As filed with the Securities and Exchange Commission on September 17, 1996
                                                   REGISTRATION NO. 333-[      ]
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
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                                   FORM S-4

                            REGISTRATION STATEMENT
                                     UNDER
                          THE SECURITIES ACT OF 1933
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                          CONTINENTAL AIRLINES, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 4512 74-2099724 (STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER) INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
2929 ALLEN PARKWAY, SUITE 2010 HOUSTON, TEXAS 77019 (713) 834-2950 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANTS PRINCIPAL EXECUTIVE OFFICES) ---------------------------------------- JEFFERY A. SMISEK, ESQ. SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY CONTINENTAL AIRLINES, INC. 2929 ALLEN PARKWAY, SUITE 2010 HOUSTON, TEXAS 77019 (713) 834-2950 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPIES OF CORRESPONDENCE TO: MICHAEL L. RYAN, ESQ. CLEARY, GOTTLIEB, STEEN & HAMILTON ONE LIBERTY PLAZA NEW YORK, NEW YORK 10006 ---------------------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the Registration Statement of the Securities becomes effective. ---------------------------------------- If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] ---------------------------------- CALCULATION OF REGISTRATION FEE
==================================================================================================================== TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING REGISTRATION PRICE (1) FEE(2) - -------------------------------------------------------------------------------------------------------------------- Pass Through Certificates, $290,000 100% $290,000 $100 Series 1996-2 - --------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457 under the Securities Act of 1933, as amended. (2) Pursuant to Rule 429, a registration fee of $176,114.59 was previously paid in connection with the registration of $510,733,000 in aggregate principal amount of pass through certificates under a Registration Statement on Form S-4 (File No. 333-04827) filed by the Registrant. ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. ================================================================================ CONTINENTAL AIRLINES, INC. CROSS-REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION REQUIRED BY ITEMS IN FORM S-4
ITEM LOCATION IN PROSPECTUS ---- ---------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus...................................... Facing Page of the Registration Statement; Cross Reference Sheet; Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus............................. Available Information; Outside Back Cover Page of Prospectus 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information................... Prospectus Summary; Risk Factors; The Company; Selected Financial Data 4. Terms of the Transaction.......................... Prospectus Summary; Risk Factors; The Exchange Offer; Description of New Certificates; Plan of Distribution; Certain Federal Income Tax Considerations 5. Pro Forma Financial Information................... Not Applicable 6. Material Contracts With the Company Being Acquired.................................. Not Applicable 7. Additional Information Requred for Reoffering by Persons and Parties Deemed to be Underwriters....................... Not Applicable 8. Interests of Named Experts and Counsel............ Not Applicable 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities..................................... Not Applicable 10. Information with Respect to S-3 Registrants..................................... Prospectus Summary; The Company; Recent Developments 11. Incorporation of Certain Information by Reference....................................... Available Information; Incorporation of Certain Documents by Reference 12. Information with Respect to S-2 or S-3 Registrants..................................... Not Applicable 13. Incorporation of Certain Information by Reference....................................... Not Applicable 14. Information with Respect to Registrants Other Than S-3 or S-2 Registrants............... Not Applicable 15. Information with Respect to S-3 Companies....................................... Not Applicable 16. Information with Respect or S-2 to S-3 Companies....................................... Not Applicable 17. Information with Respect to Companies Other Than S-3 or S-2 Companies................. Not Applicable 18. Information if Proxies, Consents or Authorizations Are to be Solicited.............. Not Applicable 19. Information if Proxies, Consents or Authorizations Are Not to be Solicited or in an Exchange Offer............... Prospectus Summary; The Exchange Offer; Description of New Certificates
******************************************************************************** * INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A * * REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE * * SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR * * MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT * * BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL * * OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE * * SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE * * UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS * * OF ANY SUCH STATE. * ******************************************************************************** SUBJECT TO COMPLETION--DATED SEPTEMBER 17, 1996 PROSPECTUS Continental Airlines, Inc. Offer to Exchange Pass Through Certificates, Series 1996-2, which have been registered under the Securities Act of 1933, as amended, for any and all outstanding Pass Through Certificates, Series 1996-2 The Exchange Offer will expire at 5:00 p.m., New York City time, on [ ], 1996, unless extended. Pass Through Certificates, Series 1996-2 (the "New Certificates"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which this Prospectus is a part, are hereby offered, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying letter of transmittal (the "Letter of Transmittal" and, together with this Prospectus, the "Exchange Offer"), in exchange for an equal principal amount of outstanding Pass Through Certificates, Series 1996-2 (the "Old Certificates"), of which $171,749,000 aggregate principal amount is outstanding as of the date hereof. The New Certificates and the Old Certificates are collectively referred to herein as the "Certificates." Any and all Old Certificates that are validly tendered and not withdrawn on or prior to 5:00 P.M., New York City time, on the date the Exchange Offer expires, which will be [ ], 1996 (30 calendar days following the commencement of the Exchange Offer) unless the Exchange Offer is extended (such date, including as extended, the "Expiration Date") will be accepted for exchange. Tenders of Old Certificates may be withdrawn at any time prior to 5:00 P.M., New York City time on the Expiration Date. The Exchange Offer is not conditioned upon any minimum principal amount of Old Certificates being tendered for exchange. However, the Exchange Offer is subject to certain customary conditions which may be waived by the Company and to the terms of the Registration Rights Agreement (as defined herein). Old Certificates may be tendered only in integral multiples of $1,000. See "The Exchange Offer." The New Certificates will be entitled to the benefits of the same Pass-Through Trust Agreements (as defined herein) which govern the Old Certificates and will govern the New Certificates. The form and terms of the New Certificates are the same in all material respects as the form and terms of the Old Certificates, except that the New Certificates do not contain terms with respect to the interest rate step-up provisions and the New Certificates have been registered under the Securities Act and therefore will not bear legends restricting the transfer thereof. See "The Exchange Offer" and "Description of New Certificates." Each Certificate represents a fractional undivided interest in one of the four Continental Airlines 1996-2 Pass Through Trusts (the "Class A Trust", the "Class B Trust", the "Class C Trust" and the "Class D Trust" and, collectively, the "Trusts") formed pursuant to four separate pass through trust agreements (the "Pass Through Trust Agreements") between Continental and Wilmington Trust Company (the "Trustee"), as trustee under each Trust. Pursuant to an Intercreditor Agreement (as defined herein), (i) the Certificates of the Class B Trust are subordinated in right of payment to the Certificates of the Class A Trust, (ii) the Certificates of the Class C Trust are subordinated in right of payment to the Certificates of the Class B Trust and (iii) the Certificates of the Class D Trust are subordinated in right of payment to the Certificates of the Class C Trust. Payments of interest on the Certificates issued by each Trust (other than the Class D Trust) are supported by separate liquidity facilities for the benefit of the (continued on next page) ---------------------- FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 25 OF THIS PROSPECTUS. ----------------------
Final Expected Pass Through Certificates Principal Amount Interest Rate Distribution Date - ------------------------- ---------------- ------------- ----------------- 1996-2A.................... $ 82,513,000 7.75% July 2, 2014 1996-2B.................... $ 35,363,000 8.56% July 2, 2014 1996-2C.................... $ 35,363,000 10.22% July 2, 2014 1996-2D.................... $ 18,510,000 11.50% April 2, 2008 ------------ TOTAL $171,749,000 ============
-------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. -------------------- The date of this Prospectus is [ ], 1996 (continued from cover page) holders of such Certificates, each such facility provided initially by De Nationale Investeringsbank N.V. ("DNIB"), in an amount sufficient to pay interest thereon at the applicable interest rate for such Trust on six successive quarterly distribution dates. All of the Equipment Notes held in each Trust will accrue interest at the applicable rate per annum for such Trust, payable on January 2, April 2, July 2 and October 2 of each year commencing on July 2, 1996. Such interest will be passed through to Certificateholders (as defined herein) of such Trust on each such date, in each case subject to the Intercreditor Agreement (as defined herein). See "Description of New Certificates--General" and "--Payments and Distributions." The New Certificates will accrue interest at the applicable per annum rate for such Trust, from the last date on which interest was paid on the Old Certificates surrendered in exchange therefor. See "The Exchange Offer--Interest on New Certificates." Scheduled principal payments on the Equipment Notes held in each Trust will be passed through to the Certificateholders of each such Trust on January 2, April 2, July 2 and October 2 in certain years, commencing on October 2, 1996, in the case of each of the Class A Trust, the Class B Trust and the Class C Trust and July 2, 1996, in the case of the Class D Trust, in accordance with the principal repayment schedule set forth below under "Description of New Certificates--Pool Factors" and "Description of the Equipment Notes--Principal and Interest Payments", in each case subject to the Intercreditor Agreement. Under each Pass Through Trust Agreement, an Event of Default will occur if the Trustee fails to pay within 10 business days of the due date thereof: (i) the outstanding Pool Balance (as defined herein) of the applicable Class of Certificates on the Final Maturity Date (as defined herein) for such Class or (ii) interest due on such Certificates on any distribution date (unless the Subordination Agent (as defined herein) shall have made an Interest Drawing (as defined herein) in an amount sufficient to pay such interest and shall have distributed such amount to the Certificateholders entitled thereto). Each Class of New Certificates will be represented by a single, permanent global Certificate in fully registered form and will be deposited with the Trustee as custodian for and registered in the name of a nominee of DTC. Beneficial interests in the permanent global Certificates will be shown on, and transfers thereof will be effected through, records maintained by DTC and its participants. Based on interpretations by the staff of the Securities and Exchange Commission (the "Commission"), as set forth in no-action letters issued to third parties, including Exxon Capital Holdings Corporation, SEC No-Action Letter (available April 13, 1989) (the "Exxon Capital Letter"), Morgan Stanley & Co. Incorporated, SEC No-Action Letter (available June 5, 1991) (the "Morgan Stanley Letter") and Shearman & Sterling, SEC No-Action Letter (available July 2, 1993) (the "Shearman & Sterling Letter") (collectively, the "Exchange Offer No-Action Letters"), the Company believes that the New Certificates issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than a broker-dealer who acquires such New Certificates directly from the Trustee for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or any holder that is an "affiliate" of the Company as defined under Rule 405 of the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Certificates are acquired in the ordinary course of such holders business and such holders are not engaged in, and do not intend to engage in, a distribution of such New Certificates and have no arrangement with any person to participate in a distribution of such New Certificates. By tendering the Old Certificates in exchange for New Certificates, each holder, other than a broker-dealer, will represent to the Company that: (i) it is not an affiliate of the Company (as defined under Rule 405 of the Securities Act) nor a broker-dealer tendering Old Certificates acquired directly from the Company for its own account; (ii) any New Certificates to be received by it will be acquired in the ordinary course of its business; and (iii) it is not engaged in, and does not intend to engage in, a distribution of such New Certificates and has no arrangement or understanding to participate in a distribution of the New Certificates. If a holder of Old Certificates is engaged in or intends to engage in a distribution of the New Certificates or has any arrangement or understanding with respect to the distribution of the New Certificates to be acquired pursuant to the Exchange Offer, such holder may not rely on the applicable interpretations of the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. Each broker-dealer that receives New Certificates for its own account pursuant to the Exchange Offer (a "Participating Broker-Dealer") must acknowledge that it will deliver a prospectus in connection with any resale of such New Certificates. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Certificates received in exchange for Old Certificates where such Old Certificates were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. Pursuant to the Registration Rights Agreement, the Company has agreed that starting on the Expiration Date it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." The Company will not receive any proceeds from this offering. The Company has agreed to pay the expenses of the Exchange Offer. No underwriter is being utilized in connection with the Exchange Offer. THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD CERTIFICATES IN ANY JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION. Prior to this Exchange Offer, there has been no public market for the Old Certificates or New Certificates. If such a market were to develop, the New Certificates could trade at prices that may be higher or lower than their principal amount. Neither Continental nor any Trust has applied or intends to apply for listing of the New Certificates on any national securities exchange or for quotation of the New 2 Certificates through the National Association of Securities Dealers Automated Quotation System. One or more of Morgan Stanley & Co. Incorporated, CS First Boston Corporation and FIELDSTONE FPCG SERVICES, L.P. (the "Initial Purchasers") have previously made a market in the Old Certificates and Continental has been advised that Morgan Stanley & Co. Incorporated and CS First Boston Corporation presently intend to make a market in the New Certificates, as permitted by applicable laws and regulations, after consummation of the Exchange Offer. None of the Initial Purchasers is obligated, however, to make a market in the Old Certificates or the New Certificates and any such market making activity may be discontinued at any time without notice at the sole discretion of each Initial Purchaser. There can be no assurance as to the liquidity of the public market for the New Certificates or that any active public market for the New Certificates will develop or continue. If an active public market does not develop or continue, the market prices and liquidity of the New Certificates may be adversely affected. See "Risk Factors--Absence of a Public Market for the New Certificates." 3 AVAILABLE INFORMATION Continental is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information may be inspected and copied at the following public reference facilities maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may also be obtained from the Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed rates. The Commission maintains a Web site at http://www.sec.gov containing reports, proxy statements and other information regarding registrants that file electronically with the Commission, including Continental. In addition, reports, proxy statements and other information concerning Continental may be inspected and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. Continental is the successor to Continental Airlines Holdings, Inc. ("Holdings"), which merged with and into Continental on April 27, 1993. Holdings had also been subject to the informational requirements of the Exchange Act. This Prospectus constitutes a part of a registration statement on Form S-4 (together with all amendments and exhibits, the "Registration Statement") filed by Continental with the Commission, through the Electronic Data Gathering, Analysis and Retrieval System ("EDGAR"), under the Securities Act, with respect to the New Certificates offered hereby. This Prospectus omits certain of the information contained in the Registration Statement, and reference is hereby made to the Registration Statement for further information with respect to Continental and Holdings and the securities offered hereby. Although statements concerning and summaries of certain documents are included herein, reference is made to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. These documents may be inspected without charge at the office of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be obtained at fees and charges prescribed by the Commission. REPORTS TO PASS THROUGH CERTIFICATEHOLDERS Wilmington Trust Company, in its capacity as Pass Through Trustee under each of the Trusts, will provide the certificateholders of each Trust certain periodic reports concerning the distributions made from such Trust. See "Description of New Certificates--Reports to Certificateholders." INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed with the Commission (File No. 0-9781) are hereby incorporated by reference in this Prospectus: (i) Continental's Annual Report on Form 10-K for the year ended December 31, 1995 (as amended by Forms 10-K/A1 and 10-K/A2 filed on March 8, 1996 and April 10, 1996, respectively), (ii) Continental's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996, and (iii) Continental's Current Reports on Form 8-K, filed on January 31, 1996, March 26, 1996, May 7, 1996, June 27, 1996, July 22, 1996 and September 16, 1996. All reports and any definitive proxy or information statements filed by Continental pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the securities offered hereby shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated herein by reference, or contained in this Prospectus, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or 4 supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON TO WHOM A PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF SUCH PERSON, FROM CONTINENTAL AIRLINES, INC., 2929 ALLEN PARKWAY, SUITE 2010, HOUSTON, TEXAS 77019, ATTENTION: SECRETARY, TELEPHONE (713) 834-2950. IN ORDER TO ENSURE TIMELY DELIVER OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY _________, 1996. 5 PROSPECTUS SUMMARY The following summary information is qualified in its entirety by the detailed information and financial statements (including the notes thereto) appearing elsewhere in this Prospectus. Prospective investors should consider carefully the matters discussed under the caption "Risk Factors." Unless otherwise stated or unless the context otherwise requires, references to "Continental" or the "Company" include Continental Airlines, Inc. and its predecessors and subsidiaries. Information contained in this Prospectus relating to the outstanding principal amount of the Certificates and Equipment Notes is provided as of the date of the issuance of the Old Certificates without giving effect to any intervening payments of principal on the Certificates or Equipment Notes. See "Description of the New Certificates--Pool Factors." THE COMPANY Continental Airlines, Inc. is a major United States air carrier engaged in the business of transporting passengers, cargo and mail. Continental is the fifth largest United States airline (as measured by revenue passenger miles in the first six months of 1996) and, together with its wholly owned subsidiary, Continental Express, Inc. ("Express"), and its 91%-indirect owned subsidiary, Continental Micronesia, Inc. ("CMI"), serves 190 airports worldwide. The Company operates its route system primarily through domestic hubs at Newark, Houston Intercontinental and Cleveland, and a Pacific hub on the neighboring islands of Guam and Saipan. Each of Continentals three U.S. hubs is located in a large business and population center, contributing to a high volume of "origin and destination" traffic. The Guam/Saipan hub is strategically located to provide service from Japanese and other Asian cities to popular resort destinations in the western Pacific. Continental is the primary carrier at each of these hubs, accounting for 52%, 79%, 53% and 72% of all daily jet departures, respectively. Continental directly serves 133 U.S. cities, with additional cities (principally in the western and southwestern United States) connected to Continental's route system under agreements with America West Airlines, Inc. ("America West"). Internationally, Continental flies to 57 destinations and offers additional connecting service through alliances with foreign carriers. Continental operates 59 weekly departures to five European cities and markets service to four other cities through code-sharing agreements. Continental recently announced new service from Newark to Lisbon, Portugal, which is scheduled to commence May 1, 1997. Continental is one of the leading airlines providing service to Mexico and Central America, serving more destinations in Mexico than any other United States airline. In addition, Continental flies to four cities in South America. Through its Guam/Saipan hub, Continental provides extensive service in the western Pacific, including service to more Japanese cities than any other United States carrier. The Company is a Delaware corporation. Its executive offices are located at 2929 Allen Parkway, Suite 2010, Houston, Texas 77019, and its telephone number is (713) 834-2950. THE EXCHANGE OFFER Registration Rights Agreement......... The Old Certificates were issued on May 20, 1996 to the Initial Purchasers. The Initial Purchasers placed the Old Certificates with institutional investors. In connection therewith, the Company, the Trustee, as trustee under each of the Trusts, and the Initial Purchasers entered into the Registration Rights Agreement providing, among other things, for the Exchange Offer. See "The Exchange Offer." The Exchange Offer.................... New Certificates are being offered in exchange for an equal principal amount of Old Certificates. As of the date hereof, $171,749,000 aggregate principal amount of Old Certificates are outstanding. Old Certificates may be tendered only in integral multiples of $1000. 6 Resale of New Certificates............ Based on interpretations by the staff of the Commission, as set forth in no- action letters issued to third parties, including the Exchange Offer No-Action Letters, the Company believes that the New Certificates issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than a broker-dealer who acquires such New Certificates directly from the Trustee for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or any holder that is an "affiliate" of the Company as defined under Rule 405 of the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Certificates are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not intend to engage in, a distribution of such New Certificates and have no arrangement with any person to participate in a distribution of such New Certificates. By tendering the Old Certificates in exchange for New Certificates, each holder, other than a broker-dealer, will represent to the Company that: (i) it is not an affiliate of the Company (as defined under Rule 405 of the Securities Act) nor a broker- dealer tendering Old Certificates acquired directly from the Company for its own account; (ii) any New Certificates to be received by it were acquired in the ordinary course of its business; and (iii) it is not engaged in, and does not intend to engage in, a distribution of such New Certificates and has no arrangement or understanding to participate in a distribution of the New Certificates. If a holder of Old Certificates is engaged in or intends to engage in a distribution of the New Certificates or has any arrangement or understanding with respect to the distribution of the New Certificates to be acquired pursuant to the Exchange Offer, such holder may not rely on the applicable interpretations of the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. Each Participating Broker-Dealer that receives New Certificates for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Certificates. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker- Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Certificates received in exchange for Old Certificates where such Old Certificates were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business 180 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." To comply with the securities laws of certain jurisdictions, it may be necessary to qualify for sale or 7 register the New Certificates prior to offering or selling such New Certificates. The Company has agreed, pursuant to the Registration Rights Agreement and subject to certain specified limitations therein, to register or qualify the New Certificates for offer or sale under the securities or "blue sky" laws of such jurisdictions as may be necessary to permit the holders of New Certificates to trade the New Certificates without any restrictions or limitations under the securities laws of the several states of the United States. Consequences of Failure to Exchange Old Certificates...................... Upon consummation of the Exchange Offer, subject to certain exceptions, holders of Old Certificates who do not exchange their Old Certificates for New Certificates in the Exchange Offer will no longer be entitled to registration rights and will not be able to offer or sell their Old Certificates, unless such Old Certificates are subsequently registered under the Securities Act (which, subject to certain limited exceptions, the Company will have no obligation to do), except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. See "Risk Factors--Risk Factors Relating to the Certificates and the Offering-- Consequences of Failure to Exchange" and "The Exchange Offer--Terms of the Exchange Offer." Expiration Date....................... 5:00 p.m., New York City time, on [__________], 1996 (30 calendar days following the commencement of the Exchange Offer), unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Interest on the New Certificates...... The New Certificates will accrue interest at the applicable per annum rate for such Trust set forth on the cover page of this Prospectus, from the last date on which interest was paid on the Old Certificates surrendered in exchange therefor. Interest on the New Certificates is payable on January 2, April 2, July 2 and October 2 of each year commencing July 2, 1996, subject to the terms of the Intercreditor Agreement. Conditions to the Exchange Offer...... The Exchange Offer is not conditioned upon any minimum principal amount of Old Certificates being tendered for exchange. However, the Exchange Offer is subject to certain customary conditions, which may be waived by the Company. See "The Exchange Offer-- Conditions." Except for the requirements of applicable federal and state securities laws, there are no federal or state regulatory requirements to be complied with or obtained by the Company in connection with the Exchange Offer. Procedures for Tendering Old Certificates.......................... Each holder of Old Certificates wishing to accept the Exchange Offer must complete, sign and date the Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver such Letter of Transmittal, or such facsimile, together with the Old Certificates to be exchanged and any other required documentation to the Exchange Agent (as defined herein) at the address set forth herein 8 or effect a tender of Old Certificates pursuant to the procedures for book- entry transfer as provided for herein. See "The Exchange Offer--Procedures for Tendering" and "--Book Entry Transfer." Guaranteed Delivery Procedures........ Holders of Old Certificates who wish to tender their Old Certificates and whose Old Certificates are not immediately available or who cannot deliver their Old Certificates and a properly completed Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent prior to the Expiration Date may tender their Old Certificates according to the guaranteed delivery procedures set forth in "The Exchange Offer-- Guaranteed Delivery Procedures." Withdrawal Rights..................... Tenders of Old Certificates may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Old Certificates, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at its address set forth herein under "The Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration Date. Acceptance of Old Certificates and Delivery of New Certificates.......... Subject to certain conditions, any and all Old Certificates which are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date will be accepted for exchange. The New Certificates issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Certain Tax Considerations............ The exchange of New Certificates for Old Certificates should not be a sale or exchange or otherwise a taxable event for Federal income tax purposes. See "Certain Federal Income Tax Considerations." Exchange Agent........................ Wilmington Trust Company is serving as exchange agent (the "Exchange Agent") in connection with the Exchange Offer. Fees and Expenses..................... All expenses incident to the Company'ss consummation of the Exchange Offer and compliance with the Registration Rights Agreement will be borne by the Company. See "The Exchange Offer--Fees and Expenses." Use of Proceeds....................... There will be no cash proceeds payable to Continental from the issuance of the New Certificates pursuant to the Exchange Offer. The proceeds from the sale of the Old Class A, B, C and D Certificates were used to purchase the Series A, B, C and D Equipment Notes issued by (i) the related Owner Trustees in connection with the refinancing of the indebtedness incurred by the Owner Trustees to finance the purchase of each of the Leased Aircraft and (ii) Continental, as owner of the Owned Aircraft. The Equipment Notes issued in respect of the Leased Aircraft represent in the aggregate the entire debt portion currently outstanding of the leveraged lease transactions relating the Leased Aircraft. Continental received cash proceeds from the sale of the Old Certificates, representing that portion of the total proceeds from the sale of the Old Certificates as was used to 9 purchase the Equipment Notes issued with respect to the Owned Aircraft. See "Use of Proceeds." SUMMARY OF TERMS OF NEW CERTIFICATES The Exchange Offer relates to the exchange of up to $171,749,000 aggregate principal amount of Old Certificates for up to an equal aggregate principal amount of New Certificates. The New Certificates will be entitled to the benefits of the same Pass Through Trust Agreements that govern the Old Certificates and will govern the New Certificates. The form and terms of the New Certificates are the same in all material respects as the form and terms of the Old Certificates, except that the New Certificates do not contain terms with respect to the interest rate step-up provisions and the New Certificates have been registered under the Securities Act and therefore will not bear legends restricting the transfer thereof. See "Description of New Certificates." Trusts................................ Each of the Continental Airlines 1996- 2A Pass Through Trust, the Continental Airlines 1996-2B Pass Through Trust, the Continental Airlines 1996-2C Pass Through Trust and the Continental Airlines 1996-2D Pass Through Trust has been formed pursuant to one of the four separate Pass Through Trust Agreements that were entered into between the Company and Wilmington Trust Company, as trustee under each Trust. Each Trust is a separate entity. New Certificates Offered.............. Pass Through Certificates issued by each Trust, representing fractional undivided interests in such Trust. The New Certificates issued by the Class A Trust, the Class B Trust, the Class C Trust and the Class D Trust are referred to herein as "Class A Certificates", "Class B Certificates", "Class C Certificates", and "Class D Certificates", respectively. Subordination Agent................... Wilmington Trust Company, as subordination agent under the Intercreditor Agreement (the "Subordination Agent"). Liquidity Provider.................... De Nationale Investeringsbank N.V., a bank organized under the laws of The Netherlands. DNIB has provided three separate liquidity facilities for the benefit of the holders of Class A Certificates, Class B Certificates and Class C Certificates, respectively. 10 SUMMARY OF TERMS OF CERTIFICATES
CLASS A CLASS B CLASS C CLASS D CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES ---------------- ---------------- ---------------- -------------- Aggregate Face Amount........ $82,513,000 $35,363,000 $35,363,000 $18,510,000 Initial Loan to Aircraft Value (cumulative)(1)........ 35.0% 50.0% 65.0% 72.9% Expected Principal Distribution Window (in years)................... 0.4-18.1 0.4-18.1 0.4-18.1 0.1-11.9 Initial Average Life (in years)................... 10.3 10.3 10.3 7.1 Regular Distribution Dates... January 2, January 2, January 2, January 2, April 2, April 2, April 2, April 2, July 2 & July 2 & July 2 & July 2 & October 2 October 2 October 2 October 2 Final Expected Regular Distribution Date............ July 2, 2014 July 2, 2014 July 2, 2014 April 2, 2008 Final Maturity Date.......... January 2, 2016 January 2, 2016 January 2, 2016 April 2, 2008 Minimum Denomination......... $ 100,000 $ 100,000 $ 100,000 $ 100,000 (S) 1110 Protection(2)....... Yes Yes Yes Yes Liquidity Facility Coverage.. 6 quarterly 6 quarterly 6 quarterly None interest interest interest payments payments payments Initial Liquidity Facility Amount(3).................... $ 9,592,136 $ 4,540,609 $ 5,421,148 None
(1) Assumes an aggregate appraised Aircraft value of $235,753,333. (2) The benefits of Section 1110 of the U.S. Bankruptcy Code are available to the Loan Trustees. (3) For each Class of Certificates (other than the Class D Certificates), the initial amount of the Liquidity Facility covers six consecutive quarterly interest payments (without regard to any future payments of principal on such Certificates). In aggregate for Class A, B and C Certificates, the initial amount of Liquidity Facilities will be $19,553,893. 11 EQUIPMENT NOTES AND THE AIRCRAFT Set forth below is certain information about the Equipment Notes to be held in the Trusts and the Aircraft securing such Equipment Notes:
OUTSTANDING AIRCRAFT EQUIPMENT PRINCIPAL REGISTRATION AIRCRAFT NOTE AMOUNT OF APPRAISED NUMBER AIRCRAFT TYPE DELIVERY DATE MATURITY DATE EQUIPMENT NOTES VALUE - -------------- ------------- ------------- --------------- --------------- ------------ N12114 Boeing 757-224 July 1995 January 2, 2013 $ 37,652,850.00 $ 51,650,000 N14115 Boeing 757-224 August 1995 January 2, 2013 37,798,650.00 51,850,000 N12116 Boeing 757-224 March 1996 April 2, 2014 37,386,771.20 52,593,333 N19117 Boeing 757-224 April 1996 July 2, 2014 37,310,876.80 52,660,000 N33637 Boeing 737-524 April 1996 April 2, 2008 21,599,852.00 27,000,000 --------------- ------------ $171,749,000.00 $235,753,333 =============== ============
The appraised value of each Aircraft set forth above is based upon the lesser of the average and median fair market value of such Aircraft as appraised by three independent appraisal and consulting firms: Aircraft Information Services, Inc. ("AISI"), BK Associates, Inc. ("BK") and Morten Beyer and Associates, Inc. ("MBA") (collectively, the "Appraisers") as of March 26, 1996. See "Risk Factors--Appraisals and Realizable Value of Aircraft" and "Description of the Aircraft and the Appraisals." LOAN TO AIRCRAFT VALUE RATIOS The following table sets forth loan to Aircraft value ratios ("LTVs") for each Class of Certificates as of the date of the issuance of the Old Certificates and the Regular Distribution Dates specified therein. The LTVs for each Class of Certificates were obtained for each such Regular Distribution Date by dividing (i) the expected Pool Balance of such Class of Certificates together in each case with the expected Pool Balance of all other Classes of Certificates senior in right of payment to such Class of Certificates under the Intercreditor Agreement determined immediately after giving effect to the distributions expected to be made on such Regular Distribution Date, by (ii) the assumed value of all of the Aircraft (the "Assumed Aggregate Aircraft Value") on such Regular Distribution Date based on the assumptions set forth below. The table is based on the assumption that the value of each Aircraft included in the Assumed Aggregate Aircraft Value opposite May 20, 1996 depreciates by approximately 2% of the initial appraised value per year until the fifteenth year after the year of delivery of such Aircraft and by approximately 4% of the initial appraised value per year thereafter. Other rates or methods of depreciation would result in materially different LTVs and no assurance can be given (i) that the depreciation rates and method assumed for the purpose of the table are the ones most likely to occur or (ii) as to the actual future value of any Aircraft. Although the table is compiled on an aggregate basis, it should be noted that, since the Equipment Notes are not cross-collateralized with respect to the Aircraft, the excess proceeds realized from the disposition of any particular Aircraft would not be available to offset shortfalls on the Equipment Notes relating to any other Aircraft. Therefore, upon the occurrence of an Indenture Default, even if the Aircraft as a group could be sold for more than the total amounts payable in respect of all of the outstanding Equipment Notes, if certain Aircraft were sold for less than the total amount payable in respect of the related Equipment Notes, there would not be sufficient proceeds to pay all Classes of Certificates in full. See "Description of the Equipment Notes--Loan to Value Ratios of Equipment Notes" for additional information regarding LTVs for the Equipment Notes issued in respect of each Aircraft, which may be more relevant in a default situation than the aggregate values shown in the following table. Thus, the table should not be considered a forecast or prediction of expected or likely LTVs but simply a mathematical calculation based on one set of assumptions. 12
ASSUMED AGGREGATE CLASS A CLASS A CLASS B CLASS B CLASS C CLASS C AIRCRAFT CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES DATE VALUE(1) POOL BALANCE LTV POOL BALANCE LTV POOL BALANCE LTV --------------- ------------ ------------ ------------ ------------ ------------ ----------- ----------- May 20, 1996 $235,753,333 $82,513,000 35.0% $35,363,000 50.0% $35,363,000 65.0% April 2, 1997 230,996,022 80,211,435 34.7 34,376,604 49.6 34,376,604 64.5 April 2, 1998 226,238,710 78,298,749 34.6 33,556,878 49.4 33,556,878 64.3 April 2, 1999 221,481,399 76,732,939 34.6 32,885,813 49.5 32,885,813 64.3 April 2, 2000 216,724,087 74,696,896 34.5 32,013,218 49.2 32,013,218 64.0 April 2, 2001 211,966,776 70,171,427 33.1 30,073,725 47.3 30,073,725 61.5 April 2, 2002 207,209,464 64,361,692 31.1 27,583,834 44.4 27,583,834 57.7 April 2, 2003 202,452,152 59,256,220 29.3 25,395,768 41.8 25,395,768 54.4 April 2, 2004 197,694,841 56,106,628 28.4 24,045,938 40.5 24,045,938 52.7 April 2, 2005 192,937,529 51,029,240 26.4 21,869,909 37.8 21,869,909 49.1 April 2, 2006 188,180,218 46,648,812 24.8 19,992,575 35.4 19,992,575 46.0 April 2, 2007 183,422,906 41,230,376 22.5 17,670,379 32.1 17,670,379 41.7 April 2, 2008 158,145,595 32,311,412 20.4 13,847,748 29.2 13,847,748 37.9 April 2, 2009 153,928,283 27,084,981 17.6 11,607,849 25.1 11,607,849 32.7 April 2, 2010 149,710,971 21,778,620 14.5 9,333,694 20.8 9,333,694 27.0 April 2, 2011 143,381,415 13,837,522 9.7 5,930,367 13.8 5,930,367 17.9 April 2, 2012 134,946,792 5,653,696 4.2 2,423,013 6.0 2,423,013 7.8 April 2, 2013 65,257,067 2,378,146 3.6 1,019,205 5.2 1,019,205 6.8 April 2, 2014 30,542,800 423,321 1.4 181,423 2.0 181,423 2.6 CLASS D CLASS D CERTIFICATES CERTIFICATES DATE POOL BALANCE LTV -------------- ------------ ------------ May 20, 1996 $18,510,000 72.9% April 2, 1997 18,219,435 72.4 April 2, 1998 18,037,450 72.2 April 2, 1999 16,172,624 71.6 April 2, 2000 12,443,551 69.8 April 2, 2001 8,928,294 65.7 April 2, 2002 8,641,881 61.9 April 2, 2003 8,321,082 58.5 April 2, 2004 7,961,770 56.7 April 2, 2005 7,559,320 53.0 April 2, 2006 7,108,555 49.8 April 2, 2007 6,603,672 45.3 April 2, 2008 0 37.9 April 2, 2009 0 32.7 April 2, 2010 0 27.0 April 2, 2011 0 17.9 April 2, 2012 0 7.8 April 2, 2013 0 6.8 April 2, 2014 0 2.6
(1) The Assumed Aggregate Aircraft Value set forth opposite May 20, 1996 (but not the Assumed Aggregate Aircraft Values for subsequent dates) was determined based upon the lesser of the average and median fair market value of all Aircraft as appraised by the Appraisers as of March 26, 1996 (see "Description of the Aircraft and the Appraisals"). No assurance can be given that such value represents the realizable value of any Aircraft. See "Risk Factors--Risk Factors Relating to the Certificates and the Offering-- Appraisals and Realizable Value of Aircraft" and "Description of the Aircraft and the Appraisals." 13 CASH FLOW STRUCTURE Set forth below is a diagram illustrating the structure for the offering of the Certificates and certain cash flows. [CASH FLOW STRUCTURE CHART APPEARS HERE] - ------------------ * Each Leased Aircraft is subject to a separate Lease and the related Indenture; the Owned Aircraft is subject to a separate Indenture. ** Liquidity Facilities are available with respect to the Class A Certificates, the Class B Certificates and the Class C Certificates. 14 Trust Property........................ The property of each Trust (the "Trust Property") consists of (i) Equipment Notes issued (a) on a recourse basis by Continental in connection with the financing of the Owned Aircraft and (b) on a nonrecourse basis by each of the Owner Trustees in four separate leveraged lease transactions to refinance the current indebtedness of the related Owner Trustee, originally incurred to finance the purchase of each of the Leased Aircraft leased by the related Owner Trustee to Continental, (ii) the rights of such Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights), (iii) except for the Class D Trust, all monies receivable under the Liquidity Facility for such Trust and (iv) funds from time to time deposited with the Trustee in accounts relating to such Trust. The Equipment Notes with respect to the Owned Aircraft were issued in four series under an Indenture (the "Owned Aircraft Indenture") between Continental and the indenture trustee thereunder (the "Owned Aircraft Trustee"). The Equipment Notes with respect to each Leased Aircraft were issued in four series under an Indenture (each, a "Leased Aircraft Indenture" and together with the other Leased Aircraft Indentures and the Owned Aircraft Indenture, the "Indentures") between the applicable Owner Trustee and the indenture trustee thereunder (the "Leased Aircraft Trustee" and together with the other Leased Aircraft Trustees and the Owned Aircraft Trustee, the "Loan Trustees"). Each Trust has acquired, pursuant to a certain Note Purchase Agreement (the "Note Purchase Agreement") and certain Refunding Agreements (each, a "Refunding Agreement" and together with the other Refunding Agreements and the Note Purchase Agreement, the "Financing Agreements"), those Equipment Notes having an interest rate equal to the interest rate applicable to the Certificates to be issued by such Trust. The maturity dates of the Equipment Notes acquired by each Trust will occur on or before the final expected Regular Distribution Date applicable to the Certificates to be issued by such Trust. The aggregate original principal amount of the Equipment Notes to be held in each Trust is the same as the aggregate original face amount of the Certificates to be issued by such Trust. Certificates; Denominations........... The New Certificates of each Trust will be issued in a minimum denomination of $1,000 and integral multiples thereof. See "Description of the New Certificates--General." Regular Distribution Dates............ January 2, April 2, July 2 and October 2, commencing July 2, 1996. Special Distribution Dates............ Any Business Day on which a Special Payment is to be distributed. Record Dates.......................... The fifteenth day preceding a Regular Distribution Date or a Special Distribution Date. Distributions......................... All payments of principal, premium (if any) and interest received by the Trustee on the Equipment Notes held in each Trust will be distributed by the Trustee to the holders of the Certificates (the "Certificateholders") of such Trust on the Regular Distribution Dates referred to above, subject to the provisions of the Intercreditor Agreement. Payments on the Equipment Notes held in each Trust are scheduled to be received in specified amounts by the Trustee of such Trust on January 2, April 2, July 2 and October 2, commencing on July 2, 1996, and to be distributed to the Certificateholders of such Trust on the corresponding Regular Distribution Date, subject to the provisions of the Intercreditor Agreement. Payments of principal, premium (if any) and interest resulting from the early redemption or purchase (if any) 15 of the Equipment Notes held in any Trust will be distributed on a Special Distribution Date after not less than 20 days' notice from the Trustee to the Certificateholders of such Trust, subject to the provisions of the Intercreditor Agreement. For a discussion of distributions upon an Indenture Default, see "Description of the New Certificates--Indenture Defaults and Certain Rights Upon an Indenture Default." Events of Default..................... Events of default under each Pass Through Trust Agreement (each, a "PTC Event of Default") are 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 Maturity Date for such Class or (ii) interest due on such Certificates on any distribution date (unless in the case of the Class A, B or C Certificates the Subordination Agent shall have made an Interest Drawing with respect thereto in an amount sufficient to pay such interest and shall have distributed such amount to the Certificateholders entitled thereto). The Final Maturity Dates for each of the Class A, B and C Certificates is January 2, 2016, and the Final Maturity Date for the Class D Certificates is April 2, 2008. Any failure to make expected principal distributions on any Class of Certificates on any Regular Distribution Date (other than the Final Maturity Date) will not constitute a PTC Event of Default with respect to such Certificates. Purchase Rights of Certificateholders.................... Upon the occurrence and during the continuation of a Triggering Event (as defined below), (i) the Class B Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates, (ii) the Class C Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates and the Class B Certificates and (iii) the Class D Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates, the Class B Certificates and the Class C Certificates, in each case at a purchase price equal to the Pool Balance of the relevant Class or Classes of Certificates plus accrued and unpaid interest thereon to the date of purchase without premium but including any other amounts due to the Certificateholders of such Class or Classes. "Triggering Event" means (x) the occurrence of an Indenture Default under all 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 or (z) certain bankruptcy or insolvency events involving Continental. Equipment Notes (a) Interest......................... The Equipment Notes held in each Trust accrue interest at the applicable rate per annum for such Trust set forth on the cover page of this Prospectus, payable on January 2, April 2, July 2 and October 2 of each year commencing on July 2, 1996, and such interest payments will be passed through to Certificateholders of such Trust on each such date until the final distribution date for such Certificates, in each case, subject to the Intercreditor Agreement. Interest is calculated on the basis of a 360- day year consisting of twelve 30-day months. See "Description of the Equipment Notes--Principal and Interest Payments". The interest rates for the Equipment Notes are subject to change under certain circumstances described in "Exchange Offer--Terms of the Exchange Offer" to the same extent as the interest rates for the Old Certificates. The New Certificates do 16 not contain terms with respect to interest rate step-up provisions of the Old Certificates. (b) Principal........................ Scheduled principal payments on the Equipment Notes held in each Trust will be passed through to the Certificateholders of each such Trust on January 2, April 2, July 2 and October 2 in certain years, commencing on October 2, 1996, in the case of each of the Class A Trust, the Class B Trust and the Class C Trust and on July 2, 1996, in the case of the Class D Trust, in accordance with the principal repayment schedule set forth below under "Description of New Certificates--Pool Factors" and "Description of the Equipment Notes-- Principal and Interest Payments", in each case, subject to the Intercreditor Agreement. (c) Redemption and Purchase Mandatory Redemption............. If an Event of Loss occurs with respect to any Aircraft and such Aircraft is not replaced by Continental under the related Lease (in the case of a Leased Aircraft) or under the Owned Aircraft Indenture (in the case of the Owned Aircraft), the Equipment Notes issued with respect to such Aircraft will be redeemed in whole, in each case at a price equal to the aggregate unpaid principal thereof, together with accrued interest thereon to, but not including, the date of redemption, but without any premium. Optional Redemption and Purchase......................... All of the Equipment Notes issued with respect to any Aircraft may be redeemed prior to maturity at a price equal to the aggregate unpaid principal thereof, together with accrued interest thereon to, but not including, the date of redemption, plus, if such redemption is made prior to September 22, 2006 (in the case of the Equipment Notes held by the Class A Trust, the Class B Trust or the Class C Trust) or June 26, 2003 (in the case of the Equipment Notes held by the Class D Trust) (each, a "Premium Termination Date"), a Make- Whole Premium (as defined herein). See "Description of the Equipment Notes-- Redemption" for a description of the manner of computing such Make-Whole Premium and the circumstances under which the Equipment Notes may be so redeemed. If, with respect to a Leased Aircraft, (x) one or more Lease Events of Default shall have occurred and be continuing, (y) in the event of a bankruptcy proceeding involving Continental, (i) during the Section 1110 Period (as defined herein), the trustee in such proceeding or Continental does not agree to perform its obligations under the related Lease or (ii) at any time after agreeing to perform such obligations, such trustee or Continental ceases to perform such obligations or (z) the Loan Trustee with respect to such Equipment Notes shall take action or notify the applicable Owner Trustee that it intends to take action to foreclose the lien of the related Leased Aircraft Indenture, then in each case the Equipment Notes issued with respect to such Leased Aircraft may be purchased by the Owner Trustee or Owner Participant on the applicable purchase date at a price equal to the aggregate unpaid principal thereof, together with accrued interest thereon to, but not including, the purchase date, but without any premium (provided that a premium shall be payable if such Equipment Notes are to be purchased pursuant to clause (x) above when a Lease Event of Default shall have occurred and be continuing for less than 120 days). Continental, as owner of the Owned Aircraft, has no comparable right under the Owned Aircraft Indenture to purchase the Equipment Notes under such 17 circumstances. (d) Security......................... The Equipment Notes issued with respect to each Aircraft are secured by a security interest in such Aircraft and, in the case of each Leased Aircraft, by an assignment to the related Loan Trustee of certain of the related Owner Trustees rights under the Lease with respect to such Aircraft, including the right to receive payments of rent thereunder, with certain exceptions. The Equipment Notes are not cross-collateralized and, consequently, the Equipment Notes issued in respect of any one Aircraft are not secured by any of the other Aircraft or the Leases related thereto. There are no cross-default provisions in the Indentures or in the Leases. Consequently, events resulting in an Indenture Default under any particular Indenture may or may not result in an Indenture Default occurring under any other Indenture, and a Lease Event of Default under any particular Lease will not constitute a Lease Event of Default under any other Lease. If the Equipment Notes issued with respect to one or more Aircraft are in default and the Equipment Notes issued with respect to the remaining Aircraft are not in default, no remedies will be exercisable under the Indentures with respect to such remaining Aircraft. See "Description of the Equipment Notes--Security and Indenture Defaults, Notice and Waiver". Although the Equipment Notes issued in respect of the Leased Aircraft are not obligations of, or guaranteed by, Continental, the amounts unconditionally payable by Continental for lease of the Leased Aircraft will be sufficient to pay in full when due all amounts required to be paid on the Equipment Notes issued in respect of the Leased Aircraft. The Equipment Notes issued in respect of the Owned Aircraft are direct obligations of Continental. See "Description of the Equipment Notes--General". (e) Section 1110 Protection.......... Cleary, Gottlieb, Steen & Hamilton, counsel to Continental, has advised (x) the Leased Aircraft Trustees that the Owner Trustee, as lessor under the Lease relating to each Leased Aircraft, and the related Leased Aircraft Trustee, as assignee of such Owner Trustee's rights under such Lease pursuant to the related Leased Aircraft Indenture, are entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code with respect to the airframe and engines comprising the related Leased Aircraft and (y) the Owned Aircraft Trustee that it is entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code with respect to the airframe and engines comprising the Owned Aircraft. See "Description of the Equipment Notes-- Remedies" for a description of that opinion and certain assumptions contained therein. (f) Ranking.......................... Series B Equipment Notes issued in respect of any Aircraft are subordinated in right of payment to Series A Equipment Notes issued in respect of such Aircraft; Series C Equipment Notes issued in respect of such Aircraft are subordinated in right of payment to such Series B Equipment Notes; and Series D Equipment Notes issued in respect of such Aircraft are subordinated in right of payment to such Series C Equipment Notes. On each Distribution Date, (i) payments of interest and principal due on Series A Equipment Notes issued in respect of any Aircraft will be made prior to payments of interest and principal due on Series B Equipment Notes issued in respect of such Aircraft, (ii) payments of interest and principal due on such Series B Equipment Notes will be made prior to payments of interest and principal due on Series C Equipment Notes issued in respect of such Aircraft and (iii) payments of interest and principal due on such 18 Series C Equipment Notes will be made prior to payments of interest and principal due on Series D Equipment Notes issued in respect of such Aircraft. (g) Owner Participant................ Gaucho-2 Inc., a wholly owned subsidiary of The Boeing Company ("Boeing"), is currently the owner participant ("Owner Participant") with respect to all of the four leveraged leases for the Leased Aircraft. The Owner Participant and certain of its affiliates have various business relationships with Continental, including as a supplier of certain equipment and services to Continental. The Owner Participant has the right to sell, assign or otherwise transfer its interests as Owner Participant in any or all of such leveraged leases, subject to the terms and conditions of the relevant Participation Agreement and related documents. Liquidity Facilities.................. The Subordination Agent and the Liquidity Provider entered into a revolving credit agreement (each, a "Liquidity Facility") with respect to each Trust (other than the Class D Trust). Under each of the Liquidity Facilities, the Liquidity Provider will, if necessary, make advances ("Interest Drawings") in an aggregate amount (the "Required Amount") sufficient to pay interest on the Class A, B or C Certificates, as the case may be, on up to six successive quarterly Regular Distribution Dates (without regard to any future payments of principal on such Certificates) at the respective interest rates shown on the cover page of this Prospectus (plus an additional margin specified by the Registration Rights Agreement, if applicable) for such Certificates (the "Stated Interest Rates"). The initial amount available under the Liquidity Facilities for the Class A Certificates, the Class B Certificates and the Class C Certificates is $9,592,136, $4,540,609 and $5,421,148, respectively. An Interest Drawing under the relevant Liquidity Facility will be made promptly after any Regular Distribution Date if, after giving effect to the subordination provisions of the Intercreditor Agreement, there are insufficient funds available to the Subordination Agent to pay interest on any Class A, B or C Certificates; provided, however, that on any date the maximum amount available under such Liquidity Facility to fund any shortfall in interest due on such Certificates will not exceed an amount equal to the then Required Amount of such Liquidity Facility. The Liquidity Facility for any Class of Certificates does not provide for drawings thereunder to pay for principal of or premium on the Certificates of such Class, any interest on the Certificates of such Class in excess of the Stated Interest Rates, or principal of or interest or premium on the Certificates of any other Class. Upon each Interest Drawing under any Liquidity Facility, the Subordination Agent will be obligated to reimburse (to the extent that the Subordination Agent has available funds therefor) the Liquidity Provider for the amount of such drawing. Such reimbursement obligation and any other amounts owing to the Liquidity Provider under each Liquidity Facility or certain other agreements (the "Liquidity Obligations") will rank pari passu with the Liquidity Obligations relating to all other Liquidity Facilities and will rank senior to the Certificates in right of payment. Upon reimbursement in full of the Interest Drawings, together with any accrued interest thereon, under any Liquidity Facility, the amount available under such Liquidity Facility will be reinstated to the then Required Amount of such Liquidity Facility; provided that the amount will not be so reinstated if (i) a Liquidity Event of Default shall have occurred and be continuing and (ii) less than 65% of the 19 aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. "Performing Equipment Note" means an Equipment Note with respect to which no payment default has occurred and is continuing; provided that in the event of a bankruptcy proceeding involving Continental under the U.S. Bankruptcy Code, (i) any payment default existing during the 60-day period under Section 1110(a)(1)(A) of the U.S. Bankruptcy Code (or such longer period as may apply under Section 1110(b) of the U.S. Bankruptcy Code) (the "Section 1110 Period") shall not be taken into consideration, unless during the Section 1110 Period the trustee in such proceeding or Continental does not agree to perform its obligations under the Lease related to such Equipment Note (in the case of a Leased Aircraft) or under the Owned Aircraft Indenture (in the case of the Owned Aircraft) and (ii) any payment default occurring after the date of the order of relief in such proceeding shall not be taken into consideration if such payment default is cured under Section 1110(a)(1)(B) of the U.S. Bankruptcy Code before the later of 30 days after the date of such default or the expiration of the Section 1110 Period. If at any time the short-term unsecured debt rating of any Liquidity Provider issued by either Rating Agency (or if DNIB is such Liquidity Provider and does not have a published short-term unsecured debt rating issued by Standard & Poor's, with respect to Standard & Poor's only, the long-term unsecured debt rating of DNIB issued by Standard & Poor's) is lower than the Threshold Rating, the Liquidity Facility for the related Class of Certificates will be required to be replaced by another similar facility to be provided by a financial institution having such unsecured debt ratings issued by both Rating Agencies which are equal to or higher than the Threshold Rating. If such Liquidity Facility is not replaced within 10 days after notice of the downgrading, such Liquidity Facility will be drawn in full (the "Downgrade Drawing") and the proceeds will be deposited into a cash collateral account (the "Cash Collateral Account") for the related Class of Certificates and used for the same purposes and under the same circumstances and subject to the same conditions as cash payments of Interest Drawings under such Liquidity Facility would be used. Upon receipt by the Subordination Agent of a Termination Notice with respect to any Liquidity Facility from the Liquidity Provider (given as described in "Description of the Liquidity Facilities--Liquidity Events of Default"), the Subordination Agent shall request a final drawing (the "Final Drawing") under such Liquidity Facility in an amount equal to all available and undrawn amounts thereunder and shall hold the proceeds thereof in the Cash Collateral Account for the related Trust as cash collateral to be used for the same purposes and under the same circumstances, and subject to the same conditions, as cash payments of Interest Drawings under such Liquidity Facility would be used. Continental may, at its option, with or without cause, arrange for a replacement facility to replace the Liquidity Facility for any Trust, subject to certain conditions. If such replacement facility is provided at any time after a Downgrade Drawing under such Liquidity Facility, the funds on deposit in the Cash Collateral Account for such Trust will be returned to the 20 Liquidity Provider being replaced. Notwithstanding the subordination provisions of the Intercreditor Agreement, the holders of the Certificates issued by each Trust (other than the Class D Trust) will be entitled to receive and retain the proceeds of drawings under the Liquidity Facility for such Trust. See "Description of the Liquidity Facilities". Liquidity Provider.................... De Nationale Investeringsbank N.V., a bank organized under the laws of The Netherlands. DNIB has provided three separate liquidity facilities for the benefit of the holders of Class A Certificates, Class B Certificates and Class C Certificates, respectively. Intercreditor Agreement (a) Subordination.................... The Trusts, the Liquidity Providers and the Subordination Agent have entered into an agreement (the "Intercreditor Agreement") which provides as follows: (i) All payments made in respect of the Equipment Notes and certain other payments will be made to the Subordination Agent, which will distribute such payments in accordance with the provisions of paragraphs (ii) and (iii) below. (ii) On any Regular Distribution Date or Special Distribution Date (each, a "Distribution Date"), so long as no Triggering Event shall have occurred (whether or not continuing), all payments received by the Subordination Agent in respect of the Equipment Notes and certain other payments shall be distributed in the following order: (1) payment of the Liquidity Obligations; (2) payment of Expected Distributions to the holders of Class A Certificates; (3) payment of Expected Distributions to the holders of Class B Certificates; (4) payment of Expected Distributions to the holders of Class C Certificates; (5) payment of Expected Distributions to the holders of Class D Certificates; and (6) payment of certain fees and expenses of the Subordination Agent and the Trustees. "Expected Distributions" means, with respect to the Certificates of any Trust on any Distribution Date (the "Current Distribution Date") the sum of (x) accrued and unpaid interest on such Certificates and (y) the difference between (A) the Pool Balance of such Certificates as of the immediately preceding Distribution Date and (B) the Pool Balance of such Certificates as of the Current Distribution Date, calculated on the basis that the principal of the Equipment Notes held in such Trust has been paid when due (whether at stated maturity, upon redemption, prepayment or acceleration or otherwise) and such payments have been distributed to the holders of such Certificates. (iii) Upon the occurrence of a Triggering Event and at all times thereafter, all payments received by the Subordination Agent in respect of the Equipment Notes and certain other payments shall be distributed in the following order: (1) to the Subordination Agent, the Trustee and certain other parties in payment of the Administration Expenses (as defined herein) and to the Liquidity Provider in payment of the Liquidity Obligations; (2) to the holders of Class A Certificates in payment of Adjusted Expected Distributions; (3) to the holders of Class B Certificates in payment of Adjusted Expected Distributions; (4) to the holders of Class C Certificates 21 in payment of Adjusted Expected Distributions; and (5) to the holders of Class D Certificates in payment of Adjusted Expected Distributions. "Adjusted Expected Distributions" means, with respect to the Certificates of any Trust on any Distribution Date (the "Current Distribution Date"), the sum of (x) accrued and unpaid interest on such Certificates and (y) the greater of: (A) the difference between (x) the Pool Balance of such Certificates as of the immediately preceding Distribution Date and (y) the Pool Balance of such Certificates as of the Current Distribution Date calculated on the basis that (i) the principal of the Equipment Notes other than Performing Equipment Notes (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 and (ii) the principal of the Performing Equipment Notes has been paid when due (but without giving effect to any acceleration of Performing Equipment Notes) and such payments have been distributed to the holders of such Certificates, and (B) the amount of the excess, if any, of (i) the Pool Balance of such Class of Certificates as of the immediately preceding Distribution Date, over (ii) the Aggregate LTV Collateral Amount for such Class of Certificates for the Current Distribution Date; provided that, until the date of the initial LTV Appraisals, clause (B) shall not apply. "Aggregate LTV Collateral Amount" for any Class of Certificates for any Distribution Date means the sum of the applicable LTV Collateral Amounts for each Aircraft, minus the Pool Balance for each Class of Certificates, if any, senior to such Class, after giving effect to any distribution of principal on such Distribution Date on such senior Class or Classes. "LTV Collateral Amount" of any Aircraft for any Class of Certificates means, as of any Distribution Date, the lesser of (i) the LTV Ratio for such Class of Certificates multiplied by the Appraised Current Market Value of such Aircraft and (ii) the outstanding principal amount of the Equipment Notes secured by such Aircraft after giving effect to any principal payments of such Equipment Notes on or before such Distribution Date. "LTV Ratio" means for the Class A Certificates 35.0%, for the Class B Certificates 50.0%, for the Class C Certificates 65.0% and for the Class D Certificates 72.9%. "Appraised Current Market Value" of any Aircraft means the lower of the average and the median of the most recent three Appraisals of such Aircraft. After a Triggering Event occurs and any Equipment Note becomes a Non-Performing Equipment Note, the Subordination Agent shall obtain Appraisals for the Aircraft (the "LTV Appraisals") as soon as practicable and additional LTV Appraisals on or prior to each anniversary of the date of such initial LTV Appraisals; provided that if the Controlling Party reasonably objects to the appraised value of the Aircraft shown in such LTV Appraisals, the Controlling Party shall have the right to obtain or cause to 22 be obtained substitute LTV Appraisals (including LTV Appraisals based upon physical inspection of the Aircraft). (b) Intercreditor Rights............. Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity Provider have agreed that, with respect to any Indenture at any given time, the Loan Trustee will be directed (a) in taking, or refraining from taking, any action thereunder by the holders of at least a majority of the outstanding principal amount of the Equipment Notes issued thereunder as long as no Indenture Default has occurred and is continuing thereunder and (b) subject to certain conditions, in exercising remedies thereunder (including acceleration of such Equipment Notes or foreclosing the lien on the Aircraft securing such Equipment Notes) by the Controlling Party insofar as an Indenture Default thereunder has occurred and is continuing. "Controlling Party" with respect to any Indenture means: (w) the Class A Trustee; (x) upon payment of Final Distributions to the holders of Class A Certificates, the Class B Trustee; (y) upon payment of Final Distributions to the holders of Class B Certificates, the Class C Trustee; and (z) upon payment of Final Distributions to the holders of Class C Certificates, the Class D Trustee. See "Description of the New Certificates--Indenture Defaults and Certain Rights Upon an Indenture Default" for a description of the rights of the Certificateholders of each Trust to direct the respective Trustees. Notwithstanding the foregoing, at any time after 18 months from the earlier to occur of (x) the date on which the entire available amount under any Liquidity Facility shall have been drawn (for any reason other than a Downgrade Drawing) and remain unreimbursed and (y) the date on which all Equipment Notes shall have been accelerated, the Liquidity Provider shall have the right to become the Controlling Party with respect to such Indenture; provided that if there is more than one Liquidity Provider, the Liquidity Provider with the greatest amount of unreimbursed Liquidity Obligations shall have such right. For purposes of giving effect to the foregoing, the Trustees (other than the Controlling Party) have irrevocably agreed (and the Certificateholders (other than the Certificateholders represented by the Controlling Party) shall be deemed to agree by virtue of their purchase of Certificates) to exercise their voting rights as directed by the Controlling Party. For a description of certain limitations on the Controlling Partys rights to exercise remedies, see "Description of the Equipment Notes-- Remedies". "Final Distributions" means, with respect to the Certificates of any Trust on any Distribution Date, the sum of (x) accrued and unpaid interest on such Certificates and (y) the Pool Balance of such Certificates as of the immediately preceding Distribution Date. (i) Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Controlling Party may accelerate and sell all (but not less than all) of the Equipment Notes issued under such Indenture to any person, subject to the provisions of paragraph (ii) below. The proceeds of such sale will be distributed pursuant to the provisions of the Intercreditor Agreement. (ii) So long as any Certificates are outstanding, during nine months after the earlier of (x) the acceleration of the Equipment Notes under any Indenture or (y) the bankruptcy or insolvency of Continental, without 23 the consent of each Trustee, (a) no Aircraft subject to the lien of such Indenture or such Equipment Notes may be sold, if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (b) with respect to any Leased Aircraft, the amount and payment dates of rentals payable by Continental under the Lease for such Leased Aircraft may not be adjusted, if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the rentals payable by Continental under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Notes issued under such Indenture as the discount rate. "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) 75% of the Appraised Current Market Value of such Aircraft and (2) the aggregate outstanding principal amount of such Equipment Notes, plus accrued and unpaid interest thereon. Certificates; Book-Entry Registration.......................... The New Certificates of each Trust will be represented by a single permanent global Certificate in definitive, fully registered form and registered in the name of Cede & Co. ("Cede"), as nominee of The Depository Trust Company ("DTC"). See "Description of the New Certificates--Book Entry; Delivery and Form." Method of Distribution................ The persons in whose names the Certificates are registered will be treated as the owners of such Certificates for the purpose of receiving payments of principal of and interest on such Certificates and for all other purposes whatsoever. Therefore, none of the Trustee, Continental, the Loan Trustee, the Liquidity Provider, the Owner Participant or the Owner Trustee has any direct responsibility or liability for distributions or payments to owners of beneficial interests in the Certificates (the "Certificate Owners"). Distributions by the Trustee in respect of Certificates registered in the name of Cede, as nominee of DTC, including the final distribution of principal with respect to such Certificates of any Trust, will be made in same-day funds to DTC. DTC will in turn make distributions in same-day funds to those participants in DTC who are credited with ownership of such Certificates ("DTC Participants") in amounts proportionate to the amount of each such DTC Participants respective holdings of beneficial interests in such Certificates. Corresponding payments by the DTC Participants to beneficial owners of such Certificates will be the responsibility of such DTC Participants and will be made in accordance with customary industry practices. Distributions by the Trustee to Certificateholders in respect of Certificates issued in definitive form, other than the final distribution, will be made by check mailed to each such Certificateholder of record on the applicable record date at its address appearing on the register. The final distribution with respect to the Certificates of any Trust will be made only upon surrender and presentation thereof to the Trustee. See "Description of the New Certificates--Book-Entry; Delivery and Form". 24 Trustee.......................... Wilmington Trust Company will act as Trustee and as paying agent and registrar for the Certificates of each Trust. Wilmington Trust Company will also act as Loan Trustee, as paying agent and registrar for each Series of Equipment Notes and as Subordination Agent under the Intercreditor Agreement. Federal Income Tax Consequences.. The exchange of New Certificates for Old Certificates should not be a sale or exchange or otherwise a taxable event for Federal income tax purposes. ERISA Considerations............. In general, employee benefit plans subject to Title I of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended (the "Code") (or entities which may be deemed to hold the assets of any such plan) (collectively, "Plans") will be eligible to purchase the Class A Certificates. Plans will not be eligible to purchase Class B, Class C or Class D Certificates, except that such Certificates may be acquired with the assets of an insurance company general account that may be deemed to constitute Plan assets if the conditions of Prohibited Transaction Class Exemption ("PTCE") 95-60 are satisfied. Holders of Class B, Class C or Class D Certificates that tender such Old Certificates in exchange for New Certificates will be deemed to have represented and warranted that either (i) no Plan assets have been used to purchase such Certificate or (ii) the purchase and holding of such Certificate is exempt from the prohibited transaction restrictions of ERISA and Section 4975 of the Code pursuant to PTCE 95-60. See "ERISA Considerations" and "Transfer Restrictions". Each Plan fiduciary (and each fiduciary for a governmental or church plan subject to rules similar to those imposed on Plans under ERISA) should consult with its legal advisor concerning an investment in any of the Certificates. 25 RISK FACTORS Holders of Old Certificates should carefully consider the following risk factors, as well as other information set forth in this Prospectus, before tendering their Old Certificates in the Exchange Offer. The risk factors set forth below (other than "--Risk Factors Relating to the Certificates-- Consequences of Failure to Exchange") are generally applicable to the Old Certificates as well as the New Certificates. RISK FACTORS RELATING TO THE COMPANY Continental's History of Operating Losses Although Continental recorded net income of $224 million in 1995 and $255 million in the six months ended June 30, 1996, it had experienced significant operating losses in the previous eight years. In the long term, Continental's viability depends on its ability to sustain profitable results of operations. Leverage and Liquidity Continental has successfully negotiated a variety of agreements to increase its liquidity during 1995 and 1996. Nevertheless, Continental remains more leveraged and has significantly less liquidity than certain of its competitors, several of whom have available lines of credit and/or significant unencumbered assets. Accordingly, Continental may be less able than certain of its competitors to withstand a prolonged recession in the airline industry. As of June 30, 1996, Continental and its consolidated subsidiaries had approximately $1.7 billion (including current maturities) of long-term indebtedness and capital lease obligations and had approximately $867 million of minority interest, Continental-obligated mandatorily redeemable preferred securities of subsidiary trust, redeemable warrants, redeemable preferred stock and common stockholders' equity. Common stockholders' equity reflects the adjustment of the Company's balance sheet and the recording of assets and liabilities at fair market value as of April 27, 1993 in accordance with fresh start reporting. During the first and second quarters of 1995, in connection with negotiations with various lenders and lessors, Continental ceased or reduced contractually required payments under various agreements, which produced a significant number of events of default under debt, capital lease and operating lease agreements. Through agreements reached with the various lenders and lessors, Continental has cured all of these events of default. The last such agreement was put in place during the fourth quarter of 1995. As of June 30, 1996, Continental had approximately $825 million of cash and cash equivalents, including restricted cash and cash equivalents of $104 million. Continental does not have general lines of credit and has significant encumbered assets. Continental had firm commitments with The Boeing Company ("Boeing") to take delivery of 43 new jet aircraft during the years 1997 through 2002 with an estimated aggregate cost of $2.6 billion. Continental has recently amended the terms of its commitments with Boeing to take delivery of a total of 61 jet aircraft during the years 1997 through 2003 with options for an additional 23 aircraft. The estimated aggregate cost of the firm-commitment aircraft is $2.7 billion. These amendments changed the aircraft mix and timing of delivery of aircraft, in order to more closely match Continentals anticipated future aircraft needs. In addition, the Company took delivery of three Beech 1900-D aircraft in the second quarter of 1996 and an additional four such aircraft are scheduled to be delivered later in 1996. The Company currently anticipates that the firm financing commitments available to it with respect to its acquisition of new aircraft from Boeing and Beech Acceptance Corporation ("Beech") will be sufficient to fund all new aircraft deliveries scheduled during 1996, and that it will have remaining financing commitments from aircraft manufacturers of $676 million for jet aircraft deliveries beyond 1996. However, the Company believes that further financing will be needed to satisfy the remaining amount of such capital commitments. There can be no assurance that sufficient financing will be available for all aircraft and other capital expenditures not covered by firm financing commitments. Continental has also entered into letters of 26 intent or agreements with several outside parties to lease four DC10-30 aircraft and to purchase three DC10-30 aircraft and two MD-80 aircraft. These nine aircraft are expected to be delivered by mid-year 1997, and Continental expects to finance the aircraft to be purchased from available cash or from third-party sources. The Company's wholly-owned subsidiary, Continental Express, Inc. ("Express"), recently announced an order for EMB-145 regional jets. Express' order, which is for 25 firm aircraft and 175 option aircraft, is structured so that Express will lease, under operating leases, the aircraft it takes under the aircraft order, and neither Express nor Continental will have any obligation to take aircraft which are not financed by a third party and leased to Express. Continental will guarantee Express' obligations under the operating leases. For 1996, Continental expects to incur cash expenditures under operating leases relating to aircraft of approximately $568 million, compared with $521 million for 1995, and approximately $229 million relating to facilities and other rentals, the same amount as for 1995. In addition, Continental has capital requirements relating to compliance with regulations that are discussed below. See "--Regulatory Matters." CMI recently consummated a $320 million secured term loan financing with a group of banks and other financial institutions. The loan was made in two tranches--a $180 million five-year amortizing term loan and a $140 million seven-year amortization extended loan. Each tranche bears interest at a floating rate. The loan is secured by the stock of CMI and substantially all its unencumbered assets, consisting primarily of CMI's route authorities, and is guaranteed by Continental and Air Micronesia, Inc. (CMI's parent company). CMI used the net proceeds of the financing to prepay $160 million in principal amount of indebtedness to an affiliate of General Electric Company (General Electric Company and affiliates, collectively "GE") and to pay transaction costs, and Continental used the $136 million in proceeds received by it as an indirect dividend from CMI, together with approximately $28 million of cash on hand, to prepay approximately $164 million in principal amount of indebtedness to GE. The bank financing does not contain any restrictive covenants at the Continental parent level, and none of the assets of Continental Airlines, Inc. (other than its stock in Air Micronesia, Inc.) is pledged in connection with the new financing. The bank financing contains significant financial covenants relating to CMI, including maintenance of a minimum fixed charge coverage ratio, a minimum consolidated net worth and minimum liquidity, and covenants restricting CMI's leverage, its incurrence of certain indebtedness and its pledge of assets. The financial covenants also limit the ability of CMI to pay dividends to Continental. On July 2, 1996, the Company announced its plan to expand its gates and related facilities in Terminal B as well as planned improvements at Terminal C at Continental's Houston Intercontinental Airport hub. The expansion is expected to cost approximately $115 million, which the Company expects will be funded principally by the issuance of tax-exempt debt by the applicable municipal authority. In connection therewith, the Company expects to enter into long-term leases (or amendments to existing leases) with the applicable municipal authority containing rental payments sufficient to service the related tax-exempt debt. Aircraft Fuel Since fuel costs constitute a significant portion of Continental's operating costs (approximately 12.5% for the year ended December 31, 1995 and 12.8% for the six months ended June 30, 1996), significant changes in fuel costs would materially affect the Company's operating results. Jet fuel prices have recently increased. Fuel prices continue to be susceptible to international events, and the Company cannot predict near or longer-term fuel prices. The Company has entered into petroleum option contracts to provide some short-term protection (currently approximately six months) against a sharp increase in jet fuel prices. In the event of a fuel supply shortage resulting from a disruption of oil imports or otherwise, higher fuel prices or curtailment of scheduled service could result. 27 Certain Tax Matters The Company's United States federal income tax return reflects net operating loss carryforwards ("NOLs") of $2.5 billion, subject to audit by the Internal Revenue Service, of which $1.2 billion are not subject to the limitations of Section 382 of the Internal Revenue Code ("Section 382"). As a result, the Company will not pay United States federal income taxes (other than alternative minimum tax) until it has recorded approximately an additional $1.2 billion of taxable income following December 31, 1995. For financial reporting purposes, Continental began accruing tax expense on its income statement during the second quarter of 1996. Section 382 imposes limitations on a corporations ability to utilize NOLs if it experiences an "ownership change". In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. The sale of the Company's common stock in the Secondary Offering (as defined in and described under "Recent Developments") gave rise to an increase in percentage ownership by certain stockholders for this purpose. Based upon the advice of its counsel, Cleary, Gottlieb, Steen & Hamilton, the Company believes that such percentage increase did not give rise to an ownership change under Section 382. However, no assurance can be given that future transactions, whether within or outside the control of the Company, will not cause a change in ownership, thereby substantially limiting the potential utilization of the NOLs in a given future year. In the event that an ownership change should occur, utilization of Continental's NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of the Company's stock (including both common and preferred stock) at the time of the ownership change by the applicable long-term tax exempt rate (which was 5.80% for August 1996). Unused annual limitations may be carried over to later years, and the amount of the limitation may under certain circumstances be increased by the built-in gains in assets held by the Company at the time of the change that are recognized in the five-year period after the change. Under current conditions, if an ownership change were to occur, Continental's NOL utilization would be limited to approximately $90 million per year. In connection with the Company's 1993 reorganization under Chapter 11 of the U.S. bankruptcy code effective April 27, 1993 (the "Reorganization") and the recording of assets and liabilities at fair market value under the American Institute of Certified Public Accountants' Statement of Position 90-7-- "Financial Reporting by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"), the Company recorded a deferred tax liability at April 27, 1993, net of the amount of the Company's estimated realizable NOLs as required by Statement of Financial Accounting Standards No. 109--"Accounting for Income Taxes". Realization of a substantial portion of the Company's NOLs will require the completion during the five-year period following the Reorganization of transactions resulting in recognition of built-in gains for federal income tax purposes. The Company has consummated one such transaction, which had the effect of realizing approximately 40% of the built-in gains required to be realized over the five-year period, and currently intends to consummate one or more additional transactions. If the Company were to determine in the future that not all such transactions will be completed, an adjustment to the net deferred tax liability of up to $116 million would be charged to income in the period such determination was made. CMI CMI's operating profit margins have consistently been greater than the Company's margins overall. In addition to its non-stop service between Honolulu and Tokyo, CMI's operations focus on the neighboring islands of Guam and Saipan, resort destinations that cater primarily to Japanese travelers. Because the majority of CMI's traffic originates in Japan, its results of operations are substantially affected by the Japanese economy and changes in the value of the yen as compared to the dollar. Appreciation of the yen against the dollar during 1993 and 1994 increased CMIs profitability and a decline of the yen against the dollar may be expected to decrease it. The yen has declined against the dollar during 1996 as compared to 1995. To reduce the potential negative impact on CMI's dollar earnings, CMI from time to time purchases average rate options as a hedge against a portion of its expected net yen cash flow position. Any significant and sustained decrease in traffic or yields to and from Japan could materially adversely affect Continental's consolidated profitability. 28 Principal Stockholders As of July 31, 1996, Air Canada held approximately 10.0% of the common equity interests and 4.0% of the general voting power of the Company, and Air Partners, L.P. ("Air Partners") held approximately 9.8% of the common equity interests and 39.3% of the general voting power of the Company. In addition, assuming exercise of all of the warrants held by Air Partners, approximately 23.3% of the common equity interests and 52.1% of the general voting power would be held by Air Partners. As discussed in "Recent Developments," Air Canada has announced its intention to divest its interest in the Company during December 1996 or early 1997, subject to market conditions. At any time after January 1, 1997, shares of Class A common stock may be freely converted into an equal number of shares of Class B common stock. Such conversion would effectively increase the relative voting power of those Class A stockholders who do not convert. See "Recent Developments." Various provisions in the Company's Amended and Restated Certificate of Incorporation (the "Certificate of Incorporation") and Bylaws (the "Bylaws") currently provide Air Partners with the right to elect one-third of the directors in certain circumstances; these provisions could have the effect of delaying, deferring or preventing a change in control of the Company. See "Recent Developments." RISK FACTORS RELATING TO THE AIRLINE INDUSTRY Industry Conditions and Competition The airline industry is highly competitive and susceptible to price discounting. The Company has in the past both responded to discounting actions taken by other carriers and initiated significant discounting actions itself. Continental's competitors include carriers with substantially greater financial resources, as well as smaller carriers with lower cost structures. Airline profit levels are highly sensitive to, and during recent years have been severely impacted by, changes in fuel costs, fare levels (or "average yield") and passenger demand. Passenger demand and yields have been adversely affected by, among other things, the general state of the economy, international events and actions taken by carriers with respect to fares. From 1990 to 1993, these factors contributed to the domestic airline industry's incurring unprecedented losses. Although fare levels have increased recently, significant industry-wide discounts could be reimplemented at any time, and the introduction of broadly available, deeply discounted fares by a major United States airline would likely result in lower yields for the entire industry and could have a material adverse effect on the Company's operating results. The airline industry has consolidated in past years as a result of mergers and liquidations and may further consolidate in the future. Among other effects, such consolidation has allowed certain of Continental's major competitors to expand (in particular) their international operations and increase their market strength. Furthermore, the emergence in recent years of several new carriers, typically with low cost structures, has further increased the competitive pressures on the major United States airlines. In many cases, the new entrants have initiated or triggered price discounting. Aircraft, skilled labor and gates at most airports continue to be readily available to start-up carriers. Although management believes that Continental is better able than some of its major competitors to compete with fares offered by start-up carriers because of its lower cost structure, competition with new carriers or other low cost competitors on Continental's routes could negatively impact Continental's operating results. Regulatory Matters In the last several years, the United States Federal Aviation Administration (the "FAA") has issued a number of maintenance directives and other regulations relating to, among other things, retirement of older aircraft, collision avoidance systems, airborne windshear avoidance systems, noise abatement, commuter aircraft safety and increased inspections and maintenance procedures to be conducted on older aircraft. The Company expects to continue incurring expenses for the purpose of complying with the FAA's noise and aging aircraft regulations. In addition, several airports have recently sought to increase substantially the rates charged to 29 airlines, and the ability of airlines to contest such increases has been restricted by federal legislation, U.S. Department of Transportation regulations and judicial decisions. Management believes that the Company benefited significantly from the expiration of the aviation trust fund tax (the "ticket tax") on December 31, 1995, although the amount of any such benefit resulting directly from the expiration of the ticket tax cannot precisely be determined. In early August 1996, the Congress approved legislation reinstating the ticket tax until December 31, 1996, and the ticket tax was reinstated on August 27, 1996. Management believes that the reimposition of the ticket tax has a negative impact on the Company, although the amount of such negative impact directly resulting from the reimposition of the ticket tax cannot be precisely determined. Additional laws and regulations have been proposed from time to time that could significantly increase the cost of airline operations by imposing additional requirements or restrictions on operations, including various new safety requirements recently proposed. Laws and regulations have also been considered that would prohibit or restrict the ownership and/or transfer of airline routes or takeoff and landing slots. Also, the availability of international routes to United States carriers is regulated by treaties and related agreements between the United States and foreign governments that are amendable. Continental cannot predict what laws and regulations may be adopted or their impact, but there can be no assurance that laws or regulations currently proposed or enacted in the future will not adversely affect the Company. RISK FACTORS RELATING TO THE CERTIFICATES AND THE OFFERING Consequences of Failure to Exchange Holders of Old Certificates who do not exchange their Old Certificates for New Certificates pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Certificates as set forth in the legend thereon as a consequence of the issuance of the Old Certificates pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Certificates may not be offered or sold, unless registered under the Securities Act, except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. The Company does not currently anticipate that it will register the Old Certificates under the Securities Act. To the extent that Old Certificates are tendered and accepted in the Exchange Offer, the trading market for untendered and tendered but unaccepted Old Certificates could be adversely affected. Appraisals and Realizable Value of Aircraft Appraisals in respect of the Aircraft (without physical inspection thereof) have been prepared by AISI, BK and MBA. According to the appraisals of the three firms, the Aircraft had an aggregate appraised value of $239,360,000, $229,500,000 and $241,860,000, respectively, in each case as of March 26, 1996. See "Description of the Aircraft and the Appraisals". However, an appraisal is only an estimate of value and should not be relied upon as a measure of realizable value; the proceeds realized upon a sale of any Aircraft may be less than the appraised value thereof. The value of the Aircraft in the event of the exercise of remedies under the applicable Indenture will depend on market and economic conditions, the availability of buyers, the condition of the Aircraft and other factors. Accordingly, there can be no assurance that the proceeds realized upon any such exercise with respect to the Equipment Notes and the Aircraft pursuant to the applicable Pass Through Trust Agreement and the applicable Indenture would be sufficient to satisfy in full payments due on the Certificates. Priority of Distributions; Subordination Pursuant to the Intercreditor Agreement to which the Trusts, the Subordination Agent and the Liquidity Providers are parties, on each Distribution Date, so long as no Triggering Event shall have occurred, all payments received by the Subordination Agent will be distributed in the following order: (1) payment of the Liquidity Obligations to the Liquidity Providers; (2) payment of Expected Distributions to the holders of Class A Certificates; (3) payment of Expected Distributions to the holders of Class B Certificates; (4) payment of 30 Expected Distributions to the holders of Class C Certificates; (5) payment of Expected Distributions to the holders of Class D Certificates; and (6) payment of certain fees and expenses of the Subordination Agent and the Trustees. In addition, upon the occurrence of a Triggering Event and at all times thereafter, all payments received by the Subordination Agent in respect of the Equipment Notes and certain other payments will be distributed under the Intercreditor Agreement in the following order: (1) to the Subordination Agent, the Trustee and certain other parties in payment of the Administration Expenses and to the Liquidity Providers in payment of the Liquidity Obligations; (2) to the holders of Class A Certificates in payment of Adjusted Expected Distributions; (3) to the holders of Class B Certificates in payment of Adjusted Expected Distributions; (4) to the holders of Class C Certificates in payment of Adjusted Expected Distributions; and (5) to the holders of Class D Certificates in payment of Adjusted Expected Distributions. The priority of distributions after a payment default under any Equipment Note will have the effect in certain circumstances of requiring the distribution to more senior Classes of Certificates of payments received in respect of one or more junior series of Equipment Notes. If this should occur, the interest accruing on the remaining Equipment Notes would in the aggregate be less than the interest accruing on the remaining Certificates because such Certificates include a relatively greater proportion of junior Classes with relatively higher interest rates. As a result of this possible interest shortfall, the holders of one or more junior Classes of Certificates may not receive the full amount due them after a payment default under any Equipment Note even if all Equipment Notes are eventually paid in full. Control over Collateral; Sale of Collateral Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity Provider have agreed that, with respect to any Indenture at any given time, the Loan Trustee will be directed (a) in taking, or refraining from taking, any action thereunder by the holders of at least a majority of the outstanding principal amount of the Equipment Notes issued thereunder as long as no Indenture Default has occurred and is continuing thereunder and (b) subject to certain conditions, in exercising remedies thereunder (including acceleration of such Equipment Notes or foreclosing the lien on the Aircraft securing such Equipment Notes) insofar as an Indenture Default has occurred and is continuing by the Controlling Party. See "Description of the New Certificates--Indenture Defaults and Certain Rights Upon an Indenture Default" for a description of the rights of the Certificateholders of each Trust to direct the respective Trustees. Notwithstanding the foregoing, at any time after 18 months from the earlier to occur of (x) the date on which the entire available amount under any Liquidity Facility shall have been drawn (for any reason other than a Downgrade Drawing) and remain unreimbursed and (y) the date on which all Equipment Notes shall have been accelerated, the Liquidity Provider shall have the right to elect to become the Controlling Party with respect to such Indenture. For purposes of giving effect to the foregoing, the Trustees (other than the Controlling Party) shall irrevocably agree (and the Certificateholders (other than the Certificateholders represented by the Controlling Party) shall be deemed to agree by virtue of their purchase of Certificates) to exercise their voting rights as directed by the Controlling Party. For a description of certain limitations on the Controlling Party's rights to exercise remedies, see "Description of the Equipment Notes--Remedies". Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Controlling Party may accelerate and, subject to the provisions of the immediately following sentence, sell all (but not less than all) of the Equipment Notes issued under such Indenture to any person. So long as any Certificates are outstanding, during nine months after the earlier of (x) the acceleration of the Equipment Notes under any Indenture or (y) the bankruptcy or insolvency of Continental, without the consent of each Trustee, (a) no Aircraft subject to the lien of such Indenture or such Equipment Notes may be sold, if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (b) with respect to any Leased Aircraft, the amount and payment dates of rentals payable by Continental under the Lease for such Leased Aircraft may not be adjusted, if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the rentals payable by Continental under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Notes issued under such Indenture as the discount rate. 31 Other Business Relationships with Owner Participant Gaucho-2 Inc., a wholly owned subsidiary of Boeing, is currently the Owner Participant with respect to all of the four leveraged leases for the Leased Aircraft. Boeing and certain of its affiliates have various business relationships with Continental, including as a supplier of certain equipment and services to Continental. Due to such relationships, Gaucho-2 Inc. as the Owner Participant may have interests different from those of any other owner participant without such business relationships. Absence of a Public Market for the New Certificates Prior to the Exchange Offer, there has been no public market for the Old Certificates or the New Certificates. Neither Continental nor any Trust intends to apply for listing of the New Certificates on any securities exchange or for quotation of New Certificates on The Nasdaq Stock Market's National Market or otherwise. Certain of the Initial Purchasers have previously made a market in the Old Certificates and Continental has been advised that Morgan Stanley & Co. Incorporated and CS First Boston Corporation presently intend to make a market in the New Certificates, as permitted by applicable laws and regulations, after consummation of the Exchange Offer. None of the Initial Purchasers is obligated, however, to make a market in the Old Certificates or the New Certificates and any such market making activity may be discontinued at any time without notice at the sole discretion of each Initial Purchaser. There can be no assurance as to the liquidity of the public market for the New Certificates or that any active public market for the Certificates will develop or continue. If an active public market does not develop, the market price and liquidity of the Certificates may be adversely affected. 32 RECENT DEVELOPMENTS STOCK SPLIT On June 26, 1996, the Board of Directors of the Company declared a two-for-one stock split (the "Stock Split") pursuant to which (a) one share of the Company's Class A common stock was issued for each share of Class A common stock outstanding on July 2, 1996 (the "Record Date") and (b) one share of the Company's Class B common stock was issued for each share of Class B common stock outstanding on the Record Date. Shares issuable pursuant to the Stock Split were distributed on or about July 16, 1996. CORPORATE GOVERNANCE On June 26, 1996, at the Company's annual meeting of stockholders (the "Annual Meeting"), the Company's stockholders approved changes proposed by the Company to its Certificate of Incorporation, which, together with amendments to the Company's Bylaws previously approved by the Company's Board of Directors (collectively, the "Amendments"), generally eliminate special classes of directors (except for Air Partners' right to elect one-third of the directors in certain circumstances as described below) and supermajority provisions, and make a variety of other modifications aimed at streamlining the Company's corporate governance structure. The amendments to the Company's Certificate of Incorporation included elimination of Class C common stock, par value $.01 per share (the "Class C common stock"), of the Company as an authorized class of capital stock and changed the rights of holders of Class D common stock, par value $.01 per share (the "Class D common stock"), with respect to election of directors--holders of Class D common stock will now be entitled to elect one- third of the directors. Pursuant to the Certificate of Incorporation, Class D common stock is solely issuable to Air Partners and certain of its affiliates. There is currently no Class D common stock outstanding. The Amendments, as a whole, reflect the reduction of Air Canada's equity interest in the Company, as described below, and the decision of the former directors designated by Air Canada not to stand for reelection, along with the expiration of various provisions of the Company's Certificate of Incorporation and Bylaws specifically included at the time of the Company's reorganization in 1993. The Amendments also provide that, at any time after January 1, 1997, shares of Class A common stock may be freely converted into an equal number of shares of Class B common stock. Under agreements put in place at the time of the Company's reorganization in 1993, and designed in part to ensure compliance with the foreign ownership limitations applicable to United States air carriers, in light of the substantial stake in the Company then held by Air Canada, holders of Class A common stock were not permitted under the Company's Certificate of Incorporation to convert their shares to Class B common stock. In recent periods, the market price of Class A common stock has generally been below the market price of Class B common stock, which the Company believes is attributable in part to the reduced liquidity present in the trading market for Class A common stock. A number of Class A stockholders requested that the Company provide for free convertibility of Class A common stock into Class B common stock, and in light of the reduction of Air Canada's equity stake, the Company determined that the restriction was no longer necessary. Any such conversion would effectively increase the relative voting power of those Class A stockholders who do not convert. On April 19, 1996, the Company's Board of Directors approved certain agreements (the "Agreements") with its two major stockholders, Air Canada and Air Partners. The Agreements contain a variety of arrangements intended generally to reflect the intention that Air Canada has expressed to the Company of divesting its investment in Continental during December 1996 or early 1997, subject to market conditions. Air Canada has indicated to the Company that its original investment in Continental has become less central to Air Canada in light of other initiatives it has undertaken -- particularly expansion within Canada and exploitation of the 1995 Open Skies agreement to expand Air Canada's own flights into the U.S. Because of these initiatives Air Canada has determined it appropriate to redeploy the funds invested in the Company into other uses in Air Canada's business. The Agreements also reflect the distribution by Air Partners, effective March 29, 1996, to its investors (the "AP Investors") of all of the shares of the Class B common stock held by Air Partners and the desire of some of the AP Investors to realize the increase in value of their investment in the Company by selling all or a portion of their shares of Class B common stock. 33 Among other things, the Agreements required the Company to file a registration statement under the Securities Act to permit the sale by Air Canada of 2,200,000 shares of Class B common stock held by it and by certain of the AP Investors of an aggregate of 1,730,240 (each on a pre-Stock Split basis) such shares pursuant to an underwritten public offering arranged by the Company (the "Secondary Offering"). The Secondary Offering was completed on May 14, 1996. The Agreements provided for the following additional steps to be taken in connection with the completion of the Secondary Offering: . in light of its reduced equity stake in the Company, Air Canada was no longer entitled to designate nominees to the Board of Directors of the Company, caused the four then-present or former members of the Air Canada board who served as directors of Continental to decline nomination for reelection as directors and converted all of its Class A common stock to Class B common stock; . Air Canada and Air Partners entered into a number of agreements restricting, prior to December 16, 1996, further disposition of the common stock of the Company held by either of them; and . each of the existing Stockholders' Agreement and the registration rights agreement (the "Original Registration Rights Agreement") among the parties was modified in a number of respects to reflect, among other matters, the changing composition of the respective equity interests of the parties. After such sale and the conversion by Air Canada of its Class A common stock into Class B common stock, Air Canada holds approximately 10.0% of the common equity interests and 4.0% of the general voting power of the Company, and Air Partners holds approximately 9.8% of the common equity interests and 39.3% of the general voting power of the Company. If all of the warrants held by Air Partners were exercised, approximately 23.3% of the common equity interests and 52.1% of the general voting power would be held by Air Partners. The Company and Air Canada also entered into a memorandum of understanding, subject to the fulfillment of certain conditions, regarding modifications to certain of the Company's existing "synergy" agreements with Air Canada, which covered items such as maintenance and ground facilities, and resolved certain outstanding commercial issues under the agreements. In May 1996, the Company entered into an agreement with Air Partners for the sale by Air Partners to the Company from time to time at Air Partners' election for the one-year period beginning August 15, 1996, of up to an aggregate of $50 million in intrinsic value (then-current Class B common stock price minus exercise price) of Air Partners' Class B Warrants pursuant to the Warrant Purchase Agreement. The purchase price would be payable in cash. The Board of Directors has authorized the Company to publicly issue up to $50 million in net proceeds of Class B common stock in connection with any such purchase and the Company has filed a shelf registration statement with respect thereto that has been declared effective by the Commission. In connection with this agreement, the Company has reclassified $50 million from common equity to redeemable warrants. Because certain aspects of the Agreements raised issues under the change in control provisions of certain of the Company's employment agreements and employee benefit plans, these agreements and plans were modified to provide a revised change of control definition that the Company believes is appropriate in light of the prospective changes to its equity ownership structure. In connection with the modifications, payments were made to certain employees, benefits were granted to certain employees and options equal to 10% of the amount of the options previously granted to each optionee were granted (subject to certain conditions) to substantially all employees holding outstanding options. 34 USE OF PROCEEDS There will be no cash proceeds payable to Continental from the issuance of the New Certificates pursuant to the Exchange Offer. The proceeds from the sale of the Old Certificates were used to purchase the Equipment Notes issued by (i) the related Owner Trustees in connection with the refinancing of the indebtedness incurred by the Owner Trustees to finance the purchase of each of the Leased Aircraft and (ii) Continental, as owner of the Owned Aircraft. The Equipment Notes issued in respect of the Leased Aircraft represent in the aggregate the entire debt portion currently outstanding of the leveraged lease transactions relating to the Leased Aircraft. Continental received cash proceeds from the sale of the Old Certificates, representing that portion of the total proceeds from the sale of the Old Certificates as was used to purchase Equipment Notes issued with respect to the Owned Aircraft. 35 SELECTED FINANCIAL DATA The following tables set forth selected financial data of (i) the Company for the three and six months ended June 30, 1996 and 1995, the years ended December 31, 1995 and 1994 and the period from April 28, 1993 through December 31, 1993 and (ii) Holdings for the period from January 1, 1993 through April 27, 1993. The consolidated financial data of both the Company, for the years ended December 31, 1995 and 1994 and for the period from April 28, 1993 through December 31, 1993, and Holdings, for the period from January 1, 1993 through April 27, 1993, are derived from their respective audited consolidated financial statements. On April 27, 1993, in connection with the Reorganization, the Company adopted fresh start reporting in accordance with SOP 90-7. A vertical black line is shown in the table below to separate Continental's post- reorganized consolidated financial data from the pre-reorganized consolidated financial data of Holdings since they have not been prepared on a consistent basis of accounting. The consolidated financial data of the Company for the three and six months ended June 30, 1996 and 1995 are derived from its unaudited consolidated financial statements, which include all adjustments (consisting solely of normal recurring accruals) that the Company considers necessary for the presentation of the financial position and results of operations for these periods. Operating results for the six months ended June 30, 1996 are not necessarily indicative of the results that may be expected for the year ending December 31, 1996. The Company's selected consolidated financial data should be read in conjunction with, and are qualified in their entirety by reference to, the consolidated financial statements, including the notes thereto, incorporated by reference herein.
