INTERCREDITOR AGREEMENT
(2004-ERJ1)
Dated as of
June 29, 2004
AMONG
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee under the
Continental Airlines Pass Through Trust 2004-ERJ1
WESTLB AG,
New York Branch,
and
CITICORP NORTH AMERICA, INC.,
as Liquidity Providers
AND
WILMINGTON TRUST COMPANY,
not in its individual capacity except
as expressly set forth herein but
solely as Subordination Agent and Trustee
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS.......................................................2
SECTION 1.1
Definitions..................................................2
ARTICLE II TRUST ACCOUNTS; CONTROLLING
PARTY...............................17
SECTION 2.1 Agreement to Terms of
Subordination;
Payments from Monies Received Only........................17
SECTION 2.2 Trust
Accounts..............................................18
SECTION 2.3 Deposits to the Collection Account
and
Special Payments Account..................................19
SECTION 2.4 Distributions of Special
Payments...........................20
SECTION 2.5 Designated
Representatives..................................22
SECTION 2.6 Controlling
Party...........................................23
ARTICLE III RECEIPT, DISTRIBUTION AND
APPLICATION OF
AMOUNTS RECEIVED..........................................24
SECTION 3.1 Written Notice of
Distribution..............................24
SECTION 3.2 Distribution of Amounts on Deposit
in the
Collection Account........................................26
SECTION 3.3 Distribution of Amounts on
Deposit
Following a Triggering Event..............................27
SECTION 3.4 Other
Payments..............................................29
SECTION 3.5 Payments to the Trustee and the
Liquidity
Provider..................................................29
SECTION 3.6 Liquidity
Facilities........................................30
ARTICLE IV EXERCISE OF
REMEDIES............................................36
SECTION 4.1 Directions from the Controlling
Party.......................36
SECTION 4.2 Remedies
Cumulative.........................................37
SECTION 4.3 Discontinuance of
Proceedings...............................38
SECTION 4.4 Right of Certificateholders to
Receive
Payments Not to Be Impaired...............................38
SECTION 4.5 Undertaking for
Costs.......................................38
ARTICLE V DUTIES OF THE SUBORDINATION AGENT;
AGREEMENTS
OF TRUSTEE, ETC...........................................39
SECTION 5.1 Notice of Indenture Default or
Triggering
Event.....................................................39
SECTION 5.2
Indemnification.............................................40
SECTION 5.3 No Duties Except as Specified
in
Intercreditor Agreement...................................40
SECTION 5.4 Notice from the Liquidity Provider
and
Trustee...................................................41
ARTICLE VI THE SUBORDINATION
AGENT.........................................41
SECTION 6.1 Authorization; Acceptance of
Trusts and
Duties....................................................41
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
SECTION 6.2 Absence of
Duties...........................................41
SECTION 6.3 No Representations or Warranties
as to
Documents.................................................41
SECTION 6.4 No Segregation of Monies; No
Interest.......................41
SECTION 6.5 Reliance; Agents; Advice of
Counsel.........................42
SECTION 6.6 Capacity in Which
Acting....................................42
SECTION 6.7
Compensation................................................42
SECTION 6.8 May Become
Certificateholder................................43
SECTION 6.9 Subordination Agent Required;
Eligibility...................43
SECTION 6.10 Money to Be Held in
Trust..................................43
ARTICLE VII INDEMNIFICATION OF SUBORDINATION
AGENT.........................43
SECTION 7.1 Scope of
Indemnification....................................43
ARTICLE VIII SUCCESSOR SUBORDINATION
AGENT.................................44
SECTION 8.1 Replacement of Subordination
Agent;
Appointment of Successor..................................44
ARTICLE IX SUPPLEMENTS AND
AMENDMENTS......................................45
SECTION 9.1 Amendments, Waivers,
Etc....................................45
SECTION 9.2 Subordination Agent
Protected...............................46
SECTION 9.3 Effect of Supplemental
Agreements...........................46
SECTION 9.4 Notice to Rating
Agencies..................................46
ARTICLE X
MISCELLANEOUS....................................................47
SECTION 10.1 Termination of Intercreditor
Agreement.....................47
SECTION 10.2 Intercreditor Agreement for
Benefit of
the Trustee, the Liquidity Providers
and the Subordination Agent...............................47
SECTION 10.3
Notices....................................................47
SECTION 10.4
Severability...............................................49
SECTION 10.5 No Oral Modifications or
Continuing
Waivers...................................................49
SECTION 10.6 Successors and
Assigns.....................................49
SECTION 10.7
Headings...................................................49
SECTION 10.8 Counterpart
Form...........................................49
SECTION 10.9
Subordination..............................................50
SECTION 10.10 Governing
Law.............................................51
SECTION 10.11 Submission to Jurisdiction; Waiver
of
Jury Trial; Waiver of Immunity............................51
<PAGE>
INTERCREDITOR AGREEMENT (2004-ERJ1)
INTERCREDITOR AGREEMENT (2004-ERJ1) dated as of June 29, 2004
(this
"AGREEMENT"), among WILMINGTON TRUST
COMPANY, a Delaware corporation ("WTC"),
not in its individual capacity but solely
as Trustee of the Trust (as defined
below), WESTLB AG, a joint stock company
("Aktiengesellschaft") organized under
the laws of Germany, acting through its New
York Branch ("WESTLB"), as a
Liquidity Provider, Citicorp North America,
Inc. ("CNAI"), a Delaware
corporation and a direct wholly-owned
subsidiary of Citicorp, as a Liquidity
Provider, and WILMINGTON TRUST COMPANY, not
in its individual capacity except as
expressly set forth herein, but solely as
Subordination Agent and trustee
hereunder (in such capacity, together with
any successor appointed pursuant to
Article VIII hereof, the "SUBORDINATION
AGENT").
WHEREAS, all capitalized terms used herein shall have the
respective
meanings referred to in Article I
hereof;
WHEREAS, pursuant to each Indenture, the related Owner Trustee
proposes to issue on a non-recourse basis
one series of Equipment Notes to
finance the debt portion of the purchase
price of the Aircraft referred to in
such Indenture which will be leased to
Continental pursuant to the related
Lease;
WHEREAS, pursuant to the Financing Agreements, the Trust will
acquire the Equipment Notes;
WHEREAS, pursuant to the Trust Agreement, the Trust proposes to
issue Certificates bearing the interest
rate and having the final distribution
date described in the Trust Agreement on
the terms and subject to the conditions
set forth therein;
WHEREAS, pursuant to the Underwriting Agreement, the
Underwriters
propose to purchase Certificates issued by
the Trust in the aggregate face
amount set forth on Schedule I thereto on
the terms and subject to the
conditions set forth therein;
WHEREAS, each Liquidity Provider proposes to enter into a
separate
Liquidity Facility with the Subordination
Agent, as agent for the Trustee, for
the benefit of the Certificateholders;
WHEREAS, Citicorp, a Delaware corporation (the "GUARANTOR"),
will
guarantee in full, pursuant to a separate
guarantee dated as of the date hereof
(the "GUARANTEE AGREEMENT"), the
obligations of CNAI under its Liquidity
Facility; and
WHEREAS, it is a condition precedent to the obligations of the
Underwriters under the Underwriting
Agreement that the Subordination Agent, the
Trustee and the Liquidity Providers agree
to the terms of subordination set
forth in this Agreement in respect of the
Certificates, and the Subordination
Agent, the Trustee and the Liquidity
Providers, by entering into this Agreement,
hereby acknowledge and agree to such terms
of subordination and the other
provisions of this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the mutual agreements
herein
contained, and of other good and valuable
consideration, the receipt and
adequacy of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. For all purposes of this Agreement,
except
as otherwise expressly provided or unless
the context otherwise requires:
(1) the terms used herein that are defined in this Article have
the
meanings
assigned to them in this Article, and include the plural as
well
as the
singular;
(2) all references in this Agreement to designated "Articles",
"Sections"
and other subdivisions are to the designated Articles, Sections
and other
subdivisions of this Agreement;
(3) the words "herein", "hereof" and "hereunder" and other words
of
similar import refer to this
Agreement as a whole and not to any
particular
Article, Section or other subdivision; and
(4) the term "including" shall mean "including without
limitation".
