with respect thereto, requesting a Policy Drawing thereunder (for payment to the receiver, conservator, debtor-in-possession, trustee in bankruptcy or the Trustee (for deposit into the Policy Account), as applicable) in an amount equal to the amount of relevant Avoided Payment. To the extent that any portion of such Avoided Payment is to be paid to the Trustee, such Written Notice shall also set the date for the distribution of such portion of the proceeds of such Policy Drawing which date shall constitute a Distribution Date and shall be the earlier of three Business Days after the date of the expiration of the Policy and the Business Day that immediately follows the 25th day after the date of such Written Notice. Upon receipt, the Trustee shall pay the proceeds of the specified Policy Drawing under the Policy to the Securityholders or the Liquidity Provider, as applicable on such Distribution Date. (g) APPLICATION OF POLICY DRAWINGS. Notwithstanding anything to the contrary contained in this Indenture (including, without limitation, Section 3.2 hereof), except as provided in Section 3.6(d) hereof, all payments received by the Trustee in respect of a Policy Drawing (including, without limitation, that portion, if any, of the proceeds of a Policy Drawing for any Avoided Payment that is to be paid to the Trustee and not to any receiver, conservator, debtor-in-possession or trustee in bankruptcy as provided in the Policy) shall be promptly paid from the Policy Account to the Securityholders. (h) LIMITATION TO OUTSTANDING PRINCIPAL AMOUNT; INTEREST ON POLICY DRAWINGS. Notwithstanding anything to the contrary in this Section 3.6, except as provided in Section 3.6(f), at no time shall the Trustee make any Policy Drawing under the Policy under clause (b), (c) or (e) of this Section 3.6 in excess of the then outstanding principal amount of the Securities, and accrued and unpaid interest at the Debt Rate. Nothing contained in this Indenture shall alter or amend the liabilities, obligations, requirements or procedures of the Policy Provider under the Policy, and the Policy Provider shall not be obligated to make payment except at the times and in the amounts and under the circumstances expressly set forth in the Policy. Except for Policy Provider Interest Obligations, no interest shall accrue on any Policy Drawing or any other payment made by the Policy Provider. (i) RESUBMISSION OF NOTICE FOR PAYMENT. If the Policy Provider at any time informs the Trustee in accordance with the Policy that a Notice for Payment or Notice of Avoided Payment submitted by the Trustee does not meet the requirements of the Policy, the Trustee shall, as promptly as possible after being so informed, submit to the Policy Provider an amended and revised Notice for Payment or Notice of Avoided Payment, as the case may be, and shall pay to Securityholders out of the Policy Account the amount received pursuant to such amended or revised Notice for Payment or Notice of Avoided Payment, as the case may be, when received. (j) NO DISCHARGE OF THE COMPANY'S OBLIGATIONS. The payment of principal of or interest on the Securities with funds drawn under the Policy shall not be deemed to discharge the Company's obligation to make such payment, which obligation shall continue in full force and effect.

(k) INTEREST COVERAGE. The interest payable by the Policy Provider under the Policy shall include interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding. Section 3.7 DESIGNATED REPRESENTATIVES. (a) With the delivery of this Indenture, the Trustee shall furnish to the Liquidity Provider and the Policy Provider, and from time to time thereafter may furnish to the Liquidity Provider and the Policy Provider, at the Trustee's discretion, or upon the Liquidity Provider's or the Policy Provider's request (which request shall not be made more than one time in any 12-month period), a certificate (a "TRUSTEE INCUMBENCY CERTIFICATE") of a Responsible Officer of the Trustee certifying as to the incumbency and specimen signatures of the officers of the Trustee and the attorney-in-fact and agents of the Trustee (the "TRUSTEE REPRESENTATIVES") authorized to give Written Notices on behalf of the Trustee hereunder. Until the Liquidity Provider and the Policy Provider receives a subsequent Trustee Incumbency Certificate, it shall be entitled to rely on the last Trustee Incumbency Certificate delivered to it hereunder. (b) With the delivery of this Indenture, the Liquidity Provider and the Policy Provider shall furnish to the Trustee, and from time to time thereafter may furnish to the Trustee, at the Liquidity Provider's or Policy Provider's discretion, or upon the Trustee's request (which request shall not be made more than one time in any 12-month period), a certificate (each, a "PROVIDER INCUMBENCY CERTIFICATE") of any Responsible Officer of such Liquidity Provider or Policy Provider certifying as to the incumbency and specimen signatures of any officer, attorney-in-fact, agent or other designated representative of such Liquidity Provider or Policy Provider (in each case, the "PROVIDER REPRESENTATIVES" and, together with the Trustee Representatives, the "DESIGNATED REPRESENTATIVES") authorized to give Written Notices on behalf of the Liquidity Provider or Policy Provider hereunder. Until the Trustee receives a subsequent Provider Incumbency Certificate, it shall be entitled to rely on the last Provider Incumbency Certificate delivered to it hereunder by the Liquidity Provider or the Policy Provider. Section 3.8 CONTROLLING PARTY. (a) Subject to the rights of the Holders hereunder (including, without limitation, Sections 7.4, 7.6, 7.7 and 10.2) and the requirements of the TIA, in taking, or refraining from taking, any action under this Indenture, whether before or after the occurrence of an Event of Default, the Trustee will be directed by the Controlling Party. In particular, in taking, or refraining from taking, any action under this Indenture pursuant to the exercise of remedies hereunder as provided in Article 7 and under the Security Agreement pursuant to the exercise of remedies thereunder as provided in Article 6 thereof (including foreclosing the Lien on the Collateral), the Trustee and the Collateral Agents will be directed by the Controlling Party. The provisions of Section 316(a)(1) of the TIA and, except during any period that the Required Holders are the Controlling Party, the provisions of Section 315(d)(3) of the TIA are expressly excluded from this Indenture.

(b) The Person who shall be the "CONTROLLING PARTY" shall be the Policy Provider (or, if any Policy Provider Default shall have occurred and be continuing, the Required Holders). The Trustee shall give Written Notice to the Policy Provider and the Liquidity Provider promptly upon a change in the identity of the Controlling Party. Each of the Securityholders, by their acceptance of the Securities, the Policy Provider, by entering into the Policy Provider Agreement, and the Liquidity Provider, by entering into the Liquidity Facility, has agreed that it shall not exercise any of the rights of the Controlling Party at such time as it is not the Controlling Party hereunder; PROVIDED, HOWEVER, that nothing herein contained shall prevent or prohibit any Non-Controlling Party from exercising such rights as shall be specifically granted to such Non-Controlling Party hereunder and under the other Operative Documents or the Support Documents. (c) Notwithstanding the foregoing, if at any time after the Liquidity Provider Reimbursement Date a Policy Provider Default attributable to a failure to make a payment referred to in Section 3.6(d) shall have occurred and be continuing, the Liquidity Provider (so long as the Liquidity Provider has not defaulted in its obligation to make any Drawing under the Liquidity Facility) shall have the right to elect, by Written Notice to the Trustee and the Policy Provider, to become the Controlling Party hereunder at any time from and including the Liquidity Provider Reimbursement Date; PROVIDED, HOWEVER, that if the Policy Provider subsequently pays to the Liquidity Provider all outstanding Drawings, together with accrued interest thereon, under the Liquidity Facility, and no other Policy Provider Default has occurred and is continuing, then, the Policy Provider rather than the Liquidity Provider shall be the Controlling Party, subject to Section 3.8(b). (d) The Controlling Party shall not be entitled to require or obligate any Non-Controlling Party to provide funds necessary to exercise any right or remedy hereunder. Section 3.9 COMPANY'S PAYMENT OBLIGATIONS. The Company agrees to pay to the Trustee for distribution in accordance with Section 3.2 hereof: (a)(i) an amount equal to the fees payable to the Liquidity Provider under Section 2.03 of the Liquidity Facility and the related Fee Letter; (ii) the amount equal to interest on any Downgrade Advance (other than any Applied Downgrade Advance) payable under Section 3.07 of the Liquidity Facility minus Investment Earnings from such Downgrade Advance; (iii) the amount equal to interest on any Non-Extension Advance (other than any Applied Non-Extension Advance) payable under Section 3.07 of the Liquidity Facility minus Investment Earnings from such Non-Extension Advance; (iv) if any payment default shall have occurred and be continuing with respect to interest on any Securities, the excess, if any, of (1) an amount equal to interest on any Unpaid Advance, Applied Downgrade Advance or Applied Non-Extension Advance payable under Section 3.07 of the Liquidity Facility (or, if the Policy Provider has made a payment equivalent to such an Advance, as would have been payable under Section 3.07 of the Liquidity Facility had such Advance been made) over (2) the sum of Investment Earnings from any Final Advance plus any amount of interest at the Payment Due Rate actually payable (whether or not in fact paid) by the

Company on the overdue scheduled interest on the Securities in respect of which such Unpaid Advance, Applied Downgrade Advance or Applied Non-Extension Advance was made by the Liquidity Provider (or an equivalent payment made by the Policy Provider); (v) any other amounts owed to the Liquidity Provider by the Trustee as borrower under the Liquidity Facility other than amounts due as repayment of advances thereunder or as interest on such advances, except to the extent payable pursuant to clause (ii), (iii) or (iv) above, and (vi) an amount equal to the fees payable to the Policy Provider under Section 3.02(d) of the Policy Provider Agreement and all other compensation and reimbursement of expenses and disbursements (but excluding reimbursement of advances) payable to the Policy Provider under the Policy Provider Agreement (but excluding all such amounts actually paid by the Company to the Policy Provider under the Policy Provider Agreement or the Policy Fee Letter). The Trustee shall immediately deposit in the Collection Account all payments from the Company received pursuant to this Section. Section 3.10. EXECUTION OF SUPPORT DOCUMENTS. The Trustee is authorized and directed, for the benefit of the Securityholders, to enter into the Support Documents on the Closing Date. The Trustee shall not amend or supplement, or grant any waiver with respect to, any Support Document, except pursuant to the provisions of Article 10. ARTICLE 4. REDEMPTIONS Section 4.1 OPTIONAL REDEMPTION. The Securities may be redeemed at any time in whole or (so long as no Payment Default has occurred and is continuing) in part (in any integral multiple of $1,000) by the Company at its sole option at a redemption price equal to the sum of 100% of the principal amount of, accrued and unpaid interest on, and Premium, if any, and Break Amount, if any, with respect to, the redeemed Securities to and including the Redemption Date. Section 4.2 REDEMPTION NOTICE TO TRUSTEE. If the Company elects to redeem Securities as provided in Section 4.1, it shall notify the Trustee of the Redemption Date, the principal amount of Securities to be redeemed and all other information needed for the notice to be given by the Trustee pursuant to Section 4.4. The Company shall give the notice provided for in this Section at least ten (10) days (unless a shorter notice shall be satisfactory to the Trustee) prior to the date the Trustee must give notice pursuant to Section 4.4.

Section 4.3 SELECTION OF SECURITIES TO BE REDEEMED. If less than all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed on either a PRO RATA basis or by lot or by any other equitable manner determined by the Trustee in its sole discretion. The Trustee shall make the selection from Securities outstanding not previously called for redemption. The Trustee may select for redemption portions of the principal of Securities that have denominations larger than $1,000. Securities and portions of them it selects shall be in amounts of $1,000 or whole multiples of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption, and references to such Securities shall also refer to such portions of such Securities. Section 4.4 NOTICE OF REDEMPTION. At least 15 days but not more than 60 days before a Redemption Date, the Trustee shall mail by first-class mail a notice of redemption to each Holder whose Securities are to be redeemed. The notice shall identify the Securities and the principal amount thereof to be redeemed and shall state: (1) the Redemption Date; (2) the redemption price (including the amount of accrued and unpaid interest, and Premium, if any, to be paid on the Securities called for redemption); (3) if any Security is being redeemed in part, the portion of the principal amount of such Security to be redeemed and that, after the Redemption Date, upon surrender of such Security, a new Security or Securities in principal amount equal to the unredeemed portion will be issued; (4) the name and address of the Paying Agent; (5) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; and (6) that, unless the Company fails to make the redemption payment, interest on the Securities to be redeemed ceases to accrue on and after the Redemption Date and the only remaining right of the Holders of such Securities is to receive payment of the redemption price (including the amount of accrued and unpaid interest, and Premium, if any, to be paid on the Securities called for redemption) upon surrender to the Paying Agent of the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense.

Section 4.5 EFFECT OF NOTICE OF REDEMPTION. Once a notice of redemption is mailed, Securities called for redemption become due and payable on the Redemption Date at the redemption price and, on and after such date (unless the Company shall fail to make the payment of the redemption price), such Securities shall cease to bear interest. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price. Notwithstanding the foregoing, if the Trustee gives notice of redemption, but the Company fails to pay when due all amounts necessary to effect such redemption, such redemption shall be deemed revoked and no amount shall be due as a result of notice of redemption having been given. Section 4.6 DEPOSIT OF REDEMPTION PRICE. On or before 12:30 p.m., Eastern Time, on the Redemption Date, the Company shall deposit with the Paying Agent money in funds immediately available on the Redemption Date sufficient to pay the principal amount of and accrued interest on and Premium, if any, and Break Amount, if any, with respect to, all Securities to be redeemed on that date, PROVIDED that the Company's failure to make such deposit shall result in the revocation of such redemption in accordance with Section 4.5. Section 4.7 SECURITIES REDEEMED IN PART. Upon surrender of a Security that is redeemed in part, the Trustee shall authenticate for the Holder a new Security equal in principal amount of the unredeemed portion of the Security surrendered. ARTICLE 5. COVENANTS Section 5.1 PAYMENT OF SECURITIES. The Company shall pay the principal of, interest on and Premium, if any, and Break Amount, if any, with respect to, the Securities on the dates and in the manner provided in this Indenture and in the Securities. The Company will, on or before each due date for the payment of the principal of, interest on, Premium, if any, or Break Amount, if any, due under any of the Securities, deposit with the Trustee payments sufficient to pay the principal, interest, Premium, if any, or Break Amount, if any, so becoming due, and the Trustee shall immediately deposit all such payments in the Collection Account. The principal of, interest on, Premium, if any, Break Amount, if any, and other amounts due under any of the Securities or hereunder will be payable in Dollars by wire transfer of immediately available funds not later than 12:30 p.m., New York time, on the due date of payment to the Trustee at the Corporate Trust Office for distribution in the manner provided herein. The Trustee will make funds deposited in the Collection Account on a Distribution Date and required to be distributed to Securityholders pursuant to Section 3.2 available

to the Paying Agent for such distribution. The Paying Agent shall distribute amounts payable to each Securityholder by check mailed to such Securityholder at its address appearing in the Register, except that with respect to Securities registered on the applicable Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). The Company shall not have any responsibility for the distribution of such payments to any Securityholder. Any payment made hereunder shall be made without any presentment or surrender of any Securities, except that, in the case of the final payment in respect of any Security, such Security shall be surrendered to the Paying Agent for cancellation against receipt of such payment. Section 5.2 MAINTENANCE OF OFFICE OR AGENCY. The Company shall maintain in the Borough of Manhattan, The City of New York, an office or agency where Securities may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Securities and this Indenture may be served. At the request of the Company, said office or agency may be an office of the Trustee or an agent appointed by the Trustee for such purpose. The Company shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed by the Trustee. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office. The Company may also from time to time designate one or more other offices or agencies where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency. The Company hereby designates the Corporate Trust Office as one such office or agency of the Company in accordance with Section 2.8. Section 5.3 CORPORATE EXISTENCE. Except as otherwise provided in Section 5.4, the Company shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence and shall at all times remain a U.S. Air Carrier. Section 5.4 COMPANY NOT TO CONSOLIDATE, MERGE, CONVEY OR TRANSFER EXCEPT UNDER CERTAIN CONDITIONS. (a) The Company shall not consolidate with, or merge into, or convey, transfer or lease all or substantially all of its assets to any Person unless:

(i) the resulting, surviving, transferee or lessee Person (the "SUCCESSOR COMPANY") shall be a Person organized and existing under the laws of the U.S., any state thereof or the District of Columbia and a U.S. Air Carrier, and the Successor Company shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Securities, the Indenture, the other Operative Documents and the Support Documents to which the Company is a party; (ii) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that (i) such consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with the terms of this Indenture and (ii) this Indenture, each other Operative Document and the Securities constitute the valid and legally binding obligations of the Successor Company; (iii) the Company or the Successor Company complies with the requirements of Section 4.04(c) of the Security Agreement; and (iv) immediately after giving effect to such transaction, no Event of Default shall have occurred and be continuing. (b) The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and be bound by and obligated to pay the obligations of, and may exercise every right and power of, the Company under the Indenture, each other Operative Document, the Securities and the Support Documents to which the Company is a party, but the predecessor Company in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of, interest on, and Premium, if any, and Break Amount, if any, with respect to, the Securities and any other amounts payable by the Company hereunder. (c) The Successor Company may cause to be signed, and may issue either in its own name or in the name of the Company prior to such succession any or all of the Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee; and upon the order of the Successor Company, instead of the Company, and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee shall authenticate and shall deliver any Securities which previously shall have been signed and delivered by the officers of the Company to the Trustee for authentication, and any Securities which such Successor Company thereafter shall cause to be signed and delivered to the Trustee for that purpose. All of the Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as though all of such Securities had been issued at the date of the execution hereof. (d) In case of any such consolidation, merger, sale, conveyance, transfer or lease such changes in phraseology and form (but not in substance) may be made in the Securities thereafter to be issued as may be appropriate.

Section 5.5 REPORTS BY THE COMPANY. (a) The Company shall file with the Trustee, within 15 days after the Company is required to file the same with the SEC, copies of the annual reports and of the information, documents, and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) that the Company may be required to file with the SEC pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company is not required to file information, documents, or reports pursuant to either of said sections, then to file with the Trustee and the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such of the supplementary and periodic information, documents, and reports that may be required pursuant to Section 13 of the Exchange Act in respect of a security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations. (b) So long as required by the TIA, the Company shall deliver to the Trustee, within 120 days after the end of each calendar year, a certificate signed by the Company's principal executive officer, principal financial officer or principal accounting officer (which certificate need not comply with Section 12.4 or 12.5) stating that to his or her knowledge during such preceding calendar year no Default or Event of Default has occurred (or, if a Default or Event of Default shall have occurred, describing all such Defaults or Events of Default of which he or she may have knowledge). ARTICLE 6. INDEMNIFICATION Section 6.1 GENERAL INDEMNITY. (a) The Company shall indemnify, protect, defend and hold harmless each Indemnitee from, against and in respect of, and shall pay on a net after-tax basis, any and all Expenses of any kind or nature whatsoever that may be imposed on, incurred by or asserted against any Indemnitee, relating to, resulting from, or arising out of or in connection with, any one or more of the following: (i) The Operative Documents or the Support Documents, or the enforcement of any of the terms of any of the Operative Documents or the Support Documents; (ii) The Spare Parts Collateral, including, without limitation, with respect thereto, (A) the manufacture, design, purchase, acceptance, nonacceptance or rejection, ownership, delivery, nondelivery, lease, sublease, assignment, possession, use or non-use, operation, maintenance, testing, repair, overhaul, condition, alteration, modification, addition, improvement, storage, airworthiness, replacement, repair, sale, substitution, return, abandonment, redelivery or other disposition of any Spare Parts Collateral, (B) any claim or penalty arising out of violations of applicable Laws by the Company (or any Permitted Lessee), (C) tort

liability, whether or not arising out of the negligence of any Indemnitee (whether active, passive or imputed), (D) death or property damage of passengers, shippers or others, (E) environmental control, noise or pollution and (F) any Liens in respect of the Spare Parts Collateral; (iii) The offer, sale, or delivery of any Securities or any interest therein or represented thereby; and (iv) Any breach of or failure to perform or observe, or any other noncompliance with, any covenant or agreement or other obligation to be performed by the Company under any Operative Document or Support Document to which it is party or the falsity of any representation or warranty of the Company in any Operative Document or Support Document to which it is party. (b) Notwithstanding anything contained in Section 6.1(a), the Company shall not be required to indemnify, protect, defend and hold harmless any Indemnitee pursuant to Section 6.1(a) in respect of any Expense of such Indemnitee: (i) For any Taxes or a loss of Tax benefit; (ii) Except to the extent attributable to acts or events occurring prior thereto, acts or events (other than acts or events related to the performance by the Company of its obligations pursuant to the terms of the Operative Documents or the Support Documents to which it is a party) that occur after the Indenture is required to be terminated in accordance with Section 9.1 of this Indenture; PROVIDED, that nothing in this clause (ii) shall be deemed to exclude or limit any claim that any Indemnitee may have under applicable Law by reason of an Event of Default or for damages from the Company for breach of the Company's covenants contained in the Operative Documents or the Support Documents to which it is a party or to release the Company from any of its obligations under the Operative Documents or the Support Documents to which it is a party that expressly provide for performance after termination of the Indenture; (iii) To the extent attributable to any transfer (voluntary or involuntary) by or on behalf of such Indemnitee or any related Indemnitee of any Security or interest therein; (iv) To the extent attributable to the gross negligence or willful misconduct of such Indemnitee or any related Indemnitee (as defined below) (other than gross negligence or willful misconduct imputed to such person by reason of its interest in the Spare Parts Collateral or any Operative Document); (v) To the extent attributable to the incorrectness or breach of any representation or warranty of such Indemnitee or any related Indemnitee contained in or made pursuant to any Operative Document or any Support Document;

(vi) To the extent attributable to the failure by such Indemnitee or any related Indemnitee to perform or observe any agreement, covenant or condition on its part to be performed or observed in any Operative Document or any Support Document; (vii) To the extent attributable to the offer or sale by such Indemnitee or any related Indemnitee of any interest in the Spare Parts Collateral, any Security, or any similar interest, in violation of the Securities Act or other applicable federal, state or foreign securities Laws (other than any thereof caused by acts or omissions of the Company); (viii) (x) With respect to any Indemnitee (other than the Trustee, any Agent or any Collateral Agent), to the extent attributable to the failure of the Trustee, any Agent or any Collateral Agent to distribute funds received and distributable by it in accordance with the Indenture or a Collateral Agreement, as the case may be, or (y) with respect to the Trustee, any Agent or any Collateral Agent, to the extent attributable to the negligence or willful misconduct of the Trustee, any Agent or any Collateral Agent in the distribution of funds received and distributable by it in accordance with the Indenture or a Collateral Agreement, as the case may be; (ix) Other than during the continuation of an Event of Default, to the extent attributable to the authorization or giving or withholding of any future amendments, supplements, waivers or consents with respect to any Operative Document or Support Document other than such as have been requested by the Company or as are required by or made pursuant to the terms of the Operative Documents or Support Documents (unless such requirement results from the actions of an Indemnitee not required by or made pursuant to the Operative Documents or the Support Documents); (x) To the extent attributable to any amount which any Indemnitee expressly agrees to pay or such Indemnitee expressly agrees shall not be paid by or be reimbursed by the Company; (xi) To the extent that it is an ordinary and usual operating or overhead expense; (xii) For any Lien attributable to such Indemnitee or any related Indemnitee; (xiii) If another provision of an Operative Document or a Support Document specifies the extent of the Company's responsibility or obligation with respect to such Expense, to the extent arising from other than failure of the Company to comply with such specified responsibility or obligation; or (xiv) To the extent incurred by or asserted against an Indemnitee as a result of any "prohibited transaction", within the meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code.

For purposes of this Section 6.1, a Person shall be considered a "related" Indemnitee with respect to an Indemnitee if such Person is an Affiliate or employer of such Indemnitee, a director, officer, employee, agent, or servant of such Indemnitee or any such Affiliate or a successor or permitted assignee of any of the foregoing. Section 6.2 SEPARATE AGREEMENT. This Article 6 constitutes a separate agreement with respect to each Indemnitee and is enforceable directly by each such Indemnitee. Section 6.3 NOTICE. If a claim for any Expense that an Indemnitee shall be indemnified against under this Article 6 is made, such Indemnitee shall give prompt written notice thereof to the Company. Notwithstanding the foregoing, the failure of any Indemnitee to notify the Company as provided in this Section 6.3, or in Section 6.4, shall not release the Company from any of its obligations to indemnify such Indemnitee hereunder, except to the extent that such failure results in an additional Expense to the Company (in which event the Company shall not be responsible for such additional expense) or materially impairs the Company's ability to contest such claim. Section 6.4 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS. (a) In case any action, suit or proceeding shall be brought against any Indemnitee for which the Company is responsible under this Article 6, such Indemnitee shall notify the Company of the commencement thereof and the Company may, at its expense, participate in and to the extent that it shall wish (subject to the provisions of the following paragraph), assume and control the defense thereof and, subject to Section 6.4(c), settle or compromise the same. (b) The Company or its insurer(s) shall have the right, at its or their expense, to investigate or, if the Company or its insurer(s) shall agree not to dispute liability to the Indemnitee giving notice of such action, suit or proceeding under this Section 6.4 for indemnification hereunder or under any insurance policies pursuant to which coverage is sought, control the defense of, any action, suit or proceeding, relating to any Expense for which indemnification is sought pursuant to this Article 6, and each Indemnitee shall cooperate with the Company or its insurer(s) with respect thereto; PROVIDED, that the Company shall not be entitled to control the defense of any such action, suit, proceeding or compromise any such Expense during the continuance of any Event of Default. In connection with any such action, suit or proceeding being controlled by the Company, such Indemnitee shall have the right to participate therein, at its sole cost and expense, with counsel reasonably satisfactory to the Company; PROVIDED, that such Indemnitee's participation does not, in the reasonable opinion of the independent counsel appointed by the Company or its insurers to conduct such proceedings, interfere with the defense of such case. (c) In no event shall any Indemnitee enter into a settlement or other compromise with respect to any Expense without the prior written consent of the

Company, which consent shall not be unreasonably withheld or delayed, unless such Indemnitee waives its right to be indemnified with respect to such Expense under this Article 6. (d) In the case of any Expense indemnified by the Company hereunder which is covered by a policy of insurance maintained by the Company pursuant to a Collateral Agreement, at the Company's expense, each Indemnitee agrees to cooperate with the insurers in the exercise of their rights to investigate, defend or compromise such Expense as may be required to retain the benefits of such insurance with respect to such Expense. (e) If an Indemnitee is not a party to this Indenture, the Company may require such Indemnitee to agree in writing to the terms of this Article 6 prior to making any payment to such Indemnitee under this Article 6. (f) Nothing contained in this Section 6.4 shall be deemed to require an Indemnitee to contest any Expense or to assume responsibility for or control of any judicial proceeding with respect thereto. Section 6.5 INFORMATION. The Company will provide the relevant Indemnitee with such information not within the control of such Indemnitee, as is in the Company's control or is reasonably available to the Company, which such Indemnitee may reasonably request and will otherwise cooperate with such Indemnitee so as to enable such Indemnitee to fulfill its obligations under Section 6.4. The Indemnitee shall supply the Company with such information not within the control of the Company, as is in such Indemnitee's control or is reasonably available to such Indemnitee, which the Company may reasonably request to control or participate in any proceeding to the extent permitted by Section 6.4. Section 6.6 SUBROGATION; FURTHER ASSURANCES. Upon the payment in full by the Company of any indemnity provided for under this Article 6, the Company, without any further action and to the full extent permitted by Law, will be subrogated to all rights and remedies of the person indemnified (other than with respect to any of such Indemnitee's insurance policies) in respect of the matter as to which such indemnity was paid. Each Indemnitee will give such further assurances or agreements and cooperate with the Company to permit the Company to pursue such claims, if any, to the extent reasonably requested by the Company and at the Company's expense. Section 6.7 REFUNDS. If an Indemnitee receives any refund, in whole or in part, with respect to any Expense paid by the Company hereunder, it will promptly pay the amount refunded (but not an amount in excess of the amount the Company or any of its insurers has paid in respect of such Expense) over to the Company unless an Event of Default shall have occurred and be continuing, in which case such amounts shall be paid over to the Security Agent to hold as security for the

Company's obligations under the Operative Documents and the Support Documents to which the Company is a party or, if requested by the Company, applied to satisfy such obligations. ARTICLE 7. DEFAULT AND REMEDIES Section 7.1 EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" shall mean any of the following events (whatever the reason for such Event of Default and whether such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administration or governmental body): (a) the Company shall fail to pay (i) principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to any Security when due, and such failure shall continue unremedied for a period of 10 Business Days thereafter (it being understood that any amount distributed to Securityholders in respect of the foregoing from funds provided by the Policy Provider, the Liquidity Provider or the Cash Collateral Account shall not be deemed to cure such Default), or (ii) any other amount payable by it to the Holders under this Indenture or any Operative Document when due, and such failure shall continue for a period in excess of 10 Business Days after the Company has received written notice from the Trustee of the failure to make such payment when due; (b) the Company shall fail to observe or perform (or caused to be observed and performed) in any material respect any other covenant, agreement or obligation set forth herein or in any other Operative Document to which the Company is a party and such failure shall continue unremedied for a period of 30 days from and after the date of written notice thereof to the Company from the Trustee, unless such failure is capable of being corrected and the Company shall be diligently proceeding to correct such failure, in which case there shall be no Event of Default unless and until such failure shall continue unremedied for a period of 270 days after receipt of such notice; (c) any representation or warranty made by the Company herein or in any other Operative Document to which the Company is a party (a) shall prove to have been untrue or inaccurate in any material respect as of the date made, (b) such untrue or inaccurate representation or warranty is material at the time in question, and (c) the same shall remain uncured (to the extent of the adverse impact of such incorrectness on the interest of the Trustee) for a period in excess of 30 days from and after the date of written notice thereof from Trustee to the Company; (d) the Company shall consent to the appointment of or taking possession by a receiver, trustee or liquidator of itself or of a substantial part of its property, or the Company shall admit in writing its inability to pay its debts generally as they come due or shall make a general assignment for the benefit of its creditors, or the Company shall file a voluntary petition in bankruptcy or a

voluntary petition or an answer seeking reorganization, liquidation or other relief under any bankruptcy laws or insolvency laws (as in effect at such time), or an answer admitting the material allegations of a petition filed against it in any such case, or the Company shall seek relief by voluntary petition, answer or consent, under the provisions of any other bankruptcy or similar law providing for the reorganization or winding-up of corporations (as in effect at such time), or the Company shall seek an agreement, composition, extension or adjustment with its creditors under such laws or the Company's board of directors shall adopt a resolution authorizing corporate action in furtherance of any of the foregoing; (e) an order, judgment or decree shall be entered by any court of competent jurisdiction appointing, without the consent of the Company, a receiver, trustee or liquidator of the Company or of any substantial part of its property, or any substantial part of the property of the Company shall be sequestered, or granting any other relief in respect of the Company as a debtor under any bankruptcy laws or other insolvency laws (as in effect at such time), and any such order, judgment, decree, or decree of appointment or sequestration shall remain in force undismissed, unstayed or unvacated for a period of 90 days after the date of entry thereof; or (f) a petition against the Company in a proceeding under any bankruptcy laws or other insolvency laws (as in effect at such time) is filed and not withdrawn or dismissed within 90 days thereafter, or if, under the provisions of any law providing for reorganization or winding-up of corporations which may apply to the Company, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Company of any substantial part of its property and such jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of 90 days. Section 7.2 ACCELERATION. If an Event of Default (other than an Event of Default specified in Section 7.1(d), (e) or (f) with respect to the Company) occurs, and is continuing, the Controlling Party may, by notice to the Company and the Trustee, and the Trustee shall, upon the request of such Controlling Party, declare all unpaid principal of, accrued but unpaid interest on, and Premium, if any, Break Amount, if any, with respect to the Securities Outstanding and other amounts otherwise payable hereunder, if any, to the date of acceleration to be due and payable and upon any such declaration, the same shall become and be immediately due and payable. If an Event of Default specified in Section 7.1(d), (e) or (f) occurs with respect to the Company, all unpaid principal of, accrued but unpaid interest on, and Premium, if any, Break Amount, if any, with respect to, the Securities Outstanding and other amounts otherwise payable hereunder, if any, shall automatically become and be immediately due and payable without any declaration or other act on the part of the Trustee, the Controlling Party or any Securityholder. Upon payment of such principal amount, interest, Premium, if any, Break Amount, if any, and other amounts, all of the Company's obligations under the Securities and this Indenture, other than obligations under Article 6 and Section 8.7, shall terminate. The Controlling Party by notice to the Trustee may rescind an acceleration and its consequences if (a) all existing Events of Default, other than the non-payment as to the Securities of the principal, interest, Premium, if any, and Break Amount, if any, with respect thereto and

other amounts otherwise payable hereunder, if any, which has become due solely by such declaration of acceleration, have been cured or waived, (b) to the extent the payment of such interest is permitted by law, interest on overdue installments of interest and on overdue principal which has become due otherwise than by such declaration of acceleration, has been paid, (c) the rescission would not conflict with any judgment or decree of a court of competent jurisdiction, and (d) all payments due to the Trustee and any predecessor Trustee under Section 8.7 have been made. No such rescission shall affect any subsequent default or impair any right arising from any subsequent default. Section 7.3 OTHER REMEDIES. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to the Securities or other amounts otherwise payable hereunder, if any, or to enforce the performance of any provision of the Securities or this Indenture including, without limitation, instituting proceedings and exercising and enforcing, or directing exercise and enforcement of, all rights and remedies of the Trustee and the Collateral Agent under the other Operative Documents and directing the Collateral Agent to deposit with the Trustee all cash and/or Investment Securities held by the Collateral Agent. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. Section 7.4 WAIVER OF PAST DEFAULTS. Subject to Sections 7.7, 10.2 and 10.6, the Controlling Party by notice to the Trustee may authorize the Trustee to waive an existing Default or Event of Default and its consequences, except a Default or Event of Default (i) in the payment of principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to, any Security as specified in Section 7.1(a) that has not been paid from funds provided by the Policy Provider, the Liquidity Provider or the Cash Collateral Account or (ii) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Liquidity Provider, the Policy Provider and the Holder of each Security affected. When a Default or Event of Default is so waived, it is cured and ceases, and the Company, the Liquidity Provider, the Policy Provider, the Holders and the Trustee shall be restored to their former positions and rights hereunder respectively; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereon.

Section 7.5 CONTROL OF REMEDIES. The Controlling Party may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee (as Trustee or Collateral Agent, subject, in the case of any actions based on the status of the Trustee as Collateral Agent, to any limitations otherwise expressly provided for in the other Operative Documents) or exercising any trust or power conferred on it; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. The Trustee may refuse to follow any direction hereunder or authorization under Section 7.4 that conflicts with law or this Indenture, that the Trustee determines may subject the Trustee to personal liability or, after a Policy Provider Default, that the Trustee determines may be unduly prejudicial to the rights of another Securityholder. However, the Trustee shall have no liability for any actions or omissions to act which are in accordance with any such direction or authorization. The Controlling Party shall not direct the Trustee or any Collateral Agent to sell or otherwise dispose of any Collateral unless all unpaid principal of, accrued but unpaid interest on, and Premium, if any, and Break Amount, if any, with respect to, the Outstanding Securities and other amounts otherwise payable under this Indenture, if any, shall be declared or otherwise become due and payable immediately. Section 7.6 LIMITATION ON SUITS. A Securityholder may not pursue any remedy with respect to this Indenture or the Securities unless: (a) the Holder gives to the Trustee written notice of a continuing Event of Default; (b) the Holders of at least twenty-five percent (25%) in principal amount of the Securities Outstanding make a written request to the Trustee to pursue the remedy; (c) such Holder or Holders offer to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense; (d) the Trustee does not comply with the request within sixty (60) days after receipt of the request and the offer of indemnity; and (e) during such 60-day period the Controlling Party does not give the Trustee a direction which, in the opinion of the Trustee, is inconsistent with such request. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder. Section 7.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right of any Holder of a Security to receive payment of principal of, interest on, and Premium, if any, and Break Amount, if any, with respect to, the Security in

cash, on or after the respective due dates expressed in the Security, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of the Holder. It is hereby expressly understood, intended and agreed that any and all actions which a Holder of the Securities may take to enforce the provisions of this Indenture and/or collect Payments due hereunder or under the Securities, except to the extent that such action is determined to be on behalf of all Holders of the Securities, shall be in addition to and shall not in any way change, adversely affect or impair the rights and remedies of the Trustee, the Controlling Party or any other Holder of the Securities thereunder or under this Indenture, the other Operative Documents and the Support Documents, including the right to foreclose upon and sell the Collateral or any part thereof and to apply any proceeds realized in accordance with the provisions of this Indenture. Section 7.8 COLLECTION SUIT BY TRUSTEE. If an Event of Default in payment of principal, interest, Premium or Break Amount specified in Section 7.1(a) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Securities for the whole amount of principal, accrued interest, Premium, if any, or Break Amount, if any, remaining unpaid, together with interest on overdue principal and on overdue interest, Premium or Break Amount to the extent that payment of such interest is permitted by law, in each case at the rate per annum provided for by the Securities, and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel. Section 7.9 TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company (or any other obligor upon the Securities), its creditors or its property and shall be entitled and empowered to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 8.7, and unless prohibited by law or applicable regulations to vote on behalf of the Holders of Securities for the election of a trustee in bankruptcy or other person performing similar functions. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or

composition affecting the Securities or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding except, as aforesaid, for the election of a trustee in bankruptcy or person performing similar functions. Section 7.10 APPLICATION OF PROCEEDS. Any moneys collected by the Trustee pursuant to this Article 7 or by the Security Agent under Section 6.02 of the Security Agreement shall be distributed in the order provided in Section 3.2 at the date or dates fixed by the Trustee and, in case of the distribution of such moneys on account of principal, interest, Premium, if any, or Break Amount, if any, upon presentation of the several Securities and stamping (or otherwise noting) thereon the payment, or issuing Securities in reduced principal amounts in exchange for the presented Securities if only partially paid, or upon surrender thereof if fully paid. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section 7.10, and the Trustee shall give the Company and the Securityholders written notice thereof no less than 15 days prior to any such record date. Section 7.11 UNDERTAKING FOR COSTS. All parties to this Indenture agree, and each Holder of any Security by his acceptance thereof shall be deemed to have agreed, that any court in its discretion may require in any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 7.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 7.7, or a suit by Holders of more than ten percent (10%) in principal amount of the Securities Outstanding. Section 7.12 RESTORATION OF RIGHTS ON ABANDONMENT OF PROCEEDINGS. In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned for any reason, or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the Securityholders shall be restored respectively to their former positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the Securityholders shall continue as though no such proceedings had been taken. Section 7.13 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER OF DEFAULT. No right or remedy herein conferred upon or reserved to the Trustee or to the Securityholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative

and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. No delay or omission of the Trustee or of any Holder of any of the Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power or shall be construed to be a waiver of any such Event of Default or an acquiescence therein; and, subject to the other applicable provisions of this Indenture, every power and remedy given by this Indenture or by law to the Trustee, a Liquidity Provider, the Policy Provider or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders. Any right or remedy herein conferred upon or reserved to the Trustee may be exercised by it in its capacity as Trustee and/or as Collateral Agent, as it may deem most efficacious, if it is then acting in such capacity. ARTICLE 8. TRUSTEE Section 8.1 DUTIES OF TRUSTEE. (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of his own affairs. (b) Except during the continuance of an Event of Default: (i) The Trustee need perform only those duties as are specifically set forth in this Indenture, the other Operative Documents and the Support Documents and no others. (ii) In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture. (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that: (i) This paragraph (c) does not limit the effect of paragraph (b) of this Section 8.1 or of Section 8.2.

(ii) The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts. (iii) The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 7.5. (d) The Trustee may refuse to perform any duty or exercise any right or power unless it receives indemnity satisfactory to it against any loss, liability or expense. (e) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 8.1. (f) Funds held in trust for the benefit of the Holders of the Securities by the Trustee or any Paying Agent on deposit with itself or elsewhere, and Investment Securities held in trust for the benefit of the Holders of the Securities by the Trustee, shall be held in distinct, identifiable accounts, and other funds or investments of any nature or from any source whatsoever may be held in such accounts, except, in each case, to the extent required by law. The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree with the Company. Section 8.2 RIGHTS OF TRUSTEE. (a) The Trustee may rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel, which shall conform to Section 12.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion. (c) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through its attorneys and agents and the Trustee shall not be responsible for the misconduct or negligence of any agent or attorney appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within its rights or powers. Section 8.3 INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or Affiliates of the Company with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 8.10 and 8.11.

