INTERCREDITOR AGREEMENT (2007-1)

 

 

 

 

 

 

INTERCREDITOR AGREEMENT

(2007-1)

 

Dated as of

April 10, 2007

 

AMONG

 

WILMINGTON TRUST COMPANY,

not in its individual capacity

but solely as Trustee under the

Continental Airlines Pass Through Trust 2007-1A,

Continental Airlines Pass Through Trust 2007-1B,

and

Continental Airlines Pass Through Trust 2007-1C

 

RZB FINANCE LLC,

as Class A Liquidity Provider

and

as Class B Liquidity Provider

 

AND

 

WILMINGTON TRUST COMPANY,

not in its individual capacity except

as expressly set forth herein but

solely as Subordination Agent and Trustee

 

 

 

TABLE OF CONTENTS

 

Page

 

 

Page

 

 

 

INTERCREDITOR AGREEMENT

INTERCREDITOR AGREEMENT dated as of April 10, 2007, among WILMINGTON TRUST COMPANY, a Delaware corporation (" WTC "), not in its individual capacity but solely as Trustee of each Trust (each as defined below); RZB FINANCE LLC, a limited liability company organized under the laws of Delaware (" RZB "), as Class A Liquidity Provider and Class B 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, Continental will issue on a recourse basis up to (and including) three series of Equipment Notes to finance the purchase of the related Aircraft;

WHEREAS, pursuant to the Financing Agreements, each Trust will acquire Equipment Notes having an interest rate equal to the interest rate applicable to the Certificates to be issued by such Trust;

WHEREAS, pursuant to each Trust Agreement, the Trust created thereby proposes to issue a single class of Certificates (a " Class ") bearing the interest rate and having the final distribution date described in such Trust Agreement on the terms and subject to the conditions set forth therein;

WHEREAS, pursuant to the Underwriting Agreement, the Underwriters propose to purchase the Class A Certificates issued by the Class A Trust, the Class B Certificates issued by the Class B Trust and the Class C Certificates issued by the Class C Trust in the aggregate face amount set forth opposite the name of such Trust on Schedule I thereto on the terms and subject to the conditions set forth therein;

WHEREAS, the Class A Liquidity Provider proposes to enter into a revolving credit agreement relating to the Class A Certificates and the Class B Liquidity Provider proposes to enter into a revolving credit agreement relating to the Class B Certificates, in each case with the Subordination Agent, as agent for the Trustee of the applicable Trust, respectively, for the benefit of the Certificateholders of such Trust;

WHEREAS, Raiffeisen Zentralbank Österreich Aktiengesellschaft, a banking institution organized and existing under the laws of the Republic of Austria (the " Guarantor "), will guarantee in full, pursuant to a master guaranty certificate dated as of the date hereof and issued by the Guarantor pursuant to that certain Master Guaranty Agreement, dated as of September 1, 1997, issued by the Guarantor (collectively, the " Guarantee Agreement "), the obligations of RZB under the Class A Liquidity Facility and the Class B Liquidity Facility; and

 

 

WHEREAS, it is a condition precedent to the obligations of the Underwriters under the Underwriting Agreement that the Subordination Agent, the Trustees and the Liquidity Providers agree to the terms of subordination set forth in this Agreement in respect of each Class of Certificates, and the Subordination Agent, the Trustees 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.

NOW, THEREFORE, in consideration of the mutual agreements herein contained, and for 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:

" 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.

" Actual Disposition Event "   means, in respect of any Equipment Note: (i) the disposition of the Collateral (as defined in the Indenture pursuant to which such Equipment Note was issued) securing such Equipment Note, (ii) the occurrence of the mandatory redemption date for such Equipment Note following an Event of Loss (as defined in such Indenture) with respect to the Aircraft which secured such Equipment Note or (iii) the sale of such Equipment Note.

" Additional Certificateholders " has the meaning specified in Section 9.1(d).

" Additional Certificates " has the meaning specified in Section 9.1(d).

" Additional Equipment Notes " has the meaning specified in Section 9.1(d).

 

 

" Additional Trust " has the meaning specified in Section 9.1(d).

" Additional Trust Agreement " has the meaning specified in Section 9.1(d).

" Additional Trustee " has the meaning specified in Section 9.1(d).

" Administration Expenses " has the meaning specified in clause "first" of Section 3.2.

" Advance ", with respect to any Liquidity Facility, means any Advance 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.

" Aircraft " means, with respect to each Indenture, the "Aircraft" referred to therein.

" Appraisal " has the meaning specified in Section 4.1(a)(iv).

" Appraised Current Market Value " of any Aircraft means the lower of the average and the median of the three most recent Post-Default Appraisals of such Aircraft.

" Appraisers " means Aircraft Information Services, Inc., BK Associates, Inc. and Morten Beyer and Agnew, Inc. or, so long as the Person entitled or required hereunder to select such Appraiser acts reasonably, any other nationally recognized appraiser reasonably satisfactory to the Subordination Agent and the Controlling Party.

" Assignment and Assumption Agreements " means each of the Assignment and Assumption Agreements to be executed between a Trustee and trustee of the relevant Successor Trust in accordance with the relevant Trust Agreement, as the same may be amended, modified or supplemented from time to time.