"ACCELERATION" means, with respect to the amounts payable in
respect
of the Equipment Notes issued under any
Indenture, such amounts becoming
immediately due and payable by declaration
or otherwise. "ACCELERATE",
"ACCELERATED" and "ACCELERATING" have
meanings correlative to the foregoing.
"ADVANCE", with respect to any Liquidity Facility, means any
Advances as defined in such Liquidity
Facility.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling,
controlled by or under common control with
such Person. For the purposes of this
definition, "control" means the power,
directly or indirectly, to direct or cause
the direction of the management and
policies of such Person whether through the
ownership of voting securities or by
contract or otherwise; and the terms
"controlling" and "controlled" have
meanings correlative to the foregoing.
"AGGREGATE REQUIRED AMOUNT" means, for any day, the sum of the
aggregate amount of interest, calculated at
the rate per annum equal to the
Stated Interest Rate, that would be payable
on the Certificates on each of the
eighteen successive Regular Distribution
Dates immediately following such day
or, if such day is a Regular Distribution
Date, on such day and the succeeding
seventeen Regular Distribution Dates, in
each case calculated on the basis of
the Pool Balance (subject to the proviso in
the definition of "Required Amount"
below) on such date and without regard to
expected future payments of principal
on the Certificates.
<PAGE>
"AGREEMENT" has the meaning assigned to such term in the first
paragraph of this Agreement.
"AIRCRAFT" means, with respect to each Indenture, the
"Aircraft"
referred to therein.
"APPRAISAL" has the meaning assigned to such term in Section
4.1(a)(iii).
"APPRAISERS" means Aviation Specialist Group, AvSolutions and
BK
Associates or any other nationally
recognized appraiser reasonably selected by
the Subordination Agent or the Controlling
Party.
"AVAILABLE AMOUNT"
means, with respect to any Liquidity Facility, on
any drawing date, subject to the proviso
contained in the first sentence of
Section 3.6(g) hereof, an amount equal to
(a) the Stated Amount of such
Liquidity Facility at such time, LESS (b)
the aggregate amount of each Interest
Drawing honored by the Liquidity Provider
under such Liquidity Facility on or
prior to such date which has not been
reimbursed or reinstated as of such date;
PROVIDED that, following a Downgrade
Drawing, a Non-Extension Drawing, a CNAI
Special Termination Drawing, a WestLB Early
Termination Drawing, a WestLB
Expiration Drawing or a Final Drawing under
such Liquidity Facility, the
Available Amount of such Liquidity Facility
shall be zero.
"BASIC AGREEMENT" means the Pass Through Trust Agreement dated as
of
September 25, 1997 between Continental and
WTC, not in its individual capacity,
except as otherwise expressly provided
therein, but solely as trustee.
"BUSINESS DAY" means any day 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 Certificate is outstanding, the
city and state in which the Trustee, the
Subordination Agent or any Loan Trustee
maintains its Corporate Trust Office or
receives and disburses funds, and that,
solely with respect to draws under any
Liquidity Facility, also is a "Business
Day" as defined in such Liquidity
Facility.
"CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account
consisting of the Sub-Accounts in the name
of the Subordination Agent maintained
at an Eligible Institution, which shall be
the Subordination Agent if it shall
so qualify, into which all amounts drawn
under any Liquidity Facility pursuant
to Section 3.6(c), 3.6(d), 3.6(i), 3.6(k)
or 3.6(l) shall be deposited.
"CERTIFICATES" means the certificates issued by the Trust,
substantially in the form of Exhibit A to
the Trust Agreement, and authenticated
by the Trustee, representing fractional
undivided interests in the Trust, and
any certificates issued in exchange
therefor or replacement thereof pursuant to
the terms of the Trust Agreement.
"CERTIFICATEHOLDER" means, at any time, any holder of one or
more
Certificates.
"CLOSING DATE" means June 29, 2004.
"CNAI" has the meaning assigned to such term in the recital of
parties to this Agreement.
<PAGE>
"CNAI FEE LETTER" means the Fee Letter dated the date hereof
among
CNAI, Embraer, Continental and the
Subordination Agent with respect to the
initial CNAI Liquidity Facility.
"CNAI LIQUIDITY FACILITY" means, initially, the Revolving
Credit
Agreement, dated as of the date hereof,
between the Subordination Agent, as
agent and trustee for the Trust, and CNAI,
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.
"CNAI SPECIAL TERMINATION DRAWING" has the meaning assigned to
such
term in Section 3.6(k).
"CNAI SPECIAL TERMINATION NOTICE" has the meaning assigned to
such
term in the CNAI Liquidity Facility.
"CNAI SUB-ACCOUNT" means, with respect to the Cash Collateral
Account, a sub-ledger account to such Cash
Collateral Account designated "CNAI
Sub-Account".
"CODE" means the Internal Revenue Code of 1986, as amended from
time
to time, and the Treasury Regulations
promulgated thereunder.
"COLLECTION ACCOUNT" means the Eligible Deposit Account
established
by the Subordination Agent pursuant to
Section 2.2 which the Subordination Agent
shall make deposits in and withdrawals from
in accordance with this Agreement.
"CONSENT PERIOD" has the meaning specified in Section 3.6(d).
"CONTINENTAL" means Continental Airlines, Inc., a Delaware
corporation, and its successors and
assigns.