Section 8.4 TRUSTEE'S DISCLAIMER. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement in the Securities or in this Indenture other than its certificate of authentication. Section 8.5 NOTICE OF DEFAULTS. If a Default occurs and is continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder, the Liquidity Provider and the Policy Provider a notice of the Default within ninety (90) days after the occurrence thereof except as otherwise permitted by the TIA. Except in the case of a Default in payment of principal of, or interest on, or Premium, if any, or Break Amount, if any, with respect to, any Security, the Trustee may withhold the notice if and so long as it, in good faith, determines that withholding the notice is in the interests of the Securityholders. Section 8.6 REPORTS BY TRUSTEE TO HOLDERS. If circumstances require any report to Holders under TIA ss. 313(a), it shall be mailed to Securityholders within sixty (60) days after each May 15 (beginning with the May 15 following the date of this Indenture) as of which such circumstances exist. The Trustee also shall comply with the remainder of TIA ss. 313. The Company shall notify the Trustee if the Securities become listed on or delisted from any stock exchange or other recognized trading market. The Trustee shall, upon the written request of any Holder of Securities but subject to applicable laws and contractual limitations, provide to such Holder copies of any reports, certificates, opinions or other materials of any kind or nature required to be delivered to the Trustee (including in its capacity as Collateral Agent) under this Indenture, any of the other Operative Documents or the Support Documents or otherwise delivered by or on behalf of the Company to the Trustee (including in its capacity as Collateral Agent). Section 8.7 COMPENSATION AND INDEMNITY. The Company shall pay to the Trustee from time to time reasonable compensation, as agreed upon from time to time, for its services, including as Collateral Agent. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable disbursements, expenses and advances incurred or made by it in any such capacities. Such expenses shall include the reasonable compensation, disbursements and expenses of the Trustee's agents and counsel and all agents and other persons not regularly in its employ. The Company shall indemnify the Trustee (in its capacities as Trustee and Collateral Agent) and each predecessor Trustee for, and hold each of them

harmless against, any loss or liability incurred by each of them in connection with the administration of this trust and its duties hereunder. In connection with any defense of such a claim, the Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee or any predecessor Trustee through the negligence or bad faith of such Trustee or each such predecessor Trustee. To secure the Company's payment obligations in this Section 8.7, the Trustee shall have a Lien (legal and equitable) prior to the Securities on all money or property held or collected by the Trustee, in its capacity as Trustee, or otherwise distributable to Securityholders, except money, securities or property held in trust to pay principal of, interest on or Premium, if any, or Break Amount, if any, with respect to the particular Securities. When the Trustee incurs expenses or renders services after an Event of Default specified in Section 7.1(d), (e) or (f) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under the Bankruptcy Code or any similar law of any jurisdiction other than the U.S. Section 8.8 REPLACEMENT OF TRUSTEE. The Trustee (in its capacities as Trustee and Collateral Agent) may resign by so notifying the Company, the Liquidity Provider and the Policy Provider in writing. The Controlling Party may remove the Trustee (in its capacities as Trustee and Collateral Agent) by so notifying the Trustee in writing and may appoint a successor Trustee with the Company's consent, which consent shall not be unreasonably refused or delayed. The Company may remove the Trustee (in its capacities as Trustee and Collateral Agent) if: (a) the Trustee fails to comply with Section 8.10; (b) the Trustee is adjudged a bankrupt or an insolvent; (c) a receiver or other public officer takes charge of the Trustee or its property; (d) the Trustee becomes incapable of acting; or (e) no Default or Event of Default has occurred and is continuing and the Company determines in good faith to remove the Trustee. If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Controlling Party may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee, subject to the Lien provided in Section 8.7, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder. No resignation or removal of the Trustee and no appointment of a successor Trustee, pursuant to this Article, shall become effective until the acceptance of appointment by the successor Trustee under this Section 8.8. If a successor Trustee does not take office within sixty (60) days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company, the Liquidity Provider, the Policy Provider or the Holders of at least ten percent (10%) in principal amount of the Securities Outstanding may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 8.10, any Holder of Securities may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding replacement of the Trustee pursuant to this Section 8.8, the Company's obligations under Section 8.7 shall continue for the benefit of the retiring Trustee which shall retain its claim pursuant to Section 8.7. Section 8.9 SUCCESSOR TRUSTEE BY MERGER, ETC. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. Section 8.10 ELIGIBILITY; DISQUALIFICATION. This Indenture shall always have a Trustee who satisfies the requirements of TIA ss. 310(a)(1) and ss. 310(a)(5). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent, published annual report of condition. The Trustee shall comply with TIA ss. 310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation of TIA ss. 310(b)(1) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding, if the requirements for such exclusion set forth in TIA ss. 310(b)(1) are met. Section 8.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA ss. 311(a), excluding any creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or been removed shall be subject to TIA ss. 311(a) to the extent indicated.

Section 8.12 OTHER CAPACITIES. At all times during which any Securities are Outstanding, unless otherwise permitted under the Operative Documents, the Trustee shall serve as the Collateral Agent and any resignation, removal or disqualification from any one such office shall, without action on the part of any Person, result in the resignation, removal, or disqualification from all such offices. Any Person serving in such capacities shall have and may effectively exercise all the rights, remedies and powers, and be entitled to all protections and indemnifications, provided to such Person in whatever capacities such Person then serves under any and all of the Indenture, the other Operative Documents and the Support Documents, regardless of the capacity or capacities in which such Person may purport to take or omit any action. The Trustee agrees to and shall have the benefit of all provisions of the Operative Documents stated therein to be applicable to the Trustee. Section 8.13 TRUST ACCOUNTS. (a) Upon the execution of this Indenture, the Trustee shall establish and maintain in its name (i) the Collection Account as an Eligible Deposit Account, bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Securityholders, the Liquidity Provider and the Policy Provider, and (ii) a Policy Account as an Eligible Deposit Account bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Securityholders and, with respect to amounts paid by the Policy Provider under Section 3.6(d) and clause (vii) of the definition of "Deficiency Amount" in the Policy, the Liquidity Provider. The Trustee shall establish and maintain the Cash Collateral Account pursuant to and under the circumstances set forth in Section 3.5(f) hereof. Upon such establishment and maintenance under Section 3.5(f) hereof, the Cash Collateral Account shall, together with the Collection Account and the Policy Account, constitute the "TRUST ACCOUNTS" hereunder. (b) Funds on deposit in the Trust Accounts shall be invested and reinvested by the Trustee in Eligible Investments selected by the Trustee if such investments are reasonably available and have maturities no later than the earlier of (i) 90 days following the date of such investment and (ii) the Business Day immediately preceding the Interest Payment Date next following the date of such investment; PROVIDED, HOWEVER, that following the making of a Downgrade Drawing or a Non-Extension Drawing under the Liquidity Facility, the Trustee shall invest and reinvest such amounts in Eligible Investments at the direction of the Company (or, if and to the extent so specified to the Trustee by the Company, the Liquidity Provider); PROVIDED FURTHER, HOWEVER, that, notwithstanding the foregoing proviso, following the making of a Non-Extension Drawing under the initial Liquidity Facility, the Trustee shall invest and reinvest the amounts in the Cash Collateral Account with respect to such Liquidity Facility in Eligible Investments pursuant to the written instructions of the Liquidity Provider; PROVIDED FURTHER, HOWEVER, that upon the occurrence and during the continuation of an Event of Default, the Trustee shall invest and reinvest such amounts in accordance with the written instructions of the Controlling Party. Unless otherwise expressly provided in this Indenture (including, without limitation, with respect to Investment Earnings on amounts

on deposit in the Cash Collateral Account pursuant to Section 3.5(f) hereof), any Investment Earnings shall be deposited in the Collection Account when received by the Trustee and shall be applied by the Trustee in the same manner as the other amounts on deposit in the Collection Account are to be applied and any losses shall be charged against the principal amount invested, in each case net of the Trustee's reasonable fees and expenses in making such investments. The Trustee shall not be liable for any loss resulting from any investment, reinvestment or liquidation required to be made under this Indenture other than by reason of its willful misconduct or gross negligence. Eligible Investments and any other investment required to be made hereunder shall be held to their maturities except that any such investment may be sold (without regard to its maturity) by the Trustee without instructions whenever such sale is necessary to make a distribution required under the Indenture. Uninvested funds held hereunder shall not earn or accrue interest. (c) The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Trust Accounts and in all proceeds thereof (including all income thereon, except as otherwise expressly provided in Section 3.3(b) with respect to Investment Earnings). The Trust Accounts shall be held in trust by the Trustee under the sole dominion and control of the Trustee for the benefit of the Securityholders, the Liquidity Provider and the Policy Provider, as the case may be. If, at any time, any of the Trust Accounts ceases to be an Eligible Deposit Account, the Trustee shall within 10 Business Days (or such longer period, not to exceed 30 calendar days, for which a Ratings Confirmation for the Securities and the consent of the Policy Provider (which consent shall not be unreasonably withheld or delayed) shall have been obtained) establish a new Collection Account, Policy Account or Cash Collateral Account, as the case may be, as an Eligible Deposit Account and shall transfer any cash and/or any investments to such new Collection Account, Policy Account or Cash Collateral Account, as the case may be. So long as WTC is an Eligible Institution, the Trust Accounts shall be maintained with it as Eligible Deposit Accounts. Section 8.14 DEPOSITS TO THE COLLECTION ACCOUNT. The Trustee shall, upon receipt thereof, deposit in the Collection Account all Payments received by it (other than any Payment which by the express terms hereof is to be deposited in the Policy Account or the Cash Collateral Account). Section 8.15 CERTAIN PAYMENTS. Except for amounts constituting Liquidity Obligations, Policy Expenses or Policy Provider Obligations which shall be deposited in the Collection Account and distributed as provided in Section 3.2, the Trustee will distribute promptly upon receipt thereof to the Person entitled thereto any indemnity payment or expense reimbursement received by it from the Company in respect of the Liquidity Provider or the Policy Provider.

ARTICLE 9. DISCHARGE OF INDENTURE Section 9.1 DISCHARGE OF LIABILITY ON SECURITIES. (a) When (i) the Company delivers to the Trustee all Outstanding Securities (other than Securities replaced pursuant to Section 2.12) for cancellation or (ii) all Outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 4 hereof and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all Outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.12), Premium, if any, and Break Amount, if any, and if in either case the Company pays all other sums payable hereunder by the Company and due on or prior to such maturity or redemption date, then this Indenture shall, subject to Section 9.1(b), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture by executing and delivering to the Company on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel, a written instrument to such effect prepared by the Company at its sole cost and expense. (b) Notwithstanding clause (a) above, the provisions of Sections 2.1 through 2.17, inclusive, 6.1, 8.7 and 8.8 and in this Article 9 shall survive until the Outstanding Securities have been paid in full. Thereafter, the Company's obligations in Sections 6.1, 8.7, 9.4 and 9.5 shall survive. Section 9.2 APPLICATION OF TRUST MONEY. The Trustee shall hold in trust cash deposited with it pursuant to this Article 9. It shall apply the deposited cash through the Paying Agent and in accordance with this Indenture to the payment of principal of, interest on, Premium, if any, and Break Amount, if any, on the Securities. Section 9.3 REPAYMENT TO COMPANY. The Trustee and the Paying Agent shall promptly turn over to the Company, upon request accompanied by a certificate from a nationally recognized firm of independent accountants expressing their opinion that any cash then held by the Trustee is in excess of the amounts sufficient to pay when due all of the principal of, interest on, and Premium, if any, and Break Amount, if any, with respect to the Securities to redemption or maturity, as the case may be, any such excess cash held by them. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any cash held by them for the payment of principal, interest, Premium or Break Amount that remains unclaimed for two years, and, thereafter, Securityholders entitled to the cash must look to the Company for payment as general creditors.

Section 9.4 REINSTATEMENT. If the Trustee or Paying Agent is unable to apply any cash in accordance with this Article 9 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture, the other Operative Documents, the Support Documents and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 9 until such time as the Trustee or Paying Agent is permitted to apply all such cash in accordance with this Article 9; PROVIDED, HOWEVER, that, if the Company has made any payment of principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the cash held by the Trustee or Paying Agent. ARTICLE 10. AMENDMENTS, SUPPLEMENTS AND WAIVERS Section 10.1 WITHOUT CONSENT OF THE CONTROLLING PARTY OR HOLDERS. The Company and the Trustee or the Collateral Agent, as the case may be, may amend or supplement this Indenture, the Securities and the other Operative Documents and, upon request of the Company, the Trustee shall amend or supplement the Support Documents, in each case without notice to or consent of any Securityholder and, except as otherwise provided in the Support Documents, without notice to or consent of the Liquidity Provider or the Policy Provider: (i) to provide for uncertificated Securities in addition to or in place of certificated Securities; (ii) to provide for the assumption of the Company's obligations under the Operative Documents and the Securities in the case of a merger or consolidation or conveyance, transfer or lease of all or substantially all of the assets of the Company or otherwise to comply with Section 5.4; (iii) to comply with any requirements of the SEC in connection with the qualification of this Indenture under the TIA; (iv) to effect the amendments contemplated by Section 3.5(e)(v)(y); (v) to provide for the effectiveness of a Collateral Agreement pursuant to Section 3.1 of the Collateral Maintenance Agreement; (vi) to provide for the issuance of the Subordinated Securities;

(vii) to comply with the requirements of DTC, Euroclear or Clearstream or the Trustee with respect to the provisions of the Indenture or the Securities relating to transfers and exchanges of the Securities or beneficial interests therein; (viii) to provide for any successor Trustee or Collateral Agent; (ix) to cure any ambiguity, defect or inconsistency; or (x) to make any other change not inconsistent with the provisions hereof, PROVIDED that such action does not materially adversely affect the interests of any Securityholder. Section 10.2 WITH CONSENT OF THE CONTROLLING PARTY, LIQUIDITY PROVIDER AND HOLDERS. (a) The Company and the Trustee or the Collateral Agent, as the case may be, may amend or supplement this Indenture, the Securities and the other Operative Documents and, upon request of the Company, the Trustee shall amend or supplement the Support Documents, in each case without notice to or consent of the Liquidity Provider or the Policy Provider and without notice to any Securityholder but with the written consent of the Controlling Party, PROVIDED that (i) Sections 3.5, 3.6, 3.8 and 3.9 of this Indenture may not be modified without the consent of the Liquidity Provider and the Policy Provider and (ii) the Collateral Maintenance Agreement and the Support Documents may not be modified other than in accordance with the provisions thereof. Subject to Sections 7.4, 7.5 and 7.7, unless any Event of Default has occurred and is continuing, the Controlling Party may authorize the Trustee to, and the Trustee, subject to Section 10.6, upon such authorization shall, waive compliance by the Company with any provision of this Indenture, the Securities or the other Operative Documents. However, an amendment, supplement or waiver, including a waiver pursuant to any provision of Section 7.4, may not without the consent of the Liquidity Provider, the Policy Provider and each Securityholder affected: (i) reduce the amount of Securities whose Holders must consent to an amendment, supplement or waiver; (ii) reduce the rate or extend the time for payment of interest on any Security; (iii) reduce the amount or extend the time for payment of principal of or Premium, if any or Break Amount, if any, with respect to (in each case, whether on redemption or otherwise) any Security; (iv) change the place of payment where, or the coin or currency in which, any Security (or the redemption price thereof), interest thereon, or Premium, if any, or Break Amount, if any, with respect thereto is payable;

(v) change the distribution and application of payments as described in Section 3.2 of this Indenture (except to provide for distributions on Subordinated Securities as permitted by Section 2.18); (vi) waive a default in the payment of the principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to any Security; (vii) make any changes in Sections 7.4, 7.7 or 7.10 or the third sentence of this Section 10.2(a); or (viii) impair the right of any Holder to institute suit for the enforcement of any amount payable on any Security when due. (b) It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof. (c) After an amendment, supplement or waiver under this Section 10.2 becomes effective, the Company shall mail to the Holders affected thereby a brief notice describing such amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however in any way impair or affect the validity of any such amendment, supplement or waiver. Section 10.3 COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment to or supplement of this Indenture, any other Operative Document or the Securities shall comply with the TIA as then in effect. Section 10.4 REVOCATION AND EFFECT OF CONSENTS. (a) Until an amendment or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent is not made on any Security. However, any such Holder or subsequent Holder may revoke the consent as to his Security or portion of a Security. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. (b) After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder, unless it makes a change described in any of clauses (i) through (viii) of Section 10.2(a). In that case the amendment, supplement or waiver shall bind each Holder of a Security who has consented to it and every subsequent Holder of a Security or portion of a Security that evidences the same debt as the consenting Holder's Security; PROVIDED, HOWEVER, that no amendment, supplement or waiver relating to any impairment of the right to receive principal, interest, Premium, if any, or Break Amount, if any, when due and payable consented to by a Holder shall be binding upon any subsequent Holder of a Security or a portion of a Security that evidences the same debt as the

consenting Holder's Security unless notation with regard thereto is made upon such Security or the Security representing such portion. Section 10.5 NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment, supplement or waiver changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Section 10.6 TRUSTEE TO SIGN AMENDMENTS, ETC. Upon the Request of the Company, the Trustee shall execute any amendment, supplement or waiver authorized pursuant to this Article 10; PROVIDED that the Trustee shall not be obligated to execute any such amendment, supplement or waiver which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise. Section 10.7 EFFECT OF SUPPLEMENT AND/OR AMENDMENT. Upon the execution of any supplemental indenture and/or any such amendment or supplement to the Operative Documents or the Support Documents pursuant to the provisions of this Article 10, this Indenture, such Operative Documents and such Support Documents shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture, the other Operative Documents and the Support Documents of the Trustee, the Collateral Agent, the Liquidity Provider, the Policy Provider, the Company and the Holders of Securities shall thereafter be determined, exercised and enforced hereunder and thereunder subject in all respects to such modifications and amendments, and all terms and conditions of any such supplemental indenture and/or any such amendment or supplement to the other Operative Documents or the Support Documents shall be and be deemed to be part of the terms and conditions of this Indenture, the other Operative Documents and the Support Documents for any and all purposes. ARTICLE 11. SECURITY Section 11.1 OTHER OPERATIVE DOCUMENTS. (a) To secure the due and punctual payment, performance and observance of the Obligations, the Company has simultaneously with the execution of this Indenture entered into the Security Agreement and has granted a security interest on the Spare Parts Collateral to the Security Agent in the manner and to the extent therein provided. WTC is hereby appointed as Security Agent and authorized and directed to enter into the Security Agreement on the Closing Date. Each Securityholder, by accepting a Security, agrees to all of the terms

and provisions of each Operative Document (including, without limitation, the provisions providing for the release of Collateral), as the same may be in effect or may be amended from time to time pursuant to its terms and the terms hereof. The Company will execute, acknowledge and deliver to the Trustee or the Collateral Agent such further assignments, transfers, assurances or other instruments as the Trustee may require or request, and will do or cause to be done all such acts and things as may be necessary or proper, or as may be reasonably required by the Trustee or the Collateral Agent to assure and confirm to the Trustee or the Collateral Agent the security interest in the Collateral contemplated hereby and by the other Operative Documents, as from time to time constituted, so as to render the same available for the security and benefit of this Indenture and of the Securities secured hereby, according to the intent and purposes herein expressed. (b) The Trustee acknowledges that it is a third-party beneficiary of the Trustee Provisions and agrees to perform its obligations expressly set forth in the Collateral Maintenance Agreement. Section 11.2 OPINIONS, CERTIFICATES AND APPRAISALS. (a) The Company shall furnish to the Trustee promptly after the execution and delivery of this Indenture an Opinion of Counsel stating that in the opinion of such counsel the Indenture or Security Agreement has been properly recorded and filed so as to make effective the Lien intended to be created thereby and reciting the details of such actions, or (ii) stating that, in the opinion of such counsel, no such action is necessary to make such Lien effective. (b) The Company shall furnish to the Trustee not later than one hundred and twenty (120) days after January 1 in each year beginning with January 1, 2003, an Opinion of Counsel, dated as of such date, either (a) stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, rerecording, and refiling of the Indenture, any Collateral Agreement, any amendment or supplement thereto, and all financing statements, continuation statements or other instruments of further assurance as is necessary to maintain the Lien created by the Collateral Agreements (if not then terminated pursuant to its terms) and reciting the details of such action, or (b) stating that, in the opinion of such counsel, no such action is necessary to maintain such Lien. (c) The release of any Collateral from the terms of any Collateral Agreement, will not be deemed to impair the security under this Indenture in contravention of the provisions hereof if and to the extent the Collateral is released pursuant to the applicable Collateral Agreement. To the extent applicable, the Company shall cause TIA ss. 314(d) relating to the release of property or securities from the Lien of any Collateral Agreement, and relating to the substitution therefor of any property or securities to be subjected to the Lien of such Collateral Agreement, to be complied with. With respect to any such substitution, the Company shall furnish to the Trustee an Independent Appraiser's Certificate if required by TIA ss. 314(d). Any certificate or opinion required by TIA ss. 314(d) may be made by an Officer of the Company,

except in cases where TIA ss. 314(d) requires that such certificate or opinion be made by an independent person, which person shall meet the requirements set forth in clause (ii) of the definition of the term "Independent Appraiser." Section 11.3 AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE OPERATIVE DOCUMENTS. The Trustee (in its capacities as such or as a Collateral Agent) may, in its sole discretion and without the consent of the Securityholders, take all actions it deems necessary or appropriate to (a) enforce any of the terms of the Operative Documents and the Support Documents and (b) collect and receive any and all amounts payable in respect of the obligations of the Company hereunder. Subject to the provisions of this Indenture, the other Operative Documents and the Support Documents, the Trustee (in such capacities) shall have power to institute and to maintain such suits and proceedings as it may deem expedient to prevent any impairment of the Collateral by any acts which may be unlawful or in violation of the other Operative Documents or this Indenture, and such suits and proceedings as it may deem expedient to preserve or protect its interest and the interests of the Securityholders in the Collateral (including power to institute and maintain suits or proceedings to restrain the enforcement of or compliance with any legislative or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid if the enforcement of, or compliance with, such enactment, rule or order would impair the security interest hereunder or be prejudicial to the interests of the Securityholders or of the Trustee in any such capacity). Section 11.4 AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE OPERATIVE DOCUMENTS AND THE SUPPORT DOCUMENTS. The Trustee is authorized to receive any funds for the benefit of Securityholders distributed under the Collateral Agreements and the Support Documents, and to make further distributions of such funds to the Holders according to the provisions of this Indenture. Section 11.5 AGREEMENT AS TO FAIR MARKET VALUE. The Company and the Trustee acknowledge that the use of Fair Market Value herein or in the other Operative Documents is strictly and solely for convenience in establishing the amount of Collateral and any substitutions therefor under the Operative Documents. Accordingly, the Fair Market Value of any Collateral subjected to the Lien of a Collateral Agreement is not an indication of and shall not be deemed an agreement by the parties as the basis for valuation of such Collateral for purposes of determining the value of the Trustee's secured claim against the Company, adequate protection of the Trustee's interest in the Collateral or for any other purpose in any bankruptcy, receivership or insolvency proceeding involving the Company or any remedial action brought by the Trustee or Collateral Agent, except to the extent such valuations are mandated by applicable law, or any court with jurisdiction over such proceedings, in either case without regard to the use of the concept of Fair Market Value by the parties hereto.

ARTICLE 12. MISCELLANEOUS Section 12.1 CONFLICT WITH TRUST INDENTURE ACT OF 1939. If and to the extent that any provision of this Indenture limits, qualifies, or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the TIA, such imposed duties shall control. Section 12.2 NOTICES; WAIVERS. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with (a) the Company shall be sufficient for every purpose hereunder if in writing and sent by personal delivery, by telecopier, by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to the Company at: Continental Airlines, Inc. 1600 Smith Street Dept. HQS-FN Houston, TX 77002 Attention: Treasurer Telecopier No.: (713) 324-2447 (b) the Trustee shall be sufficient for every purpose hereunder if in writing and sent by personal delivery, by telecopier, by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to the Trustee at: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Telecopier No.: (302) 651-8882 (c) the Liquidity Provider shall be sufficient for every purpose hereunder if in writing and sent by personal delivery, by telecopier, by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to the Liquidity Provider at:

Morgan Stanley Capital Services Inc. 1585 Broadway New York, New York 10036 Attention: David Rogers Telecopier No.: (212) 761-0350 (d) the Policy Provider shall be sufficient for every purpose hereunder if in writing and sent by personal delivery, by telecopier, by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to the Policy Provider at: MBIA Insurance Corporation 113 King Street Armonk, New York 10504 Attention: Insured Portfolio Management, Structured Finance Telecopier No.: (914) 765-3163 or to any of the above parties at any other address or telecopier number subsequently furnished in writing by it to each of the other parties listed above. An affidavit by any person representing or acting on behalf of the Company, the Trustee, Liquidity Provider or Policy Provider as to such mailing, having any registry receipt required by this Section attached, shall be conclusive evidence of the giving of such demand, notice or communication. Any notice or communication mailed to a Holder shall be sent to such Holder by first-class mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, at such Holder's address as it appears on the Register and shall be sufficiently given to such Holder if so sent within the time prescribed. Any notice or communication shall comply with TIA ss. 313(c) to the extent required by the TIA. Failure to mail a notice or send a communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. Notices under this Indenture to the Trustee, to the Policy Provider, to the Liquidity Provider or to the Company are deemed given only when received. Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by the Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. Section 12.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS. Securityholders may communicate pursuant to TIA ss. 312(b) with other Securityholders with respect to their rights under this Indenture or the

Securities. The Company, the Trustee, the Registrar and any other person shall have the protection of TIA ss. 312(c). Section 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any Request or application by the Company to the Trustee to take any action under this Indenture or another Operative Document, the Company shall furnish to the Trustee: (a) an Officers' Certificate and (b) an Opinion of Counsel, each stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture or such Operative Document, as the case may be, relating to the proposed action have been complied with, provided, that in the case of any such application or Request as to which the furnishing of an Officers' Certificate or Opinion of Counsel is specifically required by any provision of this Indenture or another Operative Document relating to such particular application or Request, no additional certificate or opinion, as the case may be, need be furnished. Section 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each certificate or opinion provided for and delivered to the Trustee or the Collateral Agent with respect to compliance with a condition or covenant provided for in this Indenture or another Operative Document shall include: (a) a statement that the Person signing such certificate or opinion has read such condition or covenant and the definitions herein or therein relating thereto; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such condition or covenant has been complied with; and (d) a statement as to whether or not in the opinion of such Person, such condition or covenant has been complied with. Any certificate or opinion of an Officer or an engineer, insurance broker, accountant or other expert may be based, insofar as it relates to legal matters, upon a certificate or opinion of or upon representations by counsel, unless such officer, engineer, insurance broker, accountant or other expert knows that the certificate or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous, or in the exercise of reasonable care should have known that the same were erroneous. Any certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon the certificate or opinion of or representations by an officer or officers of the Company stating that the information with respect to such factual matters is in possession of the Company, unless such counsel knows that the certificate or opinion or representations with respect to the matters upon which his opinion may be based as aforesaid are erroneous and insofar as it relates to legal matters in a jurisdiction or area of law beyond the expertise of such counsel, such counsel may rely upon the opinion of counsel qualified in such other jurisdiction or area of law.

Wherever in this Indenture or another Operative Document in connection with any application, certificate or report to the Trustee or the Collateral Agent it is provided that the Company shall deliver any document as a condition of the granting of such application or as evidence of the Company's compliance with any term hereof, it is intended that the truth and accuracy at the time of the granting of such application or at the effective date of such certificate or report, as the case may be, of the facts and opinions stated in such document shall in each such case be a condition precedent to the right of the Company to have such application granted or to the sufficiency of such certificate or report. Nevertheless, in the case of any such application, certificate or report, any document required by any provision of this Indenture or another Operative Document to be delivered to the Trustee or the Collateral Agent as a condition of the granting of such application or as evidence of such compliance may be received by the Trustee or the Collateral Agent as conclusive evidence of any statement therein contained and shall be full warrant, authority and protection to the Trustee or the Collateral Agent acting on the faith thereof. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents. Whenever any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements or opinions or other instruments under this Indenture or another Operative Document he may, but need not, consolidate such instruments into one. Section 12.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR. The Trustee may make reasonable rules for action by or at a meeting of Securityholders. The Registrar or Paying Agent may make reasonable rules for their respective functions. Section 12.7 EFFECT OF HEADINGS. The Article and Section headings and the Table of Contents contained in this Indenture have been inserted for convenience of reference only, and are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Indenture. Section 12.8 GOVERNING LAW. THIS INDENTURE IS BEING DELIVERED IN THE STATE OF NEW YORK. THIS INDENTURE AND THE SECURITIES ISSUED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

Section 12.9 QUIET ENJOYMENT. The Trustee, the Policy Provider and the Liquidity Provider each agrees as to itself with the Company that, so long as no Event of Default shall have occurred and be continuing, such Person shall not (and shall not permit any of its Affiliates or other Person claiming by, through or under it to) interfere with the Company's rights in accordance with the Indenture and the other Operative Documents to the quiet enjoyment, possession and use of the Collateral. Section 12.10 NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any personal liability for any obligations of the Company under the Securities, the Indenture or the other Operative Documents by reason of his or her status as such director, officer, employee or stockholder. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. Section 12.11 BENEFITS OF INDENTURE AND THE SECURITIES RESTRICTED. Subject to the provisions of Section 12.12 hereof, nothing in this Indenture or the Securities, express or implied, shall give or be construed to give to any Person, firm or corporation, other than the parties hereto and the Holders, any legal or equitable right, remedy or claim under or in respect of this Indenture or under any covenant, condition, or provision herein contained, all such covenants, conditions and provisions, subject to Section 12.12 hereof, being for the sole benefit of the parties hereto and of the Holders. Section 12.12 SUCCESSORS AND ASSIGNS. This Indenture and all obligations of the Company hereunder shall be binding upon the successors and permitted assigns of the Company, and shall, together with the rights and remedies of the Trustee hereunder, inure to the benefit of the Trustee, the Holders, and their respective successors and assigns. Any assignment in violation of this Indenture shall be null and void ab initio. Section 12.13 COUNTERPART ORIGINALS. This Indenture may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. Section 12.14 SEVERABILITY. The provisions of this Indenture are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any

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

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and delivered all as of the date first written above. CONTINENTAL AIRLINES, INC. By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- WILMINGTON TRUST COMPANY, as Trustee By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- MORGAN STANLEY CAPITAL SERVICES INC., as Liquidity Provider By: ----------------------------------------- Name: --------------------------------------- Title: -------------------------------------- MBIA INSURANCE CORPORATION, as Policy Provider By: ----------------------------------------- Name: --------------------------------------- Title: --------------------------------------

Appendix I DEFINITIONS APPENDIX SECTION 1. DEFINED TERMS. "ACCELERATION" means, with respect to the amounts payable in respect of the Securities issued under the Indenture, such amounts becoming immediately due and payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED" and "ACCELERATING" have meanings correlative to the foregoing. "ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture. "ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral Maintenance Agreement. "ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral Maintenance Agreement. "ADVANCE" means any Advance as defined in the Liquidity Facility. "AFFILIATE" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "CONTROL" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying Agent. "AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture. "AIRCRAFT" means any contrivance invented, used, or designed to navigate, or fly in, the air. "ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market Value of the Spare Parts Collateral, taking at least the following actions: (i) reviewing the Parts Inventory Report prepared as of the applicable Valuation Date; (ii) reviewing the Independent Appraiser's internal value database for values applicable to Qualified Spare Parts included in the Spare Parts Collateral; (iii) developing a representative sampling of a reasonable number of the different Qualified Spare Parts included in Spare Parts Collateral for which a market check will be conducted; (iv) checking other sources, such as manufacturers, other airlines, U.S. government procurement data and airline parts pooling price lists, for current market prices of the sample parts referred to in clause (iii); (v) establishing an assumed ratio of Serviceable Parts to Unserviceable Parts as of the applicable Valuation Date based upon information provided by the Company and the Independent Appraiser's limited physical review of the Spare Parts Collateral referred to in the following

clause (vi); (vi) visiting at least two locations selected by the Independent Appraiser where the Pledged Spare Parts are kept by the Company (neither of which was visited for purposes of the last appraisal under Section 2.1 or 2.2 of the Collateral Maintenance Agreement, whichever was most recent), PROVIDED that at least one such location shall be one of the top three locations at which the Company keeps the largest number of Pledged Spare Parts, to conduct a limited physical inspection of the Spare Parts Collateral; (vii) conducting a limited review of the inventory reporting system applicable to the Pledged Spare Parts, including checking information reported in such system against information determined through physical inspection pursuant to the preceding clause (vi) and (viii) reviewing a sampling of the Spare Parts Documents (including tear-down reports). "ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral Maintenance Agreement. "APPLIANCE" means an instrument, equipment, apparatus, a part, an appurtenance, or an accessory used, capable of being used, or intended to be used, in operating or controlling Aircraft in flight, including a parachute, communication equipment, and another mechanism installed in or attached to Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller. "APPLICABLE MARGIN" means 0.90%. "APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance Agreement. "APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing information relating to the calculation of the Collateral Ratio and Rotable Ratio, which shall be substantially in the form of Appendix II to the Collateral Maintenance Agreement. "APPRAISED VALUE" means, with respect to any Collateral, the Fair Market Value of such Collateral as most recently determined pursuant to (i) the report attached as Appendix II to the Offering Memo or (ii) Article 2 and, if applicable, Section 3.1 of the Collateral Maintenance Agreement. "AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment (as defined in the Liquidity Facility) on such date. "AVOIDED PAYMENT" has the meaning assigned to such term in the Policy. "BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C. Section 101 ET SEQ. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any committee of such board duly authorized to act in respect of any particular matter. "BREAK AMOUNT" means, as of any date of payment, redemption or acceleration of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent on the date that is two Business Days prior to the Applicable Date pursuant to the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be payable (x) if the Break Amount, as calculated pursuant to the formula set forth below, is equal to or less than zero or (y) on or in respect of any Applicable

Date that is an Interest Payment Date (or, if such an Interest Payment Date is not a Business Day, the next succeeding Business Day) Break Amount = Z-Y Where: X = with respect to any applicable Interest Period, the sum of (i) the amount of the outstanding principal amount of such Note as of the first day of the then applicable Interest Period plus (ii) interest payable thereon during such entire Interest Period at then effective LIBOR. Y = X, discounted to present value from the last day of the then applicable Interest Period to the Applicable Date, using then effective LIBOR as the discount rate. Z = X, discounted to present value from the last day of the then applicable Interest Period to the Applicable Date, using a rate equal to the applicable London interbank offered rate for a period commencing on the Applicable Date and ending on the last day of the then applicable Interest Period, determined by the Reference Agent as of two Business Days prior to the Applicable Date as the discount rate. "BUSINESS DAY" means any day that is a day for trading by and between banks in the London interbank Eurodollar market and that is other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Houston, Texas, New York, New York, or, so long as any Security is outstanding, the city and state in which the Trustee maintains its Corporate Trust Office or, solely with respect to draws under any Policy, the city and state in which the office of the Policy Provider at which notices, presentations, transmissions, deliveries and communications are to be made under the Policy is located, and that, solely with respect to draws under the Liquidity Facility, also is a "Business Day" as defined in the Liquidity Facility. "CAPPED INTEREST RATE" means a rate per annum equal to 12%. "CASH COLLATERAL" means cash and/or Investment Securities deposited or to be deposited with the Collateral Agent or an Eligible Institution and subject to the Lien of any Collateral Agreement. "CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of the Trustee maintained at an Eligible Institution, which shall be the Trustee if it shall so qualify, into which all amounts drawn under the Liquidity Facility pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be deposited. "CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15). "CLEARING AGENCY" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act.

"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg. "CLOSING DATE" means the Issuance Date. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL" means the Spare Parts Collateral and all other collateral in which the Collateral Agent has a security interest pursuant to the Collateral Agreements. "COLLATERAL AGENT" means the Trustee in its capacity as Security Agent or as agent on behalf of the Holders under any other Collateral Agreement. "COLLATERAL AGREEMENT" means the Security Agreement and any agreement under which a security interest has been granted pursuant to Section 3.1(a)(ii) of the Collateral Maintenance Agreement. "COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance Agreement, dated as of the date of the Indenture, between the Company and the Policy Provider. "COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the aggregate principal amount of all Securities Outstanding minus the sum of the Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of all Collateral (excluding any Cash Collateral), as set forth in the most recent Independent Appraiser's Certificate delivered by the Company pursuant to Article 2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable. "COLLECTION ACCOUNT" means the Eligible Deposit Account established by the Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make deposits in and withdrawals from in accordance with the Indenture. "COMPANY" means the party named as such in the Indenture or any obligor on the Securities until a successor replaces it pursuant to the Indenture and thereafter means the successor. "CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture. "CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an Event of Default under Section 7.1(d), (e) or (f) of the Indenture. "CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash equivalents that would have been shown on the balance sheet of Continental and its consolidated subsidiaries prepared in accordance with GAAP as of any Valuation Date, plus (b) the amount of marketable securities that would have been reflected on such balance sheet which had, as of such Valuation Date, a maturity of less than one year and which, but for their maturity, would have qualified to be reflected on such balance sheet as cash equivalents. "CONTROLLING PARTY" means the Person entitled to act as such pursuant to the terms of Section 3.8 of the Indenture.

