REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 4512 74-2099724
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
(713) 324-2950
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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Jennifer L. Vogel, Esq.
Vice President, General Counsel and Secretary
Continental Airlines, Inc.
1600 Smith Street, Dept. HQSLG
Houston, Texas 77002
(713) 324-2950
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES OF CORRESPONDENCE TO:
John K. Hoyns, Esq.
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004-1482
(212) 837-6000
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. |_|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
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If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITES TO BE REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE(1)
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Floating Rate Secured Notes
Due 2007 $200,000,000 100% $200,000,000 $16,180(2)
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(1) Pursuant to Rule 457(f)(2), the registration fee has been calculated using
the book value of the securities being registered.
(2) The Commission has informed Continental Airlines, Inc. that it may set off
an amount equal to $12,740.53 against the registration fee payable for this
registration statement due to a post-filing adjustment of the registration
fee for the Continental Airlines, Inc. registration statment on Form S-3
(File No. 333-71906), originally filed with the Commission on October 19,
2001.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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SUBJECT TO COMPLETION, DATED APRIL __, 2003
PROSPECTUS
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities or accept offers to buy these
securities until the registration statement filed with the Securities and
Exchange Commission is effective. This preliminary prospectus is not an offer to
sell these securities and we are not soliciting offers to buy these securities
in any jurisdiction where the offer or sale is not permitted.
$200,000,000
CONTINENTAL AIRLINES, INC.
OFFER TO EXCHANGE
FLOATING RATE SECURED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING FLOATING RATE SECURED NOTES DUE 2007
We are offering to issue the new notes to satisfy our obligations contained
in the registration rights agreement entered into when the old notes were sold
in transactions exempt from, or not subject to, registration under the
Securities Act.
The terms of the new notes will be substantially identical to the terms of
the old notes, except that the new notes will be registered under the Securities
Act of 1933, the transfer restrictions, registration rights and provisions for
additional interest relating to the old notes will not apply to the new notes,
and the new notes will be available only in book-entry form.
There is no existing market for the new notes. The new notes will not be
listed on any national securities exchange.
All old notes that are validly tendered and not validly withdrawn will be
exchanged.
The exchange offer expires at 5:00 p.m., New York City time, on _______,
2003, unless the exchange offer is extended.
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THE NOTES AND THE EXCHANGE OFFER INVOLVE RISKS. SEE "RISK FACTORS" ON PAGE
20.
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PRINCIPAL INTEREST FINAL SCHEDULED
AMOUNT RATE(1) PAYMENT DATE
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$200,000,000 USD 3-Month LIBOR + 0.90% December 6, 2007
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(1) Subject to a maximum rate of 12% applicable only for periods as to which
Continental has failed to pay accrued interest when due and failed to cure
such nonpayment.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _______, 2003
TABLE OF CONTENTS
PAGE PAGE
PRESENTATION OF INFORMATION......3 DESCRIPTION OF THE NOTES.........45
FORWARD-LOOKING STATEMENTS.......3 General.......................45
WHERE YOU CAN FIND MORE Payments of Principal
INFORMATION..................3 and Interest...............45
INCORPORATION OF CERTAIN Determination of LIBOR........46
DOCUMENTS BY REFERENCE.......4 Break Amount..................47
PROSPECTUS SUMMARY...............5 Redemption....................47
The Exchange Offer............5 Collateral....................48
Summary of Terms of Notes.....8 Event of Default..............52
Collateral....................9 Remedies......................53
Cash Flow Structure..........10 Controlling Party.............55
The Notes....................11 Priority of Distributions.....55
Summary Financial and Possible Issuance of
Operating Data............16 Subordinated Notes.........57
RISK FACTORS....................20 Modifications and Waiver
Terrorist Attacks and of the Indenture and
International Certain Other Agreements....57
Hostilities...............20 Merger, Consolidation and
Risk Factors Relating Transfer of Assets.........58
to the Company............20 Indemnification...............59
Risk Factors Relating Governing Law.................59
to the Airline Industry...23 The Trustee...................59
Risk Factors Relating Book Entry; Delivery
to the Notes and and Form...................59
the Exchange Offer........24 DESCRIPTION OF THE
Risk Factors Relating LIQUIDITY FACILITY...........62
to the Policy Provider....27 General.......................62
USE OF PROCEEDS.................27 Drawings......................62
RATIO OF EARNINGS TO Reimbursement of Drawings.....64
FIXED CHARGES...............28 Liquidity Events of Default
THE COMPANY.....................29 and Termination............66
Domestic Operations..........29 Liquidity Provider............66
International Operations.....30 DESCRIPTION OF THE POLICY
Outlook......................31 AND THE POLICY
DESCRIPTION OF THE POLICY PROVIDER AGREEMENT...........67
PROVIDER....................35 The Policy....................67
General......................35 General.......................69
MBIA Financial Information...35 Definitions...................69
Financial Strength Rating The Policy Provider
of MBIA...................36 Agreement..................70
THE EXCHANGE OFFER..............37 DESCRIPTION OF THE APPRAISAL.....71
Terms of the Exchange CERTAIN U.S. FEDERAL INCOME
Offer.....................37 TAX CONSEQUENCES.............73
Interest on the New Notes....39 Exchange of Old Notes
Procedures for Tendering.....40 for New Notes..............73
Acceptance of Old Notes PLAN OF DISTRIBUTION.............73
for Exchange; Delivery LEGAL MATTERS....................74
of New Notes..............41 EXPERTS..........................74
Book-Entry Transfer..........42 INDEX OF TERMS...........APPENDIX I
Guaranteed Delivery APPRAISAL LETTER........APPENDIX II
Procedures................42
Withdrawal of Tenders........42
Conditions...................43
Exchange Agent...............43
Fees and Expenses............44
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY BE ACCURATE ONLY
ON THE DATE OF THIS DOCUMENT.
PRESENTATION OF INFORMATION
We have given certain capitalized terms specific meanings for purposes of
this Prospectus. The "Index of Terms" attached as Appendix I to this Prospectus
lists the page on which we have defined each such term.
At various places in this Prospectus, we refer you to other sections of
this document for additional information by indicating the caption heading of
such other sections. The page on which each principal caption included in this
Prospectus can be found is listed in the Table of Contents.
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents we incorporate by reference may contain
statements that constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements include any statements that
predict, forecast, indicate or imply future results, performance or
achievements, and may contain the words "believe", "anticipate", "expect",
"estimate", "project", "will be", "will continue", "will result", or words or
phrases of similar meaning.
Any such forward-looking statements are not assurances of future
performance and involve risks and uncertainties. Actual results may vary
materially from anticipated results for a number of reasons, including those
stated in our Commission reports incorporated in this Prospectus by reference or
as stated in "Risk Factors".
All forward-looking statements attributable to us are expressly qualified
in their entirety by the cautionary statements above.
WHERE YOU CAN FIND MORE INFORMATION
Continental files annual, quarterly and special reports, proxy statements
and other information with the Commission under the Securities Exchange Act of
1934. You may read and copy this information at the Public Reference Room of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the Commission at (800) SEC-0330.
The Commission also maintains an internet web site that contains reports,
proxy statements and other information about issuers, like Continental, who file
reports electronically with the Commission. The address of that site is
HTTP://WWW.SEC.GOV.
You may also inspect reports, proxy statements and other information about
Continental at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
Continental's annual report on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K, as well as any amendments and exhibits to those
reports, are available free of charge through Continental's website at
HTTP://WWW.CONTINENTAL.COM/COMPANY/INVESTOR as soon as reasonably practicable
after it files them with, or furnishes them to, the Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments, exhibits and appendices, the "Registration
Statement") filed by Continental with the Securities and Exchange Commission
(the "Commission") under the Securities Act. This Prospectus omits certain of
the information contained in the Registration Statement, and reference is hereby
made to the Registration Statement for further information with respect to
Continental and the securities offered hereby. Although statements concerning
and summaries of certain documents are included herein, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission allows us to incorporate by reference information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the Commission. The
information incorporated by reference is considered to be part of this
Prospectus, except for any information that is superseded by subsequent
incorporated documents or by information that is included directly in this
Prospectus.
This Prospectus includes by reference the documents listed below that we
previously have filed with the Commission and that are not delivered with this
document. They contain important information about our company and its financial
condition.
FILING DATE FILED
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Amended Annual Report on Form 10-K/A-1
for the year ended December 31, 2002...................... April 22, 2003
Quarterly Report on Form 10-Q
for the Quarter ended March 31, 2003...................... April 16, 2003
Current Report on Form 8-K................................ January 3, 2003
Current Report on Form 8-K................................ January 15, 2003
Current Report on Form 8-K................................ February 4, 2003
Current Report on Form 8-K................................ February 4, 2003
Current Report on Form 8-K................................ March 4, 2003
Amendment to Current Report on Form 8-K................... March 4, 2003
Current Report on Form 8-K................................ March 4, 2003
Current Report on Form 8-K................................ March 19, 2003
Current Report on Form 8-K................................ March 20, 2003
Current Report on Form 8-K................................ April 2, 2003
Current Report on Form 8-K................................ April 15, 2003
Our Commission file number is 1-10323.
We incorporate by reference additional documents that we may file with the
Commission between the date of this Prospectus and the termination of the
Exchange Offer. These documents include our periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, as well as our proxy statements.
You may obtain any of these incorporated documents from us without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference in such document. You may obtain documents
incorporated by reference in this prospectus from our website
WWW.CONTINENTAL.COM or by requesting them from us in writing or by telephone at
the following address:
Continental Airlines, Inc.
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
Attention: Secretary
Telephone: (713) 324-2950
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY
NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. FOR MORE COMPLETE
INFORMATION ABOUT THE NOTES AND CONTINENTAL AIRLINES, INC., YOU SHOULD READ THIS
ENTIRE PROSPECTUS, AS WELL AS THE MATERIALS FILED WITH THE COMMISSION THAT ARE
CONSIDERED TO BE PART OF THIS PROSPECTUS. SEE "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE".
THE EXCHANGE OFFER
The Notes.................... On December 6, 2002, Continental issued an
aggregate of $200,000,000 Floating Rate Secured
Notes due 2007 in transactions exempt from or not
subject to the registration requirements of the
Securities Act.
When we use the term "Old Notes" in this
Prospectus, we mean the Floating Rate Secured
Notes due 2007 which were issued on December 6,
2002 and which were not registered with the
Commission.
When we use the term "New Notes" in this
Prospectus, we mean the Floating Rate Secured
Notes due 2007 registered with the Commission and
offered hereby in exchange for the Old Notes.
When we use the term "Notes" in this Prospectus,
the related discussion applies both to the Old
Notes and the New Notes.
Registration Rights
Agreement................. On December 6, 2002, Continental entered into a
Registration Rights Agreement with the Initial
Purchaser providing, among other things, for the
Exchange Offer being made pursuant to this
Prospectus.
The Exchange Offer........... Continental is offering New Notes in exchange for
an equal principal amount of Old Notes. The New
Notes will be issued to satisfy Continental's
obligations under the Registration Rights
Agreement. As of the date of this Prospectus,
$200,000,000 aggregate principal amount of Old
Notes are outstanding. Old Notes may be tendered
only in integral multiples of $1,000.
Resale of New Notes.......... We believe that you can offer for resale, resell
or otherwise transfer the New Notes without
complying with the registration and prospectus
delivery requirements of the Securities Act if:
o you acquire the New Notes in the ordinary
course of your business;
o you have no arrangement or understanding with
any person to participate in the distribution
of the New Notes; and
o you are not an "affiliate", as defined in the
Rule 405 under the Securities Act, of
Continental or a broker-dealer who acquired
Old Notes directly from Continental for your
own account.
If any of these conditions is not satisfied and
you transfer any New Note without delivering a
proper prospectus or without qualifying for a
registration exemption, you may incur liability
under the Securities Act. Continental does not
assume or indemnify you against such liability.
Each broker-dealer that receives New Notes in
exchange for Old Notes held for its own account
as a result of market-making or other trading
activities must acknowledge that it will deliver
a prospectus in connection with any resale of
such New Notes. A broker-dealer may use this
prospectus for an offer to resell, resale or
other transfer of such New Notes issued to it in
the Exchange Offer.
Conditions to the Exchange
Offer..................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Notes being
tendered for exchange. However, the Exchange
Offer is subject to certain customary conditions,
which may be waived by Continental.
Expiration Date of the
Exchange Offer............ [__________], 2003, subject to Continental's
right to extend the Expiration Date.
Procedures for Tendering
Old Notes................. If you wish to accept the Exchange Offer, you
must deliver your Old Notes to the Exchange Agent
for exchange no later than 5:00 p.m., New York
City time, on the Expiration Date.
You must also deliver a completed and signed
Letter of Transmittal together with the Old
Notes. A Letter of Transmittal has been sent to
Noteholders and a form is attached as an exhibit
to the Registration Statement.
If you hold Old Notes through DTC and wish to
accept the Exchange Offer, you may do so through
DTC's Automated Tender Offer Program. By
accepting the Exchange Offer through such
program, you will agree to be bound by the Letter
of Transmittal as though you had signed the
Letter of Transmittal and delivered it to the
Exchange Agent.
Guaranteed Delivery
Procedures................ If you wish to tender your Old Notes and your Old
Notes are not immediately available, you cannot
deliver your Old Notes and a properly completed
Letter of Transmittal or any other document
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date or
you cannot complete the book-entry transfer
procedures prior to the Expiration Date, you may
tender your Old Notes according to the guaranteed
delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures".
Withdrawal Rights............ You may withdraw a tender of Old Notes at any
time prior to 5:00 p.m., New York City time, on
the Expiration Date. To withdraw a tender of Old
Notes, the Exchange Agent must receive a written
or facsimile transmission notice requesting such
withdrawal at its address set forth under "The
Exchange Offer--Exchange Agent" prior to 5:00
p.m., New York City time, on the Expiration Date.
Acceptance of Old Notes
and Delivery of New
Notes..................... Subject to certain conditions, any and all Old
Notes which are properly tendered in the Exchange
Offer prior to 5:00 p.m., New York City time, on
the Expiration Date will be accepted for
exchange. The New Notes issued pursuant to the
Exchange Offer will be delivered promptly
following the Expiration Date.
Registration, Clearance
and Settlement............ The New Notes will be represented by one or more
permanent global notes, which will be registered
in the name of the nominee of DTC. The global
notes will be deposited with the Trustee as
custodian for DTC.
Consequences of Failure
to Exchange Old Notes..... Once the Exchange Offer has been completed, if
you do not exchange your Old Notes for New Notes
in the Exchange Offer, you will no longer be
entitled to registration rights and will not be
able to offer or sell your Old Notes, unless (i)
such Old Notes are subsequently registered under
the Securities Act (which, subject to certain
limited exceptions, Continental will have no
obligation to do) or (ii) your transaction is
exempt from, or otherwise not subject to, the
Securities Act and applicable state securities
laws.
Certain Federal Income Tax
Consequences.............. The exchange of Old Notes for New Notes will not
be a sale or exchange or otherwise a taxable
event for federal income tax purposes.
Exchange Agent............... Wilmington Trust Company is serving as Exchange
Agent in connection with the Exchange Offer.
Fees and Expenses............ All expenses incident to Continental's
consummation of the Exchange Offer and compliance
with the Registration Rights Agreement will be
borne by Continental.
Use of Proceeds.............. Continental will not receive any cash proceeds
from the exchange of the Old Notes for the New
Notes.
SUMMARY OF TERMS OF NOTES
Principal Amount.................. $200,000,000
Loan to Collateral Value (1)...... 42.8%
Interest Payment Dates............ March 6, June 6, September 6 and December 6
Final Scheduled Payment Date...... December 6, 2007
Final Legal Maturity Date......... December 6, 2009
Minimum Denomination.............. $1,000
Section 1110 Protection (2)....... Yes
Liquidity Facility Coverage (3)... 8 quarterly
interest payments
Policy Provider Coverage (3)...... Interest when due and principal
no later than the Final Legal Maturity Date
(1) This percentage has been determined by dividing the outstanding principal
amount of the Notes (minus Cash Collateral) by the appraised value of the
Collateral determined as of December 25, 2002. Continental is required to
provide to the Policy Provider and the Trustee a semiannual appraisal of
the Collateral. If any such subsequent appraisal indicates that the loan to
Collateral value is greater than 45%, Continental is required to provide
additional collateral or to reduce the principal amount of Notes
outstanding so that the loan to Collateral value is not greater than 45%.
Continental deposited $13,056,950 as Cash Collateral at the initial
issuance of the Old Notes so that the initial loan to Collateral value
would not exceed 45%, based on the appraisal determined as of August 25,
2002. The loan to Collateral value, determined using the appraisal as of
December 25, 2002, would have been 45.8% without giving effect to such
deposit of Cash Collateral. Continental expects to satisfy the 45%
requirement at the time of the next appraisal due in August 2003, based
upon its projected purchases of spare parts, in which case Continental will
be entitled to withdraw such Cash Collateral. However, no assurance can be
given that such 45% requirement will be satisfied. An appraised value is
only an estimate and reflects certain assumptions. See "Description of the
Appraisal".
(2) Section 1110 of the U.S. Bankruptcy Code will be applicable to the spare
parts of the types initially subject to the lien securing the Notes, but
will not be applicable to Cash Collateral. In addition, in order to satisfy
the semiannual loan to collateral value requirement referred to in note (1)
above, Continental may add other collateral that may not be entitled to the
benefits of Section 1110, subject to certain limitations.
(3) The amounts available under the Liquidity Facility and the Policy for the
payment of accrued interest have been calculated utilizing the Capped
Interest Rate, which is the maximum interest rate applicable only for
periods as to which Continental has failed to pay accrued interest when due
and failed to cure such nonpayment.
COLLATERAL
The Notes are secured by a lien on spare parts (including appliances) first
placed in service after October 22, 1994 and owned by Continental that are
appropriate for installation on or use in
o one or more of the following aircraft models: Boeing model 737-700,
737-800, 737-900, 757-200, 757-300, 767-200, 767-400 or 777-200
aircraft,
o any engine utilized on any such aircraft or
o any other spare part included in the Collateral,
and not appropriate for installation on or use in any other model of aircraft
currently operated by Continental or engine utilized on any such other model of
aircraft. The lien will not apply for as long as a spare part is installed on or
being used in any aircraft, engine or other spare part so installed or being
used. In addition, the lien will not apply to a spare part not located at one of
the designated locations specified pursuant to the security agreement applicable
to the spare parts.
The spare parts included in the Collateral fall into two categories,
"rotables" and "expendables". Rotables are parts that wear over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which they relate. Expendables consist of parts
that can be restored to a serviceable condition but have a life less than the
related flight equipment and parts that generally are used once and thereby
consumed or thereafter discarded. Spare engines are not included in the
Collateral. Set forth below is certain information about the spare parts
included in the Collateral as of December 25, 2002:
SPARE PARTS QUANTITY(1)
-----------------------
AIRCRAFT MODEL EXPENDABLES ROTABLES TOTAL APPRAISED VALUE(2)
-------------- ----------- -------- ------- ------------------
737-700................ 877 24 901
737-700/800............ 278,912 6,942 285,854
737-800................ 3,777 191 3,968
737-900................ 821 10 831
------- ------- -------
737-7/8/9 Subtotal..... 284,387 7,167 291,554 $185,972,600
757-200................ 185,731 3,391 189,122 69,352,800
757-300................ 10,946 96 11,042 3,116,700
767-200................ 25,485 227 25,712 8,946,700
767-400................ 51,147 1,586 52,733 55,741,200
777-200................ 111,210 3,006 114,216 113,712,000
------- ------- ------- ------------
Total.................. 668,906 15,473 684,379 $436,841,900
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(1) This quantity of spare parts used in preparing the appraised value was
determined as of December 25, 2002. Since spare parts are regularly used,
refurbished, purchased, transferred and discarded in the ordinary course of
Continental's business, the quantity of spare parts included in the
Collateral and their appraised value will change over time. Continental is
required to provide to the Policy Provider and the Trustee a semiannual
appraisal of the Collateral.
(2) The appraised value reflects the opinion of Simat, Helliesen & Eichner,
Inc., an independent aviation appraisal and consulting firm, of the fair
market value of the spare parts. A letter summarizing such appraisal is
annexed to this Prospectus as Appendix II. The appraisal is subject to
number of assumptions and limitations and was prepared based on certain
specified methodologies. An appraisal is only an estimate of value and
should not be relied upon as a measure of realizable value.
CASH FLOW STRUCTURE
Set forth below is a diagram illustrating the structure of certain cash
flows applicable to the Notes.
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(1) The Liquidity Facility is sufficient to cover eight consecutive quarterly
interest payments, but does not cover any other amounts payable on the
Notes.
(2) The Policy covers regular interest payments and outstanding principal no
later than the Final Legal Maturity Date, but does not cover any other
amounts payable on the Notes.
THE NOTES
Issuer....................... Continental Airlines, Inc.
Notes Offered................ Floating Rate Secured Notes due 2007.
Use of Proceeds.............. The proceeds from the sale of the Old Notes were
used for general corporate purposes. Continental
will not receive any proceeds from the exchange
of the New Notes for the Old Notes.
Trustee and Paying Agent..... Wilmington Trust Company.
Liquidity Provider........... Morgan Stanley Capital Services.
Policy Provider.............. MBIA Insurance Corporation.
Final Scheduled Payment
Date...................... The entire principal amount of the Notes is
scheduled for payment on December 6, 2007.
Final Legal Maturity Date.... December 6, 2009.
Interest..................... The Notes will accrue interest at a variable rate
per annum set forth on the cover page of this
Prospectus. The interest rate will be subject to
a maximum equal to the Capped Interest Rate of
12% per annum applicable only for periods as to
which Continental has failed to pay accrued
interest when due and failed to cure such
nonpayment. For all other periods, the interest
rate on the Notes will not be capped. Interest is
calculated on the basis of the actual number of
days elapsed over a 360-day year. LIBOR is
determined from time to time by the Reference
Agent as described in "Description of the
Notes--Determination of LIBOR".
Interest Payment Dates....... March 6, June 6, September 6 and December 6,
commencing on March 6, 2003.
Record Dates................. The fifteenth day preceding the related Interest
Payment Date.
Optional Redemption.......... Continental may elect to redeem all or (so long
as no Payment Default has occurred and is
continuing) some of the Notes at any time prior
to maturity. The redemption price in such case
will be the principal amount of the Notes,
together with accrued and unpaid interest, LIBOR
break amount, if any, and, if redeemed prior to
the third anniversary of the Issuance Date
(except in connection with a redemption to
satisfy the maximum Collateral Ratio or minimum
Rotable Ratio requirement), a Premium equal to
the following percentage of the principal amount
prepaid:
IF REDEEMED DURING THE YEAR
PRIOR TO THE ANNIVERSARY OF THE
ISSUANCE DATE INDICATED BELOW PREMIUM
----------------------------- -------
1st 1.50%
2nd 1.00
3rd 0.50
If Continental gives notice of redemption but
fails to pay when due all amounts necessary to
effect such redemption, such redemption shall be
deemed revoked and no amount shall be due as a
result of notice of redemption having been given.
Collateral................... The Notes are secured by a lien on spare parts
(including appliances) first placed in service
after October 22, 1994 and owned by Continental
that are appropriate for installation on or use
in
o one or more of the following aircraft models:
Boeing model 737-700, 737-800, 737-900,
757-200, 757-300, 767-200, 767-400 or 777-200
aircraft,
o any engine utilized on any such aircraft or
o any other spare part included in the
Collateral,
and not appropriate for installation on or use in
any other model of aircraft currently operated by
Continental or engine utilized on any such other
model of aircraft. The lien will not apply for as
long as a spare part is installed on or being
used in any aircraft, engine or other spare part
so installed or being used. In addition, the lien
will not apply to a spare part not located at one
of the designated locations specified pursuant to
the security agreement applicable to the spare
parts.
Maintenance of Collateral
Ratio..................... Continental is required to provide to the Policy
Provider and the Trustee a semiannual appraisal
of the Collateral. If any such appraisal
indicates that the loan to collateral value ratio
is greater than 45% or the ratio of the value of
Rotables included in the Collateral to the loan
is less than 150%, Continental is required to
provide additional collateral or to reduce the
principal amount of Notes outstanding so that the
loan to collateral value ratio is not greater
than 45% and the Rotables value to loan ratio is
not less than 150%.
Section 1110 Protection...... Continental's outside counsel has provided its
opinion to the Trustee and the Policy Provider
that the benefits of Section 1110 of the U.S.
Bankruptcy Code will be available with respect to
the lien on the spare parts collateral.
Liquidity Facility........... Under the Liquidity Facility, the Liquidity
Provider will, if necessary, make advances in an
aggregate amount sufficient to pay interest on
the Notes on up to eight successive quarterly
Interest Payment Dates. Drawings under the
Liquidity Facility cannot be used to pay any
other amount in respect of the Notes.
Upon each drawing under the Liquidity Facility to
pay interest on the Notes, the Trustee will
reimburse the Liquidity Provider for the amount
of such drawing. Such reimbursement obligation
and all interest, fees and other amounts owing to
the Liquidity Provider under the Liquidity
Facility and certain other agreements will rank
senior to the Notes in right of payment.
Policy Coverage.............. Under the Policy, the Policy Provider is required
to honor drawings to cover:
o Any shortfall on any Distribution Date in
funds to be distributed as accrued interest
on the Notes.
o Any shortfall on the Final Legal Maturity
Date in funds to be distributed as principal
of, and accrued interest on, the Notes.
o Any shortfall in the proceeds of the
disposition of the remaining Collateral from
the amount required to pay principal of, and
accrued interest on, the Notes on the
Distribution Date established in connection
with such disposition.
o If certain payments with respect to the Notes
are by court order determined to be a
"preferential transfer" under the U.S.
Bankruptcy Code or otherwise required to be
returned, the amount of such payments.
o After the continuance of a Payment Default
for eight consecutive Interest Periods, any
shortfall in funds required to pay principal
of, and accrued interest on, the Notes on the
Distribution Date established in connection
with such Payment Default. If such
Distribution Date would occur prior to the
Final Scheduled Payment Date, instead of
paying such shortfall on such Distribution
Date, the Policy Provider may, so long as no
Policy Provider Default is continuing, elect
to pay:
o Any shortfall on such Distribution Date in
funds required to pay accrued interest on
the Notes.
o Thereafter, on each Distribution Date, an
amount equal to the scheduled principal (on
the Final Scheduled Payment Date) and
interest (without regard to any
acceleration thereof) payable on the Notes
on such Distribution Date.
Notwithstanding such election by the Policy
Provider, the Policy Provider may, on any
Business Day (which shall be a Distribution Date)
elected by the Policy Provider upon 20 days'
notice, cause the Trustee to make a drawing under
the Policy for an amount equal to the then
outstanding principal balance of the Notes and
accrued and unpaid interest thereon. Further,
notwithstanding such election by the Policy
Provider, upon the occurrence of a Policy
Provider Default, the Trustee shall, on any
Business Day elected by the Trustee upon 20 days'
written notice to the Policy Provider, make a
drawing under the Policy for an amount equal to
the then outstanding principal balance of the
Notes and accrued and unpaid interest thereon.
Any shortfall for which a drawing under the
Policy may be made as described above will be
calculated after the application of funds
available through drawings under the Liquidity
Facility and withdrawals from the Cash Collateral
Account.
The Policy Provider is required to honor drawings
under the Policy by the Trustee on behalf of the
Liquidity Provider for all outstanding drawings
under the Liquidity Facility, together with
interest thereon, on or after the Business Day
which is 24 months from the earliest to occur of
(1) the date on which an Interest Drawing shall
have been made under the Liquidity Facility and
remain unreimbursed from payments made by
Continental at the end of such 24-month period,
(2) the date on which any Downgrade Drawing,
Non-Extension Drawing or Final Drawing that was
deposited into the Cash Collateral Account shall
have been applied to pay any scheduled payment of
interest on the Notes and remain unreimbursed
from payments made by Continental at the end of
such 24-month period and (3) the date on which
all of the Notes have been accelerated and remain
unpaid by Continental at the end of such 24-month
period, in each case disregarding any
reimbursements from payments by the Policy
Provider and from proceeds from the sale of
Collateral distributed by the Trustee during such
24-month period.
The reimbursement of drawings under the Policy
ranks junior to further distributions on the
Notes.
Control of Trustee........... The "Controlling Party" will direct the Trustee
in taking action under the Indenture and other
agreements relating to the Notes, including in
amending such agreements and granting waivers
thereunder, except for certain provisions that
cannot be amended or waived without the consent
of each Noteholder affected thereby. If an Event
of Default is continuing, the "Controlling Party"
will direct the Trustee in exercising remedies,
such as accelerating the Notes or foreclosing the
lien on the collateral securing the Notes.
The Controlling Party will be:
o The Policy Provider or, if a Policy Provider
Default is continuing, the holders of more
than 50% in aggregate unpaid principal amount
of the Notes then outstanding.
o Under certain circumstances, the Liquidity
Provider.
STANDARD &
MOODY'S POOR'S
------- ----------
Threshold Rating for
the Liquidity Provider....... Short Term............ P-1 A-1
Liquidity Provider Rating.... Morgan Stanley, the parent company of Morgan
Stanley Capital Services, meets the Threshold
Rating requirement and has guaranteed Morgan
Stanley Capital Services' obligations under the
Liquidity Facility.
MOODY'S
-------
Policy Provider Rating....... Financial Strength................ Aaa
SUMMARY FINANCIAL AND OPERATING DATA
The following tables summarize certain consolidated financial data and
certain operating data with respect to Continental. The following selected
consolidated financial data for the years ended December 31, 2002, 2001 and 2000
are derived from the audited consolidated financial statements of Continental
(including certain reclassifications to conform to the current year
presentation) including the notes thereto incorporated by reference in this
Prospectus and should be read in conjunction with those financial statements.
The following selected consolidated financial data for the years ended December
31, 1999 and 1998 are derived from the selected financial data contained in
Continental's Annual Report on Form 10-K for the year ended December 31, 2002,
incorporated by reference in this Prospectus, and the audited consolidated
financial statements of Continental for the years ended December 31, 1999 and
1998 and should be read in conjunction therewith. The consolidated financial
data of Continental for the three months ended March 31, 2003 and 2002 are
derived from the unaudited consolidated financial statements of Continental
incorporated by reference in this Prospectus, which include all adjustments
(consisting solely of normal recurring accruals, except for fleet impairment
losses and other special charges) that Continental considers necessary for the
fair presentation of the financial position and results of operations for these
periods. Operating results for the three months ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003.
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH 31,
2003 2002 2002 2001 2000 1999 1998
-------- ------- ---------- -------- -------- -------- ------
(IN MILLIONS OF DOLLARS, EXCEPT OPERATING DATA, PER SHARE DATA AND RATIOS)
FINANCIAL DATA--OPERATIONS:(1)
Operating Revenue.................... $ 2,042 $ 1,993 $ 8,402 $ 8,969 $ 9,899 $ 8,639 $ 7,927
Operating Expenses................... 2,266 2,180 8,714 8,825 9,170 8,024 7,226
--------- -------- -------- -------- -------- -------- ---------
Operating Income (Loss).............. (224) (187) (312) 144 729 615 701
Non-operating Income (Expense), net.. (86) (67) (303) (258) (167) 183 (59)
--------- -------- -------- -------- -------- -------- ---------
Income (Loss) before Income Taxes
and Cumulative Effect of Changes
in Accounting Principles.......... (310) (254) (615) (114) 562 798 642
Net Income (Loss).................... $ (221) $ (166) $ (451) $ (95) $ 342 $ 455 $ 383
======== ======== ======= ======= ======= ======= ========
Earnings (Loss) per Share:
Basic............................. $ (3.38) $(2.61) $(7.02) $(1.72) $ 5.62 $ 6.54 $ 6.34
======== ======== ======= ======= ======= ======= ========
Diluted........................... $ (3.38) $(2.61) $(7.02) $(1.72) $ 5.45 $ 6.20 $ 5.02
======== ======== ======= ======= ======= ======= ========
Shares used for Computation:
Basic............................. 65.3 63.5 64.2 55.5 60.7 69.5 60.3
Diluted........................... 65.3 63.5 64.2 55.5 62.8 73.9 80.3
Ratio of Earnings to Fixed Charges
(2).................................. -- -- -- -- 1.51x 1.80x 1.93x
======== ======== ======= ======= ======= ======= ========
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
-------- -------- ---------- -------- -------- -------- ------
(IN MILLIONS OF DOLLARS, EXCEPT OPERATING DATA, PER SHARE DATA AND RATIOS)
OPERATING DATA:
MAINLINE JET STATISTICS:
Revenue passengers (thousands)........ 9,245 10,057 41,016 44,238 46,896 45,540 43,625
Revenue passenger miles
(millions) (3)...................... 13,274 14,032 59,349 61,140 64,161 60,022 53,910
Cargo ton miles (millions)............ 233 208 908 917 1,096 1,000 856
Available seat miles (millions) (4)... 19,076 18,951 80,122 84,485 86,100 81,946 74,727
Passenger load factor (5)............. 69.6% 74.0% 74.1% 72.4% 74.5% 73.2% 72.1%
Passenger revenue per available
seat mile (cents)................... 8.45 8.77 8.61 8.98 9.84 9.12 9.23
Total revenue per available seat mile
(cents)............................. 9.31 9.40 9.27 9.58 10.52 9.75 9.85
Operating cost per available seat mile
(cents) (6)......................... 10.25 10.09 9.53 9.22 9.68 9.07 9.03
Special items per available seat mile. 0.34 0.48 0.31 (0.36) N/A 0.09 0.14
Average yield per revenue passenger mile
(cents) (7)......................... 12.14 11.84 11.63 12.42 13.20 12.45 12.79
Average price per gallon of fuel,
excluding fuel taxes (cents)........ 98.50 60.17 69.97 78.24 84.21 46.56 46.83
Average price per gallon of fuel,
including fuel taxes (cents)........ 102.87 64.39 74.01 82.48 88.54 50.78 51.20
Fuel gallons consumed (millions)...... 305 308 1,296 1,426 1,533 1,536 1,487
Average fare per revenue passenger.... $174.27 $165.21 $168.25 $171.59 $180.66 $164.11 $158.02
Average length of aircraft flight (miles) 1,257 1,191 1,225 1,185 1,159 1,114 1,044
Average daily utilization of each
aircraft (hours) (8)................ 9:19 9:31 9:31 10:19 10:36 10:29 10:13
Actual aircraft in fleet at end of
period (9).......................... 362 364 366 352 371 363 363
REGIONAL JET AND TURBOPROP STATISTICS
(10):
Revenue passenger miles
(millions) (3)...................... 1,078 835 3,952 3,388 2,947 2,149 1,564
Available seat miles (millions) (4)... 1,767 1,424 6,219 5,437 4,735 3,431 2,641
Passenger load factor (5)............. 61.0% 58.6% 63.5% 62.3% 62.2% 62.6% 59.2%
CONSOLIDATED STATISTICS:
Consolidated passenger load factor.... 68.9% 73.0% 73.3% 71.8% 73.9% 72.8% 71.7%
Consolidated breakeven passenger load
factor (11)......................... 84.5% 87.4% 82.5% 73.5% 67.9% 64.0% 63.6%
MARCH 31, DECEMBER 31,
2003 2002
------------ ------------
(IN MILLIONS OF DOLLARS)
FINANCIAL DATA--BALANCE SHEET:
ASSETS:
Cash, Cash Equivalents and Short-Term Investments................ $ 1,181 $ 1,342
Other Current Assets............................................. 1,079 935
Total Property and Equipment, net................................ 6,824 6,968
Routes and Airport Operating Rights, net......................... 1,003 1,009
Other Assets..................................................... 503 486
------------ ------------
Total Assets............................................... $ 10,590 $ 10,740
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities.............................................. $ 3,137 $ 2,926
Long-Term Debt and Capital Leases................................ 5,096 5,222
Deferred Credits and Other Long-Term Liabilities................. 1,546 1,572
Minority Interest................................................ 19 7
Mandatorily Redeemable Preferred Securities of Subsidiary
Trust Holding Solely Convertible Subordinated Debentures
of Continental (12)........................................... 241 241
Redeemable Preferred Stock of Subsidiary (13).................... 5 5
Stockholders' Equity............................................. 546 $ 767
------------ ------------
Total Liabilities and Stockholders' Equity................. $ 10,590 $ 10,740
============ ============
- --------------
(1) Includes the following special expense (income) items (in millions):
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------------
2003 2002 2002 2001 2000 1999 1998
------ ------ ------ ------ ------ ------ ------
Operating expense (income):
Fleet impairment and restructuring
charges............................... $ 65 $ 90 $242 $ 61 $ -- $ 81 $122
Air Transportation Safety and System
Stabilization Act grant............... -- -- 12 (417) -- -- --
Severance and other special charges..... -- -- -- 63 -- -- --
Nonoperating expense (income):
Gain on sale of assets.................. -- -- -- -- (9) (326) --
Impairment of investments............... -- -- -- 22 -- -- --
Cumulative effect of change in accounting,
net of taxes............................ -- -- -- -- -- 33 --
(2) For purposes of calculating this ratio, earnings consist of income before
income taxes and cumulative effect of changes in accounting principles
plus interest expense (net of capitalized interest), the portion of rental
expense representative of interest expense and amortization of previously
capitalized interest. Fixed charges consist of interest expenses, the
portion of rental expense representative of interest expense, the amount
amortized for debt discount, premium and issuance expense and interest
previously capitalized. For the three months ended March 31, 2003 and 2002
and the years ended December 31, 2002 and 2001, earnings were inadequate
to cover fixed charges and the coverage deficiency was $307 million, $257
million, $616 million and $143 million, respectively.
(3) The number of scheduled miles flown by revenue passengers.
(4) The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
(5) Revenue passenger miles divided by available seat miles.
(6) Includes applicable special items noted in (1).
(7) The average revenue received for each mile a revenue passenger is carried.
(8) The average number of hours per day that an aircraft flown in revenue
service is operated (from gate departure to gate arrival).
(9) Excludes aircraft that are either temporarily or permanently removed rom
service.
(10) These statistics reflect operations of Continental Express (as operated by
ExpressJet). In April 2002, ExpressJet's parent company Holdings completed
an initial public offering, and Continental's ownership in Holdings was
reduced to 53.1% of its outstanding common stock. Pursuant to a capacity
purchase agreement, Continental currently purchases all of ExpressJet's
available seat miles for a negotiated price.
(11) The percentage of seats that must be occupied by revenue passengers for us
to break even on a net income basis. The special items noted in (1)
included in the consolidated breakeven passenger load factor account for
3.0, 4.9, 3.3, (3.0), (0.1), (2.3) and 1.6 percentage points in each of
the periods, respectively.
(12) The sole assets of the Trust are convertible subordinated debentures
issued by Continental with an aggregate principal amount of $250 million,
which bear interest at the rate of 6% per annum and mature on November 15,
2030. Upon repayment, the Mandatorily Redeemable Preferred Securities of
Subsidiary Trust will be mandatorily redeemed.
(13) In connection with an internal reorganization by Holdings, Continental's
53.1% majority owned subsidiary, a subsidiary of Holdings issued
non-voting preferred stock which has a liquidation preference of $5
million, is mandatorily redeemable in 2012, and is callable beginning in
2005. The preferred stock was sold to a non-affiliated third party for a
note in the original principal amount of $5 million and is included on our
balance sheet as redeemable preferred stock of subsidiary.
RISK FACTORS
TERRORIST ATTACKS AND INTERNATIONAL HOSTILITIES
THE 2001 TERRORIST ATTACKS AND THE MILITARY ACTION IN IRAQ HAVE ADVERSELY
AFFECTED, AND ANY ADDITIONAL TERRORIST ATTACKS OR HOSTILITIES MAY FURTHER
ADVERSELY AFFECT, CONTINENTAL'S FINANCIAL CONDITION, RESULTS OF OPERATIONS AND
PROSPECTS
As described in greater detail below under "The Company--Outlook" and in
Continental's filings with the Commission, the terrorist attacks of September
11, 2001 involving commercial aircraft adversely affected Continental's
financial condition, results of operations and prospects, and the airline
industry generally. Those effects continue, although they have been mitigated
somewhat by increased traffic, the Stabilization Act and Continental's
cost-cutting measures. Moreover, additional terrorist attacks, even if not made
directly on the airline industry, or the fear of such attacks, particularly in
light of the war in Iraq, could further negatively affect Continental and the
airline industry. The current hostilities in the Middle East have further
decreased demand for air travel, which could have a material adverse impact on
Continental's financial condition, liquidity and results of operations.
Among the effects Continental experienced from the September 11, 2001
terrorist attacks were significant flight disruption costs caused by the Federal
Aviation Administration ("FAA") imposed grounding of the U.S. airline industry's
fleet, significantly increased security, insurance and other costs,
significantly higher ticket refunds, significantly reduced load factors (defined
as revenue passenger miles divided by available seat miles), and significantly
reduced yields. Further terrorist attacks against commercial aircraft could
result in another grounding of Continental's fleet, and would likely result in
significant reductions in load factor and yields, along with increased ticket
refunds and security, insurance and other costs. In addition, terrorist attacks
not involving commercial aircraft, the war in Iraq or other world events could
result in decreased load factors and yields and could also result in increased
costs for Continental and the airline industry. For instance, fuel costs rose
significantly during 2002 and the first quarter of 2003 and until recently have
been at historically high levels. Even though Continental has hedged
approximately 80% of its fuel requirements for the second quarter of 2003, the
continued military action in Iraq, post war unrest in that country, other
conflicts in the Middle East, political events in Venezuela and Nigeria, or
significant events in other oil-producing nations could cause fuel prices to
increase further and may reduce the availability of fuel. Premiums for aviation
insurance have increased substantially, and could escalate further, or certain
aviation insurance could become unavailable or available only for reduced
amounts of coverage that are insufficient to comply with the levels of insurance
coverage required by aircraft lenders and lessors or required by applicable
government regulations. Additionally, war-risk coverage or other insurance might
cease to be available to Continental's vendors, or might be available only at
significantly increased premiums or for reduced amounts of coverage, which could
adversely impact Continental's operations or costs.
Due in part to the lack of predictability of future traffic, business mix
and yields, Continental is currently unable to estimate the long-term impact on
it of the events of September 11, 2001 or the impact of any further terrorist
attacks or the war in Iraq. However, given the magnitude of the unprecedented
events of September 11, 2001 and their continuing aftermath, the adverse impact
to Continental's financial condition, results of operations, liquidity and
prospects may continue to be material, and Continental's financial resources
might not be sufficient to absorb it or that of any further terrorist attacks or
continued military action in Iraq.
RISK FACTORS RELATING TO THE COMPANY
CONTINENTAL CONTINUES TO EXPERIENCE SIGNIFICANT LOSSES
Since September 11, 2001, Continental has incurred significant losses.
Continental recorded losses of $451 million in 2002 and $221 million in the
first quarter of 2003, and expects to incur a significant loss for the full year
2003. Passenger revenue per available seat mile for Continental's mainline jet
operations has continued to decline since September 11, 2001, dropping 4.1% for
the year ended December 31, 2002 versus the same period in 2001 and 3.6% in the
first quarter of 2003 versus the first quarter of 2002. Overall passenger
revenue declined 7.0% during 2002 compared to 2001, and was flat in the first
quarter of 2003 compared to the same period in 2002. Business traffic in most
markets continues to be weak, and carriers continue to offer reduced fares to
attract passengers, which lowers Continental's passenger revenue and yields and
raises Continental's break-even load factor. Continental cannot predict when
business traffic or yields will increase. Further, the long-term impact of any
changes in fare structures, most importantly in relation to business fares,
booking patterns, low-cost competitor growth, increased usage of regional jets,
competitor bankruptcies and other changes in industry structure and conduct,
cannot be predicted at this time, but could have a material adverse effect on
Continental's financial condition, liquidity and results of operations. See "The
Company--Outlook".
In addition, Continental's capacity purchase agreement with ExpressJet
provides that Continental purchase, in advance, all of ExpressJet's available
seat miles for a negotiated price, and Continental is at risk for reselling the
available seat miles at market prices. Continental previously announced its
intention to sell or otherwise dispose of its remaining interests in ExpressJet.
If Continental does so, then Continental would report greater fixed costs, which
could result in lower or more volatile earnings or both. For example, for the
year ended December 31, 2002, Continental's net loss of $451 million included
net income for ExpressJet of $84 million. For the quarter ended March 31, 2003,
Continental's net loss of $221 million included net income for ExpressJet of $26
million.
CONTINENTAL'S HIGH LEVERAGE MAY AFFECT ITS ABILITY TO SATISFY ITS SIGNIFICANT
FINANCING NEEDS OR MEET ITS OBLIGATIONS
As is the case with its principal competitors, Continental has a high
proportion of debt compared to its equity capital. During 2002, the amount of
Continental's long-term debt increased 26%. Continental also has significant
operating leases and facility rental costs. In addition, Continental has fewer
cash resources than some of its principal competitors and substantially all of
Continental's property and equipment is subject to liens securing indebtedness.
Accordingly, Continental may be less able than some of its competitors to
withstand a prolonged recession in the airline industry or respond as well to
changing economic and competitive conditions. Moreover, competitors emerging
from bankruptcy will likely have lower cost structures and greater operating
flexibility after reorganizing their companies in bankruptcy.
As of March 31, 2003, Continental had approximately:
o $5.6 billion (including current maturities) of long-term debt and
capital lease obligations.
o $248 million liquidation amount of Continental-obligated mandatorily
redeemable preferred securities of trust ($241 million net of
unamortized discount).
o $546 million of stockholders' equity.
o $1.18 billion in cash, cash equivalents and short-term investments.
Continental has substantial commitments for capital expenditures, including
for the acquisition of new aircraft. As of March 31, 2003, Continental had firm
commitments for 67 aircraft from Boeing, with an estimated cost of approximately
$2.5 billion. The 67 aircraft are scheduled to be delivered between late 2003
and mid 2008, with four Boeing 737-800 aircraft scheduled for delivery in the
fourth quarter of 2003. Continental has been offered backstop financing for
approximately 12 firm aircraft and is currently in negotiations regarding the
offer. Continental does not have backstop financing or any other financing
currently in place for the remainder of the aircraft. In addition, at March 31,
2003, Continental had firm commitments to purchase 13 spare engines related to
the new Boeing aircraft for approximately $80 million. Continental does not have
any financing currently in place for such spare engines. These spare engines are
scheduled to be delivered through March 2005. Further financing will be needed
to satisfy Continental's capital commitments for its aircraft and
aircraft-related expenditures such as engines, spare parts and related items.
There can be no assurance that sufficient financing will be available for the
aircraft on order and other capital expenditures.
As of March 31, 2003, ExpressJet had firm commitments for an additional 74
regional jets from Empresa Brasileira de Aeronautica S.A. ("Embraer"), with an
estimated aggregate cost of $1.5 billion. Effective February 26, 2003,
ExpressJet and Embraer amended the purchase agreement to slow the pace of
regional jet deliveries. ExpressJet will take delivery of 24 regional jets
during the remainder of 2003 (for a total of 36 in 2003), down from its original
plan for 48 deliveries, and will take 21 aircraft deliveries in 2004, down from
36. As a result, ExpressJet will increase its aircraft deliveries to 21 and
eight for 2005 and 2006, up from two and zero for these years, respectively.
ExpressJet does not have any obligation to take any of these firm aircraft that
are not financed by a third party and leased either to ExpressJet or
Continental. In addition, ExpressJet expects to purchase 15 spare engines for
approximately $41 million through 2006. ExpressJet does not have any financing
currently in place for such spare engines. ExpressJet would have no obligation
to acquire the spare engines if the firm order aircraft are not delivered for
any reason.
Continental also has significant operating lease and facility rental
obligations. For the year ended December 31, 2002, annual aircraft and facility
rental expense under operating leases approximated $1.3 billion.
Additional financing will be needed to satisfy Continental's capital
commitments. Continental cannot predict whether sufficient financing will be
available. On several occasions subsequent to September 11, 2001, each of
Moody's, Standard and Poor's and Fitch, Inc. downgraded the credit ratings of a
number of major airlines, including Continental's credit ratings. Additional
downgrades were made in March and April 2003 and further downgrades are possible
due to the impact of the war in Iraq. Reductions in Continental's credit ratings
have increased the interest Continental pays on new issuances of debt and may
increase the cost and reduce the availability of financing to Continental in the
future.
Continental does not have debt obligations that would be accelerated as a
result of a credit rating downgrade, but under two letters of credit facilities
securing our worker's compensation program, Continental could be required to
substitute approximately $67 million of cash collateral for spare engines that
currently serve as collateral if the rating of its senior unsecured debt is
lowered below CCC- by Standard & Poor's or Caa3 by Moody's. Continental's
senior unsecured debt is currently rated "CCC+" on CreditWatch with negative
implications by Standard & Poor's and "Caa2" with negative outlook by
Moody's.
SIGNIFICANT CHANGES OR EXTENDED PERIODS OF HIGH FUEL COSTS OR FUEL SUPPLY
DISRUPTIONS WOULD MATERIALLY AFFECT CONTINENTAL'S OPERATING RESULTS
Until recently, fuel costs have been at historically high levels and
constitute a significant portion of Continental's operating expense. Fuel costs
represented approximately 11.7% of Continental's operating expenses for the year
ended December 31, 2002 and 13.9% of Continental's operating expenses for the
year ended December 31, 2001. Fuel costs represented approximately 15.3% and
9.5% of Continental's operating expenses for the three months ended March 31,
2003 and 2002, respectively. Fuel prices and supplies are influenced
significantly by international political and economic circumstances, such as the
political crises in Venezuela and Nigeria and the war in Iraq. From time to time
Continental enters into petroleum swap contracts, petroleum call option
contracts and/or jet fuel purchase commitments to provide some short-term
protection (generally three to six months) against a sharp increase in jet fuel
prices. Depending upon the hedging method employed, Continental's strategy may
limit its ability to benefit from declines in fuel prices. Continental has
hedged approximately 80% of its fuel requirements for the second quarter of 2003
with petroleum call options at approximately $33 per barrel. Continental has not
hedged its fuel requirements beyond the end of the second quarter of 2003. If a
future fuel supply shortage were to arise from OPEC production curtailments, a
disruption of oil imports, the continued military action in Iraq, post war
unrest in that country, other conflicts in the Middle East, or otherwise, higher
fuel prices or further reduction of scheduled airline service could result.
Significant changes in fuel costs would materially affect Continental's
operating results.
LABOR COSTS IMPACT CONTINENTAL'S RESULTS OF OPERATIONS
Labor costs constitute a significant percentage of Continental's total
operating costs. Continental's mechanics, represented by the International
Brotherhood of Teamsters, ratified a new four-year collective bargaining
agreement in December 2002. The mechanics agreement makes an adjustment to
current pay and recognizes current industry conditions with a provision to
re-open negotiations regarding wages, pension and health insurance provisions in
January 2004. Work rules and other contract items are established through 2006.
Collective bargaining agreements between Continental and its pilots and between
ExpressJet and its pilots (both of whom are represented by the Air Line Pilots
Association) became amendable in October 2002. After being deferred due to the
economic uncertainty following the September 11, 2001 terrorist attacks,
negotiations recommenced in September 2002 and are continuing. Although
Continental may incur increased labor costs in connection with the negotiation
of the pilot collective bargaining agreements, the labor cost uncertainty
associated with recent major hub-and-spoke carrier bankruptcies makes predicting
the outcome of negotiations more difficult. US Airways Group, Inc. ("US
Airways") and United Air Lines, Inc. ("United") have significantly decreased
their labor costs during their bankruptcy cases, and United may further decrease
them and may emerge from bankruptcy with significantly lower labor costs than
Continental's. Delta and Northwest Airlines have each recently announced that
they are seeking to decrease their labor costs significantly, and American
Airlines, Inc. ("American Airlines") has recently agreed with its major labor
groups on labor cost reductions, although two of the labor groups have announced
that they intend to call a new vote regarding these recently agreed cost
reductions. In addition, Northwest Airlines has publicly acknowledged that it
may file for bankruptcy unless it renegotiates its outstanding labor agreements.
Although Continental enjoys generally good relations with its employees, there
can be no assurance that Continental will not experience labor disruptions in
the future.
RISK FACTORS RELATING TO THE AIRLINE INDUSTRY
THE AIRLINE INDUSTRY IS HIGHLY COMPETITIVE
The airline industry is highly competitive and susceptible to price
discounting. Carriers use discount fares to stimulate traffic during periods of
slack demand, to generate cash flow and to increase market share. Some of
Continental's competitors have substantially greater financial resources or
lower cost structures than Continental, or both. In recent years, the market
share held by low cost carriers has increased significantly.
Airline profit levels are highly sensitive to changes in fuel costs, fare
levels and passenger demand. Passenger demand and fare levels are influenced by,
among other things, the state of the global economy, domestic and international
events, airline capacity and pricing actions taken by carriers. The weak U.S.
economy, turbulent international events and extensive price discounting by
carriers contributed to unprecedented losses for U.S. airlines from 1990 to
1993. Since September 11, 2001, these same factors, together with the effects of
the terrorist attacks and the war in Iraq, have resulted in dramatic losses for
Continental and the airline industry generally. Continental cannot predict when
conditions will improve. US Airways, United and several small competitors have
filed for bankruptcy protection, although US Airways emerged from bankruptcy on
March 31, 2003. Other carriers, including American Airlines and Northwest
Airlines, could follow. These carriers could operate under bankruptcy protection
in a manner that would be adverse to Continental, and could emerge from
bankruptcy as more vigorous competitors with substantially lower costs.
In recent years, the major U.S. airlines have sought to form marketing
alliances with other U.S. and foreign air carriers. Such alliances generally
provide for codesharing, frequent flyer reciprocity, coordinated scheduling of
flights of each alliance member to permit convenient connections and other joint
marketing activities. Such arrangements permit an airline to market flights
operated by other alliance members as its own. This increases the destinations,
connections and frequencies offered by the airline, which provide an opportunity
to increase traffic on its segment of flights connecting with its alliance
partners. Continental's alliance with Northwest Airlines and its new alliance
with Delta and Northwest Airlines are examples of such arrangements, and
Continental has existing alliances with numerous other air carriers. Other major
U.S. airlines have alliances or planned alliances more extensive than
Continental's. Continental cannot predict the extent to which it will be
disadvantaged by competing alliances.
Since its deregulation in 1978, the U.S. airline industry has undergone
substantial consolidation, and it may in the future experience additional
consolidation. Continental routinely monitors changes in the competitive
landscape and engages in analysis and discussions regarding its strategic
position, including alliances and business combination transactions. Continental
has had, and expects to continue to have, discussions with third parties
regarding strategic alternatives. The impact of any consolidation within the
U.S. airline industry cannot be predicted at this time.
THE AVIATION SECURITY ACT WILL IMPOSE ADDITIONAL COSTS AND MAY CAUSE SEVERE
DISRUPTIONS
In November 2001, the President signed into law the Aviation and
Transportation Security Act (the "Aviation Security Act"). This law federalized
substantially all aspects of civil aviation security, creating a new
Transportation Security Administration under the Department of Transportation
(the "TSA"). Among other things, the law required that all checked baggage be
screened by explosive detection systems by December 31, 2002 (although during
the implementation phase, other permitted methods of screening are being
utilized and federal law permits individual airports to request extensions of
such deadline). At some airports, the TSA has provided for temporary security
measures which are less than optimal. Implementation of the requirements of the
Aviation Security Act has resulted in increased costs for the airline industry
and may result in additional costs, delays and disruptions in air travel,
although pursuant a supplemental appropriations bill approved by both houses of
Congress and signed by the President in April 2003, some of these costs will be
reimbursed by the U.S. government. See "The Company--Outlook".
CONTINENTAL'S BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION
As evidenced by the enactment of the Aviation Security Act, airlines are
subject to extensive regulatory and legal compliance requirements that result in
significant costs. The FAA from time to time issues directives and other
regulations relating to the maintenance and operation of aircraft that require
significant expenditures. Some FAA requirements cover, among other things,
retirement of older aircraft, security measures, collision avoidance systems,
airborne windshear avoidance systems, noise abatement and other environmental
concerns, commuter aircraft safety and increased inspections and maintenance
procedures to be conducted on older aircraft. Continental expects to continue
incurring expenses to comply with the FAA's regulations.
Additional laws, regulations, taxes and airport rates and charges have been
proposed from time to time that could significantly increase the cost of airline
operations or reduce revenue. Additionally, because of significantly higher
security and other costs incurred by airports since September 11, 2001, and
because reduced landing weights since September 11, 2001 have reduced the fees
airlines pay to airports, many airports are significantly increasing their rates
and charges to air carriers, including to Continental. Restrictions on the
ownership and transfer of airline routes and takeoff and landing slots have also
been proposed. The ability of U.S. carriers to operate international routes is
subject to change because the applicable arrangements between the United States
and foreign governments may be amended from time to time, or because appropriate
slots or facilities are not made available. Continental cannot provide assurance
that current laws and regulations, or laws or regulations enacted in the future,
will not adversely affect it.
CONTINENTAL'S OPERATIONS ARE AFFECTED BY THE SEASONALITY ASSOCIATED WITH THE
AIRLINE INDUSTRY
Due to greater demand for air travel during the summer months, revenue in
the airline industry in the second and third quarters of the year is generally
stronger than revenue in the first and fourth quarters of the year for most U.S.
air carriers. Continental's results of operations generally reflect this
seasonality, but have also been impacted by numerous other factors that are not
necessarily seasonal, including the extent and nature of competition from other
airlines, fare actions, excise and similar taxes, security fees, changing levels
of operations, fuel prices, weather, air traffic control delays, foreign
currency exchange rates and general economic conditions.
RISK FACTORS RELATING TO THE NOTES AND THE EXCHANGE OFFER
CONSEQUENCES OF FAILURE TO EXCHANGE
If you fail to deliver the proper documentation to the Exchange Agent in a
timely fashion, your tender of Old Notes will be rejected. The New Notes will be
issued in exchange for the Old Notes only after timely receipt by the Exchange
Agent of the Old Notes, a properly completed and executed Letter of Transmittal
(or an Agent's Message in lieu thereof) and all other required documentation. If
you wish to tender your Old Notes in exchange for New Notes, you should allow
sufficient time to ensure timely delivery. None of the Exchange Agent, the
Trustee or Continental is under any duty to give holders of Old Notes
notification of defects or irregularities with respect to tenders of Old Notes
for exchange.
If you do not exchange your Old Notes for New Notes pursuant to the
Exchange Offer, or if your tender of Old Notes is not accepted, your Old Notes
will continue to be subject to the restrictions on transfer of such Old Notes as
set forth in the legend thereon. In general, you may not offer or sell Old Notes
unless they are registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. Continental does not currently anticipate that
it will register the Old Notes under the Securities Act. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
untendered and tendered but unaccepted Old Notes could be adversely affected.
APPRAISAL AND REALIZABLE VALUE OF COLLATERAL
Simat, Helliesen & Eichner, Inc., an independent aviation appraisal and
consulting firm ("SH&E"), has prepared an appraisal of the spare parts
included in the Collateral as of December 25, 2002. A letter, dated January 24,
2003, summarizing such appraisal is annexed to this Prospectus as Appendix II.
The appraisal is subject to a number of assumptions and limitations and was
prepared based on certain specified methodologies. In preparing its appraisal,
SH&E conducted only a limited physical inspection of certain locations at
which Continental maintains the spare parts. An appraisal that is subject to
other assumptions and limitations and based on other methodologies may result in
valuations that are materially different from those contained in SH&E's
appraisal. See "Description of the Appraisal".
Continental is required to provide to the Policy Provider and the Trustee a
semiannual appraisal of the Collateral. If any such subsequent appraisal
indicates that the loan to Collateral value is greater than 45%, Continental is
required to provide additional collateral or to reduce the principal amount of
Notes outstanding so that the loan to Collateral value is not greater than 45%.
Continental deposited $13,056,950 as Cash Collateral at the initial issuance of
the Old Notes so that the initial loan to Collateral value would not exceed 45%,
based on the appraisal determined as of August 25, 2002. The loan to Collateral
value, determined using the appraisal as of December 25, 2002, would have been
45.8%, without giving effect to such deposit of Cash Collateral. Continental
expects to satisfy the 45% requirement at the time the next appraisal is
required based upon its projected purchases of spare parts, in which case
Continental will be entitled to withdraw such Cash Collateral. However, no
assurance can be given that such 45% requirement will be satisfied. See
"Description of the Notes--Collateral".
An appraisal is only an estimate of value. An appraisal should not be
relied upon as a measure of realizable value. The proceeds realized upon a sale
of any Collateral may be less than its appraised value. The value of the
Collateral if remedies are exercised under the Indenture will depend on market
and economic conditions, the supply of similar spare parts, the availability of
buyers, the condition of the Collateral and other factors. In addition, since
spare parts are regularly used, refurbished, purchased, transferred and
discarded in the ordinary course of business, the quantity of spare parts
included in the Collateral and their appraised value will change over time.
Accordingly, Continental cannot assure you that the proceeds realized upon any
such exercise of remedies would be sufficient to satisfy in full payments due on
the Notes. If a Policy Provider Default occurs and such proceeds are not
sufficient to repay all such amounts due on the Notes, then holders (to the
extent not repaid from the proceeds of the sale of Collateral) would have only
unsecured claims against Continental and the Policy Provider.
As discussed under "Risk Factors Relating to the Airline Industry--The
Airline Industry is Highly Competitive", since September 11, 2001, the airline
industry has suffered substantial losses. Two major air carriers, US Airways and
United, have filed for bankruptcy protection, although US Airways emerged from
bankruptcy on March 31, 2003. Northwest Airlines has publicly acknowledged that
it may file for bankruptcy unless it renegotiates its outstanding labor
agreements, and other airlines may file for bankruptcy protection as well.
Moreover, recent reports have suggested the possibility of liquidation by
United. In response to adverse market conditions, many air carriers have reduced
the number of aircraft in operation, and there may be further reductions,
particularly by air carriers in bankruptcy or liquidation. Any such reduction of
aircraft of the same models as the models of aircraft on which the spare parts
included in the Collateral may be installed or used could adversely affect the
value of the Collateral.
CONTROL OVER AMENDMENTS, WAIVERS AND SALE OF COLLATERAL
The "Controlling Party" will direct the Trustee in taking action under the
Indenture and other agreements relating to the Notes, including in amending such
agreements and granting waivers thereunder, except for certain provisions that
cannot be amended or waived without the consent of each Noteholder affected
thereby. If an Event of Default is continuing, the "Controlling Party" will
direct the Trustee in exercising remedies under the Indenture and the Collateral
Agreements, including accelerating the Notes or foreclosing the lien on the
Collateral securing the Notes. See "Description of the Notes--Remedies".
The Controlling Party will be:
o The Policy Provider or, if a Policy Provider Default is continuing,
the holders of more than 50% in aggregate unpaid principal amount of
the Notes then outstanding.
o Under certain circumstances, the Liquidity Provider.
MAXIMUM INTEREST RATE IF CONTINENTAL DEFAULTS
If Continental fails to pay accrued interest on the Notes when due on a
Distribution Date and fails to cure such nonpayment, the interest rate for the
interest due on such Distribution Date will be subject to a maximum equal to the
Capped Interest Rate. If Continental cures such nonpayment, such maximum rate
will not apply. However, the amounts available under the Liquidity Facility and
the Policy for the payment of accrued interest are limited by the same maximum
rate. Accordingly, if Continental fails to make a payment of interest when due
and the interest rate then applicable exceeds the Capped Interest Rate, the
amount that the Trustee may draw under the Liquidity Facility and Policy (or, if
applicable, withdraw from the Cash Collateral Account) to make such payment will
be calculated at the Capped Interest Rate. If Continental subsequently cures,
Continental will be obligated to pay the accrued interest calculated without
regard to such maximum rate. If Continental fails to cure, the Noteholders will
not have a claim for interest due on such Distribution Date above the amount
calculated at the Capped Interest Rate.
CERTAIN LIMITATIONS WITH RESPECT TO THE COLLATERAL
The Notes are secured by a lien on the Pledged Spare Parts. See
"Description of the Notes--Collateral". However, the lien will not apply to a
spare part for as long as it is installed on or being used in any aircraft,
engine or other spare part so installed or being used. In addition, since spare
parts are regularly used, refurbished, purchased, transferred and discarded in
the ordinary course of Continental's business, the quantity of spare parts
included in the Collateral and their appraised value will change over time.
Continental is required to keep the Pledged Spare Parts at certain
Designated Locations, subject to certain exceptions. See "Description of the
Notes--Collateral--Designated Locations". The lien of the Notes will not apply
to any spare part not located at a Designated Location.
Upon initial issuance of the Old Notes, Continental made a cash collateral
deposit with the Security Agent of $13,056,950 so that the initial loan to
Collateral value would not exceed 45%. In addition, Continental is required to
provide to the Policy Provider and the Trustee a semiannual appraisal of the
Collateral. If any such subsequent appraisal indicates that the loan to
Collateral value is greater than 45%, Continental is required to provide
additional collateral or to reduce the principal amount of Notes outstanding so
that the loan to Collateral value is not greater than 45%. In order to satisfy
this requirement, Continental may grant a lien on additional Qualified Spare
Parts, cash or certain investment securities. In addition, Continental may grant
a lien on other collateral, provided that the Policy Provider agrees and each
Rating Agency confirms that the use of such additional collateral will not
result in a reduction of the rating of the Notes below the then current rating
for the Notes (determined without regard to the Policy) or a withdrawal or
suspension of the rating of the Notes. See "Description of the
Notes--Collateral". Section 1110 of the U.S. Bankruptcy Code, which provides
special rights to holders of liens with respect to certain equipment (see
"Description of the Notes--Remedies"), would apply to any such additional
Qualified Spare Parts but would not apply to any such cash or investment
securities. In addition, Section 1110 may not apply to such other collateral,
depending on the circumstances.