"CONTINENTAL BANKRUPTCY EVENT" means the occurrence and
continuation
of any of the following:
(a) Continental shall consent to the appointment of or the
taking of possession by a receiver, trustee or liquidator of
itself
or of a
substantial part of its property, or Continental shall admit
in writing its inability to pay its debts generally as they
come
due, or does not pay its debts generally as they become due or
shall
make a general assignment for the benefit of creditors, or
Continental shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization,
liquidation
or other relief in a case under any bankruptcy laws or other
insolvency laws (as in effect at such time) or an answer
admitting
the material allegations of a petition filed against Continental
in
any such case, or Continental shall seek relief by voluntary
petition, answer or consent, under the provisions of any other
<PAGE>
bankruptcy or other similar law providing for the reorganization
or
winding-up of corporations (as in effect at such time) or
Continental shall seek an agreement, composition, extension or
adjustment with its creditors under such laws, or Continental's
board of directors shall adopt a resolution authorizing
corporate
action in furtherance of any of the foregoing; or
(b) an order, judgment or decree shall be entered by any court
of competent jurisdiction appointing, without the consent of
Continental, a receiver, trustee or liquidator of Continental or
of
any substantial part of its property, or any substantial part of
the
property of Continental shall be sequestered, or granting any
other
relief in respect of Continental as a debtor under any
bankruptcy
laws or other insolvency laws (as in effect at such time), and
any
such order, judgment or decree of appointment or sequestration
shall
remain in force undismissed, unstayed and unvacated for a period
of
60 days after the date of entry thereof; or
(c) a petition against Continental in a case under any
bankruptcy laws or other insolvency laws (as in effect at such
time)
is filed and not withdrawn or dismissed within 60 days
thereafter,
or if, under the provisions of any law providing for
reorganization
or winding-up of corporations which may apply to Continental,
any
court of competent jurisdiction assumes jurisdiction, custody
or
control of Continental or of any substantial part of its
property
and such jurisdiction, custody or control remains in force
unrelinquished, unstayed and unterminated for a period of 60
days.
"CONTINENTAL PROVISIONS" has the meaning specified in Section
9.1(a).
"CONTROLLING PARTY" means the Person entitled to act as such
pursuant to the terms of Section 2.6.
"CORPORATE TRUST OFFICE" means, with respect to the Trustee,
the
Subordination Agent or any Loan Trustee,
the office of such Person in the city
at which, at any particular time, its
corporate trust business shall be
principally administered.
"CURRENT DISTRIBUTION DATE" means a Distribution Date specified as
a
reference date for calculating the Expected
Distributions or the Triggering
Event Distributions with respect to the
Certificates as of such Distribution
Date.
"DELIVERY PERIOD EXPIRY DATE" means the earlier of (a) December
31,
2004, or, if the Equipment Notes relating
to all of the Aircraft (or Substitute
Aircraft in lieu thereof) have not been
purchased by the Trustee on or prior to
such date due to any reason beyond the
control of Continental and not occasioned
by Continental's fault or negligence, March
31, 2005 and (b) the date on which
Equipment Notes with respect to all
Aircraft (or Substitute Aircraft in lieu
thereof) have been purchased by the Trustee
in accordance with the Note Purchase
Agreement.
"DEPOSIT AGREEMENT" shall mean the Deposit Agreement dated as of
the
date hereof between the Escrow Agent and
the Depositary, as the same may be
<PAGE>
amended, modified or supplemented from time
to time in accordance with the terms
thereof.
"DEPOSITARY" means WestLB AG, New York Branch, as depositary
under
the Deposit Agreement.
"DEPOSITS" has the meaning set forth in the Deposit Agreement.
"DESIGNATED REPRESENTATIVES" means the Subordination Agent
Representatives, the Trustee
Representatives and the LP Representatives
identified under Section 2.5.
"DISTRIBUTION DATE" means a Regular Distribution Date or a
Special
Distribution Date.
"DOLLARS" or "$" means United States dollars.
"DOWNGRADE DRAWING" has the meaning assigned to such term in
Section
3.6(c).
"DOWNGRADE EVENT", with respect to any Liquidity Facility, has
the
meaning assigned to such term in such
Liquidity Facility.
"DOWNGRADED FACILITY" has the meaning assigned to such term in
Section 3.6(c).
"DRAWING" means an Interest Drawing, a Final Drawing, a
Non-Extension Drawing, a CNAI Special
Termination Drawing, a WestLB Early
Termination Drawing, a WestLB Expiration
Drawing or a Downgrade Drawing, as the
case may be.
"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 from each Rating Agency of at least
A-3 or its equivalent. An Eligible
Deposit Account may be maintained with a
Liquidity Provider so long as such
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 corporate trust department
of
the Subordination Agent or the Trustee, as
applicable, 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 each
Rating Agency of at least A-3 or its
equivalent.
"ELIGIBLE INVESTMENTS" means (a) investments in obligations of,
or
guaranteed by, the United States 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
<PAGE>
issued by Moody's and Standard & Poor's
of at least P-1 and A-1, respectively,
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
issuer ratings of at least B/C by Thomson
Bankwatch, 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 Continental 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 confirmation
shall have been received from each
Rating Agency that the making of such
investment will not result in a withdrawal
or downgrading of the ratings of the
Certificates.
"EMBRAER" means Embraer-Empresa Brasileira de Aeronautica S.A.,
a
company organized under the laws of Brazil,
and its successors and assigns.
"EQUIPMENT NOTES" means the 9.558% Equipment Notes issued
pursuant
to any Indenture by the related Owner
Trustee and authenticated by the Loan
Trustee thereunder, and any such Equipment
Notes issued in exchange therefor or
replacement thereof pursuant to the terms
of such Indenture.
"ESCROW AGENT" means Wells Fargo Bank Northwest, National
Association, as escrow agent under each
Escrow and Paying Agent Agreement,
together with its successors in such
capacity.
"ESCROW AND PAYING AGENT AGREEMENT" shall mean the Escrow and
Paying
Agent Agreement dated as of the date hereof
among the Escrow Agent, the
Underwriters, the Trustee and the Paying
Agent, as the same may be amended,
modified or supplemented from time to time
in accordance with the terms thereof.
"EXPECTED DISTRIBUTIONS" means, on any Current Distribution
Date,
the sum of (x) accrued and unpaid interest
on the Certificates (excluding
interest, if any, payable with respect to
any Deposits) and (y) the difference
between (A) the Pool Balance as of the
immediately preceding Distribution Date
(or, if the Current Distribution Date is
the first Distribution Date, the
original aggregate face amount of the
Certificates), and (B) the Pool Balance as
of the Current Distribution Date calculated
on the basis that (i) the principal
of the Equipment Notes has been paid when
due (whether at stated maturity, upon
<PAGE>
redemption, prepayment, purchase,
Acceleration or otherwise) and such payments
have been distributed to the
Certificateholders and (ii) the principal of any
Equipment Notes formerly held in the Trust
that have been sold pursuant to the
terms hereof has been paid in full and such
payments have been distributed to
the Certificateholders, but without giving
effect to any reduction in the Pool
Balance as a result of any distribution
attributable to Deposits occurring after
the immediately preceding Distribution Date
(or, if the Current Distribution
Date is the first Distribution Date,
occurring after the initial issuance of the
Certificates). For purposes of calculating
Expected Distributions, any premium
paid on the Equipment Notes that has not
been distributed to the
Certificateholders (other than such premium
or a portion thereof applied to the
payment of interest on the Certificates or
the reduction of the Pool Balance)
shall be added to the amount of such
Expected Distributions.
"EXPIRY DATE", with respect to any Liquidity Facility, shall
have
the meaning set forth in such Liquidity
Facility.