PERIOD FROM | PERIOD FROM REORGANIZATION | JANUARY 1, THREE MONTHS ENDED SIX MONTHS YEAR ENDED (APRIL 28, | 1993 JUNE 30, ENDED JUNE 30, DECEMBER 31, 1993) THROUGH | THROUGH ------------------ ----------------- ----------------- DECEMBER 31, | APRIL 27, 1996 1995 1996 1995 1995 1994 1993 | 1993 ---- ---- ---- ---- ---- ---- ---- | ---- (In millions of dollars, except per share data) | STATEMENT OF OPERATIONS (unaudited) (unaudited) | DATA: | | Operating Revenue: | Passenger................. $1,519 $1,355 $2,894 $2,595 $5,302 $ 5,036 $3,493 | $1,622 Cargo, mail and other..... 120 123 234 292 523 634 417 | 235 ------ ------ ------ ------ ------ -------- ------ | ------ 1,639 1,478 3,128 2,887 5,825 5,670 3,910 | 1,857 ------ ------ ------ ------ ------ -------- ------ | ------ Operating Expenses: | Wages, salaries and | related costs......... 378 357 742 723 1,432(1) 1,532 1,000 | 502 Aircraft fuel............. 180 168 357 337 681 741 540 | 272 Aircraft rentals.......... 127 124 251 247 497 433 261 | 154 Commissions............... 137 131 263 250 489 439 378 | 175 Maintenance, materials | and repairs........... 119 101 231 198 429 495 363 | 184 Other rentals and landing | fees.................. 85 93 169 185 356 392 258 | 120 Depreciation and | amortization......... 67 65 132 129 253 258 162 | 77 Other..................... 317 330 634 680 1,303 1,391 853 | 487 ------ ------ ------ ------ ------ -------- ------ | ------ 1,410 1,369 2,779 2,749 5,440 5,681 3,815 | 1,971 ------ ------ ------ ------ ------ -------- ------ | ------ Operating Income (Loss).... 229 109 349 138 385 (11) 95 | (114) ------ ------ ------ ------ ------ -------- ------ | ------ Nonoperating Income | (Expense): | Interest expense.......... (42) (56) (89) (110) (213) (241) (165) | (52) Interest capitalized...... -- 3 1 4 6 17 8 | 2 Interest income........... 10 8 19 13 31 23 14 | -- Reorganization items, net. -- -- -- -- -- -- -- | (818) Other, net................ 9 117 21 108 101 (439)(2) (4) | 5 ------ ------ ------ ------ ------ -------- ------ | ------ (23) 72 (48) 15 (75) (640) (147) | (863) ------ ------ ------ ------ ------ -------- ------ | ------ Income (Loss) before | Income Taxes, Minority | Interest and | Extraordinary Gain........ 206 181 301 153 310 (651) (52) | (977) Net Income (Loss).......... $ 167 $ 102 $ 255 $ 72 $ 224 $ (613) $ (39) | $2,640 (3) Earnings (Loss) per Common | and Common Equivalent | Share(4).................. $2.53 $1.51 $3.90 $1.15 $3.60 $(11.88) $(1.17) | N.M. (5) ====== ====== ====== ====== ====== ======== ====== | Earnings (Loss) per Common | Share Assuming Full | Dilution(4)............... $2.04 $1.49 $3.25 $1.10 $3.15 $(11.88) $(1.17) | N.M. (5) ====== ====== ====== ====== ====== ======== ====== |
36
AS OF AS OF JUNE 30, DECEMBER 31, 1996 1995 --------- ------------- BALANCE SHEET DATA: (In millions of dollars) (unaudited) Cash and Cash Equivalents, including restricted Cash and Cash Equivalents of $104 and $144, respectively(6)............ $ 825 $ 747 Other Current Assets........................................... 702 568 Total Property and Equipment, Net.............................. 1,436 1,461 Routes, Gates and Slots, Net................................... 1,502 1,531 Other Assets, Net.............................................. 485 514 ------ ------ Total Assets.................................................. $4,950 $4,821 ====== ====== Current Liabilities............................................ $2,108 $1,984 Long-term Debt and Capital Leases.............................. 1,435 1,658 Deferred Credits and Other Long-term Liabilities............... 540 564 Minority Interest.............................................. 28 27 Continental-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust holding solely Convertible Subordinated Debentures(7).................................... 242 242 Redeemable Warrants(8)......................................... 50 -- Redeemable Preferred Stock..................................... 43 41 Common Stockholders' Equity.................................... 504 305 ------ ------ Total Liabilities and Stockholders' Equity.................... $4,950 $4,821 ====== ====== - -------------------
(1) Includes a $20 million cash payment in 1995 by the Company in connection with a 24-month collective bargaining agreement entered into by the Company and the Independent Association of Continental Pilots. (2) Includes a provision of $447 million recorded in the fourth quarter of 1994 associated with the planned early retirement of certain aircraft and closed or underutilized airport and maintenance facilities and other assets. (3) Reflects a $3.6 billion extraordinary gain from extinguishment of debt. (4) On June 26, 1996, the Company announced the Stock Split with respect to the Company's Class A common stock and Class B common stock. Accordingly, the earnings per share information has been restated to give effect to the Stock Split. (5) Historical per share data for Holdings is not meaningful since the Company has been recapitalized and has adopted fresh start reporting as of April 27, 1993. (6) Restricted cash and cash equivalents agreements relate primarily to workers' compensation claims and the terms of certain other agreements. In addition, CMI is required by loan agreements to maintain certain minimum consolidated net worth and liquidity levels, which effectively restrict the amount of cash available to Continental from CMI. (7) The sole assets of the Trust are Convertible Subordinated Debentures, with an aggregate principal amount of $250 million, which bear interest at the rate of 8-1/2% per annum and mature on December 1, 2020. Upon repayment, the Continental-Obligated Mandatorily Redeemable Preferred Securities of Subsidiary Trust will be mandatorily redeemed. (8) The Company has agreed to repurchase up to $50 million of intrinsic value (then-current Class B common stock price minus exercise price) of Class B Warrants at the election of Air Partners during the one year period commencing August 15, 1996. 37 THE EXCHANGE OFFER The summary herein of certain provisions of the Registration Rights Agreement does not purport to be complete and reference is made to the provisions of the Registration Rights Agreement, which has been filed as an exhibit to the Registration Statement and a copy of which is available as set forth under the heading "Available Information." TERMS OF THE EXCHANGE OFFER General In connection with the issuance of the Old Certificates pursuant to a Purchase Agreement dated as of May 9, 1996, between the Company and the Initial Purchasers, the Initial Purchasers and their respective assignees became entitled to the benefits of the Registration Rights Agreement. Under the Registration Rights Agreement, the Company is obligated to use its best efforts to (i) file the Registration Statement of which this Prospectus is a part for a registered exchange offer with respect to an issue of new certificates identical in all material respects to the Old Certificates within 120 calendar days after May 20, 1996, the date the Old Certificates were issued (the "Issue Date"), (ii) to cause the Registration Statement to become effective within 60 days after filing of the Registration Statement, (iii) to cause the Registration Statement to remain effective until the closing of the Exchange Offer and (iv) to consummate the Exchange Offer within 30 calendar days after the date the Registration Statement is declared effective by the Commission. The Company will keep the Exchange Offer open for a period of not less than 30 calendar days. The Exchange Offer being made hereby, if commenced and consummated within the time periods described in this paragraph, will satisfy those requirements under the Registration Rights Agreement. Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal (which together constitute the Exchange Offer), all Old Certificates validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on the Expiration Date will be accepted for exchange. New Certificates of the same class will be issued in exchange for an equal principal amount of outstanding Old Certificates accepted in the Exchange Offer. Old Certificates may be tendered only in integral multiples of $1000. This Prospectus, together with the Letter of Transmittal, is being sent to all registered holders as of _________, 1996. The Exchange Offer is not conditioned upon any minimum principal amount of Old Certificates being tendered for exchange. However, the obligation to accept Old Certificates for exchange pursuant to the Exchange Offer is subject to certain conditions as set forth herein under "--Conditions." Old Certificates shall be deemed to have been accepted as validly tendered when, as and if the Trustee has given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering holders of Old Certificates for the purposes of receiving the New Certificates and delivering New Certificates to such holders. Based on interpretations by the staff of the Commission, as set forth in no-action letters issued to third parties, including the Exchange Offer No- Action Letters, the Company believes that the New Certificates issued pursuant to the Exchange Offer may be offered for resale, resold or otherwise transferred by holders thereof (other than a broker-dealer who acquires such New Certificates directly from the Trustee for resale pursuant to Rule 144A under the Securities Act or any other available exemption under the Securities Act or any holder that is an "affiliate" of the Company as defined under Rule 405 of the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Certificates are acquired in the ordinary course of such holders' business and such holders are not engaged in, and do not intend to engage in, a distribution of such New Certificates and have no arrangement with any person to participate in a distribution of such New Certificates. By tendering the Old Certificates in exchange for New Certificates, each holder, other than a broker-dealer, will represent to the Company that: (i) it is not an affiliate of the Company (as defined under Rule 405 of the Securities Act) nor a broker-dealer tendering Old Certificates 38 acquired directly from the Company for its own account; (ii) any New Certificates to be received by it will be acquired in the ordinary course of its business; and (iii) it is not engaged in, and does not intend to engage in, a distribution of such New Certificates and has no arrangement or understanding to participate in a distribution of the New Certificates. If a holder of Old Certificates is engaged in or intends to engage in a distribution of the New Certificates or has any arrangement or understanding with respect to the distribution of the New Certificates to be acquired pursuant to the Exchange Offer, such holder may not rely on the applicable interpretations of the staff of the Commission and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any secondary resale transaction. Each Participating Broker-Dealer that receives New Certificates for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Certificates. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a Participating Broker-Dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a Participating Broker-Dealer in connection with resales of New Certificates received in exchange for Old Certificates where such Old Certificates were acquired by such Participating Broker-Dealer as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business 180 days after the Expiration Date, it will make this Prospectus available to any Participating Broker-Dealer for use in connection with any such resale. See "Plan of Distribution." In the event that any changes in law or the applicable interpretations of the staff of the Commission do not permit Continental to effect the Exchange Offer, if the Registration Statement is not declared effective within 60 calendar days after the filing thereof with the Commission under certain circumstances or the Exchange Offer is not consummated within 30 days after the effectiveness of the Registration Statement under certain other circumstances, at the request of a holder not eligible to participate in the Exchange Offer or under certain other circumstances described in the Registration Rights Agreement, Continental will, in lieu of effecting the registration of the New Certificates pursuant to the Registration Statement and at no cost to the holders of Old Certificates, (a) as promptly as practicable, file with the Commission a shelf registration statement (the "Shelf Registration Statement") covering resales of the Old Certificates, (b) use its best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act by the 180th calendar day after the Issue Date and (c) use its best efforts to keep effective the Shelf Registration Statement for a period of three years after its effective date (or for such shorter period as shall end when all of the Old Certificates covered by the Shelf Registration Statement have been sold pursuant thereto or may be freely sold pursuant to Rule 144 under the Securities Act). In the event that neither the consummation of the Exchange Offer nor the declaration by the Commission of the Shelf Registration Statement to be effective (each a "Registration Event") occurs on or prior to the 180th calendar day following the Issue Date, the interest rate per annum borne by the Equipment Notes and passed through to holders of Old Certificates shall be increased by 0.50% effective from and including January 2, 1997, to but excluding the date on which a Registration Event occurs. In the event that the Shelf Registration Statement ceases to be effective at any time, during the period the Company is required to keep such Shelf Registration Statement effective, for more than 60 days, whether or not consecutive, during any 12-month period, the interest rate per annum borne by the Equipment Notes shall be increased by 0.50% from the 61st day of the applicable 12-month period such Shelf Registration Statement ceases to be effective until such time as the Shelf Registration Statement again becomes effective. Upon consummation of the Exchange Offer, subject to certain exceptions, holders of Old Certificates who do not exchange their Old Certificates for New Certificates in the Exchange Offer will no longer be entitled to registration rights and will not be able to offer or sell their Old Certificates, unless such Old Certificates are subsequently registered under the Securities Act (which, subject to certain limited exceptions, the Company will have no obligation to do), except pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. See "Risk Factors--Risk Factors Relating to the Certificates--Consequences of Failure to Exchange." 39 Expiration Date; Extensions; Amendments; Termination The term "Expiration Date" shall mean ___________, 1996 (30 calendar days following the commencement of the Exchange Offer), unless the Company, in its sole discretion, extends the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date to which the Exchange Offer is extended. Notwithstanding any extension of the Exchange Offer, if the Exchange Offer is not consummated by November 16, 1996, the interest rate borne by the Equipment Notes and passed through to the Certificateholders is subject to increase. See "--General." In order to extend the Expiration Date, the Company will notify the Exchange Agent of any extension by oral or written notice and will mail to the record holders of Old Certificates an announcement thereof, each prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Such announcement may state that the Company is extending the Exchange Offer for a specified period of time. The Company reserves the right (i) to delay acceptance of any Old Certificates, to extend the Exchange Offer or to terminate the Exchange Offer and not permit acceptance of Old Certificates not previously accepted if any of the conditions set forth herein under "--Conditions" shall have occurred and shall not have been waived by the Company, by giving oral or written notice of such delay, extension or termination to the Exchange Agent, or (ii) to amend the terms of the Exchange Offer in any manner deemed by it to be advantageous to the holders of the Old Certificates. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by oral or written notice thereof to the Exchange Agent. If the Exchange Offer is amended in a manner determined by the Company to constitute a material change, the Company will promptly disclose such amendment in a manner reasonably calculated to inform the holders of the Old Certificates of such amendment. Without limiting the manner in which the Company may choose to make public announcement of any delay, extension, amendment or termination of the Exchange Offer, the Company shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency. INTEREST ON THE NEW CERTIFICATES The New Certificates will accrue interest at the applicable per annum rate for such Trust set forth on the cover page of this Prospectus, from the last date on which interest was paid on the Old Certificates surrendered in exchange therefor. Interest on the New Certificates is payable on January 2, April 2, July 2 and October 2 of each year commencing upon the consummation of the Exchange Offer, subject to the terms of the Intercreditor Agreement. PROCEDURES FOR TENDERING To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with any other required documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date. In addition, either (i) certificates for such Old Certificates must be received by the Exchange Agent along with the Letter of Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Old Certificates, if such procedure is available, into the Exchange Agent's account at The Depository Trust Company (the" Book-Entry Transfer Facility") pursuant to the procedure for book-entry transfer described below, must be received by the Exchange Agent prior to the Expiration Date or (iii) the holder must comply with the guaranteed delivery procedures described below. THE METHOD OF DELIVERY OF OLD CERTIFICATES, LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF 40 TRANSMITTAL OR OLD CERTIFICATES SHOULD BE SENT TO THE COMPANY. Delivery of all documents must be made to the Exchange Agent at its address set forth below. Holders may also request their respective brokers, dealers, commercial banks, trust companies or nominees to effect such tender for such holders. The tender by a holder of Old Certificates will constitute an agreement between such holder and the Company in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. Only a holder of Old Certificates may tender such Old Certificates in the Exchange Offer. The term "holder" with respect to the Exchange Offer means any person in whose name Old Certificates are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered holder. Any beneficial owner whose Old Certificates are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on his behalf. If such beneficial owner wishes to tender on his own behalf, such beneficial owner must, prior to completing and executing the Letter of Transmittal and delivering his Old Certificates, either make appropriate arrangements to register ownership of the Old Certificates in such owners name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by any member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor" institution within the meaning of Rule 17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the Old Certificates tendered pursuant thereto are tendered (i) by a registered holder who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. If the Letter of Transmittal is signed by a person other than the registered holder of any Old Certificates listed therein, such Old Certificates must be endorsed or accompanied by bond powers and a proxy which authorizes such person to tender the Old Certificates on behalf of the registered holder, in each case as the name of the registered holder or holders appears on the Old Certificates. If the Letter of Transmittal or any Old Certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Company, evidence satisfactory to the Company of their authority to so act must be submitted with the Letter of Transmittal. All questions as to the validity, form, eligibility (including time of receipt) and withdrawal of the tendered Old Certificates will be determined by the Company in its sole discretion, which determination will be final and binding. The Company reserves the absolute right to reject any and all Old Certificates not properly tendered or any Old Certificates which, if accepted, would, in the opinion of counsel for the Company, be unlawful. The Company also reserves the absolute right to waive any irregularities or conditions of tender as to particular Old Certificates. The Company's interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Certificates must be cured within such time as the Company shall determine. Neither the Company, the Exchange Agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old Certificates, nor shall any of them incur any liability for failure to give such notification. Tenders of Old Certificates will not be deemed to have been made until such irregularities have been cured or waived. Any Old Certificates received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such holder by the Exchange Agent to the tendering holders of Old 41 Certificates, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. In addition, the Company reserves the right in its sole discretion, subject to the provisions of the Indenture, to (i) purchase or make offers for any Old Certificates that remain outstanding subsequent to the Expiration Date or, as set forth under "--Conditions," to terminate the Exchange Offer in accordance with the terms of the Registration Rights Agreement and (ii) to the extent permitted by applicable law, purchase Old Certificates in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer. ACCEPTANCE OF OLD CERTIFICATES FOR EXCHANGE; DELIVERY OF NEW CERTIFICATES Upon satisfaction or waiver of all of the conditions to the Exchange Offer, all Old Certificates properly tendered will be accepted, promptly after the Expiration Date, and the New Certificates will be issued promptly after acceptance of the Old Certificates. See "--Conditions" below. For purposes of the Exchange Offer, Old Certificates shall be deemed to have been accepted validly tendered for exchange when, as and if the Company has given oral or written notice thereof to the Exchange Agent. In all cases, issuance of New Certificates for Old Certificates that are accepted for exchange pursuant to the Exchange Offer will be made only after timely receipt by the Exchange Agent of certificates for such Old Certificates or a timely Book-Entry Confirmation of such Old Certificates into the Exchange Agent's account at the Book-Entry Transfer Facility, a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Old Certificates are not accepted for any reason set forth in the terms and conditions of the Exchange Offer or if Old Certificates are submitted for a greater principal amount than the holder desires to exchange, such unaccepted or nonexchanged Old Certificates will be returned without expense to the tendering holder thereof (or, in the case of Old Certificates tendered by book-entry transfer procedures described below, such nonexchanged Old Certificates will be credited to an account maintained with such Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Exchange Offer. BOOK-ENTRY TRANSFER The Exchange Agent will make a request to establish an account with respect to the Old Certificates at the Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of this Prospectus. Any financial institution that is a participant in the Book-Entry Transfer Facility's systems may make book-entry delivery of Old Certificates by causing the Book-Entry Transfer Facility to transfer such Old Certificates into the Exchange Agent's account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility's procedures for transfer. However, although delivery of Old Certificates may be effected through book-entry transfer at the Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the Exchange Agent at one of the addresses set forth below under "--Exchange Agent" on or prior to the Expiration Date or the guaranteed delivery procedures described below must be complied with. GUARANTEED DELIVERY PROCEDURES If a registered holder of the Old Certificates desires to tender such Old Certificates, and the Old Certificates are not immediately available, or time will not permit such holder's Old Certificates or other required documents to reach the Exchange Agent before the Expiration Date, or the procedures for book-entry transfer cannot be completed on a timely basis, a tender may be effected if (i) the tender is made through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Old Certificates and the amount of Old Certificates tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all 42 physically tendered Old Certificates, in proper form for transfer, or a Book- Entry Confirmation, as the case may be, and any other documents required by the Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent and (iii) the certificates for all physically tendered Old Certificates, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other documents required by the Letter of Transmittal are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. WITHDRAWAL OF TENDERS Tenders of Old Certificates may be withdrawn at any time prior to 5:00 p.m., New York City time on the Expiration Date. For a withdrawal to be effective, a written notice of withdrawal must be received by the Exchange Agent prior to 5:00 p.m., New York City time on the Expiration Date at one of the addresses set forth below under "--Exchange Agent." Any such notice of withdrawal must specify the name of the person having tendered the Old Certificates to be withdrawn, identify the Old Certificates to be withdrawn (including the principal amount of such Old Certificates) and (where certificates for Old Certificates have been transmitted) specify the name in which such Old Certificates are registered, if different from that of the withdrawing holder. If certificates for Old Certificates have been delivered or otherwise identified to the Exchange Agent, then, prior to the release of such certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by an Eligible Institution unless such holder is an Eligible Institution. If Old Certificates have been tendered pursuant to the procedure for book-entry transfer described above, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Certificates and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Old Certificates so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Certificates which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder thereof without cost to such holder (or, in the case of Old Certificates tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures described above, such Old Certificates will be credited to an account maintained with such Book-Entry Transfer Facility for the Old Certificates) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Certificates may be retendered by following one of the procedures described under "--Procedures for Tendering" and "--Book-entry Transfer" above at any time on or prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, Old Certificates will not be required to be accepted for exchange, nor will New Certificates be issued in exchange for, any Old Certificates and the Company may terminate or amend the Exchange Offer as provided herein before the acceptance of such Old Certificates, if because of any change in law, or applicable interpretations thereof by the Commission, the Company determines that it is not permitted to effect the Exchange Offer, and the Company has no obligation to, and will not knowingly, permit acceptance of tenders of Old Certificates from affiliates of the Company (within the meaning of Rule 405 under the Securities Act) or from any other holder or holders who are not eligible to participate in the Exchange Offer under applicable law or interpretations thereof by the Commission, or if the New Certificates to be received by such holder or holders of Old Certificates in the Exchange Offer, upon receipt, will not be tradable by such holder without restriction under the Securities Act and the Exchange Act and without material restrictions under the "blue sky" or securities laws of substantially all of the states of the United States. 43 EXCHANGE AGENT Wilmington Trust Company has been appointed as Exchange Agent for the Exchange Offer. Questions and requests for assistance and requests for additional copies of this Prospectus or of the Letter of Transmittal should be directed to the Exchange Agent addressed as follows: By Mail, Overnight Delivery: By Hand: Wilmington Trust Company Wilmington Trust Company 1100 North Market Street 1105 North Market Street, 1st Floor Wilmington, Delaware 19890-0001 Wilmington, Delaware 19890 Attention: Jill Rylee Attention: Corporate Trust Operations Facsimile Transmission: (302) 651-1079 Confirm by Telephone: (302) 651-8869 Jill Rylee FEES AND EXPENSES The expenses of soliciting tenders pursuant to the Exchange Offer will be borne by the Company. The principal solicitation for tenders pursuant to the Exchange Offer is being made by mail; however, additional solicitations may be made by telegraph, telephone, telecopy or in person by officers and regular employees of the Company. The Company will not make any payments to brokers, dealers or other persons soliciting acceptances of the Exchange Offer. The Company, however, will pay the Exchange Agent reasonable and customary fees for its services and will reimburse the Exchange Agent for its reasonable out-of-pocket expenses in connection therewith. The Company may also pay brokerage houses and other custodians, nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding copies of the Prospectus and related documents to the beneficial owners of the Old Certificates, and in handling or forwarding tenders for exchange. The expenses to be incurred in connection with the Exchange Offer will be paid by the Company, including fees and expenses of the Exchange Agent and Trustee and accounting, legal, printing and related fees and expenses. The Company will pay all transfer taxes, if any, applicable to the exchange of Old Certificates pursuant to the Exchange Offer. If, however, certificates representing New Certificates or Old Certificates for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Old Certificates tendered, or if tendered Old Certificates are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Old Certificates pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering holder. 44 DESCRIPTION OF THE NEW CERTIFICATES The New Certificates will be issued pursuant to four separate Pass Through Trust Agreements. The following summary describes certain terms of the Certificates and the Pass Through Trust Agreements. The summary does not purport to be complete and reference is made to all of the provisions of the Certificates and the Pass Through Trust Agreements, which have been filed as exhibits to the Registration Statement and copies of which are available as set forth under the heading "Available Information." Except as otherwise indicated, the following summary relates to each of the Trusts and the Certificates issued by each Trust. The terms and conditions governing each of the Trusts are substantially the same, except as described under "--Subordination" below and except that the principal amount, the interest rate, scheduled repayments of principal, and maturity date applicable to the Equipment Notes held by each Trust and the final Distribution Date applicable to each Trust will differ. Citations to the relevant sections of the Pass Through Trust Agreements appear below in parentheses unless otherwise indicated. Copies of the Pass Through Trust Agreements are available from the Trustee. Information contained in this Prospectus relating to the outstanding principal amount of the Certificates and Equipment Notes is provided as of the date of the issuance of the Old Certificates without giving effect to any intervening payments of principal on the Certificates or Equipment Notes. See "--Pool Factors." GENERAL The New Certificates of each Trust will be issued in fully registered form only. Each New Certificate will represent a fractional undivided interest in the Trust created by the Pass Through Trust Agreement pursuant to which such Certificate is issued. The Trust Property consists of (i) the Equipment Notes held in such Trust, all monies at any time paid thereon and all monies due and to become due thereunder, (ii) the rights of such Trust under the Intercreditor Agreement (including all monies receivable in respect of such rights), (iii) except for the Class D Trust, all monies receivable under the Liquidity Facility for such Trust and (iv) funds from time to time deposited with the Trustee in accounts relating to such Trust. The New Certificates represent pro rata shares of the Equipment Notes and other property held in the related Trust and will be issued only in minimum denominations of $1,000 and integral multiples thereof. (Section 3.01). The Certificates represent interests in the respective Trusts and all payments and distributions thereon will be made only from the Trust Property. (Section 3.11) The Certificates do not represent an interest in or obligation of Continental, the Trustees, any of the Loan Trustees or Owner Trustees in their individual capacities, any Owner Participant, or any affiliate of any thereof. The existence of each Trust will not limit the liability that Certificate holders of such Trust would otherwise incur if such holders owned directly the corresponding Equipment Notes or incurred directly the obligations of such Trust. SUBORDINATION Pursuant to the Intercreditor Agreement to which the Trusts, the Subordination Agent and the Liquidity Providers are parties, on each Distribution Date, so long as no Triggering Event shall have occurred, all payments received by the Subordination Agent will be distributed in the following order: (1) payment of the Liquidity Obligations to the Liquidity Providers; (2) payment of Expected Distributions to the holders of Class A Certificates; (3) payment of Expected Distributions to the holders of Class B Certificates; (4) payment of Expected Distributions to the holders of Class C Certificates; (5) payment of Expected Distributions to the holders of Class D Certificates; and (6) payment of certain fees and expenses of the Subordination Agent and the Trustees. In addition, upon the occurrence of a Triggering Event and at all times thereafter, all payments received by the Subordination Agent in respect of the Equipment Notes and certain other payments will be distributed under the Intercreditor Agreement in the following order: (1) to the Subordination Agent, the Trustees and certain other parties in payment of the Administration Expenses and to the Liquidity Providers in payment of the Liquidity Obligations; (2) to the holders of Class A Certificates in payment of; (3) to the holders of Class B Certificates in payment of Adjusted Expected Distributions; (4) to the holders of Class C Certificates in payment of Adjusted Expected Distributions; and (5) to the holders of Class D Certificates in payment of Adjusted Expected Distributions. For purposes of calculating Expected Distributions or Adjusted Expected Distributions, any premium paid on the Equipment Notes held in any Trust that has not been distributed to the Certificateholders of 45 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 Expected Distributions or Adjusted Expected Distributions. The priority of distributions after a payment default under any Equipment Note will have the effect in certain circumstances of requiring the distribution to more senior Classes of Certificates of payments received in respect of one or more junior series of Equipment Notes. If this should occur, the interest accruing on the remaining Equipment Notes would in the aggregate be less than the interest accruing on the remaining Certificates because such Certificates include a relatively greater proportion of junior Classes with relatively higher interest rates. As a result of this possible interest shortfall, the holders of one or more junior Classes of Certificates may not receive the full amount due them after a payment default under any Equipment Note even if all Equipment Notes are eventually paid in full. PAYMENTS AND DISTRIBUTIONS Payments of principal, premium (if any) and interest with respect to the Equipment Notes or other Trust Property held in each Trust will be distributed by the Trustee to Certificateholders of such Trust on the date receipt of such payment is confirmed, except in the case of certain types of Special Payments (as defined herein). The Equipment Notes held in each Trust accrue interest at the applicable rate per annum for such Trust set forth on the cover page of this Prospectus, payable on January 2, April 2, July 2 and October 2 of each year commencing on July 2, 1996 and such interest payments will be passed through to Certificateholders of such Trust on each such date until the final Distribution Date for such Trust, in each case, subject to the Intercreditor Agreement. Interest is calculated on the basis of a 360-day year consisting of twelve 30- day months. The interest rates for the Certificates are subject to change under certain circumstances. See "The Exchange Offer--Terms of the Exchange Offer." Payments of interest on the Certificates to be issued by each Trust (other than the Class D Trust) will be supported by a separate Liquidity Facility to be provided by DNIB (the "Liquidity Provider") for the benefit of the holders of such Certificates in an aggregate amount (the "Required Amount") sufficient to pay interest thereon at the Stated Interest Rate for such Trust on up to six successive quarterly Distribution Dates. Notwithstanding the subordination provisions of the Intercreditor Agreement, the holders of the Certificates to be issued by each Trust (other than the Class D Trust) will be entitled to receive and retain the proceeds of drawings under the Liquidity Facility for such Trust. See "Description of the Liquidity Facilities". Payments of principal on the Equipment Notes held in each Trust are scheduled to be received by the Trustee on January 2, April 2, July 2 or October 2, in certain years depending upon the terms of the Equipment Notes held in such Trust, commencing October 2, 1996 in the case of each of the Class A Trust, the Class B Trust and the Class C Trust and on July 2, 1996 in the case of the Class D Trust. Scheduled payments of interest and principal on the Equipment Notes are herein referred to as "Scheduled Payments", and January 2, April 2, July 2 and October 2 of each year are herein referred to as "Regular Distribution Dates". See "Description of the Equipment Notes--Principal and Interest Payments". The Final Maturity Date for each of the Class A, B and C Certificates is January 2, 2016 and the Final Maturity Date for the Class D Certificates is April 2, 2008. The Trustee of each Trust will distribute, subject to the Intercreditor Agreement, on each Regular Distribution Date to the Certificateholders of such Trust all Scheduled Payments, the receipt of which is confirmed by the Trustee on such Regular Distribution Date. Each Certificateholder of each Trust will be entitled to receive a pro rata share of any distribution in respect of Scheduled Payments of principal and interest made on the Equipment Notes held in such Trust. Each such distribution of Scheduled Payments will be made by the Trustee of each Trust to the Certificateholders of record of such Trust on the Record Date applicable to such Scheduled Payment subject to certain exceptions. (Sections 4.01 and 4.02) If a Scheduled Payment is not received by the Trustee on a Regular Distribution Date but is received within five days thereafter, it will be distributed to such holders of record on the date received. If it is received after such five-day period, it will be treated as a Special Payment (as defined below) and distributed as described below. 46 Any payment in respect of, or any proceeds of, any Equipment Note or the Trust Indenture Estate under (and as defined in) each Indenture (other than a Scheduled Payment) (each, a "Special Payment") will be distributed on, in the case of an early redemption or a purchase of the Equipment Notes relating to one or more Aircraft, the date of such early redemption or purchase (which shall be a Business Day), and otherwise on the Business Day specified for distribution of such Special Payment pursuant to a notice delivered by the Trustee as soon as practicable after the Trustee has received funds for such Special Payment, in each case subject to the Intercreditor Agreement. The Trustee will mail notice to the Certificateholders of the applicable Trust not less than 20 days prior to the Special Distribution Date on which any Special Payment is scheduled to be distributed by the Trustee stating such anticipated Special Distribution Date. (Section 4.02(c)) Each distribution of a Special Payment, other than a final distribution, on a Special Distribution Date for any Trust will be made by the Trustee to the Certificateholders of record of such Trust on the Record Date applicable to such Special Payment. See "--Indenture Defaults and Certain Rights Upon an Indenture Default" and "Description of the Equipment Notes--Redemption". Each Pass Through Trust Agreement requires that the Trustee establish and maintain, for the related Trust and for the benefit of the Certificateholders of such Trust, one or more accounts (the "Certificate Account") for the deposit of payments representing Scheduled Payments on the Equipment Notes held in such Trust. Each Pass Through Trust Agreement also requires that the Trustee establish and maintain, for the related Trust and for the benefit of the Certificateholders of such Trust, one or more accounts (the "Special Payments Account") for the deposit of payments representing Special Payments, which account shall be non-interest bearing except in certain circumstances where the Trustee may invest amounts in such account in certain permitted investments. Pursuant to the terms of each Pass Through Trust Agreement, the Trustee is required to deposit any Scheduled Payments relating to the applicable Trust received by it in the Certificate Account of such Trust and to deposit any Special Payments so received by it in the Special Payments Account of such Trust. (Section 4.01) All amounts so deposited will be distributed by the Trustee on a Regular Distribution Date or a Special Distribution Date, as appropriate. (Section 4.02) Distributions by the Trustee from the Certificate Account or the Special Payments Account of each Trust on a Regular Distribution Date or a Special Distribution Date in respect of Certificates issued by such Trust in definitive form will be made to each Certificateholder of record of such Certificates on the applicable Record Date. (Section 4.02) The final distribution for each Trust, however, will be made only upon presentation and surrender of the Certificates for such Trust at the office or agency of the Trustee specified in the notice given by the Trustee of such final distribution. The Trustee will mail such notice of the final distribution to the Certificateholders of such Trust, specifying the date set for such final distribution and the amount of such distribution. (Section 11.01) See "--Termination of the Trusts" below. Distributions in respect of Certificates issued in global form will be made as described in "--Book Entry; Delivery and Form" below. If any Regular Distribution Date or Special Distribution Date is not a Business Day, distributions scheduled to be made on such Regular Distribution Date or Special Distribution Date will be made on the next succeeding Business Day without additional interest. POOL FACTORS Unless there has been an early redemption, purchase, or a default in the payment of principal or interest, in respect of one or more issues of the Equipment Notes held in a Trust, as described in "--Indenture Defaults and Certain Rights Upon an Indenture Default" and "Description of the Equipment Notes--Redemption", the Pool Factor with respect to each Trust will decline in proportion to the scheduled repayments of principal on the Equipment Notes held in such Trust as described below in "Description of the Equipment Notes-- General". In the event of such redemption, purchase or default, the Pool Factor and the Pool Balance of each Trust so affected will be recomputed after giving effect thereto and notice thereof will be mailed to the Certificateholders of such Trust. Each Trust will have a separate Pool Factor. The "Pool Balance" for each Trust or for the Certificates issued by any Trust indicates, as of any date, the original aggregate face amount of the Certificates of such Trust less the aggregate amount of all 47 payments made in respect of the Certificates of 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 as of any Regular Distribution Date or Special Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in such Trust and the distribution thereof to be made on that date. The "Pool Factor" for each Trust as of any Regular Distribution Date or Special Distribution Date is the quotient (rounded to the seventh decimal place) computed by dividing (i) the Pool Balance by (ii) the original aggregate face amount of the Certificates of such Trust. The Pool Factor for each Trust as of any Regular Distribution Date or Special Distribution Date shall be computed after giving effect to the payment of principal, if any, on the Equipment Notes or other Trust Property held in such Trust and the distribution thereof to be made on that date. Assuming that no early redemption or purchase, or default, in respect of any Equipment Notes shall have occurred, the Pool Factor for each Trust will be 1.0000000 on the date of issuance of the Certificates; thereafter, the Pool Factor for each Trust will decline as described herein to reflect reductions in the Pool Balance of such Trust. The amount of a Certificateholder's pro rata share of the Pool Balance of a Trust can be determined by multiplying the par value of the holder's Certificate of such Trust by the Pool Factor for such Trust as of the applicable Regular Distribution Date or Special Distribution Date. Notice of the Pool Factor and the Pool Balance for each Trust will be mailed to Certificateholders of such Trust on each Regular Distribution Date and Special Distribution Date. As of the date of sale by the Trustee of the Certificates, assuming all Equipment Notes shall have been purchased by the Trusts and assuming that no early redemption or purchase, or default in the payment of principal, in respect of any Equipment Notes shall occur, the Scheduled Payments of principal on the Equipment Notes held in the Class A Trust, the Class B Trust, the Class C Trust and the Class D Trust, and the resulting Pool Factors for such Trusts after taking into account each Scheduled Payment, are set forth below:
1996-2A 1996-2B 1996-2C 1996-2D TRUST TRUST TRUST TRUST EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT 1996-2D NOTES 1996-2A NOTES 1996-2B NOTES 1996-2C NOTES TRUST SCHEDULED TRUST SCHEDULED TRUST SCHEDULED TRUST SCHEDULED EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF POOL DATE PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR PRINCIPAL FACTOR ---- ------------ ------------ ---------- ------------ ----------- ----------- ---------- ---------- May 20, 1996 $ 0 1.0000000 $ 0 1.0000000 $ 0 $ 0 1.0000000 July 2, 1996 0 1.0000000 0 1.0000000 0 1.0000000 37,717 0.9979624 October 2, 1996 16,953 0.9997945 7,265 0.9997945 7,265 0.9997945 81,906 0.9935374 January 2, 1997 1,931,687 0.9763838 827,866 0.9763840 827,866 0.9763840 84,260 0.9889853 April 2, 1997 352,925 0.9721066 151,264 0.9721066 151,264 0.9721066 86,683 0.9843022 July 2, 1997 0 0.9721066 0 0.9721066 0 0.9721066 43,581 0.9819478 October 2, 1997 0 0.9721066 0 0.9721066 0 0.9721066 44,834 0.9795257 January 2, 1998 1,783,882 0.9504872 764,521 0.9504873 764,521 0.9504873 46,122 0.9770339 April 2, 1998 128,804 0.9489262 55,206 0.9489262 55,206 0.9489262 47,448 0.9744705 July 2, 1998 0 0.9489262 0 0.9489262 0 0.9489262 48,813 0.9718334 October 2, 1998 0 0.9489262 0 0.9489262 0 0.9489262 50,216 0.9691205 January 2, 1999 1,513,831 0.9305796 648,787 0.9305797 648,787 0.9305797 51,660 0.9663296 April 2, 1999 51,979 0.9299497 22,278 0.9299497 22,278 0.9299497 1,714,138 0.8737236 July 2, 1999 0 0.9299497 0 0.9299497 0 0.9299497 54,673 0.8707699 October 2, 1999 0 0.9299497 0 0.9299497 0 0.9299497 56,245 0.8677313 January 2, 2000 2,036,043 0.9052743 872,595 0.9052744 872,595 0.9052744 3,558,630 0.6754768 April 2, 2000 0 0.9052743 0 0.9052744 0 0.9052744 59,525 0.6722610 July 2, 2000 0 0.9052743 0 0.9052744 0 0.9052744 61,237 0.6689527 October 2, 2000 0 0.9052743 0 0.9052744 0 0.9052744 62,997 0.6655493 January 2, 2001 3,797,527 0.8592509 1,627,517 0.8592512 1,627,517 0.8592512 3,132,426 0.4963204 April 2, 2001 727,943 0.8504287 311,975 0.8504291 311,975 0.8504291 258,597 0.4823497 July 2, 2001 421,668 0.8453184 180,715 0.8453188 180,715 0.8453188 68,588 0.4786443 October 2, 2001 2,016,729 0.8208771 864,312 0.8208777 864,312 0.8208777 70,560 0.4748323 January 2, 2002 1,782,956 0.7992689 764,129 0.7992695 764,129 0.7992695 72,589 0.4709107 April 2, 2002 1,588,382 0.7800188 680,735 0.7800196 680,735 0.7800196 74,676 0.4668763 July 2, 2002 1,302,015 0.7642393 558,006 0.7642402 558,006 0.7642402 76,823 0.4627260 October 2, 2002 2,148,391 0.7382023 920,739 0.7382034 920,739 0.7382034 79,031 0.4584563 January 2, 2003 441,808 0.7328479 189,351 0.7328489 189,351 0.7328489 81,304 0.4540639 April 2, 2003 1,213,258 0.7181440 519,969 0.7181452 519,969 0.7181452 83,641 0.4495452 July 2, 2003 801,572 0.7084295 343,531 0.7084308 343,531 0.7084308 86,046 0.4448966 October 2, 2003 0 0.7084295 0 0.7084308 0 0.7084308 88,520 0.4401144
48
1996-2A 1996-2B 1996-2C 1996-2D TRUST TRUST TRUST TRUST EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT 1996-2D NOTES 1996-2A NOTES 1996-2B NOTES 1996-2C NOTES TRUST SCHEDULED TRUST SCHEDULED TRUST SCHEDULED TRUST SCHEDULED EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF POOL DATE PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR PRINCIPAL FACTOR ---- ------------ ------------ ---------- ------------ ----------- ----------- ---------- ---------- January 2, 2004 $2,302,628 0.6805233 $ 986,845 0.6805246 $ 986,845 0.6805246 $ 91,064 0.4351946 April 2, 2004 45,391 0.6799732 19,455 0.6799745 19,455 0.6799745 93,683 0.4301334 July 2, 2004 0 0.6799732 0 0.6799745 0 0.6799745 96,376 0.4249267 October 2, 2004 0 0.6799732 0 0.6799745 0 0.6799745 99,147 0.4195703 January 2, 2005 5,061,720 0.6186287 2,169,314 0.6186303 2,169,314 0.6186303 101,997 0.4140600 April 2, 2005 15,669 0.6184388 6,716 0.6184404 6,716 0.6184404 104,930 0.4083912 July 2, 2005 0 0.6184388 0 0.6184404 0 0.6184404 107,946 0.4025594 October 2, 2005 0 0.6184388 0 0.6184404 0 0.6184404 111,050 0.3965599 January 2, 2006 4,380,428 0.5653511 1,877,334 0.5653529 1,877,334 0.5653529 114,242 0.3903880 April 2, 2006 0 0.5653511 0 0.5653529 0 0.5653529 117,527 0.3840386 July 2, 2006 0 0.5653511 0 0.5653529 0 0.5653529 120,906 0.3775067 October 2, 2006 0 0.5653511 0 0.5653529 0 0.5653529 124,382 0.3707870 January 2, 2007 5,418,436 0.4996834 2,322,196 0.4996855 2,322,196 0.4996855 127,958 0.3638741 April 2, 2007 0 0.4996834 0 0.4996855 0 0.4996855 131,637 0.3567624 July 2, 2007 0 0.4996834 0 0.4996855 0 0.4996855 135,421 0.3494463 October 2, 2007 0 0.4996834 0 0.4996855 0 0.4996855 139,315 0.3419199 January 2, 2008 5,679,532 0.4308514 2,434,205 0.4308507 2,434,205 0.4308507 6,181,496 0.0079654 April 2, 2008 3,239,432 0.3915918 1,388,426 0.3915886 1,388,426 0.3915886 147,440 0.0000000 July 2, 2008 0 0.3915918 0 0.3915886 0 0.3915886 0 0.0000000 October 2, 2008 0 0.3915918 0 0.3915886 0 0.3915886 0 0.0000000 January 2, 2009 5,226,431 0.3282511 2,239,899 0.3282484 2,239,899 0.3282484 0 0.0000000 April 2, 2009 0 0.3282511 0 0.3282484 0 0.3282484 0 0.0000000 July 2, 2009 0 0.3282511 0 0.3282484 0 0.3282484 0 0.0000000 October 2, 2009 0 0.3282511 0 0.3282484 0 0.3282484 0 0.0000000 January 2, 2010 5,306,362 0.2639417 2,274,155 0.2639395 2,274,155 0.2639395 0 0.0000000 April 2, 2010 0 0.2639417 0 0.2639395 0 0.2639395 0 0.0000000 July 2, 2010 0 0.2639417 0 0.2639395 0 0.2639395 0 0.0000000 October 2, 2010 0 0.2639417 0 0.2639395 0 0.2639395 0 0.0000000 January 2, 2011 7,941,098 0.1677011 3,403,328 0.1676998 3,403,328 0.1676998 0 0.0000000 April 2, 2011 0 0.1677011 0 0.1676998 0 0.1676998 0 0.0000000 July 2, 2011 0 0.1677011 0 0.1676998 0 0.1676998 0 0.0000000 October 2, 2011 0 0.1677011 0 0.1676998 0 0.1676998 0 0.0000000 January 2, 2012 7,085,877 0.0818252 3,036,804 0.0818246 3,036,804 0.0818246 0 0.0000000 April 2, 2012 1,097,949 0.0685189 470,550 0.0685183 470,550 0.0685183 0 0.0000000 July 2, 2012 0 0.0685189 0 0.0685183 0 0.0685183 0 0.0000000 October 2, 2012 0 0.0685189 0 0.0685183 0 0.0685183 0 0.0000000 January 2, 2013 2,077,835 0.0433370 890,501 0.0433366 890,501 0.0433366 0 0.0000000 April 2, 2013 1,197,716 0.0288215 513,307 0.0288212 513,307 0.0288212 0 0.0000000 July 2, 2013 0 0.0288215 0 0.0288212 0 0.0288212 0 0.0000000 October 2, 2013 0 0.0288215 0 0.0288212 0 0.0288212 0 0.0000000 January 2, 2014 1,177,888 0.0145463 504,809 0.0145462 504,809 0.0145462 0 0.0000000 April 2, 2014 776,937 0.0051304 332,973 0.0051303 332,973 0.0051303 0 0.0000000 July 2, 2014 423,321 0.0000000 181,423 0.0000000 181,423 0.0000000 0 0.0000000
49 REPORTS TO CERTIFICATEHOLDERS On each Regular Distribution Date and Special Distribution Date, the applicable Trustee will include with each distribution of a Scheduled Payment or Special Payment, respectively, to Certificateholders of the related Trust a statement, giving effect to such distribution to be made on such Regular Distribution Date or Special Distribution Date, setting forth the following information (per $1,000 aggregate principal amount of Certificate for such Trust, as to (i) and (ii) below): (i) the amount of such distribution allocable to principal and the amount allocable to premium (if any); (ii) the amount of such distribution allocable to interest; and (iii) the Pool Balance and the Pool Factor for such Trust. (Section 4.03) With respect to the Certificates registered in the name of Cede, as nominee for DTC, on the record date prior to each Distribution Date, the applicable Trustee will request from DTC a Securities Position Listing setting forth the names of all DTC Participants reflected on DTCs books as holding interests in the Certificates on such record date. On each Distribution Date, the applicable Trustee will mail to each such DTC Participant the statement described above and will make available additional copies as requested by such DTC Participant for forwarding to holders of Certificates. In addition, after the end of each calendar year, the applicable Trustee will prepare for each Certificateholder of each Trust at any time during the preceding calendar year a report containing the sum of the amounts determined pursuant to clauses (i) and (ii) above with respect to the Trust for such calendar year or, in the event such person was a Certificateholder during only a portion of such calendar year, for the applicable portion of such calendar year, and such other items as are readily available to such Trustee and which a Certificateholder shall reasonably request as necessary for the purpose of such Certificateholder's preparation of its U.S. federal income tax returns. (Section 4.03) Such report and such other items shall be prepared on the basis of information supplied to the applicable Trustee by the DTC Participants and shall be delivered by such Trustee to such DTC Participants to be available for forwarding by such DTC Participants to Certificate Owners in the manner described above. With respect to the Certificates issued in definitive form, the applicable Trustee will prepare and deliver the information described above to each Certificateholder of record of each Trust as the name of such Certificateholder appears on the records of the registrar of the Certificates. INDENTURE DEFAULTS AND CERTAIN RIGHTS UPON AN INDENTURE DEFAULT An event of default under an Indenture (an "Indenture Default") will, with respect to the Leased Aircraft Indentures, include an event of default under the related Lease (a "Lease Event of Default"). Since the Equipment Notes issued under an Indenture may be held in more than one Trust, a continuing Indenture Default under such Indenture would affect the Equipment Notes held by each such Trust. There are no cross-default provisions in the Indentures or in the Leases. Consequently, events resulting in an Indenture Default under any particular Indenture may or may not result in an Indenture Default under any other Indenture, and a Lease Event of Default under any particular Lease will not constitute a Lease Event of Default under any other Lease. If an Indenture Default occurs in fewer than all of the Indentures, notwithstanding the treatment of Equipment Notes issued under any Indenture under which an Indenture Default has occurred, payments of principal and interest on the Equipment Notes issued pursuant to Indentures with respect to which an Indenture Default has not occurred will continue to be distributed to the holders of the Certificates as originally scheduled, subject to the Intercreditor Agreement. See "Description of the Intercreditor Agreement--Priority of Distributions". With respect to each Leased Aircraft, the applicable Owner Trustee and Owner Participant will, under the related Leased Aircraft Indenture, have the right under certain circumstances to cure Indenture Defaults 50 that result from the occurrence of a Lease Event of Default under the related Lease. If the Owner Trustee or the Owner Participant exercises any such cure right, the Indenture Default will be deemed to have been cured. In the event that the same institution acts as Trustee of multiple Trusts, in the absence of instructions from the Certificateholders of any such Trust, such Trustee could be faced with a potential conflict of interest upon an Indenture Default. In such event, each Trustee has indicated that it would resign as Trustee of one or all such Trusts, and a successor trustee would be appointed in accordance with the terms of the applicable Pass Through Trust Agreement. Upon the occurrence and continuation of any Indenture Default under any Indenture, the Controlling Party may accelerate and sell all (but not less than all) of the Equipment Notes issued under such Indenture to any person, subject to certain limitations. The proceeds of such sale will be distributed pursuant to the provisions of the Intercreditor Agreement. Any proceeds received by the applicable Trustee upon any such sale shall be deposited in the applicable Special Payments Account and shall be distributed to the Certificateholders of such Trust on a Special Distribution Date. (Sections 4.01 and 4.02) The market for Equipment Notes at the time of the existence of any Indenture Default may be very limited and there can be no assurance as to the price at which they could be sold. If such Trustee sells any such Equipment Notes for less than their outstanding principal amount, the Certificateholders will receive a smaller amount of principal distributions than anticipated and will not have any claim for the shortfall against Continental, any Liquidity Provider, any Owner Trustee, any Owner Participant or any Trustee. Any amount, other than Scheduled Payments received on a Regular Distribution Date, distributed to the Trustee of any Trust by the Subordination Agent on account of the Equipment Notes or other Trust Property held in such Trust following an Indenture Default under any Indenture shall be deposited in the Special Payments Account for such Trust and shall be distributed to the Certificateholders of such Trust on a Special Distribution Date. (Section 4.02) In addition, if, following an Indenture Default under any Leased Aircraft Indenture relating to a Leased Aircraft, the applicable Owner Trustee exercises its option to redeem or purchase the outstanding Equipment Notes issued under such Leased Aircraft Indenture, the price paid by such Owner Trustee for the Equipment Notes issued under such Leased Aircraft Indenture and distributed to such Trust by the Subordination Agent shall be deposited in the Special Payments Account for such Trust and shall be distributed to the Certificateholders of such Trust on a Special Distribution Date. (Section 4.02) Any funds representing payments received with respect to any defaulted Equipment Notes held in a Trust, or the proceeds from the sale of any Equipment Notes held by the Trustee in the Special Payments Account for such Trust shall, to the extent practicable, be invested and reinvested by such Trustee in certain permitted investments pending the distribution of such funds on a Special Distribution Date. (Section 4.04) Such permitted investments are defined as obligations of the United States or agencies or instrumentalities thereof the payment of which is backed by the full faith and credit of the United States and which mature in not more than 60 days or such lesser time as is required for the distribution of any such funds on a Special Distribution Date. (Section 1.01) Each Pass Through Trust Agreement provides that the Trustee of the related Trust shall, within 90 days after the occurrence of any Indenture Default, give to the Certificateholders of such Trust notice, transmitted by mail, of all uncured or unwaived defaults with respect to such Trust known to it, provided that, except in the case of default in the payment of principal, premium, if any, or interest on any of the Equipment Notes or other Trust Property held in such Trust, the applicable Trustee shall be protected in withholding such notice if it in good faith determines that the withholding of such notice is in the interests of such Certificateholders. (Section 7.02) Each Pass Through Trust Agreement contains a provision entitling the Trustee of the related Trust, subject to the duty of such Trustee during a default to act with the required standard of care, to be offered reasonable security or indemnity by the holders of the Certificates of such Trust before proceeding to exercise any right or power under such Pass Through Trust Agreement at the request of such Certificateholders. (Section 7.03(e)) 51 In certain cases, the holders of the Certificates of a Trust evidencing fractional undivided interests aggregating not less than a majority in interest of such Trust may on behalf of the holders of all the Certificates of such Trust waive any past default under the related Pass Through Trust Agreement or, if the Trustee of such Trust is the Controlling Party, may direct the Trustee to instruct the applicable Loan Trustee to waive any past Indenture Default with respect to such Trust and thereby annul any direction given by such holders to such Loan Trustee with respect thereto, except (i) a default in the deposit of any Scheduled Payment or Special Payment or in the distribution thereof, (ii) a default in payment of the principal, premium, if any, or interest with respect to any of the Equipment Notes held in such Trust and (iii) a default in respect of any covenant or provision of the related Pass Through Trust Agreement that cannot be modified or amended without the consent of each Certificateholder of such Trust affected thereby. (Section 6.05) Each Indenture provides that, with certain exceptions, the holders of the majority in aggregate unpaid principal amount of the Equipment Notes issued thereunder may on behalf of all such holders waive any past default or Indenture Default thereunder. Notwithstanding the foregoing provisions of this paragraph, however, pursuant to the Intercreditor Agreement, only the Controlling Party will be entitled to waive any such past default or Indenture Default. PURCHASE RIGHTS OF CERTIFICATEHOLDERS Upon the occurrence and during the continuation of a Triggering Event, (i) the Class B Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates, (ii) the Class C Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates and the Class B Certificates and (iii) the Class D Certificateholders shall have the right to purchase all, but not less than all, of the Class A Certificates, the Class B Certificates and the Class C Certificates, in each case at a purchase price equal to the Pool Balance of the relevant Class or Classes of Certificates plus accrued and unpaid interest thereon to the date of purchase without premium but including any other amounts due to the Certificateholders of such Class or Classes. PTC EVENT OF DEFAULT A PTC Event of Default is defined under each Pass Through Trust Agreement as 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 Maturity Date for such Class or (ii) interest due on such Certificates on any Distribution Date (unless the Subordination Agent shall have made an Interest Drawing with respect thereto in an amount sufficient to pay such interest and shall have distributed such amount to the Certificateholders entitled thereto). Any failure to make expected principal distributions on any Class of Certificates on any Regular Distribution Date (other than the Final Maturity Date) will not constitute a PTC Event of Default with respect to such Certificates. A PTC Event of Default with respect to the most senior Class of Certificates resulting from an Indenture Default under all Indentures will constitute a Triggering Event. MERGER, CONSOLIDATION AND TRANSFER OF ASSETS Continental is prohibited from consolidating with or merging into any other corporation or transferring substantially all of its assets as an entirety to any other corporation unless (i) the surviving successor or transferee corporation shall (a) be a "citizen of the United States" as defined in Section 40102(a)(15) of Title 49 of the United States Code, as amended, relating to aviation (the "Aviation Act"), (b) be a United States certificated air carrier and (c) expressly assume all of the obligations of Continental contained in the Pass Through Trust Agreements, the Financing Agreements, the Indentures, the Participation Agreements and the Leases, and any other operative documents; (ii) immediately after giving effect to such transaction, no Lease Event of Default, in the case of Leased Aircraft, or Indenture Event of Default, in the case of the Owned Aircraft, shall have occurred and be continuing; and (iii) Continental shall have delivered a certificate and an opinion or opinions of counsel indicating that such transaction complies with such conditions. (Section 5.02; Leases, Section 13.2; Owned Aircraft Indenture, Section 4.09) The Pass Through Trust Agreements and the Indentures do not contain any covenants or provisions which may afford the applicable Trustee or Certificateholders protection in the event of a highly 52 leveraged transaction, including transactions effected by management or affiliates, which may or may not result in a change in control of Continental. MODIFICATIONS OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS Each Pass Through Trust Agreement contains provisions permitting the execution of supplemental trust agreements, without the consent of the holders of any of the Certificates of such Trust, (i) to evidence the succession of another corporation to Continental and the assumption by such corporation of Continental's obligations under such Pass Through Trust Agreement, (ii) to add to the covenants of Continental for the benefit of holders of such Certificates or to surrender any right or power in such Pass Through Trust Agreement conferred upon Continental, (iii) to correct or supplement any defective or inconsistent provision of such Pass Through Trust Agreement or to modify any other provisions with respect to matters or questions arising thereunder, provided such action shall not materially adversely affect the interests of the holders of such Certificates, or to cure any ambiguity or correct any mistake, (iv) to add to such Pass Through Trust Agreement such other provisions as may be expressly permitted by the Trust Indenture Act and (v) to provide for a successor Trustee or to add to or change any provision of such Pass Through Trust Agreement as shall be necessary to facilitate the administration of the Trust thereunder by more than one Trustee. In addition, each Pass Through Trust Agreement provides that the Trustee will be permitted to enter into any amendment or supplement to the Intercreditor Agreement or the Liquidity Facilities, without the consent of the holders of any Certificates, to cure any ambiguity or correct any mistake or to correct or supplement any defective or inconsistent provision thereof or to modify any other provision with respect to matters or questions arising thereunder; provided that such action shall not materially adversely affect the interests of the Certificateholders. (Section 9.01) Each Pass Through Trust Agreement also contains provisions permitting the execution, with the consent of the holders of the Certificates of the related Trust evidencing fractional undivided interests aggregating not less than a majority in interest of such Trust, and with the consent of the applicable Owner Trustee (such consent not to be unreasonably withheld), of supplemental trust agreements adding any provisions to or changing or eliminating any of the provisions of such Pass Through Trust Agreement or modifying the rights of the Certificateholders, except that no such supplemental trust agreement may, without the consent of the holder of each Certificate so affected thereby, (a) reduce in any manner the amount of, or delay the timing of, any receipt by the Trustee of payments on the Equipment Notes or other Trust Property held in such Trust or distributions in respect of any Certificate related to such Trust, or change the date or place of any payment in respect of any Certificate, or make distributions payable in coin or currency other than that provided for in such Certificates, or impair the right of any Certificateholder of such Trust to institute suit for the enforcement of any such payment when due, (b) permit the disposition of any Equipment Note held in such Trust, except as provided in such Pass Through Trust Agreement, or otherwise deprive any Certificateholder of the benefit of the ownership of the applicable Equipment Notes, (c) alter the priority of distributions specified in the Intercreditor Agreement, (d) reduce the percentage of the aggregate fractional undivided interests of the Trust provided for in such Pass Through Trust Agreement, the consent of the holders of which is required for any such supplemental trust agreement or for any waiver provided for in such Pass Through Trust Agreement or (e) modify any of the provisions relating to the rights of the Certificateholders in respect of the waiver of events of default or receipt of payment. (Section 9.02) TERMINATION OF THE TRUSTS The obligations of Continental and the applicable Trustee with respect to a Trust will terminate upon the distribution to Certificateholders of such Trust of all amounts required to be distributed to them pursuant to the applicable Pass Through Trust Agreement and the disposition of all property held in such Trust. The applicable Trustee will send to each Certificateholder of record of such Trust notice of the termination of such Trust, the amount of the proposed final payment and the proposed date for the distribution of such final payment for such Trust. The final distribution to any Certificateholder of such Trust will be made only upon surrender of such Certificateholder's Certificates at the office or agency of the applicable Trustee specified in such notice of termination. (Section 11.01) 53 THE TRUSTEES The Trustee for each Trust is Wilmington Trust Company. With certain exceptions, the Trustees make no representations as to the validity or sufficiency of the Pass Through Trust Agreements, the Certificates, the Equipment Notes, the Indentures, the Leases or other related documents. (Sections 7.04 and 7.15) The Trustee of any Trust shall not be liable, with respect to the Certificates of such Trust, for any action taken or omitted to be taken by it in good faith in accordance with the direction of the holders of a majority in principal amount of outstanding Certificates of such Trust. Subject to certain provisions, the Trustees shall be under no obligation to exercise any of their rights or powers under any Pass Through Trust Agreement at the request of any holders of Certificates issued thereunder unless there shall have been offered to the Trustees indemnity satisfactory to them. (Section 7.03(d)) Each Pass Through Trust Agreement provides that the Trustees in their individual or any other capacity may acquire and hold Certificates issued thereunder and, subject to certain conditions, may otherwise deal with Continental and with any Owner Trustee with the same rights they would have if they were not the Trustees. (Section 7.05) Any Trustee may resign with respect to any or all of the Trusts of which it is the Trustee at any time, in which event Continental will be obligated to appoint a successor trustee. If any Trustee ceases to be eligible to continue as Trustee with respect to a Trust or becomes incapable of acting as Trustee or becomes insolvent, Continental may, with the consent of the Owner Participants for the Leased Aircraft (which consent shall not be unreasonably withheld), remove such Trustee, or any holder of the Certificates of such Trust for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of such Trustee and the appointment of a successor trustee. Any resignation or removal of the Trustee with respect to a Trust and appointment of a successor trustee for such Trust does not become effective until acceptance of the appointment by the successor trustee. (Sections 7.09 and 7.10) Each Pass Through Trust Agreement provides that Continental or the Owner Participant will pay the applicable Trustee's fees and expenses. (Section 7.07) BOOK-ENTRY; DELIVERY AND FORM The New Certificates of each Trust will be represented by a single, permanent global Certificate, in definitive, fully registered form without interest coupons (the "Global Certificates"), to be deposited with the Trustee as custodian for DTC and registered in the name of Cede, as nominee of DTC. DTC has advised Continental as follows: DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of the New York Banking law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provision of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates. Participants include securities brokers and dealers, banks, trust companies and clearing corporations and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Upon the issuance of the Global Certificates, DTC or its custodian credited, on its internal system, the respective principal amount of the individual beneficial interests represented by such Global Certificates to the accounts of persons who have accounts with such depositary. Ownership of beneficial interests Global Certificates is limited to persons who have accounts with DTC ("participants") or persons who hold interests through participants. Ownership of beneficial interests in the Global Certificates is shown on, and the transfer of that ownership is effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). The laws of some states require that certain purchasers of securities take physical delivery of such securities. Such limits and such laws may limit the market for beneficial interests in the Global Certificates. 54 Qualified institutional buyers may hold their interests in the Global Certificates directly through DTC if they are participants in such system, or directly through organizations which are participants in such system. So long as DTC or its nominee is the registered owner or holder of the Global Certificates, DTC or such nominee, as the case may be, will be considered the sole record owner or holder of the Certificates represented by such Global Certificates for all purposes under the related Pass Through Trust Agreements No beneficial owners of an interest in the Global Certificates will be able to transfer that interest except in accordance with DTC's applicable procedures, in addition to those provided for under the Pass Through Trust Agreements and, if applicable, Euroclear or Cedel. Payments of the principal of, premium, if any, and interest on the Global Certificates will be made to DTC or its nominee, as the case may be, as the registered owner thereof. Neither Continental, the Trustee, nor any paying agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in the Global Certificates or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Continental expects that DTC or its nominee, upon receipt of any payment of principal, premium, if any, or interest in respect of the Global Certificates will credit participants' accounts with payments in amounts proportionate to their respective beneficial ownership interests in the principal amount of such Global Certificates, as shown on the records of DTC or its nominee. Continental also expects that payments by participants to owners of beneficial interests in such Global Certificates held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Neither Continental nor the Trustee has any responsibility for the performance by DTC or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. If DTC is at any time unwilling or unable to continue as a depositary for the Global Certificates and a successor depositary is not appointed by within 90 days, the Trusts will issue certificates in definitive, fully registered form in exchange for the Global Certificates. 55 DESCRIPTION OF THE LIQUIDITY FACILITIES The following summary describes certain terms of the Liquidity Facilities and certain provisions of the Intercreditor Agreement relating to the Liquidity Facilities. The summary does not purport to be complete and reference is made to the provisions of the Liquidity Facilities and such provisions of the Intercreditor Agreement. The provisions of the Liquidity Facilities are substantially identical except as otherwise indicated. Copies of such documents are filed as exhibits to the Registration Statement and are available as set forth under the heading "Available Information." GENERAL With respect to the Certificates of each Trust (other than the Class D Trust), the Subordination Agent has entered into a Liquidity Facility with the Liquidity Provider pursuant to which the Liquidity Provider will make one or more advances to the Subordination Agent to pay interest on such Certificates subject to certain limitations. The Liquidity Facility for any Trust is intended to enhance the likelihood of timely receipt by the Certificateholders of such Trust of the interest payable on the Certificates of such Trust at the Stated Interest Rate therefor on up to six consecutive quarterly Regular Distribution Dates. If interest payment defaults occur which exceed the amount covered by or available under the Liquidity Facility for any Trust, the Certificateholders of such Trust will bear their allocable share of the deficiencies to the extent that there are no other sources of funds. Although DNIB is the initial Liquidity Provider for each of the Class A Trust, the Class B Trust and the Class C Trust, DNIB may be replaced by one or more other entities with respect to the Trusts under certain circumstances. Therefore, if DNIB is no longer the sole Liquidity Provider, the Liquidity Provider for any Trust may be different from the Liquidity Provider for any other Trust. DRAWINGS The initial stated amount available under the Liquidity Facilities for the Class A Trust, the Class B Trust and the Class C Trust is $9,592,136, $4,540,609 and $5,421,148, respectively. Except as otherwise provided below, the Liquidity Facility for each Trust enables the Subordination Agent to make Interest Drawings thereunder promptly after any Regular Distribution Date to pay interest then due and payable on the Certificates of such Trust at the Stated Interest Rate for such Trust to the extent that the amount, if any, available to the Subordination Agent on such Regular Distribution Date is not sufficient to pay such interest; provided, however, that the maximum amount available to be drawn under such Liquidity Facility on any Regular Distribution Date to fund any shortfall of interest on such Certificates will not exceed an amount equal to the then Required Amount of such Liquidity Facility. The Liquidity Facility for any Trust does not provide for drawings thereunder to pay for principal of or premium on the Certificates of such Trust or any interest on the Certificates of such Trust in excess of the Stated Interest Rate for such Trust or more than six quarterly installments of interest thereon or principal of or interest or premium on the Certificates of any other Trust. (Liquidity Facilities, Section 2.02; Intercreditor Agreement, Section 3.6(b)) Each payment by the Liquidity Provider under each Liquidity Facility reduces pro tanto the amount available to be drawn under such Liquidity Facility, subject to reinstatement as hereinafter described. With respect to any Interest Drawings under the Liquidity Facility for any Trust, upon reimbursement of the Liquidity Provider in full for the amount of such Interest Drawings plus interest thereon, the amount available to be drawn under such Liquidity Facility in respect of interest on the Certificates of such Trust shall be reinstated to an amount not to exceed the then Required Amount of such Liquidity Facility; provided, however, that such Liquidity Facility shall not be so reinstated at any time after (i) a Liquidity Event of Default shall have occurred and be continuing and (ii) less than 65% of the then aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes. With respect to any other drawings under such Liquidity Facility, amounts available to be drawn thereunder are not subject to reinstatement. The Required Amount of the Liquidity Facility for any Trust will be automatically reduced from time to time to an amount equal to the next six successive interest payments due on the Certificates of such Trust (without regard to expected future payment of principal of such Certificates) at the Stated Interest Rate for such Trust. (Liquidity Facilities, Section 2.04(a); Intercreditor Agreement, Section 3.6(j)) 56 If at any time the short-term unsecured debt rating of the Liquidity Provider for any Trust then issued by either Rating Agency (or, if DNIB is such Liquidity Provider and does not have a published unsecured short-term debt rating issued by Standard & Poor's, with respect to Standard & Poor's only, the unsecured long-term debt rating of DNIB issued by Standard & Poor's) is lower than the Threshold Rating, the Liquidity Facility for such Trust will be required to be replaced by a Replacement Facility (as defined below). In the event that such Liquidity Facility is not replaced with a Replacement Facility within 10 days after notice of the downgrading and as otherwise provided in the Intercreditor Agreement, the Subordination Agent shall request the Downgrade Drawing in an amount equal to all available and undrawn amounts thereunder and shall hold the proceeds thereof in the Cash Collateral Account for such Trust as cash collateral to be used for the same purposes and under the same circumstances as cash payments of Interest Drawings under such Liquidity Facility would be used. (Liquidity Facilities, Section 2.02(c); Intercreditor Agreement, Section 3.6(c)) A "Replacement Facility" for any Trust means an irrevocable liquidity facility in substantially the form of the initial Liquidity Facility for such Trust, 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 Certificates (before downgrading of such ratings, if any, as a result of the downgrading of the Liquidity Provider), in a face amount equal to the amount of interest payable on the Certificates of such Trust (at the Stated Interest Rate for such Trust, and without regard to expected future principal payments) on the six Regular Distribution Dates following the date of replacement of such Liquidity Facility and issued by a Person having unsecured short-term debt ratings issued by both Rating Agencies which are equal to or higher than the Threshold Rating. (Intercreditor Agreement, Section 1.1) "Threshold Rating" means the short-term unsecured debt rating of P-1 by Moody's and A-1 by Standard & Poor's (provided that, so long as DNIB is the Liquidity Provider and does not have a published short-term unsecured debt rating issued by Standard & Poor's, the Threshold Rating with respect to Standard & Poor's shall be its long-term unsecured debt rating of AA-). The Liquidity Facility for each Trust provides that the Liquidity Provider's obligations thereunder will expire on the earliest of (i) January 17, 2016; (ii) the date on which such Liquidity Facility is surrendered to the Liquidity Provider together with a certification that all of the Certificates of such Trust have been paid in full; (iii) the date such Liquidity Facility is surrendered to the Liquidity Provider together with a certification that a Replacement Facility has been substituted for such Liquidity Facility; (iv) the fifth Business Day following receipt by the Subordination Agent of a Termination Notice from the Liquidity Provider (see "--Liquidity Events of Default"); and (v) the date on which no amount is or may (by reason of reinstatement) become available for drawing under such Liquidity Facility. (Liquidity Facilities, Section 2.02(b); Intercreditor Agreement, Section 3.6(d)) Continental may, at its option, arrange for a replacement facility at any time to replace the Liquidity Facility for any Trust, provided that if DNIB is the Liquidity Provider being replaced, (i) it must be replaced with respect to all three Liquidity Facilities, (ii) DNIB may not be replaced prior to May 20, 2001 except for cause or for its ceasing to meet the Threshold Ratings and (iii) from May 20, 2001 to May 20, 2006, if DNIB is replaced other than for cause or for its ceasing to meet the Threshold Ratings, Continental must pay a replacement fee to DNIB equal to 0.30% of the then current Required Amount under each Liquidity Facility. "With cause" and "for cause" means a failure by DNIB to perform any agreement, covenant or condition required to be performed by it under any Liquidity Facility or a failure by DNIB to perform any material agreement, covenant or condition required to be performed by it under the Intercreditor Agreement. If such replacement facility is provided at any time after the Downgrade Drawing under such Liquidity Facility, the funds on deposit in the Cash Collateral Account for such Trust will be returned to the Liquidity Provider being replaced. (Intercreditor Agreement, Section 3.6(e)) The Intercreditor Agreement provides that, upon receipt by the Subordination Agent of a Termination Notice with respect to any Liquidity Facility from the Liquidity Provider (given as described in "--Liquidity Events of Default"), the Subordination Agent shall request a final drawing (the "Final Drawing") under such Liquidity Facility in an amount equal to all available and undrawn amounts thereunder and shall hold the 57 proceeds thereof in the Cash Collateral Account for the related Trust as cash collateral to be used for the same purposes and under the same circumstances, and subject to the same conditions, as cash payments of Interest Drawings under such Liquidity Facility would be used. (Liquidity Facilities, Section 2.02(d); Intercreditor Agreement, Section 3.6(i)) Drawings under any Liquidity Facility will be made by delivery by the Subordination Agent of a certificate in the form required by such Liquidity Facility. Upon receipt of such a certificate, the Liquidity Provider is obligated to make payment of the drawing requested thereby in immediately available funds. Upon payment by the Liquidity Provider of the amount specified in any drawing under any Liquidity Facility, the Liquidity Provider will be fully discharged of its obligations under such Liquidity Facility with respect to such drawing and will not thereafter be obligated to make any further payments under such Liquidity Facility in respect of such drawing to the Subordination Agent or any other person or entity who makes a demand for payment in respect of interest on the related Certificates. REIMBURSEMENT OF DRAWINGS Amounts drawn under any Liquidity Facility by reason of an Interest Drawing or the Final Drawing will be immediately due and payable, together with interest on the amount of such drawing at a rate equal to the applicable LIBOR plus 1.75% per annum; provided that the Subordination Agent will be obligated to reimburse such amounts only to the extent that the Subordination Agent has available funds therefor. The amount drawn under the Liquidity Facility for any Trust by reason of the Downgrade Drawing will be treated as follows: (i) such amount will be released on any Regular Distribution Date to the Liquidity Provider to the extent that such amount exceeds the Required Amount minus any unreimbursed Interest Drawings under such Liquidity Facility; (ii) any portion of such amount withdrawn from the Cash Collateral Account for such Certificates to pay interest on such Certificates will be treated in the same way as Interest Drawings; and (iii) the balance of such amount will be invested in Eligible Investments. The Downgrade Drawing under any Liquidity Facility will bear interest at a rate equal to the applicable LIBOR plus 0.60% per annum. (Liquidity Facilities, Section 2.06) LIQUIDITY EVENTS OF DEFAULT Events of Default under each Liquidity Facility (each, a "Liquidity Event of Default") consist of: (i) the acceleration of all the Equipment Notes; and (ii) certain bankruptcy or similar events involving Continental. (Liquidity Facilities, Section 1.01) If (i) any Liquidity Event of Default occurs under any Liquidity Facility and (ii) less than 65% of the aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes, the Liquidity Provider may, in its discretion, give a notice of termination of the related Liquidity Facility and accelerate the reimbursement obligations thereunder (a "Termination Notice") the effect of which shall be to cause (i) such Liquidity Facility to expire on the fifth Business Day after the date on which such Termination Notice is received by the Subordination Agent, (ii) any Drawing remaining unreimbursed as of the date of termination to be automatically converted into a Final Drawing under such Liquidity Facility, and (iii) all amounts owing to the Liquidity Provider automatically to become accelerated. Notwithstanding the foregoing, the Subordination Agent will be obligated to pay amounts owing to the Liquidity Provider only to the extent of funds available therefor after giving effect to the payments in accordance with the provisions set forth under "Description of the Intercreditor Agreement--Priority of Distributions". (Liquidity Facilities, Section 6.01) Upon the circumstances described below under "Description of the Intercreditor Agreement--Intercreditor Rights", the Liquidity Provider may become the Controlling Party with respect to the exercise of remedies under the Indentures. (Intercreditor Agreement, Section 2.6(c)) 58 LIQUIDITY PROVIDER The Liquidity Provider is De Nationale Investeringsbank N.V., which is a wholesale bank, organized under the laws of The Netherlands, specializing in long-term lending, equity investments, capital market transactions and various types of financial consulting and brokerage activities. DNIB had total assets of approximately NLG 18 billion (approximately $10.7 billion) as of December 31, 1995 and is the tenth largest bank in The Netherlands in terms of assets. DNIB is active both in The Netherlands and abroad with branch offices in London and Belgium and subsidiary banks in Singapore and the Netherlands Antilles. In the last few years approximately 50% of new credit grants went to borrowers abroad. The shares of DNIB are traded on the Amsterdam Stock Exchange. The State of The Netherlands owns 50.3% of the banks shares, with the remaining shares held by institutional and retail investors. DNIB's strategy and policy are guided by its independent management. 59 DESCRIPTION OF THE INTERCREDITOR AGREEMENT The following summary describes certain provisions of the Intercreditor Agreement. The summary does not purport to be complete and reference is made to the provisions of the Intercreditor Agreement, which has been filed as an exhibit to the Registration Statement and is available as set forth under the heading "Available Information." INTERCREDITOR RIGHTS Controlling Party Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity Provider have agreed that, with respect to any Indenture at any given time, the Loan Trustee will be directed (a) in taking, or refraining from taking, any action thereunder by the holders of at least a majority of the outstanding principal amount of the Equipment Notes issued thereunder (provided that, for so long as the Subordination Agent is the registered holder of the Equipment Notes, the Subordination Agent shall act with respect to this clause (a) in accordance with the directions of the Trustees), so long as no Indenture Default shall have occurred and be continuing thereunder and (b) after the occurrence and during the continuance of an Indenture Default thereunder, in taking, or refraining from taking, any action thereunder, including exercising remedies thereunder (including acceleration of such Equipment Notes or foreclosing the lien on the Aircraft securing such Equipment Notes), by the Controlling Party, subject to the limitations described below. See "Description of the New Certificates--Indenture Defaults and Certain Rights Upon an Indenture Default" for a description of the rights of the Certificateholders of each Trust to direct the respective Trustees. Notwithstanding the foregoing, at any time after 18 months from the earlier to occur of (x) the date on which the entire available amount under any Liquidity Facility shall have been drawn (for any reason other than a Downgrade Drawing) and remain unreimbursed and (y) the date on which all Equipment Notes shall have been accelerated, the Liquidity Provider shall have the right to elect to become the Controlling Party with respect to such Indenture; provided that if there is more than one Liquidity Provider, the Liquidity Provider with the greatest amount of unreimbursed Liquidity Obligations shall have such right. For purposes of giving effect to the foregoing, the Trustees (other than the Controlling Party) shall irrevocably agree (and the Certificateholders (other than the Certificateholders represented by the Controlling Party) shall be deemed to agree by virtue of their purchase of Certificates) to exercise their voting rights as directed by the Controlling Party. (Intercreditor Agreement, Section 2.6) For a description of certain limitations on the Controlling Partys rights to exercise remedies, see "Description of the Equipment Notes--Remedies". Sale of Equipment Notes or Aircraft Upon the occurrence and during the continuation of any Indenture Default under any Indenture, the Controlling Party may accelerate and, subject to the provisions of the immediately following sentence, sell all (but not less than all) of the Equipment Notes issued under such Indenture to any person. So long as any Certificates are outstanding, during nine months after the earlier of (x) the acceleration of the Equipment Notes under any Indenture or (y) the bankruptcy or insolvency of Continental, without the consent of each Trustee, (a) no Aircraft subject to the lien of such Indenture or such Equipment Notes may be sold, if the net proceeds from such sale would be less than the Minimum Sale Price for such Aircraft or such Equipment Notes, and (b) with respect to any Leased Aircraft, the amount and payment dates of rentals payable by Continental under the Lease for such Leased Aircraft may not be adjusted, if, as a result of such adjustment, the discounted present value of all such rentals would be less than 75% of the discounted present value of the rentals payable by Continental under such Lease before giving effect to such adjustment, in each case, using the weighted average interest rate of the Equipment Notes issued under such Indenture as the discount rate. The Subordination Agent may from time to time during the continuance of an Indenture Default (and before the occurrence of a Triggering Event) commission Appraisals with respect to the related Aircraft at the request of the Controlling Party. (Intercreditor Agreement, Section 4.1) 60 PRIORITY OF DISTRIBUTIONS So long as no Triggering Event shall have occurred, the payments in respect of the Equipment Notes and certain other payments received on any Distribution Date will be promptly distributed by the Subordination Agent on such Distribution Date in the following order of priority: (i) to pay the Liquidity Obligations (other than any interest accrued thereon or the principal amount of any Drawing) (the "Liquidity Expenses") to the Liquidity Provider; (ii) to pay interest accrued on the Liquidity Obligations to the Liquidity Provider; (iii) to pay or reimburse the Liquidity Provider for the Liquidity Obligations (other than amounts payable pursuant to clauses (i) and (ii) above) and, if applicable, to replenish each Cash Collateral Account up to the Required Amount; (iv) to pay Expected Distributions to the holders of Class A Certificates; (v) to pay Expected Distributions to the holders of Class B Certificates; (vi) to pay Expected Distributions to the holders of Class C Certificates; (vii) to pay Expected Distributions to the holders of Class D Certificates; and (viii) to pay certain fees and expenses of the Subordination Agent and the Trustees. "Expected Distributions" means, with respect to the Certificates of any Trust on any Distribution Date (the "Current Distribution Date") the sum of (x) accrued and unpaid interest on such Certificates and (y) the difference between (A) the Pool Balance of such Certificates as of the immediately preceding Distribution Date and (B) the Pool Balance of such Certificates as of the Current Distribution Date, calculated on the basis that the principal of the Equipment Notes held in such Trust has been paid when due (whether at stated maturity, upon redemption, prepayment or acceleration or otherwise) and such payments have been distributed to the holders of such Certificates. Subject to the terms of the Intercreditor Agreement, upon the occurrence of a Triggering Event and at all times thereafter, all funds received by the Subordination Agent in respect of the Equipment Notes and certain other payments will be promptly distributed by the Subordination Agent in the following order of priority: (i) to pay certain out-of-pocket costs and expenses actually incurred by the Subordination Agent or any Trustee or to reimburse any Certificateholder or the Liquidity Provider in respect of payments made to the Subordination Agent or any Trustee in connection with the protection or realization of the value of the Equipment Notes or any Trust Indenture Estate (the "Administration Expenses"); (ii) to the Liquidity Provider, to pay the Liquidity Expenses; (iii) to the Liquidity Provider, to pay interest accrued on the Liquidity Obligations; (iv) to the Liquidity Provider, to pay the outstanding amount of all Liquidity Obligations and, if applicable, so long as at least 65% of the aggregate outstanding principal amount of all Equipment Notes are Performing Equipment Notes, to replenish each Cash Collateral Account up to the Required Amount for the related Class of Certificates; (v) to pay certain fees, taxes, charges and other amounts payable to the Subordination Agent, any Trustee or any Certificateholder; 61 (vi) to pay Adjusted Expected Distributions to the holders of Class A Certificates; (vii) to pay Adjusted Expected Distributions to the holders of Class B Certificates; (viii) to pay Adjusted Expected Distributions to the holders of Class C Certificates; and (ix) to pay to the holders of Class D Certificates. "Adjusted Expected Distributions" means, with respect to the Certificates of any Trust on any Current Distribution Date, the sum of (x) accrued and unpaid interest on such Certificates and (y) the greater of: (A) the difference between (x) the Pool Balance of such Certificates as of the immediately preceding Distribution Date and (y) the Pool Balance of such Certificates as of the Current Distribution Date calculated on the basis that (i) the principal of the Equipment Notes other than Performing Equipment Notes (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 and (ii) the principal of the Performing Equipment Notes has been paid when due (but without giving effect to any acceleration of Performing Equipment Notes) and such payments have been distributed to the holders of such Certificates, and (B) the amount of the excess, if any, of (i) the Pool Balance of such Class of Certificates as of the immediately preceding Distribution Date, over (ii) the Aggregate LTV Collateral Amount for such Class of Certificates for the Current Distribution Date; provided that, until the date of the initial LTV Appraisals, clause (B) shall not apply. "Aggregate LTV Collateral Amount" for any Class of Certificates for any Distribution Date means the sum of the applicable LTV Collateral Amounts for each Aircraft, minus the Pool Balance for each Class of Certificates, if any, senior to such Class, after giving effect to any distribution of principal on such Distribution Date on such senior Class or Classes. "LTV Collateral Amount" of any Aircraft for any Class of Certificates means, as of any Distribution Date, the lesser of (i) the LTV Ratio for such Class of Certificates multiplied by the Appraised Current Market Value of such Aircraft and (ii) the outstanding principal amount of the Equipment Notes secured by such Aircraft after giving effect to any principal payments of such Equipment Notes on or before such Distribution Date. "LTV Ratio" means for the Class A Certificates 35.0%, for the Class B Certificates 50.0%, for the Class C Certificates 65.0% and for the Class D Certificates 72.9%. "Appraised Current Market Value" of any Aircraft means the lower of the average and the median of the most recent three Appraisals of such Aircraft. After a Triggering Event occurs and any Equipment Note becomes a Non-Performing Equipment Note, the Subordination Agent shall obtain Appraisals for the Aircraft (the "LTV Appraisals") as soon as practicable and additional LTV Appraisals on or prior to each anniversary of the date of such initial LTV Appraisals; provided that if the Controlling Party reasonably objects to the appraised value of the Aircraft shown in such Appraisals, the Controlling Party shall have the right to obtain or cause to be obtained substitute LTV Appraisals (including LTV Appraisals based upon physical inspection of the Aircraft). "Appraisal" means a fair market value appraisal (which may be a "desktop" appraisal) performed by any Appraiser or any other nationally recognized appraiser on the basis of an arm's-length transaction between an informed and willing purchaser under no compulsion to buy and an informed and willing seller under no compulsion to sell and both having knowledge of all relevant facts. 62 Certain amounts payable to the Trustees, the Subordination Agent and the Liquidity Provider, including fees and expenses of the Trustees and the Subordination Agent and indemnification obligations of Continental, will not be entitled to the benefits of the lien of the Indentures. Consequently, if a default occurs in the payment of any such amounts, and to the extent that such amounts are distributed to any such party in accordance with the priorities of distribution described above, the holders of one or more junior Classes of Certificates may not receive the full amount due them even if all Equipment Notes are eventually paid in full, and any unpaid amounts will be unsecured claims against Continental. Interest Drawings under the Liquidity Facility and withdrawals from the Cash Collateral Account, in each case in respect of interest on the Certificates of any Trust (other than the Class D Trust), will be distributed to the Trustee for such Trust, notwithstanding the priority of distributions set forth in the Intercreditor Agreement and otherwise described herein. All amounts on deposit in the Cash Collateral Account for any Trust which are in excess of the Required Amount and all investment earnings on such amounts on deposit in the Cash Collateral Account will be paid to the Liquidity Provider. VOTING OF EQUIPMENT NOTES In the event that the Subordination Agent, as the registered holder of any Equipment Note, receives a request for its consent to any amendment, modification or waiver under such Equipment Note or the related Indenture (or, if applicable, the Lease, the Participation Agreement or other related document), (i) if no Indenture Default shall have occurred and be continuing, the Subordination Agent shall request instructions from the Trustees and the consent of the Liquidity Provider (which consent shall not be unreasonably withheld or delayed) and shall vote or consent in accordance with the vote of the Trustees and the instructions of the Liquidity Provider and (ii) if any Indenture Default shall have occurred and be continuing with respect to such Indenture, the Subordination Agent will exercise its voting rights as directed by the Controlling Party. (Intercreditor Agreement, Section 9.1) THE SUBORDINATION AGENT Wilmington Trust Company is the Subordination Agent under the Intercreditor Agreement. Continental and its affiliates may from time to time enter into banking and trustee relationships with the Subordination Agent and its affiliates. The Subordination Agent's address is Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. The Subordination Agent may resign at any time, in which event a successor Subordination Agent will be appointed as provided in the Intercreditor Agreement. The Controlling Party may remove the Subordination Agent for cause as provided in the Intercreditor Agreement. In such circumstances, a successor Subordination Agent will be appointed as provided in the Intercreditor Agreement. Any resignation or removal of the Subordination Agent and appointment of a successor Subordination Agent does not become effective until acceptance of the appointment by the successor Subordination Agent. 63 DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS THE AIRCRAFT The Aircraft are comprised of four Boeing 757-200 aircraft and one Boeing 737-500 aircraft. The Aircraft are designed to be in compliance with Stage III noise level standards, which constitute the most restrictive regulatory standards currently in effect in the United States for aircraft noise abatement. The table below sets forth certain additional information for the Aircraft.
AIRCRAFT REGISTRATION AIRCRAFT ENGINE DELIVERY APPRAISED VALUE ------------ -------- ------ -------- ----------- --------------- ---------- NUMBER TYPE TYPE DATE AISI BK MBA ------------ -------- ------ -------- ----------- --------------- ---------- N12114 757-200 RB211-535E4B July 1995 $ 51,650,000 $ 50,250,000 $ 54,010,000 N14115 757-200 RB211-535E4B August 1995 51,850,000 50,250,000 54,240,000 N12116 757-200 RB211-535E4B March 1996 52,600,000 51,000,000 54,180,000 N19117 757-200 RB211-535E4B April 1996 52,750,000 51,000,000 54,230,000 N33637 737-500 CFM56-3B1 April 1996 30,510,000 27,000,000 25,200,000 ------------ ------------ ------------ TOTAL $239,360,000 $229,500,000 $241,860,000 ============ ============ ============
APPRAISED VALUE The appraised values set forth in the foregoing chart were determined by the following three independent aircraft appraisal and consulting firms: AISI, BK and MBA. Each Appraiser was asked to provide its opinion as to the fair market value of each Aircraft as of March 26, 1996. As part of this process, all three Appraisers performed "desk-top" appraisals without any physical inspection of the Aircraft. The Appraisers have delivered letters summarizing their respective appraisals, copies of which are annexed to this Prospectus as Appendix II. An appraisal is only an estimate of value and should not be relied upon as a measure of realizable value; the proceeds realized upon a sale of any Aircraft may be less than the appraised value thereof. The value of the Aircraft in the event of the exercise of remedies under the applicable Indenture will depend on market and economic conditions, the availability of buyers, the condition of the Aircraft and other similar factors. Accordingly, there can be no assurance that the proceeds realized upon any such exercise with respect to the Equipment Notes and the Aircraft pursuant to the applicable Indenture would be as appraised or sufficient to satisfy in full payments due on the Equipment Notes issued thereunder. DESCRIPTION OF THE EQUIPMENT NOTES The statements under this caption are summaries and do not purport to be complete. The summaries make use of terms defined in and reference is made to all of the provisions of the Equipment Notes, the Indentures, the Leases, the Participation Agreements, the Trust Agreements and the Financing Agreements. Except as otherwise indicated, the following summaries relate to the Equipment Notes, the Indenture, the Lease, the Participation Agreement, the Trust Agreement and the Financing Agreement relating to each Aircraft, forms of which are filed as exhibits to the Registration Statement and are available as set forth under the heading "Available Information." GENERAL The Equipment Notes were issued in four series with respect to each Aircraft. The Equipment Notes with respect to each Leased Aircraft were issued under a separate Leased Aircraft Indenture between First Security Bank of Utah, National Association, as Owner Trustee of a trust for the benefit of the Owner Participant who is the beneficial owner of such Aircraft, and Wilmington Trust Company, as Loan Trustee. The Equipment Notes with respect to the Owned Aircraft were issued under the Owned Aircraft Indenture between Continental and Wilmington Trust Company, as Owned Aircraft Trustee. 64 The related Owner Trustee leases each Leased Aircraft to Continental pursuant to a separate Lease between such Owner Trustee and Continental with respect to such Leased Aircraft. Under each Lease, Continental is obligated to make or cause to be made rental and other payments to the related Loan Trustee on behalf of the related Owner Trustee, which rental and other payments will be at least sufficient to pay in full when due all payments required to be made on the Equipment Notes issued with respect to such Leased Aircraft. The Equipment Notes issued with respect to the Leased Aircraft are not, however, direct obligations of, or guaranteed by, Continental. Continental's rental obligations under each Lease and the Equipment Notes issued with respect to the Owned Aircraft are general obligations of Continental. Gaucho-2 Inc., a wholly-owned subsidiary of The Boeing Company, is currently the Owner Participant with respect to all of the four leveraged leases for the Leased Aircraft. Gaucho-2 Inc. has the right to sell, assign or otherwise transfer its interests as Owner Participant in any or all of such leveraged leases, subject to the terms and conditions of the relevant Participation Agreement and related documents. SUBORDINATION Series B Equipment Notes issued in respect of any Aircraft are subordinated in right of payment to Series A Equipment Notes issued in respect of such Aircraft; Series C Equipment Notes issued in respect of such Aircraft are subordinated in right of payment to such Series B Equipment Notes; and Series D Equipment Notes issued in respect of such Aircraft are subordinated in right of payment to such Series C Equipment Notes. On each Equipment Note payment date, (i) payments of interest and principal due on Series A Equipment Notes issued in respect of any Aircraft will be made prior to payments of interest and principal due on Series B Equipment Notes issued in respect of such Aircraft, (ii) payments of interest and principal due on such Series B Equipment Notes will be made prior to payments of interest and principal due on Series C Equipment Notes issued in respect of such Aircraft and (iii) payments of interest and principal due on such Series C Equipment Notes will be made prior to payments of interest and principal due on Series D Equipment Notes issued in respect of such Aircraft. PRINCIPAL AND INTEREST PAYMENTS Subject to the provisions of the Intercreditor Agreement, interest paid on the Equipment Notes held in each Trust will be passed through to the Certificateholders of such Trust on the dates and at the rate per annum set forth on the cover page of this Prospectus until the final expected Regular Distribution Date for such Trust. Subject to the provisions of the Intercreditor Agreement, principal paid on the Equipment Notes held in each Trust will be passed through to the Certificateholders of such Trust in scheduled amounts on the dates set forth herein until the final expected Regular Distribution Date for such Trust. The aggregate original principal amounts of the Equipment Notes issued with respect to each Aircraft, as such Equipment Notes will be held in each of the Trusts, are as follows:
AIRCRAFT TRUST TRUST TRUST TRUST REGISTRATION 1996-2A EQUIPMENT 1996-2B EQUIPMENT 1996-2C EQUIPMENT 1996-2D EQUIPMENT NUMBER NOTES NOTES NOTES NOTES(1) TOTAL(1) ------------ ------------------ ----------------- ----------------- ------------------ ------------ N12114 $18,077,500 $ 7,747,500 $ 7,747,500 $ 4,080,350 $ 37,652,850 N14115 18,147,500 7,777,500 7,777,500 4,096,150 37,798,650 N12116 18,407,667 7,889,000 7,889,000 3,201,104 37,386,771 N19117 18,431,000 7,899,000 7,899,000 3,081,877 37,310,877 N33637 9,449,333 4,050,000 4,050,000 4,050,519 21,599,852 ----------- ----------- ----------- ----------- ------------ TOTAL $82,513,000 $35,363,000 $35,363,000 $18,510,000 $171,749,000 =========== =========== =========== =========== ============
- --------------- (1) The amounts stated may differ from the actual amounts due to rounding. Interest is payable on the unpaid principal amount of each Equipment Note at the rate applicable to such Equipment Note on January 2, April 2, July 2 and October 2 in each year, commencing July 2, 1996. 65 Such interest is computed on the basis of a 360-day year of twelve 30-day months. Under certain circumstances described in "The Exchange Offer--Terms of the Exchange Offer;", the interest rates for the Equipment Notes may be increased to the extent described therein. If any date scheduled for any payment of principal, premium (if any) or interest with respect to the Equipment Notes is not a Business Day, such payment will be made on the next succeeding Business Day without any additional interest. REDEMPTION If an Event of Loss occurs with respect to any Aircraft and such Aircraft is not replaced by Continental under the related Lease (in the case of a Leased Aircraft) or under the Owned Aircraft Indenture (in the case of the Owned Aircraft), the Equipment Notes issued with respect to such Aircraft will be redeemed, in whole, in each case at a price equal to the aggregate unpaid principal amount thereof, together with accrued interest thereon to, but not including, the date of redemption, but without premium, on a Special Distribution Date. (Indentures, Section 2.10(a)) If Continental exercises its right to terminate a Lease under Section 9 of such Lease, the Equipment Notes relating to the related Leased Aircraft will be redeemed, in whole, on a Special Distribution Date at a price equal to the aggregate unpaid principal amount thereof, together with accrued interest thereon to, but not including, the date of redemption, plus, if such redemption is made prior to the related Premium Termination Date, a Make-Whole Premium.(Leased Aircraft Indentures, Section 2.10(b)). See "--The Leases--Lease Termination". All of the Equipment Notes issued with respect to a Leased Aircraft may be redeemed prior to maturity at any time after December 31, 2000 (in the case of the two Leased Aircraft with registration numbers N12114 and N14115) and at any time after December 31, 2001 (in the case of the two Leased Aircraft with registration numbers N12116 and N19117) as part of a refunding or refinancing thereof under Section 13 of the applicable Participation Agreement, and all of the Equipment Notes issued with respect to the Owned Aircraft may be redeemed prior to maturity at any time at the option of Continental, in each case at a price equal to the aggregate unpaid principal thereof, together with accrued interest thereon to, but not including, the date of redemption, plus, if such redemption is made prior to the related Premium Termination Date, a Make-Whole Premium. (Indentures, Section 2.11) If notice of such a redemption shall have been given in connection with a refinancing of Equipment Notes with respect to a Leased Aircraft, such notice may be revoked not later than three days prior to the proposed redemption date. (Leased Aircraft Indentures, Section 2.12) If, with respect to a Leased Aircraft, (x) one or more Lease Events of Default shall have occurred and be continuing, (y) in the event of a bankruptcy proceeding involving Continental, (i) during the Section 1110 Period, the trustee in such proceeding or Continental does not agree to perform its obligations under the related Lease or (ii) at any time after agreeing to perform such obligations, such trustee or Continental ceases to perform such obligations or (z) the Leased Aircraft Trustee with respect to such Equipment Notes shall take action or notify the applicable Owner Trustee that it intends to take action to foreclose the lien of the related Indenture, then in each case the Equipment Notes issued with respect to such Leased Aircraft may be purchased by the Owner Trustee or Owner Participant on the applicable purchase date at a price equal to the aggregate unpaid principal thereof, together with accrued interest thereon to, but not including, the date of redemption, but without any premium (provided that a Make-Whole Premium shall be payable if such Equipment Notes are to be purchased pursuant to clause (x) when a Lease Event of Default shall have occurred and be continuing for less than 120 days). (Leased Aircraft Indentures, Section 2.14). Continental has no comparable right under the Owned Aircraft Indenture to purchase the Equipment Notes under such circumstances. "Make-Whole Premium" means, with respect to any Equipment Note, an amount (as determined by an independent investment banker of national standing) equal to the excess, if any, of (a) the 66 present value of the remaining scheduled payments of principal and interest to maturity of such Equipment Note computed by discounting such payments on a quarterly basis on each Payment Date (assuming a 360-day year of twelve 30-day months) using a discount rate equal to the Treasury Yield over (b) the outstanding principal amount of such Equipment Note plus accrued interest to the date of determination. For purposes of determining the Make-Whole Premium, "Treasury Yield" means, at the date of determination with respect to any Equipment Note, the interest rate (expressed as a quarterly equivalent and as a decimal and, in the case of United States Treasury bills, converted to a bond equivalent yield) determined to be the per annum rate equal to the semi-annual yield to maturity for United States Treasury securities maturing on the Average Life Date of such Equipment Note and trading in the public securities markets either as determined by interpolation between the most recent weekly average yield to maturity for two series of United States Treasury securities, trading in the public securities markets, (A) one maturing as close as possible to, but earlier than, the Average Life Date of such Equipment Note and (B) the other maturing as close as possible to, but later than, the Average Life Date of such Equipment Note, in each case as published in the most recent H.15(519) or, if a weekly average yield to maturity for United States securities maturing on its Average Life Date of such Equipment is reported on the most recent "H.15(519)" such weekly average yield to maturity as published in such H.15(519). "H.15(519)" means the weekly statistical release designated as such, or any successor publication, published by the Board of Governors of the Federal Reserve System. The date of determination of a Make-Whole Premium shall be the third Business Day prior to the applicable payment or redemption date and the "most recent H.15(519)" means the H.5(519) published prior to the close of business on the third Business Day prior to the applicable payment or redemption date. "Average Life Date" for any Equipment Note shall be the date which follows the time of determination by a period equal to the "Remaining Weighted Average Life" of such Equipment Note. Remaining Weighted Average Life on a given date with respect to any Equipment Note shall be the number of days equal to the quotient obtained by dividing (a) the sum of each of the products obtained by multiplying (i) the amount of each then remaining scheduled payment of principal of such Equipment Note by (ii) the number of days from and including such determination date to but excluding the date on which such payment of principal is scheduled to be made, by (b) the then outstanding principal amount of such Equipment Note. SECURITY The Equipment Notes issued with respect to each Leased Aircraft are secured by (i) an assignment by the related Owner Trustee to the related Leased Aircraft Trustee of such Owner Trustee's rights, except for certain limited rights, under the Lease with respect to the related Aircraft, including the right to receive payments of rent thereunder, (ii) a mortgage to such Leased Aircraft Trustee of such Aircraft, subject to the rights of Continental under such Lease, and (iii) an assignment to such Leased Aircraft Trustee of certain of such Owner Trustee's rights under the purchase agreement between Continental and the related manufacturer. Unless and until an Indenture Default with respect to a Leased Aircraft has occurred and is continuing, the Leased Aircraft Trustee may not exercise the rights of the Owner Trustee under the related Lease, except the Owner Trustee's right to receive payments of rent due thereunder. The assignment by the Owner Trustee to the Leased Aircraft Trustee of its rights under the related Lease will exclude rights of such Owner Trustee and the related Owner Participant relating to indemnification by Continental for certain matters, insurance proceeds payable to such Owner Trustee in its individual capacity and to such Owner Participant under liability insurance maintained by Continental under such Lease or by such Owner Trustee or such Owner Participant, insurance proceeds payable to such Owner Trustee in its individual capacity or to such Owner Participant under certain casualty insurance maintained by such Owner Trustee or such Owner Participant under such Lease and certain reimbursement payments made by Continental to such Owner Trustee. (Leased Aircraft Indenture, Granting Clause) The Equipment Notes are not cross-collateralized, and, consequently, the Equipment Notes issued in respect of any one Aircraft are not secured by any of the other Aircraft or replacement aircraft (as described in "--The Leases--Events of Loss") or the Leases related thereto. 67 The Equipment Notes issued with respect to the Owned Aircraft are secured by (i) a mortgage to the Owned Aircraft Trustee of such Aircraft and (ii) an assignment to the Owned Aircraft Trustee of certain of Continental's rights under its purchase agreement with the related manufacturer. Funds, if any, held from time to time by the Loan Trustee with respect to any Aircraft, including funds held as the result of an Event of Loss to such Aircraft or, in the case of a Leased Aircraft, termination of the Lease, if any, relating thereto, will be invested and reinvested by such Loan Trustee, at the direction of the related Owner Trustee in the case of the Leased Aircraft or Continental in the case of the Owned Aircraft (except in the case of certain Indenture Defaults), in investments described in the related Indenture. LOAN TO VALUE RATIOS OF EQUIPMENT NOTES The following table sets forth loan to Aircraft value ratios for the Equipment Notes issued in respect of each Aircraft as of the dates specified and was obtained by dividing (i) the outstanding balance (assuming no payment default) of such Equipment Notes determined immediately after giving effect to the payments scheduled to be made in each such month by (ii) the assumed value (the "Assumed Aircraft Value") of the Aircraft securing such Equipment Notes. The table is based on the assumption that the value of each Aircraft set forth opposite May 20, 1996 depreciates by approximately 2% of the initial appraised value per year until the fifteenth year after the year of delivery of such Aircraft and by approximately 4% of the initial appraised value per year thereafter. Other rates or methods of depreciation would result in materially different loan to Aircraft value ratios and no assurance can be given (i) that the depreciation rates and method assumed for the purposes of the table are the ones most likely to occur or (ii) as to the actual value of any Aircraft. Thus the table should not be considered a forecast or prediction of expected or likely loan to Aircraft value ratios but simply a mathematical calculation based on one set of assumptions.
AIRCRAFT REGISTRATION AIRCRAFT REGISTRATION AIRCRAFT REGISTRATION NUMBER N12114 NUMBER N14115 NUMBER N12116 ------------------------------- -------------------------------- ------------------------------ EQUIPMENT EQUIPMENT EQUIPMENT NOTE ASSUMED LOAN NOTE ASSUMED LOAN NOTE ASSUMED LOAN OUTSTANDING AIRCRAFT TO OUTSTANDING AIRCRAFT TO OUTSTANDING AIRCRAFT TO BALANCE VALUE VALUE BALANCE VALUE VALUE BALANCE VALUE VALUE DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO --------- ---------- ---------- -------- ----------- ---------- ----- ----------- ---------- ----- May 20, 1996 $37.65 $51.65 72.9% $37.80 $51.85 72.9% $37.39 $52.59 71.1% April 2, 1997 36.88 50.60 72.9 37.03 50.79 72.9 36.19 51.54 70.2 April 2, 1998 35.76 49.54 72.2 35.95 49.73 72.3 35.74 50.49 70.8 April 2, 1999 34.36 48.49 70.9 34.60 48.68 71.1 35.02 49.44 70.8 April 2, 2000 32.05 47.43 67.6 32.26 47.62 67.7 33.97 48.39 70.2 April 2, 2001 29.52 46.38 63.6 29.69 46.56 63.8 30.14 47.33 63.7 April 2, 2002 27.61 45.33 60.9 27.85 45.50 61.2 26.10 46.28 56.4 April 2, 2003 25.63 44.27 57.9 25.85 44.44 58.2 23.92 45.23 52.9 April 2, 2004 23.97 43.22 55.5 24.09 43.38 55.5 23.92 44.18 54.1 April 2, 2005 22.32 42.16 52.9 22.42 42.33 53.0 20.73 43.13 48.1 April 2, 2006 20.78 41.11 50.6 20.86 41.27 50.6 18.68 42.07 44.4 April 2, 2007 18.36 40.06 45.8 18.51 40.21 46.0 16.26 41.02 39.6 April 2, 2008 15.95 39.00 40.9 16.06 39.15 41.0 14.40 39.97 36.0 April 2, 2009 13.02 37.95 34.3 13.09 38.09 34.4 12.45 38.92 32.0 April 2, 2010 10.31 36.89 27.9 10.30 37.04 27.8 10.32 37.87 27.2 April 2, 2011 6.01 34.78 17.3 5.73 34.92 16.4 7.12 36.82 19.4 April 2, 2012 1.10 32.68 3.4 0.75 32.80 2.3 3.67 34.71 10.6 April 2, 2013 0.00 0.00 0.0 0.00 0.00 0.0 1.44 32.61 4.4 April 2, 2014 0.00 0.00 0.0 0.00 0.00 0.0 0.00 0.00 0.0
68
AIRCRAFT REGISTRATION AIRCRAFT REGISTRATION NUMBER N19117 NUMBER N33637 --------------------------------------------------- ---------------------------------------------------- EQUIPMENT NOTE EQUIPMENT NOTE OUTSTANDING ASSUMED OUTSTANDING ASSUMED BALANCE AIRCRAFT VALUE LOAN TO VALUE BALANCE AIRCRAFT VALUE LOAN TO VALUE DATE (MILLIONS) (MILLIONS) RATIO (MILLIONS) (MILLIONS) RATIO --------- ------------- -------------- ------------- ------------- --------------- ------------- May 20, 1996 $37.31 $52.66 70.9% $21.60 $27.00 80.0% April 2, 1997 36.44 51.61 70.6 20.64 26.46 78.0 April 2, 1998 35.78 50.55 70.8 20.22 25.92 78.0 April 2, 1999 34.90 49.50 70.5 19.80 25.38 78.0 April 2, 2000 33.62 48.45 69.4 19.26 24.84 77.5 April 2, 2001 31.23 47.39 65.9 18.66 24.30 76.8 April 2, 2002 28.57 46.34 61.6 18.04 23.76 75.9 April 2, 2003 25.60 45.29 56.5 17.38 23.22 74.8 April 2, 2004 23.52 44.23 53.2 16.67 22.68 73.5 April 2, 2005 20.95 43.18 48.5 15.91 22.14 71.9 April 2, 2006 18.40 42.13 43.7 15.02 21.60 69.5 April 2, 2007 16.07 41.07 39.1 13.97 21.06 66.3 April 2, 2008 13.59 40.02 34.0 0.00 0.00 0.0 April 2, 2009 11.74 38.97 30.1 0.00 0.00 0.0 April 2, 2010 9.52 37.92 25.1 0.00 0.00 0.0 April 2, 2011 6.84 36.86 18.6 0.00 0.00 0.0 April 2, 2012 4.99 34.76 14.3 0.00 0.00 0.0 April 2, 2013 2.97 32.65 9.1 0.00 0.00 0.0 April 2, 2014 0.79 30.54 2.6 0.00 0.00 0.0
69 LIMITATION OF LIABILITY The Equipment Notes issued with respect to the Leased Aircraft are not direct obligations of, or guaranteed by, Continental, the Owner Participant or the Owner Trustees in their individual capacity. None of the Owner Trustees, the Owner Participants or the Loan Trustees, or any affiliates thereof, shall be personally liable to any holder of an Equipment Note or, in the case of the Owner Trustees and the Owner Participants, to the Loan Trustees for any amounts payable under the Equipment Notes or, except as provided in each Indenture, for any liability under such Indenture. All payments of principal of, premium, if any, and interest on the Equipment Notes issued with respect to any Aircraft (other than payments made in connection with an optional redemption or purchase of Equipment Notes issued with respect to a Leased Aircraft by the related Owner Trustee or the related Owner Participant) will be made only from the assets subject to the lien of the Indenture with respect to such Aircraft or the income and proceeds received by the related Loan Trustee therefrom (including, in the case of the Leased Aircraft, rent payable by Continental under the Lease with respect to such Aircraft). Except as otherwise provided in the Indentures, each Owner Trustee in its individual capacity shall not be answerable or accountable under the Indentures or under the Equipment Notes under any circumstances except for its own willful misconduct or gross negligence. None of the Owner Participants will have any duty or responsibility under any of the Leased Aircraft Indentures or the Equipment Notes to the Leased Aircraft Trustees or to any holder of any Equipment Note. The Equipment Notes issued with respect to the Owned Aircraft are direct obligations of Continental. INDENTURE DEFAULTS, NOTICE AND WAIVER Indenture Defaults under each Indenture include: (a) in the case of a Leased Aircraft Indenture, the occurrence of any Lease Event of Default under the related Lease (other than the failure to make certain indemnity payments and other payments to the related Owner Trustee or Owner Participant unless a notice is given by such Owner Trustee that such failure shall constitute an Indenture Default), (b) the failure by the Owner Trustee (other than as a result of a Lease default or Lease Event of Default), in the case of a Leased Aircraft Indenture, or Continental, in the case of the Owned Aircraft Indenture, to pay any interest or principal or premium, if any, when due, under such Indenture or under any Equipment Note issued thereunder continued for more than 10 business days, in the case of a Leased Aircraft Indenture, or 15 days, in the case of the Owned Aircraft Indenture, (c) the failure by the Owner Participant or the Owner Trustee, in the case of a Leased Aircraft Indenture, or Continental, in the case of the Owned Aircraft Indenture, to discharge certain liens, continued after notice and specified cure periods, (d) any representation or warranty made by the related Owner Trustee or Owner Participant in the related Participation Agreement or by Continental, the Owner Trustee or Owner Participant in the related Financing Agreement or certain related documents furnished to the Loan Trustee pursuant thereto being false or incorrect when made and continuing to be material and remaining unremedied after notice and specified cure periods, (e) failure by Continental or the related Owner Trustee or Owner Participant to perform or observe any covenant or obligation for the benefit of the Loan Trustee or holders of Equipment Notes under such Indenture or certain related documents, continued after notice and specified cure periods, (f) the registration of the related Aircraft ceasing to be effective as a result of the Owner Participant (in the case of a Leased Aircraft) or Continental (in the case of the Owned Aircraft) not being a citizen of the United States (subject to a cure period in the case of the Owned Aircraft), (g) with respect to the Owned Aircraft, the lapse or cancellation of insurance required under the Owned Aircraft Indenture, or the operation by Continental of the Owned Aircraft after having received notice that such insurance has lapsed or been canceled or (h) the occurrence of certain events of bankruptcy, reorganization or insolvency of the related Owner Trustee or Owner Participant (in the case of a Leased Aircraft) or Continental (in the case of the Owned Aircraft). (Leased Aircraft Indentures, Section 4.02; Owned Aircraft Indenture, Section 5.01) There are no cross-default provisions in the Indentures or the Leases. Consequently, events resulting in an Indenture Default under any particular Indenture may or may not result in an Indenture Default occurring under any other Indenture, and a Lease Event of Default under any particular Lease will not constitute a Lease Event of Default under any other Lease. 70 If Continental fails to make any quarterly basic rental payment due under any Lease, within a specified period after such failure the applicable Owner Trustee may furnish to the Loan Trustee the amount due on the Equipment Notes issued with respect to the related Leased Aircraft, together with any interest thereon on account of the delayed payment thereof, in which event the Leased Aircraft Trustee and the holders of outstanding Equipment Notes issued under such Indenture may not exercise any remedies otherwise available under such Indenture or such Lease as the result of such failure to make such rental payment, unless Continental has failed to make a rental payment when due on the six or more immediately preceding quarterly basic rental payment dates or on any twelve or more previous quarterly basic rental payment dates (or, for so long as Gaucho-2 Inc. or any other affiliate of Boeing is the Owner Participant, on the nine or more immediately preceding quarterly basic rental payment dates or on any sixteen or more previous quarterly basic rental payment dates). The applicable Owner Trustee also may cure any other default by Continental in the performance of its obligations under any Lease which can be cured with the payment of money. (Leased Aircraft Indentures, Section 4.03) The holders of a majority in principal amount of the outstanding Equipment Notes issued with respect to any Aircraft, by notice to the Loan Trustee, may on behalf of all the holders waive any existing default and its consequences under the Indenture with respect to such Aircraft, except a default in the payment of the principal of or interest on any such Equipment Notes or a default in respect of any covenant or provision of such Indenture that cannot be modified or amended without the consent of each holder of Equipment Notes affected thereby. (Leased Aircraft Indentures, Section 4.08; Owned Aircraft Indenture, Section 5.06) REMEDIES If an Indenture Default occurs and is continuing under an Indenture, the related Loan Trustee or the holders of a majority in principal amount of the Equipment Notes outstanding under such Indenture may, subject to the applicable Owner Participant's or Owner Trustee's right to cure, as discussed above, declare the principal of all such Equipment Notes issued thereunder immediately due and payable, together with all accrued but unpaid interest thereon. The holders of a majority in principal amount of Equipment Notes outstanding under such Indenture may rescind any such declaration at any time before the judgment or decree for the payment of the money so due shall be entered if (i) there has been paid to the related Loan Trustee an amount sufficient to pay all principal, interest, and premium, if any, on any such Equipment Notes, to the extent such amounts have become due otherwise than by such declaration of acceleration and (ii) all other Indenture Defaults and potential Indenture Defaults under such Indenture have been cured or waived. (Leased Aircraft Indentures, Section 4.04(b); Owned Aircraft Indenture, Section 5.02(b)) Each Indenture provides that if an Indenture Default under such Indenture has occurred and is continuing, the related Loan Trustee may exercise certain rights or remedies available to it under such Indenture or under applicable law, including (if, in the case of a Leased Aircraft, the corresponding Lease has been declared in default) one or more of the remedies under such Indenture or, in the case of a Leased Aircraft, such Lease with respect to the Aircraft subject to such Lease. The related Leased Aircraft Trustee's right to exercise remedies under a Leased Aircraft Indenture is subject, with certain exceptions, to its having proceeded to exercise one or more of the dispossessory remedies under the Lease with respect to such Leased Aircraft; provided that the requirement to exercise such remedies under such Lease shall not apply in circumstances where such exercise has been involuntarily stayed or prohibited by applicable law or court order for a continuous period in excess of 60 days or such other period as may be specified in Section 1110(a)(1)(A) of the U.S. Bankruptcy Code (the "U.S. Bankruptcy Code") (plus an additional period, if any, resulting from (i) the trustee in such proceeding assuming, or agreeing to perform its obligations under, such Lease with the approval of the applicable court or such Leased Aircraft Trustee's consent to an extension of such period, (ii) such Leased Aircraft Trustee's failure to give any requisite notice, or (iii) Continental's assumption of such Lease with the approval of the relevant court). See "--The Leases--Lease Events of Default." Such remedies may be exercised by the related Leased Aircraft Trustee to the exclusion of the related Owner Trustee, subject to certain conditions specified in such Indenture, and Continental, subject to the terms of such Lease. Any Aircraft sold in the exercise of such remedies will be free and clear of any rights of those parties, including the rights of Continental under the Lease with respect to such Aircraft; provided that no exercise of any remedies by the related Leased Aircraft Trustee may affect the rights of Continental under any Lease unless a Lease Event of Default has occurred and is continuing. 71 (Leased Aircraft Indentures, Section 4.04; Leases, Section 15) The Owned Aircraft Indenture does not contain such limitations on the Owned Aircraft Trustees ability to exercise remedies upon an Indenture Default under the Owned Aircraft Indenture. If a bankruptcy proceeding involving Continental under the U.S. Bankruptcy Code occurs, all of the rights of the Owner Trustee as lessor under a particular Lease will be exercised by the Owner Trustee in accordance with the terms thereof unless (i) during the Section 1110 Period the trustee in such proceeding or Continental does not agree to perform its obligations under such Lease, (ii) at anytime after agreeing to perform such obligations, such trustee or Continental ceases to perform such obligations or (iii) the related Loan Trustee takes action, or notifies the Owner Trustee that such Loan Trustee intends to take action, to foreclose the lien of the related Leased Aircraft Indenture in accordance with the provisions of the immediately preceding paragraph. The Owner Trustee's exercise of such rights shall be subject to certain limitations and, in no event, reduce the amount or change the time of any payment in respect of the Equipment Notes or adversely affect the validity or enforcement of the lien under the related Leased Aircraft Indenture. If the Equipment Notes issued in respect of one Aircraft are in default, the Equipment Notes issued in respect of the other Aircraft may not be in default, and, if not, no remedies will be exercisable under the applicable Indentures with respect to such other Aircraft. Section 1110 of the U.S. Bankruptcy Code provides that the right of lessors, conditional vendors and holders of security interests with respect to "equipment" (as defined in Section 1110 of the U.S. Bankruptcy Code) to take possession of such equipment in compliance with the provisions of a lease, conditional sale contract or security agreement, as the case may be, is not affected by (a) the automatic stay provision of the U.S. Bankruptcy Code, which provision enjoins repossessions by creditors for the duration of the reorganization period, (b) the provision of the U.S. Bankruptcy Code allowing the trustee in reorganization to use property of the debtor during the reorganization period, (c) Section 1129 of the U.S. Bankruptcy Code (which governs the confirmation of plans of reorganization in Chapter 11 cases) and (d) any power of the bankruptcy court to enjoin a repossession. Section 1110 provides, however, that the right of a lessor, conditional vendor or holder of a security interest to take possession of an aircraft in the event of an event of default may not be exercised for 60 days following the date of commencement of the reorganization proceedings (unless specifically permitted by the bankruptcy court) and may not be exercised at all if, within such 60-day period (or such longer period consented to by the lessor, conditional vendor or holder of a security interest), the trustee in reorganization agrees to perform the debtor's obligations that become due on or after such date and cures all existing defaults (other than defaults resulting solely from the financial condition, bankruptcy, insolvency or reorganization of the debtor). "Equipment" is defined in Section 1110 of the U.S. Bankruptcy Code, in part, as "an aircraft, aircraft engine, propeller, appliance, or spare part (as defined in section 40102 of title 49) that is subject to a security interest granted by, leased to, or conditionally sold to a debtor that is a citizen of the United States (as defined in section 40102 of title 49) holding an air carrier operating certificate issued by the Secretary of Transportation pursuant to chapter 447 of title 49 for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo." Cleary, Gottlieb, Steen & Hamilton, counsel to Continental, has advised (x) the Leased Aircraft Trustees that the right of the Owner Trustee, as lessor under each of the Leases, and the Leased Aircraft Trustee, as assignee of such Owner Trustee's rights under each of the Leases pursuant to each of the related Indentures, to exercise its right to take possession of the respective Aircraft under each of the Leases is entitled to the benefits of Section 1110 of the U.S. Bankruptcy Code with respect to the airframe and engines comprising the related Leased Aircraft and (y) the Owned Aircraft Trustee that the right of the Owned Aircraft Trustee to exercise its right to take possession of the Owned Aircraft under the Owned Aircraft Indenture is entitled to the benefits of Section 1110 with respect to the airframe and engines comprising the Owned Aircraft. This opinion assumes that Continental is and will be a citizen of the United States holding an air carrier operating certificate issued by the Secretary of Transportation pursuant to chapter 447 of title 49 of the U.S. Code for aircraft capable of carrying 10 or more individuals or 6,000 pounds or more of cargo. For a description of certain limitations on the Loan Trustees exercise of rights contained in the Indenture, see"--Indenture Defaults, Notice and Waiver." 72 The opinion of Cleary, Gottlieb, Steen & Hamilton did not address the possible replacement of an Aircraft after an Event of Loss in the future, the consummation of which is conditioned upon the contemporaneous delivery of an opinion of counsel to the effect that the related Loan Trustee's entitlement to Section 1110 benefits should not be diminished as a result of such replacement. See"--The Leases--Events of Loss". The opinion of Cleary, Gottlieb, Steen & Hamilton also does not address the availability of Section 1110 with respect to any possible sublessee of a Leased Aircraft subleased by Continental or to any possible lessee of the Owned Aircraft if it is leased by Continental. If an Indenture Default under any Indenture occurs and is continuing, any sums held or received by the related Loan Trustee may be applied to reimburse such Loan Trustee for any tax, expense or other loss incurred by it and to pay any other amounts due to such Loan Trustee prior to any payments to holders of the Equipment Notes issued under such Indenture. (Indentures, Section 3.03) In the event of bankruptcy, insolvency, receivership or like proceedings involving an Owner Participant, it is possible that, notwithstanding that the applicable Leased Aircraft is owned by the related Owner Trustee in trust, such Leased Aircraft and the related Lease and Equipment Notes might become part of such proceeding. In such event, payments under such Lease or on such Equipment Notes might be interrupted and the ability of the related Leased Aircraft Trustee to exercise its remedies under the related Leased Aircraft Indenture might be restricted, although such Leased Aircraft Trustee would retain its status as a secured creditor in respect of the related Lease and the related Leased Aircraft. MODIFICATION OF INDENTURES AND LEASES Without the consent of holders of a majority in principal amount of the Equipment Notes outstanding under any Indenture, the provisions of such Indenture and the related Lease, the Participation Agreement and the Trust Agreement corresponding thereto may not be amended or modified, except to the extent indicated below. Certain provisions of any Leased Aircraft Indenture, and of the Lease (so long as no Indenture Default has occurred and is continuing), the Participation Agreement, and the Trust Agreement related thereto, may be amended or modified by the parties thereto without the consent of any holders of the Equipment Notes outstanding under such Indenture. In the case of each Lease, such provisions include, among others, provisions relating to (i) the return to the related Owner Trustee of the related Leased Aircraft at the end of the term of such Lease and (ii) the renewal of such Lease and the option of Continental at the end of the term of such Lease to purchase the related Leased Aircraft. (Leased Aircraft Indentures, Section 9.01) In addition, any Indenture may be amended without the consent of the holders of Equipment Notes, to, among other things, cure any defect or inconsistency in such Indenture or the Equipment Notes issued thereunder provided that such change does not adversely affect the interests of any such holder or to cure any ambiguity or correct any mistake. (Leased Aircraft Indentures, Section 9.01; Owned Aircraft Indenture, Section 10.01) Without the consent of the holder of each Equipment Note outstanding under any Indenture affected thereby, no amendment or modification of such Indenture may among other things (a) reduce the principal amount of, or premium, if any, or interest payable on, any Equipment Notes issued under such Indenture or change the date on which any principal or premium, if any, or interest is due and payable, (b) create any security interest with respect to the property subject to the lien of such Indenture, except as provided in such Indenture, or deprive any holder of an Equipment Note issued under such Indenture of the lien of such Indenture upon the property subject thereto or (c) reduce the percentage in principal amount of outstanding Equipment Notes issued under such Indenture necessary to modify or amend any provision of such Indenture or to waive compliance therewith. (Leased Aircraft Indentures, Section 9.01(b); Owned Aircraft Indenture, Section 10.01(a)) OWNER PARTICIPANT'S RIGHT TO RESTRUCTURE So long as Gaucho-2 Inc. or any affiliate of The Boeing Company is the Owner Participant with respect to the leveraged lease of any Leased Aircraft, subject to certain conditions, such Owner Participant will 73 have the right to restructure such leveraged lease transaction using a "cross- border lease", a tax lease or head-lease/sublease structure and any other type of transaction. In no event, however, shall any such restructuring (i) change the terms and conditions of the rights and obligations of any holder of Equipment Notes under the relevant Operative Agreements or any holder of Certificates or (ii) expose any such holder to any additional risks. As a precondition to any such restructuring, the Owner Participant will be obligated to deliver to the Leased Aircraft Trustee an appropriate officer's certificate as to the satisfaction of the foregoing conditions and obtain a written confirmation from the Rating Agencies prior to the implementation of such restructuring to the effect that such restructuring will not adversely affect the ratings of the Certificates. (Participation Agreements, Section 15) INDEMNIFICATION Continental is required to indemnify each Loan Trustee, each Owner Participant and each Owner Trustee for certain losses, claims and other matters. Continental is required under certain circumstances to indemnify each Owner Participant against the loss of depreciation deductions and certain other benefits allowable for certain income tax purposes with respect to the related Leased Aircraft. Each Owner Participant is required to indemnify the related Loan Trustee and the holders of the Equipment Notes issued with respect to the Leased Aircraft in which such Owner Participant has an interest for certain losses that may be suffered as a result of the failure of such Owner Participant to discharge certain liens or claims on or against the assets subject to the lien of the related Indenture. THE LEASES AND CERTAIN PROVISIONS OF THE OWNED AIRCRAFT INDENTURE Each Leased Aircraft is leased to Continental by the relevant Owner Trustee under the relevant Lease. The Owned Aircraft is owned by Continental. Lease Term Rentals and Payments Each Leased Aircraft has been leased separately by the relevant Owner Trustee to Continental for a term commencing on the date on which the Aircraft was acquired by the Owner Trustee and expiring on a date not earlier than the latest maturity date of the relevant Equipment Notes, unless terminated prior to the originally scheduled expiration date as permitted by the applicable Lease. The quarterly basic rent payment under each Lease is payable by Continental on each related Lease Payment Date (as defined below) (or, if such day is not a business day, on the next business day), and has been assigned by the Owner Trustee under the corresponding Indenture to provide the funds necessary to make payments of principal and interest due from the Owner Trustee on the Equipment Notes issued under such Indenture. In certain cases, the quarterly basic rent payments under the Leases may be adjusted, but each Lease provides that under no circumstances will rent payments by Continental be less than the scheduled payments on the related Equipment Notes. In addition, the amount of basic rent may be increased in an amount necessary to pay additional interest due on the Equipment Notes on the relevant Lease Payment Date as a result of the resetting of the rate of interest on the Equipment Notes as required by the terms thereof--for example, if certain terms of the Registration Rights Agreement require such a resetting. See "Exchange Offer;". Any balance of each such quarterly basic rent payment under each Lease, after payment of amounts due on the Equipment Notes issued under the Indenture corresponding to such Lease, will be paid over to the Owner Trustee. (Leases, Section 3; Leased Aircraft Indentures, Section 3.01) "Lease Payment Date" means, with respect to each Lease, January 2, April 2, July 2 or October 2 during the term of such Lease. Quarterly payments of interest and principal under the Equipment Notes issued by Continental under the Owned Aircraft Indenture are payable each January 2, April 2, July 2 and October 2 (or, if such day is not a business day, on the next business day). The amount of such quarterly payment may be increased in an amount equal to any increase in the amount of interest due on such Equipment Notes on the relevant payment date as a result of the resetting of the rate of interest on such Equipment Notes as required by certain terms of the Registration Rights Agreement. (Owned Aircraft Indenture, Section 2.02) 74 Maintenance Under the terms of each Lease, Continental's obligations in respect of each Leased Aircraft will be those of a lessee under a "net lease". Accordingly, under each Lease Continental is obligated, among other things and at its expense, to keep each Aircraft duly registered and insured, to pay all costs of operating the Aircraft and to maintain, service, repair and overhaul the Aircraft so as to keep it in as good an operating condition as when delivered to Continental, ordinary wear and tear excepted, and in such condition as required to maintain the airworthiness certificate for the Aircraft in good standing at all times. (Leases, Sections 7.1 and 8.1 and Annex C.) The Owned Aircraft Indenture imposes comparable maintenance, service and repair obligations (as well as comparable registration and insurance obligations discussed below) on Continental with respect to the Owned Aircraft. (Owned Aircraft Indenture, Section 4.02) Possession, Sublease and Transfer Each Aircraft may be operated by Continental or under lease, sublease or interchange arrangements, subject to certain restrictions. Normal interchange and pooling agreements with respect to any Engine are permitted with U.S. air carriers and foreign air carriers in countries with which the United States maintains normal diplomatic relations and which recognize and give effect to the rights of lessors and mortgagees. In the case of a Leased Aircraft, subleases for a term of up to 60 months are also permitted with solvent U.S. air carriers and with certain specified foreign air carriers, so long as they are solvent, subject to a reasonably satisfactory opinion that such country would give effect to the title of the Owner Trustee in and to the Aircraft and would give effect to the priority and validity of the lien of the Indenture as if such country were a party to the Convention on the International Recognition of Rights in Aircraft (Geneva 1948) ("the Convention"). (Leases, Section 7). With respect to the Owned Aircraft, so long as no Indenture Event of Default exists under the Owned Aircraft Indenture, Continental is permitted to lease the Owned Aircraft or Engines to (a) certain specified foreign air carriers, so long as they are solvent; (b) any other foreign air carriers, so long as they are solvent, organized under the laws of a country (other than Taiwan) with which the United States maintains normal diplomatic relations and the Loan Trustee receives an opinion of counsel regarding the enforceability of the lien under the Owned Aircraft Indenture or (c) any U.S. air carrier, so long as it is solvent, subject, in each case, to certain conditions. (Aircraft Indenture, Section 4.02) It is uncertain to what extent the relevant Loan Trustee's security interest would be recognized in an Aircraft located in a country that is not a party to the Convention, and to what extent such security interest would be recognized in a jurisdiction adhering to the Convention if the Aircraft is registered in a jurisdiction not a party to the Convention. Moreover, in the case of an Indenture Event of Default, the ability of the related Loan Trustee to realize upon its security interest in an Aircraft could be adversely affected as a legal or practical matter if such Aircraft were registered or located outside the United States. Registration Continental is required to keep each Aircraft duly registered under the Transportation Code with the FAA, except (in the case of a Leased Aircraft) if the relevant Owner Trustee or the relevant Owner Participant fails to meet the applicable citizenship requirements, and to record each Lease (in the case of a Leased Aircraft) and Indenture and certain other documents under the Transportation Code. (Leases, Section 7; Owned Aircraft Indenture, Section 4.02(e)) Such recordation of the Indenture and other documents with respect to each Aircraft will give the relevant Loan Trustee a first-priority, perfected security interest in such Aircraft whenever it is located in the United States or any of its territories and possessions. The Convention provides that such security interest will also be recognized, with certain limited exceptions, in those jurisdictions that have ratified or adhere to the Convention. (Leases, Section 7.1.1; Owned Aircraft Indenture, Section 4.02(e)) So long as no Lease default or Lease Event of Default exists, Continental has the right to register the Leased Aircraft subject to such Lease in a country other than the United States at its own expense in connection with a permitted sublease of the Aircraft to certain specified foreign air carriers, subject to certain conditions set forth in the related Participation Agreement. These conditions include a requirement that the country of registration recognizes the interests of lessors, owner participants and mortgagees and provides substantially equivalent protection to such interests as provided by law in the United States. (Leases, 75 Section 7.1.2; Participation Agreements, Section 8.7.12) The Owned Aircraft Indenture contains comparable provisions with respect to registration of the Owned Aircraft in connection with a permitted lease of the Owned Aircraft. (Owned Aircraft Indenture, Section 4.02(e)) Liens Continental is required to maintain each Aircraft free of any liens, other than the rights of the relevant Loan Trustee, the holders of the related Equipment Notes, Continental and, with respect to a Leased Aircraft, the Owner Participant and Owner Trustee arising under the applicable Indenture, the Lease (in the case of a Leased Aircraft) or the other operative documents related thereto, and other than certain limited liens permitted under such documents, including (i) liens for taxes either not yet due or being contested in good faith by appropriate proceedings; (ii) materialmens, mechanics' and other similar liens arising in the ordinary course of business and securing obligations that either are not yet delinquent or are being contested in good faith by appropriate proceedings; and (iii) judgment liens so long as such judgment is discharged or vacated within 30 days or the execution of such judgment is stayed pending appeal and discharged, vacated or reversed within 30 days after expiration of such stay; provided that in the case of each of the liens described in the foregoing clauses (i), (ii) and (iii), such liens and proceedings do not involve any material risk of the sale, forfeiture or loss of such Aircraft or any interest therein or any discernible risk of criminal liability or any material risk of civil penalty against the relevant Loan Trustee or (in the case of a Leased Aircraft) the relevant Owner Trustee or Owner Participant. (Leases, Section 6; Owned Aircraft Indenture, Section 4.01) Replacement of Parts; Alterations Continental is obligated to replace all parts at its expense that may from time to time be incorporated or installed in or attached to any Aircraft and that may become lost, damaged beyond repair, worn out, stolen, seized, confiscated or rendered permanently unfit for use (other than severable parts added at the option of Continental and obsolete or unsuitable parts that Continental is permitted to remove to the extent described below). Continental or any permitted sublessee has the right, at its own expense, to make such alterations, modifications and additions with respect to each Aircraft as it deems desirable in the proper conduct of its business and to remove parts which it deems to be obsolete or no longer suitable or appropriate for use; provided that such alteration, modification, addition or removal does not diminish the value, utility, performance or the remaining useful life of the related Aircraft, Airframe or Engine or adversely affect the commercial use of the Aircraft for passenger service in the United States or invalidate the Aircraft's airworthiness certificate, except that the value of the Aircraft may be reduced by the removal of obsolete or unsuitable parts so long as the aggregate original cost of all such parts removed from any one Aircraft and not replaced shall not exceed $250,000 for each Aircraft. (Leases, Section 8.1 and Annex C; Owned Aircraft Indenture, Section 4.04(d)) Insurance Continental is required to maintain, at its expense (or at the expense of a permitted lessee, in the case of the Owned Aircraft, or a permitted sublessee, in the case of a Leased Aircraft), all-risk aircraft hull insurance covering each Aircraft, at all times in an amount not less than the stipulated loss value of the Aircraft (which exceeds the aggregate outstanding principal amount of the Equipment Notes related to such Aircraft, together with accrued interest thereon), and all-risk property damage insurance covering Engines and parts while removed from an aircraft in an amount not less than the replacement cost of such Engines and parts. All insurance proceeds with respect to a total loss of an Aircraft, Airframe or Engine and all insurance proceeds in excess of $3,000,000 per occurrence with respect to repairable damage to an Aircraft, Airframe or Engine are payable to the relevant Owner Trustee (in the case of a Leased Aircraft) or to the applicable Loan Trustee, for so long as the relevant Indenture shall be in effect. Insurance proceeds of up to $3,000,000 per occurrence with respect to repairable damage to an Aircraft, Airframe or Engine are payable directly to Continental so long as a default or an Indenture Event of Default does not exist with respect to the Owned Aircraft Indenture or (in the case of a Leased Aircraft) the Owner Trustee has not notified the insurance underwriters that a Lease default or a Lease Event of Default exists. So long as the loss does not constitute an Event of Loss (as defined below), 76 insurance proceeds will be applied to repair or replace the property. (Leases, Sections 11.1 and 11.5 and Annex D; Owned Aircraft Indenture, Section 4.06) In addition, Continental is obligated to maintain comprehensive airline liability insurance at its expense (or at the expense of a permitted lessee, in the case of the Owned Aircraft, or a permitted sublessee, in the case of a Leased Aircraft), including, without limitation, third-party and passenger liability and property damage, cargo and products liability and contractual liability insurance with respect to each Aircraft. Such liability insurance shall be of the type usually carried by prudent major United States commercial air carriers and cover the kind of risks against which prudent United States commercial air carriers customarily insure. Such liability insurance shall be underwritten by nationally or internationally recognized insurers of substantial financial capacity used by other major United States commercial air carriers. The amount of such liability insurance coverage per occurrence shall be not less than the amount of comprehensive airline liability insurance from time to time applicable to aircraft owned or leased and operated by Continental of the same type as such Aircraft. Continental (but no permitted sublessee) shall have the right to self-insure any Leased Aircraft to the extent of any applicable minimum amount per aircraft (or, if applicable, per annum or other period) hull or liability insurance deductible imposed by the insurer providing such aircraft hull or liability insurance, which are commensurate with the standard deductibles in the airline insurance industry available to major U.S. airlines. (Leases, Section 11.1 and Annex D, Section A) With respect to the Owned Aircraft, Continental may self-insure in such amounts as are then self-insured with respect to similar owned or leased aircraft in its fleet, but the amount of such self-insurance in the aggregate may not exceed 50% of the largest replacement value of any single aircraft on which Continental carries insurance or 1 1/2% of the aggregate insurable value (during the preceding calendar year) of all aircraft on which Continental carries insurance, whichever is less, unless an insurance broker of national standing shall certify that the standard among all other major U.S. airlines is a higher level of self-insurance, in which case Continental may self-insure the Owned Aircraft to such higher level. (Owned Aircraft Indenture, Section 4.06(d)) Continental is also required to maintain war-risk, hijacking or allied perils insurance if it (or any permitted sublessee or lessee) operates any Aircraft, Airframe or Engine in any area of recognized or threatened hostilities or if Continental (or any permitted sublessee or lessee) maintains such insurance with respect to other aircraft on the same routes or areas or if the Aircraft is operated outside the United States or Canada. Continental (but no permitted sublessee or lessee) may self-insure to the extent of any hull or liability insurance deductible imposed by the insurer, provided such deductibles are commensurate with standard deductibles in the aircraft insurance industry. (Leases, Annex D, Section H; Owned Aircraft Indenture, Section 4.06) In respect of each Aircraft, Continental is required to cause the relevant Loan Trustee and holders of the Equipment Notes and (in the case of the Leased Aircraft) the relevant Owner Participant and Owner Trustee, in its individual capacity and as owner of such Aircraft, and certain other parties to be named as additional insured parties under all liability, hull and property and war risk, hijacking and allied perils insurance policies required with respect to such Aircraft. In addition, the insurance policies maintained under the Leases and the Owned Aircraft Indenture will be required to provide that, in respect of the interests of such additional insured persons, the insurance shall not be invalidated or impaired by any act or omission of Continental or any other person and to insure the respective interests of such additional insured persons, regardless of any breach or violation of any representation, warranty, declaration, term or condition contained in such policies by Continental, any permitted sublessee or any other person. (Leases, Annex D, Section D; Owned Aircraft Indenture, Section 4.06) Lease Termination Unless a Lease default or Lease Event of Default shall have occurred and be continuing, Continental may terminate any Lease on any Lease Payment Date occurring after the tenth anniversary of the date on which such Lease commenced and on or before one year prior to the date on which such Lease is scheduled to expire, if it determines that the Leased Aircraft subject to such Lease is economically obsolete or surplus to its requirements. Such determination must be made on a nondiscriminatory basis with respect to the Aircraft subject to such Lease and all similar aircraft operated by Continental which could also be terminated. Continental is 77 required to give notice of its intention to exercise its right of termination described in this paragraph at least six months prior to the proposed date of termination (which notice may be withdrawn up to 25 days prior to such proposed date if Continental determines that no bid for such Aircraft of a reasonable amount has been received); provided that Continental may give only three such termination notices. In such a situation, if the Owner Trustee elects (subject to the rights of Continental to purchase the Aircraft as described below) to sell such Aircraft, Continental is required to use best reasonable efforts to sell such Aircraft as an agent for such Owner Trustee. If the Owner Trustee elects to accept any bid, such Owner Trustee shall sell such Aircraft on the date of termination to the highest cash bidder. If such sale occurs, the Equipment Notes related thereto are required to be prepaid. The net proceeds of such sale shall be payable to the applicable Owner Trustee. If the net proceeds to be received from such sale are less than the termination value for such Aircraft (which is set forth in a schedule to each Lease), Continental is required to pay to the applicable Owner Trustee an amount equal to the excess, if any, of the applicable termination value for such Aircraft over such net proceeds. Upon payment of termination value for such Aircraft and an amount equal to the Make-Whole Premium, if any, payable on such date of payment, together with certain additional amounts and together with all accrued and unpaid interest thereon, the lien of the relevant Indenture shall be released, the relevant Lease shall terminate, and the obligation of Continental thereafter to make scheduled rent payments under such Lease shall cease. However, certain payment obligations of Continental shall survive the termination of the Lease. If such Aircraft is not sold by the proposed termination date, such Lease, including all of Continental's obligations thereunder, shall continue in effect, and the Equipment Notes related thereto will not be prepaid. (Leases, Section 9; Leased Aircraft Indentures, Section 2.10(b)) The Owner Trustee has the option to retain title to the Leased Aircraft if Continental has given a notice of termination under the Lease. In such event, such Owner Trustee shall pay to the applicable Loan Trustee an amount sufficient to prepay the outstanding Equipment Notes issued with respect to such Aircraft, and Continental shall pay to the Owner Trustee an amount equal to the excess, if any, of the termination value of such Aircraft over the highest bona fide cash bid made for such Aircraft, together with the Make-Whole Premium, if any, on such Equipment Notes and all other amounts due and payable to the Owner Trustee and Owner Participant under such Lease, the related Participation Agreement or any other related operative document. (Leases, Section 9; Leased Aircraft Indentures, Section 2.10(b)) Events of Loss If an Event of Loss occurs with respect to the Airframe or the Airframe and Engines of an Aircraft, Continental must elect within 20 days after such occurrence either to make payment with respect to such Event of Loss or to replace such Airframe and any such Engines. Not later than the first business day following the sixty-first day following the date of occurrence of such Event of Loss, or, if earlier, the second business day following the receipt of the insurance proceeds in respect of such Event of Loss, Continental must either (i) pay to the applicable Owner Trustee (in the case of a Leased Aircraft) or to the Owned Aircraft Trustee (in the case of the Owned Aircraft) the stipulated loss value of such Aircraft, together with certain additional amounts, but, in any case, without any Make-Whole Premium or (ii) unless a Lease default or any Lease Event of Default under the relevant Lease (in the case of a Leased Aircraft) or a default or Indenture Event of Default under the Owned Aircraft Indenture (in the case of the Owned Aircraft) shall have occurred and be continuing, substitute an aircraft (or airframe and one or more engines, as the case may be) for the Aircraft, Airframe or Engine(s) that suffered such Event of Loss. (Leases, Sections 10.1.1 and 10.1.2; Leased Aircraft Indentures, Section 2.10(a); Owned Aircraft Indenture, Sections 2.10 and 4.05(a)) If Continental elects to replace an Aircraft (or Airframe or Airframe and one or more Engines, as the case may be) that suffered such Event of Loss, it shall, in the case of a Leased Aircraft, convey to the related Owner Trustee title to an aircraft (or airframe or airframe and one or more engines, as the case may be), and (i) in the case of any replacement airframe for a Leased Aircraft, such airframe must be (a) manufactured by Boeing under a certain purchase agreement between The Boeing Company and Continental and (b) delivered under such agreement after the Airframe to be replaced was delivered to Continental, (ii) such replacement airframe or airframe and engines must be the same model as the Airframe or Airframe and Engines to be replaced or an improved model, with performance and durability characteristics and a value, utility and remaining useful life at 78 least equal to, and in at least as good an operating condition as, the Airframe or Airframe and Engines to be replaced (assuming that such Airframe and such Engines were of the value and utility and in the condition and repair required by the terms of the related Lease, immediately prior to the occurrence of such Event of Loss). In the case of the Owned Aircraft, any replacement airframe and engines must be of the same series as the Airframe or Engines or an improved model of the manufacturer thereof and must have a value and utility at least equal to, and be in as good operating condition and repair as, the Airframe and Engines to be replaced (assuming such Airframe and Engines were in the condition required by the terms of the Owned Aircraft Indenture). Continental is also required to provide to the relevant Loan Trustee and (in the case of a Leased Aircraft) the relevant Owner Trustee and Owner Participant (a) a certification as to compliance with the foregoing requirements from a qualified aircraft appraiser, together with a certified report setting forth such appraiser's opinion as to the fair market value of such replacement airframe or engine and (b) reasonably acceptable opinions of counsel to the effect that (i) Continental or such Owner Trustee, as the case may be, will acquire good title to such replacement airframe and, if applicable, replacement engine, free and clear of all liens (other than permitted liens), (ii) such replacement airframe and, if applicable, engine will be made subject to the applicable Indenture to the same extent as the Airframe and, if applicable, Engine replaced thereby, (iii) in the case of a Leased Aircraft, such Owner Trustee and Loan Trustee (as assignee of lessor's rights and interests under the Lease) or the Owned Aircraft Trustee, in the case of the Owned Aircraft, will be entitled to receive the benefits and protections of Section 1110 of the U.S. Bankruptcy Code with respect to any such replacement airframe and (to the extent such opinion can be rendered, in view of applicable law) such replacement engine and (iv) such replacement airframe has been duly registered and each supplement to such Lease or Indenture, as applicable, has been duly recorded. (Leases, Sections 10.1.3 and 10.3; Owned Aircraft Indenture, Section 4.05(c)) If Continental elects not to replace such Aircraft, then upon payment of the outstanding principal amount of the Equipment Notes issued with respect to such Aircraft (in the case of the Owned Aircraft) or the stipulated loss value for such Aircraft (in the case of a Leased Aircraft), together with all additional amounts then due and unpaid with respect to such Aircraft, which must be at least sufficient to pay in full as of the date of payment thereof the aggregate unpaid principal amount under such Equipment Notes together with accrued but unpaid interest thereon and all other amounts due and owing in respect of such Equipment Notes, the lien of the Indenture and (in the case of a Leased Aircraft) the Lease relating to such Aircraft shall terminate with respect to such Aircraft, the obligation of Continental thereafter to make the scheduled rent payments (in the case of a Leased Aircraft) or interest and principal payments (in the case of the Owned Aircraft) with respect thereto shall cease and (in the case of a Leased Aircraft) the related Owner Trustee shall transfer all of its right, title and interest in and to the related Aircraft to Continental. The stipulated loss value and other payments made under the Leases or the Owned Aircraft Indenture, as the case may be, by Continental shall be deposited with the applicable Loan Trustee. Amounts in excess of the amounts due and owing under the Equipment Notes issued with respect to such Aircraft will be distributed by such Loan Trustee to the applicable Owner Trustee or to Continental, as the case may be. (Leases, Section 10.1.2; Leased Aircraft Indentures, Sections 2.06 and 3.02; Owned Aircraft Indenture, Sections 2.10 and 4.05(a)(ii)) If the Owned Aircraft Trustee (in the case of the Owned Aircraft) or the Owner Trustee and the Leased Aircraft Trustee (in the case of a Leased Aircraft) are not entitled to Section 1110 benefits with respect to any replacement airframe or engine or if certain Lease defaults or any Lease Event of Default (in the case of a Leased Aircraft) or any Indenture Event of Default (in the case of the Owned Aircraft) has occurred and is continuing, Continental shall not be entitled to replace such Airframe and shall be required instead to pay the stipulated loss value applicable to such Airframe and the related Engines, plus certain additional amounts (in the case of the Leased Aircraft) or the outstanding principal amount of, and accrued interest on, the Equipment Notes issued with respect to such Aircraft (in the case of the Owned Aircraft). (Leases, Section 10.3.2; Owned Aircraft Indenture, Sections 2.10 and 4.05(e)) If an Event of Loss occurs with respect to an Engine alone, Continental will be required to replace such Engine within 60 days after the occurrence of such Event of Loss with another engine, free and clear of all liens (other than certain permitted liens). Such replacement engine shall be the same make and model as the Engine to be replaced, suitable for installation and use on the Aircraft, and having performance and durability characteristics and a value and utility at least equal to, and in at least as good an operating condition as, the 79 Engine to be replaced (assuming that such Engine was of the value and utility and in the condition and repair required by the terms of the relevant Lease or the Owned Aircraft Indenture, as the case may be, immediately prior to the occurrence of the Event of Loss). (Leases, Section 10.2; Owned Aircraft Indenture, Section 4.05(a)(ii)) An Event of Loss with respect to an Aircraft, Airframe or any Engine means any of the following events with respect to such property: (i) the destruction of such property, damage to such property beyond practical or economic repair or rendition of such property permanently unfit for normal use; (ii) the actual or constructive total loss of such property or any damage to such property or requisition of title or use of such property which results in an insurance settlement with respect to such property on the basis of a total loss or a constructive or compromised total loss; (iii) any loss of such property or loss of use of such property for a period of 90 days or more as a consequence of any theft, hijacking or disappearance of such property; (iv) any seizure, condemnation, confiscation, taking or requisition of title to such property by any governmental entity or purported non-U.S. governmental entity; (v) any seizure, condemnation, confiscation, taking or requisition of use of such property that continues until the earliest to occur of (A) the last day of the Lease term (in the case of a Leased Aircraft) or the maturity date of the Equipment Notes (in the case of the Owned Aircraft), (B) the date on which the Aircraft is modified in such a manner as would render conversion of such property for use in normal commercial passenger service impractical or uneconomical, (C) the date on which such property is operated or located in any area excluded from coverage by any insurance policy required to be maintained by the related Lease (in the case of a Leased Aircraft) or the Owned Aircraft Indenture (in the case of the Owned Aircraft) (unless an indemnity from the U.S. Government is obtained in lieu of such insurance), and (D) the date that is 90 days following the commencement of such loss of use (unless such loss of use results from action by the U.S. Government); or (vi) as a result of any law, rule, regulation, order or other action by the FAA or any governmental entity, the use of such property in the normal course of Continental's business of passenger air transportation is prohibited for 180 days (or 360 days, if Continental diligently implements all steps which are necessary or desirable to permit the normal use of such property by it) or for a period expiring on the last day of the Lease term, whichever is earlier. (Leases, Annex A; Owned Aircraft Indenture, Annex A) Purchase Options under the Leases So long as no Lease default or Lease Event of Default has occurred and is continuing, Continental has the option to purchase any Leased Aircraft on the last business day of the original Lease or on the last business day of either of the two one-year renewal terms at a purchase price equal to the fair market sales value of such Aircraft. The fair market sales value of such Aircraft shall be determined not more than 170 days nor less than 150 days prior to the date of purchase by mutual agreement of Continental and the Owner Trustee or, if they are unable to agree, by an appraisal. Continental may exercise its purchase option by delivering an irrevocable notice to the Owner Trustee not more than 180 days nor less than 120 days prior to the proposed date of purchase. The Owner Trustee shall not be under any obligation to sell such Aircraft to Continental if the fair market sales value of such Aircraft is determined to be less than a certain minimum residual value amount. Upon receipt by the Owner Trustee of payment of the applicable fair market sales value of such Aircraft and all other amounts due and payable by Continental under the relevant Lease, Participation Agreement and any other related operative document, the Owner Trustee shall transfer title to such Aircraft to Continental, provided that all related Equipment Notes have previously been paid in full. (Leases, Section 17.3; Leased Aircraft Indentures, Section 10.01) The holder of the Equipment Notes issued under a Leased Aircraft Indenture does not have any right to amounts payable by Continental in connection with its exercise of purchase options for the related Leased Aircraft to the extent that all amounts payable by the relevant Owner Trustee to such holder under such Equipment Notes, such Indenture and related operative agreements have been paid in full. Events of Default under the Leases Lease Events of Default under each Lease include, among other things, (i) failure by Continental to make any payment of basic rent, renewal rent, stipulated loss value or termination value under such Lease 80 within five business days after the same shall have become due, or failure by Continental to pay any other amount due under such Lease or under any other related operative document within five business days from and after the date of any written demand therefor from the Owner Trustee; (ii) failure by Continental to make any excluded payment within five business days after written notice that such failure constitutes a Lease Event of Default is given by the relevant Owner Participant to Continental and the relevant Loan Trustee; (iii) failure by Continental to carry and maintain insurance on and in respect of the Aircraft, Airframe and Engines subject to such Lease, in accordance with the provisions of such Lease or the operation of the Aircraft, Airframe or Engines subject to such Lease at any time when such insurance is not in effect; (iv) failure by Continental to maintain its corporate existence except as permitted by the Lease, or the winding up, liquidation or dissolution of Continental; (v) failure to maintain the registration of the Aircraft with the FAA or with a permitted foreign registry, failure to record the Indenture or maintain the Indenture of record as a first-priority, perfected mortgage (subject to permitted liens) or operation of the Aircraft in any area excluded by insurance coverage required by such Lease or in any recognized or threatened area of hostilities unless fully covered by war-risk insurance, as required by Section 11 of such Lease (subject to certain exceptions); (vi) breach of the covenants in such Lease pertaining to possession, interchange and pooling of Engines and subleasing; (vii) breach of certain prohibitions against attempted assignments by Continental of its obligations under such Lease and against the merger of Continental with any other person, except as expressly permitted by such Lease; and (viii) failure by Continental to perform or observe any other covenant or agreement to be performed or observed by it under such Lease or the related Participation Agreement or any other related operative document (other than (a) the agreement by Continental to treat the Lease as a lease for U.S. Federal income tax purposes and (b) nonpayment provisions under the related tax indemnity agreement between Continental and the Owner Participant), and such failure shall continue unremedied for a period of 30 days (or such other shorter applicable period) after written notice of such failure by the applicable Owner Trustee or Loan Trustee; (ix) (a) any representation or warranty made by Continental in such Lease or the related Participation Agreement or in any other related operative document (other than in the related tax indemnity agreement between Continental and the Owner Participant) shall prove to have been untrue, inaccurate or misleading in any material respect at the time made, (b) such representation or warranty is material at the time in question and (c) the same shall remain uncured for more than 30 days after the date of written notice thereof to Continental; and (x) the occurrence of certain voluntary events of bankruptcy, reorganization or insolvency of Continental or the occurrence of involuntary events of bankruptcy, reorganization or insolvency which shall continue undismissed or unstayed for a period of 60 days. (Leases, Section 14) Indenture Events of Default under the Owned Aircraft Indenture are discussed above under "--Indenture Defaults, Notice and Waiver". Remedies Exercisable upon Events of Default under the Lease If a Lease Event of Default has occurred and is continuing, the applicable Owner Trustee may (or, so long as the Indenture shall be in effect, the applicable Loan Trustee may, subject to the terms of the Indenture) exercise one or more of the remedies provided in such Lease with respect to the related Aircraft. These remedies include the right to repossess and use or operate such Aircraft, to rescind or terminate such Lease, to sell or re-lease such Aircraft free and clear of Continental's rights, except as set forth in the Lease, and retain the proceeds, and to require Continental to pay, as liquidated damages any due and unpaid basic rent or renewal rent plus an amount equal to the excess of the termination value for such Aircraft (specified in schedules to such Lease) over, at such Owner Trustee's (or, subject to the terms of the relevant Leased Aircraft Indenture, the Leased Aircraft Trustee's) option, any of (i) the discounted fair market rental value of such Aircraft for the remainder of the term of the Lease relating to such Aircraft (using a discount rate equal to 10 per cent per annum), (ii) the fair market sales value of such Aircraft or (iii) if such Aircraft has been sold, the net sales proceeds from the sale of such Aircraft (unless such Aircraft is sold at a private sale to the Owner Trustee, Loan Trustee, Owner Participant or any of their affiliates, in which case the fair market sales value shall be used). (Leases, Section 15; Indenture, 81 Section 4.04) If the Loan Trustee has validly terminated such Lease, the Loan Trustee may not sell or lease or otherwise afford the use of such Aircraft to Continental or any of its affiliates. (Leased Aircraft Indentures, Sections 4.03 and 4.04) Remedies under the Owned Aircraft Indenture are discussed above under "--Remedies". Notwithstanding that an Indenture Event of Default has occurred and is continuing, so long as the Equipment Notes thereunder have not been accelerated or the Loan Trustee has not taken action or notified the Owner Trustee that it intends to take action to foreclose the lien of a Leased Aircraft Indenture or otherwise commence the exercise of any significant remedy under such Indenture or the related Lease, the Leased Aircraft Trustee may not, without the consent of the Owner Trustee, enter into any amendment, modification, waiver or consent in respect of any of the provisions of the related Lease, which consent shall not be unreasonably withheld if no right or interest of the relevant Owner Trustee or Owner Participant would be diminished or impaired thereby. (Leased Aircraft Indentures, Section 5.02) Transfer of Owner Participant Interests Subject to certain restrictions, each Owner Participant may transfer all or any part of, or grant participations in, its interest in the related Leased Aircraft. (Participation Agreements, Section 12.1.1) 82 CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES EXCHANGE OF OLD CERTIFICATES FOR NEW CERTIFICATES The following summary describes the principal U.S. federal income tax consequences to Certificateholders of the exchange of the Old Certificates for New Certificates. This summary is intended to address the beneficial owners of Certificates that are citizens or residents of the United States, corporations, partnerships or other entities created or organized in or under the laws of the United States or any State, or estates or trusts the income of which is subject to U.S. federal income taxation regardless of its source that will hold the Certificates as capital assets. The exchange of Old Certificates for New Certificates (the "Exchange") pursuant to the Exchange Offer will not be a taxable event for U.S. federal income tax purposes. As a result, a holder of an Old Certificate whose Old Certificate is accepted in an Exchange Offer will not recognize gain on the Exchange. A tendering holder's tax basis in the New Certificates will be the same as such holder's tax basis in its Old Certificates. A tendering holder's holding period for the New Certificates received pursuant to the Exchange Offer will include its holding period for the Old Certificates surrendered therefor. ALL HOLDERS OF OLD CERTIFICATES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF THE EXCHANGE OF OLD CERTIFICATES FOR NEW CERTIFICATES AND OF THE OWNERSHIP AND DISPOSITION OF NEW CERTIFICATES RECEIVED IN THE EXCHANGE OFFER IN LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES. 83 ERISA CONSIDERATIONS IN GENERAL ERISA imposes certain requirements on employee benefit plans subject to ERISA ("ERISA Plans"), and on those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary requirements, including, but not limited to, the requirement of investment prudence and diversification and the requirement that an ERISA Plan's investments be made in accordance with the documents governing the Plan. Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to Section 4975 of the Code, such as individual retirement accounts (together with ERISA Plans, ("Plans")) and certain persons (referred to as "parties in interest" or "disqualified persons") having certain relationships to such Plans, unless a statutory or administrative exemption is applicable to the transaction. A party in interest or disqualified person who engages in a prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. The Department of Labor has promulgated a regulation, 29 CFR Section 2510.3-101 (the "Plan Asset Regulation"), describing what constitutes the assets of a Plan with respect to the Plan's investment in an entity for purposes of ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan invests (directly or indirectly) in a Certificate, the Plan's assets will include both the Certificate and an undivided interest in each of the underlying assets of the corresponding Trust, including the Equipment Notes held by such Trust, unless it is established that equity participation in the Trust by employee benefit plans (including Plans and entities whose underlying assets include plan assets by reason of an employee benefit plan's investment in the entity) is not "significant" within the meaning of the Plan Asset Regulation. In this regard, the extent to which there is equity participation in a particular Trust by, or on behalf of, employee benefit plans will not be monitored. If the assets of a Trust are deemed to constitute the assets of a Plan, transactions involving the assets of such Trust could be subject to the prohibited transaction provisions of ERISA and Section 4975 of the Code unless a statutory or administrative exemption is applicable to the transaction. The fiduciary of a Plan that proposes to purchase and hold any Certificates should consider, among other things, whether such purchase and holding may involve (i) the direct or indirect extension of credit to a party in interest or a disqualified person, (ii) the sale or exchange of any property between a Plan and a party in interest or a disqualified person, and (iii) the transfer to, or use by or for the benefit of, a party in interest or a disqualified person, of any Plan assets. In addition, whether or not the assets of a Trust are deemed to be Plan assets under the Plan Asset Regulation, if Certificates are purchased by a Plan and Certificates of a subordinate Class are held by a party in interest or a disqualified person with respect to such Plan, or vice versa, the exercise by the holder of the subordinate Class of Certificates of its right to purchase the senior Classes of Certificates upon the occurrence and during the continuation of a Triggering Event could be considered to constitute a prohibited transaction unless a statutory or administrative exemption were applicable. Depending on the identity of the Plan fiduciary making the decision to acquire or hold Certificates on behalf of a Plan, Prohibited Transaction Class Exemption ("PTCE") 91-38 (relating to investments by bank collective investment funds), PTCE 84-14 (relating to transactions effected by a "qualified professional asset manager"), PTCE 95-60 (relating to investments by an insurance company general account), PTCE 96-23 (relating to transactions directed by an in-house professional asset manager) or PTCE 90-1 (relating to investments by insurance company pooled separate accounts) (collectively, the "Class Exemptions") could provide an exemption from the prohibited transaction provisions of ERISA and Section 4975 of the Code with respect to such exercise of rights. However, there can be no assurance that any of these Class Exemptions or any other exemption will be available with respect to any particular transaction involving the Certificates. Governmental plans and certain church plans, while not subject to the fiduciary responsibility provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state or other 84 federal laws that are substantially similar to the foregoing provisions of ERISA and the Code. Fiduciaries of any such plans should consult with their counsel before purchasing any Certificates. Any Plan fiduciary which proposes to cause a Plan to purchase any Certificates should consult with its counsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions of ERISA and Section 4975 of the Code to such an investment, and to confirm that such purchase and holding will not constitute or result in a non-exempt prohibited transaction or any other violation of an applicable requirement of ERISA. CLASS A CERTIFICATES An individual exemption may apply to the purchase, holding and secondary market sale of Class A Certificates by Plans, provided that certain specified conditions are met. In particular, the Department of Labor has issued individual administrative exemptions to certain of the Initial Purchasers which are substantially the same as the administrative exemption issued to Morgan Stanley & Co., Incorporated, Prohibited Transaction Exemption 90-24 (55 Fed. Reg. 20,548 (1990)) (the "Underwriter Exemption"), which generally exempts from the application of certain, but not all, of the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code certain transactions relating to the initial purchase, holding and subsequent secondary market sale of pass- through certificates which represent an interest in a trust, the assets of which include equipment notes secured by leases, provided that certain conditions set forth in the Underwriter Exemption are satisfied. The Underwriter Exemption sets a number of general and specific conditions which must be satisfied for a transaction involving the initial purchase, holding or secondary market sale of Class A Certificates to be eligible for exemptive relief thereunder. In particular, the acquisition of Class A Certificates by a Plan must be on terms that are at least as favorable to the Plan as they would be in an arm's-length transaction with an unrelated party; the rights and interests evidenced by the Certificates must not be subordinated to the rights and interests evidenced by other Certificates of the same trust estate; the Certificates at the time of acquisition by the Plan must be rated in one of the three highest generic rating categories by Moody's, Standard & Poor's, Duff & Phelps Inc. or Fitch Investors Service, Inc.; and the investing Plan must be an accredited investor as defined in Rule 501(a)(1) of Regulation D of the Commission under the Securities Act. The Underwriter Exemption does not apply to the Class B, Class C or Class D Certificates. Even if all of the conditions of the Underwriter Exemption are satisfied with respect to the Class A Certificates, no assurance can be given that the Exemption would apply with respect to all transactions involving the Class A Certificates or the assets of the Class A Trust. In particular, it appears that the Underwriter Exemption would not apply to the purchase by Class B Certificateholders, Class C Certificateholders or Class D Certificateholders of Class A Certificates in connection with the exercise of their rights upon the occurrence and during the continuance of a Triggering Event. Therefore, the fiduciary of a Plan considering the purchase of a Class A Certificate should consider the availability of the exemptive relief provided by the Exemption, as well as the availability of any other exemptions with respect to transactions to which the Exemption may not apply. CLASS B, CLASS C AND CLASS D CERTIFICATES The Class B, Class C and Class D Certificates may not be acquired with the assets of a Plan, except that such Certificates may be acquired with the assets of an insurance company general account that may be deemed to constitute Plan assets, provided that the conditions of PTCE 95-60 are satisfied at the time of the acquisition (and during the holding) of such Certificates. By its acceptance of a Class B Certificate, Class C Certificate or Class D Certificate, each Certificateholder will be deemed to have represented and warranted that either (i) no Plan assets have been used to purchase such Certificate or (ii) the purchase and holding of such Certificate is exempt from the prohibited transaction restrictions of ERISA and the Code pursuant to PTCE 95-60. See "Transfer Restrictions". Each Plan fiduciary (and each fiduciary for a governmental or church plan subject to rules similar to those imposed on Plans under ERISA) should consult with its legal advisor concerning an investment in any of the Certificates. 85 PLAN OF DISTRIBUTION Each broker-dealer that receives New Certificates for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Certificates. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Certificates received in exchange for Old Certificates where such Old Certificates were acquired as a result of market-making activities or other trading activities. The Company has agreed that, starting on the Expiration Date and ending on the close of business 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until such date all broker-dealers effecting transactions in the New Certificates may be required to deliver a prospectus. The Company will not receive any proceeds from any sale of New Certificates by broker-dealers. New Certificates received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Certificates or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such New Certificates. Any broker-dealer that resells New Certificates that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Certificates may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit of any such resale of New Certificates and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. Starting on the Expiration Date, the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Notes) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the New Certificates (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS The validity of the New Certificates and certain United States Federal income taxation matters with respect to Section 382 will be passed upon for Continental by Cleary, Gottlieb, Steen & Hamilton, New York, New York. EXPERTS The consolidated financial statements (including schedules) of Continental Airlines, Inc. appearing in Continental Airlines, Inc.'s Annual Report (Form 10-K) as of December 31, 1995 and 1994, and for the two years ended December 31, 1995 and the period of April 28, 1993 through December 31, 1993, and the consolidated statements of operations, redeemable and non-redeemable preferred stock and common stockholders' equity and cash flows of Continental Airlines Holdings, Inc. for the period of January 1, 1993 through April 27, 1993, incorporated by reference in this Prospectus have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports thereon included therein and incorporated herein by reference, in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. 86 - -------------------------------------------------------------------------------- NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REVERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF. TABLE OF CONTENTS PAGE ---- AVAILABLE INFORMATION............................................4 REPORTS TO PASS THROUGH CERTIFICATEHOLDERS.......................4 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..................4 PROSPECTUS SUMMARY...............................................6 RISK FACTORS....................................................26 RECENT DEVELOPMENTS.............................................33 USE OF PROCEEDS.................................................35 SELECTED FINANCIAL DATA.........................................36 THE EXCHANGE OFFER..............................................38 DESCRIPTION OF THE NEW CERTIFICATES.............................45 DESCRIPTION OF THE LIQUIDITY FACILITIES.........................56 DESCRIPTION OF THE INTERCREDITOR AGREEMENT......................60 DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS..................64 DESCRIPTION OF THE EQUIPMENT NOTES..............................64 CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES....................83 ERISA CONSIDERATIONS............................................84 PLAN OF DISTRIBUTION............................................86 LEGAL MATTERS...................................................86 EXPERTS.........................................................86
- -------------------------------------------------------------------------------- CONTINENTAL AIRLINES, INC. OFFER TO EXCHANGE PASS THROUGH CERTIFICATES, SERIES 1996-2, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, FOR ANY AND ALL OUTSTANDING PASS THROUGH CERTIFICATES, SERIES 1996-2 PROSPECTUS SEPTEMBER , 1996 - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 20. Indemnification of Directors and Officers. The Company's Certificate of Incorporation and Bylaws provide that the Company will indemnify each of its directors and officers to the full extent permitted by the laws of the State of Delaware and may indemnify certain other persons as authorized by the Delaware General Corporation Law (the "GCL"). Section 145 of the GCL provides as follows: "(a) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b). Such determination shall be made (1) by a majority vote of the board of directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders. II-1 (e) Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative, or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this section. (h) For purposes of this section, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent for such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (i) For purposes of this section, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this section. (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporations obligation to advance expenses (including attorneys' fees)." The Certificate of Incorporation and Bylaws also limit the personal liability of directors to the Company and its stockholders for monetary damages resulting from certain breaches of the directors fiduciary duties. The bylaws of the Company provide as follows: II-2 "No Director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, except for liability (i) for any breach of the Director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the. . . GCL, or (iv) for any transaction from which the Director derived any improper personal benefit. If the GCL is amended to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of Directors of the Corporation shall be eliminated or limited to the full extent permitted by the GCL, as so amended." The Company maintains directors' and officers' liability insurance. Item 21. Exhibits. Exhibit Number Exhibit Description - ------- ------------------- 4.1* Form of New 7.75% Continental Airlines Pass Through Certificate Series 1996-2A (included in Exhibit 4.5) 4.2* Form of New 8.56% Continental Airlines Pass Through Certificate Series 1996-2B (included in Exhibit 4.6) 4.3* Form of New 10.22% Continental Airlines Pass Through Certificate Series 1996-2C (included in Exhibit 4.7) 4.4* Form of New 11.50% Continental Airlines Pass Through Certificate Series 1996-2D (included in Exhibit 4.8) 4.5* Pass Through Trust Agreement, dated as of May 20, 1996, between Continental Airlines, Inc., and Wilmington Trust Company, as Trustee, relating to the formation of Continental Airlines 1996-2A Pass Through Trust 4.6* Pass Through Trust Agreement, dated as of May 20, 1996, between Continental Airlines, Inc., and Wilmington Trust Company, as Trustee, relating to the formation of Continental Airlines 1996-2B Pass Through Trust 4.7* Pass Through Trust Agreement, dated as of May 20, 1996, between Continental Airlines, Inc., and Wilmington Trust Company, as Trustee, relating to the formation of Continental Airlines 1996-2C Pass Through Trust 4.8* Pass Through Trust Agreement, dated as of May 20, 1996, between Continental Airlines, Inc., and Wilmington Trust Company, as Trustee, relating to the formation of Continental Airlines 1996-2D Pass Through Trust 4.9* Revolving Credit Agreement, dated May 20, 1996, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Continental Airlines 1996-2A Pass Through Trust, as Borrower and DNIB as Liquidity Provider 4.10* Revolving Credit Agreement, dated May 20, 1996, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Continental Airlines 1996-2B Pass Through Trust, as Borrower and DNIB as Liquidity Provider II-3 4.11* Revolving Credit Agreement, dated May 20, 1996, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Continental Airlines 1996-2C Pass Through Trust, as Borrower and DNIB as Liquidity Provider 4.12* Intercreditor Agreement dated as of May 20, 1996, among Wilmington Trust Company, as Trustee under the Continental Airlines Pass Through Trust 1996-2A, Continental Airlines Pass Through Trust 1996-2B, Continental Airlines Pass Through Trust 1996-2C and Continental Pass Through Trust 1996-2D, DNIB, as Class A Liquidity Provider, Class B Liquidity Provider, Class C Liquidity Provider, and Wilmington Trust Company, as Subordination Agent and Trustee 4.13* Registration Rights Agreement, dated as of May 20, 1996, among Continental Airlines, Inc., Wilmington Trust Company, as Trustee under Continental Airlines Pass Through Trust 1996-2A, Continental Airlines Pass Through Trust 1996-2B, Continental Airlines Pass Through Trust 1996-2C, Continental Airlines Pass Through Trust 1996-2D, and the Initial Purchasers 4.14** Form of Refunding Agreement 114 & 115, dated as of May 20, 1996, among Continental Airlines, Inc., as Lessee, First Security Bank of Utah, National Association, as Owner Trustee, Wilmington Trust Company, as Pass Through Trustee under each of the Continental Airlines 1996-2 Pass Through Trust Agreements, Fleet National Bank, formerly named Shawmut Bank Connecticut, National Association, as Original Pass Through Trustee and Loan Participant, Gaucho-2 Inc., as Owner Participant, Rolls-Royce PLC, as Guarantor, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Morgan Stanley & Co. Incorporated, as Aero Trust Certificateholder 4.15** Form of Amended and Restated Participation Agreement 114 & 115 dated as of July 1, 1995, among Continental Airlines, Inc., as Lessee, Gaucho-2 Inc., as Owner Participant, Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement and as Loan Participant, First Security Bank of Utah, National Association, as Owner Trustee, and Wilmington Trust Company, as Loan Trustee 4.16** Form of Amended and Restated Lease Agreement 114 & 115 dated as of July 1, 1995 between First Security Bank of Utah, National Association, as Owner Trustee and as Lessor and Continental Airlines, Inc., as Lessee 4.17** Form of Amended and Restated Trust Indenture and Mortgage 114 & 115, dated as of May 20, 1996, between First Security Bank of Utah, National Association, as Owner Trustee, and Wilmington Trust Company, as Loan Trustee 4.18** Form of Trust Agreement 114 & 115 Amendment No. 1 dated May 20, 1996 between Gaucho-2 Inc. as Owner Participant and First Security Bank of Utah, National Association, as Owner Trustee II-4 4.19** Form of Refunding Agreement 116 & 117, dated as of May 20, 1996, among Continental Airlines, Inc., as Lessee, First Security Bank of Utah, National Association, as Owner Trustee, Wilmington Trust Company, as Pass Through Trustee under each of the Continental Airlines 1996-2 Pass Through Trust Agreements, The Boeing Company, as Loan Participant, Gaucho-2 Inc., as Owner Participant, Wilmington Trust Company, as Subordination Agent, and Wilmington Trust Company, as Loan Trustee 4.20** Form of Participation Agreement 116 & 117 Amendment No. 1 dated May 20, 1996, among Continental Airlines, Inc., as Lessee, Gaucho-2 Inc., as Owner Participant, Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement and as Loan Participant, First Security Bank of Utah, National Association, as Owner Trustee and Wilmington Trust Company, as Loan Trustee 4.21** Form of Lease Agreement 116 & 117 Amendment No. 1 dated May 20, 1996 between First Security Bank of Utah, National Association, as Owner Trustee and Lessor and Continental Airlines, Inc., as Lessee 4.22** Form of Amended and Restated Trust Indenture and Mortgage 116 & 117, dated as of May 20, 1996, between First Security Bank of Utah, National Association, as Owner Trustee, and Wilmington Trust Company, as Loan Trustee 4.23* Note Purchase Agreement 637 dated May 20, 1996 among Continental Airlines, Inc. as Owner, Wilmington Trust Company as Pass Through Trustee under each of the Continental Airlines 1996-2 Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent and Wilmington Trust Company as Loan Trustee 4.24* Trust Indenture and Mortgage 637 dated May 20, 1996 between Continental Airlines, Inc., as Owner, and Wilmington Trust Company, as Loan Trustee 4.25* Trust Indenture and Mortgage 637 Supplement No. 1 dated May 20, 1996 between Continental Airlines, Inc., as Owner, and Wilmington Trust Company, as Loan Trustee 4.26** Form of Series A Equipment Note, dated May 20, 1996, 1996, by First Security Bank of Utah, National Association, as Owner trustee, payable to Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement 4.27** Form of Series B Equipment Note, dated May 20, 1996, by First Security Bank of Utah, National Association, as Owner trustee, payable to Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement 4.28** Form of Series C Equipment Note, dated May 20, 1996, by First Security Bank of Utah, National Association, as Owner trustee, payable to Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement 4.29** Form of Series D Equipment Note, dated May 20, 1996, by First Security Bank of Utah, National Association, as Owner trustee, payable to Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement 5.1* Opinion of Cleary, Gottlieb, Steen & Hamilton relating to validity of New Certificates II-5 12.1 Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to the Company's Registration Statement (File No. 333-07899)) 23.1* Consent of Ernst & Young LLP 23.2* Consent of Cleary, Gottlieb, Steen & Hamilton (included in its opinion filed as exhibit 5.1) 23.3* Consent of Aircraft Information Services, Inc. 23.4* Consent of BK Associates, Inc. 23.5* Consent of Morten Beyer and Associates, Inc. 23.6* Consent of Cleary, Gottlieb, Steen & Hamilton 24.1* Powers of Attorney 25.1* Statement of Eligibility of Wilmington Trust Company for the 1996-2A Pass Through Certificates, on Form T-1 25.2* Statement of Eligibility of Wilmington Trust Company for the 1996-2B Pass Through Certificates, on Form T-1 25.3* Statement of Eligibility of Wilmington Trust Company for the 1996-2C Pass Through Certificates, on Form T-1 25.4* Statement of Eligibility of Wilmington Trust Company for the 1996-2D Pass Through Certificates, on Form T-1 99.1* Form of Letter of Transmittal 99.2* Form of Notice of Guaranteed Delivery 99.3* Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4* Form of Letter to Clients - ------------- * Filed herewith. ** Filed herewith. With respect to such Exhibits, separate agreements have been entered into with respect to each Aircraft. Except for differences in designations, dollar amounts, interest rates, percentages, final distribution dates, Aircraft Registration numbers, Manufacturer's Serial Numbers for Aircraft and Engines and the like, as applicable, there are no material details in which any such agreements not filed herewith differ from the corresponding Exhibit for the forms of such documents. Item 22. Undertakings. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section l0(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration (or the most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the II-6 registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high and of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plans annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant, pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by any such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether or not such indemnification is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-7 The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b))(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-4 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Houston, State of Texas, on September 17, 1996. CONTINENTAL AIRLINES, INC. By: /s/ Jeffery A. Smisek ____________________________ Jeffery A. Smisek Senior Vice President Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated, on September 17, 1996. Signature Title --------- ----- * - ------------------------ Gordon M. Bethune President, Chief Executive Officer (Principal Executive Officer) and Director * - ------------------------ Senior Vice President and Chief Financial Lawrence W. Kellner Officer (Principal Financial Officer) * - ------------------------ Staff Vice President and Controller Michael P. Bonds (Principal Accounting Officer) * - ------------------------ Director Thomas J. Barrack, Jr. - ------------------------ Director Lloyd M. Bentsen, Jr. * - ------------------------ Director David Bonderman * - ------------------------ Director Gregory D. Brenneman * - ------------------------ Director Patrick Foley * - ------------------------ Director Douglas H. McCorkindale * - ------------------------ Director George G.C. Parker * - ------------------------ Director Richard W. Pogue II-9 * - ------------------------ Director William S. Price III * - ------------------------ Director Donald L. Sturm * - ------------------------ Director Karen Hastie Williams * - ------------------------ Director Charles A. Yamarone *By: /s/ Scott R. Peterson - ---------------------------- Scott R. Peterson, Attorney-in-fact II-10 EXHIBIT INDEX Exhibit Number Exhibit Description - ------- ------------------- 4.1* Form of New 7.75% Continental Airlines Pass Through Certificate Series 1996-2A (included in Exhibit 4.5) 4.2* Form of New 8.56% Continental Airlines Pass Through Certificate Series 1996-2B (included in Exhibit 4.6) 4.3* Form of New 10.22% Continental Airlines Pass Through Certificate Series 1996-2C (included in Exhibit 4.7) 4.4* Form of New 11.50% Continental Airlines Pass Through Certificate Series 1996-2D (included in Exhibit 4.8) 4.5* Pass Through Trust Agreement, dated as of May 20, 1996, between Continental Airlines, Inc., and Wilmington Trust Company, as Trustee, relating to the formation of Continental Airlines 1996-2A Pass Through Trust 4.6* Pass Through Trust Agreement, dated as of May 20, 1996, between Continental Airlines, Inc., and Wilmington Trust Company, as Trustee, relating to the formation of Continental Airlines 1996-2B Pass Through Trust 4.7* Pass Through Trust Agreement, dated as of May 20, 1996, between Continental Airlines, Inc., and Wilmington Trust Company, as Trustee, relating to the formation of Continental Airlines 1996-2C Pass Through Trust 4.8* Pass Through Trust Agreement, dated as of May 20, 1996, between Continental Airlines, Inc., and Wilmington Trust Company, as Trustee, relating to the formation of Continental Airlines 1996-2D Pass Through Trust 4.9* Revolving Credit Agreement, dated May 20, 1996, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Continental Airlines 1996-2A Pass Through Trust, as Borrower and DNIB as Liquidity Provider 4.10* Revolving Credit Agreement, dated May 20, 1996, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Continental Airlines 1996-2B Pass Through Trust, as Borrower and DNIB as Liquidity Provider 4.11* Revolving Credit Agreement, dated May 20, 1996, between Wilmington Trust Company, as Subordination Agent, as agent and trustee for the Continental Airlines 1996-2C Pass Through Trust, as Borrower and DNIB as Liquidity Provider 4.12* Intercreditor Agreement dated as of May 20, 1996, among Wilmington Trust Company, as Trustee under the Continental Airlines Pass Through Trust 1996-2A, Continental Airlines Pass Through Trust 1996-2B, Continental Airlines Pass Through Trust 1996-2C and Continental Pass Through Trust 1996-2D, DNIB, as Class A Liquidity Provider, Class B Liquidity Provider, Class C Liquidity Provider, and Wilmington Trust Company, as Subordination Agent and Trustee 4.13* Registration Rights Agreement, dated as of May 20, 1996, among Continental Airlines, Inc., Wilmington Trust Company, as Trustee under Continental Airlines Pass Through Trust 1996-2A, Continental Airlines Pass Through Trust 1996-2B, Continental Airlines Pass Through Trust 1996-2C, Continental Airlines Pass Through Trust 1996-2D, and the Initial Purchasers 4.14** Form of Refunding Agreement 114 & 115, dated as of May 20, 1996, among Continental Airlines, Inc., as Lessee, First Security Bank of Utah, National Association, as Owner Trustee, Wilmington Trust Company, as Pass Through Trustee under each of the Continental Airlines 1996-2 Pass Through Trust Agreements, Fleet National Bank, formerly named Shawmut Bank Connecticut, National Association, as Original Pass Through Trustee and Loan Participant, Gaucho-2 Inc., as Owner Participant, Rolls-Royce PLC, as Guarantor, Wilmington Trust Company, as Subordination Agent, Wilmington Trust Company, as Loan Trustee, and Morgan Stanley & Co. Incorporated, as Aero Trust Certificateholder 4.15** Form of Amended and Restated Participation Agreement 114 & 115 dated as of July 1, 1995, among Continental Airlines, Inc., as Lessee, Gaucho-2 Inc., as Owner Participant, Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement and as Loan Participant, First Security Bank of Utah, National Association, as Owner Trustee, and Wilmington Trust Company, as Loan Trustee 4.16** Form of Amended and Restated Lease Agreement 114 & 115 dated as of July 1, 1995 between First Security Bank of Utah, National Association, as Owner Trustee and as Lessor and Continental Airlines, Inc., as Lessee 4.17** Form of Amended and Restated Trust Indenture and Mortgage 114 & 115, dated as of May 20, 1996, between First Security Bank of Utah, National Association, as Owner Trustee, and Wilmington Trust Company, as Loan Trustee 4.18** Form of Trust Agreement 114 & 115 Amendment No. 1 dated May 20, 1996 between Gaucho-2 Inc. as Owner Participant and First Security Bank of Utah, National Association, as Owner Trustee 4.19** Form of Refunding Agreement 116 & 117, dated as of May 20, 1996, among Continental Airlines, Inc., as Lessee, First Security Bank of Utah, National Association, as Owner Trustee, Wilmington Trust Company, as Pass Through Trustee under each of the Continental Airlines 1996-2 Pass Through Trust Agreements, The Boeing Company, as Loan Participant, Gaucho-2 Inc., as Owner Participant, Wilmington Trust Company, as Subordination Agent, and Wilmington Trust Company, as Loan Trustee 4.20** Form of Participation Agreement 116 & 117 Amendment No. 1 dated May 20, 1996, among Continental Airlines, Inc., as Lessee, Gaucho-2 Inc., as Owner Participant, Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement and as Loan Participant, First Security Bank of Utah, National Association, as Owner Trustee and Wilmington Trust Company, as Loan Trustee 4.21** Form of Lease Agreement 116 & 117 Amendment No. 1 dated May 20, 1996 between First Security Bank of Utah, National Association, as Owner Trustee and Lessor and Continental Airlines, Inc., as Lessee 4.22** Form of Amended and Restated Trust Indenture and Mortgage 116 & 117, dated as of May 20, 1996, between First Security Bank of Utah, National Association, as Owner Trustee, and Wilmington Trust Company, as Loan Trustee 4.23* Note Purchase Agreement 637 dated May 20, 1996 among Continental Airlines, Inc. as Owner, Wilmington Trust Company as Pass Through Trustee under each of the Continental Airlines 1996-2 Pass Through Trust Agreements, Wilmington Trust Company, as Subordination Agent and Wilmington Trust Company as Loan Trustee 4.24* Trust Indenture and Mortgage 637 dated May 20, 1996 between Continental Airlines, Inc., as Owner, and Wilmington Trust Company, as Loan Trustee 4.25* Trust Indenture and Mortgage 637 Supplement No. 1 dated May 20, 1996 between Continental Airlines, Inc., as Owner, and Wilmington Trust Company, as Loan Trustee 4.26** Form of Series A Equipment Note, dated May 20, 1996, 1996, by First Security Bank of Utah, National Association, as Owner trustee, payable to Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement 4.27** Form of Series B Equipment Note, dated May 20, 1996, by First Security Bank of Utah, National Association, as Owner trustee, payable to Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement 4.28** Form of Series C Equipment Note, dated May 20, 1996, by First Security Bank of Utah, National Association, as Owner trustee, payable to Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement 4.29** Form of Series D Equipment Note, dated May 20, 1996, by First Security Bank of Utah, National Association, as Owner trustee, payable to Wilmington Trust Company, as Subordination Agent under the Intercreditor Agreement 5.1* Opinion of Cleary, Gottlieb, Steen & Hamilton relating to validity of New Certificates 12.1 Computation of Ratio of Earnings to Fixed Charges (incorporated by reference to the Company's Registration Statement (File No.333-07899)) 23.1* Consent of Ernst & Young LLP 23.2* Consent of Cleary, Gottlieb, Steen & Hamilton (included in its opinion filed as exhibit 5.1) 23.3* Consent of Aircraft Information Services, Inc. 23.4* Consent of BK Associates, Inc. 23.5* Consent of Morten Beyer and Associates, Inc. 23.6* Consent of Cleary, Gottlieb, Steen & Hamilton 24.1* Powers of Attorney 25.1* Statement of Eligibility of Wilmington Trust Company for the 1996-2A Pass Through Certificates, on Form T-1 25.2* Statement of Eligibility of Wilmington Trust Company for the 1996-2B Pass Through Certificates, on Form T-1 25.3* Statement of Eligibility of Wilmington Trust Company for the 1996-2C Pass Through Certificates, on Form T-1 25.4* Statement of Eligibility of Wilmington Trust Company for the 1996-2D Pass Through Certificates, on Form T-1 99.1* Form of Letter of Transmittal 99.2* Form of Notice of Guaranteed Delivery 99.3* Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees 99.4* Form of Letter to Clients - ----------------- * Filed herewith. ** Filed herewith. With respect to such Exhibits, separate agreements have been entered into with respect to each Aircraft. Except for differences in designations, dollar amounts, interest rates, percentages, final distribution dates, Aircraft Registration numbers, Manufacturers Serial Numbers for Aircraft and Engines and the like, as applicable, there are no material details in which any such agreements not filed herewith differ from the corresponding Exhibit for the forms of such documents.