LIMITED ABILITY TO RESELL THE NOTES
Prior to the Exchange Offer, there has been no public market for the Notes.
Continental does not intend to apply for listing of the Notes on any national
securities exchange or otherwise. Morgan Stanley & Co. Incorporated (the
"Initial Purchaser") has previously made a market in the Old Notes and
Continental has been advised by the Initial Purchaser that it presently intends
to make a market in the New Notes, as permitted by applicable laws and
regulations, after consummation of the Exchange Offer. The Initial Purchaser is
not obligated, however, to make a market in the Old Notes or the New Notes, and
any such market-making activity may be discontinued at any time without notice
at the sole discretion of the Initial Purchaser. There can be no assurance as to
the liquidity of the public market for the Notes or that any active public
market for the Notes will develop or continue. If an active public market does
develop, it might not continue or it might not be sufficiently liquid to allow
you to resell any of your Notes.
RISK FACTORS RELATING TO THE POLICY PROVIDER
IF THE FINANCIAL CONDITION OF THE POLICY PROVIDER DECLINES, THE RATING OF THE
NOTES MAY DECLINE
The Aaa rating by Moody's of the Notes is based, primarily, on the
existence of the Policy that insures the complete and timely payment of interest
relating to the Notes on each Interest Payment Date and the payment of
outstanding principal no later than the Final Legal Maturity Date. MBIA
Insurance Corporation, the Policy Provider, has issued the Policy. If the Policy
Provider's financial condition declines or if it becomes insolvent, the Trustee
may be unable to recover the full amount due under the Policy. In addition, such
a decline or insolvency could lead Moody's to downgrade the ratings of the Notes
because of a concern that the Policy Provider may be unable to make payments to
the holders of the Notes under the Policy. For information on the financial
information generally available relating to the Policy Provider, see
"Description of the Policy Provider" and "Description of the Policy and the
Policy Provider Agreement--The Policy".
POLICY PROTECTION IS LIMITED
Although the Trustee may make drawings under the Policy for interest
payments on each Interest Payment Date, the Trustee may not make drawings for
principal payments until the Final Legal Maturity Date except in certain limited
circumstances. This limits the protection afforded to holders of Notes by the
Policy.
USE OF PROCEEDS
There will be no cash proceeds payable to Continental from the issuance of
the New Notes pursuant to the Exchange Offer. The proceeds from the sale of the
Old Notes were used by Continental for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of our "earnings" to our "fixed charges" for each of the years
1998 through 2002 and for the three months ended March 31, 2003 were:
THREE MONTHS ENDED
MARCH 31, 2003 YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
--(1) --(1) --(1) 1.51 1.80 1.93
- ----------
(1) For the three months ended March 31, 2003 and the years ended December 31,
2002 and 2001, earnings were inadequate to cover fixed charges and the
coverage deficiency was $307 million, $616 million and $143 million,
respectively.
For purposes of the ratios, "earnings" means the sum of:
o our pre-tax income (loss); and
o our fixed charges, net of interest capitalized.
"Fixed charges" represent:
o the interest we pay on borrowed funds;
o the amount we amortize for debt discount, premium and issuance expense
and interest previously capitalized; and
o that portion of rentals considered to be representative of interest
expense.
THE COMPANY
Continental Airlines, Inc. ("Continental" or the "Company") is a major
United States air carrier engaged in the business of transporting passengers,
0cargo and mail. Continental is the fifth largest United States airline (as
measured by the number of scheduled miles flown by revenue passengers, known as
revenue passenger miles, in 2002) and, together with its indirect 53.1%-owned
subsidiary, ExpressJet Airlines, Inc. (operating as Continental Express and
referred to in this Prospectus as "ExpressJet") and its wholly owned subsidiary,
Continental Micronesia, Inc. ("CMI"), served 225 airports worldwide at March 31,
2003. As of March 31, 2003, Continental flew to 130 domestic and 95
international destinations and offered additional connecting service through
alliances with domestic and foreign carriers. Continental directly served 16
European cities, seven South American cities, Tel Aviv, Hong Kong and Tokyo as
of March 31, 2003, and is one of the leading airlines providing service to
Mexico and Central America, serving 28 cities, more destinations than any other
United States airline. Through its Guam hub, CMI provides extensive service in
the western Pacific, including service to more Japanese cities than any other
United States carrier. The Company's executive offices are located at 1600 Smith
Street, Houston, Texas 77002. The Company's telephone number is (713) 324-2950.
DOMESTIC OPERATIONS
Continental operates its domestic route system primarily through its hubs
in the New York metropolitan area at Newark Liberty International Airport
("Liberty International" or "Newark"), in Houston, Texas at George Bush
Intercontinental Airport ("Bush Intercontinental" or "Houston") and in
Cleveland, Ohio at Hopkins International Airport ("Hopkins International").
Continental's hub system allows it to transport passengers between a large
number of destinations with substantially more frequent service than if each
route were served directly. The hub system also allows Continental to add
service to a new destination from a large number of cities using only one or a
limited number of aircraft. As of March 31, 2003, Continental operated 67% of
the average daily jet departures from Liberty International, 84% of the average
daily jet departures from Bush Intercontinental, and 67% of the average daily
jet departures from Hopkins International (in each case including regional
jets). Each of Continental's domestic hubs is located in a large business and
population center, contributing to a high volume of "origin and destination"
traffic.
EXPRESSJET
Continental's mainline jet service at each of its domestic hub cities is
coordinated with ExpressJet, which operates new-generation regional jets. In
April 2002, ExpressJet Holdings, Inc. ("Holdings"), Continental's then wholly
owned subsidiary and the sole stockholder of ExpressJet, sold 10 million shares
of its common stock in an initial public offering and used the net proceeds to
repay $147 million of ExpressJet's indebtedness to Continental. In addition,
Continental sold 20 million of its shares of Holdings common stock in the
offering for net proceeds of $300 million. In connection with the offering,
Continental's ownership of Holdings fell to 53.1%. Continental does not
currently intend to remain a stockholder of Holdings over the long term. Subject
to market conditions, Continental expects to sell or otherwise dispose of some
or all of its shares of Holdings common stock in the future.
Effective January 1, 2001, Continental entered into a capacity purchase
agreement with ExpressJet pursuant to which Continental currently purchases all
of ExpressJet's available seat miles for a negotiated price. Under the
agreement, ExpressJet has the right through December 31, 2006 to be
Continental's sole provider of regional jet service from Continental's hubs.
Continental is responsible for all scheduling, pricing and seat inventories of
ExpressJet's flights and is entitled to all revenue associated with those
flights. Continental pays ExpressJet based on scheduled block hours (the hours
from departure gate to arrival gate) in accordance with a formula designed to
provide ExpressJet with an operating margin of approximately 10% before taking
into account variations in some costs and expenses that are generally
controllable by ExpressJet. ExpressJet's overall operating margin was 13.6% in
2002. Continental assumes the risk of revenue volatility associated with fares
and passenger traffic, price volatility for specified expense items such as fuel
and the cost of all distribution and revenue-related costs. The capacity
purchase agreement replaced Continental's prior revenue-sharing arrangement.
As of March 31, 2003, ExpressJet served 97 destinations in the U.S., 13
cities in Mexico and five cities in Canada. Since December 2002, ExpressJet's
fleet has been comprised entirely of regional jets. Continental believes
ExpressJet's regional jet service complements Continental's operations by
carrying traffic that connects onto Continental's mainline jets and allowing
more frequent flights to smaller cities than could be provided economically with
larger jet aircraft. Continental believes that ExpressJet's regional jets
provide greater comfort and enjoy better customer acceptance than turboprop
aircraft. The regional jets also allow ExpressJet to serve certain routes that
cannot be served by turboprop aircraft. Additional commuter feed traffic is
currently provided to Continental by other codesharing partners.
DOMESTIC CARRIER ALLIANCES
Continental has entered into alliance agreements, which are also referred
to as codeshare agreements or cooperative marketing agreements, with other
carriers. These relationships may include (a) codesharing (one carrier placing
its name and flight number, or "code", on flights operated by the other carrier)
and (b) reciprocal frequent flyer program participation, reciprocal airport
lounge access and other joint activities (such as seamless check-in at
airports). Some relationships may include other cooperative undertakings such as
joint purchasing, joint corporate sale contracts, airport handling, facilities
sharing or joint technology development.
Continental has a long-term global alliance with Northwest Airlines, Inc.
("Northwest Airlines") through 2025, subject to earlier termination by either
carrier in the event of certain changes in control of either Northwest Airlines
or Continental. The alliance with Northwest provides for each carrier placing
its code on a large number of the flights of the other, reciprocity of frequent
flyer programs and airport lounge access, and other joint marketing activities.
Northwest Airlines and Continental also have joint contracts with major
corporations and travel agents designed to create access to a broader product
line encompassing the route systems of both carriers.
Continental also has domestic codesharing agreements with Gulfstream
International Airlines, Inc., Mesaba Aviation, Inc., Hawaiian Airlines, Inc.,
Alaska Airlines, Inc., Horizon Airlines, Inc., Champlain Enterprises, Inc.
(CommutAir), Hyannis Air Service, Inc. (Cape Air) and American Eagle Airlines,
Inc. In 2002, Continental introduced the first train-to-plane alliance in the
United States with Amtrak.
In response to the dramatic changes occurring in the airline industry,
including a marketing alliance between United and US Airways, Continental signed
a marketing agreement with Northwest Airlines and Delta Air Lines ("Delta") in
August 2002 to permit it to compete more effectively with other carriers and
alliance groups. As with the alliance with Northwest Airlines, this alliance
involves codesharing, reciprocal frequent flyer benefits and reciprocal airport
lounge privileges. Implementation of this marketing alliance is planned for
Summer 2003, subject to satisfaction of certain conditions.
INTERNATIONAL OPERATIONS
Continental directly serves destinations throughout Europe, Canada, Mexico,
Central and South America and the Caribbean as well as Tel Aviv, Hong Kong and
Tokyo. Continental also provides service to numerous other destinations through
codesharing arrangements with other carriers and has extensive operations in the
western Pacific conducted by CMI. As measured by 2002 available seat miles,
approximately 39% of Continental's mainline jet operations, including CMI, were
dedicated to international traffic.
Continental's New York/Newark hub is a significant international gateway.
From Liberty International, at March 31, 2003 Continental and ExpressJet served
16 European cities, five Canadian cities, six Mexican cities, six Central
American cities, four South American cities, 14 Caribbean destinations, Tel
Aviv, Hong Kong (though service between Hong Kong and Newark was suspended in
April 2003) and Tokyo.
Continental's Houston hub is the focus of its operations in Mexico and
Central America. As of March 31, 2003, Continental and ExpressJet flew from Bush
Intercontinental to 20 cities in Mexico, every country in Central America, six
cities in South America, three cities in Canada, three cities in Europe, two
Caribbean destinations and Tokyo.
From Continental's Cleveland hub, Continental and ExpressJet flew to
Montreal, Toronto, London, Cancun, Mexico, Nassau and San Juan, Puerto Rico as
of March 31, 2003.
CONTINENTAL MICRONESIA
From its hub operations based on the island of Guam, as of March 31, 2003,
CMI provided service to eight cities in Japan, more than any other United States
carrier, as well as other Pacific Rim destinations, including Taiwan, the
Philippines, Hong Kong, Australia and Indonesia.
CMI is the principal air carrier in the Micronesian Islands, where it
pioneered scheduled air service in 1968. CMI's route system is linked to the
United States market through Hong Kong, Tokyo and Honolulu, each of which CMI
serves non-stop from Guam. CMI and Continental also maintain a codesharing
agreement and coordinate schedules on certain flights from the United States to
Honolulu, and from Honolulu to Guam, to facilitate travel from the United States
into CMI's route system.
FOREIGN CARRIER ALLIANCES
Continental seeks to develop international alliance relationships that
complement Continental's own route system and permit expanded service through
its hubs to major international destinations. International alliances assist
Continental in the development of its route structure by enabling Continental to
offer more frequencies in a market, provide passengers connecting service from
Continental's international flights to other destinations beyond an alliance
partner's hub, and expand the product line that Continental may offer in a
foreign destination.
In October 2001, Continental announced that it had signed a cooperative
marketing agreement with KLM Royal Dutch Airlines ("KLM") that includes
extensive codesharing and reciprocal frequent flyer program participation and
airport lounge access. In January 2002, Continental placed its code on selected
flights operated by KLM and KLM Cityhopper from Amsterdam to more than 40
destinations in Europe, Africa and the Middle East, and KLM placed its code on
selected flights to U.S. destinations operated by Continental beyond its New
York and Houston hubs. In addition, members of each carrier's frequent flyer
program are able to earn mileage anywhere on the other's global route network,
as well as the global network of Northwest Airlines. The agreement terminates in
May 2003, unless extended by the parties.
Continental also currently has international codesharing agreements with
Air Europa, Air China, EVA Airways Corporation (an airline based in Taiwan),
British European, Virgin Atlantic Airways ("Virgin") and Compania Panamena de
Aviacion, S.A. ("Copa"). Continental owns 49% of the common equity of Copa. In
February 2003, Continental launched an air/rail codeshare agreement with the
French high speed rail provider SNCF TGV.
OUTLOOK
The current U.S. domestic airline environment is the worst in Continental's
history, and may deteriorate further if hostilities in the Middle East continue.
Prior to September 2001, Continental was profitable, although many U.S. air
carriers were losing money and Continental's profitability was declining. The
terrorist attacks of September 11, 2001 and the war in Iraq have dramatically
worsened the difficult financial environment and presented new and greater
challenges for the airline industry. Since the terrorist attacks, several
airlines, including United and US Airways, have filed for bankruptcy, although
US Airways emerged from bankruptcy on March 31, 2003. Northwest Airlines has
publicly acknowledged that it may file for bankruptcy unless it renegotiates its
outstanding labor agreements, and other airlines may file for bankruptcy
protection as well. Although Continental has been able to raise capital,
downsize its operations and reduce its expenses significantly, Continental has
reported significant losses since the terrorist attacks, and current trends in
the airline industry make it likely that Continental will continue to post
significant losses for the foreseeable future. The revenue environment continues
to be weak in light of changing pricing models, excess capacity in the market,
reduced corporate travel spending and other issues. In addition, until recently
fuel prices had significantly escalated due to the war in Iraq and political
tensions in Venezuela and Nigeria. Absent adverse factors outside Continental's
control such as those described herein, Continental believes that its liquidity
and access to cash will be sufficient to fund its current operations through
2003 (and beyond if Continental is successful in implementing its previously
announced revenue-generating and cost cutting measures). However, Continental
believes that the economic environment must improve for Continental to continue
to operate at its current size and expense level beyond that time. Continental
may find it necessary to further downsize its operations, ground additional
aircraft and further reduce its expenses. Continental anticipates that its
previously announced capacity and cost reductions, together with the capacity
reductions announced by other carriers and capacity reductions that could come
from restructurings within the industry, should result in a better financial
environment by the end of 2003, absent adverse factors outside Continental's
control such as a further economic recession, additional terrorist attacks,
continued military action in Iraq or another conflict elsewhere in the world, a
significant spread of Severe Acute Respiratory Syndrome, or "SARS", decreased
consumer demand or sustained high fuel prices. However, Continental expects to
incur a significant loss for the full year in 2003, regardless of such adverse
factors.
Due in part to the lack of predictability of future traffic, business mix
and yields, Continental is currently unable to estimate the long-term effect on
it of the events of September 11, 2001, or the impact of any further terrorist
attacks or the military action in Iraq. However, given the magnitude of the
unprecedented events of September 11, 2001 and their continuing aftermath, the
adverse impact to Continental's financial condition, results of operations,
liquidity and prospects may continue to be material, and Continental's financial
resources might not be sufficient to absorb it or that of any further terrorist
attacks or continued military action in Iraq.
Among the many factors that threaten Continental and the airline industry
generally are the following:
o A weak global and domestic economy has significantly decreased
Continental's revenue. Business traffic, Continental's most profitable
source of revenue, and yields are down significantly, as well as
leisure traffic and yields. Several of Continental's competitors are
significantly changing all or a portion of their pricing structures in
a manner that is revenue dilutive to Continental. Although Continental
has been successful in decreasing its unit cost as its unit revenue
has declined, Continental currently expects its net cash flows for the
second quarter of 2003, excluding amounts expected to be received from
the U.S. government discussed in the third bullet point below, to be
slightly negative at approximately $0.5 million per day, including
required debt payments and capital expenditures. In addition,
Continental expects to incur significant losses in that quarter and
for the full year 2003.
o Continental believes that reduced demand persists not only because of
the weak economy, but also because of some customers' concerns about
further terrorist attacks and reprisals. The war in Iraq significantly
reduced Continental's bookings and lowered passenger traffic. In
addition, the spread of SARS in China and elsewhere has caused a
further decline in passenger traffic, particularly to Hong Kong and
certain other cities in Asia that Continental serves. Both of these
events have disproportionately affected Continental's international
passenger traffic. Continental has responded to the reduced actual and
anticipated demand by announcing temporary capacity reductions on
certain trans-Atlantic and trans-Pacific routes (including the
suspension of its flights between Hong Kong and Newark) and by
reducing its summer schedule. Continental believes that demand is
further weakened by customer dissatisfaction with the hassles and
delays of heightened airport security and screening procedures.
o Fuel costs rose significantly at the end of 2002 and until recently
have been at historically high levels. Even though Continental has
hedged approximately 80% of its fuel requirements for the second
quarter of 2003, the continued military action in Iraq, post war
unrest in that country, other conflicts in the Middle East, political
events in Venezuela or Nigeria, or significant events in other
oil-producing nations could cause fuel prices to increase further and
may impact the availability of fuel. Based on gallons consumed in
2002, for every one dollar increase in the price of crude oil,
Continental's annual fuel expense would be approximately $40 million
higher.
o The terrorist attacks of 2001 have caused security costs to increase
significantly, many of which have been passed on to airlines. Security
costs are likely to continue rising for the foreseeable future. In the
current environment of lower consumer demand and discounted pricing,
these costs cannot effectively be passed on to customers. Insurance
costs have also risen sharply, in part due to greater perceived risks
and in part due to the reduced availability of insurance coverage.
Continental must absorb these additional expenses in the current
pricing environment. Under a supplemental appropriations bill approved
by both houses of Congress and signed by the President in April 2003,
Continental and other U.S. carriers will be reimbursed for certain
security fees paid or collected by such carriers and compensated for
other security related costs. Although Continental is still in the
process of estimating the amount of reimbursement and compensation
that it will receive, Continental believes that it will be in the
range of $175 million to $200 million.
o Although Continental reduced some of its costs during the last year
and continues to implement cost-cutting measures, its costs cannot be
decreased as quickly as its revenue has declined. In addition, as is
the case with many of its competitors, Continental is highly
leveraged, and has few assets that remain unpledged to support any new
debt. Combined with reduced access to the capital markets, themselves
already weakened by the state of the economy, there is the potential
for insufficient liquidity if current conditions continue unabated for
a sufficiently long period of time. Continental had approximately
$1.18 billion of cash, cash equivalents and short-term investments at
March 31, 2003. Continental continues to hold 53.1% of the outstanding
stock of Holdings, the publicly traded parent of its regional jet
subsidiary, which stock is not pledged to creditors. Continental
intends to sell or otherwise dispose of some or all of its interest in
Holdings, subject to market conditions.
o The nature of the airline industry is changing dramatically as
business travelers change their spending patterns and low-cost
carriers continue to gain market share. Continental has announced and
is implementing plans to modify its product for the large segment of
its customers who are not willing to pay for a premium product, to
reduce costs and to generate additional revenue. Other carriers have
announced similar plans to create lower-cost products, or to offer
separate low cost products (such as a low cost "airline within an
airline"). In addition, carriers emerging from bankruptcy will have
significantly reduced cost structures and operational flexibility that
will allow them to compete more effectively.
o Current conditions may cause consolidation of the airline industry,
domestically and globally. The extremity of current conditions could
result in a reduction of some of the regulatory hurdles that
historically have limited consolidation. Depending on the nature of
the consolidation, Continental could benefit from it or be harmed by
it. Continental continues to monitor developments throughout the
industry and has entered into a marketing alliance (implementation of
which is subject to certain conditions) with Northwest Airlines and
Delta to permit Continental to compete more effectively with other
carriers and alliance groups.
o Continental is engaged in labor negotiations with the union
representing its pilots. Continental cannot predict the outcome of
these negotiations or the financial impact on Continental of any new
labor contract with its pilots. Recent significant concession
agreements with labor groups at US Airways and United have had the
effect of lowering industry standard wages and benefits. In addition,
American Airlines has recently agreed with its major labor groups on
labor cost reductions, although two of the labor groups have announced
that they intend to call a new vote regarding these recently agreed
cost reductions. Continental's negotiations may be influenced by these
and other labor cost developments.
o Continental has several noncontributory defined benefit plans covering
substantially all of Continental's employees. As of December 31, 2002,
these plans were underfunded by approximately $1.2 billion as measured
by SFAS 87, "Employers Accounting for Pensions". Continental's
contributions for the remainder of 2003 are expected to be $89 million
as of March 31, 2003. Absent any changes to the plans (which in most
cases are subject to collective bargaining agreements with our unions)
or a waiver of required payments from the Internal Revenue Service,
the minimum funding requirement in 2004 is expected to be
significantly greater than in 2003.
o At April 15, 2003, under the most restrictive provisions of a credit
facility agreement with an outstanding balance of $165 million at
March 31, 2003, Continental is required to maintain a minimum
unrestricted cash balance of $600 million. Also, a separate credit
facility agreement with an outstanding balance of $43 million at March
31, 2003 requires, beginning in June 2003, Continental to maintain a 1
to 1 ratio of EBITDAR (earnings before interest, income taxes,
depreciation and aircraft rentals) to fixed charges, which consist of
interest expense, aircraft rental expense, cash income taxes and cash
dividends, for the previous four quarters. Continental believes that
it will be able to meet both of these covenants for the remainder of
2003.
DESCRIPTION OF THE POLICY PROVIDER
GENERAL
The information set forth in this section, including any financial
statements incorporated by reference herein, has been provided by MBIA Insurance
Corporation ("MBIA" or the "Policy Provider") for inclusion in this Prospectus,
and such information has not been independently verified by Continental, the
Initial Purchaser, the Trustee or the Liquidity Provider. Accordingly,
notwithstanding anything to the contrary herein, none of Continental, the
Initial Purchaser, the Trustee or the Liquidity Provider assumes any
responsibility for the accuracy, completeness, or applicability of such
information.
MBIA is the principal operating subsidiary of MBIA Inc., a New York Stock
Exchange listed company (the "Parent Company"). The Parent Company is not
obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the
State of New York and licensed to do business in and subject to regulation under
the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of
the United States and the Territory of Guam. MBIA has three branches, one in the
Republic of France, one in the Republic of Singapore and one in the Kingdom of
Spain. New York has laws prescribing minimum capital requirements, limiting
classes and concentrations of investments, and requiring the approval of policy
rates and forms. State laws also regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by MBIA, changes
in control, and transactions among affiliates. Additionally, MBIA is required to
maintain contingency reserves on its liabilities in certain amounts and for
certain periods of time.
MBIA does not accept any responsibility for the accuracy or completeness of
this Prospectus or any information or disclosure contained herein, or omitted
herefrom, other than with respect to the accuracy of the information regarding
the Policy Provider set forth under the heading "Description of the Policy
Provider" or incorporated by reference herein. Additionally, MBIA makes no
representation regarding the Notes or the advisability of investing in the
Notes.
The Policy is not covered by the Property/Casualty Insurance Security Fund
specified in Article 76 of the New York Insurance Law.
MBIA FINANCIAL INFORMATION
The following document filed by the Parent Company with the Commission is
incorporated herein by reference:
o the Parent Company's Annual Report on Form 10-K for the year ended
December 31, 2002.
Any documents filed by the Parent Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
Prospectus and prior to the termination of the offering of the New Notes shall
be deemed to be incorporated by reference in this Prospectus and to be a part
hereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, or contained in this Prospectus, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The consolidated financial statements of MBIA, a wholly owned subsidiary of
the Parent Company, and its subsidiaries as of December 31, 2002 and December
31, 2001 and for each of the three years in the period ended December 31, 2002,
prepared in accordance with generally accepted accounting principles, included
in the Annual Report on Form 10-K of the Parent Company for the year ended
December 31, 2002 are hereby incorporated by reference into this Prospectus and
shall be deemed to be a part hereof. All financial statements of MBIA and its
subsidiaries included in documents filed by the Parent Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
subsequent to the date of this Prospectus and prior to the termination of the
offering of the New Notes shall be deemed to be incorporated by reference into
this Prospectus and to be a part hereof from the respective dates of filing such
documents.
The Parent Company files annual, quarterly, and special reports,
information statements and other information with the Commission under File No.
1-9583. Copies of the Commission filings (including the Parent Company's Annual
Report on Form 10-K for the year ended December 31, 2002) are available (i) over
the Internet at the Commission web site at HTTP://WWW.SEC.GOV; (ii) at the
Commission's public reference room in Washington D.C.; and (iii) at no cost,
upon request to MBIA Insurance Corporation, 113 King Street, Armonk, New York
10504. The telephone number of MBIA is (914) 273-4545.
The tables below present selected financial information of MBIA determined
in accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities ("SAP") as well as generally accepted
accounting principles ("GAAP"):
SAP
------------------------------------------
DECEMBER 31, DECEMBER 31,
2002 2001
------------------------------------------
(AUDITED) (AUDITED)
(IN MILLIONS)
Admitted Assets $9,212 $8,545
Liabilities 6,054 5,688
Capital and Surplus 3,158 2,857
GAAP
------------------------------------------
DECEMBER 31, DECEMBER 31,
2002 2001
------------------------------------------
(AUDITED) (AUDITED)
(IN MILLIONS)
Assets $10,588 $9,460
Liabilities 4,679 4,234
Shareholders' Equity 5,909 5,226
FINANCIAL STRENGTH RATING OF MBIA
Moody's rates the financial strength of MBIA "Aaa".
The above rating reflects the current assessment by Moody's of the
creditworthiness of MBIA and its ability to pay claims on its policies of
insurance. Any further explanation as to the significance of the above rating
may be obtained only from Moody's. The above rating is not a recommendation to
buy, sell, or hold any Notes, and such rating may be subject to revision or
withdrawal at any time by Moody's. Any downward revision or withdrawal of the
above rating may have an adverse effect on the market price of the Notes. MBIA
does not guaranty the market price of the Notes nor does it guaranty that the
rating on the Notes will not be revised or withdrawn.
THE EXCHANGE OFFER
The following summary describes all material provisions of the Registration
Rights Agreement (the "Registration Rights Agreement") between Continental and
the Initial Purchaser. The summary does not purport to be complete and is
qualified in its entirely by reference to all of the provisions of the
Registration Rights Agreement, which has been filed as an exhibit to the
Registration Statement and copies of which are available as set forth under
"Where You Can Find More Information".
TERMS OF THE EXCHANGE OFFER
GENERAL
In connection with the issuance of the Old Notes, the Initial Purchaser and
its assignees became entitled to the benefits of the Registration Rights
Agreement.
Under the Registration Rights Agreement, Continental is obligated to use
its best efforts to:
o file the Registration Statement of which this Prospectus is a part for
a registered exchange offer with respect to an issue of new notes
identical in all material respects to the Old Notes within 120 days
after December 6, 2002, which is the date on which the Old Notes were
issued (the "Issuance Date");
o cause the Registration Statement to become effective under the
Securities Act within 180 days after the Issuance Date;
o cause the Registration Statement to remain effective until the closing
of the Exchange Offer; and
o consummate the Exchange Offer within 210 calendar days after the
Issuance Date.
Continental will keep the Exchange Offer open for a period of not less than
30 days. The Exchange Offer being made hereby, if commenced and consummated
within the time periods described in this paragraph, will satisfy those
requirements under the Registration Rights Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal (which together constitute the Exchange Offer),
all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the Expiration Date will be accepted for exchange. New Notes will
be issued in exchange for an equal face amount of outstanding Old Notes accepted
in the Exchange Offer. Old Notes may be tendered only in integral multiples of
$1,000. This Prospectus, together with the Letter of Transmittal, is being sent
to all registered holders of Old Notes as of [_____], 2003. The Exchange Offer
is not conditioned upon any minimum principal amount of Old Notes being tendered
for exchange. However, the obligation to accept Old Notes for exchange pursuant
to the Exchange Offer is subject to certain conditions, as set forth herein
under "--Conditions".
Old Notes shall be deemed to have been accepted as validly tendered when,
as and if Continental has given oral or written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for the tendering holders of Old
Notes for the purposes of receiving the New Notes and delivering New Notes to
such holders.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, Continental believes that the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold or otherwise transferred by holders thereof (other
than (i) a broker-dealer who acquired such Old Notes directly from Continental
for resale pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act or (ii) any holder that is an "affiliate" of
Continental as defined in Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such New Notes are acquired in the ordinary course of such
holders' business and such holders are not engaged in, and do not intend to
engage in, a distribution of such New Notes and have no arrangement with any
person to participate in a distribution of such New Notes.
By tendering the Old Notes in exchange for New Notes, each holder, other
than a broker-dealer, will represent to Continental that:
o it is not an affiliate of Continental (as defined in Rule 405 under
the Securities Act) nor a broker-dealer tendering Old Notes acquired
directly from Continental for its own account;
o any New Notes to be received by it will be acquired in the ordinary
course of its business; and
o it is not engaged in, and does not intend to engage in, a distribution
of such New Notes and has no arrangement or understanding to
participate in a distribution of the New Notes.
If a holder of Old Notes is engaged in or intends to engage in a
distribution of the New Notes or has any arrangement or understanding with
respect to the distribution of the New Notes to be acquired pursuant to the
Exchange Offer, such holder may not rely on the applicable interpretations of
the staff of the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any secondary
resale transaction. Each broker-dealer that receives New Notes for its own
account pursuant to the Exchange Offer (a "Participating Broker-Dealer") must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with resales of New Notes
received in exchange for Old Notes where such Old Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. Continental has agreed that, starting on the Expiration Date
and ending on the close of business 180 days after the Exp+iration Date, it will
make this Prospectus available to any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of Distribution".
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit Continental to effect the Exchange
Offer, if the Registration Statement is not declared effective within 180
calendar days after the Issuance Date under certain circumstances or the
Exchange Offer is not consummated within 210 days after the Issuance Date under
certain other circumstances, at the request of a holder not eligible to
participate in the Exchange Offer or under certain other circumstances described
in the Registration Rights Agreement, Continental will, in lieu of effecting the
registration of the New Notes pursuant to the Registration Statement and at no
cost to the holders of Old Notes:
o as promptly as practicable file with the Commission a shelf
registration statement (the "Shelf Registration Statement") covering
resales of the Old Notes;
o use its best efforts to cause the Shelf Registration Statement to be
declared effective under the Securities Act by the 180th calendar day
after the Issuance Date; and
o use its best efforts to keep effective the Shelf Registration
Statement for a period of two years after its effective date (or for
such shorter period as shall end when all of the Old Notes covered by
the Shelf Registration Statement have been sold pursuant thereto or
may be freely sold pursuant to Rule 144 under the Securities Act).
In the event that neither the consummation of the Exchange Offer nor the
declaration by the Commission of the Shelf Registration Statement to be
effective (each, a "Registration Event") occurs on or prior to the 210th
calendar day following the Issuance Date, the interest rate per annum borne by
the Notes shall be increased by 0.50% from and including such 210th day to but
excluding the earlier of (i) the date on which a Registration Event occurs and
(ii) the date on which all of the Notes otherwise become transferable by
Noteholders (other than affiliates or former affiliates of Continental) without
further registration under the Securities Act. In the event that the Shelf
Registration Statement ceases to be effective at any time during the period
specified by the Registration Rights Agreement for more than 60 days, whether or
not consecutive, during any 12-month period, the interest rate per annum borne
by the Notes shall be increased by 0.50% from the 61st day of the applicable
12-month period such Shelf Registration Statement ceases to be effective until
such time as the Shelf Registration Statement again becomes effective (or, if
earlier, the end of such period specified by the Registration Rights Agreement).
Upon consummation of the Exchange Offer, subject to certain exceptions,
holders of Old Notes who do not exchange their Old Notes for New Notes in the
Exchange Offer will no longer be entitled to registration rights and will not be
able to offer or sell their Old Notes, unless such Old Notes are subsequently
registered under the Securities Act (which, subject to certain limited
exceptions, the Company will have no obligation to do), except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. See "Risk Factors--Risk Factors Relating to
the Notes and the Exchange Offer--Consequences of Failure to Exchange".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean [________], 2003 (30 calendar days
following the commencement of the Exchange Offer), unless the Company, in its
sole discretion, extends the Exchange Offer, in which case the term "Expiration
Date" shall mean the latest date to which the Exchange Offer is extended.
Notwithstanding any extension of the Exchange Offer, if the Exchange Offer is
not consummated by July 4, 2003, the interest rate borne by the Notes is subject
to increase. See "--General".
In order to extend the Expiration Date, Continental will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Notes an announcement thereof, each prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date. Such announcement may state that the Company is extending the
Exchange Offer for a specified period of time.
Continental reserves the right:
o to delay acceptance of any Old Notes, to extend the Exchange Offer or
to terminate the Exchange Offer and not permit acceptance of Old Notes
not previously accepted if any of the conditions set forth herein
under "--Conditions" shall have occurred and shall not have been
waived by the Company, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent; and
o to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Old Notes.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
Exchange Agent. If the Exchange Offer is amended in a manner determined by
Continental to constitute a material change, Continental will promptly disclose
such amendment in a manner reasonably calculated to inform the holders of the
Old Notes of such amendment.
Without limiting the manner in which Continental may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, Continental shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at the Stated Interest Rate from the most
recent date to which interest has been paid on the Old Notes. Accordingly,
registered holders of New Notes on the relevant record date for the first
interest payment date following the completion of the Exchange Offer will
receive interest accruing from the most recent date to which interest has been
paid. Old Notes accepted for exchange will cease to accrue interest from and
after the date of completion of the Exchange Offer. Holders of Old Notes whose
Old Notes are accepted for exchange will not receive any payment for accrued
interest on the Old Notes otherwise payable on any Interest Payment Date the
record date for which occurs on or after completion of the Exchange Offer and
will be deemed to have waived their rights to receive the accrued interest on
the Old Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof (or, if the Old Notes are tendered
in accordance with the procedure for book-entry transfer described below, an
Agent's Message in lieu of the Letter of Transmittal), have the signatures
thereon guaranteed if required by the Letter of Transmittal and mail or
otherwise deliver such Letter of Transmittal or such facsimile or have the
Agent's Message delivered, together with any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
In addition, either
o certificates for such Old Notes must be received by the Exchange Agent
along with the Letter of Transmittal;
o a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Notes, if such procedure is available, into
the Exchange Agent's account at The Depository Trust Company ("DTC")
pursuant to the procedure for book-entry transfer described below,
must be received by the Exchange Agent prior to the Expiration Date;
or
o the holder must comply with the guaranteed delivery procedures
described below.
The method of delivery of Old Notes, Letters of Transmittal and all other
required documents is at the election and risk of the holders. If such delivery
is by mail, it is recommended that registered mail, properly insured, with
return receipt requested, be used. In all cases, sufficient time should be
allowed to assure timely delivery. No Letters of Transmittal or Old Notes should
be sent to Continental. Delivery of all documents must be made to the Exchange
Agent at one of the addresses as set forth below. Holders may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of Old Notes will constitute an agreement between
such holder and Continental in accordance with the terms and subject to the
conditions set forth in the Prospectus and in the Letter of Transmittal.
Only a holder of Old Notes may tender such Old Notes in the Exchange
Offer. The term "holder" with respect to the Exchange Offer means any person in
whose name Old Notes are registered on the books of Continental or any other
person who has obtained a properly completed bond power from the registered
holder.
Any beneficial owner, whose Old Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender, should contact such registered holder promptly and instruct such
registered holder to tender on such owner's behalf. If such beneficial owner
wishes to tender on such owner's behalf, such beneficial owner must, prior to
completing and executing the Letter of Transmittal and delivering such owner's
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (each, an "Eligible Institution") unless the Old
Notes tendered pursuant thereto are tendered (i) by a registered holder who has
not completed the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Notes listed therein, such Old Notes must be
endorsed or accompanied by bond powers and a proxy which authorizes such person
to tender the Old Notes on behalf of the registered holder, in each case as the
name of the registered holder or holders appears on the Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by Continental,
evidence satisfactory to Continental of their authority to so act must be
submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Notes will be determined by the
Company in its sole discretion, which determination will be final and binding.
The Company reserves the absolute right to reject any and all Old Notes not
properly tendered or any Old Notes the acceptance of which would, in the opinion
of counsel for Continental, be unlawful. Continental also reserves the absolute
right to waive any irregularities or conditions of tender as to particular Old
Notes. Continental's interpretation of the terms and conditions of the Exchange
Offer (including the instructions in the Letter of Transmittal) will be final
and binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be cured within such time as
Continental shall determine. Neither Continental, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Notes, nor shall any of them incur
any liability for failure to give such notification. Tenders of Old Notes will
not be deemed to have been made until such irregularities have been cured or
waived. Any Old Notes received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned without cost to such holder by the Exchange Agent to the
tendering holders of Old Notes, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, Continental reserves the right in its sole discretion, subject
to the provisions of the Indenture, to (i) purchase or make offers for any Old
Notes that remain outstanding subsequent to the Expiration Date or, as set forth
under "--Conditions", to terminate the Exchange Offer in accordance with the
terms of the Registration Rights Agreement and (ii) to the extent permitted by
applicable law, purchase Old Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Notes properly tendered will be accepted promptly after the Expiration
Date, and the New Notes will be issued promptly after acceptance of the Old
Notes. See "--Conditions" below. For purposes of the Exchange Offer, Old Notes
shall be deemed to have been accepted for exchange when, as and if Continental
has given oral or written notice thereof to the Exchange Agent.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of:
o certificates for such Old Notes or a timely Book-Entry Confirmation of
such Old Notes into the Exchange Agent's account at DTC;
o a properly completed and duly executed Letter of Transmittal or an
Agent's Message in lieu thereof; and
o all other required documents.
If any tendered Old Notes are not accepted for any reason set forth in the
terms and conditions of the Exchange Offer or if Old Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Notes will be returned without expense to the tendering holder
thereof (or, in the case of Old Notes tendered by the book-entry transfer
procedures described below, such nonexchanged Old Notes will be credited to an
account maintained with DTC) as promptly as practicable after the expiration or
termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at DTC for purposes of the Exchange Offer within two business
days after the date of this Prospectus. The Exchange Agent has confirmed that
any financial institution that is a participant in DTC's systems (a "DTC
Participant") may use DTC's Automated Tender Offer program ("ATOP") procedures
to tender Old Notes in the Exchange Offer. Any DTC Participant may make
book-entry delivery of Old Notes by causing DTC to transfer such Old Notes into
the Exchange Agent's account at DTC in accordance with DTC's ATOP procedures for
transfer. However, although delivery of Old Notes may be effected through
book-entry transfer into the Exchange Agent's account at DTC, the Letter of
Transmittal (or facsimile thereof) with any required signature guarantees, or an
Agent's Message in lieu of the Letter of Transmittal, and any other required
documents must, in any case, be transmitted to and received by the Exchange
Agent at one of the addresses set forth below under "--Exchange Agent" on or
prior to 5:00 p.m., New York City time, on the Expiration Date or the guaranteed
delivery procedures described below must be complied with. The term "Agent's
Message" means a message, transmitted by DTC and received by the Exchange Agent
and forming part of a Book-Entry Confirmation, that states that DTC has received
an express acknowledgment from a DTC Participant tendering Old Notes that are
the subject of such Book-Entry Confirmation that such DTC Participant has
received and agrees to be bound by the terms of the Letter of Transmittal, and
that Continental may enforce the Letter of Transmittal against such DTC
Participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of Old Notes desires to tender such Old Notes, and
(i) the Old Notes are not immediately available, or (ii) time will not permit
such holder's Old Notes, the Letter of Transmittal or any other required
documents to reach the Exchange Agent before the Expiration Date, or (iii) the
procedures for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if:
o the tender is made through an Eligible Institution;
o prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof or Agent's Message in lieu
thereof) and Notice of Guaranteed Delivery, substantially in the form
provided by Continental (by facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of Old
Notes and the amount of Old Notes tendered, stating that the tender is
being made thereby and guaranteeing that within three New York Stock
Exchange trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Old
Notes in proper form for transfer, or a Book-Entry Confirmation, as
the case may be, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof or Agent's Message in lieu
thereof) and any other documents required by the Letter of Transmittal
will be deposited by the Eligible Institution with the Exchange Agent;
and
o the certificates for all physically tendered Old Notes in proper form
for transfer, or a Book-Entry Confirmation, as the case may be, a
properly completed and duly executed Letter of Transmittal (or a
facsimile thereof or Agent's Message in lieu thereof) and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within three New York Stock Exchange trading days after
the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date at one of the addresses set forth below under "--Exchange
Agent". Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn
(including the principal amount of such Old Notes) and (where certificates for
Old Notes have been transmitted) specify the name in which such Old Notes are
registered, if different from that of the withdrawing holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange Agent,
then, prior to the release of such certificates, the withdrawing holder must
also submit the serial numbers of the particular certificates to be withdrawn
and a signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder is an Eligible Institution. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at DTC
to be credited with the withdrawn Old Notes and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
Continental, whose determination shall be final and binding on all parties. Any
Old Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
DTC pursuant to the book-entry transfer procedures described above, such Old
Notes will be credited to an account maintained with DTC for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "--Procedures for Tendering" and "--Book-Entry
Transfer" above at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Old Notes will not be
required to be accepted for exchange, nor will New Notes be issued in exchange
for, any Old Notes, and Continental may terminate or amend the Exchange Offer as
provided herein before the acceptance of such Old Notes, if because of any
change in law, or applicable interpretations thereof by the Commission,
Continental determines that it is not permitted to effect the Exchange Offer,
and Continental has no obligation to, and will not, knowingly, permit acceptance
of tenders of Old Notes from affiliates of the Company (within the meaning of
Rule 405 under the Securities Act) or from any other holder or holders who are
not eligible to participate in the Exchange Offer under applicable law or
interpretations thereof by the Commission, or if the New Notes to be received by
such holder or holders of Old Notes in the Exchange Offer, upon receipt, will
not be tradable by such holder without restriction under the Securities Act and
the Exchange Act and without material restrictions under the "blue sky" or
securities laws of substantially all of the states of the United States.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as exchange agent (the
"Exchange Agent") for the Exchange Offer. Questions and requests for assistance
and requests for additional copies of this Prospectus or of the Letter of
Transmittal should be directed to the Exchange Agent addressed as follows:
BY MAIL: BY OVERNIGHT DELIVERY OR HAND:
Wilmington Trust Company Wilmington Trust Company
DC-1615 Reorg Services Corporate Trust Reorg Services
PO Box 8861 1100 North Market Street
Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615
FACSIMILE TRANSMISSION:
(302) 636-4145
CONFIRM BY TELEPHONE:
(302) 636-6472
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by Continental. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telephone, telecopy, electronic mail or in person by officers and
regular employees of Continental.
Continental will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. Continental, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. Continental may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of the Prospectus and related documents to the beneficial
owners of the Old Notes, and in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by Continental, including fees and expenses of the Exchange Agent and the
Trustee and accounting, legal, printing and related fees and expenses.
Continental will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be registered or issued
in the name of, any person other than the registered holder of the Old Notes
tendered, or if tendered Old Notes are registered in the name of any person
other than the person signing the Letter of Transmittal, or if a transfer tax is
imposed for any reason other than the exchange of Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
DESCRIPTION OF THE NOTES
The following summary describes the material terms of the Notes. The
summary does not purport to be complete and is qualified in its entirety by all
provisions of the Notes, the Indenture, the Security Agreement, the Collateral
Maintenance Agreement and the Reference Agency Agreement (collectively, the
"Operative Documents"), each of which has been filed as an exhibit to the
Registration Statement and copies of which are available as set forth under
"Where You Can Find More Information". The references to Sections in parentheses
in the following summary are to the relevant Sections of the Indenture unless
otherwise indicated.
GENERAL
The Old Notes were, and the New Notes will be, issued by Continental under
an Indenture (the "Indenture") among Continental, Wilmington Trust Company, as
trustee (the "Trustee"), the Policy Provider and the Liquidity Provider.
The forms and terms of the New Notes are the same in all material respects
as the form and terms of the Old Notes, except that:
o the New Notes will be registered under the Securities Act;
o the New Notes will not contain restrictions on transfer or provisions
relating to registration rights or interest rate increases; and
o the New Notes will be available only in book-entry form.
The New Notes will be issued only in fully registered form, without
coupons, and will be subject to the provisions described below under
"--Book-Entry; Delivery and Form". The New Notes will be issued only in minimum
denominations of $1,000 or integral multiples thereof, except that one Note may
be issued in a different denomination. (Section 2.1(b))
The Notes are secured by a lien on the Collateral. The Notes rank equally
in right of payment with all of Continental's other unsubordinated obligations,
except to the extent of the assets subject to such lien, as to which the Notes
effectively rank senior.
On the Issuance Date, the Trustee, for the benefit of the Noteholders,
entered into the Liquidity Facility, the fee letter with respect thereto, the
Policy and the Policy Provider Agreement (collectively, the "Support
Documents"). (Section 3.10)
PAYMENTS OF PRINCIPAL AND INTEREST
Continental has issued $200,000,000 in aggregate principal amount of Old
Notes. The Notes are limited to $200,000,000 of principal in the aggregate.
Subject to the provisions of the Indenture, the entire principal amount of the
Notes is scheduled to be paid to the Noteholders on December 6, 2007 (the "Final
Scheduled Payment Date"). The "Final Legal Maturity Date" is December 6, 2009.
Interest accrues on the unpaid principal amount of each Note at the
variable rate per annum set forth on the cover page of this Prospectus (plus, if
applicable, 0.50% during the period specified in the Registration Rights
Agreement), subject to a maximum equal to the Capped Interest Rate applicable
only for periods as to which Continental has failed to pay accrued interest when
due and failed to cure such nonpayment (the "Stated Interest Rate"). For all
other periods, the interest rate on the Notes will not be capped. Accrued
interest will be payable on March 6, June 6, September 6 and December 6 of each
year (each, a "Scheduled Interest Payment Date") or, if not a Business Day, the
next succeeding Business Day (each date on which interest is due, an "Interest
Payment Date" ), commencing on March 6, 2003. Such accrued interest will be paid
to holders of record on the 15th day preceding the applicable Scheduled Interest
Payment Date. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the Issuance
Date. Interest on the Notes is calculated on the basis of the actual number of
days elapsed over a 360-day year and shall accrue with respect to the first but
not the last day of each Interest Period. If any date scheduled for a payment of
principal, interest, Premium, if any, or Break Amount, if any, is not a Business
Day, such payment will be made on the next succeeding Business Day, and interest
shall be added for such additional period. (Section 2.7)
Payments of interest on the Notes are supported by a Liquidity Facility
provided by the Liquidity Provider for the benefit of the holders of the Notes.
The Liquidity Facility will provide an amount sufficient to pay interest on the
Notes at the Stated Interest Rate on up to eight successive Interest Payment
Dates. The Liquidity Facility does not provide for drawings or payments
thereunder to pay for principal of, or Premium, if any, or Break Amount, if any,
with respect to, the Notes. See "Description of the Liquidity Facility".
Except in specified circumstances, after use of any available funds under
the Liquidity Facility and the Cash Collateral Account, the payment of interest
on the Notes at the Stated Interest Rate is supported by the Policy provided by
the Policy Provider. Payment of principal of the Notes no later than the Final
Legal Maturity Date is also supported by the Policy. See "Description of the
Policy and the Policy Provider Agreement--The Policy".
Payments of interest and principal will be distributed by the Trustee on
the date scheduled for such payment under the Indenture or, if the money for
purposes of such payment has not been deposited, in whole or in part, with the
Trustee by Continental, the Liquidity Provider or the Policy Provider on such
date, on the next Business Day on which some or all of the money has been
deposited with the Trustee (a "Distribution Date"). However, if some or all of
the money has not been deposited with the Trustee for purposes of making an
interest payment on the Notes within five days after the Interest Payment Date
for such payment, Continental is required to fix a special payment date and
special record date for such payment and to give written notice to the
Noteholders of such special dates and the amount of defaulted interest to be
paid.
DETERMINATION OF LIBOR
LIBOR ("LIBOR") for the period commencing on and including the Issuance
Date and ending on but excluding the first Interest Payment Date (the "Initial
Interest Period" and an "Interest Period") was determined on the second Business
Day preceding the Issuance Date as the rate for deposits in U.S. dollars for a
period of three months that appeared on the display designated as page "3750" on
the Telerate Monitor.
For the purpose of calculating LIBOR for the periods from and including an
Interest Payment Date to but excluding the next succeeding Interest Payment Date
(each, also an "Interest Period"), Continental and the Trustee have entered into
a Reference Agency Agreement (the "Reference Agency Agreement") with Wilmington
Trust Company, as reference agent (the "Reference Agent"). The Reference Agent
will determine LIBOR for each Interest Period following the Initial Interest
Period, on a date (the "Reference Date") that is two London banking days
(meaning days on which commercial banks are open for general business in London,
England) before the Interest Payment Date on which such Interest Period
commences.
On each Reference Date, the Reference Agent will determine LIBOR as the
rate for deposits in U.S. dollars for a period of three months that appears on
the display designated as page "3750" on the Telerate Monitor (or such other
page or service as may replace it) as of 11:00 a.m., London time.
If the rate determined as described in the foregoing paragraph does not
appear on the Telerate Page 3750, the Reference Agent will determine LIBOR on
the basis of the rates at which deposits in U.S. Dollars are offered by certain
reference banks as described in the Reference Agency Agreement at approximately
11:00 a.m., London time, on the Reference Date for such Interest Period to prime
banks in the London interbank market for a period of three months commencing on
the first day of such Interest Period and in an amount that is representative
for a single transaction in the London interbank market at the relevant time.
The Reference Agent will request the principal London office of each of the
reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that Interest Period will be the
arithmetic mean of the quotations. If fewer than two quotations are provided,
the interest rate for the next Interest Period shall be the arithmetic mean of
the rates quoted by major banks in New York City, selected by the Reference
Agent in good faith and in a commercially reasonable manner, at approximately
11:00 a.m., New York City time, on the first day of such Interest Period for
loans in U.S. Dollars to leading European banks for a period of three months
commencing on the first day of such Interest Period and in an amount that is
representative for a single transaction in the New York market at the relevant
time, except that, if the banks so selected by the Reference Agent are not
quoting as mentioned above, LIBOR shall be the floating rate of interest in
effect for the last preceding Interest Period.
The Reference Agent's determination of LIBOR (in the absence of negligence,
willful default, bad faith or manifest error) will be conclusive and binding
upon all parties.
As promptly as is practicable after the determination thereof, the
Reference Agent will give notice of its determination of LIBOR for the relevant
Interest Period to Continental, the Trustee, the Liquidity Provider and the
Policy Provider. Holders of the Notes (the "Noteholders") may obtain such
information from the Trustee.
Continental reserves the right to terminate the appointment of the
Reference Agent at any time on 30 days' notice and to appoint a replacement
reference agent in its place. Notice of any such termination will be given to
the Noteholders. The Reference Agent may not be removed or resign its duties
without a successor having been appointed.
BREAK AMOUNT
"Break Amount" means, as of any date of payment, redemption or acceleration
of any Note (the "Applicable Date"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the Applicable Date pursuant to
the formula set forth below.
The Break Amount will be calculated as follows:
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum of (i) the
amount of the outstanding principal amount of such Note as of the
first day of the then applicable Interest Period plus (ii) interest
payable thereon during such entire Interest Period at then
effective LIBOR.
Y = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using then
effective LIBOR as the discount rate.
Z = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using a rate
equal to the applicable London interbank offered rate for a period
commencing on the Applicable Date and ending on the last day of the
then applicable Interest Period, determined by the Reference Agent
as of two Business Days prior to the Applicable Date as the
discount rate.
No Break Amount will be payable (x) if the Break Amount, as calculated
pursuant to the formula set forth above, is equal to or less than zero or (y) on
or in respect of any Applicable Date that is an Interest Payment Date.
REDEMPTION
The Notes may be redeemed at any time in whole or (so long as no Payment
Default has occurred and is continuing) in part (in any integral multiple of
$1,000) by the Company at its sole option at a redemption price equal to the sum
of 100% of the principal amount of, accrued and unpaid interest on, and Break
Amount, if any, with respect to, the redeemed Notes to and including the date of
redemption. In addition, if a Note is redeemed before the third anniversary of
the Issuance Date (except in connection with a redemption to satisfy the maximum
Collateral Ratio or minimum Rotable Ratio requirement discussed under
"--Collateral--Appraisals and Maintenance of Ratios"), such redemption price
will include a premium (the "Premium") equal to the following percentage of the
principal amount of such Note: (i) if redeemed before the first anniversary of
the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and
before the second anniversary of the Issuance Date, 1.0%; and (iii) if redeemed
on or after such second anniversary and before the third anniversary of the
Issuance Date, 0.5%. (Section 4.1)
At least 15 days but not more than 60 days before any redemption date, the
Trustee will send a notice of redemption to each Noteholder whose Notes are to
be redeemed, identifying the Notes and the principal amount thereof to be
redeemed. If less than all of the Notes are to be redeemed, the Trustee will
select the Notes to be redeemed on either a pro rata basis or by lot or by any
other equitable manner determined by the Trustee in its sole discretion. On the
redemption date, interest will cease to accrue on the Notes or portions thereof
called for redemption, unless Continental fails to make the redemption payment
for such Notes. (Sections 4.3, 4.4 and 4.5)
If Continental gives notice of redemption but fails to pay when due all
amounts necessary to effect such redemption, such redemption shall be deemed
revoked and no amount shall be due as a result of notice of redemption having
been given.
COLLATERAL
The Notes are secured by a lien on spare parts (including appliances) first
placed in service after October 22, 1994, and owned by Continental that are
appropriate for installation on or use in
o one or more of the following aircraft models: Boeing model 737-700,
737-800, 737-900, 757-200, 757-300, 767-200, 767-400 or 777-200
aircraft,
o any engine utilized on any such aircraft or
o any other Qualified Spare Part,
and not appropriate for installation on or use in any other model of aircraft
currently operated by Continental or engine utilized on any such other model of
aircraft ("Qualified Spare Parts"), together with certain records relating to
such spare parts, certain rights of Continental with respect to such spare parts
and certain proceeds of the foregoing (collectively, the "Collateral"). The lien
will not apply for as long as a spare part is installed on or being used in any
aircraft, engine or other spare part so installed or being used. In addition,
the lien will not apply if a spare part is not located at a Designated Location.
(Security Agreement, Section 2.01) Spare engines are not included in the
Collateral.
On the Issuance Date, Continental entered into a Security Agreement (the
"Security Agreement" and, together with any other agreement under which
Continental may grant a lien for the benefit of the Noteholders, the "Collateral
Agreements") with the Trustee, acting as security agent (the "Security Agent"
and, together with any collateral agent under any other Collateral Agreement,
the "Collateral Agents"), providing for the grant of the lien on the Collateral.
In addition, on the Issuance Date, Continental entered into a Collateral
Maintenance Agreement (the "Collateral Maintenance Agreement") with the Policy
Provider, providing for appraisal reports and certain other requirements with
respect to the Collateral. The following summarizes certain provisions of the
Security Agreement and Collateral Maintenance Agreement relating to the spare
parts included in the Collateral (the "Pledged Spare Parts").
APPRAISALS AND MAINTENANCE OF RATIOS
Continental is required to furnish to the Policy Provider and the Trustee
by the fifth Business Day of February and the fifth Business Day of August in
each year, commencing in August 2003, so long as the Notes are outstanding, a
certificate of an independent appraiser. Such certificates are required to state
such appraiser's opinion of the fair market value of the Collateral and of the
Rotables included in the Collateral, determined on the basis of a hypothetical
sale negotiated in an arm's length free market transaction between a willing and
able seller and a willing and able buyer, neither of whom is under undue
pressure to complete the transaction, under then current market conditions (the
"Fair Market Value"). This appraisal will not apply to any cash or permitted
investment securities (the "Cash Collateral") then held as collateral for the
Notes, and such securities will be valued by the Trustee in accordance with
customary financial market practices. Such valuations will then be used to
calculate the "Collateral Ratio" applicable to the Notes, which shall mean a
percentage determined by dividing (i) the aggregate principal amount of all
outstanding Notes minus the sum of the Cash Collateral held by the Collateral
Agent by (ii) the Fair Market Value of all Collateral (excluding any Cash
Collateral) as set forth in such independent appraiser's certificate. Such
valuations will also be used to calculate the "Rotable Ratio" applicable to the
Notes, which shall mean a percentage determined by dividing (i) the Fair Market
Value of the Rotables as set forth in such independent appraiser's certificate
by (ii) the aggregate principal amount of all outstanding Notes minus the sum of
the Cash Collateral held by the Collateral Agent. The calculation of the
Collateral Ratio and Rotable Ratio will be set forth in a certificate of
Continental. (Collateral Maintenance Agreement, Article 2)
If the Collateral Ratio as so determined is greater than 45%, Continental
will be required, within 90 days after the date of Continental's certificate
calculating such Collateral Ratio, to:
o subject additional Qualified Spare Parts to the lien of the Security
Agreement;
o grant a security interest in other property to secure the Notes for
the benefit of the Noteholders (which thereafter will be included as
"Collateral" for purposes of the Notes), but only if the Policy
Provider agrees and Continental shall have received written
confirmation from each nationally recognized rating agency then rating
the Notes at Continental's request (a "Rating Agency") that the use of
such additional collateral and the related agreements to reduce the
Collateral Ratio will not result in a reduction of the rating for the
Notes below the then current rating for the Notes (such rating
determined without regard to the Policy) or a withdrawal or suspension
of the rating of the Notes;
o provide additional Cash Collateral to the Security Agent under the
Security Agreement (provided that if Continental's cash, cash
equivalents and certain other marketable securities as of the
applicable determination date was less than $600,000,000, then the
total amount of Cash Collateral may not exceed $20,000,000);
o deliver Notes to the Trustee for cancellation; o redeem some or all of
the Notes; or
o any combination of the foregoing;
such that the Collateral Ratio, as recalculated giving effect to such action
(but otherwise using the information most recently used to determine the
Collateral Ratio), would not be greater than 45%. (Collateral Maintenance
Agreement, Section 3.1(a))
If the Rotable Ratio as so determined is less than 150%, Continental will
be required, within 90 days after the date of Continental's certificate
calculating such Rotable Ratio, to:
o subject additional Rotables to the lien of the Security Agreement;
o provide additional Cash Collateral to the Security Agent under the
Security Agreement (provided that if Continental's cash, cash
equivalents and certain other marketable securities as of the
applicable determination date was less than $600,000,000, then the
total amount of Cash Collateral may not exceed $20,000,000);
o deliver Notes to the Trustee for cancellation;
o redeem some or all of the Notes; or
o any combination of the foregoing;
such that the Rotable Ratio, as recalculated giving effect to such action (but
otherwise using the information most recently used to determine the Rotable
Ratio), would not be less than 150%. (Collateral Maintenance Agreement, Section
3.1(b))
If Continental provides additional Cash Collateral to comply with such
maximum Collateral Ratio or minimum Rotable Ratio requirement, it must, within
90 days after providing such Cash Collateral, take additional action (other than
providing Cash Collateral) to cause the Collateral Ratio (calculated to exclude
such Cash Collateral) not to be greater than 45% and to cause the Rotable Ratio
(calculated to exclude such Cash Collateral) not to be less than 150%.
(Collateral Maintenance Agreement, Section 3.1(e)) If the Collateral Ratio is
less than the maximum Collateral Ratio and the Rotable Ratio is greater than the
minimum Rotable Ratio, in each case as most recently determined as described
above, and the Security Agent held Cash Collateral as of the relevant
determination date, Continental may withdraw Cash Collateral in excess of the
amount necessary to comply with such ratios. (Security Agreement, Section
7.03(b)).
Continental deposited Cash Collateral of $13,056,950 with the Security
Agent upon initial issuance of the Old Notes, which resulted in an initial
Collateral Ratio of 45% based on the initial appraisal as of August 25, 2002,
prepared by SH&E. See "Description of the Appraisal". Without giving effect to
such deposit, the initial Collateral Ratio would have been 48%. Using the
appraisal of the Collateral determined as of December 25, 2002, and without
giving effect to such deposit, the Collateral Ratio would have been 45.8%. See
"Description of the Appraisal". The calculation of the Collateral Ratio at the
time of the next semiannual appraisal due in August 2003 will be made without
giving effect to such Cash Collateral deposit. Continental expects to satisfy
the maximum Collateral Ratio requirement at that time based on its projected
purchases of spare parts, in which case Continental will be entitled to withdraw
such Cash Collateral. However, no assurance can be given that the maximum
Collateral Ratio requirement will be satisfied based on such purchases. If it is
not, Continental will be required to take one or more of the other actions
described above (other than providing Cash Collateral) to satisfy such
requirement.
Continental is required to furnish to the Policy Provider and the Trustee,
within ten Business Days after each May 1 and November 1, commencing with May 1,
2003, a report providing certain information regarding the quantity of Pledged
Spare Parts included in the Collateral and compliance with certain requirements
of the Collateral Maintenance Agreement.
FLEET REDUCTION
The Collateral Maintenance Agreement requires that the outstanding
principal amount of Notes be reduced if the total number of aircraft of any of
the four aircraft model groups listed below in Continental's in-service fleet
during any period of 60 consecutive days is less than the minimum specified
below for such group (other than due to restrictions on operating such aircraft
imposed by the FAA or any other U.S. Government agency):
AIRCRAFT MODEL MINIMUM
-------------- -------
o Boeing 737-700, Boeing 737-800 and
Boeing 737-900 Aircraft.............................. 63.Aircraft
o Boeing 757-200 and Boeing 757-300 Aircraft........... 23.Aircraft
o Boeing 767-200 and Boeing 767-400 Aircraft........... 13.Aircraft
o Boeing 777-200 Aircraft.............................. 9.Aircraft
If any of the foregoing specified minimums is not so satisfied with respect
to any aircraft model group, then within 90 days after such occurrence,
Continental must redeem Notes or deliver Notes to the Trustee for cancellation
(or a combination thereof) in a percentage of the outstanding principal amount
of all Notes determined by dividing the appraised value of the Pledged Spare
Parts that are appropriate for installation on, or use in, only the aircraft of
such model group, or the engines utilized only on such aircraft, by the
appraised value of the Collateral. (Collateral Maintenance Agreement, Section
3.3)
LIENS
Continental is required to maintain the Pledged Spare Parts free of any
liens, other than the rights of the Trustee, the Noteholders and Continental
arising under the Indenture or the other Operative Documents related thereto,
and other than certain limited liens permitted under such documents, including
but not limited to (i) liens for taxes either not yet due or being contested in
good faith by appropriate proceedings; (ii) materialmen's, mechanics' and other
similar liens arising in the ordinary course of business that either are not yet
delinquent for more than 60 days or are being contested in good faith by
appropriate proceedings; (iii) judgment liens so long as such judgment is
discharged or vacated within 60 days or the execution of such judgment is stayed
pending appeal or discharged, vacated or reversed within 60 days after
expiration of such stay; and (iv) any other lien as to which Continental has
provided a bond or other security adequate in the reasonable opinion of the
Security Agent; provided that in the case of each of the liens described in the
foregoing clauses (i), (ii) and (iii), such liens and proceedings do not involve
any material risk of the sale, forfeiture or loss of the Pledged Spare Parts or
the interest of the Security Agent therein or impair the lien of the Security
Agreement. (Collateral Maintenance Agreement, Section 3.4)
MAINTENANCE
Continental is required to maintain the Pledged Spare Parts in good working
order and condition, excluding (i) Pledged Spare Parts that have become worn out
or unfit for use and not reasonably repairable or obsolete, (ii) Pledged Spare
Parts that are not required for Continental's normal operations and (iii)
expendable parts that have been consumed or used in Continental's operations. In
addition, Continental must maintain all records, logs and other materials
required by the FAA or under the Federal Aviation Act to be maintained in
respect of the Pledged Spare Parts. (Collateral Maintenance Agreement, Section
3.5)
USE AND POSSESSION
Continental has the right to deal with the Pledged Spare Parts in any
manner consistent with its ordinary course of business. This includes the right
to install on, or use in, any aircraft, engine or Qualified Spare Part leased to
or owned by Continental any Pledged Spare Part, free from the lien of the
Security Agreement. (Security Agreement Section 4.02(a))
Continental may not sell, lease, transfer or relinquish possession of any
Pledged Spare Part without the prior written consent of the Policy Provider,
except as permitted by the Security Agreement or the Collateral Maintenance
Agreement. So long as no Event of Default has occurred and is continuing,
Continental may sell, transfer or dispose of Pledged Spare Parts free from the
Lien of the Security Agreement. (Security Agreement, Section 4.03(a)) However,
as of any date during the period between the dates of independent appraiser's
certificates delivered pursuant to the Collateral Maintenance Agreement, the
aggregate appraised value of all Pledged Spare Parts (x) previously during such
period sold, transferred or disposed of (with certain exceptions) may not exceed
2% of the appraised value of the Collateral, (y) then subject to leases or loans
may not exceed 2% of the appraised value of the Collateral or (z) previously
during such period moved from a Designated Location to a location that is not a
Designated Location (with certain exceptions) may not exceed 2% of the appraised
value of the Collateral. (Collateral Maintenance Agreement, Section 3.2)
Continental may, in the ordinary course of business, transfer possession of
any Pledged Spare Part to the manufacturer thereof or any other organization for
testing, overhaul, repairs, maintenance, alterations or modifications or to any
person for the purpose of transport to any of the foregoing. In addition,
Continental may dismantle any Pledged Spare Part that has become worn out or
obsolete or unfit for use and may sell or dispose of any such Pledged Spare Part
or any salvage resulting from such dismantling, free from the lien of the
Security Agreement. Continental also may subject any Pledged Spare Part to a
pooling, exchange, borrowing or maintenance servicing agreement arrangement
customary in the airline industry and entered into in the ordinary course of
business; provided, however, that if Continental's title to any such Pledged
Spare Part shall be divested under any such agreement or arrangement, such
divestiture shall be deemed to be a sale with respect to such Pledged Spare
Part. (Collateral Maintenance Agreement, Section 3.6(a))
So long as no Event of Default shall have occurred and be continuing,
Continental may enter into a lease with respect to any Pledged Spare Part to any
U.S. air carrier that is not then subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution or similar proceeding and shall not
have substantially all of its property in the possession of any liquidator,
trustee, receiver or similar person. In the case of any such lease, Continental
will include in such lease appropriate provisions which (i) make such lease
expressly subject and subordinate to all of the terms of the Security Agreement,
including the rights of the Security Agent to avoid such lease in the exercise
of its rights to repossession of the Pledged Spare Parts thereunder; (ii)
require the lessee to comply with the insurance requirements of the Collateral
Maintenance Agreement; and (iii) require that the Pledged Spare Parts subject
thereto be used in accordance with the limitations applicable to the Company's
use, possession and location of such Pledged Spare Parts provided in the
Collateral Maintenance Agreement and the Security Agreement (including, without
limitation, that such Pledged Spare Parts be kept at one or more Designated
Locations). (Collateral Maintenance Agreement, Section 3.6(b))
DESIGNATED LOCATIONS
Continental is required to keep the Pledged Spare Parts at one or more of
the designated locations specified in the Security Agreement or added from time
to time by Continental in accordance with the Security Agreement (the
"Designated Locations"), except as otherwise permitted under the Security
Agreement and Collateral Maintenance Agreement. (Security Agreement, Section
4.02(b)) Continental is entitled to hold Qualified Spare Parts at locations
other than Designated Locations. The lien of the Security Agreement does not
apply to any spare part not located at a Designated Location.