"FEE LETTERS" means, collectively, the CNAI Fee Letter and the
WestLB Fee Letter and any fee letter
entered into between the Subordination
Agent, Embraer, Continental and any
Replacement Liquidity Provider in respect of
a Liquidity Facility.
"FINAL DRAWING" has the meaning assigned to such term in
Section
3.6(i).
"FINAL LEGAL DISTRIBUTION DATE" means March 1, 2021.
"FINANCING AGREEMENTS" means each of the Participation
Agreements
and the Note Purchase Agreement.
"GUARANTEE AGREEMENT" has the meaning assigned to such term in
the
preliminary statements to this
Agreement.
"GUARANTOR" has the meaning assigned to such term in the
preliminary
statements to this Agreement.
"INDENTURE" means each of the Trust Indentures entered into by
the
Loan Trustee and the Owner Trustee pursuant
to the Note Purchase Agreement, in
each case as the same may be amended,
supplemented or otherwise modified from
time to time in accordance with its
terms.
"INDENTURE DEFAULT" means, with respect to any Indenture, any
Event
of Default (as such term is defined in such
Indenture) thereunder.
"INTEREST DRAWING" has the meaning assigned to such term in
Section
3.6(a).
"INTEREST PAYMENT DATE" means each date on which interest is due
and
payable under the Liquidity Facilities on a
Downgrade Drawing, Non-Extension
Drawing, CNAI Special Termination Drawing,
WestLB Early Termination Drawing,
WestLB Expiration Drawing or Final Drawing
thereunder, other than any such date
on which interest is due and payable under
the Liquidity Facilities only on an
Applied Provider Advance (as such term is
defined in the Liquidity Facilities).
<PAGE>
"INVESTMENT EARNINGS" means investment earnings on funds on
deposit
in the Trust Accounts net of losses and
investment expenses of the Subordination
Agent in making such investments.
"LEASE" means, with respect to each Indenture, the "Lease"
referred
to therein.
"LENDING OFFICE" means, with respect to the Liquidity Facility
of
each initial Liquidity Provider, the
lending office of such Liquidity Provider
presently located at New York, New York, or
such other lending office as such
Liquidity Provider from time to time shall
notify the Trustee as its lending
office under such Liquidity Facility;
PROVIDED that no Liquidity Provider shall
change its Lending Office to a Lending
Office outside the United States of
America except in accordance with the
applicable Liquidity Facility.
"LIEN"
means any mortgage, pledge, lien, charge, claim, disposition
of title, encumbrance, lease, sublease,
sub-sublease or security interest of any
kind, including, without limitation, any
thereof arising under any conditional
sales or other title retention
agreement.
"LIQUIDITY EVENT OF DEFAULT", with respect to any Liquidity
Facility, has the meaning assigned to such
term in such Liquidity Facility.
"LIQUIDITY EXPENSES" means all Liquidity Obligations other than
(i)
the principal amount of any Drawings under
the Liquidity Facilities and (ii) any
interest accrued on any Liquidity
Obligations.
"LIQUIDITY FACILITIES" means, collectively, the CNAI Liquidity
Facility and the WestLB Liquidity
Facility.
"LIQUIDITY OBLIGATIONS" means all principal, interest, fees and
other amounts owing to the Liquidity
Providers under the Liquidity Facilities,
Section 9.1 of the Participation Agreements
or the Fee Letters.
"LIQUIDITY PROVIDERS" means WestLB and CNAI, together with any
Replacement Liquidity Provider which has
issued a Replacement Liquidity Facility
to replace any Liquidity Facility pursuant
to Section 3.6(e).
"LOAN TRUSTEE" means, with respect to any Indenture, the
mortgagee
thereunder.
"LP INCUMBENCY CERTIFICATE" has the meaning assigned to such term
in
Section 2.5(c).
"LP REPRESENTATIVES" has the meaning assigned to such term in
Section 2.5(c).
"MOODY'S" means Moody's Investors Service, Inc.
"NON-CONTROLLING PARTY" means, at any time, the Trustee and
each
Liquidity Provider, if such person is not
the Controlling Party at such time.
<PAGE>
"NON-EXTENDED FACILITY" has the meaning assigned to such term
in
Section 3.6(d).
"NON-EXTENSION DRAWING" has the meaning assigned to such term
in
Section 3.6(d).
"NON-PERFORMING EQUIPMENT NOTE" means an Equipment Note issued
pursuant to an Indenture that is not a
Performing Equipment Note.
"NOTE PURCHASE AGREEMENT" means the Note Purchase Agreement dated
as
of the date hereof, among Continental, the
Trustee, the Escrow Agent, the
Subordination Agent and the Paying Agent,
as amended, supplemented or otherwise
modified from time to time in accordance
with its terms.
"OFFICER'S CERTIFICATE" of any Person means a certification
signed
by a Responsible Officer of such
Person.
"OPERATIVE AGREEMENTS" means this Agreement, the Liquidity
Facilities, the Guarantee Agreement, the
Underwriting Agreement, the Indentures,
the Trust Agreement, the Leases, the
Financing Agreements, the Fee Letters, the
Equipment Notes and the Certificates,
together with all exhibits and schedules
included with any of the foregoing.
"OUTSTANDING" means, when used with respect to the Certificates,
as
of the date of determination, all
Certificates theretofore authenticated and
delivered under the Trust Agreement,
except:
(i) Certificates theretofore canceled by the Registrar (as
defined in the Trust Agreement) or delivered to the Trustee or
such
Registrar for cancellation;
(ii) Certificates for which money in the full amount required
to make the final distribution with respect to such
Certificates
pursuant to Section 11.01 of such Trust Agreement has been
theretofore deposited with the Trustee in trust for the holders
of
the Certificates as provided in Section 4.01 of the Trust
Agreement
pending distribution of such money to the Certificateholders
pursuant to such final distribution payment; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been authenticated and delivered pursuant to
the
Trust Agreement;
PROVIDED,
HOWEVER, that in determining whether the holders of the
requisite
Outstanding amount of the Certificates have given any request,
demand,
authorization, direction, notice, consent or waiver hereunder,
any
Certificates owned by Continental or any of its Affiliates shall
be
disregarded and deemed not to be Outstanding, except that, in
determining
whether
the Trustee shall be protected in relying upon any such
request,
demand,
authorization, direction, notice, consent or waiver, only
Certificates that the Trustee knows to be so owned shall be so
disregarded. Certificates so owned that have been pledged in good
faith
may be
regarded as Outstanding if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with
respect to
<PAGE>
such
Certificates and that the pledgee is not Continental or any of
its
Affiliates.
"OVERDUE SCHEDULED PAYMENT" means any Scheduled Payment which is
not
in fact received by the Subordination Agent
within five days after the Scheduled
Payment Date relating thereto.
"OWNER PARTICIPANT" means, with respect to any Participation
Agreement, the owner participant
thereunder.
"OWNER TRUSTEE" means, with respect to any Indenture, the Owner
Trustee (as defined therein) not in its
individual capacity but solely as
trustee under the related owner trust
agreement, together with any successor
trustee appointed pursuant to such owner
trust agreement.