" Available Amount " means, with respect to any Liquidity Facility on any date, the Maximum Available Commitment (as defined therein) on such date.

" Bankruptcy Code " means the United States Bankruptcy Code, 11 U.S.C. Sections 101 et seq .

" 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 any Trustee, the Subordination Agent or any Loan Trustee maintains its Corporate Trust Office and that, solely with respect to the making and repayment of Advances under any Liquidity Facility, also is a "Business Day" as defined in such Liquidity Facility.

" Cash Collateral Account " means the Class A Cash Collateral Account or the Class B Cash Collateral Account, as applicable.

" Certificate " means a Class A Certificate, a Class B Certificate or a Class C Certificate, as applicable.

" Certificate Buy-Out Event " means that a Continental Bankruptcy Event has occurred and is continuing and the following events have occurred: (A) (i) the 60-Day Period has expired, and (ii) Continental has not entered into one or more agreements under Section 1110(a)(2)(A) of the Bankruptcy Code to perform all of its obligations under all of the Indentures or, if it has entered into such agreements, has at any time thereafter failed to cure any default under any of the Indentures in accordance with Section 1110(a)(2)(B) of the Bankruptcy Code; or (B) if prior to the expiry of the 60-Day Period, Continental shall have abandoned any Aircraft.

" Certificateholder " means any holder of one or more Certificates.

" Class " has the meaning assigned to such term in the preliminary statements to this Agreement.

" Class A Cash Collateral Account " means an Eligible Deposit Account 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 the Class A Liquidity Facility pursuant to Section 3.5(c), 3.5(d) or 3.5(i) shall be deposited.

" Class A Certificateholder " means, at any time, any holder of one or more Class A Certificates.

" Class A Certificates " means the certificates issued by the Class A Trust, substantially in the form of Exhibit A to the Class A Trust Agreement, and authenticated by the Class A Trustee, representing fractional undivided interests in the Class A Trust, and any certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Class A Trust Agreement.

" Class A Liquidity Facility " means, initially, the Revolving Credit Agreement dated as of the date hereof, between the Subordination Agent, as agent and trustee for the Class A Trust, and the initial Class A 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.

 

 

" Class A Liquidity Provider " means RZB or, if applicable, any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace any Class A Liquidity Facility pursuant to Section 3.5(e).

" Class A Trust " means (i) prior to the Transfer, the Continental Airlines Pass Through Trust 2007-1A-O created and administered pursuant to the Class A Trust Agreement and (ii) after the Transfer, the Continental Airlines Pass Through Trust 2007-1A-S created and administered pursuant to the Class A Trust Agreement.

" Class A Trust Agreement " means (i) prior to the Transfer, the Basic Agreement, as supplemented by the Supplement No. 2007-1A-O thereto dated as of the date hereof, governing the creation and administration of the Continental Airlines Pass Through Trust 2007-1A-O and the issuance of the Class A Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms, and (ii) after the Transfer, the Basic Agreement, as supplemented by the Supplement No. 2007-1A-S thereto, governing the creation and administration of the Continental Airlines Pass Through Trust 2007-1A-S and the issuance of the Class A Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms.

" Class A Trustee " means WTC, not in its individual capacity except as expressly set forth in the Class A Trust Agreement, but solely as trustee under the Class A Trust Agreement, together with any successor trustee appointed pursuant thereto.

" Class B Adjusted Interest "   means, as of any Current Distribution Date: (I) any interest described in clause (II) of this definition accruing prior to the immediately preceding Distribution Date which remains unpaid and (II) interest at the Stated Interest Rate for the Class B Certificates (A) for the number of days during the period commencing on, and including, the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the Closing Date) and ending on, but excluding the Current Distribution Date, on the Preferred B Pool Balance on such Current Distribution Date and (B) on the principal amount calculated pursuant to clauses (B)(i), (ii), (iii) and (iv) of the definition of Preferred B Pool Balance for each Series B Equipment Note with respect to which a disposition, distribution, sale or Deemed Disposition Event has occurred since the immediately preceding Distribution Date (but only if no such event has previously occurred with respect to such Series B Equipment Note), for each day during the period, for each such Equipment Note, commencing on, and including, the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the Closing Date) and ending on, but excluding the date of disposition, distribution, sale or Deemed Disposition Event with respect to such Equipment Note, Aircraft or Collateral, as the case may be.

" Class B Cash Collateral Account " means an Eligible Deposit Account 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 the Class B Liquidity Facility pursuant to Section 3.5(c), 3.5(d) or 3.5(i) shall be deposited.

" Class B Certificateholder " means, at any time, any holder of one or more Class B Certificates.

 

 

" Class B Certificates " means the certificates issued by the Class B Trust, substantially in the form of Exhibit A to the Class B Trust Agreement, and authenticated by the Class B Trustee, representing fractional undivided interests in the Class B Trust, and any certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Class B Trust Agreement.

" Class B Liquidity Facility " means, initially, the Revolving Credit Agreement dated as of the date hereof, between the Subordination Agent, as agent and trustee for the Class B Trust, and the initial Class B 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.