INSURANCE
Continental is required to maintain insurance covering physical damage to
the Pledged Spare Parts. Such insurance must provide for the reimbursement of
Continental's expenditure in repairing or replacing any damaged or destroyed
Pledged Spare Part. If any such Pledged Spare Part is not repaired or replaced,
such insurance must provide for the payment of the amount it would cost to
repair or replace such Pledged Spare Part, on the date of loss, with proper
deduction for obsolescence and physical depreciation. However, after giving
effect to self-insurance permitted as described below, the amounts payable under
such insurance may be less.
All insurance proceeds paid under such policies as a result of the
occurrence of an "Event of Loss" with respect to any Pledged Spare Parts
involving proceeds in excess of $2 million, up to 110% of the outstanding
principal amount of the Notes (the "Debt Balance"), will be paid to the Security
Agent. The entire amount of any insurance proceeds not involving an "Event of
Loss" with respect to any Pledged Spare Parts or involving proceeds of $2
million or less, and the amount of insurance proceeds in excess of the Debt
Balance, will be paid to the Company so long as no Payment Default, Event of
Default or Continental Bankruptcy Event shall be continuing. For these purposes,
"Event of Loss" means, with respect to any Pledge Spare Part, its destruction,
damage beyond repair, damage that results in the receipt of insurance proceeds
on the same basis as destruction or loss of possession by the Company for 90
consecutive days as a result of theft or disappearance. Any such proceeds held
by the Security Agent will be disbursed to Continental to reimburse it for the
purchase of additional Qualified Spare Parts after the occurrence of such Event
of Loss. In addition, such proceeds will be disbursed to Continental to the
extent it would not cause the Collateral Ratio, as subsequently determined, to
exceed the maximum Collateral Ratio.
Continental is also required to maintain third party liability insurance
with respect to the Pledged Spare Parts, in an amount and scope as it
customarily maintains for equipment similar to the Pledged Spare Parts.
Continental may self-insure the risks required to be insured against as
described above in such amounts as shall be consistent with normal industry
practice.
EVENT OF DEFAULT
Each of the following constitutes an "Event of Default" with respect to the
Notes:
o Failure by Continental to pay (i) principal of, interest on, or
Premium, if any, or Break Amount, if any, with respect to, any Note
when due, and such failure shall remain unremedied for more than ten
Business Days (it being understood that any amount distributed to the
Noteholders in respect of the foregoing from funds provided by the
Policy Provider, the Liquidity Provider or the Cash Collateral Account
shall not be deemed to cure such Default) or (ii) any other amount
payable by it to the Noteholders under the Indenture or any other
Operative Document when due, and such failure shall continue for more
than ten Business Days after Continental has received written notice
from the Trustee of the failure to make such payment when due (without
giving effect to any such notice or grace period, a "Payment
Default").
o Failure by Continental to observe or perform (or cause to be obtained
and performed) in any material respect any other covenant, agreement
or obligation set forth in the Indenture or in any other Operative
Document, and such failure shall continue after notice and specified
cure periods.
o Any representation or warranty made by Continental in the Indenture or
any Operative Document (a) shall prove to have been untrue or
inaccurate in any material respect as of the date made, (b) such
untrue or inaccurate representation or warranty is material at the
time in question and (c) the same shall remain uncured (to the extent
of the adverse impact of such incorrectness on the Trustee) for more
than 30 days after the date of written notice from the Trustee to
Continental.
o The occurrence of certain events of bankruptcy, reorganization or
insolvency of Continental (each, a "Continental Bankruptcy Event").
(Section 7.1)
If an event occurs and is continuing which is, or after notice or passage
of time, or both, would be an Event of Default (a "Default") and if such Default
is known the Trustee, the Trustee shall mail to each Noteholder, the Liquidity
Provider and the Policy Provider a notice of the Default within 90 days after
the occurrence thereof except as otherwise permitted by the Trust Indenture Act
of 1939, as amended (the "TIA"). Except in the case of a Default in payment of
principal of, or interest on, or Premium, if any, or Break Amount, if any, with
respect to, any Note, the Trustee may withhold the notice if and so long as it,
in good faith, determines that withholding the notice is in the interests of the
Noteholders. (Section 8.5)
REMEDIES
If an Event of Default (other than a Continental Bankruptcy Event) occurs
and is continuing, the Controlling Party may, by notice to Continental and the
Trustee, and the Trustee shall, upon the request of the Controlling Party,
declare all unpaid principal of, accrued but unpaid interest on, and Premium, if
any, and Break Amount, if any, with respect to, the outstanding Notes and other
amounts otherwise payable under the Indenture, if any, to be due and payable
immediately. If a Continental Bankruptcy Event occurs, such amounts shall be due
and payable without any declaration or other act on the part of the Trustee, the
Controlling Party or any Noteholder. (Section 7.2)
The Controlling Party by notice to the Trustee may rescind an acceleration
and its consequences if (a) all existing Events of Default, other than the
non-payment as to the Notes of the principal, interest, Premium, if any, and
Break Amount, if any, with respect thereto and other amounts otherwise payable
under the Indenture, if any, which have become due solely by such declaration of
acceleration, have been cured or waived, (b) to the extent the payment of such
interest is permitted by law, interest on overdue installments of interest and
on overdue principal which has become due otherwise than by such declaration of
acceleration, has been paid, (c) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction, and (d) all payments
due to the Trustee and any predecessor Trustee have been made. No such
rescission shall affect any subsequent default or impair any right arising from
any subsequent default. (Section 7.2)
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, interest on, or Premium, if any, or Break Amount, if any, with
respect to, the Notes or other amounts otherwise payable under the Indenture, if
any, or to enforce the performance of any provision of the Notes or the
Indenture, including instituting proceedings and exercising and enforcing, or
directing exercise and enforcement of, all rights and remedies of the Trustee
and the Collateral Agent under the Operative Documents and directing the
Collateral Agent to deposit with the Trustee all cash or investment securities
held by the Collateral Agent. The Trustee may maintain a proceeding even if it
does not possess any of the Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Noteholder in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are cumulative.
(Section 7.3)
The Controlling Party by notice to the Trustee may authorize the Trustee to
waive an existing Default or Event of Default and its consequences, except a
Default (i) in the payment of principal of, interest on, or Premium, if any, or
Break Amount, if any, with respect to, any Note that has not been paid to the
Noteholder from funds provided by the Policy Provider, the Liquidity Provider or
the Cash Collateral Account or (ii) in respect of a covenant or provision of the
Indenture which cannot be modified or amended without the consent of the
Liquidity Provider, the Policy Provider and the holder of each Note affected.
When a Default or Event of Default is waived, it is cured and ceases, and the
Company, the Liquidity Provider, the Policy Provider, the Noteholders and the
Trustee shall be restored to their former positions and rights hereunder
respectively; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon. (Section 7.4)
Except to enforce the right to receive payment when due of principal,
interest, Premium, if any, and Break Amount, if any, no holder of a Note may
institute any remedy with respect to the Indenture or the Notes unless such
holder has previously given to the Trustee written notice of a continuing Event
of Default, the holders of 25% or more of the principal amount of the Notes then
outstanding have requested that the Trustee pursue the remedy, such holder has
offered the Trustee indemnity against loss, liability and expense satisfactory
to the Trustee, the Trustee has failed so to act for 60 days after receipt of
the same and during such 60-day period, and the Controlling Party has not given
the Trustee a direction inconsistent with the request. (Section 7.6)
The Controlling Party may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee (as Trustee or Collateral
Agent, subject, in the case of any actions based on the status of the Trustee as
Collateral Agent, to any limitations otherwise expressly provided for in the
Operative Documents) or exercising any trust or power conferred on it; provided
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction. The Trustee may refuse to follow any
direction or authorization that conflicts with law or the Indenture or that the
Trustee determines may subject the Trustee to personal liability. In addition,
at any time after a Policy Provider Default, the Trustee may refuse to follow
any direction or authorization that the Trustee determines may be unduly
prejudicial to the rights of another Noteholder. However, the Trustee shall have
no liability for any actions or omissions to act which are in accordance with
any such direction or authorization. (Section 7.5)
The Controlling Party shall not direct the Trustee or any Collateral Agent
to sell or otherwise dispose of any Collateral unless all unpaid principal of,
accrued but unpaid interest on, and Premium, if any, and Break Amount, if any,
with respect to, the outstanding Notes and other amounts otherwise payable under
the Indenture, if any, shall be declared or otherwise become due and payable
immediately. (Section 7.5)
In the case of Chapter 11 bankruptcy proceedings, Section 1110 of the U.S.
Bankruptcy Code ("Section 1110") provides special rights to holders of security
interests with respect to "equipment" (defined as described below). Under
Section 1110, the right of such holders to take possession of such equipment in
compliance with the provisions of a security agreement is not affected by any
provision of the U.S. Bankruptcy Code or any power of the bankruptcy court. Such
right to take possession may not be exercised for 60 days following the date of
commencement of the reorganization proceedings. Thereafter, such right to take
possession may be exercised during such proceedings unless, within the 60-day
period or any longer period consented to by the relevant parties, the debtor
agrees to perform its future obligations and cures all existing and future
defaults on a timely basis. Defaults resulting solely from the financial
condition, bankruptcy, insolvency or reorganization of the debtor need not be
cured.
"Equipment" is defined in Section 1110, in part, as an aircraft, aircraft
engine, propeller, appliance or spare part (as defined in Section 40102 of Title
49 of the U.S. Code) that is subject to a security interest granted by, leased
to, or conditionally sold to a debtor that, at the time such transaction is
entered into, holds an air carrier operating certificate issued pursuant to
chapter 447 of Title 49 of the U.S. Code for aircraft capable of carrying ten or
more individuals or 6,000 pounds or more of cargo.
On the Issuance Date, Hughes Hubbard & Reed LLP, outside counsel to
Continental, provided its opinion to the Trustee and the Policy Provider that
the Security Agent will be entitled to the benefits of Section 1110 with respect
to the Pledged Spare Parts, assuming that, at the time of the issuance,
Continental held an air carrier operating certificate issued pursuant to chapter
447 of Title 49 of the U.S. Code for aircraft capable of carrying ten or more
individuals or 6,000 pounds or more of cargo.
CONTROLLING PARTY
The Trustee and the Security Agent will be directed by the Controlling
Party in taking action under the Indenture and other agreements relating to the
Notes, including in amending such agreements and granting waivers thereunder,
except for certain provisions that cannot be amended or waived without the
consent of each Noteholder affected thereby. If an Event of Default has occurred
and is continuing, the Controlling Party will direct the Trustee and the
Security Agent in exercising remedies under the Indenture and under the Security
Agreement, subject to the limitations described below. (Section 3.8(a))
The "Controlling Party" will be:
o The Policy Provider or, if a Policy Provider Default is continuing,
the holders of more than 50% in aggregate unpaid principal amount of
the Notes then outstanding.
o Under the circumstances described in the next paragraph, the Liquidity
Provider.
At any time after the Liquidity Provider Reimbursement Date, if a Policy
Provider Default attributable to a failure to make a drawing to pay the
Liquidity Provider, as described under "Description of the Policy and the Policy
Provider Agreement--The Policy--Liquidity Provider Drawing", is continuing, the
Liquidity Provider (so long as the Liquidity Provider has not defaulted in its
obligation to make any advance under the Liquidity Facility) shall have the
right to become the Controlling Party, provided that if the Policy Provider
subsequently pays to the Liquidity Provider all outstanding drawings, together
with accrued interest thereon owing under the Liquidity Facility, and no other
Policy Provider Default has occurred and is continuing, then the Policy Provider
shall be the Controlling Party so long as no Policy Provider Default occurs
after the date of such payment. (Section 3.8(c))
"Policy Provider Default" means the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of written notice of such failure to the
Policy Provider or (b) the Policy Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is
final and nonappealable, or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Policy Provider (or taking of possession of
all or any material portion of the Policy Provider's property).
PRIORITY OF DISTRIBUTIONS
On each Distribution Date, all payments received by the Trustee in respect
of the Notes will be promptly distributed in the following order:
o If an Event of Default shall have occurred and be continuing on such
Distribution Date, to the Trustee, the Policy Provider, the Liquidity
Provider and any Noteholder to the extent required to pay certain
out-of-pocket costs and expenses actually incurred by the Trustee or
the Policy Provider or to reimburse the Policy Provider, the Liquidity
Provider or any Noteholder in respect of payments made to the Trustee
in connection with the protection or realization of the value of the
Collateral.
o To the Liquidity Provider to the extent required to pay the Liquidity
Expenses and to the Policy Provider to pay the Policy Expenses.
o To the Liquidity Provider to the extent required to pay interest
accrued on the Liquidity Obligations (as determined after giving
effect to certain payments by the Policy Provider to the Liquidity
Provider), to the Policy Provider to the extent required to pay
interest accrued on certain Policy Provider Obligations and, if the
Policy Provider has paid to the Liquidity Provider all outstanding
drawings and interest thereon owing to the Liquidity Provider, to the
Policy Provider to the extent required to reimburse the Policy
Provider for the amount of such payment made to the Liquidity Provider
attributable to interest accrued on such drawings.
o To (i) the Liquidity Provider to the extent required to pay the
outstanding amount of all Liquidity Obligations (as determined after
giving effect to certain payments by the Policy Provider to the
Liquidity Provider), (ii) if applicable, unless (x) on such
Distribution Date the Notes are Non-Performing and a Liquidity Event
of Default shall have occurred and be continuing or (y) the Final
Drawing shall have occurred, to replenish the Cash Collateral Account
up to the Required Amount (less the amount of any repayments of
Interest Drawings under the Liquidity Facility while sub-clause (x) of
this clause is applicable) and (iii) if the Policy Provider has paid
to the Liquidity Provider all outstanding drawings and interest
thereon owing to the Liquidity Provider, to the Policy Provider to the
extent required to reimburse the Policy Provider for the amount of
such payment made to the Liquidity Provider in respect of principal of
drawings under the Liquidity Facility.
o If an Event of Default shall have occurred and be continuing on such
Distribution Date and at all times thereafter, to the Trustee or any
Noteholder, to the extent required to pay certain fees, taxes, charges
and other amounts payable.
o To the Noteholders to the extent required to pay in full amounts due
on such Distribution Date.
o To the Policy Provider to the extent required to pay Policy Provider
Obligations (other than amounts payable pursuant to the first four
clauses above).
o To the Trustee for the payment of certain fees and expenses (other
than amounts payable pursuant to the first and fifth clauses above).
o To the Company (unless on such Distribution Date (i) an Event of
Default has occurred and is continuing or (ii) any amount due to the
Liquidity Provider or the Policy Provider from the Company has not
been paid). (Section 3.2)
"Liquidity Obligations" means the obligations to reimburse or to pay the
Liquidity Provider all principal, interest, fees and other amounts owing to it
under the Liquidity Facility or certain other agreements.
"Liquidity Expenses" means the Liquidity Obligations other than any
interest accrued thereon or the principal amount of any drawing under the
Liquidity Facility.
"Non-Performing" means, with respect to any Note, a Payment Default
existing thereunder (without giving effect to any acceleration); provided, that,
in the event of a bankruptcy proceeding under the U.S. Bankruptcy Code in which
the Company is a debtor, any Payment Default existing at the commencement of
such bankruptcy proceeding or during the 60-day period under Section 1110(a) (2)
(A) of the U.S. Bankruptcy Code (or such longer period as may apply under
Section 1110(b) of the U.S. Bankruptcy Code or as may apply for the cure of such
Payment Default under Section 1110(a)(2)(B) of the U.S. Bankruptcy Code) shall
not be taken into consideration until the expiration of the applicable period.
"Policy Provider Obligations" means all reimbursement and other amounts,
including fees and indemnities (to the extent not included in Policy Expenses)
due to the Policy Provider under the Policy Provider Agreement and, if the
Liquidity Provider has failed to honor any Interest Drawing, interest on any
Policy Drawing made to cover the shortfall attributable to such failure by the
Liquidity Provider in an amount equal to the amount of interest that would have
accrued on such Interest Drawing if such Interest Drawing had been made at the
interest rate applicable to such Interest Drawing until such Policy Drawing has
been repaid in full. Except as provided in the definition of Policy Provider
Obligations, no interest will accrue on any Policy Drawing.
"Policy Expenses" means all amounts (including amounts in respect of
premiums, fees, expenses or indemnities) owing to the Policy Provider under the
Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest
accrued on any Policy Provider Obligation and (iii) reimbursement of and
interest on the Liquidity Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider, provided that if, at the time
of determination, a Policy Provider Default exists, Policy Expenses will not
include any indemnity payments owed to the Policy Provider.
"Policy Drawing" means any payment of a claim under the Policy.
Interest Drawings under the Liquidity Facility, withdrawals from the Cash
Collateral Account and drawings under the Policy will be distributed to the
Trustee for distribution to the Noteholders, notwithstanding the priority of
distributions set forth in the Indenture and otherwise described herein. All
amounts on deposit in the Cash Collateral Account that are in excess of the
Required Amount will be paid to the Liquidity Provider.
If any Distribution Date is a Saturday, Sunday or other day on which
commercial banks are authorized or required to close in New York, New York,
Houston, Texas, or Wilmington, Delaware, or, which is not a day for trading by
and between banks in the London interbank Eurodollar market (any other day being
a "Business Day"), distributions scheduled to be made on such Distribution Date
will be made on the next succeeding Business Day, and interest shall be added
for such additional period.
POSSIBLE ISSUANCE OF SUBORDINATED NOTES
Continental may elect to issue additional notes under the Indenture that
are subordinated in the right to receive distributions to the Notes (the
"Subordinated Notes"). The Indenture provides that Continental's ability to
issue any Subordinated Notes is contingent upon its obtaining written
confirmation from the Rating Agency that the issuance of such Subordinated Notes
will not result in a withdrawal or downgrading of the rating of the Notes
(without regard to the Policy).
MODIFICATIONS AND WAIVER OF THE INDENTURE AND CERTAIN OTHER AGREEMENTS
The Company, the Trustee and the Collateral Agent may amend or supplement
the Indenture, the Notes, the other Operative Documents and, upon request of
Continental, the Trustee shall amend or supplement the Support Documents, in
each case without the consent of the Noteholders:
o To provide for uncertificated Notes in addition to or in place of
certificated Notes.
o To provide for the assumption of the Company's obligations under the
Operative Documents and the Notes in the case of a merger,
consolidation or conveyance, transfer or lease of all or substantially
all of the assets of the Company.
o To comply with any requirements of the Commission in connection with
the qualification of the Indenture under the TIA.
o To provide for a replacement Liquidity Provider.
o To provide for the effectiveness of any additional Collateral
Agreement.
o To provide for the issuance of the Subordinated Notes.
o To comply with the requirements of DTC, Euroclear Bank or Clearstream
Banking or the Trustee with respect to the provisions of the Indenture
or the Notes relating to transfers and exchanges of the Notes or
beneficial interests therein.
o To provide for any successor Trustee or Collateral Agent.
o To cure any ambiguity, defect or inconsistency.
o To make any other change not inconsistent with the Indenture provided
that such action does not materially adversely affect the interests of
any Noteholder. (Section 10.1)
The Company and the Policy Provider can amend or modify any provision of
the Collateral Maintenance Agreement (including the provisions described under
"--Appraisals and Maintenance of Ratios", "--Fleet Reduction", "--Liens",
"--Maintenance", "--Insurance" and "--Use and Possession") without the consent
of the Trustee, the Collateral Agent or any Noteholders, except for certain
limited provisions. The Company, the Trustee and the Collateral Agent may
otherwise amend or supplement the Indenture, the Notes and the other Operative
Documents (other than the Collateral Maintenance Agreement), and, upon consent
of the Company, the Trustee shall amend or supplement the Support Documents, in
each case only with the written consent of the Controlling Party. The
Controlling Party may authorize the Trustee to, and the Trustee upon such
authorization shall, waive compliance by the Company with any provision of the
Indenture, the Notes or the other Operative Documents. However, no such
amendment, supplement or waiver may, without the consent of each Noteholder
affected:
o Reduce the amount of Notes whose holders must consent to an amendment,
supplement or waiver.
o Reduce the rate or extend the time for payment of interest on any
Note.
o Reduce the amount or extend the time for payment of principal of, or
Premium, if any, or Break Amount, if any, with respect to (in each
case, whether on redemption or otherwise), any Note.
o Change the place of payment where, or the coin or currency in which,
any Note (or the redemption price thereof), interest thereon, or
Premium, if any, or Break Amount, if any, with respect thereto, is
payable.
o Change the priority of distributions and application of payments
specified in the Indenture (except to provide for distributions on
Subordinated Notes after the distribution to Noteholders as originally
provided in the Indenture).
o Waive a default in the payment of the principal of, interest on, or
Premium, if any, or Break Amount, if any, with respect to, any Note.
o Make any changes to provisions in the Indenture that involve the
waiver of defaults, the right of Noteholders to receive payment of
principal of, interest on, and Premium, if any, and Break Amount, if
any, with respect to, any Note on or after the respective due dates.
o Impair the right of any Noteholder to institute suit for the
enforcement of any amount payable on any Note when due. (Section 10.2)
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Continental is prohibited from consolidating with, merging into, or
conveying, transferring or leasing substantially all of its assets to any Person
unless:
o The resulting, surviving, transferee or lessee Person shall be
organized under the laws of the United States, any state thereof or
the District of Columbia and shall be a U.S. air carrier.
o The resulting, surviving, transferee or lessee Person shall expressly
assume all of the obligations of Continental contained in the
Indenture, the Notes and any other Operative Documents.
o Continental shall have delivered a certificate and an opinion of
counsel stating that (i) such transaction, in effect, complies with
such conditions and (ii) the Indenture, the Notes and the other
Operative Documents constitute the valid and legally binding
obligations of the resulting, surviving, transferee or lessee Person.
o Immediately after giving effect to such transaction, no Event of
Default shall have occurred and be continuing. (Section 5.4)
The Indenture, the Notes and the other Operative Documents do not contain
any covenants or provisions which may afford the Trustee or Noteholders
protection in the event of a highly leveraged transaction, including
transactions effected by management or affiliates, which may or may not result
in a change in control of Continental.
INDEMNIFICATION
Continental is required to indemnify the Liquidity Provider, the Policy
Provider, the Trustee and the Collateral Agent, but not the Noteholders, for
certain losses, claims and other matters. (Section 6.1)
GOVERNING LAW
The Indenture and the Notes are governed by the laws of the State of New
York. (Section 12.8)
THE TRUSTEE
The Trustee is Wilmington Trust Company. Except as otherwise provided in
the Indenture, the Trustee, in its individual capacity, will not be answerable
or accountable under the Indenture or under the Notes under any circumstances
except, among other things, for its own willful misconduct or gross negligence.
Continental and its affiliates may from time to time enter into banking and
trustee relationships with the Trustee and its affiliates. The Trustee's address
is Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration.
BOOK ENTRY; DELIVERY AND FORM
GENERAL
The New Notes will be represented by one or more global Notes, in
definitive, fully registered form without interest coupons (the "Global Notes").
Each Global Note will be deposited with the Trustee, as custodian for DTC, and
registered in the name of Cede & Co. ("Cede"), as nominee for DTC.
DTC has advised Continental as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "clearing agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for DTC Participants and facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic book-entry
changes in accounts of DTC Participants, thereby eliminating the need for
physical movement of certificates. DTC Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of DTC Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Indirect access to the DTC system is
available to others such as banks, brokers, dealers and trust companies that
clear through or maintain a custodial relationship with a DTC Participant,
either directly or indirectly ("Indirect Participants").
Ownership of beneficial interests in Global Notes is limited to persons who
have accounts with DTC Participants or persons who hold interests through DTC
Participants. Ownership of beneficial interests in the Global Notes is shown on,
and the transfer of that ownership is effected only through, records maintained
by DTC or its nominee (with respect to interests of DTC Participants) and the
records of DTC Participants (with respect to interests of persons other than DTC
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities. Such limits and such laws
may limit the market for beneficial interests in the Global Notes.
So long as DTC or its nominee is the registered owner or holder of the
Global Notes, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the Notes represented by such Global Notes for
all purposes under the Indenture. No beneficial owners of an interest in the
Global Notes will be able to transfer that interest except in accordance with
DTC's applicable procedures, in addition to those provided for under the
Indenture.
Beneficial interests in the Global Notes will be exchangeable or
transferable, as the case may be, for Notes in definitive, fully registered form
("Definitive Notes") only if (i) DTC notifies the Trustee that DTC is unwilling
or unable to continue as depositary for such Notes and successor depositary is
not appointed by the Trustee within 90 days of such notice or (ii) after the
occurrence and during the continuance of an Event of Default, owners of
beneficial interests in the Global Notes (the "Note Owners") with a principal
amount aggregating not less than a majority of the outstanding principal amount
of the Global Notes advise the Trustee, Continental and DTC through Direct
Participants in writing that the continuation of a book-entry system through DTC
(or a successor thereto) is no longer in their best interests. (Section 2.5(b))
Upon the occurrence of any event described in clauses (i) or (ii) of the
immediately preceding sentence, the Trustee will be required to notify all
Direct Participants having a beneficial interest in the Global Notes of the
availability of Definitive Notes. Upon surrender by DTC of the Global Notes and
receipt of instructions for re-registration, the Trustee will reissue the Notes
as Definitive Notes to Note Owners. (Section 2.5(d))
Payments of the principal of, interest on, Premium, if any, and Break
Amount, if any, with respect to, the Global Notes will be made to DTC or its
nominee, as the case may be, as the registered owner thereof. Neither
Continental, the Trustee, nor any paying agent will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Continental expects that DTC or its nominee, upon receipt of any payment of
principal of, interest on, Premium, if any, and Break Amount, if any, with
respect to, a Global Note, will credit the accounts of DTC Participants with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Note, as shown on the records of DTC or its
nominee. Continental also expects that payments by DTC Participants to owners of
beneficial interests in such Global Note held through such DTC Participants will
be governed by standing instructions and customary practices, as is now the case
with securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
DTC Participants.
Distributions of principal of, interest on, and Premium, if any, and Break
Amount, if any, with respect to, Definitive Notes will be made by the Trustee
directly in accordance with the procedures set forth in the Indenture, to
holders in whose names the Definitive Notes were registered at the close of
business on the applicable record date. Such distributions will be made by check
mailed to the address of such holder as it appears on the register maintained by
the Trustee. The final payment on any Note, however, will be made only upon
presentation and surrender of such Note at the office or agency specified in the
notice of final distribution to Noteholders.
Neither Continental nor the Trustee has any responsibility for the
performance by DTC, DTC Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
SAME-DAY SETTLEMENT AND PAYMENT
As long as the Notes are registered in the name of DTC or its nominee,
Continental will make all payments to the Trustee under the Indenture in
immediately available funds. The Trustee will pass through to DTC in immediately
available funds all payments received from Continental, including the final
distribution of principal with respect to the Notes.
Any Notes registered in the name of DTC or its nominee will trade in DTC's
Same-Day Funds Settlement System until maturity. DTC will require secondary
market trading activity in the Notes to settle in immediately available funds.
Continental cannot give any assurance as to the effect, if any, of settlement in
same-day funds on trading activity in the Notes.
DESCRIPTION OF THE LIQUIDITY FACILITY
The following summary describes the material terms of the Liquidity
Facility and certain provisions of the Indenture relating to the Liquidity
Facility. The summary does not purport to be complete and is qualified in its
entirety by reference to all of the provisions of the Liquidity Facility and the
Indenture, each of which has been filed as an exhibit to the Registration
Statement and copies of which are available as set forth under "Where You Can
Find More Information".
GENERAL
Morgan Stanley Capital Services Inc. (the "Liquidity Provider") has entered
into a revolving credit agreement (the "Liquidity Facility") with the Trustee
with respect to the Notes. On any Distribution Date, if, after giving effect to
the subordination provisions of the Indenture, the Trustee does not have
sufficient funds for the payment of interest on the Notes, the Liquidity
Provider is required to make an advance (an "Interest Drawing") in the amount
needed to fund the interest shortfall (calculated assuming that Continental will
not cure the nonpayment of interest) up to the Maximum Available Commitment.
The maximum amount of Interest Drawings available under the Liquidity
Facility will be sufficient to pay interest on the Notes on up to eight
consecutive quarterly Interest Payment Dates at the Stated Interest Rate
(calculated assuming that Continental will not cure any nonpayment of interest).
If interest payment defaults occur which exceed the amount covered by and
available under the Liquidity Facility, the Noteholders will bear their
allocable share of the deficiencies to the extent that there are no other
sources of funds. The initial Liquidity Provider may be replaced by one or more
other entities under certain circumstances.
DRAWINGS
The aggregate amount available under the Liquidity Facility at March 6,
2003, the first Interest Payment Date after the Issuance Date, was
$48,733,333.33.
Except as otherwise provided below, the Liquidity Facility will enable the
Trustee to make Interest Drawings thereunder promptly on or after any
Distribution Date if, after giving effect to the subordination provisions of the
Indenture, there are insufficient funds available to the Trustee to pay interest
on the Notes at the Stated Interest Rate (calculated assuming that Continental
will not cure any nonpayment of interest); provided, however, that the maximum
amount available to be drawn under the Liquidity Facility on any Distribution
Date to fund any shortfall of interest on the Notes will not exceed the then
Maximum Available Commitment.
The "Maximum Available Commitment" at any time is an amount equal to the
then Required Amount of the Liquidity Facility less the aggregate amount of each
Interest Drawing outstanding thereunder at such time, provided that, following a
Non-Extension Drawing, a Downgrade Drawing or a Final Drawing, the Maximum
Available Commitment shall be zero.
The "Required Amount" will be equal, on any day, to the sum of the
aggregate amount of interest, calculated at the Capped Interest Rate, that would
be payable on the Notes on each of the eight consecutive quarterly Interest
Payment Dates immediately following such day or, if such day is an Interest
Payment Date, on such day and the succeeding seven quarterly Interest Payment
Dates, in each case calculated on the outstanding aggregate principal amount of
the Notes on such day and without regard to expected future payments of
principal.
"Capped Interest Rate" is 12% per annum.
The Liquidity Facility does not provide for drawings thereunder to pay for
principal of, or Premium, if any, or Break Amount, if any, with respect to, the
Notes or any interest thereon in excess of an amount equal to eight full
quarterly installments of interest calculated at the Capped Interest Rate
thereon. (Liquidity Facility, Section 2.02; Indenture, Section 3.5)
Each payment by the Liquidity Provider reduces by the same amount the
Maximum Available Commitment, subject to reinstatement as hereinafter described.
With respect to any Interest Drawings, upon reimbursement of the Liquidity
Provider in full or in part for the amount of such Interest Drawings plus
interest thereon, the Maximum Available Commitment will be reinstated to an
amount not to exceed the then Required Amount. However, the Liquidity Facility
will not be so reinstated at any time if (i) the Notes are Non-Performing and a
Liquidity Event of Default shall have occurred and be continuing or (ii) the
Liquidity Provider Reimbursement Date has occurred. Any amounts paid by the
Policy Provider to the Liquidity Provider as described in "Description of the
Notes--Controlling Party" or "Description of the Policy and the Policy Provider
Agreement--Liquidity Provider Drawing" will not reinstate the Liquidity Facility
but any reimbursement of such amounts received by the Policy Provider under the
distribution provisions of the Indenture will reinstate the Liquidity Facility
to the extent of such reimbursement unless (i) the Notes are Non-Performing and
a Liquidity Event of Default shall have occurred and be continuing or (ii) the
Liquidity Provider Reimbursement Date has occurred. With respect to any other
drawings under the Liquidity Facility, amounts available to be drawn thereunder
are not subject to reinstatement. The Required Amount will be automatically
reduced from time to time to an amount equal to the next eight successive
quarterly interest payments due on the Notes (without regard to expected future
payments of principal) at the Capped Interest Rate. (Liquidity Facility, Section
2.04(a); Indenture, Section 3.5(j)) Upon the occurrence of the Liquidity
Provider Reimbursement Date, no further drawings under the Liquidity Facility
will be permitted.
If at any time the short-term unsecured debt rating of the Liquidity
Provider Guarantor then issued by either Moody's or Standard & Poor's is lower
than the Threshold Rating or the Liquidity Provider Guarantor's guarantee ceases
to be in full force and effect or becomes invalid or unenforceable or the
Liquidity Provider Guarantor denies its liability thereunder, and the Liquidity
Facility is not replaced with a Replacement Facility within ten days after
notice of such downgrading or such event and as otherwise provided in the
Indenture, the Liquidity Facility will be drawn in full up to the then Maximum
Available Commitment (the "Downgrade Drawing"). The proceeds of a Downgrade
Drawing will be deposited into a cash collateral account (the "Cash Collateral
Account") and used for the same purposes and under the same circumstances and
subject to the same conditions as cash payments of Interest Drawings under the
Liquidity Facility would be used. (Liquidity Facility, Section 2.02(c);
Indenture, Section 3.5(c)) If a qualified Replacement Facility is subsequently
provided, the balance of the Cash Collateral Account will be repaid to the
replaced Liquidity Provider.
A "Replacement Facility" means an irrevocable liquidity facility (or
liquidity facilities) in substantially the form of the replaced Liquidity
Facility, including reinstatement provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating Agency to confirm in
writing its ratings then in effect for the Notes (before downgrading of such
ratings, if any, as a result of the downgrading of the Liquidity Provider but
without regard to the Policy), which shall have been consented to by the Policy
Provider, which consent shall not be unreasonably withheld or delayed, in a face
amount (or in an aggregate face amount) equal to the amount of interest payable
on the Notes (at the Capped Interest Rate and without regard to expected future
payments of principal) on the eight Interest Payment Dates following the date of
replacement of the Liquidity Facility and issued by a person (or persons) having
unsecured short-term debt ratings issued by each of Moody's and Standard &
Poor's which are equal to or higher than the Threshold Rating. (Indenture,
Appendix I) The provider of any Replacement Facility will have the same rights
(including, without limitation, priority distribution rights and rights as
"Controlling Party") under the Indenture as the initial Liquidity Provider.
"Threshold Rating" means the short-term unsecured debt rating of P-1 by
Moody's Investors Service, Inc. ("Moody's") and A-1 by Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc. ("Standard & Poor's").
The Liquidity Facility provides that the Liquidity Provider's obligations
thereunder will expire on the earliest of:
o 364 days after the Issuance Date (counting from, and including, the
Issuance Date).
o The date on which the Trustee delivers to the Liquidity Provider a
certification that all of the Notes have been paid in full.
o The date on which the Trustee delivers to the Liquidity Provider a
certification that a Replacement Facility has been substituted for
such Liquidity Facility.
o The fifth Business Day following receipt by the Trustee of a
Termination Notice from the Liquidity Provider (see "--Liquidity
Events of Default and Termination").
o The date on which no amount is or may (by reason of reinstatement)
become available for drawing under the Liquidity Facility.
o The occurrence of the Liquidity Provider Reimbursement Date.
The Liquidity Facility provides that it will be automatically extended for
additional 364-day periods unless the Liquidity Provider notifies the Trustee
that it does not agree to such extension.
The Indenture provides for the replacement of the Liquidity Facility if
such Liquidity Facility is scheduled to expire earlier than 15 days after the
Final Legal Maturity Date and the Liquidity Facility is not extended at least 25
days prior to its then scheduled expiration date. If the Liquidity Facility is
not so extended or replaced by the 25th day prior to its then scheduled
expiration date, the Liquidity Facility will be drawn in full up to the then
Maximum Available Commitment (the "Non-Extension Drawing"). The proceeds of the
Non-Extension Drawing will be deposited in the Cash Collateral Account as cash
collateral to be used for the same purposes and under the same circumstances,
and subject to the same conditions, as cash payments of Interest Drawings under
the Liquidity Facility would be used. (Liquidity Facility, Section 2.02(b);
Indenture, Section 3.5(d))
Subject to certain limitations, Continental may, at its option, arrange for
a Replacement Facility at any time to replace the Liquidity Facility (including,
without limitation, any Replacement Facility described in the following
sentence). In addition, if the Liquidity Provider shall determine not to extend
the Liquidity Facility, then the Liquidity Provider may, at its option, arrange
for a Replacement Facility to replace the Liquidity Facility (i) during the
period no earlier than 40 days and no later than 25 days prior to the then
scheduled expiration date of the Liquidity Facility and (ii) at any time after
such scheduled expiration date. The Liquidity Provider may also arrange for a
Replacement Facility to replace the Liquidity Facility at any time after a
Downgrade Drawing thereunder. If any Replacement Facility is provided at any
time after a Downgrade Drawing or a Non-Extension Drawing, the funds on deposit
in the Cash Collateral Account will be returned to the Liquidity Provider being
replaced. (Indenture, Section 3.5 (e))
Upon receipt by the Trustee of a Termination Notice from the Liquidity
Provider, the Trustee shall request a final drawing (a "Final Drawing") under
the Liquidity Facility in an amount equal to the then Maximum Available
Commitment thereunder. The Trustee will hold the proceeds of the Final Drawing
in the Cash Collateral Account as cash collateral to be used for the same
purposes and under the same circumstances, and subject to the same conditions,
as cash payments of Interest Drawings under the Liquidity Facility would be
used. (Liquidity Facility, Section 2.02(d); Indenture, Section 3.5(i))
Drawings under the Liquidity Facility will be made by delivery by the
Trustee of a certificate in the form required by the Liquidity Facility. Upon
receipt of such a certificate, the Liquidity Provider is obligated to make
payment of the drawing requested thereby in immediately available funds. Upon
payment by the Liquidity Provider of the amount specified in any drawing under
the Liquidity Facility, the Liquidity Provider will be fully discharged of its
obligations under the Liquidity Facility with respect to such drawing and will
not thereafter be obligated to make any further payments under the Liquidity
Facility in respect of such drawing to the Trustee or any other person.
REIMBURSEMENT OF DRAWINGS
The Trustee must reimburse amounts drawn under the Liquidity Facility by
reason of an Interest Drawing, Final Drawing, Downgrade Drawing or Non-Extension
Drawing and interest thereon, but only to the extent that the Trustee has funds
available therefor.
INTEREST DRAWINGS AND FINAL DRAWINGS
Amounts drawn by reason of an Interest Drawing or Final Drawing under the
Liquidity Facility will be immediately due and payable, together with interest
on the amount of such drawing. From the date of the drawing to (but excluding)
the third business day following the Liquidity Provider's receipt of the notice
of such Interest Drawing, interest will accrue at the Base Rate plus 2.00% per
annum. Thereafter, interest will accrue at Liquidity Facility LIBOR for the
applicable interest period plus 2.00% per annum. In the case of the Final
Drawing, however, the Trustee may convert the Final Drawing into a drawing
bearing interest at the Base Rate plus 2.00% per annum on the last day of an
interest period for such Drawing.
"Base Rate" means a fluctuating interest rate per annum in effect from time
to time, which rate per annum shall at all times be equal to (a) the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a business day, for the next preceding business day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day that is a business day, the average of the quotations for such day for
such transactions received by the Liquidity Provider from three Federal funds
brokers of recognized standing selected by it, plus (b) one-quarter of one
percent (1/4 of 1%).
"Liquidity Facility LIBOR" means, with respect to any interest period, (i)
the rate per annum appearing on display page 3750 (British Bankers
Association--LIBOR) of the Dow Jones Markets Service (or any successor or
substitute therefor) at approximately 11:00 A.M. (London time) two business days
before the first day of such interest period, as the rate for dollar deposits
with a maturity comparable to such interest period, or (ii) if the rate
calculated pursuant to clause (i) above is not available, the average (rounded
upwards, if necessary, to the next 1/16 of 1%) of the rates per annum at which
deposits in dollars are offered for the relevant interest period by three banks
of recognized standing selected by the Liquidity Provider in the London
interbank market at approximately 11:00 A.M. (London time) two business days
before the first day of such interest period in an amount approximately equal to
the principal amount of the LIBOR Advance to which such interest period is to
apply and for a period comparable to such interest period.
DOWNGRADE DRAWINGS AND NON-EXTENSION DRAWINGS
The amount drawn under the Liquidity Facility by reason of a Downgrade
Drawing or a Non-Extension Drawing will be treated as follows:
o Such amount will be released on any Distribution Date to the Liquidity
Provider to the extent that such amount exceeds the Required Amount.
o Any portion of such amount withdrawn from the Cash Collateral Account
to pay interest on the Notes will be treated in the same way as
Interest Drawings.
o The balance of such amount will be invested in certain specified
eligible investments.
Any Downgrade Drawing, other than any portion thereof applied to the
payment of interest on the Notes, will bear interest (x) subject to clause (y)
below, at a rate equal to Liquidity Facility LIBOR for the applicable interest
period plus a specified margin on the outstanding amount from time to time of
such Downgrade Drawing and (y) from and after the date, if any, on which it is
converted into a Final Drawing as described below under "--Liquidity Events of
Default and Termination", at a rate equal to Liquidity Facility LIBOR for the
applicable interest period (or, as described in the first paragraph under
"--Interest Drawings and Final Drawings", the Base Rate) plus 2.00% per annum.
Any Non-Extension Drawing, other than any portion thereof applied to the
payment of interest on the Notes, will bear interest (x) subject to clause (y)
below, in an amount equal to the investment earnings on amounts deposited in the
Cash Collateral Account plus a specified margin on the outstanding amount from
time to time of such Non-Extension Drawing and (y) from and after the date, if
any, on which it is converted into a Final Drawing as described below under
"--Liquidity Events of Default and Termination", at a rate equal to Liquidity
Facility LIBOR for the applicable interest period (or, as described in the first
paragraph under "--Interest Drawings and Final Drawings", the Base Rate) plus
2.00% per annum.
LIQUIDITY EVENTS OF DEFAULT AND TERMINATION
Events of default under the Liquidity Facility (each, a "Liquidity Event of
Default") consist of:
o The acceleration of the Notes.
o Certain bankruptcy or similar events involving Continental. (Liquidity
Facility, Section 1.01)
If any Liquidity Event of Default has occurred and is continuing and the
Notes are Non-Performing, the Liquidity Provider may, in its discretion, give a
notice of termination of the Liquidity Facility (a "Termination Notice"). The
Termination Notice will have the following consequences:
o The Liquidity Facility will expire on the fifth Business Day after the
date on which such Termination Notice is received by the Trustee.
o The Trustee will promptly request, and the Liquidity Provider will
make, a Final Drawing in an amount equal to the then Maximum Available
Commitment.
o Any drawing remaining unreimbursed as of the date of termination will
be automatically converted into a Final Drawing.
o All amounts owing to the Liquidity Provider automatically will be
accelerated.
Notwithstanding the foregoing, the Trustee will be obligated to pay amounts
owing to the Liquidity Provider only to the extent of funds available therefor
after giving effect to the payments in accordance with the provisions set forth
under "Description of the Notes--Priority of Distributions". (Liquidity
Facility, Section 6.01) Upon the circumstances described above under
"Description of the Notes--Remedies", the Liquidity Provider may become the
Controlling Party with respect to the exercise of remedies under the Indenture.
(Indenture, Section 3.8(c))
Upon the occurrence of the Liquidity Provider Reimbursement Date, the
Liquidity Facility will automatically expire, any drawing remaining unreimbursed
as of such date will be automatically converted into a Final Drawing and all
amounts owing to the Liquidity Provider automatically will be accelerated. On
and after such date, no drawings under the Liquidity Facility will be permitted.
LIQUIDITY PROVIDER
The initial Liquidity Provider for the Notes is Morgan Stanley Capital
Services Inc. The obligations of Morgan Stanley Capital Services Inc. are
guaranteed by Morgan Stanley, its parent company (the "Liquidity Provider
Guarantor"). Morgan Stanley has short-term unsecured debt ratings of P-1 from
Moody's and A-1 from Standard & Poor's.
DESCRIPTION OF THE POLICY AND THE POLICY PROVIDER AGREEMENT
The following summary describes the material terms of the Policy and
certain provisions of the Policy Provider Agreement. The summary does not
purport to be complete and is qualified in its entirety by reference to all of
the provisions of the Policy, which has been filed as an exhibit to the
Registration Statement and copies of which are available as set forth under
"Where You Can Find More Information".
THE POLICY
The Policy Provider has issued a certificate guarantee insurance policy
(the "Policy") in favor of the Trustee for the benefit of the Noteholders and
the Liquidity Provider. Drawings under the Policy may be made under the
following six circumstances:
INTEREST DRAWINGS
If on any Distribution Date (other than the date on which a Policy Drawing
is made as described in "--Proceeds Deficiency Drawing", "--Non-Performance
Drawing" or "--Final Policy Drawing") after giving effect to the subordination
provisions of the Indenture and to the application of any drawing paid under the
Liquidity Facility in respect of interest due on the Notes on such Distribution
Date and any withdrawal of funds from the Cash Collateral Account in respect of
such interest (collectively, "Prior Funds"), the Trustee does not then have
sufficient funds available for the payment of all amounts due and owing in
respect of accrued interest on the Notes at the Stated Interest Rate (without
giving effect to any acceleration and calculated assuming that Continental will
not cure the nonpayment of interest), the Trustee is to request a Policy Drawing
under the Policy in an amount sufficient to enable the Trustee to pay such
accrued interest.
PROCEEDS DEFICIENCY DRAWING
If on any Distribution Date (other than the date on which a Policy Drawing
is made as described in "--Non-Performance Drawing" or "--Final Policy Drawing")
established by the Trustee by reason of its receipt of a payment constituting
the proceeds from the sale of Pledged Spare Parts comprising all of the Pledged
Spare Parts subject to the lien of the Security Agreement at the time of such
sale, after giving effect to the subordination provisions of the Indenture and
to the application of Prior Funds, the Trustee does not then have sufficient
funds available for the payment in full of the then outstanding principal amount
of the Notes together with accrued and unpaid interest thereon at the Stated
Interest Rate (calculated assuming that Continental will not cure the nonpayment
of interest and excluding any accrued and unpaid Premium or Break Amount)
(collectively, the "Outstanding Amount"), the Trustee is to request a Policy
Drawing under the Policy in an amount sufficient to enable the Trustee to pay
the Outstanding Amount.
NON-PERFORMANCE DRAWING
If a Payment Default exists under the Notes (without giving effect to any
acceleration or any payments by the Liquidity Provider or the Policy Provider)
for eight consecutive Interest Periods (such period, the "Non-Performing
Period") (regardless of whether any proceeds from the sale of any Collateral are
distributed by the Trustee during such period) and continues to exist on the
Interest Payment Date on which such eighth Interest Period ends (or, if such
Interest Payment Date falls within the applicable period specified in the
proviso to the definition of "Non-Performing", continues to exist on the
Business Day immediately following such period (the "Relevant Date")), and on
the 25th day following such Interest Payment Date or, if applicable, the
Relevant Date (or, if such 25th day is not a Business Day, the next Business
Day) (the "Non-Performance Payment Date") after giving effect to the
subordination provisions of the Indenture and to the application of Prior Funds,
the Trustee does not then have sufficient funds available for the payment in
full of the Outstanding Amount as of the Non-Performance Payment Date, unless
the Policy Provider shall have paid on any day prior thereto the Outstanding
Amount as of such day pursuant to a Policy Drawing as described in "--Proceeds
Deficiency Drawing" or "--Final Policy Drawing", the Trustee is to request a
Policy Drawing under the Policy in an amount sufficient to enable the Trustee to
pay such Outstanding Amount. If the Non-Performance Payment Date is established,
the Trustee shall send to the Noteholders written notice thereof promptly, but
no later than three Business Days, after the occurrence of the Interest Payment
Date on which the Non-Performing Period ends or, if applicable, the Relevant
Date.
Notwithstanding the foregoing, if the Non-Performance Payment Date is
scheduled to occur prior to the Final Scheduled Payment Date, instead of paying
such amount on the Non-Performance Payment Date, the Policy Provider may, so
long as no Policy Provider Default is continuing, elect (the "Policy Provider
Election"), by giving notice to the Trustee at least 10 days prior to the
Non-Performance Payment Date, to pay:
o Any shortfall on the Non-Performance Payment Date in funds required to
pay accrued interest on the Notes.
o Thereafter, on each Distribution Date, an amount equal to the
scheduled principal (on the Final Scheduled Payment Date) and interest
(without regard to any acceleration thereof) payable on the Notes on
such Distribution Date.
Notwithstanding the Policy Provider Election, the Policy Provider may, on
any Business Day (which shall be a Distribution Date) elected by the Policy
Provider upon 20 days' notice, cause the Trustee to make a drawing under the
Policy for an amount equal to the Outstanding Amount as of such day. Further,
notwithstanding the Policy Provider Election, upon the occurrence of a Policy
Provider Default, the Trustee shall, on any Business Day elected by the Trustee
upon 20 days' notice to the Policy Provider, make a drawing under the Policy for
an amount equal to the Outstanding Amount as of such day.
FINAL POLICY DRAWING
If on the Final Legal Maturity Date, after giving effect to the
subordination provisions of the Indenture and to the application of any Prior
Funds, unless the Policy Provider shall have paid on any day prior thereto the
Outstanding Amount as of such day as described in "--Proceeds Deficiency
Drawing" or "--Non-Performance Drawing", the Trustee does not then have
sufficient funds available for the payment in full of the Outstanding Amount as
of such date, the Trustee is to request a Policy Drawing under the Policy in an
amount sufficient to enable the Trustee to pay such Outstanding Amount.
AVOIDANCE DRAWING
If, at any time, the Trustee has actual knowledge of the issuance of any
Final Order, the Trustee is to give prompt notice to the Liquidity Provider and
the Policy Provider of such Final Order and, prior to the expiration of the
Policy, to request a Policy Drawing for the relevant Avoided Payment and to
deliver to the Policy Provider a copy of the documentation required by the
Policy with respect to such Final Order. To the extent that any portion of such
Avoided Payment is to be paid to the Trustee (and not to any receiver,
conservator, debtor-in-possession or trustee in bankruptcy as provided in the
Policy), the Trustee shall establish as a Distribution Date the date that is the
earlier of three Business Days after the date of the expiration of the Policy
and the Business Day that immediately follows the 25th day after that notice for
distribution of such portion of the proceeds of such Policy Drawing.
LIQUIDITY PROVIDER DRAWING
On or after the Business Day which is 24 months from the earliest to occur
of (1) the date on which an Interest Drawing shall have been made under the
Liquidity Facility and remains unreimbursed from payments made by Continental at
the end of such 24-month period, (2) the date on which any Downgrade Drawing,
Non-Extension Drawing or Final Drawing that was deposited into the Cash
Collateral Account shall have been applied to pay any scheduled payment of
interest on the Notes and remains unreimbursed from payments made by Continental
at the end of such 24-month period and (3) the date on which all of the Notes
have been accelerated and remain unpaid by Continental at the end of such
24-month period (in each case, disregarding any reimbursements from payments by
the Policy Provider and from proceeds from the sale of Collateral distributed by
the Trustee during such 24-month period) (such Business Day, the "Liquidity
Provider Reimbursement Date"), the Policy Provider (upon 20 days' prior notice
from the Trustee on behalf of the Liquidity Provider) will be required to honor
drawings under the Policy by the Trustee on behalf of the Liquidity Provider for
all outstanding drawings under the Liquidity Facility, together with interest
thereon.
GENERAL
All requests by the Trustee for a Policy Drawing under the Policy (other
than a Policy Drawing as described in "--Liquidity Provider Drawing") are to be
made by it no later than 1:00 p.m. (New York City time) on (or, in the case of
any Avoided Payment, at least three Business Days prior to) the applicable
Distribution Date and in the form required by the Policy and delivered to the
Policy Provider in accordance with the Policy. All proceeds of any Policy
Drawing under the Policy (other than a Policy Drawing as described in
"--Liquidity Provider Drawing") by the Trustee are to be deposited by the
Trustee in a separate policy account and from there distributed to the
Noteholders without regard to the subordination provisions of the Indenture. In
the case of any Avoided Payments, however, all or part of the Policy Drawing
will be paid directly to the bankruptcy receiver, conservator,
debtor-in-possession or trustee to the extent such amounts have not been paid by
the Noteholders. If any request for a Policy Drawing is rejected as not meeting
the requirements of the Policy, the Trustee is to resubmit such request so as to
meet such requirements.
The Policy provides that if such a request for a Policy Drawing is properly
submitted or resubmitted it will pay to the Trustee for deposit in a separate
policy account the applicable payment under the Policy no later than 3:00 p.m.
on the later of the relevant Distribution Date and the date the request is
received by the Policy Provider (if the request is received by 1:00 p.m. on such
date) or the next Business Day (if the request is received after that time).
Once any payment under the Policy is paid to the Trustee, the Policy
Provider will have no further obligation in respect of such payment. THE POLICY
PROVIDER SHALL NOT BE REQUIRED TO MAKE ANY PAYMENT EXCEPT AT THE TIMES AND IN
THE AMOUNTS AND UNDER THE CIRCUMSTANCES EXPRESSLY SET FORTH IN THE POLICY.
The Policy does not cover (i) shortfalls, if any, attributable to the
liability of the Trustee for withholding taxes, if any (including interest and
penalties in respect of that liability), (ii) any interest on the Notes in
excess of the Capped Interest Rate, (iii) any Premium or other acceleration
payment payable in respect of the Notes, (iv) any Break Amount or (v) any
failure of the Trustee to make any payment due to the Noteholders from funds
received.
The Policy Provider's obligation under the Policy will be discharged to the
extent that funds are received by the Trustee for distribution to the
Noteholders, whether or not the funds are properly distributed by the Trustee.
The Policy is noncancellable. The Policy expires and terminates without any
action on the part of the Policy Provider or any other person on the date (the
"Termination Date") that is one year and one day following the date on which the
Outstanding Amount is paid on the Notes, unless an Insolvency Proceeding has
commenced and has not been concluded or dismissed on the Termination Date, in
which case on the later of (i) the date of the conclusion or dismissal of such
Insolvency Proceeding without continuing jurisdiction by the court in such
Insolvency Proceeding and (ii) the date on which the Policy Provider has made
all payments required to be made under the terms of such Policy in respect of
Avoided Payments. No portion of the premium under the Policy is refundable for
any reason including payment or provision being made for payment.
The Policy is issued under and pursuant to, and shall be construed under,
the laws of the State of New York.
DEFINITIONS
"Avoided Payment" means with respect to the Policy any amount paid or
required to be paid thereunder that is voided under any applicable bankruptcy,
insolvency, receivership or similar law in an Insolvency Proceeding, and, as a
result of which, the Trustee, the Liquidity Provider or any Noteholder is
required to return all or any portion of such voided payment (including any
disgorgement from the Noteholders or the Liquidity Provider resulting from an
Insolvency Proceeding whether such disgorgement is determined on a theory of
preferential conveyance or otherwise) in accordance with a final, non-appealable
order of a court of competent jurisdiction.
"Final Order" means the order referred to in the definition of the term
"Avoided Payment".
"Insolvency Proceeding" means the commencement, after the Issuance Date, of
any bankruptcy, insolvency, readjustment of debt, reorganization, marshalling of
assets and liabilities or similar proceedings by or against Continental or the
Liquidity Provider and the commencement, after the Issuance Date, of any
proceedings by Continental or the Liquidity Provider for the winding up or
liquidation of its affairs or the consent, after the Issuance Date, to the
appointment of a trustee, conservator, receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, reorganization, marshalling of assets and
liabilities or similar proceedings of or relating to Continental or the
Liquidity Provider.
THE POLICY PROVIDER AGREEMENT
The Trustee, Continental and the Policy Provider have entered into an
insurance and indemnity agreement (the "Policy Provider Agreement") pursuant to
which Continental has agreed to reimburse the Policy Provider for amounts paid
pursuant to claims made under the Policy. Pursuant to the Policy Provider
Agreement, Continental has agreed to pay the Policy Provider a premium based on
the outstanding principal of the Notes and a fee in connection with any
prepayment of the Notes and to reimburse the Policy Provider for certain
expenses.
DESCRIPTION OF THE APPRAISAL
SH&E, an independent aviation appraisal and consulting firm, has prepared
an appraisal of the spare parts included in the Collateral as of December 25,
2002. A letter, dated January 24, 2003, summarizing such appraisal is annexed to
this Prospectus as Appendix II. The appraisal is subject to a number of
assumptions and limitations and was prepared based on certain specified
methodologies. In preparing its appraisal, SH&E conducted only a limited
physical inspection of certain locations at which Continental maintains the
spare parts. An appraisal that is subject to other assumptions and limitations
and based on other methodologies may result in valuations that are materially
different from those contained in SH&E's appraisal.
The spare parts included in the Collateral fall into two categories,
"rotables" and "expendables". Rotables are parts that wear over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which they relate ("Rotables"). For example,
thrust reversers, auxiliary power units and landing gear are Rotables.
Expendables consist of parts that can be restored to a serviceable condition but
have a life less than the related flight equipment and parts that generally are
used once and thereby consumed or thereafter discarded. For example, engine
cowlings, engine blades and duct assemblies are repairable expendable parts and
bolts, screws, tubes and hoses are consumable expendable parts. Spare engines
are not included in the Collateral. Set forth below is certain information about
the spare parts of the types included in the Collateral and the appraised value
of such spare parts set forth in SH&E's appraisal referred to above:
SPARE PARTS QUANTITY(1)
-----------------------------------
AIRCRAFT MODEL EXPENDABLES ROTABLES TOTAL APPRAISED VALUE
-------------- ----------- --------- ------- ---------------
737-700............ 877 24 901
737-700/800........ 278,912 6,942 285,854
737-800............ 3,777 191 3,968
737-900............ 821 10 831
------- -------- --------
737-7/8/9
Subtotal...... 284,387 7,167 291,554 $185,972,600
757-200............ 185,731 3,391 189,122 69,352,800
757-300............ 10,946 96 11,042 3,116,700
767-200............ 25,485 227 25,712 8,946,700
767-400............ 51,147 1,586 52,733 55,741,200
777-200............ 111,210 3,006 114,216 113,712,000
------- --------- --------- ------------
Total.............. 668,906 15,473 684,379 $436,841,900
- ------------
(1) This quantity of spare parts used in preparing the appraised value was
determined as of December 25, 2002. Since spare parts are regularly used,
refurbished, purchased, transferred and discarded in the ordinary course of
Continental's business, the quantity of spare parts included in the
Collateral and their appraised value will change over time. Continental is
required to provide to the Policy Provider and the Trustee a semiannual
appraisal of the Collateral. See "Description of the Notes--Collateral".
In connection with the issuance of the Old Notes, SH&E prepared an
appraisal, dated as of October 31, 2002, of the spare parts of the types
included in the Collateral owned by Continental as of August 25, 2002, prepared
on substantially the same basis as the appraisal described above. The total
appraised value of the spare parts according to such appraisal was $415,429,000.
An appraisal is only an estimate of value. An appraisal should not be
relied upon as a measure of realizable value. The proceeds realized upon a sale
of any Collateral may be less than its appraised value. The value of the
Collateral if remedies are exercised under the Indenture will depend on market
and economic conditions, the supply of similar spare parts, the availability of
buyers, the condition of the Collateral and other factors. In addition, since
spare parts are regularly used, refurbished, purchased, transferred and
discarded in the ordinary course of business, the quantity of spare parts
included in the Collateral and their appraised value will change over time.
Accordingly, Continental cannot assure you that the proceeds realized upon any
such exercise of remedies would be sufficient to satisfy in full payments due on
the Notes. If a Policy Provider Default occurs and such proceeds are not
sufficient to repay all such amounts due on the Notes, then holders (to the
extent not repaid from the proceeds of the sale of Collateral) would have only
unsecured claims against Continental and the Policy Provider.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
EXCHANGE OF OLD NOTES FOR NEW NOTES
The following summary describes the material generally applicable U.S.
federal income tax consequences to Noteholders of the exchange of the Old Notes
for New Notes. This summary is intended to address the beneficial owners of
Notes that are citizens or residents of the United States, corporations,
partnerships or other entities created or organized in or under the laws of the
United States or any State, or estates or trusts the income of which is subject
to U.S. federal income taxation regardless of its source that will hold the
Notes as capital assets. The summary does not address all of the federal income
tax consequences that may be relevant to all Noteholders in light of their
particular circumstances (including, for example, any special rules applicable
to tax-exempt organizations, broker-dealers, insurance companies, foreign
entities and persons who are not citizens or residents of the United States) and
does not address any tax consequences other than federal income tax
consequences.
The exchange of Old Notes for New Notes (the "Exchange") pursuant to the
Exchange Offer will be treated as a continuation of the holder's investment in
the Old Notes and will not be a taxable event for U.S. federal income tax
purposes. As a result, a holder of an Old Note whose Old Note is accepted in an
Exchange Offer will not recognize gain or loss on the Exchange. Similarly, there
would be no federal income tax consequences to a Noteholder that does not
participate in the Exchange Offer. A tendering holder's tax basis in the New
Notes will be the same as such holder's tax basis in its Old Notes. A tendering
holder's holding period for the New Notes received pursuant to the Exchange
Offer will include its holding period for the Old Notes surrendered therefor.
ALL HOLDERS OF OLD NOTES ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES AND OF THE OWNERSHIP AND DISPOSITION
OF NEW NOTES RECEIVED IN THE EXCHANGE OFFER IN LIGHT OF THEIR OWN PARTICULAR
CIRCUMSTANCES.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. Continental has agreed that, starting on the Expiration Date
and ending on the close of business 180 days after the Expiration Date, it will
make this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale. In addition, until such date all
broker-dealers effecting transactions in the New Notes may be required to
deliver a prospectus.
Continental will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer and any broker or dealer that participates in a distribution
of such New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit of any such resale of New Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
Starting on the Expiration Date, Continental will promptly send additional
copies of this Prospectus and any amendment or supplement to this Prospectus to
any broker-dealer that requests such documents in the Letter of Transmittal.
Continental has agreed to pay all expenses incident to the Exchange Offer other
than commissions or concessions of any brokers or dealers, fees of counsel to
the Holders and certain transfer taxes, and will indemnify the Holders of the
New Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Notes is being passed upon for Continental by Hughes
Hubbard & Reed LLP, New York, New York.
EXPERTS
The consolidated financial statements (including the financial statement
schedule) of Continental Airlines, Inc. appearing in Continental Airlines,
Inc.'s Annual Report (Form 10-K), as amended, for the year ended December 31,
2002 have been audited by Ernst & Young LLP, independent auditors, as set forth
in their reports thereon included therein and incorporated herein by reference.
Such consolidated financial statements (including the financial statement
schedule) are, and audited consolidated financial statements to be included in
subsequently filed documents will be, incorporated herein by reference in
reliance upon such reports of Ernst & Young LLP pertaining to such consolidated
financial statements (to the extent covered by consents filed with the
Commission) given on the authority of such firm as experts in accounting and
auditing.
The consolidated balance sheets of MBIA Inc. and subsidiaries and MBIA
Insurance Corporation and subsidiaries as of December 31, 2002 and December 31,
2001 and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 2002, incorporated herein by reference, have been incorporated herein in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing. Any
other audited financial statements of such companies that are incorporated or
that are deemed to be incorporated herein by reference that are the subject of a
report by PricewaterhouseCoopers LLP, independent accountants, will be so
incorporated by reference in reliance upon such reports and upon the authority
of such firms as experts in accounting and auditing to the extent covered by
consents of PricewaterhouseCoopers LLP filed with the SEC.