"PARTICIPATION AGREEMENT" means, with respect to each Indenture,
the
"Participation Agreement" referred to
therein.
"PAYEE" has the meaning assigned to such term in Section
2.4(e).
"PAYING AGENT" means Wilmington Trust Company, as paying agent
under
the Escrow and Paying Agent Agreement,
together with its successors in such
capacity.
"PERFORMING EQUIPMENT NOTE" means an Equipment Note with respect
to
which no payment default has occurred and
is continuing (without giving effect
to any Acceleration); PROVIDED that in the
event of a bankruptcy proceeding
under Title 11 of the United States Code
(the "BANKRUPTCY CODE") in which
Continental is a debtor any payment default
existing 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.
"PERFORMING NOTE DEFICIENCY" means any time that less than 65%
of
the then aggregate outstanding principal
amount of all Equipment Notes are
Performing Equipment Notes.
"PERSON" means any individual, corporation, partnership, joint
venture, association, limited liability
company, joint-stock company, trust,
trustee, unincorporated organization or
government or any agency or political
subdivision thereof.
"POOL BALANCE" means, as of any date, (i) the original
aggregate
face amount of the Certificates LESS (ii)
the aggregate amount of all payments
made in respect of the Certificates or in
respect of Deposits other than
payments made in respect of interest or
premium thereon or reimbursement of any
costs and expenses in connection therewith.
The Pool Balance as of any
Distribution Date shall be computed after
giving effect to any special
distribution with respect to unused
Deposits, payment of principal of the
Equipment Notes or payment with respect to
other Trust Property and the
distribution thereof to be made on that
date.
<PAGE>
"PROCEEDING" means any suit in equity, action at law or other
judicial or administrative proceeding.
"PRO RATA PORTION", with respect to any Liquidity Facility or
Sub-Account, for any day, means a fraction
(expressed as a percentage rounded to
a sufficient number of decimal places such
that the sum of the Pro Rata Portions
shall equal 100.00%), the numerator of
which is the Required Amount for such
Liquidity Facility or Sub-Account for such
day and the denominator of which is
the Aggregate Required Amount for such
day.
"PTC EVENT OF DEFAULT" means the failure to pay within 10
Business
Days of the due date thereof: (i) the
outstanding Pool Balance of the
Certificates on the Final Legal
Distribution Date or (ii) interest due on the
Certificates on any Distribution Date
(unless the Subordination Agent shall have
made an Interest Drawing, or a withdrawal
from the Cash Collateral Account, with
respect thereto in an aggregate amount
sufficient to pay such interest and shall
have distributed such amount to the
Trustee).
"RATING AGENCIES" means, collectively, at any time, each
nationally
recognized rating agency which shall have
been requested to rate the
Certificates and which shall then be rating
the Certificates. The initial Rating
Agencies will be Moody's and Standard &
Poor'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 Certificates
below the then current rating for the
Certificates or (ii) a withdrawal or
suspension of the rating of the
Certificates.
"REGULAR DISTRIBUTION DATES" means the 1st day of each month,
commencing on August 1, 2004; PROVIDED,
HOWEVER, that, if any such day shall not
be a Business Day, the related distribution
shall be made on the next succeeding
Business Day without additional
interest.
"REPLACEMENT LIQUIDITY FACILITY" means, for any Liquidity
Facility,
an irrevocable revolving credit agreement
(or agreements) in substantially the
form of the replaced Liquidity Facility,
including reinstatement provisions, or
in such other form or forms (which may
include a letter of credit, surety bond,
financial insurance policy or guaranty) as
shall permit the Rating Agencies to
confirm in writing their respective ratings
then in effect for the Certificates
(before downgrading of such ratings, if
any, as a result of the downgrading of
the replaced Liquidity Provider), in a face
amount (or in an aggregate face
amount) equal to the then Required Amount
for the replaced Liquidity Facility
and issued by a Person (or Persons) having
an unsecured short-term debt rating
and a short-term issuer credit rating, as
the case may be, issued by both Rating
Agencies which are equal to or higher than
the Threshold Rating or such other
ratings and qualifications as shall permit
the Rating Agencies to confirm in
writing their respective ratings then in
effect for the Certificates (before the
downgrading of such ratings, if any, as a
result of the downgrading of the
replaced Liquidity Provider). Without
limitation of the form that a Replacement
Liquidity Facility otherwise may have
pursuant to the preceding sentence, a
Replacement Liquidity Facility may have a
stated expiration date earlier than 15
days after the Final Legal Distribution
Date of the Certificates so long as such
Replacement Liquidity Facility provides for
a Non-Extension Drawing as
contemplated by Section 3.6(d)(i)
hereof.
<PAGE>
"REPLACEMENT LIQUIDITY PROVIDER" means a Person (or Persons)
who
issues a Replacement Liquidity
Facility.
"REPLACEMENT LIQUIDITY PROVIDER SUB-ACCOUNT" means, with respect
to
any Cash Collateral Account, a sub-ledger
account to such Cash Collateral
Account having a designation indicating
that it is a Sub-Account with respect to
such Replacement Liquidity Provider.
"REQUIRED AMOUNT" means (i) with respect to the WestLB
Liquidity
Facility or the WestLB Sub-Account, for any
day, the Aggregate Required Amount
for such day LESS the amount specified in
clause (ii) below for such day and
(ii) with respect to the CNAI Liquidity
Facility or CNAI Sub-Account, for any
day, the sum of the aggregate amount of
interest, calculated at the rate per
annum equal to the Stated Interest Rate,
that would be payable on the
Certificates on each of the eighteen
successive Regular Distribution Dates
immediately following such day or, if such
day is a Regular Distribution Date,
on such day and the succeeding seventeen
Regular Distribution Dates, in each
case calculated on the basis of a Pool
Balance equal to the lower of (x)
$63,876,911.93 and (y) the Pool Balance on
such day and without regard to
expected future payments of principal on
the Certificates; PROVIDED that, for
any date, the Pool Balance for purposes of
determining the Aggregate Required
Amount or the amount in clause (ii) above
(after determining the lower of
subclauses (x) and (y) as provided
therein), shall, in the event of (A) the
disposition of any Aircraft pursuant to the
exercise of remedies under an
Indenture on or prior to such date, be
deemed to be reduced by an amount equal
to the outstanding principal amount of the
Equipment Note secured by such
Aircraft that remains unpaid after giving
effect to the application under such
Indenture of proceeds from the disposition
of such Aircraft and any amounts
otherwise received from Continental in
connection with such disposition at or
prior to the time of such disposition or
(B) the sale of any Equipment Note
pursuant to the Intercreditor Agreement on
or prior to such date, be deemed to
be reduced by an amount equal to the excess
of (x) the outstanding amount of
principal as of the date of sale of such
Equipment Note over (y) the excess of
(A) the net purchase price received with
respect to the sale of such Equipment
Note over (B) the outstanding amount of
interest accrued and payable under such
Equipment Note as of the date of sale of
such Equipment Note.