" Class B Liquidity Provider " means RZB or, if applicable, any Replacement Liquidity Provider which has issued a Replacement Liquidity Facility to replace any Class B Liquidity Facility pursuant to Section 3.5(e).

" Class B Trust " means (i) prior to the Transfer, the Continental Airlines Pass Through Trust 2007-1B-O created and administered pursuant to the Class B Trust Agreement and (ii) after the Transfer, the Continental Airlines Pass Through Trust 2007-1B-S created and administered pursuant to the Class B Trust Agreement.

" Class B Trust Agreement " means (i) prior to the Transfer, the Basic Agreement, as supplemented by the Supplement No. 2007-1B-O thereto dated as of the date hereof, governing the creation and administration of the Continental Airlines Pass Through Trust 2007-1B-O and the issuance of the Class B Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms, and (ii) after the Transfer, the Basic Agreement, as supplemented by the Supplement No. 2007-1B-S thereto, governing the creation and administration of the Continental Airlines Pass Through Trust 2007-1B-S and the issuance of the Class B Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms.

" Class B Trustee " means WTC, not in its individual capacity except as expressly set forth in the Class B Trust Agreement, but solely as trustee under the Class B Trust Agreement, together with any successor trustee appointed pursuant thereto.

" Class C Adjusted Interest "   means, as of any Current Distribution Date, (I) any interest described in clause (II) of this definition accruing prior to the immediately preceding Distribution Date which remains unpaid and (II) interest at the Stated Interest Rate for the Class C Certificates (A) for the number of days during the period commencing on, and including, the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the Closing Date) and ending on, but excluding the Current Distribution Date, on the Preferred C Pool Balance on such Current Distribution Date and (B) on the principal amount calculated pursuant to clauses (B)(i), (ii), (iii) and (iv) of the definition of Preferred C Pool Balance for each Series C Equipment Note with respect to which a disposition, distribution, sale or Deemed Disposition Event has occurred since the immediately preceding Distribution Date (but only if no such event has previously occurred with respect to such Series C Equipment

 

 

Note), for each day during the period, for each such Equipment Note, commencing on, and including, the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the Closing Date) and ending on, but excluding the date of disposition, distribution, sale or Deemed Disposition Event with respect to such Equipment Note, Aircraft or Collateral, as the case may be.

" Class C Certificateholder " means, at any time, any holder of one or more Class C Certificates.

" Class C Certificates " means the certificates issued by the Class C Trust, substantially in the form of Exhibit A to the Class C Trust Agreement, and authenticated by the Class C Trustee, representing fractional undivided interests in the Class C Trust, and any certificates issued in exchange therefor or replacement thereof pursuant to the terms of the Class C Trust Agreement.

" Class C Trust " means (i) prior to the Transfer, the Continental Airlines Pass Through Trust 2007-1C-O created and administered pursuant to the Class C Trust Agreement and (ii) after the Transfer, the Continental Airlines Pass Through Trust 2007-1C-S created and administered pursuant to the Class C Trust Agreement.

" Class C Trust Agreement " means (i) prior to the Transfer, the Basic Agreement, as supplemented by the Supplement No. 2007-1C-O thereto dated as of the date hereof, governing the creation and administration of the Continental Airlines Pass Through Trust 2007-1C-O and the issuance of the Class C Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms, and (ii) after the Transfer, the Basic Agreement, as supplemented by the Supplement No. 2007-1C-S thereto, governing the creation and administration of the Continental Airlines Pass Through Trust 2007-1C-S and the issuance of the Class C Certificates, as the same may be amended, supplemented or otherwise modified from time to time in accordance with its terms.

" Class C Trustee " means WTC, not in its individual capacity except as expressly set forth in the Class C Trust Agreement, but solely as trustee under the Class C Trust Agreement, together with any successor trustee appointed pursuant thereto.

" Closing Date " means April 10, 2007.

" Code " means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations promulgated thereunder.

" Collateral " has the meaning specified in the Indentures.

" Collection Account " means the Eligible Deposit Account established by the Subordination Agent pursuant to Section 2.2(a)(i) which the Subordination Agent shall make deposits in and withdrawals from in accordance with this Agreement.

" Consent Period " has the meaning specified in Section 3.5(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:

" 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 any 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 with respect to the Certificates of any Trust as of such Distribution Date.

" Deemed Disposition Event "   means, in respect of any Equipment Note, the continuation of an Indenture Default in respect of such Equipment Note without an Actual Disposition Event occurring in respect of such Equipment Note for a period of five years from the date of the occurrence of such Indenture Default.

" Delivery Period Expiry Date " means the earlier of (a) June 30, 2009, or, if the Equipment Notes relating to all the New Aircraft (or Substitute Aircraft in lieu thereof) have not been purchased by the Trusts on or prior to such date due to any reason beyond the control of Continental and not occasioned by Continental's fault or negligence, September 30, 2009 ( provided that, if a labor strike occurs at The Boeing Company on or prior to either or both of such dates referred to in this clause (a), such date or dates on or following the commencement of such strike shall be extended by adding thereto the number of days that such strike continued in effect) and (b) the date on which Equipment Notes with respect to all New Aircraft (or Substitute Aircraft in lieu thereof) have been purchased by the Trusts in accordance with the Note Purchase Agreement.