The references to SH&E, and to its appraisal reports, dated as of October
31, 2002 and January 24, 2003, are included herein in reliance upon the
authority of such firm as an expert with respect to the matters contained in its
appraisal reports.
APPENDIX I--INDEX OF TERMS
PAGE PAGE
Agent's Message.................42 Final Scheduled Payment
American Airlines...............23 Date.......................... .45
Applicable Date.................47 Fixed charges.....................28
ATOP............................42 GAAP..............................36
Aviation Security Act...........23 Global Notes......................59
Avoided Payment.................69 holder............................40
Base Rate.......................65 Holdings..........................29
Book-Entry Confirmation.........40 Hopkins International.............29
Break Amount....................47 Houston...........................29
Bush Intercontinental...........29 Indenture.........................45
Business Day....................57 Indirect Participants.............59
Capped Interest Rate............62 Initial Interest Period...........46
Cash Collateral.................48 Initial Purchaser.................26
Cash Collateral Account.........63 Insolvency Proceeding.............70
Cede............................59 Interest Drawing..................62
CMI.............................29 Interest Payment Date.............45
Collateral......................48 Interest Period...................46
Collateral Agents...............48 Issuance Date.....................37
Collateral Agreements...........48 KLM...............................31
Collateral Maintenance Liberty International.............29
Agreement.....................48 LIBOR.............................46
Collateral Ratio................48 Liquidity Event of Default........66
Commission.......................3 Liquidity Expenses................56
Company.........................29 Liquidity Facility................62
Continental.....................29 Liquidity Facility LIBOR..........65
Continental Bankruptcy Liquidity Obligations.............56
Event.........................53 Liquidity Provider................62
Controlling Party...............55 Liquidity Provider Guarantor......66
Copa............................31 Liquidity Provider
Debt Balance....................52 Reimbursement Date..............68
Default.........................53 Maximum Available
Definitive Notes................60 Commitment......................62
Delta...........................30 MBIA..............................35
Designated Locations............52 Moody's...........................63
Distribution Date...............46 New Notes..........................5
Downgrade Drawing...............63 Newark............................29
DTC.............................40 Non-Extension Drawing.............64
DTC Participant.................42 Non-Performance Payment Date......67
earnings........................28 Non-Performing....................56
Eligible Institution............40 Non-Performing Period.............67
Embraer.........................21 Northwest Airlines................30
Equipment.......................54 Note Owners.......................60
Event of Default................52 Noteholders.......................47
Event of Loss...................52 Notes..............................5
Exchange........................73 Old Notes..........................5
Exchange Agent..................43 Operative Documents...............45
Exchange Offer...................5 Outstanding Amount................67
Expiration Date.................39 Parent Company....................35
ExpressJet......................29 Participating Broker-Dealer.......38
FAA.............................20 Payment Default...................52
Fair Market Value...............48 Pledged Spare Parts...............48
Final Drawing...................64 Policy............................67
Final Legal Maturity Date.......45 Policy Drawing....................57
Final Order.....................69
Policy Expenses.................57 SARS..............................32
Policy Provider.................35 Scheduled Interest Payment
Policy Provider Agreement.......70 Date...........................45
Policy Provider Default.........55 Section 1110......................54
Policy Provider Election........68 Security Agent....................48
Policy Provider Obligations.....56 Security Agreement................48
Premium.........................47 SH&E..............................25
Prior Funds.....................67 Shelf Registration Statement......38
Qualified Spare Parts...........48 Standard & Poor's.................63
Rating Agency...................49 Stated Interest Rate..............45
Reference Agency Agreement......46 Subordinated Notes................57
Reference Agent.................46 Support Documents.................45
Reference Date..................46 Termination Date..................69
Registration Event..............38 Termination Notice................66
Registration Rights Agreement...37 Threshold Rating..................63
Registration Statement...........3 TIA...............................53
Relevant Date...................67 Trustee...........................45
Replacement Facility............63 TSA...............................23
Required Amount.................62 United............................23
Rotable Ratio...................48 US Airways........................23
Rotables........................71 Virgin............................31
SAP.............................36
APPENDIX II--APPRAISAL LETTER
SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY
A FULL APPRAISAL OF SELECTED SPARE PARTS
Prepared for:
CONTINENTAL AIRLINES
Prepared by:
SH&E
JANUARY 24, 2003
TABLE OF CONTENTS
1 1.0 INTRODUCTION, DETERMINATION &
ASSUMPTIONS....................................................................1
1.1 Introduction.......................................................1
1.2 Determination......................................................1
1.3 Assumptions........................................................3
2 2.0 DESCRIPTION OF ASSETS................................................4
2.1 Spare Parts Nomenclature...........................................4
2.2 Summary of the Continental Inventory...............................7
2.3 Comparison of the Two Appraisals...................................8
2.3.1 Inventory Size Comparison....................................9
2.3.2 Significant Changes in the Inventory........................10
2.3.3 Other Observations..........................................11
3 3.0 METHODOLOGY.........................................................12
3.1 Definition of Terms...............................................12
3.1.1 Base Value..................................................12
3.1.2 Current Market Value........................................12
3.2 Spare Parts Appraisal Methodology.................................13
3.2.1 Sampling Process............................................13
3.2.2 Sample Valuation............................................14
3.2.3 Current Market Value Determination..........................14
3.2.4 Condition and Quantity Adjustment...........................15
4 4.0 THE MARKET FOR THE SUBJECT ASSETS...................................16
5 5.0 QUALIFICATIONS......................................................17
6 6.0 LIMITATIONS.........................................................18
Appendix A - Value by Aircraft Type by Material Class
Appendix B - Summary of Inventory Adjustments
Appendix C - Proportion of Serviceable & Unserviceable Parts
1.0 INTRODUCTION, DETERMINATION
& ASSUMPTIONS
1.1 INTRODUCTION
Continental Airlines, Inc. ("Continental" the "Client") has retained Simat,
Helliesen & Eichner, Inc. ("SH&E") to prepare an update to its opinion of the
Current (or Fair) Market Value ("CMV") of an inventory of selected spare parts
owned by Continental (collectively the "Subject Assets"). This report is an
update to SH&E's previous report dated October 31, 2002.
As part of the appraisal, SH&E conducted limited physical inspections of
Continental's warehouse facilities at Newark (3 locations), Cleveland, Los
Angeles (2 locations), Houston - George Bush Intercontinental (4 locations),
Houston - Hobby, Honolulu (2 locations) and Orlando. Together, these locations
account for 80% of the subject asset value.
1.2 DETERMINATION
SH&E has determined the aggregate Adjusted(1) Current Market Value of the
Subject Assets to be:
$ 436.8 MILLION
As a point of reference, this updated appraisal represents an increase of $21.4
million from the valuation provided in the previous report dated October 31,
2002 that was based on an inventory listing as of August 25, 2002.
- --------------------
(1) Adjustments were made to the CMV to reflect serviceability levels and
inventory accuracy
- --------------------------------------------------------------------------------
TABLE 1-1: CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000)
- --------------------------------------------------------------------------------
UNADJUSTED CURRENT MARKET VALUE
Serviceable Unserviceable Total
- --------------------------------------------------------------------------------
737-7/8/9 $157,991.7 $56,175.8 $214,167.6
757-200 $62,373.7 $17,599.7 $79,973.4
757-300 $2,944.5 $434.0 $3,378.4
767-200 $6,340.1 $7,193.2 $13,533.3
767-400 $51,935.1 $9,576.8 $61,511.8
777-200 $97,444.4 $32,665.2 $130,109.6
--------- --------- ----------
Total $379,029.5 $123,644.7 $502,674.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 1-2: CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000)
- --------------------------------------------------------------------------------
ADJUSTED CURRENT MARKET VALUE
SH&E Value
Group Serviceable Unserviceable Total
- --------------------------------------------------------------------------------
737-7/8/9 $157,991.7 $27,980.8 $185,972.6
757-200 $62,373.7 $6,979.1 $69,352.8
757-300 $2,944.5 $172.2 $3,116.7
767-200 $6,340.1 $2,606.6 $8,946.7
767-400 $51,935.1 $3,806.1 $55,741.2
777-200 $97,444.4 $16,267.6 $113,712.0
--------- --------- ----------
Total $379,029.5 $57,812.4 $436,841.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1.3 ASSUMPTIONS
SH&E relied on the following assumptions while performing this valuation:
O The global commercial aviation industry and, more specifically, the
aviation spare parts aftermarket will continue to recover from the
financial distress experienced since early 2001.
O The SH&E values assume the Subject Assets meet all relevant
specifications and performance capabilities.
O SH&E relied upon Continental's determination as to the serviceability
or unserviceability of the Subject Assets. Any variation in their
status would affect the values referenced herein.
O SH&E has not addressed any ownership rights and has assumed that the
Subject Assets are owned by the Client.
O The Subject Asset's records are in compliance with International Civil
Aviation Organization (ICAO) standards and furthermore, all Life
Limited Parts ("LLP's") records are traceable "back to birth"(2).
O All normally required maintenance has been performed including
compliance with all mandatory Airworthiness Directives.
O All of the data and information provided by Continental is an accurate
representation of the actual conditions or circumstances of the
Subject Assets.
O The Subject Assets have not been involved in any major incident or
accident that resulted in significant damage to the asset.
- --------------------
(2) "Back-to-birth" records are those that provide operating history
information for each LLP from the date of its first delivery by the
Original Equipment Manufacturer (OEM) to its first operator and for each
subsequent installation.
2.0 DESCRIPTION OF ASSETS
2.1 SPARE PARTS NOMENCLATURE
Aircraft and engine spare parts are generally categorized as follows:
ROTABLES
Rotable parts are those components that can be repeatedly and economically
restored to a serviceable condition over a period approximating the life of the
flight equipment to which they are related. When in need of overhaul, rotable
components are generally worth 30-50% of new and, after overhaul, they are
typically worth 70-85% of new depending on the age of the aircraft type.
Examples of rotable parts include thrust reversers, auxiliary power units,
landing gears, generators, valves and actuators. Rotable parts normally have an
unique serial number.
REPAIRABLES
Repairables are those components or parts that can be economically restored to a
serviceable or overhauled condition, but that have a life that is considerably
less than the life of the flight equipment to which they are related. In
addition, they can only be overhauled or repaired a limited number of times.
When in need of overhaul or repair, repairable parts are typically worth 30-50%
of new and, after overhaul 60-80 % of new.
In the Continental system, these parts are classified as Expendables (because
they are ultimately consumed) with a notation in the part record that the part
is to be "recovered" and inspected to determine if repair is cost effective
prior to being scrapped.
Examples of repairable or Recoverable Expendable parts include engine cowlings,
fairings, and engine blades, flap track assemblies, certain bearings, duct
assemblies and fittings.
EXPENDABLES
Expendables are parts or material that, once used, cannot be re-used and, if not
serviceable, they generally cannot be overhauled or repaired.
LIFE LIMITED PARTS
Life limited parts (LLP) have a finite operating life that is defined by hours,
cycles or calendar limit and are usually found in engines and landing gear
assemblies. When a LLP reaches its life limit, it cannot be overhauled or
repaired and must be destroyed.
The condition of aircraft and engine parts is classified as follows:
NEW
New parts are parts that have never been used and are normally in the
manufacturer's original packaging.
OVERHAULED
Overhauled parts are rotable or repairable parts that have been repaired and
tested to defined overhaul standards that can be specified by the manufacturer,
an airline or the repair vendor. The overhaul process restores the part to near
new service standard.
SERVICEABLE
Serviceable parts are parts that have been inspected and tested and found to be
within prescribed service limits.
AS REMOVED
An 'As Removed' part is in the condition that it was when it was removed from an
operator's aircraft or engine. Such a part can be installed, if operating
normally prior to removal, without prior testing on an aircraft or engine in the
same operator's fleet. In all other cases, an As Removed part must be inspected
and tested in an approved manner before it can be declared serviceable.
UNSERVICEABLE
Unserviceable (sometimes referred to as Repairable) components or parts have
been either removed from service for not working correctly or, upon inspection
and testing, were found not to meet certain prescribed standards. Such parts can
be sent to suitably qualified facilities for repair or overhaul as required.
BEYOND ECONOMIC REPAIR
An unserviceable part that, when inspected and tested, is found to require
repairs that are estimated to cost more than the part is worth is declared
'Beyond Economic Repair' (BER) and is usually scrapped.
AIRWORTHINESS OF PARTS
All parts, regardless of whether or not they are classified as 'New',
'Overhauled' or 'Serviceable' only remain airworthy as long as the part
continues to comply with all manufacturer's storage, maintenance and FAA
Airworthiness Directives requirements.
2.2 SUMMARY OF THE CONTINENTAL INVENTORY
The Subject Assets are selected airframe, avionic and engine spare parts for
Continental's in-service fleet of Boeing 737-700, 737-800 and 737-900 together
with Boeing 757-200, 757-300, 767-200, 767-400 and 777-200 aircraft. The
aircraft inventories include the total inventory population for all of those
aircraft except for the 757-200. The 757 parts include only those acquired after
October 1994.
SH&E was provided with an electronic inventory listing from CO's 'SCEPTRE/ICS'
inventory management system dated as of December 25, 2002. The inventory listed
each Continental part number ("MEPN") and information for each MEPN by fleet,
category (expendable or rotable), historic average cost (also last purchase
price and catalogue price if available), and the percentage serviceable. The
inventory consisted of 25,465 line items with a total of 789,737 individual
parts. A total of 2,110 line items containing 105,358 parts (see Appendix B)
were excluded from this appraisal for the following reasons:
1. The parts are for an aircraft modification program that will be
completed by the next appraisal (cockpit doors).
2. The parts are assets supplied and owned by vendors but tracked in the
Continental maintenance system (brake and tire sets).
3. Or, are branded parts specific to Continental and can only be used by
the airline (seat covers, carpet and cushion, and fabric).
These parts except for the cockpit doors, which are new items, were also removed
from the previous appraisal.
The majority of the Subject Assets were assessed to be in a new or overhauled
maintenance condition. Continental claimed that the accuracy of the inventory
management systems found by SH&E at the inspected facilities was representative
of other stations in the system and SH&E found no indications to the contrary.
It should be noted that SH&E did not compare or reconcile the part cost basis
provided to SH&E with values reported on Continental's Balance Sheet.
- --------------------------------------------------------------------------------
TABLE 2-1: SELECTED SPARE PARTS DISTRIBUTION
- --------------------------------------------------------------------------------
Value Group Fleet Expendable Rotable Total
- --------------------------------------------------------------------------------
737-700/800 278,912 6,942 285,854
737-800 3,777 191 3,968
737-900 821 10 831
--- -- ---
737-7/8/900 Total 284,387 7,167 291,554
757-200 757-200 185,731 3,391 189,122
757-300 757-300 10,946 96 11,042
767-200 767-200 25,485 227 25,712
767-400 767-400 51,147 1,586 52,733
777-200 777-200 111,210 3,006 114,216
------- ----- -------
Grand Total 668,906 15,473 684,379
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*These summary tables reflect the current part count after all inventory
adjustments. See Appendix B for a detailed summary of inventory adjustments.
2.3 COMPARISON OF THE TWO APPRAISALS
For this appraisal SH&E used data as of December 25, 2002; in the prior
appraisal, the inventory was dated as of August 25, 2002
2.3.1 INVENTORY SIZE COMPARISON
The inventory as of December 25, 2002 contained 742 more Continental part
numbers and contained 59,454 more individual parts. The following table
summarizes the differences.
- --------------------------------------------------------------------------------
TABLE 2-2: INVENTORY AS OF DECEMBER 2002
- --------------------------------------------------------------------------------
Aircraft Lines Parts
- --------------------------------------------------------------------------------
737-7/8/9 6,036 335,753
757-200 7,568 212,363
757-300 674 12,662
767-200 1,298 26,574
767-400 3,970 67,597
777-200 5,919 134,788
----- -------
Grand Total 25,465 789,737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 2-3: INVENTORY AS OF AUGUST 2002
- --------------------------------------------------------------------------------
Aircraft Lines Parts
- --------------------------------------------------------------------------------
737-7/8/9 5,756 279,537
757-200 7,386 212,424
757-300 659 12,080
767-200 1,260 26,418
767-400 3,867 67,304
777-200 5,795 132,520
----- -------
Grand Total 24,723 730,283
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 2-4: INVENTORY - DIFFERENCES
- --------------------------------------------------------------------------------
Aircraft Lines Parts
- --------------------------------------------------------------------------------
737-7/8/9 280 56,216
757-200 182 (61)
757-300 15 582
767-200 38 156
767-400 103 293
777-200 124 2,268
--- -----
Grand Total 742 59,454
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*THE COUNT OF PARTS AS OF JANUARY 2003 IS BEFORE ALL INVENTORY ADJUSTMENTS. SEE
APPENDIX B FOR A DETAILED SUMMARY OF INVENTORY ADJUSTMENTS.
The change in inventory represents an increase in unadjusted current market
value of approximately $47.9 Million.
2.3.2 SIGNIFICANT CHANGES IN THE INVENTORY
SH&E noted that the proportion of unserviceable parts has increased by
approximately $50 million (before maintenance adjustment) since the previous
inventory. This change was expected as it was noted during the prior appraisal
that the proportion of unserviceable parts was relatively low compared with U.S.
industry average.
SH&E also noted that Continental acquired 4 new APUs(3) with an approximate
current market value of $2.5 million.
- --------------------
(3) An APU is an Auxiliary Power Unit. It is a small jet engine used to provide
electrical and pneumatic power to aircraft system when on the ground and
power for starting the main engines. Certain of the engines can be used to
provide emergency in-flight electrical power.
2.3.3 OTHER OBSERVATIONS
O At Newark Liberty International Airport, Continental is building a new
spare parts facility which is due for completion in April 2003. Once
complete, parts from the current hanger location and off-airport
warehouse will be consolidated into the single facility.
O The Guam station holds inventory representing approximately $25
million in value and was recently damaged by a typhoon. Accordingly,
SH&E was unable to inspect this facility. Continental reports that the
facility is being repaired. Continental further informs us that the
associated damage, to the spare parts was minimal, and affected parts
are being repaired. SH&E will inspect the facility at the next
appraisal update.
O SH&E observed different packaging standards between different stations
although all were acceptable by industry standards. SH&E recommended
that all parts in excess of $2,500 be individually packaged even when
stored within a bin.
O Previously at the Houston - Morales (MOR) location, SH&E discovered
several rotable parts were reported as being present at the facility
inventory when they were actually installed on an aircraft.
Continental was aware of the problem and advised it was being
corrected. SH&E retested samples of this inventory and the problem
appears to have been corrected.
3.0 METHODOLOGY
3.1 DEFINITION OF TERMS
3.1.1 BASE VALUE
The Base Value ("BV") is the appraiser's opinion of the underlying economic
value of an asset in an open, unrestricted and stable market environment with a
reasonable balance of supply and demand, and also assumes full considerations of
its "highest and best use". An asset's BV is founded in the historical trend of
values and in the projection of value trends and presumes an arm's-length, cash
transaction between willing, able and knowledgeable parties, acting prudently,
with an absence of duress and with a reasonable period of time available for
marketing.
Since BV pertains to a somewhat idealized asset and market combination it may
not necessarily reflect the actual value of the asset in question, but is a
nominal starting value to which adjustments may be applied to determine an
actual value. Since BV is related to long-term market trends, the BV definition
is normally applied to analyses of historical values and projections of residual
values and lease rates.
3.1.2 CURRENT MARKET VALUE
The Current (or Fair) Market Value ("CMV" or "FMV") is the appraiser's opinion
of the most likely trading price that may be generated for an individual asset
under the market circumstances that are perceived to exist at the time in
question. CMV assumes that the asset is valued for its highest, best use, that
the parties to the hypothetical sale transaction are willing, able, prudent and
knowledgeable. Neither are under any unusual pressure for a prompt sale, and
that the transaction would be negotiated in an open and unrestricted market on
an arm's-length basis, for cash or equivalent consideration, and given an
adequate amount of time for effective exposure to prospective buyers. Unless
stated otherwise, the total CMV of multiple assets represents the aggregate of
the individual asset's Current Market Values were they to be sold on an
asset-by-asset basis and not the value of the assets if sold in bulk.
3.2 SPARE PARTS APPRAISAL METHODOLOGY
SH&E's standard parts appraisal can be summarized as a calculation of an
adjustment to the owner's internal inventory value. The statistically based
adjustment is achieved by the development of a representative, dollar-weighted,
stratified sample of the parts, the valuation of that sample and then, the
application of a derived adjustment factor to the sample and then to the entire
population of parts. That process is more fully described below.
3.2.1 SAMPLING PROCESS
SH&E obtained an itemized database of the parts to be valued from Continental.
The data identified each part by aircraft type, rotable or expendable category,
description, manufacturer's part number, quantity, and percent serviceable. The
data also provided an average acquisition cost for each part. Some parts were
listed with zero cost and those were handled separately.
SH&E compiled a single database of the selected Continental inventory that
contained 25,465 line items. The inventory was then grouped by aircraft type
with common trading characteristics and subsequently, by category. For this
valuation, SH&E initially grouped all 737 aircraft together but kept the 757 and
767 parts separate. It should be noted that the later model 767-400 has
significant systems and parts commonality with the 777 aircraft.
Each of the groupings was then sorted by descending unit cost value and then
divided into four to six separate strata of approximately equal total value
based on Continental's reported cost or value for each line item. A further
stratum was created in some cases to provide consideration for parts with a
reported zero average acquisition value. Approximately 1,500 line items were
selected for the initial sampling and these served as the basis of the pricing
and physical sampling process. The pricing sample was further increased to
include all matching parts in SH&E's internal parts database.
3.2.2 SAMPLE VALUATION
The CMV of the individual parts that make up each sample was determined by
investigating the current sale price for new or overhauled parts, based on
information from independent third parties, manufacturers' parts lists and SH&E
files.
SH&E performed a detailed pricing survey for the prior appraisal and, for this
update, spot checked values from each pool of parts and found no significant
change in the individual part's values. New pricing was performed on a small
group of parts with higher values to validate their pricing consistency with
similar parts from the prior appraisal. A small sample of new parts was sent to
several major parts vendors who provided current trading values. As before, most
of these parts are associated with new production aircraft with a limited
secondary market and many of the returned vendor-provided values were new prices
or catalogue values.
3.2.3 CURRENT MARKET VALUE DETERMINATION
SH&E applied the results of the sample pricing to each appropriate strata and,
in addition, applied price matches from other sources. Over 30 different sources
including price catalogs from the major manufacturers, US government procurement
data, airline parts pooling price lists and inventory and purchase records from
seven major U.S. and European airlines files were reviewed in order to determine
additional current market values. More than three million parts pricing records
were examined in order to match a part number and reference price for each part
in the Continental inventory.
SH&E obtained a market price for the small sample of parts based on an
assumption that each part would be purchased independently, as a single unit,
and in a new or overhauled condition for rotables and new condition for
expendables. In cases where more than one quote was obtained, SH&E attempted to
determine the most reasonable value.
This file matching procedure, using both the initial sample and SH&E's internal
resources, was successful in determining market price for approximately 17,500
line items representing approximately 71% of the line items and 74% of the
historic cost.
3.2.4 CONDITION AND QUANTITY ADJUSTMENT
The CMV of unserviceable parts was calculated using ratios of serviceable to
unserviceable values obtained from prior SH&E parts appraisals and applied to
SH&E's findings made during the physical inspection and audit.
Continental provided SH&E with a percentage unserviceable by part number. This
statistic was tested against internal records but, during this appraisal, no
supplier audits or surveys' were made to validate the unserviceable percentages
provided by the airline. Selected vendor audit will be performed during the next
full appraisal.
For this update, SH&E revisited Continental's parts facilities in Newark,
Cleveland, Los Angeles and Houston (George Bush) and performed first time visits
to Honolulu, Houston Hobby and Orlando to physically inspect the assets and to
verify the accuracy of the inventory reporting system. As before the accuracy of
Continental's inventory was above industry standard and Honolulu and Cleveland
both had no discrepancies. SH&E's review of the associated records also revealed
no discrepancies.
The physical sample audit indicated accuracy above U.S. industry norms, however,
SH&E did note that the airline creates a large number of "kits." A kit is a
package of parts, either multiple units of the same part or a collection of
necessary parts needed to complete a certain maintenance task. Sometimes the kit
contains a rotable item along with the necessary expendable material to perform
installation. Almost all the material was new. It should be noted that the
"kitting" process makes the kit unique to Continental but the parts can be made
generic simply by disassembling the kit. For this valuation the kit parts were
treated as independent parts.
4.0 THE MARKET FOR THE SUBJECT
ASSETS
The potential market for Continental Airlines' spare parts remains positive. In
the main, the parts are associated with aircraft that have enjoyed extensive
production runs and also have a wide operator base. The two exceptions are the
757-300 and the 767-400; these aircraft have both limited production runs and
small operator bases. There have been a total of 63 757-300 aircraft ordered for
7 operators and 37 767-400 aircraft ordered for two operators, Continental and
Delta. That said, there is very significant commonality between the 757-200 and
757-300 aircraft and also between the 767-400 and the 777.
The parts aftermarket, generally estimated to exceed $1.3 billion in annual
revenues, has obtained the majority of its product from either airline surplus
sales or from dismantled aircraft. There have been no significant sales of
surplus parts for the late generation aircraft represented by this parts
inventory or for their associated engines. Nor have any of these aircraft types
been dismantled for parts other than incident-related aircraft. Consequently,
there is very little of this type of airframe material available on the parts
aftermarket. The same is true for the engine market where the Original Equipment
Manufacturers ("OEM") have maintained a tight control of any aftermarket
relating to newer generation engines. SH&E is of the opinion that the Subject
Assets, if offered for sale, would include some of the most marketable material
in the commercial aviation parts aftermarket.
5.0 QUALIFICATIONS
Founded in 1963 and with offices in New York, Boston, Washington, London and
Amsterdam, SH&E is the world's largest consulting firm specializing in
commercial aviation. Its staff of over 90 personnel encompasses expertise in all
disciplines of the industry and the firm has provided appraisal, consulting,
strategic planning and technical services to airlines, leasing companies,
government agencies, airframe and engine manufacturers, and financial
institutions.
SH&E's appraisal staff are all members of the International Society of Transport
Aircraft Trading (ISTAT), the internationally recognized body for the
certification of aircraft appraisers. SH&E performs all appraisals in accordance
with the definitions, guidelines and standards set forth by ISTAT. SH&E's
officer responsible for all appraisals is an ISTAT Senior Appraiser.
SH&E annually values approximately $20 billion of aviation assets including
commercial and military equipment, airline fleets and lease portfolios. The
appraisals range from full appraisals involving detailed aircraft and record
inspections conducted by SH&E's technical staff to the valuation of tax-based
leases. SH&E's proprietary aircraft residual value model is widely accepted by
the rating agencies as a reliable forecasting tool. In addition to the above
aircraft valuations, SH&E annually values in excess of $3 billion worth of
aircraft spare parts and spare engines. SH&E routinely values flight simulators,
hangar tooling, ground equipment, gates, slots, maintenance facilities and Fixed
Base Operations.
A related service that SH&E offers its Clients is Asset Management. Over the
last few years, SH&E has been the principal asset manager responsible for the
recovery and subsequent remarketing of a number of individual aircraft and some
significant portfolios.
This active participation in the market place provides SH&E with practical and
first hand knowledge of the values and lease rates of aircraft, engines and
parts.
6.0 LIMITATIONS
SH&E used information supplied by the Client together with in-house data
accumulated through other recent studies of aircraft parts transactions.
SH&E's opinions are based upon historical relationships and expectations that it
believes are reasonable.
Some of the underlying assumptions, including those described above are detailed
explicitly or implicitly elsewhere in this report, may not materialize because
of unanticipated events and circumstances. SH&E's opinions could, and would,
vary materially, should any of the above assumptions prove to be inaccurate.
The opinions expressed herein are not given for, or as an inducement or
endorsement for, any financial transaction. They are prepared for the exclusive
use of the addressee. SH&E accepts no responsibility for damages, if any, that
result from decisions made or actions taken based on this report.
This report does not address the validity of title or ownership of the items
discussed herein.
This report reflects SH&E's expert opinion and best judgment based upon the
information available to it at the time of its preparation. SH&E does not have,
and does not expect to have, any financial interest in the appraised property.
For SH&E:
/s/ CLIVE G. MEDLAND
- ---------------------------
Clive G. Medland, FRAeS
Senior Vice President
Senior Appraiser
International Society of
Transport Aircraft Trading
January 24, 2003
SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY
APPENDIX A
VALUE BY AIRCRAFT TYPE BY MATERIAL CLASS
SELECTED SPARE PARTS VALUATION SUMMARY BY MATERIAL
CLASS
Dollars in (000)
------------------------------------------------------------------------
VALUE GROUP ROTABLE EXPENDABLE GRAND TOTAL
------------------------------------------------------------------------
737-7/8/9 $153,526.8 $32,445.7 $185,972.6
------------------------------------------------------------------------
757-200 $49,898.8 $19,454.1 $69,352.8
------------------------------------------------------------------------
757-300 $2,267.0 $849.7 $3,116.7
------------------------------------------------------------------------
767-200 $6,611.4 $2,335.3 $8,946.7
------------------------------------------------------------------------
767-400 $46,714.4 $9,026.8 $55,741.2
------------------------------------------------------------------------
777-200 $88,442.0 $25,270.0 $113,712.0
------------------------------------------------------------------------
TOTAL $347,460.4 $89,381.5 $436,841.9
------------------------------------------------------------------------
SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY
APPENDIX B
SUMMARY OF INVENTORY ADJUSTMENTS
SELECTED SPARE PARTS: SUMMARY OF INVENTORY
ADJUSTMENTS
- ------------------------ ------------------------------- ---------------------- --------------------- ----------------------
Starting CO Inventory Less brakes, tires, cockpit Less CO specific Total Adjustments Inventory After
doors parts to Inventory Adjustments
- ------------------------ ------------------------------- ---------------------- --------------------- ----------------------
Group Lines Qty Group Lines Qty Reason Group Lines Qty Group Lines Qty Group Lines Qty
- ------------------------ ------------------------------- ---------------------- --------------------- ----------------------
737-7/8/9 6,036 335,753 737-7/8/9 1 50 DOOR 737-7/8/9 470 44,149 737-7/8/9471 44,199 737-7/8/5,565 291,554
757-200 7,568 212,363 757-200 3 99 BRAKE/TIRE 757-200 395 23,142 757-200 398 23,241 757-200 7,170 189,122
757-300 674 12,662 757-300 2 14 BRAKE/TIRE 757-300 46 1,606 757-300 48 1,620 757-300 626 11,042
767-200 1,298 26,574 767-200 2 9 BRAKE/TIRE 767-200 38 853 767-200 40 862 767-200 1,258 25,712
767-400 3,970 67,597 767-400 1 35 BRAKE/TIRE 767-400 282 14,829 767-400 283 14,864 767-400 3,687 52,733
777-200 5,919 134,788 777-200 3 294 BRAKE/TIRE 777-200 867 20,278 777-200 870 20,572 777-200 5,049 114,216
- ------------------------ ------------------------------- ---------------------- --------------------- ----------------------
Total 25,465 789,737 Total 12 501 Total 2,098 104,857 Total 2,110105,358 Total 23,355 684,379
- ------------------------ ------------------------------- ---------------------- --------------------- ----------------------
*CO specific parts include: seat covers, carpet, cushions, curtains, fabric, cloth, placards
SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY
APPENDIX C
PROPORTION OF SERVICEABLE AND
UNSERVICEABLE PARTS
COMPARISON OF THE SELECTED PARTS INVENTORY VALUATIONS
DOLLARS IN (000)
- -----------------------------------------------------------------------------------------------------------------------
CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000) DECEMBER 2002
- -----------------------------------------------------------------------------------------------------------------------
UNADJUSTED CURRENT MARKET VALUE ADJUSTED CURRENT MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------------
Value Group Serviceable Unserviceable Total Serviceable Unserviceable Total %
Unserviceable
-----------------------------------------------------------------------------------------------------------
737-7/8/9 $157,991.7 $56,175.8 $214,167.6 $157,991.7 $27,980.8 $185,972.6 15%
757-200 $62,373.7 $17,599.7 $79,973.4 $62,373.7 $6,979.1 $69,352.8 10%
757-300 $2,944.5 $434.0 $3,378.4 $2,944.5 $172.2 $3,116.7 6%
767-200 $6,340.1 $7,193.2 $13,533.3 $6,340.1 $2,606.6 $8,946.7 29%
767-400 $51,935.1 $9,576.8 $61,511.8 $51,935.1 $3,806.1 $55,741.2 7%
777-200 $97,444.4 $32,665.2 $130,109.6 $97,444.4 $16,267.6 $113,712.0 14%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $379,029.5 $123,644.7 $502,674.2 $379,029.5 $57,812.4 $436,841.9 13%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000) AUGUST 2002
- -----------------------------------------------------------------------------------------------------------------------
UNADJUSTED CURRENT MARKET VALUE ADJUSTED CURRENT MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------------
Value Group Serviceable Unserviceable Total Serviceable Unserviceable Total % Unserviceable
-----------------------------------------------------------------------------------------------------------
737-7/8/9 $158,726.5 $33,816.2 $192,542.7 $158,726.5 $16,811.8 $175,538.3 10%
757-200 $62,627.8 $15,171.1 $77,799.0 $62,627.8 $6,009.3 $68,637.2 9%
757-300 $2,927.8 $372.3 $3,300.1 $2,927.8 $147.6 $3,075.4 5%
767-200 $6,948.4 $4,070.4 $11,018.7 $6,948.4 $1,407.8 $8,356.1 17%
767-400 $50,651.2 $5,196.2 $55,847.3 $50,651.2 $2,056.1 $52,707.3 4%
777-200 $100,107.0 $14,129.3 $114,236.3 $100,107.0 $7,007.5 $107,114.6 7%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $381,988.8 $72,755.4 $454,744.2 $381,988.8 $33,440.2 $415,429.0 8%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
DIFFERENCES (DECEMBER 2002 - AUGUST 2002) ($000)
- -----------------------------------------------------------------------------------------------------------------------
UNADJUSTED CURRENT MARKET VALUE ADJUSTED CURRENT MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------------
Value Group Serviceable Unserviceable Total Serviceable Unserviceable Total
- -----------------------------------------------------------------------------------------------------------------------
737-7/8/9 ($734.8) $22,359.6 $21,624.9 ($734.8) $11,169.0 $10,434.2
757-200 ($254.1) $2,428.6 $2,174.5 ($254.1) $969.8 $715.7
757-300 $16.6 $61.6 $78.3 $16.6 $24.6 $41.3
767-200 ($608.3) $3,122.8 $2,514.5 ($608.3) $1,198.8 $590.6
767-400 $1,283.9 $4,380.6 $5,664.5 $1,283.9 $1,750.0 $3,033.9
777-200 ($2,662.6) $18,535.9 $15,873.3 ($2,662.6) $9,260.0 $6,597.4
-----------------------------------------------------------------------------------------------------------
TOTAL ($2,959.3) $50,889.3 $47,930.0 ($2,959.3) $24,372.3 $21,413.0
- -----------------------------------------------------------------------------------------------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation and Bylaws provide that the
Company will indemnify each of its directors and officers to the full extent
permitted by the laws of the State of Delaware and may indemnify certain other
persons as authorized by the Delaware General Corporation Law (the "GCL").
Section 145 of the GCL provides as follows:
"(a) A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that the
person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as
a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding if the person acted in
good faith and in a manner the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause
to believe the person's conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith
and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe
that the person's conduct was unlawful.
(b) A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the
fact that the person is or was a director, officer, employee or agent
of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably
incurred by the person in connection with the defense or settlement of
such action or suit if the person acted in good faith and in a manner
the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall
be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation unless
and only to the extent that the Court of Chancery or the court in
which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or
such other court shall deem proper.
(c) To the extent that a present or former director or officer of
a corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections
(a) and (b) of this section, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the present or former director, officer, employee
or agent is proper in the circumstances because the person has met the
applicable standard of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made, with respect to a
person who is a director or officer at the time of such determination,
(1) by a majority vote of the directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or (2) by
a committee of such directors designated by majority vote of such
directors, even though less than a quorum, or (3) if there are no such
directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (4) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer
or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit
or proceeding upon receipt of an undertaking by or on behalf of such
director or officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by the
corporation as authorized in this section. Such expenses (including
attorneys' fees) incurred by former directors and officers or other
employees and agents may be so paid upon such terms and conditions, if
any, as the corporation deems appropriate.
(f) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of this section shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in such person's official capacity and as
to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the
power to indemnify such person against such liability under this
section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence
had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to
the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner
such person reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of
the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by,
or granted pursuant to, this section shall, unless otherwise provided
when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors, or
otherwise. The Court of Chancery may summarily determine a
corporation's obligation to advance expenses (including attorneys'
fees)."
The Certificate of Incorporation and Bylaws also limit the personal
liability of directors to the Company and its stockholders for monetary damages
resulting from certain breaches of the directors' fiduciary duties. The bylaws
of the Company provide as follows:
"No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the Director derived any improper personal benefit. If
the GCL is amended ... to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a Director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the GCL, as so amended."
The Company maintains directors' and officers' liability insurance.
ITEM 21. EXHIBITS.
The Index to Exhibits to this Registration Statement is incorporated herein
by reference.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) shall not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished
to the Commission by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by any such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether or not such indemnification is against
public policy as expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on April 22, 2003.
CONTINENTAL AIRLINES, INC.
By: /S/ JENNIFER L. VOGEL
-------------------------------
Jennifer L. Vogel
Vice President, General Counsel
and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated, on April 22, 2003.
SIGNATURE TITLE
- ---------------------------------- -----------------------------------
GORDON M. BETHUNE* Chairman of the Board, Chief
- ---------------------------------- Executive Officer (Principal
Gordon M. Bethune Executive Officer) and Director
LAWRENCE W. KELLNER* President, Chief Operating Officer
- ---------------------------------- and Director
Lawrence W. Kellner
/S/ JEFFREY J. MISNER Senior Vice President and Chief
- ---------------------------------- Financial Officer
Jeffrey J. Misner (Principal Financial Officer)
/S/ CHRIS KENNY Vice President and Controller
- ---------------------------------- (Principal Accounting Officer)
Chris Kenny
THOMAS J. BARRACK, JR.* Director
- ----------------------------------
Thomas J. Barrack, Jr.
DAVID BONDERMAN* Director
- ----------------------------------
David Bonderman
KIRBYJON CALDWELL* Director
- ----------------------------------
Kirbyjon Caldwell
PATRICK FOLEY* Director
- ----------------------------------
Patrick Foley
DOUGLAS H. MCCORKINDALE* Director
- ----------------------------------
Douglas H. McCorkindale
GEORGE G.C. PARKER* Director
- ----------------------------------
George G.C. Parker
RICHARD W. POGUE* Director
- ----------------------------------
Richard W. Pogue
SIGNATURE TITLE
- ---------------------------------- -----------------------------------
WILLIAM S. PRICE III* Director
- ----------------------------------
William S. Price III
- ---------------------------------- Director
Donald L. Sturm
KAREN HASTIE WILLIAMS* Director
- ----------------------------------
Karen Hastie Williams
CHARLES A. YAMARONE* Director
- ----------------------------------
Charles A. Yamarone
*BY: /S/ JENNIFER L. VOGEL
- ----------------------------------
Jennifer L. Vogel
Attorney-in-Fact
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
4.1 Indenture, dated as of December 6, 2002, among Continental Airlines,
Inc., Wilmington Trust Company, as Trustee, Morgan Stanley Capital
Services Inc., as Liquidity Provider, and MBIA Insurance Corporation,
as Policy Provider, made with respect to the issuance of Floating Rate
Secured Notes Due 2007
4.2 Form of Exchange Floating Rate Secured Note Due 2007 (included in
Exhibit 4.1)
4.3 Collateral Maintenance Agreement, dated as of December 6, 2002,
between Continental Airlines, Inc. and MBIA Insurance Corporation
4.4 Spare Parts Security Agreement, dated as of December 6, 2002, between
Continental Airlines, Inc. and Wilmington Trust Company, as Security
Agent
4.5 Reference Agency Agreement, dated as of December 6, 2002, among
Continental Airlines, Inc., Wilmington Trust Company, as Trustee, and
Wilmington Trust Company, as Reference Agent
4.6 Revolving Credit Agreement, dated as of December 6, 2002, between
Wilmington Trust Company, as Trustee, and Morgan Stanley Capital
Services Inc., as Liquidity Provider
4.7 Guarantee Agreement, dated as of December 6, 2002, by Morgan Stanley,
relating to the Revolving Credit Agreement
4.8 Financial Guarantee Insurance Policy #39753 of MBIA Insurance
Corporation
4.9 Exchange and Registration Rights Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. and Morgan Stanley & Co.
Incorporated
4.10 Purchase Agreement, dated as of December 2, 2002, between Continental
Airlines, Inc. and Morgan Stanley & Co. Incorporated, as Initial
Purchaser
5.1 Opinion of Hughes Hubbard & Reed LLP relating to validity of the New
Notes
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Hughes Hubbard & Reed LLP (included in its opinion filed as
exhibit 5.1)
23.4 Consent of Simat, Helliesen & Eichner, Inc.
24.1 Powers of Attorney
25.1 Statement of Eligibility of Wilmington Trust Company for the Floating
Rate Secured Notes Due 2007, on Form T-1 (to be filed by amendment)
99.1 Form of Letter of Transmittal
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees
99.4 Form of Letter to Clients
================================================================================
INDENTURE
Dated as of December 6, 2002
Among
CONTINENTAL AIRLINES, INC.
WILMINGTON TRUST COMPANY,
as Trustee
MORGAN STANLEY CAPITAL SERVICES INC.,
as Liquidity Provider
and
MBIA INSURANCE CORPORATION,
as Policy Provider
$200,000,000
Floating Rate Secured Notes due 2007
================================================================================
TABLE OF CONTENTS
PAGE
ARTICLE 1.
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions.................................................1
Section 1.2 Rules of Construction.......................................1
ARTICLE 2.
THE SECURITIES
Section 2.1 Title, Form, Denomination and Execution of Securities.......1
Section 2.2 Restrictive Legends.........................................3
Section 2.3 Authentication of Securities................................5
Section 2.4 Transfer and Exchange.......................................5
Section 2.5 Book-Entry Provisions for Restricted Global Securities and
Regulation S Global Securities..............................6
Section 2.6 Special Transfer Provisions.................................8
Section 2.7 Terms of Securities........................................11
Section 2.8 Registrar and Paying Agent.................................11
Section 2.9 Paying Agent to Hold Payments In Trust.....................12
Section 2.10 Record Dates...............................................13
Section 2.11 Securityholder Lists.......................................13
Section 2.12 Mutilated, Defaced, Destroyed, Lost and Stolen Securities..14
Section 2.13 Treasury Securities........................................15
Section 2.14 Temporary Securities.......................................15
Section 2.15 Cancellation...............................................15
Section 2.16 Defaulted Interest.........................................16
Section 2.17 CUSIP Numbers..............................................16
Section 2.18 Issuance of Subordinated Securities........................16
ARTICLE 3.
LIQUIDITY PROVIDER AND POLICY PROVIDER
Section 3.1 Written Notice of Distribution.............................17
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 3.2 Priority of Distributions; Subordination...................18
Section 3.3 Other Payments.............................................20
Section 3.4 Payments to Liquidity Provider and Policy Provider.........21
Section 3.5 Liquidity Facility.........................................21
Section 3.6 The Policy.................................................28
Section 3.7 Designated Representatives.................................32
Section 3.8 Controlling Party..........................................32
Section 3.9 Company's Payment Obligations..............................33
Section 3.10 Execution of Support Documents.............................34
ARTICLE 4.
REDEMPTIONS
Section 4.1 Optional Redemption........................................34
Section 4.2 Redemption Notice to Trustee...............................34
Section 4.3 Selection of Securities to be Redeemed.....................35
Section 4.4 Notice of Redemption.......................................35
Section 4.5 Effect of Notice of Redemption.............................36
Section 4.6 Deposit of Redemption Price................................36
Section 4.7 Securities Redeemed in Part................................36
ARTICLE 5.
COVENANTS
Section 5.1 Payment of Securities......................................36
Section 5.2 Maintenance of Office or Agency............................37
Section 5.3 Corporate Existence........................................37
Section 5.4 Company Not to Consolidate, Merge, Convey or Transfer
Except Under Certain Conditions............................37
Section 5.5 Reports by the Company.....................................39
ARTICLE 6.
INDEMNIFICATION
Section 6.1 General Indemnity..........................................39
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 6.2 Separate Agreement.........................................42
Section 6.3 Notice.....................................................42
Section 6.4 Notice of Proceedings; Defense of Claims; Limitations......42
Section 6.5 Information................................................43
Section 6.6 Subrogation; Further Assurances............................43
Section 6.7 Refunds....................................................43
ARTICLE 7.
DEFAULT AND REMEDIES
Section 7.1 Events of Default..........................................44
Section 7.2 Acceleration...............................................45
Section 7.3 Other Remedies.............................................46
Section 7.4 Waiver of Past Defaults....................................46
Section 7.5 Control of Remedies........................................47
Section 7.6 Limitation on Suits........................................47
Section 7.7 Rights of Holders to Receive Payment.......................47
Section 7.8 Collection Suit by Trustee.................................48
Section 7.9 Trustee May File Proofs of Claim...........................48
Section 7.10 Application of Proceeds....................................49
Section 7.11 Undertaking for Costs......................................49
Section 7.12 Restoration of Rights on Abandonment of Proceedings........49
Section 7.13 Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default..........................................49
ARTICLE 8.
TRUSTEE
Section 8.1 Duties of Trustee..........................................50
Section 8.2 Rights of Trustee..........................................51
Section 8.3 Individual Rights of Trustee...............................51
Section 8.4 Trustee's Disclaimer.......................................52
Section 8.5 Notice of Defaults.........................................52
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 8.6 Reports by Trustee to Holders..............................52
Section 8.7 Compensation and Indemnity.................................52
Section 8.8 Replacement of Trustee.....................................53
Section 8.9 Successor Trustee by Merger, etc...........................54
Section 8.10 Eligibility; Disqualification..............................54
Section 8.11 Preferential Collection of Claims Against Company..........54
Section 8.12 Other Capacities...........................................55
Section 8.13 Trust Accounts.............................................55
Section 8.14 Deposits to the Collection Account.........................56
Section 8.15 Certain Payments...........................................56
ARTICLE 9.
DISCHARGE OF INDENTURE
Section 9.1 Discharge of Liability on Securities.......................57
Section 9.2 Application of Trust Money.................................57
Section 9.3 Repayment to Company.......................................57
Section 9.4 Reinstatement..............................................58
ARTICLE 10.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 10.1 Without Consent of The Controlling Party or Holders........58
Section 10.2 With Consent of the Controlling Party, Liquidity Provider
and Holders................................................59
Section 10.3 Compliance with Trust Indenture Act........................60
Section 10.4 Revocation and Effect of Consents..........................60
Section 10.5 Notation on or Exchange of Securities......................61
Section 10.6 Trustee to Sign Amendments, etc............................61
Section 10.7 Effect of Supplement and/or Amendment......................61
ARTICLE 11.
SECURITY
Section 11.1 Other Operative Documents..................................61
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 11.2 Opinions, Certificates and Appraisals......................62
Section 11.3 Authorization of Actions to be Taken by the Trustee Under
the Operative Documents....................................63
Section 11.4 Authorization of Receipt of Funds by the Trustee Under the
Operative Documents and the Support Documents..............63
Section 11.5 Agreement as to Fair Market Value..........................63
ARTICLE 12.
MISCELLANEOUS
Section 12.1 Conflict with Trust Indenture Act of 1939..................64
Section 12.2 Notices; Waivers...........................................64
Section 12.3 Communications By Holders With Other Holders...............65
Section 12.4 Certificate and Opinion as to Conditions Precedent.........66
Section 12.5 Statements Required In Certificate or Opinion..............66
Section 12.6 Rules By Trustee, Paying Agent, Registrar..................67
Section 12.7 Effect of Headings.........................................67
Section 12.8 Governing Law..............................................67
Section 12.9 Quiet Enjoyment............................................68
Section 12.10 No Recourse Against Others.................................68
Section 12.11 Benefits of Indenture and the Securities Restricted........68
Section 12.12 Successors and Assigns.....................................68
Section 12.13 Counterpart Originals......................................68
Section 12.14 Severability...............................................68
APPENDIX I Definitions
EXHIBIT A Form of Security
EXHIBIT B Form of Certificate to Request Removal of Restricted Legend
EXHIBIT C Form of Certificate to be Delivered by an Institutional
Accredited Investor
INDENTURE dated as of December 6, 2002, among CONTINENTAL AIRLINES, INC., a
Delaware corporation (the "COMPANY"), WILMINGTON TRUST COMPANY, a Delaware
banking corporation ("WTC"), not in its individual capacity but solely as
Trustee (the "TRUSTEE"), MORGAN STANLEY CAPITAL SERVICES INC., a Delaware
corporation ("MSCS"), as Liquidity Provider, and MBIA INSURANCE CORPORATION, a
New York insurance company, as Policy Provider.
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Securities.
ARTICLE 1.
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 DEFINITIONS.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to such terms in Section 1 of the Definitions Appendix
attached hereto as Appendix I, which shall be a part of this Indenture as if
fully set forth in this place.
Section 1.2 RULES OF CONSTRUCTION.
The rules of construction for this Indenture are set forth in Section 2 of
the Definitions Appendix.
ARTICLE 2.
THE SECURITIES
Section 2.1 TITLE, FORM, DENOMINATION AND EXECUTION OF SECURITIES.
(a) The Initial Securities shall be known as the "INITIAL FLOATING RATE
SECURED NOTES DUE 2007" and the Exchange Securities shall be known as the
"EXCHANGE FLOATING RATE SECURED NOTES DUE 2007", in each case, of the Company.
Each Security shall be substantially in the form set forth as Exhibit A hereto,
with such appropriate insertions, omissions, substitutions and other variations
as are required or permitted by this Indenture and may have such letters,
numbers or other marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any securities exchange
or as may, consistently herewith, be determined by the Company or the Officers
executing the Securities, as evidenced by the Company's or the Officers'
execution of the Securities.
(b) The Initial Securities shall be issued only in fully registered form
without coupons and only in denominations of $100,000 or integral multiples of
$1,000 in excess thereof, except that one Security may be issued in a different
denomination. The Exchange Securities will be issued in denominations of $1,000
or integral multiples thereof, except that one Security may be issued in a
different denomination. Each Security shall be dated the date of its
authentication. The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $200,000,000
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Sections
2.4, 2.6, 2.12, 2.14 or 10.5. The issuance of the Securities hereunder shall be
collectively considered a single extension of credit to the Company.
(c) The Initial Securities offered and sold in reliance on Rule 144A shall
be issued, and will only be available, in the form of one or more global
Securities substantially in the form of Exhibit A hereto with such applicable
legends as are provided for in Section 2.2 (each, a "RESTRICTED GLOBAL
SECURITY") duly executed by the Company and duly authenticated by the Trustee as
herein provided. The Restricted Global Securities shall be in definitive, fully
registered form without interest coupons and be registered in the name of DTC
and deposited with the Trustee, at its Corporate Trust office, as custodian for
DTC. The aggregate principal amount of any Restricted Global Security may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for DTC for such Restricted Global Security, as provided
in Section 2.6 hereof, which adjustments shall be conclusive as to the aggregate
principal amount of any such Global Security.
(d) The Initial Securities offered and sold outside the United States in
reliance on Regulation S shall be issued, and will only be available, in the
form of one or more global Securities substantially in the form of Exhibit A
hereto (each, a "REGULATION S GLOBAL SECURITY") duly executed by the Company and
duly authenticated by the Trustee as herein provided. The Regulation S Global
Securities shall be in definitive, fully registered form without interest
coupons and be registered in the name of DTC and deposited with the Trustee, at
its Corporate Trust Office, as custodian for DTC, for credit initially and
during the Restricted Period to the respective accounts of beneficial owners of
such Securities (or to such other accounts as they may direct) at Morgan
Guaranty Trust Company of New York, Brussels office, as operator of Euroclear or
Clearstream. As used herein, the term "RESTRICTED PERIOD", with respect to the
Regulation S Global Securities offered and sold in reliance on Regulation S,
means the period of 40 consecutive days beginning on and including the later of
(i) the day on which the Securities are first offered to persons other than
distributors (as defined in Regulation S) in reliance on Regulation S and (ii)
the Closing Date. The aggregate principal amount of any Regulation S Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee, as custodian for DTC for such Global Security, as
provided in Section 2.6 hereof, which adjustments shall be conclusive as to the
aggregate principal amount of any such Global Security. The Restricted Global
Security and Regulation S Global Security are sometimes collectively referred to
herein as the "GLOBAL SECURITIES".
(e) Initial Securities offered and sold to any Institutional Accredited
Investor that is not a QIB in a transaction exempt from registration under the
Securities Act (and other than as described in Section 2.1(d)) shall be issued
substantially in the form of Exhibit A hereto in definitive, fully registered
form without interest coupons with such applicable legends as are provided for
in Section 2.2 (the "RESTRICTED DEFINITIVE SECURITIES") duly executed by the
Company and duly authenticated by the Trustee as herein provided. Securities
issued pursuant to Section 2.5(b) in exchange for interests in a Regulation S
Global Security shall be issued in definitive, fully registered form without
interest coupons (the "REGULATION S DEFINITIVE SECURITIES"). The Restricted
Definitive Securities and the Regulation S Definitive Securities are sometimes
collectively referred to herein as the "DEFINITIVE SECURITIES".
(f) The Exchange Securities shall be issued in the form of one or more
global Securities substantially in the form of Exhibit A hereto (each, a "GLOBAL
EXCHANGE SECURITY"), except that (i) the Restricted Legend shall be omitted and
(ii) the Exchange Securities shall contain such appropriate insertions,
omissions, substitutions and other variations from the form set forth in Exhibit
A hereto relating to the nature of the Exchange Securities as the Officers of
the Company executing such Exchange Securities on behalf of the Company may
determine, as evidenced by such Officers' execution on behalf of the Company of
such Exchange Securities. The Global Exchange Securities shall be in registered
form and be registered in the name of DTC and deposited with the Trustee, at its
Corporate Trust Office, as custodian for DTC. The aggregate principal amount of
any Global Exchange Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for DTC for such
Global Exchange Security, which adjustments shall be conclusive as to the
aggregate principal amount of any such Global Exchange Security. Subject to
clauses (i) and (ii) of the first sentence of this Section 2.1(f), the terms
hereof applicable to the Global Securities shall apply to the Global Exchange
Securities, MUTATIS MUTANDIS, unless the context otherwise requires.
(g) The definitive Securities shall be in registered form and shall be
typed, printed, lithographed or engraved or produced by any combination of these
methods or may be produced in any other manner, all as determined by the
Officers executing such Securities, as evidenced by their execution of such
Securities.
(h) The Securities shall be signed for the Company by the manual or
facsimile signatures of two Officers. If an Officer whose signature is on a
Security no longer holds that office at the time the Trustee authenticates the
Security, the Security shall be valid nevertheless.
Section 2.2 RESTRICTIVE LEGENDS.
All Initial Securities issued pursuant to this Indenture shall be
"RESTRICTED SECURITIES" and shall bear a legend to the following effect (the
"RESTRICTED LEGEND") except as provided in Section 2.6 or unless the Company and
the Trustee determine otherwise consistent with applicable law:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT
WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS
SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL
AIRLINES, INC. OR ANY AFFILIATE OF CONTINENTAL AIRLINES, INC. RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO CONTINENTAL AIRLINES, INC.,
(B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER
THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IF IT SHOULD RESELL
OR OTHERWISE TRANSFER THIS SECURITY IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY OR THE LAST DATE
ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL AIRLINES, INC. OR ANY
AFFILIATE OF CONTINENTAL AIRLINES, INC., THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS SECURITY TO CONTINENTAL AIRLINES, INC. OR ITS
AGENT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE
FOREGOING RESTRICTIONS."
Each Global Security and Global Exchange Security shall bear the following
legend on the face thereof:
"UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
CONTINENTAL AIRLINES, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 2.5 AND 2.6 OF THE INDENTURE REFERRED TO HEREIN."
Section 2.3 AUTHENTICATION OF SECURITIES.
(a) Subject to the limits set forth herein, the Trustee shall
authenticate Securities for original issue upon written order of the Company
signed by two Officers. The order shall specify the amount of Securities to be
authenticated and the date on which the original issue of Securities is to be
authenticated, shall provide instructions with respect to the delivery thereof
and shall be accompanied by the documents specified in Section 12.4.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
any Affiliate of the Company.
(b) No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its authorized
signatories, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder
Section 2.4 TRANSFER AND EXCHANGE.
All Securities issued upon any registration of transfer or exchange of
Securities shall be valid obligations of the Company, evidencing the same
interest therein, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
A Securityholder may transfer a Security, or request that a Security be
exchanged for Securities (including, without limitation, subject to the proviso
to this sentence, Exchange Securities) in authorized denominations and in an
aggregate principal amount equal to the principal amount of such Security
surrendered for exchange of other authorized denominations, by surrender of such
Security to the Trustee with the form of transfer notice thereon duly completed
and executed, and otherwise complying with the terms of this Indenture,
including providing evidence of compliance with any restrictions on transfer, in
form satisfactory to the Company, the Trustee and the Registrar; PROVIDED that
exchanges of Initial Securities for Exchange Securities shall occur only after
an Exchange Offer Registration Statement shall have been declared effective by
the SEC (notice of which shall be provided to the Trustee by the Company) and
otherwise only in accordance with the terms of the Exchange Offer. No such
transfer shall be effected until, and such transferee shall succeed to the
rights of a Securityholder only upon, final acceptance and registration of the
transfer by the Registrar in the Register. Prior to the registration of any
transfer of a Security by a Securityholder as provided herein, the Company, the
Registrar, the Paying Agent and the Trustee shall deem and treat the person in
whose name the Security is registered on the Register as the absolute owner and
holder thereof for the purpose of receiving payment of all amounts payable with
respect to such Security and for all other purposes, and none of the Company,
the Registrar, the Paying Agent or the Trustee shall be affected by any notice
to the contrary. Furthermore, DTC shall, by acceptance of a Global Security,
agree that transfers of beneficial interests in such Global Security may be
effected only through a book-entry system maintained by DTC (or its agent) and
that ownership of a beneficial interest in the Security shall be required to be
reflected in a book-entry. When Securities are presented to the Registrar with a
request to register the transfer thereof or to exchange them for other
authorized denominations of a Security in a principal amount equal to the
aggregate principal amount of Securities surrendered for exchange, the Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met.
To permit registrations of transfers and exchanges in accordance with the
terms, conditions and restrictions hereof, the Company shall execute, and the
Trustee shall authenticate, Securities at the Registrar's request. No service
charge shall be made to a Securityholder for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or governmental charge that may be imposed in connection with
any transfer or exchange of Securities. All Securities surrendered for
registration of transfer or exchange shall be canceled and subsequently
destroyed by the Trustee.
Section 2.5 BOOK-ENTRY PROVISIONS FOR RESTRICTED GLOBAL SECURITIES AND
REGULATION S GLOBAL SECURITIES.
(a) Members of, or participants in, DTC ("AGENT MEMBERS") shall have no
rights under this Indenture with respect to any Global Security held on their
behalf by DTC, or the Trustee as its custodian, and DTC may be treated by the
Company, the Trustee and any agent of the Trustee as the absolute owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by DTC or shall impair, as between DTC and its Agent
Members, the operation of customary practices governing the exercise of the
rights of a holder of any Security. Upon the issuance of any Global Security,
the Registrar or its duly appointed agent shall record DTC as the registered
holder of such Global Security.
(b) Transfers of any Global Security shall be limited to transfers of
such Restricted Global Security or Regulation S Global Security in whole, but
not in part, to DTC. Beneficial interests in the Restricted Global Security and
any Regulation S Global Security may be transferred in accordance with the rules
and procedures of DTC and the provisions of Section 2.6. Beneficial interests in
a Restricted Global Security or a Regulation S Global Security shall be
delivered to all beneficial owners thereof in the form of Restricted Definitive
Securities or Regulation S Definitive Securities, as the case may be, if (i) DTC
notifies the Trustee that it is unwilling or unable to continue as depositary
for such Restricted Global Security or Regulation S Global Security, as the case
may be, and a successor depositary is not appointed by the Trustee within 90
days of such notice, and (ii) after the occurrence and during the continuance of
an Event of Default, owners of beneficial interests in a Global Security with a
principal amount aggregating not less than a majority of the outstanding
principal amount of the Global Security advise the Trustee, the Company and DTC
through Agent Members in writing that the continuation of a book-entry system
through DTC or its successor is no longer in their best interests.
(c) Any beneficial interest in one of the Global Securities that is
transferred to a Person who takes delivery in the form of an interest in another
Global Security will, upon such transfer, cease to be an interest in such Global
Security and become an interest in the other Global Security and, accordingly,
will thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Security for
as long as it remains such an interest.
(d) In connection with the transfer of an entire Restricted Global
Security or an entire Regulation S Global Security to the beneficial owners
thereof pursuant to paragraph (b) of this Section 2.5, such Restricted Global
Security or Regulation S Global Security, as the case may be, shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate, to each beneficial owner identified by DTC
in exchange for its beneficial interest in such Restricted Global Security or
Regulation S Global Security, as the case may be, an equal aggregate principal
amount of Restricted Definitive Securities or Regulation S Definitive
Securities, as the case may be, of authorized denominations. None of the
Company, the Registrar, the Paying Agent or the Trustee shall be liable for any
delay in delivery of such instructions and may conclusively rely on, and shall
be protected in relying on, such registration instructions. Upon the issuance of
Definitive Securities, the Company and the Trustee shall recognize the Person in
whose name the Definitive Securities are registered in the Register as
Securityholders hereunder.
(e) Any Definitive Security delivered in exchange for an interest in the
Restricted Global Security pursuant to paragraph (b) of this Section 2.5 shall,
except as otherwise provided by paragraph (e) of Section 2.6, bear the
Restricted Legend.
(f) Prior to the expiration of the Restricted Period, any Regulation S
Definitive Security delivered in exchange for an interest in a Regulation S
Global Security pursuant to paragraph (b) of this Section 2.5 shall bear the
Restricted Legend.
(g) The registered holder of any Restricted Global Security or Regulation
S Global Security may grant proxies and otherwise authorize any Person,
including Agent Members and Persons that may hold interests through Agent
Members, to take any action which a Holder is entitled to take under this
Indenture or the Securities.
(h) Neither the Company nor the Trustee shall be liable if the Trustee or
the Company is unable to locate a qualified successor clearing agency.
Section 2.6 SPECIAL TRANSFER PROVISIONS.
Unless and until (i) an Initial Security is sold under an effective Shelf
Registration Statement, or (ii) an Initial Security is exchanged for an Exchange
Security pursuant to an effective Exchange Offer Registration Statement, in each
case pursuant to the terms of the Registration Rights Agreement, the following
provisions shall apply to such Initial Securities:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Security to any Institutional Accredited Investor that is
neither a QIB nor a Non-U.S. Person:
(i) The Registrar shall register the transfer of any Security,
whether or not bearing the Restricted Legend, only if (x) the requested
transfer is at least two years after the later of the (A) Closing Date and
(B) the last date on which such Security was held by the Company or any
affiliate of the Company or (y) the proposed transferor is an Initial
Purchaser who is transferring Securities purchased under the Purchase
Agreement and the proposed transferee has delivered to the Registrar a
letter substantially in the form of Exhibit C hereto and the aggregate
principal amount of the Securities being transferred is at least $100,000.
Except as provided in the foregoing sentence, the Registrar shall not
register the transfer of any Security to any Institutional Accredited
Investor that is neither a QIB nor a Non-U.S. Person.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in a Restricted Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with DTC's and the Registrar's procedures,
the Registrar shall reflect on its books and records the date of the
transfer and a decrease in the principal amount of such Restricted Global
Security in an amount equal to the principal amount of the beneficial
interest in such Restricted Global Security to be transferred, and the
Trustee shall execute, authenticate and deliver to the transferor or at its
direction, one or more Restricted Definitive Securities of like tenor and
amount.
(b) TRANSFERS TO QIBS. The following provisions shall apply with respect
to the registration of any proposed transfer of an Initial Security to a QIB
(excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of a Restricted
Definitive Security, or of an interest in any Regulation S Global Security
during the Restricted Period, the Registrar shall register the transfer if
such transfer is being made by a proposed transferor who has checked the
box provided for on the form of Initial Security stating, or has otherwise
advised the Company, the Trustee and the Registrar in writing, that the
sale has been made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on the form of
Initial Security stating, or has otherwise advised the Company, the Trustee
and the Registrar in writing, that it is purchasing the Initial Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it, or the Person on whose behalf it is
acting with respect to any such account, is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
(ii) Upon receipt by the Registrar of the documents required by
clause (i) above and instructions given in accordance with DTC's and the
Registrar's procedures therefor, the Registrar shall reflect on its books
and records the date of such transfer and an increase in the principal
amount of a Restricted Global Security in an amount equal to the principal
amount of the Restricted Definitive Securities or interests in such
Regulation S Global Security, as the case may be, being transferred, and
the Trustee shall cancel such Definitive Securities or decrease the amount
of such Regulation S Global Security so transferred.