"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the office of the Trustee at which at any particular time its corporate trust business is administered and which, at the Closing Date, is located at Wilmington Trust Company, as Trustee, Rodney Square North 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration. "DEBT BALANCE" means 110% of the principal amount of the Outstanding Securities. "DEBT RATE" means a rate per annum equal, in the case of the first Interest Period, to 2.32% and, in the case of any subsequent Interest Period, LIBOR for such Interest Period, as determined pursuant to the Reference Agency Agreement, plus the Applicable Margin, PROVIDED that, solely in the event no Registration Event (as defined in the Registration Rights Agreement) occurs on or prior to the 210th day after the Closing Date, the Debt Rate shall be increased by an additional margin equal to 0.50% per annum, from and including such 210th day to and excluding the earlier of (i) the date on which such Registration Event occurs and (ii) the date on which there ceases to be any Registrable Securities (as defined in the Registration Rights Agreement)); or if the Shelf Registration Statement (as defined in the Registration Rights Agreement) (if it is filed), after being declared effective by the SEC, ceases to be effective at any time during the period specified by Section 2(b)(B) of the Registration Rights Agreement for more than 60 days, whether or not consecutive, during any 12-month period, the Debt Rate shall be increased by an additional margin equal to 0.50% per annum from and including the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective to and excluding the date on which the Shelf Registration Statement again becomes effective (or, if earlier, the end of the period specified by Section 2(b)(B) of the Registration Rights Agreement), PROVIDED that the additional margin added to the Debt Rate pursuant to the preceding proviso shall never exceed 0.50% at any time, PROVIDED FURTHER that, if a default in the payment of interest on the Securities occurs and is continuing on any Interest Payment Date, then the Debt Rate applicable to the Interest Period ending on such Interest Payment Date shall not exceed the Capped Interest Rate, except that for purposes of any payment made by the Company intended to cure such default, this proviso shall not apply. "DEFAULT" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. "DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix I to the Indenture and constituting a part of the Indenture. "DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture. "DESIGNATED LOCATIONS" means the locations in the U.S. designated from time to time by the Company at which the Pledged Spare Parts may be maintained by or on behalf of the Company, which initially shall be the locations set forth on Schedule 1 to the Security Agreement and shall include the additional locations designated by the Company pursuant to Section 4.04(d) of the Security Agreement. "DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a Payment required to be paid to the Trustee for distribution on such Scheduled Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in part, on such Scheduled Payment Date, the next Business Day on which the Trustee receives some or all of such Payment by 12:30 p.m., New York time, except for a defaulted payment of interest that is not paid within five days after the Scheduled Payment Date therefor), (ii) each day established for payment by the Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv) the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the Policy Election Distribution Date, (vii) the date established as a Distribution Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the Indenture and not for purposes of any other payment or distribution under the Indenture, the date established for such payment in accordance with the Policy. "DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture. "DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c) of the Indenture. "DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture. "DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension Drawing or a Downgrade Drawing, as the case may be. "DTC" means The Depository Trust Company, its nominees and their respective successors. "ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture. "ELIGIBLE ACCOUNT" means an account established by and with an Eligible Institution at the request of the Security Agent, which institution agrees, for all purposes of the New York UCC including Article 8 thereof, that (a) such account shall be a "securities account" (as defined in Section 8-501 of the New York UCC), (b) such institution is a "securities intermediary" (as defined in Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash) credited to such account shall be treated as a "financial asset" (as defined in Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the "entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in respect of such account, (e) it will comply with all entitlement orders issued by the Security Agent to the exclusion of the Company, (f) it will waive or subordinate in favor of the Security Agent all claims (including without limitation, claims by way of security interest, lien or right of set-off or right of recoupment), and (g) the "securities intermediary jurisdiction" (under Section 8-110(e) of the New York UCC) shall be the State of New York. "ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution has a long-term unsecured debt rating or issuer credit rating, as the case may be, from Moody's of at least A-3 or its

equivalent. An Eligible Deposit Account may be maintained with the Liquidity Provider so long as the Liquidity Provider is an Eligible Institution; provided that such Liquidity Provider shall have waived all rights of set-off and counterclaim with respect to such account. "ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured debt rating or issuer credit rating, as the case may be, from Moody's of at least A-3 or its equivalent. "ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or guaranteed by, the U.S. Government having maturities no later than 90 days following the date of such investment, (b) investments in open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof with a short-term unsecured debt rating issued by Moody's of at least P-1 and a short-term issuer credit rating issued by Standard & Poor's of at least A-1 having maturities no later than 90 days following the date of such investment or (c) investments in negotiable certificates of deposit, time deposits, banker's acceptances, commercial paper or other direct obligations of, or obligations guaranteed by, commercial banks organized under the laws of the United States or of any political subdivision thereof (or any U.S. branch of a foreign bank) with a short-term unsecured debt rating by Moody's of at least P-1 and a short-term issuer credit rating by Standard & Poor's of at least A-1, having maturities no later than 90 days following the date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments that are bank obligations shall be denominated in U.S. dollars; and (y) the aggregate amount of Eligible Investments at any one time that are bank obligations issued by any one bank shall not be in excess of 5% of such bank's capital surplus; PROVIDED FURTHER that any investment of the types described in clauses (a), (b) and (c) above may be made through a repurchase agreement in commercially reasonable form with a bank or other financial institution qualifying as an Eligible Institution so long as such investment is held by a third party custodian also qualifying as an Eligible Institution; PROVIDED FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a domestic branch of a foreign bank, the income from such investment shall be from sources within the United States for purposes of the Code. Notwithstanding the foregoing, no investment of the types described in clause (b) above which is issued or guaranteed by the Company or any of its Affiliates, and no investment in the obligations of any one bank in excess of $10,000,000, shall be an Eligible Investment unless written approval has been obtained from the Policy Provider and a Ratings Confirmation shall have been received with respect to the making of such investment. "ENGINE" means an engine used, or intended to be used, to propel an Aircraft, including a part, appurtenance, and accessory of the Engine, except a Propeller. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time "EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear System. "EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.

"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of the use thereof due to destruction, damage beyond repair or rendition of any of the Pledged Spare Parts permanently unfit for normal use for any reason whatsoever (other than the use of Expendables in the Company's operations); (ii) any damage to any of the Pledged Spare Parts which results in the receipt of insurance proceeds with respect to such Pledged Spare Parts on the basis of an actual or constructive loss; or (iii) the loss of possession of any of the Pledged Spare Parts by the Company for ninety (90) consecutive days as a result of the theft or disappearance of such Pledged Spare Parts. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time. "EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a) of the Indenture. "EXCHANGE OFFER" means the exchange offer which may be made pursuant to the Registration Rights Agreement to exchange Initial Certificates for Exchange Certificates. "EXCHANGE OFFER REGISTRATION STATEMENT" means the registration statement that, pursuant to the Registration Rights Agreement, is filed by the Company with the SEC with respect to the exchange of Initial Securities for Exchange Securities. "EXCHANGE SECURITIES" means the securities substantially in the form of Exhibit A to the Indenture issued in exchange for the Initial Securities pursuant to the Registration Rights Agreement and authenticated pursuant to the Indenture. "EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a location not a Designated Location. "EXPENDABLES" means Qualified Spare Parts other than Rotables. "EXPENSES" means any and all liabilities, obligations, losses, damages, settlements, penalties, claims, actions, suits, costs, expenses and disbursements (including, without limitation, reasonable fees and disbursements of legal counsel, accountants, appraisers, inspectors or other professionals, and costs of investigation). "FAA" means the Federal Aviation Administration or similar regulatory authority established to replace it. "FAA FILED DOCUMENTS" means the Security Agreement. "FACILITY OFFICE" means, with respect to any Liquidity Facility, the office of the Liquidity Provider thereunder, presently located at 1585 Broadway, New York, New York 10036, or such other office as such Liquidity Provider from time to time shall notify the Trustee as its "Facility Office" under any such Liquidity Facility; provided that such Liquidity Provider shall not change its Facility Office to another Facility Office outside the United States of America except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity Facility.

"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market value determined on the basis of a hypothetical sale negotiated in an arm's length free market transaction between a willing and able seller and a willing and able buyer, neither of whom is under undue pressure to complete the transaction, under then current market conditions, provided that cash shall be valued at its Dollar amount. "FEDERAL AVIATION ACT" means Title 49 of the United States Code, "Transportation", as amended from time to time, or any similar legislation of the United States enacted in substitution or replacement thereof. "FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the Closing Date between the Trustee and the initial Liquidity Provider with respect to the initial Liquidity Facility and (ii) any fee letter entered into between the Trustee and any Replacement Liquidity Provider in respect of any Replacement Liquidity Facility. "FINAL DRAWING" is defined in Section 3.5(i) of the Indenture. "FINAL LEGAL MATURITY DATE" means December 6, 2009. "FINAL ORDER" has the meaning assigned to such term in the Policy. "FINAL SCHEDULED PAYMENT DATE" means December 6, 2007. "FINANCING STATEMENTS" means, collectively, UCC-1 financing statements covering the Spare Parts Collateral, by the Company, as debtor, showing the Security Agent as secured party, for filing in Delaware, Guam and each other jurisdiction that, in the opinion of the Security Agent, is necessary to perfect its Lien on the Spare Parts Collateral. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture. "GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture. "GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar government, and any body, board, department, commission, court, tribunal, authority, agency or other instrumentality of any such government or otherwise exercising any executive, legislative, judicial, administrative or regulatory functions of such government or (b) any other government entity having jurisdiction over any matter contemplated by the Operative Documents or relating

to the observance or performance of the obligations of any of the parties to the Operative Documents. "HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is registered on the Registrar's books. "INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each separate or additional trustee or security agent appointed pursuant to the Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each of the respective directors, officers, employees, agents and servants of each of the persons described in clauses (i) through (iv) inclusive above. "INDENTURE" means the Indenture dated as of December 6, 2002, among the Company, the Trustee, the Liquidity Provider and the Policy Provider under which the Securities are issued. "INDENTURE DISCHARGE DATE" means the date of the termination of the effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without giving effect to Section 9.1(b) thereof). "INDENTURE TRUSTEE" means the Trustee. "INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other Person (i) engaged in a business which includes appraising Aircraft and assets related to the operation and maintenance of Aircraft from time to time and (ii) who does not have any material financial interest in the Company and is not connected with the Company or any of its Affiliates as an officer, director, employee, promoter, underwriter, partner or person performing similar functions. "INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an Independent Appraiser and attached as Appendix II to the Offering Memo or delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral Maintenance Agreement. "INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950. "INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a) of the Indenture. "INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated. "INITIAL SECURITIES" mean the securities issued and authenticated pursuant to the Indenture and substantially in the form of Exhibit A thereto, other than the Exchange Securities. "INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. "INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture. "INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6 of each year so long as any Security is Outstanding (commencing March 6, 2003),

PROVIDED that if any such day is not a Business Day, then the relevant Interest Payment Date shall be the next succeeding Business Day. "INTEREST PERIOD" means (i) in the case of the first Interest Period, the period commencing on (and including) the Closing Date and ending on (but excluding) the first Interest Payment Date following such date and (ii) in the case of each subsequent Interest Period, the period commencing on (and including) the last day of the immediately preceding Interest Period, and ending on (but excluding) the next Interest Payment Date. "INVESTMENT EARNINGS" means investment earnings on funds on deposit in the Trust Accounts net of losses and investment expenses of the Trustee in making such investments. "INVESTMENT SECURITY" means (a) any bond, note or other obligation which is a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any obligation which is a direct obligation of or guaranteed by any state of the U.S. or any subdivision thereof or any agency of any such state or subdivision, and which has the highest rating published by Moody's or Standard & Poor's; (c) any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's or A-1 by Standard & Poor's; (d) any money market investment instrument relying upon the credit and backing of any bank or trust company which is a member of the Federal Reserve System and which has a combined capital (including capital reserves to the extent not included in capital) and surplus and undivided profits of not less than $250,000,000 (including the Collateral Agent and its Affiliates if such requirements as to Federal Reserve System membership and combined capital and surplus and undivided profits are satisfied), including, without limitation, certificates of deposit, time and other interest-bearing deposits, bankers' acceptances, commercial paper, loan and mortgage participation certificates and documented discount notes accompanied by irrevocable letters of credit and money market fund investing solely in securities backed by the full faith and credit of the United States; or (e) repurchase agreements collateralized by any of the foregoing. "ISSUANCE DATE" means the date of issuance of the Initial Securities. "LAW" means (a) any constitution, treaty, statute, law, decree, regulation, order, rule or directive of any Government Entity, and (b) any judicial or administrative interpretation or application of, or decision under, any of the foregoing. "LIBOR" has the meaning specified in the Reference Agency Agreement. "LIBOR ADVANCE" has the meaning provided in the Liquidity Facility. "LIEN" means any mortgage, pledge, lease, security interest, encumbrance, lien or charge of any kind affecting title to or any interest in property. "LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the Liquidity Facility. "LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the principal amount of any Drawings under the Liquidity Facility and (ii) any interest accrued on any Liquidity Obligations.

"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated as of the Issuance Date, between the Trustee and the initial Liquidity Provider, and from and after the replacement of such Revolving Credit Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date of the Indenture, providing for the guarantee by the Liquidity Guarantor of the obligations of the Liquidity Provider under the Liquidity Facility. "LIQUIDITY GUARANTOR" means Morgan Stanley. "LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee Letter. "LIQUIDITY PROVIDER" means Morgan Stanley Capital Services Inc., together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the Indenture. "LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the Indenture. "LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement. "MATERIAL ADVERSE CHANGE" means, with respect to any person, any event, condition or circumstance that materially and adversely affects such person's business or consolidated financial condition, or its ability to observe or perform its obligations, liabilities and agreements under the Operative Documents. "MAXIMUM COLLATERAL RATIO" means 45%. "MINIMUM ROTABLE RATIO" means 150%. "MOODY'S" means Moody's Investors Service, Inc. "MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement. "MSCS" has the meaning specified in the first paragraph of the Indenture. "NEW YORK UCC" is defined in Section 1.01 of the Security Agreement. "NONAPPRAISAL COMPLIANCE REPORT" means a report providing information relating to compliance by the Company with Section 3.2 of the Collateral Maintenance Agreement, which shall be substantially in the form of Appendix III to the Collateral Maintenance Agreement. "NON-CONTROLLING PARTY" means, at any time, the Holders, the Liquidity Provider and the Policy Provider, excluding whichever is the Controlling Party at such time. "NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.

"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture. "NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture. "NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the Indenture. "NON-PERFORMING" means, with respect to any Security, a Payment Default existing thereunder (without giving effect to any Acceleration); PROVIDED, that, in the event of a bankruptcy proceeding under the Bankruptcy Code in which the Company is a debtor, any Payment Default existing at the commencement of such bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy Code or as may apply for the cure of such Payment Default under Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into consideration until the expiration of the applicable period. "NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture. "NON-U.S. PERSON" means any Person other than a U.S. person, as defined in Regulation S. "NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the Policy. "NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined in the Policy. "OBLIGATIONS" is defined in Section 2.01 of the Security Agreement. "OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of the Company relating to the offering of the Securities. "OFFICER" means the Chairman of the Board, the President, any Vice President of any grade, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers satisfying the requirements of Sections 12.4 and 12.5 of the Indenture. "OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the Collateral Maintenance Agreement and the Reference Agency Agreement. "OPINION OF COUNSEL" means a written opinion from the General Counsel of the Company, legal counsel to the Company or another legal counsel who is reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the Company. The acceptance by the Trustee (without written objection to the Company during the fifteen (15) Business Days following receipt) of, or its action on, an opinion of counsel not specifically referred to above shall be sufficient evidence that such counsel is acceptable to the Trustee.

"OUTSTANDING" or "OUTSTANDING" when used with respect to Securities or a Security, means all Securities theretofore authenticated and delivered under the Indenture, except: (a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee in trust for the Holders of such Securities, PROVIDED that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Trustee has been made; (c) Securities for which payment has been deposited with the Trustee or any Paying Agent in trust pursuant to Article 9 of the Indenture (except to the extent provided therein); and (d) Securities which have been paid, or for which other Securities shall have been authenticated and delivered in lieu thereof or in substitution therefor pursuant to the terms of Section 2.12 of the Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by bona fide purchasers in whose hands the Securities are valid obligations of the Company. A Security does not cease to be Outstanding because the Company or one of its Affiliates holds the Security; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite aggregate principal amount of Securities Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or any other Operative Document, Section 2.13 of the Indenture shall be applicable. "OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture. "OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on the Securities which is not in fact received by the Trustee (whether from the Company, the Liquidity Provider, the Policy Provider or otherwise) on or within five days after the Scheduled Payment Date relating thereto and which is not subsequently paid in connection with the redemption or final maturity of a Security. "PARTS INVENTORY REPORT" means, as of any date, a list identifying the Pledged Spare Parts by manufacturer's part number and brief description and stating the quantity of each such part included in the Pledged Spare Parts as of such specified date. "PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture. "PAYMENT" means (i) any payment of principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to the Securities from the Company, (ii) any payment of interest on the Securities with funds drawn under the Liquidity Facility or from a Cash Collateral Account or (iii) any payment of interest on or principal of Securities with funds drawn under the Policy, or (iv) any payment received or amount realized by the Trustee from the exercise of remedies after the occurrence of an Event of Default.

"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the Indenture. "PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the maximum rate permitted by applicable law. "PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance Agreement. "PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the Collateral Maintenance Agreement. "PERMITTED LIEN" means (a) the rights of Security Agent under the Operative Documents; (b) Liens attributable to Security Agent (both in its capacity as Security Agent and in its individual capacity); (c) the rights of others under agreements or arrangements to the extent expressly permitted by the terms of Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the Company (and its U.S. federal tax law consolidated group), either not yet due or being contested in good faith by appropriate proceedings so long as such Liens and such proceedings do not involve any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent therein or impair the Lien of the Security Agreement; (e) materialmen's, mechanics', workers', repairers', employees' or other like Liens arising in the ordinary course of business for amounts the payment of which is either not yet delinquent for more than 60 days or is being contested in good faith by appropriate proceedings, so long as such Liens and such proceedings do not involve any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent therein or impair the Lien of the Security Agreement; (f) Liens arising out of any judgment or award against the Company, so long as such judgment shall, within 60 days after the entry thereof, have been discharged or vacated, or execution thereof stayed pending appeal or shall have been discharged, vacated or reversed within 60 days after the expiration of such stay, and so long as during any such 60 day period there is not as a result, or any such judgment or award does not involve, any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent therein or any impairment of the Lien of the Security Agreement; (g) any other Lien with respect to which the Company shall have provided a bond, cash collateral or other security adequate in the reasonable opinion of Security Agent. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, trustee, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first paragraph of Section 2.01 of the Security Agreement. "POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance Policy No. 39753, issued as of the Closing Date, as amended, supplemented or otherwise modified from time to time in accordance with its respective terms. "POLICY ACCOUNT" means the Eligible Deposit Account established by the Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall make deposits in and withdrawals from in accordance with the Indenture.

"POLICY DRAWING" means any payment of a claim under the Policy. "POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture. "POLICY EXPENSES" means all amounts (including amounts in respect of premiums, fees, expenses or indemnities) due to the Policy Provider under the Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest accrued on any Policy Provider Obligations, and (iii) reimbursement of and interest on the Liquidity Obligations in respect of the Liquidity Facility paid by the Policy Provider to the Liquidity Provider; provided that if, at the time of determination, a Policy Provider Default exists, Policy Expenses shall not include any indemnity payments owed to the Policy Provider. "POLICY FEE LETTER" means the fee letter, dated as of the date hereof, from the Policy Provider to Continental and acknowledged by the Trustee, setting forth the fees and premiums payable with respect to the Policy. "POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance company, and its successors and permitted assigns. "POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement dated as of the date hereof among the Trustee, the Company and the Policy Provider, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following events: (a) the Policy Provider fails to make a payment required under the Policy in accordance with its terms and such failure remains unremedied for two Business Days following the delivery of Written Notice of such failure to the Policy Provider or (b) the Policy Provider (i) files any petition or commences any case or proceeding under any provisions of any federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) makes a general assignment for the benefit of its creditors or (iii) has an order for relief entered against it under any federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is final and nonappealable, or (c) a court of competent jurisdiction, the New York Department of Insurance or another competent regulatory authority enters a final and nonappealable order, judgment or decree (i) appointing a custodian, trustee, agent or receiver for the Policy Provider or for all or any material portion of its property or (ii) authorizing the taking of possession by a custodian, trustee, agent or receiver of the Policy Provider (or taking of possession of all or any material portion of the Policy Provider's property). "POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture. "POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy Drawing made to cover any shortfall attributable to any failure of the Liquidity Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the Liquidity Facility in an amount equal to the amount of interest that would have accrued on such Interest Drawing if such Interest Drawing had been made in accordance with Section 2.02(e) of the Liquidity Facility at the interest rate applicable to such Interest Drawing until such Policy Drawing has been repaid in full.

"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts, including, without limitation, fees and indemnities (to the extent not included in Policy Expenses), due to the Policy Provider under the Policy Provider Agreement but shall not include any interest on Policy Drawings other than Policy Provider Interest Obligations. "PREMIUM" means, with respect to any Security redeemed pursuant to Article 4 of the Indenture, the following percentage of the principal amount of such Security: (i) if redeemed before the first anniversary of the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and before the second anniversary of the Issuance Date, 1.0%; and (iii) if redeemed on or after such second anniversary and before the third anniversary of the Issuance Date, 0.5%; PROVIDED that no Premium shall be payable in connection with a redemption made by the Company to satisfy the Maximum Collateral Ratio or Minimum Rotable Ratio requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement. "PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the Liquidity Facility on such Distribution Date and any funds withdrawn from the Cash Collateral Account on such Distribution Date in respect of accrued interest on the Securities. "PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the Indenture. "PROPELLER" includes a part, appurtenance, and accessory of a propeller. "PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the Indenture. "PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture. "PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by and between the Initial Purchaser and the Company. "QIB" means a qualified institutional buyer as defined in Rule 144A. "QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first paragraph in Section 2.01 of the Security Agreement. "RATING AGENCIES" means, collectively, at any time, each nationally recognized rating agency which shall have been requested by the Company to rate the Securities and which shall then be rating the Securities. The initial Rating Agency will be Moody's. "RATINGS CONFIRMATION" means, with respect to any action proposed to be taken, a written confirmation from each of the Rating Agencies that such action would not result in (i) a reduction of the rating for the Securities below the then current rating for the Securities (such rating as determined without regard to the Policy) or (ii) a withdrawal or suspension of the rating of the Securities. "RECORD DATE" means the fifteenth (15th) day preceding any Scheduled Interest Payment Date, whether or not a Business Day.

"REDEMPTION DATE", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to the Indenture and such Security. "REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as of the Issuance Date, among the Company, WTC, as the reference agent thereunder, and the Trustee. "REGISTER" has the meaning provided in Section 2.8 of the Indenture. "REGISTRAR" has the meaning provided in Section 2.8 of the Indenture. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated as of December 6, 2002, by and between the Company and the Initial Purchaser. "REGULATION S" means Regulation S under the Securities Act. "REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture. "REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the Indenture. "RELEVANT DATE" is defined in Section 3.6(c) of the Indenture. "REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit agreement (or agreements) in substantially the form of the replaced Liquidity Facility, including reinstatement provisions, or in such other form (which may include a letter of credit) as shall permit the Rating Agencies to confirm in writing their respective ratings then in effect for the Securities (before downgrading of such ratings, if any, as a result of the downgrading of the Liquidity Provider), and be consented to by the Policy Provider, which consent shall not be unreasonably withheld or delayed, in a face amount (or in an aggregate face amount) equal to the amount of interest payable on the Securities (at the Capped Interest Rate, and without regard to expected future principal payments) on the eight Interest Payment Dates following the date of replacement of such Liquidity Facility (or if such date is an Interest Payment Date, on such day and the seven Interest Payment Dates following the date of replacement of such Liquidity Facility) and issued by a Person (or Persons) having unsecured short-term debt rating or issuer credit rating, as the case may be, issued by the Rating Agencies which are equal to or higher than the Threshold Rating. Without limitation of the form that a Replacement Liquidity Facility otherwise may have pursuant to the preceding sentence, a Replacement Liquidity Facility for the Securities may have a stated expiration date earlier than 15 days after the Final Legal Maturity Date so long as such Replacement Liquidity Facility provides for a Non-Extension Drawing as contemplated by Section 3.5(d) of the Indenture. "REQUEST" means a written request for the action therein specified signed on behalf of the Company by any Officer and delivered to the Trustee. Each Request shall be accompanied by an Officers' Certificate if and to the extent required by Section 12.4 of the Indenture. "REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of interest, calculated at the Capped Interest Rate, that would be payable on the Securities on each of the eight successive Interest Payment Dates immediately following such day or, if such day is an Interest Payment Date, on such day and the succeeding seven Interest Payment Dates, in each case calculated on the

basis of the outstanding principal amount of the Securities on such date and without regard to expected future payments of principal on the Securities. "REQUIRED HOLDERS" means from time to time the Holders of more than 50% in aggregate unpaid principal amount of the Securities then Outstanding. "RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in the corporate trust administration department of the Trustee or any other officer customarily performing functions similar to those performed by the Persons who at the time shall be such officers or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with a particular subject, (ii) with respect to the Liquidity Provider, any authorized officer of the Liquidity Provider, and (iii) with respect to the Policy Provider, any authorized officer of the Policy Provider. "RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture. "RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture. "RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture. "RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture. "RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture. "ROTABLE" means a Qualified Spare Part that wears over time and can be repeatedly restored to a serviceable condition over a period approximating the life of the flight equipment to which it relates. "ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair Market Value of the Rotables, as set forth in the most recent Independent Appraiser's Certificate delivered by the Company pursuant to Article 2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal amount of all Securities Outstanding minus the sum of the Cash Collateral held by the Collateral Agent. "RULE 144A" means Rule 144A under the Securities Act. "SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement. "SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without giving effect to the proviso to the definition of Interest Payment Date. "SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest, the Interest Payment Date applicable thereto, (ii) with respect to any payment of defaulted interest, the payment date established pursuant to Section 2.16, (iii) with respect to amounts due on the redemption of any Security, the Redemption Date applicable thereto, and (iv) with respect to the final maturity of the Securities, December 6, 2007.

"SEC" means the Securities and Exchange Commission and any government agency succeeding to its functions. "SECTION 1110" means Section 1110 of the Bankruptcy Code. "SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any, agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional period, if any, commencing with the trustee or debtor-in-possession in such proceeding agreeing, with court approval, to perform its obligations under the Operative Documents within such 60 days (or longer period as agreed) and continuing until such time as such trustee or debtor-in-possession ceases to fully perform its obligations thereunder with the result that the period during which the Collateral Agent is prohibited from repossessing the collateral under any Collateral Agreement comes to an end. "SECURITIES" means the "Securities", as defined in the Indenture, that are issued under the Indenture. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SECURITY AGENT" means the Trustee acting in the capacity of security agent on behalf of the Holders under the Security Agreement. "SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of the date of the Indenture between the Company and the Security Agent. "SECURITYHOLDER" means any holder of one or more Securities. "SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions referred to in clauses (iii) and (iv) of the definition of Annual Methodology. "SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral Maintenance Agreement. "SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for incorporation in, installation on, attachment or appurtenance to or use in an Aircraft, Engine or other Qualified Spare Part. "SHELF REGISTRATION STATEMENT" means the shelf registration statement which may be required to be filed by the Company with the SEC pursuant to the Registration Rights Agreement, other than an Exchange Offer Registration Statement. "SPARE PART" means an accessory, appurtenance, or part of an Aircraft (except an Engine or Propeller), Engine (except a Propeller), Propeller, or Appliance, that is to be installed at a later time in an Aircraft, Engine, Propeller or Appliance. "SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the Security Agreement.

"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the first paragraph of Section 2.01 of the Security Agreement. "SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy Event. "SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the Indenture. "SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral Maintenance Agreement. "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity Facility). "STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture. "SUBORDINATED SECURITIES" is defined in Section 2.18 of the Indenture. "SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture. "SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security Agreement substantially in the form of Exhibit A to the Security Agreement. "SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy Provider Agreement and the Fee Letters. "TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, loss, damage, liability, expense, additions to tax and additional amounts or costs incurred or imposed with respect thereto) imposed or otherwise assessed by the United States of America or by any state, local or foreign government (or any subdivision or agency thereof) or other taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth and similar charges; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, taxes on goods and services, gains taxes, license, registration and documentation fees, customs duties, tariffs, and similar charges. "TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity Facility. "THRESHOLD AMOUNT" means $2,000,000. "THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply to the Liquidity Guarantor.

"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that in the event the TIA is amended after such date, "TIA" means, to the extent required by any such amendment, the TIA as so amended. "TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture. "TRUST OFFICER" means any officer in the corporate trust department of the Trustee, or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "TRUSTEE" means the party named as such in the Indenture until a successor replaces it in accordance with the provisions of the Indenture and thereafter means the successor. "TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the Indenture. "TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral Maintenance Agreement. "TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture. "UCC" means the Uniform Commercial Code as in effect in any applicable jurisdiction. "UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility. "UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable Parts. "U.S." or "UNITED STATES" means the United States of America. "U.S. AIR CARRIER" means any United States air carrier that is a Citizen of the United States holding an air carrier operating certificate issued pursuant to chapter 447 of title 49 of the United States Code for aircraft capable of carrying 10 or more individuals or 6000 pounds or more of cargo. "U.S. GOVERNMENT" means the federal government of the United States, or any instrumentality or agency thereof the obligations of which are guaranteed by the full faith and credit of the federal government of the United States. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the option of the issuer thereof. "U.S. PERSON" means any Person described in Section 7701(a)(30) of the Code. "VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance Agreement. "WARRANTIES" is defined in clause (2) of Section 2.01 of the Security Agreement. "WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the Policy Provider, a written instrument executed by the Designated Representative

of such Person. An invoice delivered by the Liquidity Provider pursuant to Section 3.1 of the Indenture in accordance with its normal invoicing procedures shall constitute Written Notice under such Section. "WTC" has the meaning specified in the first paragraph of the Indenture. SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the following rules of construction shall apply for all purposes of the Operative Documents (including this appendix) and of such agreements as may incorporate this appendix by reference. (a) In each Operative Document, unless otherwise expressly provided, a reference to: (i) each of the Company, the Trustee, the Collateral Agent, the Security Agent or any other person includes, without prejudice to the provisions of any Operative Document, any successor in interest to it and any permitted transferee, permitted purchaser or permitted assignee of it; (ii) words importing the plural include the singular and words importing the singular include the plural; (iii) any agreement, instrument or document, or any annex, schedule or exhibit thereto, or any other part thereof, includes, without prejudice to the provisions of any Operative Document, that agreement, instrument or document, or annex, schedule or exhibit, or part, respectively, as amended, modified or supplemented from time to time in accordance with its terms and in accordance with the Operative Documents, and any agreement, instrument or document entered into in substitution or replacement therefor; (iv) any provision of any Law includes any such provision as amended, modified, supplemented, substituted, reissued or reenacted prior to the Closing Date, and thereafter from time to time; (v) the words "Agreement", "this Agreement", "hereby", "herein", "hereto", "hereof" and "hereunder" and words of similar import when used in any Operative Document refer to such Operative Document as a whole and not to any particular provision of such Operative Document; (vi) the words "including", "including, without limitation", "including, but not limited to", and terms or phrases of similar import when used in any Operative Document, with respect to any matter or thing, mean including, without limitation, such matter or thing; and (vii) a "Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule" in any Operative Document, or in any annex thereto, is a reference to a section of, or an exhibit, an annex, an appendix or a schedule to, such Operative Document or such annex, respectively.

(b) Each exhibit, annex, appendix and schedule to each Operative Document is incorporated in, and shall be deemed to be a part of, such Operative Document. (c) Unless otherwise defined or specified in any Operative Document, all accounting terms therein shall be construed and all accounting determinations thereunder shall be made in accordance with GAAP. (d) Headings used in any Operative Document are for convenience only and shall not in any way affect the construction of, or be taken into consideration in interpreting, such Operative Document. (e) For purposes of each Operative Document, the occurrence and continuance of a Default or Event of Default referred to in Section 7.1(d), (e) or (f) of the Indenture shall not be deemed to prohibit the Company from taking any action or exercising any right that is conditioned on no Special Default, Default or Event of Default having occurred and be continuing if such Special Default, Default or Event of Default consists of the institution of reorganization proceedings with respect to the Company under Chapter 11 of the Bankruptcy Code and the trustee or debtor-in-possession in such proceedings shall have agreed to perform its obligations under the Operative Documents with the approval of the applicable court and thereafter shall have continued to perform such obligations in accordance with Section 1110.

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

SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS.] [UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO CONTINENTAL AIRLINES, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.5 AND 2.6 OF THE INDENTURE REFERRED TO HEREIN.] - ------------------ To be included on the face of each Restricted Security. To be included on the face of each Global Security.

No. [ ] CUSIP/Common Code No. [ ] ---- ------- $[ ] ---------- [[REGULATION S] GLOBAL SECURITY] [INITIAL] [EXCHANGE] FLOATING RATE SECURED NOTE DUE 2007 CONTINENTAL AIRLINES, INC., a Delaware corporation (the "Company"), promises to pay to [__________], or the registered assignee thereof, the principal sum of $[_______] Dollars (the "Principal Amount") on December 6, 2007, subject to earlier payment as provided in the Indenture referred to herein. This Security shall bear interest on the unpaid Principal Amount from time to time outstanding from the most recent Interest Payment Date to which interest has been paid (or, if no interest has been paid under the Indenture, from December 6, 2002) at a rate annum for each Interest Period equal to the Debt Rate for such Interest Period (calculated on the basis of a year of 360 days and actual days elapsed during the period for which such amount accrues). The Company shall pay accrued interest in arrears on each March 6, June 6, September 6 and December 6 of each year, commencing March 6, 2003 (or, if not a Business Day, the next succeeding Business Day) (an "Interest Payment Date") until the Principal Amount has been paid in full, PROVIDED that if such payment in full is not made on an Interest Payment Date, accrued interest shall be paid on the date of such payment in full rather than the next Interest Payment Date. Interest shall accrue with respect to the first but not the last day of each Interest Period. This Security shall bear interest, payable on demand, at the Payment Due Rate (calculated on the basis of a year of 360 days and actual days elapsed during the period for which such amount accrues) on any part of the Principal Amount and, to the extent permitted by applicable Law, interest and any other amounts payable hereunder not paid when due, in each case for the period the same is overdue. Amounts shall be overdue if not paid when due (whether at stated maturity, by acceleration or otherwise). Notwithstanding anything to the contrary contained herein, if any date on which a payment under this Security becomes due and payable is not a Business Day, then such payment shall not be made on such scheduled date but shall be made on the next succeeding Business Day, and such extension of time shall be included in the computation of interest payable. 1. GENERAL. This Security is one of a duly authorized issue of securities of the Company designated as "[Initial] [Exchange] Floating Rate Secured Notes due 2007" (herein, called the "Securities"), limited in aggregate principal amount to $200,000,000, issued, authenticated and delivered pursuant to the Indenture, dated as of December 6, 2002 (the "Indenture"), among the Company, Wilmington Trust Company, as Trustee (the "Trustee"), Morgan Stanley Capital Services Inc., as Liquidity Provider, and MBIA Insurance Corporation, as Policy Provider. To the extent not otherwise defined herein, the capitalized terms used herein have the meanings assigned to them in the Indenture. This Security is subject to the terms, provisions and conditions of the Indenture and those made - ------------------ To be included on the face of each Global Security

applicable to the Indenture by the TIA. To the extent any provision of this Security conflicts with the express provisions of the Indenture, the provisions of the Indenture shall govern and be controlling. Reference is hereby made to the Indenture, the TIA, the Security Agreement, the other Operative Documents and the Support Documents for a complete statement of the rights and obligations of the holders of, and the nature and extent of the security for, this Security. By virtue of its acceptance hereof the Securityholder of this Security assents to and agrees to be bound by the provisions of the Indenture. 2. RECORD DATES. The Person in whose name any Security is registered at the close of business on the fifteenth day preceding a Scheduled Interest Payment Date shall be entitled to receive the interest payable on the applicable Interest Payment Date to the extent provided by such Security, except if and to the extent the Company shall default in the payment of the interest due on such Interest Payment Date, in which case defaulted interest shall be paid to the Person in whose name the Security is registered at the close of business on the subsequent record date established by notice given by mail by or on behalf of the Company to the Holders of Securities pursuant to the Indenture. 3. OPTIONAL REDEMPTION. The Company may redeem the Securities at any time in whole or (so long as no Payment Default has occurred and is continuing) in part (in any integral multiple of $1,000) at its sole option at a redemption price equal to the sum of 100% of the principal amount of, accrued and unpaid interest on, and Premium, if any, and Break Amount, if any, with respect to, the redeemed Securities to and including the Redemption Date. "Premium" means, with respect to any Security redeemed pursuant to the Indenture, the following percentage of the principal amount of such Security: (i) if redeemed before the first anniversary of the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and before the second anniversary of the Issuance Date, 1.0%; and (iii) if redeemed on or after such second anniversary and before the third anniversary of the Issuance Date, 0.5%; PROVIDED that no Premium shall be payable in connection with a redemption made by the Company to satisfy the Maximum Collateral Ratio or Minimum Rotable Ratio requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement. The Trustee shall mail a notice of any redemption at least 15 days but not more than 60 days before the Redemption Date to each Holder whose Securities are to be redeemed at his registered address. If the Trustee gives notice of redemption but the Company fails to pay when due all amounts necessary to effect such redemption, such redemption shall be deemed revoked and no amount shall be due as a result of notice of redemption having been given. Securities called for redemption shall cease to bear interest on and after the Redemption Date (unless the Company shall fail to pay the redemption price). Upon surrender to the Paying Agent, such Securities shall be paid the redemption price. 4. METHOD OF PAYMENT. The Paying Agent shall distribute amounts payable to each Securityholder by check mailed to such Securityholder at its address appearing in the Register, except that with respect to Securities registered on the applicable Record Date in the name of a Clearing Agency (or its nominee), such distribution shall be made by wire transfer in immediately available funds to the account designated by such Clearing Agency (or such nominee). The Company shall not have any responsibility for the distribution of such payments to any Securityholder. Any payment made hereunder shall be made without any presentment or surrender of this Security, except that, in the case of the final payment in

respect of this Security, this Security shall be surrendered to the Paying Agent for cancellation against receipt of such payment. 5. CREDIT SUPPORT. The Company's obligations with respect to the Securities are secured by a lien on the Pledged Spare Parts and certain other property of the Company. In addition, the Trustee has entered into a Liquidity Facility under which the Liquidity Provider is obligated to make advances to the Trustee in an aggregate amount sufficient to pay interest on the Securities up to eight successive quarterly Interest Payment Dates. The Trustee is also the beneficiary of the Policy under which the Policy Provider is obligated to honor drawings to cover interest on the Securities when due and principal of the Securities no later than 24 months after the Final Scheduled Payment Date of the Securities. 6. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or agency where Securities eligible for transfer or exchange may be presented for registration of transfer or for exchange, and an office or agency where Securities may be presented for payment. Initially, the Trustee will act as Registrar and Paying Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such. 7. DENOMINATIONS, TRANSFER AND EXCHANGE. The Securities shall be issued only in fully registered form without coupons and [only in denominations of $100,000 or integral multiples of $1,000 in excess thereof,] [in denominations of $1,000 or integral multiples thereof,] except that one Security may be issued in a different denomination. The transfer of Securities may be registered and Securities may be exchanged as provided in the Indenture. No transfer shall be effected until, and such transferee shall succeed to the rights of a Securityholder only upon, final acceptance and registration of the transfer by the Registrar in the Register. No service charge shall be made to a Securityholder for any registration of transfer or exchange of Securities, but the Company may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Securities. 8. PERSONS DEEMED OWNERS. Prior to the registration of any transfer of a Security by a Securityholder as provided in the Indenture, the Company, the Registrar, the Paying Agent and the Trustee shall deem and treat the person in whose name the Security is registered on the Register as the absolute owner and holder thereof for the purpose of receiving payment of all amounts payable with respect to such Security and for all other purposes, and none of the Company, the Registrar, the Paying Agent or the Trustee shall be affected by any notice to the contrary. 9. AMENDMENTS AND WAIVERS. The Company and the Trustee or the Collateral Agent, as the case may be, may amend or supplement the Indenture, the - ------------------ To be used for Initial Securities. To be used for Exchange Securities.

Securities, or any of the other Operative Documents and, upon request of the Company, the Trustee shall amend or supplement the Support Documents, in each case only with the written consent of the Controlling Party, PROVIDED that certain amendments, supplements and waivers may not be made without the consent of each Securityholder affected thereby. Any consent by the Securityholder of this Security shall be conclusive and binding on such Securityholder and upon all future Securityholders of this Security and of any Security issued upon the transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent is made upon such Security. Without the consent of the Controlling Party or any Holder, the Indenture, the Securities, any of the Operative Documents and any of the Support Documents may be amended to, among other things, cure any ambiguity, defect or inconsistency or to make any other change not inconsistent with the provisions of the Indenture, provided that such action does not materially adversely affect the interests of any Securityholder. 10. DEFAULTS AND REMEDIES. Events of Default under the Indenture include the following: (a) failure by the Company to pay (1) principal of, interest on, Premium, if any, or Break Amount, if any, with respect to any Security when due, and such failure shall continue unremedied for a period of 10 Business Days thereafter (it being understood that any amount distributed to Securityholders in respect of the foregoing from funds provided by the Policy Provider, the Liquidity Provider or a Cash Collateral Account shall not be deemed to cure such Default) or (2) any other amount payable by it to the Holders under the Indenture or any Operative Document when due, and such failure shall continue for a period in excess of 10 Business Days after the Company has received written notice from the Trustee of the failure to make such payment when due; (b) failure by the Company to observe and perform in any material respect any other covenant, agreement or obligation set forth in the Indenture or in any other Operative Documents, with such failure continuing after notice and specified cure periods; (c) any representation or warranty made by the Company in the Indenture or any other Operative Document (1) shall prove to have been untrue or inaccurate in any material respect as of the date made, (2) such untrue or inaccurate representation or warranty is material at the time in question and (3) the same shall remain uncured following notice; and (d) the occurrence of certain events of bankruptcy, reorganization or insolvency of the Company. Subject to certain limitations in the Indenture, if an Event of Default occurs and is continuing, the Controlling Party may, by notice to Company and the Trustee, and the Trustee shall, upon the request of the Controlling Party, declare all unpaid principal of, accrued interest on, Premium, if any, and Break Amount, if any, with respect to the Securities Outstanding and other amounts otherwise payable under the Indenture, if any, to be due and payable immediately. In the case of an Event of Default arising from certain events of bankruptcy, reorganization or insolvency, such amounts shall automatically become and be immediately due and payable without further action or notice. Under certain circumstance, the Controlling Party by notice to the Trustee may rescind an acceleration and its consequences. If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to, the Securities or other amounts otherwise payable under the Indenture, if any. Subject to the Indenture, so long as an Event of Default has occurred and is continuing, the Controlling Party by notice to the Trustee may authorize the Trustee to waive an existing Default or Event of Default and its consequences. The Controlling Party may direct the time, method and place of

conducting any proceeding for any remedy available to the Trustee (as Trustee or Collateral Agent, subject, in the case of any actions based on the status of the Trustee as Collateral Agent, to any limitations otherwise expressly provided for in the Operative Documents) or exercising any trust or power conferred on it; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Securities. The Trustee may withhold from Securityholders notice of any continuing default (except a default in payment of principal, interest, Premium or Break Amount) if it determines in good faith that withholding notice is in their interests. The above description of Events of Default and remedies is qualified by reference, and subject in its entirety to the more complete description thereof contained in the Indenture. 11. NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any personal liability for any obligations of the Company under the Securities, the Indenture or the other Operative Documents by reason of his or her status as such director, officer, employee or stockholder. Each Securityholder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 12. AUTHENTICATION. This Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until the certificate of authentication attached hereto has been executed by the manual signature of an authorized signatory of the Trustee or an authenticating agent appointed by the Trustee. 13. UNCLAIMED MONEY. If money deposited with the Trustee or any Paying Agent in trust for the payment of the principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to, any Security and unclaimed for two (2) years after such principal, interest, Premium, if any, or Break Amount, if any, has become due and payable shall be paid to the Company on its request, subject to any applicable abandoned property law, and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof. 14. ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act). 15. CUSIP NUMBERS. The Company in issuing this Security may use a "CUSIP" number (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER, that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers.