" Deposit Agreement " means, with respect to any Class of Certificates, the Deposit Agreement pertaining to such Class, dated as of the date hereof, between the Escrow Agent and the Depositary, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.

" Depositary " means Credit Suisse, New York Branch, as depositary under each Deposit Agreement.

" Deposits " with respect to any Class of Certificates, has the meaning set forth in the Deposit Agreement pertaining to such Class.

" Designated Representatives " means the Subordination Agent Representatives, the Trustee Representatives and the Provider 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 specified in Section 3.5(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 specified in Section 3.5(c).

" Drawing " means an Interest Drawing, a Final Drawing, a Non-Extension 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 of at least A3 from Moody's and a long-term issuer credit rating of at least A- from Standard & Poor's. 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 any 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 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 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 a Ratings Confirmation shall have been received with respect to the making of such investment.

" Equipment Note Buy-Out Event " means the occurrence and continuation of (i) a Certificate Buy-Out Event or (ii) an Indenture Default under any Indenture that has continued for

 

 

a period of five years without an Actual Disposition Event occurring with respect to the Equipment Notes issued under such Indenture.

" Equipment Note Special Payment " means a Special Payment on account of the redemption, purchase or prepayment of all of the Equipment Notes issued pursuant to an Indenture.

" Equipment Notes " means, at any time, the Series A Equipment Notes, the Series B Equipment Notes and the Series C Equipment Notes, collectively, and in each case, any Equipment Notes issued in exchange therefor or replacement thereof pursuant to the terms of the Indentures.

" 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 " means, with respect to any Class of Certificates, the Escrow and Paying Agent Agreement pertaining to such Class dated as of the date hereof between the Escrow Agent, the Underwriters, the Trustee for such Class and the Paying Agent, as the same may be amended, modified or supplemented from time to time in accordance with the terms thereof.

" Escrow Receipts " has the meaning assigned to such term in the Escrow and Paying Agent Agreement for the Class A Trust, Class B Trust or Class C Trust, as applicable.

" Excess Liquidity Obligations " means, with respect to an Indenture, the amounts payable under clause (a) of the third paragraph of Section 2.02 of such Indenture.

" Expected Distributions " means, with respect to the Certificates of any Trust on any Current Distribution Date, the difference between (A) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (or, if the Current Distribution Date is the first Distribution Date, the original aggregate face amount of Certificates of such Trust) and (B) the Pool Balance of such Certificates as of the Current Distribution Date calculated on the basis that (i) the principal of the Non-Performing Equipment Notes held in such Trust has been paid in full and such payments have been distributed to the holders of such Certificates, (ii) the principal of the Performing Equipment Notes held in such Trust has been paid when due (without giving effect to any Acceleration of Performing Equipment Notes) and such payments have been distributed to the holders of such Certificates and (iii) the principal of any Equipment Notes formerly held in such Trust that have been sold pursuant to the terms hereof has been paid in full and such payments have been distributed to the holders of such Certificates, 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 of such Trust). For purposes of calculating Expected Distributions with respect to the Certificates of any Trust, any Premium paid on the Equipment Notes held in such Trust which has not been distributed to the Certificateholders of such Trust (other than such Premium or a portion thereof applied to the

 

 

payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of such Expected Distributions.

" Expiry Date " with respect to any Liquidity Facility, has the meaning set forth in such Liquidity Facility.

" Facility Office " means, with respect to any Liquidity Facility, the office of the Liquidity Provider thereunder, presently located at Bethel, Connecticut, or such other office as such Liquidity Provider from time to time shall notify the applicable 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 Section 3.01, 3.02 or 3.03 of any such Liquidity Facility.

" Fee Letters " means, collectively, (i) the Fee Letter dated as of the date hereof between RZB and the Subordination Agent with respect to the initial Liquidity Facilities and (ii) any fee letter entered into between the Subordination Agent and any Replacement Liquidity Provider in respect of such Liquidity Facilities.

" Final Distributions " means, with respect to the Certificates of any Trust on any Distribution Date, the sum of (x) the aggregate amount of all accrued and unpaid interest on such Certificates (excluding interest, if any, payable with respect to the Deposits relating to such Trust) and (y) the Pool Balance of such Certificates as of the immediately preceding Distribution Date (less the amount of the Deposits for such Class of Certificates as of such preceding Distribution Date other than any portion of such Deposits thereafter used to acquire Equipment Notes pursuant to the Note Purchase Agreement). For purposes of calculating Final Distributions with respect to the Certificates of any Trust, any Premium paid on the Equipment Notes held in such Trust which has not been distributed to the Certificateholders of such Trust (other than such Premium or a portion thereof applied to the payment of interest on the Certificates of such Trust or the reduction of the Pool Balance of such Trust) shall be added to the amount of such Final Distributions.

" Final Drawing " has the meaning assigned to such term in Section 3.5(i).

" Final Legal Distribution Date " means (i) with respect to the Class A Certificates and Class B Certificates, October 19, 2023, and (ii) with respect to the Class C Certificates, April 19, 2014.