(c) TRANSFERS OF INTERESTS IN THE REGULATION S GLOBAL SECURITY OR
REGULATION S DEFINITIVE SECURITIES. After the expiration of the Restricted
Period, the Registrar shall register any transfer of interests in any Regulation
S Global Security or Regulation S Definitive Security without requiring any
additional certification. Until the expiration of the Restricted Period,
interests in the Regulation S Global Security may only be held through Agent
Members acting for and on behalf of Euroclear and Clearstream.
(d) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following provisions
shall apply with respect to any registration of any transfer of an Initial
Security to a Non-U.S. Person:
(i) Prior to the expiration of the Restricted Period, the Registrar
shall register any proposed transfer of an Initial Security to a Non-U.S.
Person upon receipt of a certificate substantially in the form set forth as
Exhibit B hereto from the proposed transferor.
(ii) After the expiration of the Restricted Period, the Registrar
shall register any proposed transfer to any Non-U.S. Person if the Security
to be transferred is a Restricted Definitive Security or an interest in a
Restricted Global Security, upon receipt of a certificate substantially in
the form of Exhibit B from the proposed transferor. The Registrar shall
promptly send a copy of such certificate to the Company.
(iii) Upon receipt by the Registrar of (x) the documents, if any,
required by clause (ii) and (y) instructions in accordance with DTC's and
the Registrar's procedures, the Registrar shall reflect on its books and
records the date of such transfer and a decrease in the principal amount of
such Restricted Global Security in an amount equal to the principal amount
of the beneficial interest in such Restricted Global Security to be
transferred, and, upon receipt by the Registrar of instructions given in
accordance with DTC's and the Registrar's procedures, the Registrar shall
reflect on its books and records the date and an increase in the principal
amount of the Regulation S Global Security in an amount equal to the
principal amount of the Restricted Definitive Security or the Restricted
Global Security, as the case may be, to be transferred, and the Trustee
shall cancel the Definitive Security, if any, so transferred or decrease
the amount of such Restricted Global Security.
(e) RESTRICTED LEGEND. Upon the transfer, exchange or replacement of
Securities not bearing the Restricted Legend, the Registrar shall deliver
Securities that do not bear the Restricted Legend. Upon the transfer, exchange
or replacement of Securities bearing the Restricted Legend, the Registrar shall
deliver only Securities that bear the Restricted Legend unless either (i) the
circumstances contemplated by paragraph (d)(ii) of this Section 2.6 exist or
(ii) there is delivered to the Registrar an opinion of counsel to the effect
that neither such legend nor the related restrictions on transfer are required
in order to maintain compliance with the provisions of the Securities Act.
(f) GENERAL. By acceptance of any Security bearing the Restricted Legend,
each Holder of such Security acknowledges the restrictions on transfer of such
Security set forth in such Restricted Legend and otherwise in this Indenture and
agrees that it will transfer such Security only as provided in such Restricted
Legend and otherwise in this Indenture. The Registrar shall not register a
transfer of any Security unless such transfer complies with the restrictions on
transfer, if any, of such Security set forth in such Restricted Legend and
otherwise in this Indenture. In connection with any transfer of Securities, each
Securityholder agrees by its acceptance of the Securities to furnish the
Registrar or the Trustee such certifications, legal opinions or other
information as either of them may reasonably require to confirm that such
transfer is being made pursuant to an exemption from, or a transaction not
subject to, the registration requirements of the Securities Act and in
accordance with the terms and provisions of this Article 2; PROVIDED that the
Registrar shall not be required to determine the sufficiency of any such
certifications, legal opinions or other information.
Until such time as no Securities remain Outstanding, the Registrar shall
retain copies of all letters, notices and other written communications received
pursuant to Section 2.5 or this Section 2.6. The Trustee, if not the Registrar
at such time, shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Registrar.
Section 2.7 TERMS OF SECURITIES.
The outstanding principal amount of the Securities shall be due on December
6, 2007. The Securities shall bear interest on the unpaid principal amount
thereof from time to time outstanding from the most recent Interest Payment Date
to which interest has been paid (or, if no interest has been paid, from the
Closing Date) at the rate per annum for each Interest Period equal to the Debt
Rate for such Interest Period (calculated on the basis of a year of 360 days and
actual days elapsed during the period for which such amount accrues). Accrued
interest on the Securities shall be payable in arrears on each Interest Payment
Date, until the principal amount of the Securities has been paid in full,
PROVIDED that if such payment in full is not made on an Interest Payment Date,
accrued interest shall be paid on the date of such payment in full rather than
the next Interest Payment Date. Interest on the Securities shall accrue with
respect to the first but not the last day of each Interest Period. The
Securities shall bear interest, payable on demand, at the Payment Due Rate
(calculated on the basis of a year of 360 days and actual days elapsed during
the period for which such amount accrues) on any part of the principal amount,
and, to the extent permitted by applicable Law, interest and any other amounts
payable thereunder not paid when due, in each case for the period the same is
overdue. Amounts under any Security shall be overdue if not paid when due
(whether at stated maturity, by acceleration or otherwise). Notwithstanding
anything to the contrary contained herein, if any date on which a payment under
any Security becomes due and payable is not a Business Day then such payment
shall not be made on such scheduled date but shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest payable thereunder.
Section 2.8 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Securities eligible
for transfer or exchange may be presented for registration of transfer or for
exchange ("REGISTRAR") and an office or agency where Securities may be presented
for payment ("PAYING AGENT"). The Registrar shall keep a register of the
Securities and of their transfer and exchange ("REGISTER"). Such Register shall
be in written form in the English language. At all reasonable times such
Register shall be open for inspection by the Trustee. The Company may have one
or more co-Registrars and one or more additional paying agents. The term "Paying
Agent" includes any additional paying agent.
The Company may enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
of the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints WTC as Registrar and Paying Agent.
Section 2.9 PAYING AGENT TO HOLD PAYMENTS IN TRUST.
Each Paying Agent shall hold in trust for the benefit of Securityholders
all Payments held by the Paying Agent for the payment of principal of, interest
on, and Premium, if any, and Break Amount, if any, with respect to, the
Securities and shall notify the Trustee of any default by the Company in making
any such payment. The Company at any time may require a Paying Agent to pay all
Payments held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any Payment Default, upon
written request to a Paying Agent, require such Paying Agent to pay all Payments
held by it to the Trustee and to account for any Payments distributed. Upon
receipt of such Payment, the Trustee shall immediately deposit all such amounts
in the Collection Account. Upon doing so the Paying Agent shall have no further
liability for the Payments.
The Paying Agent, as agent for the Company, shall exclude and withhold at
the appropriate rate from each payment of principal of, interest on, Premium, if
any, Break Amount, if any, and other amounts due hereunder or under each
Security (and such exclusion and withholding shall constitute payment in respect
of such Security) any and all United States withholding taxes applicable thereto
as required by Law. The Paying Agent agrees to act as such withholding agent
and, in connection therewith, whenever any present or future United States taxes
or similar charges are required to be withheld with respect to any amounts
payable hereunder or in respect of the Securities, to withhold such amounts and
timely pay the same to the appropriate authority in the name of and on behalf of
the Securityholders, that it will file any necessary United States withholding
tax returns or statements when due, and that as promptly as possible after the
payment thereof it will deliver to each Securityholder (with a copy to the
Company) appropriate receipts showing the payment thereof, together with such
additional documentary evidence as any such Securityholder may reasonably
request from time to time.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will:
(a) hold all Payments received by it as such agent for the payment of the
principal of, interest on, Premium, if any, or Break Amount, if any, with
respect to the Securities in trust for the benefit of the Persons entitled
thereto until such Payments shall be paid to such Persons or otherwise disposed
of as herein provided;
(b) promptly give the Trustee notice of any failure by the Company to
make any payment of the principal of, interest on, Premium, if any, or Break
Amount, if any, with respect to, the Securities when the same shall be due and
payable; and
(c) at any time during the continuance of any such failure, upon the
written request of the Trustee, forthwith pay to the Trustee all Payments so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, direct any Paying
Agent to pay to the Trustee all Payments held in trust by such Paying Agent,
such Payments to be held by the Trustee upon the same trusts as those upon which
such Payments were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such Payments held by it as Paying Agent.
Any Payments deposited with the Trustee or any Paying Agent in trust for
the payment of the principal of, interest on, or Premium, if any, or Break
Amount, if any, with respect to, any Security and unclaimed for two (2) years
after such principal, interest, Premium, if any, or Break Amount, if any, has
become due and payable shall be paid to the Company on its request, unless
otherwise required by mandatory provisions of applicable escheat or abandoned or
unclaimed property law, and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof and all
liability of the Trustee or such Paying Agent with regard to such Payments shall
thereupon cease.
Section 2.10 RECORD DATES.
The Person in whose name any Security is registered at the close of
business on any Record Date with respect to any Interest Payment Date shall be
entitled to receive the interest payable on such Interest Payment Date to the
extent provided by such Security, except if and to the extent the Company shall
default in the payment of the interest due on such Interest Payment Date, in
which case defaulted interest shall be paid to the Person in whose name the
Outstanding Security is registered at the close of business on the subsequent
record date (which shall be not less than five (5) Business Days prior to the
date of payment of such defaulted interest) established by notice given by mail
by or on behalf of the Company to the Holders of Securities not less than
fifteen (15) days preceding such subsequent record date (a "SPECIAL RECORD
DATE") pursuant to Section 2.16.
Section 2.11 SECURITYHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Securityholders. If the Trustee is not the Registrar, the Company shall furnish
to the Trustee on or before each Distribution Date and at such other times as
the Trustee may request in writing a list in such form and as of such date as
the Trustee may reasonably require of the names and addresses of
Securityholders.
Section 2.12 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN
SECURITIES.
In case any temporary or definitive Security shall become mutilated,
defaced or be apparently destroyed, lost or stolen, subject to compliance with
the following sentence and in the absence of notice to the Company or the
Trustee that such Security has been acquired by a bona fide purchaser, the
Company shall execute, and the Trustee shall authenticate and deliver, a new
Security, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated or defaced Security, or in lieu of and
substitution for the Security so apparently destroyed, lost or stolen. In every
case the applicant for a substitute Security shall furnish to the Company and to
the Trustee and any agent of the Company or the Trustee such security or
indemnity as may be required by them to indemnify and defend and to save each of
them harmless and, in every case of destruction, loss or theft, evidence to
their satisfaction of the apparent destruction, loss or theft of such Security
and of the ownership thereof.
Upon the issuance of any substitute Security pursuant to the preceding
paragraph, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith. In case any Security which has matured or is about to mature, shall
become mutilated or defaced or be apparently destroyed, lost or stolen, the
Company may, instead of issuing a substitute Security, pay or authorize the
payment of such Security (without surrender of such Security except in the case
of a mutilated or defaced Security), as applicable, if the applicant for such
payment shall furnish to the Company and to the Trustee and any agent of the
Company or the Trustee such security or indemnity as any of them may require to
save each of them harmless from all risks, however remote, and, in every case of
apparent destruction, loss or theft, the applicant shall also furnish to the
Company and the Trustee and any agent of the Company or the Trustee evidence to
their satisfaction of the apparent destruction, loss or theft of such Security
and of the ownership thereof.
Every substitute Security issued pursuant to the provisions of this Section
by virtue of the fact that any Security is apparently destroyed, lost or stolen
shall constitute an additional contractual obligation of the Company, whether or
not the apparently destroyed, lost or stolen Security shall be at any time
enforceable by anyone and shall be entitled to all the benefits of (but shall
also be subject to all the limitations of rights set forth in) this Indenture
equally and proportionately with any and all other Securities duly authenticated
and delivered hereunder. Every substitute Security issued pursuant to the
provisions of this Section 2.12 by virtue of the fact that any Security is
mutilated or defaced shall constitute an additional contractual obligation of
the Company and shall be entitled to all the benefits of (but shall also be
subject to all the limitations of rights set forth in) this Indenture equally
and proportionately with any and all other Securities of the same series duly
authenticated and delivered hereunder. All Securities shall be held and owned
upon the express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of mutilated
or defaced or apparently destroyed, lost or stolen Securities and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter enacted to the contrary with respect to the replacement or payment
of negotiable instruments or other securities without their surrender.
Section 2.13 TREASURY SECURITIES.
In determining whether the Holders of the required principal amount of
Securities have given or concurred in any amendment, request, demand,
authorization, direction, notice, consent or waiver under this Indenture or any
other Operative Document, Securities owned by the Company or any of its
Affiliates shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination, except that, for the purposes of determining whether
the Trustee shall be protected in relying on any such amendment, request,
demand, authorization, direction, notice, consent or waiver, only Securities
which the Trustee knows are so owned shall be so disregarded. Securities so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Trustee that neither the
Company nor any of its majority-owned subsidiaries is affiliated with the
pledgee or any Affiliate of the pledgee and that the pledgee has the present
right (subject to no contrary obligation or understanding) so to act with
respect to the Securities as a Holder independently of any direction by or
interest of the Company or any of its Affiliates. In case of a dispute as to
such right, the Trustee in good faith shall be entitled to rely upon the advice
of counsel, including counsel for the Company. Upon request of the Trustee, the
Company shall promptly furnish to the Trustee a certificate of an Officer
listing and identifying all Securities, if any, known by the Company to be owned
or held by or for the account of the Company or any of its Affiliates; and
subject to Sections 8.1 and 8.2 herein, the Trustee shall be entitled to accept
such certificate as conclusive evidence of the facts therein set forth and of
the fact that all Securities not listed therein are Outstanding for the purpose
of any such determination.
Section 2.14 TEMPORARY SECURITIES.
Until definitive Securities are ready for delivery, the Company may
prepare, and, upon written order of the Company, the Trustee shall authenticate,
temporary Securities in any authorized denominations. Temporary Securities shall
be substantially of the tenor of the definitive Securities in lieu of which they
are issued but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate and deliver definitive Securities in exchange for
temporary Securities. Until so exchanged, the temporary Securities shall be
entitled to the same benefits under this Indenture as definitive Securities of
the same series.
Section 2.15 CANCELLATION.
The Company may at any time deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee and no one else shall cancel all Securities surrendered for transfer,
exchange, payment or cancellation. The Company may not issue new Securities to
replace Securities it has paid or which have been delivered to the Trustee for
cancellation. The Trustee shall destroy all canceled Securities and, if
requested, deliver a certificate of such destruction to the Company. If the
Company shall acquire any of the Securities, such acquisition shall not operate
as a satisfaction of the indebtedness represented by such Securities unless and
until the same are delivered to the Trustee for cancellation.
Section 2.16 DEFAULTED INTEREST.
If any payment of interest on the Securities due on any Interest Payment
Date becomes an Overdue Scheduled Payment, the Company shall pay such defaulted
interest, plus interest on the defaulted interest, at the Payment Due Rate to
the extent permitted by law and the terms thereof, to the persons who are
Securityholders on a subsequent Special Record Date. The Company shall fix the
Special Record Date and payment date. At least fifteen (15) days before the
Special Record Date, the Company shall mail to each Securityholder a notice that
states the Special Record Date, the payment date and the amount of defaulted
interest to be paid.
Section 2.17 CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; PROVIDED, HOWEVER, that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
Section 2.18 ISSUANCE OF SUBORDINATED SECURITIES.
After the Closing Date, the Company shall be entitled to issue a second
series of securities under this Indenture (the "SUBORDINATED SECURITIES") that
shall have such terms as shall be set forth in an amendment to this Indenture,
PROVIDED that in no event shall any such amendment (i) provide for a
distribution to be made on such Subordinated Securities on a Distribution Date
prior to all distributions having been made pursuant to clauses FIRST through
SEVENTH, inclusive, of Section 3.2 or (ii) (x) provide such Subordinated
Securities the benefit of any credit support similar to the Liquidity Facility
or the Policy (unless claims for fees, interest, expenses, reimbursement of
advances and other obligations arising from such credit support rank below
clause SEVENTH of Section 3.2) or (y) amend or modify any of the provisions of
Section 3.5, 3.6(d) or 3.8(c), unless, in the case of either clause (x) or (y),
the prior written consent of the Liquidity Provider shall have been obtained.
The Subordinated Securities shall not be issued, and no such amendment to this
Indenture shall be made, unless the Controlling Party shall have consented in
writing to such issuance and amendment and the Company shall have obtained
Ratings Confirmation with respect to such issuance and amendment. Upon Request
of the Company, the Trustee shall execute and deliver an amendment to the
Indenture permitted by this Section 2.18.
ARTICLE 3.
LIQUIDITY PROVIDER AND POLICY PROVIDER
Section 3.1 WRITTEN NOTICE OF DISTRIBUTION.
(a) No later than 3:00 p.m. (New York City time) on the Business Day
immediately preceding each Distribution Date, each of the following Persons
shall deliver to the Trustee a Written Notice setting forth the following
information as at the close of business on such Business Day:
(i) The Liquidity Provider shall set forth the amounts to be paid to
it in accordance with clauses "first", "second", "third", "fourth" and
"fifth" of Section 3.2; and
(ii) The Policy Provider shall set forth the amounts to be paid to it
in accordance with clauses "first", "second", "third", "fourth" and
"eighth" of Section 3.2.
The notices required under this Section 3.1(a) may be in the form of a
schedule or similar document provided to the Trustee by the Persons referenced
therein or by any one of them, which schedule or similar document may state
that, unless there has been a prepayment of the Securities, such schedule or
similar document is to remain in effect until any substitute notice or amendment
shall be given to the Trustee by the Person providing such notice. Any amounts
requested and received under the Policy Fee Letter or the Policy Provider
Agreement or any amounts for which the Policy Provider is not entitled to be
reimbursed pursuant to the provisions of the Policy Provider Agreement may not
be requested by the Policy Provider under this Section 3.1(a) nor distributed to
the Policy Provider under Section 3.2.
(b) At such time as the Liquidity Provider or the Policy Provider shall
have received all amounts owing to it pursuant to Section 3.2 hereof and its
commitment or obligations under the Liquidity Facility or the Policy, as the
case may be, shall have terminated or expired, such Person shall, by a Written
Notice, so inform the Trustee.
(c) The Trustee shall be fully protected in relying on any of the
information set forth in a Written Notice provided by the Liquidity Provider or
the Policy Provider pursuant to paragraphs (a) or (b) above and shall have no
independent obligation to verify, calculate or recalculate any amount set forth
in any Written Notice delivered in accordance with such paragraphs.
(d) In the event the Trustee shall not receive from any Person any
information set forth in paragraph (a) above which is required to enable the
Trustee to make a distribution to such Person pursuant to Section 3.2, the
Trustee shall request such information and, failing to receive any such
information, the Trustee shall not make such distribution(s) to such Person. In
such event, the Trustee shall make distributions pursuant to clauses "FIRST"
through "TENTH" of Section 3.2 to the extent it shall have sufficient
information to enable it to make such distributions, and shall continue to hold
any funds remaining, after making such distributions, until the Trustee shall
receive all necessary information to enable it to distribute any funds so
withheld.
(e) On such dates (but not more frequently than monthly) as the Liquidity
Provider or the Policy Provider shall request, but in any event automatically at
the end of each calendar quarter, the Trustee shall send to such Person a
written statement reflecting all amounts on deposit with the Trustee pursuant to
Section 3.1(d) hereof.
Section 3.2 PRIORITY OF DISTRIBUTIONS; SUBORDINATION.
Except as otherwise provided in Sections 3.1(d), 3.3, 3.5(b), 3.5(k) and
3.6, amounts on deposit in the Collection Account on any Distribution Date shall
be promptly distributed in the following order of priority and in accordance
with the information provided to the Trustee pursuant to Section 3.1(a) hereof:
FIRST, if an Event of Default shall have occurred and be continuing
on such Distribution Date, such amount as shall be required to reimburse
(i) the Trustee for any reasonable out-of-pocket costs and expenses
actually incurred by it (to the extent not previously reimbursed) in the
protection of, or the realization of the value of, the Collateral, shall be
applied by the Trustee in reimbursement of such costs and expenses, (ii)
the Policy Provider for any amounts of the nature described in clause (i)
above actually incurred by it under the Policy Provider Agreement (to the
extent not previously reimbursed), shall be distributed to the Policy
Provider, and (iii) the Liquidity Provider, the Policy Provider or any
Securityholder for payments, if any, made by it to the Trustee in respect
of amounts described in clause (i) above, shall be distributed to the
Liquidity Provider, the Policy Provider or to the Trustee for the account
of such Securityholder, in each such case, pro rata on the basis of all
amounts described in clauses (i) through (iii) above.
SECOND, such amount as shall be required to pay (i) all accrued and
unpaid Liquidity Expenses owed to the Liquidity Provider and (ii) all
accrued and unpaid Policy Expenses owed to the Policy Provider, shall be
distributed to the Liquidity Provider and the Policy Provider pro rata on
the basis of the amount of Liquidity Expenses and Policy Expenses owed to
the Liquidity Provider and the Policy Provider;
THIRD, such amount as shall be required to pay (i) the aggregate
amount of accrued and unpaid interest on all Liquidity Obligations (at the
rate, or in the amount, provided in the Liquidity Facility and determined
after application of the proceeds of any Policy Drawing pursuant to Section
3.6(d) or other payment by the Policy Provider to the Liquidity Provider in
respect of any interest on Drawings in accordance with the provisions of
Section 3.8(c)), (ii) the aggregate amount of accrued and unpaid Policy
Provider Interest Obligations and (iii) if the Policy Provider has paid
pursuant to Section 3.6(d) or the proviso to Section 3.8(c) to the
Liquidity Provider all outstanding Drawings and interest thereon owing to
the Liquidity Provider under the Liquidity Facility, the amount of such
payments made to the Liquidity Provider attributable to interest accrued on
Drawings under the Liquidity Facility, shall be distributed to the
Liquidity Provider and the Policy Provider, as the case may be, pro rata on
the basis of the amounts owed to the Liquidity Provider and the Policy
Provider under subclauses (i), (ii) and (iii) of this clause "third";
FOURTH, such amount as shall be required (i)(A) if the Cash
Collateral Account had been previously funded as provided in Section
3.5(f), unless (1) on such Distribution Date the Securities are
Non-Performing and a Liquidity Event of Default shall have occurred and be
continuing or (2) the Final Drawing shall have occurred, to fund the Cash
Collateral Account up to the Required Amount (less the amount of any
repayments of Interest Drawings under the Liquidity Facility while
subclause (i)(A)(1) above is applicable) shall be deposited in the Cash
Collateral Account, (B) if the Liquidity Facility shall become a Downgraded
Facility or a Non-Extended Facility at a time when unreimbursed Interest
Drawings under the Liquidity Facility have reduced the Available Amount to
zero, unless (1) on such Distribution Date the Securities are
Non-Performing and a Liquidity Event of Default shall have occurred and be
continuing or (2) the Final Drawing shall have occurred, to deposit into
the Cash Collateral Account an amount equal to the Required Amount (less
the amount of any repayments of Interest Drawings under the Liquidity
Facility while subclause (i)(B)(1) above is applicable) shall be deposited
in the Cash Collateral Account, and (C) if neither subclause (i)(A) nor
subclause (i)(B) of this clause "fourth" is applicable, to pay or reimburse
the Liquidity Provider in an amount equal to the amount of all Liquidity
Obligations then due under the Liquidity Facility (other than amounts
payable pursuant to Section 3.6(d) or clause "second" or "third" of this
Section 3.2), net of any and all payments made by the Policy Provider to
the Liquidity Provider with respect to the principal of any Interest
Drawing, and (ii) if the Policy Provider has paid pursuant to the proviso
to Section 3.8(c) to the Liquidity Provider all outstanding Drawings and
interest thereon owing to the Liquidity Provider under the Liquidity
Facility, the amount of such payments made to the Liquidity Provider in
respect of principal of Drawings under the Liquidity Facility, shall be
paid to the Policy Provider, pro rata on the basis of the amounts of all
such deficiencies and/or unreimbursed Liquidity Obligations payable to the
Liquidity Provider and the amount of such unreimbursed Policy Provider
Obligations payable to the Policy Provider, in each instance, under this
clause "fourth";
FIFTH, if any amounts are to be distributed pursuant to either
subclause (i)(A) or (i)(B) of clause "fourth" above, then the Liquidity
Provider shall be paid the excess of (x) the aggregate outstanding amount
of unreimbursed Advances (whether or not then due) under the Liquidity
Facility over (y) the Required Amount (less the amount of any repayments of
Interest Drawings under the Liquidity Facility while subclause (i)(A)(1) or
(i)(B)(1), as the case may be, of clause "fourth" above is applicable);
SIXTH, if an Event of Default shall have occurred and be continuing
on such Distribution Date and at all times thereafter, such amount as shall
be required to reimburse or pay (i) the Trustee for any Tax (other than
Taxes imposed on compensation paid hereunder), expense, fee, charge or
other loss incurred by or any other amount payable to the Trustee in
connection with the transactions contemplated hereby (to the extent not
previously reimbursed), shall be applied by the Trustee in reimbursement of
such amount, and (ii) each Securityholder for payments, if any, made by it
pursuant to an indemnity provided pursuant to Section 7.6(c) hereof in
respect of amounts described in subclause (i) above, shall be distributed
to the Trustee for the account of such Securityholder, in each such case,
pro rata on the basis of all amounts described in subclauses (i) and (ii)
of this clause "sixth";
SEVENTH, such amount as shall be required to pay in full amounts due
to the Securityholders on such Distribution Date;
EIGHTH, such amount as shall be required to pay the Policy Provider
all Policy Provider Obligations then due and unpaid (other than amounts
payable pursuant to clauses "first", "second", "third" and "fourth" of this
Section 3.2) shall be paid to the Policy Provider;
NINTH, such amount as shall be required to pay in full the aggregate
unpaid amount of fees and expenses payable as of such Distribution Date to
the Trustee pursuant to the terms of this Indenture (other than amounts
payable pursuant to clauses "first" and "sixth" of this Section 3.2), shall
be distributed to the Trustee; and
TENTH, the balance, if any, of any such amount remaining thereafter
shall be paid to the Company unless on such Distribution Date (i) an Event
of Default has occurred and is continuing or (ii) any amount due to the
Liquidity Provider or the Policy Provider from the Company has not been
paid, in which case such amount shall be held in the Collection Account for
later distribution in accordance with this Article 3 or paid to the Company
upon discharge of the Indenture pursuant to Article 9.
Section 3.3 OTHER PAYMENTS.
(a) Any payments received by the Trustee for which no provision as to the
application thereof is made in this Indenture shall be distributed by the
Trustee in the order of priority specified in Section 3.2 hereof.
(b) Notwithstanding the priority of payments specified in Section 3.2, in
the event any Investment Earnings on amounts on deposit in the Cash Collateral
Account resulting from an Unapplied Provider Advance are deposited in the
Collection Account, such Investment Earnings shall be used to pay interest
payable in respect of such Unapplied Provider Advance to the extent of such
Investment Earnings.
(c) If the Trustee receives any Payment after the Scheduled Payment Date
relating thereto, then the Trustee shall deposit such Payment in the Collection
Account and distribute such Payment on the next Distribution Date in accordance
with the priority of distributions set forth in Section 3.2 hereof.
Section 3.4 PAYMENTS TO LIQUIDITY PROVIDER AND POLICY PROVIDER.
Any amounts distributed hereunder to the Liquidity Provider or Policy
Provider shall be paid to the Liquidity Provider or Policy Provider by wire
transfer of funds to the address the Liquidity Provider or Policy Provider shall
provide to the Trustee. The Trustee shall provide a Written Notice of any such
transfer to the Liquidity Provider or Policy Provider, as the case may be, at
the time of such transfer.
Section 3.5 LIQUIDITY FACILITY.
(a) INTEREST DRAWINGS. If on any Distribution Date, after giving effect
to the subordination provisions of Section 3.2, the Trustee shall not have
sufficient funds for the payment of any amounts due and owing in respect of
accrued interest on the Securities (at the Debt Rate), then, prior to 12:30 p.m.
(New York City time) on such Distribution Date, the Trustee shall request a
drawing (each such drawing, an "INTEREST DRAWING") under the Liquidity Facility
(and concurrently with the making of such request, the Trustee will give notice
to the Policy Provider of such insufficiency of funds) in an amount equal to the
lesser of (x) an amount sufficient to pay the amount of such accrued interest
(at the Debt Rate) and (y) the Available Amount, and shall pay such amount to
the Securityholders in accordance with the provisions of this Indenture in
payment of such accrued interest.
(b) APPLICATION OF INTEREST DRAWINGS. Notwithstanding anything to the
contrary contained in this Indenture, all payments received by the Trustee in
respect of an Interest Drawing under the Liquidity Facility and all amounts
withdrawn by the Trustee from the Cash Collateral Account, and payable in each
case to the Securityholders, shall be promptly distributed to the
Securityholders in accordance with the provisions of this Indenture, PROVIDED
that if (x) the Trustee shall receive any amount in respect of an Interest
Drawing under the Liquidity Facility or a withdrawal from the Cash Collateral
Account to pay Accrued Interest after such Accrued Interest has been fully paid
to the Securityholders by a Policy Drawing under the Policy pursuant to Section
3.6(a) hereof or (y) the Trustee shall receive any amount in respect of a Policy
Drawing under the Policy pursuant to Section 3.6(a) hereof to fully pay Accrued
Interest after such Accrued Interest has been paid (in full or in part) to the
Securityholders by an Interest Drawing under the Liquidity Facility or a
withdrawal from the Cash Collateral Account, the Trustee, in the case of either
clause (x) or (y), shall pay an amount equal to the amount of such Interest
Drawing or withdrawal directly to the Policy Provider as reimbursement of such
Policy Drawing rather than to the Securityholders.
(c) DOWNGRADE DRAWINGS. (i) A Downgrade Drawing under the Liquidity
Facility shall be requested by the Trustee as provided in Section 3.5(c)(iii),
if at any time, (x) so long as MSCS is the Liquidity Provider, the short-term
unsecured debt rating of the Liquidity Guarantor is lower than the applicable
Threshold Rating issued by either Moody's or Standard & Poor's or the related
Liquidity Guarantee ceases to be in full force and effect or becomes invalid or
unenforceable or the Liquidity Guarantor denies its liability thereunder, or (y)
if MSCS is not the Liquidity Provider, the short-term unsecured debt rating of
the Liquidity Provider is lower than the applicable Threshold Rating issued by
either Moody's or Standard & Poor's (in each case, a "DOWNGRADE EVENT", and the
Liquidity Facility, a "DOWNGRADED FACILITY"), unless an event described in
Section 3.5(c)(ii) occurs.
(ii) If at any time the Liquidity Facility becomes a Downgraded
Facility, the Trustee shall not request a Downgrade Drawing thereunder in
accordance with Section 3.5(c)(iii), if the Liquidity Provider or the
Company has arranged for a Replacement Liquidity Provider to issue and
deliver a Replacement Liquidity Facility to the Trustee within 10 days
after receiving notice of a Downgrade Event (but not later than the
expiration date of such Downgraded Facility).
(iii) If the Trustee is required to request a Downgrade Drawing under
Section 3.5(c)(i), the Trustee shall, on the 10th day referred to in
Section 3.5(c)(ii) (or if such 10th day is not a Business Day, on the next
succeeding Business Day) (or, if earlier, the expiration date of such
Downgraded Facility), request a drawing in accordance with and to the
extent permitted by such Downgraded Facility (such drawing, a "DOWNGRADE
DRAWING") of the Available Amount. Amounts drawn pursuant to a Downgrade
Drawing shall be maintained and invested as provided in Section 3.5(f)
hereof. The Liquidity Provider may also arrange for a Replacement Liquidity
Provider to issue and deliver a Replacement Liquidity Facility at any time
after such Downgrade Drawing so long as such Downgrade Drawing has not been
reimbursed in full to the Liquidity Provider.
(d) NON-EXTENSION DRAWINGS. If the Liquidity Facility is scheduled to
expire on a date (the "STATED EXPIRATION DATE") prior to the date that is 15
days after the Final Legal Maturity Date, then, no earlier than the 60th day and
no later than the 40th day prior to the then Stated Expiration Date, the Trustee
shall request that the Liquidity Provider extend the Stated Expiration Date
until the earlier of (i) the date which is 15 days after the Final Legal
Maturity Date and (ii) the date that is the day immediately preceding the 364th
day occurring after the last day of the applicable Consent Period (unless the
obligations of the Liquidity Provider under the Liquidity Facility are earlier
terminated in accordance with the Liquidity Facility). Whether or not the
Liquidity Provider has received a request from the Trustee, the Liquidity
Provider shall advise the Trustee, no earlier than the 40th day (or, if earlier,
the date of the Liquidity Provider's receipt of such request, if any, from the
Trustee) and no later than the 25th day prior to the Stated Expiration Date then
in effect (such period, the "CONSENT PERIOD"), whether, in its sole discretion,
it agrees to extend such Stated Expiration Date. If (A) on or before the date on
which such Consent Period ends, the Liquidity Facility shall not have been
replaced in accordance with Section 3.5(e) and (B) the Liquidity Provider fails
irrevocably and unconditionally to advise the Trustee on or before the date on
which such Consent Period ends that such Stated Expiration Date then in effect
shall be so extended, the Trustee shall, on the date on which such Consent
Period ends (or as soon as possible thereafter), in accordance with the terms of
the expiring Liquidity Facility (a "NON-EXTENDED FACILITY"), request a drawing
under such expiring Liquidity Facility (such drawing, a "NON-EXTENSION DRAWING")
of all available and undrawn amounts thereunder. Notwithstanding the immediately
preceding three sentences, so long as MSCS is the Liquidity Provider, the Stated
Expiration Date shall be automatically extended, effective on the 25th day prior
to such Stated Expiration Date (unless such Stated Expiration Date is on or
after the date that is 15 days after the Final Legal Maturity Date), for a
period of 364 days after the Stated Expiration Date (unless the obligations of
the Liquidity Provider are earlier terminated in accordance with the Liquidity
Facility) without the necessity of any act by the Trustee or the Liquidity
Provider, unless the Liquidity Provider shall advise the Trustee, prior to such
25th day, that it does not agree to such extension of the Stated Expiration
Date, in which event, the Trustee shall, on such 25th day (or as soon as
possible thereafter), in accordance with and to the extent permitted by the
terms of the Non-Extended Facility, request a Non-Extension Drawing under the
Non-Extended Facility of all available and undrawn amounts thereunder. Amounts
drawn pursuant to a Non-Extension Drawing shall be maintained and invested in
accordance with Section 3.5(f) hereof.
(e) ISSUANCE OF REPLACEMENT LIQUIDITY FACILITY. (i) At any time, the
Company may, at its option, with cause or without cause, arrange for a
Replacement Liquidity Facility to replace any Liquidity Facility (including any
Replacement Liquidity Facility provided pursuant to Section 3.5(e)(ii) hereof);
PROVIDED, HOWEVER, that the initial Liquidity Provider shall not be replaced by
the Company as a Liquidity Provider without the consent of such initial
Liquidity Provider unless (A) there shall have become due to such initial
Liquidity Provider, or such initial Liquidity Provider shall have demanded,
amounts pursuant to Section 3.01, 3.02 or 3.03 of the Liquidity Facility and the
replacement of such initial Liquidity Provider would reduce or eliminate the
obligation to pay such amounts or the Company determines in good faith that
there is a substantial likelihood that such initial Liquidity Provider will have
the right to claim any such amounts (unless such initial Liquidity Provider
waives, in writing, any right it may have to claim such amounts), which
determination shall be set forth in a certificate delivered by the Company to
such initial Liquidity Provider setting forth the basis for such determination
and accompanied by an opinion of outside counsel selected by the Company and
reasonably acceptable to such initial Liquidity Provider verifying the legal
conclusions, if any, of such certificate relating to such basis, PROVIDED that,
in the case of any likely claim for such amounts based upon any proposed, or
proposed change in, law, rule, regulation, interpretation, directive,
requirement, request or administrative practice, such opinion may assume the
adoption or promulgation of such proposed matter, (B) it shall become unlawful
or impossible for such initial Liquidity Provider (or its Facility Office) to
maintain or fund its LIBOR Advances as described in Section 3.10 of the
Liquidity Facility, (C) the Liquidity Facility of the initial Liquidity Provider
shall become a Downgraded Facility or a Non-Extended Facility or a Downgrade
Drawing or a Non-Extension Drawing shall have occurred under the Liquidity
Facility of the initial Liquidity Provider or (D) the initial Liquidity Provider
shall have breached any of its payment (including, without limitation, funding)
obligations under the Liquidity Facility. If such Replacement Liquidity Facility
is provided at any time after a Downgrade Drawing or Non-Extension Drawing has
been made, all funds on deposit in the Cash Collateral Account will be returned
to the Liquidity Provider being replaced.
(ii) If the Liquidity Provider shall determine not to extend the
Liquidity Facility in accordance with Section 3.5(d), then the Liquidity
Provider may, at its option, arrange for a Replacement Liquidity Facility
to replace the Liquidity Facility during the period no earlier than 40 days
and no later than 25 days prior to the then effective Stated Expiration
Date. In addition, so long as the initial Liquidity Provider is the
Liquidity Provider, at any time after a Non-Extension Drawing has been made
under the Liquidity Facility, the Liquidity Provider may, at its option,
arrange for a Replacement Liquidity Facility to replace the Liquidity
Facility.
(iii) No Replacement Liquidity Facility arranged by the Company or a
Liquidity Provider in accordance with clause (i) or (ii) above or pursuant
to Section 3.5(c), respectively, shall become effective and no such
Replacement Liquidity Facility shall be deemed a "Liquidity Facility" under
the Operative Documents and the Support Documents, unless and until (A)
each of the conditions referred to in sub-clauses (iv)(x) and (z) below
shall have been satisfied, (B) if such Replacement Liquidity Facility shall
materially adversely affect the rights, remedies, interests or obligations
of the Securityholders under any of the Operative Documents or the Support
Documents, the Trustee shall have consented, in writing, to the execution
and issuance of such Replacement Liquidity Facility and (C) in the case of
a Replacement Liquidity Facility arranged by a Liquidity Provider under
Section 3.5(e)(ii) or pursuant to Section 3.5(c), such Replacement
Liquidity Facility is acceptable to the Company.
(iv) In connection with the issuance of each Replacement Liquidity
Facility, the Trustee shall (x) prior to the issuance of such Replacement
Liquidity Facility, obtain written confirmation from each Rating Agency
that such Replacement Liquidity Facility will not cause a reduction of any
rating then in effect for the Securities by such Rating Agency (without
regard to any downgrading of any rating of any Liquidity Provider being
replaced pursuant to Section 3.5(c) hereof and without regard to the
Policy) or a withdrawal or suspension of the rating of the Securities by
such Rating Agency and the written consent of the Policy Provider (which
consent will not be unreasonably withheld or delayed), (y) pay all
Liquidity Obligations then owing to the replaced Liquidity Provider (which
payment shall be made first from available funds in the Cash Collateral
Account as described in clause (iii) of Section 3.5(f) hereof, and
thereafter from any other available source, including, without limitation,
a drawing under the Replacement Liquidity Facility) and (z) cause the
issuer of the Replacement Liquidity Facility to deliver the Replacement
Liquidity Facility to the Trustee, together with a legal opinion opining
that such Replacement Liquidity Facility is an enforceable obligation of
such Replacement Liquidity Provider.
(v) Upon satisfaction of the conditions set forth in clauses (iii)
and (iv) of this Section 3.5(e) with respect to a Replacement Liquidity
Facility, (w) the replaced Liquidity Facility shall terminate, (x) the
Trustee shall, if and to the extent so requested by the Company or the
Liquidity Provider being replaced, execute and deliver any certificate or
other instrument required in order to terminate the replaced Liquidity
Facility, shall surrender the replaced Liquidity Facility to the Liquidity
Provider being replaced and shall execute and deliver the Replacement
Liquidity Facility and any associated Fee Letter, (y) each of the parties
hereto shall enter into any amendments to this Indenture necessary to give
effect to (1) the replacement of the applicable Liquidity Provider with the
applicable Replacement Liquidity Provider and (2) the replacement of the
applicable Liquidity Facility with the applicable Replacement Liquidity
Facility and (z) the applicable Replacement Liquidity Provider shall be
deemed to be a Liquidity Provider with the rights and obligations of a
Liquidity Provider hereunder and under the other Operative Documents and
the Support Documents and such Replacement Liquidity Facility shall be
deemed to be a Liquidity Facility hereunder and under the other Operative
Documents and the Support Documents.
(f) CASH COLLATERAL ACCOUNT; WITHDRAWALS; INVESTMENTS. In the event the
Trustee shall draw all available amounts under the Liquidity Facility pursuant
to Section 3.5(c), 3.5(d) or 3.5(i) hereof, or in the event amounts are to be
deposited in the Cash Collateral Account pursuant to subclause (i)(A) or (i)(B)
of clause "fourth" of Section 3.2, amounts so drawn or to be deposited, as the
case may be, shall be deposited by the Trustee in the Cash Collateral Account.
All amounts on deposit in the Cash Collateral Account shall be invested and
reinvested in Eligible Investments in accordance with Section 8.13(b) hereof.
On each Interest Payment Date, Investment Earnings on amounts on deposit in
the Cash Collateral Account shall be deposited in the Collection Account and
applied on such Interest Payment Date in accordance with Section 3.2 or 3.3 (as
applicable). The Trustee shall deliver a written statement to the Company, the
Liquidity Provider and the Policy Provider one day prior to each Interest
Payment Date setting forth the amount of Investment Earnings held in the Cash
Collateral Account as of such date. In addition, from and after the date funds
are so deposited, the Trustee shall make withdrawals from such accounts as
follows:
(i) on each Distribution Date, the Trustee shall, to the extent it
shall not have received funds to pay accrued and unpaid interest due and
owing on the Securities (at the Debt Rate) after giving effect to the
subordination provisions of Section 3.2, withdraw from the Cash Collateral
Account, and pay to the Securityholders, an amount equal to the lesser of
(x) an amount necessary to pay accrued and unpaid interest (at the Debt
Rate) on such Securities and (y) the amount on deposit in the Cash
Collateral Account (so long as the aggregate amount of unreplenished
withdrawals, including such withdrawal, does not exceed the Required Amount
for such Distribution Date);
(ii) on each date on which principal of the Securities shall have
been paid to the Securityholders pursuant to Section 3.2 hereof, the
Trustee shall withdraw from the Cash Collateral Account such amount as is
necessary so that, after giving effect to such payment of principal on such
date (and any reduction in the amounts on deposit in the Cash Collateral
Account resulting from a prior withdrawal of amounts on deposit in the Cash
Collateral Account on such date) and any transfer of Investment Earnings
from such Cash Collateral Account to the Collection Account on such date,
an amount equal to the sum of the Required Amount (calculated for purposes
of this clause (ii) on the basis of the Capped Interest Rate) plus (if on a
Distribution Date not coinciding with an Interest Payment Date) Investment
Earnings on deposit in the Cash Collateral Account (after giving effect to
any such transfer of Investment Earnings) will be on deposit in the Cash
Collateral Account and shall first, pay such withdrawn amount to the
Liquidity Provider until the Liquidity Obligations owing to such the
Liquidity Provider shall have been paid in full, and second, deposit any
remaining withdrawn amount in the Collection Account;
(iii) if a Replacement Liquidity Facility shall be delivered to the
Trustee following the date on which funds have been deposited into the Cash
Collateral Account, the Trustee shall withdraw all amounts on deposit in
the Cash Collateral Account and shall pay such amounts to the replaced
Liquidity Provider until all Liquidity Obligations owed to such Person
shall have been paid in full, and shall deposit any remaining amount in the
Collection Account; and
(iv) following the payment of all sums payable with respect to the
Securities, on the date on which the Trustee shall have been notified by
the Liquidity Provider that the Liquidity Obligations owed to the Liquidity
Provider have been paid in full, the Trustee shall withdraw all amounts on
deposit in the Cash Collateral Account and shall distribute such amounts in
accordance with the order of priority set forth in Section 3.2.
(g) REINSTATEMENT. With respect to any Interest Drawing under the Liquidity
Facility, upon the reimbursement of the Liquidity Provider for all or any part
of the amount of such Interest Drawing, together with any accrued interest
thereon, the Available Amount of the Liquidity Facility shall be reinstated by
an amount equal to the amount of such Interest Drawing so reimbursed to the
Liquidity Provider but not to exceed the Stated Amount; PROVIDED, HOWEVER, that
the Liquidity Facility shall not be so reinstated in part or in full at any time
if (x) the Securities are Non-Performing and a Liquidity Event of Default shall
have occurred and be continuing or (y) the Final Drawing shall have occurred;
PROVIDED FURTHER, that any payment by the Policy Provider to the Liquidity
Provider of any amounts pursuant to the second proviso to Section 3.8(c) shall
not reinstate the Liquidity Facility, but the Liquidity Facility (so long as the
Liquidity Facility is in effect) shall be reinstated, PRO TANTO, to the extent
the Policy Provider receives any reimbursement in respect of such payment under
clause "FOURTH" of Section 3.2, unless (x) the Securities are Non-Performing and
a Liquidity Event of Default shall have occurred and be continuing or (y) the
Final Drawing shall have occurred. In the event that (i) funds are withdrawn
from the Cash Collateral Account pursuant to clause (i) of Section 3.5(f) hereof
or (ii) the Liquidity Facility shall become a Downgraded Facility or a
Non-Extended Facility at a time when unreimbursed Interest Drawings have reduced
the Available Amount to zero, then funds received by the Trustee at any time
other than (x) any time when the Securities are Non-Performing and Liquidity
Event of Default shall have occurred and be continuing or (y) any time after the
Final Drawing shall have occurred, shall be deposited in the Cash Collateral
Account as and to the extent provided in clause "FOURTH" of Section 3.2, and
applied in accordance with Section 3.5(f) hereof.
(h) REIMBURSEMENT. The amount of each drawing under the Liquidity
Facility shall be due and payable, together with interest thereon, on the dates
and at the rate, respectively, provided in the Liquidity Facility.
(i) FINAL DRAWING. Upon receipt from the Liquidity Provider of a
Termination Notice, the Trustee shall, not later than the date specified in such
Termination Notice, in accordance with the terms of the Liquidity Facility,
request a drawing under the Liquidity Facility of all available and undrawn
amounts thereunder (a "FINAL DRAWING"). Amounts drawn pursuant to a Final
Drawing shall be maintained and invested in accordance with Section 3.5(f)
hereof.
(j) ADJUSTMENTS OF STATED AMOUNT. Promptly following each date on which
the Required Amount is reduced as a result of a payment of the principal amount
of the Securities, the Stated Amount shall automatically be adjusted to an
amount equal to the Required Amount (as calculated by the Trustee after giving
effect to such payment).
(k) RELATION TO SUBORDINATION PROVISIONS. Subject to the proviso
contained in Section 3.5(b), Interest Drawings under the Liquidity Facility and
withdrawals from the Cash Collateral Account will be distributed to the Trustee,
and the Trustee will distribute such Interest Drawings and withdrawals promptly
to the Securityholders in accordance with the provisions of this Indenture, in
each case, notwithstanding Section 3.2 hereof.
(l) ASSIGNMENT OF LIQUIDITY FACILITY. The Trustee agrees not to consent
to the assignment by the Liquidity Provider of any of its rights or obligations
under the Liquidity Facility or any interest therein, unless (i) the Company
shall have consented to such assignment and (ii) each Rating Agency shall have
provided a Ratings Confirmation in respect of such assignment and (iii) the
Policy Provider shall have consented to such assignment (which consent shall not
be unreasonably withheld or delayed); PROVIDED, that the Trustee shall consent
to such assignment if the conditions in the foregoing clauses (i), (ii) and
(iii) are satisfied, and the foregoing is not intended to and shall not be
construed to limit the rights of the initial Liquidity Provider under Section
3.5(e)(ii).
(m) NO DISCHARGE OF THE COMPANY'S OBLIGATIONS. The payment of interest on
the Securities with funds drawn under the Liquidity Facility or from the Cash
Collateral Account shall not be deemed to discharge the Company's obligation to
make such payment, which obligation shall continue in full force and effect.
(n) INTEREST COVERAGE. The interest payable by the Liquidity Provider
under the Liquidity Facility shall include interest accruing during the pendency
of any bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding.
Section 3.6 THE POLICY.
(a) INTEREST DRAWINGS. If on any Distribution Date (other than the Final
Legal Maturity Date, the Election Distribution Date, the Policy Election
Distribution Date, the Non-Performance Payment Date or a date on which a Policy
Drawing is to be made pursuant to Section 3.6(b) of this Indenture), after
giving effect to the subordination provisions of Section 3.2 and to the
application of Prior Funds, the Trustee does not then have sufficient funds
available for the payment of all amounts due and owing in respect of accrued and
unpaid interest on the Securities at the Debt Rate (without giving effect to any
Acceleration and calculated assuming that the Company will not cure the
nonpayment of interest) ("ACCRUED INTEREST"), then the Trustee (i) prior to 1:00
p.m. (New York City time) on such Distribution Date shall deliver a Notice for
Payment, as provided in the Policy, to the Policy Provider or its fiscal agent,
requesting a Policy Drawing under the Policy (for payment into the Policy
Account) in an amount sufficient to enable the Trustee to pay such Accrued
Interest and (ii) upon receipt shall pay such amount from the Policy Account to
the Securityholders in payment of such Accrued Interest.
(b) PROCEEDS DEFICIENCY DRAWING. If on any Distribution Date
(other than the Final Legal Maturity Date, the Election Distribution Date, the
Policy Election Distribution Date or the Non-Performance Payment Date)
established by the Trustee by reason of its receipt of a payment constituting
the proceeds from the sale of Pledged Spare Parts comprising all of the Pledged
Spare Parts subject to the Lien of the Security Agreement at the time of such
sale, after giving effect to the subordination provisions of Section 3.2 and, if
such payment is received prior to a Policy Provider Election, to the application
of Prior Funds, the Trustee does not then have sufficient funds available for
the payment in full of the then outstanding principal amount of the Securities
together with accrued and unpaid interest thereon at the Debt Rate (excluding
any accrued and unpaid Premium or Break Amount and calculated assuming that the
Company will not cure the nonpayment of interest) (collectively, the
"OUTSTANDING AMOUNT"), then the Trustee (i) prior to 1:00 p.m. (New York City
time) on such Distribution Date shall deliver a Notice for Payment, as provided
in the Policy, to the Policy Provider or its fiscal agent, requesting a Policy
Drawing (the "PROCEEDS DEFICIENCY DRAWING") under the Policy (for payment into
the Policy Account) in an amount sufficient to enable the Trustee to pay the
Outstanding Amount and (ii) upon receipt shall pay such amount from the Policy
Account to the Securityholders in payment of the Outstanding Amount.
(c) NON-PERFORMANCE DRAWING. If a Payment Default exists under the
Securities (without giving effect to any Acceleration or any payments by the
Liquidity Provider or the Policy Provider) for a period of eight consecutive
Interest Periods (such period, the "NON-PERFORMING PERIOD") (regardless of
whether any proceeds from the sale of any Collateral are distributed by the
Trustee during such period) and continues to exist on the Interest Payment Date
on which such eighth Interest Period ends (or, if such Interest Payment Date
falls within the applicable period specified in the proviso to the definition of
"Non-Performing", continues to exist on the Business Day immediately following
such period (the "RELEVANT DATE")), and on the 25th day following such Interest
Payment Date or, if applicable, the Relevant Date (or, if such 25th day is not a
Business Day, the next Business Day) (the "NON-PERFORMANCE PAYMENT DATE") after
giving effect to the subordination provisions of Section 3.2 and to the
application of Prior Funds, the Trustee does not then have sufficient funds
available for the payment in full of the Outstanding Amount as of the
Non-Performance Payment Date, then unless the Policy Provider shall have paid on
any day prior thereto the Outstanding Amount as of such day pursuant to Section
3.6(b) or 3.6(e) of this Indenture, the Trustee (i) prior to the 1:00 p.m. (New
York City time) on the Non-Performance Payment Date shall deliver a Notice for
Payment, as provided in the Policy, to the Policy Provider or its fiscal agent,
requesting a Policy Drawing (the "NON-PERFORMANCE DRAWING") under the Policy
(for payment into the Policy Account) in an amount sufficient to enable the
Trustee to pay such Outstanding Amount, and (ii) upon receipt shall pay such
amount from the Policy Account to the Securityholders in payment of such
Outstanding Amount. If the Non-Performance Payment Date is established, the
Trustee shall send to the Securityholders Written Notice thereof promptly, but
no later than three Business Days, after the occurrence of the Interest Payment
Date on which the Non-Performing Period ends or, if applicable, the Relevant
Date.
Notwithstanding the foregoing, if, and only if, the Non-Performance Payment
Date is scheduled to occur prior to the Final Scheduled Payment Date, the Policy
Provider has the right, by Written Notice to the Trustee given at least 10 days
prior to the Non-Performance Payment Date, so long as no Policy Provider Default
shall have occurred and be continuing, to elect (the "POLICY PROVIDER ELECTION")
not to pay the deficiency necessary to pay the Outstanding Amount on the
Non-Performance Payment Date pursuant to the preceding paragraph, in which case
the Policy Provider shall (i) pay on the Non-Performance Payment Date any
shortfall in funds required to pay accrued interest on the Securities (without
regard to Acceleration and after giving effect to the subordination provisions
of Section 3.2 and to the application of Prior Funds), (ii) thereafter, on each
Distribution Date until the establishment of an Election Distribution Date or a
Policy Election Distribution Date, pay an amount equal to the scheduled
principal on the Final Scheduled Payment Date and interest (without regard to
any Acceleration) payable on the Securities on such Distribution Date, and (iii)
(A) on any Business Day elected by the Policy Provider upon at least 20 days'
Written Notice to the Trustee, direct the Trustee (such Business Day a "POLICY
ELECTION DISTRIBUTION DATE") or (B) following the occurrence of a Policy
Provider Default, on any Business Day specified by the Trustee upon at least 20
days' Written Notice to the Policy Provider (such Business Day an "ELECTION
DISTRIBUTION DATE") permit the Trustee, in each case, to make a Policy Drawing
under the Policy for an amount equal to the Outstanding Amount as of such Policy
Election Distribution Date or Election Distribution Date, as applicable. The
Trustee shall (i) prior to 1:00 p.m. (New York City time) on each such
Distribution Date referred to in the preceding sentence deliver a Notice of
Payment, as provided in the Policy, to the Policy Provider or its fiscal agent
requesting a Policy Drawing under the Policy for payment into the Policy Account
to pay the amount then due under this paragraph and (ii) upon receipt of the
proceeds thereof pay the amount thereof from the Policy Account to the
Securityholders in payment of such amount.
(d) LIQUIDITY PROVIDER DRAWING. On or after the Business Day which is 24
months from the earliest to occur of (i) the date on which an Interest Drawing
shall have been made under the Liquidity Facility and remains unreimbursed from
payments made by the Company at the end of such 24-month period, (ii) the date
on which any Downgrade Drawing, Non-Extension Drawing or Final Drawing that was
deposited into the Cash Collateral Account shall have been applied to pay any
scheduled payment of interest on the Securities and remains unreimbursed from
payments made by the Company at the end of such 24-month period and (iii) the
date on which all of the Securities have been accelerated and such Securities
remain unpaid by the Company at the end of such 24-month period (in each case,
disregarding any reimbursements from payments by the Policy Provider and from
proceeds from the sale of Collateral distributed by the Trustee during such
24-month period) (such Business Day, the "LIQUIDITY PROVIDER REIMBURSEMENT
DATE"), the Policy Provider (upon at least 20 days' prior notice from the
Trustee on behalf of the Liquidity Provider, which notice can be given in
advance of the expiry of such twenty-four month period) will be required to
honor drawings under the Policy by the Trustee on behalf of the Liquidity
Provider in an amount sufficient to repay all outstanding drawings under the
Liquidity Facility, together with interest accrued thereon in accordance with
the Liquidity Facility. The Liquidity Provider hereby appoints the Trustee as
its agent for purposes of making the drawing pursuant to this clause (d) and
clause (vii) of the definition of "Deficiency Amount" in the Policy and the
Trustee hereby accepts such appointment and agrees to make such drawing at the
direction of the Liquidity Provider and to promptly distribute all amounts
received in respect of such drawing to the Liquidity Provider.
(e) FINAL POLICY DRAWING. If on the Final Legal Maturity Date, after
giving effect to the subordination provisions of Section 3.2 and to the
application of Prior Funds, unless the Policy Provider shall have paid on any
day prior thereto the Outstanding Amount as of such day pursuant to Section
3.6(b) or 3.6(c) of this Indenture, the Trustee does not then have sufficient
funds available on such date for the payment in full of the Outstanding Amount
as of such date, then the Trustee shall (i) prior to 1:00 p.m. (New York City
time) on such date deliver a Notice for Payment, as provided in the Policy, to
the Policy Provider or its fiscal agent, requesting a Policy Drawing under the
Policy (for payment into the Policy Account) in an amount sufficient to enable
the Trustee to pay such Outstanding Amount, and (ii) upon receipt pay such
amount from the Policy Account to Securityholders in payment of such amount.
(f) AVOIDANCE DRAWINGS. If at any time the Trustee shall have actual
knowledge of the issuance of any Final Order, the Trustee shall promptly give
notice thereof to the Liquidity Provider and the Policy Provider. The Trustee
shall thereupon calculate the relevant Avoided Payments resulting therefrom and
shall promptly: (a) send to the Securityholders a Written Notice of such amounts
and (b) prior to the expiration of the Policy, deliver to the Policy Provider or
its fiscal agent a Notice of Avoided Payment under the Policy, together with a
copy of the documentation required by the Policy with respect thereto,
requesting a Policy Drawing thereunder (for payment to the receiver,
conservator, debtor-in-possession, trustee in bankruptcy or the Trustee (for
deposit into the Policy Account), as applicable) in an amount equal to the
amount of relevant Avoided Payment. To the extent that any portion of such
Avoided Payment is to be paid to the Trustee, such Written Notice shall also set
the date for the distribution of such portion of the proceeds of such Policy
Drawing which date shall constitute a Distribution Date and shall be the earlier
of three Business Days after the date of the expiration of the Policy and the
Business Day that immediately follows the 25th day after the date of such
Written Notice. Upon receipt, the Trustee shall pay the proceeds of the
specified Policy Drawing under the Policy to the Securityholders or the
Liquidity Provider, as applicable on such Distribution Date.
(g) APPLICATION OF POLICY DRAWINGS. Notwithstanding anything to the
contrary contained in this Indenture (including, without limitation, Section 3.2
hereof), except as provided in Section 3.6(d) hereof, all payments received by
the Trustee in respect of a Policy Drawing (including, without limitation, that
portion, if any, of the proceeds of a Policy Drawing for any Avoided Payment
that is to be paid to the Trustee and not to any receiver, conservator,
debtor-in-possession or trustee in bankruptcy as provided in the Policy) shall
be promptly paid from the Policy Account to the Securityholders.
(h) LIMITATION TO OUTSTANDING PRINCIPAL AMOUNT; INTEREST ON POLICY
DRAWINGS. Notwithstanding anything to the contrary in this Section 3.6, except
as provided in Section 3.6(f), at no time shall the Trustee make any Policy
Drawing under the Policy under clause (b), (c) or (e) of this Section 3.6 in
excess of the then outstanding principal amount of the Securities, and accrued
and unpaid interest at the Debt Rate. Nothing contained in this Indenture shall
alter or amend the liabilities, obligations, requirements or procedures of the
Policy Provider under the Policy, and the Policy Provider shall not be obligated
to make payment except at the times and in the amounts and under the
circumstances expressly set forth in the Policy. Except for Policy Provider
Interest Obligations, no interest shall accrue on any Policy Drawing or any
other payment made by the Policy Provider.
(i) RESUBMISSION OF NOTICE FOR PAYMENT. If the Policy Provider at any
time informs the Trustee in accordance with the Policy that a Notice for Payment
or Notice of Avoided Payment submitted by the Trustee does not meet the
requirements of the Policy, the Trustee shall, as promptly as possible after
being so informed, submit to the Policy Provider an amended and revised Notice
for Payment or Notice of Avoided Payment, as the case may be, and shall pay to
Securityholders out of the Policy Account the amount received pursuant to such
amended or revised Notice for Payment or Notice of Avoided Payment, as the case
may be, when received.
(j) NO DISCHARGE OF THE COMPANY'S OBLIGATIONS. The payment of principal
of or interest on the Securities with funds drawn under the Policy shall not be
deemed to discharge the Company's obligation to make such payment, which
obligation shall continue in full force and effect.
(k) INTEREST COVERAGE. The interest payable by the Policy Provider under
the Policy shall include interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding.
Section 3.7 DESIGNATED REPRESENTATIVES.
(a) With the delivery of this Indenture, the Trustee shall furnish to the
Liquidity Provider and the Policy Provider, and from time to time thereafter may
furnish to the Liquidity Provider and the Policy Provider, at the Trustee's
discretion, or upon the Liquidity Provider's or the Policy Provider's request
(which request shall not be made more than one time in any 12-month period), a
certificate (a "TRUSTEE INCUMBENCY CERTIFICATE") of a Responsible Officer of the
Trustee certifying as to the incumbency and specimen signatures of the officers
of the Trustee and the attorney-in-fact and agents of the Trustee (the "TRUSTEE
REPRESENTATIVES") authorized to give Written Notices on behalf of the Trustee
hereunder. Until the Liquidity Provider and the Policy Provider receives a
subsequent Trustee Incumbency Certificate, it shall be entitled to rely on the
last Trustee Incumbency Certificate delivered to it hereunder.
(b) With the delivery of this Indenture, the Liquidity Provider and the
Policy Provider shall furnish to the Trustee, and from time to time thereafter
may furnish to the Trustee, at the Liquidity Provider's or Policy Provider's
discretion, or upon the Trustee's request (which request shall not be made more
than one time in any 12-month period), a certificate (each, a "PROVIDER
INCUMBENCY CERTIFICATE") of any Responsible Officer of such Liquidity Provider
or Policy Provider certifying as to the incumbency and specimen signatures of
any officer, attorney-in-fact, agent or other designated representative of such
Liquidity Provider or Policy Provider (in each case, the "PROVIDER
REPRESENTATIVES" and, together with the Trustee Representatives, the "DESIGNATED
REPRESENTATIVES") authorized to give Written Notices on behalf of the Liquidity
Provider or Policy Provider hereunder. Until the Trustee receives a subsequent
Provider Incumbency Certificate, it shall be entitled to rely on the last
Provider Incumbency Certificate delivered to it hereunder by the Liquidity
Provider or the Policy Provider.
Section 3.8 CONTROLLING PARTY.
(a) Subject to the rights of the Holders hereunder (including, without
limitation, Sections 7.4, 7.6, 7.7 and 10.2) and the requirements of the TIA, in
taking, or refraining from taking, any action under this Indenture, whether
before or after the occurrence of an Event of Default, the Trustee will be
directed by the Controlling Party. In particular, in taking, or refraining from
taking, any action under this Indenture pursuant to the exercise of remedies
hereunder as provided in Article 7 and under the Security Agreement pursuant to
the exercise of remedies thereunder as provided in Article 6 thereof (including
foreclosing the Lien on the Collateral), the Trustee and the Collateral Agents
will be directed by the Controlling Party. The provisions of Section 316(a)(1)
of the TIA and, except during any period that the Required Holders are the
Controlling Party, the provisions of Section 315(d)(3) of the TIA are expressly
excluded from this Indenture.
(b) The Person who shall be the "CONTROLLING PARTY" shall be the Policy
Provider (or, if any Policy Provider Default shall have occurred and be
continuing, the Required Holders).
The Trustee shall give Written Notice to the Policy Provider and the
Liquidity Provider promptly upon a change in the identity of the Controlling
Party. Each of the Securityholders, by their acceptance of the Securities, the
Policy Provider, by entering into the Policy Provider Agreement, and the
Liquidity Provider, by entering into the Liquidity Facility, has agreed that it
shall not exercise any of the rights of the Controlling Party at such time as it
is not the Controlling Party hereunder; PROVIDED, HOWEVER, that nothing herein
contained shall prevent or prohibit any Non-Controlling Party from exercising
such rights as shall be specifically granted to such Non-Controlling Party
hereunder and under the other Operative Documents or the Support Documents.
(c) Notwithstanding the foregoing, if at any time after the Liquidity
Provider Reimbursement Date a Policy Provider Default attributable to a failure
to make a payment referred to in Section 3.6(d) shall have occurred and be
continuing, the Liquidity Provider (so long as the Liquidity Provider has not
defaulted in its obligation to make any Drawing under the Liquidity Facility)
shall have the right to elect, by Written Notice to the Trustee and the Policy
Provider, to become the Controlling Party hereunder at any time from and
including the Liquidity Provider Reimbursement Date; PROVIDED, HOWEVER, that if
the Policy Provider subsequently pays to the Liquidity Provider all outstanding
Drawings, together with accrued interest thereon, under the Liquidity Facility,
and no other Policy Provider Default has occurred and is continuing, then, the
Policy Provider rather than the Liquidity Provider shall be the Controlling
Party, subject to Section 3.8(b).
(d) The Controlling Party shall not be entitled to require or obligate
any Non-Controlling Party to provide funds necessary to exercise any right or
remedy hereunder.
Section 3.9 COMPANY'S PAYMENT OBLIGATIONS.
