Registration No. 333-57188
Filed with the Securities and Exchange Commission on March 21, 2001
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
CONTINENTAL AIRLINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 74-2099724
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
1600 SMITH STREET, DEPT. HQSEO
HOUSTON, TEXAS 77002
(713) 324-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------
JEFFERY A. SMISEK, ESQ. COPIES OF CORRESPONDENCE TO:
EXECUTIVE VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY JOHN K. HOYNS, ESQ.
CONTINENTAL AIRLINES, INC. HUGHES HUBBARD & REED LLP
1600 SMITH STREET, DEPT. HQSEO ONE BATTERY PARK PLAZA
HOUSTON, TEXAS 77002 NEW YORK, NEW YORK 10004-1482
(713) 324-2950
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this registration statement becomes effective.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
Pursuant to Rule 429 of the Rules and Regulations of the Securities and
Exchange Commission under the Securities Act of 1933, as amended, the form of
prospectus included in this registration statement also relates to an aggregate
remaining amount of $859,042,000 of pass through certificates covered by such
form of prospectus previously registered under the registrant's registration
statement on Form S-3 (File No. 333-45834).
CALCULATION OF REGISTRATION FEE
======================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
- - ------------------------------------------------------------------------------------------------------
Pass through certificates $1,800,000,000 $1,800,000,000 $235,240
======================================================================================================
Estimated solely for purposes of determining the registration fee pursuant to
Rule 457(o) under the Securities Act of 1933, as amended.
Pursuant to Rule 457(o), the registration fee has been calculated on the basis
of the maximum aggregate offering price of the securities listed.
Omitted pursuant to Rule 457(o).
A filing fee of $214,760 was previously paid in connection with the pass through
certificates included herein remaining from the registrant's registration
statement on Form S-3 (File No. 333-45834).
Paid on March 16, 2001.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT WILL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
- - --------------------------------------------------------------------------------
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
- - --------------------------------------------------------------------------------
SUBJECT TO COMPLETION - DATED MARCH 21, 2001
PROSPECTUS
$1,800,000,000
CONTINENTAL AIRLINES, INC.
PASS THROUGH CERTIFICATES
--------------------------
This prospectus relates to pass through certificates to be issued by one
or more trusts that we will form, as creator of each pass through trust, with a
national or state bank or trust company, as trustee. The trustee will hold all
property owned by a trust for the benefit of holders of pass through
certificates issued by that trust. Each pass through certificate issued by a
trust will represent a beneficial interest in all property held by that trust.
We will describe the specific terms of any offering of pass through
certificates in a prospectus supplement to this prospectus. You should read this
prospectus and the applicable prospectus supplement carefully before you invest.
This prospectus may not be used to consummate sales of pass through
certificates unless accompanied by a prospectus supplement.
--------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
The date of this prospectus is ____________, 2001.
TABLE OF CONTENTS
PAGE PAGE
---- ----
Defeasance of the Indentures
Where You Can Find More and the Equipment Notes in
Information....................1 Certain Circumstances..........24
Assumption of Obligations by
Forward-Looking Statements.......1 Continental....................25
Liquidity Facility.............25
Incorporation of Certain Intercreditor Issues...........25
Documents by Reference.........2
U.S. Income Tax Matters..........26
Summary..........................3 General........................26
The Offering...................3 Tax Status of the Pass Through
Certificates...................3 Trusts.........................26
Pass Through Trusts............3 Taxation of Certificateholders
Equipment Notes................4 Generally......................26
Effect of Subordination of
The Company......................6 Certificateholders of
Subordinated Trusts............27
Use of Proceeds..................6 Original Issue Discount........27
Sale or Other Disposition of
Ratio of Earnings to Fixed the Certificates...............27
Charges........................7 Foreign Certificateholders.....28
Backup Withholding.............28
Description of the Certificates..7
General........................7 ERISA Considerations.............28
Book-Entry Registration.......11
Payments and Distributions....13 Plan of Distribution.............28
Pool Factors..................14
Reports to Certificateholders.14 Legal Opinions...................30
Voting of Equipment Notes.....15
Events of Default and Certain Experts..........................30
Rights Upon an Event of
Default.......................15
Merger, Consolidation and
Transfer of Assets............17
Modifications of the Basic
Agreement.....................18
Modification of Indenture and
Related Agreements............19
Cross-Subordination Issues....19
Termination of the Pass
Through Trusts................20
Delayed Purchase of Equipment
Notes.........................20
Liquidity Facility............20
The Pass Through Trustee......20
Description of the Equipment
Notes.........................21
General.......................21
Principal and Interest
Payments......................21
Redemption....................21
Security......................22
Ranking of Equipment Notes....23
Payments and Limitation of
Liability.....................24
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. You may read
and copy this information at the following locations of the SEC:
Judiciary Plaza Seven World Trade Center Citicorp Center
450 Fifth Street, N.W. 13th Floor 500 West Madison Street,
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661
You may also obtain copies of this information by mail from the Public
Reference Room of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at (800) SEC-0330.
The SEC also maintains an internet world wide web site that contains
reports, proxy statements and other information about issuers, like us, who file
reports electronically with the SEC. The address of that site is
HTTP://WWW.SEC.GOV.
You may also inspect reports, proxy statements and other information about
us at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New
York, New York 10005.
We have filed with the SEC a registration statement on Form S-3, which
registers the securities that we may offer under this prospectus. The
registration statement, including the attached exhibits and schedules, contains
additional relevant information about us and the securities offered. The rules
and regulations of the SEC allow us to omit certain information included in the
registration statement from this prospectus.
FORWARD-LOOKING STATEMENTS
This prospectus, any prospectus supplement delivered with this prospectus
and the documents we incorporate by reference may contain statements that
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Forward-looking statements include any statements that predict, forecast,
indicate or imply future results, performance or achievements, and may contain
the words "believe," "anticipate," "expect," "estimate," "project," "will be,"
"will continue," "will result," or words or phrases of similar meaning.
Any such forward-looking statements are not assurances of future
performance and involve risks and uncertainties. Actual results may vary
materially from anticipated results for a number of reasons, including those
stated in our SEC reports incorporated in this prospectus by reference or as
stated in a prospectus supplement to this prospectus under the caption "Risk
Factors".
All forward-looking statements attributable to us are expressly qualified
in their entirety by the cautionary statements above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to incorporate by reference information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus, except
for any information that is superseded by subsequent incorporated documents or
by information that is included directly in this prospectus or any prospectus
supplement.
This prospectus includes by reference the documents listed below that we
previously have filed with the SEC and that are not delivered with this
document. They contain important information about our company and its financial
condition.
FILING DATE FILED
- - ------ ----------
Annual Report on Form 10-K for the year ended December 31, 2000 February 6, 2001
Current Report on Form 8-K January 19, 2001
Current Report on Form 8-K February 5, 2001
Current Report on Form 8-K March 8, 2001
Current Report on Form 8-K March 20, 2001
Our SEC file number is 0-9781.
We incorporate by reference additional documents that we may file with the
SEC between the date of this prospectus and the termination of the offering of
securities under this prospectus. These documents include our periodic reports,
such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as well as our proxy statements.
You may obtain any of these incorporated documents from us without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference in such document. You may obtain documents
incorporated by reference in this prospectus by requesting them from us in
writing or by telephone at the following address:
Continental Airlines, Inc.
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
Attention: Secretary
(713) 324-2950.
SUMMARY
THE OFFERING
This prospectus describes the pass through certificates that we may offer
from time to time after the date of this prospectus. The proceeds of these
offerings will be used to provide funds for the financing or refinancing of our
aircraft. For convenience, throughout this prospectus, the words we, us, ours or
similar words refer to Continental Airlines, Inc.
This prospectus describes the general terms of the pass through
certificates. The actual terms of any offering of pass through certificates will
be described in a supplement to this prospectus. To the extent that any
provision in any prospectus supplement is inconsistent with any provision in
this prospectus, the provision of the prospectus supplement will control.
CERTIFICATES
Pass through certificates are securities that evidence an ownership
interest in a pass through trust. The holders of the certificates issued by a
pass through trust will be the beneficiaries of that trust. For convenience, we
may refer to pass through certificates as "certificates" and refer to the holder
of a pass through certificate as a "certificateholder."
The beneficial interest in a pass through trust represented by a
certificate will be a percentage interest in the property of that trust equal to
the original face amount of such certificate divided by the original face amount
of all of the certificates issued by that trust. Each certificate will represent
a beneficial interest only in the property of the pass through trust that issued
the certificate. Multiple series of certificates may be issued. If more than one
series of certificates is issued, each series of certificates will be issued by
a separate pass through trust.
The property that will be held by each pass through trust will include
equipment notes secured by aircraft that we own or lease. Payments of principal
and interest on the equipment notes owned by a pass through trust will be passed
through to holders of certificates issued by that trust in accordance with the
terms of the pass through trust agreement pursuant to which the trust was
formed.
If certificates of any series are entitled to the benefits of a liquidity
facility or other form of credit enhancement, the prospectus supplement relating
to that series will describe the terms of the liquidity facility or other form
of credit enhancement. A liquidity facility is a revolving credit agreement,
letter of credit, bank guarantee, insurance policy or other instrument or
agreement under which another person agrees to make certain payments in respect
of the certificates if there is a shortfall in amounts otherwise available for
distribution. While a liquidity facility is designed to increase the likelihood
of the timely payment of certain amounts due under certificates, it is not a
guarantee of timely or ultimate payment.
The rights of a pass through trustee to receive monies payable under
equipment notes held for that pass through trustee may be subject to the effect
of subordination provisions contained in an intercreditor agreement described in
the prospectus supplement for a series of certificates. An intercreditor
agreement will set forth the terms and conditions upon which payments made under
the equipment notes and payments made under any liquidity facility will be
received, shared and distributed among the several pass through trustees and the
liquidity provider.
We may offer and sell up to $1,800,000,000 of aggregate initial offering
price of certificates pursuant to this prospectus and related prospectus
supplements in one or more offerings of certificates. The initial offering price
may be denominated in U.S. dollars or foreign currencies based on the applicable
exchange rate at the time of sale.
PASS THROUGH TRUSTS
We will form a separate pass through trust to issue each series of
certificates. Each pass through trust will be formed by us, as creator of each
pass through trust, and a national or state bank or trust company, as trustee.
Unless otherwise stated in a prospectus supplement, Wilmington Trust Company
will be the trustee of each pass through trust. For convenience, we may refer to
the pass through trustee as the trustee.
Each pass through trust will be governed by a trust instrument that
creates the trust and sets forth the powers of the trustee and the rights of the
beneficiaries. The beneficiaries of a pass through trust will be the holders of
certificates issued by that trust. The trust instrument for each pass through
trust will consist of a basic pass through trust agreement between us and the
pass through trustee, which we refer to as the "Basic Agreement", and a
supplement to that basic agreement, which we refer to as a "pass through trust
supplement."
When a pass through trust supplement is signed and delivered, the pass
through trustee, on behalf of the related pass through trust, will enter into
one or more purchase or refunding agreements, referred to as "note purchase
agreements," under which it will agree to purchase one or more promissory notes
secured by aircraft described in the applicable prospectus supplement. These
secured promissory notes are referred to as "equipment notes."
Under the applicable note purchase agreement, the pass through trustee, on
behalf of the related pass through trust, will purchase one or more equipment
notes. The equipment notes that are the property of a pass through trust will
have:
o identical interest rates, in each case equal to the rate applicable
to the certificates issued by such pass through trust; and
o identical priority of payment relative to each of the other
equipment notes held for such pass through trust.