"RESERVE ACCOUNT" means the Eligible Deposit Account established
by
the Subordination Agent pursuant to Section
2.2 from which the Subordination
Agent shall make withdrawals to fund the
Appraisals in accordance with Section
4.1 hereof.
"RESERVE AMOUNT" means $75,000.
"RESPONSIBLE OFFICER" means (i) with respect to the
Subordination
Agent and the Trustee, any officer in the
corporate trust administration
department of the Subordination Agent or
the Trustee or any other officer
customarily performing functions similar to
those performed by the Persons who
at the time shall be such officers,
respectively, or to whom any corporate trust
matter is referred because of his knowledge
of and familiarity with a particular
subject, and (ii) with respect to each
Liquidity Provider, any authorized
officer of such Liquidity Provider.
"SCHEDULED PAYMENT" means, with respect to any Equipment Note,
(i)
any payment of principal or interest on
such Equipment Note (other than an
<PAGE>
Overdue Scheduled Payment) due from the
obligor thereon, which payment
represents the installment of principal at
the stated maturity of such
installment of principal on such Equipment
Note, the payment of regularly
scheduled interest accrued on the unpaid
principal amount of such Equipment
Note, or both, or (ii) any payment of
interest on the Certificates with funds
drawn under any Liquidity Facility or any
Sub-Account of the Cash Collateral
Account; PROVIDED that any payment of
principal of, premium, if any, or interest
resulting from the redemption or purchase
of any Equipment Note shall not
constitute a Scheduled Payment.
"SCHEDULED PAYMENT DATE" means, with respect to any Scheduled
Payment, the date on which such Scheduled
Payment is scheduled to be made.
"SECTION 2.4(B) FRACTION" has the meaning assigned to such term
in
Section 2.4(b).
"SPECIAL DISTRIBUTION DATE" means, with respect to any Special
Payment, the date chosen by the
Subordination Agent pursuant to Section 2.4(a)
for the distribution of such Special
Payment in accordance with this Agreement.
"SPECIAL PAYMENT" means any payment (other than a Scheduled
Payment)
in respect of, or any proceeds of, any
Equipment Note or Trust Indenture Estate
(as defined in each Indenture).
"SPECIAL PAYMENTS ACCOUNT" means the Eligible Deposit Account
created pursuant to Section 2.2 as a
sub-account to the Collection Account.
"STANDARD & POOR'S" means Standard & Poor's Ratings
Services, a
division of The McGraw-Hill Companies,
Inc.
"STATED AMOUNT" means, with respect to any Liquidity Facility,
the
Maximum Commitment (as defined in such
Liquidity Facility) of the applicable
Liquidity Provider thereunder.
"STATED EXPIRATION DATE" has the meaning specified in Section
3.6(d)(i).
"STATED INTEREST RATE" means 9.558% per annum.
"SUB-ACCOUNT" means, collectively, the CNAI Sub-Account, the
WestLB
Sub-Account and any Replacement Liquidity
Provider Sub-Account.
"SUBORDINATION AGENT" has the meaning assigned to it in the
preliminary statements to this
Agreement.
"SUBORDINATION AGENT INCUMBENCY CERTIFICATE" has the meaning
assigned to such term in Section
2.5(a).
"SUBORDINATION AGENT REPRESENTATIVES" has the meaning assigned
to
such term in Section 2.5(a).
<PAGE>
"SUBSTITUTE AIRCRAFT" has the meaning set forth in the Note
Purchase
Agreement.
"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" with respect to any Liquidity Facility, has
the
meaning assigned to such term in such
Liquidity Facility.
"THRESHOLD RATING" means the short-term unsecured debt rating of
P-1
by Moody's and short-term issuer credit
rating of A-1 by Standard & Poor's;
provided that so long as CNAI is the
Liquidity Provider for any Liquidity
Facility, the Threshold Rating shall apply
to the Guarantor in the case of such
Liquidity Facility.
"TREASURY REGULATIONS" means regulations, including proposed or
temporary regulations, promulgated under
the Code. References herein to specific
provisions of proposed or temporary
regulations shall include analogous
provisions of final Treasury Regulations or
other successor Treasury
Regulations.
"TRIGGERING EVENT" means (x) the occurrence of an Indenture
Default
under all of the Indentures resulting in a
PTC Event of Default, (y) the
Acceleration of all of the outstanding
Equipment Notes (PROVIDED that, with
respect to the period prior to the Delivery
Period Expiry Date, the aggregate
principal balance of such Equipment Notes
is in excess of $108,000,000) or (z)
the occurrence of a Continental Bankruptcy
Event.
"TRIGGERING EVENT DISTRIBUTIONS" means, on any Current
Distribution
Date, the sum of (x) the aggregate amount
of all accrued and unpaid interest on
the Certificates (excluding interest, if
any, payable with respect to the
Deposits) and (y) the Pool Balance as of
the immediately preceding Distribution
Date (or, if the Current Distribution Date
is the first Distribution Date, the
original aggregate face amount of the
Certificates) (less the amount of the
Deposits as of such preceding Distribution
Date (or, if the Current Distribution
Date is the first Distribution Date, the
Closing Date) other than any portion of
such Deposits thereafter used to acquire
Equipment Notes pursuant to the Note
Purchase Agreement). For purposes of
calculating the Triggering Event
Distributions, any premium paid on the
Equipment Notes that has not been
distributed to the Certificateholders
(other than such premium or a portion
thereof applied to the payment of interest
on the Certificates or the reduction
of the Pool Balance) shall be added to the
amount of the Triggering Event
Distributions.
<PAGE>
"TRUST" means the Continental Airlines Pass Through Trust
2004-ERJ1
created and administered pursuant to the
Trust Agreement.
"TRUST ACCOUNTS" has the meaning assigned to such term in
Section
2.2(a).
"TRUST AGREEMENT" means the Basic Agreement, as supplemented by
the
Trust Supplement No. 2004-ERJ1 thereto,
dated the date hereof, governing the
creation and administration of the Pass
Through Trust 2004-ERJ1 and the issuance
of the Certificates, as the same may be
amended, supplemented or otherwise
modified from time to time in accordance
with its terms.
"TRUSTEE" means WTC, not in its individual capacity except as
expressly set forth in the Trust Agreement,
but solely as trustee under the
Trust Agreement, together with any
successor trustee appointed pursuant thereto.
"TRUSTEE INCUMBENCY CERTIFICATE" has the meaning assigned to
such
term in Section 2.5(b).
"TRUSTEE REPRESENTATIVES" has the meaning assigned to such term
in
Section 2.5(b).
"TRUST INDENTURE ESTATE" with respect to any Indenture, has the
meaning assigned to such term in such
Indenture.
"TRUST PROPERTY" has the meaning set forth in the Trust
Agreement.
"UNAPPLIED PROVIDER ADVANCE", with respect to any Liquidity
Facility, has the meaning specified in such
Liquidity Facility.
"UNDERWRITERS" means Citigroup Global Markets Inc. and Morgan
Stanley & Co. Incorporated.