" Financing Agreement " 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 Continental, 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 specified in Section 3.5(a).

" Interest Payment Date " means, with respect to any Liquidity Facility, each date on which interest is due and payable under such Liquidity Facility on a Downgrade Drawing, Non-Extension Drawing or Final Drawing thereunder, other than any such date on which interest is due and payable under such Liquidity Facility only on an Applied Provider Advance (as such term is defined in such Liquidity Facility).

" Interest Period " has the meaning specified in the Indentures.

" 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.

" Junior Additional Certificateholder " has the meaning specified in Section 2.7(c).

" 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, with respect to the Liquidity Facilities, 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 Facility " means, at any time, the Class A Liquidity Facility or the Class B Liquidity Facility, as applicable.

" Liquidity Obligations " means, with respect to the Liquidity Facilities, all principal, interest, fees and other amounts owing to the Liquidity Providers under the Liquidity Facilities, Section 8.1 of the Participation Agreements or the Fee Letters.

" Liquidity Provider " means, at any time, the Class A Liquidity Provider or the Class B Liquidity Provider, as applicable.

" Loan Trustee " means, with respect to any Indenture, the mortgagee thereunder.

" Minimum Sale Price " means, with respect to any Aircraft or the Equipment Notes issued in respect of such Aircraft, at any time, the lesser of (1) in the case of the sale

 

 

of an Aircraft, 75%, or in the case of  the sale of related Equipment Notes, 85%, of the Appraised Current Market Value of such Aircraft and (2) the sum of the aggregate Note Target Price of such Equipment Notes and an amount equal to the Excess Liquidity Obligations in respect of the Indenture under which such Equipment Notes were issued.

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

" New Aircraft " has the meaning set forth in the Note Purchase Agreement.

" Non-Controlling Party " means, at any time, any Trustee or Liquidity Provider which is not the Controlling Party at such time.

" Non-Extended Facility " has the meaning specified in Section 3.5(d).

" Non-Extension Drawing " has the meaning specified in Section 3.5(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, each 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.

" Note Target Price " means, for any Equipment Note issued under any Indenture, (i) the aggregate outstanding principal amount of such Equipment Note, plus (ii) the accrued and unpaid interest thereon, together with all other sums owing on or in respect of such Equipment Note under such Indenture (including, without limitation, enforcement costs incurred by the Subordination Agent in respect of such Equipment Note).

" 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 Indentures, the Trust Agreements, the Underwriting Agreement, 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 each Class of Certificates, as of the date of determination, all Certificates of such Class theretofore authenticated and delivered under the related Trust Agreement, except:

 

 

provided , however , that in determining whether the holders of the requisite Outstanding amount of such 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 such Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Certificates that such 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 applicable Trustee the pledgee's right so to act with respect to 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.

" Participation Agreement " means, with respect to each Indenture, the "Participation Agreement" referred to therein.

" Payee " has the meaning specified in Section 2.4(e).

" Paying Agent " means Wilmington Trust Company, as paying agent under each Escrow and Paying Agent Agreement, together with its successors in such capacity.

" Paying Agent Account " has the meaning assigned to such term in the Escrow and Paying Agent Agreements.

" 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 the Bankruptcy Code in which Continental is a debtor any payment default existing during the 60-Day Period (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 (other than any Additional Equipment Notes issued under any Indenture) 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, with respect to each Trust or the Certificates issued by any Trust, as of any date, (i) the original aggregate face amount of the Certificates of such Trust less (ii) the aggregate amount of all payments made as of such date in respect of the Certificates of such Trust or in respect of Deposits relating to such Trust other than payments made in respect of interest or Premium thereon or reimbursement of any costs and expenses in connection therewith. The Pool Balance for each Trust or for the Certificates issued by any Trust as of any 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 held in such Trust and the distribution thereof to be made on that date.

" Post-Default Appraisal " has the meaning specified in Section 4.1(a)(iv).

" Preferred B Pool Balance "   means, as of any date, the excess of (A) the Pool Balance of the Class B Certificates as of the immediately preceding Distribution Date (or, if such date is on or before the first Distribution Date, the original aggregate face amount of the Class B Certificates) (after giving effect to distributions made on such date) over (B) the sum of (i) the outstanding principal amount of each Series B Equipment Note that remains unpaid as of such date subsequent to the disposition of the Collateral under the Indenture pursuant to which such Series B Equipment Note was issued and after giving effect to any distributions of the proceeds of such disposition applied under such Indenture to the payment of each such Series B Equipment Note, (ii) the outstanding principal amount of each Series B Equipment Note that remains unpaid as of such date subsequent to the scheduled date of mandatory redemption of such Series B Equipment Note following an Event of Loss (as defined in such Indenture) with respect to the Aircraft which secured such Series B Equipment Note and after giving effect to the distributions of any proceeds in respect of such Event of Loss applied under such Indenture to the payment of each such Series B Equipment Note, (iii) the excess, if any, of (x) the outstanding amount of principal and interest as of the date of sale of each Series B Equipment Note previously sold over (y) the purchase price received with respect to the sale of such Series B Equipment Note (net of any applicable costs and expenses of sale) and (iv) the outstanding principal amount of any Series B Equipment Note with respect to which a Deemed Disposition Event has occurred; provided , however , that if more than one of the clauses (i), (ii), (iii) and (iv) is applicable to any one Series B Equipment Note, only the amount determined pursuant to the clause that first became applicable shall be counted with respect to such Series B Equipment Note.