If any portion of the proceeds of an offering of a series of certificates
is not used to purchase equipment notes on the date the certificates are
originally issued, those proceeds will be held for the benefit of the
certificateholders. If any of the proceeds are not later used to purchase
equipment notes by the date specified in the applicable prospectus supplement,
the proceeds will be returned to the certificateholders.
EQUIPMENT NOTES
The equipment notes owned by a pass through trust may consist of any
combination of:
o Equipment notes issued by an owner trustee and secured by an
aircraft owned by that trustee and leased to us. We refer to these
equipment notes as "leased aircraft notes."
o Equipment notes issued by us and secured by an aircraft owned by us.
We refer to these equipment notes as "owned aircraft notes."
LEASED AIRCRAFT NOTES. Except as specified in a prospectus supplement,
leased aircraft notes will be issued by a bank, trust company, financial
institution or other entity solely in its capacity as owner trustee in a
leveraged lease transaction. In a leveraged lease transaction, one or more
persons will form an owner trust to acquire an aircraft and then that owner
trust will lease the aircraft to us. The investors that are the beneficiaries of
the owner trusts are typically referred to as owner participants. Each owner
participant will contribute a portion of the purchase price of the aircraft to
the owner trust, and the remainder of the purchase price of the aircraft will be
financed, or "leveraged", through the issuance of leased aircraft notes. Leased
aircraft notes may also be issued to refinance an aircraft previously financed
in a leveraged lease transaction or otherwise.
The leased aircraft notes will be issued pursuant to a separate indenture
between the owner trustee and a bank, trust company, financial institution or
other entity, as loan trustee. The indenture entered into in connection with the
issuance of leased aircraft notes will be referred to as a "leased aircraft
indenture." The loan trustee under a leased aircraft indenture will act as a
trustee for the holders of the leased aircraft notes issued under that leased
aircraft indenture.
In a leveraged lease transaction, we will pay or advance rent and other
amounts to the owner trustee in its capacity as lessor under the lease. The
owner trustee will use the rent payments and certain other amounts received by
it to make payments of principal and interest on the leased aircraft notes. The
owner trustee also will assign its rights to receive basic rent and certain
other payments to a loan trustee as security for the owner trustee's obligations
to pay principal of, premium, if any, and interest on the leased aircraft notes.
Payments or advances required to be made under a lease and related
agreements will at all times be sufficient to make scheduled payments of
principal of, and interest on, the leased aircraft notes issued to finance the
aircraft subject to that lease. However, we will not have any direct obligation
to pay principal of, or interest on, the leased aircraft notes. No owner
participant or owner trustee will be personally liable for any amount payable
under a leased aircraft indenture or the leased aircraft notes issued under that
indenture.
OWNED AIRCRAFT NOTES. We may finance or refinance aircraft that we own
through the issuance of owned aircraft notes. Owned aircraft notes relating to
an owned aircraft will be issued under a separate indenture relating to that
owned aircraft. Each separate indenture relating to owned aircraft notes will be
between us and a bank, trust company, financial institution or other entity, as
loan trustee. The indenture entered into in connection with the issuance of
owned aircraft notes will be referred to as an "owned aircraft indenture."
Because we often refer to owned aircraft indentures and leased aircraft
indentures together, we sometimes refer to them collectively as the
"indentures". The loan trustee under an owned aircraft indenture will act as a
trustee for the holders of the owned aircraft notes issued under that owned
aircraft indenture.
Unlike the leased aircraft notes, we will have a direct obligation to pay
the principal of, and interest on, the owned aircraft notes.
THE COMPANY
We are a major United States air carrier engaged in the business of
transporting passengers, cargo and mail. We are the fifth largest U.S. airline,
as measured by revenue passenger miles in 2000, and, together with our wholly
owned subsidiaries, Continental Express, Inc. and Continental Micronesia, Inc.,
serve 230 airports worldwide. As of January 19, 2001, we flew to 136 domestic
and 94 international destinations and offered additional connecting service
through alliances with domestic and foreign air carriers. We directly serve 16
European cities, 7 South American cities, Tel Aviv and Tokyo and are one of the
leading airlines providing service to Mexico and Central America, serving more
destinations there than any other U.S. airline. Continental Micronesia provides
extensive service in the western Pacific, including service to more Japanese
cities than any other U.S. carrier.
We operate our route system primarily through domestic hubs at Newark
International Airport, George Bush Intercontinental Airport in Houston, Hopkins
International Airport in Cleveland, and a Pacific hub on the island of Guam. We
are the primary carrier at each of these hubs, accounting for 55%, 78%, 50% and
68% of average daily jet departures, respectively, as of January 19, 2001 (in
each case excluding regional jets). Each of our domestic hubs is located in a
large business and population center, contributing to a high volume of "origin
and destination" traffic. The Guam hub is strategically located to provide
service from Japanese and other Asian cities to popular resort destinations in
the western Pacific.
We are a Delaware corporation, with executive offices located at 1600
Smith Street, Houston, Texas 77002. Our telephone number is (713) 324-2950.
USE OF PROCEEDS
Except as set forth in a prospectus supplement for a specific offering of
certificates, the certificates will be issued in order to provide funds for:
o the financing or refinancing of the debt portion and, in certain
cases, the refinancing of some of the equity portion of one or more
separate leveraged lease transactions entered into by us, as lessee,
with respect to the leased aircraft as described in the applicable
prospectus supplement; and
o the financing or refinancing of debt to be issued, or the purchase
of debt previously issued, by us in respect of the owned aircraft as
described in the applicable prospectus supplement.
Except as set forth in a prospectus supplement for a specific offering of
certificates, the proceeds from the sale of the certificates will be used by the
pass through trustee on behalf of the applicable pass through trust or pass
through trusts to purchase either:
o leased aircraft notes issued by one or more owner trustees to
finance or refinance, as specified in the applicable prospectus
supplement, the related leased aircraft; or
o owned aircraft notes issued by us to finance or refinance, as
specified in the applicable prospectus supplement, the related owned
aircraft.
If any portion of the proceeds of an offering of a series of certificates is not
used to purchase equipment notes on the date the certificates are issued, those
proceeds will be held for the benefit of the certificateholders. If any of the
proceeds are not later used to purchase equipment notes by the date specified in
the applicable prospectus supplement, the proceeds will be returned to the
certificateholders. See "Description of Certificates--Delayed Purchase of
Equipment Notes".
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of our "earnings" to our "fixed charges" for each of the years
1996 through 2000 were:
YEAR ENDED DECEMBER 31,
-----------------------------------
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
1.81 2.07 1.94 1.80 1.51
The ratios of earnings to fixed charges are based on continuing
operations. For purposes of the ratios, "earnings" means the sum of:
o our pre-tax income; and
o our fixed charges, net of interest capitalized.
"Fixed charges" represent:
o the interest we pay on borrowed funds;
o the amount we amortize for debt discount, premium and issuance
expense and interest previously capitalized; and
o that portion of rentals considered to be representative of the
interest factor.
DESCRIPTION OF THE CERTIFICATES
The following description is a summary of the terms of the certificates
that we expect will be common to all series of certificates. We will describe
the financial terms and other specific terms of any series of certificates in a
prospectus supplement. To the extent that any provision in any prospectus
supplement is inconsistent with any provision in this prospectus, the provision
of the prospectus supplement will control.
Because the following description is a summary, it does not describe every
aspect of the certificates, and it is subject to and qualified in its entirety
by reference to all the provisions of the pass through trust agreement and the
applicable supplements to the pass through trust agreement. For convenience, we
will refer to the pass through trust agreement between the pass through trustee
and us as the "Basic Agreement," and to the Basic Agreement as supplemented by a
supplement as a "pass through trust agreement." The form of Basic Agreement has
been filed as an exhibit to the registration statement of which this prospectus
is a part. The supplement to the Basic Agreement relating to each series of
certificates and the forms of the other agreements described in this prospectus
and the applicable prospectus supplement will be filed as exhibits to a
post-effective amendment to the registration statement of which this prospectus
is a part, a Current Report on Form 8-K, a Quarterly Report on Form 10-Q or an
Annual Report on Form 10-K, as applicable, filed by us with the SEC.
GENERAL
Except as amended by a supplement to the Basic Agreement, the terms of the
Basic Agreement generally will apply to all of the pass through trusts that we
form to issue certificates. We will create a separate pass through trust for
each series of certificates by entering into a separate supplement to the Basic
Agreement. Each supplement to the Basic Agreement will contain the additional
terms governing the specific pass through trust to which it relates and, to the
extent inconsistent with the Basic Agreement, will supersede the Basic
Agreement.
Certificates for a pass through trust will be issued pursuant to the pass
through trust agreement applicable to such pass through trust. Unless otherwise
stated in the applicable prospectus supplement, each pass through certificate
will be issued in a minimum denomination of $1,000 or a multiple of $1,000,
except that one certificate of each series may be issued in a different
denomination.
Each certificate will represent a fractional undivided interest in the
property of the pass through trust that issued the certificate. All payments and
distributions made with respect to a certificate will be made only from the
property owned by the pass through trust that issued the certificate. The
certificates do not represent an interest in or obligation of Continental, the
pass through trustee, any of the owner trustees or loan trustees, in their
individual capacities, or any owner participant. Each certificateholder by its
acceptance of a certificate agrees to look solely to the income and proceeds
from the property of the applicable pass through trust as provided in the pass
through trust agreement.
The property of each pass through trust for which a series of certificates
will be issued will include:
o the equipment notes held for the pass through trust;
o all monies at any time paid under the equipment notes held for the
pass through trust;
o the rights of such pass through trust to acquire equipment notes;
o funds from time to time deposited with the pass through trustee in
accounts relating to that pass through trust; and
o if so specified in the relevant prospectus supplement, rights under
intercreditor agreements relating to cross-subordination
arrangements and monies receivable under a liquidity facility.
The rights of a pass through trustee to receive monies payable under
equipment notes held for that pass through trustee may be subject to the effect
of subordination provisions contained in an intercreditor agreement described in
the prospectus supplement for a series of certificates. An intercreditor
agreement refers to an agreement among the pass through trustees and, if
applicable, a liquidity provider under a liquidity facility, as creditors of the
issuers of the equipment notes owned by the pass through trustees. An
intercreditor agreement will set forth the terms and conditions upon which
payments made under the equipment notes and payments made under any liquidity
facility will be received, shared and distributed among the several pass through
trustees and the liquidity provider. In addition, the intercreditor agreement
will set forth agreements among the pass through trustees and the liquidity
provider relating to the exercise of remedies under the equipment notes and the
indentures.
Cross-subordination refers to an agreement under which payments on a
junior class of equipment notes issued under an indenture are distributed to a
pass through trustee that holds a senior class of equipment notes issued under a
different indenture on which all required payments were not made. The effect of
this distribution mechanism is that holders of certificates of a pass through
trust that owns a junior class of equipment notes will not receive payments made
on that junior class of equipment notes until certain distributions are made on
the certificates of the pass through trust that owns a senior class of equipment
notes.
Equipment notes owned by a pass through trust may be leased aircraft
notes, owned aircraft notes or a combination of leased aircraft notes and owned
aircraft notes.