"UNDERWRITING AGREEMENT" means the Underwriting Agreement dated
June
18, 2004 among the Underwriters, the
Depositary, Embraer and Continental,
relating to the purchase of the
Certificates by the Underwriters, as the same
may be amended, supplemented or otherwise
modified from time to time in
accordance with its terms.
"WESTLB" has the meaning assigned to such term in the recital
of
parties to this Agreement.
"WESTLB EARLY TERMINATED FACILITY" has the meaning assigned to
such
term in Section 3.6(d)(ii).
"WESTLB EARLY TERMINATION DRAWING" has the meaning assigned to
such
term in Section 3.6(d)(ii)
"WESTLB EARLY TERMINATION DATE" means the date specified in a
WestLB
Early Termination Notice delivered by a
Liquidity Provider to the Subordination
<PAGE>
Agent in accordance with Section
3.6(d)(ii), which date shall not be earlier
than the 25th day following the receipt by
the Subordination Agent of such
WestLB Early Termination Notice.
"WESTLB EARLY TERMINATION NOTICE" has the meaning assigned to
such
term in Section 3.6(d)(ii).
"WESTLB EARLY TERMINATION NOTICE PERIOD" has the meaning assigned
to
such term in Section 3.6(d)(ii).
"WESTLB EXPIRED FACILITY" has the meaning assigned to such term
in
Section 3.6(l).
"WESTLB EXPIRATION DRAWING" has the meaning assigned to such term
in
Section 3.6(l).
"WESTLB FEE LETTER" means the Fee Letter dated the date hereof
among
WestLB, Embraer, Continental and the
Subordination Agent with respect to the
initial WestLB Liquidity Facility.
"WESTLB LIQUIDITY FACILITY" means, initially, the Revolving
Credit
Agreement, dated as of the date hereof,
between the Subordination Agent, as
agent and trustee for the Trust, and
WestLB, 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.
"WESTLB SUB-ACCOUNT" means, with respect to the Cash Collateral
Account, a sub-ledger account to such Cash
Collateral Account designated "WestLB
Sub-Account".
"WRITTEN NOTICE" means, from the Subordination Agent, the Trustee
or
any Liquidity Provider, a written
instrument executed by the Designated
Representative of such Person. An invoice
delivered by a Liquidity Provider
pursuant to Section 3.1 in accordance with
its normal invoicing procedures shall
constitute Written Notice under such
Section.
"WTC" has the meaning assigned to such term in the recital of
parties to this Agreement.
ARTICLE II
TRUST ACCOUNTS; CONTROLLING PARTY
SECTION 2.1 AGREEMENT TO TERMS OF SUBORDINATION; PAYMENTS FROM
MONIES RECEIVED ONLY. (a) The Trustee
hereby acknowledges and agrees to the
terms of subordination and distribution set
forth in this Agreement in respect
of the Certificates and agrees to enforce
such provisions and cause all payments
in respect of the Equipment Notes and the
Liquidity Facilities to be applied in
accordance with the terms of this
Agreement. In addition, the Trustee hereby
<PAGE>
agrees to cause the Equipment Notes
purchased by the Trust to be registered in
the name of the Subordination Agent or its
nominee, as agent and trustee for the
Trustee, to be held in trust by the
Subordination Agent solely for the purpose
of facilitating the enforcement of the
subordination and other provisions of
this Agreement.
(b) Except as
otherwise expressly provided in the next succeeding
sentence of this Section 2.1, all payments
to be made by the Subordination Agent
hereunder shall be made only from amounts
received by it that constitute
Scheduled Payments, Special Payments or
payments under Section 9.1 of the
Participation Agreements or payments under
Section 6 of the Note Purchase
Agreement, and only to the extent that the
Subordination Agent shall have
received sufficient income or proceeds
therefrom to enable it to make such
payments in accordance with the terms
hereof. The Trustee and the Subordination
Agent hereby agree and, as provided in the
Trust Agreement, each
Certificateholder, by its acceptance of a
Certificate, and each Liquidity
Provider, by entering into the Liquidity
Facility to which it is a party, have
agreed to look solely to such amounts to
the extent available for distribution
to it as provided in this Agreement and to
the relevant Deposits and that none
of the Owner Trustees, Loan Trustees, Owner
Participants nor the Trustee or the
Subordination Agent is personally liable to
any of them for any amounts payable
or any liability under this Agreement, the
Trust Agreement, any Liquidity
Facility or such Certificate, except (in
the case of the Subordination Agent) as
expressly provided herein or (in the case
of the Trustee) as expressly provided
in the Trust Agreement or (in the case of
the Owner Trustees and the Loan
Trustees) as expressly provided in any
Operative Agreement.
SECTION 2.2 TRUST ACCOUNTS. (a) Upon the execution of this
Agreement, the Subordination Agent 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 Trustee, the
Certificateholders and the Liquidity Providers, (ii)
as a sub-account in the Collection Account,
the Special Payments 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 Trustee, the
Certificateholders and the Liquidity
Providers and (iii) the Reserve 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 Trustee, the
Liquidity Providers and the
Certificateholders. The Subordination Agent shall
establish and maintain the Cash Collateral
Account (consisting of the CNAI
Sub-Account, the WestLB Sub-Account and any
Replacement Liquidity Provider
Sub-Account related thereto) pursuant to
and under the circumstances set forth
in Section 3.6(f) hereof. Upon such
establishment and maintenance under Section
3.6(f) hereof, the Cash Collateral Account
shall, together with the Collection
Account, constitute the "TRUST ACCOUNTS"
hereunder.
(b) Funds on
deposit in the Trust Accounts shall be invested and
reinvested by the Subordination Agent in
Eligible Investments selected by the
Subordination Agent if such investments are
reasonably available and have
maturities no later than the earlier of (i)
30 days following the date of such
investment and (ii) the Business Day
immediately preceding the Regular
Distribution Date or the date of the
related distribution pursuant to Section
2.4 hereof, as the case may be, next
following the date of such investment;
PROVIDED, HOWEVER, that following the
making of a Downgrade Drawing, a
Non-Extension Drawing, a CNAI Special
Termination Drawing, a WestLB Early
<PAGE>
Termination Drawing or a WestLB Expiration
Drawing under any Liquidity Facility,
the Subordination Agent shall invest and
reinvest such amounts in the
Sub-Account related to such Liquidity
Facility in Eligible Investments at the
direction of Continental (or, if and to the
extent so specified to the
Subordination Agent by Continental, the
Liquidity Provider with respect to such
Liquidity Facility); PROVIDED FURTHER,
HOWEVER, that upon the occurrence and
during the continuation of a Triggering
Event, the Subordination Agent shall
invest and reinvest such amounts in
accordance with the written instructions of
the Controlling Party. Unless otherwise
expressly provided in this Agreement
(including, without limitation, with
respect to Investment Earnings on amounts
on deposit in the Cash Collateral Account,
Section 3.6(f) hereof), any
Investment Earnings shall be deposited in
the Collection Account when received
by the Subordination Agent and shall be
applied by the Subordination Agent 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
Subordination Agent's reasonable fees and
expenses in making such investments. The
Subordination Agent shall not be liable
for any loss resulting from any investment,
reinvestment or liquidation required
to be made under this Agreement 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 Subordination
Agent without instructions whenever such
sale is necessary to make a
distribution required under this Agreement.