" Preferred C Pool Balance "   means, as of any date, the excess of (A) the Pool Balance of the Class C Certificates as of the immediately preceding Distribution Date (or, if such date is on or before the first Distribution Date, the original aggregate face amount of the Class C Certificates) (after giving effect to distributions made on such date) over (B) the sum of (i) the outstanding principal amount of each Series C Equipment Note that remains unpaid as of such date subsequent to the disposition of the Collateral under the Indenture pursuant to which such Series C Equipment Note was issued and after giving effect to any distributions of the proceeds of such disposition applied under such Indenture to the payment of each such Series C

 

 

Equipment Note, (ii) the outstanding principal amount of each Series C Equipment Note that remains unpaid as of such date subsequent to the scheduled date of mandatory redemption of such Series C Equipment Note following an Event of Loss (as defined in such Indenture) with respect to the Aircraft which secured such Series C Equipment Note and after giving effect to the distributions of any proceeds in respect of such Event of Loss applied under such Indenture to the payment of each such Series C Equipment Note, (iii) the excess, if any, of (x) the outstanding amount of principal and interest as of the date of sale of each Series C Equipment Note previously sold over (y) the purchase price received with respect to the sale of such Series C Equipment Note (net of any applicable costs and expenses of sale) and (iv) the outstanding principal amount of any Series C Equipment Note with respect to which a Deemed Disposition Event has occurred; provided , however , that if more than one of the clauses (i), (ii), (iii) and (iv) is applicable to any one Series C Equipment Note, only the amount determined pursuant to the clause that first became applicable shall be counted with respect to such Series C Equipment Note.

" Premium " means any "Make-Whole Amount" as such term is defined in any Indenture.

" Proceeding " means any suit in equity, action at law or other judicial or administrative proceeding.

" Provider Incumbency Certificate " has the meaning specified in Section 2.5(c).

" Provider Representatives " has the meaning specified in Section 2.5(c).

" PTC Event of Default " means, with respect to each Trust Agreement, the failure to pay within 10 Business Days of the due date thereof: (i) the outstanding Pool Balance of the applicable Class of Certificates on the Final Legal Distribution Date for such Class or (ii) interest due on such Certificates on any Distribution Date (unless, in the case of the Class A Trust Agreement or the Class B Trust Agreement, the Subordination Agent shall have made an Interest Drawing or a withdrawal from the Cash Collateral Account relating to a Liquidity Facility for such Class, with respect thereto in an aggregate amount sufficient to pay such interest and shall have distributed such amount to the Trustee entitled thereto).

" 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 any Class of Certificates below the then current rating for such Class of Certificates or (ii) a withdrawal or suspension of the rating of any Class of Certificates.

" Refinancing Certificateholders " has the meaning specified in Section 9.1(c).

" Refinancing Certificates " has the meaning specified in Section 9.1(c).

" Refinancing Equipment Notes " has the meaning specified in Section 9.1(c).

 

 

" Refinancing Trust Agreement " has the meaning specified in Section 9.1(c).

" Refinancing Trust " has the meaning specified in Section 9.1(c).

" Refinancing Trustee " has the meaning specified in Section 9.1(c).

" Regular Distribution Dates " means each April 19 and October 19, commencing on October 19, 2007; 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 (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 related Certificates (before downgrading of such ratings, if any, as a result of the downgrading of the applicable Liquidity Provider), in a face amount (or in an aggregate face amount) equal to the then Required Amount and issued by a Person (or Persons) having unsecured short-term debt rating or issuer credit rating, as the case may be, issued by both 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 any Class of Certificates may have a stated expiration date earlier than 15 days after the Final Legal Distribution Date of such Class of Certificates so long as such Replacement Liquidity Facility provides for a Non-Extension Drawing as contemplated by Section 3.5(d) hereof.

" Replacement Liquidity Provider " means a Person (or Persons) who issues a Replacement Liquidity Facility.

" Required Amount " means with respect to each Liquidity Facility or Cash Collateral Account, for any day, the sum of the aggregate amount of interest, calculated at the rate per annum equal to the Stated Interest Rate for the related Class of Certificates, that would be payable on such Class of Certificates on each of the three successive Regular Distribution Dates immediately following such day or, if such day is a Regular Distribution Date, on such day and the succeeding two Regular Distribution Dates, in each case calculated on the basis of the Pool Balance of such Class of Certificates on such date and without regard to expected future payments of principal on such Class of Certificates.

" Responsible Officer " means (i) with respect to the Subordination Agent and each of the Trustees, any officer in the corporate trust administration department of the Subordination Agent or such 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.

" RZB " has the meaning assigned to such term in the recital of parties to this Agreement.