Leased aircraft notes will be issued in connection with the leveraged
lease of an aircraft to us. Except as set forth in the applicable prospectus
supplement, each leased aircraft will be leased to us under a lease between us,
as lessee, and an owner trustee, as lessor. Each owner trustee will issue leased
aircraft notes on a non-recourse basis under a separate leased aircraft
indenture between it and the applicable loan trustee. The owner trustee will use
the proceeds of the sale of the leased aircraft notes to finance or refinance a
portion of the purchase price paid or to be paid by the owner trustee for the
applicable leased aircraft. The owner trustee will obtain the remainder of the
funding for the leased aircraft from an equity contribution from the owner
participant that is the beneficiary of the owner trust and, to the extent set
forth in the applicable prospectus supplement, additional debt secured by the
applicable leased aircraft or other sources. A leased aircraft also may be
subject to other financing arrangements.
Generally, neither the owner trustee nor the owner participant will be
personally liable for any principal or interest payable under any leased
aircraft indenture or any leased aircraft notes. In some cases, an owner
participant may be required to make payments to an owner trustee that are to be
used by the owner trustee to pay principal of, and interest on, the equipment
notes. If an owner participant is required to make payments to be used by an
owner trustee to pay principal of, and interest on, the equipment notes and the
owner participant fails to make the payment, we will be required to provide the
owner trustee with funds sufficient to make the payment. We will be obligated to
make payments or advances under a lease and the related documents sufficient to
pay when due all scheduled principal and interest payments on the leased
aircraft notes issued to finance the aircraft subject to that lease.
We will issue owned aircraft notes under separate owned aircraft
indentures. Owned aircraft notes will be issued in connection with the financing
or refinancing of an aircraft that we own. Owned aircraft notes will be
obligations that have recourse to us and the related aircraft. Any owned
aircraft may secure additional debt or be subject to other financing
arrangements.
An indenture may provide for the issuance of multiple classes of equipment
notes. If an indenture provides for multiple classes of equipment notes, it may
also provide for differing priority of payments among the different classes.
Equipment notes issued under an indenture may be held in more than one pass
through trust, and one pass through trust may hold equipment notes issued under
more than one indenture. Unless otherwise provided in a prospectus supplement,
only equipment notes having the same priority of payment may be held for the
same pass through trust.
Except as set forth in the prospectus supplement for any series of
certificates, interest payments on the equipment notes held for a pass through
trust will be passed through to the registered holders of certificates of that
pass through trust at the annual rate shown on the cover page of the prospectus
supplement for the certificates issued by that pass through trust. The
certificateholders' right to receive payments made in respect of the equipment
notes is subject to the effect of any cross-subordination provisions described
in the prospectus supplement for a series of certificates.
We refer you to the prospectus supplement that accompanies this prospectus
for a description of the specific series of certificates being offered by this
prospectus and the applicable prospectus supplement, including:
o the specific designation, title and amount of the certificates;
o amounts payable on and distribution dates for the certificates;
o the currency or currencies, including currency units, in which the
certificates may be denominated;
o the specific form of the certificates, including whether or not the
certificates are to be issued in accordance with a book-entry
system;
o a description of the equipment notes to be purchased by the pass
through trust issuing that series of certificates, including:
o the period or periods within which, the price or prices at
which, and the terms and conditions upon which the equipment
notes may or must be redeemed or defeased in whole or in part,
by us or an owner trustee;
o the payment priority of the equipment notes in relation to any
other equipment notes issued with respect to the related
aircraft; and
o any intercreditor or other rights or limitations between or
among the holders of equipment notes of different priorities
issued with respect to the same aircraft;
o a description of the aircraft to be financed with the proceeds of
the issuance of the equipment notes;
o a description of the note purchase agreement setting forth the terms
and conditions upon which that pass through trust will purchase
equipment notes;
o a description of the indentures under which the equipment notes to
be purchased for that pass through trust will be issued;
o a description of the events of default, the remedies exercisable
upon the occurrence of events of default and any limitations on the
exercise of those remedies under the indentures pursuant to which
the equipment notes to be purchased for that pass through trust will
be issued;
o if the certificates relate to leased aircraft, a description of the
leases to be entered into by the owner trustees and us;
o if the certificates relate to leased aircraft, a description of the
provisions of the leased aircraft indentures governing:
o the rights of the related owner trustee and/or owner
participant to cure our failure to pay rent under the leases;
and
o any limitations on the exercise of remedies with respect to
the leased aircraft notes;
o if the certificates relate to leased aircraft, a description of the
participation agreements that will set forth the terms and
conditions upon which the owner participant, the owner trustee, the
pass through trustees, the loan trustee and we agree to enter into a
leveraged lease transaction;
o if the certificates relate to an owned aircraft, a description of
the participation agreements that will set forth the terms and
conditions upon which the applicable pass through trustees, the loan
trustee and we agree to enter into a financing transaction for the
owned aircraft;
o a description of the limitations, if any, on amendments to leases,
indentures, pass through trust agreements, participation agreements
and other material agreements entered into in connection with the
issuance of equipment notes;
o a description of any cross-default provisions in the indentures;
o a description of any cross-collateralization provisions in the
indentures;
o a description of any agreement among the holders of equipment notes
and any liquidity provider governing the receipt and distribution of
monies with respect to the equipment notes and the enforcement of
remedies under the indentures, including a description of any
applicable intercreditor and cross-subordination arrangements;
o a description of any liquidity facility or other credit enhancement
relating to the certificates;
o if the certificates relate to aircraft that have not yet been
delivered or financed, a description of any deposit or escrow
agreement or other arrangement providing for the deposit and
investment of funds pending the purchase of equipment notes and the
financing of an owned aircraft or leased aircraft; and
o any other special terms pertaining to the certificates.
The concept of cross-default mentioned above refers to a situation where a
default under one indenture or lease results in a default under other indentures
or leases. We currently do not expect any indentures or leases to contain
cross-default provisions. The concept of cross-collateralization mentioned above
refers to the situation where collateral that secures obligations incurred under
one indenture also serves as collateral for obligations under one or more other
indentures. We currently do not expect any indentures to be
cross-collateralized.
BOOK-ENTRY REGISTRATION
GENERAL
If specified in the applicable prospectus supplement, the certificates
will be subject to the procedures and provisions described below.
Upon issuance, each series of certificates will be represented by one or
more fully registered global certificates. Each global certificate will be
deposited with, or on behalf of, The Depository Trust Company, referred to as
DTC, and registered in the name of Cede & Co., the nominee of DTC. No purchaser
of a certificate will be entitled to receive a physical certificate representing
an interest in the global certificates, except as set forth below under
"--Physical Certificates". For convenience, we refer to such purchasers as
"certificate owners". Unless and until physical certificates are issued under
the limited circumstances described below, all references in this prospectus and
any prospectus supplement to actions by certificateholders will refer to actions
taken by DTC upon instructions from DTC participants, and all references to
distributions, notices, reports and statements to certificateholders will refer,
as the case may be, to distributions, notices, reports and statements to DTC or
Cede, as the registered holder of the certificates, or to DTC participants for
distribution to certificateholders in accordance with DTC procedures.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
"clearing agency" registered pursuant to Section 17A of the Securities Exchange
Act of 1934.
Under the New York Uniform Commercial Code, a "clearing corporation" is
defined as:
o a person that is registered as a "clearing agency" under the federal
securities laws;
o a federal reserve bank; or
o any other person that provides clearance or settlement services with
respect to financial assets that would require it to register as a
clearing agency under the federal securities laws but for an
exclusion or exemption from the registration requirement, if its
activities as a clearing corporation, including promulgation of
rules, are subject to regulation by a federal or state governmental
authority.
A "clearing agency" is an organization established for the execution of
trades by transferring funds, assigning deliveries and guaranteeing the
performance of the obligations of parties to trades.
DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between DTC participants
through electronic book-entry changes in the accounts of DTC participants. The
ability to execute transactions through book-entry changes in accounts
eliminates the need for transfer of physical certificates. DTC is owned by a
number of DTC participants and by the New York Stock Exchange, the American
Stock Exchange, and the National Association of Securities Dealers. DTC
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. Banks, brokers, dealers,
trust companies and other entities that clear through or maintain a custodial
relationship with a DTC participant, either directly or indirectly, are indirect
participants in the DTC system.
Under the rules, regulations and procedures creating and affecting DTC and
its operations, DTC is required to make book-entry transfers of the certificates
among DTC participants on whose behalf it acts with respect to the certificates
and to receive and transmit distributions of principal, premium, if any, and
interest with respect to the certificates. DTC participants and indirect DTC
participants with which certificate owners have accounts similarly are required
to make book-entry transfers and receive and transmit the payments on behalf of
their respective customers. Certificate owners that are not DTC participants or
indirect DTC participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, the certificates may do so only through DTC
participants and indirect DTC participants. In addition, certificate owners will
receive all distributions of principal, premium, if any, and interest from the
pass through trustee through DTC participants or indirect DTC participants, as
the case may be.
Under a book-entry format, certificate owners may experience some delay in
their receipt of payments, because payments with respect to the certificates
will be forwarded by the pass through trustee to Cede, as nominee for DTC. DTC
will forward payments in same-day funds to each DTC participant who is credited
with ownership of the certificates in an amount proportionate to the principal
amount of that DTC participant's holdings of beneficial interests in the
certificates, as shown on the records of DTC or its nominee. Each such DTC
participant will forward payments to its indirect DTC participants in accordance
with standing instructions and customary industry practices. DTC participants
and indirect DTC participants will be responsible for forwarding distributions
to certificate owners for whom they act. Accordingly, although certificate
owners will not possess physical certificates, DTC's rules provide a mechanism
by which certificate owners will receive payments on the certificates and will
be able to transfer their interests.
Unless and until physical certificates are issued under the limited
circumstances described below, the only physical certificateholder will be Cede,
as nominee of DTC. Certificate owners will not be recognized by the pass through
trustee as registered owners of certificates under the pass through trust
agreement. Certificate owners will be permitted to exercise their rights under
the pass through trust agreement only indirectly through DTC. DTC will take any
action permitted to be taken by a certificateholder under the pass through trust
agreement only at the direction of one or more DTC participants to whose
accounts with DTC the certificates are credited. In the event any action
requires approval by certificateholders of a certain percentage of the
beneficial interests in a pass through trust, DTC will take action only at the
direction of and on behalf of DTC participants whose holdings include undivided
interests that satisfy the required percentage. DTC may take conflicting actions
with respect to other undivided interests to the extent that the actions are
taken on behalf of DTC participants whose holdings include those undivided
interests. DTC will convey notices and other communications to DTC participants,
and DTC participants will convey notices and other communications to indirect
DTC participants in accordance with arrangements among them. Arrangements among
DTC and its direct and indirect participants are subject to any statutory or
regulatory requirements as may be in effect from time to time. DTC's rules
applicable to itself and DTC participants are on file with the SEC.
A certificate owner's ability to pledge the certificates to persons or
entities that do not participate in the DTC system, or otherwise to act with
respect to the certificates, may be limited due to the lack of a physical
certificate to evidence ownership of the certificates, and because DTC can only
act on behalf of DTC participants, who in turn act on behalf of indirect DTC
participants.
Neither we nor the pass through trustee will have any liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the certificates held by Cede, as nominee for DTC, for
maintaining, supervising or reviewing any records relating to the beneficial
ownership interests or for the performance by DTC, any DTC participant or any
indirect DTC participant of their respective obligations under the rules and
procedures governing their obligations.
The applicable prospectus supplement will specify any additional
book-entry registration procedures applicable to certificates denominated in a
currency other than U.S. dollars.
SAME-DAY SETTLEMENT AND PAYMENT
As long as the certificates are registered in the name of DTC or its
nominee, we will make all payments to the loan trustee under any lease or any
owned aircraft indenture in immediately available funds. The pass through
trustee will pass through to DTC in immediately available funds all payments
received from us, including the final distribution of principal with respect to
the certificates of any pass through trust.