[16. REGISTRATION. The Holder of this Security is entitled to the benefits of the Registration Rights Agreement. In the event that no Registration Event (as defined in the Registration Rights Agreement) occurs on or prior to the 210th day after the Issuance Date, the Debt Rate shall be increased by an additional margin equal to 0.50%, from and including such 210th day to and excluding the earlier of (i) the date on which a Registration Event occurs and (ii) the date on which there ceases to be any Registrable Securities (as defined in the Registration Rights Agreement); or if the Shelf Registration Statement (as defined in the Registration Rights Agreement) (if it is filed), after being declared effective by the SEC, ceases to be effective at any time during the period specified by Section 2(b)(B) of the Registration Rights Agreement for more than 60 days, whether or not consecutive, during any 12-month period, the Debt Rate shall be increased by an additional margin equal to 0.50% from and including the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective to and excluding the date on which the Shelf Registration Statement again becomes effective (or, if earlier, the end of the period specified by Section 2(b)(B) of the Registration Rights Agreement); PROVIDED that the additional margin added to the Debt Rate pursuant to this section shall never exceed 0.50% at any time.] [17. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT. Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Rights Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein.] 18. GOVERNING LAW. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. The Company will furnish to any Holder of this Security, upon written request and without charge, a copy of the Indenture. Request may be made to: Continental Airlines, Inc., 1600 Smith Street, Houston, Texas 77002, Attention: Corporate Secretary. - ------------------ To be included only on each Initial Certificate. To be included only on each Initial Certificate.

IN WITNESS WHEREOF, the Company has caused this Security to be duly executed in its corporate name by its officer thereunto duly authorized on the date hereof. Dated: CONTINENTAL AIRLINES, INC. By: ----------------------- Name: Title: By: ----------------------- Name: Title:

[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION] This is one of the Securities referred to in the Indenture. WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Trustee By: ------------------------------ Authorized Officer

FORM OF TRANSFER NOTICE FOR VALUE RECEIVED the undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto INSERT TAXPAYER IDENTIFICATION NO. - -------------------- - -------------------- please print or typewrite name and address including zip code of assignee - -------------------- the within Security and all rights thereunder, hereby irrevocably constituting and appointing - -------------------- attorney to transfer said Security on the books of the Registrar with full power of substitution in the premises. [THE FOLLOWING PROVISION TO BE INCLUDED ON ALL SECURITIES, EXCEPT REGULATION S GLOBAL, REGULATION S DEFINITIVE SECURITIES AND EXCHANGE SECURITIES] In connection with any transfer of this Certificate occurring prior to the date that is the earlier of the date of an effective Registration Statement or the date two years after the later of the original issuance of this Security or the last date on which this Security was held by Continental Airlines, Inc. or any affiliate of Continental Airlines, Inc., the undersigned confirms that without utilizing any general solicitation or general advertising that:

[CHECK ONE] [_] (a) this Security is being transferred in compliance with the exemption from registration under the Securities Act of 1933, as amended, provided by Rule 144A thereunder. OR [_] (b) this Security is being transferred other than in accordance with (a) above and documents are being furnished that comply with the conditions of transfer set forth in this Security and the Indenture. If neither of the foregoing boxes is checked, the Registrar shall not be obligated to register this Security in the name of any Person other than the Holder hereof unless and until the conditions to any such transfer of registration set forth herein and in Section 2.6 of the Indenture shall have been satisfied. Date:[___________, __] [Name of Transferor] ------------------------------------- NOTE: The signature must correspond with the name as written upon the face of the within-mentioned instrument in every particular, without alteration or any change whatsoever. Signature Guarantee: -------------------------- TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, as amended, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated:[___________, __] ------------------------------------- NOTE: To be executed by an executive officer.

EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS OF SECURITIES PURSUANT TO REGULATION S [_____________,____] Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Re: FLOATING RATE SECURED NOTES DUE 2007 (THE "SECURITIES") Ladies and Gentlemen: In connection with our proposed sale of US $[______] of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the Securities Act of 1933, as amended, and, accordingly, we represent that: (1) the offer of the Securities was not made to a person in the United States; (2) either (a) at the time the buy order was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States; (3) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(a) or Rule 904(a) of Regulation S, as applicable; and (4) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act. In addition, if the sale is made during a restricted period and the provisions of Rule 903(b)(2) or Rule 904(b)(1) of Regulation S are applicable thereto, we confirm that such sale has been made in accordance with the applicable provisions of Rule 903(b)(2) or Rule 904(b)(1), as the case may be.

You and Continental Airlines, Inc. are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S. Very truly yours, [Name of Transferor]

EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS OF SECURITIES TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS [_______________,_____] Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, DE 19890-0001 Attention: Corporate Trust Administration Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002 CONTINENTAL AIRLINES Floating Rate Secured Notes due 2007 (the "Securities") ________________________ Ladies and Gentlemen: In connection with our proposed purchase of U.S. $[_____________] of Securities (the "Purchased Securities"), we confirm that: 1. We understand that any subsequent transfer of the Purchased Securities is subject to certain restrictions and conditions set forth in the Indenture, dated as of December 6, 2002, among Continental Airlines, Inc. (the "Company"), Wilmington Trust Company (the "Trustee"), Morgan Stanley Capital Services Inc., as Liquidity Provider, and MBIA Insurance Corporation, as Policy Provider, relating to the Securities, and we agree to be bound by, and not to resell, pledge or otherwise transfer the Purchased Securities except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the "Securities Act"). 2. We are purchasing Securities having an aggregate principal amount of not less than $100,000 and each account (if any) for which we are purchasing Securities is purchasing Securities having an aggregate principal amount of not less than $100,000. 3. We understand that the Purchased Securities have not been registered under the Securities Act, that the Purchased Securities are being sold to us in a transaction that is exempt from the registration requirements of the Securities Act and that the Purchased Securities may not be offered or resold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that, if we should sell any Purchased Securities within two years after the later of the original issuance of such Purchased Securities and the last date on which such Purchased Securities are owned by the Company or any affiliate of the Company, we will do so only (A) to the Company, (B) in accordance with Rule 144A under the Securities Act to a "qualified institutional buyer" (as defined

therein), (C) outside the United States in accordance with Rule 904 of Regulation S under the Securities Act, (D) pursuant to the exemption from registration provided by Rule 144 under the Securities Act or (E) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any person purchasing any of the Purchased Securities from us a notice advising such purchaser that resales of the Purchased Securities are restricted as stated herein. 4. We understand that, on any proposed resale of any Purchased Securities, we will be required to furnish to the Company and the Trustee such certifications, legal opinions and other information as the Company and the Trustee may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Purchased Securities purchased by us will bear a legend to the foregoing effect. 5. We are an institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Purchased Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investments. 6. We are acquiring the Purchased Securities for our own account or for one or more accounts (each of which is an institutional "accredited investor") as to each of which we exercise sole investment discretion and not with a view to any distribution of the Purchased Securities, subject, nevertheless to the understanding that the disposition of our property shall at all times be and remain within our control. You are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy thereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Very truly yours, By: ------------------------------- Name: Title:






                        COLLATERAL MAINTENANCE AGREEMENT

                                     BETWEEN

                           CONTINENTAL AIRLINES, INC.

                                       AND

                           MBIA INSURANCE CORPORATION

                          dated as of December 6, 2002

                                   relating to

                      Floating Rate Secured Notes due 2007

TABLE OF CONTENTS PAGE ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION..............................1 Section 1.1 Definitions...................................................1 Section 1.2 Rules of Construction.........................................1 ARTICLE 2 REPORTS REGARDING THE COLLATERAL...................................1 Section 2.2 Semiannual Appraisal..........................................2 Section 2.3 Quarterly Reports.............................................3 Section 2.4 Special Reports...............................................3 Section 2.5 Information from the Trustee..................................4 Section 2.6 Independent Appraiser.........................................4 ARTICLE 3 COLLATERAL REQUIREMENTS............................................4 Section 3.1 Maintenance of Collateral Ratio and Rotable Ratio.............4 Section 3.2 Certain Limitations Regarding the Collateral..................6 Section 3.3 Fleet Reduction...............................................7 Section 3.4 Liens.........................................................7 Section 3.5 Maintenance...................................................7 Section 3.6 Possession....................................................8 Section 3.7 Inspection....................................................9 Section 3.8 The Company's Obligation to Insure............................9 ARTICLE 4 MISCELLANEOUS.....................................................10 Section 4.1 Benefits of Agreement Restricted.............................10 Section 4.2 Appraiser's Certificate......................................10 Section 4.3 Notices; Waiver..............................................10 Section 4.4 Amendments, Etc..............................................11 Section 4.5 No Waiver....................................................11 Section 4.6 Successors and Assigns.......................................11 Section 4.7 Governing Law................................................12 Section 4.8 Effect of Headings...........................................12

PAGE Section 4.9 Counterpart Originals........................................12 Section 4.10 Severability.................................................12 APPENDIX I - DEFINITIONS APPENDIX II - FORM OF APPRAISAL COMPLIANCE REPORT APPENDIX III - FORM OF NONAPPRAISAL COMPLIANCE REPORT APPENDIX IV - INSURANCE

COLLATERAL MAINTENANCE AGREEMENT COLLATERAL MAINTENANCE AGREEMENT, dated as of December 6, 2002, between 0CONTINENTAL AIRLINES, INC., a Delaware corporation (the "COMPANY"), and MBIA INSURANCE CORPORATION, a New York insurance company (the "POLICY PROVIDER"). R E C I T A L S WHEREAS, the Company, the Trustee, the Policy Provider and the Liquidity Provider have entered into the Indenture providing for the issuance of $200,000,000 aggregate principal amount of the Securities, and the Policy Provider has issued the Policy under which the Trustee may make drawings to make certain payments with respect to the Securities; WHEREAS, in order to secure the payment of the principal amount of and interest on the Securities and all other Obligations of the Company under the Indenture, the Securities and the other Operative Documents, the Company has granted a security interest in the Spare Parts Collateral pursuant to the Security Agreement; and WHEREAS, the Company and the Policy Provider wish to set forth herein certain additional agreements with respect to the Spare Parts Collateral. NOW, THEREFORE, in consideration of the premises and other benefits to the Company, the receipt and sufficiency of which are hereby acknowledged, the Company and the Policy Provider agree as follows: ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION Section 1.1 DEFINITIONS. Capitalized terms used above or hereinafter and not otherwise defined herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall be part of this Agreement as if fully set forth in this place. Section 1.2 RULES OF CONSTRUCTION. The rules of construction for this Agreement are set forth in Section 2 of the Definitions Appendix. ARTICLE 2 REPORTS REGARDING THE COLLATERAL Section 2.1 ANNUAL APPRAISAL. So long as the Securities are Outstanding, by the fifth Business Day of February in 2004 and by the fifth Business Day of February of each year thereafter, the Company shall furnish the Policy Provider

and the Trustee an Independent Appraiser's Certificate signed by an Independent Appraiser, dated as of a date between the preceding January 15 and February 1 (inclusive). Each such Independent Appraiser's Certificate shall state, in the opinion of such Independent Appraiser, based upon use of the Annual Methodology, the following: (a) the Fair Market Value of the Collateral (excluding any Cash Collateral and, for the avoidance of doubt, any Excluded Parts) as of a specified date within 30 days (or, if an Independent Appraiser's Certificate signed by such Independent Appraiser has not previously been delivered to the Policy Provider pursuant to this Agreement or in the Offering Memo, 60 days) (the "PERMITTED DAYS") preceding the date of such Certificate (the "ANNUAL VALUATION DATE"); (b) the Fair Market Value of the Rotables and of the Expendables included in the Collateral as of the applicable Annual Valuation Date (and shall separately state the quantity of such Rotables and Expendables); and (c) the Fair Market Value of the Serviceable Parts and the Unserviceable Parts included in the Collateral as of the applicable Annual Valuation Date. Each annual Independent Appraiser's Certificate shall be accompanied by an Appraisal Compliance Report determined as of the applicable Annual Valuation Date. The Appraisal Compliance Report shall set forth the calculation of the Collateral Ratio and the Rotable Ratio based on the Fair Market Value of the Collateral and the Rotables set forth in such Independent Appraiser's Certificate, the Fair Market Value of Cash Collateral held by the Collateral Agent, and the principal amount of the Securities Outstanding, each as of the applicable Annual Valuation Date. Upon written request of the Policy Provider given to the Company within twenty Business Days after delivery to the Policy Provider of an annual Independent Appraiser's Certificate under this Section 2.1, the Company shall furnish to the Policy Provider (with a copy to the Trustee) a recent Parts Inventory Report and a report showing the percentage of the average cost of the Pledged Spare Parts located at each Company facility as of the same date as the date of such Parts Inventory Report. Section 2.2 SEMIANNUAL APPRAISAL. So long as the Securities are Outstanding, by the fifth Business Day of February in 2003, by the fifth Business Day of August in 2003 and by the fifth Business Day of August in each year thereafter, the Company shall furnish the Policy Provider and the Trustee an Independent Appraiser's Certificate signed by an Independent Appraiser, dated as of a date between the preceding January 15 and February 1 (inclusive), in the case of such Certificate due in February 2003 (the "FEBRUARY 2003 CERTIFICATE"), or the preceding July 15 and August 1 (inclusive), in the case of such other Certificates. Each such semiannual Independent Appraiser's Certificate shall state, in the opinion of such Independent Appraiser, based upon the use of the Semiannual Methodology, the following: (a) the Fair Market Value of the Collateral (excluding any Cash Collateral and, for the avoidance of doubt, any Excluded Parts) as of a specified date within the Permitted Days preceding the date of such Certificate (the "SEMIANNUAL VALUATION DATE");

(b) the Fair Market Value of the Rotables and of the Expendables included in the Collateral as of the applicable Semiannual Valuation Date (and shall separately state the quantity of such Rotables and Expendables); and (c) the Fair Market Value of the Serviceable Parts and the Unserviceable Parts included in the Collateral as of the applicable Semiannual Valuation Date. Each semiannual Independent Appraiser's Certificate shall be accompanied by an Appraisal Compliance Report determined as of the applicable Semiannual Valuation Date, except that no Appraisal Compliance Report shall be required to accompany the February 2003 Certificate, and the Maximum Collateral Ratio and Minimum Rotable Ratio requirements shall not be required to be satisfied in connection with the February 2003 Certificate. The Appraisal Compliance Report provided with the semiannual Independent Appraiser's Certificate shall set forth the calculation of the Collateral Ratio and the Rotable Ratio based on the Fair Market Value of the Collateral and Rotables set forth in such Independent Appraiser's Certificate, the Fair Market Value of Cash Collateral held by the Collateral Agent, and the principal amount of the Securities Outstanding, each as of the applicable Semiannual Valuation Date, PROVIDED that the Cash Collateral deposited by the Company with the Security Agent on the Closing Date shall be excluded from the calculation of the Collateral Ratio and Rotable Ratio in connection with the Independent Appraiser's Certificate due by the fifth Business Day of August, 2003, for purposes of Article 3 of this Agreement (but not for purposes of Section 7.03 of the Security Agreement). Section 2.3 QUARTERLY REPORTS. So long as the Securities are Outstanding, within ten Business Days after each May 1 and November 1, commencing with May 1, 2003, the Company shall furnish the Policy Provider and the Trustee a Nonappraisal Compliance Report determined as of such May 1 or November 1, as applicable, or any date during such ten Business Day period thereafter. Section 2.4 SPECIAL REPORTS. The Policy Provider may (i) if the Company defaults in any of its obligations with respect to indebtedness of the Company in an outstanding principal amount greater than $100,000,000 which results in the acceleration of the Company's obligation to pay such indebtedness in full prior to its stated final maturity date, at any time prior to the payment of such indebtedness or the reversal of such acceleration, or (ii) if an Event of Default occurs, at any time while such Event of Default is continuing, request by written notice to the Company that the Company furnish to the Policy Provider (with a copy to the Trustee) a special Independent Appraiser's Certificate. Any such special Independent Appraiser's Certificate shall state, in the opinion of such Independent Appraiser, based upon use of the Annual Methodology, the following: (a) the Fair Market Value of the Collateral (excluding any Cash Collateral and, for the avoidance of doubt, any Excluded Parts) as of a specified date within the Permitted Days preceding the date of such Certificate (the "SPECIAL VALUATION DATE" and, together with each Annual Valuation Date and Semiannual Valuation Date, the "VALUATION DATES");

(b) the Fair Market Value of the Rotables and of the Expendables included in the Collateral as of the applicable Special Valuation Date (and shall separately state the quantity of such Rotables and Expendables); and (c) the Fair Market Value of the Serviceable Parts and the Unserviceable Parts included in the Collateral as of the applicable Special Valuation Date. The Company shall furnish to the Policy Provider (with a copy to the Trustee) any such requested special Independent Appraiser's Certificate reasonably promptly after receipt of such request. Notwithstanding the foregoing, the Company shall not be obligated (i) to furnish any Independent Appraiser's Certificate under this Section 2.4 during the Section 1110 Period or (ii) to deliver pursuant to this Article 2 an Independent Appraiser's Certificate more than twice in any six month period. Upon written request of the Policy Provider given to the Company within twenty Business Days after delivery to the Policy Provider of a special Independent Appraiser's Certificate under this Section 2.4, the Company shall furnish to the Policy Provider (with a copy to the Trustee) a recent Parts Inventory Report and a report showing the percentage of the average cost of the Pledged Spare Parts located at each Company facility as of the same date as the date of such Parts Inventory Report. Section 2.5 INFORMATION FROM THE TRUSTEE. The Fair Market Value of any Investment Securities included in the Cash Collateral for purposes of this Agreement shall be determined by the Trustee in accordance with customary financial market practices. The Trustee shall inform the Company of the principal amount of the Securities Outstanding and the Fair Market Value of any Investment Securities included in the Collateral, in each case as of any Valuation Date or for purposes of Section 3.1, promptly after the Company's request for such information. Section 2.6 INDEPENDENT APPRAISER. If the Policy Provider has a reasonable basis for concluding that the performance of the Independent Appraiser that executed the most recent Independent Appraiser's Certificate delivered pursuant to Article 2 was not satisfactory, the Policy Provider may designate another Independent Appraiser to perform the next required appraisal under this Article 2 by written notice given to the Company within 90 days after the date of such most recent Independent Appraiser's Certificate. The Company shall use such other Independent Appraiser designated by the Policy Provider for the next appraisal unless it gives the Policy Provider written notice of reasonable objection to the use of such other Independent Appraiser. ARTICLE 3 COLLATERAL REQUIREMENTS Section 3.1 MAINTENANCE OF COLLATERAL RATIO AND ROTABLE RATIO. (a) If the Collateral Ratio, as most recently determined pursuant to an Appraisal Compliance Report, is greater than the Maximum Collateral Ratio, the Company shall within 90 days after the date of the Appraisal Compliance Report setting forth the calculation of such Collateral Ratio:

(i) subject additional Qualified Spare Parts (the "ADDITIONAL PARTS") to the Lien of the Security Agreement in accordance with Section 3.1(c); (ii) grant a security interest to a Collateral Agent in other property to secure the Obligations for the benefit of the Holders and the Indemnitees, PROVIDED that the Company shall have received, with respect to the use for purposes of this Section 3.1(a) of such additional collateral and the applicable Collateral Agreement, (x) approval of the Policy Provider and (y) Rating Agency Confirmation; (iii) provide additional cash and/or Investment Securities to the Collateral Agent under the Security Agreement, PROVIDED that if the Continental Cash Balance as of the applicable Valuation Date was less than $600,000,000, then the amount of Cash Collateral included in the Collateral, after giving effect to the action taken pursuant to Sections 3.1(a) and 3.1(b) with respect to such Valuation Date, shall not exceed $20,000,000; (iv) deliver Securities to the Trustee for cancellation; (v) redeem some or all of the Securities pursuant to Article 4 of the Indenture; or (vi) any combination of the foregoing; such that, the Collateral Ratio, as recalculated giving effect to such action taken pursuant to this Section 3.1(a) and, in the case of clauses (i), (ii) and (iii) of this Section 3.1(a), using the Fair Market Value of any such additional Collateral determined pursuant to Section 3.1(d) (but otherwise using the information used to determine the Collateral Ratio as most recently determined pursuant to Article 2), would not be greater than the Maximum Collateral Ratio. (b) If the Rotable Ratio, as most recently determined pursuant to an Appraisal Compliance Report, is less than the Minimum Rotable Ratio, the Company shall within 90 days after the date of the Appraisal Compliance Report setting forth the calculation of such Rotable Ratio: (i) subject additional Rotables (the "ADDITIONAL ROTABLES") to the Lien of the Security Agreement in accordance with Section 3.1(c); (ii) provide additional cash and/or Investment Securities to the Collateral Agent under the Security Agreement; PROVIDED that if the Continental Cash Balance as of the applicable Valuation Date was less than $600,000,000, then the amount of Cash Collateral included in the Collateral, after giving effect to the action taken pursuant to Sections 3.1(a) and 3.1(b) with respect to such Valuation Date, shall not exceed $20,000,000; (iii) deliver Securities to the Trustee for cancellation; (iv) redeem some or all of the Securities pursuant to Article 4 of the Indenture; or

(v) any combination of the foregoing. such that, the Rotable Ratio, as recalculated giving effect to such action taken pursuant to this Section 3.1(b) and, in the case of clauses (i) and (ii) of this Section 3.1(b), using the Fair Market Value of any such additional Collateral determined pursuant to Section 3.1(d) (but otherwise using the information used to determine the Rotable Ratio as most recently determined pursuant to Article 2), would not be less than the Minimum Rotable Ratio. (c) In order to comply with Section 3.1(a)(i) or 3.1(b)(i), the Company shall (i) add one or more locations as Designated Locations pursuant to Section 4.02(b) of the Security Agreement, in which case the Qualified Spare Parts or Rotables, as the case may be, at such new Designated Locations, to the extent not included in the Pledged Spare Parts on the preceding Valuation Date, shall be deemed Additional Parts or Additional Rotables, as the case may be; and/or (ii) add to a Designated Location Qualified Spare Parts or Rotables, as the case may be, that were not included as Pledged Spare Parts on the preceding Valuation Date, which shall be deemed Additional Parts or Additional Rotables, as the case may be. (d) In connection with the provision of additional Collateral pursuant to clause (i) or (ii) of Section 3.1(a) or Section 3.1(b), the Company shall furnish to the Policy Provider (with a copy to the Trustee) an Independent Appraiser's Certificate signed by an Independent Appraiser, dated as of a date after the most recent Valuation Date, stating, in the opinion of such Independent Appraiser, the Fair Market Value of such additional Collateral (other than Cash Collateral), as of a date not earlier than 60 days prior to the date of such Independent Appraiser's Certificate (but not earlier than the most recent Valuation Date) and using, in the case of Additional Parts or Additional Rotables, the Annual Methodology. (e) If the Company shall have provided Cash Collateral pursuant to Section 3.1(a)(iii) or Section 3.1(b)(ii) (the "TEMPORARY CASH COLLATERAL"), it shall within 90 days after providing such Temporary Cash Collateral (i) in the case of Section 3.1(a)(iii), take additional action pursuant to Section 3.1(a) (excluding the right to provide Cash Collateral) to cause the Collateral Ratio, calculated to exclude such Temporary Cash Collateral, not to be greater than the Maximum Collateral Ratio and (ii) in the case of Section 3.1(b)(ii), take additional action pursuant to Section 3.1(b) (excluding the right to provide Cash Collateral) to cause the Rotable Ratio, calculated to exclude such Temporary Cash Collateral, not to be less than the Minimum Rotable Ratio. Section 3.2 CERTAIN LIMITATIONS REGARDING THE COLLATERAL. During any period commencing on the Closing Date or the date of an Independent Appraiser's Certificate delivered pursuant to Article 2 through the date preceding the date of the next Independent Appraiser's Certificate delivered pursuant to Article 2 (each, an "APPLICABLE PERIOD"), the Company agrees that, as of any date during an Applicable Period, the aggregate Appraised Value of all Pledged Spare Parts (x) previously during such Applicable Period sold, transferred or disposed of (excluding any such transaction pursuant to Section 4.02(a)(ii) of the Security Agreement and Pledged Spare Parts deemed sold pursuant to the proviso in Section 3.6(a) of this Agreement as to which the Company has reacquired title) (collectively, "SALES") shall not exceed 2% of the Appraised Value of the Collateral, (y) then subject to leases to Permitted Lessees or loans to other Persons (together, "LOANS") shall not exceed 2% of the Appraised Value of the

Collateral or (z) previously during such Applicable Period moved from a Designated Location to a location not a Designated Location (excluding those permitted under Sections 4.02(a)(i) of the Security Agreement and clauses (i) and (ii) of Section 3.6(a) of this Agreement) ("MOVES") shall not exceed 2% of the Appraised Value of the Collateral. Section 3.3 FLEET REDUCTION. If at any time after the Closing Date so long as any Securities are Outstanding the total number of Aircraft of any Aircraft Model (as defined below) in the Company's in-service fleet during any period of 60 consecutive days is less than the Specified Minimum (as defined below) for such Aircraft Model (other than due to restrictions on operating such Aircraft imposed by the FAA or any other instrumentality or agency of the United States), then within 90 days after such occurrence the Company shall redeem Securities pursuant to Article 4 of the Indenture or deliver Securities to the Trustee for cancellation, or a combination of the foregoing, in an aggregate principal amount not less than the principal amount of the Securities Outstanding at the end of such 60 day period multiplied by a fraction, the numerator of which shall be the Appraised Value of the Pledged Spare Parts that are appropriate for incorporation in, installation on, attachment or appurtenance to, or use in only Aircraft of such Aircraft Model or Engines utilized only on such Aircraft, and the denominator of which shall be the Appraised Value of the Collateral. For purposes of this Section "AIRCRAFT MODEL" shall mean each of the four models or groups of models of Aircraft set forth below and "SPECIFIED MINIMUM" for any Aircraft Model shall mean the number of Aircraft set forth opposite such Aircraft Model below: AIRCRAFT MODEL SPECIFIED MINIMUM 1. Boeing 737-700, Boeing 737-800 and Boeing 737-900 Aircraft 63 Aircraft 2. Boeing 757-200 and Boeing 757-300 Aircraft 23 Aircraft 3. Boeing 767-200 and Boeing 767-400 Aircraft 13 Aircraft 4. Boeing 777-200 Aircraft 9 Aircraft Section 3.4 LIENS. The Company will not directly or indirectly create, incur, assume or suffer to exist any Lien on or with respect to the Spare Parts Collateral, title to any of the foregoing or any interest of the Company therein, except Permitted Liens. The Company shall promptly, at its own expense, take such action as may be necessary to duly discharge (by bonding or otherwise) any such Lien other than a Permitted Lien arising at any time. Section 3.5 MAINTENANCE. The Company: (a) shall maintain, or cause to be maintained, at all times the Pledged Spare Parts in accordance with all applicable Laws issued by the FAA or any other Governmental Entity having jurisdiction over the Company or any such Pledged Spare Parts, including making any modifications, alterations, replacements and additions necessary therefor;

(b) shall maintain, or cause to be maintained, all records, logs and other materials required by the FAA or under the Federal Aviation Act to be maintained in respect of the Pledged Spare Parts and shall not modify its record retention procedures in respect of the Pledged Spare Parts if such modification would materially diminish the value of the Pledged Spare Parts, taken as a whole; and (c) shall maintain, or cause to be maintained, the Pledged Spare Parts in good working order and condition and shall perform all maintenance thereon necessary for that purpose, excluding (i) Pledged Spare Parts that have become worn out or unfit for use and not reasonably repairable or become obsolete, (ii) Pledged Spare Parts that are not required for the Company's normal operations and (iii) Expendables that have been consumed or used in the Company's operations. Section 3.6 POSSESSION. (a) Without the prior written consent of the Policy Provider, the Company will not sell, lease, transfer or relinquish possession of any Pledged Spare Part to anyone other than the grant of the security interest to the Security Agent pursuant to the Security Agreement, except as permitted by the provisions of Sections 3.2 and 3.6 of this Agreement and Sections 4.02 and 4.03 of the Security Agreement and except that the Company shall have the right, in the ordinary course of business, (i) to transfer possession of any Pledged Spare Part to the manufacturer thereof or any other organization for testing, overhaul, repairs, maintenance, alterations or modifications or to any Person for the purpose of transport to any of the foregoing or (ii) to subject any Pledged Spare Part to a pooling, exchange, borrowing or maintenance servicing agreement arrangement customary in the airline industry and entered into in the ordinary course of business; PROVIDED, HOWEVER, that if the Company's title to any such Pledged Spare Part shall be divested under any such agreement or arrangement, such divestiture shall be deemed to be a Sale with respect to such Pledged Spare Part subject to the provisions of Section 3.2. (b) So long as no Event of Default shall have occurred and be continuing, the Company may enter into a lease with respect to any Pledged Spare Part to any U.S. Air Carrier that is not then subject to any bankruptcy, insolvency, liquidation, reorganization, dissolution or similar proceeding and shall not have substantially all of its property in the possession of any liquidator, trustee, receiver or similar person (a "PERMITTED LESSEE"). In the case of any such lease, the Company will include in such lease appropriate provisions which (t) make such lease expressly subject and subordinate to all of the terms of the Security Agreement, including the rights of the Security Agent to avoid such lease in the exercise of its rights to repossession of the Pledged Spare Parts under the Security Agreement; (u) require the Permitted Lessee to comply with the terms of Section 3.8; and (v) require that the Pledged Spare Parts subject thereto be used in accordance with the limitations applicable to the Company's use, possession and location of such Pledged Spare Parts provided in this Agreement and the Security Agreement (including, without limitation, that such Pledged Spare Parts be kept at one or more Designated Locations), it being understood that such Permitted Lessee shall be entitled to incorporate in, install on, attach or make appurtenant to, or use in, any Aircraft, Engine or Appliance leased to, or owned by, such Permitted Lessee (whether or not subject to any Lien) any Pledged Spare Part subject thereto, free from the Lien of the Security Agreement. No lease permitted under this Section shall be entered into unless (w) the Company shall provide written notice to the Policy Provider and

the Trustee (promptly after entering into any such lease); (x) the Company shall furnish to the Policy Provider (with a copy to the Trustee) evidence reasonably satisfactory to the Policy Provider that the insurance required by Section 3.8 remains in effect; (y) all necessary documents shall have been duly filed, registered or recorded in such public offices as may be required fully to preserve the first priority security interest (subject to Permitted Liens) of Security Agent in the Pledged Spare Parts; and (z) the Company shall reimburse the Policy Provider for all of its reasonable out-of-pocket fees and expenses, including, without limitation, reasonable fees and disbursements of counsel, incurred by the Policy Provider in connection with any such lease. Except as otherwise provided herein and without in any way relieving the Company from its primary obligation for the performance of its obligations under this Agreement and the Security Agreement, the Company may in its sole discretion permit a lessee to exercise any or all rights which the Company would be entitled to exercise under Sections 3.4 through 3.8, inclusive, of this Agreement and Article 4 of the Security Agreement, and may cause a lessee to perform any or all of the Company's obligations under Sections 3.4 through 3.8, inclusive, of this Agreement and Article 4 of the Security Agreement, and the Policy Provider agrees to accept (and to direct the Security Agent to accept) actual and full performance thereof by a lessee in lieu of performance by the Company. Section 3.7 INSPECTION. (a) At all reasonable times, the Policy Provider and its authorized representatives (the "INSPECTING PARTIES") may (not more than once every 12 months unless an Event of Default has occurred and is continuing, in which case such inspection right shall not be so limited) inspect the Pledged Spare Parts (including without limitation, the Spare Parts Documents). (b) Any inspection of the Pledged Spare Parts hereunder shall be limited to a visual inspection and shall not include the disassembling, or opening of any components, of any Pledged Spare Part, and no such inspection shall interfere with the Company's or any Permitted Lessee's maintenance and use of the Pledged Spare Parts. (c) With respect to such rights of inspection, the Policy Provider shall not have any duty or liability to make, or any duty or liability by reason of not making, any such visit, inspection or survey. (d) Each Inspecting Party shall bear its own expenses in connection with any such inspection, PROVIDED that the Company shall reimburse the Inspecting Party for its reasonable out-of-pocket expenses in connection with any such inspection during the continuance of an Event of Default, except during the Section 1110 Period. Section 3.8 THE COMPANY'S OBLIGATION TO INSURE. The Company shall comply with, or cause to be complied with, each of the provisions of Appendix IV, which provisions are hereby incorporated by this reference as if set forth in full herein. Nothing in this Section shall limit or prohibit (a) the Company from maintaining the policies of insurance required under Appendix IV with higher limits than those specified in Appendix IV, or (b) the Policy Provider, the Trustee or the Security Agent from obtaining insurance for its own account (and any proceeds payable under such separate insurance shall be payable as provided in the policy relating thereto); PROVIDED, HOWEVER, that no insurance may be

obtained or maintained that would limit or otherwise adversely affect the coverage of any insurance required to be obtained or maintained by the Company pursuant to Section 3.8 and Appendix IV. ARTICLE 4 MISCELLANEOUS Section 4.1 BENEFITS OF AGREEMENT RESTRICTED. Subject to the provisions of Section 4.6 hereof, nothing in this Agreement or the other Operative Documents, express or implied, shall give or be construed to give to any Person, other than the parties hereto, any legal or equitable right, remedy or claim under or in respect of this Agreement or under any covenant, condition or provision herein contained, all such covenants, conditions and provisions, subject to Section 4.6 hereof, being for the sole benefit of the parties hereto, PROVIDED that the Trustee is an intended third-party beneficiary of each provision of this Agreement that expressly grants it a right to receive certain documents that are provided to the Policy Provider and of the last sentence of Section 4.6, and the Trustee and the Security Agent each is an intended third-party beneficiary of each provision of Section 3.8 and Appendix IV that expressly refers to it (collectively, the "TRUSTEE PROVISIONS") (it being understood that the Company's obligation to deliver a document to the Policy Provider and the contents of any such document are not Trustee Provisions, and such provisions referred to in this parenthetical may be amended, supplemented or waived without the consent of the Trustee or the Security Agent, PROVIDED that the right of the Trustee to receive a copy of such document if it is required to be delivered to the Trustee or the Security Agent is a Trustee Provision). Section 4.2 APPRAISER'S CERTIFICATE. Unless otherwise specifically provided, an Independent Appraiser's Certificate shall be sufficient evidence of the Appraised Value and Fair Market Value of any property under this Agreement. Section 4.3 NOTICES; WAIVER. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Agreement to be made upon, given or furnished to, or filed with (a) the Company shall be sufficient for every purpose hereunder if in writing and sent by personal delivery, by telecopier, by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to the Company at: Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002 Attention: Treasurer Telecopier No.: (713) 324-2447 (b) the Policy Provider shall be sufficient for every purpose hereunder if in writing and sent by personal delivery, by telecopier, by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to the Policy Provider at:

MBIA Insurance Corporation 113 King Street Armonk, New York 10504 Attention: Insured Portfolio Management, Structured Finance Telecopier No.: (914) 765-3163 (c) the Trustee or the Security Agent shall be sufficient for every purpose hereunder if in writing and sent by personal delivery, by telecopier, by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid to the Trustee or the Security Agent at: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Telecopier No.: (302) 651-8882 or to any of the above parties at any other address or telecopier number subsequently furnished in writing by it to each of the other parties listed above. Any such delivery shall be deemed made on the date of receipt by the addressee of such delivery or of refusal by such addressee to accept delivery. Section 4.4 AMENDMENTS, ETC. This Agreement may be amended or supplemented, and compliance with any obligation in this Agreement may be waived, by written instrument executed by the Company and the Policy Provider, PROVIDED that the Trustee Provisions, insofar as they relate to the rights of the Trustee or the Security Agent, may not be amended, supplemented or waived without the written consent of the Trustee or the Security Agent, as the case may be. Section 4.5 NO WAIVER. No failure on the part of the Policy Provider to exercise, and no delay in exercising any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Failure by the Policy Provider at any time or times hereafter to require strict performance by the Company with any of the provisions, warranties, terms or conditions contained herein shall not waive, affect or diminish any right of the Policy Provider at any time or times hereafter to demand strict performance thereof, and such right shall not be deemed to have been modified or waived by any course of conduct or knowledge of the Policy Provider or any agent, officer or employee of the Policy Provider. Section 4.6 SUCCESSORS AND ASSIGNS. This Agreement and all obligations of the Company hereunder shall be binding upon the successors and permitted assigns of the Company, and shall, together with the rights and remedies of the Policy Provider hereunder, inure to the benefit of the Policy Provider and its successors and assigns. The interest of the Company under this Agreement is not assignable and any attempt to assign all or any portion of this Agreement by the Company shall be null and void except for an assignment in connection with a

merger, consolidation or conveyance, transfer or lease of all or substantially all the Company's assets permitted under the Indenture. Upon the occurrence of a Policy Provider Default, all rights and obligations of the Policy Provider under this Agreement shall automatically, without any notice, demand or other action, be assigned to and assumed by the Trustee, and the Trustee shall take or refrain from taking action under this Agreement at the direction of the Controlling Party. Section 4.7 GOVERNING LAW. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Section 4.8 FFECT OF HEADINGS. The Article and Section headings and the Table of Contents contained in this Agreement have been inserted for convenience of reference only, and are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Agreement. Section 4.9 COUNTERPART ORIGINALS. This Agreement may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Agreement. Section 4.10 SEVERABILITY. The provisions of this Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Agreement in any jurisdiction. [SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered all as of the date first above written. CONTINENTAL AIRLINES, INC. By: -------------------------------- Name: Title: MBIA INSURANCE CORPORATION By: -------------------------------- Name: Title:

Appendix I DEFINITIONS APPENDIX SECTION 1. DEFINED TERMS. "ACCELERATION" means, with respect to the amounts payable in respect of the Securities issued under the Indenture, such amounts becoming immediately due and payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED" and "ACCELERATING" have meanings correlative to the foregoing. "ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture. "ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral Maintenance Agreement. "ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral Maintenance Agreement. "ADVANCE" means any Advance as defined in the Liquidity Facility. "AFFILIATE" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "CONTROL" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying Agent. "AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture. "AIRCRAFT" means any contrivance invented, used, or designed to navigate, or fly in, the air. "ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market Value of the Spare Parts Collateral, taking at least the following actions: (i) reviewing the Parts Inventory Report prepared as of the applicable Valuation Date; (ii) reviewing the Independent Appraiser's internal value database for values applicable to Qualified Spare Parts included in the Spare Parts Collateral; (iii) developing a representative sampling of a reasonable number of the different Qualified Spare Parts included in Spare Parts Collateral for which a market check will be conducted; (iv) checking other sources, such as manufacturers, other airlines, U.S. government procurement data and airline parts pooling price lists, for current market prices of the sample parts referred to in clause (iii); (v) establishing an assumed ratio of Serviceable Parts to Unserviceable Parts as of the applicable Valuation Date based upon information provided by the Company and the Independent Appraiser's limited physical review of the Spare Parts Collateral referred to in the following

clause (vi); (vi) visiting at least two locations selected by the Independent Appraiser where the Pledged Spare Parts are kept by the Company (neither of which was visited for purposes of the last appraisal under Section 2.1 or 2.2 of the Collateral Maintenance Agreement, whichever was most recent), PROVIDED that at least one such location shall be one of the top three locations at which the Company keeps the largest number of Pledged Spare Parts, to conduct a limited physical inspection of the Spare Parts Collateral; (vii) conducting a limited review of the inventory reporting system applicable to the Pledged Spare Parts, including checking information reported in such system against information determined through physical inspection pursuant to the preceding clause (vi) and (viii) reviewing a sampling of the Spare Parts Documents (including tear-down reports). "ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral Maintenance Agreement. "APPLIANCE" means an instrument, equipment, apparatus, a part, an appurtenance, or an accessory used, capable of being used, or intended to be used, in operating or controlling Aircraft in flight, including a parachute, communication equipment, and another mechanism installed in or attached to Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller. "APPLICABLE MARGIN" means 0.90%. "APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance Agreement. "APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing information relating to the calculation of the Collateral Ratio and Rotable Ratio, which shall be substantially in the form of Appendix II to the Collateral Maintenance Agreement. "APPRAISED VALUE" means, with respect to any Collateral, the Fair Market Value of such Collateral as most recently determined pursuant to (i) the report attached as Appendix II to the Offering Memo or (ii) Article 2 and, if applicable, Section 3.1 of the Collateral Maintenance Agreement. "AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment (as defined in the Liquidity Facility) on such date. "AVOIDED PAYMENT" has the meaning assigned to such term in the Policy. "BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C. Section 101 ET SEQ. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any committee of such board duly authorized to act in respect of any particular matter. "BREAK AMOUNT" means, as of any date of payment, redemption or acceleration of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent on the date that is two Business Days prior to the Applicable Date pursuant to the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be payable (x) if the Break Amount, as calculated pursuant to the formula set forth below, is equal to or less than zero or (y) on or in respect of any Applicable

Date that is an Interest Payment Date (or, if such an Interest Payment Date is not a Business Day, the next succeeding Business Day) Break Amount = Z-Y Where: X = with respect to any applicable Interest Period, the sum of (i) the amount of the outstanding principal amount of such Note as of the first day of the then applicable Interest Period plus (ii) interest payable thereon during such entire Interest Period at then effective LIBOR. Y = X, discounted to present value from the last day of the then applicable Interest Period to the Applicable Date, using then effective LIBOR as the discount rate. Z = X, discounted to present value from the last day of the then applicable Interest Period to the Applicable Date, using a rate equal to the applicable London interbank offered rate for a period commencing on the Applicable Date and ending on the last day of the then applicable Interest Period, determined by the Reference Agent as of two Business Days prior to the Applicable Date as the discount rate. "BUSINESS DAY" means any day that is a day for trading by and between banks in the London interbank Eurodollar market and that is other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Houston, Texas, New York, New York, or, so long as any Security is outstanding, the city and state in which the Trustee maintains its Corporate Trust Office or, solely with respect to draws under any Policy, the city and state in which the office of the Policy Provider at which notices, presentations, transmissions, deliveries and communications are to be made under the Policy is located, and that, solely with respect to draws under the Liquidity Facility, also is a "Business Day" as defined in the Liquidity Facility. "CAPPED INTEREST RATE" means a rate per annum equal to 12%. "CASH COLLATERAL" means cash and/or Investment Securities deposited or to be deposited with the Collateral Agent or an Eligible Institution and subject to the Lien of any Collateral Agreement. "CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of the Trustee maintained at an Eligible Institution, which shall be the Trustee if it shall so qualify, into which all amounts drawn under the Liquidity Facility pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be deposited. "CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15). "CLEARING AGENCY" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act.