 

 

" Scheduled Payment " means, with respect to any Equipment Note, (i) any payment of principal or interest on such Equipment Note (other than an 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 corresponding Class of Certificates with funds drawn under any Liquidity Facility or withdrawn from any Cash Collateral Account, which payment represents the payment of regularly scheduled interest accrued on the unpaid principal amount of the related Equipment Note; 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 Fraction " means, with respect to any Special Distribution Date, a fraction, the numerator of which shall be the amount of principal of the applicable Series A Equipment Notes and Series B Equipment Notes being redeemed, purchased or prepaid on such Special Distribution Date, and the denominator of which shall be the aggregate unpaid principal amount of all Series A Equipment Notes and Series B Equipment Notes outstanding as of such Special Distribution Date.

" Senior Additional Certificateholder " has the meaning specified in Section 2.7(c).

" Senior Additional Equipment Notes " has the meaning specified in Section 2.7(c).

" Series A Equipment Notes " means the Series A Equipment Notes issued pursuant to any Indenture by Continental 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.

" Series B Equipment Notes " means the Series B Equipment Notes issued pursuant to any Indenture by Continental 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.

" Series C Equipment Notes " means the Series C Equipment Notes issued or re-issued pursuant to any Indenture by Continental 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.

" 60-Day Period " means 60-day period specified in Section 1110(a)(2)(A) of the Bankruptcy Code.

" 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, whether distributed pursuant to Section 2.4 or Section 3.2 hereof.

 

 

" Special Payment " means any payment (other than a Scheduled Payment) in respect of, or any proceeds of, any Equipment Note or Collateral.

" Special Payments Account " means the Eligible Deposit Account created pursuant to Section 2.2(a)(ii) 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 " with respect to any Liquidity Facility, means the Maximum Commitment (as defined in such Liquidity Facility) of the applicable Liquidity Provider thereunder.

" Stated Expiration Date " has the meaning specified in Section 3.5(d).

" Stated Interest Rate " means (i) with respect to the Class A Certificates, 5.983% per annum, (ii) with respect to the Class B Certificates, 6.903% per annum and (iii) with respect to the Class C Certificates, 7.339% per annum.

" Subordination Agent " has the meaning assigned to it in the preliminary statements to this Agreement.

" Subordination Agent Incumbency Certificate " has the meaning specified in Section 2.5(a).

" Subordination Agent Representatives " has the meaning specified in Section 2.5(a).

" Substitute Aircraft " has the meaning set forth in the Note Purchase Agreement.

" Successor Trusts " means, collectively, Continental Airlines Pass Through Trust 2007-1A-S, Continental Airlines Pass Through Trust 2007-1B-S and Continental Airlines Pass Through Trust 2007-1C-S.

" 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 the short-term issuer credit rating of A-1 by Standard & Poor's; provided that so long as RZB is the Liquidity Provider for any Liquidity Facility, the Threshold Rating shall apply to the Guarantor in the case of such Liquidity Facility.

" Transfer " means, with respect to any particular Trust, the transfers contemplated by the Assignment and Assumption Agreement with respect to such Trust.

" 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 with respect to the most senior Class of Certificates then Outstanding, (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 $450,000,000) or (z) the occurrence of a Continental Bankruptcy Event.

" Trust " means any of the Class A Trust, the Class B Trust or the Class C Trust.

" Trust Accounts " has the meaning specified in Section 2.2(a).

" Trust Agreement " means any of the Class A Trust Agreement, the Class B Trust Agreement or the Class C Trust Agreement.

" Trust Property " with respect to any Trust, has the meaning set forth in the Trust Agreement for such Trust.

" Trustee " means any of the Class A Trustee, the Class B Trustee or the Class C Trustee.

" Trustee Incumbency Certificate " has the meaning specified in Section 2.5(b).

" Trustee Representatives " has the meaning specified in Section 2.5(b).

" Underwriters " means Morgan Stanley & Co. Incorporated, Credit Suisse Securities (USA) LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., UBS Securities LLC, Calyon Securities (USA) Inc. and J.P. Morgan Securities Inc.

" Underwriting Agreement " means the Underwriting Agreement dated March 27, 2007 among the Underwriters, the Depositary 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.

" Withdrawal Notice " has the meaning specified in Section 3.5(d).

 

 

" Written Notice " means, from the Subordination Agent, any 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) Each Trustee hereby acknowledges and agrees to the terms of subordination and distribution set forth in this Agreement in respect of each Class of Certificates and agrees to enforce such provisions and cause all payments in respect of the Equipment Notes held by the Subordination Agent and the Liquidity Facilities to be applied in accordance with the terms of this Agreement. In addition, each Trustee hereby agrees to cause the Equipment Notes purchased by the related Trust to be registered in the name of the Subordination Agent or its nominee, as agent and trustee for such 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, payments under Section 8.1 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. Each of the Trustees and the Subordination Agent hereby agrees and, as provided in each 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, has 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 Trustees, Loan Trustees nor the Subordination Agent is personally liable to any of them for any amounts payable or any liability under this Agreement, any 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 Trustees) as expressly provided in each Trust Agreement or (in the case of 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 Trustees, the Certificateholders and the Liquidity Providers and (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 Trustees, the Certificateholders and the Liquidity Providers. The Subordination Agent shall establish and maintain the Cash Collateral Accounts 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 Accounts shall, together with the Collection Account, constitute the " Trust Accounts " hereunder. Without limiting the foregoing, all monies credited to the Trust Accounts shall be, and shall remain, the property of the relevant Trust(s).