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






                   PASS THROUGH TRUST AGREEMENT

                     Dated as of May 20, 1996


                             between


                    CONTINENTAL AIRLINES, INC.


                               and


                    WILMINGTON TRUST COMPANY,

                            as Trustee





          Continental Airlines 1996-2A Pass Through Trust

          7.75% 1996-2A Initial Pass Through Certificates
         7.75% 1996-2A Exchange Pass Through Certificates





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









Reconciliation and tie between Continental Airlines 1996-2A Pass
Through Trust Agreement, dated as of May 20, 1996, and the Trust
Indenture Act of 1939. This reconciliation does not constitute
part of the Pass Through Trust Agreement.



  Trust Indenture Act                             Pass Through Trust
    of 1939 Section                                Agreement Section
- ------------------------                       -------------------------

310(a)(1)                                                7.08

 (a)(2)                                                  7.08

 312(a)                                            3.05; 8.01; 8.02

 313(a)                                                  8.03

 314(a)                                              8.04(a) - (c)

 (a)(4)                                                  8.04(d)

 (c)(1)                                                  1.02

 (c)(2)                                                  1.02

 (d)(1)                                               7.13; 11.01

 (d)(2)                                               7.13; 11.01

 (d)(3)                                                  2.01

    (e)                                                  1.02

 315(b)                                                  7.02

 316(a)(last                                            1.04(c)
sentence)

(a)(1)(A)                                                6.04

(a)(1)(B)                                                6.05

    (b)                                                  6.06

    (c)                                                  1.04(d)

317(a)(1)                                                6.03

    (b)                                                  7.13

 318(a)                                                  12.06










                        TABLE OF CONTENTS


      Section                                                  Page

                            ARTICLE I

                           DEFINITIONS

      1.01.  Definitions........................................  2
      1.02.  Compliance Certificates and Opinions............... 13
      1.03.  Form of Documents Delivered to Trustee............. 14
      1.04.  Directions of Certificateholders................... 14

                            ARTICLE II

                ORIGINAL ISSUANCE OF CERTIFICATES;
                  ACQUISITION OF EQUIPMENT NOTES

      2.01.  Issuance of Certificates; Acquisition of
              Equipment Notes................................... 16
      2.02.  Acceptance by Trustee.............................. 18
      2.03.  Limitation of Powers............................... 19

                           ARTICLE III

                         THE CERTIFICATES

      3.01.  Title, Form, Denomination and Execution of
              Certificates...................................... 19
      3.02.  Restrictive Legends................................ 20
      3.03.  Authentication of Certificates..................... 22
      3.04.  Transfer and Exchange.............................. 23
      3.05.  Book-Entry Provisions for U.S. Global
              Certificate and Offshore Global Certificates...... 23
      3.06.  Special Transfer Provisions........................ 25
      3.07.  Mutilated, Destroyed, Lost or Stolen
              Certificates...................................... 28
      3.08.  Persons Deemed Owners.............................. 28
      3.09.  Cancellation....................................... 29
      3.10.  Temporary Certificates............................. 29
      3.11.  Limitation of Liability for Payments............... 29



                            ARTICLE IV

                   DISTRIBUTIONS; STATEMENTS TO
                        CERTIFICATEHOLDERS

      4.01.  Certificate Account and Special Payments
              Account........................................... 30





                                ii


      Section                                                  Page


      4.02.  Distributions from Certificate Account and
              Special Payments Account.......................... 30
      4.03.  Statements to Certificateholders................... 32
      4.04.  Investment of Special Payment Moneys............... 33

                            ARTICLE V

                           THE COMPANY

      5.01.  Maintenance of Corporate Existence................. 33
      5.02.  Consolidation, Merger, etc......................... 33

                            ARTICLE VI

                             DEFAULT

      6.01.  Events of Default.................................. 34
      6.02.  [Intentionally omitted.]........................... 37
      6.03.  Judicial Proceedings Instituted by Trustee;
              Trustee May Bring Suit............................ 37
      6.04.  Control by Certificateholders...................... 37
      6.05.  Waiver of Past Defaults............................ 37
      6.06.  Right of Certificateholders to Receive Payments
              Not to Be Impaired................................ 38
      6.07.  Certificateholders May Not Bring Suit Except
              Under Certain Conditions.......................... 38
      6.08.  Remedies Cumulative................................ 39

                           ARTICLE VII

                           THE TRUSTEE

      7.01.  Certain Duties and Responsibilities................ 39
      7.02.  Notice of Defaults................................. 40
      7.03.  Certain Rights of Trustee.......................... 40
      7.04.  Not Responsible for Recitals or Issuance of
              Certificates...................................... 42
      7.05.  May Hold Certificates.............................. 42
      7.06.  Money Held in Trust................................ 42
      7.07.  Compensation and Reimbursement..................... 42
      7.08.  Corporate Trustee Required; Eligibility............ 43
      7.09.  Resignation and Removal; Appointment of
              Successor......................................... 43
      7.10.  Acceptance of Appointment by Successor............. 45
      7.11.  Merger, Conversion, Consolidation or Succession
              to Business....................................... 45
      7.12.  Maintenance of Agencies............................ 46
      7.13.  Money for Certificate Payments to Be Held in
              Trust............................................. 47





                             iii


      Section                                                  Page


      7.14.  Registration of Equipment Notes in Name of
              Subordination Agent............................... 47
      7.15.  Representations and Warranties of Trustee.......... 47
      7.16.  Withholding Taxes; Information Reporting........... 49
      7.17.  Trustee's Liens.................................... 49

                           ARTICLE VIII

         CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE

      8.01.  The Company to Furnish Trustee with Names and
              Addresses of Certificateholders................... 49
      8.02.  Preservation of Information; Communications to
              Certificateholders................................ 50
      8.03.  Reports by Trustee................................. 50
      8.04.  Reports by the Company............................. 50

                            ARTICLE IX

                     SUPPLEMENTAL AGREEMENTS

      9.01.  Supplemental Agreements Without Consent of
              Certificateholders................................ 51
      9.02.  Supplemental Agreements with Consent of
              Certificateholders................................ 52
      9.03.  Documents Affecting Immunity or Indemnity.......... 53
      9.04.  Execution of Supplemental Agreements............... 53
      9.05.  Effect of Supplemental Agreements.................. 53
      9.06.  Conformity with Trust Indenture Act................ 53
      9.07.  Reference in Certificates to Supplemental
              Agreements........................................ 54

                            ARTICLE X

         AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS

      10.01.  Amendments and Supplements to Indentures and
              Other Financing Documents......................... 54

                            ARTICLE XI

                       TERMINATION OF TRUST

      11.01.  Termination of the Trust.......................... 55

                           ARTICLE XII

                     MISCELLANEOUS PROVISIONS

      12.01.  Limitation on Rights of Certificateholders........ 56





                              iv


      Section                                                  Page

      12.02.  Certificates Nonassessable and Fully Paid......... 56
      12.03.  Notices........................................... 56
      12.04.  Governing Law..................................... 57
      12.05.  Severability of Provisions........................ 58
      12.06.  Trust Indenture Act Controls...................... 58
      12.07.  Effect of Headings and Table of Contents.......... 58
      12.08.  Successors and Assigns............................ 58
      12.09.  Benefits of Agreement............................. 58
      12.10.  Legal Holidays.................................... 58
      12.11.  Counterparts...................................... 58
      12.12.  Intention of Parties.............................. 59


Schedule 1  -        Indentures
Schedule 2  -        Financing Agreements


Exhibit A   -        Form of Certificate
Exhibit B   -        Form of Certificate for Unlegended
                     Certificates
Exhibit C   -        Form of Certificate to Be Delivered in
                     Connection with Transfers Pursuant to
                     Regulation S
Exhibit D   -        Form of Certificate to Be Delivered in
                     Connection with Transfers to Non-QIB
                     Accredited Investors







                   PASS THROUGH TRUST AGREEMENT


           This PASS THROUGH TRUST AGREEMENT, dated as of May 20,
1996, between CONTINENTAL AIRLINES, INC., a Delaware corporation,
and WILMINGTON TRUST COMPANY, as Trustee, is made with respect to
the formation of Continental Airlines 1996-2A Pass Through Trust
and the issuance of 7.75% Continental Airlines 1996-2A Pass
Through Certificates representing fractional undivided interests
in the Trust.

           WITNESSETH:

           WHEREAS, (i) the Company, the Owner Trustees and the
Owner Participants (as such terms and certain other capitalized
terms used herein are defined below) have previously entered into
four separate leveraged lease transactions in connection with the
purchase of four Boeing 757-224 aircraft from the manufacturer
(the "Leased Aircraft") and (ii) the Company has previously
purchased one Boeing 737-524 aircraft from the manufacturer (the
"Owned Aircraft"; together with the Leased Aircraft, the
"Aircraft");

           WHEREAS, each Owner Trustee, acting on behalf of the
corresponding Owner Participant, will issue pursuant to an
Indenture, on a non-recourse basis, four series of Equipment
Notes, among other things, to refinance the current indebtedness
of such Owner Trustee originally incurred to finance the purchase
price of the related Leased Aircraft;

           WHEREAS, the Company, will issue pursuant to an
Indenture, on a recourse basis, four series of Equipment Notes,
relating to the Owned Aircraft;

           WHEREAS, the Trustee, upon execution and delivery of
this Agreement, hereby declares the creation of the Trust for the
benefit of the Certificateholders, and the initial
Certificateholders, as the grantors of the Trust, by their
respective acceptances of the Certificates, join in the creation
of this Trust with the Trustee;

           WHEREAS, all Certificates to be issued by the Trust
will evidence fractional undivided interests in the Trust and
will convey no rights, benefits or interests in respect of any
property other than the Trust Property;

           WHEREAS, pursuant to the terms and conditions of this
Agreement and each of the Financing Agreements to be entered into
by the Trustee simultaneously with the execution and delivery of
this Agreement, the Trustee on behalf of the Trust shall purchase
one or more issues of Equipment Notes having the same interest
rate as, and final maturity dates not later than the final
Regular Distribution Date of, the Certificates issued hereunder






and shall hold such Equipment Notes in trust for the benefit of
the Certificateholders;

           WHEREAS, to facilitate the sale of Equipment Notes to,
and the purchase of Equipment Notes by, the Trustee on behalf of
the Trust, the Company has duly authorized the execution and
delivery of this Agreement as the "issuer", as such term is
defined in and solely for purposes of the Securities Act of 1933,
as amended, of the Certificates to be issued pursuant hereto and
as the "obligor", as such term is defined in and solely for
purposes of the Trust Indenture Act of 1939, as amended, with
respect to all such Certificates and is undertaking to perform
certain administrative and ministerial duties hereunder and is
also undertaking to pay the ongoing fees and expenses of the
Trustee;

           WHEREAS, all of the conditions and requirements
necessary to make this Agreement, when duly executed and
delivered, a valid, binding and legal instrument, enforceable in
accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof
have been in all respects duly authorized; and

           WHEREAS, upon issuance of the Exchange Certificates,
if any, or the effectiveness of the Registration Statement, this
Agreement, as amended or supplemented from time to time, will be
subject to the provisions of the Trust Indenture Act of 1939, and
shall, to the extent applicable, be governed by such provisions;

           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 1.01.  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 other terms used herein which are defined in
      the Trust Indenture Act, either directly or by reference

                                 2





      therein, or by the rules promulgated under the Trust
      Indenture Act, have the meanings assigned to them therein;

           (3) all references in this Agreement to designated
      "Articles", "Sections", "Subsections" and other
      subdivisions are to the designated Articles, Sections,
      Subsections and
      other subdivisions of this Agreement;

           (4) 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,
      Subsection or other subdivision; and

           (5) unless the context otherwise requires, whenever
      the words "including", "include" or "includes" are used
      herein, it shall be deemed to be followed by the phrase
      "without limitation".

           Affiliate: Means, with respect to any Person, any
      other Person directly or indirectly controlling or
      controlled by or under common control with such Person,
      provided, however, that neither America West Airlines, Inc.
      nor any of its subsidiaries shall be deemed to be an
      "Affiliate" of the Company for purposes of this Agreement.
      For purposes of this definition, "control" means the power,
      directly or indirectly, to direct 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.

           Agent Members:  Has the meaning specified in Section
      3.05.

           Aircraft:  Has the meaning specified in the first
      recital to this Agreement.

           Authorized Agent:  Means any Paying Agent or Registrar
      for the Certificates.

           Avoidable Tax: Means a state or local tax (i) upon (w)
      the Trust, (x) the Trust Property, (y) Certificateholders
      or (z) the Trustee for which the Trustee is entitled to
      seek reimbursement from the Trust Property, and (ii) which
      would be avoided if the Trustee were located in another
      state, or jurisdiction within a state, within the United
      States. A tax shall not be an Avoidable Tax if the Company
      or any Owner Trustee shall agree to pay, and shall pay,
      such tax.


                                 3





           Business Day: Means any day other than a Saturday, a
      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 or any Loan Trustee maintains
      its Corporate Trust Office or receives and disburses funds.

           Cedel:  Means Cedel Bank societe anonyme.

           Certificate:  Means any one of the Initial Certificates
      or Exchange Certificates and any such Certificates issued in
      exchange therefor or replacement thereof pursuant to this
      Agreement.

           Certificate Account:  Means the account or accounts
      created and maintained  pursuant to Section 4.01(a).

           Certificateholder or Holder:  Means the Person in whose
      name a Certificate is registered in the Register.

           Company: Means Continental Airlines, Inc., a Delaware
      corporation, or its successor in interest pursuant to
      Section 5.02, or any other obligor (within the meaning of
      the Trust Indenture Act) with respect to the Certificates.

           Controlling Party:  Has the meaning specified in the
      Intercreditor Agreement.

           Corporate Trust Office: With respect to the Trustee or
      any Loan Trustee, means the office of such trustee in the
      city at which at any particular time its corporate trust
      business shall be principally administered.

           Cut-off Date:  Means August 2, 1996.

           Delayed Equipment Notes:  Means the Equipment Notes to
      be issued on the applicable Transfer Date in respect of the
      two Leased Aircraft bearing Federal Aviation Registration
      Marks of N12114 and N14115.

           Depositary:  Means the Depository Trust Company, its
      nominees and their respective successors.

           Direction:  Has the meaning specified in
      Section 1.04(a).

           Distribution Date:  Means any Regular Distribution Date
      or Special Distribution Date.

           Equipment Notes:  Means the equipment notes issued
      under the Indentures.

                                 4






           ERISA:  Means the Employee Retirement Income Security
      Act of 1974, as amended from time to time, or any successor
      federal statute.

           Escrow Account:  Has the meaning specified in
      Section 2.01(b).

           Escrowed Funds:  Has the meaning specified in
      Section 2.01(b).

           Euroclear:  Means the Euroclear System.

           Event of Default: Means an Indenture Default under any
      Indenture pursuant to which Equipment Notes held by the
      Trust were issued.

           Exchange Certificates: Means the certificates
      substantially in the form of Exhibit A hereto issued in
      exchange for the Initial Certificates pursuant to the
      Registration Rights Agreement and authenticated hereunder.

           Exchange Offer Registration Statement:  Means the
      Exchange Offer Registration Statement defined in the
      Registration Rights Agreement.

           Financing Agreements: Means each of the four separate
      Refunding Agreements and the Note Purchase Agreement, in
      each case, dated the date hereof, listed on Schedule 2
      hereto, providing for, among other things, the purchase of
      Equipment Notes by the Trustee on behalf of the Trust, as
      the same may be amended, supplemented or otherwise modified
      from time to time in accordance with its terms.

           Financing Documents: With respect to any Equipment
      Note, means (i) the related Indenture and Financing
      Agreement and (ii) in the case of any Equipment Note
      related to a Leased Aircraft, the Lease and the
      Participation Agreement relating to such Leased Aircraft.

           Fractional Undivided Interest:  Means the fractional
      undivided interest in the Trust that is evidenced by a
      Certificate.

           Global Certificates:  Has the meaning assigned to such
      term in Section 3.01.

           Indentures: Means each of the four separate Amended
      and Restated Trust Indentures and Mortgages and the Trust
      Indenture and Mortgage listed on Schedule 1 hereto, in each
      case as the same may be amended, supplemented or otherwise
      modified from time to time in accordance with its terms.

                                 5






           Indenture Default:  With respect to any Indenture,
      means any Event of Default (as such term is defined in such
      Indenture).

           Initial Certificates:  Means the certificates issued
      and authenticated hereunder substantially in the form of
      Exhibit A hereto other than the Exchange Certificates.

           Initial Purchasers:  Means, collectively, Morgan
      Stanley & Co. Incorporated, CS First Boston Corporation and
      Fieldstone FPCG Services, L.P.

           Initial Regular Distribution Date:  Means the first
      Regular Distribution Date on which a Scheduled Payment is to
      be made.

           Institutional Accredited Investor: Means an
      institutional investor that is an "accredited investor"
      within the meaning set forth in Rule 501(a)(1), (2), (3) or
      (7) of Regulation D under the Securities Act.

           Intercreditor Agreement: Means the Intercreditor
      Agreement dated the date hereof among the Trustee, the
      Other Trustees, the Liquidity Provider, the liquidity
      provider, if any, relating to the Certificates issued under
      (and as defined in) each of the Other Pass Through Trust
      Agreements, and Wilmington Trust Company, as Subordination
      Agent thereunder, as amended, supplemented or otherwise
      modified from time to time in accordance with its terms.

           Issuance Date:  Means the date of the issuance of the
      Initial Certificates.

           Lease: Means, with respect to each Leased Aircraft,
      the lease between an Owner Trustee, as the lessor, and the
      Company, as the lessee, referred to in the related
      Indenture, as such lease may be amended, supplemented or
      otherwise modified in accordance with its terms.

           Leased Aircraft:  Has the meaning specified in the
      first recital to this Agreement.

           Liquidity Facility: Means the Revolving Credit
      Agreement dated the date hereof relating to the
      Certificates, between the Liquidity Provider and the
      Subordination Agent, as amended, replaced, supplemented or
      otherwise modified from time to time in accordance with its
      terms and the terms of the Intercreditor Agreement.

           Liquidity Provider:  Means, initially, De Nationale
      Investeringsbank N.V.,  and any replacement or successor

                                 6





      therefor appointed in accordance with the Liquidity Facility
      and the Intercreditor Agreement.

           Loan Trustee: With respect to any Equipment Note or
      the Indenture applicable thereto, means the bank or trust
      company designated as indenture trustee under such
      Indenture, together with any successor to such Loan Trustee
      appointed pursuant thereto.

           Non-U.S. Person:  Means a Person that is not a "U.S.
      person", as defined in Regulation S.

           Officer's Certificate: Means a certificate signed, (a)
      in the case of the Company, by (i) the Chairman or Vice
      Chairman of the Board of Directors, the President, any
      Executive Vice President, any Senior Vice President or the
      Treasurer of the Company, signing alone or (ii) any Vice
      President of the Company signing together with the
      Secretary, the Assistant Secretary, the Treasurer or any
      Assistant Treasurer of the Company or, (b) in the case of
      an Owner Trustee or a Loan Trustee, a Responsible Officer
      of such Owner Trustee or such Loan Trustee, as the case may
      be.

           Offshore Certificates Exchange Date:  Has the meaning
      specified in Section 3.01.

           Offshore Global Certificates:  Has the meaning assigned
      to such term in Section 3.01.

           Offshore Physical Certificates:  Has the meaning
      assigned to such term in Section 3.01.

           Opinion of Counsel: Means a written opinion of legal
      counsel who (a) in the case of counsel for the Company may
      be (i) a senior attorney of the Company one of whose
      principal duties is furnishing advice as to legal matters,
      (ii) Cleary, Gottlieb, Steen & Hamilton, (iii) Hughes
      Hubbard & Reed, or (iv) such other counsel designated by
      the Company and reasonably acceptable to the Trustee and
      (b) in the case of counsel for any Owner Trustee or any
      Loan Trustee may be such counsel as may be designated by
      any of them whether or not such counsel is an employee of
      any of them, and who shall be reasonably acceptable to the
      Trustee.

           Other Pass Through Trust Agreements:  Means each of the
      three other Continental Airlines 1996-2 Pass Through Trust
      Agreements relating to Continental Airlines 1996-2B Pass
      Through Trust, Continental Airlines 1996-2C Pass Through
      Trust and Continental Airlines 1996-2D Pass Through Trust,
      dated the date hereof.


                                 7





           Other Trustees:  Means the trustee under the Other Pass
      Through Trust Agreements, and any successor or other trustee
      appointed as provided therein.

           Outstanding:  When used with respect to Certificates,
      means, as of the date of determination, all Certificates
      theretofore authenticated and delivered under this
      Agreement, except:

                (i)   Certificates theretofore cancelled by the
           Registrar or delivered to the Trustee or the 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
           hereof has been theretofore deposited with the Trustee
           in trust for the Holders of such Certificates as
           provided in Section 4.01 pending distribution of such
           money to such Certificateholders pursuant to payment
           of such final distribution; and

                (iii) Certificates in exchange for or in lieu of
           which other Certificates have been authenticated and
           delivered pursuant to this Agreement.

           Owned Aircraft:  Has the meaning specified in the first
      recital to this Agreement.

           Owner Participant: With respect to any Equipment Note
      relating to a Leased Aircraft, means the "Owner
      Participant" as referred to in the Indenture pursuant to
      which such Equipment Note is issued and any permitted
      successor or assign of such Owner Participant; and Owner
      Participants at any time of determination means all of the
      Owner Participants thus referred to in the Indentures.

           Owner Trustee: With respect to any Equipment Note
      relating to a Leased Aircraft, means the "Owner Trustee",
      as referred to in the Indenture pursuant to which such
      Equipment Note is issued, not in its individual capacity
      but solely as trustee; and Owner Trustees means all of the
      Owner Trustees party to any of the Indentures.

           Participation Agreement:  With respect to any Leased
      Aircraft, means the Participation Agreement referred to in
      the related Indenture.

           Paying Agent:  Means the paying agent maintained and
      appointed for the Certificates pursuant to Section 7.12.


                                 8





           Permanent Offshore Global Certificates:  Has the
      meaning specified in Section 3.01.

           Permanent Offshore Physical Certificates:  Has the
      meaning specified in Section 3.01.

           Permitted Investments: Means obligations of the United
      States of America or agencies or instrumentalities thereof
      the payment of which is backed by the full faith and credit
      of the United States of America and which mature in not
      more than 60 days after the date of acquisition thereof or
      such lesser time as is required for the distribution of any
      Special Payments on a Special Distribution Date.

           Person: Means any person, including any individual,
      corporation, partnership, joint venture, association,
      joint-stock company, trust, trustee, unincorporated
      organization, or government or any agency or political
      subdivision thereof.

           Physical Certificates:  Has the meaning specified in
      Section 3.01.

           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 such
      Certificates other than payments made in respect of
      interest or premium thereon or reimbursement of any costs
      or expenses incurred in connection therewith. The Pool
      Balance as of any Distribution Date shall be computed after
      giving effect to the payment of principal, if any, on the
      Equipment Notes or other Trust Property held in such Trust
      and the distribution thereof to be made on such
      Distribution Date.

           Pool Factor: Means, as of any date, the quotient
      (rounded to the seventh decimal place) computed by dividing
      (i) the Pool Balance as at such date by (ii) the original
      aggregate face amount of the Certificates. The Pool Factor
      as of any Distribution Date shall be computed after giving
      effect to the payment of principal, if any, on the
      Equipment Notes or other Trust Property and the
      distribution thereof to be made on such Distribution Date.

           Postponed Notes: Means (i) the Delayed Equipment Notes
      and (ii) the Equipment Notes to be held in the Trust as to
      which a Postponement Notice shall have been delivered
      pursuant to Section 2.01(b).

           Postponement Notice:  Means an Officer's Certificate of
      the Company  (1) requesting that the Trustee temporarily
      postpone the purchase pursuant to one or more of the

                                 9





      Financing Agreements of certain of the Equipment Notes to a
      date which is later than the Issuance Date, (2) identifying
      the amount of the purchase price of each such Equipment
      Note and the aggregate purchase price for all such
      Equipment Notes, (3) setting forth the reasons for such
      postponement and (4) with respect to each such Equipment
      Note, either (a) setting or resetting a new Transfer Date
      (which shall be on or prior to the applicable Cut-off Date)
      for payment by the Trustee of such purchase price and
      issuance of the related Equipment Note, or (b) indicating
      that such new Transfer Date (which shall be on or prior to
      the applicable Cut-off Date) will be set by subsequent
      written notice not less than one Business Day prior to such
      new Transfer Date.

           Private Placement Legend:  Has the meaning specified in
      Section 3.02.

           PTC Event of Default: Means any failure to pay within
      10 Business Days of the due date thereof: (i) the
      outstanding Pool Balance on January 2, 2016 or (ii)
      interest due on the Certificates on any Distribution Date
      (unless the Subordination Agent shall have made an Interest
      Drawing (as defined in the Intercreditor Agreement) with
      respect thereto in an amount sufficient to pay such
      interest and shall have distributed such amount to the
      Certificateholders).

           QIB:  Means a qualified institutional buyer as defined
      in Rule 144A.

           Record Date: Means (i) for Scheduled Payments to be
      distributed on any Regular Distribution Date, other than
      the final distribution, the 15th day (whether or not a
      Business Day) preceding such Regular Distribution Date, and
      (ii) for Special Payments to be distributed on any Special
      Distribution Date, other than the final distribution, the
      15th day (whether or not a Business Day) preceding such
      Special Distribution Date.

           Refunding Agreements:  Has the meaning specified in the
Indentures.

           Register and Registrar:  Mean the register maintained
      and the registrar appointed pursuant to Sections 3.04
      and 7.12.

           Registration Rights Agreement:  Means the Registration
      Rights Agreement dated May 20, 1996, among the Initial
      Purchasers, the Trustee, the Other Trustees and the Company,
      as amended, supplemented or otherwise modified from time to
      time in accordance with its terms.


                                10





           Registration Statement:  Means the Registration
      Statement defined in the Registration Rights Agreement.

           Regular Distribution Date: With respect to
      distributions of Scheduled Payments in respect of the
      Certificates, means each date designated as a Regular
      Distribution Date in this Agreement, until payment of all
      the Scheduled Payments to be made under the Equipment Notes
      held in the Trust have been made; 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.

           Regulation S: Means Regulation S under the Securities
      Act or any successor regulation thereto.

           Responsible Officer: With respect to the Trustee, any
      Loan Trustee and any Owner Trustee, means any officer in
      the Corporate Trust Office of the Trustee, Loan Trustee or
      Owner 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.

           Rule 144A: Means Rule 144A under the Securities Act
      and any successor rule thereto.

           Scheduled Payment: With respect to any Equipment Note,
      means (i) any payment of principal and interest on such
      Equipment Note (other than any such payment which is not in
      fact received by the Subordination Agent within five days
      of the date on which such payment is scheduled to be made)
      due from the obligor thereon or (ii) any payment of
      interest on the Certificates with funds drawn under the
      Liquidity Facility, 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;
      provided that any payment of principal, premium, if any, or
      interest resulting from the redemption or purchase of any
      Equipment Note shall not constitute a Scheduled Payment.

           SEC: Means the Securities and Exchange Commission, as
      from time to time constituted or created under the
      Securities Exchange Act of 1934, as amended, or, if at any
      time after the execution of this instrument such Commission
      is not existing and performing the duties now assigned to
      it under the Trust Indenture Act, then the body performing
      such duties on such date.

                                11






           Securities Act:  Means the United States Securities Act
      of 1933, as amended from time to time, or any successor
      thereto.

           Special Distribution Date: Means each date on which a
      Special Payment is to be distributed as specified in this
      Agreement; 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.

           Special Payment: Means (i) 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), (ii) the amounts required to be
      distributed pursuant to the last paragraph of Section
      2.01(b) or (iii) the amounts required to be distributed
      pursuant to the penultimate paragraph of Section 2.01(b).

           Special Payments Account:  Means the account or
      accounts created and maintained pursuant to Section 4.01(b).

           Specified Investments: Means, with respect to
      investments to be made with Escrowed Funds pursuant to
      Section 2.01(b) hereof, (i) obligations of, or guaranteed
      by, the United States Government or agencies thereof, (ii)
      open market commercial paper of any corporation
      incorporated under the laws of the United States of America
      or any State thereof rated at least P-2 or its equivalent
      by Moody's Investors Service, Inc. or at least A-2 or its
      equivalent by Standard & Poor's Ratings Group, (iii)
      certificates of deposit issued by commercial banks
      organized under the laws of the United States or of any
      political subdivision thereof having a combined capital and
      surplus in excess of $100,000,000, which banks or their
      holding companies have a short-term deposit rating of P1 by
      Moody's Investors Service, Inc. or its equivalent by
      Standard & Poor's Ratings Group; provided, however, that
      the aggregate amount at any one time so invested in
      certificates of deposit issued by any one bank shall not
      exceed 5% of such bank's capital and surplus, (iv) U.S.
      dollar denominated offshore certificates of deposit issued
      by, or offshore time deposits with, any commercial bank
      described in clause (iii) above or any subsidiary thereof
      and (v) repurchase agreements with any financial
      institution having combined capital and surplus of at least
      $100,000,000 with respect to any of the obligations
      described in clauses (i) through (iv) above as collateral;
      provided further that if all of the above investments are
      unavailable, all amounts to be invested may be used to

                                12





      purchase Federal Funds from an entity described in
      clause (iii) above.

           Subordination Agent:  Has the meaning specified in the
      Intercreditor Agreement.

           Temporary Offshore Global Certificates:  Has the
      meaning specified in Section 3.01.

           Transfer Date:  Has the meaning assigned to the term
      "Refunding Date" or "Funding Date" in each Financing
      Agreement.

           Triggering Event:  Has the meaning assigned to such
      term in the Intercreditor Agreement.

           Trust:  Means the trust created by this Agreement, the
      estate of which consists of the Trust Property.

           Trust Indenture Act:  Except as otherwise provided in
      Section 9.06, means the United States Trust Indenture Act of
      1939 as in force at the date hereof.

           Trust Property: Means (i) the Equipment Notes held as
      the property of the Trust and all monies at any time paid
      thereon and all monies due and to become due thereunder,
      (ii) funds from time to time deposited in the Escrow
      Account, the Certificate Account and the Special Payments
      Account, and (iii) all rights of the Trust and the Trustee,
      on behalf of the Trust, under the Intercreditor Agreement
      and the Liquidity Facility, including, without limitation,
      all rights to receive certain payments thereunder, and all
      monies paid to the Trustee on behalf of the Trust pursuant
      to the Intercreditor Agreement or the Liquidity Facility.

           Trustee:  Means Wilmington Trust Company, or its
      successor in interest, and any successor or other trustee
      appointed as provided herein.

           Trustee's Lien:  Has the meaning specified in Section
      7.17.

           U.S. Global Certificate:  Has the meaning specified in
      Section 3.01.

           U.S. Physical Certificates:  Has the meaning specified
      in Section 3.01.

           Section 1.02.  Compliance Certificates and Opinions.
Upon any application or request by the Company, any Owner Trustee
or any Loan Trustee to the Trustee to take any action under any

                                13





provision of this Agreement, the Company, such Owner Trustee or
such Loan Trustee, as the case may be, shall furnish to the
Trustee (i) an Officer's Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in
this Agreement relating to the proposed action have been complied
with and (ii) an Opinion of Counsel stating that in the opinion
of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or
request as to which the furnishing of such documents is
specifically required by any provision of this Agreement relating
to such particular application or request, no additional
certificate or opinion need be furnished.

           Every certificate or opinion with respect to
compliance with a condition or covenant provided for in this
Agreement (other than a certificate provided pursuant to Section
8.04(d)) shall include:

           (1) a statement that each individual signing such
      certificate or opinion has read such covenant or condition
      and the definitions in this Agreement relating thereto;

           (2) a brief statement as to the nature and scope of
      the examination or investigation upon which the statements
      or opinions contained in such certificate or opinion are
      based;

           (3) a statement that, in the opinion of each such
      individual, he has made such examination or investigation
      as is necessary to enable him to express an informed
      opinion as to whether or not such covenant or condition has
      been complied with; and

           (4) a statement as to whether, in the opinion of each
      such individual, such condition or covenant has been
      complied with.

           Section 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by
the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters and any such
Person may certify or give an opinion as to such matters in one
or several documents.

           Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Agreement

                                14





or, in respect of the Certificates, this Agreement, they may, but
need not, be consolidated and form one instrument.

           Section 1.04. Directions of Certificateholders. (a)
Any direction, consent, request, demand, authorization, notice,
waiver or other action provided by this Agreement to be given or
taken by Certificateholders (a "Direction") may be embodied in
and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent
or proxy duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective
when such instrument or instruments are delivered to the Trustee
and, where it is hereby expressly required pursuant to this
Agreement, to the Company or any Loan Trustee. Proof of execution
of any such instrument or of a writing appointing any such agent
or proxy shall be sufficient for any purpose of this Agreement
and conclusive in favor of the Trustee, the Company and any Loan
Trustee, if made in the manner provided in this Section.

           (b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the
certificate of any notary public or other officer of any
jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument
acknowledged to him the execution thereof, or by an affidavit of
a witness to such execution sworn to before any such notary or
such other officer and where such execution is by an officer of a
corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such
certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing
the same, may also be proved in any other reasonable manner which
the Trustee deems sufficient.

           (c) In determining whether the Certificateholders of
the requisite Fractional Undivided Interests of Certificates
Outstanding have given any Direction under this Agreement,
Certificates owned by the Company or any Affiliate thereof shall
be disregarded and deemed not to be Outstanding for purposes of
any such determination. In determining whether the Trustee shall
be protected in relying upon any such Direction, only
Certificates which the Trustee knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, (i) if any such
Person owns 100% of the Certificates Outstanding, such
Certificates shall not be so disregarded, and (ii) if any amount
of Certificates so owned by any such Person have been pledged in
good faith, such Certificates shall not be disregarded if the
pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates and
that the pledgee is not the Company or any Affiliate thereof.

                                15






           (d) The Company may at its option, by delivery of an
Officer's Certificate to the Trustee, set a record date to
determine the Certificateholders entitled to give any Direction.
Notwithstanding Section 316(c) of the Trust Indenture Act, such
record date shall be the record date specified in such Officer's
Certificate, which shall be a date not more than 30 days prior to
the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such Direction may be
given before or after such record date, but only the
Certificateholders of record at the close of business on such
record date shall be deemed to be Certificateholders for the
purposes of determining whether Certificateholders of the
requisite proportion of Outstanding Certificates have authorized
or agreed or consented to such Direction, and for that purpose
the Outstanding Certificates shall be computed as of such record
date; provided that no such Direction by the Certificateholders
on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Agreement not
later than one year after such record date.

           (e) Any Direction by the Holder of any Certificate
shall bind the Holder of every Certificate issued upon the
transfer thereof or in exchange therefor or in lieu thereof,
whether or not notation of such Direction is made upon such
Certificate.

           (f) Except as otherwise provided in Section 1.04(c),
Certificates owned by or pledged to any Person shall have an
equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among
all of the Certificates.


                            ARTICLE II

                ORIGINAL ISSUANCE OF CERTIFICATES;
                  ACQUISITION OF EQUIPMENT NOTES

           Section 2.01. Issuance of Certificates; Acquisition of
Equipment Notes. (a) The Trustee is hereby directed to execute
and deliver the Intercreditor Agreement, the Registration Rights
Agreement and each of the Financing Agreements on or prior to the
Issuance Date, each in the form delivered to the Trustee by the
Company. Upon request of the Company and the satisfaction of the
closing conditions specified in each of the Financing Agreements,
the Trustee shall execute, deliver and authenticate Certificates
equalling in the aggregate the aggregate principal amount of the
Equipment Notes to be purchased by the Trustee pursuant to each
of the Financing Agreements on the Transfer Date, and evidencing
the entire ownership interest in the Trust. The Trustee shall
issue and sell such Certificates, in authorized denominations and

                                16





in such Fractional Undivided Interests, so as to result in the
receipt by the Trustee of consideration in an amount equal to the
aggregate principal amount of such Equipment Notes and,
concurrently therewith, the Trustee shall purchase, pursuant to
the terms and conditions of the Financing Agreements, the
Equipment Notes at a purchase price equal to the amount of such
consideration so received. Except as provided in Sections 3.04
and 3.07 hereof, the Trustee shall not execute, authenticate or
deliver Certificates in excess of the aggregate amount specified
in this paragraph. The provisions of this Subsection (a) are
subject to the provisions of Subsection (b) below.

           (b) On or prior to the Issuance Date, the Company may
deliver to the Trustee a Postponement Notice relating to one or
more Postponed Notes (other than the Delayed Equipment Notes)
(which Postponement Notice may be given by the Company only if
one or more conditions to the purchase of such Postponed Notes by
the Trustee shall not have been satisfied or waived pursuant to
the related Financing Agreement). The Trustee shall postpone the
purchase of the Postponed Notes from the consideration received
from the sale of Certificates and shall promptly deposit funds in
an amount equal to the purchase price of such Postponed Notes
(the "Escrowed Funds") into an escrow account (the "Escrow
Account") with the Trustee to be maintained as a part of the
Trust. The Escrowed Funds so deposited shall be invested by the
Trustee at the direction and risk of the Company in Specified
Investments (i) maturing no later than any scheduled Transfer
Date relating to the Postponed Notes or (ii) if no such Transfer
Date has been scheduled, maturing on the next Business Day, or
(iii) if the Company has given notice to the Trustee that any
Postponed Notes will not be issued, with respect to the portion
of the Escrowed Funds relating to such Postponed Notes, maturing
on the next applicable Special Distribution Date, if such
investments are reasonably available for purchase. The Trustee
shall make withdrawals from the Escrow Account only as provided
in this Agreement. Upon request of the Company on one or more
occasions and the satisfaction of the closing conditions
specified in the applicable Financing Agreements on or prior to
the Cut-off Date, the Trustee shall purchase the applicable
Postponed Notes with the Escrowed Funds withdrawn from the Escrow
Account. The purchase price shall equal the principal amount of
such Postponed Notes.

           The Trustee shall hold all Specified Investments until
the maturity thereof and will not sell or otherwise transfer
Specified Investments. If Specified Investments held in an Escrow
Account mature prior to any applicable Transfer Date, any
proceeds received on the maturity of such Specified Investments
(other than any earnings thereon) shall be reinvested by the
Trustee at the direction and risk of the Company in Specified
Investments maturing as provided in the preceding paragraph. The

                                17





Company shall pay to the Trustee for deposit to the Escrow
Account an amount equal to any losses on such Specified
Investments as incurred.

           On the Initial Regular Distribution Date, the Company
will pay (in immediately available funds) to the Trustee an
amount equal to (i) the sum of (A) the interest that would have
accrued on any Postponed Notes purchased on or prior to the
Initial Regular Distribution Date if such Postponed Notes had
been purchased on the Issuance Date, from and including the
Issuance Date to but excluding the date of such purchase and (B)
the interest that would have accrued on any Postponed Notes not
purchased on or prior to the Initial Regular Distribution Date
(other than any Postponed Notes for which a Special Distribution
Date specified in the immediately succeeding paragraph has
occurred on or prior to the Initial Regular Distribution Date) if
such Postponed Notes had been purchased on the Issuance Date,
from and including the Issuance Date to but excluding the Initial
Regular Distribution Date, minus (ii) the earnings on Specified
Investments received by the Trustee from and including the later
of the Issuance Date or the date immediately preceding the
Initial Regular Distribution Date on which an amount has been
paid pursuant to the immediately succeeding paragraph to but
excluding the Initial Regular Distribution Date. On the second
Regular Distribution Date, the Company will pay (in immediately
available funds) to the Trustee an amount equal to the interest
that would have accrued on any Postponed Notes purchased after
the Initial Regular Distribution Date and on or prior to the
Cut-off Date if such Postponed Notes had been purchased on the
Initial Regular Distribution Date, from and including the Initial
Regular Distribution Date to but excluding the date of such
purchase, minus (ii) the earnings on Specified Investments
received by the Trustee from and including the later of the
Initial Regular Distribution Date or the date immediately
preceding the second Regular Distribution Date on which an amount
has been paid pursuant to either of the two succeeding paragraphs
to but excluding the second Regular Distribution Date.

           If the Company notifies the Trustee prior to the
Cutoff Date that any Postponed Notes will not be issued on or
prior to the Cut-off Date for any reason, on the next Special
Distribution Date occurring more than 20 days following the date
of such notice (i) the Company shall pay to the Trustee for
deposit in the Special Payments Account, in immediately available
funds, an amount equal to the sum of (A) the interest that would
have accrued on the Postponed Notes designated in such notice at
a rate equal to the interest rate applicable to the Certificates
from and including the Issuance Date (if such Special
Distribution Date shall occur on or prior to the Initial Regular
Distribution Date) or the Initial Regular Distribution Date (if

                                18





such Special Distribution Date occurs after the Initial Regular
Distribution Date) to but excluding such Special Distribution
Date and (B) if any such Postponed Notes shall be Delayed
Equipment Notes and shall not be issued for any reason other than
the occurrence of an Event of Loss (as defined in the related
Indenture) with respect to the Aircraft relating to such Delayed
Equipment Notes, 2% of the aggregate principal amount of such
Delayed Equipment Notes and (ii) the Trustee shall transfer an
amount equal to that amount of Escrowed Funds that would have
been used to purchase the Postponed Notes designated in such
notice plus the amount paid by the Company pursuant to the
immediately preceding clause (i) to the Special Payments Account
for distribution as a Special Payment in accordance with the
provisions hereof.

           If, on the Cut-off Date, an amount equal to less than
all of the Escrowed Funds (other than Escrowed Funds referred to
in the immediately preceding paragraph) has been used to purchase
Postponed Notes, on the next Special Distribution Date occurring
more than 20 days following the Cut-off Date (i) the Company
shall pay to the Trustee for deposit in the Special Payments
Account, in immediately available funds, an amount equal to the
sum of (A) the interest that would have accrued on Postponed
Notes originally contemplated to be purchased with such unused
Escrowed Funds (other than Escrowed Funds referred to in the
immediately preceding paragraph) but not so purchased at a rate
equal to the interest rate applicable to the Certificates from
and including the Initial Regular Distribution Date to but
excluding such Special Distribution Date and (B) if any such
Postponed Notes shall be Delayed Equipment Notes and shall not
have been purchased for any reason other than the occurrence of
an Event of Loss (as defined in the related Indenture) with
respect to the Aircraft relating to such Delayed Equipment Notes,
2% of the aggregate principal amount of such Delayed Equipment
Notes and (ii) the Trustee shall transfer such unused Escrowed
Funds and the amount paid by the Company pursuant to the
immediately preceding clause (i) to the Special Payments Account
for distribution as a Special Payment in accordance with the
provisions hereof.

           Section 2.02. Acceptance by Trustee. The Trustee, upon
the execution and delivery of this Agreement, acknowledges its
acceptance of all right, title and interest in and to the
Equipment Notes acquired pursuant to Section 2.01 hereof and the
Financing Agreements and declares that the Trustee holds and will
hold such right, title and interest, together with all other
property constituting the Trust Property, for the benefit of all
then present and future Certificateholders, upon the trusts
herein set forth. Subject to Section 7.14, the Trustee shall take
all actions reasonably necessary to effect the registration of
all such Equipment Notes in the name of the Subordination

                                19





Agent. By its payment for and acceptance of each Certificate
issued to it under this Agreement, each initial Certificateholder
as grantor of the Trust thereby joins in the creation and
declaration of the Trust.

           Section 2.03. Limitation of Powers. The Trust is
constituted solely for the purpose of making the investment in
the Equipment Notes, and, except as set forth herein, the Trustee
shall not be authorized or empowered to acquire any other
investments or engage in any other activities and, in particular,
the Trustee shall not be authorized or empowered to do anything
that would cause such Trust to fail to qualify as a "grantor
trust" for federal income tax purposes (including as subject to
this restriction, acquiring any Aircraft (as defined in the
respective Indentures) by bidding such Equipment Notes or
otherwise, or taking any action with respect to any such Aircraft
once acquired).


                           ARTICLE III

                         THE CERTIFICATES

           Section 3.01. Title, Form, Denomination and Execution
of Certificates. (a) The Initial Certificates shall be known as
the "7.75% 1996-2A Initial Pass Through Certificates" and the
Exchange Certificates shall be known as the "7.75% 1996-2A
Exchange Pass Through Certificates", in each case, of the Trust.
Each Certificate will represent a fractional undivided interest
in the Trust and shall be substantially in the form set forth as
Exhibit A hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted
by this Agreement and may have such letters, numbers or other
marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be
determined by the officers executing such Certificates, as
evidenced by their execution of the Certificates. Any portion of
the text of any Certificate may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the
Certificate.