Uninvested funds held hereunder
shall not earn or accrue interest.
(c) The
Subordination Agent 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 3.4(b) with
respect to Investment Earnings). The
Trust Accounts shall be held in trust by
the Subordination Agent under the sole
dominion and control of the Subordination
Agent for the benefit of the Trustee,
the Certificateholders and the Liquidity
Providers, as the case may be. If, at
any time, any of the Trust Accounts or the
Reserve Account ceases to be an
Eligible Deposit Account, the Subordination
Agent shall within 10 Business Days
(or such longer period, not to exceed 30
calendar days, for which a Ratings
Confirmation shall have been obtained)
establish a new Collection Account,
Special Payments Account, Reserve 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, Special Payments Account,
Reserve Account or Cash Collateral Account,
as the case may be. So long as WTC
is an Eligible Institution, the Trust
Accounts and the Reserve Account shall be
maintained with it as Eligible Deposit
Accounts.
(d) The
Subordination Agent shall possess all right, title and
interest in all funds on deposit from time
to time in the Reserve Account. The
Reserve Account shall be used by the
Subordination Agent solely to fund the
Appraisals when required to be obtained
pursuant to Section 4.1 hereof.
SECTION 2.3 DEPOSITS TO THE COLLECTION ACCOUNT AND SPECIAL
PAYMENTS
ACCOUNT. (a) The Subordination Agent shall,
upon receipt thereof, deposit in the
Collection Account all Scheduled Payments
received by it.
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(b) The
Subordination Agent shall, on each date when one or more
Special Payments are made to the
Subordination Agent as holder of the Equipment
Notes, deposit in the Special Payments
Account the aggregate amount of such
Special Payments.
SECTION 2.4 DISTRIBUTIONS OF SPECIAL PAYMENTS. (a) NOTICE OF
SPECIAL
PAYMENT. Except as provided in Section
2.4(e) below, upon receipt by the
Subordination Agent, as registered holder
of the Equipment Notes, of any notice
of a Special Payment (or, in the absence of
any such notice, upon receipt by the
Subordination Agent of a Special Payment),
the Subordination Agent shall
promptly give notice thereof to the Trustee
and the Liquidity Providers. The
Subordination Agent shall promptly
calculate the amount of the redemption or
purchase of Equipment Notes or the amount
of any Overdue Scheduled Payment, as
the case may be, comprising such Special
Payment under the applicable Indenture
or Indentures and shall promptly send to
the Trustee a Written Notice of such
amount. Such Written Notice shall also set
the distribution date for such
Special Payment (a "SPECIAL DISTRIBUTION
DATE"), which shall be the Business Day
which immediately follows the later to
occur of (x) the 15th day after the date
of such Written Notice or (y) the date the
Subordination Agent has received or
expects to receive such Special Payment.
Amounts on deposit in the Special
Payments Account shall be distributed in
accordance with Sections 2.4(b) and
2.4(c) hereof, as applicable.
(b) REDEMPTIONS
AND PURCHASES OF EQUIPMENT NOTES. (i) So long as
no Triggering Event shall have occurred
(whether or not continuing), the
Subordination Agent shall make
distributions pursuant to this Section 2.4(b) of
amounts on deposit in the Special Payments
Account on account of the redemption,
purchase (including, without limitation, a
purchase resulting from a sale of the
Equipment Notes permitted by Article IV
hereof) or prepayment of all of the
Equipment Notes issued pursuant to an
Indenture on the Special Distribution Date
for such Special Payment in the following
order of priority:
FIRST, such amount as shall be required to pay (A) all accrued
and
unpaid
Liquidity Expenses then in arrears PLUS (B) the product of (x)
the
aggregate
amount of all accrued and unpaid Liquidity Expenses not in
arrears to
such Special Distribution Date MULTIPLIED BY (y) a fraction,
the
numerator of which is the aggregate outstanding principal amount
of
Equipment
Notes being redeemed, purchased or prepaid on such Special
Distribution Date and the denominator of which is the aggregate
outstanding principal amount of all Equipment Notes (the "SECTION
2.4(B)
FRACTION"), shall be distributed to the Liquidity Providers pro
rata on
the basis
of the amount of the Liquidity Expenses owed to each Liquidity
Provider;
SECOND, such amount as shall be required to pay (i) (A) all
accrued
and unpaid
interest then in arrears on all Liquidity Obligations PLUS (B)
the
product of (x) the aggregate amount of all accrued and unpaid
interest
on all
Liquidity Obligations not in arrears to such Special
Distribution
Date (at
the rate provided in the Liquidity Facilities) MULTIPLIED BY
(y)
the
Section 2.4(b) Fraction and (ii) if a CNAI Special Termination
Drawing
has been
made under the CNAI Liquidity Facility and has not been
converted
into a
Final Advance, the outstanding amount of such CNAI Special
Termination Drawing, shall be distributed to the Liquidity
Providers pro
rata on
the basis of the amount of such Liquidity Obligations owed to
each
Liquidity
Provider;
<PAGE>
THIRD, such amount as shall be required (A) if any Sub-Account
of
any Cash
Collateral Account had been previously funded as provided in
Section
3.6(f), to fund such Sub-Account up to its Required Amount
shall
be
deposited in such Sub-Account, (B) if any Liquidity Facility
shall
become a
Downgraded Facility, a Non-Extended Facility, a WestLB Early
Terminated
Facility or a WestLB Expired Facility at a time when
unreimbursed Interest Drawings under such Liquidity Facility have
reduced
the
Available Amount thereunder to zero, to fund the related
Sub-Account
of the Cash Collateral Account up
to an amount equal to such Sub-Account's
Required
Amount shall be deposited in such Sub-Account, and (C) if, with
respect to
any particular Liquidity Facility, neither subclause (A) nor
subclause
(B) of this clause "third" are applicable, to pay or reimburse
the
Liquidity Provider in respect of such Liquidity Facility an
amount
equal to
the amount of any unreimbursed Interest Drawings under such
Liquidity
Facility shall be distributed to such Liquidity Provider, pro
rata on
the basis of the amounts of such deficiencies in respect of
each
Sub-Account and unreimbursed Interest Drawings in respect of
each
Liquidity
Provider;
FOURTH, if, with respect to any particular Liquidity Facility,
any
amounts
are to be distributed pursuant to either subclause (A) or (B)
of
clause
"third" above, then the Liquidity Provider with respect to such
Liquidity
Facility shall be paid the excess of (x) the aggregate
outstanding amount of unreimbursed Advances (whether or not then
due)
under such
Liquidity Facility over (y) such Liquidity Facility's Required
Amount,
pro rata on the basis of such amounts in respect of each
Liquidity
Provider;
FIFTH, such amount as shall be required to pay in full Expected
Distributions to the holders of the Certificates on such
Special
Distribution Date shall be distributed to the Trustee; and
SIXTH, the balance, if any, of such Special Payment shall be
transferred to th