Any certificates registered in the name of DTC or its nominee will trade
in DTC's Same-Day Funds Settlement System until maturity. DTC will require
secondary market trading activity in the certificates to settle in immediately
available funds. We cannot give any assurance as to the effect, if any, of
settlement in same-day funds on trading activity in the certificates.
PHYSICAL CERTIFICATES
Physical certificates will be issued in paper form to certificateholders
or their nominees, rather than to DTC or its nominee, only if:
o we advise the pass through trustee in writing that DTC is no longer
willing or able to discharge properly its responsibilities as
depository with respect to the certificates and we are unable to
locate a qualified successor;
o we elect to terminate the book-entry system through DTC; or
o after the occurrence of certain events of default or other events
specified in the related prospectus supplement, certificateholders
owning at least a majority in interest in a pass through trust
advise the applicable pass through trustee, us and DTC through DTC
participants that the continuation of a book-entry system through
DTC or a successor to DTC is no longer in the certificate owners'
best interest.
Upon the occurrence of any of the events described in the three
subparagraphs above, the applicable pass through trustee will notify all
certificate owners through DTC participants of the availability of physical
certificates. Upon surrender by DTC of the global certificates and receipt of
instructions for re-registration, the pass through trustee will reissue the
certificates as physical certificates to certificate owners.
After physical certificates are issued, the pass through trustee or a
paying agent will make distributions of principal, premium, if any, and interest
with respect to certificates directly to holders in whose names the physical
certificates were registered at the close of business on the applicable record
date. Except for the final payment to be made with respect to a certificate, the
pass through trustee or a paying agent will make distributions by check mailed
to the addresses of the registered holders as they appear on the register
maintained by the pass through trustee. The pass through trustee or a paying
agent will make the final payment with respect to any pass through certificate
only upon presentation and surrender of the applicable pass through certificate
at the office or agency specified in the notice of final distribution to
certificateholders.
Physical certificates will be freely transferable and exchangeable at the
office of the pass through trustee upon compliance with the requirements set
forth in the pass through trust agreement. Neither the pass through trustee nor
any transfer or exchange agent will impose a service charge for any registration
of transfer or exchange. However, the pass through trustee or transfer or
exchange agent will require payment of a sum sufficient to cover any tax or
other governmental charge attributable to a transfer or exchange.
PAYMENTS AND DISTRIBUTIONS
Subject to the effect of any cross-subordination provisions set forth
in the prospectus supplement for a series of certificates:
o Payments of principal, premium, if any, and interest with respect to
the equipment notes held for each pass through trust will be
distributed by the pass through trustee, upon receipt, to
certificateholders of that trust on the dates and in the currency
specified in the applicable prospectus supplement, except in certain
cases when some or all of the equipment notes are in default as
described in the applicable prospectus supplement. Payments of
principal of, and interest on, the unpaid principal amount of the
equipment notes held in each pass through trust will be scheduled to
be received by the pass through trustee on the dates specified in
the applicable prospectus supplement.
o Each certificateholder of a pass through 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
for such pass through trust.
If we elect or are required to redeem equipment notes relating to one or
more aircraft prior to their scheduled maturity date, payments of principal,
premium (if any) and interest received by the pass through trustee as a result
of the early redemption will be distributed on a special distribution date
determined as described in the applicable prospectus supplement. Payments
received by the pass through trustee following a default under the equipment
notes held for a pass through trust will also be distributed on a special
distribution date determined in the same way. However, if following such a
default the pass through trustee receives any scheduled payments on equipment
notes on a regular distribution date or within five days thereafter, the pass
through trustee will distribute those payments on the date they are received. In
addition, if following a default under equipment notes the pass through trustee
receives payments on the equipment notes on a regular distribution date by
making a drawing under any liquidity facility, as described in the applicable
prospectus supplement, those payments will be distributed to certificateholders
on the regular distribution date. The pass through trustee will mail notice to
the certificateholders of record of the applicable pass through trust stating
the anticipated special distribution date.
POOL FACTORS
Unless otherwise described in the applicable prospectus supplement, the
"pool balance" for each pass through trust or for the certificates issued by any
pass through trust indicates, as of any date, the portion of the original
aggregate face amount of the certificates issued by that pass through trust that
has not been distributed to certificateholders (excluding any payments of
interest or premium). The pool balance for each pass through trust as of any
distribution date will be computed after giving effect to any distribution to
certificateholders to be made on that date.
Unless otherwise described in the applicable prospectus supplement, the
"pool factor" for a pass through trust as of any distribution date for that
trust is the quotient (rounded to the seventh decimal place) computed by
dividing (a) the pool balance by (b) the aggregate original face amount of the
certificates issued by that pass through trust. The pool factor for a pass
through trust as of any distribution date will be computed after giving effect
to the payment of principal, if any, on the equipment notes held for that pass
through trust and distribution to certificateholders of the payment of principal
to be made on that date. Each pass through trust will have a separate pool
factor.
The pool factor for a pass through trust initially will be 1.0000000. The
pool factor for a pass through trust will decline as described in this
prospectus and the related prospectus supplement to reflect reductions in the
pool balance of that pass through trust. As of any distribution date for a pass
through trust, a certificate will represent a share of the pool balance of that
pass through trust equal to the product obtained by multiplying the original
face amount of the certificate by the pool factor for the pass through trust
that issued such certificate. The pool factor and pool balance of each past
through trust will be mailed to the certificateholders of the pass through trust
on each distribution date.
The pool factor for each pass through trust will decline in proportion to
the scheduled repayments of principal on the equipment notes held by that pass
through trust, unless there is an early redemption or purchase of equipment
notes held by a pass through trust or if a default occurs in the repayment of
equipment notes held by a pass through trust. In the event of a redemption,
purchase or default, the pool factor and the pool balance of each pass through
trust affected by the redemption, purchase or default will be recomputed, and a
notice will be mailed to the certificateholders of the pass through trust.
REPORTS TO CERTIFICATEHOLDERS
The pass through trustee will include with each distribution of a payment
to certificateholders a statement setting forth the following information:
o the amount of the distribution allocable to principal and the amount
allocable to premium, if any;
o the amount of the distribution allocable to interest; and
o the pool balance and the pool factor for the pass through trust
after giving effect to the distribution.
As long as the certificates are registered in the name of DTC or its
nominee, on the record date prior to each distribution date, the pass through
trustee will request from DTC a securities position listing setting forth the
names of all DTC participants reflected on DTC's books as holding interests in
the certificates on that record date. On each distribution date, the applicable
pass through trustee will mail to each DTC participant holding certificates the
statement described above and will make available additional copies as requested
by the DTC participants for forwarding to certificate owners.
After the end of each calendar year, each pass through trustee will
prepare a report for each person that was a holder of one or more of its pass
through certificates at any time during the preceding calendar year. This report
will contain the sum of the amount of distributions allocable to principal,
premium and interest with respect to that pass through trust for the preceding
calendar year or, if the person was a holder of a pass through certificate
during only a portion of the preceding calendar year, for the applicable portion
of the preceding calendar year. In addition, each pass through trustee will
prepare for each person that was a holder of one or more of its pass through
certificates at any time during the preceding calendar year any other
information that are readily available to the pass through trustee and which a
certificateholder reasonably requests as necessary for the purpose of preparing
its federal income tax returns. The reports and other items described in this
section will be prepared on the basis of information supplied to the pass
through trustee by DTC participants and will be delivered by the pass through
trustee to DTC participants to be available for forwarding by DTC participants
to certificate owners in the manner described above.
If the certificates of a pass through trust are issued in the form of
physical certificates, the pass through trustee of that pass through trust will
prepare and deliver the information described above to each record holder of a
pass through certificate issued by that pass through trust as the name and
period of ownership of the holder appears on the records of the registrar of the
certificates.
VOTING OF EQUIPMENT NOTES
A pass through trustee has the right to vote and give consents and waivers
with respect to the equipment notes held by that pass through trust. However,
the pass through trustee's right to vote and give consents or waivers may be
restricted or may be exercisable by another person in accordance with the terms
of an intercreditor agreement, as described in the applicable prospectus
supplement. The pass through trust agreement will set forth:
o the circumstances in which a pass through trustee may direct any
action or cast any vote with respect to the equipment notes held for
its pass through trust at its own discretion;
o the circumstances in which a pass through trustee will seek
instructions from its certificateholders; and
o if applicable, the percentage of certificateholders required to
direct the pass through trustee to take action.
If the holders of certificates are entitled to the benefits of a liquidity
facility, and the liquidity facility is used to make any payments to
certificateholders, the provider of the liquidity facility may be entitled to
exercise rights to vote or give consents and waivers with respect to the
equipment notes held for the pass through trust that issued the certificates, as
described in the applicable prospectus supplement.
EVENTS OF DEFAULT AND CERTAIN RIGHTS UPON AN EVENT OF DEFAULT
The prospectus supplement will specify the events of default that can
occur under the pass through trust agreement and under the indentures relating
to the equipment notes held for the related pass through trust. In the case of a
leased aircraft indenture, an indenture default will include events of default
under the related lease. In the case of any equipment notes that are supported
by a liquidity facility, a default may include events of default under that
liquidity facility.
Unless otherwise provided in a prospectus supplement, all of the equipment
notes issued under the same indenture will relate to a specific aircraft and
there will be no cross-collateralization or cross-default provisions in the
indentures. As a result, events resulting in a default under any particular
indenture will not necessarily result in an a default under any other indenture.
If a default occurs in fewer than all of the indentures, payments of principal
and interest on the equipment notes issued under the indentures with respect to
which a default has not occurred will continue to be made as originally
scheduled.
As described below under "--Cross-Subordination Issues", a prospectus
supplement may describe the terms of any cross-subordination provisions among
certificateholders of separate pass through trusts. If cross-subordination is
provided, payments made pursuant to an indenture under which a default has not
occurred may be distributed first to the holders of the certificates issued
under the pass through trust which holds the most senior equipment notes issued
under all of the indentures.
The ability of the applicable owner trustee or owner participant under a
leased aircraft indenture to cure a default under the indenture, including a
default that results from the occurrence of a default under the related lease,
will be described in the prospectus supplement. Unless otherwise provided in a
prospectus supplement, with respect to any pass through certificates or
equipment notes entitled to the benefits of a liquidity facility, a drawing
under the liquidity facility for the purpose of making a payment of interest as
a result of our failure to have made a corresponding payment will not cure a
default related to our failure.
The prospectus supplement related to a series of pass through certificates
will describe the circumstances under which the pass through trustee of the
related pass through trust may vote some or all of the equipment notes held in
the pass through trust. The prospectus supplement also will set forth the
percentage of certificateholders of the pass through trust entitled to direct
the pass through trustee to take any action with respect to the equipment notes.
If the equipment notes outstanding under an indenture are held by more than one
pass through trust, then the ability of the certificateholders issued with
respect to any one pass through trust to cause the loan trustee with respect to
any equipment notes held in the pass through trust to accelerate the equipment
notes under the applicable indenture or to direct the exercise of remedies by
the loan trustee under the applicable indenture will depend, in part, upon the
proportion of the aggregate principal amount of the equipment notes outstanding
under that indenture and held in that pass through trust to the aggregate
principal amount of all equipment notes outstanding under that indenture.