           (b) The Initial Certificates shall be issued only in
fully registered form without coupons and only in denominations
of $100,000 or integral multiples of $1,000 in excess thereof,
except that one Certificate may be issued in a denomination of
less than $100,000. The Exchange Certificates will be issued in
denominations of $1,000 or integral multiples thereof. Each
Certificate shall be dated the date of its authentication. The
aggregate Fractional Undivided Interest of Certificates shall not
at any time exceed $82,513,000.

                                20






           (c) Initial Certificates offered and sold in reliance
on Rule 144A shall be issued initially in the form of a single
permanent global Certificate in registered form, substantially in
the form set forth as Exhibit A hereto (the "U.S. Global
Certificate"), duly executed and authenticated by the Trustee as
hereinafter provided. The U.S. Global Certificate will be
registered in the name of a nominee for the Depositary and
deposited with the Trustee, as custodian for the Depositary. The
aggregate principal amount of the U.S. Global Certificate may
from time to time be increased or decreased by adjustments made
on the records of the Depositary or its nominee, or of the
Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.

           (d) Initial Certificates offered and sold in offshore
transactions in reliance on Regulation S shall be issued
initially in the form of a single temporary global Certificate in
registered form, substantially in the form set forth as Exhibit A
hereto (the "Temporary Offshore Global Certificate") duly
executed and authenticated by the Trustee as hereinafter
provided. The Temporary Offshore Global Certificates will be
registered in the name of a nominee of the Depositary for credit
to the account of the Agent Members acting as depositaries for
Euroclear and Cedel and deposited with the Trustee as custodian
for the Depositary. At any time following June 29, 1996 (the
"Offshore Certificates Exchange Date"), upon receipt by the
Trustee of a certificate substantially in the form of Exhibit B
hereto, a single permanent global Certificate in registered form
substantially in the form set forth in Exhibit A (the "Permanent
Offshore Global Certificate"; and together with the Temporary
Offshore Global Certificate, the "Offshore Global Certificates"),
duly executed and authenticated by the Trustee as hereinafter
provided, shall be registered in the name of a nominee for the
Depositary and deposited with the Trustee, as custodian for the
Depositary, and the Registrar shall reflect on its books and
records the date of such transfer and a decrease in the principal
amount of any Temporary Offshore Global Certificate in an amount
equal to the principal amount of the beneficial interest in such
Temporary Offshore Global Certificate transferred. The U.S.
Global Certificate and the Offshore Global Certificates are
sometimes referred to as the "Global Certificates".

           (e)  Initial Certificates offered and sold to
Institutional Accredited Investors shall be issued in the form of
permanent certificated Certificates in registered form in
substantially the form set forth as Exhibit A hereto (the "U.S.
Physical Certificates").  Certificates issued pursuant to Section
3.05(b) in exchange for interests in any Offshore Global
Certificate shall be in the form of permanent certificated
Certificates in registered form substantially in the form set
forth in Exhibit A (the "Offshore Physical Certificates").  The

                                21





Offshore Physical Certificates and U.S. Physical Certificates are
sometimes collectively herein referred to as the "Physical
Certificates".

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

           Section 3.02. Restrictive Legends. (a) Subject to
Section 3.06, unless and until (i) an Initial Certificate is sold
under an effective Registration Statement or (ii) an Initial
Certificate is exchanged for an Exchange Certificate pursuant to
an effective Exchange Offer Registration Statement, in each case
as provided for in the Registration Rights Agreement, each Global
Certificate (other than the Permanent Offshore Global
Certificate) and each U.S. Physical Certificate shall bear the
following legend (the "Private Placement Legend") on the face
thereof:

           THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
      U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
      ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN
      THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
      ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
      BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
      (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
      RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN
      INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
      501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
      SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR
      (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
      CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
      REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT
      WILL NOT WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
      ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
      CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE
      TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR
      OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO A
      QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
      UNDER THE SECURITIES ACT, (B) INSIDE THE UNITED STATES TO
      AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR
      MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT,
      PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED
      LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
      RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS CERTIFICATE 
      (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), 
      (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN 
      COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D)

                                22





      PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
      RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E)
      PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
      SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH
      PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE
      SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION
      WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN THREE YEARS
      AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS
      CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS
      HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
      AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE
      APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
      THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
      THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
      TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
      MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
      ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
      REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
      THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
      RESTRICTIONS.

           (b) Each Global Certificate shall also bear the
following legend on the face thereof:

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

      TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
      TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR
      TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
      TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE
      LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
      RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE
      PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.

           Section 3.03. Authentication of Certificates. (a) The
Trustee shall duly execute, authenticate and deliver Certificates
in authorized denominations equalling in the aggregate the
aggregate principal amount of the Equipment Notes to be purchased
by the Trustee pursuant to the Financing Agreements and
evidencing the entire ownership of the Trust.


                                23





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

           Section 3.04. Transfer and Exchange. (a) The Trustee
shall cause to be kept at the office or agency to be maintained
by it in accordance with the provisions of Section 7.12 of this
Agreement a register (the "Register") for the Certificates in
which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of the
Certificates and of transfers and exchanges of the Certificates
as herein provided. The Trustee shall initially be the registrar
(the "Registrar") for the purpose of registering the Certificates
and transfers and exchanges of the Certificates as herein
provided. A Certificateholder may transfer a Certificate by
written application to the Registrar stating the name of the
proposed transferee and otherwise complying with the terms of
this Agreement, including providing a written certificate or
other evidence of compliance with any restrictions on transfer.
No such transfer shall be effected until, and such transferee
shall succeed to the rights of a Certificateholder only upon,
final acceptance and registration of the transfer by the
Registrar in the Register. Prior to the registration of any
transfer by a Certificateholder as provided herein, the Trustee
shall treat the person in whose name the Certificate is
registered as the owner thereof for all purposes, and the Trustee
shall not be affected by notice to the contrary. Furthermore, the
Depositary shall, by acceptance of a Global Certificate, agree
that transfers of beneficial interests in such Global Certificate
may be effected only through a book-entry system maintained by
the Depositary (or its agent), and that ownership of a beneficial
interest in the Certificate shall be required to be reflected in
a book entry. When Certificates are presented to the Registrar
with a request to register the transfer or to exchange them for
an equal face amount of Certificates of other authorized
denominations, the Registrar shall register the transfer or make
the exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and
exchanges in accordance with the terms, conditions and
restrictions hereof, the Trustee shall execute and authenticate
Certificates at the Registrar's request. No service charge shall
be made for any registration of transfer or exchange of the
Certificates, but the Trustee may require payment by the
transferor of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental

                                24





charges payable upon exchanges pursuant to Section 3.10 or 9.07).


           Section 3.05. Book-Entry Provisions for U.S. Global
Certificate and Offshore Global Certificates. (a) Members of, or
participants in, the Depositary ("Agent Members") shall have no
rights under this Agreement with respect to any Global
Certificate held on their behalf by the Depositary, or the
Trustee as its custodian, and the Depositary may be treated by
the Trustee and any agent of the Trustee as the absolute owner of
such Global Certificate for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the
Trustee or any agent of the Trustee from giving effect to any
written certification, proxy or other authorization furnished by
the Depositary or shall impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Certificate. Upon the
issuance of any Global Certificate, the Registrar or its duly
appointed agent shall record a nominee of the Depositary as the
registered holder of such Global Certificate.

           (b) Transfers of any Global Certificate shall be
limited to transfers of such Global Certificate or Offshore
Global Certificate in whole, but not in part, to nominees of the
Depositary, its successor or such successor's nominees.
Beneficial interests in the U.S. Global Certificate and any
Offshore Global Certificate may be transferred in accordance with
the rules and procedures of the Depositary and the provisions of
Section 3.06. Beneficial interests in the U.S. Global Certificate
or an Offshore Global Certificate shall be delivered to all
beneficial owners in the form of U.S. Physical Certificates or
Offshore Physical Certificates, as the case may be, if (i) the
Depositary notifies the Trustee that it is unwilling or unable to
continue as Depositary for the U.S. Global Certificate or such
Offshore Global Certificate, as the case may be, and a successor
depositary is not appointed by the Trustee within 90 days of such
notice or (ii) an Event of Default has occurred and is continuing
and the Registrar has received a request from the Depositary to
issue Physical Certificates.

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

           (d)  [Intentionally omitted.]

                                25






           (e) In connection with the transfer of the entire U.S.
Global Certificate or an entire Offshore Global Certificate to
the beneficial owners thereof pursuant to paragraph (b) of this
Section 3.05, such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, shall be deemed to be
surrendered to the Trustee for cancellation, and the Trustee
shall execute, authenticate and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial
interest in such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, an equal aggregate principal
amount of U.S. Physical Certificates or Offshore Physical
Certificates, as the case may be, of authorized denominations.

           (f) Any U.S. Physical Certificate delivered in
exchange for an interest in the U.S. Global Certificate pursuant
to paragraph (b) of this Section 3.05 shall, except as otherwise
provided by paragraph (f) of Section 3.06, bear the Private
Placement Legend.

           (g) Any Offshore Physical Certificate delivered in
exchange for an interest in an Offshore Global Certificate
pursuant to paragraph (b) of this Section shall, except as
otherwise provided by paragraph (f) of Section 3.06, bear the
applicable legend regarding transfer restrictions set forth in
Section 3.02(a).

           (h) The registered holder of the U.S. Global
Certificate or any Offshore Global Certificate may grant proxies
and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this
Agreement or the Certificates.

           Section 3.06. Special Transfer Provisions. Unless and
until (i) an Initial Certificate is sold under an effective
Registration Statement, or (ii) an Initial Certificate is
exchanged for an Exchange Certificate pursuant to an effective
Exchange Offer Registration Statement, in each case pursuant to
the Registration Rights Agreement, the following provisions shall
apply to such Initial Certificates:

           (a)  Transfers to Non-QIB Institutional Accredited
Investors.  The following provisions shall apply with respect to
the registration of any proposed transfer of a Certificate to any
Institutional Accredited Investor which is not a QIB (excluding
transfers to or by Non-U.S. Persons):

           (i) The Registrar shall register the transfer of any
      Certificate, whether or not such Certificate bears the
      Private Placement Legend, if (x) the requested transfer is
      at least three years after the later of the original issue

                                26





      date of the Certificates and the last date on which such
      Certificate was held by the Company or any affiliate of any
      such persons or (y) the proposed transferee has delivered
      to the Registrar a letter substantially in the form of
      Exhibit D hereto and the aggregate principal amount of the
      Certificates being transferred is at least $100,000.

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

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

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


                                27





           (ii) Upon receipt by the Registrar of the documents
      referred to in clause (i) above and instructions given in
      accordance with the Depositary's and the Registrar's
      procedures therefor, the Registrar shall reflect on its
      books and records the date of such transfer and an increase
      in the principal amount of the U.S. Global Certificate in
      an amount equal to the principal amount of the U.S.
      Physical Certificates or interests in the Temporary
      Offshore Global Certificate, as the case may be, being
      transferred, and the Trustee shall cancel such Physical
      Certificates or decrease the amount of such Temporary
      Offshore Global Certificate so transferred.

           (c)  [intentionally omitted.]

           (d) Transfers of Interests in the Permanent Offshore
Global Certificate or Offshore Physical Certificates. The
Registrar shall register any transfer of interests in the
Permanent Offshore Global Certificate or Offshore Physical
Certificates without requiring any additional certification.

           (e)  Transfers to Non-U.S. Persons at Any Time.  The
following provisions shall apply with respect to any registration
of any transfer of an Initial Certificate to a Non-U.S. Person:

           (i) Prior to the Offshore Certificates Exchange Date,
      the Registrar shall register any proposed transfer of an
      Initial Certificate to a Non-U.S. Person upon receipt of a
      certificate substantially in the form set forth as Exhibit
      C hereto from the proposed transferor.

           (ii) On and after the Offshore Certificates Exchange
      Date, the Registrar shall register any proposed transfer to
      any Non-U.S. Person if the Certificate to be transferred is
      a U.S. Physical Certificate or an interest in the U.S.
      Global Certificate, upon receipt of a certificate
      substantially in the form of Exhibit C from the proposed
      transferor. The Registrar shall promptly send a copy of
      such certificate to the Company.

           (iii) Upon receipt by the Registrar of (x) the
      documents, if any, required by paragraph (ii) and (y)
      instructions in accordance with the Depositary's and the
      Registrar's procedures, the Registrar shall reflect on its
      books and records the date of such transfer and a decrease
      in the principal amount of such U.S. Global Certificate in
      an amount equal to the principal amount of the beneficial
      interest in such U.S. Global Certificate to be transferred,
      and (B) upon receipt by the Registrar of instructions given
      in accordance with the Depositary's and the Registrar's
      procedures, the Registrar shall reflect on its books and

                                28





      records the date and an increase in the principal amount of
      the Offshore Global Certificate in an amount equal to the
      principal amount of the U.S. Physical Certificate or the
      U.S. Global Certificate, as the case may be, to be
      transferred, and the Trustee shall cancel the Physical
      Certificate, if any, so transferred or decrease the amount
      of such U.S. Global Certificate.

           (f) Private Placement Legend. Upon the transfer,
exchange or replacement of Certificates not bearing the Private
Placement Legend, the Registrar shall deliver Certificates that
do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Certificates bearing the Private
Placement Legend, the Registrar shall deliver only Certificates
that bear the Private Placement Legend unless either (i) the
circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of
this Section 3.06 exist or (ii) there is delivered to the
Registrar an Opinion of Counsel to the effect that neither such
legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the
Securities Act.

           (g) General. By its acceptance of any Certificate
bearing the Private Placement Legend, each Holder of such a
Certificate acknowledges the restrictions on transfer of such
Certificate set forth in this Agreement and agrees that it will
transfer such Certificate only as provided in this Agreement. The
Registrar shall not register a transfer of any Certificate unless
such transfer complies with the restrictions on transfer of such
Certificate set forth in this Agreement. In connection with any
transfer of Certificates, each Certificateholder agrees by its
acceptance of the Certificates to furnish the Registrar or the
Trustee such certifications, legal opinions or other information
as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the
Securities Act; provided that the Registrar shall not be required
to determine the sufficiency of any such certifications, legal
opinions or other information.

           Until such time as no Certificates remain Outstanding,
the Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.05 or
this Section 3.06. The Trustee, if not the Registrar at such
time, shall have the right to inspect and make copies of all such
letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to
the Registrar.

           Section 3.07.  Mutilated, Destroyed, Lost or Stolen
Certificates.  If (a) any mutilated Certificate is surrendered to

                                29





the Registrar or the Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate
and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save
each of them harmless, then, in the absence of notice to the
Registrar or the Trustee that such destroyed, lost or stolen
Certificate has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the Uniform
Commercial Code in effect in any applicable jurisdiction are met,
the Trustee shall execute, authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate or Certificates, in authorized
denominations and of like Fractional Undivided Interest and
bearing a number not contemporaneously outstanding.

           In connection with the issuance of any new Certificate
under this Section 3.07, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee and the
Registrar) connected therewith.

           Any duplicate Certificate issued pursuant to this
Section 3.07 shall constitute conclusive evidence of the
appropriate Fractional Undivided Interest in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.

           The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Certificates.

           Section 3.08. Persons Deemed Owners. Prior to due
presentment of a Certificate for registration of transfer, the
Trustee, the Registrar and any Paying Agent may treat the Person
in whose name any Certificate is registered (as of the day of
determination) as the owner of such Certificate for the purpose
of receiving distributions pursuant to Article IV and for all
other purposes whatsoever, and none of the Trustee, the Registrar
or any Paying Agent shall be affected by any notice to the
contrary.

           Section 3.09. Cancellation. All Certificates
surrendered for payment or transfer or exchange shall, if
surrendered to the Trustee or any agent of the Trustee other than
the Registrar, be delivered to the Registrar for cancellation and
shall promptly be cancelled by it. No Certificates shall be
authenticated in lieu of or in exchange for any Certificates
cancelled as provided in this Section, except as expressly
permitted by this Agreement. All cancelled Certificates held by

                                30





the Registrar shall be destroyed and a certification of their
destruction delivered to the Trustee.

           Section 3.10. Temporary Certificates. Until definitive
Certificates are ready for delivery, the Trustee shall
authenticate temporary Certificates. Temporary Certificates shall
be substantially in the form of definitive Certificates but may
have insertions, substitutions, omissions and other variations
determined to be appropriate by the officers executing the
temporary Certificates, as evidenced by their execution of such
temporary Certificates. If temporary Certificates are issued, the
Trustee will cause definitive Certificates to be prepared without
unreasonable delay. After the preparation of definitive
Certificates, the temporary Certificates shall be exchangeable
for definitive Certificates upon surrender of the temporary
Certificates at the office or agency of the Trustee designated
for such purpose pursuant to Section 7.12, without charge to the
Certificateholder. Upon surrender for cancellation of any one or
more temporary Certificates, the Trustee shall execute,
authenticate and deliver in exchange therefor a like face amount
of definitive Certificates of authorized denominations. Until so
exchanged, the temporary Certificates shall be entitled to the
same benefits under this Agreement as definitive Certificates.

           Section 3.11. Limitation of Liability for Payments.
All payments and distributions made to Certificateholders shall
be made only from the Trust Property and only to the extent that
the Trustee shall have sufficient income or proceeds from the
Trust Property to make such payments in accordance with the terms
of Article IV of this Agreement. Each Certificateholder, by its
acceptance of a Certificate, agrees that it will look solely to
the income and proceeds from the Trust Property for any payment
or distribution due to such Certificateholder pursuant to the
terms of this Agreement and that it will not have any recourse to
the Company, the Trustee, the Loan Trustees, the Liquidity
Providers, the Owner Trustees or the Owner Participants, except
as otherwise expressly provided herein or in the Intercreditor
Agreement.

           The Company is a party to this Agreement solely for
purposes of meeting the requirements of the Trust Indenture Act,
and therefore shall not have any right, obligation or liability
hereunder (except as otherwise expressly provided herein).



                                31





                            ARTICLE IV

                   DISTRIBUTIONS; STATEMENTS TO
                        CERTIFICATEHOLDERS

           Section 4.01. Certificate Account and Special Payments
Account. (a) The Trustee shall establish and maintain on behalf
of the Certificateholders a Certificate Account as one or more
non-interest-bearing accounts. The Trustee shall hold the
Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals
therefrom only as provided in this Agreement. On each day when a
Scheduled Payment is made to the Trustee under the Intercreditor
Agreement, the Trustee upon receipt thereof shall immediately
deposit the aggregate amount of such Scheduled Payment in the
Certificate Account.

           (b) The Trustee shall establish and maintain on behalf
of the Certificateholders a Special Payments Account as one or
more accounts, which shall be non-interest bearing except as
provided in Section 4.04. The Trustee shall hold the Special
Payments Account in trust for the benefit of the
Certificateholders and shall make or permit withdrawals therefrom
only as provided in this Agreement. On each day when one or more
Special Payments are made to the Trustee, the Trustee, upon
receipt thereof, shall immediately deposit the aggregate amount
of such Special Payments in the Special Payments Account.

           (c) The Trustee shall present to the related Loan
Trustee of each Equipment Note such Equipment Note on the date of
its stated final maturity or, in the case of any Equipment Note
which is to be redeemed in whole pursuant to the related
Indenture, on the applicable redemption date under such
Indenture.

           Section 4.02. Distributions from Certificate Account
and Special Payments Account. (a) On each Regular Distribution
Date or as soon thereafter as the Trustee has confirmed receipt
of the payment of all or any part of the Scheduled Payments due
on such date, the Trustee shall distribute out of the Certificate
Account the entire amount deposited therein pursuant to Section
4.01(a). There shall be so distributed to each Certificateholder
of record on the Record Date with respect to such Regular
Distribution Date (other than as provided in Section 11.01
concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional
Undivided Interest in the Trust held by such Certificateholder)
of the total amount in the Certificate Account, except that, with
respect to Certificates registered on the Record Date in the name
of the nominee of the Depositary (initially, such nominee to be 

                                32





Cede & Co.), such distribution shall be made by wire transfer in 
immediately available funds to the account designated by such 
nominee.

           (b) On each Special Distribution Date with respect to
any Special Payment or as soon thereafter as the Trustee has
confirmed receipt of any Special Payments, the Trustee shall
distribute out of the Special Payments Account the entire amount
of such Special Payment deposited therein pursuant to Section
4.01(b). There shall be so distributed to each Certificateholder
of record on the Record Date with respect to such Special
Distribution Date (other than as provided in Section 11.01
concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional
Undivided Interest in the Trust held by such Certificateholder)
of the total amount in the Special Payments Account on account of
such Special Payment, except that, with respect to Certificates
registered on the Record Date in the name of the nominee of the
Depositary (initially, such nominee to be Cede & Co.), such
distribution shall be made by wire transfer in immediately
available funds to the account designated by such nominee.

           (c) The Trustee shall, at the expense of the Company,
cause notice of each Special Payment to be mailed to each
Certificateholder at his address as it appears in the Register.
In the event of redemption or purchase of Equipment Notes held in
the Trust, such notice shall be mailed not less than 20 days
prior to the Special Distribution Date for the Special Payment
resulting from such redemption or purchase, which Special
Distribution Date shall be the date of such redemption or
purchase. In the case of any other Special Payments, such notice
shall be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment,
stating the Special Distribution Date for such Special Payment
which shall occur not less than 20 days after the date of such
notice and as soon as practicable thereafter. Notices mailed by
the Trustee shall set forth:

           (i)  the Special Distribution Date and the Record Date
      therefor (except as otherwise provided in Section 11.01),

           (ii) the amount of the Special Payment for each $1,000
      face amount Certificate (taking into account any payment to
      be made by the Company pursuant to Section 2.01(b)) and the
      amount thereof constituting principal, premium, if any, and
      interest,

           (iii)     the reason for the Special Payment, and


                                33





           (iv) if the Special Distribution Date is the same date
      as a Regular Distribution Date, the total amount to be
      received on such date for each $1,000 face amount
      Certificate.

If the amount of premium, if any, payable upon the redemption or
purchase of an Equipment Note has not been calculated at the time
that the Trustee mails notice of a Special Payment, it shall be
sufficient if the notice sets forth the other amounts to be
distributed and states that any premium received will also be
distributed.

           If any redemption of the Equipment Notes held in the
Trust is cancelled, the Trustee, as soon as possible after
learning thereof, shall cause notice thereof to be mailed to each
Certificateholder at its address as it appears on the Register.

           Section 4.03. Statements to Certificateholders. (a) On
each Distribution Date, the Trustee will include with each
distribution to Certificateholders of a Scheduled Payment or
Special Payment, as the case may be, a statement setting forth
the following information (per $1,000 face amount Certificate as
to (i) and (ii) below):

           (i)  the amount of such distribution allocable to
      principal and the amount allocable to premium, if any;

           (ii)  the amount of such distribution allocable to
      interest; and

           (iii)  the Pool Balance and the Pool Factor.

           With respect to the Certificates registered in the
name of Cede & Co., as nominee for the Depositary, on the Record
Date prior to each Distribution Date, the Trustee will request
from the Depositary a Securities Position Listing setting forth
the names of all Agent Members reflected on the Depositary's
books as holding interests in the Certificates on such Record
Date. On each Distribution Date, the Trustee will mail to each
such Agent Member the statement described above and will make
available additional copies as requested by such Agent Member for
forwarding to holders of interests in the Certificates.

           (b) Within a reasonable period of time after the end
of each calendar year but not later than the latest date
permitted by law, the Trustee shall furnish to each Person who at
any time during such calendar year was a Certificateholder of
record a statement containing the sum of the amounts determined
pursuant to clauses (a)(i) and (a)(ii) above with respect to the
Trust for such calendar year or, in the event such Person was a
Certificateholder of record during a portion of such calendar

                                34





year, for such portion of such year, and such other items as are
readily available to the Trustee and which a Certificateholder
shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax
returns. Such statement and such other items shall be prepared on
the basis of information supplied to the Trustee by the Agent
Members and shall be delivered by the Trustee to such Agent
Members to be available for forwarding by such Agent Members to
the holders of interests in the Certificates in the manner
described in Section 4.03(a).

           Section 4.04. Investment of Special Payment Moneys.
Any money received by the Trustee pursuant to Section 4.01(b)
representing a Special Payment which is not to be promptly
distributed shall, to the extent practicable, be invested in
Permitted Investments by the Trustee pending distribution of such
Special Payment pursuant to Section 4.02. Any investment made
pursuant to this Section 4.04 shall be in such Permitted
Investments having maturities not later than the date that such
moneys are required to be used to make the payment required under
Section 4.02 on the applicable Special Distribution Date and the
Trustee shall hold any such Permitted Investments until maturity.
The Trustee shall have no liability with respect to any
investment made pursuant to this Section 4.04, other than by
reason of the willful misconduct or negligence of the Trustee.
All income and earnings from such investments shall be
distributed on such Special Distribution Date as part of such
Special Payment.


                            ARTICLE V

                           THE COMPANY

           Section 5.01. Maintenance of Corporate Existence. The
Company, at its own cost and expense, will do or cause to be done
all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises, except as
otherwise specifically permitted in Section 5.02; provided,
however, that the Company shall not be required to preserve any
right or franchise if the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company.

           Section 5.02. Consolidation, Merger, etc. The Company
shall not consolidate with or merge into any other corporation or
convey, transfer or lease substantially all of its assets as an
entirety to any Person unless:

           (a)   the corporation formed by such consolidation or
      into which the Company is merged or the Person that acquires

                                35





      by conveyance, transfer or lease substantially all of the
      assets of the Company as an entirety shall be (i) organized
      and validly existing under the laws of the United States of
      America or any state thereof or the District of Columbia,
      (ii) a "citizen of the United States" as defined in 49
      U.S.C. 40102(a)(15), as amended, and (iii) a United States
      certificated air carrier, if and so long as such status is
      a condition of entitlement to the benefits of Section 1110
      of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C.
      ss. 1110), with respect to the Leases;

           (b) the corporation formed by such consolidation or
      into which the Company is merged or the Person which
      acquires by conveyance, transfer or lease substantially all
      of the assets of the Company as an entirety shall execute
      and deliver to the Trustee a duly authorized, valid,
      binding and enforceable agreement in form and substance
      reasonably satisfactory to the Trustee containing an
      assumption by such successor corporation or Person of the
      due and punctual performance and observance of each
      covenant and condition of this Agreement, the Other Pass
      Through Trust Agreements, the Financing Agreements, and
      each other Financing Document to be performed or observed
      by the Company; and

           (c) the Company shall have delivered to the Trustee an
      Officer's Certificate of the Company and an Opinion of
      Counsel of the Company reasonably satisfactory to the
      Trustee, each stating that such consolidation, merger,
      conveyance, transfer or lease and the assumption agreement
      mentioned in clause (b) above comply with this Section 5.02
      and that all conditions precedent herein provided for
      relating to such transaction have been complied with.

           Upon any consolidation or merger, or any conveyance,
transfer or lease of substantially all of the assets of the
Company as an entirety in accordance with this Section 5.02, the
successor corporation or Person formed by such consolidation or
into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if such successor
corporation or Person had been named as the Company herein. No
such conveyance, transfer or lease of substantially all of the
assets of the Company as an entirety shall have the effect of
releasing any successor corporation or Person which shall have
become such in the manner prescribed in this Section 5.02 from
its liability in respect of this Agreement and any Financing
Document to which it is a party.



                                36





                            ARTICLE VI

                             DEFAULT

           Section 6.01. Events of Default. (a) Exercise of
Remedies. Upon the occurrence and during the continuation of any
Indenture Default under any Indenture, the Trustee may, to the
extent it is the Controlling Party at such time (as determined
pursuant to the Intercreditor Agreement), direct the exercise of
remedies as provided in the Intercreditor Agreement.

           (b)  Purchase Rights of Certificateholders.  By
acceptance of its Certificate, each Certificateholder agrees that
at any time after the occurrence and during the continuation of a
Triggering Event,

           (i) each Class B Certificateholder shall have the
      right to purchase all, but not less than all, of the
      Certificates upon ten days' written notice to the Trustee
      and each other Class B Certificateholder, provided that (A)
      if prior to the end of such ten-day period any other Class
      B Certificateholder notifies such purchasing Class B
      Certificateholder that such other Class B Certificateholder
      wants to participate in such purchase, then such other
      Class B Certificateholder may join with the purchasing
      Class B Certificateholder to purchase all, but not less
      than all, of the Certificates pro rata based on the
      Fractional Undivided Interest in the Class B Trust held by
      each such Class B Certificateholder and (B) if prior to the
      end of such ten-day period any other Class B
      Certificateholder fails to notify the purchasing Class B
      Certificateholder of such other Class B Certificateholder's
      desire to participate in such a purchase, then such other
      Class B Certificateholder shall lose its right to purchase
      the Certificates pursuant to this Section 6.01(b);

           (ii) each Class C Certificateholder shall have the
      right (which shall not expire upon any purchase of the
      Certificates pursuant to clause (i) above) to purchase all,
      but not less than all, of the Certificates and the Class B
      Certificates upon ten days' written notice to the Trustee,
      the Class B Trustee and each other Class C
      Certificateholder, provided that (A) if prior to the end of
      such ten-day period any other Class C Certificateholder
      notifies such purchasing Class C Certificateholder that
      such other Class C Certificateholder wants to participate
      in such purchase, then such other Class C Certificateholder
      may join with the purchasing Class C Certificateholder to
      purchase all, but not less than all, of the Certificates
      and the Class B Certificates pro rata based on the Fractional 
      Undivided Interest in the Class C Trust held by each such

                                37





      Class C Certificateholder and (B) if prior to the end of
      such ten day period any other Class C Certificateholder
      fails to notify the purchasing Class C Certificateholder of
      such other Class C Certificateholder's desire to
      participate in such a purchase, then such other Class C
      Certificateholder shall lose its right to purchase the
      Certificates pursuant to this Section 6.01(b); and

           (iii) each Class D Certificateholder shall have the
      right (which shall not expire upon any purchase of the
      Certificates pursuant to clause (i) above or the purchase
      of the Certificates and the Class B Certificates pursuant
      to clause (ii) above) to purchase all, but not less than
      all, of the Certificates, the Class B Certificates and the
      Class C Certificates upon ten days' written notice to the
      Trustee, the Class B Trustee, the Class C Trustee and each
      other Class D Certificateholder, provided that (A) if prior
      to the end of such ten-day period any other Class D
      Certificateholder notifies such purchasing Class D
      Certificateholder that such other Class D Certificateholder
      wants to participate in such purchase, then such other
      Class D Certificateholder may join with the purchasing
      Certificateholder to purchase all, but not less than all,
      of the Certificates, the Class B Certificates and the Class
      C Certificates pro rata based on the Fractional Undivided
      Interest in the Class D Trust held by each such Class D
      Certificateholder and (B) if prior to the end of such ten
      day period any other Class D Certificateholder fails to
      notify the purchasing Class D Certificateholder of such
      other Class D Certificateholder's desire to participate in
      such a purchase, then such other Class D Certificateholder
      shall lose its right to purchase the Certificates, the
      Class B Certificates and the Class C Certificates pursuant
      to this Section 6.01(b).

           The purchase price with respect to the Certificates
shall be equal to the Pool Balance of the Certificates, together
with accrued and unpaid interest thereon to the date of such
purchase, without premium, but including any other amounts then
due and payable to the Certificateholders under this Agreement,
the Intercreditor Agreement or any other Financing Document or on
or in respect of the Certificates; provided, however, that no
such purchase of Certificates shall be effective unless the
purchaser shall certify to the Trustee that contemporaneously
with such purchase, such purchaser is purchasing, pursuant to the
terms of this Agreement and the Other Pass Through Trust
Agreements, the Certificates, the Class B Certificates and the
Class C Certificates which are senior to the securities held by
such purchaser. Each payment of the purchase price of the
Certificates referred to in the first sentence hereof shall be
made to an account or accounts designated by the Trustee and each

                                38





such purchase shall be subject to the terms of this Section
6.01(b). Each Certificateholder agrees by its acceptance of its
Certificate that it will, subject to Section 3.04 hereof, upon
payment from such Class B Certificateholder(s), Class C
Certificateholder(s) or Class D Certificateholder(s), as the case
may be, of the purchase price set forth in the first sentence of
this paragraph, forthwith sell, assign, transfer and convey to
the purchaser thereof (without recourse, representation or
warranty of any kind except for its own acts), all of the right,
title, interest and obligation of such Certificateholder in, this
Agreement, the Intercreditor Agreement, the Liquidity Facility,
the Financing Documents and all Certificates held by such
Certificateholder (excluding all right, title and interest under
any of the foregoing to the extent such right, title or interest
is with respect to an obligation not then due and payable as
respects any action or inaction or state of affairs occurring
prior to such sale) and the purchaser shall assume all of such
Certificateholder's obligations under this Agreement, the
Intercreditor Agreement, the Liquidity Facility and the Financing
Documents. The Certificates will be deemed to be purchased on the
date payment of the purchase price is made notwithstanding the
failure of the Certificateholders to deliver any Certificates
(whether in the form of Physical Certificates or beneficial
interests in Global Certificates) and, upon such a purchase, (i)
the only rights of the Certificateholders will be to deliver the
Certificates to the purchaser and receive the purchase price for
such Certificates and (ii) if the purchaser shall so request,
such Certificateholder will comply with all the provisions of
Section 3.04 hereof to enable new Certificates to be issued to
the purchaser in such denominations as it shall request. All
charges and expenses in connection with the issuance of any such
new Certificates shall be borne by the purchaser thereof.

           As used in this Section 6.01(b), the terms
"Certificateholder", "Class", "Class B Certificate", "Class B
Certificateholder", "Class B Trust", "Class B Trustee", "Class C
Certificate", "Class C Certificateholder", "Class C Trust",
"Class C Trustee", "Class D Certificate", "Class D
Certificateholder", "Class D Trust" and "Class D Trustee", shall
have the respective meanings assigned to such terms in the
Intercreditor Agreement.

           Section 6.02.  [Intentionally omitted.].

           Section 6.03. Judicial Proceedings Instituted by
Trustee; Trustee May Bring Suit. If there shall be a failure to
make payment of the principal of, premium, if any, or interest on
any Equipment Note, or if there shall be any failure to pay Rent
(as defined in the relevant Lease) under any Lease when due and
payable, then the Trustee, in its own name and as trustee of an
express trust, as holder of such Equipment Notes, to the extent

                                39





permitted by and in accordance with the terms of the
Intercreditor Agreement and the Financing Documents (subject to
the rights of the applicable Owner Trustee or Owner Participant
to cure any such failure in accordance with Section 4.03 of the
applicable Indenture), shall be entitled and empowered to
institute any suits, actions or proceedings at law, in equity or
otherwise, for the collection of the sums so due and unpaid on
such Equipment Notes or under such Lease and may prosecute any
such claim or proceeding to judgment or final decree with respect
to the whole amount of any such sums so due and unpaid.

           Section 6.04. Control by Certificateholders. Subject
to Section 6.03 and the Intercreditor Agreement, the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee with respect to the Trust or pursuant to
the terms of the Intercreditor Agreement, or exercising any trust
or power conferred on the Trustee under this Agreement or the
Intercreditor Agreement, including any right of the Trustee as
Controlling Party under the Intercreditor Agreement or as holder
of the Equipment Notes, provided that

           (1) such Direction shall not be in conflict with any
      rule of law or with this Agreement and would not involve
      the Trustee in personal liability or expense,

           (2) the Trustee shall not determine that the action so
      directed would be unjustly prejudicial to the
      Certificateholders not taking part in such Direction, and

           (3) the Trustee may take any other action deemed
      proper by the Trustee which is not inconsistent with such
      Direction.

           Section 6.05. Waiver of Past Defaults. Subject to the
Intercreditor Agreement, the Certificateholders holding
Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust (i)
may on behalf of all of the Certificateholders waive any past
Event of Default hereunder and its consequences or (ii) if the
Trustee is the Controlling Party, may direct the Trustee to
instruct the applicable Loan Trustee to waive, any past Indenture
Default under any Indenture and its consequences, and thereby
annul any Direction given by such Certificateholders or the Trustee 
to such Loan Trustee with respect thereto, except a default:


                                40





           (1)  in the deposit of any Scheduled Payment or Special
      Payment under Section 4.01 or in the distribution of any
      payment under Section 4.02 on the Certificates, or

           (2)   in the payment of the principal of (premium, if
      any) or interest on the Equipment Notes, or

           (3) in respect of a covenant or provision hereof which
      under Article X cannot be modified or amended without the
      consent of each Certificateholder holding an Outstanding
      Certificate affected thereby.

           Upon any such waiver, such default shall cease to
exist with respect to the Certificates and any Event of Default
arising therefrom shall be deemed to have been cured for every
purpose and any direction given by the Trustee on behalf of the
Certificateholders to the relevant Loan Trustee shall be annulled
with respect thereto; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any
right consequent thereon. Upon any such waiver, the Trustee shall
vote the Equipment Notes issued under the relevant Indenture to
waive the corresponding Indenture Default.

           Section 6.06. Right of Certificateholders to Receive
Payments Not to Be Impaired. Anything in this Agreement to the
contrary notwithstanding, including, without limitation, Section
6.07 hereof, but subject to the Intercreditor Agreement, the
right of any Certificateholder to receive distributions of
payments required pursuant to Section 4.02 hereof on the
Certificates when due, or to institute suit for the enforcement
of any such payment on or after the applicable Regular
Distribution Date or Special Distribution Date, shall not be
impaired or affected without the consent of such
Certificateholder.

           Section 6.07. Certificateholders May Not Bring Suit
Except Under Certain Conditions. A Certificateholder shall not
have the right to institute any suit, action or proceeding at law
or in equity or otherwise with respect to this Agreement, for the
appointment of a receiver or for the enforcement of any other
remedy under this Agreement, unless:

           (1)  such Certificateholder previously shall have given
      written notice to the Trustee of a continuing Event of
      Default;

           (2) Certificateholders holding Certificates evidencing
      Fractional Undivided Interests aggregating not less than
      25% of the Trust shall have requested the Trustee in writing 
      to institute such action, suit or proceeding and shall have

                                41





      offered to the Trustee indemnity as provided in
      Section 7.03(e);

           (3) the Trustee shall have refused or neglected to
      institute such an action, suit or proceeding for 60 days
      after receipt of such notice, request and offer of
      indemnity; and

           (4) no direction inconsistent with such written
      request shall have been given to the Trustee during such
      60- day period by Certificateholders holding Certificates
      evidencing Fractional Undivided Interests aggregating not
      less than a majority in interest in the Trust.

           It is understood and intended that no one or more of
the Certificateholders shall have any right in any manner
whatsoever hereunder or under the Certificates to (i) surrender,
impair, waive, affect, disturb or prejudice any property in the
Trust Property or the lien of any Indenture on any property
subject thereto, or the rights of the Certificateholders or the
holders of the Equipment Notes, (ii) obtain or seek to obtain
priority over or preference with respect to any other such
Certificateholder or (iii) enforce any right under this
Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all the Certificateholders
subject to the provisions of this Agreement.

           Section 6.08. Remedies Cumulative. Every remedy given
hereunder to the Trustee or to any of the Certificateholders
shall not be exclusive of any other remedy or remedies, and every
such remedy shall be cumulative and in addition to every other
remedy given hereunder or now or hereafter given by statute, law,
equity or otherwise.


                           ARTICLE VII

                           THE TRUSTEE

           Section 7.01. Certain Duties and Responsibilities. (a)
Except during the continuance of an Event of Default, the Trustee
undertakes to perform such duties as are specifically set forth
in this Agreement, and no implied covenants or obligations shall
be read into this Agreement against the Trustee.

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


                                42





           (c) No provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful
misconduct, except that

           (1)  this Subsection shall not be construed to limit
      the effect of Subsection (a) of this Section; and

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

           (d) Whether or not herein expressly so provided, every
provision of this Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.

           Section 7.02. Notice of Defaults. As promptly as
practicable after, and in any event within 90 days after, the
occurrence of any default (as such term is defined below)
hereunder, the Trustee shall transmit by mail to the Company, the
Owner Trustees, the Owner Participants, the Loan Trustees and the
Certificateholders in accordance with Section 313(c) of the Trust
Indenture Act, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default on the
payment of the principal, premium, if any, or interest on any
Equipment Note, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that
the withholding of such notice is in the interests of the
Certificateholders. For the purpose of this Section, the term
"default" means any event that is, or after notice or lapse of
time or both would become, an Event of Default.

           Section 7.03.  Certain Rights of Trustee.  Subject to
the provisions of Section 315 of the Trust Indenture Act:

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

           (b) any request or direction of the Company mentioned
      herein shall be sufficiently evidenced by a written
      description of the subject matter thereof accompanied by an

                                43





      Officer's Certificate and an Opinion of Counsel as provided
      in Section 1.02 of this Agreement;

           (c) whenever in the administration of this Agreement
      the Trustee shall deem it desirable that a matter be proved
      or established prior to taking, suffering or omitting any
      action hereunder, the Trustee (unless other evidence be
      herein specifically prescribed) may, in the absence of bad
      faith on its part, rely upon an Officer's Certificate of
      the Company, any Owner Trustee or any Loan Trustee;

           (d) the Trustee may consult with counsel and the
      advice of such counsel or any Opinion of Counsel shall be
      full and complete authorization and protection in respect
      of any action taken, suffered or omitted by it hereunder in
      good faith and in reliance thereon;

           (e) the Trustee shall be under no obligation to
      exercise any of the rights or powers vested in it by this
      Agreement at the Direction of any of the Certificateholders
      pursuant to this Agreement, unless such Certificateholders
      shall have offered to the Trustee reasonable security or
      indemnity against the cost, expenses and liabilities which
      might be incurred by it in compliance with such Direction;

           (f) the Trustee shall not be bound to make any
      investigation into the facts or matters stated in any
      resolution, certificate, statement, instrument, opinion,
      report, notice, request, direction, consent, order, bond,
      debenture or other paper or document;

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

           (h) the Trustee shall not be liable with respect to
      any action taken or omitted to be taken by it in good faith
      in accordance with the Direction of the Certificateholders
      holding Certificates evidencing Fractional Undivided
      Interests aggregating not less than a majority in interest
      in the Trust relating to the time, method and place of
      conducting any proceeding for any remedy available to the
      Trustee, or exercising any trust or power conferred upon
      the Trustee, under this Agreement; and

           (i)   the Trustee shall not be required to expend or
      risk its own funds in the performance of any of its duties
      under this Agreement, or in the exercise of any of its

                                44





      rights or powers, if it shall have reasonable grounds for
      believing that repayment of such funds or adequate
      indemnity against such risk is not reasonably assured to
      it.

           Section 7.04. Not Responsible for Recitals or Issuance
of Certificates. The recitals contained herein and in the
Certificates, except the certificates of authentication, shall
not be taken as the statements of the Trustee, and the Trustee
assumes no responsibility for their correctness. Subject to
Section 7.15, the Trustee makes no representations as to the
validity or sufficiency of this Agreement, any Financing
Agreement, any Equipment Notes, the Certificates or any other
Financing Document, except that the Trustee hereby represents and
warrants that this Agreement has been, and the Intercreditor
Agreement, the Registration Rights Agreement, each Financing
Agreement and each Certificate will be, executed, authenticated
and delivered by one of its officers who is duly authorized to
execute, authenticate and deliver such document on its behalf.

           Section 7.05. May Hold Certificates. The Trustee, any
Paying Agent, Registrar or any of their Affiliates or any other
agent in their respective individual or any other capacity may
become the owner or pledgee of Certificates and, subject to
Sections 310(b) and 311 of the Trust Indenture Act, if
applicable, may otherwise deal with the Company, the Owner
Trustees or the Loan Trustees with the same rights it would have
if it were not Trustee, Paying Agent, Registrar or such other
agent.

           Section 7.06. Money Held in Trust. Money held by the
Trustee or the Paying Agent in trust hereunder need not be
segregated from other funds except to the extent required herein
or by law and neither the Trustee nor the Paying Agent shall have
any liability for interest upon any such moneys except as
provided for herein.

           Section 7.07.  Compensation and Reimbursement.  The
Company agrees:

           (1) to pay, or cause to be paid, to the Trustee from
      time to time reasonable compensation for all services
      rendered by it hereunder (which compensation shall not be
      limited by any provision of law in regard to the
      compensation of a trustee of an express trust);

           (2) except as otherwise expressly provided herein, to
      reimburse, or cause to be reimbursed, the Trustee upon its
      request for all reasonable out-of-pocket expenses,
      disbursements and advances incurred or made by the Trustee
      in accordance with any provision of this Agreement
      (including the reasonable compensation and the expenses and

                                45





      disbursements of its agents and counsel), except any such
      expense, disbursement or advance as may be attributable to
      its negligence, willful misconduct or bad faith or as may
      be incurred due to the Trustee's breach of its
      representations and warranties set forth in Section 7.15;
      and

           (3)  to indemnify the Trustee pursuant to Section 10.1
      of the Participation Agreements (as amended by the
      Amendments No. 1 thereto dated as of the date hereof) (as
      defined in the Intercreditor Agreement).

           The Trustee shall be entitled to reimbursement from,
and shall have a lien prior to the Certificates upon, the Trust
Property for any tax incurred without negligence, bad faith or
willful misconduct, on its part, arising out of or in connection
with the acceptance or administration of such Trust (other than
any tax attributable to the Trustee's compensation for serving as
such), including any costs and expenses incurred in contesting
the imposition of any such tax. If the Trustee reimburses itself
from the Trust Property of such Trust for any such tax, it will
mail a brief report within 30 days setting forth the
circumstances thereof to all Certificateholders as their names
and addresses appear in the Register.

           Section 7.08. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as a trustee under Section 310(a) of the Trust
Indenture Act and shall have a combined capital and surplus of at
least $75,000,000 (or a combined capital and surplus in excess of
$5,000,000 and the obligations of which, whether now in existence
or hereafter incurred, are fully and unconditionally guaranteed
by a corporation organized and doing business under the laws of
the United States, any state or territory thereof or of the
District of Columbia and having a combined capital and surplus of
at least $75,000,000). If such corporation publishes reports of
conditions at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of
Columbia supervising or examining authority, then for the
purposes of this Section 7.08, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of conditions
so published.

           In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.08
to act as Trustee, the Trustee shall resign immediately as
Trustee in the manner and with the effect specified in Section
7.09.

           Section 7.09.  Resignation and Removal; Appointment of
Successor.  (a)  No resignation or removal of the Trustee and no

                                46





appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 7.10.

           (b) The Trustee may resign at any time as trustee by
giving prior written notice thereof to the Company, the
Authorized Agents, the Owner Trustees and the Loan Trustees. If
an instrument of acceptance by a successor Trustee shall not have
been delivered to the Company, the Authorized Agents, the Owner
Trustees, the Loan Trustees and the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

           (c) The Trustee may be removed at any time by
Direction of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less
than a majority in interest in the Trust delivered to the Trustee
and to the Company, the Owner Trustees and the Loan Trustees.

           (d)  If at any time:

           (1) the Trustee shall fail to comply with Section 310
      of the Trust Indenture Act, if applicable, after written
      request therefor by the Company or by any Certificateholder
      who has been a bona fide Certificateholder for at least six
      months; or

           (2) the Trustee shall cease to be eligible under
      Section 7.08 and shall fail to resign after written request
      therefor by the Company or by any such Certificateholder;
      or

           (3) the Trustee shall become incapable of acting or
      shall be adjudged a bankrupt or insolvent or a receiver of
      the Trustee or of its property shall be appointed or any
      public officer shall take charge or control of the Trustee
      or of its property or affairs for the purpose of
      rehabilitation, conservation or liquidation;

then, in any case, (i) the Company may, with the consent of the
Owner Participants, which consent may not be unreasonably
withheld, remove the Trustee or (ii) any Certificateholder who
has been a bona fide Certificateholder for at least six months
may, on behalf of itself and all others similarly situated,
petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.

           (e) If a Responsible Officer of the Trustee shall
obtain actual knowledge of an Avoidable Tax which has been or is
likely to be asserted, the Trustee shall promptly notify the
Company and shall, within 30 days of such notification, resign

                                47





hereunder unless within such 30-day period the Trustee shall have
received notice that the Company has agreed to pay such tax. The
Company shall promptly appoint a successor Trustee in a
jurisdiction where there are no Avoidable Taxes.

           (f) If the Trustee shall resign, be removed or become
incapable of acting or if a vacancy shall occur in the office of
the Trustee for any cause, the Company shall promptly appoint a
successor Trustee. If, within one year after such resignation,
removal or incapability, or other occurrence of such vacancy, a
successor Trustee shall be appointed by Direction of the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust delivered to the Company, the Owner
Trustees, the Loan Trustees and the retiring Trustee, and the
Company approves such appointment, which approval shall not be
unreasonably withheld, then the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become
the successor Trustee and supersede the successor Trustee
appointed as provided above. If no successor Trustee shall have
been so appointed as provided above and accepted appointment in
the manner hereinafter provided, any Certificateholder who has
been a bona fide Certificateholder for at least six months may,
on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a
successor Trustee.

           (g) The successor Trustee shall give notice of the
resignation and removal of the Trustee and appointment of the
successor Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Certificateholders as
their names and addresses appear in the Register. Each notice
shall include the name of such successor Trustee and the address
of its Corporate Trust Office.

           Section 7.10. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute and
deliver to the Company, the Authorized Agents, the Owner Trustees
and the Loan Trustees and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall execute and
deliver an instrument transferring to such successor Trustee all
such rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all
Trust Property held by such retiring Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 7.07.
Upon request of any such successor Trustee, the Company, the

                                48





retiring Trustee and such successor Trustee shall execute and
deliver any and all instruments containing such provisions as
shall be necessary or desirable to transfer and confirm to, and
for more fully and certainly vesting in, such successor Trustee
all such rights, powers and trusts.

           No institution shall accept its appointment as a
Trustee hereunder unless at the time of such acceptance such
institution shall be qualified and eligible under this Article
VII.

           Section 7.11. Merger, Conversion, Consolidation or
Succession to Business. Any corporation into which the Trustee
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article VII, without
the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Certificates shall
have been executed or authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such
execution or authentication and deliver the Certificates so
executed or authenticated with the same effect as if such
successor Trustee had itself executed or authenticated such
Certificates.

           Section 7.12. Maintenance of Agencies. (a) There shall
at all times be maintained an office or agency in the location
set forth in Section 12.03 where Certificates may be presented or
surrendered for registration of transfer or for exchange, and for
payment thereof and where notices and demands to or upon the
Trustee in respect of such certificates or this Agreement may be
served; provided, however, that, if it shall be necessary that
the Trustee maintain an office or agency in another location
(e.g., the Certificates shall be represented by Physical
Certificates and shall be listed on a national securities
exchange), the Trustee will make all reasonable efforts to
establish such an office or agency. Written notice of the
location of each such other office or agency and of any change of
location thereof shall be given by the Trustee to the Company,
the Owner Trustees, the Loan Trustees (in the case of any Owner
Trustee or Loan Trustee, at its address specified in the
Financing Agreements or such other address as may be notified to
the Trustee) and the Certificateholders. In the event that no
such office or agency shall be maintained or no such notice of
location or of change of location shall be given, presentations

                                49





and demands may be made and notices may be served at the
Corporate Trust Office of the Trustee.

           (b) There shall at all times be a Registrar and a
Paying Agent hereunder with respect to the Certificates. Each
such Authorized Agent shall be a bank or trust company, shall be
a corporation organized and doing business under the laws of the
United States or any state, with a combined capital and surplus
of at least $75,000,000, or, if the Trustee shall be acting as
the Registrar or Paying Agent hereunder, a corporation having a
combined capital and surplus in excess of $5,000,000, the
obligations of which are guaranteed by a corporation organized
and doing business under the laws of the United States or any
state, with a combined capital and surplus of at least
$75,000,000, and shall be authorized under such laws to exercise
corporate trust powers, subject to supervision by Federal or
state authorities. The Trustee shall initially be the Paying
Agent and, as provided in Section 3.04, Registrar hereunder with
respect to the Certificates. Each Registrar shall furnish to the
Trustee, at stated intervals of not more than six months, and at
such other times as the Trustee may request in writing, a copy of
the Register maintained by such Registrar.

           (c) Any corporation into which any Authorized Agent
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, consolidation or
conversion to which any Authorized Agent shall be a party, or any
corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent
hereunder, if such successor corporation is otherwise eligible
under this Section, without the execution or filing of any paper
or any further act on the part of the parties hereto or such
Authorized Agent or such successor corporation.

           (d) Any Authorized Agent may at any time resign by
giving written notice of resignation to the Trustee, the Company,
the Owner Trustees and the Loan Trustees. The Company may, and at
the request of the Trustee shall, at any time terminate the
agency of any Authorized Agent by giving written notice of
termination to such Authorized Agent and to the Trustee. Upon the
resignation or termination of an Authorized Agent or in case at
any time any such Authorized Agent shall cease to be eligible
under this Section (when, in either case, no other Authorized
Agent performing the functions of such Authorized Agent shall
have been appointed), the Company shall promptly appoint one or
more qualified successor Authorized Agents, reasonably
satisfactory to the Trustee, to perform the functions of the
Authorized Agent which has resigned or whose agency has been
terminated or who shall have ceased to be eligible under this
Section. The Company shall give written notice of any such
appointment made by it to the Trustee, the Owner Trustees and the

                                50





Loan Trustees; and in each case the Trustee shall mail notice of
such appointment to all Certificateholders as their names and
addresses appear on the Register.

           (e) The Company agrees to pay, or cause to be paid,
from time to time to each Authorized Agent reasonable
compensation for its services and to reimburse it for its
reasonable expenses.

           Section 7.13. Money for Certificate Payments to Be
Held in Trust. All moneys deposited with any Paying Agent for the
purpose of any payment on Certificates shall be deposited and
held in trust for the benefit of the Certificateholders entitled
to such payment, subject to the provisions of this Section.
Moneys so deposited and held in trust shall constitute a separate
trust fund for the benefit of the Certificateholders with respect
to which such money was deposited.

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

           Section 7.14. Registration of Equipment Notes in Name
of Subordination Agent. The Trustee agrees that all Equipment
Notes to be purchased by the Trust shall be issued in the name of
the Subordination Agent or its nominee and held by the
Subordination Agent in trust for the benefit of the
Certificateholders, or, if not so held, the Subordination Agent
or its nominee shall be reflected as the owner of such Equipment
Notes in the register of the issuer of such Equipment Notes.

           Section 7.15.  Representations and Warranties of
Trustee.  The Trustee hereby represents and warrants that:

           (a)  the Trustee is a Delaware banking corporation
      organized and validly existing in good standing under the
      laws of the State of Delaware;

           (b) the Trustee has full power, authority and legal
      right to execute, deliver, and perform this Agreement, the
      Intercreditor Agreement, the Registration Rights Agreement
      and the Financing Agreements and has taken all necessary
      action to authorize the execution, delivery, and
      performance by it of this Agreement, the Intercreditor
      Agreement, the Registration Rights Agreement and the
      Financing Agreements;


                                51





           (c) the execution, delivery and performance by the
      Trustee of this Agreement, the Intercreditor Agreement, the
      Registration Rights Agreement and the Financing Agreements
      (i) will not violate any provision of United States federal
      law or the law of the state of the United States where it
      is located governing the banking and trust powers of the
      Trustee or any order, writ, judgment, or decree of any
      court, arbitrator or governmental authority applicable to
      the Trustee or any of its assets, (ii) will not violate any
      provision of the articles of association or by-laws of the
      Trustee, or (iii) will not violate any provision of, or
      constitute, with or without notice or lapse of time, a
      default under, or result in the creation or imposition of
      any lien on any properties included in the Trust Property
      pursuant to the provisions of any mortgage, indenture,
      contract, agreement or other undertaking to which it is a
      party, which violation, default or lien could reasonably be
      expected to have an adverse effect on the Trustee's
      performance or ability to perform its duties hereunder or
      thereunder or on the transactions contemplated herein or
      therein;

           (d) the execution, delivery and performance by the
      Trustee of this Agreement, the Intercreditor Agreement, the
      Registration Rights Agreement and the Financing Agreements
      will not require the authorization, consent, or approval
      of, the giving of notice to, the filing or registration
      with, or the taking of any other action in respect of, any
      governmental authority or agency of the United States or
      the State of the United States where it is located
      regulating the banking and corporate trust activities of
      the Trustee; and

           (e) this Agreement, the Intercreditor Agreement, the
      Registration Rights Agreement and the Financing Agreements
      have been duly executed and delivered by the Trustee and
      constitute the legal, valid, and binding agreements of the
      Trustee, enforceable against it in accordance with their
      respective terms, provided that enforceability may be
      limited by (i) applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting the
      rights of creditors generally and (ii) general principles
      of equity.

           Section 7.16. Withholding Taxes; Information
Reporting. The Trustee, as trustee of the grantor trust created
by this Agreement, shall exclude and withhold from each
distribution of principal, premium, if any, and interest and
other amounts due under this Agreement or under the Certificates
any and all withholding taxes applicable thereto as required by
law. The Trustee agrees to act as such withholding agent and, in

                                52





connection therewith, whenever any present or future taxes or
similar charges are required to be withheld with respect to any
amounts payable in respect of the Certificates, to withhold such
amounts and timely pay the same to the appropriate authority in
the name of and on behalf of the Certificateholders, that it will
file any necessary withholding tax returns or statements when
due, and that, as promptly as possible after the payment thereof,
it will deliver to each such Certificateholder appropriate
documentation showing the payment thereof, together with such
additional documentary evidence as such Certificateholders may
reasonably request from time to time. The Trustee agrees to file
any other information reports as it may be required to file under
United States law.

           Section 7.17. Trustee's Liens. The Trustee in its
individual capacity agrees that it will at its own cost and
expense promptly take any action as may be necessary to duly
discharge and satisfy in full any mortgage, pledge, lien, charge,
encumbrance, security interest or claim ("Trustee's Liens") on or
with respect to the Trust Property which is attributable to the
Trustee either (i) in its individual capacity and which is
unrelated to the transactions contemplated by this Agreement, the
Intercreditor Agreement, the Financing Agreements or the
Financing Documents, or (ii) as Trustee hereunder or in its
individual capacity and which arises out of acts or omissions
which are not contemplated by this Agreement.


                           ARTICLE VIII

         CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE

           Section 8.01. The Company to Furnish Trustee with
Names and Addresses of Certificateholders. The Company will
furnish to the Trustee within 15 days after each Record Date with
respect to a Scheduled Payment, and at such other times as the
Trustee may request in writing within 30 days after receipt by
the Company of any such request, a list, in such form as the
Trustee may reasonably require, of all information in the
possession or control of the Company as to the names and
addresses of the Certificateholders, in each case as of a date
not more than 15 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the sole
Registrar, no such list need be furnished; and provided further,
however, that no such list need be furnished for so long as a
copy of the Register is being furnished to the Trustee pursuant
to Section 7.12.

           Section 8.02.  Preservation of Information;
Communications to Certificateholders.  The Trustee shall
preserve, in as current a form as is reasonably practicable, the

                                53





names and addresses of Certificateholders contained in the most
recent list furnished to the Trustee as provided in Section 7.12
or Section 8.01, as the case may be, and the names and addresses
of Certificateholders received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list
furnished to it as provided in Section 7.12 or Section 8.01, as
the case may be, upon receipt of a new list so furnished.

           Section 8.03. Reports by Trustee. Within 60 days after
May 15 of each year commencing with the first full year following
the issuance of the Certificates, the Trustee shall transmit to
the Certificateholders, as provided in Section 313(c) of the
Trust Indenture Act, a brief report dated as of such May 15, if
required by Section 313(a) of the Trust Indenture Act.

           Section 8.04.  Reports by the Company.  The Company
shall:

           (a) file with the Trustee, within 30 days after the
      Company is required to file the same with the SEC, copies
      of the annual reports and of the information, documents and
      other reports (or copies of such portions of any of the
      foregoing as the SEC may from time to time by rules and
      regulations prescribe) which the Company is required to
      file with the SEC pursuant to section 13 or section 15(d)
      of the Securities Exchange Act of 1934, as amended; or, if
      the Company is not required to file information, documents
      or reports pursuant to either of such sections, then to
      file with the Trustee and the SEC, in accordance with rules
      and regulations prescribed by the SEC, such of the
      supplementary and periodic information, documents and
      reports which may be required pursuant to section 13 of the
      Securities Exchange Act of 1934, as amended, in respect of
      a security listed and registered on a national securities
      exchange as may be prescribed in such rules and
      regulations;

           (b) file with the Trustee and the SEC, in accordance
      with the rules and regulations prescribed by the SEC, such
      additional information, documents and reports with respect
      to compliance by the Company with the conditions and
      covenants provided for in this Agreement, as may be
      required by such rules and regulations, including, in the
      case of annual reports, if required by such rules and
      regulations, certificates or opinions of independent public
      accountants;

           (c) transmit to all Certificateholders, in the manner
      and to the extent provided in Section 313(c) of the Trust
      Indenture Act such summaries of any information, documents
      and reports required to be filed by the Company pursuant to
      subsections (a) and (b) of this Section 8.04 as may be
      required by rules and regulations prescribed by the SEC;
      and

                                54






           (d) furnish to the Trustee, not less often than
      annually, a brief certificate from the principal executive
      officer, principal financial officer or principal
      accounting officer as to his or her knowledge of the
      Company's compliance with all conditions and covenants
      under this Agreement (it being understood that for purposes
      of this paragraph (d), such compliance shall be determined
      without regard to any period of grace or requirement of
      notice provided under this Agreement).


                            ARTICLE IX

                     SUPPLEMENTAL AGREEMENTS

           Section 9.01. Supplemental Agreements Without Consent
of Certificateholders. Without the consent of the
Certificateholders, the Company may (but will not be required
to), and the Trustee (subject to Section 9.03) shall, at any time
and from time to time, enter into one or more agreements
supplemental hereto or, if applicable, to the Intercreditor
Agreement or the Liquidity Facility in form satisfactory to the
Trustee, for any of the following purposes:

           (1)  to evidence the succession of another corporation
      to the Company and the assumption by any such successor of
      the covenants of the Company herein contained; or

           (2)  to add to the covenants of the Company for the
      benefit of the Certificateholders, or to surrender any right
      or power in this Agreement conferred upon the Company; or

           (3) to correct or supplement any provision in this
      Agreement, the Intercreditor Agreement or the Liquidity
      Facility which may be defective or inconsistent with any
      other provision herein or to cure any ambiguity or correct
      any mistake or to modify any other provision with respect
      to matters or questions arising under this Agreement, the
      Intercreditor Agreement or the Liquidity Facility, provided
      that any such action shall not materially adversely affect
      the interests of the Certificateholders; or

           (4) to modify, eliminate or add to the provisions of
      this Agreement to such extent as shall be necessary to
      continue the qualification of this Agreement (including any
      supplemental agreement) under the Trust Indenture Act or
      under any similar Federal statute hereafter enacted, and to
      add to this Agreement such other provisions as may be ex-
      pressly permitted by the Trust Indenture Act, excluding, how-
      ever, the provisions referred to in Section 316(a)(2) of the 
      Trust Indenture Act as in effect at the date as of which

                                55





      this instrument was executed or any corresponding provision
      in any similar Federal statute hereafter enacted; or

           (5) to evidence and provide for the acceptance of
      appointment under this Agreement by the Trustee of a
      successor Trustee and to add to or change any of the
      provisions of this Agreement as shall be necessary to
      provide for or facilitate the administration of the Trust,
      pursuant to the requirements of Section 7.10; or

           (6)  to provide the information required under
      Section 7.12 and Section 12.03 as to the Trustee; or

           (7) to modify or eliminate provisions relating to the
      transfer or exchange of Exchange Certificates or the
      Initial Certificates upon consummation of the Exchange
      Offer (as defined in the Registration Rights Agreement) or
      effectiveness of the Registration Statement.

           Section 9.02. Supplemental Agreements with Consent of
Certificateholders. With the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust, by
Direction of said Certificateholders delivered to the Company and
the Trustee, the Company may (with the consent of the Owner
Trustees, if any, which consent shall not be unreasonably
withheld), and the Trustee (subject to Section 9.03) shall, enter
into an agreement or agreements for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, the Intercreditor Agreement, the
Liquidity Facility, the Registration Rights Agreement or any
Financing Agreement to the extent applicable to such
Certificateholders or of modifying in any manner the rights and
obligations of such Certificateholders under this Agreement, the
Intercreditor Agreement, the Liquidity Facility, the Registration
Rights Agreement or any Financing Agreement; provided, however,
that no such agreement shall, without the consent of the
Certificateholder of each Outstanding Certificate affected
thereby:

           (1) reduce in any manner the amount of, or delay the
      timing of, any receipt by the Trustee of payments on the
      Equipment Notes held in the Trust or distributions that are
      required to be made herein on any Certificate, or change
      any date of payment on any Certificate, or change the place
      of payment where, or the coin or currency in which, any
      Certificate is payable, or impair the right to institute
      suit for the enforcement of any such payment or
      distribution on or after the Regular Distribution Date or
      Special Distribution Date applicable thereto; or


                                56





           (2) permit the disposition of any Equipment Note
      included in the Trust Property except as permitted by this
      Agreement, or otherwise deprive such Certificateholder of
      the benefit of the ownership of the Equipment Notes in the
      Trust; or

           (3) reduce the percentage of the aggregate Fractional
      Undivided Interests of the Trust which is required for any
      such supplemental agreement, or reduce such percentage
      required for any waiver of compliance with certain
      provisions of this Agreement or certain defaults hereunder
      and their consequences provided for in this Agreement; or

           (4)  waive, amend or modify Section 2.4, 3.2 or 3.3 of
      the Intercreditor Agreement in a manner adverse to the
      Certificateholders; or

           (5) modify any of the provisions of this Section 9.02
      or Section 6.05, except to increase any such percentage or
      to provide that certain other provisions of this Agreement
      cannot be modified or waived without the consent of the
      Certificateholder of each Certificate affected thereby.

           It shall not be necessary for any Direction of
Certificateholders under this Section to approve the particular
form of any proposed supplemental agreement, but it shall be
sufficient if such Direction shall approve the substance thereof.

           Section 9.03. Documents Affecting Immunity or
Indemnity. If in the opinion of the Trustee any document required
to be executed by it pursuant to the terms of Section 9.01 or
9.02 affects any interest, right, duty, immunity or indemnity in
favor of the Trustee under this Agreement, the Trustee may in its
discretion decline to execute such document.

           Section 9.04. Execution of Supplemental Agreements. In
executing, or accepting the additional trusts created by, any
agreement permitted by this Article or the modifications thereby
of the trusts created by this Agreement, the Trustee shall be
entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this
Agreement.

           Section 9.05. Effect of Supplemental Agreements. Upon
the execution of any agreement supplemental to this Agreement
under this Article, this Agreement shall be modified in
accordance therewith, and such supplemental agreement shall form
a part of this Agreement for all purposes; and every Holder of a
Certificate theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.

                                57






           Section 9.06. Conformity with Trust Indenture Act.
Every supplemental agreement executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act as
then in effect.

           Section 9.07. Reference in Certificates to
Supplemental Agreements. Certificates authenticated and delivered
after the execution of any supplemental agreement pursuant to
this Article may bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental agreement;
and, in such case, suitable notation may be made upon Outstanding
Certificates after proper presentation and demand.


                            ARTICLE X

         AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS

           Section 10.01. Amendments and Supplements to
Indentures and Other Financing Documents. In the event that the
Trustee, as holder of any Equipment Note in trust for the benefit
of the Certificateholders or as Controlling Party under the
Intercreditor Agreement, receives a request for a consent to any
amendment, modification, waiver or supplement under any Indenture
or other Financing Document, the Trustee shall forthwith send a
notice of such proposed amendment, modification, waiver or
supplement to each Certificateholder registered on the Register
as of the date of such notice. The Trustee shall request from the
Certificateholders a Direction as to (a) whether or not to take
or refrain from taking any action which a holder of such
Equipment Note has the option to direct, (b) whether or not to
give or execute any waivers, consents, amendments, modifications
or supplements as a holder of such Equipment Note and (c) how to
vote any Equipment Note if a vote has been called for with
respect thereto. Provided such a request for Certificateholder
Direction shall have been made, in directing any action or
casting any vote or giving any consent as the holder of any
Equipment Note, the Trustee shall vote for or give consent to any
such action with respect to such Equipment Note in the same
proportion as that of (i) the aggregate face amounts of all
Certificates actually voted in favor of or for giving consent to
such action by such Direction of Certificateholders to (ii) the
aggregate face amount of all Outstanding Certificates. For
purposes of the immediately preceding sentence, a Certificate
shall have been "actually voted" if the Holder of such
Certificate has delivered to the Trustee an instrument evidencing
such Holder's consent to such Direction prior to two Business
Days before the Trustee directs such action or casts such vote or
gives such consent. Notwithstanding the foregoing, but subject to
Section 6.04 and the Intercreditor Agreement, the Trustee may, in
its own discretion and at its own direction, consent and

                                58





notify the relevant Loan Trustee of such consent to any
amendment, modification, waiver or supplement under the relevant
Indenture or any other Financing Document, if an Event of Default
hereunder shall have occurred and be continuing, or if such
amendment, modification or waiver will not adversely affect the
interests of the Certificateholders.


                            ARTICLE XI

                       TERMINATION OF TRUST

           Section 11.01. Termination of the Trust. The
respective obligations and responsibilities of the Company and
the Trustee with respect to the Trust shall terminate upon the
distribution to all Holders of Certificates and the Trustee of
all amounts required to be distributed to them pursuant to this
Agreement and the disposition of all property held as part of the
Trust Property; provided, however, that in no event shall the
Trust continue beyond one hundred ten (110) years following the
date of the earliest execution of this Trust Agreement.

           Notice of any termination, specifying the Regular
Distribution Date (or Special Distribution Date, as the case may
be) upon which the Certificateholders may surrender their
Certificates to the Trustee for payment of the final Distribution
Date and cancellation, shall be mailed promptly by the Trustee to
Certificateholders not earlier than the 60th day and not later
than the 20th day next preceding such final Distribution Date
specifying (A) the Regular Distribution Date (or Special
Distribution Date, as the case may be) upon which the proposed
final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office or agency of the
Trustee therein specified, (B) the amount of any such proposed
final payment, and (C) that the Record Date otherwise applicable
to such Regular Distribution Date (or Special Distribution Date,
as the case may be) is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office
or agency of the Trustee therein specified. The Trustee shall
give such notice to the Registrar at the time such notice is
given to Certificateholders. Upon presentation and surrender of
the Certificates in accordance with such notice, the Trustee
shall cause to be distributed to Certificateholders such final
payments.

           In the event that all of the Certificateholders shall
not surrender their Certificates for cancellation within six
months after the date specified in the above-mentioned written
notice, the Trustee shall give a second written notice to the
remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect

                                59





thereto. No additional interest shall accrue on the Certificates
after the Regular Distribution Date (or Special Distribution
Date, as the case may be) specified in the first written notice.
In the event that any money held by the Trustee for the payment
of distributions on the Certificates shall remain unclaimed for
two years (or such lesser time as the Trustee shall be satisfied,
after sixty days' notice from the Company, is one month prior to
the escheat period provided under applicable law) after the final
distribution date with respect thereto, the Trustee shall pay to
each Loan Trustee the appropriate amount of money relating to
such Loan Trustee and shall give written notice thereof to the
related Owner Trustees, the Owner Participants and the Company.


                           ARTICLE XII

                     MISCELLANEOUS PROVISIONS

           Section 12.01. Limitation on Rights of
Certificateholders. The death or incapacity of any
Certificateholder shall not operate to terminate this Agreement
or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any
action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights,
obligations, and liabilities of the parties hereto or any of
them.

           Section 12.02. Certificates Nonassessable and Fully
Paid. Except as set forth in the last sentence of this Section
12.02, Certificateholders shall not be personally liable for
obligations of the Trust, the Fractional Undivided Interests
represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and
Certificates, upon authentication thereof by the Trustee pursuant
to Section 3.03, are and shall be deemed fully paid. No
Certificateholder shall have any right (except as expressly
provided herein) to vote or in any manner otherwise control the
operation and management of the Trust Property, the Trust, or the
obligations of the parties hereto, nor shall anything set forth
herein, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to
time as partners or members of an association. Neither the
existence of the Trust nor any provision herein is intended to or
shall limit the liability the Certificateholders would otherwise
incur if the Certificateholders owned Trust Property as
co-owners, or incurred any obligations of the Trust, directly
rather than through the Trust.

           Section 12.03.  Notices.  (a)  Unless otherwise
specifically provided herein, all notices required under the

                                60





terms and provisions of this Agreement shall be in English and in
writing, and any such notice may be given by United States mail,
courier service or telecopy, and any such notice shall be
effective when delivered or received or, if mailed, three days
after deposit in the United States mail with proper postage for
ordinary mail prepaid,

           if to the Company, to:

                Continental Airlines, Inc.
                2929 Allen Parkway
                Houston, TX  77019
                Attention:  Chief Financial Officer and
                         General Counsel
                    Facsimile: (713) 523-2831

           if to the Trustee, to:

                Wilmington Trust Company
                Rodney Square North
                1100 North Market Street
                Wilmington, DE  19890-0001
                Attention:  Corporate Trust Department
                Facsimile:     (302) 651-8882
                Telephone:     (302) 651-8584


           (b) The Company or the Trustee, by notice to the
other, may designate additional or different addresses for
subsequent notices or communications.

           (c) Any notice or communication to Certificateholders
shall be mailed by first-class mail to the addresses for
Certificateholders shown on the Register kept by the Registrar.
Failure so to mail a notice or communication or any defect in
such notice or communication shall not affect its sufficiency
with respect to other Certificateholders.

           (d) If a notice or communication is mailed in the
manner provided above within the time prescribed, it is
conclusively presumed to have been duly given, whether or not the
addressee receives it.

           (e) If the Company mails a notice or communication to
the Certificateholders, it shall mail a copy to the Trustee and
to the Paying Agent at the same time.

           (f) Notwithstanding the foregoing, all communications
or notices to the Trustee shall be deemed to be given only when
received by a Responsible Officer of the Trustee.


                                61





           (g) The Trustee shall promptly furnish the Company
with a copy of any demand, notice or written communication
received by the Trustee hereunder from any Certificateholder,
Owner Trustee or Loan Trustee.

           Section 12.04. Governing Law. THIS AGREEMENT HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS-OF-LAW PRINCIPLES.

           Section 12.05. Severability of Provisions. If any one
or more of the covenants, agreements, provisions or terms of this
Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions, or terms shall be deemed
severable from the remaining covenants, agreements, provisions or
terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or
the Trust, or of the Certificates or the rights of the
Certificateholders thereof.

           Section 12.06.  Trust Indenture Act Controls.  This
Agreement is subject to the provisions of the Trust Indenture Act
and shall, to the extent applicable, be governed by such
provisions.

           Section 12.07.  Effect of Headings and Table of
Contents.  The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.

           Section 12.08. Successors and Assigns. All covenants,
agreements, representations and warranties in this Agreement by
the Trustee and the Company shall bind and, to the extent
permitted hereby, shall inure to the benefit of and be
enforceable by their respective successors and assigns, whether
so expressed or not.

           Section 12.09. Benefits of Agreement. Nothing in this
Agreement or in the Certificates, express or implied, shall give
to any Person, other than the parties hereto and their successors
hereunder, and the Certificateholders, any benefit or any legal
or equitable right, remedy or claim under this Agreement.

           Section 12.10. Legal Holidays. In any case where any
Regular Distribution Date or Special Distribution Date relating
to any Certificate shall not be a Business Day, then
(notwithstanding any other provision of this Agreement) payment
need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made

                                62





on such Regular Distribution Date or Special Distribution Date,
and no interest shall accrue during the intervening period.

           Section 12.11. Counterparts. For the purpose of
facilitating the execution of this Agreement and for other
purposes, this Agreement may be executed simultaneously in any
number of counterparts, each of which counterparts shall be
deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.

           Section 12.12. Intention of Parties. The parties
hereto intend that the Trust be classified for U.S. federal
income tax purposes as a grantor trust under Subpart E, Part I of
Subchapter J of the Internal Revenue Code of 1986, as amended,
and not as a trust or association taxable as a corporation or as
a partnership. The powers granted and obligations undertaken
pursuant to this Agreement shall be so construed so as to further
such intent.



                                63





           IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first written
above.


                                    CONTINENTAL AIRLINES, INC.


                                    By _________________________
                                       Name:
                                          Title:



                                    WILMINGTON TRUST COMPANY, as
                                       Trustee


                                    By _________________________
                                       Name:
                                       Title:



                                64





                                                          EXHIBIT A


                       FORM OF CERTIFICATE



REGISTERED

No. ______________


      [THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S.
      SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
      AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
      UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
      PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
      ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
      IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
      144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL
      "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
      (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
      "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
      U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN
      OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
      THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN
      THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
      THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE
      WAS HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
      AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE
      TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED
      INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
      SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN
      INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR
      MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT,
      PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED
      LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
      RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
      CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
      THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
      TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
      SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
      REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
      (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT
      WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
      TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
      LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE
      WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
      OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFI-
      CATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY






      AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE
      APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
      THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
      THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
      TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
      MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
      ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
      REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
      THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
      RESTRICTIONS.]*

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

      TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
      TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR
      TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
      TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE
      LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
      RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE
      PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.]**

- --------
      *    Not to be included on the face of the Permanent Offshore
           Global Certificate.
      **   To be included on the face of each Global Certificate.

                             A-2





                      [GLOBAL CERTIFICATE]*

          CONTINENTAL AIRLINES 1996-2A PASS THROUGH TRUST

   7.75% Continental Airlines [Initial] [Exchange] Pass Through
Certificate
                          Series 1996-2A

              Final Distribution Date:  July 2, 2014

evidencing a fractional undivided interest in a trust, the
property of which includes certain equipment notes each secured
by an Aircraft leased to Continental Airlines, Inc.


                     $             Fractional Undivided Interest
                     representing .        % of the Trust per
                     $1,000 face amount

           THIS CERTIFIES THAT                       , for value
                               ----------------------
received, is the registered owner of a $             (
                                        ------------
    dollars) Fractional Undivided Interest in the Continental
Airlines 1996-2A Pass Through Trust (the "Trust") created
pursuant to a Pass Through Trust Agreement, dated as of May 20,
1996 (the "Agreement"), between Wilmington Trust Company (the
"Trustee") and Continental Airlines, Inc., a corporation
incorporated under Delaware law (the "Company"), a summary of
certain of the pertinent provisions of which is set forth below.
To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement.
This Certificate is one of the duly authorized Certificates
designated as "7.75% Continental Airlines [Initial] [Exchange]
Pass Through Certificates Series 1996-2A" (herein called the
"Certificates"). This Certificate is issued under and is subject
to the terms, provisions, and conditions of the Agreement. By
virtue of its acceptance hereof the Certificateholder of this
Certificate assents to and agrees to be bound by the provisions
of the Agreement and the Intercreditor Agreement. The property of
the Trust includes certain Equipment Notes and all rights of the
Trust to receive payments under the Intercreditor Agreement and
the Liquidity Facilities (the "Trust Property"). Each issue of
the Equipment Notes is secured by, among other things, a security
interest in the Aircraft leased to or owned by the Company.

           The Certificates represent fractional undivided
interests in the Trust and the Trust Property, and have no


- --------
*     To be included on the face of each Global Certificate.

                               A-3





rights, benefits or interest in respect of any assets or property
other than the Trust Property.

           Subject to and in accordance with the terms of the
Agreement and the Intercreditor Agreement, from and to the extent
of funds then available to the Trustee, there will be distributed
on each January 2, April 2, July 2 and October 2 (a "Regular
Distribution Date"), commencing on July 2, 1996, to the Person in
whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date,
an amount in respect of the Scheduled Payments on the Equipment
Notes due on such Regular Distribution Date, the receipt of which
has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate
and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement and
the Intercreditor Agreement, in the event that Special Payments
on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the
applicable Special Distribution Date, to the Person in whose name
this Certificate is registered at the close of business on the
15th day preceding the Special Distribution Date, an amount in
respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the
product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special
Payments so received. If a Regular Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same
force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the
intervening period. The Trustee shall mail notice of each Special
Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate.