The Company agrees to pay to the Trustee for distribution in accordance
with Section 3.2 hereof: (a)(i) an amount equal to the fees payable to the
Liquidity Provider under Section 2.03 of the Liquidity Facility and the related
Fee Letter; (ii) the amount equal to interest on any Downgrade Advance (other
than any Applied Downgrade Advance) payable under Section 3.07 of the Liquidity
Facility minus Investment Earnings from such Downgrade Advance; (iii) the amount
equal to interest on any Non-Extension Advance (other than any Applied
Non-Extension Advance) payable under Section 3.07 of the Liquidity Facility
minus Investment Earnings from such Non-Extension Advance; (iv) if any payment
default shall have occurred and be continuing with respect to interest on any
Securities, the excess, if any, of (1) an amount equal to interest on any Unpaid
Advance, Applied Downgrade Advance or Applied Non-Extension Advance payable
under Section 3.07 of the Liquidity Facility (or, if the Policy Provider has
made a payment equivalent to such an Advance, as would have been payable under
Section 3.07 of the Liquidity Facility had such Advance been made) over (2) the
sum of Investment Earnings from any Final Advance plus any amount of interest at
the Payment Due Rate actually payable (whether or not in fact paid) by the
Company on the overdue scheduled interest on the Securities in respect of which
such Unpaid Advance, Applied Downgrade Advance or Applied Non-Extension Advance
was made by the Liquidity Provider (or an equivalent payment made by the Policy
Provider); (v) any other amounts owed to the Liquidity Provider by the Trustee
as borrower under the Liquidity Facility other than amounts due as repayment of
advances thereunder or as interest on such advances, except to the extent
payable pursuant to clause (ii), (iii) or (iv) above, and (vi) an amount equal
to the fees payable to the Policy Provider under Section 3.02(d) of the Policy
Provider Agreement and all other compensation and reimbursement of expenses and
disbursements (but excluding reimbursement of advances) payable to the Policy
Provider under the Policy Provider Agreement (but excluding all such amounts
actually paid by the Company to the Policy Provider under the Policy Provider
Agreement or the Policy Fee Letter). The Trustee shall immediately deposit in
the Collection Account all payments from the Company received pursuant to this
Section.
Section 3.10. EXECUTION OF SUPPORT DOCUMENTS.
The Trustee is authorized and directed, for the benefit of the
Securityholders, to enter into the Support Documents on the Closing Date. The
Trustee shall not amend or supplement, or grant any waiver with respect to, any
Support Document, except pursuant to the provisions of Article 10.
ARTICLE 4.
REDEMPTIONS
Section 4.1 OPTIONAL REDEMPTION.
The Securities may be redeemed at any time in whole or (so long as no
Payment Default has occurred and is continuing) in part (in any integral
multiple of $1,000) by the Company at its sole option at a redemption price
equal to the sum of 100% of the principal amount of, accrued and unpaid interest
on, and Premium, if any, and Break Amount, if any, with respect to, the redeemed
Securities to and including the Redemption Date.
Section 4.2 REDEMPTION NOTICE TO TRUSTEE.
If the Company elects to redeem Securities as provided in Section 4.1, it
shall notify the Trustee of the Redemption Date, the principal amount of
Securities to be redeemed and all other information needed for the notice to be
given by the Trustee pursuant to Section 4.4.
The Company shall give the notice provided for in this Section at least ten
(10) days (unless a shorter notice shall be satisfactory to the Trustee) prior
to the date the Trustee must give notice pursuant to Section 4.4.
Section 4.3 SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities are to be redeemed, the Trustee shall
select the Securities to be redeemed on either a PRO RATA basis or by lot or by
any other equitable manner determined by the Trustee in its sole discretion. The
Trustee shall make the selection from Securities outstanding not previously
called for redemption. The Trustee may select for redemption portions of the
principal of Securities that have denominations larger than $1,000. Securities
and portions of them it selects shall be in amounts of $1,000 or whole multiples
of $1,000. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption, and
references to such Securities shall also refer to such portions of such
Securities.
Section 4.4 NOTICE OF REDEMPTION.
At least 15 days but not more than 60 days before a Redemption Date, the
Trustee shall mail by first-class mail a notice of redemption to each Holder
whose Securities are to be redeemed.
The notice shall identify the Securities and the principal amount thereof
to be redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price (including the amount of accrued and unpaid
interest, and Premium, if any, to be paid on the Securities called for
redemption);
(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion will be
issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price; and
(6) that, unless the Company fails to make the redemption payment,
interest on the Securities to be redeemed ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of such
Securities is to receive payment of the redemption price (including the
amount of accrued and unpaid interest, and Premium, if any, to be paid on
the Securities called for redemption) upon surrender to the Paying Agent of
the Securities.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense.
Section 4.5 EFFECT OF NOTICE OF REDEMPTION.
Once a notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date at the redemption price and, on
and after such date (unless the Company shall fail to make the payment of the
redemption price), such Securities shall cease to bear interest. Upon surrender
to the Paying Agent, such Securities shall be paid at the redemption price.
Notwithstanding the foregoing, if the Trustee gives notice of redemption, but
the Company fails to pay when due all amounts necessary to effect such
redemption, such redemption shall be deemed revoked and no amount shall be due
as a result of notice of redemption having been given.
Section 4.6 DEPOSIT OF REDEMPTION PRICE.
On or before 12:30 p.m., Eastern Time, on the Redemption Date, the Company
shall deposit with the Paying Agent money in funds immediately available on the
Redemption Date sufficient to pay the principal amount of and accrued interest
on and Premium, if any, and Break Amount, if any, with respect to, all
Securities to be redeemed on that date, PROVIDED that the Company's failure to
make such deposit shall result in the revocation of such redemption in
accordance with Section 4.5.
Section 4.7 SECURITIES REDEEMED IN PART.
Upon surrender of a Security that is redeemed in part, the Trustee shall
authenticate for the Holder a new Security equal in principal amount of the
unredeemed portion of the Security surrendered.
ARTICLE 5.
COVENANTS
Section 5.1 PAYMENT OF SECURITIES.
The Company shall pay the principal of, interest on and Premium, if any,
and Break Amount, if any, with respect to, the Securities on the dates and in
the manner provided in this Indenture and in the Securities. The Company will,
on or before each due date for the payment of the principal of, interest on,
Premium, if any, or Break Amount, if any, due under any of the Securities,
deposit with the Trustee payments sufficient to pay the principal, interest,
Premium, if any, or Break Amount, if any, so becoming due, and the Trustee shall
immediately deposit all such payments in the Collection Account.
The principal of, interest on, Premium, if any, Break Amount, if any, and
other amounts due under any of the Securities or hereunder will be payable in
Dollars by wire transfer of immediately available funds not later than 12:30
p.m., New York time, on the due date of payment to the Trustee at the Corporate
Trust Office for distribution in the manner provided herein. The Trustee will
make funds deposited in the Collection Account on a Distribution Date and
required to be distributed to Securityholders pursuant to Section 3.2 available
to the Paying Agent for such distribution. The Paying Agent shall distribute
amounts payable to each Securityholder by check mailed to such Securityholder at
its address appearing in the Register, except that with respect to Securities
registered on the applicable Record Date in the name of a Clearing Agency (or
its nominee), such distribution shall be made by wire transfer in immediately
available funds to the account designated by such Clearing Agency (or such
nominee). The Company shall not have any responsibility for the distribution of
such payments to any Securityholder. Any payment made hereunder shall be made
without any presentment or surrender of any Securities, except that, in the case
of the final payment in respect of any Security, such Security shall be
surrendered to the Paying Agent for cancellation against receipt of such
payment.
Section 5.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency where Securities may be surrendered for registration
of transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. At the request of the Company, said office or agency may be an
office of the Trustee or an agent appointed by the Trustee for such purpose. The
Company shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency not designated or appointed by
the Trustee. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office.
The Company may also from time to time designate one or more other offices
or agencies where the Securities may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations; PROVIDED,
HOWEVER, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, The City of New York, for such purposes. The Company will give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency. The Company hereby
designates the Corporate Trust Office as one such office or agency of the
Company in accordance with Section 2.8.
Section 5.3 CORPORATE EXISTENCE.
Except as otherwise provided in Section 5.4, the Company shall do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence and shall at all times remain a U.S. Air Carrier.
Section 5.4 COMPANY NOT TO CONSOLIDATE, MERGE, CONVEY OR TRANSFER
EXCEPT UNDER CERTAIN CONDITIONS.
(a) The Company shall not consolidate with, or merge into, or convey,
transfer or lease all or substantially all of its assets to any Person unless:
(i) the resulting, surviving, transferee or lessee Person (the
"SUCCESSOR COMPANY") shall be a Person organized and existing under the
laws of the U.S., any state thereof or the District of Columbia and a U.S.
Air Carrier, and the Successor Company shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under
the Securities, the Indenture, the other Operative Documents and the
Support Documents to which the Company is a party;
(ii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (i) such
consolidation, merger, conveyance, transfer or lease and such supplemental
indenture comply with the terms of this Indenture and (ii) this Indenture,
each other Operative Document and the Securities constitute the valid and
legally binding obligations of the Successor Company;
(iii) the Company or the Successor Company complies with the
requirements of Section 4.04(c) of the Security Agreement; and
(iv) immediately after giving effect to such transaction, no Event of
Default shall have occurred and be continuing.
(b) The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and be bound by and obligated to pay the
obligations of, and may exercise every right and power of, the Company under the
Indenture, each other Operative Document, the Securities and the Support
Documents to which the Company is a party, but the predecessor Company in the
case of a conveyance, transfer or lease shall not be released from the
obligation to pay the principal of, interest on, and Premium, if any, and Break
Amount, if any, with respect to, the Securities and any other amounts payable by
the Company hereunder.
(c) The Successor Company may cause to be signed, and may issue either in
its own name or in the name of the Company prior to such succession any or all
of the Securities issuable hereunder which theretofore shall not have been
signed by the Company and delivered to the Trustee; and upon the order of the
Successor Company, instead of the Company, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Securities which previously shall have been
signed and delivered by the officers of the Company to the Trustee for
authentication, and any Securities which such Successor Company thereafter shall
cause to be signed and delivered to the Trustee for that purpose. All of the
Securities so issued shall in all respects have the same legal rank and benefit
under this Indenture as though all of such Securities had been issued at the
date of the execution hereof.
(d) In case of any such consolidation, merger, sale, conveyance, transfer
or lease such changes in phraseology and form (but not in substance) may be made
in the Securities thereafter to be issued as may be appropriate.
Section 5.5 REPORTS BY THE COMPANY.
(a) The Company shall file with the Trustee, within 15 days after the
Company is required to file the same with the SEC, copies of the annual reports
and of the information, documents, and other reports (or copies of such portions
of any of the foregoing as the SEC may from time to time by rules and
regulations prescribe) that the Company may be required to file with the SEC
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company
is not required to file information, documents, or reports pursuant to either of
said sections, then to file with the Trustee and the SEC, in accordance with
rules and regulations prescribed from time to time by the SEC, such of the
supplementary and periodic information, documents, and reports that may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.
(b) So long as required by the TIA, the Company shall deliver to the
Trustee, within 120 days after the end of each calendar year, a certificate
signed by the Company's principal executive officer, principal financial officer
or principal accounting officer (which certificate need not comply with Section
12.4 or 12.5) stating that to his or her knowledge during such preceding
calendar year no Default or Event of Default has occurred (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge).
ARTICLE 6.
INDEMNIFICATION
Section 6.1 GENERAL INDEMNITY.
(a) The Company shall indemnify, protect, defend and hold harmless each
Indemnitee from, against and in respect of, and shall pay on a net after-tax
basis, any and all Expenses of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against any Indemnitee, relating to, resulting from,
or arising out of or in connection with, any one or more of the following:
(i) The Operative Documents or the Support Documents, or the
enforcement of any of the terms of any of the Operative Documents or the
Support Documents;
(ii) The Spare Parts Collateral, including, without limitation, with
respect thereto, (A) the manufacture, design, purchase, acceptance,
nonacceptance or rejection, ownership, delivery, nondelivery, lease,
sublease, assignment, possession, use or non-use, operation, maintenance,
testing, repair, overhaul, condition, alteration, modification, addition,
improvement, storage, airworthiness, replacement, repair, sale,
substitution, return, abandonment, redelivery or other disposition of any
Spare Parts Collateral, (B) any claim or penalty arising out of violations
of applicable Laws by the Company (or any Permitted Lessee), (C) tort
liability, whether or not arising out of the negligence of any Indemnitee
(whether active, passive or imputed), (D) death or property damage of
passengers, shippers or others, (E) environmental control, noise or
pollution and (F) any Liens in respect of the Spare Parts Collateral;
(iii) The offer, sale, or delivery of any Securities or any interest
therein or represented thereby; and
(iv) Any breach of or failure to perform or observe, or any other
noncompliance with, any covenant or agreement or other obligation to be
performed by the Company under any Operative Document or Support Document
to which it is party or the falsity of any representation or warranty of
the Company in any Operative Document or Support Document to which it is
party.
(b) Notwithstanding anything contained in Section 6.1(a), the Company
shall not be required to indemnify, protect, defend and hold harmless any
Indemnitee pursuant to Section 6.1(a) in respect of any Expense of such
Indemnitee:
(i) For any Taxes or a loss of Tax benefit;
(ii) Except to the extent attributable to acts or events occurring
prior thereto, acts or events (other than acts or events related to the
performance by the Company of its obligations pursuant to the terms of the
Operative Documents or the Support Documents to which it is a party) that
occur after the Indenture is required to be terminated in accordance with
Section 9.1 of this Indenture; PROVIDED, that nothing in this clause (ii)
shall be deemed to exclude or limit any claim that any Indemnitee may have
under applicable Law by reason of an Event of Default or for damages from
the Company for breach of the Company's covenants contained in the
Operative Documents or the Support Documents to which it is a party or to
release the Company from any of its obligations under the Operative
Documents or the Support Documents to which it is a party that expressly
provide for performance after termination of the Indenture;
(iii) To the extent attributable to any transfer (voluntary or
involuntary) by or on behalf of such Indemnitee or any related Indemnitee
of any Security or interest therein;
(iv) To the extent attributable to the gross negligence or willful
misconduct of such Indemnitee or any related Indemnitee (as defined below)
(other than gross negligence or willful misconduct imputed to such person
by reason of its interest in the Spare Parts Collateral or any Operative
Document);
(v) To the extent attributable to the incorrectness or breach of any
representation or warranty of such Indemnitee or any related Indemnitee
contained in or made pursuant to any Operative Document or any Support
Document;
(vi) To the extent attributable to the failure by such Indemnitee or
any related Indemnitee to perform or observe any agreement, covenant or
condition on its part to be performed or observed in any Operative Document
or any Support Document;
(vii) To the extent attributable to the offer or sale by such
Indemnitee or any related Indemnitee of any interest in the Spare Parts
Collateral, any Security, or any similar interest, in violation of the
Securities Act or other applicable federal, state or foreign securities
Laws (other than any thereof caused by acts or omissions of the Company);
(viii) (x) With respect to any Indemnitee (other than the Trustee,
any Agent or any Collateral Agent), to the extent attributable to the
failure of the Trustee, any Agent or any Collateral Agent to distribute
funds received and distributable by it in accordance with the Indenture or
a Collateral Agreement, as the case may be, or (y) with respect to the
Trustee, any Agent or any Collateral Agent, to the extent attributable to
the negligence or willful misconduct of the Trustee, any Agent or any
Collateral Agent in the distribution of funds received and distributable by
it in accordance with the Indenture or a Collateral Agreement, as the case
may be;
(ix) Other than during the continuation of an Event of Default, to
the extent attributable to the authorization or giving or withholding of
any future amendments, supplements, waivers or consents with respect to any
Operative Document or Support Document other than such as have been
requested by the Company or as are required by or made pursuant to the
terms of the Operative Documents or Support Documents (unless such
requirement results from the actions of an Indemnitee not required by or
made pursuant to the Operative Documents or the Support Documents);
(x) To the extent attributable to any amount which any Indemnitee
expressly agrees to pay or such Indemnitee expressly agrees shall not be
paid by or be reimbursed by the Company;
(xi) To the extent that it is an ordinary and usual operating or
overhead expense;
(xii) For any Lien attributable to such Indemnitee or any related
Indemnitee;
(xiii) If another provision of an Operative Document or a Support
Document specifies the extent of the Company's responsibility or obligation
with respect to such Expense, to the extent arising from other than failure
of the Company to comply with such specified responsibility or obligation;
or
(xiv) To the extent incurred by or asserted against an Indemnitee as
a result of any "prohibited transaction", within the meaning of Section 406
of ERISA or Section 4975(c)(1) of the Code.
For purposes of this Section 6.1, a Person shall be considered a "related"
Indemnitee with respect to an Indemnitee if such Person is an Affiliate or
employer of such Indemnitee, a director, officer, employee, agent, or servant of
such Indemnitee or any such Affiliate or a successor or permitted assignee of
any of the foregoing.
Section 6.2 SEPARATE AGREEMENT.
This Article 6 constitutes a separate agreement with respect to each
Indemnitee and is enforceable directly by each such Indemnitee.
Section 6.3 NOTICE.
If a claim for any Expense that an Indemnitee shall be indemnified against
under this Article 6 is made, such Indemnitee shall give prompt written notice
thereof to the Company. Notwithstanding the foregoing, the failure of any
Indemnitee to notify the Company as provided in this Section 6.3, or in Section
6.4, shall not release the Company from any of its obligations to indemnify such
Indemnitee hereunder, except to the extent that such failure results in an
additional Expense to the Company (in which event the Company shall not be
responsible for such additional expense) or materially impairs the Company's
ability to contest such claim.
Section 6.4 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS.
(a) In case any action, suit or proceeding shall be brought against any
Indemnitee for which the Company is responsible under this Article 6, such
Indemnitee shall notify the Company of the commencement thereof and the Company
may, at its expense, participate in and to the extent that it shall wish
(subject to the provisions of the following paragraph), assume and control the
defense thereof and, subject to Section 6.4(c), settle or compromise the same.
(b) The Company or its insurer(s) shall have the right, at its or their
expense, to investigate or, if the Company or its insurer(s) shall agree not to
dispute liability to the Indemnitee giving notice of such action, suit or
proceeding under this Section 6.4 for indemnification hereunder or under any
insurance policies pursuant to which coverage is sought, control the defense of,
any action, suit or proceeding, relating to any Expense for which
indemnification is sought pursuant to this Article 6, and each Indemnitee shall
cooperate with the Company or its insurer(s) with respect thereto; PROVIDED,
that the Company shall not be entitled to control the defense of any such
action, suit, proceeding or compromise any such Expense during the continuance
of any Event of Default. In connection with any such action, suit or proceeding
being controlled by the Company, such Indemnitee shall have the right to
participate therein, at its sole cost and expense, with counsel reasonably
satisfactory to the Company; PROVIDED, that such Indemnitee's participation does
not, in the reasonable opinion of the independent counsel appointed by the
Company or its insurers to conduct such proceedings, interfere with the defense
of such case.
(c) In no event shall any Indemnitee enter into a settlement or other
compromise with respect to any Expense without the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed, unless
such Indemnitee waives its right to be indemnified with respect to such Expense
under this Article 6.
(d) In the case of any Expense indemnified by the Company hereunder which
is covered by a policy of insurance maintained by the Company pursuant to a
Collateral Agreement, at the Company's expense, each Indemnitee agrees to
cooperate with the insurers in the exercise of their rights to investigate,
defend or compromise such Expense as may be required to retain the benefits of
such insurance with respect to such Expense.
(e) If an Indemnitee is not a party to this Indenture, the Company may
require such Indemnitee to agree in writing to the terms of this Article 6 prior
to making any payment to such Indemnitee under this Article 6.
(f) Nothing contained in this Section 6.4 shall be deemed to require an
Indemnitee to contest any Expense or to assume responsibility for or control of
any judicial proceeding with respect thereto.
Section 6.5 INFORMATION.
The Company will provide the relevant Indemnitee with such information not
within the control of such Indemnitee, as is in the Company's control or is
reasonably available to the Company, which such Indemnitee may reasonably
request and will otherwise cooperate with such Indemnitee so as to enable such
Indemnitee to fulfill its obligations under Section 6.4. The Indemnitee shall
supply the Company with such information not within the control of the Company,
as is in such Indemnitee's control or is reasonably available to such
Indemnitee, which the Company may reasonably request to control or participate
in any proceeding to the extent permitted by Section 6.4.
Section 6.6 SUBROGATION; FURTHER ASSURANCES.
Upon the payment in full by the Company of any indemnity provided for under
this Article 6, the Company, without any further action and to the full extent
permitted by Law, will be subrogated to all rights and remedies of the person
indemnified (other than with respect to any of such Indemnitee's insurance
policies) in respect of the matter as to which such indemnity was paid. Each
Indemnitee will give such further assurances or agreements and cooperate with
the Company to permit the Company to pursue such claims, if any, to the extent
reasonably requested by the Company and at the Company's expense.
Section 6.7 REFUNDS.
If an Indemnitee receives any refund, in whole or in part, with respect to
any Expense paid by the Company hereunder, it will promptly pay the amount
refunded (but not an amount in excess of the amount the Company or any of its
insurers has paid in respect of such Expense) over to the Company unless an
Event of Default shall have occurred and be continuing, in which case such
amounts shall be paid over to the Security Agent to hold as security for the
Company's obligations under the Operative Documents and the Support Documents to
which the Company is a party or, if requested by the Company, applied to satisfy
such obligations.
ARTICLE 7.
DEFAULT AND REMEDIES
Section 7.1 EVENTS OF DEFAULT.
The term "EVENT OF DEFAULT" shall mean any of the following events
(whatever the reason for such Event of Default and whether such event shall be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court or
any order, rule or regulation of any administration or governmental body):
(a) the Company shall fail to pay (i) principal of, interest on, or
Premium, if any, or Break Amount, if any, with respect to any Security when due,
and such failure shall continue unremedied for a period of 10 Business Days
thereafter (it being understood that any amount distributed to Securityholders
in respect of the foregoing from funds provided by the Policy Provider, the
Liquidity Provider or the Cash Collateral Account shall not be deemed to cure
such Default), or (ii) any other amount payable by it to the Holders under this
Indenture or any Operative Document when due, and such failure shall continue
for a period in excess of 10 Business Days after the Company has received
written notice from the Trustee of the failure to make such payment when due;
(b) the Company shall fail to observe or perform (or caused to be
observed and performed) in any material respect any other covenant, agreement or
obligation set forth herein or in any other Operative Document to which the
Company is a party and such failure shall continue unremedied for a period of 30
days from and after the date of written notice thereof to the Company from the
Trustee, unless such failure is capable of being corrected and the Company shall
be diligently proceeding to correct such failure, in which case there shall be
no Event of Default unless and until such failure shall continue unremedied for
a period of 270 days after receipt of such notice;
(c) any representation or warranty made by the Company herein or in any
other Operative Document to which the Company is a party (a) shall prove to have
been untrue or inaccurate in any material respect as of the date made, (b) such
untrue or inaccurate representation or warranty is material at the time in
question, and (c) the same shall remain uncured (to the extent of the adverse
impact of such incorrectness on the interest of the Trustee) for a period in
excess of 30 days from and after the date of written notice thereof from Trustee
to the Company;
(d) the Company shall consent to the appointment of or taking possession
by a receiver, trustee or liquidator of itself or of a substantial part of its
property, or the Company shall admit in writing its inability to pay its debts
generally as they come due or shall make a general assignment for the benefit of
its creditors, or the Company shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization, liquidation or other
relief under any bankruptcy laws or insolvency laws (as in effect at such time),
or an answer admitting the material allegations of a petition filed against it
in any such case, or the Company shall seek relief by voluntary petition, answer
or consent, under the provisions of any other bankruptcy or similar law
providing for the reorganization or winding-up of corporations (as in effect at
such time), or the Company shall seek an agreement, composition, extension or
adjustment with its creditors under such laws or the Company's board of
directors shall adopt a resolution authorizing corporate action in furtherance
of any of the foregoing;
(e) an order, judgment or decree shall be entered by any court of
competent jurisdiction appointing, without the consent of the Company, a
receiver, trustee or liquidator of the Company or of any substantial part of its
property, or any substantial part of the property of the Company shall be
sequestered, or granting any other relief in respect of the Company as a debtor
under any bankruptcy laws or other insolvency laws (as in effect at such time),
and any such order, judgment, decree, or decree of appointment or sequestration
shall remain in force undismissed, unstayed or unvacated for a period of 90 days
after the date of entry thereof; or
(f) a petition against the Company in a proceeding under any bankruptcy
laws or other insolvency laws (as in effect at such time) is filed and not
withdrawn or dismissed within 90 days thereafter, or if, under the provisions of
any law providing for reorganization or winding-up of corporations which may
apply to the Company, any court of competent jurisdiction shall assume
jurisdiction, custody or control of the Company of any substantial part of its
property and such jurisdiction, custody or control shall remain in force
unrelinquished, unstayed or unterminated for a period of 90 days.
Section 7.2 ACCELERATION.
If an Event of Default (other than an Event of Default specified in Section
7.1(d), (e) or (f) with respect to the Company) occurs, and is continuing, the
Controlling Party may, by notice to the Company and the Trustee, and the Trustee
shall, upon the request of such Controlling Party, declare all unpaid principal
of, accrued but unpaid interest on, and Premium, if any, Break Amount, if any,
with respect to the Securities Outstanding and other amounts otherwise payable
hereunder, if any, to the date of acceleration to be due and payable and upon
any such declaration, the same shall become and be immediately due and payable.
If an Event of Default specified in Section 7.1(d), (e) or (f) occurs with
respect to the Company, all unpaid principal of, accrued but unpaid interest on,
and Premium, if any, Break Amount, if any, with respect to, the Securities
Outstanding and other amounts otherwise payable hereunder, if any, shall
automatically become and be immediately due and payable without any declaration
or other act on the part of the Trustee, the Controlling Party or any
Securityholder. Upon payment of such principal amount, interest, Premium, if
any, Break Amount, if any, and other amounts, all of the Company's obligations
under the Securities and this Indenture, other than obligations under Article 6
and Section 8.7, shall terminate. The Controlling Party by notice to the Trustee
may rescind an acceleration and its consequences if (a) all existing Events of
Default, other than the non-payment as to the Securities of the principal,
interest, Premium, if any, and Break Amount, if any, with respect thereto and
other amounts otherwise payable hereunder, if any, which has become due solely
by such declaration of acceleration, have been cured or waived, (b) to the
extent the payment of such interest is permitted by law, interest on overdue
installments of interest and on overdue principal which has become due otherwise
than by such declaration of acceleration, has been paid, (c) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction, and (d) all payments due to the Trustee and any predecessor
Trustee under Section 8.7 have been made. No such rescission shall affect any
subsequent default or impair any right arising from any subsequent default.
Section 7.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, interest on, or Premium, if any, or Break Amount, if any, with
respect to the Securities or other amounts otherwise payable hereunder, if any,
or to enforce the performance of any provision of the Securities or this
Indenture including, without limitation, instituting proceedings and exercising
and enforcing, or directing exercise and enforcement of, all rights and remedies
of the Trustee and the Collateral Agent under the other Operative Documents and
directing the Collateral Agent to deposit with the Trustee all cash and/or
Investment Securities held by the Collateral Agent.
The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 7.4 WAIVER OF PAST DEFAULTS.
Subject to Sections 7.7, 10.2 and 10.6, the Controlling Party by notice to
the Trustee may authorize the Trustee to waive an existing Default or Event of
Default and its consequences, except a Default or Event of Default (i) in the
payment of principal of, interest on, or Premium, if any, or Break Amount, if
any, with respect to, any Security as specified in Section 7.1(a) that has not
been paid from funds provided by the Policy Provider, the Liquidity Provider or
the Cash Collateral Account or (ii) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the Liquidity
Provider, the Policy Provider and the Holder of each Security affected. When a
Default or Event of Default is so waived, it is cured and ceases, and the
Company, the Liquidity Provider, the Policy Provider, the Holders and the
Trustee shall be restored to their former positions and rights hereunder
respectively; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.
Section 7.5 CONTROL OF REMEDIES.
The Controlling Party may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee (as Trustee or Collateral
Agent, subject, in the case of any actions based on the status of the Trustee as
Collateral Agent, to any limitations otherwise expressly provided for in the
other Operative Documents) or exercising any trust or power conferred on it;
provided that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction. The Trustee may refuse to follow
any direction hereunder or authorization under Section 7.4 that conflicts with
law or this Indenture, that the Trustee determines may subject the Trustee to
personal liability or, after a Policy Provider Default, that the Trustee
determines may be unduly prejudicial to the rights of another Securityholder.
However, the Trustee shall have no liability for any actions or omissions to act
which are in accordance with any such direction or authorization. The
Controlling Party shall not direct the Trustee or any Collateral Agent to sell
or otherwise dispose of any Collateral unless all unpaid principal of, accrued
but unpaid interest on, and Premium, if any, and Break Amount, if any, with
respect to, the Outstanding Securities and other amounts otherwise payable under
this Indenture, if any, shall be declared or otherwise become due and payable
immediately.
Section 7.6 LIMITATION ON SUITS.
A Securityholder may not pursue any remedy with respect to this Indenture
or the Securities unless:
(a) the Holder gives to the Trustee written notice of a continuing Event
of Default;
(b) the Holders of at least twenty-five percent (25%) in principal amount
of the Securities Outstanding make a written request to the Trustee to pursue
the remedy;
(c) such Holder or Holders offer to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within sixty (60) days
after receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Controlling Party does not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent with
such request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
Section 7.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, interest on, and
Premium, if any, and Break Amount, if any, with respect to, the Security in
cash, on or after the respective due dates expressed in the Security, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder.
It is hereby expressly understood, intended and agreed that any and all
actions which a Holder of the Securities may take to enforce the provisions of
this Indenture and/or collect Payments due hereunder or under the Securities,
except to the extent that such action is determined to be on behalf of all
Holders of the Securities, shall be in addition to and shall not in any way
change, adversely affect or impair the rights and remedies of the Trustee, the
Controlling Party or any other Holder of the Securities thereunder or under this
Indenture, the other Operative Documents and the Support Documents, including
the right to foreclose upon and sell the Collateral or any part thereof and to
apply any proceeds realized in accordance with the provisions of this Indenture.
Section 7.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal, interest, Premium or Break
Amount specified in Section 7.1(a) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Securities for the whole amount of
principal, accrued interest, Premium, if any, or Break Amount, if any, remaining
unpaid, together with interest on overdue principal and on overdue interest,
Premium or Break Amount to the extent that payment of such interest is permitted
by law, in each case at the rate per annum provided for by the Securities, and
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 7.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Securityholders
allowed in any judicial proceedings relative to the Company (or any other
obligor upon the Securities), its creditors or its property and shall be
entitled and empowered to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel, and any other amounts due the Trustee under Section 8.7, and unless
prohibited by law or applicable regulations to vote on behalf of the Holders of
Securities for the election of a trustee in bankruptcy or other person
performing similar functions. Nothing herein contained shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Securityholder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Securityholder in
any such proceeding except, as aforesaid, for the election of a trustee in
bankruptcy or person performing similar functions.
Section 7.10 APPLICATION OF PROCEEDS.
Any moneys collected by the Trustee pursuant to this Article 7 or by the
Security Agent under Section 6.02 of the Security Agreement shall be distributed
in the order provided in Section 3.2 at the date or dates fixed by the Trustee
and, in case of the distribution of such moneys on account of principal,
interest, Premium, if any, or Break Amount, if any, upon presentation of the
several Securities and stamping (or otherwise noting) thereon the payment, or
issuing Securities in reduced principal amounts in exchange for the presented
Securities if only partially paid, or upon surrender thereof if fully paid.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section 7.10, and the Trustee shall give the
Company and the Securityholders written notice thereof no less than 15 days
prior to any such record date.
Section 7.11 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court in its
discretion may require in any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 7.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 7.7, or a suit
by Holders of more than ten percent (10%) in principal amount of the Securities
Outstanding.
Section 7.12 RESTORATION OF RIGHTS ON ABANDONMENT OF PROCEEDINGS.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned for any
reason, or shall have been determined adversely to the Trustee, then and in
every such case the Company, the Trustee and the Securityholders shall be
restored respectively to their former positions and rights hereunder, and all
rights, remedies and powers of the Company, the Trustee and the Securityholders
shall continue as though no such proceedings had been taken.
Section 7.13 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT
WAIVER OF DEFAULT.
No right or remedy herein conferred upon or reserved to the Trustee or to
the Securityholders is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder of any of the
Securities to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to the other applicable provisions of this
Indenture, every power and remedy given by this Indenture or by law to the
Trustee, a Liquidity Provider, the Policy Provider or to the Securityholders may
be exercised from time to time, and as often as shall be deemed expedient, by
the Trustee or by the Securityholders.
Any right or remedy herein conferred upon or reserved to the Trustee may be
exercised by it in its capacity as Trustee and/or as Collateral Agent, as it may
deem most efficacious, if it is then acting in such capacity.
ARTICLE 8.
TRUSTEE
Section 8.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are specifically
set forth in this Indenture, the other Operative Documents and the Support
Documents and no others.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) This paragraph (c) does not limit the effect of paragraph (b) of
this Section 8.1 or of Section 8.2.
(ii) The Trustee shall not be liable for any error of judgment made
in good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 7.5.
(d) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 8.1.
(f) Funds held in trust for the benefit of the Holders of the Securities
by the Trustee or any Paying Agent on deposit with itself or elsewhere, and
Investment Securities held in trust for the benefit of the Holders of the
Securities by the Trustee, shall be held in distinct, identifiable accounts, and
other funds or investments of any nature or from any source whatsoever may be
held in such accounts, except, in each case, to the extent required by law. The
Trustee shall not be liable for interest on any money received by it except as
the Trustee may agree with the Company.
Section 8.2 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, which shall conform to Section
12.5. The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such certificate or opinion.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through its attorneys and
agents and the Trustee shall not be responsible for the misconduct or negligence
of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within its
rights or powers.
Section 8.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or Affiliates of the Company with the same rights it would
have if it were not Trustee. Any Agent may do the same with like rights.
However, the Trustee is subject to Sections 8.10 and 8.11.
Section 8.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's use
of the proceeds from the Securities, and it shall not be responsible for any
statement in the Securities or in this Indenture other than its certificate of
authentication.
Section 8.5 NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to each Securityholder, the Liquidity Provider and the
Policy Provider a notice of the Default within ninety (90) days after the
occurrence thereof except as otherwise permitted by the TIA. Except in the case
of a Default in payment of principal of, or interest on, or Premium, if any, or
Break Amount, if any, with respect to, any Security, the Trustee may withhold
the notice if and so long as it, in good faith, determines that withholding the
notice is in the interests of the Securityholders.
Section 8.6 REPORTS BY TRUSTEE TO HOLDERS.
If circumstances require any report to Holders under TIA ss. 313(a), it
shall be mailed to Securityholders within sixty (60) days after each May 15
(beginning with the May 15 following the date of this Indenture) as of which
such circumstances exist. The Trustee also shall comply with the remainder of
TIA ss. 313.
The Company shall notify the Trustee if the Securities become listed on or
delisted from any stock exchange or other recognized trading market.
The Trustee shall, upon the written request of any Holder of Securities but
subject to applicable laws and contractual limitations, provide to such Holder
copies of any reports, certificates, opinions or other materials of any kind or
nature required to be delivered to the Trustee (including in its capacity as
Collateral Agent) under this Indenture, any of the other Operative Documents or
the Support Documents or otherwise delivered by or on behalf of the Company to
the Trustee (including in its capacity as Collateral Agent).
Section 8.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation, as agreed upon from time to time, for its services, including as
Collateral Agent. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee upon request for all reasonable disbursements, expenses and advances
incurred or made by it in any such capacities. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel and all agents and other persons not regularly in its employ.
The Company shall indemnify the Trustee (in its capacities as Trustee and
Collateral Agent) and each predecessor Trustee for, and hold each of them
harmless against, any loss or liability incurred by each of them in connection
with the administration of this trust and its duties hereunder. In connection
with any defense of such a claim, the Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not reimburse any expense or indemnify against any loss or liability
incurred by the Trustee or any predecessor Trustee through the negligence or bad
faith of such Trustee or each such predecessor Trustee.
To secure the Company's payment obligations in this Section 8.7, the
Trustee shall have a Lien (legal and equitable) prior to the Securities on all
money or property held or collected by the Trustee, in its capacity as Trustee,
or otherwise distributable to Securityholders, except money, securities or
property held in trust to pay principal of, interest on or Premium, if any, or
Break Amount, if any, with respect to the particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 7.1(d), (e) or (f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Code or any similar law of any jurisdiction
other than the U.S.
Section 8.8 REPLACEMENT OF TRUSTEE.
The Trustee (in its capacities as Trustee and Collateral Agent) may resign
by so notifying the Company, the Liquidity Provider and the Policy Provider in
writing. The Controlling Party may remove the Trustee (in its capacities as
Trustee and Collateral Agent) by so notifying the Trustee in writing and may
appoint a successor Trustee with the Company's consent, which consent shall not
be unreasonably refused or delayed. The Company may remove the Trustee (in its
capacities as Trustee and Collateral Agent) if:
(a) the Trustee fails to comply with Section 8.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or its
property;
(d) the Trustee becomes incapable of acting; or
(e) no Default or Event of Default has occurred and is continuing and the
Company determines in good faith to remove the Trustee.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the
Controlling Party may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Immediately after that, the retiring
Trustee shall transfer all property held by it as Trustee to the successor
Trustee, subject to the Lien provided in Section 8.7, the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Securityholder.
No resignation or removal of the Trustee and no appointment of a successor
Trustee, pursuant to this Article, shall become effective until the acceptance
of appointment by the successor Trustee under this Section 8.8. If a successor
Trustee does not take office within sixty (60) days after the retiring Trustee
resigns or is removed, the retiring Trustee, the Company, the Liquidity
Provider, the Policy Provider or the Holders of at least ten percent (10%) in
principal amount of the Securities Outstanding may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 8.10, any Holder of Securities
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section 8.8,
the Company's obligations under Section 8.7 shall continue for the benefit of
the retiring Trustee which shall retain its claim pursuant to Section 8.7.
Section 8.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the resulting, surviving or transferee corporation without any further act shall
be the successor Trustee.
Section 8.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss. 310(a)(1) and ss. 310(a)(5). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent,
published annual report of condition. The Trustee shall comply with TIA ss.
310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
Section 8.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
Section 8.12 OTHER CAPACITIES.
At all times during which any Securities are Outstanding, unless otherwise
permitted under the Operative Documents, the Trustee shall serve as the
Collateral Agent and any resignation, removal or disqualification from any one
such office shall, without action on the part of any Person, result in the
resignation, removal, or disqualification from all such offices. Any Person
serving in such capacities shall have and may effectively exercise all the
rights, remedies and powers, and be entitled to all protections and
indemnifications, provided to such Person in whatever capacities such Person
then serves under any and all of the Indenture, the other Operative Documents
and the Support Documents, regardless of the capacity or capacities in which
such Person may purport to take or omit any action. The Trustee agrees to and
shall have the benefit of all provisions of the Operative Documents stated
therein to be applicable to the Trustee.
Section 8.13 TRUST ACCOUNTS.
(a) Upon the execution of this Indenture, the Trustee shall establish and
maintain in its name (i) the Collection Account as an Eligible Deposit Account,
bearing a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Securityholders, the Liquidity Provider and
the Policy Provider, and (ii) a Policy Account as an Eligible Deposit Account
bearing a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Securityholders and, with respect to
amounts paid by the Policy Provider under Section 3.6(d) and clause (vii) of the
definition of "Deficiency Amount" in the Policy, the Liquidity Provider. The
Trustee shall establish and maintain the Cash Collateral Account pursuant to and
under the circumstances set forth in Section 3.5(f) hereof. Upon such
establishment and maintenance under Section 3.5(f) hereof, the Cash Collateral
Account shall, together with the Collection Account and the Policy Account,
constitute the "TRUST ACCOUNTS" hereunder.
(b) Funds on deposit in the Trust Accounts shall be invested and
reinvested by the Trustee in Eligible Investments selected by the Trustee if
such investments are reasonably available and have maturities no later than the
earlier of (i) 90 days following the date of such investment and (ii) the
Business Day immediately preceding the Interest Payment Date next following the
date of such investment; PROVIDED, HOWEVER, that following the making of a
Downgrade Drawing or a Non-Extension Drawing under the Liquidity Facility, the
Trustee shall invest and reinvest such amounts in Eligible Investments at the
direction of the Company (or, if and to the extent so specified to the Trustee
by the Company, the Liquidity Provider); PROVIDED FURTHER, HOWEVER, that,
notwithstanding the foregoing proviso, following the making of a Non-Extension
Drawing under the initial Liquidity Facility, the Trustee shall invest and
reinvest the amounts in the Cash Collateral Account with respect to such
Liquidity Facility in Eligible Investments pursuant to the written instructions
of the Liquidity Provider; PROVIDED FURTHER, HOWEVER, that upon the occurrence
and during the continuation of an Event of Default, the Trustee shall invest and
reinvest such amounts in accordance with the written instructions of the
Controlling Party. Unless otherwise expressly provided in this Indenture
(including, without limitation, with respect to Investment Earnings on amounts
on deposit in the Cash Collateral Account pursuant to Section 3.5(f) hereof),
any Investment Earnings shall be deposited in the Collection Account when
received by the Trustee and shall be applied by the Trustee in the same manner
as the other amounts on deposit in the Collection Account are to be applied and
any losses shall be charged against the principal amount invested, in each case
net of the Trustee's reasonable fees and expenses in making such investments.
The Trustee shall not be liable for any loss resulting from any investment,
reinvestment or liquidation required to be made under this Indenture other than
by reason of its willful misconduct or gross negligence. Eligible Investments
and any other investment required to be made hereunder shall be held to their
maturities except that any such investment may be sold (without regard to its
maturity) by the Trustee without instructions whenever such sale is necessary to
make a distribution required under the Indenture. Uninvested funds held
hereunder shall not earn or accrue interest.
(c) The Trustee shall possess all right, title and interest in all funds
on deposit from time to time in the Trust Accounts and in all proceeds thereof
(including all income thereon, except as otherwise expressly provided in Section
3.3(b) with respect to Investment Earnings). The Trust Accounts shall be held in
trust by the Trustee under the sole dominion and control of the Trustee for the
benefit of the Securityholders, the Liquidity Provider and the Policy Provider,
as the case may be. If, at any time, any of the Trust Accounts ceases to be an
Eligible Deposit Account, the Trustee shall within 10 Business Days (or such
longer period, not to exceed 30 calendar days, for which a Ratings Confirmation
for the Securities and the consent of the Policy Provider (which consent shall
not be unreasonably withheld or delayed) shall have been obtained) establish a
new Collection Account, Policy Account or Cash Collateral Account, as the case
may be, as an Eligible Deposit Account and shall transfer any cash and/or any
investments to such new Collection Account, Policy Account or Cash Collateral
Account, as the case may be. So long as WTC is an Eligible Institution, the
Trust Accounts shall be maintained with it as Eligible Deposit Accounts.
Section 8.14 DEPOSITS TO THE COLLECTION ACCOUNT.
The Trustee shall, upon receipt thereof, deposit in the Collection Account
all Payments received by it (other than any Payment which by the express terms
hereof is to be deposited in the Policy Account or the Cash Collateral Account).
Section 8.15 CERTAIN PAYMENTS.
Except for amounts constituting Liquidity Obligations, Policy Expenses or
Policy Provider Obligations which shall be deposited in the Collection Account
and distributed as provided in Section 3.2, the Trustee will distribute promptly
upon receipt thereof to the Person entitled thereto any indemnity payment or
expense reimbursement received by it from the Company in respect of the
Liquidity Provider or the Policy Provider.
ARTICLE 9.
DISCHARGE OF INDENTURE
Section 9.1 DISCHARGE OF LIABILITY ON SECURITIES.
(a) When (i) the Company delivers to the Trustee all Outstanding
Securities (other than Securities replaced pursuant to Section 2.12) for
cancellation or (ii) all Outstanding Securities have become due and payable,
whether at maturity or as a result of the mailing of a notice of redemption
pursuant to Article 4 hereof and the Company irrevocably deposits with the
Trustee funds sufficient to pay at maturity or upon redemption all Outstanding
Securities, including interest thereon to maturity or such redemption date
(other than Securities replaced pursuant to Section 2.12), Premium, if any, and
Break Amount, if any, and if in either case the Company pays all other sums
payable hereunder by the Company and due on or prior to such maturity or
redemption date, then this Indenture shall, subject to Section 9.1(b), cease to
be of further effect. The Trustee shall acknowledge satisfaction and discharge
of this Indenture by executing and delivering to the Company on demand of the
Company accompanied by an Officers' Certificate and an Opinion of Counsel, a
written instrument to such effect prepared by the Company at its sole cost and
expense.
(b) Notwithstanding clause (a) above, the provisions of Sections 2.1
through 2.17, inclusive, 6.1, 8.7 and 8.8 and in this Article 9 shall survive
until the Outstanding Securities have been paid in full. Thereafter, the
Company's obligations in Sections 6.1, 8.7, 9.4 and 9.5 shall survive.
Section 9.2 APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust cash deposited with it pursuant to this
Article 9. It shall apply the deposited cash through the Paying Agent and in
accordance with this Indenture to the payment of principal of, interest on,
Premium, if any, and Break Amount, if any, on the Securities.
Section 9.3 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly turn over to the Company,
upon request accompanied by a certificate from a nationally recognized firm of
independent accountants expressing their opinion that any cash then held by the
Trustee is in excess of the amounts sufficient to pay when due all of the
principal of, interest on, and Premium, if any, and Break Amount, if any, with
respect to the Securities to redemption or maturity, as the case may be, any
such excess cash held by them.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any cash held by them for the
payment of principal, interest, Premium or Break Amount that remains unclaimed
for two years, and, thereafter, Securityholders entitled to the cash must look
to the Company for payment as general creditors.
Section 9.4 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any cash in accordance
with this Article 9 by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture, the other Operative Documents, the Support Documents and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to this Article 9 until such time as the Trustee or Paying Agent is
permitted to apply all such cash in accordance with this Article 9; PROVIDED,
HOWEVER, that, if the Company has made any payment of principal of, interest on,
or Premium, if any, or Break Amount, if any, with respect to any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
cash held by the Trustee or Paying Agent.
ARTICLE 10.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 10.1 WITHOUT CONSENT OF THE CONTROLLING PARTY OR HOLDERS.
The Company and the Trustee or the Collateral Agent, as the case may be,
may amend or supplement this Indenture, the Securities and the other Operative
Documents and, upon request of the Company, the Trustee shall amend or
supplement the Support Documents, in each case without notice to or consent of
any Securityholder and, except as otherwise provided in the Support Documents,
without notice to or consent of the Liquidity Provider or the Policy Provider:
(i) to provide for uncertificated Securities in addition to or in
place of certificated Securities;
(ii) to provide for the assumption of the Company's obligations under
the Operative Documents and the Securities in the case of a merger or
consolidation or conveyance, transfer or lease of all or substantially all
of the assets of the Company or otherwise to comply with Section 5.4;
(iii) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA;
(iv) to effect the amendments contemplated by Section 3.5(e)(v)(y);
(v) to provide for the effectiveness of a Collateral Agreement
pursuant to Section 3.1 of the Collateral Maintenance Agreement;
(vi) to provide for the issuance of the Subordinated Securities;
(vii) to comply with the requirements of DTC, Euroclear or
Clearstream or the Trustee with respect to the provisions of the Indenture
or the Securities relating to transfers and exchanges of the Securities or
beneficial interests therein;
(viii) to provide for any successor Trustee or Collateral Agent;
(ix) to cure any ambiguity, defect or inconsistency; or
(x) to make any other change not inconsistent with the provisions
hereof, PROVIDED that such action does not materially adversely affect the
interests of any Securityholder.
Section 10.2 WITH CONSENT OF THE CONTROLLING PARTY, LIQUIDITY PROVIDER
AND HOLDERS.
(a) The Company and the Trustee or the Collateral Agent, as the case may
be, may amend or supplement this Indenture, the Securities and the other
Operative Documents and, upon request of the Company, the Trustee shall amend or
supplement the Support Documents, in each case without notice to or consent of
the Liquidity Provider or the Policy Provider and without notice to any
Securityholder but with the written consent of the Controlling Party, PROVIDED
that (i) Sections 3.5, 3.6, 3.8 and 3.9 of this Indenture may not be modified
without the consent of the Liquidity Provider and the Policy Provider and (ii)
the Collateral Maintenance Agreement and the Support Documents may not be
modified other than in accordance with the provisions thereof. Subject to
Sections 7.4, 7.5 and 7.7, unless any Event of Default has occurred and is
continuing, the Controlling Party may authorize the Trustee to, and the Trustee,
subject to Section 10.6, upon such authorization shall, waive compliance by the
Company with any provision of this Indenture, the Securities or the other
Operative Documents. However, an amendment, supplement or waiver, including a
waiver pursuant to any provision of Section 7.4, may not without the consent of
the Liquidity Provider, the Policy Provider and each Securityholder affected:
(i) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the rate or extend the time for payment of interest on
any Security;
(iii) reduce the amount or extend the time for payment of principal
of or Premium, if any or Break Amount, if any, with respect to (in each
case, whether on redemption or otherwise) any Security;
(iv) change the place of payment where, or the coin or currency in
which, any Security (or the redemption price thereof), interest thereon, or
Premium, if any, or Break Amount, if any, with respect thereto is payable;
(v) change the distribution and application of payments as described
in Section 3.2 of this Indenture (except to provide for distributions on
Subordinated Securities as permitted by Section 2.18);
(vi) waive a default in the payment of the principal of, interest on,
or Premium, if any, or Break Amount, if any, with respect to any Security;
(vii) make any changes in Sections 7.4, 7.7 or 7.10 or the third
sentence of this Section 10.2(a); or
(viii) impair the right of any Holder to institute suit for the
enforcement of any amount payable on any Security when due.
(b) It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
(c) After an amendment, supplement or waiver under this Section 10.2
becomes effective, the Company shall mail to the Holders affected thereby a
brief notice describing such amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however in any
way impair or affect the validity of any such amendment, supplement or waiver.
Section 10.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture, any other Operative
Document or the Securities shall comply with the TIA as then in effect.
Section 10.4 REVOCATION AND EFFECT OF CONSENTS.
(a) Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Security or portion of a Security that evidences the same debt as the consenting
Holder's Security, even if notation of the consent is not made on any Security.
However, any such Holder or subsequent Holder may revoke the consent as to his
Security or portion of a Security. Such revocation shall be effective only if
the Trustee receives the notice of revocation before the date the amendment,
supplement or waiver becomes effective.
(b) After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(i) through (viii) of Section 10.2(a). In that case the amendment, supplement or
waiver shall bind each Holder of a Security who has consented to it and every
subsequent Holder of a Security or portion of a Security that evidences the same
debt as the consenting Holder's Security; PROVIDED, HOWEVER, that no amendment,
supplement or waiver relating to any impairment of the right to receive
principal, interest, Premium, if any, or Break Amount, if any, when due and
payable consented to by a Holder shall be binding upon any subsequent Holder of
a Security or a portion of a Security that evidences the same debt as the
consenting Holder's Security unless notation with regard thereto is made upon
such Security or the Security representing such portion.
Section 10.5 NOTATION ON OR EXCHANGE OF SECURITIES.
If an amendment, supplement or waiver changes the terms of a Security, the
Trustee may require the Holder of the Security to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms.
Section 10.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
Upon the Request of the Company, the Trustee shall execute any amendment,
supplement or waiver authorized pursuant to this Article 10; PROVIDED that the
Trustee shall not be obligated to execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Section 10.7 EFFECT OF SUPPLEMENT AND/OR AMENDMENT.
Upon the execution of any supplemental indenture and/or any such amendment
or supplement to the Operative Documents or the Support Documents pursuant to
the provisions of this Article 10, this Indenture, such Operative Documents and
such Support Documents shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture, the other Operative
Documents and the Support Documents of the Trustee, the Collateral Agent, the
Liquidity Provider, the Policy Provider, the Company and the Holders of
Securities shall thereafter be determined, exercised and enforced hereunder and
thereunder subject in all respects to such modifications and amendments, and all
terms and conditions of any such supplemental indenture and/or any such
amendment or supplement to the other Operative Documents or the Support
Documents shall be and be deemed to be part of the terms and conditions of this
Indenture, the other Operative Documents and the Support Documents for any and
all purposes.
ARTICLE 11.
SECURITY
Section 11.1 OTHER OPERATIVE DOCUMENTS.
(a) To secure the due and punctual payment, performance and observance of
the Obligations, the Company has simultaneously with the execution of this
Indenture entered into the Security Agreement and has granted a security
interest on the Spare Parts Collateral to the Security Agent in the manner and
to the extent therein provided. WTC is hereby appointed as Security Agent and
authorized and directed to enter into the Security Agreement on the Closing
Date. Each Securityholder, by accepting a Security, agrees to all of the terms
and provisions of each Operative Document (including, without limitation, the
provisions providing for the release of Collateral), as the same may be in
effect or may be amended from time to time pursuant to its terms and the terms
hereof. The Company will execute, acknowledge and deliver to the Trustee or the
Collateral Agent such further assignments, transfers, assurances or other
instruments as the Trustee may require or request, and will do or cause to be
done all such acts and things as may be necessary or proper, or as may be
reasonably required by the Trustee or the Collateral Agent to assure and confirm
to the Trustee or the Collateral Agent the security interest in the Collateral
contemplated hereby and by the other Operative Documents, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Securities secured hereby, according to the intent and
purposes herein expressed.
(b) The Trustee acknowledges that it is a third-party beneficiary of the
Trustee Provisions and agrees to perform its obligations expressly set forth in
the Collateral Maintenance Agreement.
Section 11.2 OPINIONS, CERTIFICATES AND APPRAISALS.
(a) The Company shall furnish to the Trustee promptly after the execution
and delivery of this Indenture an Opinion of Counsel stating that in the opinion
of such counsel the Indenture or Security Agreement has been properly recorded
and filed so as to make effective the Lien intended to be created thereby and
reciting the details of such actions, or (ii) stating that, in the opinion of
such counsel, no such action is necessary to make such Lien effective.
(b) The Company shall furnish to the Trustee not later than one hundred
and twenty (120) days after January 1 in each year beginning with January 1,
2003, an Opinion of Counsel, dated as of such date, either (a) stating that, in
the opinion of such counsel, such action has been taken with respect to the
recording, filing, rerecording, and refiling of the Indenture, any Collateral
Agreement, any amendment or supplement thereto, and all financing statements,
continuation statements or other instruments of further assurance as is
necessary to maintain the Lien created by the Collateral Agreements (if not then
terminated pursuant to its terms) and reciting the details of such action, or
(b) stating that, in the opinion of such counsel, no such action is necessary to
maintain such Lien.
(c) The release of any Collateral from the terms of any Collateral
Agreement, will not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to the applicable Collateral Agreement. To the extent
applicable, the Company shall cause TIA ss. 314(d) relating to the release of
property or securities from the Lien of any Collateral Agreement, and relating
to the substitution therefor of any property or securities to be subjected to
the Lien of such Collateral Agreement, to be complied with. With respect to any
such substitution, the Company shall furnish to the Trustee an Independent
Appraiser's Certificate if required by TIA ss. 314(d). Any certificate or
opinion required by TIA ss. 314(d) may be made by an Officer of the Company,
except in cases where TIA ss. 314(d) requires that such certificate or opinion
be made by an independent person, which person shall meet the requirements set
forth in clause (ii) of the definition of the term "Independent Appraiser."
Section 11.3 AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER
THE OPERATIVE DOCUMENTS.
The Trustee (in its capacities as such or as a Collateral Agent) may, in
its sole discretion and without the consent of the Securityholders, take all
actions it deems necessary or appropriate to (a) enforce any of the terms of the
Operative Documents and the Support Documents and (b) collect and receive any
and all amounts payable in respect of the obligations of the Company hereunder.
Subject to the provisions of this Indenture, the other Operative Documents and
the Support Documents, the Trustee (in such capacities) shall have power to
institute and to maintain such suits and proceedings as it may deem expedient to
prevent any impairment of the Collateral by any acts which may be unlawful or in
violation of the other Operative Documents or this Indenture, and such suits and
proceedings as it may deem expedient to preserve or protect its interest and the
interests of the Securityholders in the Collateral (including power to institute
and maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Securityholders or of the Trustee in any
such capacity).
Section 11.4 AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
OPERATIVE DOCUMENTS AND THE SUPPORT DOCUMENTS.
The Trustee is authorized to receive any funds for the benefit of
Securityholders distributed under the Collateral Agreements and the Support
Documents, and to make further distributions of such funds to the Holders
according to the provisions of this Indenture.
Section 11.5 AGREEMENT AS TO FAIR MARKET VALUE.
The Company and the Trustee acknowledge that the use of Fair Market Value
herein or in the other Operative Documents is strictly and solely for
convenience in establishing the amount of Collateral and any substitutions
therefor under the Operative Documents. Accordingly, the Fair Market Value of
any Collateral subjected to the Lien of a Collateral Agreement is not an
indication of and shall not be deemed an agreement by the parties as the basis
for valuation of such Collateral for purposes of determining the value of the
Trustee's secured claim against the Company, adequate protection of the
Trustee's interest in the Collateral or for any other purpose in any bankruptcy,
receivership or insolvency proceeding involving the Company or any remedial
action brought by the Trustee or Collateral Agent, except to the extent such
valuations are mandated by applicable law, or any court with jurisdiction over
such proceedings, in either case without regard to the use of the concept of
Fair Market Value by the parties hereto.
ARTICLE 12.
MISCELLANEOUS
Section 12.1 CONFLICT WITH TRUST INDENTURE ACT OF 1939.
If and to the extent that any provision of this Indenture limits,
qualifies, or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the TIA, such imposed duties shall control.
Section 12.2 NOTICES; WAIVERS.
Any request, demand, authorization, direction, notice, consent, waiver or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with
(a) the Company shall be sufficient for every purpose hereunder if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier, postage or courier charges,
as the case may be, prepaid, to the Company at:
Continental Airlines, Inc.
1600 Smith Street
Dept. HQS-FN
Houston, TX 77002
Attention: Treasurer
Telecopier No.: (713) 324-2447
(b) the Trustee shall be sufficient for every purpose hereunder if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier, postage or courier charges,
as the case may be, prepaid, to the Trustee at:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
(c) the Liquidity Provider shall be sufficient for every purpose
hereunder if in writing and sent by personal delivery, by telecopier, by
registered or certified mail or by nationally recognized overnight courier,
postage or courier charges, as the case may be, prepaid, to the Liquidity
Provider at:
Morgan Stanley Capital Services Inc.
1585 Broadway
New York, New York 10036
Attention: David Rogers
Telecopier No.: (212) 761-0350
(d) the Policy Provider shall be sufficient for every purpose hereunder
if in writing and sent by personal delivery, by telecopier, by registered or
certified mail or by nationally recognized overnight courier, postage or courier
charges, as the case may be, prepaid, to the Policy Provider at:
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management, Structured Finance
Telecopier No.: (914) 765-3163
or to any of the above parties at any other address or telecopier number
subsequently furnished in writing by it to each of the other parties listed
above. An affidavit by any person representing or acting on behalf of the
Company, the Trustee, Liquidity Provider or Policy Provider as to such mailing,
having any registry receipt required by this Section attached, shall be
conclusive evidence of the giving of such demand, notice or communication.
Any notice or communication mailed to a Holder shall be sent to such Holder
by first-class mail or by nationally recognized overnight courier, postage or
courier charges, as the case may be, prepaid, at such Holder's address as it
appears on the Register and shall be sufficiently given to such Holder if so
sent within the time prescribed. Any notice or communication shall comply with
TIA ss. 313(c) to the extent required by the TIA.
Failure to mail a notice or send a communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. Notices
under this Indenture to the Trustee, to the Policy Provider, to the Liquidity
Provider or to the Company are deemed given only when received. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by the Holders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver.
Section 12.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA ss. 312(c).
Section 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any Request or application by the Company to the Trustee to take any
action under this Indenture or another Operative Document, the Company shall
furnish to the Trustee: (a) an Officers' Certificate and (b) an Opinion of
Counsel, each stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture or such Operative Document, as
the case may be, relating to the proposed action have been complied with,
provided, that in the case of any such application or Request as to which the
furnishing of an Officers' Certificate or Opinion of Counsel is specifically
required by any provision of this Indenture or another Operative Document
relating to such particular application or Request, no additional certificate or
opinion, as the case may be, need be furnished.
Section 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion provided for and delivered to the Trustee or
the Collateral Agent with respect to compliance with a condition or covenant
provided for in this Indenture or another Operative Document shall include: (a)
a statement that the Person signing such certificate or opinion has read such
condition or covenant and the definitions herein or therein relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based; (c) a statement that, in the opinion of such
Person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such condition or
covenant has been complied with; and (d) a statement as to whether or not in the
opinion of such Person, such condition or covenant has been complied with.
Any certificate or opinion of an Officer or an engineer, insurance broker,
accountant or other expert may be based, insofar as it relates to legal matters,
upon a certificate or opinion of or upon representations by counsel, unless such
officer, engineer, insurance broker, accountant or other expert knows that the
certificate or opinion or representations with respect to the matters upon which
his opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should have known that the same were erroneous.
Any certificate or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon the certificate or opinion of or representations by an
officer or officers of the Company stating that the information with respect to
such factual matters is in possession of the Company, unless such counsel knows
that the certificate or opinion or representations with respect to the matters
upon which his opinion may be based as aforesaid are erroneous and insofar as it
relates to legal matters in a jurisdiction or area of law beyond the expertise
of such counsel, such counsel may rely upon the opinion of counsel qualified in
such other jurisdiction or area of law.
Wherever in this Indenture or another Operative Document in connection with
any application, certificate or report to the Trustee or the Collateral Agent it
is provided that the Company shall deliver any document as a condition of the
granting of such application or as evidence of the Company's compliance with any
term hereof, it is intended that the truth and accuracy at the time of the
granting of such application or at the effective date of such certificate or
report, as the case may be, of the facts and opinions stated in such document
shall in each such case be a condition precedent to the right of the Company to
have such application granted or to the sufficiency of such certificate or
report. Nevertheless, in the case of any such application, certificate or
report, any document required by any provision of this Indenture or another
Operative Document to be delivered to the Trustee or the Collateral Agent as a
condition of the granting of such application or as evidence of such compliance
may be received by the Trustee or the Collateral Agent as conclusive evidence of
any statement therein contained and shall be full warrant, authority and
protection to the Trustee or the Collateral Agent acting on the faith thereof.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Whenever any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements or opinions or other
instruments under this Indenture or another Operative Document he may, but need
not, consolidate such instruments into one.
Section 12.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar or Paying Agent may make reasonable rules for
their respective functions.
Section 12.7 EFFECT OF HEADINGS.
The Article and Section headings and the Table of Contents contained in
this Indenture have been inserted for convenience of reference only, and are and
shall be without substantive meaning or content of any kind whatsoever and are
not a part of this Indenture.
Section 12.8 GOVERNING LAW.
THIS INDENTURE IS BEING DELIVERED IN THE STATE OF NEW YORK. THIS INDENTURE
AND THE SECURITIES ISSUED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 12.9 QUIET ENJOYMENT.
The Trustee, the Policy Provider and the Liquidity Provider each agrees as
to itself with the Company that, so long as no Event of Default shall have
occurred and be continuing, such Person shall not (and shall not permit any of
its Affiliates or other Person claiming by, through or under it to) interfere
with the Company's rights in accordance with the Indenture and the other
Operative Documents to the quiet enjoyment, possession and use of the
Collateral.
Section 12.10 NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company shall
not have any personal liability for any obligations of the Company under the
Securities, the Indenture or the other Operative Documents by reason of his or
her status as such director, officer, employee or stockholder. Each
Securityholder by accepting a Security waives and releases all such liability.
The waiver and release are part of the consideration for the issue of the
Securities.
Section 12.11 BENEFITS OF INDENTURE AND THE SECURITIES RESTRICTED.
Subject to the provisions of Section 12.12 hereof, nothing in this
Indenture or the Securities, express or implied, shall give or be construed to
give to any Person, firm or corporation, other than the parties hereto and the
Holders, any legal or equitable right, remedy or claim under or in respect of
this Indenture or under any covenant, condition, or provision herein contained,
all such covenants, conditions and provisions, subject to Section 12.12 hereof,
being for the sole benefit of the parties hereto and of the Holders.
Section 12.12 SUCCESSORS AND ASSIGNS.
This Indenture and all obligations of the Company hereunder shall be
binding upon the successors and permitted assigns of the Company, and shall,
together with the rights and remedies of the Trustee hereunder, inure to the
benefit of the Trustee, the Holders, and their respective successors and
assigns. Any assignment in violation of this Indenture shall be null and void ab
initio.
Section 12.13 COUNTERPART ORIGINALS.
This Indenture may be signed in two or more counterparts, each of which
shall be deemed an original, but all of which shall together constitute one and
the same agreement.
Section 12.14 SEVERABILITY.
The provisions of this Indenture are severable, and if any clause or
provision shall be held invalid, illegal or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect in that
jurisdiction only such clause or provision, or part thereof, and shall not in
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision of this Indenture in any jurisdiction, and a Holder
shall have no claim therefor against any party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and delivered all as of the date first written above.
CONTINENTAL AIRLINES, INC.
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
WILMINGTON TRUST COMPANY,
as Trustee
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
MORGAN STANLEY CAPITAL
SERVICES INC.,
as Liquidity Provider
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
MBIA INSURANCE CORPORATION,
as Policy Provider
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Appendix I
DEFINITIONS APPENDIX
SECTION 1. DEFINED TERMS.
"ACCELERATION" means, with respect to the amounts payable in respect of the
Securities issued under the Indenture, such amounts becoming immediately due and
payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.
"ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.
"ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral
Maintenance Agreement.
"ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral
Maintenance Agreement.
"ADVANCE" means any Advance as defined in the Liquidity Facility.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying
Agent.
"AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.
"AIRCRAFT" means any contrivance invented, used, or designed to navigate,
or fly in, the air.
"ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral, taking at least the following actions: (i)
reviewing the Parts Inventory Report prepared as of the applicable Valuation
Date; (ii) reviewing the Independent Appraiser's internal value database for
values applicable to Qualified Spare Parts included in the Spare Parts
Collateral; (iii) developing a representative sampling of a reasonable number of
the different Qualified Spare Parts included in Spare Parts Collateral for which
a market check will be conducted; (iv) checking other sources, such as
manufacturers, other airlines, U.S. government procurement data and airline
parts pooling price lists, for current market prices of the sample parts
referred to in clause (iii); (v) establishing an assumed ratio of Serviceable
Parts to Unserviceable Parts as of the applicable Valuation Date based upon
information provided by the Company and the Independent Appraiser's limited
physical review of the Spare Parts Collateral referred to in the following
clause (vi); (vi) visiting at least two locations selected by the Independent
Appraiser where the Pledged Spare Parts are kept by the Company (neither of
which was visited for purposes of the last appraisal under Section 2.1 or 2.2 of
the Collateral Maintenance Agreement, whichever was most recent), PROVIDED that
at least one such location shall be one of the top three locations at which the
Company keeps the largest number of Pledged Spare Parts, to conduct a limited
physical inspection of the Spare Parts Collateral; (vii) conducting a limited
review of the inventory reporting system applicable to the Pledged Spare Parts,
including checking information reported in such system against information
determined through physical inspection pursuant to the preceding clause (vi) and
(viii) reviewing a sampling of the Spare Parts Documents (including tear-down
reports).
"ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral
Maintenance Agreement.
"APPLIANCE" means an instrument, equipment, apparatus, a part, an
appurtenance, or an accessory used, capable of being used, or intended to be
used, in operating or controlling Aircraft in flight, including a parachute,
communication equipment, and another mechanism installed in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.
"APPLICABLE MARGIN" means 0.90%.
"APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.
"APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing
information relating to the calculation of the Collateral Ratio and Rotable
Ratio, which shall be substantially in the form of Appendix II to the Collateral
Maintenance Agreement.
"APPRAISED VALUE" means, with respect to any Collateral, the Fair Market
Value of such Collateral as most recently determined pursuant to (i) the report
attached as Appendix II to the Offering Memo or (ii) Article 2 and, if
applicable, Section 3.1 of the Collateral Maintenance Agreement.
"AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment
(as defined in the Liquidity Facility) on such date.
"AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
Section 101 ET SEQ.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of such board duly authorized to act in respect of any particular
matter.
"BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the Applicable Date pursuant to
the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below, is equal to or less than zero or (y) on or in respect of any Applicable
Date that is an Interest Payment Date (or, if such an Interest Payment Date is
not a Business Day, the next succeeding Business Day)
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum of (i) the
amount of the outstanding principal amount of such Note as of the
first day of the then applicable Interest Period plus (ii)
interest payable thereon during such entire Interest Period at
then effective LIBOR.
Y = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using then
effective LIBOR as the discount rate.
Z = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using a rate
equal to the applicable London interbank offered rate for a period
commencing on the Applicable Date and ending on the last day of
the then applicable Interest Period, determined by the Reference
Agent as of two Business Days prior to the Applicable Date as the
discount rate.
"BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank Eurodollar market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston, Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with respect to draws under any Policy, the city and state in which the
office of the Policy Provider at which notices, presentations, transmissions,
deliveries and communications are to be made under the Policy is located, and
that, solely with respect to draws under the Liquidity Facility, also is a
"Business Day" as defined in the Liquidity Facility.
"CAPPED INTEREST RATE" means a rate per annum equal to 12%.
"CASH COLLATERAL" means cash and/or Investment Securities deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.
"CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if
it shall so qualify, into which all amounts drawn under the Liquidity Facility
pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be
deposited.
"CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15).
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.
"CLOSING DATE" means the Issuance Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the Spare Parts Collateral and all other collateral in
which the Collateral Agent has a security interest pursuant to the Collateral
Agreements.
"COLLATERAL AGENT" means the Trustee in its capacity as Security Agent or
as agent on behalf of the Holders under any other Collateral Agreement.
"COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.
"COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance
Agreement, dated as of the date of the Indenture, between the Company and the
Policy Provider.
"COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the
aggregate principal amount of all Securities Outstanding minus the sum of the
Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral), as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.
"COLLECTION ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.
"COMPANY" means the party named as such in the Indenture or any obligor on
the Securities until a successor replaces it pursuant to the Indenture and
thereafter means the successor.
"CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.
"CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.
"CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents that would have been shown on the balance sheet of Continental and
its consolidated subsidiaries prepared in accordance with GAAP as of any
Valuation Date, plus (b) the amount of marketable securities that would have
been reflected on such balance sheet which had, as of such Valuation Date, a
maturity of less than one year and which, but for their maturity, would have
qualified to be reflected on such balance sheet as cash equivalents.
"CONTROLLING PARTY" means the Person entitled to act as such pursuant to
the terms of Section 3.8 of the Indenture.
"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the
office of the Trustee at which at any particular time its corporate trust
business is administered and which, at the Closing Date, is located at
Wilmington Trust Company, as Trustee, Rodney Square North 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
"DEBT BALANCE" means 110% of the principal amount of the Outstanding
Securities.
"DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period, to 2.32% and, in the case of any subsequent Interest Period, LIBOR for
such Interest Period, as determined pursuant to the Reference Agency Agreement,
plus the Applicable Margin, PROVIDED that, solely in the event no Registration
Event (as defined in the Registration Rights Agreement) occurs on or prior to
the 210th day after the Closing Date, the Debt Rate shall be increased by an
additional margin equal to 0.50% per annum, from and including such 210th day to
and excluding the earlier of (i) the date on which such Registration Event
occurs and (ii) the date on which there ceases to be any Registrable Securities
(as defined in the Registration Rights Agreement)); or if the Shelf Registration
Statement (as defined in the Registration Rights Agreement) (if it is filed),
after being declared effective by the SEC, ceases to be effective at any time
during the period specified by Section 2(b)(B) of the Registration Rights
Agreement for more than 60 days, whether or not consecutive, during any 12-month
period, the Debt Rate shall be increased by an additional margin equal to 0.50%
per annum from and including the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective to and excluding the date on
which the Shelf Registration Statement again becomes effective (or, if earlier,
the end of the period specified by Section 2(b)(B) of the Registration Rights
Agreement), PROVIDED that the additional margin added to the Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time, PROVIDED FURTHER
that, if a default in the payment of interest on the Securities occurs and is
continuing on any Interest Payment Date, then the Debt Rate applicable to the
Interest Period ending on such Interest Payment Date shall not exceed the Capped
Interest Rate, except that for purposes of any payment made by the Company
intended to cure such default, this proviso shall not apply.
"DEFAULT" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.
"DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.
"DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged Spare Parts may be maintained by or
on behalf of the Company, which initially shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.
"DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a
Payment required to be paid to the Trustee for distribution on such Scheduled
Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time, except for a
defaulted payment of interest that is not paid within five days after the
Scheduled Payment Date therefor), (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv)
the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the
Policy Election Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the
Indenture and not for purposes of any other payment or distribution under the
Indenture, the date established for such payment in accordance with the Policy.
"DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.
"DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c)
of the Indenture.
"DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.
"DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension
Drawing or a Downgrade Drawing, as the case may be.
"DTC" means The Depository Trust Company, its nominees and their respective
successors.
"ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.
"ELIGIBLE ACCOUNT" means an account established by and with an Eligible
Institution at the request of the Security Agent, which institution agrees, for
all purposes of the New York UCC including Article 8 thereof, that (a) such
account shall be a "securities account" (as defined in Section 8-501 of the New
York UCC), (b) such institution is a "securities intermediary" (as defined in
Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash)
credited to such account shall be treated as a "financial asset" (as defined in
Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the
"entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in
respect of such account, (e) it will comply with all entitlement orders issued
by the Security Agent to the exclusion of the Company, (f) it will waive or
subordinate in favor of the Security Agent all claims (including without
limitation, claims by way of security interest, lien or right of set-off or
right of recoupment), and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository institution has a long-term unsecured debt rating or issuer
credit rating, as the case may be, from Moody's of at least A-3 or its
equivalent. An Eligible Deposit Account may be maintained with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution; provided
that such Liquidity Provider shall have waived all rights of set-off and
counterclaim with respect to such account.
"ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any U.S. branch of a
foreign bank), which has a long-term unsecured debt rating or issuer credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.
"ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or
guaranteed by, the U.S. Government having maturities no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any state thereof with a short-term unsecured debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having maturities no later than 90 days following the
date of such investment or (c) investments in negotiable certificates of
deposit, time deposits, banker's acceptances, commercial paper or other direct
obligations of, or obligations guaranteed by, commercial banks organized under
the laws of the United States or of any political subdivision thereof (or any
U.S. branch of a foreign bank) with a short-term unsecured debt rating by
Moody's of at least P-1 and a short-term issuer credit rating by Standard &
Poor's of at least A-1, having maturities no later than 90 days following the
date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments
that are bank obligations shall be denominated in U.S. dollars; and (y) the
aggregate amount of Eligible Investments at any one time that are bank
obligations issued by any one bank shall not be in excess of 5% of such bank's
capital surplus; PROVIDED FURTHER that any investment of the types described in
clauses (a), (b) and (c) above may be made through a repurchase agreement in
commercially reasonable form with a bank or other financial institution
qualifying as an Eligible Institution so long as such investment is held by a
third party custodian also qualifying as an Eligible Institution; PROVIDED
FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code. Notwithstanding the
foregoing, no investment of the types described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates, and no investment
in the obligations of any one bank in excess of $10,000,000, shall be an
Eligible Investment unless written approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.
"ENGINE" means an engine used, or intended to be used, to propel an
Aircraft, including a part, appurtenance, and accessory of the Engine, except a
Propeller.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time
"EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear
System.
"EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.
"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of
the use thereof due to destruction, damage beyond repair or rendition of any of
the Pledged Spare Parts permanently unfit for normal use for any reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged Spare Parts which results in the receipt of
insurance proceeds with respect to such Pledged Spare Parts on the basis of an
actual or constructive loss; or (iii) the loss of possession of any of the
Pledged Spare Parts by the Company for ninety (90) consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section
2.1(a) of the Indenture.
"EXCHANGE OFFER" means the exchange offer which may be made pursuant to the
Registration Rights Agreement to exchange Initial Certificates for Exchange
Certificates.
"EXCHANGE OFFER REGISTRATION STATEMENT" means the registration statement
that, pursuant to the Registration Rights Agreement, is filed by the Company
with the SEC with respect to the exchange of Initial Securities for Exchange
Securities.
"EXCHANGE SECURITIES" means the securities substantially in the form of
Exhibit A to the Indenture issued in exchange for the Initial Securities
pursuant to the Registration Rights Agreement and authenticated pursuant to the
Indenture.
"EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.
"EXPENDABLES" means Qualified Spare Parts other than Rotables.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration or similar regulatory
authority established to replace it.
"FAA FILED DOCUMENTS" means the Security Agreement.
"FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider thereunder, presently located at 1585 Broadway, New
York, New York 10036, or such other office as such Liquidity Provider from time
to time shall notify the Trustee as its "Facility Office" under any such
Liquidity Facility; provided that such Liquidity Provider shall not change its
Facility Office to another Facility Office outside the United States of America
except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity
Facility.
"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market
value determined on the basis of a hypothetical sale negotiated in an arm's
length free market transaction between a willing and able seller and a willing
and able buyer, neither of whom is under undue pressure to complete the
transaction, under then current market conditions, provided that cash shall be
valued at its Dollar amount.
"FEDERAL AVIATION ACT" means Title 49 of the United States Code,
"Transportation", as amended from time to time, or any similar legislation of
the United States enacted in substitution or replacement thereof.
"FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial Liquidity Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.
"FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.
"FINAL LEGAL MATURITY DATE" means December 6, 2009.
"FINAL ORDER" has the meaning assigned to such term in the Policy.
"FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.
"FINANCING STATEMENTS" means, collectively, UCC-1 financing statements
covering the Spare Parts Collateral, by the Company, as debtor, showing the
Security Agent as secured party, for filing in Delaware, Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.
"GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Documents or relating
to the observance or performance of the obligations of any of the parties to the
Operative Documents.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is
registered on the Registrar's books.
"INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or additional trustee or security agent appointed pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.
"INDENTURE" means the Indenture dated as of December 6, 2002, among the
Company, the Trustee, the Liquidity Provider and the Policy Provider under which
the Securities are issued.
"INDENTURE DISCHARGE DATE" means the date of the termination of the
effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without
giving effect to Section 9.1(b) thereof).
"INDENTURE TRUSTEE" means the Trustee.
"INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other
Person (i) engaged in a business which includes appraising Aircraft and assets
related to the operation and maintenance of Aircraft from time to time and (ii)
who does not have any material financial interest in the Company and is not
connected with the Company or any of its Affiliates as an officer, director,
employee, promoter, underwriter, partner or person performing similar functions.
"INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an
Independent Appraiser and attached as Appendix II to the Offering Memo or
delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral
Maintenance Agreement.
"INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.
"INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.
"INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.
"INITIAL SECURITIES" mean the securities issued and authenticated pursuant
to the Indenture and substantially in the form of Exhibit A thereto, other than
the Exchange Securities.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is
an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act.
"INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.
"INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6
of each year so long as any Security is Outstanding (commencing March 6, 2003),
PROVIDED that if any such day is not a Business Day, then the relevant Interest
Payment Date shall be the next succeeding Business Day.
"INTEREST PERIOD" means (i) in the case of the first Interest Period, the
period commencing on (and including) the Closing Date and ending on (but
excluding) the first Interest Payment Date following such date and (ii) in the
case of each subsequent Interest Period, the period commencing on (and
including) the last day of the immediately preceding Interest Period, and ending
on (but excluding) the next Interest Payment Date.
"INVESTMENT EARNINGS" means investment earnings on funds on deposit in the
Trust Accounts net of losses and investment expenses of the Trustee in making
such investments.
"INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any
obligation which is a direct obligation of or guaranteed by any state of the
U.S. or any subdivision thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's; (c)
any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment instrument relying
upon the credit and backing of any bank or trust company which is a member of
the Federal Reserve System and which has a combined capital (including capital
reserves to the extent not included in capital) and surplus and undivided
profits of not less than $250,000,000 (including the Collateral Agent and its
Affiliates if such requirements as to Federal Reserve System membership and
combined capital and surplus and undivided profits are satisfied), including,
without limitation, certificates of deposit, time and other interest-bearing
deposits, bankers' acceptances, commercial paper, loan and mortgage
participation certificates and documented discount notes accompanied by
irrevocable letters of credit and money market fund investing solely in
securities backed by the full faith and credit of the United States; or (e)
repurchase agreements collateralized by any of the foregoing.
"ISSUANCE DATE" means the date of issuance of the Initial Securities.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"LIBOR" has the meaning specified in the Reference Agency Agreement.
"LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.
"LIEN" means any mortgage, pledge, lease, security interest, encumbrance,
lien or charge of any kind affecting title to or any interest in property.
"LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the
Liquidity Facility.
"LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the
principal amount of any Drawings under the Liquidity Facility and (ii) any
interest accrued on any Liquidity Obligations.
"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
"LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date
of the Indenture, providing for the guarantee by the Liquidity Guarantor of the
obligations of the Liquidity Provider under the Liquidity Facility.
"LIQUIDITY GUARANTOR" means Morgan Stanley.
"LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other
amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee
Letter.
"LIQUIDITY PROVIDER" means Morgan Stanley Capital Services Inc., together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the
Indenture.
"LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.
"LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Documents.
"MAXIMUM COLLATERAL RATIO" means 45%.
"MINIMUM ROTABLE RATIO" means 150%.
"MOODY'S" means Moody's Investors Service, Inc.
"MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MSCS" has the meaning specified in the first paragraph of the Indenture.
"NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.
"NONAPPRAISAL COMPLIANCE REPORT" means a report providing information
relating to compliance by the Company with Section 3.2 of the Collateral
Maintenance Agreement, which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.
"NON-CONTROLLING PARTY" means, at any time, the Holders, the Liquidity
Provider and the Policy Provider, excluding whichever is the Controlling Party
at such time.
"NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.
"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.
"NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.
"NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the
Indenture.
"NON-PERFORMING" means, with respect to any Security, a Payment Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy proceeding under the Bankruptcy Code in which the
Company is a debtor, any Payment Default existing at the commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy Code or as may apply for the cure of such Payment Default under
Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into
consideration until the expiration of the applicable period.
"NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.
"NON-U.S. PERSON" means any Person other than a U.S. person, as defined in
Regulation S.
"NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the
Policy.
"NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined
in the Policy.
"OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.
"OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of
the Company relating to the offering of the Securities.
"OFFICER" means the Chairman of the Board, the President, any Vice
President of any grade, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.
"OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the
Collateral Maintenance Agreement and the Reference Agency Agreement.
"OPINION OF COUNSEL" means a written opinion from the General Counsel of
the Company, legal counsel to the Company or another legal counsel who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days following receipt) of, or its action on,
an opinion of counsel not specifically referred to above shall be sufficient
evidence that such counsel is acceptable to the Trustee.
"OUTSTANDING" or "OUTSTANDING" when used with respect to Securities or
a Security, means all Securities theretofore authenticated and delivered under
the Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Trustee in
trust for the Holders of such Securities, PROVIDED that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Trustee has been made;
(c) Securities for which payment has been deposited with the Trustee
or any Paying Agent in trust pursuant to Article 9 of the Indenture (except to
the extent provided therein); and
(d) Securities which have been paid, or for which other Securities
shall have been authenticated and delivered in lieu thereof or in substitution
therefor pursuant to the terms of Section 2.12 of the Indenture, unless proof
satisfactory to the Trustee is presented that any such Securities are held by
bona fide purchasers in whose hands the Securities are valid obligations of the
Company.
A Security does not cease to be Outstanding because the Company or one of
its Affiliates holds the Security; PROVIDED, HOWEVER, that in determining
whether the Holders of the requisite aggregate principal amount of Securities
Outstanding have given any request, demand, authorization, direction, notice,
consent or waiver under the Indenture or any other Operative Document, Section
2.13 of the Indenture shall be applicable.
"OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.
"OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on the
Securities which is not in fact received by the Trustee (whether from the
Company, the Liquidity Provider, the Policy Provider or otherwise) on or within
five days after the Scheduled Payment Date relating thereto and which is not
subsequently paid in connection with the redemption or final maturity of a
Security.
"PARTS INVENTORY REPORT" means, as of any date, a list identifying the
Pledged Spare Parts by manufacturer's part number and brief description and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.
"PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.
"PAYMENT" means (i) any payment of principal of, interest on, or Premium,
if any, or Break Amount, if any, with respect to the Securities from the
Company, (ii) any payment of interest on the Securities with funds drawn under
the Liquidity Facility or from a Cash Collateral Account or (iii) any payment of
interest on or principal of Securities with funds drawn under the Policy, or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.
"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the
Indenture.
"PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the
maximum rate permitted by applicable law.
"PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance
Agreement.
"PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the
Collateral Maintenance Agreement.
"PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents; (b) Liens attributable to Security Agent (both in its capacity as
Security Agent and in its individual capacity); (c) the rights of others under
agreements or arrangements to the extent expressly permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being contested in good faith by appropriate proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged Spare Parts or the interest of Security Agent therein or
impair the Lien of the Security Agreement; (e) materialmen's, mechanics',
workers', repairers', employees' or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for more than 60 days or is being contested in good faith by appropriate
proceedings, so long as such Liens and such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award against the Company, so long as
such judgment shall, within 60 days after the entry thereof, have been
discharged or vacated, or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result, or
any such judgment or award does not involve, any material risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent
therein or any impairment of the Lien of the Security Agreement; (g) any other
Lien with respect to which the Company shall have provided a bond, cash
collateral or other security adequate in the reasonable opinion of Security
Agent.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, trustee,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.
"POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance
Policy No. 39753, issued as of the Closing Date, as amended, supplemented or
otherwise modified from time to time in accordance with its respective terms.
"POLICY ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.
"POLICY DRAWING" means any payment of a claim under the Policy.
"POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the
Indenture.
"POLICY EXPENSES" means all amounts (including amounts in respect of
premiums, fees, expenses or indemnities) due to the Policy Provider under the
Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest
accrued on any Policy Provider Obligations, and (iii) reimbursement of and
interest on the Liquidity Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider; provided that if, at the time
of determination, a Policy Provider Default exists, Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.
"POLICY FEE LETTER" means the fee letter, dated as of the date hereof, from
the Policy Provider to Continental and acknowledged by the Trustee, setting
forth the fees and premiums payable with respect to the Policy.
"POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance
company, and its successors and permitted assigns.
"POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement
dated as of the date hereof among the Trustee, the Company and the Policy
Provider, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of Written Notice of such failure to the
Policy Provider or (b) the Policy Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is
final and nonappealable, or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Policy Provider (or taking of possession of
all or any material portion of the Policy Provider's property).
"POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.
"POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity Facility in an amount equal to the amount of interest that would have
accrued on such Interest Drawing if such Interest Drawing had been made in
accordance with Section 2.02(e) of the Liquidity Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.
"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts,
including, without limitation, fees and indemnities (to the extent not included
in Policy Expenses), due to the Policy Provider under the Policy Provider
Agreement but shall not include any interest on Policy Drawings other than
Policy Provider Interest Obligations.
"PREMIUM" means, with respect to any Security redeemed pursuant to Article
4 of the Indenture, the following percentage of the principal amount of such
Security: (i) if redeemed before the first anniversary of the Issuance Date,
1.5%; (ii) if redeemed on or after such first anniversary and before the second
anniversary of the Issuance Date, 1.0%; and (iii) if redeemed on or after such
second anniversary and before the third anniversary of the Issuance Date, 0.5%;
PROVIDED that no Premium shall be payable in connection with a redemption made
by the Company to satisfy the Maximum Collateral Ratio or Minimum Rotable Ratio
requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement.
"PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the
Liquidity Facility on such Distribution Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.
"PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the
Indenture.
"PROPELLER" includes a part, appurtenance, and accessory of a propeller.
"PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the
Indenture.
"PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.
"QIB" means a qualified institutional buyer as defined in Rule 144A.
"QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.
"RATING AGENCIES" means, collectively, at any time, each nationally
recognized rating agency which shall have been requested by the Company to rate
the Securities and which shall then be rating the Securities. The initial Rating
Agency will be Moody's.
"RATINGS CONFIRMATION" means, with respect to any action proposed to be
taken, a written confirmation from each of the Rating Agencies that such action
would not result in (i) a reduction of the rating for the Securities below the
then current rating for the Securities (such rating as determined without regard
to the Policy) or (ii) a withdrawal or suspension of the rating of the
Securities.
"RECORD DATE" means the fifteenth (15th) day preceding any Scheduled
Interest Payment Date, whether or not a Business Day.
"REDEMPTION DATE", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to the Indenture and
such Security.
"REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.
"REGISTER" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of December 6, 2002, by and between the Company and the Initial
Purchaser.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the
Indenture.
"RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.
"REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit
agreement (or agreements) in substantially the form of the replaced Liquidity
Facility, including reinstatement provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating Agencies to confirm in
writing their respective ratings then in effect for the Securities (before
downgrading of such ratings, if any, as a result of the downgrading of the
Liquidity Provider), and be consented to by the Policy Provider, which consent
shall not be unreasonably withheld or delayed, in a face amount (or in an
aggregate face amount) equal to the amount of interest payable on the Securities
(at the Capped Interest Rate, and without regard to expected future principal
payments) on the eight Interest Payment Dates following the date of replacement
of such Liquidity Facility (or if such date is an Interest Payment Date, on such
day and the seven Interest Payment Dates following the date of replacement of
such Liquidity Facility) and issued by a Person (or Persons) having unsecured
short-term debt rating or issuer credit rating, as the case may be, issued by
the Rating Agencies which are equal to or higher than the Threshold Rating.
Without limitation of the form that a Replacement Liquidity Facility otherwise
may have pursuant to the preceding sentence, a Replacement Liquidity Facility
for the Securities may have a stated expiration date earlier than 15 days after
the Final Legal Maturity Date so long as such Replacement Liquidity Facility
provides for a Non-Extension Drawing as contemplated by Section 3.5(d) of the
Indenture.
"REQUEST" means a written request for the action therein specified signed
on behalf of the Company by any Officer and delivered to the Trustee. Each
Request shall be accompanied by an Officers' Certificate if and to the extent
required by Section 12.4 of the Indenture.
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of
interest, calculated at the Capped Interest Rate, that would be payable on the
Securities on each of the eight successive Interest Payment Dates immediately
following such day or, if such day is an Interest Payment Date, on such day and
the succeeding seven Interest Payment Dates, in each case calculated on the
basis of the outstanding principal amount of the Securities on such date and
without regard to expected future payments of principal on the Securities.
"REQUIRED HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.
"RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the corporate trust administration department of the Trustee or any other
officer customarily performing functions similar to those performed by the
Persons who at the time shall be such officers or to whom any corporate trust
matter is referred because of his or her knowledge of and familiarity with a
particular subject, (ii) with respect to the Liquidity Provider, any authorized
officer of the Liquidity Provider, and (iii) with respect to the Policy
Provider, any authorized officer of the Policy Provider.
"RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.
"RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.
"RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture.
"RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.
"ROTABLE" means a Qualified Spare Part that wears over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which it relates.
"ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market Value of the Rotables, as set forth in the most recent Independent
Appraiser's Certificate delivered by the Company pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities Outstanding minus the sum of the Cash Collateral held
by the Collateral Agent.
"RULE 144A" means Rule 144A under the Securities Act.
"SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.
"SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable thereto, (ii) with respect to any payment
of defaulted interest, the payment date established pursuant to Section 2.16,
(iii) with respect to amounts due on the redemption of any Security, the
Redemption Date applicable thereto, and (iv) with respect to the final maturity
of the Securities, December 6, 2007.
"SEC" means the Securities and Exchange Commission and any government
agency succeeding to its functions.
"SECTION 1110" means Section 1110 of the Bankruptcy Code.
"SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified
in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period, if any, commencing with the trustee or debtor-in-possession in such
proceeding agreeing, with court approval, to perform its obligations under the
Operative Documents within such 60 days (or longer period as agreed) and
continuing until such time as such trustee or debtor-in-possession ceases to
fully perform its obligations thereunder with the result that the period during
which the Collateral Agent is prohibited from repossessing the collateral under
any Collateral Agreement comes to an end.
"SECURITIES" means the "Securities", as defined in the Indenture, that are
issued under the Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement.
"SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of
the date of the Indenture between the Company and the Security Agent.
"SECURITYHOLDER" means any holder of one or more Securities.
"SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.
"SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral
Maintenance Agreement.
"SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation in, installation on, attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.
"SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be required to be filed by the Company with the SEC pursuant to the
Registration Rights Agreement, other than an Exchange Offer Registration
Statement.
"SPARE PART" means an accessory, appurtenance, or part of an Aircraft
(except an Engine or Propeller), Engine (except a Propeller), Propeller, or
Appliance, that is to be installed at a later time in an Aircraft, Engine,
Propeller or Appliance.
"SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the
Security Agreement.
"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.
"SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy
Event.
"SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the
Indenture.
"SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral
Maintenance Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.
"STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity
Facility).
"STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.
"SUBORDINATED SECURITIES" is defined in Section 2.18 of the Indenture.
"SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.
"SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security
Agreement substantially in the form of Exhibit A to the Security Agreement.
"SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy
Provider Agreement and the Fee Letters.
"TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs incurred or imposed with respect thereto) imposed or otherwise
assessed by the United States of America or by any state, local or foreign
government (or any subdivision or agency thereof) or other taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth and similar charges; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, taxes on goods and services, gains taxes, license, registration and
documentation fees, customs duties, tariffs, and similar charges.
"TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.
"THRESHOLD AMOUNT" means $2,000,000.
"THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by
Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial
Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply
to the Liquidity Guarantor.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is amended after such date, "TIA" means, to the extent
required by any such amendment, the TIA as so amended.
"TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.
"TRUST OFFICER" means any officer in the corporate trust department of the
Trustee, or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"TRUSTEE" means the party named as such in the Indenture until a successor
replaces it in accordance with the provisions of the Indenture and thereafter
means the successor.
"TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the
Indenture.
"TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral
Maintenance Agreement.
"TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility.
"UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable
Parts.
"U.S." or "UNITED STATES" means the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating certificate issued pursuant
to chapter 447 of title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the option of the issuer thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance
Agreement.
"WARRANTIES" is defined in clause (2) of Section 2.01 of the Security
Agreement.
"WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the
Policy Provider, a written instrument executed by the Designated Representative
of such Person. An invoice delivered by the Liquidity Provider pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing procedures
shall constitute Written Notice under such Section.
"WTC" has the meaning specified in the first paragraph of the Indenture.
SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the
following rules of construction shall apply for all purposes of the Operative
Documents (including this appendix) and of such agreements as may incorporate
this appendix by reference.
(a) In each Operative Document, unless otherwise expressly provided, a
reference to:
(i) each of the Company, the Trustee, the Collateral Agent, the Security
Agent or any other person includes, without prejudice to the
provisions of any Operative Document, any successor in interest to it
and any permitted transferee, permitted purchaser or permitted
assignee of it;
(ii) words importing the plural include the singular and words importing
the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule or
exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Document, that
agreement, instrument or document, or annex, schedule or exhibit, or
part, respectively, as amended, modified or supplemented from time to
time in accordance with its terms and in accordance with the
Operative Documents, and any agreement, instrument or document
entered into in substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as amended,
modified, supplemented, substituted, reissued or reenacted prior to
the Closing Date, and thereafter from time to time;
(v) the words "Agreement", "this Agreement", "hereby", "herein",
"hereto", "hereof" and "hereunder" and words of similar import when
used in any Operative Document refer to such Operative Document as a
whole and not to any particular provision of such Operative Document;
(vi) the words "including", "including, without limitation", "including,
but not limited to", and terms or phrases of similar import when used
in any Operative Document, with respect to any matter or thing, mean
including, without limitation, such matter or thing; and
(vii) a "Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule"
in any Operative Document, or in any annex thereto, is a reference to
a section of, or an exhibit, an annex, an appendix or a schedule to,
such Operative Document or such annex, respectively.
(b) Each exhibit, annex, appendix and schedule to each Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.
(c) Unless otherwise defined or specified in any Operative Document,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Document are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Document.
(e) For purposes of each Operative Document, the occurrence and
continuance of a Default or Event of Default referred to in Section 7.1(d), (e)
or (f) of the Indenture shall not be deemed to prohibit the Company from taking
any action or exercising any right that is conditioned on no Special Default,
Default or Event of Default having occurred and be continuing if such Special
Default, Default or Event of Default consists of the institution of
reorganization proceedings with respect to the Company under Chapter 11 of the
Bankruptcy Code and the trustee or debtor-in-possession in such proceedings
shall have agreed to perform its obligations under the Operative Documents with
the approval of the applicable court and thereafter shall have continued to
perform such obligations in accordance with Section 1110.
EXHIBIT A
[FORM OF SECURITY]
[THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES
THAT IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
THIS SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL
AIRLINES, INC. OR ANY AFFILIATE OF CONTINENTAL AIRLINES, INC. RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO CONTINENTAL AIRLINES, INC., (B)
TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE)
OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT;
AND (3) AGREES THAT IF IT SHOULD RESELL OR OTHERWISE TRANSFER THIS SECURITY IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS
SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL
AIRLINES, INC. OR ANY AFFILIATE OF CONTINENTAL AIRLINES, INC., THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO CONTINENTAL AIRLINES, INC. OR ITS
AGENT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND
"U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTIONS.]
[UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO CONTINENTAL
AIRLINES, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY IS REGISTERED IN THE NAME
OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.5 AND
2.6 OF THE INDENTURE REFERRED TO HEREIN.]
- ------------------
To be included on the face of each Restricted Security.
To be included on the face of each Global Security.
No. [ ] CUSIP/Common Code No. [ ]
---- -------
$[ ]
----------
[[REGULATION S] GLOBAL SECURITY]
[INITIAL] [EXCHANGE] FLOATING RATE SECURED NOTE DUE 2007
CONTINENTAL AIRLINES, INC., a Delaware corporation (the "Company"),
promises to pay to [__________], or the registered assignee thereof, the
principal sum of $[_______] Dollars (the "Principal Amount") on December 6,
2007, subject to earlier payment as provided in the Indenture referred to
herein. This Security shall bear interest on the unpaid Principal Amount from
time to time outstanding from the most recent Interest Payment Date to which
interest has been paid (or, if no interest has been paid under the Indenture,
from December 6, 2002) at a rate annum for each Interest Period equal to the
Debt Rate for such Interest Period (calculated on the basis of a year of 360
days and actual days elapsed during the period for which such amount accrues).
The Company shall pay accrued interest in arrears on each March 6, June 6,
September 6 and December 6 of each year, commencing March 6, 2003 (or, if not a
Business Day, the next succeeding Business Day) (an "Interest Payment Date")
until the Principal Amount has been paid in full, PROVIDED that if such payment
in full is not made on an Interest Payment Date, accrued interest shall be paid
on the date of such payment in full rather than the next Interest Payment Date.
Interest shall accrue with respect to the first but not the last day of each
Interest Period. This Security shall bear interest, payable on demand, at the
Payment Due Rate (calculated on the basis of a year of 360 days and actual days
elapsed during the period for which such amount accrues) on any part of the
Principal Amount and, to the extent permitted by applicable Law, interest and
any other amounts payable hereunder not paid when due, in each case for the
period the same is overdue. Amounts shall be overdue if not paid when due
(whether at stated maturity, by acceleration or otherwise). Notwithstanding
anything to the contrary contained herein, if any date on which a payment under
this Security becomes due and payable is not a Business Day, then such payment
shall not be made on such scheduled date but shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest payable.
1. GENERAL. This Security is one of a duly authorized issue of securities
of the Company designated as "[Initial] [Exchange] Floating Rate Secured Notes
due 2007" (herein, called the "Securities"), limited in aggregate principal
amount to $200,000,000, issued, authenticated and delivered pursuant to the
Indenture, dated as of December 6, 2002 (the "Indenture"), among the Company,
Wilmington Trust Company, as Trustee (the "Trustee"), Morgan Stanley Capital
Services Inc., as Liquidity Provider, and MBIA Insurance Corporation, as Policy
Provider. To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Indenture. This Security is
subject to the terms, provisions and conditions of the Indenture and those made
- ------------------
To be included on the face of each Global Security
applicable to the Indenture by the TIA. To the extent any provision of this
Security conflicts with the express provisions of the Indenture, the provisions
of the Indenture shall govern and be controlling. Reference is hereby made to
the Indenture, the TIA, the Security Agreement, the other Operative Documents
and the Support Documents for a complete statement of the rights and obligations
of the holders of, and the nature and extent of the security for, this Security.
By virtue of its acceptance hereof the Securityholder of this Security assents
to and agrees to be bound by the provisions of the Indenture.
2. RECORD DATES. The Person in whose name any Security is registered at the
close of business on the fifteenth day preceding a Scheduled Interest Payment
Date shall be entitled to receive the interest payable on the applicable
Interest Payment Date to the extent provided by such Security, except if and to
the extent the Company shall default in the payment of the interest due on such
Interest Payment Date, in which case defaulted interest shall be paid to the
Person in whose name the Security is registered at the close of business on the
subsequent record date established by notice given by mail by or on behalf of
the Company to the Holders of Securities pursuant to the Indenture.
3. OPTIONAL REDEMPTION. The Company may redeem the Securities at any time
in whole or (so long as no Payment Default has occurred and is continuing) in
part (in any integral multiple of $1,000) at its sole option at a redemption
price equal to the sum of 100% of the principal amount of, accrued and unpaid
interest on, and Premium, if any, and Break Amount, if any, with respect to, the
redeemed Securities to and including the Redemption Date. "Premium" means, with
respect to any Security redeemed pursuant to the Indenture, the following
percentage of the principal amount of such Security: (i) if redeemed before the
first anniversary of the Issuance Date, 1.5%; (ii) if redeemed on or after such
first anniversary and before the second anniversary of the Issuance Date, 1.0%;
and (iii) if redeemed on or after such second anniversary and before the third
anniversary of the Issuance Date, 0.5%; PROVIDED that no Premium shall be
payable in connection with a redemption made by the Company to satisfy the
Maximum Collateral Ratio or Minimum Rotable Ratio requirement pursuant to
Section 3.1 of the Collateral Maintenance Agreement. The Trustee shall mail a
notice of any redemption at least 15 days but not more than 60 days before the
Redemption Date to each Holder whose Securities are to be redeemed at his
registered address. If the Trustee gives notice of redemption but the Company
fails to pay when due all amounts necessary to effect such redemption, such
redemption shall be deemed revoked and no amount shall be due as a result of
notice of redemption having been given. Securities called for redemption shall
cease to bear interest on and after the Redemption Date (unless the Company
shall fail to pay the redemption price). Upon surrender to the Paying Agent,
such Securities shall be paid the redemption price.
4. METHOD OF PAYMENT. The Paying Agent shall distribute amounts payable to
each Securityholder by check mailed to such Securityholder at its address
appearing in the Register, except that with respect to Securities registered on
the applicable Record Date in the name of a Clearing Agency (or its nominee),
such distribution shall be made by wire transfer in immediately available funds
to the account designated by such Clearing Agency (or such nominee). The Company
shall not have any responsibility for the distribution of such payments to any
Securityholder. Any payment made hereunder shall be made without any presentment
or surrender of this Security, except that, in the case of the final payment in
respect of this Security, this Security shall be surrendered to the Paying Agent
for cancellation against receipt of such payment.
5. CREDIT SUPPORT. The Company's obligations with respect to the Securities
are secured by a lien on the Pledged Spare Parts and certain other property of
the Company. In addition, the Trustee has entered into a Liquidity Facility
under which the Liquidity Provider is obligated to make advances to the Trustee
in an aggregate amount sufficient to pay interest on the Securities up to eight
successive quarterly Interest Payment Dates. The Trustee is also the beneficiary
of the Policy under which the Policy Provider is obligated to honor drawings to
cover interest on the Securities when due and principal of the Securities no
later than 24 months after the Final Scheduled Payment Date of the Securities.
6. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or
agency where Securities eligible for transfer or exchange may be presented for
registration of transfer or for exchange, and an office or agency where
Securities may be presented for payment. Initially, the Trustee will act as
Registrar and Paying Agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such.
7. DENOMINATIONS, TRANSFER AND EXCHANGE. The Securities shall be issued
only in fully registered form without coupons and [only in denominations of
$100,000 or integral multiples of $1,000 in excess thereof,] [in
denominations of $1,000 or integral multiples thereof,] except that one
Security may be issued in a different denomination. The transfer of Securities
may be registered and Securities may be exchanged as provided in the Indenture.
No transfer shall be effected until, and such transferee shall succeed to the
rights of a Securityholder only upon, final acceptance and registration of the
transfer by the Registrar in the Register. No service charge shall be made to a
Securityholder for any registration of transfer or exchange of Securities, but
the Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer or
exchange of Securities.
8. PERSONS DEEMED OWNERS. Prior to the registration of any transfer of a
Security by a Securityholder as provided in the Indenture, the Company, the
Registrar, the Paying Agent and the Trustee shall deem and treat the person in
whose name the Security is registered on the Register as the absolute owner and
holder thereof for the purpose of receiving payment of all amounts payable with
respect to such Security and for all other purposes, and none of the Company,
the Registrar, the Paying Agent or the Trustee shall be affected by any notice
to the contrary.
9. AMENDMENTS AND WAIVERS. The Company and the Trustee or the Collateral
Agent, as the case may be, may amend or supplement the Indenture, the
- ------------------
To be used for Initial Securities.
To be used for Exchange Securities.
Securities, or any of the other Operative Documents and, upon request of the
Company, the Trustee shall amend or supplement the Support Documents, in each
case only with the written consent of the Controlling Party, PROVIDED that
certain amendments, supplements and waivers may not be made without the consent
of each Securityholder affected thereby. Any consent by the Securityholder of
this Security shall be conclusive and binding on such Securityholder and upon
all future Securityholders of this Security and of any Security issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon such Security. Without the consent of the
Controlling Party or any Holder, the Indenture, the Securities, any of the
Operative Documents and any of the Support Documents may be amended to, among
other things, cure any ambiguity, defect or inconsistency or to make any other
change not inconsistent with the provisions of the Indenture, provided that such
action does not materially adversely affect the interests of any Securityholder.
10. DEFAULTS AND REMEDIES. Events of Default under the Indenture include
the following: (a) failure by the Company to pay (1) principal of, interest on,
Premium, if any, or Break Amount, if any, with respect to any Security when due,
and such failure shall continue unremedied for a period of 10 Business Days
thereafter (it being understood that any amount distributed to Securityholders
in respect of the foregoing from funds provided by the Policy Provider, the
Liquidity Provider or a Cash Collateral Account shall not be deemed to cure such
Default) or (2) any other amount payable by it to the Holders under the
Indenture or any Operative Document when due, and such failure shall continue
for a period in excess of 10 Business Days after the Company has received
written notice from the Trustee of the failure to make such payment when due;
(b) failure by the Company to observe and perform in any material respect any
other covenant, agreement or obligation set forth in the Indenture or in any
other Operative Documents, with such failure continuing after notice and
specified cure periods; (c) any representation or warranty made by the Company
in the Indenture or any other Operative Document (1) shall prove to have been
untrue or inaccurate in any material respect as of the date made, (2) such
untrue or inaccurate representation or warranty is material at the time in
question and (3) the same shall remain uncured following notice; and (d) the
occurrence of certain events of bankruptcy, reorganization or insolvency of the
Company. Subject to certain limitations in the Indenture, if an Event of Default
occurs and is continuing, the Controlling Party may, by notice to Company and
the Trustee, and the Trustee shall, upon the request of the Controlling Party,
declare all unpaid principal of, accrued interest on, Premium, if any, and Break
Amount, if any, with respect to the Securities Outstanding and other amounts
otherwise payable under the Indenture, if any, to be due and payable
immediately. In the case of an Event of Default arising from certain events of
bankruptcy, reorganization or insolvency, such amounts shall automatically
become and be immediately due and payable without further action or notice.
Under certain circumstance, the Controlling Party by notice to the Trustee may
rescind an acceleration and its consequences.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, interest on, or Premium, if any, or Break Amount, if any, with
respect to, the Securities or other amounts otherwise payable under the
Indenture, if any. Subject to the Indenture, so long as an Event of Default has
occurred and is continuing, the Controlling Party by notice to the Trustee may
authorize the Trustee to waive an existing Default or Event of Default and its
consequences. The Controlling Party may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee (as Trustee or
Collateral Agent, subject, in the case of any actions based on the status of the
Trustee as Collateral Agent, to any limitations otherwise expressly provided for
in the Operative Documents) or exercising any trust or power conferred on it;
provided that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction. Securityholders may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Securities. The Trustee may withhold from Securityholders notice of any
continuing default (except a default in payment of principal, interest, Premium
or Break Amount) if it determines in good faith that withholding notice is in
their interests. The above description of Events of Default and remedies is
qualified by reference, and subject in its entirety to the more complete
description thereof contained in the Indenture.
11. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any personal liability for
any obligations of the Company under the Securities, the Indenture or the other
Operative Documents by reason of his or her status as such director, officer,
employee or stockholder. Each Securityholder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
12. AUTHENTICATION. This Security shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose until the
certificate of authentication attached hereto has been executed by the manual
signature of an authorized signatory of the Trustee or an authenticating agent
appointed by the Trustee.
13. UNCLAIMED MONEY. If money deposited with the Trustee or any Paying
Agent in trust for the payment of the principal of, interest on, or Premium, if
any, or Break Amount, if any, with respect to, any Security and unclaimed for
two (2) years after such principal, interest, Premium, if any, or Break Amount,
if any, has become due and payable shall be paid to the Company on its request,
subject to any applicable abandoned property law, and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof.
14. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
15. CUSIP NUMBERS. The Company in issuing this Security may use a "CUSIP"
number (if then generally in use) and, if so, the Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER,
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
[16. REGISTRATION. The Holder of this Security is entitled to the benefits
of the Registration Rights Agreement. In the event that no Registration Event
(as defined in the Registration Rights Agreement) occurs on or prior to the
210th day after the Issuance Date, the Debt Rate shall be increased by an
additional margin equal to 0.50%, from and including such 210th day to and
excluding the earlier of (i) the date on which a Registration Event occurs and
(ii) the date on which there ceases to be any Registrable Securities (as defined
in the Registration Rights Agreement); or if the Shelf Registration Statement
(as defined in the Registration Rights Agreement) (if it is filed), after being
declared effective by the SEC, ceases to be effective at any time during the
period specified by Section 2(b)(B) of the Registration Rights Agreement for
more than 60 days, whether or not consecutive, during any 12-month period, the
Debt Rate shall be increased by an additional margin equal to 0.50% from and
including the 61st day of the applicable 12-month period such Shelf Registration
Statement ceases to be effective to and excluding the date on which the Shelf
Registration Statement again becomes effective (or, if earlier, the end of the
period specified by Section 2(b)(B) of the Registration Rights Agreement);
PROVIDED that the additional margin added to the Debt Rate pursuant to this
section shall never exceed 0.50% at any time.]
[17. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT. Each Holder of
a Security, by acceptance hereof, acknowledges and agrees to the provisions of
the Registration Rights Agreement, including, without limitation, the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.]
18. GOVERNING LAW. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The Company will furnish to any Holder of this Security, upon written
request and without charge, a copy of the Indenture. Request may be made to:
Continental Airlines, Inc., 1600 Smith Street, Houston, Texas 77002, Attention:
Corporate Secretary.
- ------------------
To be included only on each Initial Certificate.
To be included only on each Initial Certificate.
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed in its corporate name by its officer thereunto duly authorized on the
date hereof.
Dated:
CONTINENTAL AIRLINES, INC.
By:
-----------------------
Name:
Title:
By:
-----------------------
Name:
Title:
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities referred
to in the Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:
------------------------------
Authorized Officer
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
INSERT TAXPAYER IDENTIFICATION NO.
- --------------------
- --------------------
please print or typewrite name and address including zip code of assignee
- --------------------
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
- --------------------
attorney to transfer said Security on the books of the Registrar with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL SECURITIES,
EXCEPT REGULATION S GLOBAL,
REGULATION S DEFINITIVE SECURITIES AND EXCHANGE SECURITIES]
In connection with any transfer of this Certificate occurring prior
to the date that is the earlier of the date of an effective Registration
Statement or the date two years after the later of the original issuance of this
Security or the last date on which this Security was held by Continental
Airlines, Inc. or any affiliate of Continental Airlines, Inc., the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[CHECK ONE]
[_] (a) this Security is being transferred in compliance with the exemption from
registration under the Securities Act of 1933, as amended, provided by Rule 144A
thereunder.
OR
[_] (b) this Security is being transferred other than in accordance with (a)
above and documents are being furnished that comply with the conditions of
transfer set forth in this Security and the Indenture.
If neither of the foregoing boxes is checked, the Registrar shall not be
obligated to register this Security in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.6 of the Indenture shall have
been satisfied.
Date:[___________, __] [Name of Transferor]
-------------------------------------
NOTE: The signature must correspond with the name
as written upon the face of the within-mentioned
instrument in every particular, without alteration
or any change whatsoever.
Signature Guarantee:
--------------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:[___________, __]
-------------------------------------
NOTE: To be executed by an executive officer.
EXHIBIT B
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS OF SECURITIES PURSUANT TO REGULATION S
[_____________,____]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Re: FLOATING RATE SECURED NOTES DUE 2007 (THE "SECURITIES")
Ladies and Gentlemen:
In connection with our proposed sale of US $[______] of the Securities, we
confirm that such sale has been effected pursuant to and in accordance with
Regulation S under the Securities Act of 1933, as amended, and, accordingly, we
represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the facilities
of a designated off-shore securities market and neither we nor any person
acting on our behalf knows that the transaction has been pre-arranged with
a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(a) or Rule 904(a) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(b)(2) or Rule 904(b)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(b)(2) or Rule 904(b)(1), as the case may be.
You and Continental Airlines, Inc. are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS OF SECURITIES TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
[_______________,_____]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002
CONTINENTAL AIRLINES
Floating Rate Secured Notes due 2007 (the "Securities")
________________________
Ladies and Gentlemen:
In connection with our proposed purchase of U.S. $[_____________] of
Securities (the "Purchased Securities"), we confirm that:
1. We understand that any subsequent transfer of the Purchased
Securities is subject to certain restrictions and conditions set forth in
the Indenture, dated as of December 6, 2002, among Continental Airlines,
Inc. (the "Company"), Wilmington Trust Company (the "Trustee"), Morgan
Stanley Capital Services Inc., as Liquidity Provider, and MBIA Insurance
Corporation, as Policy Provider, relating to the Securities, and we agree
to be bound by, and not to resell, pledge or otherwise transfer the
Purchased Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities
Act").
2. We are purchasing Securities having an aggregate principal amount
of not less than $100,000 and each account (if any) for which we are
purchasing Securities is purchasing Securities having an aggregate
principal amount of not less than $100,000.
3. We understand that the Purchased Securities have not been
registered under the Securities Act, that the Purchased Securities are
being sold to us in a transaction that is exempt from the registration
requirements of the Securities Act and that the Purchased Securities may
not be offered or resold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that, if we should sell any Purchased
Securities within two years after the later of the original issuance of
such Purchased Securities and the last date on which such Purchased
Securities are owned by the Company or any affiliate of the Company, we
will do so only (A) to the Company, (B) in accordance with Rule 144A under
the Securities Act to a "qualified institutional buyer" (as defined
therein), (C) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (D) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act or (E) pursuant
to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing any of the Purchased
Securities from us a notice advising such purchaser that resales of the
Purchased Securities are restricted as stated herein.
4. We understand that, on any proposed resale of any Purchased
Securities, we will be required to furnish to the Company and the Trustee
such certifications, legal opinions and other information as the Company
and the Trustee may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the
Purchased Securities purchased by us will bear a legend to the foregoing
effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Purchased Securities, and we and any accounts for which we are acting are
each able to bear the economic risk of our or their investments.
6. We are acquiring the Purchased Securities for our own account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion and
not with a view to any distribution of the Purchased Securities, subject,
nevertheless to the understanding that the disposition of our property
shall at all times be and remain within our control.
You are entitled to rely upon this letter and are irrevocably authorized to
produce this letter or a copy thereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By:
-------------------------------
Name:
Title:
COLLATERAL MAINTENANCE AGREEMENT
BETWEEN
CONTINENTAL AIRLINES, INC.
AND
MBIA INSURANCE CORPORATION
dated as of December 6, 2002
relating to
Floating Rate Secured Notes due 2007
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS AND RULES OF CONSTRUCTION..............................1
Section 1.1 Definitions...................................................1
Section 1.2 Rules of Construction.........................................1
ARTICLE 2 REPORTS REGARDING THE COLLATERAL...................................1
Section 2.2 Semiannual Appraisal..........................................2
Section 2.3 Quarterly Reports.............................................3
Section 2.4 Special Reports...............................................3
Section 2.5 Information from the Trustee..................................4
Section 2.6 Independent Appraiser.........................................4
ARTICLE 3 COLLATERAL REQUIREMENTS............................................4
Section 3.1 Maintenance of Collateral Ratio and Rotable Ratio.............4
Section 3.2 Certain Limitations Regarding the Collateral..................6
Section 3.3 Fleet Reduction...............................................7
Section 3.4 Liens.........................................................7
Section 3.5 Maintenance...................................................7
Section 3.6 Possession....................................................8
Section 3.7 Inspection....................................................9
Section 3.8 The Company's Obligation to Insure............................9
ARTICLE 4 MISCELLANEOUS.....................................................10
Section 4.1 Benefits of Agreement Restricted.............................10
Section 4.2 Appraiser's Certificate......................................10
Section 4.3 Notices; Waiver..............................................10
Section 4.4 Amendments, Etc..............................................11
Section 4.5 No Waiver....................................................11
Section 4.6 Successors and Assigns.......................................11
Section 4.7 Governing Law................................................12
Section 4.8 Effect of Headings...........................................12
PAGE
Section 4.9 Counterpart Originals........................................12
Section 4.10 Severability.................................................12
APPENDIX I - DEFINITIONS
APPENDIX II - FORM OF APPRAISAL COMPLIANCE REPORT
APPENDIX III - FORM OF NONAPPRAISAL COMPLIANCE REPORT
APPENDIX IV - INSURANCE
COLLATERAL MAINTENANCE AGREEMENT
COLLATERAL MAINTENANCE AGREEMENT, dated as of December 6, 2002, between
0CONTINENTAL AIRLINES, INC., a Delaware corporation (the "COMPANY"), and MBIA
INSURANCE CORPORATION, a New York insurance company (the "POLICY PROVIDER").
R E C I T A L S
WHEREAS, the Company, the Trustee, the Policy Provider and the Liquidity
Provider have entered into the Indenture providing for the issuance of
$200,000,000 aggregate principal amount of the Securities, and the Policy
Provider has issued the Policy under which the Trustee may make drawings to make
certain payments with respect to the Securities;
WHEREAS, in order to secure the payment of the principal amount of and
interest on the Securities and all other Obligations of the Company under the
Indenture, the Securities and the other Operative Documents, the Company has
granted a security interest in the Spare Parts Collateral pursuant to the
Security Agreement; and
WHEREAS, the Company and the Policy Provider wish to set forth herein
certain additional agreements with respect to the Spare Parts Collateral.
NOW, THEREFORE, in consideration of the premises and other benefits to the
Company, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Policy Provider agree as follows:
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 DEFINITIONS. Capitalized terms used above or hereinafter and
not otherwise defined herein shall have the meanings ascribed to such terms in
Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall
be part of this Agreement as if fully set forth in this place.
Section 1.2 RULES OF CONSTRUCTION. The rules of construction for this
Agreement are set forth in Section 2 of the Definitions Appendix.
ARTICLE 2
REPORTS REGARDING THE COLLATERAL
Section 2.1 ANNUAL APPRAISAL. So long as the Securities are Outstanding, by
the fifth Business Day of February in 2004 and by the fifth Business Day of
February of each year thereafter, the Company shall furnish the Policy Provider
and the Trustee an Independent Appraiser's Certificate signed by an Independent
Appraiser, dated as of a date between the preceding January 15 and February 1
(inclusive). Each such Independent Appraiser's Certificate shall state, in the
opinion of such Independent Appraiser, based upon use of the Annual Methodology,
the following:
(a) the Fair Market Value of the Collateral (excluding any Cash Collateral
and, for the avoidance of doubt, any Excluded Parts) as of a specified
date within 30 days (or, if an Independent Appraiser's Certificate
signed by such Independent Appraiser has not previously been delivered
to the Policy Provider pursuant to this Agreement or in the Offering
Memo, 60 days) (the "PERMITTED DAYS") preceding the date of such
Certificate (the "ANNUAL VALUATION DATE");
(b) the Fair Market Value of the Rotables and of the Expendables included
in the Collateral as of the applicable Annual Valuation Date (and
shall separately state the quantity of such Rotables and Expendables);
and
(c) the Fair Market Value of the Serviceable Parts and the Unserviceable
Parts included in the Collateral as of the applicable Annual Valuation
Date.
Each annual Independent Appraiser's Certificate shall be accompanied by an
Appraisal Compliance Report determined as of the applicable Annual Valuation
Date. The Appraisal Compliance Report shall set forth the calculation of the
Collateral Ratio and the Rotable Ratio based on the Fair Market Value of the
Collateral and the Rotables set forth in such Independent Appraiser's
Certificate, the Fair Market Value of Cash Collateral held by the Collateral
Agent, and the principal amount of the Securities Outstanding, each as of the
applicable Annual Valuation Date. Upon written request of the Policy Provider
given to the Company within twenty Business Days after delivery to the Policy
Provider of an annual Independent Appraiser's Certificate under this Section
2.1, the Company shall furnish to the Policy Provider (with a copy to the
Trustee) a recent Parts Inventory Report and a report showing the percentage of
the average cost of the Pledged Spare Parts located at each Company facility as
of the same date as the date of such Parts Inventory Report.
Section 2.2 SEMIANNUAL APPRAISAL. So long as the Securities are
Outstanding, by the fifth Business Day of February in 2003, by the fifth
Business Day of August in 2003 and by the fifth Business Day of August in each
year thereafter, the Company shall furnish the Policy Provider and the Trustee
an Independent Appraiser's Certificate signed by an Independent Appraiser, dated
as of a date between the preceding January 15 and February 1 (inclusive), in the
case of such Certificate due in February 2003 (the "FEBRUARY 2003 CERTIFICATE"),
or the preceding July 15 and August 1 (inclusive), in the case of such other
Certificates. Each such semiannual Independent Appraiser's Certificate shall
state, in the opinion of such Independent Appraiser, based upon the use of the
Semiannual Methodology, the following:
(a) the Fair Market Value of the Collateral (excluding any Cash Collateral
and, for the avoidance of doubt, any Excluded Parts) as of a specified
date within the Permitted Days preceding the date of such Certificate
(the "SEMIANNUAL VALUATION DATE");
(b) the Fair Market Value of the Rotables and of the Expendables included
in the Collateral as of the applicable Semiannual Valuation Date (and
shall separately state the quantity of such Rotables and Expendables);
and
(c) the Fair Market Value of the Serviceable Parts and the Unserviceable
Parts included in the Collateral as of the applicable Semiannual
Valuation Date.
Each semiannual Independent Appraiser's Certificate shall be accompanied by
an Appraisal Compliance Report determined as of the applicable Semiannual
Valuation Date, except that no Appraisal Compliance Report shall be required to
accompany the February 2003 Certificate, and the Maximum Collateral Ratio and
Minimum Rotable Ratio requirements shall not be required to be satisfied in
connection with the February 2003 Certificate. The Appraisal Compliance Report
provided with the semiannual Independent Appraiser's Certificate shall set forth
the calculation of the Collateral Ratio and the Rotable Ratio based on the Fair
Market Value of the Collateral and Rotables set forth in such Independent
Appraiser's Certificate, the Fair Market Value of Cash Collateral held by the
Collateral Agent, and the principal amount of the Securities Outstanding, each
as of the applicable Semiannual Valuation Date, PROVIDED that the Cash
Collateral deposited by the Company with the Security Agent on the Closing Date
shall be excluded from the calculation of the Collateral Ratio and Rotable Ratio
in connection with the Independent Appraiser's Certificate due by the fifth
Business Day of August, 2003, for purposes of Article 3 of this Agreement (but
not for purposes of Section 7.03 of the Security Agreement).
Section 2.3 QUARTERLY REPORTS. So long as the Securities are Outstanding,
within ten Business Days after each May 1 and November 1, commencing with May 1,
2003, the Company shall furnish the Policy Provider and the Trustee a
Nonappraisal Compliance Report determined as of such May 1 or November 1, as
applicable, or any date during such ten Business Day period thereafter.
Section 2.4 SPECIAL REPORTS. The Policy Provider may (i) if the Company
defaults in any of its obligations with respect to indebtedness of the Company
in an outstanding principal amount greater than $100,000,000 which results in
the acceleration of the Company's obligation to pay such indebtedness in full
prior to its stated final maturity date, at any time prior to the payment of
such indebtedness or the reversal of such acceleration, or (ii) if an Event of
Default occurs, at any time while such Event of Default is continuing, request
by written notice to the Company that the Company furnish to the Policy Provider
(with a copy to the Trustee) a special Independent Appraiser's Certificate. Any
such special Independent Appraiser's Certificate shall state, in the opinion of
such Independent Appraiser, based upon use of the Annual Methodology, the
following:
(a) the Fair Market Value of the Collateral (excluding any Cash Collateral
and, for the avoidance of doubt, any Excluded Parts) as of a specified
date within the Permitted Days preceding the date of such Certificate
(the "SPECIAL VALUATION DATE" and, together with each Annual Valuation
Date and Semiannual Valuation Date, the "VALUATION DATES");
(b) the Fair Market Value of the Rotables and of the Expendables included
in the Collateral as of the applicable Special Valuation Date (and
shall separately state the quantity of such Rotables and Expendables);
and
(c) the Fair Market Value of the Serviceable Parts and the Unserviceable
Parts included in the Collateral as of the applicable Special
Valuation Date.
The Company shall furnish to the Policy Provider (with a copy to the
Trustee) any such requested special Independent Appraiser's Certificate
reasonably promptly after receipt of such request. Notwithstanding the
foregoing, the Company shall not be obligated (i) to furnish any Independent
Appraiser's Certificate under this Section 2.4 during the Section 1110 Period or
(ii) to deliver pursuant to this Article 2 an Independent Appraiser's
Certificate more than twice in any six month period. Upon written request of the
Policy Provider given to the Company within twenty Business Days after delivery
to the Policy Provider of a special Independent Appraiser's Certificate under
this Section 2.4, the Company shall furnish to the Policy Provider (with a copy
to the Trustee) a recent Parts Inventory Report and a report showing the
percentage of the average cost of the Pledged Spare Parts located at each
Company facility as of the same date as the date of such Parts Inventory Report.
Section 2.5 INFORMATION FROM THE TRUSTEE. The Fair Market Value of any
Investment Securities included in the Cash Collateral for purposes of this
Agreement shall be determined by the Trustee in accordance with customary
financial market practices. The Trustee shall inform the Company of the
principal amount of the Securities Outstanding and the Fair Market Value of any
Investment Securities included in the Collateral, in each case as of any
Valuation Date or for purposes of Section 3.1, promptly after the Company's
request for such information.
Section 2.6 INDEPENDENT APPRAISER. If the Policy Provider has a reasonable
basis for concluding that the performance of the Independent Appraiser that
executed the most recent Independent Appraiser's Certificate delivered pursuant
to Article 2 was not satisfactory, the Policy Provider may designate another
Independent Appraiser to perform the next required appraisal under this Article
2 by written notice given to the Company within 90 days after the date of such
most recent Independent Appraiser's Certificate. The Company shall use such
other Independent Appraiser designated by the Policy Provider for the next
appraisal unless it gives the Policy Provider written notice of reasonable
objection to the use of such other Independent Appraiser.
ARTICLE 3
COLLATERAL REQUIREMENTS
Section 3.1 MAINTENANCE OF COLLATERAL RATIO AND ROTABLE RATIO.
(a) If the Collateral Ratio, as most recently determined pursuant to an
Appraisal Compliance Report, is greater than the Maximum Collateral Ratio, the
Company shall within 90 days after the date of the Appraisal Compliance Report
setting forth the calculation of such Collateral Ratio:
(i) subject additional Qualified Spare Parts (the "ADDITIONAL PARTS")
to the Lien of the Security Agreement in accordance with Section 3.1(c);
(ii) grant a security interest to a Collateral Agent in other property
to secure the Obligations for the benefit of the Holders and the
Indemnitees, PROVIDED that the Company shall have received, with respect to
the use for purposes of this Section 3.1(a) of such additional collateral
and the applicable Collateral Agreement, (x) approval of the Policy
Provider and (y) Rating Agency Confirmation;
(iii) provide additional cash and/or Investment Securities to the
Collateral Agent under the Security Agreement, PROVIDED that if the
Continental Cash Balance as of the applicable Valuation Date was less than
$600,000,000, then the amount of Cash Collateral included in the
Collateral, after giving effect to the action taken pursuant to Sections
3.1(a) and 3.1(b) with respect to such Valuation Date, shall not exceed
$20,000,000;
(iv) deliver Securities to the Trustee for cancellation;
(v) redeem some or all of the Securities pursuant to Article 4 of the
Indenture; or
(vi) any combination of the foregoing;
such that, the Collateral Ratio, as recalculated giving effect to such action
taken pursuant to this Section 3.1(a) and, in the case of clauses (i), (ii) and
(iii) of this Section 3.1(a), using the Fair Market Value of any such additional
Collateral determined pursuant to Section 3.1(d) (but otherwise using the
information used to determine the Collateral Ratio as most recently determined
pursuant to Article 2), would not be greater than the Maximum Collateral Ratio.
(b) If the Rotable Ratio, as most recently determined pursuant to an
Appraisal Compliance Report, is less than the Minimum Rotable Ratio, the Company
shall within 90 days after the date of the Appraisal Compliance Report setting
forth the calculation of such Rotable Ratio:
(i) subject additional Rotables (the "ADDITIONAL ROTABLES") to the
Lien of the Security Agreement in accordance with Section 3.1(c);
(ii) provide additional cash and/or Investment Securities to the
Collateral Agent under the Security Agreement; PROVIDED that if the
Continental Cash Balance as of the applicable Valuation Date was less than
$600,000,000, then the amount of Cash Collateral included in the
Collateral, after giving effect to the action taken pursuant to Sections
3.1(a) and 3.1(b) with respect to such Valuation Date, shall not exceed
$20,000,000;
(iii) deliver Securities to the Trustee for cancellation;
(iv) redeem some or all of the Securities pursuant to Article 4 of the
Indenture; or
(v) any combination of the foregoing.
such that, the Rotable Ratio, as recalculated giving effect to such action taken
pursuant to this Section 3.1(b) and, in the case of clauses (i) and (ii) of this
Section 3.1(b), using the Fair Market Value of any such additional Collateral
determined pursuant to Section 3.1(d) (but otherwise using the information used
to determine the Rotable Ratio as most recently determined pursuant to Article
2), would not be less than the Minimum Rotable Ratio.