In addition, if cross-subordination provisions are applicable to any
series of certificates, then the ability of the certificateholders of any one
pass through trust holding equipment notes issued under an indenture to cause
the loan trustee with respect to any equipment notes held in that pass through
trust to accelerate the equipment notes under that indenture or to direct the
exercise of remedies by the loan trustee under that indenture will depend, in
part, upon the class of equipment notes held in the pass through trust. If the
equipment notes outstanding under an indenture are held by more than one pass
through trust, then each pass through trust will hold equipment notes with
different terms from the equipment notes held in the other pass through trusts
and therefore the certificateholders of each pass through trust may have
divergent or conflicting interests from those of the certificateholders of the
other pass through trusts holding equipment notes issued under the same
indenture. In addition, so long as the same institution acts as pass through
trustee of each pass through trust, in the absence of instructions from the
certificateholders of any pass through trust, the pass through trustee for the
pass through trust could for the same reason be faced with a potential conflict
of interest upon a default under an indenture. In that event, the pass through
trustee has indicated that it would resign as pass through trustee of one or all
the pass through trusts, and a successor trustee would be appointed in
accordance with the terms of the Basic Agreement.
The prospectus supplement for a series of certificates will specify
whether and under what circumstances the pass through trustee may sell for cash
to any person all or part of the equipment notes held in the related pass
through trust. Any proceeds received by the pass through trustee upon a sale
will be deposited in an account established by the pass through trustee for the
benefit of the certificateholders of the pass through trust for the deposit of
the special payments and will be distributed to the certificateholders of the
pass through trust on a special distribution date.
The market for equipment notes in default may be very limited, and we
cannot assure you that they could be sold for a reasonable price. Furthermore,
so long as the same institution acts as pass through trustee of multiple pass
through trusts, it may be faced with a conflict in deciding from which pass
through trust to sell equipment notes to available buyers. If the pass through
trustee sells any equipment notes with respect to which a default under an
indenture exists for less than their outstanding principal amount, the
certificateholders of that pass through trust will receive a smaller amount of
principal distributions than anticipated and will not have any claim for the
shortfall against us, any owner trustee, owner participant or the pass through
trustee. Furthermore, neither the pass through trustee nor the
certificateholders of that pass through trust could take any action with respect
to any remaining equipment notes held in that pass through trust so long as no
default under an indenture exists.
Any amount, other than scheduled payments received on a regular
distribution date, distributed to the pass through trustee of any pass through
trust by the loan trustee under any indenture on account of the equipment notes
held in that pass through trust following a default under such indenture will be
deposited in the special payments account for that pass through trust and will
be distributed to the certificateholders of that pass through trust on a special
distribution date. In addition, if a prospectus supplement provides that the
applicable owner trustee may, under circumstances specified in the prospectus
supplement, redeem or purchase the outstanding equipment notes issued under the
applicable indenture, the price paid by the owner trustee to the pass through
trustee of any pass through trust for the equipment notes issued under that
indenture and held in that pass through trust will be deposited in the special
payments account for the pass through trust and will be distributed to the
certificateholders of the pass through trust on a special distribution date.
Any funds representing payments received with respect to any equipment
notes in default held in a pass through trust, or the proceeds from the sale by
the pass through trustee of any of those equipment notes, held by the pass
through trustee in the special payments account for that pass through trust
will, to the extent practicable, be invested and reinvested by the pass through
trustee in permitted investments pending the distribution of the funds on a
special distribution date. Permitted investments will be specified in the
related prospectus supplement.
The Basic Agreement provides that the pass through trustee of each pass
through trust will give to the certificateholders of that pass through trust
notice of all uncured or unwaived defaults known to it with respect to that pass
through trust. The Basic Agreement requires the pass through trustee to provide
the notice of default within 90 days after the occurrence of the default.
However, except in the case of default in the payment of principal, premium, if
any, or interest on any of the equipment notes held for a pass through trust,
the pass through trustee will be protected in withholding a notice of default if
it in good faith determines that withholding the notice is in the interest of
the certificateholders of such pass through trust. The term "default" as used in
this paragraph means only the occurrence of a default under an indenture with
respect to equipment notes held in a pass through trust as described above,
except that in determining whether any default under an indenture has occurred,
any related grace period or notice will be disregarded.
The Basic Agreement requires the pass through trustee to act with a
specified standard of care while a default is continuing under an indenture. In
addition, the Basic Agreement contains a provision entitling the pass through
trustee to require reasonable security or indemnification by the
certificateholders of the pass through trust before proceeding to exercise any
right or power under the Basic Agreement at the request of those
certificateholders.
The prospectus supplement for a series of certificates will specify the
percentage of certificateholders entitled to waive, or to instruct the pass
through trustee to waive, any past default with respect to the related pass
through trust and its consequences. The prospectus supplement for a series of
certificates also will specify the percentage of certificateholders entitled to
waive, or to instruct the pass through trustee or the loan trustee to waive, any
past default under an indenture.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
We will be prohibited from consolidating with or merging into any other
corporation or transferring substantially all of our assets as an entirety to
any other corporation unless the surviving, successor or transferee corporation:
o is validly existing under the laws of the United States or any of
its states;
o is a citizen of the United States, as defined in Title 49 of the
U.S. Code relating to aviation, referred to as the "Transportation
Code," holding an air carrier operating certificate issued pursuant
to Chapter 447 of Title 49, U.S. Code, if, and so long as, that
status is a condition of entitlement to the benefits of Section 1110
of the U.S. Bankruptcy Code relating to the rights of creditors of
an airline in the event of the airline's bankruptcy; and
o expressly assumes all of our obligations contained in the Basic
Agreement and any pass through trust supplement, the note purchase
agreements, any indentures, any participation agreements and, with
respect to aircraft leased by us, the applicable leases.
In addition, we will be required to deliver a certificate and an opinion
or opinions of counsel indicating that the transaction, in effect, complies with
these conditions.
MODIFICATIONS OF THE BASIC AGREEMENT
The Basic Agreement contains provisions permitting us and the pass through
trustee of each pass through trust to enter into a supplemental trust agreement,
without the consent of the holders of any of the certificates issued by such
pass through trust, in order to do the following, among other things:
o to provide for the formation of such pass through trust and the
issuance of a series of certificates and to set forth the terms of
the certificates;
o to evidence the succession of another corporation to us and the
assumption by that corporation of our obligations under the Basic
Agreement and the pass through trust agreements;
o to add to our covenants for the benefit of holders of such
certificates, or to surrender any right or power in the Basic
Agreement conferred upon us;
o to cure any ambiguity or correct or supplement any defective or
inconsistent provision of the Basic Agreement or any pass through
trust agreement, so long as those changes will not materially
adversely affect the interests of the holders of such certificates,
or to cure any ambiguity or correct any mistake or, to give effect
to or provide for replacement liquidity facilities, if applicable,
to such certificates;
o to comply with any requirement of the SEC, any applicable law, rules
or regulations of any exchange or quotation system on which any
certificates may be listed or of any regulatory body;
o to modify, eliminate or add to the provisions of the Basic Agreement
to the extent necessary to continue the qualification of the pass
through trust agreement under the Trust Indenture Act of 1939, and
to add to the Basic Agreement other provisions as may be expressly
permitted by the Trust Indenture Act;
o to provide for a successor pass through trustee or to add to or
change any provision of the Basic Agreement as necessary to
facilitate the administration of the pass through trusts created
under the pass through trust agreement by more than one pass through
trustee; and
o to make any other amendments or modifications to the Basic Agreement
so long as those amendments or modifications apply only to
certificates of a series issued after the date of the amendment or
modification.
No pass through trust supplement may be made that will adversely affect
the status of any pass through trust as a grantor trust for U.S. federal income
tax purposes.
The Basic Agreement also contains provisions permitting us and the pass
through trustee of each pass through trust, with the consent of a majority in
interest of the certificateholders of the pass through trust, to execute
supplemental trust agreements adding any provisions to or changing or
eliminating any of the provisions of the Basic Agreement, to the extent relating
to that pass through trust, and the applicable pass through trust supplement, or
modifying the rights of the certificateholders, except that no supplement may,
without the consent of each affected certificateholder:
o reduce in any manner the amount of, or delay the timing of, any
receipt by the pass through trustee of payments on the equipment
notes held in the pass through trust or distributions in respect of
any pass through certificate issued by the pass through trust;
o change the date or place of any payment in respect of any pass
through certificate, or make distributions payable in currency other
than that provided for in the certificates, or impair the right of
any certificateholder to institute suit for the enforcement of any
payment when due;
o permit the disposition of any equipment note held in the pass
through trust, except as provided in the pass through trust
agreement, or otherwise deprive any certificateholder of the benefit
of the ownership of the applicable equipment note;
o reduce the percentage of the aggregate fractional undivided
interests of the pass through trust that is required in order for
any supplement or waiver to be approved;
o 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;
o alter the priority of distributions described in any applicable
intercreditor agreement, in a manner materially adverse to the
interests of the certificateholders of such pass through trust; or
o adversely affect the status of any pass through trust as a grantor
trust for U.S. federal income tax purposes.
MODIFICATION OF INDENTURE AND RELATED AGREEMENTS
The prospectus supplement will specify the pass through trustee's
obligations if a pass through trustee, as the holder of any equipment notes held
for a pass through trust, receives a request for its consent to any amendment,
modification or waiver under the indenture under which the equipment notes were
issued, under the lease relating to the aircraft leased by us that was financed
with the proceeds of the equipment notes or under any liquidity facility.
CROSS-SUBORDINATION ISSUES
The equipment notes issued under an indenture may be held in more than one
pass through trust, and one pass through trust may hold equipment notes issued
under more than one indenture. Unless otherwise provided in a prospectus
supplement, only equipment notes having the same priority for distributions
under the applicable indenture may be held in the same pass through trust. In
that event, payments made on account of a subordinate class of certificates
issued under a prospectus supplement may be subordinated, under circumstances
described in the prospectus supplement, to the prior payment of all amounts
owing to certificateholders of a pass through trust which holds senior equipment
notes issued under the applicable indentures. The prospectus supplement related
to an issuance of certificates will describe the "cross-subordination"
provisions and any related terms, including the percentage of certificateholders
under any pass through trust which are permitted to:
o grant waivers of defaults under any applicable indenture;
o consent to the amendment or modification of any applicable
indenture; or
o direct the exercise of remedial actions under any applicable
indenture.
TERMINATION OF THE PASS THROUGH TRUSTS
Our obligations and those of the pass through trustee with respect to a
pass through trust will terminate upon the distribution to certificateholders of
the pass through 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 the pass through trust. In no event will any pass through
trust continue beyond 110 years following the date of the execution of the
applicable pass through trust supplement, or any other final expiration date as
may be specified in the pass through trust supplement. The pass through trustee
will send to each certificateholder of record of the pass through trust notice
of the termination of the pass through trust, the amount of the proposed final
payment and the proposed date for the distribution of the final payment for the
pass through trust. The final distribution to any certificateholder of the pass
through trust will be made only upon surrender of that certificateholder's
certificates at the office or agency of the pass through trustee specified in
the notice of termination.
DELAYED PURCHASE OF EQUIPMENT NOTES
On the issuance date of any certificates, if all of the proceeds from the
sale of the certificates are not used to purchase the equipment notes
contemplated to be held in the related pass through trust, the equipment notes
may be purchased by the pass through trustee at any time on or prior to the date
specified in the applicable prospectus supplement. In that event, the proceeds
from the sale of the certificates not used to purchase equipment notes will be
held under an arrangement described in the applicable prospectus supplement
pending the purchase of equipment notes. The arrangements with respect to the
payment of interest on funds so held will be described in the applicable
prospectus supplement. If any proceeds are not used to purchase equipment notes
by the date specified in the applicable prospectus supplement, the proceeds will
be returned to the certificateholders.