"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg. "CLOSING DATE" means the Issuance Date. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL" means the Spare Parts Collateral and all other collateral in which the Collateral Agent has a security interest pursuant to the Collateral Agreements. "COLLATERAL AGENT" means the Trustee in its capacity as Security Agent or as agent on behalf of the Holders under any other Collateral Agreement. "COLLATERAL AGREEMENT" means the Security Agreement and any agreement under which a security interest has been granted pursuant to Section 3.1(a)(ii) of the Collateral Maintenance Agreement. "COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance Agreement, dated as of the date of the Indenture, between the Company and the Policy Provider. "COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the aggregate principal amount of all Securities Outstanding minus the sum of the Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of all Collateral (excluding any Cash Collateral), as set forth in the most recent Independent Appraiser's Certificate delivered by the Company pursuant to Article 2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable. "COLLECTION ACCOUNT" means the Eligible Deposit Account established by the Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make deposits in and withdrawals from in accordance with the Indenture. "COMPANY" means the party named as such in the Indenture or any obligor on the Securities until a successor replaces it pursuant to the Indenture and thereafter means the successor. "CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture. "CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an Event of Default under Section 7.1(d), (e) or (f) of the Indenture. "CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash equivalents that would have been shown on the balance sheet of Continental and its consolidated subsidiaries prepared in accordance with GAAP as of any Valuation Date, plus (b) the amount of marketable securities that would have been reflected on such balance sheet which had, as of such Valuation Date, a maturity of less than one year and which, but for their maturity, would have qualified to be reflected on such balance sheet as cash equivalents. "CONTROLLING PARTY" means the Person entitled to act as such pursuant to the terms of Section 3.8 of the Indenture.

"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the office of the Trustee at which at any particular time its corporate trust business is administered and which, at the Closing Date, is located at Wilmington Trust Company, as Trustee, Rodney Square North 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration. "DEBT BALANCE" means 110% of the principal amount of the Outstanding Securities. "DEBT RATE" means a rate per annum equal, in the case of the first Interest Period, to 2.32% and, in the case of any subsequent Interest Period, LIBOR for such Interest Period, as determined pursuant to the Reference Agency Agreement, plus the Applicable Margin, PROVIDED that, solely in the event no Registration Event (as defined in the Registration Rights Agreement) occurs on or prior to the 210th day after the Closing Date, the Debt Rate shall be increased by an additional margin equal to 0.50% per annum, from and including such 210th day to and excluding the earlier of (i) the date on which such Registration Event occurs and (ii) the date on which there ceases to be any Registrable Securities (as defined in the Registration Rights Agreement)); or if the Shelf Registration Statement (as defined in the Registration Rights Agreement) (if it is filed), after being declared effective by the SEC, ceases to be effective at any time during the period specified by Section 2(b)(B) of the Registration Rights Agreement for more than 60 days, whether or not consecutive, during any 12-month period, the Debt Rate shall be increased by an additional margin equal to 0.50% per annum from and including the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective to and excluding the date on which the Shelf Registration Statement again becomes effective (or, if earlier, the end of the period specified by Section 2(b)(B) of the Registration Rights Agreement), PROVIDED that the additional margin added to the Debt Rate pursuant to the preceding proviso shall never exceed 0.50% at any time, PROVIDED FURTHER that, if a default in the payment of interest on the Securities occurs and is continuing on any Interest Payment Date, then the Debt Rate applicable to the Interest Period ending on such Interest Payment Date shall not exceed the Capped Interest Rate, except that for purposes of any payment made by the Company intended to cure such default, this proviso shall not apply. "DEFAULT" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. "DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix I to the Indenture and constituting a part of the Indenture. "DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture. "DESIGNATED LOCATIONS" means the locations in the U.S. designated from time to time by the Company at which the Pledged Spare Parts may be maintained by or on behalf of the Company, which initially shall be the locations set forth on Schedule 1 to the Security Agreement and shall include the additional locations designated by the Company pursuant to Section 4.04(d) of the Security Agreement. "DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a Payment required to be paid to the Trustee for distribution on such Scheduled Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in part, on such Scheduled Payment Date, the next Business Day on which the Trustee receives some or all of such Payment by 12:30 p.m., New York time, except for a defaulted payment of interest that is not paid within five days after the Scheduled Payment Date therefor), (ii) each day established for payment by the Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv) the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the Policy Election Distribution Date, (vii) the date established as a Distribution Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the Indenture and not for purposes of any other payment or distribution under the Indenture, the date established for such payment in accordance with the Policy. "DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture. "DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c) of the Indenture. "DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture. "DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension Drawing or a Downgrade Drawing, as the case may be. "DTC" means The Depository Trust Company, its nominees and their respective successors. "ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture. "ELIGIBLE ACCOUNT" means an account established by and with an Eligible Institution at the request of the Security Agent, which institution agrees, for all purposes of the New York UCC including Article 8 thereof, that (a) such account shall be a "securities account" (as defined in Section 8-501 of the New York UCC), (b) such institution is a "securities intermediary" (as defined in Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash) credited to such account shall be treated as a "financial asset" (as defined in Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the "entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in respect of such account, (e) it will comply with all entitlement orders issued by the Security Agent to the exclusion of the Company, (f) it will waive or subordinate in favor of the Security Agent all claims (including without limitation, claims by way of security interest, lien or right of set-off or right of recoupment), and (g) the "securities intermediary jurisdiction" (under Section 8-110(e) of the New York UCC) shall be the State of New York. "ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution has a long-term unsecured debt rating or issuer credit rating, as the case may be, from Moody's of at least A-3 or its

equivalent. An Eligible Deposit Account may be maintained with the Liquidity Provider so long as the Liquidity Provider is an Eligible Institution; provided that such Liquidity Provider shall have waived all rights of set-off and counterclaim with respect to such account. "ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured debt rating or issuer credit rating, as the case may be, from Moody's of at least A-3 or its equivalent. "ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or guaranteed by, the U.S. Government having maturities no later than 90 days following the date of such investment, (b) investments in open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof with a short-term unsecured debt rating issued by Moody's of at least P-1 and a short-term issuer credit rating issued by Standard & Poor's of at least A-1 having maturities no later than 90 days following the date of such investment or (c) investments in negotiable certificates of deposit, time deposits, banker's acceptances, commercial paper or other direct obligations of, or obligations guaranteed by, commercial banks organized under the laws of the United States or of any political subdivision thereof (or any U.S. branch of a foreign bank) with a short-term unsecured debt rating by Moody's of at least P-1 and a short-term issuer credit rating by Standard & Poor's of at least A-1, having maturities no later than 90 days following the date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments that are bank obligations shall be denominated in U.S. dollars; and (y) the aggregate amount of Eligible Investments at any one time that are bank obligations issued by any one bank shall not be in excess of 5% of such bank's capital surplus; PROVIDED FURTHER that any investment of the types described in clauses (a), (b) and (c) above may be made through a repurchase agreement in commercially reasonable form with a bank or other financial institution qualifying as an Eligible Institution so long as such investment is held by a third party custodian also qualifying as an Eligible Institution; PROVIDED FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a domestic branch of a foreign bank, the income from such investment shall be from sources within the United States for purposes of the Code. Notwithstanding the foregoing, no investment of the types described in clause (b) above which is issued or guaranteed by the Company or any of its Affiliates, and no investment in the obligations of any one bank in excess of $10,000,000, shall be an Eligible Investment unless written approval has been obtained from the Policy Provider and a Ratings Confirmation shall have been received with respect to the making of such investment. "ENGINE" means an engine used, or intended to be used, to propel an Aircraft, including a part, appurtenance, and accessory of the Engine, except a Propeller. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time "EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear System. "EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.

"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of the use thereof due to destruction, damage beyond repair or rendition of any of the Pledged Spare Parts permanently unfit for normal use for any reason whatsoever (other than the use of Expendables in the Company's operations); (ii) any damage to any of the Pledged Spare Parts which results in the receipt of insurance proceeds with respect to such Pledged Spare Parts on the basis of an actual or constructive loss; or (iii) the loss of possession of any of the Pledged Spare Parts by the Company for ninety (90) consecutive days as a result of the theft or disappearance of such Pledged Spare Parts. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time. "EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a) of the Indenture. "EXCHANGE OFFER" means the exchange offer which may be made pursuant to the Registration Rights Agreement to exchange Initial Certificates for Exchange Certificates. "EXCHANGE OFFER REGISTRATION STATEMENT" means the registration statement that, pursuant to the Registration Rights Agreement, is filed by the Company with the SEC with respect to the exchange of Initial Securities for Exchange Securities. "EXCHANGE SECURITIES" means the securities substantially in the form of Exhibit A to the Indenture issued in exchange for the Initial Securities pursuant to the Registration Rights Agreement and authenticated pursuant to the Indenture. "EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a location not a Designated Location. "EXPENDABLES" means Qualified Spare Parts other than Rotables. "EXPENSES" means any and all liabilities, obligations, losses, damages, settlements, penalties, claims, actions, suits, costs, expenses and disbursements (including, without limitation, reasonable fees and disbursements of legal counsel, accountants, appraisers, inspectors or other professionals, and costs of investigation). "FAA" means the Federal Aviation Administration or similar regulatory authority established to replace it. "FAA FILED DOCUMENTS" means the Security Agreement. "FACILITY OFFICE" means, with respect to any Liquidity Facility, the office of the Liquidity Provider thereunder, presently located at 1585 Broadway, New York, New York 10036, or such other office as such Liquidity Provider from time to time shall notify the Trustee as its "Facility Office" under any such Liquidity Facility; provided that such Liquidity Provider shall not change its Facility Office to another Facility Office outside the United States of America except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity Facility.

"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market value determined on the basis of a hypothetical sale negotiated in an arm's length free market transaction between a willing and able seller and a willing and able buyer, neither of whom is under undue pressure to complete the transaction, under then current market conditions, provided that cash shall be valued at its Dollar amount. "FEDERAL AVIATION ACT" means Title 49 of the United States Code, "Transportation", as amended from time to time, or any similar legislation of the United States enacted in substitution or replacement thereof. "FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the Closing Date between the Trustee and the initial Liquidity Provider with respect to the initial Liquidity Facility and (ii) any fee letter entered into between the Trustee and any Replacement Liquidity Provider in respect of any Replacement Liquidity Facility. "FINAL DRAWING" is defined in Section 3.5(i) of the Indenture. "FINAL LEGAL MATURITY DATE" means December 6, 2009. "FINAL ORDER" has the meaning assigned to such term in the Policy. "FINAL SCHEDULED PAYMENT DATE" means December 6, 2007. "FINANCING STATEMENTS" means, collectively, UCC-1 financing statements covering the Spare Parts Collateral, by the Company, as debtor, showing the Security Agent as secured party, for filing in Delaware, Guam and each other jurisdiction that, in the opinion of the Security Agent, is necessary to perfect its Lien on the Spare Parts Collateral. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture. "GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture. "GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar government, and any body, board, department, commission, court, tribunal, authority, agency or other instrumentality of any such government or otherwise exercising any executive, legislative, judicial, administrative or regulatory functions of such government or (b) any other government entity having jurisdiction over any matter contemplated by the Operative Documents or relating

to the observance or performance of the obligations of any of the parties to the Operative Documents. "HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is registered on the Registrar's books. "INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each separate or additional trustee or security agent appointed pursuant to the Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each of the respective directors, officers, employees, agents and servants of each of the persons described in clauses (i) through (iv) inclusive above. "INDENTURE" means the Indenture dated as of December 6, 2002, among the Company, the Trustee, the Liquidity Provider and the Policy Provider under which the Securities are issued. "INDENTURE DISCHARGE DATE" means the date of the termination of the effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without giving effect to Section 9.1(b) thereof). "INDENTURE TRUSTEE" means the Trustee. "INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other Person (i) engaged in a business which includes appraising Aircraft and assets related to the operation and maintenance of Aircraft from time to time and (ii) who does not have any material financial interest in the Company and is not connected with the Company or any of its Affiliates as an officer, director, employee, promoter, underwriter, partner or person performing similar functions. "INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an Independent Appraiser and attached as Appendix II to the Offering Memo or delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral Maintenance Agreement. "INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950. "INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a) of the Indenture. "INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated. "INITIAL SECURITIES" mean the securities issued and authenticated pursuant to the Indenture and substantially in the form of Exhibit A thereto, other than the Exchange Securities. "INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. "INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture. "INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6 of each year so long as any Security is Outstanding (commencing March 6, 2003),

PROVIDED that if any such day is not a Business Day, then the relevant Interest Payment Date shall be the next succeeding Business Day. "INTEREST PERIOD" means (i) in the case of the first Interest Period, the period commencing on (and including) the Closing Date and ending on (but excluding) the first Interest Payment Date following such date and (ii) in the case of each subsequent Interest Period, the period commencing on (and including) the last day of the immediately preceding Interest Period, and ending on (but excluding) the next Interest Payment Date. "INVESTMENT EARNINGS" means investment earnings on funds on deposit in the Trust Accounts net of losses and investment expenses of the Trustee in making such investments. "INVESTMENT SECURITY" means (a) any bond, note or other obligation which is a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any obligation which is a direct obligation of or guaranteed by any state of the U.S. or any subdivision thereof or any agency of any such state or subdivision, and which has the highest rating published by Moody's or Standard & Poor's; (c) any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's or A-1 by Standard & Poor's; (d) any money market investment instrument relying upon the credit and backing of any bank or trust company which is a member of the Federal Reserve System and which has a combined capital (including capital reserves to the extent not included in capital) and surplus and undivided profits of not less than $250,000,000 (including the Collateral Agent and its Affiliates if such requirements as to Federal Reserve System membership and combined capital and surplus and undivided profits are satisfied), including, without limitation, certificates of deposit, time and other interest-bearing deposits, bankers' acceptances, commercial paper, loan and mortgage participation certificates and documented discount notes accompanied by irrevocable letters of credit and money market fund investing solely in securities backed by the full faith and credit of the United States; or (e) repurchase agreements collateralized by any of the foregoing. "ISSUANCE DATE" means the date of issuance of the Initial Securities. "LAW" means (a) any constitution, treaty, statute, law, decree, regulation, order, rule or directive of any Government Entity, and (b) any judicial or administrative interpretation or application of, or decision under, any of the foregoing. "LIBOR" has the meaning specified in the Reference Agency Agreement. "LIBOR ADVANCE" has the meaning provided in the Liquidity Facility. "LIEN" means any mortgage, pledge, lease, security interest, encumbrance, lien or charge of any kind affecting title to or any interest in property. "LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the Liquidity Facility. "LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the principal amount of any Drawings under the Liquidity Facility and (ii) any interest accrued on any Liquidity Obligations.

"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated as of the Issuance Date, between the Trustee and the initial Liquidity Provider, and from and after the replacement of such Revolving Credit Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date of the Indenture, providing for the guarantee by the Liquidity Guarantor of the obligations of the Liquidity Provider under the Liquidity Facility. "LIQUIDITY GUARANTOR" means Morgan Stanley. "LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee Letter. "LIQUIDITY PROVIDER" means Morgan Stanley Capital Services Inc., together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the Indenture. "LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the Indenture. "LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement. "MATERIAL ADVERSE CHANGE" means, with respect to any person, any event, condition or circumstance that materially and adversely affects such person's business or consolidated financial condition, or its ability to observe or perform its obligations, liabilities and agreements under the Operative Documents. "MAXIMUM COLLATERAL RATIO" means 45%. "MINIMUM ROTABLE RATIO" means 150%. "MOODY'S" means Moody's Investors Service, Inc. "MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement. "MSCS" has the meaning specified in the first paragraph of the Indenture. "NEW YORK UCC" is defined in Section 1.01 of the Security Agreement. "NONAPPRAISAL COMPLIANCE REPORT" means a report providing information relating to compliance by the Company with Section 3.2 of the Collateral Maintenance Agreement, which shall be substantially in the form of Appendix III to the Collateral Maintenance Agreement. "NON-CONTROLLING PARTY" means, at any time, the Holders, the Liquidity Provider and the Policy Provider, excluding whichever is the Controlling Party at such time. "NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.

"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture. "NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture. "NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the Indenture. "NON-PERFORMING" means, with respect to any Security, a Payment Default existing thereunder (without giving effect to any Acceleration); PROVIDED, that, in the event of a bankruptcy proceeding under the Bankruptcy Code in which the Company is a debtor, any Payment Default existing at the commencement of such bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy Code or as may apply for the cure of such Payment Default under Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into consideration until the expiration of the applicable period. "NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture. "NON-U.S. PERSON" means any Person other than a U.S. person, as defined in Regulation S. "NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the Policy. "NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined in the Policy. "OBLIGATIONS" is defined in Section 2.01 of the Security Agreement. "OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of the Company relating to the offering of the Securities. "OFFICER" means the Chairman of the Board, the President, any Vice President of any grade, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers satisfying the requirements of Sections 12.4 and 12.5 of the Indenture. "OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the Collateral Maintenance Agreement and the Reference Agency Agreement. "OPINION OF COUNSEL" means a written opinion from the General Counsel of the Company, legal counsel to the Company or another legal counsel who is reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the Company. The acceptance by the Trustee (without written objection to the Company during the fifteen (15) Business Days following receipt) of, or its action on, an opinion of counsel not specifically referred to above shall be sufficient evidence that such counsel is acceptable to the Trustee.

"OUTSTANDING" or "OUTSTANDING" when used with respect to Securities or a Security, means all Securities theretofore authenticated and delivered under the Indenture, except: (a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee in trust for the Holders of such Securities, PROVIDED that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Trustee has been made; (c) Securities for which payment has been deposited with the Trustee or any Paying Agent in trust pursuant to Article 9 of the Indenture (except to the extent provided therein); and (d) Securities which have been paid, or for which other Securities shall have been authenticated and delivered in lieu thereof or in substitution therefor pursuant to the terms of Section 2.12 of the Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by bona fide purchasers in whose hands the Securities are valid obligations of the Company. A Security does not cease to be Outstanding because the Company or one of its Affiliates holds the Security; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite aggregate principal amount of Securities Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or any other Operative Document, Section 2.13 of the Indenture shall be applicable. "OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture. "OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on the Securities which is not in fact received by the Trustee (whether from the Company, the Liquidity Provider, the Policy Provider or otherwise) on or within five days after the Scheduled Payment Date relating thereto and which is not subsequently paid in connection with the redemption or final maturity of a Security. "PARTS INVENTORY REPORT" means, as of any date, a list identifying the Pledged Spare Parts by manufacturer's part number and brief description and stating the quantity of each such part included in the Pledged Spare Parts as of such specified date. "PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture. "PAYMENT" means (i) any payment of principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to the Securities from the Company, (ii) any payment of interest on the Securities with funds drawn under the Liquidity Facility or from a Cash Collateral Account or (iii) any payment of interest on or principal of Securities with funds drawn under the Policy, or (iv) any payment received or amount realized by the Trustee from the exercise of remedies after the occurrence of an Event of Default.

"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the Indenture. "PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the maximum rate permitted by applicable law. "PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance Agreement. "PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the Collateral Maintenance Agreement. "PERMITTED LIEN" means (a) the rights of Security Agent under the Operative Documents; (b) Liens attributable to Security Agent (both in its capacity as Security Agent and in its individual capacity); (c) the rights of others under agreements or arrangements to the extent expressly permitted by the terms of Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the Company (and its U.S. federal tax law consolidated group), either not yet due or being contested in good faith by appropriate proceedings so long as such Liens and such proceedings do not involve any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent therein or impair the Lien of the Security Agreement; (e) materialmen's, mechanics', workers', repairers', employees' or other like Liens arising in the ordinary course of business for amounts the payment of which is either not yet delinquent for more than 60 days or is being contested in good faith by appropriate proceedings, so long as such Liens and such proceedings do not involve any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent therein or impair the Lien of the Security Agreement; (f) Liens arising out of any judgment or award against the Company, so long as such judgment shall, within 60 days after the entry thereof, have been discharged or vacated, or execution thereof stayed pending appeal or shall have been discharged, vacated or reversed within 60 days after the expiration of such stay, and so long as during any such 60 day period there is not as a result, or any such judgment or award does not involve, any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent therein or any impairment of the Lien of the Security Agreement; (g) any other Lien with respect to which the Company shall have provided a bond, cash collateral or other security adequate in the reasonable opinion of Security Agent. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, trustee, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first paragraph of Section 2.01 of the Security Agreement. "POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance Policy No. 39753, issued as of the Closing Date, as amended, supplemented or otherwise modified from time to time in accordance with its respective terms. "POLICY ACCOUNT" means the Eligible Deposit Account established by the Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall make deposits in and withdrawals from in accordance with the Indenture.

"POLICY DRAWING" means any payment of a claim under the Policy. "POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture. "POLICY EXPENSES" means all amounts (including amounts in respect of premiums, fees, expenses or indemnities) due to the Policy Provider under the Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest accrued on any Policy Provider Obligations, and (iii) reimbursement of and interest on the Liquidity Obligations in respect of the Liquidity Facility paid by the Policy Provider to the Liquidity Provider; provided that if, at the time of determination, a Policy Provider Default exists, Policy Expenses shall not include any indemnity payments owed to the Policy Provider. "POLICY FEE LETTER" means the fee letter, dated as of the date hereof, from the Policy Provider to Continental and acknowledged by the Trustee, setting forth the fees and premiums payable with respect to the Policy. "POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance company, and its successors and permitted assigns. "POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement dated as of the date hereof among the Trustee, the Company and the Policy Provider, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following events: (a) the Policy Provider fails to make a payment required under the Policy in accordance with its terms and such failure remains unremedied for two Business Days following the delivery of Written Notice of such failure to the Policy Provider or (b) the Policy Provider (i) files any petition or commences any case or proceeding under any provisions of any federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) makes a general assignment for the benefit of its creditors or (iii) has an order for relief entered against it under any federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is final and nonappealable, or (c) a court of competent jurisdiction, the New York Department of Insurance or another competent regulatory authority enters a final and nonappealable order, judgment or decree (i) appointing a custodian, trustee, agent or receiver for the Policy Provider or for all or any material portion of its property or (ii) authorizing the taking of possession by a custodian, trustee, agent or receiver of the Policy Provider (or taking of possession of all or any material portion of the Policy Provider's property). "POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture. "POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy Drawing made to cover any shortfall attributable to any failure of the Liquidity Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the Liquidity Facility in an amount equal to the amount of interest that would have accrued on such Interest Drawing if such Interest Drawing had been made in accordance with Section 2.02(e) of the Liquidity Facility at the interest rate applicable to such Interest Drawing until such Policy Drawing has been repaid in full.

"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts, including, without limitation, fees and indemnities (to the extent not included in Policy Expenses), due to the Policy Provider under the Policy Provider Agreement but shall not include any interest on Policy Drawings other than Policy Provider Interest Obligations. "PREMIUM" means, with respect to any Security redeemed pursuant to Article 4 of the Indenture, the following percentage of the principal amount of such Security: (i) if redeemed before the first anniversary of the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and before the second anniversary of the Issuance Date, 1.0%; and (iii) if redeemed on or after such second anniversary and before the third anniversary of the Issuance Date, 0.5%; PROVIDED that no Premium shall be payable in connection with a redemption made by the Company to satisfy the Maximum Collateral Ratio or Minimum Rotable Ratio requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement. "PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the Liquidity Facility on such Distribution Date and any funds withdrawn from the Cash Collateral Account on such Distribution Date in respect of accrued interest on the Securities. "PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the Indenture. "PROPELLER" includes a part, appurtenance, and accessory of a propeller. "PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the Indenture. "PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture. "PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by and between the Initial Purchaser and the Company. "QIB" means a qualified institutional buyer as defined in Rule 144A. "QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first paragraph in Section 2.01 of the Security Agreement. "RATING AGENCIES" means, collectively, at any time, each nationally recognized rating agency which shall have been requested by the Company to rate the Securities and which shall then be rating the Securities. The initial Rating Agency will be Moody's. "RATINGS CONFIRMATION" means, with respect to any action proposed to be taken, a written confirmation from each of the Rating Agencies that such action would not result in (i) a reduction of the rating for the Securities below the then current rating for the Securities (such rating as determined without regard to the Policy) or (ii) a withdrawal or suspension of the rating of the Securities. "RECORD DATE" means the fifteenth (15th) day preceding any Scheduled Interest Payment Date, whether or not a Business Day.

"REDEMPTION DATE", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to the Indenture and such Security. "REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as of the Issuance Date, among the Company, WTC, as the reference agent thereunder, and the Trustee. "REGISTER" has the meaning provided in Section 2.8 of the Indenture. "REGISTRAR" has the meaning provided in Section 2.8 of the Indenture. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated as of December 6, 2002, by and between the Company and the Initial Purchaser. "REGULATION S" means Regulation S under the Securities Act. "REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture. "REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the Indenture. "RELEVANT DATE" is defined in Section 3.6(c) of the Indenture. "REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit agreement (or agreements) in substantially the form of the replaced Liquidity Facility, including reinstatement provisions, or in such other form (which may include a letter of credit) as shall permit the Rating Agencies to confirm in writing their respective ratings then in effect for the Securities (before downgrading of such ratings, if any, as a result of the downgrading of the Liquidity Provider), and be consented to by the Policy Provider, which consent shall not be unreasonably withheld or delayed, in a face amount (or in an aggregate face amount) equal to the amount of interest payable on the Securities (at the Capped Interest Rate, and without regard to expected future principal payments) on the eight Interest Payment Dates following the date of replacement of such Liquidity Facility (or if such date is an Interest Payment Date, on such day and the seven Interest Payment Dates following the date of replacement of such Liquidity Facility) and issued by a Person (or Persons) having unsecured short-term debt rating or issuer credit rating, as the case may be, issued by the Rating Agencies which are equal to or higher than the Threshold Rating. Without limitation of the form that a Replacement Liquidity Facility otherwise may have pursuant to the preceding sentence, a Replacement Liquidity Facility for the Securities may have a stated expiration date earlier than 15 days after the Final Legal Maturity Date so long as such Replacement Liquidity Facility provides for a Non-Extension Drawing as contemplated by Section 3.5(d) of the Indenture. "REQUEST" means a written request for the action therein specified signed on behalf of the Company by any Officer and delivered to the Trustee. Each Request shall be accompanied by an Officers' Certificate if and to the extent required by Section 12.4 of the Indenture. "REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of interest, calculated at the Capped Interest Rate, that would be payable on the Securities on each of the eight successive Interest Payment Dates immediately following such day or, if such day is an Interest Payment Date, on such day and the succeeding seven Interest Payment Dates, in each case calculated on the

basis of the outstanding principal amount of the Securities on such date and without regard to expected future payments of principal on the Securities. "REQUIRED HOLDERS" means from time to time the Holders of more than 50% in aggregate unpaid principal amount of the Securities then Outstanding. "RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in the corporate trust administration department of the Trustee or any other officer customarily performing functions similar to those performed by the Persons who at the time shall be such officers or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with a particular subject, (ii) with respect to the Liquidity Provider, any authorized officer of the Liquidity Provider, and (iii) with respect to the Policy Provider, any authorized officer of the Policy Provider. "RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture. "RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture. "RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture. "RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture. "RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture. "ROTABLE" means a Qualified Spare Part that wears over time and can be repeatedly restored to a serviceable condition over a period approximating the life of the flight equipment to which it relates. "ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair Market Value of the Rotables, as set forth in the most recent Independent Appraiser's Certificate delivered by the Company pursuant to Article 2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal amount of all Securities Outstanding minus the sum of the Cash Collateral held by the Collateral Agent. "RULE 144A" means Rule 144A under the Securities Act. "SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement. "SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without giving effect to the proviso to the definition of Interest Payment Date. "SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest, the Interest Payment Date applicable thereto, (ii) with respect to any payment of defaulted interest, the payment date established pursuant to Section 2.16, (iii) with respect to amounts due on the redemption of any Security, the Redemption Date applicable thereto, and (iv) with respect to the final maturity of the Securities, December 6, 2007.

"SEC" means the Securities and Exchange Commission and any government agency succeeding to its functions. "SECTION 1110" means Section 1110 of the Bankruptcy Code. "SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any, agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional period, if any, commencing with the trustee or debtor-in-possession in such proceeding agreeing, with court approval, to perform its obligations under the Operative Documents within such 60 days (or longer period as agreed) and continuing until such time as such trustee or debtor-in-possession ceases to fully perform its obligations thereunder with the result that the period during which the Collateral Agent is prohibited from repossessing the collateral under any Collateral Agreement comes to an end. "SECURITIES" means the "Securities", as defined in the Indenture, that are issued under the Indenture. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SECURITY AGENT" means the Trustee acting in the capacity of security agent on behalf of the Holders under the Security Agreement. "SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of the date of the Indenture between the Company and the Security Agent. "SECURITYHOLDER" means any holder of one or more Securities. "SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions referred to in clauses (iii) and (iv) of the definition of Annual Methodology. "SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral Maintenance Agreement. "SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for incorporation in, installation on, attachment or appurtenance to or use in an Aircraft, Engine or other Qualified Spare Part. "SHELF REGISTRATION STATEMENT" means the shelf registration statement which may be required to be filed by the Company with the SEC pursuant to the Registration Rights Agreement, other than an Exchange Offer Registration Statement. "SPARE PART" means an accessory, appurtenance, or part of an Aircraft (except an Engine or Propeller), Engine (except a Propeller), Propeller, or Appliance, that is to be installed at a later time in an Aircraft, Engine, Propeller or Appliance. "SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the Security Agreement.

"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the first paragraph of Section 2.01 of the Security Agreement. "SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy Event. "SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the Indenture. "SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral Maintenance Agreement. "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity Facility). "STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture. "SUBORDINATED SECURITIES" is defined in Section 2.18 of the Indenture. "SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture. "SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security Agreement substantially in the form of Exhibit A to the Security Agreement. "SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy Provider Agreement and the Fee Letters. "TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, loss, damage, liability, expense, additions to tax and additional amounts or costs incurred or imposed with respect thereto) imposed or otherwise assessed by the United States of America or by any state, local or foreign government (or any subdivision or agency thereof) or other taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth and similar charges; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, taxes on goods and services, gains taxes, license, registration and documentation fees, customs duties, tariffs, and similar charges. "TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity Facility. "THRESHOLD AMOUNT" means $2,000,000. "THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply to the Liquidity Guarantor.

"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that in the event the TIA is amended after such date, "TIA" means, to the extent required by any such amendment, the TIA as so amended. "TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture. "TRUST OFFICER" means any officer in the corporate trust department of the Trustee, or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "TRUSTEE" means the party named as such in the Indenture until a successor replaces it in accordance with the provisions of the Indenture and thereafter means the successor. "TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the Indenture. "TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral Maintenance Agreement. "TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture. "UCC" means the Uniform Commercial Code as in effect in any applicable jurisdiction. "UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility. "UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable Parts. "U.S." or "UNITED STATES" means the United States of America. "U.S. AIR CARRIER" means any United States air carrier that is a Citizen of the United States holding an air carrier operating certificate issued pursuant to chapter 447 of title 49 of the United States Code for aircraft capable of carrying 10 or more individuals or 6000 pounds or more of cargo. "U.S. GOVERNMENT" means the federal government of the United States, or any instrumentality or agency thereof the obligations of which are guaranteed by the full faith and credit of the federal government of the United States. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the option of the issuer thereof. "U.S. PERSON" means any Person described in Section 7701(a)(30) of the Code. "VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance Agreement. "WARRANTIES" is defined in clause (2) of Section 2.01 of the Security Agreement. "WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the Policy Provider, a written instrument executed by the Designated Representative

of such Person. An invoice delivered by the Liquidity Provider pursuant to Section 3.1 of the Indenture in accordance with its normal invoicing procedures shall constitute Written Notice under such Section. "WTC" has the meaning specified in the first paragraph of the Indenture. SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the following rules of construction shall apply for all purposes of the Operative Documents (including this appendix) and of such agreements as may incorporate this appendix by reference. (a) In each Operative Document, unless otherwise expressly provided, a reference to: (i) each of the Company, the Trustee, the Collateral Agent, the Security Agent or any other person includes, without prejudice to the provisions of any Operative Document, any successor in interest to it and any permitted transferee, permitted purchaser or permitted assignee of it; (ii) words importing the plural include the singular and words importing the singular include the plural; (iii) any agreement, instrument or document, or any annex, schedule or exhibit thereto, or any other part thereof, includes, without prejudice to the provisions of any Operative Document, that agreement, instrument or document, or annex, schedule or exhibit, or part, respectively, as amended, modified or supplemented from time to time in accordance with its terms and in accordance with the Operative Documents, and any agreement, instrument or document entered into in substitution or replacement therefor; (iv) any provision of any Law includes any such provision as amended, modified, supplemented, substituted, reissued or reenacted prior to the Closing Date, and thereafter from time to time; (v) the words "Agreement", "this Agreement", "hereby", "herein", "hereto", "hereof" and "hereunder" and words of similar import when used in any Operative Document refer to such Operative Document as a whole and not to any particular provision of such Operative Document; (vi) the words "including", "including, without limitation", "including, but not limited to", and terms or phrases of similar import when used in any Operative Document, with respect to any matter or thing, mean including, without limitation, such matter or thing; and (vii) a "Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule" in any Operative Document, or in any annex thereto, is a reference to a section of, or an exhibit, an annex, an appendix or a schedule to, such Operative Document or such annex, respectively.

(b) Each exhibit, annex, appendix and schedule to each Operative Document is incorporated in, and shall be deemed to be a part of, such Operative Document. (c) Unless otherwise defined or specified in any Operative Document, all accounting terms therein shall be construed and all accounting determinations thereunder shall be made in accordance with GAAP. (d) Headings used in any Operative Document are for convenience only and shall not in any way affect the construction of, or be taken into consideration in interpreting, such Operative Document. (e) For purposes of each Operative Document, the occurrence and continuance of a Default or Event of Default referred to in Section 7.1(d), (e) or (f) of the Indenture shall not be deemed to prohibit the Company from taking any action or exercising any right that is conditioned on no Special Default, Default or Event of Default having occurred and be continuing if such Special Default, Default or Event of Default consists of the institution of reorganization proceedings with respect to the Company under Chapter 11 of the Bankruptcy Code and the trustee or debtor-in-possession in such proceedings shall have agreed to perform its obligations under the Operative Documents with the approval of the applicable court and thereafter shall have continued to perform such obligations in accordance with Section 1110.