           [The Holder of this Certificate is entitled to the
benefits of the Registration Rights Agreement, dated as of May
20, 1996, among the Company, the Trustee and the Initial
Purchasers named therein (the "Registration Rights Agreement").
In the event that neither the consummation of the Exchange Offer
nor the declaration by the Commission of a Shelf Registration to
be effective (a "Registration Event") occurs on or prior to the
180th day after the date of the issuance of the Certificates, the
interest rate per annum borne by the Equipment Notes shall be
increased by 0.50%, from and including January 2, 1997, to but
excluding the date on which a Registration Event occurs. In the
event that the Shelf Registration Statement ceases to be
effective at any time during the period specified by the
Registration Rights Agreement for more than 60 days, whether or
not consecutive, during any 12-month period, the interest rate
per annum borne by the Equipment Notes shall be increased by

                               A-4





0.50% from the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective until such
time as the Shelf Registration Statement again becomes
effective.]*


           Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Trustee of
the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency of the
Trustee specified in such notice.

           THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.

           Reference is hereby made to the further provisions of
this Certificate set forth in the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.

           Unless the certificate of authentication hereon has
been executed by the Trustee, by manual signature, this
Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.

           IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.

Dated:  May 20, 1996                CONTINENTAL AIRLINES
                                       1996-2A           PASS THROUGH TRUST

                                    By: WILMINGTON TRUST COMPANY,
                                          not in its individual
                                          capacity but solely as
                                          Trustee


Attest:                                 By: ______________________
                                              Name:
                                              Title:
- --------------------
Authorized Signature


- --------
*     To be included only on each Initial Certificate.

                               A-5





       [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]


             This is one of the Certificates referred to in the
               within-mentioned Agreement.



                                    WILMINGTON TRUST COMPANY,
                                       not in its individual
                                       capacity but
                                       solely as Trustee



                                         By: _____________________
                                               Authorized Officer



                               A-6





                     [REVERSE OF CERTIFICATE]


           The Certificates do not represent a direct obligation
of, or an obligation guaranteed by, or an interest in, the
Company or the Trustee or any of their affiliates. The
Certificates are limited in right or payment, all as more
specifically set forth on the face hereof and in the Agreement.
All payments or distributions made to Certificateholders under
the Agreement shall be made only from the Trust Property and only
to the extent that the Trustee shall have sufficient income or
proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof,
agrees that it will look solely to the income and proceeds from
the Trust Property to the extent available for distribution to
such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby. A copy of the Agreement may be examined
during normal business hours at the principal office of the
Trustee, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.

           The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Certificateholders under the Agreement at any time by the Company
and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust.
Any such consent by the Certificateholder of this Certificate
shall be conclusive and binding on such Certificateholder and
upon all future Certificateholders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent is made
upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of
the Certificateholders of any of the Certificates.

           As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate
is registrable in the Register upon surrender of this Certificate
for registration of transfer at the offices or agencies
maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in the Borough of Manhattan, the City of New
York, duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided

                               A-7





Interest in the Trust will be issued to the designated transferee
or transferees.

           The Certificates are issuable only as registered
Certificates without coupons in minimum denominations of
[$100,000]* [$1,000]** Fractional Undivided Interest and integral
multiples of $1,000 in excess thereof [except that one
Certificate may be in a denomination of less than $100,000]*. As
provided in the Agreement and subject to certain limitations
therein set forth, the Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same
aggregate Fractional Undivided Interest in the Trust, as
requested by the Certificateholder surrendering the same.

           No service charge will be made for any such
registration of transfer or exchange, but the Trustee shall
require payment by the Holder of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.

           The Trustee, the Registrar, and any agent of the
Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes,
and neither the Trustee, the Registrar, nor any such agent shall
be affected by any notice to the contrary.

           The obligations and responsibilities created by the
Agreement and the Trust created thereby shall terminate upon the
distribution to Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement and the disposition
of all property held as part of the Trust Property.




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

*     To be included only on each Initial Certificate.
**    To be included only on each Exchange Certificate.

                               A-8






                     FORM OF TRANSFER NOTICE


           FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto

Insert Taxpayer Identification No.


- -------------------------
please print or typewrite name and address including zip code of
assignee

- -------------------------
the within Certificate and all rights thereunder, hereby
irrevocably constituting and appointing

- -------------------------
attorney to transfer said Certificate on the books of the Trustee
with full power of substitution in the premises.


              [THE FOLLOWING PROVISION TO BE INCLUDED
                       ON ALL CERTIFICATES
               EXCEPT PERMANENT OFFSHORE GLOBAL AND
                  OFFSHORE PHYSICAL CERTIFICATES]

           In connection with any transfer of this Certificate
occurring prior to the date that is the earlier of the date of an
effective Registration Statement or __________, 1999, the
undersigned confirms that without utilizing any general
solicitation or general advertising that:

                           [Check One]

[        ] (a) this Certificate is being transferred in
           compliance with the exemption from registration under
           the Securities Act of 1933, as amended, provided by
           Rule 144A thereunder.

                                or

[        ] (b) this Certificate is being transferred other than
           in accordance with (a) above and documents are being
           furnished that comply with the conditions of transfer
           set forth in this Certificate and the Agreement.

If neither of the foregoing boxes is checked, the Trustee or
other Registrar shall not be obligated to register this
Certificate in the name of any Person other than the Holder
hereof unless and until the conditions to any such transfer of

                               A-9






registration set forth herein and in Section 3.06 of the
Agreement shall have been satisfied.


Date:                              [Name of Transferor]


                                   NOTE: The signature must
                                   correspond with the name as
                                   written upon the face of the
                                   within-mentioned instrument in
                                   every particular, without
                                   alteration or any change
                                   whatsoever.

Signature Guarantee:  _______________

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

          The undersigned represents and warrants that it is
purchasing this Certificate for its own account or an account
with respect to which it exercises sole investment discretion and
that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933,
as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.


Dated: ___________________         __________________________
                                   NOTE: To be executed by an
                                         executive officer.



                               A-10






                                                         EXHIBIT B

          FORM OF CERTIFICATE FOR UNLEGENDED CERTIFICATES


                                                           [Date]

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE  19890-0001
Attention:  Corporate Trust Trustee Administration


                Re:  Continental Airlines 1996-2A Pass
                     Through Trust, Class A Pass Through
                     Trust Certificates
                     (the "Certificates")

Dear Sirs:

           This letter relates to U.S. $__________ Fractional
Undivided Interest of Certificates represented by a Certificate
(the "Legended Certificate") which bears a legend outlining
restrictions upon transfer of such Legended Certificate. Pursuant
to Section 3.01 of the Pass Through Trust Agreement relating to
the Certificates dated as of May 20, 1996 (the "Trust
Agreement"), between Continental Airlines, Inc. ("Continental")
and you, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to
whom the Certificates could be transferred in accordance with
Rule 904 of Regulation S promulgated under the U.S. Securities
Act of 1933, as amended. Accordingly, you are hereby requested to
exchange the legended certificate for an unlegended certificate
representing an identical principal amount of Certificates, all
in the manner provided for in the Trust Agreement.

           You and Continental are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.

                               Very truly yours,

                               [Name of Certificateholder]


                                          By:______________________
                                               Authorized Signature







                                                          EXHIBIT C


         FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
              WITH TRANSFERS PURSUANT TO REGULATION S


                                                           [date]



Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE  19890-0001
Attention:  Corporate Trust Trustee Administration


                Re:  Continental Airlines 1996-2A Pass Through
                     Trust (the "Trust"), 7.75% Continental
                     Airlines Pass Through Certificates
                     Series 1996-2A (the "Certificates")

Sirs:

           In connection with our proposed sale of $_______
Fractional Undivided Interest of the Certificates, we confirm
that such sale has been effected pursuant to and in accordance
with Regulation S under the Securities Act of 1933, as amended,
and, accordingly, we represent that:

           (1)  the offer of the Certificates was not made to a
      person in the United States;

           (2) either (a) at the time the buy order was
      originated, the transferee was outside the United States or
      we and any person acting on our behalf reasonably believed
      that the transferee was outside the United States or (b)
      the transaction was executed in, on or through the
      facilities of a designated off-shore securities market and
      neither we nor any person acting on our behalf knows that
      the transaction has been pre-arranged with a buyer in the
      United States;

           (3) no directed selling efforts have been made in the
      United States in contravention of the requirements of Rule
      903(b) or Rule 904(b) of Regulation S, as applicable; and

           (4) the transaction is not part of a plan or scheme to
      evade the registration requirements of the Securities Act.

           In addition, if the sale is made during a restricted
period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of







Regulation S are applicable thereto, we confirm that such sale
has been made in accordance with the applicable provisions of
Rule 903(c)(3) or Rule 904(c)(1), as the case may be.

           You and Continental Airlines, Inc. are entitled to
rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.

                                    Very truly yours,

                                    [Name of Transferor]


                                    By:_______________________
                                             Authorized Signature

                               C-2






                                                          EXHIBIT D

                    FORM OF CERTIFICATE TO BE
                   DELIVERED IN CONNECTION WITH
             TRANSFERS TO NON-QIB ACCREDITED INVESTORS

                                                           [date]

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE  19890-0001
Attention:  Corporate Trust Trustee Administration


           Re:  Continental Airlines 1996-2A Pass-
                Through Trust (the "Trust"), 7.75%
                Continental Airlines Pass Through
                Certificates Series 1996-2A
                (the "Certificates")


Dear Sirs:

           In connection with our proposed purchase of
$_______________ aggregate principal amount of the Certificates,
we confirm that:

           1. We understand that any subsequent transfer of the
      Certificates is subject to certain restrictions and
      conditions set forth in the Pass Through Trust Agreement
      dated as of May 20, 1996 relating to the Certificates (the
      "Pass Through Trust Agreement") and the undersigned agrees
      to be bound by, and not to resell, pledge or otherwise
      transfer the Certificates except in compliance with, such
      restrictions and conditions and the Securities Act of 1933,
      as amended (the "Securities Act").

           2. We understand that the Certificates have not been
      registered under the Securities Act, and that the
      Certificates may not be offered or sold except as permitted
      in the following sentence. We agree, on our own behalf and
      on behalf of any accounts for which we are acting as
      hereinafter stated, that if we should sell any Certificate,
      we will do so only (A) in accordance with Rule 144A under
      the Securities Act to a "qualified institutional buyer" (as
      defined therein), (B) to an institutional "accredited
      investor" (as defined below) that, prior to such transfer,
      furnishes to you and Continental Airlines, Inc., a signed
      letter substantially in the form of this letter, (C)
      outside the United States in accordance with Rule 904 of
      Regulation S under the Securities Act, (D) pursuant to the
      exemption







      from registration provided by Rule 144 under the Securities
      Act, or (E) pursuant to an effective registration statement
      under the Securities Act, and we further agree to provide
      to any person purchasing any of the Certificates from us a
      notice advising such purchaser that resales of the Notes
      are restricted as stated herein. We further understand that
      the Certificates purchased by us will bear a legend to the
      foregoing effect.

           3. We understand that, on any proposed resale of any
      Certificates, we will be required to furnish to you and
      Continental Airlines, Inc. such certifications, legal
      opinions and other information as you and Continental
      Airlines, Inc. may reasonably require to confirm that the
      proposed sale complies with the foregoing restrictions. We
      further understand that the Certificates purchased by us
      will bear a legend to the foregoing effect.

           4. We are an institutional "accredited investor" (as
      defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
      under the Securities Act) and have such knowledge and
      experience in financial and business matters as to be
      capable of evaluating the merits and risks of our
      investment in the Certificates and we and any accounts for
      which we are acting are each able to bear the economic risk
      of our or its investment.

           5. We are acquiring the Certificates purchased by us
      for our own account or for one or more accounts (each of
      which is an institutional "accredited investor") as to each
      of which we exercise sole investment discretion.

           You and Continental Airlines, Inc. are entitled to
rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.

                                    Very truly yours,

                                    [Name of Transferor]


                                    By: ________________________
                                          Authorized Signature


                               D-2










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






                   PASS THROUGH TRUST AGREEMENT

                     Dated as of May 20, 1996


                             between


                    CONTINENTAL AIRLINES, INC.


                               and


                    WILMINGTON TRUST COMPANY,

                            as Trustee





          Continental Airlines 1996-2B Pass Through Trust

          8.56% 1996-2B Initial Pass Through Certificates
         8.56% 1996-2B Exchange Pass Through Certificates





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









Reconciliation and tie between Continental Airlines 1996-2B Pass
Through Trust Agreement, dated as of May 20, 1996, and the Trust
Indenture Act of 1939. This reconciliation does not constitute
part of the Pass Through Trust Agreement.



  Trust Indenture Act                             Pass Through Trust
    of 1939 Section                                Agreement Section
- ------------------------                       -------------------------

310(a)(1)                                                7.08

 (a)(2)                                                  7.08

 312(a)                                            3.05; 8.01; 8.02

 313(a)                                                  8.03

 314(a)                                              8.04(a) - (c)

 (a)(4)                                                  8.04(d)

 (c)(1)                                                  1.02

 (c)(2)                                                  1.02

 (d)(1)                                               7.13; 11.01

 (d)(2)                                               7.13; 11.01

 (d)(3)                                                  2.01

    (e)                                                  1.02

 315(b)                                                  7.02

 316(a)(last                                            1.04(c)
sentence)

(a)(1)(A)                                                6.04

(a)(1)(B)                                                6.05

    (b)                                                  6.06

    (c)                                                  1.04(d)

317(a)(1)                                                6.03

    (b)                                                  7.13

 318(a)                                                  12.06










                        TABLE OF CONTENTS


      Section                                                  Page

                            ARTICLE I

                           DEFINITIONS

      1.01.  Definitions........................................  2
      1.02.  Compliance Certificates and Opinions............... 13
      1.03.  Form of Documents Delivered to Trustee............. 14
      1.04.  Directions of Certificateholders................... 14

                            ARTICLE II

                ORIGINAL ISSUANCE OF CERTIFICATES;
                  ACQUISITION OF EQUIPMENT NOTES

      2.01.  Issuance of Certificates; Acquisition of
              Equipment Notes................................... 16
      2.02.  Acceptance by Trustee.............................. 18
      2.03.  Limitation of Powers............................... 19

                           ARTICLE III

                         THE CERTIFICATES

      3.01.  Title, Form, Denomination and Execution of
              Certificates...................................... 19
      3.02.  Restrictive Legends................................ 20
      3.03.  Authentication of Certificates..................... 22
      3.04.  Transfer and Exchange.............................. 23
      3.05.  Book-Entry Provisions for U.S. Global
              Certificate and Offshore Global Certificates...... 23
      3.06.  Special Transfer Provisions........................ 25
      3.07.  Mutilated, Destroyed, Lost or Stolen
              Certificates...................................... 28
      3.08.  Persons Deemed Owners.............................. 28
      3.09.  Cancellation....................................... 29
      3.10.  Temporary Certificates............................. 29
      3.11.  Limitation of Liability for Payments............... 29



                            ARTICLE IV

                   DISTRIBUTIONS; STATEMENTS TO
                        CERTIFICATEHOLDERS

      4.01.  Certificate Account and Special Payments
              Account........................................... 30







      4.02.  Distributions from Certificate Account and
              Special Payments Account.......................... 30
      4.03.  Statements to Certificateholders................... 32
      4.04.  Investment of Special Payment Moneys............... 33

                            ARTICLE V

                           THE COMPANY

      5.01.  Maintenance of Corporate Existence................. 33
      5.02.  Consolidation, Merger, etc......................... 33

                            ARTICLE VI

                             DEFAULT

      6.01.  Events of Default.................................. 34
      6.02.  [Intentionally omitted.]........................... 37
      6.03.  Judicial Proceedings Instituted by Trustee;
              Trustee May Bring Suit............................ 37
      6.04.  Control by Certificateholders...................... 37
      6.05.  Waiver of Past Defaults............................ 37
      6.06.  Right of Certificateholders to Receive Payments
              Not to Be Impaired................................ 38
      6.07.  Certificateholders May Not Bring Suit Except
              Under Certain Conditions.......................... 38
      6.08.  Remedies Cumulative................................ 39

                           ARTICLE VII

                           THE TRUSTEE

      7.01.  Certain Duties and Responsibilities................ 39
      7.02.  Notice of Defaults................................. 40
      7.03.  Certain Rights of Trustee.......................... 40
      7.04.  Not Responsible for Recitals or Issuance of
              Certificates...................................... 42
      7.05.  May Hold Certificates.............................. 42
      7.06.  Money Held in Trust................................ 42
      7.07.  Compensation and Reimbursement..................... 42
      7.08.  Corporate Trustee Required; Eligibility............ 43
      7.09.  Resignation and Removal; Appointment of
              Successor......................................... 43
      7.10.  Acceptance of Appointment by Successor............. 45
      7.11.  Merger, Conversion, Consolidation or Succession
              to Business....................................... 45
      7.12.  Maintenance of Agencies............................ 46
      7.13.  Money for Certificate Payments to Be Held in
              Trust............................................. 47
      7.14.  Registration of Equipment Notes in Name of

                              ii






              Subordination Agent............................... 47
      7.15.  Representations and Warranties of Trustee.......... 47
      7.16.  Withholding Taxes; Information Reporting........... 49
      7.17.  Trustee's Liens.................................... 49

                           ARTICLE VIII

         CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE

      8.01.  The Company to Furnish Trustee with Names and
              Addresses of Certificateholders................... 49
      8.02.  Preservation of Information; Communications to
              Certificateholders................................ 50
      8.03.  Reports by Trustee................................. 50
      8.04.  Reports by the Company............................. 50

                            ARTICLE IX

                     SUPPLEMENTAL AGREEMENTS

      9.01.  Supplemental Agreements Without Consent of
              Certificateholders................................ 51
      9.02.  Supplemental Agreements with Consent of
              Certificateholders................................ 52
      9.03.  Documents Affecting Immunity or Indemnity.......... 53
      9.04.  Execution of Supplemental Agreements............... 53
      9.05.  Effect of Supplemental Agreements.................. 53
      9.06.  Conformity with Trust Indenture Act................ 53
      9.07.  Reference in Certificates to Supplemental
              Agreements........................................ 54

                            ARTICLE X

         AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS

      10.01.  Amendments and Supplements to Indentures and
               Other Financing Documents........................ 54

                            ARTICLE XI

                       TERMINATION OF TRUST

      11.01.  Termination of the Trust.......................... 55

                           ARTICLE XII

                     MISCELLANEOUS PROVISIONS

      12.01.  Limitation on Rights of Certificateholders........ 56
      12.02.  Certificates Nonassessable and Fully Paid......... 56

                             iii





      12.03.  Notices........................................... 56
      12.04.  Governing Law..................................... 57
      12.05.  Severability of Provisions........................ 58
      12.06.  Trust Indenture Act Controls...................... 58
      12.07.  Effect of Headings and Table of Contents.......... 58
      12.08.  Successors and Assigns............................ 58
      12.09.  Benefits of Agreement............................. 58
      12.10.  Legal Holidays.................................... 58
      12.11.  Counterparts...................................... 58
      12.12.  Intention of Parties.............................. 59


Schedule 1  -        Indentures
Schedule 2  -        Financing Agreements


Exhibit A   -        Form of Certificate
Exhibit B   -        Form of Certificate for Unlegended
                     Certificates
Exhibit C   -        Form of Certificate to Be Delivered in
                     Connection with Transfers Pursuant to
                     Regulation S
Exhibit D   -        Form of Certificate to Be Delivered in
                     Connection with Transfers to Non-QIB
                     Accredited Investors



                              iv




                   PASS THROUGH TRUST AGREEMENT


           This PASS THROUGH TRUST AGREEMENT, dated as of May 20,
1996, between CONTINENTAL AIRLINES, INC., a Delaware corporation,
and WILMINGTON TRUST COMPANY, as Trustee, is made with respect to
the formation of Continental Airlines 1996-2B Pass Through Trust
and the issuance of 8.56% Continental Airlines 1996-2B Pass
Through Certificates representing fractional undivided interests
in the Trust.

           WITNESSETH:

           WHEREAS, (i) the Company, the Owner Trustees and the
Owner Participants (as such terms and certain other capitalized
terms used herein are defined below) have previously entered into
four separate leveraged lease transactions in connection with the
purchase of four Boeing 757-224 aircraft from the manufacturer
(the "Leased Aircraft") and (ii) the Company has previously
purchased one Boeing 737-524 aircraft from the manufacturer (the
"Owned Aircraft"; together with the Leased Aircraft, the
"Aircraft");

           WHEREAS, each Owner Trustee, acting on behalf of the
corresponding Owner Participant, will issue pursuant to an
Indenture, on a non-recourse basis, four series of Equipment
Notes, among other things, to refinance the current indebtedness
of such Owner Trustee originally incurred to finance the purchase
price of the related Leased Aircraft;

           WHEREAS, the Company, will issue pursuant to an
Indenture, on a recourse basis, four series of Equipment Notes,
relating to the Owned Aircraft;

           WHEREAS, the Trustee, upon execution and delivery of
this Agreement, hereby declares the creation of the Trust for the
benefit of the Certificateholders, and the initial
Certificateholders, as the grantors of the Trust, by their
respective acceptances of the Certificates, join in the creation
of this Trust with the Trustee;

           WHEREAS, all Certificates to be issued by the Trust
will evidence fractional undivided interests in the Trust and
will convey no rights, benefits or interests in respect of any
property other than the Trust Property;

           WHEREAS, pursuant to the terms and conditions of this
Agreement and each of the Financing Agreements to be entered into
by the Trustee simultaneously with the execution and delivery of
this Agreement, the Trustee on behalf of the Trust shall purchase
one or more issues of Equipment Notes having the same interest
rate as, and final maturity dates not later than the final
Regular Distribution Date of, the Certificates issued hereunder






and shall hold such Equipment Notes in trust for the benefit of
the Certificateholders;

           WHEREAS, to facilitate the sale of Equipment Notes to,
and the purchase of Equipment Notes by, the Trustee on behalf of
the Trust, the Company has duly authorized the execution and
delivery of this Agreement as the "issuer", as such term is
defined in and solely for purposes of the Securities Act of 1933,
as amended, of the Certificates to be issued pursuant hereto and
as the "obligor", as such term is defined in and solely for
purposes of the Trust Indenture Act of 1939, as amended, with
respect to all such Certificates and is undertaking to perform
certain administrative and ministerial duties hereunder and is
also undertaking to pay the ongoing fees and expenses of the
Trustee;

           WHEREAS, all of the conditions and requirements
necessary to make this Agreement, when duly executed and
delivered, a valid, binding and legal instrument, enforceable in
accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof
have been in all respects duly authorized; and

           WHEREAS, upon issuance of the Exchange Certificates,
if any, or the effectiveness of the Registration Statement, this
Agreement, as amended or supplemented from time to time, will be
subject to the provisions of the Trust Indenture Act of 1939, and
shall, to the extent applicable, be governed by such provisions;

           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 1.01.  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 other terms used herein which are defined in
      the Trust Indenture Act, either directly or by reference

                                 2





      therein, or by the rules promulgated under the Trust
      Indenture Act, have the meanings assigned to them therein;

           (3) all references in this Agreement to designated
      "Articles", "Sections", "Subsections" and other
      subdivisions are to the designated Articles, Sections,
      Subsections and
      other subdivisions of this Agreement;

           (4) 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,
      Subsection or other subdivision; and

           (5) unless the context otherwise requires, whenever
      the words "including", "include" or "includes" are used
      herein, it shall be deemed to be followed by the phrase
      "without limitation".

           Affiliate: Means, with respect to any Person, any
      other Person directly or indirectly controlling or
      controlled by or under common control with such Person,
      provided, however, that neither America West Airlines, Inc.
      nor any of its subsidiaries shall be deemed to be an
      "Affiliate" of the Company for purposes of this Agreement.
      For purposes of this definition, "control" means the power,
      directly or indirectly, to direct 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.

           Agent Members:  Has the meaning specified in Section
      3.05.

           Aircraft:  Has the meaning specified in the first
      recital to this Agreement.

           Authorized Agent:  Means any Paying Agent or Registrar
      for the Certificates.

           Avoidable Tax: Means a state or local tax (i) upon (w)
      the Trust, (x) the Trust Property, (y) Certificateholders
      or (z) the Trustee for which the Trustee is entitled to
      seek reimbursement from the Trust Property, and (ii) which
      would be avoided if the Trustee were located in another
      state, or jurisdiction within a state, within the United
      States. A tax shall not be an Avoidable Tax if the Company
      or any Owner Trustee shall agree to pay, and shall pay,
      such tax.


                                 3





           Business Day: Means any day other than a Saturday, a
      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 or any Loan Trustee maintains
      its Corporate Trust Office or receives and disburses funds.

           Cedel:  Means Cedel Bank societe anonyme.

           Certificate:  Means any one of the Initial Certificates
      or Exchange Certificates and any such Certificates issued in
      exchange therefor or replacement thereof pursuant to this
      Agreement.

           Certificate Account:  Means the account or accounts
      created and maintained  pursuant to Section 4.01(a).

           Certificateholder or Holder:  Means the Person in whose
      name a Certificate is registered in the Register.

           Company: Means Continental Airlines, Inc., a Delaware
      corporation, or its successor in interest pursuant to
      Section 5.02, or any other obligor (within the meaning of
      the Trust Indenture Act) with respect to the Certificates.

           Controlling Party:  Has the meaning specified in the
      Intercreditor Agreement.

           Corporate Trust Office: With respect to the Trustee or
      any Loan Trustee, means the office of such trustee in the
      city at which at any particular time its corporate trust
      business shall be principally administered.

           Cut-off Date:  Means August 2, 1996.

           Delayed Equipment Notes:  Means the Equipment Notes to
      be issued on the applicable Transfer Date in respect of the
      two Leased Aircraft bearing Federal Aviation Registration
      Marks of N12114 and N14115.

           Depositary:  Means the Depository Trust Company, its
      nominees and their respective successors.

           Direction:  Has the meaning specified in
      Section 1.04(a).

           Distribution Date:  Means any Regular Distribution Date
      or Special Distribution Date.

           Equipment Notes:  Means the equipment notes issued
      under the Indentures.

                                 4






           ERISA:  Means the Employee Retirement Income Security
      Act of 1974, as amended from time to time, or any successor
      federal statute.

           Escrow Account:  Has the meaning specified in
      Section 2.01(b).

           Escrowed Funds:  Has the meaning specified in
      Section 2.01(b).

           Euroclear:  Means the Euroclear System.

           Event of Default: Means an Indenture Default under any
      Indenture pursuant to which Equipment Notes held by the
      Trust were issued.

           Exchange Certificates: Means the certificates
      substantially in the form of Exhibit A hereto issued in
      exchange for the Initial Certificates pursuant to the
      Registration Rights Agreement and authenticated hereunder.

           Exchange Offer Registration Statement:  Means the
      Exchange Offer Registration Statement defined in the
      Registration Rights Agreement.

           Financing Agreements: Means each of the four separate
      Refunding Agreements and the Note Purchase Agreement, in
      each case, dated the date hereof, listed on Schedule 2
      hereto, providing for, among other things, the purchase of
      Equipment Notes by the Trustee on behalf of the Trust, as
      the same may be amended, supplemented or otherwise modified
      from time to time in accordance with its terms.

           Financing Documents: With respect to any Equipment
      Note, means (i) the related Indenture and Financing
      Agreement and (ii) in the case of any Equipment Note
      related to a Leased Aircraft, the Lease and the
      Participation Agreement relating to such Leased Aircraft.

           Fractional Undivided Interest:  Means the fractional
      undivided interest in the Trust that is evidenced by a
      Certificate.

           Global Certificates:  Has the meaning assigned to such
      term in Section 3.01.

           Indentures: Means each of the four separate Amended
      and Restated Trust Indentures and Mortgages and the Trust
      Indenture and Mortgage listed on Schedule 1 hereto, in each
      case as the same may be amended, supplemented or otherwise
      modified from time to time in accordance with its terms.

                                 5






           Indenture Default:  With respect to any Indenture,
      means any Event of Default (as such term is defined in such
      Indenture).

           Initial Certificates:  Means the certificates issued
      and authenticated hereunder substantially in the form of
      Exhibit A hereto other than the Exchange Certificates.

           Initial Purchasers:  Means, collectively, Morgan
      Stanley & Co. Incorporated, CS First Boston Corporation and
      Fieldstone FPCG Services, L.P.

           Initial Regular Distribution Date:  Means the first
      Regular Distribution Date on which a Scheduled Payment is to
      be made.

           Institutional Accredited Investor: Means an
      institutional investor that is an "accredited investor"
      within the meaning set forth in Rule 501(a)(1), (2), (3) or
      (7) of Regulation D under the Securities Act.

           Intercreditor Agreement: Means the Intercreditor
      Agreement dated the date hereof among the Trustee, the
      Other Trustees, the Liquidity Provider, the liquidity
      provider, if any, relating to the Certificates issued under
      (and as defined in) each of the Other Pass Through Trust
      Agreements, and Wilmington Trust Company, as Subordination
      Agent thereunder, as amended, supplemented or otherwise
      modified from time to time in accordance with its terms.

           Issuance Date:  Means the date of the issuance of the
      Initial Certificates.

           Lease: Means, with respect to each Leased Aircraft,
      the lease between an Owner Trustee, as the lessor, and the
      Company, as the lessee, referred to in the related
      Indenture, as such lease may be amended, supplemented or
      otherwise modified in accordance with its terms.

           Leased Aircraft:  Has the meaning specified in the
      first recital to this Agreement.

           Liquidity Facility: Means the Revolving Credit
      Agreement dated the date hereof relating to the
      Certificates, between the Liquidity Provider and the
      Subordination Agent, as amended, replaced, supplemented or
      otherwise modified from time to time in accordance with its
      terms and the terms of the Intercreditor Agreement.

           Liquidity Provider:  Means, initially, De Nationale
      Investeringsbank N.V.,  and any replacement or successor

                                 6





      therefor appointed in accordance with the Liquidity Facility
      and the Intercreditor Agreement.

           Loan Trustee: With respect to any Equipment Note or
      the Indenture applicable thereto, means the bank or trust
      company designated as indenture trustee under such
      Indenture, together with any successor to such Loan Trustee
      appointed pursuant thereto.

           Non-U.S. Person:  Means a Person that is not a "U.S.
      person", as defined in Regulation S.

           Officer's Certificate: Means a certificate signed, (a)
      in the case of the Company, by (i) the Chairman or Vice
      Chairman of the Board of Directors, the President, any
      Executive Vice President, any Senior Vice President or the
      Treasurer of the Company, signing alone or (ii) any Vice
      President of the Company signing together with the
      Secretary, the Assistant Secretary, the Treasurer or any
      Assistant Treasurer of the Company or, (b) in the case of
      an Owner Trustee or a Loan Trustee, a Responsible Officer
      of such Owner Trustee or such Loan Trustee, as the case may
      be.

           Offshore Certificates Exchange Date:  Has the meaning
      specified in Section 3.01.

           Offshore Global Certificates:  Has the meaning assigned
      to such term in Section 3.01.

           Offshore Physical Certificates:  Has the meaning
      assigned to such term in Section 3.01.

           Opinion of Counsel: Means a written opinion of legal
      counsel who (a) in the case of counsel for the Company may
      be (i) a senior attorney of the Company one of whose
      principal duties is furnishing advice as to legal matters,
      (ii) Cleary, Gottlieb, Steen & Hamilton, (iii) Hughes
      Hubbard & Reed, or (iv) such other counsel designated by
      the Company and reasonably acceptable to the Trustee and
      (b) in the case of counsel for any Owner Trustee or any
      Loan Trustee may be such counsel as may be designated by
      any of them whether or not such counsel is an employee of
      any of them, and who shall be reasonably acceptable to the
      Trustee.

           Other Pass Through Trust Agreements:  Means each of the
      three other Continental Airlines 1996-2 Pass Through Trust
      Agreements relating to Continental Airlines 1996-2A Pass
      Through Trust, Continental Airlines 1996-2C Pass Through
      Trust and Continental Airlines 1996-2D Pass Through Trust,
      dated the date hereof.


                                 7





           Other Trustees:  Means the trustee under the Other Pass
      Through Trust Agreements, and any successor or other trustee
      appointed as provided therein.

           Outstanding:  When used with respect to Certificates,
      means, as of the date of determination, all Certificates
      theretofore authenticated and delivered under this
      Agreement, except:

                (i)   Certificates theretofore cancelled by the
           Registrar or delivered to the Trustee or the 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
           hereof has been theretofore deposited with the Trustee
           in trust for the Holders of such Certificates as
           provided in Section 4.01 pending distribution of such
           money to such Certificateholders pursuant to payment
           of such final distribution; and

                (iii) Certificates in exchange for or in lieu of
           which other Certificates have been authenticated and
           delivered pursuant to this Agreement.

           Owned Aircraft:  Has the meaning specified in the first
      recital to this Agreement.

           Owner Participant: With respect to any Equipment Note
      relating to a Leased Aircraft, means the "Owner
      Participant" as referred to in the Indenture pursuant to
      which such Equipment Note is issued and any permitted
      successor or assign of such Owner Participant; and Owner
      Participants at any time of determination means all of the
      Owner Participants thus referred to in the Indentures.

           Owner Trustee: With respect to any Equipment Note
      relating to a Leased Aircraft, means the "Owner Trustee",
      as referred to in the Indenture pursuant to which such
      Equipment Note is issued, not in its individual capacity
      but solely as trustee; and Owner Trustees means all of the
      Owner Trustees party to any of the Indentures.

           Participation Agreement:  With respect to any Leased
      Aircraft, means the Participation Agreement referred to in
      the related Indenture.

           Paying Agent:  Means the paying agent maintained and
      appointed for the Certificates pursuant to Section 7.12.


                                 8





           Permanent Offshore Global Certificates:  Has the
      meaning specified in Section 3.01.

           Permanent Offshore Physical Certificates:  Has the
      meaning specified in Section 3.01.

           Permitted Investments: Means obligations of the United
      States of America or agencies or instrumentalities thereof
      the payment of which is backed by the full faith and credit
      of the United States of America and which mature in not
      more than 60 days after the date of acquisition thereof or
      such lesser time as is required for the distribution of any
      Special Payments on a Special Distribution Date.

           Person: Means any person, including any individual,
      corporation, partnership, joint venture, association,
      joint-stock company, trust, trustee, unincorporated
      organization, or government or any agency or political
      subdivision thereof.

           Physical Certificates:  Has the meaning specified in
      Section 3.01.

           Plan Transferee: Means any Plan or any entity that is
      using the assets of any Plan to purchase or hold its
      interest in a Certificate. For purposes of this definition,
      a "Plan" means any employee benefit plan subject to ERISA
      as well as any plan that is not subject to ERISA but which
      is subject to Section 4975 of the Internal Revenue Code of
      1986, as amended.

           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 such
      Certificates other than payments made in respect of
      interest or premium thereon or reimbursement of any costs
      or expenses incurred in connection therewith. The Pool
      Balance as of any Distribution Date shall be computed after
      giving effect to the payment of principal, if any, on the
      Equipment Notes or other Trust Property held in such Trust
      and the distribution thereof to be made on such
      Distribution Date.

           Pool Factor: Means, as of any date, the quotient
      (rounded to the seventh decimal place) computed by dividing
      (i) the Pool Balance as at such date by (ii) the original
      aggregate face amount of the Certificates. The Pool Factor
      as of any Distribution Date shall be computed after giving
      effect to the payment of principal, if any, on the
      Equipment Notes or other Trust Property and the
      distribution thereof to be made on such Distribution Date.


                                 9





           Postponed Notes: Means (i) the Delayed Equipment Notes
      and (ii) the Equipment Notes to be held in the Trust as to
      which a Postponement Notice shall have been delivered
      pursuant to Section 2.01(b).

           Postponement Notice: Means an Officer's Certificate of
      the Company (1) requesting that the Trustee temporarily
      postpone the purchase pursuant to one or more of the
      Financing Agreements of certain of the Equipment Notes to a
      date which is later than the Issuance Date, (2) identifying
      the amount of the purchase price of each such Equipment
      Note and the aggregate purchase price for all such
      Equipment Notes, (3) setting forth the reasons for such
      postponement and (4) with respect to each such Equipment
      Note, either (a) setting or resetting a new Transfer Date
      (which shall be on or prior to the applicable Cut-off Date)
      for payment by the Trustee of such purchase price and
      issuance of the related Equipment Note, or (b) indicating
      that such new Transfer Date (which shall be on or prior to
      the applicable Cut-off Date) will be set by subsequent
      written notice not less than one Business Day prior to such
      new Transfer Date.

           Private Placement Legend:  Has the meaning specified in
      Section 3.02.

           PTC Event of Default: Means any failure to pay within
      10 Business Days of the due date thereof: (i) the
      outstanding Pool Balance on January 2, 2016 or (ii)
      interest due on the Certificates on any Distribution Date
      (unless the Subordination Agent shall have made an Interest
      Drawing (as defined in the Intercreditor Agreement) with
      respect thereto in an amount sufficient to pay such
      interest and shall have distributed such amount to the
      Certificateholders).

           QIB:  Means a qualified institutional buyer as defined
      in Rule 144A.

           Record Date: Means (i) for Scheduled Payments to be
      distributed on any Regular Distribution Date, other than
      the final distribution, the 15th day (whether or not a
      Business Day) preceding such Regular Distribution Date, and
      (ii) for Special Payments to be distributed on any Special
      Distribution Date, other than the final distribution, the
      15th day (whether or not a Business Day) preceding such
      Special Distribution Date.

           Refunding Agreements:  Has the meaning specified in the
Indentures.


                                10





           Register and Registrar:  Mean the register maintained
      and the registrar appointed pursuant to Sections 3.04
      and 7.12.

           Registration Rights Agreement:  Means the Registration
      Rights Agreement dated May 20, 1996, among the Initial
      Purchasers, the Trustee, the Other Trustees and the Company,
      as amended, supplemented or otherwise modified from time to
      time in accordance with its terms.

           Registration Statement:  Means the Registration
      Statement defined in the Registration Rights Agreement.

           Regular Distribution Date: With respect to
      distributions of Scheduled Payments in respect of the
      Certificates, means each date designated as a Regular
      Distribution Date in this Agreement, until payment of all
      the Scheduled Payments to be made under the Equipment Notes
      held in the Trust have been made; 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.

           Regulation S: Means Regulation S under the Securities
      Act or any successor regulation thereto.

           Responsible Officer: With respect to the Trustee, any
      Loan Trustee and any Owner Trustee, means any officer in
      the Corporate Trust Office of the Trustee, Loan Trustee or
      Owner 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.

           Rule 144A: Means Rule 144A under the Securities Act
      and any successor rule thereto.

           Scheduled Payment: With respect to any Equipment Note,
      means (i) any payment of principal and interest on such
      Equipment Note (other than any such payment which is not in
      fact received by the Subordination Agent within five days
      of the date on which such payment is scheduled to be made)
      due from the obligor thereon or (ii) any payment of
      interest on the Certificates with funds drawn under the
      Liquidity Facility, 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;
      provided that any payment of principal, premium, if any, or
      interest resulting from the redemption or purchase of any 

                                11





      Equipment Note shall not constitute a Scheduled Payment.

           SEC: Means the Securities and Exchange Commission, as
      from time to time constituted or created under the
      Securities Exchange Act of 1934, as amended, or, if at any
      time after the execution of this instrument such Commission
      is not existing and performing the duties now assigned to
      it under the Trust Indenture Act, then the body performing
      such duties on such date.

           Securities Act:  Means the United States Securities Act
      of 1933, as amended from time to time, or any successor
      thereto.

           Special Distribution Date: Means each date on which a
      Special Payment is to be distributed as specified in this
      Agreement; 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.

           Special Payment: Means (i) 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), (ii) the amounts required to be
      distributed pursuant to the last paragraph of Section
      2.01(b) or (iii) the amounts required to be distributed
      pursuant to the penultimate paragraph of Section 2.01(b).

           Special Payments Account:  Means the account or
      accounts created and maintained pursuant to Section 4.01(b).

           Specified Investments: Means, with respect to
      investments to be made with Escrowed Funds pursuant to
      Section 2.01(b) hereof, (i) obligations of, or guaranteed
      by, the United States Government or agencies thereof, (ii)
      open market commercial paper of any corporation
      incorporated under the laws of the United States of America
      or any State thereof rated at least P-2 or its equivalent
      by Moody's Investors Service, Inc. or at least A-2 or its
      equivalent by Standard & Poor's Ratings Group, (iii)
      certificates of deposit issued by commercial banks
      organized under the laws of the United States or of any
      political subdivision thereof having a combined capital and
      surplus in excess of $100,000,000, which banks or their
      holding companies have a short-term deposit rating of P1 by
      Moody's Investors Service, Inc. or its equivalent by
      Standard & Poor's Ratings Group; provided, however, that
      the aggregate amount at any one time so invested in certifi-
      cates of deposit issued by any one bank shall not exceed 5% 

                                12





      of such bank's capital and surplus, (iv) U.S. dollar
      denominated offshore certificates of deposit issued by, or
      offshore time deposits with, any commercial bank described
      in clause (iii) above or any subsidiary thereof and (v)
      repurchase agreements with any financial institution having
      combined capital and surplus of at least $100,000,000 with
      respect to any of the obligations described in clauses (i)
      through (iv) above as collateral; provided further that if
      all of the above investments are unavailable, all amounts
      to be invested may be used to purchase Federal Funds from
      an entity described in clause (iii) above.

           Subordination Agent:  Has the meaning specified in the
      Intercreditor Agreement.

           Temporary Offshore Global Certificates:  Has the
      meaning specified in Section 3.01.

           Transfer Date:  Has the meaning assigned to the term
      "Refunding Date" or "Funding Date" in each Financing
      Agreement.

           Triggering Event:  Has the meaning assigned to such
      term in the Intercreditor Agreement.

           Trust:  Means the trust created by this Agreement, the
      estate of which consists of the Trust Property.

           Trust Indenture Act:  Except as otherwise provided in
      Section 9.06, means the United States Trust Indenture Act of
      1939 as in force at the date hereof.

           Trust Property: Means (i) the Equipment Notes held as
      the property of the Trust and all monies at any time paid
      thereon and all monies due and to become due thereunder,
      (ii) funds from time to time deposited in the Escrow
      Account, the Certificate Account and the Special Payments
      Account, and (iii) all rights of the Trust and the Trustee,
      on behalf of the Trust, under the Intercreditor Agreement
      and the Liquidity Facility, including, without limitation,
      all rights to receive certain payments thereunder, and all
      monies paid to the Trustee on behalf of the Trust pursuant
      to the Intercreditor Agreement or the Liquidity Facility.

           Trustee:  Means Wilmington Trust Company, or its
      successor in interest, and any successor or other trustee
      appointed as provided herein.

           Trustee's Lien:  Has the meaning specified in Section
      7.17.

                                13






           U.S. Global Certificate:  Has the meaning specified in
      Section 3.01.

           U.S. Physical Certificates:  Has the meaning specified
      in Section 3.01.

           Section 1.02. Compliance Certificates and Opinions.
Upon any application or request by the Company, any Owner Trustee
or any Loan Trustee to the Trustee to take any action under any
provision of this Agreement, the Company, such Owner Trustee or
such Loan Trustee, as the case may be, shall furnish to the
Trustee (i) an Officer's Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in
this Agreement relating to the proposed action have been complied
with and (ii) an Opinion of Counsel stating that in the opinion
of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or
request as to which the furnishing of such documents is
specifically required by any provision of this Agreement relating
to such particular application or request, no additional
certificate or opinion need be furnished.

           Every certificate or opinion with respect to
compliance with a condition or covenant provided for in this
Agreement (other than a certificate provided pursuant to Section
8.04(d)) shall include:

           (1) a statement that each individual signing such
      certificate or opinion has read such covenant or condition
      and the definitions in this Agreement relating thereto;

           (2) a brief statement as to the nature and scope of
      the examination or investigation upon which the statements
      or opinions contained in such certificate or opinion are
      based;

           (3) a statement that, in the opinion of each such
      individual, he has made such examination or investigation
      as is necessary to enable him to express an informed
      opinion as to whether or not such covenant or condition has
      been complied with; and

           (4) a statement as to whether, in the opinion of each
      such individual, such condition or covenant has been
      complied with.

           Section 1.03.  Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by

                                14





the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters and any such
Person may certify or give an opinion as to such matters in one
or several documents.

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

           Section 1.04. Directions of Certificateholders. (a)
Any direction, consent, request, demand, authorization, notice,
waiver or other action provided by this Agreement to be given or
taken by Certificateholders (a "Direction") may be embodied in
and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent
or proxy duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective
when such instrument or instruments are delivered to the Trustee
and, where it is hereby expressly required pursuant to this
Agreement, to the Company or any Loan Trustee. Proof of execution
of any such instrument or of a writing appointing any such agent
or proxy shall be sufficient for any purpose of this Agreement
and conclusive in favor of the Trustee, the Company and any Loan
Trustee, if made in the manner provided in this Section.

           (b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the
certificate of any notary public or other officer of any
jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument
acknowledged to him the execution thereof, or by an affidavit of
a witness to such execution sworn to before any such notary or
such other officer and where such execution is by an officer of a
corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such
certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing
the same, may also be proved in any other reasonable manner which
the Trustee deems sufficient.

           (c) In determining whether the Certificateholders of
the requisite Fractional Undivided Interests of Certificates
Outstanding have given any Direction under this Agreement,
Certificates owned by the Company or any Affiliate thereof shall
be disregarded and deemed not to be Outstanding for purposes of
any such determination. In determining whether the Trustee shall

                                15





be protected in relying upon any such Direction, only
Certificates which the Trustee knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, (i) if any such
Person owns 100% of the Certificates Outstanding, such
Certificates shall not be so disregarded, and (ii) if any amount
of Certificates so owned by any such Person have been pledged in
good faith, such Certificates shall not be disregarded if the
pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates and
that the pledgee is not the Company or any Affiliate thereof.

           (d) The Company may at its option, by delivery of an
Officer's Certificate to the Trustee, set a record date to
determine the Certificateholders entitled to give any Direction.
Notwithstanding Section 316(c) of the Trust Indenture Act, such
record date shall be the record date specified in such Officer's
Certificate, which shall be a date not more than 30 days prior to
the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such Direction may be
given before or after such record date, but only the
Certificateholders of record at the close of business on such
record date shall be deemed to be Certificateholders for the
purposes of determining whether Certificateholders of the
requisite proportion of Outstanding Certificates have authorized
or agreed or consented to such Direction, and for that purpose
the Outstanding Certificates shall be computed as of such record
date; provided that no such Direction by the Certificateholders
on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Agreement not
later than one year after such record date.

           (e) Any Direction by the Holder of any Certificate
shall bind the Holder of every Certificate issued upon the
transfer thereof or in exchange therefor or in lieu thereof,
whether or not notation of such Direction is made upon such
Certificate.

           (f) Except as otherwise provided in Section 1.04(c),
Certificates owned by or pledged to any Person shall have an
equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among
all of the Certificates.



                                16





                            ARTICLE II

                ORIGINAL ISSUANCE OF CERTIFICATES;
                  ACQUISITION OF EQUIPMENT NOTES

           Section 2.01. Issuance of Certificates; Acquisition of
Equipment Notes. (a) The Trustee is hereby directed to execute
and deliver the Intercreditor Agreement, the Registration Rights
Agreement and each of the Financing Agreements on or prior to the
Issuance Date, each in the form delivered to the Trustee by the
Company. Upon request of the Company and the satisfaction of the
closing conditions specified in each of the Financing Agreements,
the Trustee shall execute, deliver and authenticate Certificates
equalling in the aggregate the aggregate principal amount of the
Equipment Notes to be purchased by the Trustee pursuant to each
of the Financing Agreements on the Transfer Date, and evidencing
the entire ownership interest in the Trust. The Trustee shall
issue and sell such Certificates, in authorized denominations and
in such Fractional Undivided Interests, so as to result in the
receipt by the Trustee of consideration in an amount equal to the
aggregate principal amount of such Equipment Notes and,
concurrently therewith, the Trustee shall purchase, pursuant to
the terms and conditions of the Financing Agreements, the
Equipment Notes at a purchase price equal to the amount of such
consideration so received. Except as provided in Sections 3.04
and 3.07 hereof, the Trustee shall not execute, authenticate or
deliver Certificates in excess of the aggregate amount specified
in this paragraph. The provisions of this Subsection (a) are
subject to the provisions of Subsection (b) below.

           (b) On or prior to the Issuance Date, the Company may
deliver to the Trustee a Postponement Notice relating to one or
more Postponed Notes (other than the Delayed Equipment Notes)
(which Postponement Notice may be given by the Company only if
one or more conditions to the purchase of such Postponed Notes by
the Trustee shall not have been satisfied or waived pursuant to
the related Financing Agreement). The Trustee shall postpone the
purchase of the Postponed Notes from the consideration received
from the sale of Certificates and shall promptly deposit funds in
an amount equal to the purchase price of such Postponed Notes
(the "Escrowed Funds") into an escrow account (the "Escrow
Account") with the Trustee to be maintained as a part of the
Trust. The Escrowed Funds so deposited shall be invested by the
Trustee at the direction and risk of the Company in Specified
Investments (i) maturing no later than any scheduled Transfer
Date relating to the Postponed Notes or (ii) if no such Transfer
Date has been scheduled, maturing on the next Business Day, or
(iii) if the Company has given notice to the Trustee that any
Postponed Notes will not be issued, with respect to the portion
of the Escrowed Funds relating to such Postponed Notes, maturing
on the next applicable Special Distribution Date, if such

                                17





investments are reasonably available for purchase. The Trustee
shall make withdrawals from the Escrow Account only as provided
in this Agreement. Upon request of the Company on one or more
occasions and the satisfaction of the closing conditions
specified in the applicable Financing Agreements on or prior to
the Cut-off Date, the Trustee shall purchase the applicable
Postponed Notes with the Escrowed Funds withdrawn from the Escrow
Account. The purchase price shall equal the principal amount of
such Postponed Notes.

           The Trustee shall hold all Specified Investments until
the maturity thereof and will not sell or otherwise transfer
Specified Investments. If Specified Investments held in an Escrow
Account mature prior to any applicable Transfer Date, any
proceeds received on the maturity of such Specified Investments
(other than any earnings thereon) shall be reinvested by the
Trustee at the direction and risk of the Company in Specified
Investments maturing as provided in the preceding paragraph. The
Company shall pay to the Trustee for deposit to the Escrow
Account an amount equal to any losses on such Specified
Investments as incurred.

           On the Initial Regular Distribution Date, the Company
will pay (in immediately available funds) to the Trustee an
amount equal to (i) the sum of (A) the interest that would have
accrued on any Postponed Notes purchased on or prior to the
Initial Regular Distribution Date if such Postponed Notes had
been purchased on the Issuance Date, from and including the
Issuance Date to but excluding the date of such purchase and (B)
the interest that would have accrued on any Postponed Notes not
purchased on or prior to the Initial Regular Distribution Date
(other than any Postponed Notes for which a Special Distribution
Date specified in the immediately succeeding paragraph has
occurred on or prior to the Initial Regular Distribution Date) if
such Postponed Notes had been purchased on the Issuance Date,
from and including the Issuance Date to but excluding the Initial
Regular Distribution Date, minus (ii) the earnings on Specified
Investments received by the Trustee from and including the later
of the Issuance Date or the date immediately preceding the
Initial Regular Distribution Date on which an amount has been
paid pursuant to the immediately succeeding paragraph to but
excluding the Initial Regular Distribution Date. On the second
Regular Distribution Date, the Company will pay (in immediately
available funds) to the Trustee an amount equal to the interest
that would have accrued on any Postponed Notes purchased after
the Initial Regular Distribution Date and on or prior to the
Cut-off Date if such Postponed Notes had been purchased on the
Initial Regular Distribution Date, from and including the Initial
Regular Distribution Date to but excluding the date of such
purchase, minus (ii) the earnings on Specified Investments
received by the Trustee from and including the later 

                                18





of the Initial Regular Distribution Date or the date
immediately preceding the second Regular Distribution Date on
which an amount has been paid pursuant to either of the two
succeeding paragraphs to but excluding the second Regular
Distribution Date.

           If the Company notifies the Trustee prior to the
Cutoff Date that any Postponed Notes will not be issued on or
prior to the Cut-off Date for any reason, on the next Special
Distribution Date occurring more than 20 days following the date
of such notice (i) the Company shall pay to the Trustee for
deposit in the Special Payments Account, in immediately available
funds, an amount equal to the sum of (A) the interest that would
have accrued on the Postponed Notes designated in such notice at
a rate equal to the interest rate applicable to the Certificates
from and including the Issuance Date (if such Special
Distribution Date shall occur on or prior to the Initial Regular
Distribution Date) or the Initial Regular Distribution Date (if
such Special Distribution Date occurs after the Initial Regular
Distribution Date) to but excluding such Special Distribution
Date and (B) if any such Postponed Notes shall be Delayed
Equipment Notes and shall not be issued for any reason other than
the occurrence of an Event of Loss (as defined in the related
Indenture) with respect to the Aircraft relating to such Delayed
Equipment Notes, 2% of the aggregate principal amount of such
Delayed Equipment Notes and (ii) the Trustee shall transfer an
amount equal to that amount of Escrowed Funds that would have
been used to purchase the Postponed Notes designated in such
notice plus the amount paid by the Company pursuant to the
immediately preceding clause (i) to the Special Payments Account
for distribution as a Special Payment in accordance with the
provisions hereof.

           If, on the Cut-off Date, an amount equal to less than
all of the Escrowed Funds (other than Escrowed Funds referred to
in the immediately preceding paragraph) has been used to purchase
Postponed Notes, on the next Special Distribution Date occurring
more than 20 days following the Cut-off Date (i) the Company
shall pay to the Trustee for deposit in the Special Payments
Account, in immediately available funds, an amount equal to the
sum of (A) the interest that would have accrued on Postponed
Notes originally contemplated to be purchased with such unused
Escrowed Funds (other than Escrowed Funds referred to in the
immediately preceding paragraph) but not so purchased at a rate
equal to the interest rate applicable to the Certificates from
and including the Initial Regular Distribution Date to but
excluding such Special Distribution Date and (B) if any such
Postponed Notes shall be Delayed Equipment Notes and shall not
have been purchased for any reason other than the occurrence of
an Event of Loss (as defined in the related Indenture) with
respect to the Aircraft relating to such Delayed Equipment Notes,

                                19





2% of the aggregate principal amount of such Delayed Equipment
Notes and (ii) the Trustee shall transfer such unused Escrowed
Funds and the amount paid by the Company pursuant to the
immediately preceding clause (i) to the Special Payments Account
for distribution as a Special Payment in accordance with the
provisions hereof.

           Section 2.02. Acceptance by Trustee. The Trustee, upon
the execution and delivery of this Agreement, acknowledges its
acceptance of all right, title and interest in and to the
Equipment Notes acquired pursuant to Section 2.01 hereof and the
Financing Agreements and declares that the Trustee holds and will
hold such right, title and interest, together with all other
property constituting the Trust Property, for the benefit of all
then present and future Certificateholders, upon the trusts
herein set forth. Subject to Section 7.14, the Trustee shall take
all actions reasonably necessary to effect the registration of
all such Equipment Notes in the name of the Subordination Agent.
By its payment for and acceptance of each Certificate issued to
it under this Agreement, each initial Certificateholder as
grantor of the Trust thereby joins in the creation and
declaration of the Trust.

           Section 2.03. Limitation of Powers. The Trust is
constituted solely for the purpose of making the investment in
the Equipment Notes, and, except as set forth herein, the Trustee
shall not be authorized or empowered to acquire any other
investments or engage in any other activities and, in particular,
the Trustee shall not be authorized or empowered to do anything
that would cause such Trust to fail to qualify as a "grantor
trust" for federal income tax purposes (including as subject to
this restriction, acquiring any Aircraft (as defined in the
respective Indentures) by bidding such Equipment Notes or
otherwise, or taking any action with respect to any such Aircraft
once acquired).


                           ARTICLE III

                         THE CERTIFICATES

           Section 3.01. Title, Form, Denomination and Execution
of Certificates. (a) The Initial Certificates shall be known as
the "8.56% 1996-2B Initial Pass Through Certificates" and the
Exchange Certificates shall be known as the "8.56% 1996-2B
Exchange Pass Through Certificates", in each case, of the Trust.
Each Certificate will represent a fractional undivided interest
in the Trust and shall be substantially in the form set forth as
Exhibit A hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted
by this Agreement and may have such letters, numbers or other

                                20





marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be
determined by the officers executing such Certificates, as
evidenced by their execution of the Certificates. Any portion of
the text of any Certificate may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the
Certificate.

           (b) The Initial Certificates shall be issued only in
fully registered form without coupons and only in denominations
of $100,000 or integral multiples of $1,000 in excess thereof,
except that one Certificate may be issued in a denomination of
less than $100,000. The Exchange Certificates will be issued in
denominations of $1,000 or integral multiples thereof. Each
Certificate shall be dated the date of its authentication. The
aggregate Fractional Undivided Interest of Certificates shall not
at any time exceed $35,363,000.

           (c) Initial Certificates offered and sold in reliance
on Rule 144A shall be issued initially in the form of a single
permanent global Certificate in registered form, substantially in
the form set forth as Exhibit A hereto (the "U.S. Global
Certificate"), duly executed and authenticated by the Trustee as
hereinafter provided. The U.S. Global Certificate will be
registered in the name of a nominee for the Depositary and
deposited with the Trustee, as custodian for the Depositary. The
aggregate principal amount of the U.S. Global Certificate may
from time to time be increased or decreased by adjustments made
on the records of the Depositary or its nominee, or of the
Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.

           (d) Initial Certificates offered and sold in offshore
transactions in reliance on Regulation S shall be issued
initially in the form of a single temporary global Certificate in
registered form, substantially in the form set forth as Exhibit A
hereto (the "Temporary Offshore Global Certificate") duly
executed and authenticated by the Trustee as hereinafter
provided. The Temporary Offshore Global Certificates will be
registered in the name of a nominee of the Depositary for credit
to the account of the Agent Members acting as depositaries for
Euroclear and Cedel and deposited with the Trustee as custodian
for the Depositary. At any time following June 29, 1996 (the
"Offshore Certificates Exchange Date"), upon receipt by the
Trustee of a certificate substantially in the form of Exhibit B
hereto, a single permanent global Certificate in registered form
substantially in the form set forth in Exhibit A (the "Permanent
Offshore Global Certificate"; and together with the Temporary
Offshore Global Certificate, the "Offshore Global Certificates"),
duly executed and authenticated by the Trustee as hereinafter

                                21





provided, shall be registered in the name of a nominee for the
Depositary and deposited with the Trustee, as custodian for the
Depositary, and the Registrar shall reflect on its books and
records the date of such transfer and a decrease in the principal
amount of any Temporary Offshore Global Certificate in an amount
equal to the principal amount of the beneficial interest in such
Temporary Offshore Global Certificate transferred. The U.S.
Global Certificate and the Offshore Global Certificates are
sometimes referred to as the "Global Certificates".

           (e) Initial Certificates offered and sold to
Institutional Accredited Investors shall be issued in the form of
permanent certificated Certificates in registered form in
substantially the form set forth as Exhibit A hereto (the "U.S.
Physical Certificates"). Certificates issued pursuant to Section
3.05(b) in exchange for interests in any Offshore Global
Certificate shall be in the form of permanent certificated
Certificates in registered form substantially in the form set
forth in Exhibit A (the "Offshore Physical Certificates"). The
Offshore Physical Certificates and U.S. Physical Certificates are
sometimes collectively herein referred to as the "Physical
Certificates".

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

           Section 3.02. Restrictive Legends. (a) Subject to
Section 3.06, unless and until (i) an Initial Certificate is sold
under an effective Registration Statement or (ii) an Initial
Certificate is exchanged for an Exchange Certificate pursuant to
an effective Exchange Offer Registration Statement, in each case
as provided for in the Registration Rights Agreement, each Global
Certificate (other than the Permanent Offshore Global
Certificate) and each U.S. Physical Certificate shall bear the
following legend (the "Private Placement Legend") on the face
thereof:

           THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
      U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
      ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN
      THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
      ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
      BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
      (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
      RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITU-
      TIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), 
      (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN

                                22





      "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
      U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN
      OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
      THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN
      THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
      THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE
      WAS HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
      AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE
      TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED
      INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
      SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN
      INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR
      MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT,
      PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED
      LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
      RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
      CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
      THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
      TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
      SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
      REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
      (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT
      WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
      TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
      LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE
      WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
      OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
      CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE
      TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER
      MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE
      HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
      THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS
      "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON"
      HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
      SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A
      PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
      TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
      RESTRICTIONS.

           (b) Each Global Certificate shall also bear the
following legend on the face thereof:

      UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
      REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
      CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
      REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
      CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS
      REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
      AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
      ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
      ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF

                                23





      DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
      REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
      HEREIN.

      TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
      TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR
      TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
      TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE
      LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
      RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE
      PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.

           Section 3.03. Authentication of Certificates. (a) The
Trustee shall duly execute, authenticate and deliver Certificates
in authorized denominations equalling in the aggregate the
aggregate principal amount of the Equipment Notes to be purchased
by the Trustee pursuant to the Financing Agreements and
evidencing the entire ownership of the Trust.

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

           Section 3.04. Transfer and Exchange. (a) The Trustee
shall cause to be kept at the office or agency to be maintained
by it in accordance with the provisions of Section 7.12 of this
Agreement a register (the "Register") for the Certificates in
which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of the
Certificates and of transfers and exchanges of the Certificates
as herein provided. The Trustee shall initially be the registrar
(the "Registrar") for the purpose of registering the Certificates
and transfers and exchanges of the Certificates as herein
provided. A Certificateholder may transfer a Certificate by
written application to the Registrar stating the name of the
proposed transferee and otherwise complying with the terms of
this Agreement, including providing a written certificate or
other evidence of compliance with any restrictions on transfer.
No such transfer shall be effected until, and such transferee
shall succeed to the rights of a Certificateholder only upon,
final acceptance and registration of the transfer by the
Registrar in the Register. Prior to the registration of any
transfer by a Certificateholder as provided herein, the Trustee
shall treat the person in whose name the Certificate is
registered as the owner thereof for all purposes, and the Trustee
shall not be affected by notice to the contrary. Furthermore,

                                24





the Depositary shall, by acceptance of a Global Certificate,
agree that transfers of beneficial interests in such Global
Certificate may be effected only through a book-entry system
maintained by the Depositary (or its agent), and that ownership
of a beneficial interest in the Certificate shall be required to
be reflected in a book entry. When Certificates are presented to
the Registrar with a request to register the transfer or to
exchange them for an equal face amount of Certificates of other
authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its requirements
for such transactions are met. To permit registrations of
transfers and exchanges in accordance with the terms, conditions
and restrictions hereof, the Trustee shall execute and
authenticate Certificates at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange
of the Certificates, but the Trustee may require payment by the
transferor of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental
charges payable upon exchanges pursuant to Section 3.10 or 9.07).


           Section 3.05. Book-Entry Provisions for U.S. Global
Certificate and Offshore Global Certificates. (a) Members of, or
participants in, the Depositary ("Agent Members") shall have no
rights under this Agreement with respect to any Global
Certificate held on their behalf by the Depositary, or the
Trustee as its custodian, and the Depositary may be treated by
the Trustee and any agent of the Trustee as the absolute owner of
such Global Certificate for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the
Trustee or any agent of the Trustee from giving effect to any
written certification, proxy or other authorization furnished by
the Depositary or shall impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Certificate. Upon the
issuance of any Global Certificate, the Registrar or its duly
appointed agent shall record a nominee of the Depositary as the
registered holder of such Global Certificate.

           (b) Transfers of any Global Certificate shall be
limited to transfers of such Global Certificate or Offshore
Global Certificate in whole, but not in part, to nominees of the
Depositary, its successor or such successor's nominees.
Beneficial interests in the U.S. Global Certificate and any
Offshore Global Certificate may be transferred in accordance with
the rules and procedures of the Depositary and the provisions of
Section 3.06. Beneficial interests in the U.S. Global Certificate
or an Offshore Global Certificate shall be delivered to all
beneficial owners in the form of U.S. Physical Certificates 
or Offshore Physical Certificates, as the case may be, if

                                25





(i) the Depositary notifies the Trustee that it is unwilling 
or unable to continue as Depositary for the U.S. Global
Certificate or such Offshore Global Certificate, as the case may
be, and a successor depositary is not appointed by the Trustee
within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a
request from the Depositary to issue Physical Certificates.

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

           (d)  [Intentionally omitted.]

           (e) In connection with the transfer of the entire U.S.
Global Certificate or an entire Offshore Global Certificate to
the beneficial owners thereof pursuant to paragraph (b) of this
Section 3.05, such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, shall be deemed to be
surrendered to the Trustee for cancellation, and the Trustee
shall execute, authenticate and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial
interest in such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, an equal aggregate principal
amount of U.S. Physical Certificates or Offshore Physical
Certificates, as the case may be, of authorized denominations.

           (f) Any U.S. Physical Certificate delivered in
exchange for an interest in the U.S. Global Certificate pursuant
to paragraph (b) of this Section 3.05 shall, except as otherwise
provided by paragraph (f) of Section 3.06, bear the Private
Placement Legend.

           (g) Any Offshore Physical Certificate delivered in
exchange for an interest in an Offshore Global Certificate
pursuant to paragraph (b) of this Section shall, except as
otherwise provided by paragraph (f) of Section 3.06, bear the
applicable legend regarding transfer restrictions set forth in
Section 3.02(a).

           (h) The registered holder of the U.S. Global
Certificate or any Offshore Global Certificate may grant proxies
and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take

                                26





any action which a Holder is entitled to take under this
Agreement or the Certificates.

           Section 3.06. Special Transfer Provisions. Unless and
until (i) an Initial Certificate is sold under an effective
Registration Statement, or (ii) an Initial Certificate is
exchanged for an Exchange Certificate pursuant to an effective
Exchange Offer Registration Statement, in each case pursuant to
the Registration Rights Agreement, the following provisions shall
apply to such Initial Certificates:

           (a)  Transfers to Non-QIB Institutional Accredited
Investors.  The following provisions shall apply with respect to
the registration of any proposed transfer of a Certificate to any
Institutional Accredited Investor which is not a QIB (excluding
transfers to or by Non-U.S. Persons):

           (i) The Registrar shall register the transfer of any
      Certificate, whether or not such Certificate bears the
      Private Placement Legend, if (x) the requested transfer is
      at least three years after the later of the original issue
      date of the Certificates and the last date on which such
      Certificate was held by the Company or any affiliate of any
      such persons or (y) the proposed transferee has delivered
      to the Registrar a letter substantially in the form of
      Exhibit D hereto and the aggregate principal amount of the
      Certificates being transferred is at least $100,000.

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

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

           (i)  If the Certificate to be transferred consists of
      U.S. Physical Certificates or an interest in any Temporary
      Offshore Global Certificate, the Registrar shall register
      the transfer if such transfer is being made by a proposed

                                27





      transferor who has checked the box provided for on the form
      of Initial Certificate stating, or has otherwise advised
      the Trustee and the Registrar in writing, that the sale has
      been made in compliance with the provisions of Rule 144A to
      a transferee who has signed the certification provided for
      on the form of Initial Certificate stating, or has
      otherwise advised the Trustee and the Registrar in writing,
      that it is purchasing the Initial Certificate for its own
      account or an account with respect to which it exercises
      sole investment discretion and that it, or the Person on
      whose behalf it is acting with respect to any such account,
      is a QIB within the meaning of Rule 144A, and is aware that
      the sale to it is being made in reliance on Rule 144A and
      acknowledges that it has received such information
      regarding the Trust and/or the Company as it has requested
      pursuant to Rule 144A or has determined not to request such
      information and that it is aware that the transferor is
      relying upon its foregoing representations in order to
      claim the exemption from registration provided by Rule
      144A.

           (ii) Upon receipt by the Registrar of the documents
      referred to in clause (i) above and instructions given in
      accordance with the Depositary's and the Registrar's
      procedures therefor, the Registrar shall reflect on its
      books and records the date of such transfer and an increase
      in the principal amount of the U.S. Global Certificate in
      an amount equal to the principal amount of the U.S.
      Physical Certificates or interests in the Temporary
      Offshore Global Certificate, as the case may be, being
      transferred, and the Trustee shall cancel such Physical
      Certificates or decrease the amount of such Temporary
      Offshore Global Certificate so transferred.

           (c)  [intentionally omitted.]

           (d) Transfers of Interests in the Permanent Offshore
Global Certificate or Offshore Physical Certificates. The
Registrar shall register any transfer of interests in the
Permanent Offshore Global Certificate or Offshore Physical
Certificates without requiring any additional certification.

           (e)  Transfers to Non-U.S. Persons at Any Time.  The
following provisions shall apply with respect to any registration
of any transfer of an Initial Certificate to a Non-U.S. Person:

           (i) Prior to the Offshore Certificates Exchange Date,
      the Registrar shall register any proposed transfer of an
      Initial Certificate to a Non-U.S. Person upon receipt of a
      certificate substantially in the form set forth as Exhibit
      C hereto from the proposed transferor.


                                28





           (ii) On and after the Offshore Certificates Exchange
      Date, the Registrar shall register any proposed transfer to
      any Non-U.S. Person if the Certificate to be transferred is
      a U.S. Physical Certificate or an interest in the U.S.
      Global Certificate, upon receipt of a certificate
      substantially in the form of Exhibit C from the proposed
      transferor. The Registrar shall promptly send a copy of
      such certificate to the Company.

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

           (f) Private Placement Legend. Upon the transfer,
exchange or replacement of Certificates not bearing the Private
Placement Legend, the Registrar shall deliver Certificates that
do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Certificates bearing the Private
Placement Legend, the Registrar shall deliver only Certificates
that bear the Private Placement Legend unless either (i) the
circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of
this Section 3.06 exist or (ii) there is delivered to the
Registrar an Opinion of Counsel to the effect that neither such
legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the
Securities Act.

           (g) General. By its acceptance of any Certificate
bearing the Private Placement Legend, each Holder of such a
Certificate acknowledges the restrictions on transfer of such
Certificate set forth in this Agreement and agrees that it will
transfer such Certificate only as provided in this Agreement. The
Registrar shall not register a transfer of any Certificate unless
such transfer complies with the restrictions on transfer of such
Certificate set forth in this Agreement. In connection with any
transfer of Certificates, each Certificateholder agrees by

                                29





its acceptance of the Certificates to furnish the Registrar or
the Trustee such certifications, legal opinions or other
information as either of them may reasonably require to confirm
that such transfer is being made pursuant to an exemption from,
or a transaction not subject to, the registration requirements of
the Securities Act; provided that the Registrar shall not be
required to determine the sufficiency of any such certifications,
legal opinions or other information.

           Until such time as no Certificates remain Outstanding,
the Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.05 or
this Section 3.06. The Trustee, if not the Registrar at such
time, shall have the right to inspect and make copies of all such
letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to
the Registrar.

           Section 3.07. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to
the Registrar or the Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate
and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save
each of them harmless, then, in the absence of notice to the
Registrar or the Trustee that such destroyed, lost or stolen
Certificate has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the Uniform
Commercial Code in effect in any applicable jurisdiction are met,
the Trustee shall execute, authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate or Certificates, in authorized
denominations and of like Fractional Undivided Interest and
bearing a number not contemporaneously outstanding.

           In connection with the issuance of any new Certificate
under this Section 3.07, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee and the
Registrar) connected therewith.

           Any duplicate Certificate issued pursuant to this
Section 3.07 shall constitute conclusive evidence of the
appropriate Fractional Undivided Interest in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.

           The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies

                                30





with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Certificates.

           Section 3.08. Persons Deemed Owners. Prior to due
presentment of a Certificate for registration of transfer, the
Trustee, the Registrar and any Paying Agent may treat the Person
in whose name any Certificate is registered (as of the day of
determination) as the owner of such Certificate for the purpose
of receiving distributions pursuant to Article IV and for all
other purposes whatsoever, and none of the Trustee, the Registrar
or any Paying Agent shall be affected by any notice to the
contrary.

           Section 3.09. Cancellation. All Certificates
surrendered for payment or transfer or exchange shall, if
surrendered to the Trustee or any agent of the Trustee other than
the Registrar, be delivered to the Registrar for cancellation and
shall promptly be cancelled by it. No Certificates shall be
authenticated in lieu of or in exchange for any Certificates
cancelled as provided in this Section, except as expressly
permitted by this Agreement. All cancelled Certificates held by
the Registrar shall be destroyed and a certification of their
destruction delivered to the Trustee.

           Section 3.10. Temporary Certificates. Until definitive
Certificates are ready for delivery, the Trustee shall
authenticate temporary Certificates. Temporary Certificates shall
be substantially in the form of definitive Certificates but may
have insertions, substitutions, omissions and other variations
determined to be appropriate by the officers executing the
temporary Certificates, as evidenced by their execution of such
temporary Certificates. If temporary Certificates are issued, the
Trustee will cause definitive Certificates to be prepared without
unreasonable delay. After the preparation of definitive
Certificates, the temporary Certificates shall be exchangeable
for definitive Certificates upon surrender of the temporary
Certificates at the office or agency of the Trustee designated
for such purpose pursuant to Section 7.12, without charge to the
Certificateholder. Upon surrender for cancellation of any one or
more temporary Certificates, the Trustee shall execute,
authenticate and deliver in exchange therefor a like face amount
of definitive Certificates of authorized denominations. Until so
exchanged, the temporary Certificates shall be entitled to the
same benefits under this Agreement as definitive Certificates.

           Section 3.11. Limitation of Liability for Payments.
All payments and distributions made to Certificateholders shall
be made only from the Trust Property and only to the extent that
the Trustee shall have sufficient income or proceeds from the
Trust Property to make such payments in accordance with the terms

                                31





of Article IV of this Agreement. Each Certificateholder, by its
acceptance of a Certificate, agrees that it will look solely to
the income and proceeds from the Trust Property for any payment
or distribution due to such Certificateholder pursuant to the
terms of this Agreement and that it will not have any recourse to
the Company, the Trustee, the Loan Trustees, the Liquidity
Providers, the Owner Trustees or the Owner Participants, except
as otherwise expressly provided herein or in the Intercreditor
Agreement.

           The Company is a party to this Agreement solely for
purposes of meeting the requirements of the Trust Indenture Act,
and therefore shall not have any right, obligation or liability
hereunder (except as otherwise expressly provided herein).


                            ARTICLE IV

                   DISTRIBUTIONS; STATEMENTS TO
                        CERTIFICATEHOLDERS

           Section 4.01. Certificate Account and Special Payments
Account. (a) The Trustee shall establish and maintain on behalf
of the Certificateholders a Certificate Account as one or more
non-interest-bearing accounts. The Trustee shall hold the
Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals
therefrom only as provided in this Agreement. On each day when a
Scheduled Payment is made to the Trustee under the Intercreditor
Agreement, the Trustee upon receipt thereof shall immediately
deposit the aggregate amount of such Scheduled Payment in the
Certificate Account.

           (b) The Trustee shall establish and maintain on behalf
of the Certificateholders a Special Payments Account as one or
more accounts, which shall be non-interest bearing except as
provided in Section 4.04. The Trustee shall hold the Special
Payments Account in trust for the benefit of the
Certificateholders and shall make or permit withdrawals therefrom
only as provided in this Agreement. On each day when one or more
Special Payments are made to the Trustee, the Trustee, upon
receipt thereof, shall immediately deposit the aggregate amount
of such Special Payments in the Special Payments Account.

           (c) The Trustee shall present to the related Loan
Trustee of each Equipment Note such Equipment Note on the date of
its stated final maturity or, in the case of any Equipment Note
which is to be redeemed in whole pursuant to the related
Indenture, on the applicable redemption date under such
Indenture.


                                32





           Section 4.02. Distributions from Certificate Account
and Special Payments Account. (a) On each Regular Distribution
Date or as soon thereafter as the Trustee has confirmed receipt
of the payment of all or any part of the Scheduled Payments due
on such date, the Trustee shall distribute out of the Certificate
Account the entire amount deposited therein pursuant to Section
4.01(a). There shall be so distributed to each Certificateholder
of record on the Record Date with respect to such Regular
Distribution Date (other than as provided in Section 11.01
concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional
Undivided Interest in the Trust held by such Certificateholder)
of the total amount in the Certificate Account, except that, with
respect to Certificates registered on the Record Date in the name
of the nominee of the Depositary (initially, such nominee to be
Cede & Co.), such distribution shall be made by wire transfer in
immediately available funds to the account designated by such
nominee.

           (b) On each Special Distribution Date with respect to
any Special Payment or as soon thereafter as the Trustee has
confirmed receipt of any Special Payments, the Trustee shall
distribute out of the Special Payments Account the entire amount
of such Special Payment deposited therein pursuant to Section
4.01(b). There shall be so distributed to each Certificateholder
of record on the Record Date with respect to such Special
Distribution Date (other than as provided in Section 11.01
concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional
Undivided Interest in the Trust held by such Certificateholder)
of the total amount in the Special Payments Account on account of
such Special Payment, except that, with respect to Certificates
registered on the Record Date in the name of the nominee of the
Depositary (initially, such nominee to be Cede & Co.), such
distribution shall be made by wire transfer in immediately
available funds to the account designated by such nominee.

           (c) The Trustee shall, at the expense of the Company,
cause notice of each Special Payment to be mailed to each
Certificateholder at his address as it appears in the Register.
In the event of redemption or purchase of Equipment Notes held in
the Trust, such notice shall be mailed not less than 20 days
prior to the Special Distribution Date for the Special Payment
resulting from such redemption or purchase, which Special
Distribution Date shall be the date of such redemption or
purchase. In the case of any other Special Payments, such notice
shall be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment,

                                33





stating the Special Distribution Date for such Special Payment
which shall occur not less than 20 days after the date of such
notice and as soon as practicable thereafter. Notices mailed by
the Trustee shall set forth:

           (i)  the Special Distribution Date and the Record Date
      therefor (except as otherwise provided in Section 11.01),

           (ii)  the amount of the Special Payment for each $1,000
      face amount Certificate (taking into account any payment to
      be made by the Company pursuant to Section 2.01(b)) and the
      amount thereof constituting principal, premium, if any, and
      interest,

           (iii)  the reason for the Special Payment, and

           (iv)  if the Special Distribution Date is the same date
      as a Regular Distribution Date, the total amount to be
      received on such date for each $1,000 face amount
      Certificate.

If the amount of premium, if any, payable upon the redemption or
purchase of an Equipment Note has not been calculated at the time
that the Trustee mails notice of a Special Payment, it shall be
sufficient if the notice sets forth the other amounts to be
distributed and states that any premium received will also be
distributed.

           If any redemption of the Equipment Notes held in the
Trust is cancelled, the Trustee, as soon as possible after
learning thereof, shall cause notice thereof to be mailed to each
Certificateholder at its address as it appears on the Register.

           Section 4.03. Statements to Certificateholders. (a) On
each Distribution Date, the Trustee will include with each
distribution to Certificateholders of a Scheduled Payment or
Special Payment, as the case may be, a statement setting forth
the following information (per $1,000 face amount Certificate as
to (i) and (ii) below):

           (i)  the amount of such distribution allocable to
      principal and the amount allocable to premium, if any;

           (ii)  the amount of such distribution allocable to
      interest; and

           (iii)  the Pool Balance and the Pool Factor.

           With respect to the Certificates registered in the
name of Cede & Co., as nominee for the Depositary, on the Record
Date prior to each Distribution Date, the Trustee will request from

                                34





the Depositary a Securities Position Listing setting forth the
names of all Agent Members reflected on the Depositary's books as
holding interests in the Certificates on such Record Date. On
each Distribution Date, the Trustee will mail to each such Agent
Member the statement described above and will make available
additional copies as requested by such Agent Member for
forwarding to holders of interests in the Certificates.

           (b) Within a reasonable period of time after the end
of each calendar year but not later than the latest date
permitted by law, the Trustee shall furnish to each Person who at
any time during such calendar year was a Certificateholder of
record a statement containing the sum of the amounts determined
pursuant to clauses (a)(i) and (a)(ii) above with respect to the
Trust for such calendar year or, in the event such Person was a
Certificateholder of record during a portion of such calendar
year, for such portion of such year, and such other items as are
readily available to the Trustee and which a Certificateholder
shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax
returns. Such statement and such other items shall be prepared on
the basis of information supplied to the Trustee by the Agent
Members and shall be delivered by the Trustee to such Agent
Members to be available for forwarding by such Agent Members to
the holders of interests in the Certificates in the manner
described in Section 4.03(a).

           Section 4.04. Investment of Special Payment Moneys.
Any money received by the Trustee pursuant to Section 4.01(b)
representing a Special Payment which is not to be promptly
distributed shall, to the extent practicable, be invested in
Permitted Investments by the Trustee pending distribution of such
Special Payment pursuant to Section 4.02. Any investment made
pursuant to this Section 4.04 shall be in such Permitted
Investments having maturities not later than the date that such
moneys are required to be used to make the payment required under
Section 4.02 on the applicable Special Distribution Date and the
Trustee shall hold any such Permitted Investments until maturity.
The Trustee shall have no liability with respect to any
investment made pursuant to this Section 4.04, other than by
reason of the willful misconduct or negligence of the Trustee.
All income and earnings from such investments shall be
distributed on such Special Distribution Date as part of such
Special Payment.