LIQUIDITY FACILITY
The related prospectus supplement may provide that one or more payments of
interest on the certificates of one or more series will be supported by a
liquidity facility issued by an institution identified in the related prospectus
supplement. The provider of the liquidity facility may have a claim on money and
property belonging to a pass through trust that is senior to the
certificateholders' as specified in the related prospectus supplement.
THE PASS THROUGH TRUSTEE
Unless otherwise provided in the prospectus supplement for any series of
certificates, the pass through trustee for each series of certificates will be
Wilmington Trust Company. With certain exceptions, the pass through trustee
makes no representations as to the validity or sufficiency of the Basic
Agreement, the pass through trust supplements, the certificates, the equipment
notes, the indentures, the leases or other related documents. The pass through
trustee will not be liable with respect to any series of certificates 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 that series issued under the Basic Agreement. Subject to those
provisions, the pass through trustee will be under no obligation to exercise any
of its rights or powers under the Basic Agreement at the request of any holders
of certificates issued under that agreement unless they will have offered to the
pass through trustee indemnity satisfactory to it. The Basic Agreement provides
that the pass through trustee in its individual or any other capacity may
acquire and hold certificates and, subject to certain conditions, may otherwise
deal with us and, with respect to the leased aircraft, with any owner trustee
with the same rights it would have if it were not the pass through trustee.
The pass through trustee may resign with respect to any or all of the pass
through trusts at any time, in which event we will be obligated to appoint a
successor trustee. If the pass through trustee ceases to be eligible to continue
as pass through trustee with respect to a pass through trust or becomes
incapable of acting as pass through trustee or becomes insolvent, we may remove
the pass through trustee, or any certificateholder of the pass through 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 the pass through
trustee and the appointment of a successor trustee. Any resignation or removal
of the pass through trustee with respect to a pass through trust and appointment
of a successor trustee for the pass through trust does not become effective
until acceptance of the appointment by the successor trustee. Pursuant to the
resignation and successor trustee provisions, it is possible that a different
trustee could be appointed to act as the successor trustee with respect to each
pass through trust. All references in this prospectus to the pass through
trustee should be read to take into account the possibility that the pass
through trusts could have different successor trustees in the event of a
resignation or removal.
The Basic Agreement provides that we will pay the pass through trustee's
fees and expenses and indemnify the pass through trustee against certain
liabilities.
DESCRIPTION OF THE EQUIPMENT NOTES
The statements made under this caption are summaries, and we refer you to
the entire prospectus and detailed information appearing in the applicable
prospectus supplement. Where no distinction is made between the leased aircraft
notes and the owned aircraft notes or between their respective indentures, those
statements refer to any equipment notes and any indenture.
To the extent that any provision in any prospectus supplement is
inconsistent with any provision in this summary, the provision of the prospectus
supplement will control.
GENERAL
The equipment notes will be issued under indentures. Equipment notes
secured by an aircraft that is leased to us will be issued under an indenture
between an owner trustee and a loan trustee. Equipment notes secured by an
aircraft that is owned by us will be issued under an indenture between a loan
trustee and us.
The leased aircraft notes will be non-recourse obligations of the
applicable owner trustee. All of the leased aircraft notes issued under the same
indenture will relate to and will be secured by one or more specific aircraft
leased to us. Unless otherwise specified in the applicable prospectus
supplement, leased aircraft notes will not be secured by any other aircraft.
We will be the issuer of owned aircraft notes. The owned aircraft notes
will be our direct recourse obligations. All of the owned aircraft notes issued
under the same indenture will relate to, and will be secured by, one or more
specific aircraft that we own. Unless otherwise specified in the applicable
prospectus supplement, the owned aircraft notes will not be secured by any other
aircraft.
PRINCIPAL AND INTEREST PAYMENTS
Interest received by the pass through trustee on the equipment notes held
in a pass through trust will be passed through to the certificateholders of that
pass through trust on the dates and at the annual rate set forth in the
applicable prospectus supplement until the final distribution for that pass
through trust. Principal payments received by the pass through trustee on the
equipment notes held in a pass through trust will be passed through to the
certificateholders of that pass through trust in scheduled amounts on the dates
set forth in the applicable prospectus supplement until the final distribution
date for that pass through trust.
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, the payment
will be made on the next succeeding business day without any additional
interest.
REDEMPTION
The applicable prospectus supplement will describe the circumstances,
whether voluntary or involuntary, under which the equipment notes may be
redeemed or purchased prior to their stated maturity date, in whole or in part.
The prospectus supplement will also describe the premium, if any, applicable
upon redemptions or purchases and other terms applying to the redemptions or
purchases of the equipment notes.
SECURITY
The leased aircraft notes will be secured by:
o an assignment by the related owner trustee to the related loan
trustee of the owner trustee's rights, except for certain rights
described below, under the lease or leases with respect to the
related aircraft, including the right to receive payments of rent
under those leases; and
o a mortgage granted to the loan trustee on the aircraft, subject to
our rights under the lease or leases.
Under the terms of each lease, our obligations in respect of each leased
aircraft will be those of a lessee under a "net lease". Accordingly, we will be
obligated, among other things and at our expense, to cause each leased aircraft
to be duly registered, to pay all costs of operating the aircraft and to
maintain, service, repair and overhaul the aircraft or cause it to be
maintained, serviced, repaired and overhauled. With respect to the leased
aircraft, the assignment by the related owner trustee to the related loan
trustee of its rights under the related lease will exclude, among other things:
o rights of the owner trustee and the related owner participant
relating to indemnification by us for certain matters;
o insurance proceeds payable to the owner trustee in its individual
capacity and to the owner participant under liability insurance
maintained by us pursuant to the lease or by the owner trustee or
the owner participant;
o insurance proceeds payable to the owner trustee in its individual
capacity or to the owner participant under certain casualty
insurance maintained by the owner trustee or the owner participant
pursuant to the lease; and
o any rights of the owner participant or the owner trustee to enforce
payment of the foregoing amounts and their respective rights to the
proceeds of the foregoing.
The owned aircraft notes will be secured by a mortgage granted to the
related loan trustee of all of our right, title and interest in and to the owned
aircraft. Under the terms of each owned aircraft indenture, we will be
obligated, among other things and at our expense, to cause each owned aircraft
to be duly registered, to pay all costs of operating the aircraft and to
maintain, service, repair and overhaul the aircraft or cause it to be
maintained, serviced, repaired and overhauled.
We will be required, except under certain circumstances, to keep each
aircraft registered under the Transportation Code, and to record the indenture
and the lease, if applicable, among other documents, with respect to each
aircraft under the Transportation Code. Recordation of the indenture, the lease,
if applicable, and other documents with respect to each aircraft will give the
related loan trustee a perfected security interest in the related aircraft
whenever it is located in the United States or any of its territories and
possessions. The Convention on the International Recognition of Rights in
Aircraft, referred to as the "Convention," provides that this security interest
will also be recognized, with certain limited exceptions, in those jurisdictions
that have ratified or adhere to the Convention.
We will have the right, subject to certain conditions, at our own expense
to register each aircraft in countries other than the United States. Each
aircraft may also be operated by us or under lease, sublease or interchange
arrangements in countries that are not parties to the Convention. The extent to
which the related loan trustee's security interest would be recognized in an
aircraft located in a country that is not a party to the Convention, and the
extent to which the 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, is uncertain. Moreover, in the case of a default under
an indenture, 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 the aircraft were registered or located outside the United
States.
Unless otherwise specified in the applicable prospectus supplement, the
equipment notes will not be cross-collateralized. Consequently, the equipment
notes issued in respect of any one aircraft will not be secured by any other
aircraft. Unless and until a default under an indenture with respect to a leased
aircraft has occurred and is continuing, the related loan trustee may exercise
only limited rights of the related owner trustee under the related lease.
The loan trustee will invest and reinvest funds, if any, held by it from
time to time under an indenture. The loan trustee will, at our direction, invest
and reinvest funds in certain investments described in the applicable indenture.
We will not be entitled to direct the loan trustee to invest and reinvest funds
with respect to a leased aircraft in the case of a default under the applicable
lease or, with respect to an owned aircraft, in the case of a default under the
applicable indenture. We will pay the net amount of any loss resulting from
these investments.
In the case of Chapter 11 bankruptcy proceedings involving a holder of
"equipment" (defined as described below), Section 1110 of the U.S. Bankruptcy
Code provides special rights to lessors, conditional vendors and holders of
security interests with respect to such equipment. Under Section 1110, the right
of such financing parties to take possession of such equipment in compliance
with the provisions of a lease, conditional sale contract or security agreement
is not affected by any provision of the U.S. Bankruptcy Code or any power of the
bankruptcy court. Ordinarily, such right would be limited by the "automatic
stay" under the Bankruptcy Code. Such right to take possession may not be
exercised for 60 days following the date of commencement of the reorganization
proceedings. Thereafter, such right to take possession may be exercised during
such proceedings unless, within the 60-day period or any longer period consented
to by the relevant parties, the debtor agrees to perform its obligations that
become due on or after that date and cures all defaults on a timely basis.
Defaults resulting solely from the financial condition, bankruptcy, insolvency
or reorganization of the debtor need not be cured.
"Equipment" is defined in Section 1110 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 of the U.S. Code) that is subject to a
security interest granted by, leased to, or conditionally sold to a debtor that,
at the time such transaction is entered into, holds an air carrier operating
certificate issued pursuant to chapter 447 of title 49 of the U.S. Code for
aircraft capable of carrying 10 or more individuals or 6,000 pounds of more of
cargo (subject to certain limitations in the case of equipment first placed in
service on or prior to October 22, 1994).
In connection with any issuance of certificates under this prospectus and
the applicable prospectus supplement, it will be a condition to the pass through
trustee's obligation to purchase equipment notes with respect to each aircraft
that our outside counsel provide its opinion (which may assume that we hold, at
the time of the lease or mortgage, as the case may be, an air carrier operating
certificate issued 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) to the Pass Through Trustee that:
o if the aircraft is a leased aircraft, the owner trustee, as lessor
under the lease for the aircraft, and the loan trustee, as assignee
of the owner trustee's rights under the lease pursuant to the
applicable indenture, will be entitled to the benefits of Section
1110 of the U.S. Bankruptcy Code with respect to the airframe and
engines comprising the aircraft; or
o if the aircraft is an owned aircraft, the loan trustee will be
entitled to the benefits of Section 1110 with respect to the
airframe and engines comprising the owned aircraft.
The opinion will not address the possible replacement of an aircraft after
an "Event of Loss", as defined in the applicable indenture, in the future.
RANKING OF EQUIPMENT NOTES
Some of the equipment notes related to one or more aircraft, as described
in the related prospectus supplement, may be subordinated and junior in right of
payment to other equipment notes related to the same aircraft. The terms of the
subordination, if any, will be described in the related prospectus supplement.
PAYMENTS AND LIMITATION OF LIABILITY
We will lease each leased aircraft from an owner trustee for a term
commencing on the delivery date of the aircraft to the owner trustee and
expiring on a date no earlier than the latest maturity date of the related
leased aircraft notes, unless previously terminated as permitted by the terms of
the related lease. We will make basic rent and other payments under each lease
to an owner trustee, as lessor. The owner trustee will assign these payments
under the applicable indenture to the related loan trustee to provide the funds
necessary to pay principal of, premium, if any, and interest due from the owner
trustee on the leased aircraft notes issued under the indenture. Each lease will
provide that under no circumstances will our rent payments be less than the
scheduled payments on the related leased aircraft notes. The balance of any
basic rent payment under each lease, after payment of amounts due on the leased
aircraft notes issued under the indenture corresponding to the lease, will be
paid over to the applicable owner trustee. Our obligation to pay rent and to
cause other payments to be made under each lease will be our direct obligation.