Appendix II to the Collateral Maintenance Agreement [Address to Policy Provider and to the Trustee] APPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL MAINTENANCE AGREEMENT Ladies and Gentlemen: We refer to the Collateral Maintenance Agreement, dated as of December 6, 2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance Corporation (the "AGREEMENT"). Terms defined in the Agreement and used herein have such respective defined meanings. The Company hereby certifies that: 1. This Compliance Report is accompanied by an Independent Appraiser's Certificate (the "RELEVANT APPRAISAL") dated [___________]. The Valuation Date for purposes of the Relevant Appraisal was [___________] (the "RELEVANT VALUATION DATE"). 2. The following sets forth the calculation of the Collateral Ratio as of the Relevant Valuation Date: a. The aggregate principal amount of all Securities Outstanding as of the Relevant Valuation Date $[_______] b. The Fair Market Value of the Cash Collateral as of the Relevant Valuation Date $[_______] c. The Fair Market Value of the Collateral (excluding Cash Collateral) as of the Relevant Valuation Date, as set forth in the accompanying Independent Appraiser's Certificate $[_______] d. The Collateral Ratio ((a - b) / c) [_______]%

3. The following sets forth the calculation of the Rotable Ratio as of the Relevant Valuation Date: a. The Fair Market Value of the Rotables as of the Relevant Valuation Date, as set forth in the accompanying Independent Appraiser's Certificate $[_______] b. The aggregate principal amount of all Securities Outstanding as of the Relevant Valuation Date $[_______] c. The Fair Market Value of the Cash Collateral as of the Relevant Valuation Date $[_______] d. The Rotable Ratio (a / b - c) [_______]% 4. The Continental Cash Balance as of the Relevant Valuation Date was $[___________]. Dated: [__________] Very truly yours, CONTINENTAL AIRLINES, INC. By: -------------------------------- Name: Title:

Appendix III to the Collateral Maintenance Agreement [Address to Policy Provider and to the Trustee] NONAPPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL MAINTENANCE AGREEMENT Ladies and Gentlemen: We refer to the Collateral Maintenance Agreement, dated as of December 6, 2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance Corporation (the "AGREEMENT"). Terms defined in the Agreement and used herein have such respective defined meanings. The Company hereby certifies that: 1. The most recent Independent Appraiser's Certificate furnished by the Company (the "RELEVANT APPRAISAL") [was dated October 31, 2002] [pursuant to Article 2 of the Agreement was dated [______________] (the "RELEVANT DATE").] The Valuation Date for purposes of the Relevant Appraisal was [___________] (the "RELEVANT VALUATION DATE"). 2. The aggregate Appraised Value of all Collateral determined as of the Relevant Valuation Date pursuant to the Agreement [, as subsequently supplemented pursuant to Section 3.1 of the Agreement,] is $[________]. 3. During the period (the "RELEVANT PERIOD") beginning on the [Closing Date] [Relevant Date] and ending on [_______] (the "DETERMINATION DATE"). i) Sales did not exceed 2% of the Appraised Value of the Collateral, and ii) Moves did not exceed 2% of the Appraised Value of the Collateral. 4. Loans outstanding on the Determination Date did not exceed 2% of the Appraised Value of the Collateral. 5. Attached hereto as Exhibit 1 is a report that correctly sets forth as of the Determination Date the percentage of the average cost of all Pledged Spare Parts consisting of Rotables, Expendables and all Pledged Spare Parts located at each Company facility. 6. Attached hereto as Exhibit 2 is a report that correctly sets forth the following information as of the Determination Date with respect to each Pledged Spare Part model among the 500 Pledged Spare Part models with the highest aggregate Appraised Value: i) Manufacturer's part number; ii) the Company's part tracking number; iii) part description;

iv) related aircraft model(s); v) classification as Rotable or Expendable; vi) quantity on hand; and vii) the Company's average cost. Very truly yours, CONTINENTAL AIRLINES, INC. By: -------------------------------- Name: Title:

Appendix IV to the Collateral Maintenance Agreement INSURANCE [OMITTED AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]

                         SPARE PARTS SECURITY AGREEMENT


                                      FROM


                           CONTINENTAL AIRLINES, INC.


                                       TO


                            WILMINGTON TRUST COMPANY,
                                As Security Agent


                          Dated as of December 6, 2002


                      Floating Rate Secured Notes due 2007

TABLE OF CONTENTS PAGE ARTICLE 1 - DEFINITIONS AND RULES OF CONSTRUCTION SECTION 1.01 DEFINITIONS.....................................................1 SECTION 1.02 RULES OF CONSTRUCTION...........................................1 ARTICLE 2 - SECURITY INTEREST SECTION 2.01 GRANT OF SECURITY INTEREST......................................2 ARTICLE 3 - REPRESENTATIONS AND WARRANTIES SECTION 3.01 ORGANIZATION; QUALIFICATION.....................................4 SECTION 3.02 CORPORATE AUTHORIZATION.........................................4 SECTION 3.03 NO VIOLATION....................................................5 SECTION 3.04 APPROVALS.......................................................5 SECTION 3.05 VALID AND BINDING AGREEMENTS....................................5 SECTION 3.06 REGISTRATION AND RECORDATION....................................5 SECTION 3.07 THE COMPANY'S LOCATION..........................................5 SECTION 3.08 COMPLIANCE WITH LAWS............................................6 SECTION 3.09 BROKER'S FEES...................................................6 SECTION 3.10 SECTION 1110....................................................6 ARTICLE 4 - COVENANTS SECTION 4.01 NOTICE OF CHANGE OF LOCATION....................................6 SECTION 4.02 USE, POSSESSION AND DESIGNATED LOCATIONS........................6 SECTION 4.03 PERMITTED SALE OR DISPOSITIONS..................................7 SECTION 4.04 CERTAIN ASSURANCES..............................................8 SECTION 4.05 INDENTURE OBLIGATIONS...........................................8 ARTICLE 5 - INSURANCE SECTION 5.01 APPLICATION OF INSURANCE PROCEEDS...............................8 SECTION 5.02 APPLICATION OF PAYMENTS DURING EXISTENCE OF A SPECIAL DEFAULT OR EVENT OF DEFAULT.............................................9 ARTICLE 6 - REMEDIES SECTION 6.01 REMEDIES........................................................9 SECTION 6.02 APPLICATION OF PROCEEDS........................................11 SECTION 6.03 OBLIGATIONS OF COMPANY NOT AFFECTED BY REMEDIES................11 SECTION 6.04 REMEDIES CUMULATIVE............................................11 SECTION 6.05 DISCONTINUANCE OF PROCEEDINGS..................................12

SECTION 6.06 WAIVER OF PAST DEFAULTS........................................12 SECTION 6.07 APPOINTMENT OF RECEIVER........................................12 SECTION 6.08 SECURITY AGENT AUTHORIZED TO EXECUTE BILLS OF SALE, ETC........12 ARTICLE 7 - CASH COLLATERAL SECTION 7.01 MAINTAINING THE CASH COLLATERAL................................13 SECTION 7.02 INVESTING OF CASH COLLATERAL...................................13 SECTION 7.03 RELEASE OF CASH COLLATERAL.....................................14 ARTICLE 8 - SECURITY AGENT SECTION 8.01 SECURITY AGENT.................................................14 ARTICLE 9 - MISCELLANEOUS SECTION 9.01 TERMINATION....................................................15 SECTION 9.02 BENEFITS OF SECURITY AGREEMENT RESTRICTED......................15 SECTION 9.03 CERTIFICATES AND OPINIONS OF COUNSEL; STATEMENTS TO BE CONTAINED THEREIN; BASIS THEREFOR..............................15 SECTION 9.04 APPRAISER'S CERTIFICATE........................................15 SECTION 9.05 NOTICES; WAIVER................................................15 SECTION 9.06 AMENDMENTS, ETC................................................16 SECTION 9.07 NO WAIVER......................................................16 SECTION 9.08 CONFLICT WITH TRUST INDENTURE ACT OF 1939......................17 SECTION 9.09 SUCCESSORS AND ASSIGNS.........................................17 SECTION 9.10 GOVERNING LAW..................................................17 SECTION 9.11 EFFECT OF HEADINGS.............................................17 SECTION 9.12 COUNTERPART ORIGINALS..........................................17 SECTION 9.13 SEVERABILITY...................................................17 SECTION 9.14 SURVIVAL PROVISIONS............................................17 SECTION 9.15 BANKRUPTCY.....................................................18 APPENDIX I DEFINITIONS EXHIBIT A FORM OF SUPPLEMENTAL SECURITY AGREEMENT (To Add Designated Locations) SCHEDULE 1 DESIGNATED LOCATIONS

SPARE PARTS SECURITY AGREEMENT SPARE PARTS SECURITY AGREEMENT, dated as of December 6, 2002, by and between CONTINENTAL AIRLINES, INC., a Delaware corporation (the "COMPANY"), and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Security Agent appointed pursuant to the Indenture (the "SECURITY AGENT"). RECITALS WHEREAS, the Company, which is a certificated air carrier under Section 44705 of title 49 of the U.S. Code, the Trustee, the Policy Provider and the Liquidity Provider have entered into the Indenture, providing for the issuance of $200,000,000 aggregate principal amount of the Securities; and WHEREAS, in order to secure the payment of the principal amount of and interest on the Securities and all other Obligations of the Company under the Indenture, the Securities and the other Operative Documents, the Company has agreed to grant a security interest in certain Spare Parts, Appliances and other Collateral, as provided for herein; and WHEREAS, Schedule 1 to this Agreement specifically describes the locations at which such Spare Parts and Appliances covered by the security interest of this Agreement may be maintained by or on behalf of the Company, and Section 4.02(b) of this Agreement provides for the designation of additional locations pursuant to Supplemental Security Agreements; and WHEREAS, the Company and the Security Agent wish to set forth herein their respective rights, liabilities and obligations with respect to the Spare Parts Collateral. NOW, THEREFORE, in consideration of the premises and other benefits to the Company, the receipt and sufficiency of which are hereby acknowledged, the Company and the Security Agent agree as follows: ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION SECTION 1.01 DEFINITIONS. Capitalized terms used above or hereinafter and not otherwise defined herein shall have the meanings ascribed to such terms in Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall be part of this Security Agreement as if fully set forth in this place. Unless otherwise defined in this Security Agreement or in Section 1 of the Definitions Appendix, terms defined in Article 8 or 9 of the UCC as in effect in the State of New York (the "NY UCC") are used in this Security Agreement as such terms are defined in such Article 8 or 9. SECTION 1.02 RULES OF CONSTRUCTION. The rules of construction for this Security Agreement are set forth in Section 2 of the Definitions Appendix.

ARTICLE 2 SECURITY INTEREST SECTION 2.01 GRANT OF SECURITY INTEREST. To secure the prompt payment of the principal amount of, interest on, and Premium, if any, and Break Amount, if any, with respect to, all Securities from time to time outstanding under the Indenture according to their tenor and effect, and the prompt payment of all other amounts from time to time owing by the Company under, and the performance and observance by the Company of all the agreements, covenants and provisions contained in, the Indenture, the Securities, this Security Agreement and the other Operative Documents (collectively, the "OBLIGATIONS"), for the benefit of the Holders and each of the Indemnitees, and in consideration of the premises and of the covenants herein contained, and of the acceptance of the Securities by the Holders thereof, and for other good and valuable consideration the receipt and adequacy whereof are hereby acknowledged, the Company has granted, bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and confirmed, and does hereby grant, bargain, sell, assign, transfer, convey, mortgage, pledge and confirm, unto the Security Agent, its successors in trust and assigns, for the security and benefit of, the Holders and each of the Indemnitees, a first priority security interest in and mortgage lien on all right, title and interest of the Company in, to and under the following described property, rights and privileges, whether now owned or hereafter acquired (which, collectively, together with all property hereafter specifically subject to the Lien of this Security Agreement by the terms hereof or any supplement hereto, are included within, and are referred to as, the "SPARE PARTS COLLATERAL"), to wit: (1) all Spare Parts and Appliances first placed in service after October 22, 1994 and currently owned or hereafter acquired by the Company that (a) are appropriate for incorporation in, installation on, attachment or appurtenance to, or use in, (i) one or more of the following models of Aircraft: a Boeing model 737-700, 737-800, 737-900, 757-200, 757-300, 767-200, 767-400 or 777-200 Aircraft; (ii) any Engine utilized on any such Aircraft; or (iii) any other Qualified Spare Part, and (b) are not appropriate for incorporation in, installation on, attachment or appurtenance to, or use in, any other model of Aircraft currently operated by the Company or any Engine utilized on any such other model of Aircraft ("QUALIFIED SPARE PARTS"), PROVIDED that the following shall be excluded from the Lien of this Security Agreement: (w) any Spare Part or Appliance so long as it is incorporated in, installed on, attached or appurtenant to, or being used in, an Aircraft, Engine or Qualified Spare Part that is so incorporated, installed, attached, appurtenant or being used; (x) any Spare Part or Appliance that has been incorporated in, installed on, attached or appurtenant to, or used in an Aircraft, Engine or Qualified Spare Part that has been so incorporated, installed, attached, appurtenant or used, for so long after its removal from such Aircraft or Engine as it remains owned by a lessor or conditional seller of, or subject to a Lien applicable to, such Aircraft or Engine; (y) the Excluded Parts; and (z) any Spare Part or Appliance leased to, loaned to, or held on consignment by, the Company (such Spare Parts and Appliances, giving effect to such exclusions, the "PLEDGED SPARE PARTS");

(2) the rights of the Company under any warranty or indemnity, express or implied, regarding title, materials, workmanship, design or patent infringement or related matters in respect of the Pledged Spare Parts (the "WARRANTIES"); (3) all proceeds with respect to the sale or other disposition by the Security Agent of any Pledged Spare Part or other Spare Parts Collateral pursuant to the terms of this Security Agreement, and all insurance proceeds with respect to any Pledged Spare Part, but excluding any insurance maintained by the Company and not required under the Collateral Maintenance Agreement; (4) all rents, revenues and other proceeds collected by the Security Agent pursuant to Section 6.01(c); (5) all Eligible Accounts; all cash, Investment Securities and other financial assets held therein by the Security Agent or an Eligible Institution; and all security entitlements with respect thereto; (6) all repair, maintenance and inventory records, logs, manuals and all other documents and materials similar thereto (including, without limitation, any such records, logs, manuals, documents and materials that are computer print-outs) at any time maintained, created or used by the Company, and all records, logs, documents and other materials required at any time to be maintained by the Company pursuant to the FAA or under the Federal Aviation Act, in each case with respect to any of the Pledged Spare Parts (the "SPARE PARTS DOCUMENTS"); and (7) all proceeds of the foregoing. PROVIDED, HOWEVER, that notwithstanding any of the foregoing provisions, so long as no Event of Default shall have occurred and be continuing, (a) the Security Agent shall not take or cause to be taken any action contrary to the Company's right hereunder to quiet enjoyment of the Pledged Spare Parts, to possess, use, retain and control the Pledged Spare Parts and to all revenues, income and profits derived therefrom, and (b) the Company shall have the right, to the exclusion of the Security Agent, with respect to the warranties and indemnities referred to in clause (2) above, to exercise in the Company's name all rights and powers (other than to amend, modify or waive any of the warranties or indemnities contained therein, except in the exercise of the Company's reasonable business judgment) and to retain any recovery or benefit resulting from the enforcement of any such warranty or indemnity; and PROVIDED FURTHER THAT, notwithstanding the occurrence or continuation of an Event of Default, the Security Agent shall not enter into any amendment of any such warranty or indemnity which would increase the obligations of the Company thereunder. TO HAVE AND TO HOLD all and singular the aforesaid property unto the Security Agent, and its successors and assigns, in trust for the equal and proportionate benefit and security of the Holders and the Indemnitees, except as provided in Section 3.2 of the Indenture, without any preference, distinction or priority of any one Security over any other by reason of priority of time of issue, sale, negotiation, date of maturity thereof or otherwise for any reason

whatsoever, and for the uses and purposes and in all cases and as to all property specified in clauses (1) through (7) inclusive above, subject to the terms and provisions set forth in this Security Agreement. The Company does hereby constitute the Security Agent the true and lawful attorney of the Company, irrevocably, granted for good and valuable consideration and coupled with an interest and with full power of substitution, and with full power (in the name of the Company or otherwise) to ask for, require, demand, receive, compound and give acquittance for any and all monies and claims for monies (in each case including insurance and requisition proceeds) due and to become due under or arising out of all property which now or hereafter constitutes part of the Spare Parts Collateral, to endorse any checks or other instruments or orders in connection therewith and to file any claims or to take any action or to institute any proceedings which the Security Agent may deem to be necessary or advisable in the premises; PROVIDED that the Security Agent shall not exercise any such rights except upon the occurrence and during the continuance of an Event of Default hereunder. The Company agrees that at any time and from time to time, upon the written request of the Security Agent, the Company will promptly and duly execute and deliver or cause to be duly executed and delivered any and all such further instruments and documents (including without limitation UCC continuation statements) as the Security Agent may reasonably deem necessary to perfect, preserve or protect the mortgage, security interests and assignments created or intended to be created hereby or to obtain for the Security Agent the full benefits of the assignment hereunder and of the rights and powers herein granted. ARTICLE 3 REPRESENTATIONS AND WARRANTIES The Company represents and warrants to the Trustee, the Liquidity Provider, the Policy Provider and the Security Agent as follows: SECTION 3.01 ORGANIZATION; QUALIFICATION. The Company is a corporation duly incorporated, validly existing and in good standing under the Laws of the State of Delaware and has the corporate power and authority to conduct the business in which it is currently engaged and to own or hold under lease its properties and to enter into and perform its obligations under the Operative Documents to which it is party. The Company is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which the nature and extent of the business conducted by it, or the ownership of its properties, requires such qualification, except where the failure to be so qualified would not give rise to a Material Adverse Change to the Company. SECTION 3.02 CORPORATE AUTHORIZATION. The Company has taken, or caused to be taken, all necessary corporate action (including, without limitation, the obtaining of any consent or approval of stockholders required by its Certificate of Incorporation or By-Laws) to authorize the execution and delivery of each of the Operative Documents to which it is party, and the performance of its obligations thereunder.

SECTION 3.03 NO VIOLATION. The execution and delivery by the Company of the Operative Documents to which it is party, the performance by the Company of its obligations thereunder and the consummation by the Company on the Closing Date of the transactions contemplated thereby, do not and will not (a) violate any provision of the Certificate of Incorporation or By-Laws of the Company, (b) violate any Law applicable to or binding on the Company or (c) violate or constitute any default under (other than any violation or default that would not result in a Material Adverse Change to the Company), or result in the creation of any Lien (other than as permitted under this Security Agreement) upon the Pledged Spare Parts under, any indenture, mortgage, chattel mortgage, deed of trust, conditional sales contract, lease, loan or other material agreement, instrument or document to which the Company is a party or by which the Company or any of its properties is bound. SECTION 3.04 APPROVALS. The execution and delivery by the Company of the Operative Documents to which the Company is a party, the performance by the Company of its obligations thereunder and the consummation by the Company on the Closing Date of the transactions contemplated thereby do not and will not require the consent or approval of, or the giving of notice to, or the registration with, or the recording or filing of any documents with, or the taking of any other action in respect of, (a) any trustee or other holder of any debt of the Company and (b) any Government Entity, other than the filing of (x) the FAA Filed Documents (with the FAA) and the Financing Statements (and continuation statements periodically) and (y) filings, recordings, notices or other ministerial actions pursuant to any routine recording, contractual or regulatory requirements applicable to it. SECTION 3.05 VALID AND BINDING AGREEMENTS. The Operative Documents to which the Company is a party have been duly authorized, executed and delivered by the Company and, assuming the due authorization, execution and delivery thereof by the other party or parties thereto, constitute the legal, valid and binding obligations of the Company and are enforceable against the Company in accordance with the respective terms thereof, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, receivership, moratorium and other similar Laws affecting the rights of creditors generally and general principles of equity, whether considered in a proceeding at law or in equity. SECTION 3.06 REGISTRATION AND RECORDATION. Except for (a) the filing for recordation (and recordation) of the FAA Filed Documents with the FAA, (b) the filing of the Financing Statements (and continuation statements relating thereto at periodic intervals), and (c) the deposit of the Initial Cash Collateral with, and the holding and investment of the Initial Cash Collateral by, the Security Agent in accordance with Article 7, no further action, including any filing or recording of any document (including any financing statement in respect thereof under Article 9 of the UCC) is necessary in order to establish and perfect the Security Agent's security interest in the Pledged Spare Parts, the Warranties, the Spare Parts Documents and the Initial Cash Collateral as against the Company and any other Person, in each case, in any applicable jurisdictions in the United States. SECTION 3.07 THE COMPANY'S LOCATION. The Company's location (as such term is used in Section 9-307 of the UCC) is Delaware. The full and correct legal name and mailing address of the Company are correctly set forth in Section 9.05.

SECTION 3.08 COMPLIANCE WITH LAWS. (a) The Company is a Citizen of the United States and a U.S. Air Carrier. (b) The Company holds all licenses, permits and franchises from the appropriate Government Entities necessary to authorize the Company to lawfully engage in air transportation and to carry on scheduled commercial passenger service as currently conducted, except where the failure to so hold any such license, permit or franchise would not give rise to a Material Adverse Change to the Company. (c) The Company is not an "investment company" or a company controlled by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. SECTION 3.09 BROKER'S FEES. No Person acting on behalf of the Company is or will be entitled to any broker's fee, commission or finder's fee in connection with the transactions pursuant to the Operative Documents on the Closing Date, other than the fees and expenses payable by the Company in connection with the sale of the Securities. SECTION 3.10 SECTION 1110. The Security Agent is entitled to the benefits of Section 1110 (as currently in effect) with respect to the right to take possession of the Pledged Spare Parts and to enforce any of its other rights or remedies as provided in the Security Agreement in the event of a case under Chapter 11 of the Bankruptcy Code in which the Company is a debtor. ARTICLE 4 COVENANTS SECTION 4.01 NOTICE OF CHANGE OF LOCATION. The Company will give Security Agent timely written notice (but in any event within 30 days prior to the expiration of the period of time specified under applicable Law to prevent lapse of perfection) of any change in its location (as such term is used in Section 9-307 of the UCC) or legal name and will promptly take any action required by Section 4.04(c) as a result of such relocation. SECTION 4.02 USE, POSSESSION AND DESIGNATED LOCATIONS. (a) Subject to the terms of the Collateral Maintenance Agreement, the Company shall have the right, at any time and from time to time at its own cost and expense, without any release from or consent by the Security Agent, to deal with the Pledged Spare Parts in any manner consistent with the Company's ordinary course of business, including without limitation any of the following: (i) to incorporate in, install on, attach or make appurtenant to, or use in, any Aircraft, Engine or Qualified Spare Part leased to or owned by the Company (whether or not subject to any Lien) any Pledged Spare Part, free from the Lien of this Security Agreement;

(ii) to dismantle any Pledged Spare Part that has become worn out or obsolete or unfit for use, and to sell or dispose of any such Pledged Spare Part or any salvage resulting from such dismantling, free from the Lien of this Security Agreement; and (iii) to transfer any or all of the Pledged Spare Parts located at one or more Designated Locations to one or more other Designated Locations or to one or more locations which are not Designated Locations. (b) The Company shall keep the Pledged Spare Parts at one or more of the Designated Locations, except as otherwise permitted under Sections 4.02(a) or 4.03 of this Agreement or the Collateral Maintenance Agreement. If and whenever the Company shall wish to add a location as a Designated Location, the Company will furnish to the Security Agent the following: (i) a Supplemental Security Agreement duly executed by the Company, identifying each location that is to become a Designated Location and specifically subjecting the Pledged Spare Parts at such location to the Lien of this Security Agreement; (ii) an Opinion of Counsel, dated the date of execution of said Supplemental Security Agreement, stating that said Supplemental Security Agreement has been duly filed for recording in accordance with the provisions of the Federal Aviation Act, and either: (a) no other filing or recording is required in any other place within the United States in order to perfect the Lien of this Security Agreement on the Qualified Spare Parts held at the Designated Locations specified in such Supplemental Security Agreement under the laws of the United States, or (b) if any such other filing or recording shall be required that said filing or recording has been accomplished in such other manner and places, which shall be specified in such Opinion of Counsel, as are necessary to perfect the Lien of this Security Agreement; and (iii) An Officers' Certificate stating that in the opinion of the Officers executing the Officers' Certificate, all conditions precedent provided for in this Security Agreement relating to the subjection of such property to the Lien of this Security Agreement have been complied with. SECTION 4.03 PERMITTED SALE OR DISPOSITIONS. (a) So long as no Event of Default has occurred and is continuing, the Company may sell, transfer or dispose of Pledged Spare Parts free from the Lien of the Security Agreement, subject to the provisions of the Collateral Maintenance Agreement. (b) No purchaser in good faith of property purporting to be transferred pursuant to Section 4.02(a)(ii) or 4.03(a) shall be bound to ascertain or inquire into the authority of the Company to make any such transfer, free and clear of the Lien of this Security Agreement. Any instrument of transfer executed by the Company under Section 4.02(a)(ii) or 4.03 shall be sufficient

for the purposes of this Security Agreement and shall constitute a good and valid release, assignment and transfer of the property therein described free from any right, title or interest of the Security Agent and the Lien of this Security Agreement. SECTION 4.04 CERTAIN ASSURANCES. (a) The Company shall duly execute, acknowledge and deliver, or shall cause to be executed, acknowledged and delivered, all such further agreements, instruments, certificates or documents, and shall do and cause to be done such further acts and things, in any case, as Security Agent shall reasonably request for accomplishing the purposes of this Security Agreement, PROVIDED that any instrument or other document so executed by the Company will not expand any obligations or limit any rights of the Company in respect of the transactions contemplated by any Operative Document. (b) The Company shall promptly take such action with respect to the recording, filing, re-recording and refiling of this Security Agreement and any amendments or supplements thereto, as shall be necessary to continue the perfection and priority of the Lien created by this Security Agreement. (c) The Company, at its sole cost and expense, will cause the FAA Filed Documents, the Financing Statements and all continuation statements (and any amendments necessitated by any consolidation or merger of the Company, any conveyance, transfer or lease of all or substantially all of the assets of the Company, or any change of the Company's location) in respect of the Financing Statements to be prepared and, subject only to the execution and delivery thereof by Security Agent, duly and timely filed and recorded, or filed for recordation, to the extent permitted under the Federal Aviation Act (with respect to the FAA Filed Documents) or the UCC or similar law of any other applicable jurisdiction (with respect to such other documents). SECTION 4.05 INDENTURE OBLIGATIONS. The Company agrees to perform and observe all of the agreements, covenants and obligations of the Company set forth in the Indenture, the Securities and the other Operative Documents (it being understood that this Section 4.05 shall not restrict the ability to amend or supplement, or waive compliance with, any Operative Document in accordance with its terms). ARTICLE 5 INSURANCE SECTION 5.01 APPLICATION OF INSURANCE PROCEEDS. (a) As between the Company and the Security Agent, all insurance proceeds up to the Debt Balance paid under policies required to be maintained by the Company pursuant to the Collateral Maintenance Agreement as a result of the occurrence of an Event of Loss with respect to any Pledged Spare Parts involving proceeds in excess of the Threshold Amount will be paid to the Security Agent. If either the Security Agent or the Company receives a payment of such insurance proceeds in excess of its entitlement pursuant to this Section 5.01, it shall promptly pay such excess to the other. At any time or from time to time after the receipt by the Security Agent of insurance proceeds, upon submission to the Security Agent of an Officers' Certificate stating that the Company has after the occurrence of such Event of Loss purchased additional Qualified Spare Parts that are located at or

have been shipped by vendor(s) to a Designated Location, and stating the aggregate purchase price for such additional Qualified Spare Parts, the Security Agent shall pay the amount of such purchase price, up to the amount of such insurance proceeds not previously disbursed pursuant to this sentence or otherwise distributed under the Indenture in accordance with its terms, to the Company or its designee. (b) All proceeds of insurance required to be maintained by the Company in accordance with the Collateral Maintenance Agreement in respect of any property damage or loss involving proceeds of the Threshold Amount or less or not constituting an Event of Loss with respect to any Pledged Spare Parts and insurance proceeds in excess of the Debt Balance shall be paid over to, and retained by, the Company. SECTION 5.02 APPLICATION OF PAYMENTS DURING EXISTENCE OF A SPECIAL DEFAULT OR EVENT OF DEFAULT. Any amount described in this Article 5 that is payable or creditable to, or retainable by, the Company shall not be paid or credited to, or retained by, the Company if at the time such payment, credit or retention would otherwise occur a Special Default or Event of Default shall have occurred and be continuing, but shall instead be held by or paid over to the Security Agent as security for the obligations of the Company under this Security Agreement and shall be invested pursuant to Article 7 hereof. At such time as there shall not be continuing any Special Default or Event of Default, such amount and any gains thereon shall be paid to the Company to the extent not previously applied in accordance with this Security Agreement. ARTICLE 6 REMEDIES SECTION 6.01 REMEDIES. (a) If an Event of Default shall have occurred and be continuing and so long as the same shall continue unremedied, then and in every such case the Security Agent may exercise any or all of the rights and powers and pursue any and all of the remedies pursuant to this Article 6, shall have and may exercise all of the rights and remedies of a secured party under the UCC, may take possession of all or any part of the properties covered or intended to be covered by the Lien created hereby or pursuant hereto, may exclude the Company and all persons claiming under it wholly or partly therefrom and may sell the Spare Parts Collateral as a whole or from time to time in part; PROVIDED, that the Security Agent shall give the Company twenty days' prior written notice of its intention to sell any Spare Parts Collateral. Without limiting any of the foregoing, it is understood and agreed that the Security Agent may exercise any right of sale of any Spare Parts Collateral available to it, even though it shall not have taken possession of such Spare Parts Collateral and shall not have possession thereof at the time of such sale. (b) If an Event of Default shall have occurred and be continuing, at the request of the Security Agent, the Company shall assemble the Spare Parts Collateral and make it available to the Security Agent at the Designated Locations and shall promptly execute and deliver to the Security Agent such instruments of title and other documents as the Security Agent may deem necessary or advisable to enable the Security Agent or an agent or

representative designated by the Security Agent, at such time or times and place or places as the Security Agent may specify, to obtain possession of all or any part of the Spare Parts Collateral to which the Security Agent shall at the time be entitled hereunder. If the Company shall for any reason fail to execute and deliver such instruments and documents after such request by the Security Agent, the Security Agent may (i) obtain a judgment conferring on the Security Agent the right to immediate possession and requiring the Company to execute and deliver such instruments and documents to the Security Agent, to the entry of which judgment the Company hereby specifically consents to the fullest extent permitted by Law, and (ii) pursue all or part of such Spare Parts Collateral wherever it may be found and may enter any of the premises of Company wherever such Spare Parts Collateral may be or are supposed to be and search for such Spare Parts Collateral and take possession of and remove such Spare Parts Collateral. All expenses of obtaining such judgment or of pursuing, searching for and taking such property shall, until paid, be secured by the Lien of this Security Agreement. (c) Upon every such taking of possession, the Security Agent may, from time to time, at the expense of the Spare Parts Collateral, make all such expenditures for maintenance, use, operation, storage, insurance, leasing, control, management, disposition, modifications or alterations to and of the Spare Parts Collateral, as it may deem proper. In each such case, the Security Agent shall have the right to maintain, use, operate, store, insure, lease, control, manage, dispose of, modify or alter the Spare Parts Collateral and to exercise all rights and powers of the Company relating to the Spare Parts Collateral, as the Security Agent shall deem best, including the right to enter into any and all such agreements with respect to the maintenance, use, operation, storage, insurance, leasing, control, management, disposition, modification or alteration of the Spare Parts Collateral or any part thereof as the Security Agent may determine, and the Security Agent shall be entitled to collect and receive directly all rents, revenues and other proceeds of the Spare Parts Collateral and every part thereof, without prejudice, however, to the right of the Security Agent under any provision of this Security Agreement to collect and receive all cash held by, or required to be deposited with, the Security Agent hereunder. Such rents, revenues and other proceeds shall be applied to pay the expenses of the maintenance, use, operation, storage, insurance, leasing, control, management, disposition, improvement, modification or alteration of the Spare Parts Collateral and of conducting the business thereof, and to make all payments which the Security Agent may be required or may elect to make, if any, for taxes, assessments, insurance or other proper charges upon the Spare Parts Collateral or any part thereof (including the employment of engineers and accountants to examine, inspect and make reports upon the properties and books and records of the Company), and all other payments which the Security Agent may be required or authorized to make under any provision of this Security Agreement, as well as just and reasonable compensation for the services of the Security Agent, and of all persons properly engaged and employed by the Security Agent with respect hereto. (d) The Holders shall be entitled, at any sale pursuant to this Section 6.01, to credit against any purchase price bid at such sale by such Holder all or any part of the unpaid obligations owing to such Holder and secured by the Lien of this Security Agreement (only to the extent that such purchase price would have been paid to such Holder pursuant to Section 3.2 of the Indenture if such purchase price were paid in cash and the foregoing provisions of this subsection (d) were not given effect).

(e) In the event of any sale of the Spare Parts Collateral, or any part thereof, pursuant to any judgment or decree of any court or otherwise in connection with the enforcement of any of the terms of this Security Agreement, the unpaid principal amount of all Securities then outstanding, together with accrued interest thereon, Break Amount, if any, Premium, if any, and other amounts due thereunder, shall immediately become due and payable without presentment, demand, protest or notice, all of which are hereby waived. (f) After the occurrence and during the continuation of an Event of Default, in taking, or refraining from taking, any action under this Security Agreement pursuant to the exercise of remedies under Article 6, the Security Agent shall be directed by the Controlling Party. SECTION 6.02 APPLICATION OF PROCEEDS. If, in the case of the happening of any Event of Default or Acceleration, the Security Agent shall exercise any of the powers conferred upon it by Section 6.01 hereof, all payments made by the Company to the Security Agent hereunder after such Event of Default or Acceleration, and the proceeds of any judgment collected by the Security Agent hereunder, and the proceeds of every sale or lease by the Security Agent hereunder of any part or the whole of the Spare Parts Collateral, together with any other sums which may then be held by the Security Agent under any of the provisions hereof, shall be applied by the Security Agent in the manner set forth in Section 7.10 of the Indenture. After all such payments shall have been made in full, the title to any part or the whole of the Spare Parts Collateral remaining unsold and abandoned by the Security Agent shall be conveyed by the Security Agent to the Company or its named designee free from any further liabilities or obligations to the Security Agent hereunder. If after applying all such sums of money realized by the Security Agent as aforesaid there shall remain any amount due to the Security Agent under the provisions hereof, the Company agrees to pay the amount of such deficit to the Security Agent for application in accordance with the Indenture. SECTION 6.03 OBLIGATIONS OF COMPANY NOT AFFECTED BY REMEDIES. No retaking of possession of part or the whole of the Spare Parts Collateral by the Security Agent, nor any withdrawal, lease or sale thereof, nor any action or failure or omission to act against the Company or in respect of the Spare Parts Collateral, on the part of the Security Agent, the Controlling Party or the Holder of any Securities, nor any delay or indulgence granted to the Company by the Security Agent, the Controlling Party or any such Holder, shall affect the obligations of the Company hereunder. The Security Agent may at any time upon notice in writing to the Company apply to any court of competent jurisdiction for instructions as to the application and distribution of the property held by it. SECTION 6.04 REMEDIES CUMULATIVE. No right, power or remedy herein conferred upon or reserved to the Security Agent, the Trustee, the Policy Provider, the Liquidity Provider and/or the Holders of the Securities is intended to be exclusive of any other right, power or remedy conferred upon or reserved to any one or more of them and every right, power and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right, power and remedy given hereunder or under the Indenture or the other Operative Documents or now or hereafter existing at law or in equity or otherwise (including, without limitation, under the UCC as in effect in any applicable jurisdiction) and may be exercised from time to time and as often and in such

order as may be deemed expedient by the Security Agent, the Trustee, the Policy Provider, the Liquidity Provider and/or the Holders of the Securities, to the extent such right, power or remedy has been conferred upon or reserved to it. The exercise by any of them of any right, power or remedy shall not be construed as a waiver of the right of any of them to exercise at the same time or thereafter any other right, power or remedy, nor as an election precluding exercise at the same time or thereafter of any alternative right, power or remedy. SECTION 6.05 DISCONTINUANCE OF PROCEEDINGS. In case the Security Agent shall have instituted any proceeding to enforce any right, power or remedy under this Security Agreement by foreclosure, entry or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Security Agent, then and in every such case the Company and the Security Agent shall, subject to any determination in such proceedings, be restored to their former positions and rights hereunder with respect to the Spare Parts Collateral, and all rights, remedies and powers of the Company or the Security Agent shall continue as if no such proceedings had been instituted. SECTION 6.06 WAIVER OF PAST DEFAULTS. So long as an Event of Default has occurred and is continuing, upon written instruction from the Controlling Party, the Security Agent shall waive any past Default hereunder and its consequences and upon any such waiver such Default shall cease to exist and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Security Agreement, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. SECTION 6.07 APPOINTMENT OF RECEIVER. The Security Agent shall, as a matter of right, be entitled to the appointment of a receiver (who may be the Security Agent or any successor or nominee thereof) for all or any part of the Spare Parts Collateral, whether such receivership be incidental to a proposed sale of the Spare Parts Collateral or the taking of possession thereof or otherwise, and the Company hereby consents to the appointment of such a receiver and will not oppose any such appointment. Any receiver appointed for all or any part of the Spare Parts Collateral shall be entitled to exercise all the rights and powers of the Security Agent with respect to the Spare Parts Collateral. SECTION 6.08 SECURITY AGENT AUTHORIZED TO EXECUTE BILLS OF SALE, ETC. The Company irrevocably appoints, while an Event of Default has occurred and is continuing, the Security Agent the true and lawful attorney-in-fact of the Company (which appointment is coupled with an interest) in its name and stead and on its behalf, for the purpose of effectuating any sale, assignment, transfer or delivery for the enforcement of the Lien of this Security Agreement, whether pursuant to foreclosure or power of sale, assignments and other instruments as may be necessary or appropriate, with full power of substitution, the Company hereby ratifying and confirming all that such attorney or any substitute shall do by virtue hereof in accordance with applicable law. Nevertheless, if so requested by the Security Agent or any purchaser, the Company shall ratify and confirm any such sale, assignment, transfer or delivery, by executing and delivering to the Security Agent or such purchaser all bills of sale, assignments, releases and other proper instruments to effect such ratification and confirmation as may be designated in any such request.