                                35





                            ARTICLE V

                           THE COMPANY

           Section 5.01. Maintenance of Corporate Existence. The
Company, at its own cost and expense, will do or cause to be done
all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises, except as
otherwise specifically permitted in Section 5.02; provided,
however, that the Company shall not be required to preserve any
right or franchise if the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company.

           Section 5.02. Consolidation, Merger, etc. The Company
shall not consolidate with or merge into any other corporation or
convey, transfer or lease substantially all of its assets as an
entirety to any Person unless:

           (a) the corporation formed by such consolidation or
      into which the Company is merged or the Person that
      acquires by conveyance, transfer or lease substantially all
      of the assets of the Company as an entirety shall be (i)
      organized and validly existing under the laws of the United
      States of America or any state thereof or the District of
      Columbia, (ii) a "citizen of the United States" as defined
      in 49 U.S.C. 40102(a)(15), as amended, and (iii) a United
      States certificated air carrier, if and so long as such
      status is a condition of entitlement to the benefits of
      Section 1110 of the Bankruptcy Reform Act of 1978, as
      amended (11 U.S.C.
      ss. 1110), with respect to the Leases;

           (b) the corporation formed by such consolidation or
      into which the Company is merged or the Person which
      acquires by conveyance, transfer or lease substantially all
      of the assets of the Company as an entirety shall execute
      and deliver to the Trustee a duly authorized, valid,
      binding and enforceable agreement in form and substance
      reasonably satisfactory to the Trustee containing an
      assumption by such successor corporation or Person of the
      due and punctual performance and observance of each
      covenant and condition of this Agreement, the Other Pass
      Through Trust Agreements, the Financing Agreements, and
      each other Financing Document to be performed or observed
      by the Company; and

           (c) the Company shall have delivered to the Trustee an
      Officer's Certificate of the Company and an Opinion of
      Counsel of the Company reasonably satisfactory to the
      Trustee, each stating that such consolidation, merger,
      conveyance, transfer or lease and the assumption agreement
      mentioned in clause (b) above comply with this Section 5.02

                                36





      and that all conditions precedent herein provided for
      relating to such transaction have been complied with.

           Upon any consolidation or merger, or any conveyance,
transfer or lease of substantially all of the assets of the
Company as an entirety in accordance with this Section 5.02, the
successor corporation or Person formed by such consolidation or
into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if such successor
corporation or Person had been named as the Company herein. No
such conveyance, transfer or lease of substantially all of the
assets of the Company as an entirety shall have the effect of
releasing any successor corporation or Person which shall have
become such in the manner prescribed in this Section 5.02 from
its liability in respect of this Agreement and any Financing
Document to which it is a party.


                            ARTICLE VI

                             DEFAULT

           Section 6.01. Events of Default. (a) Exercise of
Remedies. Upon the occurrence and during the continuation of any
Indenture Default under any Indenture, the Trustee may, to the
extent it is the Controlling Party at such time (as determined
pursuant to the Intercreditor Agreement), direct the exercise of
remedies as provided in the Intercreditor Agreement.

           (b) Purchase Rights of Certificateholders. (i) At any
time after the occurrence and during the continuation of a
Triggering Event, each Certificateholder shall have the right to
purchase all, but not less than all, of the Class A Certificates
upon ten days' written notice to the Class A Trustee and each
other Certificateholder, provided that (A) if prior to the end of
such ten-day period any other Certificateholder notifies such
purchasing Certificateholder that such other Certificateholder
wants to participate in such purchase, then such other
Certificateholder may join with the purchasing Certificateholder
to purchase all, but not less than all, of the Class A
Certificates pro rata based on the outstanding principal amount
of the Certificates held by each such Certificateholder and (B)
if prior to the end of such ten-day period any other
Certificateholder fails to notify the purchasing
Certificateholder of such other Certificateholder's desire to
participate in such a purchase, then such other Certificateholder
shall lose its right to purchase the Class A Certificates
pursuant to this Section 6.01(b)(i).


                                37





           (ii) By acceptance of its Certificate, each
Certificateholder agrees that at any time after the occurrence
and during the continuation of a Triggering Event,

           (1) each Class C Certificateholder shall have the
      right (which shall not expire upon any purchase of the
      Class A Certificates pursuant to paragraph (i) above) to
      purchase all, but not less than all, of the Class A
      Certificates and the Certificates upon ten days' written
      notice to the Class A Trustee, the Trustee and each other
      Class C Certificateholder, provided that (A) if prior to
      the end of such ten-day period any other Class C
      Certificateholder notifies such purchasing Class C
      Certificateholder that such other Class C Certificateholder
      wants to participate in such purchase, then such other
      Class C Certificateholder may join with the purchasing
      Class C Certificateholder to purchase all, but not less
      than all, of the Class A Certificates and the Certificates
      pro rata based on the Fractional Undivided Interest in the
      Class C Trust held by each such Class C Certificateholder
      and (B) if prior to the end of such ten day period any
      other Class C Certificateholder fails to notify the
      purchasing Class C Certificateholder of such other Class C
      Certificateholder's desire to participate in such a
      purchase, then such other Class C Certificateholder shall
      lose its right to purchase the Certificates pursuant to
      this Section 6.01(b); and

           (2) each Class D Certificateholder shall have the
      right (which shall not expire upon any purchase of the
      Class A Certificates pursuant to paragraph (i) above or the
      purchase of the Class A Certificates and the Certificates
      pursuant to clause (ii)(1) above) to purchase all, but not
      less than all, of the Class A Certificates, the
      Certificates and the Class C Certificates upon ten days'
      written notice to the Class A Trustee, the Trustee, the
      Class C Trustee and each other Class D Certificateholder,
      provided that (A) if prior to the end of such ten-day
      period any other Class D Certificateholder notifies such
      purchasing Class D Certificateholder that such other Class
      D Certificateholder wants to participate in such purchase,
      then such other Class D Certificateholder may join with the
      purchasing Certificateholder to purchase all, but not less
      than all, of the Class A Certificates, the Certificates and
      the Class C Certificates pro rata based on the Fractional
      Undivided Interest in the Class D Trust held by each such
      Class D Certificateholder and (B) if prior to the end of
      such ten day period any other Class D Certificateholder
      fails to notify the purchasing Class D Certificateholder of
      such other Class D Certificateholder's desire to
      participate in such a purchase, then such other Class D
      Certificateholder shall lose its right to purchase the
      Class A Certificates,

                                38





      the Certificates and the Class C Certificates pursuant to
      this Section 6.01(b).

           The purchase price with respect to the Certificates
shall be equal to the Pool Balance of the Certificates, together
with accrued and unpaid interest thereon to the date of such
purchase, without premium, but including any other amounts then
due and payable to the Certificateholders under this Agreement,
the Intercreditor Agreement or any other Financing Document or on
or in respect of the Certificates; provided, however, that no
such purchase of Certificates shall be effective unless the
purchaser shall certify to the Trustee that contemporaneously
with such purchase, such purchaser is purchasing, pursuant to the
terms of this Agreement and the Other Pass Through Trust
Agreements, the Class A Certificates, the Certificates and the
Class C Certificates which are senior to the securities held by
such purchaser. Each payment of the purchase price of the
Certificates referred to in the first sentence hereof shall be
made to an account or accounts designated by the Trustee and each
such purchase shall be subject to the terms of this Section
6.01(b). Each Certificateholder agrees by its acceptance of its
Certificate that it will, subject to Section 3.04 hereof, upon
payment from such Class C Certificateholder(s) or Class D
Certificateholder(s), as the case may be, of the purchase price
set forth in the first sentence of this paragraph, forthwith
sell, assign, transfer and convey to the purchaser thereof
(without recourse, representation or warranty of any kind except
for its own acts), all of the right, title, interest and
obligation of such Certificateholder in, this Agreement, the
Intercreditor Agreement, the Liquidity Facility, the Financing
Documents and all Certificates held by such Certificateholder
(excluding all right, title and interest under any of the
foregoing to the extent such right, title or interest is with
respect to an obligation not then due and payable as respects any
action or inaction or state of affairs occurring prior to such
sale) and the purchaser shall assume all of such
Certificateholder's obligations under this Agreement, the
Intercreditor Agreement, the Liquidity Facility and the Financing
Documents. The Certificates will be deemed to be purchased on the
date payment of the purchase price is made notwithstanding the
failure of the Certificateholders to deliver any Certificates
(whether in the form of Physical Certificates or beneficial
interests in Global Certificates) and, upon such a purchase, (i)
the only rights of the Certificateholders will be to deliver the
Certificates to the purchaser and receive the purchase price for
such Certificates and (ii) if the purchaser shall so request,
such Certificateholder will comply with all the provisions of
Section 3.04 hereof to enable new Certificates to be issued to
the purchaser in such denominations as it shall request. All
charges and expenses in connection with the issuance of any such
new Certificates shall be borne by the purchaser thereof.

                                39






           As used in this Section 6.01(b), the terms
"Certificateholder", "Class", "Class A Certificate", "Class A
Trustee", "Class C Certificate", "Class C Certificateholder",
"Class C Trust", "Class C Trustee", "Class D Certificate", "Class
D Certificateholder", "Class D Trust" and "Class D Trustee",
shall have the respective meanings assigned to such terms in the
Intercreditor Agreement.

           Section 6.02.  [Intentionally omitted.].

           Section 6.03. Judicial Proceedings Instituted by
Trustee; Trustee May Bring Suit. If there shall be a failure to
make payment of the principal of, premium, if any, or interest on
any Equipment Note, or if there shall be any failure to pay Rent
(as defined in the relevant Lease) under any Lease when due and
payable, then the Trustee, in its own name and as trustee of an
express trust, as holder of such Equipment Notes, to the extent
permitted by and in accordance with the terms of the
Intercreditor Agreement and the Financing Documents (subject to
the rights of the applicable Owner Trustee or Owner Participant
to cure any such failure in accordance with Section 4.03 of the
applicable Indenture), shall be entitled and empowered to
institute any suits, actions or proceedings at law, in equity or
otherwise, for the collection of the sums so due and unpaid on
such Equipment Notes or under such Lease and may prosecute any
such claim or proceeding to judgment or final decree with respect
to the whole amount of any such sums so due and unpaid.

           Section 6.04. Control by Certificateholders. Subject
to Section 6.03 and the Intercreditor Agreement, the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee with respect to the Trust or pursuant to
the terms of the Intercreditor Agreement, or exercising any trust
or power conferred on the Trustee under this Agreement or the
Intercreditor Agreement, including any right of the Trustee as
Controlling Party under the Intercreditor Agreement or as holder
of the Equipment Notes, provided that

           (1) such Direction shall not be in conflict with any
      rule of law or with this Agreement and would not involve
      the Trustee in personal liability or expense,

           (2) the Trustee shall not determine that the action so
      directed would be unjustly prejudicial to the
      Certificateholders not taking part in such Direction, and


                                40





           (3) the Trustee may take any other action deemed
      proper by the Trustee which is not inconsistent with such
      Direction.

           Section 6.05. Waiver of Past Defaults. Subject to the
Intercreditor Agreement, the Certificateholders holding
Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust (i)
may on behalf of all of the Certificateholders waive any past
Event of Default hereunder and its consequences or (ii) if the
Trustee is the Controlling Party, may direct the Trustee to
instruct the applicable Loan Trustee to waive, any past Indenture
Default under any Indenture and its consequences, and thereby
annul any Direction given by such Certificateholders or the
Trustee to such Loan Trustee with respect thereto, except a
default:

           (1)  in the deposit of any Scheduled Payment or Special
      Payment under Section 4.01 or in the distribution of any
      payment under Section 4.02 on the Certificates, or

           (2)  in the payment of the principal of (premium, if
      any) or interest on the Equipment Notes, or

           (3)  in respect of a covenant or provision hereof which
      under Article X cannot be modified or amended without the
      consent of each Certificateholder holding an Outstanding
      Certificate affected thereby.

           Upon any such waiver, such default shall cease to
exist with respect to the Certificates and any Event of Default
arising therefrom shall be deemed to have been cured for every
purpose and any direction given by the Trustee on behalf of the
Certificateholders to the relevant Loan Trustee shall be annulled
with respect thereto; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any
right consequent thereon. Upon any such waiver, the Trustee shall
vote the Equipment Notes issued under the relevant Indenture to
waive the corresponding Indenture Default.

           Section 6.06. Right of Certificateholders to Receive
Payments Not to Be Impaired. Anything in this Agreement to the
contrary notwithstanding, including, without limitation, Section
6.07 hereof, but subject to the Intercreditor Agreement, the
right of any Certificateholder to receive distributions of
payments required pursuant to Section 4.02 hereof on the
Certificates when due, or to institute suit for the enforcement
of any such payment on or after the applicable Regular
Distribution Date or Special Distribution Date, shall not be
impaired or affected without the consent of such
Certificateholder.

                                41






           Section 6.07. Certificateholders May Not Bring Suit
Except Under Certain Conditions. A Certificateholder shall not
have the right to institute any suit, action or proceeding at law
or in equity or otherwise with respect to this Agreement, for the
appointment of a receiver or for the enforcement of any other
remedy under this Agreement, unless:

           (1)  such Certificateholder previously shall have given
      written notice to the Trustee of a continuing Event of
      Default;

           (2) Certificateholders holding Certificates evidencing
      Fractional Undivided Interests aggregating not less than
      25% of the Trust shall have requested the Trustee in
      writing to institute such action, suit or proceeding and
      shall have offered to the Trustee indemnity as provided in
      Section 7.03(e);

           (3) the Trustee shall have refused or neglected to
      institute such an action, suit or proceeding for 60 days
      after receipt of such notice, request and offer of
      indemnity; and

           (4) no direction inconsistent with such written
      request shall have been given to the Trustee during such
      60- day period by Certificateholders holding Certificates
      evidencing Fractional Undivided Interests aggregating not
      less than a majority in interest in the Trust.

           It is understood and intended that no one or more of
the Certificateholders shall have any right in any manner
whatsoever hereunder or under the Certificates to (i) surrender,
impair, waive, affect, disturb or prejudice any property in the
Trust Property or the lien of any Indenture on any property
subject thereto, or the rights of the Certificateholders or the
holders of the Equipment Notes, (ii) obtain or seek to obtain
priority over or preference with respect to any other such
Certificateholder or (iii) enforce any right under this
Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all the Certificateholders
subject to the provisions of this Agreement.

           Section 6.08.  Remedies Cumulative.  Every remedy given
hereunder to the Trustee or to any of the Certificateholders
shall not be exclusive of any other remedy or remedies, and every

                                42





such remedy shall be cumulative and in addition to every other
remedy given hereunder or now or hereafter given by statute, law,
equity or otherwise.


                           ARTICLE VII

                           THE TRUSTEE

           Section 7.01. Certain Duties and Responsibilities. (a)
Except during the continuance of an Event of Default, the Trustee
undertakes to perform such duties as are specifically set forth
in this Agreement, and no implied covenants or obligations shall
be read into this Agreement against the Trustee.

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

           (c) No provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful
misconduct, except that

           (1)  this Subsection shall not be construed to limit
      the effect of Subsection (a) of this Section; and

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

           (d) Whether or not herein expressly so provided, every
provision of this Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.

           Section 7.02. Notice of Defaults. As promptly as
practicable after, and in any event within 90 days after, the
occurrence of any default (as such term is defined below)
hereunder, the Trustee shall transmit by mail to the Company, the
Owner Trustees, the Owner Participants, the Loan Trustees and the
Certificateholders in accordance with Section 313(c) of the Trust
Indenture Act, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default on the
payment of the principal, premium, if any, or interest on any
Equipment Note, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the

                                43





executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that
the withholding of such notice is in the interests of the
Certificateholders. For the purpose of this Section, the term
"default" means any event that is, or after notice or lapse of
time or both would become, an Event of Default.

           Section 7.03.  Certain Rights of Trustee.  Subject to
the provisions of Section 315 of the Trust Indenture Act:

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

           (b) any request or direction of the Company mentioned
      herein shall be sufficiently evidenced by a written
      description of the subject matter thereof accompanied by an
      Officer's Certificate and an Opinion of Counsel as provided
      in Section 1.02 of this Agreement;

           (c) whenever in the administration of this Agreement
      the Trustee shall deem it desirable that a matter be proved
      or established prior to taking, suffering or omitting any
      action hereunder, the Trustee (unless other evidence be
      herein specifically prescribed) may, in the absence of bad
      faith on its part, rely upon an Officer's Certificate of
      the Company, any Owner Trustee or any Loan Trustee;

           (d) the Trustee may consult with counsel and the
      advice of such counsel or any Opinion of Counsel shall be
      full and complete authorization and protection in respect
      of any action taken, suffered or omitted by it hereunder in
      good faith and in reliance thereon;

           (e) the Trustee shall be under no obligation to
      exercise any of the rights or powers vested in it by this
      Agreement at the Direction of any of the Certificateholders
      pursuant to this Agreement, unless such Certificateholders
      shall have offered to the Trustee reasonable security or
      indemnity against the cost, expenses and liabilities which
      might be incurred by it in compliance with such Direction;

           (f) the Trustee shall not be bound to make any
      investigation into the facts or matters stated in any
      resolution, certificate, statement, instrument, opinion,
      report, notice, request, direction, consent, order, bond,
      debenture or other paper or document;

                                44






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

           (h) the Trustee shall not be liable with respect to
      any action taken or omitted to be taken by it in good faith
      in accordance with the Direction of the Certificateholders
      holding Certificates evidencing Fractional Undivided
      Interests aggregating not less than a majority in interest
      in the Trust relating to the time, method and place of
      conducting any proceeding for any remedy available to the
      Trustee, or exercising any trust or power conferred upon
      the Trustee, under this Agreement; and

           (i) the Trustee shall not be required to expend or
      risk its own funds in the performance of any of its duties
      under this Agreement, or in the exercise of any of its
      rights or powers, if it shall have reasonable grounds for
      believing that repayment of such funds or adequate
      indemnity against such risk is not reasonably assured to
      it.

           Section 7.04. Not Responsible for Recitals or Issuance
of Certificates. The recitals contained herein and in the
Certificates, except the certificates of authentication, shall
not be taken as the statements of the Trustee, and the Trustee
assumes no responsibility for their correctness. Subject to
Section 7.15, the Trustee makes no representations as to the
validity or sufficiency of this Agreement, any Financing
Agreement, any Equipment Notes, the Certificates or any other
Financing Document, except that the Trustee hereby represents and
warrants that this Agreement has been, and the Intercreditor
Agreement, the Registration Rights Agreement, each Financing
Agreement and each Certificate will be, executed, authenticated
and delivered by one of its officers who is duly authorized to
execute, authenticate and deliver such document on its behalf.

           Section 7.05. May Hold Certificates. The Trustee, any
Paying Agent, Registrar or any of their Affiliates or any other
agent in their respective individual or any other capacity may
become the owner or pledgee of Certificates and, subject to
Sections 310(b) and 311 of the Trust Indenture Act, if
applicable, may otherwise deal with the Company, the Owner
Trustees or the Loan Trustees with the same rights it would have
if it were not Trustee, Paying Agent, Registrar or such other
agent.

           Section 7.06.  Money Held in Trust.  Money held by the
Trustee or the Paying Agent in trust hereunder need not be

                                45





segregated from other funds except to the extent required herein
or by law and neither the Trustee nor the Paying Agent shall have
any liability for interest upon any such moneys except as
provided for herein.

           Section 7.07.  Compensation and Reimbursement.  The
Company agrees:

           (1) to pay, or cause to be paid, to the Trustee from
      time to time reasonable compensation for all services
      rendered by it hereunder (which compensation shall not be
      limited by any provision of law in regard to the
      compensation of a trustee of an express trust);

           (2) except as otherwise expressly provided herein, to
      reimburse, or cause to be reimbursed, the Trustee upon its
      request for all reasonable out-of-pocket expenses,
      disbursements and advances incurred or made by the Trustee
      in accordance with any provision of this Agreement
      (including the reasonable compensation and the expenses and
      disbursements of its agents and counsel), except any such
      expense, disbursement or advance as may be attributable to
      its negligence, willful misconduct or bad faith or as may
      be incurred due to the Trustee's breach of its
      representations and warranties set forth in Section 7.15;
      and

           (3)  to indemnify the Trustee pursuant to Section 10.1
      of the Participation Agreements (as amended by the
      Amendments No. 1 thereto dated as of the date hereof) (as
      defined in the Intercreditor Agreement).

           The Trustee shall be entitled to reimbursement from,
and shall have a lien prior to the Certificates upon, the Trust
Property for any tax incurred without negligence, bad faith or
willful misconduct, on its part, arising out of or in connection
with the acceptance or administration of such Trust (other than
any tax attributable to the Trustee's compensation for serving as
such), including any costs and expenses incurred in contesting
the imposition of any such tax. If the Trustee reimburses itself
from the Trust Property of such Trust for any such tax, it will
mail a brief report within 30 days setting forth the
circumstances thereof to all Certificateholders as their names
and addresses appear in the Register.

           Section 7.08. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as a trustee under Section 310(a) of the Trust
Indenture Act and shall have a combined capital and surplus of at
least $75,000,000 (or a combined capital and surplus in excess of
$5,000,000 and the obligations of which, whether now in existence
or hereafter incurred, are fully and unconditionally guaranteed

                                46





by a corporation organized and doing business under the laws of
the United States, any state or territory thereof or of the
District of Columbia and having a combined capital and surplus of
at least $75,000,000). If such corporation publishes reports of
conditions at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of
Columbia supervising or examining authority, then for the
purposes of this Section 7.08, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of conditions
so published.

           In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.08
to act as Trustee, the Trustee shall resign immediately as
Trustee in the manner and with the effect specified in Section
7.09.

           Section 7.09. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 7.10.

           (b) The Trustee may resign at any time as trustee by
giving prior written notice thereof to the Company, the
Authorized Agents, the Owner Trustees and the Loan Trustees. If
an instrument of acceptance by a successor Trustee shall not have
been delivered to the Company, the Authorized Agents, the Owner
Trustees, the Loan Trustees and the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

           (c) The Trustee may be removed at any time by
Direction of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less
than a majority in interest in the Trust delivered to the Trustee
and to the Company, the Owner Trustees and the Loan Trustees.

           (d)  If at any time:

           (1) the Trustee shall fail to comply with Section 310
      of the Trust Indenture Act, if applicable, after written
      request therefor by the Company or by any Certificateholder
      who has been a bona fide Certificateholder for at least six
      months; or

           (2) the Trustee shall cease to be eligible under
      Section 7.08 and shall fail to resign after written request
      therefor by the Company or by any such Certificateholder;
      or

                                47






           (3) the Trustee shall become incapable of acting or
      shall be adjudged a bankrupt or insolvent or a receiver of
      the Trustee or of its property shall be appointed or any
      public officer shall take charge or control of the Trustee
      or of its property or affairs for the purpose of
      rehabilitation, conservation or liquidation;

then, in any case, (i) the Company may, with the consent of the
Owner Participants, which consent may not be unreasonably
withheld, remove the Trustee or (ii) any Certificateholder who
has been a bona fide Certificateholder for at least six months
may, on behalf of itself and all others similarly situated,
petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.

           (e) If a Responsible Officer of the Trustee shall
obtain actual knowledge of an Avoidable Tax which has been or is
likely to be asserted, the Trustee shall promptly notify the
Company and shall, within 30 days of such notification, resign
hereunder unless within such 30-day period the Trustee shall have
received notice that the Company has agreed to pay such tax. The
Company shall promptly appoint a successor Trustee in a
jurisdiction where there are no Avoidable Taxes.

           (f) If the Trustee shall resign, be removed or become
incapable of acting or if a vacancy shall occur in the office of
the Trustee for any cause, the Company shall promptly appoint a
successor Trustee. If, within one year after such resignation,
removal or incapability, or other occurrence of such vacancy, a
successor Trustee shall be appointed by Direction of the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust delivered to the Company, the Owner
Trustees, the Loan Trustees and the retiring Trustee, and the
Company approves such appointment, which approval shall not be
unreasonably withheld, then the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become
the successor Trustee and supersede the successor Trustee
appointed as provided above. If no successor Trustee shall have
been so appointed as provided above and accepted appointment in
the manner hereinafter provided, any Certificateholder who has
been a bona fide Certificateholder for at least six months may,
on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a
successor Trustee.

           (g) The successor Trustee shall give notice of the
resignation and removal of the Trustee and appointment of the
successor Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Certificateholders as
their names and addresses appear in the Register. Each notice

                                48





shall include the name of such successor Trustee and the address
of its Corporate Trust Office.

           Section 7.10. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute and
deliver to the Company, the Authorized Agents, the Owner Trustees
and the Loan Trustees and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall execute and
deliver an instrument transferring to such successor Trustee all
such rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all
Trust Property held by such retiring Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 7.07.
Upon request of any such successor Trustee, the Company, the
retiring Trustee and such successor Trustee shall execute and
deliver any and all instruments containing such provisions as
shall be necessary or desirable to transfer and confirm to, and
for more fully and certainly vesting in, such successor Trustee
all such rights, powers and trusts.

           No institution shall accept its appointment as a
Trustee hereunder unless at the time of such acceptance such
institution shall be qualified and eligible under this Article
VII.

           Section 7.11. Merger, Conversion, Consolidation or
Succession to Business. Any corporation into which the Trustee
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article VII, without
the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Certificates shall
have been executed or authenticated, but not delivered, by the
Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such
execution or authentication and deliver the Certificates so
executed or authenticated with the same effect as if such
successor Trustee had itself executed or authenticated such
Certificates.

           Section 7.12.  Maintenance of Agencies.  (a)  There
shall at all times be maintained an office or agency in the

                                49





location set forth in Section 12.03 where Certificates may be
presented or surrendered for registration of transfer or for
exchange, and for payment thereof and where notices and demands
to or upon the Trustee in respect of such certificates or this
Agreement may be served; provided, however, that, if it shall be
necessary that the Trustee maintain an office or agency in
another location (e.g., the Certificates shall be represented by
Physical Certificates and shall be listed on a national
securities exchange), the Trustee will make all reasonable
efforts to establish such an office or agency. Written notice of
the location of each such other office or agency and of any
change of location thereof shall be given by the Trustee to the
Company, the Owner Trustees, the Loan Trustees (in the case of
any Owner Trustee or Loan Trustee, at its address specified in
the Financing Agreements or such other address as may be notified
to the Trustee) and the Certificateholders. In the event that no
such office or agency shall be maintained or no such notice of
location or of change of location shall be given, presentations
and demands may be made and notices may be served at the
Corporate Trust Office of the Trustee.

           (b) There shall at all times be a Registrar and a
Paying Agent hereunder with respect to the Certificates. Each
such Authorized Agent shall be a bank or trust company, shall be
a corporation organized and doing business under the laws of the
United States or any state, with a combined capital and surplus
of at least $75,000,000, or, if the Trustee shall be acting as
the Registrar or Paying Agent hereunder, a corporation having a
combined capital and surplus in excess of $5,000,000, the
obligations of which are guaranteed by a corporation organized
and doing business under the laws of the United States or any
state, with a combined capital and surplus of at least
$75,000,000, and shall be authorized under such laws to exercise
corporate trust powers, subject to supervision by Federal or
state authorities. The Trustee shall initially be the Paying
Agent and, as provided in Section 3.04, Registrar hereunder with
respect to the Certificates. Each Registrar shall furnish to the
Trustee, at stated intervals of not more than six months, and at
such other times as the Trustee may request in writing, a copy of
the Register maintained by such Registrar.

           (c) Any corporation into which any Authorized Agent
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, consolidation or
conversion to which any Authorized Agent shall be a party, or any
corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent
hereunder, if such successor corporation is otherwise eligible
under this Section, without the execution or filing of any paper
or any further act on the part of the parties hereto or such
Authorized Agent or such successor corporation.

                                50






           (d) Any Authorized Agent may at any time resign by
giving written notice of resignation to the Trustee, the Company,
the Owner Trustees and the Loan Trustees. The Company may, and at
the request of the Trustee shall, at any time terminate the
agency of any Authorized Agent by giving written notice of
termination to such Authorized Agent and to the Trustee. Upon the
resignation or termination of an Authorized Agent or in case at
any time any such Authorized Agent shall cease to be eligible
under this Section (when, in either case, no other Authorized
Agent performing the functions of such Authorized Agent shall
have been appointed), the Company shall promptly appoint one or
more qualified successor Authorized Agents, reasonably
satisfactory to the Trustee, to perform the functions of the
Authorized Agent which has resigned or whose agency has been
terminated or who shall have ceased to be eligible under this
Section. The Company shall give written notice of any such
appointment made by it to the Trustee, the Owner Trustees and the
Loan Trustees; and in each case the Trustee shall mail notice of
such appointment to all Certificateholders as their names and
addresses appear on the Register.

           (e) The Company agrees to pay, or cause to be paid,
from time to time to each Authorized Agent reasonable
compensation for its services and to reimburse it for its
reasonable expenses.

           Section 7.13. Money for Certificate Payments to Be
Held in Trust. All moneys deposited with any Paying Agent for the
purpose of any payment on Certificates shall be deposited and
held in trust for the benefit of the Certificateholders entitled
to such payment, subject to the provisions of this Section.
Moneys so deposited and held in trust shall constitute a separate
trust fund for the benefit of the Certificateholders with respect
to which such money was deposited.

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

           Section 7.14. Registration of Equipment Notes in Name
of Subordination Agent. The Trustee agrees that all Equipment
Notes to be purchased by the Trust shall be issued in the name of
the Subordination Agent or its nominee and held by the
Subordination Agent in trust for the benefit of the
Certificateholders, or, if not so held, the Subordination Agent

                                51





or its nominee shall be reflected as the owner of such Equipment
Notes in the register of the issuer of such Equipment Notes.

           Section 7.15.  Representations and Warranties of
Trustee.  The Trustee hereby represents and warrants that:

           (a)  the Trustee is a Delaware banking corporation
      organized and validly existing in good standing under the
      laws of the State of Delaware;

           (b) the Trustee has full power, authority and legal
      right to execute, deliver, and perform this Agreement, the
      Intercreditor Agreement, the Registration Rights Agreement
      and the Financing Agreements and has taken all necessary
      action to authorize the execution, delivery, and
      performance by it of this Agreement, the Intercreditor
      Agreement, the Registration Rights Agreement and the
      Financing Agreements;

           (c) the execution, delivery and performance by the
      Trustee of this Agreement, the Intercreditor Agreement, the
      Registration Rights Agreement and the Financing Agreements
      (i) will not violate any provision of United States federal
      law or the law of the state of the United States where it
      is located governing the banking and trust powers of the
      Trustee or any order, writ, judgment, or decree of any
      court, arbitrator or governmental authority applicable to
      the Trustee or any of its assets, (ii) will not violate any
      provision of the articles of association or by-laws of the
      Trustee, or (iii) will not violate any provision of, or
      constitute, with or without notice or lapse of time, a
      default under, or result in the creation or imposition of
      any lien on any properties included in the Trust Property
      pursuant to the provisions of any mortgage, indenture,
      contract, agreement or other undertaking to which it is a
      party, which violation, default or lien could reasonably be
      expected to have an adverse effect on the Trustee's
      performance or ability to perform its duties hereunder or
      thereunder or on the transactions contemplated herein or
      therein;

           (d) the execution, delivery and performance by the
      Trustee of this Agreement, the Intercreditor Agreement, the
      Registration Rights Agreement and the Financing Agreements
      will not require the authorization, consent, or approval
      of, the giving of notice to, the filing or registration
      with, or the taking of any other action in respect of, any
      governmental authority or agency of the United States or
      the State of the United States where it is located
      regulating the banking and corporate trust activities of
      the Trustee; and


                                52





           (e) this Agreement, the Intercreditor Agreement, the
      Registration Rights Agreement and the Financing Agreements
      have been duly executed and delivered by the Trustee and
      constitute the legal, valid, and binding agreements of the
      Trustee, enforceable against it in accordance with their
      respective terms, provided that enforceability may be
      limited by (i) applicable bankruptcy, insolvency,
      reorganization, moratorium or similar laws affecting the
      rights of creditors generally and (ii) general principles
      of equity.

           Section 7.16. Withholding Taxes; Information
Reporting. The Trustee, as trustee of the grantor trust created
by this Agreement, shall exclude and withhold from each
distribution of principal, premium, if any, and interest and
other amounts due under this Agreement or under the Certificates
any and all withholding taxes applicable thereto as required by
law. The Trustee agrees to act as such withholding agent and, in
connection therewith, whenever any present or future taxes or
similar charges are required to be withheld with respect to any
amounts payable in respect of the Certificates, to withhold such
amounts and timely pay the same to the appropriate authority in
the name of and on behalf of the Certificateholders, that it will
file any necessary withholding tax returns or statements when
due, and that, as promptly as possible after the payment thereof,
it will deliver to each such Certificateholder appropriate
documentation showing the payment thereof, together with such
additional documentary evidence as such Certificateholders may
reasonably request from time to time. The Trustee agrees to file
any other information reports as it may be required to file under
United States law.

           Section 7.17. Trustee's Liens. The Trustee in its
individual capacity agrees that it will at its own cost and
expense promptly take any action as may be necessary to duly
discharge and satisfy in full any mortgage, pledge, lien, charge,
encumbrance, security interest or claim ("Trustee's Liens") on or
with respect to the Trust Property which is attributable to the
Trustee either (i) in its individual capacity and which is
unrelated to the transactions contemplated by this Agreement, the
Intercreditor Agreement, the Financing Agreements or the
Financing Documents, or (ii) as Trustee hereunder or in its
individual capacity and which arises out of acts or omissions
which are not contemplated by this Agreement.



                                53





                           ARTICLE VIII

         CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE

           Section 8.01. The Company to Furnish Trustee with
Names and Addresses of Certificateholders. The Company will
furnish to the Trustee within 15 days after each Record Date with
respect to a Scheduled Payment, and at such other times as the
Trustee may request in writing within 30 days after receipt by
the Company of any such request, a list, in such form as the
Trustee may reasonably require, of all information in the
possession or control of the Company as to the names and
addresses of the Certificateholders, in each case as of a date
not more than 15 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the sole
Registrar, no such list need be furnished; and provided further,
however, that no such list need be furnished for so long as a
copy of the Register is being furnished to the Trustee pursuant
to Section 7.12.

           Section 8.02. Preservation of Information;
Communications to Certificateholders. The Trustee shall preserve,
in as current a form as is reasonably practicable, the names and
addresses of Certificateholders contained in the most recent list
furnished to the Trustee as provided in Section 7.12 or Section
8.01, as the case may be, and the names and addresses of
Certificateholders received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list
furnished to it as provided in Section 7.12 or Section 8.01, as
the case may be, upon receipt of a new list so furnished.

           Section 8.03. Reports by Trustee. Within 60 days after
May 15 of each year commencing with the first full year following
the issuance of the Certificates, the Trustee shall transmit to
the Certificateholders, as provided in Section 313(c) of the
Trust Indenture Act, a brief report dated as of such May 15, if
required by Section 313(a) of the Trust Indenture Act.

           Section 8.04.  Reports by the Company.  The Company
shall:

           (a) file with the Trustee, within 30 days after the
      Company is required to file the same with the SEC, copies
      of the annual reports and of the information, documents and
      other reports (or copies of such portions of any of the
      foregoing as the SEC may from time to time by rules and
      regulations prescribe) which the Company is required to
      file with the SEC pursuant to section 13 or section 15(d)
      of the Securities Exchange Act of 1934, as amended; or, if
      the Company is not required to file information, documents
      or reports pursuant to either of such sections, then to


                                54





      file with the Trustee and the SEC, in accordance with rules 
      and regulations prescribed by the SEC, such of the
      supplementary and periodic information, documents and
      reports which may be required pursuant to section 13 of the
      Securities Exchange Act of 1934, as amended, in respect of
      a security listed and registered on a national securities
      exchange as may be prescribed in such rules and
      regulations;

           (b) file with the Trustee and the SEC, in accordance
      with the rules and regulations prescribed by the SEC, such
      additional information, documents and reports with respect
      to compliance by the Company with the conditions and
      covenants provided for in this Agreement, as may be
      required by such rules and regulations, including, in the
      case of annual reports, if required by such rules and
      regulations, certificates or opinions of independent public
      accountants;

           (c) transmit to all Certificateholders, in the manner
      and to the extent provided in Section 313(c) of the Trust
      Indenture Act such summaries of any information, documents
      and reports required to be filed by the Company pursuant to
      subsections (a) and (b) of this Section 8.04 as may be
      required by rules and regulations prescribed by the SEC;
      and

           (d) furnish to the Trustee, not less often than
      annually, a brief certificate from the principal executive
      officer, principal financial officer or principal
      accounting officer as to his or her knowledge of the
      Company's compliance with all conditions and covenants
      under this Agreement (it being understood that for purposes
      of this paragraph (d), such compliance shall be determined
      without regard to any period of grace or requirement of
      notice provided under this Agreement).


                            ARTICLE IX

                     SUPPLEMENTAL AGREEMENTS

           Section 9.01. Supplemental Agreements Without Consent
of Certificateholders. Without the consent of the
Certificateholders, the Company may (but will not be required
to), and the Trustee (subject to Section 9.03) shall, at any time
and from time to time, enter into one or more agreements
supplemental hereto or, if applicable, to the Intercreditor
Agreement or the Liquidity Facility in form satisfactory to the
Trustee, for any of the following purposes:

           (1)  to evidence the succession of another corporation
      to the Company and the assumption by any such successor of
      the covenants of the Company herein contained; or

                                55






           (2)  to add to the covenants of the Company for the
      benefit of the Certificateholders, or to surrender any right
      or power in this Agreement conferred upon the Company; or

           (3) to correct or supplement any provision in this
      Agreement, the Intercreditor Agreement or the Liquidity
      Facility which may be defective or inconsistent with any
      other provision herein or to cure any ambiguity or correct
      any mistake or to modify any other provision with respect
      to matters or questions arising under this Agreement, the
      Intercreditor Agreement or the Liquidity Facility, provided
      that any such action shall not materially adversely affect
      the interests of the Certificateholders; or

           (4) to modify, eliminate or add to the provisions of
      this Agreement to such extent as shall be necessary to
      continue the qualification of this Agreement (including any
      supplemental agreement) under the Trust Indenture Act or
      under any similar Federal statute hereafter enacted, and to
      add to this Agreement such other provisions as may be
      expressly permitted by the Trust Indenture Act, excluding,
      however, the provisions referred to in Section 316(a)(2) of
      the Trust Indenture Act as in effect at the date as of
      which this instrument was executed or any corresponding
      provision in any similar Federal statute hereafter enacted;
      or

           (5) to evidence and provide for the acceptance of
      appointment under this Agreement by the Trustee of a
      successor Trustee and to add to or change any of the
      provisions of this Agreement as shall be necessary to
      provide for or facilitate the administration of the Trust,
      pursuant to the requirements of Section 7.10; or

           (6)  to provide the information required under
      Section 7.12 and Section 12.03 as to the Trustee; or

           (7) to modify or eliminate provisions relating to the
      transfer or exchange of Exchange Certificates or the
      Initial Certificates upon consummation of the Exchange
      Offer (as defined in the Registration Rights Agreement) or
      effectiveness of the Registration Statement.

           Section 9.02. Supplemental Agreements with Consent of
Certificateholders. With the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust, by
Direction of said Certificateholders delivered to the Company and
the Trustee, the Company may (with the consent of the Owner
Trustees, if any, which consent shall not be unreasonably
withheld), and the Trustee (subject to Section 9.03) shall, enter
into an agreement or agreements for the purpose of adding any

                                56





provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, the Intercreditor Agreement, the
Liquidity Facility, the Registration Rights Agreement or any
Financing Agreement to the extent applicable to such
Certificateholders or of modifying in any manner the rights and
obligations of such Certificateholders under this Agreement, the
Intercreditor Agreement, the Liquidity Facility, the Registration
Rights Agreement or any Financing Agreement; provided, however,
that no such agreement shall, without the consent of the
Certificateholder of each Outstanding Certificate affected
thereby:

           (1) reduce in any manner the amount of, or delay the
      timing of, any receipt by the Trustee of payments on the
      Equipment Notes held in the Trust or distributions that are
      required to be made herein on any Certificate, or change
      any date of payment on any Certificate, or change the place
      of payment where, or the coin or currency in which, any
      Certificate is payable, or impair the right to institute
      suit for the enforcement of any such payment or
      distribution on or after the Regular Distribution Date or
      Special Distribution Date applicable thereto; or

           (2) permit the disposition of any Equipment Note
      included in the Trust Property except as permitted by this
      Agreement, or otherwise deprive such Certificateholder of
      the benefit of the ownership of the Equipment Notes in the
      Trust; or

           (3) reduce the percentage of the aggregate Fractional
      Undivided Interests of the Trust which is required for any
      such supplemental agreement, or reduce such percentage
      required for any waiver of compliance with certain
      provisions of this Agreement or certain defaults hereunder
      and their consequences provided for in this Agreement; or

           (4)  waive, amend or modify Section 2.4, 3.2 or 3.3 of
      the Intercreditor Agreement in a manner adverse to the
      Certificateholders; or

           (5) modify any of the provisions of this Section 9.02
      or Section 6.05, except to increase any such percentage or
      to provide that certain other provisions of this Agreement
      cannot be modified or waived without the consent of the
      Certificateholder of each Certificate affected thereby.

           It shall not be necessary for any Direction of
Certificateholders under this Section to approve the particular
form of any proposed supplemental agreement, but it shall be
sufficient if such Direction shall approve the substance thereof.


                                57





           Section 9.03. Documents Affecting Immunity or
Indemnity. If in the opinion of the Trustee any document required
to be executed by it pursuant to the terms of Section 9.01 or
9.02 affects any interest, right, duty, immunity or indemnity in
favor of the Trustee under this Agreement, the Trustee may in its
discretion decline to execute such document.

           Section 9.04. Execution of Supplemental Agreements. In
executing, or accepting the additional trusts created by, any
agreement permitted by this Article or the modifications thereby
of the trusts created by this Agreement, the Trustee shall be
entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this
Agreement.

           Section 9.05. Effect of Supplemental Agreements. Upon
the execution of any agreement supplemental to this Agreement
under this Article, this Agreement shall be modified in
accordance therewith, and such supplemental agreement shall form
a part of this Agreement for all purposes; and every Holder of a
Certificate theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.

           Section 9.06. Conformity with Trust Indenture Act.
Every supplemental agreement executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act as
then in effect.

           Section 9.07. Reference in Certificates to
Supplemental Agreements. Certificates authenticated and delivered
after the execution of any supplemental agreement pursuant to
this Article may bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental agreement;
and, in such case, suitable notation may be made upon Outstanding
Certificates after proper presentation and demand.


                            ARTICLE X

         AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS

           Section 10.01. Amendments and Supplements to
Indentures and Other Financing Documents. In the event that the
Trustee, as holder of any Equipment Note in trust for the benefit
of the Certificateholders or as Controlling Party under the
Intercreditor Agreement, receives a request for a consent to any
amendment, modification, waiver or supplement under any Indenture
or other Financing Document, the Trustee shall forthwith send a
notice of such proposed amendment, modification, waiver or
supplement to each Certificateholder registered on the Register

                                58





as of the date of such notice. The Trustee shall request from the
Certificateholders a Direction as to (a) whether or not to take
or refrain from taking any action which a holder of such
Equipment Note has the option to direct, (b) whether or not to
give or execute any waivers, consents, amendments, modifications
or supplements as a holder of such Equipment Note and (c) how to
vote any Equipment Note if a vote has been called for with
respect thereto. Provided such a request for Certificateholder
Direction shall have been made, in directing any action or
casting any vote or giving any consent as the holder of any
Equipment Note, the Trustee shall vote for or give consent to any
such action with respect to such Equipment Note in the same
proportion as that of (i) the aggregate face amounts of all
Certificates actually voted in favor of or for giving consent to
such action by such Direction of Certificateholders to (ii) the
aggregate face amount of all Outstanding Certificates. For
purposes of the immediately preceding sentence, a Certificate
shall have been "actually voted" if the Holder of such
Certificate has delivered to the Trustee an instrument evidencing
such Holder's consent to such Direction prior to two Business
Days before the Trustee directs such action or casts such vote or
gives such consent. Notwithstanding the foregoing, but subject to
Section 6.04 and the Intercreditor Agreement, the Trustee may, in
its own discretion and at its own direction, consent and notify
the relevant Loan Trustee of such consent to any amendment,
modification, waiver or supplement under the relevant Indenture
or any other Financing Document, if an Event of Default hereunder
shall have occurred and be continuing, or if such amendment,
modification or waiver will not adversely affect the interests of
the Certificateholders.


                            ARTICLE XI

                       TERMINATION OF TRUST

           Section 11.01. Termination of the Trust. The
respective obligations and responsibilities of the Company and
the Trustee with respect to the Trust shall terminate upon the
distribution to all Holders of Certificates and the Trustee of
all amounts required to be distributed to them pursuant to this
Agreement and the disposition of all property held as part of the
Trust Property; provided, however, that in no event shall the
Trust continue beyond one hundred ten (110) years following the
date of the earliest execution of this Trust Agreement.

           Notice of any termination, specifying the Regular
Distribution Date (or Special Distribution Date, as the case may
be) upon which the Certificateholders may surrender their
Certificates to the Trustee for payment of the final Distribution
Date and cancellation, shall be mailed promptly by the Trustee to

                                59





Certificateholders not earlier than the 60th day and not later
than the 20th day next preceding such final Distribution Date
specifying (A) the Regular Distribution Date (or Special
Distribution Date, as the case may be) upon which the proposed
final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office or agency of the
Trustee therein specified, (B) the amount of any such proposed
final payment, and (C) that the Record Date otherwise applicable
to such Regular Distribution Date (or Special Distribution Date,
as the case may be) is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office
or agency of the Trustee therein specified. The Trustee shall
give such notice to the Registrar at the time such notice is
given to Certificateholders. Upon presentation and surrender of
the Certificates in accordance with such notice, the Trustee
shall cause to be distributed to Certificateholders such final
payments.

           In the event that all of the Certificateholders shall
not surrender their Certificates for cancellation within six
months after the date specified in the above-mentioned written
notice, the Trustee shall give a second written notice to the
remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect
thereto. No additional interest shall accrue on the Certificates
after the Regular Distribution Date (or Special Distribution
Date, as the case may be) specified in the first written notice.
In the event that any money held by the Trustee for the payment
of distributions on the Certificates shall remain unclaimed for
two years (or such lesser time as the Trustee shall be satisfied,
after sixty days' notice from the Company, is one month prior to
the escheat period provided under applicable law) after the final
distribution date with respect thereto, the Trustee shall pay to
each Loan Trustee the appropriate amount of money relating to
such Loan Trustee and shall give written notice thereof to the
related Owner Trustees, the Owner Participants and the Company.


                           ARTICLE XII

                     MISCELLANEOUS PROVISIONS

           Section 12.01. Limitation on Rights of
Certificateholders. The death or incapacity of any
Certificateholder shall not operate to terminate this Agreement
or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any
action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights,
obligations, and liabilities of the parties hereto or any of
them.

                                60






           Section 12.02. Certificates Nonassessable and Fully
Paid. Except as set forth in the last sentence of this Section
12.02, Certificateholders shall not be personally liable for
obligations of the Trust, the Fractional Undivided Interests
represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and
Certificates, upon authentication thereof by the Trustee pursuant
to Section 3.03, are and shall be deemed fully paid. No
Certificateholder shall have any right (except as expressly
provided herein) to vote or in any manner otherwise control the
operation and management of the Trust Property, the Trust, or the
obligations of the parties hereto, nor shall anything set forth
herein, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to
time as partners or members of an association. Neither the
existence of the Trust nor any provision herein is intended to or
shall limit the liability the Certificateholders would otherwise
incur if the Certificateholders owned Trust Property as
co-owners, or incurred any obligations of the Trust, directly
rather than through the Trust.

           Section 12.03. Notices. (a) Unless otherwise
specifically provided herein, all notices required under the
terms and provisions of this Agreement shall be in English and in
writing, and any such notice may be given by United States mail,
courier service or telecopy, and any such notice shall be
effective when delivered or received or, if mailed, three days
after deposit in the United States mail with proper postage for
ordinary mail prepaid,

           if to the Company, to:

                Continental Airlines, Inc.
                2929 Allen Parkway
                Houston, TX  77019
                Attention:  Chief Financial Officer and
                         General Counsel
                    Facsimile: (713) 523-2831

           if to the Trustee, to:

                Wilmington Trust Company
                Rodney Square North
                1100 North Market Street
                Wilmington, DE  19890-0001
                Attention:  Corporate Trust Department
                Facsimile:     (302) 651-8882
                Telephone:     (302) 651-8584



                                61





           (b) The Company or the Trustee, by notice to the
other, may designate additional or different addresses for
subsequent notices or communications.

           (c) Any notice or communication to Certificateholders
shall be mailed by first-class mail to the addresses for
Certificateholders shown on the Register kept by the Registrar.
Failure so to mail a notice or communication or any defect in
such notice or communication shall not affect its sufficiency
with respect to other Certificateholders.

           (d) If a notice or communication is mailed in the
manner provided above within the time prescribed, it is
conclusively presumed to have been duly given, whether or not the
addressee receives it.

           (e) If the Company mails a notice or communication to
the Certificateholders, it shall mail a copy to the Trustee and
to the Paying Agent at the same time.

           (f) Notwithstanding the foregoing, all communications
or notices to the Trustee shall be deemed to be given only when
received by a Responsible Officer of the Trustee.

           (g) The Trustee shall promptly furnish the Company
with a copy of any demand, notice or written communication
received by the Trustee hereunder from any Certificateholder,
Owner Trustee or Loan Trustee.

           Section 12.04. Governing Law. THIS AGREEMENT HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS-OF-LAW PRINCIPLES.

           Section 12.05. Severability of Provisions. If any one
or more of the covenants, agreements, provisions or terms of this
Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions, or terms shall be deemed
severable from the remaining covenants, agreements, provisions or
terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or
the Trust, or of the Certificates or the rights of the
Certificateholders thereof.

           Section 12.06.  Trust Indenture Act Controls.  This
Agreement is subject to the provisions of the Trust Indenture Act
and shall, to the extent applicable, be governed by such
provisions.


                                62





           Section 12.07.  Effect of Headings and Table of
Contents.  The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.

           Section 12.08. Successors and Assigns. All covenants,
agreements, representations and warranties in this Agreement by
the Trustee and the Company shall bind and, to the extent
permitted hereby, shall inure to the benefit of and be
enforceable by their respective successors and assigns, whether
so expressed or not.

           Section 12.09. Benefits of Agreement. Nothing in this
Agreement or in the Certificates, express or implied, shall give
to any Person, other than the parties hereto and their successors
hereunder, and the Certificateholders, any benefit or any legal
or equitable right, remedy or claim under this Agreement.

           Section 12.10. Legal Holidays. In any case where any
Regular Distribution Date or Special Distribution Date relating
to any Certificate shall not be a Business Day, then
(notwithstanding any other provision of this Agreement) payment
need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made
on such Regular Distribution Date or Special Distribution Date,
and no interest shall accrue during the intervening period.

           Section 12.11. Counterparts. For the purpose of
facilitating the execution of this Agreement and for other
purposes, this Agreement may be executed simultaneously in any
number of counterparts, each of which counterparts shall be
deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.

           Section 12.12. Intention of Parties. The parties
hereto intend that the Trust be classified for U.S. federal
income tax purposes as a grantor trust under Subpart E, Part I of
Subchapter J of the Internal Revenue Code of 1986, as amended,
and not as a trust or association taxable as a corporation or as
a partnership. The powers granted and obligations undertaken
pursuant to this Agreement shall be so construed so as to further
such intent.



                                63





           IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first written
above.


                                    CONTINENTAL AIRLINES, INC.


                                    By _________________________
                                       Name:
                                          Title:



                                    WILMINGTON TRUST COMPANY, as
                                       Trustee


                                    By _________________________
                                       Name:
                                       Title:



                                64





                                                          EXHIBIT A


                       FORM OF CERTIFICATE



REGISTERED

No. ______________


      [THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S.
      SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
      AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
      UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
      PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
      ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
      IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
      144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL
      "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
      (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
      "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
      U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN
      OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
      THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN
      THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
      THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE
      WAS HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
      AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE
      TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED
      INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
      SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN
      INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR
      MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT,
      PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED
      LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
      RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
      CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
      THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
      TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
      SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
      REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
      (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT
      WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
      TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
      LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE
      WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
      OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
      CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE
      TRUSTEE OR ANY






      AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER MUST CHECK THE
      APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
      THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
      THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
      TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
      MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
      ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
      REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF
      THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
      RESTRICTIONS.]*

      BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A)
      IT IS NOT A PLAN TRANSFEREE (AS DEFINED IN THE PASS THROUGH
      TRUST AGREEMENT) OR (B) IT IS AN INSURANCE COMPANY USING
      THE ASSETS OF ITS GENERAL ACCOUNT TO ACQUIRE THIS
      CERTIFICATE, AND THE CONDITIONS OF PROHIBITED TRANSACTION
      CLASS EXEMPTION 95-60 ISSUED BY THE U.S. DEPARTMENT OF
      LABOR HAVE BEEN AND WILL CONTINUE TO BE SATISFIED IN
      CONNECTION WITH ITS PURCHASE AND HOLDING OF THIS
      CERTIFICATE. THE PASS THROUGH TRUST AGREEMENT CONTAINS A
      PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
      TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
      RESTRICTIONS.

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

- --------
      *    Not to be included on the face of the Permanent Offshore
           Global Certificate.

                             A-2





      TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
      TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR
      TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
      TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE
      LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
      RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE
      PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.]*

- --------
      *    To be included on the face of each Global Certificate.

                             A-3





                      [GLOBAL CERTIFICATE]*

          CONTINENTAL AIRLINES 1996-2B PASS THROUGH TRUST

   8.56% Continental Airlines [Initial] [Exchange] Pass Through
Certificate
                          Series 1996-2B

              Final Distribution Date:  July 2, 2014

evidencing a fractional undivided interest in a trust, the
property of which includes certain equipment notes each secured
by an Aircraft leased to Continental Airlines, Inc.


                     $             Fractional Undivided Interest
                     representing .        % of the Trust per
                     $1,000 face amount

           THIS CERTIFIES THAT                       , for value
                               ----------------------
received, is the registered owner of a $             (
                                        ------------
    dollars) Fractional Undivided Interest in the Continental
Airlines 1996-2B Pass Through Trust (the "Trust") created
pursuant to a Pass Through Trust Agreement, dated as of May 20,
1996 (the "Agreement"), between Wilmington Trust Company (the
"Trustee") and Continental Airlines, Inc., a corporation
incorporated under Delaware law (the "Company"), a summary of
certain of the pertinent provisions of which is set forth below.
To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement.
This Certificate is one of the duly authorized Certificates
designated as "8.56% Continental Airlines [Initial] [Exchange]
Pass Through Certificates Series 1996-2B" (herein called the
"Certificates"). This Certificate is issued under and is subject
to the terms, provisions, and conditions of the Agreement. By
virtue of its acceptance hereof the Certificateholder of this
Certificate assents to and agrees to be bound by the provisions
of the Agreement and the Intercreditor Agreement. The property of
the Trust includes certain Equipment Notes and all rights of the
Trust to receive payments under the Intercreditor Agreement and
the Liquidity Facilities (the "Trust Property"). Each issue of
the Equipment Notes is secured by, among other things, a security
interest in the Aircraft leased to or owned by the Company.

           The Certificates represent fractional undivided
interests in the Trust and the Trust Property, and have no
- --------
*     To be included on the face of each Global Certificate.

                               A-4





rights, benefits or interest in respect of any assets or property
other than the Trust Property.

           Subject to and in accordance with the terms of the
Agreement and the Intercreditor Agreement, from and to the extent
of funds then available to the Trustee, there will be distributed
on each January 2, April 2, July 2 and October 2 (a "Regular
Distribution Date"), commencing on July 2, 1996, to the Person in
whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date,
an amount in respect of the Scheduled Payments on the Equipment
Notes due on such Regular Distribution Date, the receipt of which
has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate
and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement and
the Intercreditor Agreement, in the event that Special Payments
on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the
applicable Special Distribution Date, to the Person in whose name
this Certificate is registered at the close of business on the
15th day preceding the Special Distribution Date, an amount in
respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the
product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special
Payments so received. If a Regular Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same
force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the
intervening period. The Trustee shall mail notice of each Special
Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate.

           [The Holder of this Certificate is entitled to the
benefits of the Registration Rights Agreement, dated as of May
20, 1996, among the Company, the Trustee and the Initial
Purchasers named therein (the "Registration Rights Agreement").
In the event that neither the consummation of the Exchange Offer
nor the declaration by the Commission of a Shelf Registration to
be effective (a "Registration Event") occurs on or prior to the
180th day after the date of the issuance of the Certificates, the
interest rate per annum borne by the Equipment Notes shall be
increased by 0.50%, from and including January 2, 1997, to but
excluding the date on which a Registration Event occurs. In the
event that the Shelf Registration Statement ceases to be
effective at any time during the period specified by the
Registration Rights Agreement for more than 60 days, whether or
not consecutive, during any 12-month period, the interest rate
per annum borne by the Equipment Notes shall be increased by

                               A-5





0.50% from the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective until such
time as the Shelf Registration Statement again becomes
effective.]*


           Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Trustee of
the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency of the
Trustee specified in such notice.

           THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.

           Reference is hereby made to the further provisions of
this Certificate set forth in the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.

           Unless the certificate of authentication hereon has
been executed by the Trustee, by manual signature, this
Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.

           IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.

Dated:  May 20, 1996                CONTINENTAL AIRLINES
                                       1996-2B PASS THROUGH TRUST

                                    By: WILMINGTON TRUST COMPANY,
                                          not in its individual
                                          capacity but solely as
                                          Trustee


Attest:                                 By:
                                              Name:
                                              Title:
- --------------------
Authorized Signature
- --------
*     To be included only on each Initial Certificate.

                               A-6





       [FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]


             This is one of the Certificates referred to in the
               within-mentioned Agreement.



                                    WILMINGTON TRUST COMPANY,
                                       not in its individual
                                       capacity but
                                       solely as Trustee



                                         By:
                                                       Authorized
Officer



                               A-7





                     [REVERSE OF CERTIFICATE]


           The Certificates do not represent a direct obligation
of, or an obligation guaranteed by, or an interest in, the
Company or the Trustee or any of their affiliates. The
Certificates are limited in right or payment, all as more
specifically set forth on the face hereof and in the Agreement.
All payments or distributions made to Certificateholders under
the Agreement shall be made only from the Trust Property and only
to the extent that the Trustee shall have sufficient income or
proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof,
agrees that it will look solely to the income and proceeds from
the Trust Property to the extent available for distribution to
such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby. A copy of the Agreement may be examined
during normal business hours at the principal office of the
Trustee, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.

           The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Certificateholders under the Agreement at any time by the Company
and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust.
Any such consent by the Certificateholder of this Certificate
shall be conclusive and binding on such Certificateholder and
upon all future Certificateholders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent is made
upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of
the Certificateholders of any of the Certificates.

           As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate
is registrable in the Register upon surrender of this Certificate
for registration of transfer at the offices or agencies
maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in the Borough of Manhattan, the City of New
York, duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided

                               A-8





Interest in the Trust will be issued to the designated transferee
or transferees.

           The Certificates are issuable only as registered
Certificates without coupons in minimum denominations of
[$100,000]* [$1,000]** Fractional Undivided Interest and integral
multiples of $1,000 in excess thereof [except that one
Certificate may be in a denomination of less than $100,000]*. As
provided in the Agreement and subject to certain limitations
therein set forth, the Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same
aggregate Fractional Undivided Interest in the Trust, as
requested by the Certificateholder surrendering the same.

           No service charge will be made for any such
registration of transfer or exchange, but the Trustee shall
require payment by the Holder of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.

           The Trustee, the Registrar, and any agent of the
Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes,
and neither the Trustee, the Registrar, nor any such agent shall
be affected by any notice to the contrary.

           The obligations and responsibilities created by the
Agreement and the Trust created thereby shall terminate upon the
distribution to Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement and the disposition
of all property held as part of the Trust Property.






*     To be included only on each Initial Certificate.
**    To be included only on each Exchange Certificate.

                               A-9






                     FORM OF TRANSFER NOTICE


           FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto

Insert Taxpayer Identification No.



please print or typewrite name and address including zip code of
assignee


the within Certificate and all rights thereunder, hereby
irrevocably constituting and appointing


attorney to transfer said Certificate on the books of the Trustee
with full power of substitution in the premises.


              [THE FOLLOWING PROVISION TO BE INCLUDED
                       ON ALL CERTIFICATES
               EXCEPT PERMANENT OFFSHORE GLOBAL AND
                  OFFSHORE PHYSICAL CERTIFICATES]

           In connection with any transfer of this Certificate
occurring prior to the date that is the earlier of the date of an
effective Registration Statement or __________, 1999, the
undersigned confirms that without utilizing any general
solicitation or general advertising that:

                           [Check One]

[          ] (a) this Certificate is being transferred in
           compliance with the exemption from registration under
           the Securities Act of 1933, as amended, provided by
           Rule 144A thereunder.

                                or

[          ] (b) this Certificate is being transferred other than
           in accordance with (a) above and documents are being
           furnished that comply with the conditions of transfer
           set forth in this Certificate and the Agreement.

If neither of the foregoing boxes is checked, the Trustee or
other Registrar shall not be obligated to register this
Certificate in the name of any Person other than the Holder
hereof unless and until the conditions to any such transfer of

                               A-10






registration set forth herein and in Section 3.06 of the
Agreement shall have been satisfied.


Date:                              [Name of Transferor]


                                   NOTE: The signature must
                                   correspond with the name as
                                   written upon the face of the
                                   within-mentioned instrument in
                                   every particular, without
                                   alteration or any change
                                   whatsoever.

Signature Guarantee:

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

          The undersigned represents and warrants that it is
purchasing this Certificate for its own account or an account
with respect to which it exercises sole investment discretion and
that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933,
as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.


Dated:

                                   NOTE: To be executed by an
                                         executive officer.



                               A-11






                                                         EXHIBIT B

          FORM OF CERTIFICATE FOR UNLEGENDED CERTIFICATES


                                                           [Date]

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE  19890-0001
Attention:  Corporate Trust Trustee Administration


                Re:  Continental Airlines 1996-2B Pass
                     Through Trust, Class A Pass Through
                     Trust Certificates
                     (the "Certificates")

Dear Sirs:

           This letter relates to U.S. $__________ Fractional
Undivided Interest of Certificates represented by a Certificate
(the "Legended Certificate") which bears a legend outlining
restrictions upon transfer of such Legended Certificate. Pursuant
to Section 3.01 of the Pass Through Trust Agreement relating to
the Certificates dated as of May 20, 1996 (the "Trust
Agreement"), between Continental Airlines, Inc. ("Continental")
and you, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to
whom the Certificates could be transferred in accordance with
Rule 904 of Regulation S promulgated under the U.S. Securities
Act of 1933, as amended. Accordingly, you are hereby requested to
exchange the legended certificate for an unlegended certificate
representing an identical principal amount of Certificates, all
in the manner provided for in the Trust Agreement.

           You and Continental are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.

                               Very truly yours,

                               [Name of Certificateholder]


                                          By:
                                               Authorized Signature







                                                          EXHIBIT C


         FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
              WITH TRANSFERS PURSUANT TO REGULATION S


                                                           [date]



Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE  19890-0001
Attention:  Corporate Trust Trustee Administration


                Re:  Continental Airlines 1996-2B Pass Through
                     Trust (the "Trust"), 8.56% Continental
                     Airlines Pass Through Certificates
                     Series 1996-2B (the "Certificates")

Sirs:

           In connection with our proposed sale of $_______
Fractional Undivided Interest of the Certificates, we confirm
that such sale has been effected pursuant to and in accordance
with Regulation S under the Securities Act of 1933, as amended,
and, accordingly, we represent that:

           (1)  the offer of the Certificates was not made to a
      person in the United States;

           (2) either (a) at the time the buy order was
      originated, the transferee was outside the United States or
      we and any person acting on our behalf reasonably believed
      that the transferee was outside the United States or (b)
      the transaction was executed in, on or through the
      facilities of a designated off-shore securities market and
      neither we nor any person acting on our behalf knows that
      the transaction has been pre-arranged with a buyer in the
      United States;

           (3) no directed selling efforts have been made in the
      United States in contravention of the requirements of Rule
      903(b) or Rule 904(b) of Regulation S, as applicable; and

           (4) the transaction is not part of a plan or scheme to
      evade the registration requirements of the Securities Act.








           In addition, if the sale is made during a restricted
period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of
Regulation S are applicable thereto, we confirm that such sale
has been made in accordance with the applicable provisions of
Rule 903(c)(3) or Rule 904(c)(1), as the case may be.

           You and Continental Airlines, Inc. are entitled to
rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.

                                    Very truly yours,

                                    [Name of Transferor]


                                    By:_______________________
                                             Authorized Signature

                               C-2






                                                          EXHIBIT D

                    FORM OF CERTIFICATE TO BE
                   DELIVERED IN CONNECTION WITH
             TRANSFERS TO NON-QIB ACCREDITED INVESTORS

                                                           [date]

Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE  19890-0001
Attention:  Corporate Trust Trustee Administration


           Re:  Continental Airlines 1996-2B Pass-
                Through Trust (the "Trust"), 8.56%
                Continental Airlines Pass Through
                Certificates Series 1996-2B
                (the "Certificates")


Dear Sirs:

           In connection with our proposed purchase of
$_______________ aggregate principal amount of the Certificates,
we confirm that:

           1. We understand that any subsequent transfer of the
      Certificates is subject to certain restrictions and
      conditions set forth in the Pass Through Trust Agreement
      dated as of May 20, 1996 relating to the Certificates (the
      "Pass Through Trust Agreement") and the undersigned agrees
      to be bound by, and not to resell, pledge or otherwise
      transfer the Certificates except in compliance with, such
      restrictions and conditions and the Securities Act of 1933,
      as amended (the "Securities Act").

           2. We understand that the Certificates have not been
      registered under the Securities Act, and that the
      Certificates may not be offered or sold except as permitted
      in the following sentence. We agree, on our own behalf and
      on behalf of any accounts for which we are acting as
      hereinafter stated, that if we should sell any Certificate,
      we will do so only (A) in accordance with Rule 144A under
      the Securities Act to a "qualified institutional buyer" (as
      defined therein), (B) to an institutional "accredited
      investor" (as defined below) that, prior to such transfer,
      furnishes to you and Continental Airlines, Inc., a signed
      letter substantially in the form of this letter, (C)
      outside the United States in accordance with Rule 904 of
      Regulation S under the Securities Act, (D) pursuant to the
      exemption







      from registration provided by Rule 144 under the Securities
      Act, or (E) pursuant to an effective registration statement
      under the Securities Act, and we further agree to provide
      to any person purchasing any of the Certificates from us a
      notice advising such purchaser that resales of the Notes
      are restricted as stated herein. We further understand that
      the Certificates purchased by us will bear a legend to the
      foregoing effect.

           3. We understand that, on any proposed resale of any
      Certificates, we will be required to furnish to you and
      Continental Airlines, Inc. such certifications, legal
      opinions and other information as you and Continental
      Airlines, Inc. may reasonably require to confirm that the
      proposed sale complies with the foregoing restrictions. We
      further understand that the Certificates purchased by us
      will bear a legend to the foregoing effect.

           4. We are an institutional "accredited investor" (as
      defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
      under the Securities Act) and have such knowledge and
      experience in financial and business matters as to be
      capable of evaluating the merits and risks of our
      investment in the Certificates and we and any accounts for
      which we are acting are each able to bear the economic risk
      of our or its investment.

           5. We are acquiring the Certificates purchased by us
      for our own account or for one or more accounts (each of
      which is an institutional "accredited investor") as to each
      of which we exercise sole investment discretion.

           You and Continental Airlines, Inc. are entitled to
rely upon this letter and are irrevocably authorized to produce
this letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.

                                    Very truly yours,

                                    [Name of Transferor]


                                    By:
                                        Authorized Signature


                               D-2











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






                   PASS THROUGH TRUST AGREEMENT

                     Dated as of May 20, 1996


                             between


                    CONTINENTAL AIRLINES, INC.


                               and


                    WILMINGTON TRUST COMPANY,

                            as Trustee





          Continental Airlines 1996-2C Pass Through Trust

         10.22% 1996-2C Initial Pass Through Certificates
         10.22% 1996-2C Exchange Pass Through Certificates





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









Reconciliation and tie between Continental Airlines 1996-2C Pass
Through Trust Agreement, dated as of May 20, 1996, and the Trust
Indenture Act of 1939. This reconciliation does not constitute
part of the Pass Through Trust Agreement.



  Trust Indenture Act                             Pass Through Trust
    of 1939 Section                                Agreement Section
- ------------------------                       -------------------------

310(a)(1)                                                7.08

 (a)(2)                                                  7.08

 312(a)                                            3.05; 8.01; 8.02

 313(a)                                                  8.03

 314(a)                                              8.04(a) - (c)

 (a)(4)                                                  8.04(d)

 (c)(1)                                                  1.02

 (c)(2)                                                  1.02

 (d)(1)                                               7.13; 11.01

 (d)(2)                                               7.13; 11.01

 (d)(3)                                                  2.01

    (e)                                                  1.02

 315(b)                                                  7.02

 316(a)(last                                            1.04(c)
sentence)

(a)(1)(A)                                                6.04

(a)(1)(B)                                                6.05

    (b)                                                  6.06

    (c)                                                  1.04(d)

317(a)(1)                                                6.03

    (b)                                                  7.13

 318(a)                                                  12.06










                        TABLE OF CONTENTS


      Section                                                  Page

                            ARTICLE I

                           DEFINITIONS

      1.01.  Definitions........................................  2
      1.02.  Compliance Certificates and Opinions............... 13
      1.03.  Form of Documents Delivered to Trustee............. 14
      1.04.  Directions of Certificateholders................... 14

                            ARTICLE II

                ORIGINAL ISSUANCE OF CERTIFICATES;
                  ACQUISITION OF EQUIPMENT NOTES

      2.01.  Issuance of Certificates; Acquisition of
              Equipment Notes................................... 16
      2.02.  Acceptance by Trustee.............................. 18
      2.03.  Limitation of Powers............................... 19

                           ARTICLE III

                         THE CERTIFICATES

      3.01.  Title, Form, Denomination and Execution of
              Certificates...................................... 19
      3.02.  Restrictive Legends................................ 20
      3.03.  Authentication of Certificates..................... 22
      3.04.  Transfer and Exchange.............................. 23
      3.05.  Book-Entry Provisions for U.S. Global
              Certificate and Offshore Global Certificates...... 23
      3.06.  Special Transfer Provisions........................ 25
      3.07.  Mutilated, Destroyed, Lost or Stolen
              Certificates...................................... 28
      3.08.  Persons Deemed Owners.............................. 28
      3.09.  Cancellation....................................... 29
      3.10.  Temporary Certificates............................. 29
      3.11.  Limitation of Liability for Payments............... 29



                            ARTICLE IV

                   DISTRIBUTIONS; STATEMENTS TO
                        CERTIFICATEHOLDERS

      4.01.  Certificate Account and Special Payments
              Account........................................... 30





                                ii


      Section                                                  Page


      4.02.  Distributions from Certificate Account and
              Special Payments Account.......................... 30
      4.03.  Statements to Certificateholders................... 32
      4.04.  Investment of Special Payment Moneys............... 33

                            ARTICLE V

                           THE COMPANY

      5.01.  Maintenance of Corporate Existence................. 33
      5.02.  Consolidation, Merger, etc......................... 33

                            ARTICLE VI

                             DEFAULT

      6.01.  Events of Default.................................. 34
      6.02.  [Intentionally omitted.]........................... 36
      6.03.  Judicial Proceedings Instituted by Trustee;
              Trustee May Bring Suit............................ 36
      6.04.  Control by Certificateholders...................... 37
      6.05.  Waiver of Past Defaults............................ 37
      6.06.  Right of Certificateholders to Receive Payments
              Not to Be Impaired................................ 38
      6.07.  Certificateholders May Not Bring Suit Except
              Under Certain Conditions.......................... 38
      6.08.  Remedies Cumulative................................ 39

                           ARTICLE VII

                           THE TRUSTEE

      7.01.  Certain Duties and Responsibilities................ 39
      7.02.  Notice of Defaults................................. 39
      7.03.  Certain Rights of Trustee.......................... 40
      7.04.  Not Responsible for Recitals or Issuance of
              Certificates...................................... 41
      7.05.  May Hold Certificates.............................. 41
      7.06.  Money Held in Trust................................ 42
      7.07.  Compensation and Reimbursement..................... 42
      7.08.  Corporate Trustee Required; Eligibility............ 42
      7.09.  Resignation and Removal; Appointment of
              Successor......................................... 43
      7.10.  Acceptance of Appointment by Successor............. 44
      7.11.  Merger, Conversion, Consolidation or Succession
              to Business....................................... 45
      7.12.  Maintenance of Agencies............................ 45
      7.13.  Money for Certificate Payments to Be Held in
              Trust............................................. 47





                             iii


      Section                                                  Page


      7.14.  Registration of Equipment Notes in Name of
              Subordination Agent............................... 47
      7.15.  Representations and Warranties of Trustee.......... 47
      7.16.  Withholding Taxes; Information Reporting........... 48
      7.17.  Trustee's Liens.................................... 49

                           ARTICLE VIII

         CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE

      8.01.  The Company to Furnish Trustee with Names and
              Addresses of Certificateholders................... 49
      8.02.  Preservation of Information; Communications to
              Certificateholders................................ 49
      8.03.  Reports by Trustee................................. 49
      8.04.  Reports by the Company............................. 50

                            ARTICLE IX

                     SUPPLEMENTAL AGREEMENTS

      9.01.  Supplemental Agreements Without Consent of
              Certificateholders................................ 51
      9.02.  Supplemental Agreements with Consent of
              Certificateholders................................ 52
      9.03.  Documents Affecting Immunity or Indemnity.......... 53
      9.04.  Execution of Supplemental Agreements............... 53
      9.05.  Effect of Supplemental Agreements.................. 53
      9.06.  Conformity with Trust Indenture Act................ 53
      9.07.  Reference in Certificates to Supplemental
              Agreements........................................ 53

                            ARTICLE X

         AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS

      10.01.  Amendments and Supplements to Indentures and
               Other Financing Documents........................ 54

                            ARTICLE XI

                       TERMINATION OF TRUST

      11.01.  Termination of the Trust.......................... 54

                           ARTICLE XII

                     MISCELLANEOUS PROVISIONS

      12.01.  Limitation on Rights of Certificateholders........ 55





                              iv


      Section                                                  Page

      12.02.  Certificates Nonassessable and Fully Paid......... 56
      12.03.  Notices........................................... 56
      12.04.  Governing Law..................................... 57
      12.05.  Severability of Provisions........................ 57
      12.06.  Trust Indenture Act Controls...................... 57
      12.07.  Effect of Headings and Table of Contents.......... 58
      12.08.  Successors and Assigns............................ 58
      12.09.  Benefits of Agreement............................. 58
      12.10.  Legal Holidays.................................... 58
      12.11.  Counterparts...................................... 58
      12.12.  Intention of Parties.............................. 58


Schedule 1  -        Indentures
Schedule 2  -        Financing Agreements


Exhibit A   -        Form of Certificate
Exhibit B   -        Form of Certificate for Unlegended
                     Certificates
Exhibit C   -        Form of Certificate to Be Delivered in
                     Connection with Transfers Pursuant to
                     Regulation S
Exhibit D   -        Form of Certificate to Be Delivered in
                     Connection with Transfers to Non-QIB
                     Accredited Investors







                   PASS THROUGH TRUST AGREEMENT


           This PASS THROUGH TRUST AGREEMENT, dated as of May 20,
1996, between CONTINENTAL AIRLINES, INC., a Delaware corporation,
and WILMINGTON TRUST COMPANY, as Trustee, is made with respect to
the formation of Continental Airlines 1996-2C Pass Through Trust
and the issuance of 10.22% Continental Airlines 1996-2C Pass
Through Certificates representing fractional undivided interests
in the Trust.

           WITNESSETH:

           WHEREAS, (i) the Company, the Owner Trustees and the
Owner Participants (as such terms and certain other capitalized
terms used herein are defined below) have previously entered into
four separate leveraged lease transactions in connection with the
purchase of four Boeing 757-224 aircraft from the manufacturer
(the "Leased Aircraft") and (ii) the Company has previously
purchased one Boeing 737-524 aircraft from the manufacturer (the
"Owned Aircraft"; together with the Leased Aircraft, the
"Aircraft");

           WHEREAS, each Owner Trustee, acting on behalf of the
corresponding Owner Participant, will issue pursuant to an
Indenture, on a non-recourse basis, four series of Equipment
Notes, among other things, to refinance the current indebtedness
of such Owner Trustee originally incurred to finance the purchase
price of the related Leased Aircraft;

           WHEREAS, the Company, will issue pursuant to an
Indenture, on a recourse basis, four series of Equipment Notes,
relating to the Owned Aircraft;

           WHEREAS, the Trustee, upon execution and delivery of
this Agreement, hereby declares the creation of the Trust for the
benefit of the Certificateholders, and the initial
Certificateholders, as the grantors of the Trust, by their
respective acceptances of the Certificates, join in the creation
of this Trust with the Trustee;

           WHEREAS, all Certificates to be issued by the Trust
will evidence fractional undivided interests in the Trust and
will convey no rights, benefits or interests in respect of any
property other than the Trust Property;

           WHEREAS, pursuant to the terms and conditions of this
Agreement and each of the Financing Agreements to be entered into
by the Trustee simultaneously with the execution and delivery of
this Agreement, the Trustee on behalf of the Trust shall purchase
one or more issues of Equipment Notes having the same interest
rate as, and final maturity dates not later than the final
Regular Distribution Date of, the Certificates issued hereunder






and shall hold such Equipment Notes in trust for the benefit of
the Certificateholders;

           WHEREAS, to facilitate the sale of Equipment Notes to,
and the purchase of Equipment Notes by, the Trustee on behalf of
the Trust, the Company has duly authorized the execution and
delivery of this Agreement as the "issuer", as such term is
defined in and solely for purposes of the Securities Act of 1933,
as amended, of the Certificates to be issued pursuant hereto and
as the "obligor", as such term is defined in and solely for
purposes of the Trust Indenture Act of 1939, as amended, with
respect to all such Certificates and is undertaking to perform
certain administrative and ministerial duties hereunder and is
also undertaking to pay the ongoing fees and expenses of the
Trustee;

           WHEREAS, all of the conditions and requirements
necessary to make this Agreement, when duly executed and
delivered, a valid, binding and legal instrument, enforceable in
accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof
have been in all respects duly authorized; and

           WHEREAS, upon issuance of the Exchange Certificates,
if any, or the effectiveness of the Registration Statement, this
Agreement, as amended or supplemented from time to time, will be
subject to the provisions of the Trust Indenture Act of 1939, and
shall, to the extent applicable, be governed by such provisions;

           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 1.01.  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 other terms used herein which are defined in
      the Trust Indenture Act, either directly or by reference

                                 2





      therein, or by the rules promulgated under the Trust
      Indenture Act, have the meanings assigned to them therein;

           (3) all references in this Agreement to designated
      "Articles", "Sections", "Subsections" and other
      subdivisions are to the designated Articles, Sections,
      Subsections and
      other subdivisions of this Agreement;

           (4) 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,
      Subsection or other subdivision; and

           (5) unless the context otherwise requires, whenever
      the words "including", "include" or "includes" are used
      herein, it shall be deemed to be followed by the phrase
      "without limitation".

           Affiliate: Means, with respect to any Person, any
      other Person directly or indirectly controlling or
      controlled by or under common control with such Person,
      provided, however, that neither America West Airlines, Inc.
      nor any of its subsidiaries shall be deemed to be an
      "Affiliate" of the Company for purposes of this Agreement.
      For purposes of this definition, "control" means the power,
      directly or indirectly, to direct 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.

           Agent Members:  Has the meaning specified in Section
      3.05.

           Aircraft:  Has the meaning specified in the first
      recital to this Agreement.

           Authorized Agent:  Means any Paying Agent or Registrar
      for the Certificates.

           Avoidable Tax: Means a state or local tax (i) upon (w)
      the Trust, (x) the Trust Property, (y) Certificateholders
      or (z) the Trustee for which the Trustee is entitled to
      seek reimbursement from the Trust Property, and (ii) which
      would be avoided if the Trustee were located in another
      state, or jurisdiction within a state, within the United
      States. A tax shall not be an Avoidable Tax if the Company
      or any Owner Trustee shall agree to pay, and shall pay,
      such tax.