(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) 90 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 or a Non-Extension Drawing under any Liquidity Facility, the Subordination Agent shall invest and reinvest such amounts in Eligible Investments at the direction of Continental (or, if and to the extent so specified to the Subordination Agent by Continental with respect to any Liquidity Facility, the Liquidity Provider with respect to such Liquidity Facility); provided   further , however , that, notwithstanding the foregoing proviso, following the making of an a Non-Extension Drawing under any initial Liquidity Facility, the Subordination Agent 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 funding such Drawing; 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 Accounts pursuant to Section 3.5(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 3.3(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 Trustees, the Certificateholders and the Liquidity Providers, as the case may be. If, at any time, any of the Trust Accounts 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 for each Class of Certificates shall have been obtained) establish a new Collection Account, Special Payments 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 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 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 (other than any Scheduled Payment which by the express terms hereof is to be deposited to a Cash Collateral Account).

(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(c) 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 each Trustee and the Liquidity Providers. The Subordination Agent shall promptly calculate the amount of the redemption or purchase of Equipment Notes, the amount of any Overdue Scheduled Payment or the proceeds of Equipment Notes or Collateral, as the case may be, comprising such Special Payment under the applicable Indenture or Indentures and shall promptly send to each Trustee a Written Notice of such amount and the amount allocable to each Trust. 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) and Article III hereof, as applicable.

For the purposes of the application of any Equipment Note Special Payment distributed on a Special Distribution Date in accordance with Section 3.2 hereof, so long as no Indenture Default shall have occurred and be continuing under any Indenture:

(i)   the amount of accrued and unpaid Liquidity Expenses that are not yet due that are payable pursuant to clause "second" thereof shall be multiplied by the Section 2.4 Fraction;

(ii)   clause "third" thereof shall be deemed to read as follows: " third , such amount as shall be required to pay accrued and unpaid interest then in arrears on all Liquidity Obligations (at the rate, or in the amount, provided in the applicable Liquidity Facility) plus an amount equal to the amount of accrued and unpaid interest on the Liquidity Obligations not in arrears multiplied by the Section 2.4 Fraction, shall be distributed to the Liquidity Providers, pro rata on the basis of the amounts owed to each Liquidity Provider";

 

 

(iii)   clause "seventh" thereof shall be deemed to read as follows: " seventh , such amount as shall be required to pay accrued, due and unpaid interest at the Stated Interest Rate on the outstanding Pool Balance of the Class A Certificates together with (without duplication) accrued and unpaid interest at the Stated Interest Rate on the outstanding principal amount of the Series A Equipment Notes held in the Class A Trust being redeemed, purchased or prepaid, in each case excluding interest, if any, payable with respect to the Deposits relating to the Class A Trust";

(iv)   clause "eighth" thereof shall be deemed to read as follows: " eighth , such amount as shall be required to pay any accrued, due and unpaid Class B Adjusted Interest to the holders of the Class B Certificates (excluding interest, if any, payable with respect to the Deposits relating to the Class B Trust)";

(v)   clause "ninth" thereof shall be deemed to read as follows: " ninth , such amount as shall be required to pay any accrued, due and unpaid Class C Adjusted Interest to the holders of the Class C Certificates (excluding interest, if any, payable with respect to the Deposits relating to the Class C Trust)";

(vi)   clause "eleventh" thereof shall be deemed to read as follows: " eleventh , such amount as shall be required to pay in full accrued, due and unpaid interest at the Stated Interest Rate on the outstanding Pool Balance of the Class B Certificates which was not previously paid pursuant to clause "eighth" above to the holders of the Class B Certificates together with (without duplication) accrued and unpaid interest at the Stated Interest Rate on the outstanding principal amount of the Series B Equipment Notes held in the Class B Trust and being redeemed, purchased or prepaid, in each case excluding interest, if any, payable with respect to the Deposits relating to the Class B Trust;" and

(vii)   clause "thirteenth" thereof shall be deemed to read as follows: " thirteenth , such amount as shall be required to pay in full accrued, due and unpaid interest at the Stated Interest Rate on the outstanding Pool Balance of the Class C Certificates which was not previously paid pursuant to clause "ninth" above to the holders of the Class C Certificates together with (without duplication) accrued and unpaid interest at the Stated Interest Rate on the outstanding principal amount of the Series C Equipment Notes held in the Class C Trust and being redeemed, purchased or prepaid, in each case excluding interest, if any, payable with respect to the Deposits relating to the Class C Trust;".

(b)   Investment of Amounts in Special Payments Account . Any amounts on deposit in the Special Payments Account prior to the distribution thereof pursuant to Section 2.4 or 3.2 shall be invested in accordance with Section 2.2(b). Investment Earnings on such investments shall be distributed in accordance with Article III hereof.

(c)   Certain Payments . Except for amounts constituting Liquidity Obligations which shall be distributed as provided in Section 3.2, the Subordination Agent will distribute promptly upon receipt thereof (i) any indemnity payment or expense reimbursement received by it from