Except in circumstances in which we purchase a leased aircraft and assume
the related leased aircraft notes, the leased aircraft notes will not be our
direct obligation. None of the owner trustees, the owner participants or the
loan trustees will be personally liable to any holder of leased aircraft notes
for amounts payable under the leased aircraft notes. Except as provided in the
indentures relating to the leased aircraft notes, no owner trustee or loan
trustee will be liable for or incur any liability under the indentures. Except
in the circumstances described above, all amounts payable under any leased
aircraft notes, other than payments made in connection with an optional
redemption or purchase by the related owner trustee or the related owner
participant, will be made only from:
o the assets subject to the lien of the applicable indenture with
respect to the aircraft or the income and proceeds received by the
related loan trustee from that aircraft, including rent payable by
us under the related lease; or
o if so provided in the related prospectus supplement, the applicable
liquidity facility.
With respect to the leased aircraft notes, except as otherwise provided in
the applicable indenture, no owner trustee will be personally liable for any
amount payable or for any statements, representations, warranties, agreements or
obligations under any indenture or under any leased aircraft notes. None of the
owner participants will have any duty or responsibility under the leased
aircraft indentures or under the leased aircraft notes to the related loan
trustee or to any holder of any leased aircraft note.
Our obligations under each owned aircraft indenture and under the owned
aircraft notes will be our direct obligations.
DEFEASANCE OF THE INDENTURES AND THE EQUIPMENT NOTES IN CERTAIN CIRCUMSTANCES
Unless otherwise specified in the applicable prospectus supplement, an
indenture may provide that the obligations of the related loan trustee, the
related owner trustee or us, as the case may be, under that indenture will be
deemed to have been discharged and paid in full on the 91st day after the date
that money or certain United States government securities, in an aggregate
amount sufficient to pay when due (including as a consequence of redemption in
respect of which notice is given on or prior to the date of the deposit)
principal, premium, if any, and interest on all equipment notes issued under
that indenture, are irrevocably deposited with the related loan trustee. The
discharge may occur only if, among other things, there has been published by the
IRS a ruling to the effect that holders of the equipment notes will not
recognize income, gain or loss for federal income tax purposes as a result of
the deposit, defeasance and discharge and will be subject to federal income tax
on the same amount and in the same manner and at the same time as would have
been the case if the deposit, defeasance and discharge had not occurred.
Upon defeasance of the equipment notes, or upon payment in full of the
principal of, premium, if any, and interest on all equipment notes issued under
any indenture on the applicable maturity date, or upon deposit with the
applicable loan trustee of sufficient money no earlier than one year prior to
the date of maturity, the holders of the equipment notes will have no beneficial
interest in or other rights with respect to the related aircraft or other assets
subject to the lien of the indenture and the lien will terminate.
ASSUMPTION OF OBLIGATIONS BY CONTINENTAL
Unless otherwise specified in the applicable prospectus supplement, upon
our purchase of any leased aircraft prior to the end of the applicable term, we
may assume on a full recourse basis all of the obligations of the owner trustee,
other than its obligations in its individual capacity, under the indenture and
the leased aircraft notes relating to that lease. If we assume leased aircraft
notes, provisions relating to maintenance, possession and use of the related
aircraft, liens and insurance will be incorporated into the indenture. If we
assume leased aircraft notes in connection with our purchase of a leased
aircraft, leased aircraft notes issued under the indenture will not be redeemed
and will continue to be secured by the aircraft.
LIQUIDITY FACILITY
The related prospectus supplement may provide that one or more payments of
interest on the related equipment notes of one or more series will be supported
by a liquidity facility issued by an institution identified in the related
prospectus supplement. Unless otherwise provided in the related prospectus
supplement, the provider of the liquidity facility will have a claim upon the
assets securing the equipment notes senior to the claim of the pass through
trustee, as owner of the equipment notes.
INTERCREDITOR ISSUES
Equipment notes may be issued in different classes, which means that the
equipment notes may have different payment priorities even though they are
issued by the same borrower and relate to the same aircraft. If multiple classes
of equipment notes are issued, the related prospectus supplement will describe
the priority of distributions among the equipment notes, any liquidity
facilities, the ability of any class to exercise and/or enforce any or all
remedies with respect to the related aircraft, and, if the equipment notes are
leased aircraft notes, the related lease, and certain other intercreditor terms
and provisions.
U.S. INCOME TAX MATTERS
GENERAL
Unless otherwise indicated in the applicable prospectus supplement, the
following summary describes all material generally applicable U.S. federal
income tax consequences to certificateholders of the purchase, ownership and
disposition of the certificates offered by this prospectus, and in the opinion
of Hughes Hubbard & Reed LLP, our special tax counsel, is accurate in all
material respects with respect to the matters discussed in this prospectus.
Except as otherwise specified, the summary is addressed to 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 therein, or estates or trusts the income of which is
subject to U.S. federal income taxation regardless of its source, and that will
hold the certificates as capital assets.
This summary does not address the tax treatment of U.S. certificateholders
that may be subject to special tax rules, such as banks, insurance companies,
dealers in securities or commodities, tax-exempt entities, holders that will
hold certificates as part of a straddle or holders that have a "functional
currency" other than the U.S. dollar, nor, except as specifically indicated,
does it address the tax treatment of U.S. certificateholders that do not acquire
certificates at the public offering price as part of the initial offering. The
summary is not a comprehensive description of all of the tax considerations that
may be relevant to a decision to purchase certificates. This summary does not
describe any tax consequences arising under the laws of any state, locality or
taxing jurisdiction other than the United States.
The summary is based upon the tax laws and practice of the United States
as in effect on the date of this prospectus, as well as judicial and
administrative interpretations, in final or proposed form, available on or
before that date. Changes to the existing laws could apply retroactively and
could alter the tax consequences discussed below. We have not sought any ruling
from the IRS with respect to the federal income tax consequences, discussed
below, and we cannot assure you that the IRS will not take contrary positions.
The pass through trusts are not indemnified for any federal income taxes that
may be imposed upon them, and the imposition of any such taxes on a pass through
trust could result in a reduction in the amounts available for distribution to
the certificateholders of that pass through trust. Prospective investors should
consult their own tax advisors with respect to the federal, state, local and
foreign tax consequences to them of the purchase, ownership and disposition of
the certificates.
TAX STATUS OF THE PASS THROUGH TRUSTS
In the opinion of our special tax counsel, each pass through trust will be
classified as a grantor trust for U.S. federal income tax purposes.
TAXATION OF CERTIFICATEHOLDERS GENERALLY
A U.S. certificateholder will be treated as owning its pro rata undivided
interest in each of the equipment notes and any other property held by the
related pass through trust. Accordingly, each U.S. certificateholder's share of
interest paid on the equipment notes will be taxable as ordinary income, as it
is paid or accrued, in accordance with such U.S. certificateholder's method of
accounting, and a U.S. certificateholder's share of any premium paid on
redemption of an equipment note will be treated as capital gain. If a pass
through trust is supported by a liquidity facility, any amounts received by the
pass through trust under the liquidity facility with respect to unpaid interest
will be treated for U.S. federal income tax purposes as having the same
characteristics as the payments they replace. If we assume an owner trust's
obligations under leased aircraft notes, the assumption would be treated for
federal income tax purposes as a taxable exchange of the leased aircraft notes,
resulting in recognition of gain or loss by the U.S. certificateholder.
Each U.S. certificateholder will be entitled to deduct, consistent with
its method of accounting, its pro rata share of fees and expenses paid or
incurred by the corresponding pass through trust as provided in Section 162 or
212 of the Internal Revenue Code of 1986, as amended, referred to herein as the
"Code". Certain fees and expenses, including fees paid to the pass through
trustee and the provider of the liquidity facility, if applicable, will be paid
by parties other than the certificateholders. These fees and expenses could be
treated as constructively received by the pass through trust, in which event a
U.S. certificateholder will be required to include in income and will be
entitled to deduct its pro rata share of the fees and expenses. If a U.S.
certificateholder is an individual, estate or trust, the deduction for the
certificateholder's share of fees or expenses will be allowed only to the extent
that all of the certificateholder's miscellaneous itemized deductions, including
the certificateholder's share of fees and expenses, exceed 2% of the
certificateholder's adjusted gross income. In addition, in the case of U.S.
certificateholders who are individuals, certain otherwise allowable itemized
deductions will be subject generally to additional limitations on itemized
deductions under applicable provisions of the Code.
EFFECT OF SUBORDINATION OF CERTIFICATEHOLDERS OF SUBORDINATED TRUSTS
If any pass through trust is subordinated in right of payment to any other
pass through trust and the subordinated trust receives less than the full amount
of the interest, principal or premium paid with respect to the equipment notes
held by it because of the subordination of such pass through trust, the
certificateholders of the subordinated trust would probably be treated for
federal income tax purposes as if they had:
o received as distributions their full share of interest, principal,
or premium;
o paid over to the preferred class of certificateholders an amount
equal to their share of the amount of the shortfall; and
o retained the right to reimbursement of the amount of the shortfall
to the extent of future amounts payable to the certificateholders of
the subordinated trust on account of the shortfall.
Under this analysis:
o subordinated certificateholders incurring a shortfall would be
required to include as current income any interest or other income
of the subordinated trust that was a component of the shortfall,
even though that amount was in fact paid to a preferred class of
certificateholders;
o a loss would only be allowed to subordinated certificateholders when
their right to receive reimbursement of the shortfall becomes
worthless; that is, when it becomes clear that funds will not be
available from any source to reimburse the shortfall; and
o reimbursement of the shortfall before a claim of worthlessness would
not be taxable income to certificateholders because the amount
reimbursed would have been previously included in income.
These results should not significantly affect the inclusion of income for
certificateholders on the accrual method of accounting, but could accelerate
inclusion of income to certificateholders on the cash method of accounting by,
in effect, placing them on the accrual method.
ORIGINAL ISSUE DISCOUNT
The equipment notes may be issued with original issue discount, referred
to as OID. The prospectus supplement will state whether any equipment notes to
be held by the related pass through trust will be issued with OID. Generally, a
holder of a debt instrument issued with OID that is not negligible must include
the OID in income for federal income tax purposes as it accrues, in advance of
the receipt of the cash attributable to such income, under a method that takes
into account the compounding of interest.
SALE OR OTHER DISPOSITION OF THE CERTIFICATES
Upon the sale, exchange or other disposition of a certificate, a U.S.
certificateholder generally will recognize capital gain or loss equal to the
difference between the amount realized on the disposition, other than any amount
attributable to accrued interest which will be taxable as ordinary income, and
the U.S. certificateholder's adjusted tax basis in the related equipment notes
and any other property held by the corresponding pass through trust. Any gain or
loss will be long-term capital gain or loss to the extent attributable to
property held by the pass through trust for more than one year. In the case of
individuals, estates, and trusts, the maximum rate of tax on net long-term
capital gains generally is 20%.