ARTICLE 7 CASH COLLATERAL SECTION 7.01 MAINTAINING THE CASH COLLATERAL. So long as any Obligation of the Company under the Indenture or other Operative Document shall remain unpaid, the Company will maintain all Cash Collateral only with an Eligible Institution in an Eligible Account (as defined below). At the time the Securities are initially issued, the Company shall deposit the Initial Cash Collateral with the Security Agent to be held by the Security Agent as Cash Collateral under this Agreement. SECTION 7.02 INVESTING OF CASH COLLATERAL. (a) The Security Agent agrees that, notwithstanding anything to the contrary in this Security Agreement or the Indenture, (i) any Investment Securities and any investment earnings thereon shall be credited to an Eligible Account for which either the Security Agent or another Eligible Institution is the "securities intermediary" (as defined in Section 8-102(a)(14) of the NY UCC) and the Security Agent is the "entitlement holder" (as defined in Section 8-102(a)(7) of the NY UCC) of the "securities entitlement" (as defined in Section 8-102(a)(17) of the NY UCC) with respect to each "financial asset" (as defined in Section 8-102(a)(9) of the NY UCC) credited to such Eligible Account, (ii) all such amounts, Investment Securities and all other property acquired with cash credited to such Eligible Account will be credited to such Eligible Account, (iii) all items of property (whether cash, investment property, Investment Securities, other investments, securities, instruments or other property) credited to any Eligible Account will be treated as a "financial asset" under Article 8 of the NY UCC, (iv) the "securities intermediary's jurisdiction" (as defined in Section 8-110(e) of the NY UCC) with respect to such Eligible Account is the State of New York, and (v) all securities, instruments and other property in order or registered form and credited to an Eligible Account shall be payable to or to the order of, or registered in the name of, the applicable securities intermediary or shall be indorsed to such securities intermediary or in blank, and in no case whatsoever shall any financial asset credited to such Eligible Account be registered in the name of the Company, payable to or to the order of the Company or specially indorsed to the Company except to the extent the foregoing have been specially endorsed by the Company to such securities intermediary or in blank. The Security Agent agrees that it will hold (and will indicate clearly in its books and records that it holds) its "securities entitlement" to the "financial assets" credited to any Eligible Account in trust for the benefit of the Holders and the Trustee. The Company acknowledges that, by reason of the Security Agent being the "entitlement holder" in respect of such Eligible Account as provided above, the Security Agent shall have the sole right and discretion, subject only to the terms of this Security Agreement and the Indenture, to give all "entitlement orders" (as defined in Section 8-102(a)(8) of the NY UCC) with respect to such Eligible Account and any and all financial assets and other property credited thereto to the exclusion of the Company. (b) From time to time the Security Agent will (a) invest, or direct the applicable Eligible Institution to invest, amounts received with respect to the applicable Cash Collateral in such Investment Securities as the Company may select and (b) invest or direct the applicable Eligible Institution to invest, interest paid on the Investment Securities referred to in clause (a) above, and

reinvest other proceeds of any such Investment Securities that may mature or be sold, in each case in such Investment Securities credited in the same manner. Interest and proceeds that are not invested or reinvested in Investment Securities as provided above shall be deposited and held as Spare Parts Collateral in the applicable Eligible Account. (c) The Security Agent may sell or direct any Eligible Institution to sell any Investment Securities and the proceeds of such a sale may be retained by the Security Agent as Spare Parts Collateral hereunder. SECTION 7.03 RELEASE OF CASH COLLATERAL. (a) Upon written request by the Company to the Security Agent after notice of redemption of the Securities has been given to Holders pursuant to Article 4 of the Indenture, the Security Agent shall deliver to the Trustee for deposit in the Collection Account Cash Collateral then held by the Security Agent up to the amount required to pay amounts due with respect to the Securities to be redeemed on the applicable Redemption Date. (b) If the Collateral Ratio is less than the Maximum Collateral Ratio and the Rotable Ratio is greater than the Minimum Rotable Ratio, in each case as most recently determined pursuant to Article 2 or Section 3.1 of the Collateral Maintenance Agreement, and the Security Agent held any Cash Collateral as of the Valuation Date for such Collateral Ratio and Rotable Ratio (or subsequent date as of which such ratio was recalculated pursuant to Section 3.1 of the Collateral Maintenance Agreement), upon written request of the Company the Security Agent shall pay to the Company an amount of the Cash Collateral such that the Collateral Ratio would not be greater than the Maximum Collateral Ratio and the Rotable Ratio would not be less than the Minimum Rotable Ratio, giving effect to such payment (but otherwise using the information used as of such most recent determination date to determine such ratio). ARTICLE 8 SECURITY AGENT SECTION 8.01 SECURITY AGENT. The Security Agent has been appointed pursuant to the Indenture as Security Agent hereunder. The Security Agent shall be obligated, and shall have the right, hereunder to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking action (including, without limitation, the release of Spare Parts Collateral) solely in accordance with this Security Agreement and the Indenture. Upon 30 days' written notice to the Company, the Security Agent may resign and a successor Security Agent may be appointed in the manner provided for a successor Trustee in the Indenture. Upon the acceptance of any appointment as a Security Agent by a successor Security Agent, that successor Security Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Security Agent under this Security Agreement, and the retiring Security Agent shall thereupon be discharged from its duties and obligations under this Security Agreement. After any retiring Security Agent's resignation, the provisions of this Security Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Security Agreement while it was Security Agent. The Security Agent agrees to and shall

have the benefit of all provisions of the Indenture and the other Operative Documents stated therein to be applicable to the Security Agent. ARTICLE 9 MISCELLANEOUS SECTION 9.01 TERMINATION. The Company agrees that this is a continuing agreement and shall remain in full force and effect until the occurrence of the Indenture Discharge Date, at which time the Security Agent shall have no further interest in and to the Spare Parts Collateral and will promptly release all of the Security Agent's interest in and to the Spare Parts Collateral, including any cash and/or Investment Securities held in accordance with the terms of this Security Agreement. The Security Agent shall acknowledge the termination of this Security Agreement and the release of the Spare Parts Collateral by executing and delivering to the Company such instruments to the foregoing effect as the Company shall reasonably request, at the sole cost and expense of the Company. SECTION 9.02 BENEFITS OF SECURITY AGREEMENT RESTRICTED. Subject to the provisions of Section 9.09 hereof, nothing in this Security Agreement or the Securities, express or implied, shall give or be construed to give to any Person, other than the parties hereto, the Controlling Party and, in the case of Article 3, the Trustee, the Liquidity Provider and the Policy Provider, any legal or equitable right, remedy or claim under or in respect of this Security Agreement or under any covenant, condition or provision herein contained, all such covenants, conditions and provisions, subject to Section 9.09 hereof, being for the sole benefit of the parties hereto, the Controlling Party and, in the case of Article 3, the Trustee, the Liquidity Provider and the Policy Provider. SECTION 9.03 CERTIFICATES AND OPINIONS OF COUNSEL; STATEMENTS TO BE CONTAINED THEREIN; BASIS THEREFOR. Upon any application or Request by the Company to the Security Agent to take any action under any of the provisions of this Security Agreement, the Company shall furnish to the Security Agent an Officers' Certificate and an Opinion of Counsel in compliance with, but only if required by, Sections 12.4 and/or 12.5 of the Indenture. SECTION 9.04 APPRAISER'S CERTIFICATE. Unless otherwise specifically provided, an Independent Appraiser's Certificate shall be sufficient evidence of the Appraised Value and Fair Market Value to the Company of any property under this Security Agreement. SECTION 9.05 NOTICES; WAIVER. Any request, demand, authorization, direction, notice, consent, waiver or other document provided or permitted by this Security Agreement to be made upon, given or furnished to, or filed with (a) the Company shall be sufficient for every purpose hereunder if in writing and sent by personal delivery, by telecopier, by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to the Company at:

Continental Airlines, Inc. 1600 Smith Street Houston, Texas 77002 Attention: Treasurer Telecopier No.: (713) 324-2447 (b) the Security Agent shall be sufficient for every purpose hereunder if in writing and sent by personal delivery, by telecopier, by registered or certified mail or by nationally recognized overnight courier, postage or courier charges, as the case may be, prepaid, to the Security Agent at: Wilmington Trust Company Rodney Square North 1100 North Market Street Wilmington, Delaware 19890 Attention: Corporate Trust Administration Telecopier No.: (302) 651-8882 or to any of the above parties at any other address or telecopier number subsequently furnished in writing by it to each of the other parties listed above. Any such delivery shall be deemed made on the date of receipt by the addressee of such delivery or of refusal by such addressee to accept delivery. SECTION 9.06 AMENDMENTS, ETC. (a) This Security Agreement may be amended or supplemented, and compliance with any obligation in this Security Agreement may be waived, as provided in Article 10 of the Indenture. (b) The Company and the Security Agent may enter into one or more agreements supplemental hereto without the consent of the Trustee, the Policy Provider, the Liquidity Provider or any Holder for any of the following purposes: (i) to convey, transfer, assign, mortgage or pledge any property to or with the Security Agent; (ii) to correct or amplify the description of any property at any time subject to the Lien of this Security Agreement or better to assure, convey and confirm unto the Security Agent any property subject or required to be subject to the Lien of this Security Agreement; (iii) to add any location as a Designated Location; or (iv) to add to the covenants of the Company for the benefit of the Security Agent, the Trustee, the Policy Provider, the Liquidity Provider or the Holders, or to surrender any rights or power herein conferred upon the Company. (c) If, in the opinion of the institution acting as Security Agent hereunder, any document required to be executed by it pursuant to the terms of Section 9.06 hereof affects any right, duty, immunity or indemnity with respect to such institution under this Security Agreement, such institution may in its discretion decline to execute such document. SECTION 9.07 NO WAIVER. No failure on the part of the Security Agent to exercise, and no delay in exercising any right hereunder shall operate as a

waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Failure by the Security Agent at any time or times hereafter to require strict performance by the Company or any other Person with any of the provisions, warranties, terms or conditions contained herein shall not waive, affect or diminish any right of the Security Agent at any time or times hereafter to demand strict performance thereof, and such right shall not be deemed to have been modified or waived by any course of conduct or knowledge of the Security Agent or any agent, officer or employee of the Security Agent. SECTION 9.08 CONFLICT WITH TRUST INDENTURE ACT OF 1939. If and to the extent that any provision of this Security Agreement limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the TIA, such imposed duties shall control. SECTION 9.09 SUCCESSORS AND ASSIGNS. This Security Agreement and all obligations of the Company hereunder shall be binding upon the successors and permitted assigns of the Company, and shall, together with the rights and remedies of the Security Agent hereunder, inure to the benefit of the Security Agent, the Trustee, the Holders, and their respective successors and assigns. The interest of the Company under this Security Agreement is not assignable and any attempt to assign all or any portion of this Security Agreement by the Company shall be null and void except for an assignment in connection with a merger, consolidation or conveyance, transfer or lease of all or substantially all the Company's assets permitted under the Indenture. SECTION 9.10 GOVERNING LAW. THIS SECURITY AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 9.11 EFFECT OF HEADINGS. The Article and Section headings and the Table of Contents contained in this Security Agreement have been inserted for convenience of reference only, and are and shall be without substantive meaning or content of any kind whatsoever and are not a part of this Security Agreement. SECTION 9.12 COUNTERPART ORIGINALS. This Security Agreement may be signed in two or more counterparts, each of which shall be deemed an original, but all of which shall together constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Security Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Security Agreement. SECTION 9.13 SEVERABILITY. The provisions of this Security Agreement are severable, and if any clause or provision shall be held invalid, illegal or unenforceable in whole or in part in any jurisdiction, then such invalidity or unenforceability shall affect in that jurisdiction only such clause or provision, or part thereof, and shall not in any manner affect such clause or provision in any other jurisdiction or any other clause or provision of this Security Agreement in any jurisdiction. SECTION 9.14 SURVIVAL PROVISIONS. Notwithstanding any right of the Security Agent or any of the Holders to investigate the affairs of the Company, and

notwithstanding any knowledge of facts determined or determinable by any of them pursuant to such investigation or right of investigation, all representations and warranties of the Company contained herein shall survive the execution and delivery of this Security Agreement. SECTION 9.15 BANKRUPTCY. It is the intention of the parties that the Security Agent shall be entitled to the benefits of Section 1110 with respect to the right to take possession of the Pledged Spare Parts and to enforce any of its other rights or remedies as provided herein in the event of a case under Chapter 11 of the Bankruptcy Code in which the Company is a debtor, and in any instance where more than one construction is possible of the terms and conditions hereof or any other pertinent Operative Document, each such party agrees that a construction which would preserve such benefits shall control over any construction which would not preserve such benefits. [SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties have caused this Security Agreement to be duly executed and delivered all as of the date first above written. CONTINENTAL AIRLINES, INC. By: -------------------------------------- Name: Title: WILMINGTON TRUST COMPANY, as Security Agent By: -------------------------------------- Name: Title:

Appendix I DEFINITIONS APPENDIX SECTION 1. DEFINED TERMS. "ACCELERATION" means, with respect to the amounts payable in respect of the Securities issued under the Indenture, such amounts becoming immediately due and payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED" and "ACCELERATING" have meanings correlative to the foregoing. "ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture. "ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral Maintenance Agreement. "ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral Maintenance Agreement. "ADVANCE" means any Advance as defined in the Liquidity Facility. "AFFILIATE" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "CONTROL" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing. "AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying Agent. "AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture. "AIRCRAFT" means any contrivance invented, used, or designed to navigate, or fly in, the air. "ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market Value of the Spare Parts Collateral, taking at least the following actions: (i) reviewing the Parts Inventory Report prepared as of the applicable Valuation Date; (ii) reviewing the Independent Appraiser's internal value database for values applicable to Qualified Spare Parts included in the Spare Parts Collateral; (iii) developing a representative sampling of a reasonable number of the different Qualified Spare Parts included in Spare Parts Collateral for which a market check will be conducted; (iv) checking other sources, such as manufacturers, other airlines, U.S. government procurement data and airline parts pooling price lists, for current market prices of the sample parts referred to in clause (iii); (v) establishing an assumed ratio of Serviceable Parts to Unserviceable Parts as of the applicable Valuation Date based upon information provided by the Company and the Independent Appraiser's limited physical review of the Spare Parts Collateral referred to in the following

clause (vi); (vi) visiting at least two locations selected by the Independent Appraiser where the Pledged Spare Parts are kept by the Company (neither of which was visited for purposes of the last appraisal under Section 2.1 or 2.2 of the Collateral Maintenance Agreement, whichever was most recent), PROVIDED that at least one such location shall be one of the top three locations at which the Company keeps the largest number of Pledged Spare Parts, to conduct a limited physical inspection of the Spare Parts Collateral; (vii) conducting a limited review of the inventory reporting system applicable to the Pledged Spare Parts, including checking information reported in such system against information determined through physical inspection pursuant to the preceding clause (vi) and (viii) reviewing a sampling of the Spare Parts Documents (including tear-down reports). "ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral Maintenance Agreement. "APPLIANCE" means an instrument, equipment, apparatus, a part, an appurtenance, or an accessory used, capable of being used, or intended to be used, in operating or controlling Aircraft in flight, including a parachute, communication equipment, and another mechanism installed in or attached to Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller. "APPLICABLE MARGIN" means 0.90%. "APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance Agreement. "APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing information relating to the calculation of the Collateral Ratio and Rotable Ratio, which shall be substantially in the form of Appendix II to the Collateral Maintenance Agreement. "APPRAISED VALUE" means, with respect to any Collateral, the Fair Market Value of such Collateral as most recently determined pursuant to (i) the report attached as Appendix II to the Offering Memo or (ii) Article 2 and, if applicable, Section 3.1 of the Collateral Maintenance Agreement. "AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment (as defined in the Liquidity Facility) on such date. "AVOIDED PAYMENT" has the meaning assigned to such term in the Policy. "BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C. Section 101 ET SEQ. "BOARD OF DIRECTORS" means the Board of Directors of the Company or any committee of such board duly authorized to act in respect of any particular matter. "BREAK AMOUNT" means, as of any date of payment, redemption or acceleration of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent on the date that is two Business Days prior to the Applicable Date pursuant to the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be payable (x) if the Break Amount, as calculated pursuant to the formula set forth below, is equal to or less than zero or (y) on or in respect of any Applicable

Date that is an Interest Payment Date (or, if such an Interest Payment Date is not a Business Day, the next succeeding Business Day) Break Amount = Z-Y Where: X = with respect to any applicable Interest Period, the sum of (i) the amount of the outstanding principal amount of such Note as of the first day of the then applicable Interest Period plus (ii) interest payable thereon during such entire Interest Period at then effective LIBOR. Y = X, discounted to present value from the last day of the then applicable Interest Period to the Applicable Date, using then effective LIBOR as the discount rate. Z = X, discounted to present value from the last day of the then applicable Interest Period to the Applicable Date, using a rate equal to the applicable London interbank offered rate for a period commencing on the Applicable Date and ending on the last day of the then applicable Interest Period, determined by the Reference Agent as of two Business Days prior to the Applicable Date as the discount rate. "BUSINESS DAY" means any day that is a day for trading by and between banks in the London interbank Eurodollar market and that is other than a Saturday or Sunday or a day on which commercial banks are required or authorized to close in Houston, Texas, New York, New York, or, so long as any Security is outstanding, the city and state in which the Trustee maintains its Corporate Trust Office or, solely with respect to draws under any Policy, the city and state in which the office of the Policy Provider at which notices, presentations, transmissions, deliveries and communications are to be made under the Policy is located, and that, solely with respect to draws under the Liquidity Facility, also is a "Business Day" as defined in the Liquidity Facility. "CAPPED INTEREST RATE" means a rate per annum equal to 12%. "CASH COLLATERAL" means cash and/or Investment Securities deposited or to be deposited with the Collateral Agent or an Eligible Institution and subject to the Lien of any Collateral Agreement. "CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of the Trustee maintained at an Eligible Institution, which shall be the Trustee if it shall so qualify, into which all amounts drawn under the Liquidity Facility pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be deposited. "CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15). "CLEARING AGENCY" means an organization registered as a "clearing agency" pursuant to Section 17A of the Exchange Act.

"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg. "CLOSING DATE" means the Issuance Date. "CODE" means the Internal Revenue Code of 1986, as amended. "COLLATERAL" means the Spare Parts Collateral and all other collateral in which the Collateral Agent has a security interest pursuant to the Collateral Agreements. "COLLATERAL AGENT" means the Trustee in its capacity as Security Agent or as agent on behalf of the Holders under any other Collateral Agreement. "COLLATERAL AGREEMENT" means the Security Agreement and any agreement under which a security interest has been granted pursuant to Section 3.1(a)(ii) of the Collateral Maintenance Agreement. "COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance Agreement, dated as of the date of the Indenture, between the Company and the Policy Provider. "COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the aggregate principal amount of all Securities Outstanding minus the sum of the Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of all Collateral (excluding any Cash Collateral), as set forth in the most recent Independent Appraiser's Certificate delivered by the Company pursuant to Article 2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable. "COLLECTION ACCOUNT" means the Eligible Deposit Account established by the Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make deposits in and withdrawals from in accordance with the Indenture. "COMPANY" means the party named as such in the Indenture or any obligor on the Securities until a successor replaces it pursuant to the Indenture and thereafter means the successor. "CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture. "CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an Event of Default under Section 7.1(d), (e) or (f) of the Indenture. "CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash equivalents that would have been shown on the balance sheet of Continental and its consolidated subsidiaries prepared in accordance with GAAP as of any Valuation Date, plus (b) the amount of marketable securities that would have been reflected on such balance sheet which had, as of such Valuation Date, a maturity of less than one year and which, but for their maturity, would have qualified to be reflected on such balance sheet as cash equivalents. "CONTROLLING PARTY" means the Person entitled to act as such pursuant to the terms of Section 3.8 of the Indenture.

"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the office of the Trustee at which at any particular time its corporate trust business is administered and which, at the Closing Date, is located at Wilmington Trust Company, as Trustee, Rodney Square North 1100 North Market Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration. "DEBT BALANCE" means 110% of the principal amount of the Outstanding Securities. "DEBT RATE" means a rate per annum equal, in the case of the first Interest Period, to 2.32% and, in the case of any subsequent Interest Period, LIBOR for such Interest Period, as determined pursuant to the Reference Agency Agreement, plus the Applicable Margin, PROVIDED that, solely in the event no Registration Event (as defined in the Registration Rights Agreement) occurs on or prior to the 210th day after the Closing Date, the Debt Rate shall be increased by an additional margin equal to 0.50% per annum, from and including such 210th day to and excluding the earlier of (i) the date on which such Registration Event occurs and (ii) the date on which there ceases to be any Registrable Securities (as defined in the Registration Rights Agreement)); or if the Shelf Registration Statement (as defined in the Registration Rights Agreement) (if it is filed), after being declared effective by the SEC, ceases to be effective at any time during the period specified by Section 2(b)(B) of the Registration Rights Agreement for more than 60 days, whether or not consecutive, during any 12-month period, the Debt Rate shall be increased by an additional margin equal to 0.50% per annum from and including the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective to and excluding the date on which the Shelf Registration Statement again becomes effective (or, if earlier, the end of the period specified by Section 2(b)(B) of the Registration Rights Agreement), PROVIDED that the additional margin added to the Debt Rate pursuant to the preceding proviso shall never exceed 0.50% at any time, PROVIDED FURTHER that, if a default in the payment of interest on the Securities occurs and is continuing on any Interest Payment Date, then the Debt Rate applicable to the Interest Period ending on such Interest Payment Date shall not exceed the Capped Interest Rate, except that for purposes of any payment made by the Company intended to cure such default, this proviso shall not apply. "DEFAULT" means any event which is, or after notice or passage of time, or both, would be, an Event of Default. "DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix I to the Indenture and constituting a part of the Indenture. "DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture. "DESIGNATED LOCATIONS" means the locations in the U.S. designated from time to time by the Company at which the Pledged Spare Parts may be maintained by or on behalf of the Company, which initially shall be the locations set forth on Schedule 1 to the Security Agreement and shall include the additional locations designated by the Company pursuant to Section 4.04(d) of the Security Agreement. "DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.

"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a Payment required to be paid to the Trustee for distribution on such Scheduled Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in part, on such Scheduled Payment Date, the next Business Day on which the Trustee receives some or all of such Payment by 12:30 p.m., New York time, except for a defaulted payment of interest that is not paid within five days after the Scheduled Payment Date therefor), (ii) each day established for payment by the Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv) the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the Policy Election Distribution Date, (vii) the date established as a Distribution Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the Indenture and not for purposes of any other payment or distribution under the Indenture, the date established for such payment in accordance with the Policy. "DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture. "DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c) of the Indenture. "DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture. "DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension Drawing or a Downgrade Drawing, as the case may be. "DTC" means The Depository Trust Company, its nominees and their respective successors. "ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture. "ELIGIBLE ACCOUNT" means an account established by and with an Eligible Institution at the request of the Security Agent, which institution agrees, for all purposes of the New York UCC including Article 8 thereof, that (a) such account shall be a "securities account" (as defined in Section 8-501 of the New York UCC), (b) such institution is a "securities intermediary" (as defined in Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash) credited to such account shall be treated as a "financial asset" (as defined in Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the "entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in respect of such account, (e) it will comply with all entitlement orders issued by the Security Agent to the exclusion of the Company, (f) it will waive or subordinate in favor of the Security Agent all claims (including without limitation, claims by way of security interest, lien or right of set-off or right of recoupment), and (g) the "securities intermediary jurisdiction" (under Section 8-110(e) of the New York UCC) shall be the State of New York. "ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an Eligible Institution or (b) a segregated trust account with the corporate trust department of a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, so long as any of the securities of such depository institution has a long-term unsecured debt rating or issuer credit rating, as the case may be, from Moody's of at least A-3 or its

equivalent. An Eligible Deposit Account may be maintained with the Liquidity Provider so long as the Liquidity Provider is an Eligible Institution; provided that such Liquidity Provider shall have waived all rights of set-off and counterclaim with respect to such account. "ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository institution organized under the laws of the United States of America or any one of the states thereof or the District of Columbia (or any U.S. branch of a foreign bank), which has a long-term unsecured debt rating or issuer credit rating, as the case may be, from Moody's of at least A-3 or its equivalent. "ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or guaranteed by, the U.S. Government having maturities no later than 90 days following the date of such investment, (b) investments in open market commercial paper of any corporation incorporated under the laws of the United States of America or any state thereof with a short-term unsecured debt rating issued by Moody's of at least P-1 and a short-term issuer credit rating issued by Standard & Poor's of at least A-1 having maturities no later than 90 days following the date of such investment or (c) investments in negotiable certificates of deposit, time deposits, banker's acceptances, commercial paper or other direct obligations of, or obligations guaranteed by, commercial banks organized under the laws of the United States or of any political subdivision thereof (or any U.S. branch of a foreign bank) with a short-term unsecured debt rating by Moody's of at least P-1 and a short-term issuer credit rating by Standard & Poor's of at least A-1, having maturities no later than 90 days following the date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments that are bank obligations shall be denominated in U.S. dollars; and (y) the aggregate amount of Eligible Investments at any one time that are bank obligations issued by any one bank shall not be in excess of 5% of such bank's capital surplus; PROVIDED FURTHER that any investment of the types described in clauses (a), (b) and (c) above may be made through a repurchase agreement in commercially reasonable form with a bank or other financial institution qualifying as an Eligible Institution so long as such investment is held by a third party custodian also qualifying as an Eligible Institution; PROVIDED FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a domestic branch of a foreign bank, the income from such investment shall be from sources within the United States for purposes of the Code. Notwithstanding the foregoing, no investment of the types described in clause (b) above which is issued or guaranteed by the Company or any of its Affiliates, and no investment in the obligations of any one bank in excess of $10,000,000, shall be an Eligible Investment unless written approval has been obtained from the Policy Provider and a Ratings Confirmation shall have been received with respect to the making of such investment. "ENGINE" means an engine used, or intended to be used, to propel an Aircraft, including a part, appurtenance, and accessory of the Engine, except a Propeller. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time "EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear System. "EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.

"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of the use thereof due to destruction, damage beyond repair or rendition of any of the Pledged Spare Parts permanently unfit for normal use for any reason whatsoever (other than the use of Expendables in the Company's operations); (ii) any damage to any of the Pledged Spare Parts which results in the receipt of insurance proceeds with respect to such Pledged Spare Parts on the basis of an actual or constructive loss; or (iii) the loss of possession of any of the Pledged Spare Parts by the Company for ninety (90) consecutive days as a result of the theft or disappearance of such Pledged Spare Parts. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from time to time. "EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a) of the Indenture. "EXCHANGE OFFER" means the exchange offer which may be made pursuant to the Registration Rights Agreement to exchange Initial Certificates for Exchange Certificates. "EXCHANGE OFFER REGISTRATION STATEMENT" means the registration statement that, pursuant to the Registration Rights Agreement, is filed by the Company with the SEC with respect to the exchange of Initial Securities for Exchange Securities. "EXCHANGE SECURITIES" means the securities substantially in the form of Exhibit A to the Indenture issued in exchange for the Initial Securities pursuant to the Registration Rights Agreement and authenticated pursuant to the Indenture. "EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a location not a Designated Location. "EXPENDABLES" means Qualified Spare Parts other than Rotables. "EXPENSES" means any and all liabilities, obligations, losses, damages, settlements, penalties, claims, actions, suits, costs, expenses and disbursements (including, without limitation, reasonable fees and disbursements of legal counsel, accountants, appraisers, inspectors or other professionals, and costs of investigation). "FAA" means the Federal Aviation Administration or similar regulatory authority established to replace it. "FAA FILED DOCUMENTS" means the Security Agreement. "FACILITY OFFICE" means, with respect to any Liquidity Facility, the office of the Liquidity Provider thereunder, presently located at 1585 Broadway, New York, New York 10036, or such other office as such Liquidity Provider from time to time shall notify the Trustee as its "Facility Office" under any such Liquidity Facility; provided that such Liquidity Provider shall not change its Facility Office to another Facility Office outside the United States of America except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity Facility.

"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market value determined on the basis of a hypothetical sale negotiated in an arm's length free market transaction between a willing and able seller and a willing and able buyer, neither of whom is under undue pressure to complete the transaction, under then current market conditions, provided that cash shall be valued at its Dollar amount. "FEDERAL AVIATION ACT" means Title 49 of the United States Code, "Transportation", as amended from time to time, or any similar legislation of the United States enacted in substitution or replacement thereof. "FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the Closing Date between the Trustee and the initial Liquidity Provider with respect to the initial Liquidity Facility and (ii) any fee letter entered into between the Trustee and any Replacement Liquidity Provider in respect of any Replacement Liquidity Facility. "FINAL DRAWING" is defined in Section 3.5(i) of the Indenture. "FINAL LEGAL MATURITY DATE" means December 6, 2009. "FINAL ORDER" has the meaning assigned to such term in the Policy. "FINAL SCHEDULED PAYMENT DATE" means December 6, 2007. "FINANCING STATEMENTS" means, collectively, UCC-1 financing statements covering the Spare Parts Collateral, by the Company, as debtor, showing the Security Agent as secured party, for filing in Delaware, Guam and each other jurisdiction that, in the opinion of the Security Agent, is necessary to perfect its Lien on the Spare Parts Collateral. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Closing Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board, (iii) such other statements by such other entity as approved by a significant segment of the accounting profession and (iv) the rules and regulations of the SEC governing the inclusion of financial statements (including pro forma financial statements) in periodic reports required to be filed pursuant to Section 13 of the Exchange Act, including opinions and pronouncements in staff accounting bulletins and similar written statements from the accounting staff of the SEC. "GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture. "GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture. "GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar government, and any body, board, department, commission, court, tribunal, authority, agency or other instrumentality of any such government or otherwise exercising any executive, legislative, judicial, administrative or regulatory functions of such government or (b) any other government entity having jurisdiction over any matter contemplated by the Operative Documents or relating

to the observance or performance of the obligations of any of the parties to the Operative Documents. "HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is registered on the Registrar's books. "INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each separate or additional trustee or security agent appointed pursuant to the Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each of the respective directors, officers, employees, agents and servants of each of the persons described in clauses (i) through (iv) inclusive above. "INDENTURE" means the Indenture dated as of December 6, 2002, among the Company, the Trustee, the Liquidity Provider and the Policy Provider under which the Securities are issued. "INDENTURE DISCHARGE DATE" means the date of the termination of the effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without giving effect to Section 9.1(b) thereof). "INDENTURE TRUSTEE" means the Trustee. "INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other Person (i) engaged in a business which includes appraising Aircraft and assets related to the operation and maintenance of Aircraft from time to time and (ii) who does not have any material financial interest in the Company and is not connected with the Company or any of its Affiliates as an officer, director, employee, promoter, underwriter, partner or person performing similar functions. "INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an Independent Appraiser and attached as Appendix II to the Offering Memo or delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral Maintenance Agreement. "INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950. "INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a) of the Indenture. "INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated. "INITIAL SECURITIES" mean the securities issued and authenticated pursuant to the Indenture and substantially in the form of Exhibit A thereto, other than the Exchange Securities. "INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act. "INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture. "INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6 of each year so long as any Security is Outstanding (commencing March 6, 2003),

PROVIDED that if any such day is not a Business Day, then the relevant Interest Payment Date shall be the next succeeding Business Day. "INTEREST PERIOD" means (i) in the case of the first Interest Period, the period commencing on (and including) the Closing Date and ending on (but excluding) the first Interest Payment Date following such date and (ii) in the case of each subsequent Interest Period, the period commencing on (and including) the last day of the immediately preceding Interest Period, and ending on (but excluding) the next Interest Payment Date. "INVESTMENT EARNINGS" means investment earnings on funds on deposit in the Trust Accounts net of losses and investment expenses of the Trustee in making such investments. "INVESTMENT SECURITY" means (a) any bond, note or other obligation which is a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any obligation which is a direct obligation of or guaranteed by any state of the U.S. or any subdivision thereof or any agency of any such state or subdivision, and which has the highest rating published by Moody's or Standard & Poor's; (c) any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's or A-1 by Standard & Poor's; (d) any money market investment instrument relying upon the credit and backing of any bank or trust company which is a member of the Federal Reserve System and which has a combined capital (including capital reserves to the extent not included in capital) and surplus and undivided profits of not less than $250,000,000 (including the Collateral Agent and its Affiliates if such requirements as to Federal Reserve System membership and combined capital and surplus and undivided profits are satisfied), including, without limitation, certificates of deposit, time and other interest-bearing deposits, bankers' acceptances, commercial paper, loan and mortgage participation certificates and documented discount notes accompanied by irrevocable letters of credit and money market fund investing solely in securities backed by the full faith and credit of the United States; or (e) repurchase agreements collateralized by any of the foregoing. "ISSUANCE DATE" means the date of issuance of the Initial Securities. "LAW" means (a) any constitution, treaty, statute, law, decree, regulation, order, rule or directive of any Government Entity, and (b) any judicial or administrative interpretation or application of, or decision under, any of the foregoing. "LIBOR" has the meaning specified in the Reference Agency Agreement. "LIBOR ADVANCE" has the meaning provided in the Liquidity Facility. "LIEN" means any mortgage, pledge, lease, security interest, encumbrance, lien or charge of any kind affecting title to or any interest in property. "LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the Liquidity Facility. "LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the principal amount of any Drawings under the Liquidity Facility and (ii) any interest accrued on any Liquidity Obligations.

"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated as of the Issuance Date, between the Trustee and the initial Liquidity Provider, and from and after the replacement of such Revolving Credit Agreement pursuant hereto, the Replacement Liquidity Facility therefor, if any, in each case as amended, supplemented or otherwise modified from time to time in accordance with its terms. "LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date of the Indenture, providing for the guarantee by the Liquidity Guarantor of the obligations of the Liquidity Provider under the Liquidity Facility. "LIQUIDITY GUARANTOR" means Morgan Stanley. "LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee Letter. "LIQUIDITY PROVIDER" means Morgan Stanley Capital Services Inc., together with any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the Indenture. "LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the Indenture. "LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement. "MATERIAL ADVERSE CHANGE" means, with respect to any person, any event, condition or circumstance that materially and adversely affects such person's business or consolidated financial condition, or its ability to observe or perform its obligations, liabilities and agreements under the Operative Documents. "MAXIMUM COLLATERAL RATIO" means 45%. "MINIMUM ROTABLE RATIO" means 150%. "MOODY'S" means Moody's Investors Service, Inc. "MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement. "MSCS" has the meaning specified in the first paragraph of the Indenture. "NEW YORK UCC" is defined in Section 1.01 of the Security Agreement. "NONAPPRAISAL COMPLIANCE REPORT" means a report providing information relating to compliance by the Company with Section 3.2 of the Collateral Maintenance Agreement, which shall be substantially in the form of Appendix III to the Collateral Maintenance Agreement. "NON-CONTROLLING PARTY" means, at any time, the Holders, the Liquidity Provider and the Policy Provider, excluding whichever is the Controlling Party at such time. "NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.

"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture. "NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture. "NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the Indenture. "NON-PERFORMING" means, with respect to any Security, a Payment Default existing thereunder (without giving effect to any Acceleration); PROVIDED, that, in the event of a bankruptcy proceeding under the Bankruptcy Code in which the Company is a debtor, any Payment Default existing at the commencement of such bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy Code or as may apply for the cure of such Payment Default under Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into consideration until the expiration of the applicable period. "NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture. "NON-U.S. PERSON" means any Person other than a U.S. person, as defined in Regulation S. "NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the Policy. "NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined in the Policy. "OBLIGATIONS" is defined in Section 2.01 of the Security Agreement. "OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of the Company relating to the offering of the Securities. "OFFICER" means the Chairman of the Board, the President, any Vice President of any grade, the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of the Company. "OFFICERS' CERTIFICATE" means a certificate signed by two Officers satisfying the requirements of Sections 12.4 and 12.5 of the Indenture. "OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the Collateral Maintenance Agreement and the Reference Agency Agreement. "OPINION OF COUNSEL" means a written opinion from the General Counsel of the Company, legal counsel to the Company or another legal counsel who is reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the Company. The acceptance by the Trustee (without written objection to the Company during the fifteen (15) Business Days following receipt) of, or its action on, an opinion of counsel not specifically referred to above shall be sufficient evidence that such counsel is acceptable to the Trustee.

"OUTSTANDING" or "OUTSTANDING" when used with respect to Securities or a Security, means all Securities theretofore authenticated and delivered under the Indenture, except: (a) Securities theretofore canceled by the Trustee or delivered to the Trustee for cancellation; (b) Securities, or portions thereof, for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee in trust for the Holders of such Securities, PROVIDED that, if such Securities are to be redeemed, notice of such redemption has been duly given pursuant to the Indenture or provision therefor satisfactory to the Trustee has been made; (c) Securities for which payment has been deposited with the Trustee or any Paying Agent in trust pursuant to Article 9 of the Indenture (except to the extent provided therein); and (d) Securities which have been paid, or for which other Securities shall have been authenticated and delivered in lieu thereof or in substitution therefor pursuant to the terms of Section 2.12 of the Indenture, unless proof satisfactory to the Trustee is presented that any such Securities are held by bona fide purchasers in whose hands the Securities are valid obligations of the Company. A Security does not cease to be Outstanding because the Company or one of its Affiliates holds the Security; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite aggregate principal amount of Securities Outstanding have given any request, demand, authorization, direction, notice, consent or waiver under the Indenture or any other Operative Document, Section 2.13 of the Indenture shall be applicable. "OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture. "OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on the Securities which is not in fact received by the Trustee (whether from the Company, the Liquidity Provider, the Policy Provider or otherwise) on or within five days after the Scheduled Payment Date relating thereto and which is not subsequently paid in connection with the redemption or final maturity of a Security. "PARTS INVENTORY REPORT" means, as of any date, a list identifying the Pledged Spare Parts by manufacturer's part number and brief description and stating the quantity of each such part included in the Pledged Spare Parts as of such specified date. "PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture. "PAYMENT" means (i) any payment of principal of, interest on, or Premium, if any, or Break Amount, if any, with respect to the Securities from the Company, (ii) any payment of interest on the Securities with funds drawn under the Liquidity Facility or from a Cash Collateral Account or (iii) any payment of interest on or principal of Securities with funds drawn under the Policy, or (iv) any payment received or amount realized by the Trustee from the exercise of remedies after the occurrence of an Event of Default.

"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the Indenture. "PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the maximum rate permitted by applicable law. "PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance Agreement. "PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the Collateral Maintenance Agreement. "PERMITTED LIEN" means (a) the rights of Security Agent under the Operative Documents; (b) Liens attributable to Security Agent (both in its capacity as Security Agent and in its individual capacity); (c) the rights of others under agreements or arrangements to the extent expressly permitted by the terms of Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the Company (and its U.S. federal tax law consolidated group), either not yet due or being contested in good faith by appropriate proceedings so long as such Liens and such proceedings do not involve any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent therein or impair the Lien of the Security Agreement; (e) materialmen's, mechanics', workers', repairers', employees' or other like Liens arising in the ordinary course of business for amounts the payment of which is either not yet delinquent for more than 60 days or is being contested in good faith by appropriate proceedings, so long as such Liens and such proceedings do not involve any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent therein or impair the Lien of the Security Agreement; (f) Liens arising out of any judgment or award against the Company, so long as such judgment shall, within 60 days after the entry thereof, have been discharged or vacated, or execution thereof stayed pending appeal or shall have been discharged, vacated or reversed within 60 days after the expiration of such stay, and so long as during any such 60 day period there is not as a result, or any such judgment or award does not involve, any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent therein or any impairment of the Lien of the Security Agreement; (g) any other Lien with respect to which the Company shall have provided a bond, cash collateral or other security adequate in the reasonable opinion of Security Agent. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, trustee, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first paragraph of Section 2.01 of the Security Agreement. "POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance Policy No. 39753, issued as of the Closing Date, as amended, supplemented or otherwise modified from time to time in accordance with its respective terms. "POLICY ACCOUNT" means the Eligible Deposit Account established by the Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall make deposits in and withdrawals from in accordance with the Indenture.

"POLICY DRAWING" means any payment of a claim under the Policy. "POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture. "POLICY EXPENSES" means all amounts (including amounts in respect of premiums, fees, expenses or indemnities) due to the Policy Provider under the Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest accrued on any Policy Provider Obligations, and (iii) reimbursement of and interest on the Liquidity Obligations in respect of the Liquidity Facility paid by the Policy Provider to the Liquidity Provider; provided that if, at the time of determination, a Policy Provider Default exists, Policy Expenses shall not include any indemnity payments owed to the Policy Provider. "POLICY FEE LETTER" means the fee letter, dated as of the date hereof, from the Policy Provider to Continental and acknowledged by the Trustee, setting forth the fees and premiums payable with respect to the Policy. "POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance company, and its successors and permitted assigns. "POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement dated as of the date hereof among the Trustee, the Company and the Policy Provider, as amended, supplemented or otherwise modified from time to time in accordance with its terms. "POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following events: (a) the Policy Provider fails to make a payment required under the Policy in accordance with its terms and such failure remains unremedied for two Business Days following the delivery of Written Notice of such failure to the Policy Provider or (b) the Policy Provider (i) files any petition or commences any case or proceeding under any provisions of any federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii) makes a general assignment for the benefit of its creditors or (iii) has an order for relief entered against it under any federal or state law relating to insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is final and nonappealable, or (c) a court of competent jurisdiction, the New York Department of Insurance or another competent regulatory authority enters a final and nonappealable order, judgment or decree (i) appointing a custodian, trustee, agent or receiver for the Policy Provider or for all or any material portion of its property or (ii) authorizing the taking of possession by a custodian, trustee, agent or receiver of the Policy Provider (or taking of possession of all or any material portion of the Policy Provider's property). "POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture. "POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy Drawing made to cover any shortfall attributable to any failure of the Liquidity Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the Liquidity Facility in an amount equal to the amount of interest that would have accrued on such Interest Drawing if such Interest Drawing had been made in accordance with Section 2.02(e) of the Liquidity Facility at the interest rate applicable to such Interest Drawing until such Policy Drawing has been repaid in full.

"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts, including, without limitation, fees and indemnities (to the extent not included in Policy Expenses), due to the Policy Provider under the Policy Provider Agreement but shall not include any interest on Policy Drawings other than Policy Provider Interest Obligations. "PREMIUM" means, with respect to any Security redeemed pursuant to Article 4 of the Indenture, the following percentage of the principal amount of such Security: (i) if redeemed before the first anniversary of the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and before the second anniversary of the Issuance Date, 1.0%; and (iii) if redeemed on or after such second anniversary and before the third anniversary of the Issuance Date, 0.5%; PROVIDED that no Premium shall be payable in connection with a redemption made by the Company to satisfy the Maximum Collateral Ratio or Minimum Rotable Ratio requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement. "PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the Liquidity Facility on such Distribution Date and any funds withdrawn from the Cash Collateral Account on such Distribution Date in respect of accrued interest on the Securities. "PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the Indenture. "PROPELLER" includes a part, appurtenance, and accessory of a propeller. "PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the Indenture. "PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture. "PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by and between the Initial Purchaser and the Company. "QIB" means a qualified institutional buyer as defined in Rule 144A. "QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first paragraph in Section 2.01 of the Security Agreement. "RATING AGENCIES" means, collectively, at any time, each nationally recognized rating agency which shall have been requested by the Company to rate the Securities and which shall then be rating the Securities. The initial Rating Agency will be Moody's. "RATINGS CONFIRMATION" means, with respect to any action proposed to be taken, a written confirmation from each of the Rating Agencies that such action would not result in (i) a reduction of the rating for the Securities below the then current rating for the Securities (such rating as determined without regard to the Policy) or (ii) a withdrawal or suspension of the rating of the Securities. "RECORD DATE" means the fifteenth (15th) day preceding any Scheduled Interest Payment Date, whether or not a Business Day.