                                 3





           Business Day: Means any day other than a Saturday, a
      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 or any Loan Trustee maintains
      its Corporate Trust Office or receives and disburses funds.

           Cedel:  Means Cedel Bank societe anonyme.

           Certificate:  Means any one of the Initial Certificates
      or Exchange Certificates and any such Certificates issued in
      exchange therefor or replacement thereof pursuant to this
      Agreement.

           Certificate Account:  Means the account or accounts
      created and maintained  pursuant to Section 4.01(a).

           Certificateholder or Holder:  Means the Person in whose
      name a Certificate is registered in the Register.

           Company: Means Continental Airlines, Inc., a Delaware
      corporation, or its successor in interest pursuant to
      Section 5.02, or any other obligor (within the meaning of
      the Trust Indenture Act) with respect to the Certificates.

           Controlling Party:  Has the meaning specified in the
      Intercreditor Agreement.

           Corporate Trust Office: With respect to the Trustee or
      any Loan Trustee, means the office of such trustee in the
      city at which at any particular time its corporate trust
      business shall be principally administered.

           Cut-off Date:  Means August 2, 1996.

           Delayed Equipment Notes:  Means the Equipment Notes to
      be issued on the applicable Transfer Date in respect of the
      two Leased Aircraft bearing Federal Aviation Registration
      Marks of N12114 and N14115.

           Depositary:  Means the Depository Trust Company, its
      nominees and their respective successors.

           Direction:  Has the meaning specified in
      Section 1.04(a).

           Distribution Date:  Means any Regular Distribution Date
      or Special Distribution Date.

           Equipment Notes:  Means the equipment notes issued
      under the Indentures.

                                 4






           ERISA:  Means the Employee Retirement Income Security
      Act of 1974, as amended from time to time, or any successor
      federal statute.

           Escrow Account:  Has the meaning specified in
      Section 2.01(b).

           Escrowed Funds:  Has the meaning specified in
      Section 2.01(b).

           Euroclear:  Means the Euroclear System.

           Event of Default: Means an Indenture Default under any
      Indenture pursuant to which Equipment Notes held by the
      Trust were issued.

           Exchange Certificates: Means the certificates
      substantially in the form of Exhibit A hereto issued in
      exchange for the Initial Certificates pursuant to the
      Registration Rights Agreement and authenticated hereunder.

           Exchange Offer Registration Statement:  Means the
      Exchange Offer Registration Statement defined in the
      Registration Rights Agreement.

           Financing Agreements: Means each of the four separate
      Refunding Agreements and the Note Purchase Agreement, in
      each case, dated the date hereof, listed on Schedule 2
      hereto, providing for, among other things, the purchase of
      Equipment Notes by the Trustee on behalf of the Trust, as
      the same may be amended, supplemented or otherwise modified
      from time to time in accordance with its terms.

           Financing Documents: With respect to any Equipment
      Note, means (i) the related Indenture and Financing
      Agreement and (ii) in the case of any Equipment Note
      related to a Leased Aircraft, the Lease and the
      Participation Agreement relating to such Leased Aircraft.

           Fractional Undivided Interest:  Means the fractional
      undivided interest in the Trust that is evidenced by a
      Certificate.

           Global Certificates:  Has the meaning assigned to such
      term in Section 3.01.

           Indentures: Means each of the four separate Amended
      and Restated Trust Indentures and Mortgages and the Trust
      Indenture and Mortgage listed on Schedule 1 hereto, in each
      case as the same may be amended, supplemented or otherwise
      modified from time to time in accordance with its terms.

                                 5






           Indenture Default:  With respect to any Indenture,
      means any Event of Default (as such term is defined in such
      Indenture).

           Initial Certificates:  Means the certificates issued
      and authenticated hereunder substantially in the form of
      Exhibit A hereto other than the Exchange Certificates.

           Initial Purchasers:  Means, collectively, Morgan
      Stanley & Co. Incorporated, CS First Boston Corporation and
      Fieldstone FPCG Services, L.P.

           Initial Regular Distribution Date:  Means the first
      Regular Distribution Date on which a Scheduled Payment is to
      be made.

           Institutional Accredited Investor: Means an
      institutional investor that is an "accredited investor"
      within the meaning set forth in Rule 501(a)(1), (2), (3) or
      (7) of Regulation D under the Securities Act.

           Intercreditor Agreement: Means the Intercreditor
      Agreement dated the date hereof among the Trustee, the
      Other Trustees, the Liquidity Provider, the liquidity
      provider, if any, relating to the Certificates issued under
      (and as defined in) each of the Other Pass Through Trust
      Agreements, and Wilmington Trust Company, as Subordination
      Agent thereunder, as amended, supplemented or otherwise
      modified from time to time in accordance with its terms.

           Issuance Date:  Means the date of the issuance of the
      Initial Certificates.

           Lease: Means, with respect to each Leased Aircraft,
      the lease between an Owner Trustee, as the lessor, and the
      Company, as the lessee, referred to in the related
      Indenture, as such lease may be amended, supplemented or
      otherwise modified in accordance with its terms.

           Leased Aircraft:  Has the meaning specified in the
      first recital to this Agreement.

           Liquidity Facility: Means the Revolving Credit
      Agreement dated the date hereof relating to the
      Certificates, between the Liquidity Provider and the
      Subordination Agent, as amended, replaced, supplemented or
      otherwise modified from time to time in accordance with its
      terms and the terms of the Intercreditor Agreement.

           Liquidity Provider:  Means, initially, De Nationale
      Investeringsbank N.V.,  and any replacement or successor

                                 6





      therefor appointed in accordance with the Liquidity Facility
      and the Intercreditor Agreement.

           Loan Trustee: With respect to any Equipment Note or
      the Indenture applicable thereto, means the bank or trust
      company designated as indenture trustee under such
      Indenture, together with any successor to such Loan Trustee
      appointed pursuant thereto.

           Non-U.S. Person:  Means a Person that is not a "U.S.
      person", as defined in Regulation S.

           Officer's Certificate: Means a certificate signed, (a)
      in the case of the Company, by (i) the Chairman or Vice
      Chairman of the Board of Directors, the President, any
      Executive Vice President, any Senior Vice President or the
      Treasurer of the Company, signing alone or (ii) any Vice
      President of the Company signing together with the
      Secretary, the Assistant Secretary, the Treasurer or any
      Assistant Treasurer of the Company or, (b) in the case of
      an Owner Trustee or a Loan Trustee, a Responsible Officer
      of such Owner Trustee or such Loan Trustee, as the case may
      be.

           Offshore Certificates Exchange Date:  Has the meaning
      specified in Section 3.01.

           Offshore Global Certificates:  Has the meaning assigned
      to such term in Section 3.01.

           Offshore Physical Certificates:  Has the meaning
      assigned to such term in Section 3.01.

           Opinion of Counsel: Means a written opinion of legal
      counsel who (a) in the case of counsel for the Company may
      be (i) a senior attorney of the Company one of whose
      principal duties is furnishing advice as to legal matters,
      (ii) Cleary, Gottlieb, Steen & Hamilton, (iii) Hughes
      Hubbard & Reed, or (iv) such other counsel designated by
      the Company and reasonably acceptable to the Trustee and
      (b) in the case of counsel for any Owner Trustee or any
      Loan Trustee may be such counsel as may be designated by
      any of them whether or not such counsel is an employee of
      any of them, and who shall be reasonably acceptable to the
      Trustee.

           Other Pass Through Trust Agreements:  Means each of the
      three other Continental Airlines 1996-2 Pass Through Trust
      Agreements relating to Continental Airlines 1996-2A Pass
      Through Trust, Continental Airlines 1996-2B Pass Through
      Trust and Continental Airlines 1996-2D Pass Through Trust,
      dated the date hereof.


                                 7





           Other Trustees:  Means the trustee under the Other Pass
      Through Trust Agreements, and any successor or other trustee
      appointed as provided therein.

           Outstanding:  When used with respect to Certificates,
      means, as of the date of determination, all Certificates
      theretofore authenticated and delivered under this
      Agreement, except:

                (i)   Certificates theretofore cancelled by the
           Registrar or delivered to the Trustee or the 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
           hereof has been theretofore deposited with the Trustee
           in trust for the Holders of such Certificates as
           provided in Section 4.01 pending distribution of such
           money to such Certificateholders pursuant to payment
           of such final distribution; and

                (iii) Certificates in exchange for or in lieu of
           which other Certificates have been authenticated and
           delivered pursuant to this Agreement.

           Owned Aircraft:  Has the meaning specified in the first
      recital to this Agreement.

           Owner Participant: With respect to any Equipment Note
      relating to a Leased Aircraft, means the "Owner
      Participant" as referred to in the Indenture pursuant to
      which such Equipment Note is issued and any permitted
      successor or assign of such Owner Participant; and Owner
      Participants at any time of determination means all of the
      Owner Participants thus referred to in the Indentures.

           Owner Trustee: With respect to any Equipment Note
      relating to a Leased Aircraft, means the "Owner Trustee",
      as referred to in the Indenture pursuant to which such
      Equipment Note is issued, not in its individual capacity
      but solely as trustee; and Owner Trustees means all of the
      Owner Trustees party to any of the Indentures.

           Participation Agreement:  With respect to any Leased
      Aircraft, means the Participation Agreement referred to in
      the related Indenture.

           Paying Agent:  Means the paying agent maintained and
      appointed for the Certificates pursuant to Section 7.12.


                                 8





           Permanent Offshore Global Certificates:  Has the
      meaning specified in Section 3.01.

           Permanent Offshore Physical Certificates:  Has the
      meaning specified in Section 3.01.

           Permitted Investments: Means obligations of the United
      States of America or agencies or instrumentalities thereof
      the payment of which is backed by the full faith and credit
      of the United States of America and which mature in not
      more than 60 days after the date of acquisition thereof or
      such lesser time as is required for the distribution of any
      Special Payments on a Special Distribution Date.

           Person: Means any person, including any individual,
      corporation, partnership, joint venture, association,
      joint-stock company, trust, trustee, unincorporated
      organization, or government or any agency or political
      subdivision thereof.

           Physical Certificates:  Has the meaning specified in
      Section 3.01.

           Plan Transferee: Means any Plan or any entity that is
      using the assets of any Plan to purchase or hold its
      interest in a Certificate. For purposes of this definition,
      a "Plan" means any employee benefit plan subject to ERISA
      as well as any plan that is not subject to ERISA but which
      is subject to Section 4975 of the Internal Revenue Code of
      1986, as amended.

           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 such
      Certificates other than payments made in respect of
      interest or premium thereon or reimbursement of any costs
      or expenses incurred in connection therewith. The Pool
      Balance as of any Distribution Date shall be computed after
      giving effect to the payment of principal, if any, on the
      Equipment Notes or other Trust Property held in such Trust
      and the distribution thereof to be made on such
      Distribution Date.

           Pool Factor: Means, as of any date, the quotient
      (rounded to the seventh decimal place) computed by dividing
      (i) the Pool Balance as at such date by (ii) the original
      aggregate face amount of the Certificates. The Pool Factor
      as of any Distribution Date shall be computed after giving
      effect to the payment of principal, if any, on the
      Equipment Notes or other Trust Property and the
      distribution thereof to be made on such Distribution Date.


                                 9





           Postponed Notes: Means (i) the Delayed Equipment Notes
      and (ii) the Equipment Notes to be held in the Trust as to
      which a Postponement Notice shall have been delivered
      pursuant to Section 2.01(b).

           Postponement Notice: Means an Officer's Certificate of
      the Company (1) requesting that the Trustee temporarily
      postpone the purchase pursuant to one or more of the
      Financing Agreements of certain of the Equipment Notes to a
      date which is later than the Issuance Date, (2) identifying
      the amount of the purchase price of each such Equipment
      Note and the aggregate purchase price for all such
      Equipment Notes, (3) setting forth the reasons for such
      postponement and (4) with respect to each such Equipment
      Note, either (a) setting or resetting a new Transfer Date
      (which shall be on or prior to the applicable Cut-off Date)
      for payment by the Trustee of such purchase price and
      issuance of the related Equipment Note, or (b) indicating
      that such new Transfer Date (which shall be on or prior to
      the applicable Cut-off Date) will be set by subsequent
      written notice not less than one Business Day prior to such
      new Transfer Date.

           Private Placement Legend:  Has the meaning specified in
      Section 3.02.

           PTC Event of Default: Means any failure to pay within
      10 Business Days of the due date thereof: (i) the
      outstanding Pool Balance on January 2, 2016 or (ii)
      interest due on the Certificates on any Distribution Date
      (unless the Subordination Agent shall have made an Interest
      Drawing (as defined in the Intercreditor Agreement) with
      respect thereto in an amount sufficient to pay such
      interest and shall have distributed such amount to the
      Certificateholders).

           QIB:  Means a qualified institutional buyer as defined
      in Rule 144A.

           Record Date: Means (i) for Scheduled Payments to be
      distributed on any Regular Distribution Date, other than
      the final distribution, the 15th day (whether or not a
      Business Day) preceding such Regular Distribution Date, and
      (ii) for Special Payments to be distributed on any Special
      Distribution Date, other than the final distribution, the
      15th day (whether or not a Business Day) preceding such
      Special Distribution Date.

           Refunding Agreements:  Has the meaning specified in the
Indentures.


                                10





           Register and Registrar:  Mean the register maintained
      and the registrar appointed pursuant to Sections 3.04
      and 7.12.

           Registration Rights Agreement:  Means the Registration
      Rights Agreement dated May 20, 1996, among the Initial
      Purchasers, the Trustee, the Other Trustees and the Company,
      as amended, supplemented or otherwise modified from time to
      time in accordance with its terms.

           Registration Statement:  Means the Registration
      Statement defined in the Registration Rights Agreement.

           Regular Distribution Date: With respect to
      distributions of Scheduled Payments in respect of the
      Certificates, means each date designated as a Regular
      Distribution Date in this Agreement, until payment of all
      the Scheduled Payments to be made under the Equipment Notes
      held in the Trust have been made; 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.

           Regulation S: Means Regulation S under the Securities
      Act or any successor regulation thereto.

           Responsible Officer: With respect to the Trustee, any
      Loan Trustee and any Owner Trustee, means any officer in
      the Corporate Trust Office of the Trustee, Loan Trustee or
      Owner 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.

           Rule 144A: Means Rule 144A under the Securities Act
      and any successor rule thereto.

           Scheduled Payment: With respect to any Equipment Note,
      means (i) any payment of principal and interest on such
      Equipment Note (other than any such payment which is not in
      fact received by the Subordination Agent within five days
      of the date on which such payment is scheduled to be made)
      due from the obligor thereon or (ii) any payment of
      interest on the Certificates with funds drawn under the
      Liquidity Facility, 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;
      provided that any payment of principal, premium, if any, or
      interest resulting from the redemption or purchase of 

                                11





      any Equipment Note shall not constitute a Scheduled Payment.

           SEC: Means the Securities and Exchange Commission, as
      from time to time constituted or created under the
      Securities Exchange Act of 1934, as amended, or, if at any
      time after the execution of this instrument such Commission
      is not existing and performing the duties now assigned to
      it under the Trust Indenture Act, then the body performing
      such duties on such date.

           Securities Act:  Means the United States Securities Act
      of 1933, as amended from time to time, or any successor
      thereto.

           Special Distribution Date: Means each date on which a
      Special Payment is to be distributed as specified in this
      Agreement; 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.

           Special Payment: Means (i) 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), (ii) the amounts required to be
      distributed pursuant to the last paragraph of Section
      2.01(b) or (iii) the amounts required to be distributed
      pursuant to the penultimate paragraph of Section 2.01(b).

           Special Payments Account:  Means the account or
      accounts created and maintained pursuant to Section 4.01(b).

           Specified Investments: Means, with respect to
      investments to be made with Escrowed Funds pursuant to
      Section 2.01(b) hereof, (i) obligations of, or guaranteed
      by, the United States Government or agencies thereof, (ii)
      open market commercial paper of any corporation
      incorporated under the laws of the United States of America
      or any State thereof rated at least P-2 or its equivalent
      by Moody's Investors Service, Inc. or at least A-2 or its
      equivalent by Standard & Poor's Ratings Group, (iii)
      certificates of deposit issued by commercial banks
      organized under the laws of the United States or of any
      political subdivision thereof having a combined capital and
      surplus in excess of $100,000,000, which banks or their
      holding companies have a short-term deposit rating of P1 by
      Moody's Investors Service, Inc. or its equivalent by
      Standard & Poor's Ratings Group; provided, however, that
      the aggregate amount at any one time so invested in certifi-
      cates of deposit issued by any one bank shall not exceed 5% 

                                12





      of such bank's capital and surplus, (iv) U.S. dollar
      denominated offshore certificates of deposit issued by, or
      offshore time deposits with, any commercial bank described
      in clause (iii) above or any subsidiary thereof and (v)
      repurchase agreements with any financial institution having
      combined capital and surplus of at least $100,000,000 with
      respect to any of the obligations described in clauses (i)
      through (iv) above as collateral; provided further that if
      all of the above investments are unavailable, all amounts
      to be invested may be used to purchase Federal Funds from
      an entity described in clause (iii) above.

           Subordination Agent:  Has the meaning specified in the
      Intercreditor Agreement.

           Temporary Offshore Global Certificates:  Has the
      meaning specified in Section 3.01.

           Transfer Date:  Has the meaning assigned to the term
      "Refunding Date" or "Funding Date" in each Financing
      Agreement.

           Triggering Event:  Has the meaning assigned to such
      term in the Intercreditor Agreement.

           Trust:  Means the trust created by this Agreement, the
      estate of which consists of the Trust Property.

           Trust Indenture Act:  Except as otherwise provided in
      Section 9.06, means the United States Trust Indenture Act of
      1939 as in force at the date hereof.

           Trust Property: Means (i) the Equipment Notes held as
      the property of the Trust and all monies at any time paid
      thereon and all monies due and to become due thereunder,
      (ii) funds from time to time deposited in the Escrow
      Account, the Certificate Account and the Special Payments
      Account, and (iii) all rights of the Trust and the Trustee,
      on behalf of the Trust, under the Intercreditor Agreement
      and the Liquidity Facility, including, without limitation,
      all rights to receive certain payments thereunder, and all
      monies paid to the Trustee on behalf of the Trust pursuant
      to the Intercreditor Agreement or the Liquidity Facility.

           Trustee:  Means Wilmington Trust Company, or its
      successor in interest, and any successor or other trustee
      appointed as provided herein.

           Trustee's Lien:  Has the meaning specified in Section
      7.17.

                                13






           U.S. Global Certificate:  Has the meaning specified in
      Section 3.01.

           U.S. Physical Certificates:  Has the meaning specified
      in Section 3.01.

           Section 1.02. Compliance Certificates and Opinions.
Upon any application or request by the Company, any Owner Trustee
or any Loan Trustee to the Trustee to take any action under any
provision of this Agreement, the Company, such Owner Trustee or
such Loan Trustee, as the case may be, shall furnish to the
Trustee (i) an Officer's Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in
this Agreement relating to the proposed action have been complied
with and (ii) an Opinion of Counsel stating that in the opinion
of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or
request as to which the furnishing of such documents is
specifically required by any provision of this Agreement relating
to such particular application or request, no additional
certificate or opinion need be furnished.

           Every certificate or opinion with respect to
compliance with a condition or covenant provided for in this
Agreement (other than a certificate provided pursuant to Section
8.04(d)) shall include:

           (1) a statement that each individual signing such
      certificate or opinion has read such covenant or condition
      and the definitions in this Agreement relating thereto;

           (2) a brief statement as to the nature and scope of
      the examination or investigation upon which the statements
      or opinions contained in such certificate or opinion are
      based;

           (3) a statement that, in the opinion of each such
      individual, he has made such examination or investigation
      as is necessary to enable him to express an informed
      opinion as to whether or not such covenant or condition has
      been complied with; and

           (4) a statement as to whether, in the opinion of each
      such individual, such condition or covenant has been
      complied with.

           Section 1.03.  Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by

                                14





the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters and any such
Person may certify or give an opinion as to such matters in one
or several documents.

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

           Section 1.04. Directions of Certificateholders. (a)
Any direction, consent, request, demand, authorization, notice,
waiver or other action provided by this Agreement to be given or
taken by Certificateholders (a "Direction") may be embodied in
and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent
or proxy duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective
when such instrument or instruments are delivered to the Trustee
and, where it is hereby expressly required pursuant to this
Agreement, to the Company or any Loan Trustee. Proof of execution
of any such instrument or of a writing appointing any such agent
or proxy shall be sufficient for any purpose of this Agreement
and conclusive in favor of the Trustee, the Company and any Loan
Trustee, if made in the manner provided in this Section.

           (b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the
certificate of any notary public or other officer of any
jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument
acknowledged to him the execution thereof, or by an affidavit of
a witness to such execution sworn to before any such notary or
such other officer and where such execution is by an officer of a
corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such
certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing
the same, may also be proved in any other reasonable manner which
the Trustee deems sufficient.

           (c) In determining whether the Certificateholders of
the requisite Fractional Undivided Interests of Certificates
Outstanding have given any Direction under this Agreement,
Certificates owned by the Company or any Affiliate thereof shall
be disregarded and deemed not to be Outstanding for purposes of
any such determination. In determining whether the Trustee shall

                                15





be protected in relying upon any such Direction, only
Certificates which the Trustee knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, (i) if any such
Person owns 100% of the Certificates Outstanding, such
Certificates shall not be so disregarded, and (ii) if any amount
of Certificates so owned by any such Person have been pledged in
good faith, such Certificates shall not be disregarded if the
pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates and
that the pledgee is not the Company or any Affiliate thereof.

           (d) The Company may at its option, by delivery of an
Officer's Certificate to the Trustee, set a record date to
determine the Certificateholders entitled to give any Direction.
Notwithstanding Section 316(c) of the Trust Indenture Act, such
record date shall be the record date specified in such Officer's
Certificate, which shall be a date not more than 30 days prior to
the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such Direction may be
given before or after such record date, but only the
Certificateholders of record at the close of business on such
record date shall be deemed to be Certificateholders for the
purposes of determining whether Certificateholders of the
requisite proportion of Outstanding Certificates have authorized
or agreed or consented to such Direction, and for that purpose
the Outstanding Certificates shall be computed as of such record
date; provided that no such Direction by the Certificateholders
on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Agreement not
later than one year after such record date.

           (e) Any Direction by the Holder of any Certificate
shall bind the Holder of every Certificate issued upon the
transfer thereof or in exchange therefor or in lieu thereof,
whether or not notation of such Direction is made upon such
Certificate.

           (f) Except as otherwise provided in Section 1.04(c),
Certificates owned by or pledged to any Person shall have an
equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among
all of the Certificates.



                                16





                            ARTICLE II

                ORIGINAL ISSUANCE OF CERTIFICATES;
                  ACQUISITION OF EQUIPMENT NOTES

           Section 2.01. Issuance of Certificates; Acquisition of
Equipment Notes. (a) The Trustee is hereby directed to execute
and deliver the Intercreditor Agreement, the Registration Rights
Agreement and each of the Financing Agreements on or prior to the
Issuance Date, each in the form delivered to the Trustee by the
Company. Upon request of the Company and the satisfaction of the
closing conditions specified in each of the Financing Agreements,
the Trustee shall execute, deliver and authenticate Certificates
equalling in the aggregate the aggregate principal amount of the
Equipment Notes to be purchased by the Trustee pursuant to each
of the Financing Agreements on the Transfer Date, and evidencing
the entire ownership interest in the Trust. The Trustee shall
issue and sell such Certificates, in authorized denominations and
in such Fractional Undivided Interests, so as to result in the
receipt by the Trustee of consideration in an amount equal to the
aggregate principal amount of such Equipment Notes and,
concurrently therewith, the Trustee shall purchase, pursuant to
the terms and conditions of the Financing Agreements, the
Equipment Notes at a purchase price equal to the amount of such
consideration so received. Except as provided in Sections 3.04
and 3.07 hereof, the Trustee shall not execute, authenticate or
deliver Certificates in excess of the aggregate amount specified
in this paragraph. The provisions of this Subsection (a) are
subject to the provisions of Subsection (b) below.

           (b) On or prior to the Issuance Date, the Company may
deliver to the Trustee a Postponement Notice relating to one or
more Postponed Notes (other than the Delayed Equipment Notes)
(which Postponement Notice may be given by the Company only if
one or more conditions to the purchase of such Postponed Notes by
the Trustee shall not have been satisfied or waived pursuant to
the related Financing Agreement). The Trustee shall postpone the
purchase of the Postponed Notes from the consideration received
from the sale of Certificates and shall promptly deposit funds in
an amount equal to the purchase price of such Postponed Notes
(the "Escrowed Funds") into an escrow account (the "Escrow
Account") with the Trustee to be maintained as a part of the
Trust. The Escrowed Funds so deposited shall be invested by the
Trustee at the direction and risk of the Company in Specified
Investments (i) maturing no later than any scheduled Transfer
Date relating to the Postponed Notes or (ii) if no such Transfer
Date has been scheduled, maturing on the next Business Day, or
(iii) if the Company has given notice to the Trustee that any
Postponed Notes will not be issued, with respect to the portion
of the Escrowed Funds relating to such Postponed Notes, maturing
on the next applicable Special Distribution Date, if such

                                17





investments are reasonably available for purchase. The Trustee
shall make withdrawals from the Escrow Account only as provided
in this Agreement. Upon request of the Company on one or more
occasions and the satisfaction of the closing conditions
specified in the applicable Financing Agreements on or prior to
the Cut-off Date, the Trustee shall purchase the applicable
Postponed Notes with the Escrowed Funds withdrawn from the Escrow
Account. The purchase price shall equal the principal amount of
such Postponed Notes.

           The Trustee shall hold all Specified Investments until
the maturity thereof and will not sell or otherwise transfer
Specified Investments. If Specified Investments held in an Escrow
Account mature prior to any applicable Transfer Date, any
proceeds received on the maturity of such Specified Investments
(other than any earnings thereon) shall be reinvested by the
Trustee at the direction and risk of the Company in Specified
Investments maturing as provided in the preceding paragraph. The
Company shall pay to the Trustee for deposit to the Escrow
Account an amount equal to any losses on such Specified
Investments as incurred.

           On the Initial Regular Distribution Date, the Company
will pay (in immediately available funds) to the Trustee an
amount equal to (i) the sum of (A) the interest that would have
accrued on any Postponed Notes purchased on or prior to the
Initial Regular Distribution Date if such Postponed Notes had
been purchased on the Issuance Date, from and including the
Issuance Date to but excluding the date of such purchase and (B)
the interest that would have accrued on any Postponed Notes not
purchased on or prior to the Initial Regular Distribution Date
(other than any Postponed Notes for which a Special Distribution
Date specified in the immediately succeeding paragraph has
occurred on or prior to the Initial Regular Distribution Date) if
such Postponed Notes had been purchased on the Issuance Date,
from and including the Issuance Date to but excluding the Initial
Regular Distribution Date, minus (ii) the earnings on Specified
Investments received by the Trustee from and including the later
of the Issuance Date or the date immediately preceding the
Initial Regular Distribution Date on which an amount has been
paid pursuant to the immediately succeeding paragraph to but
excluding the Initial Regular Distribution Date. On the second
Regular Distribution Date, the Company will pay (in immediately
available funds) to the Trustee an amount equal to the interest
that would have accrued on any Postponed Notes purchased after
the Initial Regular Distribution Date and on or prior to the
Cut-off Date if such Postponed Notes had been purchased on the
Initial Regular Distribution Date, from and including the Initial
Regular Distribution Date to but excluding the date of such
purchase, minus (ii) the earnings on Specified Investments
received by the Trustee from and including the later of 

                                18





the Initial Regular Distribution Date or the date immedi-
ately preceding the second Regular Distribution Date on
which an amount has been paid pursuant to either of the two
succeeding paragraphs to but excluding the second Regular
Distribution Date.

           If the Company notifies the Trustee prior to the
Cutoff Date that any Postponed Notes will not be issued on or
prior to the Cut-off Date for any reason, on the next Special
Distribution Date occurring more than 20 days following the date
of such notice (i) the Company shall pay to the Trustee for
deposit in the Special Payments Account, in immediately available
funds, an amount equal to the sum of (A) the interest that would
have accrued on the Postponed Notes designated in such notice at
a rate equal to the interest rate applicable to the Certificates
from and including the Issuance Date (if such Special
Distribution Date shall occur on or prior to the Initial Regular
Distribution Date) or the Initial Regular Distribution Date (if
such Special Distribution Date occurs after the Initial Regular
Distribution Date) to but excluding such Special Distribution
Date and (B) if any such Postponed Notes shall be Delayed
Equipment Notes and shall not be issued for any reason other than
the occurrence of an Event of Loss (as defined in the related
Indenture) with respect to the Aircraft relating to such Delayed
Equipment Notes, 2% of the aggregate principal amount of such
Delayed Equipment Notes and (ii) the Trustee shall transfer an
amount equal to that amount of Escrowed Funds that would have
been used to purchase the Postponed Notes designated in such
notice plus the amount paid by the Company pursuant to the
immediately preceding clause (i) to the Special Payments Account
for distribution as a Special Payment in accordance with the
provisions hereof.

           If, on the Cut-off Date, an amount equal to less than
all of the Escrowed Funds (other than Escrowed Funds referred to
in the immediately preceding paragraph) has been used to purchase
Postponed Notes, on the next Special Distribution Date occurring
more than 20 days following the Cut-off Date (i) the Company
shall pay to the Trustee for deposit in the Special Payments
Account, in immediately available funds, an amount equal to the
sum of (A) the interest that would have accrued on Postponed
Notes originally contemplated to be purchased with such unused
Escrowed Funds (other than Escrowed Funds referred to in the
immediately preceding paragraph) but not so purchased at a rate
equal to the interest rate applicable to the Certificates from
and including the Initial Regular Distribution Date to but
excluding such Special Distribution Date and (B) if any such
Postponed Notes shall be Delayed Equipment Notes and shall not
have been purchased for any reason other than the occurrence of
an Event of Loss (as defined in the related Indenture) with
respect to the Aircraft relating to such Delayed Equipment Notes,

                                19





2% of the aggregate principal amount of such Delayed Equipment
Notes and (ii) the Trustee shall transfer such unused Escrowed
Funds and the amount paid by the Company pursuant to the
immediately preceding clause (i) to the Special Payments Account
for distribution as a Special Payment in accordance with the
provisions hereof.

           Section 2.02. Acceptance by Trustee. The Trustee, upon
the execution and delivery of this Agreement, acknowledges its
acceptance of all right, title and interest in and to the
Equipment Notes acquired pursuant to Section 2.01 hereof and the
Financing Agreements and declares that the Trustee holds and will
hold such right, title and interest, together with all other
property constituting the Trust Property, for the benefit of all
then present and future Certificateholders, upon the trusts
herein set forth. Subject to Section 7.14, the Trustee shall take
all actions reasonably necessary to effect the registration of
all such Equipment Notes in the name of the Subordination Agent.
By its payment for and acceptance of each Certificate issued to
it under this Agreement, each initial Certificateholder as
grantor of the Trust thereby joins in the creation and
declaration of the Trust.

           Section 2.03. Limitation of Powers. The Trust is
constituted solely for the purpose of making the investment in
the Equipment Notes, and, except as set forth herein, the Trustee
shall not be authorized or empowered to acquire any other
investments or engage in any other activities and, in particular,
the Trustee shall not be authorized or empowered to do anything
that would cause such Trust to fail to qualify as a "grantor
trust" for federal income tax purposes (including as subject to
this restriction, acquiring any Aircraft (as defined in the
respective Indentures) by bidding such Equipment Notes or
otherwise, or taking any action with respect to any such Aircraft
once acquired).


                           ARTICLE III

                         THE CERTIFICATES

           Section 3.01. Title, Form, Denomination and Execution
of Certificates. (a) The Initial Certificates shall be known as
the "10.22% 1996-2C Initial Pass Through Certificates" and the
Exchange Certificates shall be known as the "10.22% 1996-2C
Exchange Pass Through Certificates", in each case, of the Trust.
Each Certificate will represent a fractional undivided interest
in the Trust and shall be substantially in the form set forth as
Exhibit A hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted
by this Agreement and may have such letters, numbers or other

                                20





marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be
determined by the officers executing such Certificates, as
evidenced by their execution of the Certificates. Any portion of
the text of any Certificate may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the
Certificate.

           (b) The Initial Certificates shall be issued only in
fully registered form without coupons and only in denominations
of $100,000 or integral multiples of $1,000 in excess thereof,
except that one Certificate may be issued in a denomination of
less than $100,000. The Exchange Certificates will be issued in
denominations of $1,000 or integral multiples thereof. Each
Certificate shall be dated the date of its authentication. The
aggregate Fractional Undivided Interest of Certificates shall not
at any time exceed $35,363,000.

           (c) Initial Certificates offered and sold in reliance
on Rule 144A shall be issued initially in the form of a single
permanent global Certificate in registered form, substantially in
the form set forth as Exhibit A hereto (the "U.S. Global
Certificate"), duly executed and authenticated by the Trustee as
hereinafter provided. The U.S. Global Certificate will be
registered in the name of a nominee for the Depositary and
deposited with the Trustee, as custodian for the Depositary. The
aggregate principal amount of the U.S. Global Certificate may
from time to time be increased or decreased by adjustments made
on the records of the Depositary or its nominee, or of the
Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.

           (d) Initial Certificates offered and sold in offshore
transactions in reliance on Regulation S shall be issued
initially in the form of a single temporary global Certificate in
registered form, substantially in the form set forth as Exhibit A
hereto (the "Temporary Offshore Global Certificate") duly
executed and authenticated by the Trustee as hereinafter
provided. The Temporary Offshore Global Certificates will be
registered in the name of a nominee of the Depositary for credit
to the account of the Agent Members acting as depositaries for
Euroclear and Cedel and deposited with the Trustee as custodian
for the Depositary. At any time following June 29, 1996 (the
"Offshore Certificates Exchange Date"), upon receipt by the
Trustee of a certificate substantially in the form of Exhibit B
hereto, a single permanent global Certificate in registered form
substantially in the form set forth in Exhibit A (the "Permanent
Offshore Global Certificate"; and together with the Temporary
Offshore Global Certificate, the "Offshore Global Certificates"),
duly executed and authenticated by the Trustee as hereinafter

                                21





provided, shall be registered in the name of a nominee for the
Depositary and deposited with the Trustee, as custodian for the
Depositary, and the Registrar shall reflect on its books and
records the date of such transfer and a decrease in the principal
amount of any Temporary Offshore Global Certificate in an amount
equal to the principal amount of the beneficial interest in such
Temporary Offshore Global Certificate transferred. The U.S.
Global Certificate and the Offshore Global Certificates are
sometimes referred to as the "Global Certificates".

           (e) Initial Certificates offered and sold to
Institutional Accredited Investors shall be issued in the form of
permanent certificated Certificates in registered form in
substantially the form set forth as Exhibit A hereto (the "U.S.
Physical Certificates"). Certificates issued pursuant to Section
3.05(b) in exchange for interests in any Offshore Global
Certificate shall be in the form of permanent certificated
Certificates in registered form substantially in the form set
forth in Exhibit A (the "Offshore Physical Certificates"). The
Offshore Physical Certificates and U.S. Physical Certificates are
sometimes collectively herein referred to as the "Physical
Certificates".

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

           Section 3.02. Restrictive Legends. (a) Subject to
Section 3.06, unless and until (i) an Initial Certificate is sold
under an effective Registration Statement or (ii) an Initial
Certificate is exchanged for an Exchange Certificate pursuant to
an effective Exchange Offer Registration Statement, in each case
as provided for in the Registration Rights Agreement, each Global
Certificate (other than the Permanent Offshore Global
Certificate) and each U.S. Physical Certificate shall bear the
following legend (the "Private Placement Legend") on the face
thereof:

           THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
      U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
      ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN
      THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF,
      ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
      BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
      (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
      RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITU-
      TIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), 
      (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN

                                22





      "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
      U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN
      OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER
      THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN
      THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
      THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE
      WAS HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
      AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE
      TRANSFER THIS CERTIFICATE EXCEPT (A) TO A QUALIFIED
      INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
      SECURITIES ACT, (B) INSIDE THE UNITED STATES TO AN
      INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING $100,000 OR
      MORE AGGREGATE PRINCIPAL AMOUNT OF SUCH CERTIFICATE THAT,
      PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED
      LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
      RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
      CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
      THE TRUSTEE), (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
      TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
      SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
      REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
      (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IT
      WILL DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS
      TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
      LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE
      WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
      OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
      CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE
      TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE HOLDER
      MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE
      HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
      THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS
      "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON"
      HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
      SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A
      PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
      TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
      RESTRICTIONS.

           (b) Each Global Certificate shall also bear the
following legend on the face thereof:

      UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
      REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
      CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
      REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
      CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS
      REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
      AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
      ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
      ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF

                                23





      DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
      REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
      HEREIN.

      TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
      TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR
      TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
      TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE
      LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
      RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE
      PASS THROUGH TRUST AGREEMENT REFERRED TO HEREIN.

           Section 3.03. Authentication of Certificates. (a) The
Trustee shall duly execute, authenticate and deliver Certificates
in authorized denominations equalling in the aggregate the
aggregate principal amount of the Equipment Notes to be purchased
by the Trustee pursuant to the Financing Agreements and
evidencing the entire ownership of the Trust.

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

           Section 3.04. Transfer and Exchange. (a) The Trustee
shall cause to be kept at the office or agency to be maintained
by it in accordance with the provisions of Section 7.12 of this
Agreement a register (the "Register") for the Certificates in
which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of the
Certificates and of transfers and exchanges of the Certificates
as herein provided. The Trustee shall initially be the registrar
(the "Registrar") for the purpose of registering the Certificates
and transfers and exchanges of the Certificates as herein
provided. A Certificateholder may transfer a Certificate by
written application to the Registrar stating the name of the
proposed transferee and otherwise complying with the terms of
this Agreement, including providing a written certificate or
other evidence of compliance with any restrictions on transfer.
No such transfer shall be effected until, and such transferee
shall succeed to the rights of a Certificateholder only upon,
final acceptance and registration of the transfer by the
Registrar in the Register. Prior to the registration of any
transfer by a Certificateholder as provided herein, the Trustee
shall treat the person in whose name the Certificate is
registered as the owner thereof for all purposes, and the Trustee
shall not be affected by notice to the contrary. Furthermore,

                                24





the Depositary shall, by acceptance of a Global Certificate,
agree that transfers of beneficial interests in such Global
Certificate may be effected only through a book-entry system
maintained by the Depositary (or its agent), and that ownership
of a beneficial interest in the Certificate shall be required to
be reflected in a book entry. When Certificates are presented to
the Registrar with a request to register the transfer or to
exchange them for an equal face amount of Certificates of other
authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its requirements
for such transactions are met. To permit registrations of
transfers and exchanges in accordance with the terms, conditions
and restrictions hereof, the Trustee shall execute and
authenticate Certificates at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange
of the Certificates, but the Trustee may require payment by the
transferor of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental
charges payable upon exchanges pursuant to Section 3.10 or 9.07).


           Section 3.05. Book-Entry Provisions for U.S. Global
Certificate and Offshore Global Certificates. (a) Members of, or
participants in, the Depositary ("Agent Members") shall have no
rights under this Agreement with respect to any Global
Certificate held on their behalf by the Depositary, or the
Trustee as its custodian, and the Depositary may be treated by
the Trustee and any agent of the Trustee as the absolute owner of
such Global Certificate for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the
Trustee or any agent of the Trustee from giving effect to any
written certification, proxy or other authorization furnished by
the Depositary or shall impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Certificate. Upon the
issuance of any Global Certificate, the Registrar or its duly
appointed agent shall record a nominee of the Depositary as the
registered holder of such Global Certificate.

           (b) Transfers of any Global Certificate shall be
limited to transfers of such Global Certificate or Offshore
Global Certificate in whole, but not in part, to nominees of the
Depositary, its successor or such successor's nominees.
Beneficial interests in the U.S. Global Certificate and any
Offshore Global Certificate may be transferred in accordance with
the rules and procedures of the Depositary and the provisions of
Section 3.06. Beneficial interests in the U.S. Global Certificate
or an Offshore Global Certificate shall be delivered to all
beneficial owners in the form of U.S. Physical Certificates 
or Offshore Physical Certificates, as the case may be, if

                                25





(i) the Depositary notifies the Trustee that it is unwilling 
or unable to continue as Depositary for the U.S. Global
Certificate or such Offshore Global Certificate, as the case may
be, and a successor depositary is not appointed by the Trustee
within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a
request from the Depositary to issue Physical Certificates.

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

           (d)  [Intentionally omitted.]

           (e) In connection with the transfer of the entire U.S.
Global Certificate or an entire Offshore Global Certificate to
the beneficial owners thereof pursuant to paragraph (b) of this
Section 3.05, such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, shall be deemed to be
surrendered to the Trustee for cancellation, and the Trustee
shall execute, authenticate and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial
interest in such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, an equal aggregate principal
amount of U.S. Physical Certificates or Offshore Physical
Certificates, as the case may be, of authorized denominations.

           (f) Any U.S. Physical Certificate delivered in
exchange for an interest in the U.S. Global Certificate pursuant
to paragraph (b) of this Section 3.05 shall, except as otherwise
provided by paragraph (f) of Section 3.06, bear the Private
Placement Legend.

           (g) Any Offshore Physical Certificate delivered in
exchange for an interest in an Offshore Global Certificate
pursuant to paragraph (b) of this Section shall, except as
otherwise provided by paragraph (f) of Section 3.06, bear the
applicable legend regarding transfer restrictions set forth in
Section 3.02(a).

           (h) The registered holder of the U.S. Global
Certificate or any Offshore Global Certificate may grant proxies
and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take

                                26





any action which a Holder is entitled to take under this
Agreement or the Certificates.

           Section 3.06. Special Transfer Provisions. Unless and
until (i) an Initial Certificate is sold under an effective
Registration Statement, or (ii) an Initial Certificate is
exchanged for an Exchange Certificate pursuant to an effective
Exchange Offer Registration Statement, in each case pursuant to
the Registration Rights Agreement, the following provisions shall
apply to such Initial Certificates:

           (a)  Transfers to Non-QIB Institutional Accredited
Investors.  The following provisions shall apply with respect to
the registration of any proposed transfer of a Certificate to any
Institutional Accredited Investor which is not a QIB (excluding
transfers to or by Non-U.S. Persons):

           (i) The Registrar shall register the transfer of any
      Certificate, whether or not such Certificate bears the
      Private Placement Legend, if (x) the requested transfer is
      at least three years after the later of the original issue
      date of the Certificates and the last date on which such
      Certificate was held by the Company or any affiliate of any
      such persons or (y) the proposed transferee has delivered
      to the Registrar a letter substantially in the form of
      Exhibit D hereto and the aggregate principal amount of the
      Certificates being transferred is at least $100,000.

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

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

           (i)  If the Certificate to be transferred consists of
      U.S. Physical Certificates or an interest in any Temporary
      Offshore Global Certificate, the Registrar shall register
      the transfer if such transfer is being made by a proposed

                                27





      transferor who has checked the box provided for on the form
      of Initial Certificate stating, or has otherwise advised
      the Trustee and the Registrar in writing, that the sale has
      been made in compliance with the provisions of Rule 144A to
      a transferee who has signed the certification provided for
      on the form of Initial Certificate stating, or has
      otherwise advised the Trustee and the Registrar in writing,
      that it is purchasing the Initial Certificate for its own
      account or an account with respect to which it exercises
      sole investment discretion and that it, or the Person on
      whose behalf it is acting with respect to any such account,
      is a QIB within the meaning of Rule 144A, and is aware that
      the sale to it is being made in reliance on Rule 144A and
      acknowledges that it has received such information
      regarding the Trust and/or the Company as it has requested
      pursuant to Rule 144A or has determined not to request such
      information and that it is aware that the transferor is
      relying upon its foregoing representations in order to
      claim the exemption from registration provided by Rule
      144A.

           (ii) Upon receipt by the Registrar of the documents
      referred to in clause (i) above and instructions given in
      accordance with the Depositary's and the Registrar's
      procedures therefor, the Registrar shall reflect on its
      books and records the date of such transfer and an increase
      in the principal amount of the U.S. Global Certificate in
      an amount equal to the principal amount of the U.S.
      Physical Certificates or interests in the Temporary
      Offshore Global Certificate, as the case may be, being
      transferred, and the Trustee shall cancel such Physical
      Certificates or decrease the amount of such Temporary
      Offshore Global Certificate so transferred.

           (c)  [intentionally omitted.]

           (d) Transfers of Interests in the Permanent Offshore
Global Certificate or Offshore Physical Certificates. The
Registrar shall register any transfer of interests in the
Permanent Offshore Global Certificate or Offshore Physical
Certificates without requiring any additional certification.

           (e)  Transfers to Non-U.S. Persons at Any Time.  The
following provisions shall apply with respect to any registration
of any transfer of an Initial Certificate to a Non-U.S. Person:

           (i) Prior to the Offshore Certificates Exchange Date,
      the Registrar shall register any proposed transfer of an
      Initial Certificate to a Non-U.S. Person upon receipt of a
      certificate substantially in the form set forth as Exhibit
      C hereto from the proposed transferor.


                                28





           (ii) On and after the Offshore Certificates Exchange
      Date, the Registrar shall register any proposed transfer to
      any Non-U.S. Person if the Certificate to be transferred is
      a U.S. Physical Certificate or an interest in the U.S.
      Global Certificate, upon receipt of a certificate
      substantially in the form of Exhibit C from the proposed
      transferor. The Registrar shall promptly send a copy of
      such certificate to the Company.

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

           (f) Private Placement Legend. Upon the transfer,
exchange or replacement of Certificates not bearing the Private
Placement Legend, the Registrar shall deliver Certificates that
do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Certificates bearing the Private
Placement Legend, the Registrar shall deliver only Certificates
that bear the Private Placement Legend unless either (i) the
circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of
this Section 3.06 exist or (ii) there is delivered to the
Registrar an Opinion of Counsel to the effect that neither such
legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the
Securities Act.

           (g) General. By its acceptance of any Certificate
bearing the Private Placement Legend, each Holder of such a
Certificate acknowledges the restrictions on transfer of such
Certificate set forth in this Agreement and agrees that it will
transfer such Certificate only as provided in this Agreement. The
Registrar shall not register a transfer of any Certificate unless
such transfer complies with the restrictions on transfer of such
Certificate set forth in this Agreement. In connection with any
transfer of Certificates, each Certificateholder agrees by

                                29





its acceptance of the Certificates to furnish the Registrar or
the Trustee such certifications, legal opinions or other
information as either of them may reasonably require to confirm
that such transfer is being made pursuant to an exemption from,
or a transaction not subject to, the registration requirements of
the Securities Act; provided that the Registrar shall not be
required to determine the sufficiency of any such certifications,
legal opinions or other information.

           Until such time as no Certificates remain Outstanding,
the Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.05 or
this Section 3.06. The Trustee, if not the Registrar at such
time, shall have the right to inspect and make copies of all such
letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to
the Registrar.

           Section 3.07. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to
the Registrar or the Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate
and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save
each of them harmless, then, in the absence of notice to the
Registrar or the Trustee that such destroyed, lost or stolen
Certificate has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the Uniform
Commercial Code in effect in any applicable jurisdiction are met,
the Trustee shall execute, authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate or Certificates, in authorized
denominations and of like Fractional Undivided Interest and
bearing a number not contemporaneously outstanding.

           In connection with the issuance of any new Certificate
under this Section 3.07, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee and the
Registrar) connected therewith.

           Any duplicate Certificate issued pursuant to this
Section 3.07 shall constitute conclusive evidence of the
appropriate Fractional Undivided Interest in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.

           The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies

                                30





with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Certificates.

           Section 3.08. Persons Deemed Owners. Prior to due
presentment of a Certificate for registration of transfer, the
Trustee, the Registrar and any Paying Agent may treat the Person
in whose name any Certificate is registered (as of the day of
determination) as the owner of such Certificate for the purpose
of receiving distributions pursuant to Article IV and for all
other purposes whatsoever, and none of the Trustee, the Registrar
or any Paying Agent shall be affected by any notice to the
contrary.

           Section 3.09. Cancellation. All Certificates
surrendered for payment or transfer or exchange shall, if
surrendered to the Trustee or any agent of the Trustee other than
the Registrar, be delivered to the Registrar for cancellation and
shall promptly be cancelled by it. No Certificates shall be
authenticated in lieu of or in exchange for any Certificates
cancelled as provided in this Section, except as expressly
permitted by this Agreement. All cancelled Certificates held by
the Registrar shall be destroyed and a certification of their
destruction delivered to the Trustee.

           Section 3.10. Temporary Certificates. Until definitive
Certificates are ready for delivery, the Trustee shall
authenticate temporary Certificates. Temporary Certificates shall
be substantially in the form of definitive Certificates but may
have insertions, substitutions, omissions and other variations
determined to be appropriate by the officers executing the
temporary Certificates, as evidenced by their execution of such
temporary Certificates. If temporary Certificates are issued, the
Trustee will cause definitive Certificates to be prepared without
unreasonable delay. After the preparation of definitive
Certificates, the temporary Certificates shall be exchangeable
for definitive Certificates upon surrender of the temporary
Certificates at the office or agency of the Trustee designated
for such purpose pursuant to Section 7.12, without charge to the
Certificateholder. Upon surrender for cancellation of any one or
more temporary Certificates, the Trustee shall execute,
authenticate and deliver in exchange therefor a like face amount
of definitive Certificates of authorized denominations. Until so
exchanged, the temporary Certificates shall be entitled to the
same benefits under this Agreement as definitive Certificates.

           Section 3.11. Limitation of Liability for Payments.
All payments and distributions made to Certificateholders shall
be made only from the Trust Property and only to the extent that
the Trustee shall have sufficient income or proceeds from the
Trust Property to make such payments in accordance with the terms

                                31





of Article IV of this Agreement. Each Certificateholder, by its
acceptance of a Certificate, agrees that it will look solely to
the income and proceeds from the Trust Property for any payment
or distribution due to such Certificateholder pursuant to the
terms of this Agreement and that it will not have any recourse to
the Company, the Trustee, the Loan Trustees, the Liquidity
Providers, the Owner Trustees or the Owner Participants, except
as otherwise expressly provided herein or in the Intercreditor
Agreement.

           The Company is a party to this Agreement solely for
purposes of meeting the requirements of the Trust Indenture Act,
and therefore shall not have any right, obligation or liability
hereunder (except as otherwise expressly provided herein).


                            ARTICLE IV

                   DISTRIBUTIONS; STATEMENTS TO
                        CERTIFICATEHOLDERS

           Section 4.01. Certificate Account and Special Payments
Account. (a) The Trustee shall establish and maintain on behalf
of the Certificateholders a Certificate Account as one or more
non-interest-bearing accounts. The Trustee shall hold the
Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals
therefrom only as provided in this Agreement. On each day when a
Scheduled Payment is made to the Trustee under the Intercreditor
Agreement, the Trustee upon receipt thereof shall immediately
deposit the aggregate amount of such Scheduled Payment in the
Certificate Account.

           (b) The Trustee shall establish and maintain on behalf
of the Certificateholders a Special Payments Account as one or
more accounts, which shall be non-interest bearing except as
provided in Section 4.04. The Trustee shall hold the Special
Payments Account in trust for the benefit of the
Certificateholders and shall make or permit withdrawals therefrom
only as provided in this Agreement. On each day when one or more
Special Payments are made to the Trustee, the Trustee, upon
receipt thereof, shall immediately deposit the aggregate amount
of such Special Payments in the Special Payments Account.

           (c) The Trustee shall present to the related Loan
Trustee of each Equipment Note such Equipment Note on the date of
its stated final maturity or, in the case of any Equipment Note
which is to be redeemed in whole pursuant to the related
Indenture, on the applicable redemption date under such
Indenture.


                                32





           Section 4.02. Distributions from Certificate Account
and Special Payments Account. (a) On each Regular Distribution
Date or as soon thereafter as the Trustee has confirmed receipt
of the payment of all or any part of the Scheduled Payments due
on such date, the Trustee shall distribute out of the Certificate
Account the entire amount deposited therein pursuant to Section
4.01(a). There shall be so distributed to each Certificateholder
of record on the Record Date with respect to such Regular
Distribution Date (other than as provided in Section 11.01
concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional
Undivided Interest in the Trust held by such Certificateholder)
of the total amount in the Certificate Account, except that, with
respect to Certificates registered on the Record Date in the name
of the nominee of the Depositary (initially, such nominee to be
Cede & Co.), such distribution shall be made by wire transfer in
immediately available funds to the account designated by such
nominee.

           (b) On each Special Distribution Date with respect to
any Special Payment or as soon thereafter as the Trustee has
confirmed receipt of any Special Payments, the Trustee shall
distribute out of the Special Payments Account the entire amount
of such Special Payment deposited therein pursuant to Section
4.01(b). There shall be so distributed to each Certificateholder
of record on the Record Date with respect to such Special
Distribution Date (other than as provided in Section 11.01
concerning the final distribution) by check mailed to such
Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional
Undivided Interest in the Trust held by such Certificateholder)
of the total amount in the Special Payments Account on account of
such Special Payment, except that, with respect to Certificates
registered on the Record Date in the name of the nominee of the
Depositary (initially, such nominee to be Cede & Co.), such
distribution shall be made by wire transfer in immediately
available funds to the account designated by such nominee.

           (c) The Trustee shall, at the expense of the Company,
cause notice of each Special Payment to be mailed to each
Certificateholder at his address as it appears in the Register.
In the event of redemption or purchase of Equipment Notes held in
the Trust, such notice shall be mailed not less than 20 days
prior to the Special Distribution Date for the Special Payment
resulting from such redemption or purchase, which Special
Distribution Date shall be the date of such redemption or
purchase. In the case of any other Special Payments, such notice
shall be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment,

                                33





stating the Special Distribution Date for such Special Payment
which shall occur not less than 20 days after the date of such
notice and as soon as practicable thereafter. Notices mailed by
the Trustee shall set forth:

           (i)  the Special Distribution Date and the Record Date
      therefor (except as otherwise provided in Section 11.01),

           (ii) the amount of the Special Payment for each $1,000
      face amount Certificate (taking into account any payment to
      be made by the Company pursuant to Section 2.01(b)) and the
      amount thereof constituting principal, premium, if any, and
      interest,

           (iii)     the reason for the Special Payment, and

           (iv) if the Special Distribution Date is the same date
      as a Regular Distribution Date, the total amount to be
      received on such date for each $1,000 face amount
      Certificate.

If the amount of premium, if any, payable upon the redemption or
purchase of an Equipment Note has not been calculated at the time
that the Trustee mails notice of a Special Payment, it shall be
sufficient if the notice sets forth the other amounts to be
distributed and states that any premium received will also be
distributed.

           If any redemption of the Equipment Notes held in the
Trust is cancelled, the Trustee, as soon as possible after
learning thereof, shall cause notice thereof to be mailed to each
Certificateholder at its address as it appears on the Register.

           Section 4.03. Statements to Certificateholders. (a) On
each Distribution Date, the Trustee will include with each
distribution to Certificateholders of a Scheduled Payment or
Special Payment, as the case may be, a statement setting forth
the following information (per $1,000 face amount Certificate as
to (i) and (ii) below):

           (i)  the amount of such distribution allocable to
      principal and the amount allocable to premium, if any;

           (ii) the amount of such distribution allocable to
      interest; and

           (iii)     the Pool Balance and the Pool Factor.

           With respect to the Certificates registered in the
name of Cede & Co., as nominee for the Depositary, on the Record
Date prior to each Distribution Date, the Trustee will request

                                34





from the Depositary a Securities Position Listing setting forth the
names of all Agent Members reflected on the Depositary's books as
holding interests in the Certificates on such Record Date. On
each Distribution Date, the Trustee will mail to each such Agent
Member the statement described above and will make available
additional copies as requested by such Agent Member for
forwarding to holders of interests in the Certificates.

           (b) Within a reasonable period of time after the end
of each calendar year but not later than the latest date
permitted by law, the Trustee shall furnish to each Person who at
any time during such calendar year was a Certificateholder of
record a statement containing the sum of the amounts determined
pursuant to clauses (a)(i) and (a)(ii) above with respect to the
Trust for such calendar year or, in the event such Person was a
Certificateholder of record during a portion of such calendar
year, for such portion of such year, and such other items as are
readily available to the Trustee and which a Certificateholder
shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax
returns. Such statement and such other items shall be prepared on
the basis of information supplied to the Trustee by the Agent
Members and shall be delivered by the Trustee to such Agent
Members to be available for forwarding by such Agent Members to
the holders of interests in the Certificates in the manner
described in Section 4.03(a).

           Section 4.04. Investment of Special Payment Moneys.
Any money received by the Trustee pursuant to Section 4.01(b)
representing a Special Payment which is not to be promptly
distributed shall, to the extent practicable, be invested in
Permitted Investments by the Trustee pending distribution of such
Special Payment pursuant to Section 4.02. Any investment made
pursuant to this Section 4.04 shall be in such Permitted
Investments having maturities not later than the date that such
moneys are required to be used to make the payment required under
Section 4.02 on the applicable Special Distribution Date and the
Trustee shall hold any such Permitted Investments until maturity.
The Trustee shall have no liability with respect to any
investment made pursuant to this Section 4.04, other than by
reason of the willful misconduct or negligence of the Trustee.
All income and earnings from such investments shall be
distributed on such Special Distribution Date as part of such
Special Payment.



                                35





                            ARTICLE V

                           THE COMPANY

           Section 5.01. Maintenance of Corporate Existence. The
Company, at its own cost and expense, will do or cause to be done
all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises, except as
otherwise specifically permitted in Section 5.02; provided,
however, that the Company shall not be required to preserve any
right or franchise if the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company.

           Section 5.02. Consolidation, Merger, etc. The Company
shall not consolidate with or merge into any other corporation or
convey, transfer or lease substantially all of its assets as an
entirety to any Person unless:

           (a) the corporation formed by such consolidation or
      into which the Company is merged or the Person that
      acquires by conveyance, transfer or lease substantially all
      of the assets of the Company as an entirety shall be (i)
      organized and validly existing under the laws of the United
      States of America or any state thereof or the District of
      Columbia, (ii) a "citizen of the United States" as defined
      in 49 U.S.C. 40102(a)(15), as amended, and (iii) a United
      States certificated air carrier, if and so long as such
      status is a condition of entitlement to the benefits of
      Section 1110 of the Bankruptcy Reform Act of 1978, as
      amended (11 U.S.C.
      ss. 1110), with respect to the Leases;

           (b) the corporation formed by such consolidation or
      into which the Company is merged or the Person which
      acquires by conveyance, transfer or lease substantially all
      of the assets of the Company as an entirety shall execute
      and deliver to the Trustee a duly authorized, valid,
      binding and enforceable agreement in form and substance
      reasonably satisfactory to the Trustee containing an
      assumption by such successor corporation or Person of the
      due and punctual performance and observance of each
      covenant and condition of this Agreement, the Other Pass
      Through Trust Agreements, the Financing Agreements, and
      each other Financing Document to be performed or observed
      by the Company; and

           (c) the Company shall have delivered to the Trustee an
      Officer's Certificate of the Company and an Opinion of
      Counsel of the Company reasonably satisfactory to the
      Trustee, each stating that such consolidation, merger,
      conveyance, transfer or lease and the assumption agreement
      mentioned in clause (b) above comply with this Section 5.02

                                36





      and that all conditions precedent herein provided for
      relating to such transaction have been complied with.

           Upon any consolidation or merger, or any conveyance,
transfer or lease of substantially all of the assets of the
Company as an entirety in accordance with this Section 5.02, the
successor corporation or Person formed by such consolidation or
into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if such successor
corporation or Person had been named as the Company herein. No
such conveyance, transfer or lease of substantially all of the
assets of the Company as an entirety shall have the effect of
releasing any successor corporation or Person which shall have
become such in the manner prescribed in this Section 5.02 from
its liability in respect of this Agreement and any Financing
Document to which it is a party.


                            ARTICLE VI

                             DEFAULT

           Section 6.01. Events of Default. (a) Exercise of
Remedies. Upon the occurrence and during the continuation of any
Indenture Default under any Indenture, the Trustee may, to the
extent it is the Controlling Party at such time (as determined
pursuant to the Intercreditor Agreement), direct the exercise of
remedies as provided in the Intercreditor Agreement.

           (b) Purchase Rights of Certificateholders. (i) At any
time after the occurrence and during the continuation of a
Triggering Event, each Certificateholder shall have the right
(which shall not expire upon any purchase of the Class A
Certificates pursuant to Section 6.01(b)(i) of the Class B Trust
Agreement) to purchase all, but not less than all, of the Class A
Certificates and the Class B Certificates upon ten days' written
notice to the Class A Trustee, the Class B Trustee and each other
Certificateholder, provided that (A) if prior to the end of such
ten day period any other Certificateholder notifies such
purchasing Certificateholder that such other Certificateholder
wants to participate in such purchase, then such other
Certificateholder may join with the purchasing Certificateholder
to purchase all, but not less than all, of the Class A
Certificates and the Class B Certificates pro rata based on the
outstanding principal amount of the Certificates held by each
such Certificateholder and (B) if prior to the end of such ten
day period any other Certificateholder fails to notify the
purchasing Certificateholder of such other Certificateholder's
desire to participate in such a purchase, then such other

                                37





Certificateholder shall lost its right to purchase the Class A
Certificates and the Class B Certificates pursuant to this
Section 6.01(b)(i).

           (ii) By acceptance of its Certificate, each
      Certificateholder agrees that at any time after the
      occurrence and during the continuation of a Triggering
      Event, each Class D Certificateholder shall have the right
      (which shall not expire upon any purchase of the Class A
      Certificates pursuant to Section 6.01(b)(i) of the Class B
      Trust Agreement or the purchase of the Class A Certificates
      and the Class B Certificates pursuant to paragraph (i)
      above) to purchase all, but not less than all, of the Class
      A Certificates, the Class B Certificates and the
      Certificates upon ten days' written notice to the Class A
      Trustee, the Class B Trustee, the Trustee and each other
      Class D Certificateholder, provided that (A) if prior to
      the end of such ten-day period any other Class D
      Certificateholder notifies such purchasing Class D
      Certificateholder that such other Class D Certificateholder
      wants to participate in such purchase, then such other
      Class D Certificateholder may join with the purchasing
      Certificateholder to purchase all, but not less than all,
      of the Class A Certificates, the Class B Certificates and
      the Certificates pro rata based on the Fractional Undivided
      Interest in the Class D Trust held by each such Class D
      Certificateholder and (B) if prior to the end of such ten
      day period any other Class D Certificateholder fails to
      notify the purchasing Class D Certificateholder of such
      other Class D Certificateholder's desire to participate in
      such a purchase, then such other Class D Certificateholder
      shall lose its right to purchase the Class A Certificates,
      the Class B Certificates and the Certificates pursuant to
      this Section 6.01(b).

           The purchase price with respect to the Certificates
shall be equal to the Pool Balance of the Certificates, together
with accrued and unpaid interest thereon to the date of such
purchase, without premium, but including any other amounts then
due and payable to the Certificateholders under this Agreement,
the Intercreditor Agreement or any other Financing Document or on
or in respect of the Certificates; provided, however, that no
such purchase of Certificates shall be effective unless the
purchaser shall certify to the Trustee that contemporaneously
with such purchase, such purchaser is purchasing, pursuant to the
terms of this Agreement and the Other Pass Through Trust
Agreements, the Class A Certificates, the Class B Certificates
and the Certificates. Each payment of the purchase price of the
Certificates referred to in the first sentence hereof shall be
made to an account or accounts designated by the Trustee and each
such purchase shall be subject to the terms of this Section

                                38





6.01(b). Each Certificateholder agrees by its acceptance of its
Certificate that it will, subject to Section 3.04 hereof, upon
payment from such Class D Certificateholder(s), as the case may
be, of the purchase price set forth in the first sentence of this
paragraph, forthwith sell, assign, transfer and convey to the
purchaser thereof (without recourse, representation or warranty
of any kind except for its own acts), all of the right, title,
interest and obligation of such Certificateholder in, this
Agreement, the Intercreditor Agreement, the Liquidity Facility,
the Financing Documents and all Certificates held by such
Certificateholder (excluding all right, title and interest under
any of the foregoing to the extent such right, title or interest
is with respect to an obligation not then due and payable as
respects any action or inaction or state of affairs occurring
prior to such sale) and the purchaser shall assume all of such
Certificateholder's obligations under this Agreement, the
Intercreditor Agreement, the Liquidity Facility and the Refunding
Documents. The Certificates will be deemed to be purchased on the
date payment of the purchase price is made notwithstanding the
failure of the Certificateholders to deliver any Certificates
(whether in the form of Physical Certificates or beneficial
interests in Global Certificates) and, upon such a purchase, (i)
the only rights of the Certificateholders will be to deliver the
Certificates to the purchaser and receive the purchase price for
such Certificates and (ii) if the purchaser shall so request,
such Certificateholder will comply with all the provisions of
Section 3.04 hereof to enable new Certificates to be issued to
the purchaser in such denominations as it shall request. All
charges and expenses in connection with the issuance of any such
new Certificates shall be borne by the purchaser thereof.
           As used in this Section 6.01(b), the terms
"Certificateholder", "Class", "Class A Certificate", "Class A
Certificateholder", "Class A Trust", "Class A Trustee", "Class B
Certificate", "Class B Certificateholder", "Class B Trust",
"Class B Trustee", "Class D Certificate", "Class D
Certificateholder", "Class D Trust" and "Class D Trustee", shall
have the respective meanings assigned to such terms in the
Intercreditor Agreement.

           Section 6.02.  [Intentionally omitted.].

           Section 6.03. Judicial Proceedings Instituted by
Trustee; Trustee May Bring Suit. If there shall be a failure to
make payment of the principal of, premium, if any, or interest on
any Equipment Note, or if there shall be any failure to pay Rent
(as defined in the relevant Lease) under any Lease when due and
payable, then the Trustee, in its own name and as trustee of an
express trust, as holder of such Equipment Notes, to the extent
permitted by and in accordance with the terms of the
Intercreditor Agreement and the Financing Documents (subject to
the rights of the applicable Owner Trustee or Owner Participant

                                39





to cure any such failure in accordance with Section 4.03 of the
applicable Indenture), shall be entitled and empowered to
institute any suits, actions or proceedings at law, in equity or
otherwise, for the collection of the sums so due and unpaid on
such Equipment Notes or under such Lease and may prosecute any
such claim or proceeding to judgment or final decree with respect
to the whole amount of any such sums so due and unpaid.

           Section 6.04. Control by Certificateholders. Subject
to Section 6.03 and the Intercreditor Agreement, the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee with respect to the Trust or pursuant to
the terms of the Intercreditor Agreement, or exercising any trust
or power conferred on the Trustee under this Agreement or the
Intercreditor Agreement, including any right of the Trustee as
Controlling Party under the Intercreditor Agreement or as holder
of the Equipment Notes, provided that

           (1) such Direction shall not be in conflict with any
      rule of law or with this Agreement and would not involve
      the Trustee in personal liability or expense,

           (2) the Trustee shall not determine that the action so
      directed would be unjustly prejudicial to the
      Certificateholders not taking part in such Direction, and

           (3) the Trustee may take any other action deemed
      proper by the Trustee which is not inconsistent with such
      Direction.

           Section 6.05. Waiver of Past Defaults. Subject to the
Intercreditor Agreement, the Certificateholders holding
Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust (i)
may on behalf of all of the Certificateholders waive any past
Event of Default hereunder and its consequences or (ii) if the
Trustee is the Controlling Party, may direct the Trustee to
instruct the applicable Loan Trustee to waive, any past Indenture
Default under any Indenture and its consequences, and thereby
annul any Direction given by such Certificateholders or the
Trustee to such Loan Trustee with respect thereto, except a
default:

           (1)  in the deposit of any Scheduled Payment or Special
      Payment under Section 4.01 or in the distribution of any
      payment under Section 4.02 on the Certificates, or


                                40





           (2)   in the payment of the principal of (premium, if
      any) or interest on the Equipment Notes, or

           (3) in respect of a covenant or provision hereof which
      under Article X cannot be modified or amended without the
      consent of each Certificateholder holding an Outstanding
      Certificate affected thereby.

           Upon any such waiver, such default shall cease to
exist with respect to the Certificates and any Event of Default
arising therefrom shall be deemed to have been cured for every
purpose and any direction given by the Trustee on behalf of the
Certificateholders to the relevant Loan Trustee shall be annulled
with respect thereto; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any
right consequent thereon. Upon any such waiver, the Trustee shall
vote the Equipment Notes issued under the relevant Indenture to
waive the corresponding Indenture Default.

           Section 6.06. Right of Certificateholders to Receive
Payments Not to Be Impaired. Anything in this Agreement to the
contrary notwithstanding, including, without limitation, Section
6.07 hereof, but subject to the Intercreditor Agreement, the
right of any Certificateholder to receive distributions of
payments required pursuant to Section 4.02 hereof on the
Certificates when due, or to institute suit for the enforcement
of any such payment on or after the applicable Regular
Distribution Date or Special Distribution Date, shall not be
impaired or affected without the consent of such
Certificateholder.

           Section 6.07. Certificateholders May Not Bring Suit
Except Under Certain Conditions. A Certificateholder shall not
have the right to institute any suit, action or proceeding at law
or in equity or otherwise with respect to this Agreement, for the
appointment of a receiver or for the enforcement of any other
remedy under this Agreement, unless:

           (1)  such Certificateholder previously shall have given
      written notice to the Trustee of a continuing Event of
      Default;

           (2) Certificateholders holding Certificates evidencing
      Fractional Undivided Interests aggregating not less than
      25% of the Trust shall have requested the Trustee in
      writing to institute such action, suit or proceeding and
      shall have offered to the Trustee indemnity as provided in
      Section 7.03(e);

           (3)  the Trustee shall have refused or neglected to
      institute such an action, suit or proceeding for 60 days

                                41





      after receipt of such notice, request and offer of
      indemnity; and

           (4) no direction inconsistent with such written
      request shall have been given to the Trustee during such
      60- day period by Certificateholders holding Certificates
      evidencing Fractional Undivided Interests aggregating not
      less than a majority in interest in the Trust.

           It is understood and intended that no one or more of
the Certificateholders shall have any right in any manner
whatsoever hereunder or under the Certificates to (i) surrender,
impair, waive, affect, disturb or prejudice any property in the
Trust Property or the lien of any Indenture on any property
subject thereto, or the rights of the Certificateholders or the
holders of the Equipment Notes, (ii) obtain or seek to obtain
priority over or preference with respect to any other such
Certificateholder or (iii) enforce any right under this
Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all the Certificateholders
subject to the provisions of this Agreement.

           Section 6.08. Remedies Cumulative. Every remedy given
hereunder to the Trustee or to any of the Certificateholders
shall not be exclusive of any other remedy or remedies, and every
such remedy shall be cumulative and in addition to every other
remedy given hereunder or now or hereafter given by statute, law,
equity or otherwise.


                           ARTICLE VII

                           THE TRUSTEE

           Section 7.01. Certain Duties and Responsibilities. (a)
Except during the continuance of an Event of Default, the Trustee
undertakes to perform such duties as are specifically set forth
in this Agreement, and no implied covenants or obligations shall
be read into this Agreement against the Trustee.

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

           (c) No provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful
misconduct, except that


                                42





           (1)  this Subsection shall not be construed to limit
      the effect of Subsection (a) of this Section; and

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

           (d) Whether or not herein expressly so provided, every
provision of this Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.

           Section 7.02. Notice of Defaults. As promptly as
practicable after, and in any event within 90 days after, the
occurrence of any default (as such term is defined below)
hereunder, the Trustee shall transmit by mail to the Company, the
Owner Trustees, the Owner Participants, the Loan Trustees and the
Certificateholders in accordance with Section 313(c) of the Trust
Indenture Act, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default on the
payment of the principal, premium, if any, or interest on any
Equipment Note, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that
the withholding of such notice is in the interests of the
Certificateholders. For the purpose of this Section, the term
"default" means any event that is, or after notice or lapse of
time or both would become, an Event of Default.

           Section 7.03.  Certain Rights of Trustee.  Subject to
the provisions of Section 315 of the Trust Indenture Act:

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

           (b) any request or direction of the Company mentioned
      herein shall be sufficiently evidenced by a written
      description of the subject matter thereof accompanied by an
      Officer's Certificate and an Opinion of Counsel as provided
      in Section 1.02 of this Agreement;

           (c)  whenever in the administration of this Agreement
      the Trustee shall deem it desirable that a matter be proved

                                43





      or established prior to taking, suffering or omitting any
      action hereunder, the Trustee (unless other evidence be
      herein specifically prescribed) may, in the absence of bad
      faith on its part, rely upon an Officer's Certificate of
      the Company, any Owner Trustee or any Loan Trustee;

           (d) the Trustee may consult with counsel and the
      advice of such counsel or any Opinion of Counsel shall be
      full and complete authorization and protection in respect
      of any action taken, suffered or omitted by it hereunder in
      good faith and in reliance thereon;

           (e) the Trustee shall be under no obligation to
      exercise any of the rights or powers vested in it by this
      Agreement at the Direction of any of the Certificateholders
      pursuant to this Agreement, unless such Certificateholders
      shall have offered to the Trustee reasonable security or
      indemnity against the cost, expenses and liabilities which
      might be incurred by it in compliance with such Direction;

           (f) the Trustee shall not be bound to make any
      investigation into the facts or matters stated in any
      resolution, certificate, statement, instrument, opinion,
      report, notice, request, direction, consent, order, bond,
      debenture or other paper or document;

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

           (h) the Trustee shall not be liable with respect to
      any action taken or omitted to be taken by it in good faith
      in accordance with the Direction of the Certificateholders
      holding Certificates evidencing Fractional Undivided
      Interests aggregating not less than a majority in interest
      in the Trust relating to the time, method and place of
      conducting any proceeding for any remedy available to the
      Trustee, or exercising any trust or power conferred upon
      the Trustee, under this Agreement; and

           (i) the Trustee shall not be required to expend or
      risk its own funds in the performance of any of its duties
      under this Agreement, or in the exercise of any of its
      rights or powers, if it shall have reasonable grounds for
      believing that repayment of such funds or adequate
      indemnity against such risk is not reasonably assured to
      it.


                                44





           Section 7.04. Not Responsible for Recitals or Issuance
of Certificates. The recitals contained herein and in the
Certificates, except the certificates of authentication, shall
not be taken as the statements of the Trustee, and the Trustee
assumes no responsibility for their correctness. Subject to
Section 7.15, the Trustee makes no representations as to the
validity or sufficiency of this Agreement, any Financing
Agreement, any Equipment Notes, the Certificates or any other
Financing Document, except that the Trustee hereby represents and
warrants that this Agreement has been, and the Intercreditor
Agreement, the Registration Rights Agreement, each Financing
Agreement and each Certificate will be, executed, authenticated
and delivered by one of its officers who is duly authorized to
execute, authenticate and deliver such document on its behalf.

           Section 7.05. May Hold Certificates. The Trustee, any
Paying Agent, Registrar or any of their Affiliates or any other
agent in their respective individual or any other capacity may
become the owner or pledgee of Certificates and, subject to
Sections 310(b) and 311 of the Trust Indenture Act, if
applicable, may otherwise deal with the Company, the Owner
Trustees or the Loan Trustees with the same rights it would have
if it were not Trustee, Paying Agent, Registrar or such other
agent.

           Section 7.06. Money Held in Trust. Money held by the
Trustee or the Paying Agent in trust hereunder need not be
segregated from other funds except to the extent required herein
or by law and neither the Trustee nor the Paying Agent shall have
any liability for interest upon any such moneys except as
provided for herein.

           Section 7.07.  Compensation and Reimbursement.  The
Company agrees:

           (1) to pay, or cause to be paid, to the Trustee from
      time to time reasonable compensation for all services
      rendered by it hereunder (which compensation shall not be
      limited by any provision of law in regard to the
      compensation of a trustee of an express trust);

           (2) except as otherwise expressly provided herein, to
      reimburse, or cause to be reimbursed, the Trustee upon its
      request for all reasonable out-of-pocket expenses,
      disbursements and advances incurred or made by the Trustee
      in accordance with any provision of this Agreement
      (including the reasonable compensation and the expenses and
      disbursements of its agents and counsel), except any such
      expense, disbursement or advance as may be attributable to
      its negligence, willful misconduct or bad faith or as may be

                                45





      incurred due to the Trustee's breach of its representations
      and warranties set forth in Section 7.15; and

           (3)  to indemnify the Trustee pursuant to Section 10.1
      of the Participation Agreements (as amended by the
      Amendments No. 1 thereto dated as of the date hereof) (as
      defined in the Intercreditor Agreement).

           The Trustee shall be entitled to reimbursement from,
and shall have a lien prior to the Certificates upon, the Trust
Property for any tax incurred without negligence, bad faith or
willful misconduct, on its part, arising out of or in connection
with the acceptance or administration of such Trust (other than
any tax attributable to the Trustee's compensation for serving as
such), including any costs and expenses incurred in contesting
the imposition of any such tax. If the Trustee reimburses itself
from the Trust Property of such Trust for any such tax, it will
mail a brief report within 30 days setting forth the
circumstances thereof to all Certificateholders as their names
and addresses appear in the Register.

           Section 7.08. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as a trustee under Section 310(a) of the Trust
Indenture Act and shall have a combined capital and surplus of at
least $75,000,000 (or a combined capital and surplus in excess of
$5,000,000 and the obligations of which, whether now in existence
or hereafter incurred, are fully and unconditionally guaranteed
by a corporation organized and doing business under the laws of
the United States, any state or territory thereof or of the
District of Columbia and having a combined capital and surplus of
at least $75,000,000). If such corporation publishes reports of
conditions at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of
Columbia supervising or examining authority, then for the
purposes of this Section 7.08, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of conditions
so published.

           In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.08
to act as Trustee, the Trustee shall resign immediately as
Trustee in the manner and with the effect specified in Section
7.09.

           Section 7.09. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 7.10.

                                46






           (b) The Trustee may resign at any time as trustee by
giving prior written notice thereof to the Company, the
Authorized Agents, the Owner Trustees and the Loan Trustees. If
an instrument of acceptance by a successor Trustee shall not have
been delivered to the Company, the Authorized Agents, the Owner
Trustees, the Loan Trustees and the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the
appointment of a successor Trustee.

           (c) The Trustee may be removed at any time by
Direction of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less
than a majority in interest in the Trust delivered to the Trustee
and to the Company, the Owner Trustees and the Loan Trustees.

           (d)  If at any time:

           (1) the Trustee shall fail to comply with Section 310
      of the Trust Indenture Act, if applicable, after written
      request therefor by the Company or by any Certificateholder
      who has been a bona fide Certificateholder for at least six
      months; or

           (2) the Trustee shall cease to be eligible under
      Section 7.08 and shall fail to resign after written request
      therefor by the Company or by any such Certificateholder;
      or

           (3) the Trustee shall become incapable of acting or
      shall be adjudged a bankrupt or insolvent or a receiver of
      the Trustee or of its property shall be appointed or any
      public officer shall take charge or control of the Trustee
      or of its property or affairs for the purpose of
      rehabilitation, conservation or liquidation;

then, in any case, (i) the Company may, with the consent of the
Owner Participants, which consent may not be unreasonably
withheld, remove the Trustee or (ii) any Certificateholder who
has been a bona fide Certificateholder for at least six months
may, on behalf of itself and all others similarly situated,
petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.

           (e) If a Responsible Officer of the Trustee shall
obtain actual knowledge of an Avoidable Tax which has been or is
likely to be asserted, the Trustee shall promptly notify the
Company and shall, within 30 days of such notification, resign
hereunder unless within such 30-day period the Trustee shall have
received notice that the Company has agreed to pay such tax. The
Company shall promptly appoint a successor Trustee in a
jurisdiction where there are no Avoidable Taxes.

                                47






           (f) If the Trustee shall resign, be removed or become
incapable of acting or if a vacancy shall occur in the office of
the Trustee for any cause, the Company shall promptly appoint a
successor Trustee. If, within one year after such resignation,
removal or incapability, or other occurrence of such vacancy, a
successor Trustee shall be appointed by Direction of the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust delivered to the Company, the Owner
Trustees, the Loan Trustees and the retiring Trustee, and the
Company approves such appointment, which approval shall not be
unreasonably withheld, then the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become
the successor Trustee and supersede the successor Trustee
appointed as provided above. If no successor Trustee shall have
been so appointed as provided above and accepted appointment in
the manner hereinafter provided, any Certificateholder who has
been a bona fide Certificateholder for at least six months may,
on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a
successor Trustee.

           (g) The successor Trustee shall give notice of the
resignation and removal of the Trustee and appointment of the
successor Trustee by mailing writ