FOREIGN CERTIFICATEHOLDERS
Subject to the discussion of backup withholding below, payments of
principal and interest (including any OID) on the equipment notes to, or on
behalf of, any beneficial owner of a certificate that is not a U.S. person
will not be subject to U.S. federal withholding tax provided that:
o the non-U.S. certificateholder does not actually or
constructively own 10% or more of the total combined voting
power of all classes of stock of an owner participant or us;
o the non-U.S. certificateholder is not a bank receiving
interest pursuant to a loan agreement entered into in the
ordinary course of its trade or business, or a controlled
foreign corporation for U.S. tax purposes that is related to
an owner participant or us; and
o certain certification requirements (including identification
of the beneficial owner of the certificate) are complied with.
Any capital gain realized upon the sale, exchange, retirement or other
disposition of a certificate or upon receipt of premium paid on an equipment
note by a non-U.S. certificateholder will not be subject to U.S. federal income
or withholding taxes if (i) such gain is not effectively connected with a U.S.
trade or business of the non-U.S. certificateholder and (ii) in the case of an
individual, such non-U.S. certificateholder is not present in the United States
for 183 days or more in the taxable year of the sale, exchange, retirement or
other disposition or receipt.
BACKUP WITHHOLDING
Payments made on the certificates will not be subject to a backup
withholding tax of 31% unless, in general, the certificateholder fails to comply
with certain reporting procedures or otherwise fails to establish an exemption
from such tax under applicable provisions of the Code.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable prospectus supplement, the
certificates may, subject to certain legal restrictions, be purchased and held
by an employee benefit plan subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended, referred to as "ERISA," or an individual
retirement account or an employee benefit plan subject to section 4975 of the
Code. A fiduciary of an employee benefit plan must determine that the purchase
and holding of a certificate is consistent with its fiduciary duties under ERISA
and does not result in a non-exempt prohibited transaction as defined in section
406 of ERISA or section 4975 of the Code. Employee benefit plans which are
governmental plans, as defined in section 3(32) of ERISA, and certain church
plans, as defined in section 3(33) of ERISA, are not subject to Title I of ERISA
or section 4975 of the Code. The certificates may, subject to certain legal
restrictions, be purchased and held by such plans.
PLAN OF DISTRIBUTION
Certificates may be sold to one or more underwriters for public offering
and resale by them. Certificates may also be sold to investors or other persons
directly or through one or more dealers or agents. Any underwriter, dealer or
agent involved in the offer and sale of the certificates will be named in an
applicable prospectus supplement.
The certificates may be sold:
o at a fixed price or prices, which may be changed;
o at market prices prevailing at the time of sale;
o at prices related to prevailing market prices; or
o at negotiated prices.
Dealer trading may take place in certain of the certificates, including
certificates not listed on any securities exchange. We do not intend to apply
for listing of the certificates on a national securities exchange. From time to
time, we also may authorize underwriters acting as our agents to offer and sell
the certificates upon the terms and conditions as will be set forth in any
prospectus supplement.
In connection with the sale of certificates, underwriters may be deemed to
have received compensation from us in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of certificates for
whom they may act as agent. Underwriters may sell certificates to or through
dealers, and those dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions, which may
be changed from time to time, from the purchasers for whom they may act as
agent.
If a dealer is used directly by us in the sale of certificates in respect
of which this prospectus is delivered, we will sell the certificates to the
dealer, as principal. The dealer may then resell the certificates to the public
at varying prices to be determined by the dealer at the time of resale. The
dealer will be named in, and the terms of the sale, will be set forth in the
applicable prospectus supplement.
Certificates may be offered and sold through agents designated by us from
time to time. The agent involved in the offer or sale of the certificates will
be named in, and any commissions payable by us to the agent will be set forth
in, the applicable prospectus supplement. Unless otherwise indicated in the
applicable prospectus supplement, the agent will be acting on a best efforts
basis for the period of its appointment.
We may solicit directly offers to purchase certificates, and certificates
may be sold directly to institutional investors or others who may be deemed to
be underwriters within the meaning of the Securities Act with respect to any
resale. The terms of these sales will be described in the applicable prospectus
supplement. Except as set forth in the applicable prospectus supplement, no
director, officer or employee of ours will solicit or receive a commission in
connection with direct sales by us of the certificates, although those persons
may respond to inquiries by potential purchasers and perform ministerial and
clerical work in connection with our direct sales.
Any underwriting compensation that we pay to underwriters, dealers or
agents in connection with the offering of certificates, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in an applicable prospectus supplement.
Underwriters, dealers and agents participating in the distribution of the
certificates may be deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the certificates
may be deemed to be underwriting discounts and commissions under the Securities
Act. Underwriters, dealers and agents may be entitled under agreements with us
to indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act, and to reimbursement by us for
certain expenses.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, us and our subsidiaries in the ordinary course of
business.
If so indicated in an applicable prospectus supplement and subject to
existing market conditions, we will authorize dealers acting as our agents to
solicit offers by certain institutions to purchase certificates from us at the
public offering price set forth in the applicable prospectus supplement pursuant
to delayed delivery contracts. These contracts will provide for payment and
delivery on the date or dates stated in the applicable prospectus supplement.
Each contract will be for an amount not less than, and the aggregate principal
amount of certificates sold pursuant to these contracts will not be less nor
more than, the respective amounts stated in the applicable prospectus
supplement. Institutions with whom these contracts, when authorized, may be made
include commercial and savings banks, insurance companies, pension funds,
investment companies, educational and charitable institutions and other
institutions, but will in all cases be subject to our approval. These contracts
will not be subject to any conditions, except for the condition that the
purchase by an institution of the certificates not be prohibited at the time of
delivery under the laws of any jurisdiction in the United States to which the
institution is subject. A commission set forth in the applicable prospectus
supplement will be granted to underwriters and agents soliciting purchases of
certificates pursuant to contracts accepted by us. Agents and underwriters will
have no responsibility in respect of the delivery or performance of these
contracts.
If an underwriter or underwriters is used in the sale of any certificates,
the applicable prospectus supplement will state the intention, if any, of the
underwriters at the date of the prospectus supplement to make a market in the
certificates. We cannot assure you that there will be a market for the
certificates.
The place and time of delivery for the certificates in respect of which
this prospectus is delivered will be set forth in the applicable prospectus
supplement.
LEGAL OPINIONS
Unless otherwise indicated in the applicable prospectus supplement, our
counsel, Hughes Hubbard & Reed LLP, New York, New York, will render an opinion
with respect to the validity of the certificates being offered by such
prospectus supplement. Unless otherwise indicated in the applicable prospectus
supplement, Hughes Hubbard & Reed LLP will rely on the opinion of counsel for
the pass through trustee as to certain matters relating to the authorization,
execution and delivery of the certificates by, and the valid and binding effect
on, the pass through trustee.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements and schedule included in our Annual Report on Form 10-K for
the year ended December 31, 2000, as set forth in their reports, which are
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements and schedule are, and audited consolidated
financial statements to be included in subsequently filed documents will be,
incorporated by reference in reliance on Ernst & Young LLP's reports pertaining
to such financial statements, to the extent covered by consents filed with the
SEC, given on their authority as experts in auditing and accounting.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with this offering, other than
underwriting discounts and commissions, are:
Securities and Exchange Commission registration filing fee $ 235,240
Printing and engraving expenses......................... 300,000*
Trustee fees and expenses............................... 40,000*
Accounting fees and expenses............................ 100,000*
Rating agency fees...................................... 1,260,000*
Legal fees and expenses................................. 550,000*
Miscellaneous........................................... 114,760*
-------
Total............................................. $2,600,000*
===========
- - -----------------
* Estimates.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Continental Airlines, Inc.'s Certificate of Incorporation and By-Laws
provide that Continental Airlines, Inc. will indemnify each of its directors and
officers to the full extent permitted by the laws of the State of Delaware and
may indemnify certain other persons as authorized by the Delaware General
Corporation Law (the "GCL"). Section 145 of the GCL provides as follows:
"(a) A corporation shall have power to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed actions, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that the
person's conduct was unlawful.
(b) A corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
the person in connection with the defense or settlement of such action or suit
if the person acted in good faith and in a manner the person reasonably believed
to be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnify for such expenses
which the Court of Chancery or such other court shall deem proper.
(c) To the extent that a present or former director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the circumstances
because the person has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made, with
respect to a person who is a director or officer at the time of such
determination, (1) by a majority vote of the directors who are not parties to
such action, suit or proceeding, even though less than a quorum, or (2) by a
committee of such directors designated by majority vote of such directors, even
though less than a quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written opinion, or (4)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative, or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of undertaking
by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by former directors and officers or other employees
and agents may be so paid upon such terms and conditions, if any, as the
corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under this section.
(h) For purposes of this section, references to `the corporation' shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to `other enterprises' shall
include employee benefit plans; references to `fines' shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to `serving at the request of the corporation' shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner `not
opposed to the best interests of the corporation' as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees)."
The Certificate of Incorporation and By-Laws 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
Certificate of Incorporation of the Company provides as follows:
"No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach of
the Director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
GCL, or (iv) for any transaction from which the Director derived any
improper personal benefit. If the GCL is amended . . . to authorize
corporate action further eliminating or limiting the personal liability of
directors, then the liability of a Director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the GCL, as so
amended."
The Company maintains directors' and officers' liability insurance.
ITEM 16. EXHIBITS
Reference is made to the Exhibit Index which immediately precedes the
exhibits filed with this registration statement, which is incorporated herein by
reference.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to section 13 or section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
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-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Houston, State of Texas, on March 21, 2001.
CONTINENTAL AIRLINES, INC.
By: /S/ JEFFERY A. SMISEK
--------------------------------------
Jeffery A. Smisek
Executive Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities indicated, on March 21, 2001.
SIGNATURE TITLE
GORDON M. BETHUNE* Chairman of the Board, Chief Executive
Gordon M. Bethune Officer (Principal Executive Officer)
and Director
LAWRENCE W. KELLNER* Executive Vice President and Chief
Lawrence W. Kellner Financial Officer
(Principal Financial Officer)
CHRIS T. KENNY* Staff Vice President and Controller
Chris T. Kenny (Principal Accounting Officer)
THOMAS J. BARRACK, JR.* Director
Thomas J. Barrack, Jr.
DAVID BONDERMAN* Director
David Bonderman
GREGORY D. BRENNEMAN* President, Chief Operating Officer and
Gregory D. Brenneman Director
KIRBYJON H. CALDWELL* Director
Kirbyjon H. Caldwell
PATRICK FOLEY* Director
Patrick Foley
DOUGLAS H. MCCORKINDALE* Director
Douglas H. McCorkindale
GEORGE G. C. PARKER* Director
George G. C. Parker
RICHARD W. POGUE* Director
Richard W. Pogue
WILLIAM S. PRICE III* Director
William S. Price III
DONALD L. STURM* Director
Donald L. Sturm
KAREN HASTIE WILLIAMS* Director
Karen Hastie Williams
CHARLES A. YAMARONE* Director
Charles A. Yamarone
*By: JEFFERY A. SMISEK
--------------------------------------
Jeffery A. Smisek
Attorney-in-fact
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT
- - ----------- -------
4.1 Form of Pass Through Trust Agreement--filed as Exhibit
4.1 to the Company's registration statement on Form S-3
(No. 333-31285) (the "July 1997 S-3") and incorporated
herein by reference
5.1 Opinion of Hughes Hubbard & Reed LLP
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of Hughes Hubbard & Reed LLP (included in its
opinion filed as exhibit 5.1)
24.1 Powers of Attorney
25.1 Statement of Eligibility of Wilmington Trust Company on
Form T-1 with respect to the Pass Through Trust
Agreement
- - ------------------------
The Pass Through Trust Agreement was previously qualified under the Trust
Indenture Act of 1939 in connection with the July 1997 S-3.
Previously filed.