"REDEMPTION DATE", when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to the Indenture and such Security. "REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as of the Issuance Date, among the Company, WTC, as the reference agent thereunder, and the Trustee. "REGISTER" has the meaning provided in Section 2.8 of the Indenture. "REGISTRAR" has the meaning provided in Section 2.8 of the Indenture. "REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement dated as of December 6, 2002, by and between the Company and the Initial Purchaser. "REGULATION S" means Regulation S under the Securities Act. "REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture. "REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the Indenture. "RELEVANT DATE" is defined in Section 3.6(c) of the Indenture. "REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit agreement (or agreements) in substantially the form of the replaced Liquidity Facility, including reinstatement provisions, or in such other form (which may include a letter of credit) as shall permit the Rating Agencies to confirm in writing their respective ratings then in effect for the Securities (before downgrading of such ratings, if any, as a result of the downgrading of the Liquidity Provider), and be consented to by the Policy Provider, which consent shall not be unreasonably withheld or delayed, in a face amount (or in an aggregate face amount) equal to the amount of interest payable on the Securities (at the Capped Interest Rate, and without regard to expected future principal payments) on the eight Interest Payment Dates following the date of replacement of such Liquidity Facility (or if such date is an Interest Payment Date, on such day and the seven Interest Payment Dates following the date of replacement of such Liquidity Facility) and issued by a Person (or Persons) having unsecured short-term debt rating or issuer credit rating, as the case may be, issued by the Rating Agencies which are equal to or higher than the Threshold Rating. Without limitation of the form that a Replacement Liquidity Facility otherwise may have pursuant to the preceding sentence, a Replacement Liquidity Facility for the Securities may have a stated expiration date earlier than 15 days after the Final Legal Maturity Date so long as such Replacement Liquidity Facility provides for a Non-Extension Drawing as contemplated by Section 3.5(d) of the Indenture. "REQUEST" means a written request for the action therein specified signed on behalf of the Company by any Officer and delivered to the Trustee. Each Request shall be accompanied by an Officers' Certificate if and to the extent required by Section 12.4 of the Indenture. "REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of interest, calculated at the Capped Interest Rate, that would be payable on the Securities on each of the eight successive Interest Payment Dates immediately following such day or, if such day is an Interest Payment Date, on such day and the succeeding seven Interest Payment Dates, in each case calculated on the

basis of the outstanding principal amount of the Securities on such date and without regard to expected future payments of principal on the Securities. "REQUIRED HOLDERS" means from time to time the Holders of more than 50% in aggregate unpaid principal amount of the Securities then Outstanding. "RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in the corporate trust administration department of the Trustee or any other officer customarily performing functions similar to those performed by the Persons who at the time shall be such officers or to whom any corporate trust matter is referred because of his or her knowledge of and familiarity with a particular subject, (ii) with respect to the Liquidity Provider, any authorized officer of the Liquidity Provider, and (iii) with respect to the Policy Provider, any authorized officer of the Policy Provider. "RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture. "RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture. "RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture. "RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture. "RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture. "ROTABLE" means a Qualified Spare Part that wears over time and can be repeatedly restored to a serviceable condition over a period approximating the life of the flight equipment to which it relates. "ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair Market Value of the Rotables, as set forth in the most recent Independent Appraiser's Certificate delivered by the Company pursuant to Article 2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal amount of all Securities Outstanding minus the sum of the Cash Collateral held by the Collateral Agent. "RULE 144A" means Rule 144A under the Securities Act. "SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement. "SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without giving effect to the proviso to the definition of Interest Payment Date. "SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest, the Interest Payment Date applicable thereto, (ii) with respect to any payment of defaulted interest, the payment date established pursuant to Section 2.16, (iii) with respect to amounts due on the redemption of any Security, the Redemption Date applicable thereto, and (iv) with respect to the final maturity of the Securities, December 6, 2007.

"SEC" means the Securities and Exchange Commission and any government agency succeeding to its functions. "SECTION 1110" means Section 1110 of the Bankruptcy Code. "SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any, agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional period, if any, commencing with the trustee or debtor-in-possession in such proceeding agreeing, with court approval, to perform its obligations under the Operative Documents within such 60 days (or longer period as agreed) and continuing until such time as such trustee or debtor-in-possession ceases to fully perform its obligations thereunder with the result that the period during which the Collateral Agent is prohibited from repossessing the collateral under any Collateral Agreement comes to an end. "SECURITIES" means the "Securities", as defined in the Indenture, that are issued under the Indenture. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SECURITY AGENT" means the Trustee acting in the capacity of security agent on behalf of the Holders under the Security Agreement. "SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of the date of the Indenture between the Company and the Security Agent. "SECURITYHOLDER" means any holder of one or more Securities. "SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions referred to in clauses (iii) and (iv) of the definition of Annual Methodology. "SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral Maintenance Agreement. "SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for incorporation in, installation on, attachment or appurtenance to or use in an Aircraft, Engine or other Qualified Spare Part. "SHELF REGISTRATION STATEMENT" means the shelf registration statement which may be required to be filed by the Company with the SEC pursuant to the Registration Rights Agreement, other than an Exchange Offer Registration Statement. "SPARE PART" means an accessory, appurtenance, or part of an Aircraft (except an Engine or Propeller), Engine (except a Propeller), Propeller, or Appliance, that is to be installed at a later time in an Aircraft, Engine, Propeller or Appliance. "SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the Security Agreement.

"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the first paragraph of Section 2.01 of the Security Agreement. "SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy Event. "SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the Indenture. "SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral Maintenance Agreement. "STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. "STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity Facility). "STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture. "SUBORDINATED SECURITIES" is defined in Section 2.18 of the Indenture. "SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture. "SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security Agreement substantially in the form of Exhibit A to the Security Agreement. "SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy Provider Agreement and the Fee Letters. "TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs, imposts, and other charges of any kind (together with any and all interest, penalties, loss, damage, liability, expense, additions to tax and additional amounts or costs incurred or imposed with respect thereto) imposed or otherwise assessed by the United States of America or by any state, local or foreign government (or any subdivision or agency thereof) or other taxing authority, including, without limitation: taxes or other charges on or with respect to income, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, social security, workers' compensation, unemployment compensation, or net worth and similar charges; taxes or other charges in the nature of excise, withholding, ad valorem, stamp, transfer, value added, taxes on goods and services, gains taxes, license, registration and documentation fees, customs duties, tariffs, and similar charges. "TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity Facility. "THRESHOLD AMOUNT" means $2,000,000. "THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply to the Liquidity Guarantor.

"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that in the event the TIA is amended after such date, "TIA" means, to the extent required by any such amendment, the TIA as so amended. "TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture. "TRUST OFFICER" means any officer in the corporate trust department of the Trustee, or any other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "TRUSTEE" means the party named as such in the Indenture until a successor replaces it in accordance with the provisions of the Indenture and thereafter means the successor. "TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the Indenture. "TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral Maintenance Agreement. "TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture. "UCC" means the Uniform Commercial Code as in effect in any applicable jurisdiction. "UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility. "UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable Parts. "U.S." or "UNITED STATES" means the United States of America. "U.S. AIR CARRIER" means any United States air carrier that is a Citizen of the United States holding an air carrier operating certificate issued pursuant to chapter 447 of title 49 of the United States Code for aircraft capable of carrying 10 or more individuals or 6000 pounds or more of cargo. "U.S. GOVERNMENT" means the federal government of the United States, or any instrumentality or agency thereof the obligations of which are guaranteed by the full faith and credit of the federal government of the United States. "U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the option of the issuer thereof. "U.S. PERSON" means any Person described in Section 7701(a)(30) of the Code. "VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance Agreement. "WARRANTIES" is defined in clause (2) of Section 2.01 of the Security Agreement. "WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the Policy Provider, a written instrument executed by the Designated Representative

of such Person. An invoice delivered by the Liquidity Provider pursuant to Section 3.1 of the Indenture in accordance with its normal invoicing procedures shall constitute Written Notice under such Section. "WTC" has the meaning specified in the first paragraph of the Indenture. SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the following rules of construction shall apply for all purposes of the Operative Documents (including this appendix) and of such agreements as may incorporate this appendix by reference. (a) In each Operative Document, unless otherwise expressly provided, a reference to: (i) each of the Company, the Trustee, the Collateral Agent, the Security Agent or any other person includes, without prejudice to the provisions of any Operative Document, any successor in interest to it and any permitted transferee, permitted purchaser or permitted assignee of it; (ii) words importing the plural include the singular and words importing the singular include the plural; (iii) any agreement, instrument or document, or any annex, schedule or exhibit thereto, or any other part thereof, includes, without prejudice to the provisions of any Operative Document, that agreement, instrument or document, or annex, schedule or exhibit, or part, respectively, as amended, modified or supplemented from time to time in accordance with its terms and in accordance with the Operative Documents, and any agreement, instrument or document entered into in substitution or replacement therefor; (iv) any provision of any Law includes any such provision as amended, modified, supplemented, substituted, reissued or reenacted prior to the Closing Date, and thereafter from time to time; (v) the words "Agreement", "this Agreement", "hereby", "herein", "hereto", "hereof" and "hereunder" and words of similar import when used in any Operative Document refer to such Operative Document as a whole and not to any particular provision of such Operative Document; (vi) the words "including", "including, without limitation", "including, but not limited to", and terms or phrases of similar import when used in any Operative Document, with respect to any matter or thing, mean including, without limitation, such matter or thing; and (vii) a "Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule" in any Operative Document, or in any annex thereto, is a reference to a section of, or an exhibit, an annex, an appendix or a schedule to, such Operative Document or such annex, respectively.

(b) Each exhibit, annex, appendix and schedule to each Operative Document is incorporated in, and shall be deemed to be a part of, such Operative Document. (c) Unless otherwise defined or specified in any Operative Document, all accounting terms therein shall be construed and all accounting determinations thereunder shall be made in accordance with GAAP. (d) Headings used in any Operative Document are for convenience only and shall not in any way affect the construction of, or be taken into consideration in interpreting, such Operative Document. (e) For purposes of each Operative Document, the occurrence and continuance of a Default or Event of Default referred to in Section 7.1(d), (e) or (f) of the Indenture shall not be deemed to prohibit the Company from taking any action or exercising any right that is conditioned on no Special Default, Default or Event of Default having occurred and be continuing if such Special Default, Default or Event of Default consists of the institution of reorganization proceedings with respect to the Company under Chapter 11 of the Bankruptcy Code and the trustee or debtor-in-possession in such proceedings shall have agreed to perform its obligations under the Operative Documents with the approval of the applicable court and thereafter shall have continued to perform such obligations in accordance with Section 1110.

EXHIBIT A FORM OF SUPPLEMENTAL SECURITY AGREEMENT (To Add Designated Locations) SUPPLEMENTAL SECURITY AGREEMENT No. _____ SUPPLEMENTAL SECURITY AGREEMENT NO. _______, dated as of __________ of CONTINENTAL AIRLINES, INC., a Delaware corporation (together with its successors and assigns, the "COMPANY"). WHEREAS, the Company, which is a certificated air carrier under Section 44705 of title 49 of the U.S. Code, and Wilmington Trust Company, as Security Agent (the "SECURITY AGENT"), have heretofore executed and delivered a Spare Parts Security Agreement, dated as of [ ], 2002 (the "SECURITY AGREEMENT"), and terms defined in the Security Agreement and used herein have such defined meanings unless otherwise defined herein; WHEREAS, the Security Agreement grants a Lien on, among other things, certain Spare Parts and Appliances to secure (subject to the provisions of the Security Agreement) the payment of the Securities and the other Obligations; WHEREAS, the Company has previously designated the locations at which the Pledged Spare Parts may be maintained by or on behalf of the Company in the Security Agreement [and in Supplemental Security Agreement No. __]; WHEREAS, the Security Agreement [and the Supplemental Security Agreements] has [have] been duly recorded with the Federal Aviation Administration at Oklahoma City, Oklahoma, pursuant to the Federal Aviation Act on the following date as a document or conveyance bearing the following number: DATE OF DOCUMENT OR RECORDING CONVEYANCE NO. Security Agreement...... WHEREAS, the Company, as provided in the Security Agreement, is hereby executing and delivering to the Security Agent this Supplemental Security Agreement for the purposes of adding locations at which the Pledged Spare Parts may be maintained by or on behalf of the Company; and WHEREAS, all things necessary to make this Supplemental Security Agreement the valid, binding and legal obligation of the Company, including all proper corporate action on the part of the Company, have been done and performed and have happened; NOW, THEREFORE, THIS SUPPLEMENTAL SECURITY AGREEMENT WITNESSETH, that the locations listed on Schedule 1 hereto shall be Designated Locations for purposes

of the Security Agreement at which Pledged Spare Parts may be maintained by or on behalf of the Company. This Supplemental Security Agreement shall be construed as supplemental to the Security Agreement and shall form a part thereof, and the Security Agreement is hereby incorporated by reference herein and is hereby ratified, approved and confirmed. THIS SUPPLEMENTAL SECURITY AGREEMENT IS DELIVERED IN THE STATE OF NEW YORK. THIS SECURITY AGREEMENT SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. Delivery of an executed counterpart of a signature page to this Supplemental Security Agreement by telecopier shall be effective as delivery of an original executed counterpart of this Supplemental Security Agreement.

IN WITNESS WHEREOF, this Supplemental Security Agreement has been duly executed and delivered all as of the date first above written. CONTINENTAL AIRLINES, INC. By: -------------------------------------- Name: Title:

SCHEDULE I to EXHIBIT A

SCHEDULE 1 DESIGNATED LOCATIONS - ------------------------------------------------------------------------------------------------------------------------------------ WAREHOUSING - ------------------------------------------------------------------------------------------------------------------------------------ Continental Airlines, Inc., Stores / Receiving 5840 S. Carge Road, Cleveland, OH 44135 - ------------------------------------------------------------------------------------------------------------------------------------ Continental Airlines, Inc., Off-Site Warehouse 640 Frelinghuysen Ave., Newark, NJ 07114 - ------------------------------------------------------------------------------------------------------------------------------------ Continental Airlines, Inc., Stores / Receiving Brewster Road, Hangar 55C, Newark, NJ 07114 - ------------------------------------------------------------------------------------------------------------------------------------ Continental Airlines, Inc., Stores / Receiving 17-3120 Mariner Avenue, Tiyan Barrigada, Guam 96913 - ------------------------------------------------------------------------------------------------------------------------------------ Continental Airlines, Inc., Stores / Receiving Material Services - EWA Service Road. Gate 30, Honolulu International Airport, Honolulu, HI 96819 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc., Stores / Receiving 110 Lauhoe Place, Honolulu, HI 96819 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc., Stores / Receiving 8401 Travelair Hangar #7, Houston, TX 77061 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc., Stores / Receiving Houston Intercontinental Airport, Houston, TX 77032 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc., Stores / Receiving 7300 World Way West, Los Angeles, CA 90045 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc., Stores / Receiving 5410 Bear Road, Orlando, FL 32827 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc., Morales Warehouse Kitting 4849 Wright Road, Houston, TX 77032 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc., Parts Control 15851 Vickery Drive, Houston, TX 77032 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc., Stores / Receiving 4849 Wright Road / Bldg B, Houston, TX 77032 - ------------------------------------------------------- ----------------------------------------------------------------------------

SCHEDULE 1 DESIGNATED LOCATIONS - ------------------------------------------------------------------------------------------------------------------------------------ MAINTENANCE - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Atlanta Hartsfield Intl. Airport Concourse D - 8, Atlanta, GA 30320 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Logan Intl. Airport Terminal C - A/C Dept., E. Boston, MA 02128 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 5300 Riverside Drive, Cleveland, OH 44135 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Ronald Reagan Washington National Airport, Washington, DC 20001 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 26360 East 103rd Avenue, Denver, CO 80249 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 910 W. Airfield Drive, Ste. 500, Dallas, TX 75261 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Detroit Metro Airport, Detroit, MI 48242 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Hangar 54, Brewster Road, Newark, NJ 07114 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 50 Terminal Drive, Ft. Lauderdale, FL 33315 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Honolulu Intl. Airport, 110 Lauhoe Drive, Honolulu, HI 96819 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 8437 Lockheed, Bldg. 3 Upstairs, Houston, TX 77061 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 4849 Wright Road, 141-B, Hangar E, Houston, TX 77032 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 15555 Vickery Drive, Houston, TX 77032 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 5757 Wayne Newton Blvd.- Ticket Counter, Las Vegas, NV 89111 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 7300 World Way West, Los Angeles, CA 90045 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. LaGuardia Airport, Main Terminal, Flushing, NY 11371 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 8855 Tradeport Drive, Orlando, FL 32827 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Miami Int'l Airport - Concourse G, Miami, FL 33122 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. New Orleans Intl. Airport Bldg 1, East Access Road, Kenner, LA 70062 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. O'Hare Intl. Airport, Chicago, IL 60666 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 3400 Sky Harbor Blvd., Phoenix, AZ 85034 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Raleigh - Durham Intl. Airport, Raleigh, NC 27613 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 9700 Airport Blvd. Room 222, San Antonio, TX 78216 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. SEA-TAC Intl. Airport- A/C MX Dept., Seattle, WA 98158 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. San Francisco Intl. Airport-S. Terminal Bldg, San Francisco, CA 94128 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. 18601 N. Airport Way, Ste. 207, Santa Ana, CA 92707 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Tampa Intl. Airport - Airside A, Tampa, FL 33607 - ------------------------------------------------------- ----------------------------------------------------------------------------

SCHEDULE 1 DESIGNATED LOCATIONS - ------------------------------------------------------------------------------------------------------------------------------------ REPAIR SUPPLIES - ------------------------------------------------------------------------------------------------------------------------------------ 4 Flight Industries 2057 S Grove Avenue, Ontario, CA 91761 - ------------------------------------------------------- ---------------------------------------------------------------------------- AAR Hermetic 100 Corporate Drive, Holtsville, NY 11742 - ------------------------------------------------------- ---------------------------------------------------------------------------- ACME Electric Corporation 528 West 21st Street, Tempe, AZ 85282 - ------------------------------------------------------- ---------------------------------------------------------------------------- Adams Rite Aerospace Inc 4141 N Palm St, Fullerton, CA 92835 - ------------------------------------------------------- ---------------------------------------------------------------------------- Air Cruisers Company 1740 Highway 34 North, Wall Township, NJ 07719 - ------------------------------------------------------- ---------------------------------------------------------------------------- Air Cruisers Company 15556 Dupont Avenue Building B, Chino, CA 91710 - ------------------------------------------------------- ---------------------------------------------------------------------------- Air Show Inc 15222 Del Amo, Tustin, CA 92780 - ------------------------------------------------------- ---------------------------------------------------------------------------- Air Spares 2617 East "L" Street, Tacoma, WA 98421-2201 - ------------------------------------------------------- ---------------------------------------------------------------------------- Aircraft Interiors Resources 283 Lockhaven, Suite 122, Houston, TX 77073 - ------------------------------------------------------- ---------------------------------------------------------------------------- Allen Aircraft Products Inc 6168 Woodbine Avenue, Ravenna, OH 44266 - ------------------------------------------------------- ---------------------------------------------------------------------------- Ameron Global Product Support 1350-2 Lincoln Avenue, Holbrook, NY 11741 - ------------------------------------------------------- ---------------------------------------------------------------------------- Ametek Aerospace Aerospace & Power Inst., 50 Fordham Road, Wilmington, MA 01887 - ------------------------------------------------------- ---------------------------------------------------------------------------- Ametek Aerospace 1644 Whittier Ave., Costa Mesa, CA 92627 - ------------------------------------------------------- ---------------------------------------------------------------------------- Applied Aerodynamics Inc 2265 Valley Branch Ln, Dallas, TX 75234 - ------------------------------------------------------- ---------------------------------------------------------------------------- Argo-Tech Corporation 671 West 17th Street, Costa Mesa, CA 92627 - ------------------------------------------------------- ---------------------------------------------------------------------------- Arkwin Industries, Inc 686 Main Street, Westbury, NY 11590 - ------------------------------------------------------- ---------------------------------------------------------------------------- Aviall Battery Shop 2139 Airport Rd, Waterford, MI 48327 - ------------------------------------------------------- ---------------------------------------------------------------------------- Aviall Services Inc 8210 Haskell Avenue, Van Nuys, CA 91406 - ------------------------------------------------------- ---------------------------------------------------------------------------- Aviall Services Inc 8305 B Telephone Rd, Houston, TX 77061 - ------------------------------------------------------- ---------------------------------------------------------------------------- Aviall Services Inc 140 Grand St., Teterboro Airport, Carlstadt, NJ 07072 - ------------------------------------------------------- ---------------------------------------------------------------------------- Aviation Product Support Inc 7600 Tyler Blvd, Mentor, OH 44060 - ------------------------------------------------------- ---------------------------------------------------------------------------- Av-Ox, Inc 6734 Valjean Avenue, Van Nuys, CA 91406 - ------------------------------------------------------- ---------------------------------------------------------------------------- Av-Ox, Inc 1812 Production Court, Louisville, KY 40299 - ------------------------------------------------------- ---------------------------------------------------------------------------- Avtech Corp 3400 Wallingford Avenue N, Seattle, WA 98103 - ------------------------------------------------------- ---------------------------------------------------------------------------- BAE Systems Controls Inc 2000 Taylor St, Dock #1, Fort Wayne, IN 46802 - ------------------------------------------------------- ---------------------------------------------------------------------------- Barry Controls Aerospace 4510 Van Owen Street, Burbank, CA 91505 - ------------------------------------------------------- ---------------------------------------------------------------------------- BE Aerospace 10800 Pflumm Road, Lenexa, KS 66215 - ------------------------------------------------------- ---------------------------------------------------------------------------- BE Aerospace ISG 3355 E. Lapalma Avenue, Repair Division, Anaheim, CA 92806 - ------------------------------------------------------- ---------------------------------------------------------------------------- BFGoodrich Aircraft Repairs/Cust Service, 100 Panton Road, Vergennes, VT 05491 - ------------------------------------------------------- ----------------------------------------------------------------------------

SCHEDULE 1 DESIGNATED LOCATIONS - ------------------------------------------------------- ---------------------------------------------------------------------------- Boeing Company Airplane Div Cust Repair Services, M/S 34-02/Col d4, 2201 S. 142 St. Door W10, Seatac, WA 98168 - ------------------------------------------------------- ---------------------------------------------------------------------------- Boeing Company Airplane Div 3131 Storey Road West, Irving, TX 75038 - ------------------------------------------------------- ---------------------------------------------------------------------------- Boeing Company Airplane Div 2201 S 142nd Street, Bldg 2201 Door W-10, SSA111, Seatac, WA 98168 - ------------------------------------------------------- ---------------------------------------------------------------------------- Boeing Company Airplane Div The Boeing Co Wichita Div, Attn: T Spear 316-526-7268, 3801 S. Oliver, Building 1-198D, Wichita, KS 67277-2207 - ------------------------------------------------------- ---------------------------------------------------------------------------- Britax Aircraft Interior Kent North Corporate Park, 8011 South 187th Street, Building G, Kent, WA 98032 - ------------------------------------------------------- ---------------------------------------------------------------------------- Carleton Technologies Inc 10 Cobham Drive, Orchard Park, NY 14127 - ------------------------------------------------------- ---------------------------------------------------------------------------- Circle Seal Corporation Return Materials, 2301 Wardlow Circle, Corona, CA 91720 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines Battery Shop, Orlando Intl Airport, 5410 Bear Rd, Suite 300, Orlando, FL 32827 - ------------------------------------------------------- ---------------------------------------------------------------------------- Continental Airlines, Inc. Sheetmetal Sh, E250, MX10, Los Angeles Intl Airport, 7300 World Way West, Los Angeles, CA 90045 - ------------------------------------------------------- ---------------------------------------------------------------------------- Crane Co Hydro-Aire Division 3000 Winona Avenue, Burbank, CA 91503 - ------------------------------------------------------- ---------------------------------------------------------------------------- Crissair Inc 38905 10th Street East, Palmdale, CA 93590 - ------------------------------------------------------- ---------------------------------------------------------------------------- Curtiss-Wright Flight Sys 3120 Northwest Blvd., Gastonia, NC 28052-1167 - ------------------------------------------------------- ---------------------------------------------------------------------------- Delta Airlines Inc Hartsfield Int'l Airport, TOC2 & TOC3 Breezeway, Department 380, 1775 Aviation Blvd, Atlanta, GA 30320-6001 - ------------------------------------------------------- ---------------------------------------------------------------------------- Eaton Aeroquip Inc Meadowbrook Road, Toccoa, GA 30577 - ------------------------------------------------------- ---------------------------------------------------------------------------- Eaton Aerospace LLC 3675 Patterson Avenue S.E., Grand Rapids, MI 49512 - ------------------------------------------------------- ---------------------------------------------------------------------------- EFS Aerospace Inc 643247 24910 Avenue Tibbetts, Valencia, CA 91355 - ------------------------------------------------------- ---------------------------------------------------------------------------- Eldec Corporation 1522 217th Pl. Southeast, Bothell, WA 98021 - ------------------------------------------------------- ---------------------------------------------------------------------------- Envirovac Inc 1260 Turret Drive, Rockford, IL 61115 - ------------------------------------------------------- ---------------------------------------------------------------------------- Fortner Engineering & 918 Thompson Avenue, Glendale, CA 91201-2079 - ------------------------------------------------------- ---------------------------------------------------------------------------- Frisby Aerospace, Inc 4520 Hampton Rd, Clemmons, NC 27012 - ------------------------------------------------------- ---------------------------------------------------------------------------- Gables Engineering Inc 247 Greco Avenue, Coral Gables, FL 33146 - ------------------------------------------------------- ---------------------------------------------------------------------------- GE Aircraft Engines 1200 Jaybird Road, Peebles, OH 45660 - ------------------------------------------------------- ---------------------------------------------------------------------------- GE Engine Services, Inc Aviation Service Dept, ACSC Central Rcv'g Dock 1, 199 Container Place, Cincinnati, OH 45246 - ------------------------------------------------------- ---------------------------------------------------------------------------- GE Engine Services, Inc Strother Field Industrial Park, Arkansas City, KS 67005 - ------------------------------------------------------- ---------------------------------------------------------------------------- GE Engine Services, Inc c/o Honeywell Intl Inc, 1 Cliff Garrett Dr, Anniston, AL 36201 - ------------------------------------------------------- ---------------------------------------------------------------------------- General Dynamics OTS, Inc. Attn: CRR, 9845 Willows Rd. NE, Building 97A, Redmond, WA 98052 - ------------------------------------------------------- ---------------------------------------------------------------------------- GKN Aerospace Chem-Tronics Inc 1550 N. 105th East Avenue, Tulsa, OK 74116 - ------------------------------------------------------- ---------------------------------------------------------------------------- Goodrich Corporation 2403 Walnut Ridge, Dallas, TX 75229 - ------------------------------------------------------- ---------------------------------------------------------------------------- Goodrich Corporation 9151 King Arthur Drive, Dallas, TX 75247 - ------------------------------------------------------- ---------------------------------------------------------------------------- Goodrich Corporation Landing Gear Division, 3201 N W. 167th St, Opa Lacka, FL 33056-4253 - ------------------------------------------------------- ----------------------------------------------------------------------------

SCHEDULE 1 DESIGNATED LOCATIONS - ------------------------------------------------------- ---------------------------------------------------------------------------- Goodrich Corporation Stringtown Rd., HC75, Union, WV 24983 - ------------------------------------------------------- ---------------------------------------------------------------------------- Goodrich Corporation 30 Van Nostrand Avenue, Englewood, NJ 07631-4396 - ------------------------------------------------------- ---------------------------------------------------------------------------- Goodrich Corporation Aerostructures Group, Foley Service Center, 1300 West Fern Avenue, Foley, AL 36536 - ------------------------------------------------------- ---------------------------------------------------------------------------- Goodrich Corporation 3405 So 5th Street, Phoenix, AZ 85040 - ------------------------------------------------------- ---------------------------------------------------------------------------- Goodrich Corporation Everett Service Center, Everett, WA 98204-3500 - ------------------------------------------------------- ---------------------------------------------------------------------------- Goodrich Corporation AIS 817 W. Howard Lane, Austin, TX 78753-9710 - ------------------------------------------------------- ---------------------------------------------------------------------------- H&L Accessory Inc T824 Old Woodruff Rd, Greer, SC 29651 - ------------------------------------------------------- ---------------------------------------------------------------------------- Hamilton Sundstrand 4747 Harrison Road, Plant 6, RATN. Repair Center, Rockford, IL 61108 - ------------------------------------------------------- ---------------------------------------------------------------------------- Hamilton Sundstrand 18008B N. Black Canyon Highway, Phoenix, AZ 85023 - ------------------------------------------------------- ---------------------------------------------------------------------------- Hamilton Sundstrand Corp 1 Hamilton Rd., Doc W, Windsor Locks, CT 06096 - ------------------------------------------------------- ---------------------------------------------------------------------------- Hamilton Sundstrand Corp 4401 Donald Douglas Drive, Long Beach, CA 90808 - ------------------------------------------------------- ---------------------------------------------------------------------------- Hartman Electrical Mfg. Div.-CII Technologies, 175 North Diamond Street, Mansfield, OH 44902 - ------------------------------------------------------- ---------------------------------------------------------------------------- Hawker Pacific Inc 11310 Sherman Way, Sun Valley, CA 91352 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell Inc 1830 Industrial Avenue, Wichita, KS 67216 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell Inc 4150 Lind Ave S W, Renton, WA 98055 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell Inc 8840 Evergreen Blvd., Coon Rapids, MN 55433-6040 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell International 16580 Air Center Blvd., Suite #400, Houston, TX 77032 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell International Inc 1944 E. Sky Harbor Circle, Phoenix, AZ 85034 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell International Inc 1 Cliff Garrett Dr., Anniston, AL 36201 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell International Inc 1300 West Warner Road, R & O Receiving, Tempe, AZ 85284 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell International Inc 11100 N Oracle Rd, Tucson, AZ 85740-8001 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell International Inc 117 E. Providencia St., Burbank, CA 91502 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell International Inc 6930 N. Lakewood, Tulsa, OK 74117 - ------------------------------------------------------- ---------------------------------------------------------------------------- Honeywell/Grimes Product Support Group, 240 Twain Ave, Urbana, OH 43078 - ------------------------------------------------------- ---------------------------------------------------------------------------- HR Textron Inc 25200 West Rye Can Rd, Valencia, CA 91355 - ------------------------------------------------------- ---------------------------------------------------------------------------- I T T Aerospace Controls Repair and Overhaul, 28150 Industry Drive, Valencia, CA 91355 - ------------------------------------------------------- ---------------------------------------------------------------------------- Iacobucci U.S.A. 200 Industrial Way West, Eatontown, NJ 07724 - ------------------------------------------------------- ---------------------------------------------------------------------------- IDC Aerospace, LLC 8050 W. Fairlane Avenue, Milwaukee, WI 53223 - ------------------------------------------------------- ---------------------------------------------------------------------------- IPECO Inc 2275 Jefferson Street, Torrance, CA 90501 - ------------------------------------------------------- ---------------------------------------------------------------------------- JAMCO America 1018 80th St SW, Everett, WA 98203 - ------------------------------------------------------- ---------------------------------------------------------------------------- Kidde Aerospace 4200 Airport Dr, NW Bldg. B, Wilson, NC 27896-9643 - ------------------------------------------------------- ---------------------------------------------------------------------------- KPS N.A. Inc 500-D Radar Road, Greensboro, NC 27410 - ------------------------------------------------------- ---------------------------------------------------------------------------- Kulite Semiconductor Prod. One Willow Tree Road, Leonia, NJ 07605 - ------------------------------------------------------- ---------------------------------------------------------------------------- L3 Communications Aviation 6000 Fruitville Road, Sarasota, FL 34232-6414 - ------------------------------------------------------- ----------------------------------------------------------------------------

SCHEDULE 1 DESIGNATED LOCATIONS - ------------------------------------------------------- ---------------------------------------------------------------------------- Labinal Aero Defense Sys Inc 7505 Hardeson Road, Suite 100, Everett, WA 98203 - ------------------------------------------------------- ---------------------------------------------------------------------------- Matsushita Avionics Systems 22333 29th Drive S.E., Bothell, WA 98021 - ------------------------------------------------------- ---------------------------------------------------------------------------- Matsushita Avionics Systems 1405 South Beltline Rd #300, Coppell, TX 75019 - ------------------------------------------------------- ---------------------------------------------------------------------------- Med-Air 23015 N. 15 Ave., Suite 105, Phoenix, AZ 85027 - ------------------------------------------------------- ---------------------------------------------------------------------------- Meggitt Safety Systems, Inc 1915 Voyager Avenue, Simi Valley, CA 93063-3349 - ------------------------------------------------------- ---------------------------------------------------------------------------- Messier Services America, Inc., 45360 Severn Way, Sterling, VA 20166-8914 - ------------------------------------------------------- ---------------------------------------------------------------------------- Midway Aircraft Instrument 100 Riser Rd., Little Ferry, NJ 07643 - ------------------------------------------------------- ---------------------------------------------------------------------------- Miltope Corp Attn: Product Support, 500 Richardson Road South, Hope Hull, AL 36043 - ------------------------------------------------------- ---------------------------------------------------------------------------- Monogram Sanitation 800 West Artesia Blvd., Compton, CA 90224 - ------------------------------------------------------- ---------------------------------------------------------------------------- Moog Inc 2268 South 3270 West, Salt Lake City, UT 84119 - ------------------------------------------------------- ---------------------------------------------------------------------------- Norco Inc 139 Ethan Allen Highway, Ridgefield, CT 06877-6294 - ------------------------------------------------------- ---------------------------------------------------------------------------- Nordam Group Inc 11200 E. Pine Street, Tulsa, OK 74116 - ------------------------------------------------------- ---------------------------------------------------------------------------- Nordam-Texas 5101 Blue Mound Rd, Ft. Worth, TX 76106 - ------------------------------------------------------- ---------------------------------------------------------------------------- P L Porter Controls, Inc 6355 Desoto, Woodland Hills, CA 91367 - ------------------------------------------------------- ---------------------------------------------------------------------------- Parker Hannifin 2220 Palmer Ave., Kalamazoo, MI 49001-4165 - ------------------------------------------------------- ---------------------------------------------------------------------------- Parker Hannifin Corp 14300 Alton Parkway, Irvine, CA 92618 - ------------------------------------------------------- ---------------------------------------------------------------------------- Parker Hannifin Corp Gull Electronics Sys. Div, 300 Marcus Boulevard, Smithtown, NY 11787 - ------------------------------------------------------- ---------------------------------------------------------------------------- Parker Hannifin Corp 200 Railroad Street, Forest, OH 45843 - ------------------------------------------------------- ---------------------------------------------------------------------------- PPG Industries Inc 1719 Highway 72 East, Huntsville, AL 35811 - ------------------------------------------------------- ---------------------------------------------------------------------------- Radiant Power Corp 6416 Parkland Drive, Ste B, Sarasota, FL 34243 - ------------------------------------------------------- ---------------------------------------------------------------------------- Rockwell Collins 7235 Corporate Center Dr., #E, Miami, FL 33126 - ------------------------------------------------------- ---------------------------------------------------------------------------- Rockwell Collins Avionics 400 Collins Road N.E., Cedar Rapids, IA 52498 - ------------------------------------------------------- ---------------------------------------------------------------------------- Rockwell Collins Avionics 5159 Southridge Parkway, Atlanta, GA 30349 - ------------------------------------------------------- ---------------------------------------------------------------------------- Rockwell Collins Avionics 2051 Airport Road, Wichita, KS 67209-1949 - ------------------------------------------------------- ---------------------------------------------------------------------------- Rockwell Collins Avionics 8304 Esters Blvd, Suite 890, Irving, TX 75062-2209 - ------------------------------------------------------- ---------------------------------------------------------------------------- Rockwell Collins Avionics 620 Naches Ave SW, Renton, WA 98055 - ------------------------------------------------------- ---------------------------------------------------------------------------- Rogerson Kratos 16940 Von Karman, Irvine, CA 92606 - ------------------------------------------------------- ---------------------------------------------------------------------------- Rosemount Aerospace Inc 14300 Judicial Road, Burnsville, MN 55306 - ------------------------------------------------------- ---------------------------------------------------------------------------- Sicma Aero Seat Services, Inc 22030 20th Ave. SE Ste 102, Bothell, WA 98021 - ------------------------------------------------------- ---------------------------------------------------------------------------- Smiths Aerospace Acuation 2720 W Washington Ave, Yakima, WA 98909 - ------------------------------------------------------- ---------------------------------------------------------------------------- Smiths Industries 14100 Roosevelt Blvd. Dock B, Clearwater, FL 33762 - ------------------------------------------------------- ---------------------------------------------------------------------------- Smiths Industries 3290 Patterson Ave., Grand Rapids, MI 49512-1991 - ------------------------------------------------------- ---------------------------------------------------------------------------- Smiths Industries Acuation Sys 110 Algonquin Parkway, Whippany, NJ 07981 - ------------------------------------------------------- ---------------------------------------------------------------------------- Soundair 15510 Wood-Red Rd., Woodinville, WA 98072 - ------------------------------------------------------- ----------------------------------------------------------------------------

SCHEDULE 1 DESIGNATED LOCATIONS - ------------------------------------------------------- ---------------------------------------------------------------------------- Spirent Systems Wichita Inc 8710 E. 32nd North, Wichita, KS 67226 - ------------------------------------------------------- ---------------------------------------------------------------------------- Tactair Fluids Control 4806 West Taft Road, Liverpool, NY 13088 - ------------------------------------------------------- ---------------------------------------------------------------------------- Teledyne Controls 12333 West Olympic Boulevard, Los Angeles, CA 90064 - ------------------------------------------------------- ---------------------------------------------------------------------------- Thales Avionics, Inc. 641 Industry Drive, Seattle, WA 98188 - ------------------------------------------------------- ---------------------------------------------------------------------------- Transaero Inc 80 Crossways Park Drive, Woodbury, NY 11797 - ------------------------------------------------------- ---------------------------------------------------------------------------- Transdigital Comm Corporation 1800 E Lambert Road, Suite 230, Brea, CA 92821 - ------------------------------------------------------- ---------------------------------------------------------------------------- Unison Industries 7575 Bay Meadows Way, Jacksonville, FL 32256 - ------------------------------------------------------- ---------------------------------------------------------------------------- Verizon Airfone Inc 3600 Thayer Ct, Aurora, IL 60504 - ------------------------------------------------------- ---------------------------------------------------------------------------- Vibro-Metr Inc 10 Ammon Drve, Manchester, NH 03103 - ------------------------------------------------------- ---------------------------------------------------------------------------- Vickers Inc 5353 Highland Drive, Jackson, MS 39206 - ------------------------------------------------------- ---------------------------------------------------------------------------- Volvo Aero Services LP 23206 66th Ave South, Kent, WA 98032 - ------------------------------------------------------- ---------------------------------------------------------------------------- West Coast Specialties Inc 8158 304th Ave. S.E., Preston, WA 98050 - ------------------------------------------------------- ---------------------------------------------------------------------------- Whittaker Controls Inc 12838 Saticoy St, North Hollywood, CA 91605 - ------------------------------------------------------- ----------------------------------------------------------------------------

SCHEDULE 1 DESIGNATED LOCATIONS - ------------------------------------------------------------------------------------------------------------------------------------ MAINLINE STATIONS - ------------------------------------------------------------------------------------------------------------------------------------ Albuquerque Int'l Airport 2200 Sunport Blvd South East, Albuquerque, NM 87106 - ------------------------------------------------------- ---------------------------------------------------------------------------- Anchorage Int'l Airport 5000 W. International Airport, Anchorage, AK 99502 - ------------------------------------------------------- ---------------------------------------------------------------------------- Atlanta Int'l Airport 6000 North Terminal Drive, Atlanta, GA 30320 - ------------------------------------------------------- ---------------------------------------------------------------------------- Austin-Bergstrom Int'l Airport 3600 Presidential Blvd, Suite 103, Austin, TX 78719 - ------------------------------------------------------- ---------------------------------------------------------------------------- Bradley Int'l Airport Bradley International Airport, Windsor Locks, CT 06096 - ------------------------------------------------------- ---------------------------------------------------------------------------- Birmingham Int'l Airport 5900 Air