(c) In order to comply with Section 3.1(a)(i) or 3.1(b)(i), the Company
shall (i) add one or more locations as Designated Locations pursuant to Section
4.02(b) of the Security Agreement, in which case the Qualified Spare Parts or
Rotables, as the case may be, at such new Designated Locations, to the extent
not included in the Pledged Spare Parts on the preceding Valuation Date, shall
be deemed Additional Parts or Additional Rotables, as the case may be; and/or
(ii) add to a Designated Location Qualified Spare Parts or Rotables, as the case
may be, that were not included as Pledged Spare Parts on the preceding Valuation
Date, which shall be deemed Additional Parts or Additional Rotables, as the case
may be.
(d) In connection with the provision of additional Collateral pursuant to
clause (i) or (ii) of Section 3.1(a) or Section 3.1(b), the Company shall
furnish to the Policy Provider (with a copy to the Trustee) an Independent
Appraiser's Certificate signed by an Independent Appraiser, dated as of a date
after the most recent Valuation Date, stating, in the opinion of such
Independent Appraiser, the Fair Market Value of such additional Collateral
(other than Cash Collateral), as of a date not earlier than 60 days prior to the
date of such Independent Appraiser's Certificate (but not earlier than the most
recent Valuation Date) and using, in the case of Additional Parts or Additional
Rotables, the Annual Methodology.
(e) If the Company shall have provided Cash Collateral pursuant to Section
3.1(a)(iii) or Section 3.1(b)(ii) (the "TEMPORARY CASH COLLATERAL"), it shall
within 90 days after providing such Temporary Cash Collateral (i) in the case of
Section 3.1(a)(iii), take additional action pursuant to Section 3.1(a)
(excluding the right to provide Cash Collateral) to cause the Collateral Ratio,
calculated to exclude such Temporary Cash Collateral, not to be greater than the
Maximum Collateral Ratio and (ii) in the case of Section 3.1(b)(ii), take
additional action pursuant to Section 3.1(b) (excluding the right to provide
Cash Collateral) to cause the Rotable Ratio, calculated to exclude such
Temporary Cash Collateral, not to be less than the Minimum Rotable Ratio.
Section 3.2 CERTAIN LIMITATIONS REGARDING THE COLLATERAL. During any period
commencing on the Closing Date or the date of an Independent Appraiser's
Certificate delivered pursuant to Article 2 through the date preceding the date
of the next Independent Appraiser's Certificate delivered pursuant to Article 2
(each, an "APPLICABLE PERIOD"), the Company agrees that, as of any date during
an Applicable Period, the aggregate Appraised Value of all Pledged Spare Parts
(x) previously during such Applicable Period sold, transferred or disposed of
(excluding any such transaction pursuant to Section 4.02(a)(ii) of the Security
Agreement and Pledged Spare Parts deemed sold pursuant to the proviso in Section
3.6(a) of this Agreement as to which the Company has reacquired title)
(collectively, "SALES") shall not exceed 2% of the Appraised Value of the
Collateral, (y) then subject to leases to Permitted Lessees or loans to other
Persons (together, "LOANS") shall not exceed 2% of the Appraised Value of the
Collateral or (z) previously during such Applicable Period moved from a
Designated Location to a location not a Designated Location (excluding those
permitted under Sections 4.02(a)(i) of the Security Agreement and clauses (i)
and (ii) of Section 3.6(a) of this Agreement) ("MOVES") shall not exceed 2% of
the Appraised Value of the Collateral.
Section 3.3 FLEET REDUCTION. If at any time after the Closing Date so long
as any Securities are Outstanding the total number of Aircraft of any Aircraft
Model (as defined below) in the Company's in-service fleet during any period of
60 consecutive days is less than the Specified Minimum (as defined below) for
such Aircraft Model (other than due to restrictions on operating such Aircraft
imposed by the FAA or any other instrumentality or agency of the United States),
then within 90 days after such occurrence the Company shall redeem Securities
pursuant to Article 4 of the Indenture or deliver Securities to the Trustee for
cancellation, or a combination of the foregoing, in an aggregate principal
amount not less than the principal amount of the Securities Outstanding at the
end of such 60 day period multiplied by a fraction, the numerator of which shall
be the Appraised Value of the Pledged Spare Parts that are appropriate for
incorporation in, installation on, attachment or appurtenance to, or use in only
Aircraft of such Aircraft Model or Engines utilized only on such Aircraft, and
the denominator of which shall be the Appraised Value of the Collateral. For
purposes of this Section "AIRCRAFT MODEL" shall mean each of the four models or
groups of models of Aircraft set forth below and "SPECIFIED MINIMUM" for any
Aircraft Model shall mean the number of Aircraft set forth opposite such
Aircraft Model below:
AIRCRAFT MODEL SPECIFIED MINIMUM
1. Boeing 737-700, Boeing
737-800 and Boeing 737-900
Aircraft 63 Aircraft
2. Boeing 757-200 and
Boeing 757-300
Aircraft 23 Aircraft
3. Boeing 767-200 and
Boeing 767-400 Aircraft 13 Aircraft
4. Boeing 777-200 Aircraft 9 Aircraft
Section 3.4 LIENS. The Company will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to the Spare Parts
Collateral, title to any of the foregoing or any interest of the Company
therein, except Permitted Liens. The Company shall promptly, at its own expense,
take such action as may be necessary to duly discharge (by bonding or otherwise)
any such Lien other than a Permitted Lien arising at any time.
Section 3.5 MAINTENANCE. The Company:
(a) shall maintain, or cause to be maintained, at all times the Pledged
Spare Parts in accordance with all applicable Laws issued by the FAA or any
other Governmental Entity having jurisdiction over the Company or any such
Pledged Spare Parts, including making any modifications, alterations,
replacements and additions necessary therefor;
(b) shall maintain, or cause to be maintained, all records, logs and other
materials required by the FAA or under the Federal Aviation Act to be maintained
in respect of the Pledged Spare Parts and shall not modify its record retention
procedures in respect of the Pledged Spare Parts if such modification would
materially diminish the value of the Pledged Spare Parts, taken as a whole; and
(c) shall maintain, or cause to be maintained, the Pledged Spare Parts in
good working order and condition and shall perform all maintenance thereon
necessary for that purpose, excluding (i) Pledged Spare Parts that have become
worn out or unfit for use and not reasonably repairable or become obsolete, (ii)
Pledged Spare Parts that are not required for the Company's normal operations
and (iii) Expendables that have been consumed or used in the Company's
operations.
Section 3.6 POSSESSION.
(a) Without the prior written consent of the Policy Provider, the Company
will not sell, lease, transfer or relinquish possession of any Pledged Spare
Part to anyone other than the grant of the security interest to the Security
Agent pursuant to the Security Agreement, except as permitted by the provisions
of Sections 3.2 and 3.6 of this Agreement and Sections 4.02 and 4.03 of the
Security Agreement and except that the Company shall have the right, in the
ordinary course of business, (i) to transfer possession of any Pledged Spare
Part to the manufacturer thereof or any other organization for testing,
overhaul, repairs, maintenance, alterations or modifications or to any Person
for the purpose of transport to any of the foregoing or (ii) to subject any
Pledged Spare Part to a pooling, exchange, borrowing or maintenance servicing
agreement arrangement customary in the airline industry and entered into in the
ordinary course of business; PROVIDED, HOWEVER, that if the Company's title to
any such Pledged Spare Part shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be a Sale with respect to such
Pledged Spare Part subject to the provisions of Section 3.2.
(b) So long as no Event of Default shall have occurred and be continuing,
the Company may enter into a lease with respect to any Pledged Spare Part to any
U.S. Air Carrier that is not then subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution or similar proceeding and shall not
have substantially all of its property in the possession of any liquidator,
trustee, receiver or similar person (a "PERMITTED LESSEE"). In the case of any
such lease, the Company will include in such lease appropriate provisions which
(t) make such lease expressly subject and subordinate to all of the terms of the
Security Agreement, including the rights of the Security Agent to avoid such
lease in the exercise of its rights to repossession of the Pledged Spare Parts
under the Security Agreement; (u) require the Permitted Lessee to comply with
the terms of Section 3.8; and (v) require that the Pledged Spare Parts subject
thereto be used in accordance with the limitations applicable to the Company's
use, possession and location of such Pledged Spare Parts provided in this
Agreement and the Security Agreement (including, without limitation, that such
Pledged Spare Parts be kept at one or more Designated Locations), it being
understood that such Permitted Lessee shall be entitled to incorporate in,
install on, attach or make appurtenant to, or use in, any Aircraft, Engine or
Appliance leased to, or owned by, such Permitted Lessee (whether or not subject
to any Lien) any Pledged Spare Part subject thereto, free from the Lien of the
Security Agreement. No lease permitted under this Section shall be entered into
unless (w) the Company shall provide written notice to the Policy Provider and
the Trustee (promptly after entering into any such lease); (x) the Company shall
furnish to the Policy Provider (with a copy to the Trustee) evidence reasonably
satisfactory to the Policy Provider that the insurance required by Section 3.8
remains in effect; (y) all necessary documents shall have been duly filed,
registered or recorded in such public offices as may be required fully to
preserve the first priority security interest (subject to Permitted Liens) of
Security Agent in the Pledged Spare Parts; and (z) the Company shall reimburse
the Policy Provider for all of its reasonable out-of-pocket fees and expenses,
including, without limitation, reasonable fees and disbursements of counsel,
incurred by the Policy Provider in connection with any such lease. Except as
otherwise provided herein and without in any way relieving the Company from its
primary obligation for the performance of its obligations under this Agreement
and the Security Agreement, the Company may in its sole discretion permit a
lessee to exercise any or all rights which the Company would be entitled to
exercise under Sections 3.4 through 3.8, inclusive, of this Agreement and
Article 4 of the Security Agreement, and may cause a lessee to perform any or
all of the Company's obligations under Sections 3.4 through 3.8, inclusive, of
this Agreement and Article 4 of the Security Agreement, and the Policy Provider
agrees to accept (and to direct the Security Agent to accept) actual and full
performance thereof by a lessee in lieu of performance by the Company.
Section 3.7 INSPECTION.
(a) At all reasonable times, the Policy Provider and its authorized
representatives (the "INSPECTING PARTIES") may (not more than once every 12
months unless an Event of Default has occurred and is continuing, in which case
such inspection right shall not be so limited) inspect the Pledged Spare Parts
(including without limitation, the Spare Parts Documents).
(b) Any inspection of the Pledged Spare Parts hereunder shall be limited to
a visual inspection and shall not include the disassembling, or opening of any
components, of any Pledged Spare Part, and no such inspection shall interfere
with the Company's or any Permitted Lessee's maintenance and use of the Pledged
Spare Parts.
(c) With respect to such rights of inspection, the Policy Provider shall
not have any duty or liability to make, or any duty or liability by reason of
not making, any such visit, inspection or survey.
(d) Each Inspecting Party shall bear its own expenses in connection with
any such inspection, PROVIDED that the Company shall reimburse the Inspecting
Party for its reasonable out-of-pocket expenses in connection with any such
inspection during the continuance of an Event of Default, except during the
Section 1110 Period.
Section 3.8 THE COMPANY'S OBLIGATION TO INSURE. The Company shall comply
with, or cause to be complied with, each of the provisions of Appendix IV, which
provisions are hereby incorporated by this reference as if set forth in full
herein. Nothing in this Section shall limit or prohibit (a) the Company from
maintaining the policies of insurance required under Appendix IV with higher
limits than those specified in Appendix IV, or (b) the Policy Provider, the
Trustee or the Security Agent from obtaining insurance for its own account (and
any proceeds payable under such separate insurance shall be payable as provided
in the policy relating thereto); PROVIDED, HOWEVER, that no insurance may be
obtained or maintained that would limit or otherwise adversely affect the
coverage of any insurance required to be obtained or maintained by the Company
pursuant to Section 3.8 and Appendix IV.
ARTICLE 4
MISCELLANEOUS
Section 4.1 BENEFITS OF AGREEMENT RESTRICTED. Subject to the provisions of
Section 4.6 hereof, nothing in this Agreement or the other Operative Documents,
express or implied, shall give or be construed to give to any Person, other than
the parties hereto, any legal or equitable right, remedy or claim under or in
respect of this Agreement or under any covenant, condition or provision herein
contained, all such covenants, conditions and provisions, subject to Section 4.6
hereof, being for the sole benefit of the parties hereto, PROVIDED that the
Trustee is an intended third-party beneficiary of each provision of this
Agreement that expressly grants it a right to receive certain documents that are
provided to the Policy Provider and of the last sentence of Section 4.6, and the
Trustee and the Security Agent each is an intended third-party beneficiary of
each provision of Section 3.8 and Appendix IV that expressly refers to it
(collectively, the "TRUSTEE PROVISIONS") (it being understood that the Company's
obligation to deliver a document to the Policy Provider and the contents of any
such document are not Trustee Provisions, and such provisions referred to in
this parenthetical may be amended, supplemented or waived without the consent of
the Trustee or the Security Agent, PROVIDED that the right of the Trustee to
receive a copy of such document if it is required to be delivered to the Trustee
or the Security Agent is a Trustee Provision).
Section 4.2 APPRAISER'S CERTIFICATE. Unless otherwise specifically
provided, an Independent Appraiser's Certificate shall be sufficient evidence of
the Appraised Value and Fair Market Value of any property under this Agreement.
Section 4.3 NOTICES; WAIVER. Any request, demand, authorization, direction,
notice, consent, waiver or other document provided or permitted by this
Agreement to be made upon, given or furnished to, or filed with
(a) the Company shall be sufficient for every purpose hereunder if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier, postage or courier charges,
as the case may be, prepaid, to the Company at:
Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002
Attention: Treasurer
Telecopier No.: (713) 324-2447
(b) the Policy Provider shall be sufficient for every purpose hereunder if
in writing and sent by personal delivery, by telecopier, by registered or
certified mail or by nationally recognized overnight courier, postage or courier
charges, as the case may be, prepaid, to the Policy Provider at:
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management, Structured Finance
Telecopier No.: (914) 765-3163
(c) the Trustee or the Security Agent shall be sufficient for every purpose
hereunder if in writing and sent by personal delivery, by telecopier, by
registered or certified mail or by nationally recognized overnight courier,
postage or courier charges, as the case may be, prepaid to the Trustee or the
Security Agent at:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
or to any of the above parties at any other address or telecopier number
subsequently furnished in writing by it to each of the other parties listed
above. Any such delivery shall be deemed made on the date of receipt by the
addressee of such delivery or of refusal by such addressee to accept delivery.
Section 4.4 AMENDMENTS, ETC. This Agreement may be amended or supplemented,
and compliance with any obligation in this Agreement may be waived, by written
instrument executed by the Company and the Policy Provider, PROVIDED that the
Trustee Provisions, insofar as they relate to the rights of the Trustee or the
Security Agent, may not be amended, supplemented or waived without the written
consent of the Trustee or the Security Agent, as the case may be.
Section 4.5 NO WAIVER. No failure on the part of the Policy Provider to
exercise, and no delay in exercising any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. Failure by the Policy Provider at any time or times hereafter to require
strict performance by the Company with any of the provisions, warranties, terms
or conditions contained herein shall not waive, affect or diminish any right of
the Policy Provider at any time or times hereafter to demand strict performance
thereof, and such right shall not be deemed to have been modified or waived by
any course of conduct or knowledge of the Policy Provider or any agent, officer
or employee of the Policy Provider.
Section 4.6 SUCCESSORS AND ASSIGNS. This Agreement and all obligations of
the Company hereunder shall be binding upon the successors and permitted assigns
of the Company, and shall, together with the rights and remedies of the Policy
Provider hereunder, inure to the benefit of the Policy Provider and its
successors and assigns. The interest of the Company under this Agreement is not
assignable and any attempt to assign all or any portion of this Agreement by the
Company shall be null and void except for an assignment in connection with a
merger, consolidation or conveyance, transfer or lease of all or substantially
all the Company's assets permitted under the Indenture. Upon the occurrence of a
Policy Provider Default, all rights and obligations of the Policy Provider under
this Agreement shall automatically, without any notice, demand or other action,
be assigned to and assumed by the Trustee, and the Trustee shall take or refrain
from taking action under this Agreement at the direction of the Controlling
Party.
Section 4.7 GOVERNING LAW. THIS AGREEMENT IS BEING DELIVERED IN THE STATE
OF NEW YORK. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 4.8 FFECT OF HEADINGS. The Article and Section headings and the
Table of Contents contained in this Agreement have been inserted for convenience
of reference only, and are and shall be without substantive meaning or content
of any kind whatsoever and are not a part of this Agreement.
Section 4.9 COUNTERPART ORIGINALS. This Agreement may be signed in two or
more counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of an original executed counterpart of this Agreement.
Section 4.10 SEVERABILITY. The provisions of this Agreement are severable,
and if any clause or provision shall be held invalid, illegal or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Agreement in any jurisdiction.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered all as of the date first above written.
CONTINENTAL AIRLINES, INC.
By:
--------------------------------
Name:
Title:
MBIA INSURANCE CORPORATION
By:
--------------------------------
Name:
Title:
Appendix I
DEFINITIONS APPENDIX
SECTION 1. DEFINED TERMS.
"ACCELERATION" means, with respect to the amounts payable in respect of the
Securities issued under the Indenture, such amounts becoming immediately due and
payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.
"ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.
"ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral
Maintenance Agreement.
"ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral
Maintenance Agreement.
"ADVANCE" means any Advance as defined in the Liquidity Facility.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying
Agent.
"AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.
"AIRCRAFT" means any contrivance invented, used, or designed to navigate,
or fly in, the air.
"ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral, taking at least the following actions: (i)
reviewing the Parts Inventory Report prepared as of the applicable Valuation
Date; (ii) reviewing the Independent Appraiser's internal value database for
values applicable to Qualified Spare Parts included in the Spare Parts
Collateral; (iii) developing a representative sampling of a reasonable number of
the different Qualified Spare Parts included in Spare Parts Collateral for which
a market check will be conducted; (iv) checking other sources, such as
manufacturers, other airlines, U.S. government procurement data and airline
parts pooling price lists, for current market prices of the sample parts
referred to in clause (iii); (v) establishing an assumed ratio of Serviceable
Parts to Unserviceable Parts as of the applicable Valuation Date based upon
information provided by the Company and the Independent Appraiser's limited
physical review of the Spare Parts Collateral referred to in the following
clause (vi); (vi) visiting at least two locations selected by the Independent
Appraiser where the Pledged Spare Parts are kept by the Company (neither of
which was visited for purposes of the last appraisal under Section 2.1 or 2.2 of
the Collateral Maintenance Agreement, whichever was most recent), PROVIDED that
at least one such location shall be one of the top three locations at which the
Company keeps the largest number of Pledged Spare Parts, to conduct a limited
physical inspection of the Spare Parts Collateral; (vii) conducting a limited
review of the inventory reporting system applicable to the Pledged Spare Parts,
including checking information reported in such system against information
determined through physical inspection pursuant to the preceding clause (vi) and
(viii) reviewing a sampling of the Spare Parts Documents (including tear-down
reports).
"ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral
Maintenance Agreement.
"APPLIANCE" means an instrument, equipment, apparatus, a part, an
appurtenance, or an accessory used, capable of being used, or intended to be
used, in operating or controlling Aircraft in flight, including a parachute,
communication equipment, and another mechanism installed in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.
"APPLICABLE MARGIN" means 0.90%.
"APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.
"APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing
information relating to the calculation of the Collateral Ratio and Rotable
Ratio, which shall be substantially in the form of Appendix II to the Collateral
Maintenance Agreement.
"APPRAISED VALUE" means, with respect to any Collateral, the Fair Market
Value of such Collateral as most recently determined pursuant to (i) the report
attached as Appendix II to the Offering Memo or (ii) Article 2 and, if
applicable, Section 3.1 of the Collateral Maintenance Agreement.
"AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment
(as defined in the Liquidity Facility) on such date.
"AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
Section 101 ET SEQ.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of such board duly authorized to act in respect of any particular
matter.
"BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the Applicable Date pursuant to
the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below, is equal to or less than zero or (y) on or in respect of any Applicable
Date that is an Interest Payment Date (or, if such an Interest Payment Date is
not a Business Day, the next succeeding Business Day)
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum of (i) the
amount of the outstanding principal amount of such Note as of the
first day of the then applicable Interest Period plus (ii)
interest payable thereon during such entire Interest Period at
then effective LIBOR.
Y = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using then
effective LIBOR as the discount rate.
Z = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using a rate
equal to the applicable London interbank offered rate for a period
commencing on the Applicable Date and ending on the last day of
the then applicable Interest Period, determined by the Reference
Agent as of two Business Days prior to the Applicable Date as the
discount rate.
"BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank Eurodollar market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston, Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with respect to draws under any Policy, the city and state in which the
office of the Policy Provider at which notices, presentations, transmissions,
deliveries and communications are to be made under the Policy is located, and
that, solely with respect to draws under the Liquidity Facility, also is a
"Business Day" as defined in the Liquidity Facility.
"CAPPED INTEREST RATE" means a rate per annum equal to 12%.
"CASH COLLATERAL" means cash and/or Investment Securities deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.
"CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if
it shall so qualify, into which all amounts drawn under the Liquidity Facility
pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be
deposited.
"CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15).
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.
"CLOSING DATE" means the Issuance Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the Spare Parts Collateral and all other collateral in
which the Collateral Agent has a security interest pursuant to the Collateral
Agreements.
"COLLATERAL AGENT" means the Trustee in its capacity as Security Agent or
as agent on behalf of the Holders under any other Collateral Agreement.
"COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.
"COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance
Agreement, dated as of the date of the Indenture, between the Company and the
Policy Provider.
"COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the
aggregate principal amount of all Securities Outstanding minus the sum of the
Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral), as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.
"COLLECTION ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.
"COMPANY" means the party named as such in the Indenture or any obligor on
the Securities until a successor replaces it pursuant to the Indenture and
thereafter means the successor.
"CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.
"CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.
"CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents that would have been shown on the balance sheet of Continental and
its consolidated subsidiaries prepared in accordance with GAAP as of any
Valuation Date, plus (b) the amount of marketable securities that would have
been reflected on such balance sheet which had, as of such Valuation Date, a
maturity of less than one year and which, but for their maturity, would have
qualified to be reflected on such balance sheet as cash equivalents.
"CONTROLLING PARTY" means the Person entitled to act as such pursuant to
the terms of Section 3.8 of the Indenture.
"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the
office of the Trustee at which at any particular time its corporate trust
business is administered and which, at the Closing Date, is located at
Wilmington Trust Company, as Trustee, Rodney Square North 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
"DEBT BALANCE" means 110% of the principal amount of the Outstanding
Securities.
"DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period, to 2.32% and, in the case of any subsequent Interest Period, LIBOR for
such Interest Period, as determined pursuant to the Reference Agency Agreement,
plus the Applicable Margin, PROVIDED that, solely in the event no Registration
Event (as defined in the Registration Rights Agreement) occurs on or prior to
the 210th day after the Closing Date, the Debt Rate shall be increased by an
additional margin equal to 0.50% per annum, from and including such 210th day to
and excluding the earlier of (i) the date on which such Registration Event
occurs and (ii) the date on which there ceases to be any Registrable Securities
(as defined in the Registration Rights Agreement)); or if the Shelf Registration
Statement (as defined in the Registration Rights Agreement) (if it is filed),
after being declared effective by the SEC, ceases to be effective at any time
during the period specified by Section 2(b)(B) of the Registration Rights
Agreement for more than 60 days, whether or not consecutive, during any 12-month
period, the Debt Rate shall be increased by an additional margin equal to 0.50%
per annum from and including the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective to and excluding the date on
which the Shelf Registration Statement again becomes effective (or, if earlier,
the end of the period specified by Section 2(b)(B) of the Registration Rights
Agreement), PROVIDED that the additional margin added to the Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time, PROVIDED FURTHER
that, if a default in the payment of interest on the Securities occurs and is
continuing on any Interest Payment Date, then the Debt Rate applicable to the
Interest Period ending on such Interest Payment Date shall not exceed the Capped
Interest Rate, except that for purposes of any payment made by the Company
intended to cure such default, this proviso shall not apply.
"DEFAULT" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.
"DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.
"DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged Spare Parts may be maintained by or
on behalf of the Company, which initially shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.
"DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a
Payment required to be paid to the Trustee for distribution on such Scheduled
Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time, except for a
defaulted payment of interest that is not paid within five days after the
Scheduled Payment Date therefor), (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv)
the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the
Policy Election Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the
Indenture and not for purposes of any other payment or distribution under the
Indenture, the date established for such payment in accordance with the Policy.
"DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.
"DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c)
of the Indenture.
"DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.
"DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension
Drawing or a Downgrade Drawing, as the case may be.
"DTC" means The Depository Trust Company, its nominees and their respective
successors.
"ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.
"ELIGIBLE ACCOUNT" means an account established by and with an Eligible
Institution at the request of the Security Agent, which institution agrees, for
all purposes of the New York UCC including Article 8 thereof, that (a) such
account shall be a "securities account" (as defined in Section 8-501 of the New
York UCC), (b) such institution is a "securities intermediary" (as defined in
Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash)
credited to such account shall be treated as a "financial asset" (as defined in
Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the
"entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in
respect of such account, (e) it will comply with all entitlement orders issued
by the Security Agent to the exclusion of the Company, (f) it will waive or
subordinate in favor of the Security Agent all claims (including without
limitation, claims by way of security interest, lien or right of set-off or
right of recoupment), and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository institution has a long-term unsecured debt rating or issuer
credit rating, as the case may be, from Moody's of at least A-3 or its
equivalent. An Eligible Deposit Account may be maintained with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution; provided
that such Liquidity Provider shall have waived all rights of set-off and
counterclaim with respect to such account.
"ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any U.S. branch of a
foreign bank), which has a long-term unsecured debt rating or issuer credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.
"ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or
guaranteed by, the U.S. Government having maturities no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any state thereof with a short-term unsecured debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having maturities no later than 90 days following the
date of such investment or (c) investments in negotiable certificates of
deposit, time deposits, banker's acceptances, commercial paper or other direct
obligations of, or obligations guaranteed by, commercial banks organized under
the laws of the United States or of any political subdivision thereof (or any
U.S. branch of a foreign bank) with a short-term unsecured debt rating by
Moody's of at least P-1 and a short-term issuer credit rating by Standard &
Poor's of at least A-1, having maturities no later than 90 days following the
date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments
that are bank obligations shall be denominated in U.S. dollars; and (y) the
aggregate amount of Eligible Investments at any one time that are bank
obligations issued by any one bank shall not be in excess of 5% of such bank's
capital surplus; PROVIDED FURTHER that any investment of the types described in
clauses (a), (b) and (c) above may be made through a repurchase agreement in
commercially reasonable form with a bank or other financial institution
qualifying as an Eligible Institution so long as such investment is held by a
third party custodian also qualifying as an Eligible Institution; PROVIDED
FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code. Notwithstanding the
foregoing, no investment of the types described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates, and no investment
in the obligations of any one bank in excess of $10,000,000, shall be an
Eligible Investment unless written approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.
"ENGINE" means an engine used, or intended to be used, to propel an
Aircraft, including a part, appurtenance, and accessory of the Engine, except a
Propeller.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time
"EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear
System.
"EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.
"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of
the use thereof due to destruction, damage beyond repair or rendition of any of
the Pledged Spare Parts permanently unfit for normal use for any reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged Spare Parts which results in the receipt of
insurance proceeds with respect to such Pledged Spare Parts on the basis of an
actual or constructive loss; or (iii) the loss of possession of any of the
Pledged Spare Parts by the Company for ninety (90) consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section
2.1(a) of the Indenture.
"EXCHANGE OFFER" means the exchange offer which may be made pursuant to the
Registration Rights Agreement to exchange Initial Certificates for Exchange
Certificates.
"EXCHANGE OFFER REGISTRATION STATEMENT" means the registration statement
that, pursuant to the Registration Rights Agreement, is filed by the Company
with the SEC with respect to the exchange of Initial Securities for Exchange
Securities.
"EXCHANGE SECURITIES" means the securities substantially in the form of
Exhibit A to the Indenture issued in exchange for the Initial Securities
pursuant to the Registration Rights Agreement and authenticated pursuant to the
Indenture.
"EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.
"EXPENDABLES" means Qualified Spare Parts other than Rotables.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration or similar regulatory
authority established to replace it.
"FAA FILED DOCUMENTS" means the Security Agreement.
"FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider thereunder, presently located at 1585 Broadway, New
York, New York 10036, or such other office as such Liquidity Provider from time
to time shall notify the Trustee as its "Facility Office" under any such
Liquidity Facility; provided that such Liquidity Provider shall not change its
Facility Office to another Facility Office outside the United States of America
except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity
Facility.
"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market
value determined on the basis of a hypothetical sale negotiated in an arm's
length free market transaction between a willing and able seller and a willing
and able buyer, neither of whom is under undue pressure to complete the
transaction, under then current market conditions, provided that cash shall be
valued at its Dollar amount.
"FEDERAL AVIATION ACT" means Title 49 of the United States Code,
"Transportation", as amended from time to time, or any similar legislation of
the United States enacted in substitution or replacement thereof.
"FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial Liquidity Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.
"FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.
"FINAL LEGAL MATURITY DATE" means December 6, 2009.
"FINAL ORDER" has the meaning assigned to such term in the Policy.
"FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.
"FINANCING STATEMENTS" means, collectively, UCC-1 financing statements
covering the Spare Parts Collateral, by the Company, as debtor, showing the
Security Agent as secured party, for filing in Delaware, Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.
"GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Documents or relating
to the observance or performance of the obligations of any of the parties to the
Operative Documents.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is
registered on the Registrar's books.
"INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or additional trustee or security agent appointed pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.
"INDENTURE" means the Indenture dated as of December 6, 2002, among the
Company, the Trustee, the Liquidity Provider and the Policy Provider under which
the Securities are issued.
"INDENTURE DISCHARGE DATE" means the date of the termination of the
effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without
giving effect to Section 9.1(b) thereof).
"INDENTURE TRUSTEE" means the Trustee.
"INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other
Person (i) engaged in a business which includes appraising Aircraft and assets
related to the operation and maintenance of Aircraft from time to time and (ii)
who does not have any material financial interest in the Company and is not
connected with the Company or any of its Affiliates as an officer, director,
employee, promoter, underwriter, partner or person performing similar functions.
"INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an
Independent Appraiser and attached as Appendix II to the Offering Memo or
delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral
Maintenance Agreement.
"INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.
"INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.
"INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.
"INITIAL SECURITIES" mean the securities issued and authenticated pursuant
to the Indenture and substantially in the form of Exhibit A thereto, other than
the Exchange Securities.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is
an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act.
"INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.
"INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6
of each year so long as any Security is Outstanding (commencing March 6, 2003),
PROVIDED that if any such day is not a Business Day, then the relevant Interest
Payment Date shall be the next succeeding Business Day.
"INTEREST PERIOD" means (i) in the case of the first Interest Period, the
period commencing on (and including) the Closing Date and ending on (but
excluding) the first Interest Payment Date following such date and (ii) in the
case of each subsequent Interest Period, the period commencing on (and
including) the last day of the immediately preceding Interest Period, and ending
on (but excluding) the next Interest Payment Date.
"INVESTMENT EARNINGS" means investment earnings on funds on deposit in the
Trust Accounts net of losses and investment expenses of the Trustee in making
such investments.
"INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any
obligation which is a direct obligation of or guaranteed by any state of the
U.S. or any subdivision thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's; (c)
any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment instrument relying
upon the credit and backing of any bank or trust company which is a member of
the Federal Reserve System and which has a combined capital (including capital
reserves to the extent not included in capital) and surplus and undivided
profits of not less than $250,000,000 (including the Collateral Agent and its
Affiliates if such requirements as to Federal Reserve System membership and
combined capital and surplus and undivided profits are satisfied), including,
without limitation, certificates of deposit, time and other interest-bearing
deposits, bankers' acceptances, commercial paper, loan and mortgage
participation certificates and documented discount notes accompanied by
irrevocable letters of credit and money market fund investing solely in
securities backed by the full faith and credit of the United States; or (e)
repurchase agreements collateralized by any of the foregoing.
"ISSUANCE DATE" means the date of issuance of the Initial Securities.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"LIBOR" has the meaning specified in the Reference Agency Agreement.
"LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.
"LIEN" means any mortgage, pledge, lease, security interest, encumbrance,
lien or charge of any kind affecting title to or any interest in property.
"LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the
Liquidity Facility.
"LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the
principal amount of any Drawings under the Liquidity Facility and (ii) any
interest accrued on any Liquidity Obligations.
"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
"LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date
of the Indenture, providing for the guarantee by the Liquidity Guarantor of the
obligations of the Liquidity Provider under the Liquidity Facility.
"LIQUIDITY GUARANTOR" means Morgan Stanley.
"LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other
amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee
Letter.
"LIQUIDITY PROVIDER" means Morgan Stanley Capital Services Inc., together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the
Indenture.
"LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.
"LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Documents.
"MAXIMUM COLLATERAL RATIO" means 45%.
"MINIMUM ROTABLE RATIO" means 150%.
"MOODY'S" means Moody's Investors Service, Inc.
"MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MSCS" has the meaning specified in the first paragraph of the Indenture.
"NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.
"NONAPPRAISAL COMPLIANCE REPORT" means a report providing information
relating to compliance by the Company with Section 3.2 of the Collateral
Maintenance Agreement, which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.
"NON-CONTROLLING PARTY" means, at any time, the Holders, the Liquidity
Provider and the Policy Provider, excluding whichever is the Controlling Party
at such time.
"NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.
"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.
"NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.
"NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the
Indenture.
"NON-PERFORMING" means, with respect to any Security, a Payment Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy proceeding under the Bankruptcy Code in which the
Company is a debtor, any Payment Default existing at the commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy Code or as may apply for the cure of such Payment Default under
Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into
consideration until the expiration of the applicable period.
"NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.
"NON-U.S. PERSON" means any Person other than a U.S. person, as defined in
Regulation S.
"NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the
Policy.
"NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined
in the Policy.
"OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.
"OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of
the Company relating to the offering of the Securities.
"OFFICER" means the Chairman of the Board, the President, any Vice
President of any grade, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.
"OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the
Collateral Maintenance Agreement and the Reference Agency Agreement.
"OPINION OF COUNSEL" means a written opinion from the General Counsel of
the Company, legal counsel to the Company or another legal counsel who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days following receipt) of, or its action on,
an opinion of counsel not specifically referred to above shall be sufficient
evidence that such counsel is acceptable to the Trustee.
"OUTSTANDING" or "OUTSTANDING" when used with respect to Securities or
a Security, means all Securities theretofore authenticated and delivered under
the Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Trustee in
trust for the Holders of such Securities, PROVIDED that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Trustee has been made;
(c) Securities for which payment has been deposited with the Trustee
or any Paying Agent in trust pursuant to Article 9 of the Indenture (except to
the extent provided therein); and
(d) Securities which have been paid, or for which other Securities
shall have been authenticated and delivered in lieu thereof or in substitution
therefor pursuant to the terms of Section 2.12 of the Indenture, unless proof
satisfactory to the Trustee is presented that any such Securities are held by
bona fide purchasers in whose hands the Securities are valid obligations of the
Company.
A Security does not cease to be Outstanding because the Company or one of
its Affiliates holds the Security; PROVIDED, HOWEVER, that in determining
whether the Holders of the requisite aggregate principal amount of Securities
Outstanding have given any request, demand, authorization, direction, notice,
consent or waiver under the Indenture or any other Operative Document, Section
2.13 of the Indenture shall be applicable.
"OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.
"OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on the
Securities which is not in fact received by the Trustee (whether from the
Company, the Liquidity Provider, the Policy Provider or otherwise) on or within
five days after the Scheduled Payment Date relating thereto and which is not
subsequently paid in connection with the redemption or final maturity of a
Security.
"PARTS INVENTORY REPORT" means, as of any date, a list identifying the
Pledged Spare Parts by manufacturer's part number and brief description and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.
"PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.
"PAYMENT" means (i) any payment of principal of, interest on, or Premium,
if any, or Break Amount, if any, with respect to the Securities from the
Company, (ii) any payment of interest on the Securities with funds drawn under
the Liquidity Facility or from a Cash Collateral Account or (iii) any payment of
interest on or principal of Securities with funds drawn under the Policy, or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.
"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the
Indenture.
"PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the
maximum rate permitted by applicable law.
"PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance
Agreement.
"PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the
Collateral Maintenance Agreement.
"PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents; (b) Liens attributable to Security Agent (both in its capacity as
Security Agent and in its individual capacity); (c) the rights of others under
agreements or arrangements to the extent expressly permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being contested in good faith by appropriate proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged Spare Parts or the interest of Security Agent therein or
impair the Lien of the Security Agreement; (e) materialmen's, mechanics',
workers', repairers', employees' or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for more than 60 days or is being contested in good faith by appropriate
proceedings, so long as such Liens and such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award against the Company, so long as
such judgment shall, within 60 days after the entry thereof, have been
discharged or vacated, or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result, or
any such judgment or award does not involve, any material risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent
therein or any impairment of the Lien of the Security Agreement; (g) any other
Lien with respect to which the Company shall have provided a bond, cash
collateral or other security adequate in the reasonable opinion of Security
Agent.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, trustee,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.
"POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance
Policy No. 39753, issued as of the Closing Date, as amended, supplemented or
otherwise modified from time to time in accordance with its respective terms.
"POLICY ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.
"POLICY DRAWING" means any payment of a claim under the Policy.
"POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the
Indenture.
"POLICY EXPENSES" means all amounts (including amounts in respect of
premiums, fees, expenses or indemnities) due to the Policy Provider under the
Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest
accrued on any Policy Provider Obligations, and (iii) reimbursement of and
interest on the Liquidity Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider; provided that if, at the time
of determination, a Policy Provider Default exists, Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.
"POLICY FEE LETTER" means the fee letter, dated as of the date hereof, from
the Policy Provider to Continental and acknowledged by the Trustee, setting
forth the fees and premiums payable with respect to the Policy.
"POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance
company, and its successors and permitted assigns.
"POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement
dated as of the date hereof among the Trustee, the Company and the Policy
Provider, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of Written Notice of such failure to the
Policy Provider or (b) the Policy Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is
final and nonappealable, or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Policy Provider (or taking of possession of
all or any material portion of the Policy Provider's property).
"POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.
"POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity Facility in an amount equal to the amount of interest that would have
accrued on such Interest Drawing if such Interest Drawing had been made in
accordance with Section 2.02(e) of the Liquidity Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.
"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts,
including, without limitation, fees and indemnities (to the extent not included
in Policy Expenses), due to the Policy Provider under the Policy Provider
Agreement but shall not include any interest on Policy Drawings other than
Policy Provider Interest Obligations.
"PREMIUM" means, with respect to any Security redeemed pursuant to Article
4 of the Indenture, the following percentage of the principal amount of such
Security: (i) if redeemed before the first anniversary of the Issuance Date,
1.5%; (ii) if redeemed on or after such first anniversary and before the second
anniversary of the Issuance Date, 1.0%; and (iii) if redeemed on or after such
second anniversary and before the third anniversary of the Issuance Date, 0.5%;
PROVIDED that no Premium shall be payable in connection with a redemption made
by the Company to satisfy the Maximum Collateral Ratio or Minimum Rotable Ratio
requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement.
"PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the
Liquidity Facility on such Distribution Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.
"PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the
Indenture.
"PROPELLER" includes a part, appurtenance, and accessory of a propeller.
"PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the
Indenture.
"PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.
"QIB" means a qualified institutional buyer as defined in Rule 144A.
"QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.
"RATING AGENCIES" means, collectively, at any time, each nationally
recognized rating agency which shall have been requested by the Company to rate
the Securities and which shall then be rating the Securities. The initial Rating
Agency will be Moody's.
"RATINGS CONFIRMATION" means, with respect to any action proposed to be
taken, a written confirmation from each of the Rating Agencies that such action
would not result in (i) a reduction of the rating for the Securities below the
then current rating for the Securities (such rating as determined without regard
to the Policy) or (ii) a withdrawal or suspension of the rating of the
Securities.
"RECORD DATE" means the fifteenth (15th) day preceding any Scheduled
Interest Payment Date, whether or not a Business Day.
"REDEMPTION DATE", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to the Indenture and
such Security.
"REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.
"REGISTER" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of December 6, 2002, by and between the Company and the Initial
Purchaser.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the
Indenture.
"RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.
"REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit
agreement (or agreements) in substantially the form of the replaced Liquidity
Facility, including reinstatement provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating Agencies to confirm in
writing their respective ratings then in effect for the Securities (before
downgrading of such ratings, if any, as a result of the downgrading of the
Liquidity Provider), and be consented to by the Policy Provider, which consent
shall not be unreasonably withheld or delayed, in a face amount (or in an
aggregate face amount) equal to the amount of interest payable on the Securities
(at the Capped Interest Rate, and without regard to expected future principal
payments) on the eight Interest Payment Dates following the date of replacement
of such Liquidity Facility (or if such date is an Interest Payment Date, on such
day and the seven Interest Payment Dates following the date of replacement of
such Liquidity Facility) and issued by a Person (or Persons) having unsecured
short-term debt rating or issuer credit rating, as the case may be, issued by
the Rating Agencies which are equal to or higher than the Threshold Rating.
Without limitation of the form that a Replacement Liquidity Facility otherwise
may have pursuant to the preceding sentence, a Replacement Liquidity Facility
for the Securities may have a stated expiration date earlier than 15 days after
the Final Legal Maturity Date so long as such Replacement Liquidity Facility
provides for a Non-Extension Drawing as contemplated by Section 3.5(d) of the
Indenture.
"REQUEST" means a written request for the action therein specified signed
on behalf of the Company by any Officer and delivered to the Trustee. Each
Request shall be accompanied by an Officers' Certificate if and to the extent
required by Section 12.4 of the Indenture.
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of
interest, calculated at the Capped Interest Rate, that would be payable on the
Securities on each of the eight successive Interest Payment Dates immediately
following such day or, if such day is an Interest Payment Date, on such day and
the succeeding seven Interest Payment Dates, in each case calculated on the
basis of the outstanding principal amount of the Securities on such date and
without regard to expected future payments of principal on the Securities.
"REQUIRED HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.
"RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the corporate trust administration department of the Trustee or any other
officer customarily performing functions similar to those performed by the
Persons who at the time shall be such officers or to whom any corporate trust
matter is referred because of his or her knowledge of and familiarity with a
particular subject, (ii) with respect to the Liquidity Provider, any authorized
officer of the Liquidity Provider, and (iii) with respect to the Policy
Provider, any authorized officer of the Policy Provider.
"RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.
"RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.
"RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture.
"RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.
"ROTABLE" means a Qualified Spare Part that wears over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which it relates.
"ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market Value of the Rotables, as set forth in the most recent Independent
Appraiser's Certificate delivered by the Company pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities Outstanding minus the sum of the Cash Collateral held
by the Collateral Agent.
"RULE 144A" means Rule 144A under the Securities Act.
"SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.
"SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable thereto, (ii) with respect to any payment
of defaulted interest, the payment date established pursuant to Section 2.16,
(iii) with respect to amounts due on the redemption of any Security, the
Redemption Date applicable thereto, and (iv) with respect to the final maturity
of the Securities, December 6, 2007.
"SEC" means the Securities and Exchange Commission and any government
agency succeeding to its functions.
"SECTION 1110" means Section 1110 of the Bankruptcy Code.
"SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified
in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period, if any, commencing with the trustee or debtor-in-possession in such
proceeding agreeing, with court approval, to perform its obligations under the
Operative Documents within such 60 days (or longer period as agreed) and
continuing until such time as such trustee or debtor-in-possession ceases to
fully perform its obligations thereunder with the result that the period during
which the Collateral Agent is prohibited from repossessing the collateral under
any Collateral Agreement comes to an end.
"SECURITIES" means the "Securities", as defined in the Indenture, that are
issued under the Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement.
"SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of
the date of the Indenture between the Company and the Security Agent.
"SECURITYHOLDER" means any holder of one or more Securities.
"SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.
"SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral
Maintenance Agreement.
"SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation in, installation on, attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.
"SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be required to be filed by the Company with the SEC pursuant to the
Registration Rights Agreement, other than an Exchange Offer Registration
Statement.
"SPARE PART" means an accessory, appurtenance, or part of an Aircraft
(except an Engine or Propeller), Engine (except a Propeller), Propeller, or
Appliance, that is to be installed at a later time in an Aircraft, Engine,
Propeller or Appliance.
"SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the
Security Agreement.
"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.
"SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy
Event.
"SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the
Indenture.
"SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral
Maintenance Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.
"STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity
Facility).
"STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.
"SUBORDINATED SECURITIES" is defined in Section 2.18 of the Indenture.
"SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.
"SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security
Agreement substantially in the form of Exhibit A to the Security Agreement.
"SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy
Provider Agreement and the Fee Letters.
"TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs incurred or imposed with respect thereto) imposed or otherwise
assessed by the United States of America or by any state, local or foreign
government (or any subdivision or agency thereof) or other taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth and similar charges; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, taxes on goods and services, gains taxes, license, registration and
documentation fees, customs duties, tariffs, and similar charges.
"TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.
"THRESHOLD AMOUNT" means $2,000,000.
"THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by
Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial
Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply
to the Liquidity Guarantor.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is amended after such date, "TIA" means, to the extent
required by any such amendment, the TIA as so amended.
"TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.
"TRUST OFFICER" means any officer in the corporate trust department of the
Trustee, or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"TRUSTEE" means the party named as such in the Indenture until a successor
replaces it in accordance with the provisions of the Indenture and thereafter
means the successor.
"TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the
Indenture.
"TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral
Maintenance Agreement.
"TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility.
"UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable
Parts.
"U.S." or "UNITED STATES" means the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating certificate issued pursuant
to chapter 447 of title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the option of the issuer thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance
Agreement.
"WARRANTIES" is defined in clause (2) of Section 2.01 of the Security
Agreement.
"WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the
Policy Provider, a written instrument executed by the Designated Representative
of such Person. An invoice delivered by the Liquidity Provider pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing procedures
shall constitute Written Notice under such Section.
"WTC" has the meaning specified in the first paragraph of the Indenture.
SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the
following rules of construction shall apply for all purposes of the Operative
Documents (including this appendix) and of such agreements as may incorporate
this appendix by reference.
(a) In each Operative Document, unless otherwise expressly provided, a
reference to:
(i) each of the Company, the Trustee, the Collateral Agent, the Security
Agent or any other person includes, without prejudice to the
provisions of any Operative Document, any successor in interest to it
and any permitted transferee, permitted purchaser or permitted
assignee of it;
(ii) words importing the plural include the singular and words importing
the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule or
exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Document, that
agreement, instrument or document, or annex, schedule or exhibit, or
part, respectively, as amended, modified or supplemented from time to
time in accordance with its terms and in accordance with the
Operative Documents, and any agreement, instrument or document
entered into in substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as amended,
modified, supplemented, substituted, reissued or reenacted prior to
the Closing Date, and thereafter from time to time;
(v) the words "Agreement", "this Agreement", "hereby", "herein",
"hereto", "hereof" and "hereunder" and words of similar import when
used in any Operative Document refer to such Operative Document as a
whole and not to any particular provision of such Operative Document;
(vi) the words "including", "including, without limitation", "including,
but not limited to", and terms or phrases of similar import when used
in any Operative Document, with respect to any matter or thing, mean
including, without limitation, such matter or thing; and
(vii) a "Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule"
in any Operative Document, or in any annex thereto, is a reference to
a section of, or an exhibit, an annex, an appendix or a schedule to,
such Operative Document or such annex, respectively.
(b) Each exhibit, annex, appendix and schedule to each Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.
(c) Unless otherwise defined or specified in any Operative Document,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Document are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Document.
(e) For purposes of each Operative Document, the occurrence and
continuance of a Default or Event of Default referred to in Section 7.1(d), (e)
or (f) of the Indenture shall not be deemed to prohibit the Company from taking
any action or exercising any right that is conditioned on no Special Default,
Default or Event of Default having occurred and be continuing if such Special
Default, Default or Event of Default consists of the institution of
reorganization proceedings with respect to the Company under Chapter 11 of the
Bankruptcy Code and the trustee or debtor-in-possession in such proceedings
shall have agreed to perform its obligations under the Operative Documents with
the approval of the applicable court and thereafter shall have continued to
perform such obligations in accordance with Section 1110.
Appendix II to the
Collateral Maintenance Agreement
[Address to Policy Provider and
to the Trustee]
APPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL
MAINTENANCE AGREEMENT
Ladies and Gentlemen:
We refer to the Collateral Maintenance Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance
Corporation (the "AGREEMENT"). Terms defined in the Agreement and used herein
have such respective defined meanings. The Company hereby certifies that:
1. This Compliance Report is accompanied by an Independent Appraiser's
Certificate (the "RELEVANT APPRAISAL") dated [___________]. The Valuation
Date for purposes of the Relevant Appraisal was [___________] (the
"RELEVANT VALUATION DATE").
2. The following sets forth the calculation of the Collateral Ratio as of the
Relevant Valuation Date:
a. The aggregate principal amount of all
Securities Outstanding as of the
Relevant Valuation Date $[_______]
b. The Fair Market Value of the Cash
Collateral as of the Relevant Valuation
Date $[_______]
c. The Fair Market Value of the Collateral
(excluding Cash Collateral) as of the
Relevant Valuation Date, as set forth
in the accompanying Independent
Appraiser's Certificate $[_______]
d. The Collateral Ratio
((a - b) / c) [_______]%
3. The following sets forth the calculation of the Rotable Ratio as of the
Relevant Valuation Date:
a. The Fair Market Value of the Rotables
as of the Relevant Valuation Date, as
set forth in the accompanying
Independent Appraiser's Certificate $[_______]
b. The aggregate principal amount of all
Securities Outstanding as of the
Relevant Valuation Date $[_______]
c. The Fair Market Value of the Cash
Collateral as of the Relevant Valuation
Date $[_______]
d. The Rotable Ratio
(a / b - c) [_______]%
4. The Continental Cash Balance as of the Relevant Valuation Date was
$[___________].
Dated: [__________]
Very truly yours,
CONTINENTAL AIRLINES, INC.
By:
--------------------------------
Name:
Title:
Appendix III to the
Collateral Maintenance Agreement
[Address to Policy Provider and
to the Trustee]
NONAPPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL
MAINTENANCE AGREEMENT
Ladies and Gentlemen:
We refer to the Collateral Maintenance Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance
Corporation (the "AGREEMENT"). Terms defined in the Agreement and used herein
have such respective defined meanings. The Company hereby certifies that:
1. The most recent Independent Appraiser's Certificate furnished by the
Company (the "RELEVANT APPRAISAL") [was dated October 31, 2002] [pursuant
to Article 2 of the Agreement was dated [______________] (the "RELEVANT
DATE").] The Valuation Date for purposes of the Relevant Appraisal was
[___________] (the "RELEVANT VALUATION DATE").
2. The aggregate Appraised Value of all Collateral determined as of the
Relevant Valuation Date pursuant to the Agreement [, as subsequently
supplemented pursuant to Section 3.1 of the Agreement,] is $[________].
3. During the period (the "RELEVANT PERIOD") beginning on the [Closing Date]
[Relevant Date] and ending on [_______] (the "DETERMINATION DATE").
i) Sales did not exceed 2% of the Appraised Value of the Collateral, and
ii) Moves did not exceed 2% of the Appraised Value of the Collateral.
4. Loans outstanding on the Determination Date did not exceed 2% of the
Appraised Value of the Collateral.
5. Attached hereto as Exhibit 1 is a report that correctly sets forth as of
the Determination Date the percentage of the average cost of all Pledged
Spare Parts consisting of Rotables, Expendables and all Pledged Spare Parts
located at each Company facility.
6. Attached hereto as Exhibit 2 is a report that correctly sets forth the
following information as of the Determination Date with respect to each
Pledged Spare Part model among the 500 Pledged Spare Part models with the
highest aggregate Appraised Value:
i) Manufacturer's part number;
ii) the Company's part tracking number;
iii) part description;
iv) related aircraft model(s);
v) classification as Rotable or Expendable;
vi) quantity on hand; and
vii) the Company's average cost.
Very truly yours,
CONTINENTAL AIRLINES, INC.
By:
--------------------------------
Name:
Title:
Appendix IV to the
Collateral Maintenance Agreement
INSURANCE
[OMITTED AS CONTAINING CONFIDENTIAL FINANCIAL INFORMATION]
SPARE PARTS SECURITY AGREEMENT
FROM
CONTINENTAL AIRLINES, INC.
TO
WILMINGTON TRUST COMPANY,
As Security Agent
Dated as of December 6, 2002
Floating Rate Secured Notes due 2007
TABLE OF CONTENTS
PAGE
ARTICLE 1 - DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01 DEFINITIONS.....................................................1
SECTION 1.02 RULES OF CONSTRUCTION...........................................1
ARTICLE 2 - SECURITY INTEREST
SECTION 2.01 GRANT OF SECURITY INTEREST......................................2
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
SECTION 3.01 ORGANIZATION; QUALIFICATION.....................................4
SECTION 3.02 CORPORATE AUTHORIZATION.........................................4
SECTION 3.03 NO VIOLATION....................................................5
SECTION 3.04 APPROVALS.......................................................5
SECTION 3.05 VALID AND BINDING AGREEMENTS....................................5
SECTION 3.06 REGISTRATION AND RECORDATION....................................5
SECTION 3.07 THE COMPANY'S LOCATION..........................................5
SECTION 3.08 COMPLIANCE WITH LAWS............................................6
SECTION 3.09 BROKER'S FEES...................................................6
SECTION 3.10 SECTION 1110....................................................6
ARTICLE 4 - COVENANTS
SECTION 4.01 NOTICE OF CHANGE OF LOCATION....................................6
SECTION 4.02 USE, POSSESSION AND DESIGNATED LOCATIONS........................6
SECTION 4.03 PERMITTED SALE OR DISPOSITIONS..................................7
SECTION 4.04 CERTAIN ASSURANCES..............................................8
SECTION 4.05 INDENTURE OBLIGATIONS...........................................8
ARTICLE 5 - INSURANCE
SECTION 5.01 APPLICATION OF INSURANCE PROCEEDS...............................8
SECTION 5.02 APPLICATION OF PAYMENTS DURING EXISTENCE OF A SPECIAL DEFAULT
OR EVENT OF DEFAULT.............................................9
ARTICLE 6 - REMEDIES
SECTION 6.01 REMEDIES........................................................9
SECTION 6.02 APPLICATION OF PROCEEDS........................................11
SECTION 6.03 OBLIGATIONS OF COMPANY NOT AFFECTED BY REMEDIES................11
SECTION 6.04 REMEDIES CUMULATIVE............................................11
SECTION 6.05 DISCONTINUANCE OF PROCEEDINGS..................................12
SECTION 6.06 WAIVER OF PAST DEFAULTS........................................12
SECTION 6.07 APPOINTMENT OF RECEIVER........................................12
SECTION 6.08 SECURITY AGENT AUTHORIZED TO EXECUTE BILLS OF SALE, ETC........12
ARTICLE 7 - CASH COLLATERAL
SECTION 7.01 MAINTAINING THE CASH COLLATERAL................................13
SECTION 7.02 INVESTING OF CASH COLLATERAL...................................13
SECTION 7.03 RELEASE OF CASH COLLATERAL.....................................14
ARTICLE 8 - SECURITY AGENT
SECTION 8.01 SECURITY AGENT.................................................14
ARTICLE 9 - MISCELLANEOUS
SECTION 9.01 TERMINATION....................................................15
SECTION 9.02 BENEFITS OF SECURITY AGREEMENT RESTRICTED......................15
SECTION 9.03 CERTIFICATES AND OPINIONS OF COUNSEL; STATEMENTS TO BE
CONTAINED THEREIN; BASIS THEREFOR..............................15
SECTION 9.04 APPRAISER'S CERTIFICATE........................................15
SECTION 9.05 NOTICES; WAIVER................................................15
SECTION 9.06 AMENDMENTS, ETC................................................16
SECTION 9.07 NO WAIVER......................................................16
SECTION 9.08 CONFLICT WITH TRUST INDENTURE ACT OF 1939......................17
SECTION 9.09 SUCCESSORS AND ASSIGNS.........................................17
SECTION 9.10 GOVERNING LAW..................................................17
SECTION 9.11 EFFECT OF HEADINGS.............................................17
SECTION 9.12 COUNTERPART ORIGINALS..........................................17
SECTION 9.13 SEVERABILITY...................................................17
SECTION 9.14 SURVIVAL PROVISIONS............................................17
SECTION 9.15 BANKRUPTCY.....................................................18
APPENDIX I DEFINITIONS
EXHIBIT A FORM OF SUPPLEMENTAL SECURITY AGREEMENT (To Add
Designated Locations)
SCHEDULE 1 DESIGNATED LOCATIONS
SPARE PARTS SECURITY AGREEMENT
SPARE PARTS SECURITY AGREEMENT, dated as of December 6, 2002, by and
between CONTINENTAL AIRLINES, INC., a Delaware corporation (the "COMPANY"), and
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Security Agent
appointed pursuant to the Indenture (the "SECURITY AGENT").
RECITALS
WHEREAS, the Company, which is a certificated air carrier under Section
44705 of title 49 of the U.S. Code, the Trustee, the Policy Provider and the
Liquidity Provider have entered into the Indenture, providing for the issuance
of $200,000,000 aggregate principal amount of the Securities; and
WHEREAS, in order to secure the payment of the principal amount of and
interest on the Securities and all other Obligations of the Company under the
Indenture, the Securities and the other Operative Documents, the Company has
agreed to grant a security interest in certain Spare Parts, Appliances and other
Collateral, as provided for herein; and
WHEREAS, Schedule 1 to this Agreement specifically describes the locations
at which such Spare Parts and Appliances covered by the security interest of
this Agreement may be maintained by or on behalf of the Company, and Section
4.02(b) of this Agreement provides for the designation of additional locations
pursuant to Supplemental Security Agreements; and
WHEREAS, the Company and the Security Agent wish to set forth herein their
respective rights, liabilities and obligations with respect to the Spare Parts
Collateral.
NOW, THEREFORE, in consideration of the premises and other benefits to the
Company, the receipt and sufficiency of which are hereby acknowledged, the
Company and the Security Agent agree as follows:
ARTICLE 1
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.01 DEFINITIONS. Capitalized terms used above or hereinafter and
not otherwise defined herein shall have the meanings ascribed to such terms in
Section 1 of the Definitions Appendix attached hereto as Appendix I, which shall
be part of this Security Agreement as if fully set forth in this place. Unless
otherwise defined in this Security Agreement or in Section 1 of the Definitions
Appendix, terms defined in Article 8 or 9 of the UCC as in effect in the State
of New York (the "NY UCC") are used in this Security Agreement as such terms are
defined in such Article 8 or 9.
SECTION 1.02 RULES OF CONSTRUCTION. The rules of construction for this
Security Agreement are set forth in Section 2 of the Definitions Appendix.
ARTICLE 2
SECURITY INTEREST
SECTION 2.01 GRANT OF SECURITY INTEREST. To secure the prompt payment of
the principal amount of, interest on, and Premium, if any, and Break Amount, if
any, with respect to, all Securities from time to time outstanding under the
Indenture according to their tenor and effect, and the prompt payment of all
other amounts from time to time owing by the Company under, and the performance
and observance by the Company of all the agreements, covenants and provisions
contained in, the Indenture, the Securities, this Security Agreement and the
other Operative Documents (collectively, the "OBLIGATIONS"), for the benefit of
the Holders and each of the Indemnitees, and in consideration of the premises
and of the covenants herein contained, and of the acceptance of the Securities
by the Holders thereof, and for other good and valuable consideration the
receipt and adequacy whereof are hereby acknowledged, the Company has granted,
bargained, sold, assigned, transferred, conveyed, mortgaged, pledged and
confirmed, and does hereby grant, bargain, sell, assign, transfer, convey,
mortgage, pledge and confirm, unto the Security Agent, its successors in trust
and assigns, for the security and benefit of, the Holders and each of the
Indemnitees, a first priority security interest in and mortgage lien on all
right, title and interest of the Company in, to and under the following
described property, rights and privileges, whether now owned or hereafter
acquired (which, collectively, together with all property hereafter specifically
subject to the Lien of this Security Agreement by the terms hereof or any
supplement hereto, are included within, and are referred to as, the "SPARE PARTS
COLLATERAL"), to wit:
(1) all Spare Parts and Appliances first placed in service after
October 22, 1994 and currently owned or hereafter acquired by the Company
that (a) are appropriate for incorporation in, installation on, attachment
or appurtenance to, or use in, (i) one or more of the following models of
Aircraft: a Boeing model 737-700, 737-800, 737-900, 757-200, 757-300,
767-200, 767-400 or 777-200 Aircraft; (ii) any Engine utilized on any such
Aircraft; or (iii) any other Qualified Spare Part, and (b) are not
appropriate for incorporation in, installation on, attachment or
appurtenance to, or use in, any other model of Aircraft currently operated
by the Company or any Engine utilized on any such other model of Aircraft
("QUALIFIED SPARE PARTS"), PROVIDED that the following shall be excluded
from the Lien of this Security Agreement: (w) any Spare Part or Appliance
so long as it is incorporated in, installed on, attached or appurtenant to,
or being used in, an Aircraft, Engine or Qualified Spare Part that is so
incorporated, installed, attached, appurtenant or being used; (x) any Spare
Part or Appliance that has been incorporated in, installed on, attached or
appurtenant to, or used in an Aircraft, Engine or Qualified Spare Part that
has been so incorporated, installed, attached, appurtenant or used, for so
long after its removal from such Aircraft or Engine as it remains owned by
a lessor or conditional seller of, or subject to a Lien applicable to, such
Aircraft or Engine; (y) the Excluded Parts; and (z) any Spare Part or
Appliance leased to, loaned to, or held on consignment by, the Company
(such Spare Parts and Appliances, giving effect to such exclusions, the
"PLEDGED SPARE PARTS");
(2) the rights of the Company under any warranty or indemnity, express
or implied, regarding title, materials, workmanship, design or patent
infringement or related matters in respect of the Pledged Spare Parts (the
"WARRANTIES");
(3) all proceeds with respect to the sale or other disposition by the
Security Agent of any Pledged Spare Part or other Spare Parts Collateral
pursuant to the terms of this Security Agreement, and all insurance
proceeds with respect to any Pledged Spare Part, but excluding any
insurance maintained by the Company and not required under the Collateral
Maintenance Agreement;
(4) all rents, revenues and other proceeds collected by the Security
Agent pursuant to Section 6.01(c);
(5) all Eligible Accounts; all cash, Investment Securities and other
financial assets held therein by the Security Agent or an Eligible
Institution; and all security entitlements with respect thereto;
(6) all repair, maintenance and inventory records, logs, manuals and
all other documents and materials similar thereto (including, without
limitation, any such records, logs, manuals, documents and materials that
are computer print-outs) at any time maintained, created or used by the
Company, and all records, logs, documents and other materials required at
any time to be maintained by the Company pursuant to the FAA or under the
Federal Aviation Act, in each case with respect to any of the Pledged Spare
Parts (the "SPARE PARTS DOCUMENTS"); and
(7) all proceeds of the foregoing.
PROVIDED, HOWEVER, that notwithstanding any of the foregoing provisions, so
long as no Event of Default shall have occurred and be continuing, (a) the
Security Agent shall not take or cause to be taken any action contrary to the
Company's right hereunder to quiet enjoyment of the Pledged Spare Parts, to
possess, use, retain and control the Pledged Spare Parts and to all revenues,
income and profits derived therefrom, and (b) the Company shall have the right,
to the exclusion of the Security Agent, with respect to the warranties and
indemnities referred to in clause (2) above, to exercise in the Company's name
all rights and powers (other than to amend, modify or waive any of the
warranties or indemnities contained therein, except in the exercise of the
Company's reasonable business judgment) and to retain any recovery or benefit
resulting from the enforcement of any such warranty or indemnity; and PROVIDED
FURTHER THAT, notwithstanding the occurrence or continuation of an Event of
Default, the Security Agent shall not enter into any amendment of any such
warranty or indemnity which would increase the obligations of the Company
thereunder.
TO HAVE AND TO HOLD all and singular the aforesaid property unto the
Security Agent, and its successors and assigns, in trust for the equal and
proportionate benefit and security of the Holders and the Indemnitees, except as
provided in Section 3.2 of the Indenture, without any preference, distinction or
priority of any one Security over any other by reason of priority of time of
issue, sale, negotiation, date of maturity thereof or otherwise for any reason
whatsoever, and for the uses and purposes and in all cases and as to all
property specified in clauses (1) through (7) inclusive above, subject to the
terms and provisions set forth in this Security Agreement.
The Company does hereby constitute the Security Agent the true and lawful
attorney of the Company, irrevocably, granted for good and valuable
consideration and coupled with an interest and with full power of substitution,
and with full power (in the name of the Company or otherwise) to ask for,
require, demand, receive, compound and give acquittance for any and all monies
and claims for monies (in each case including insurance and requisition
proceeds) due and to become due under or arising out of all property which now
or hereafter constitutes part of the Spare Parts Collateral, to endorse any
checks or other instruments or orders in connection therewith and to file any
claims or to take any action or to institute any proceedings which the Security
Agent may deem to be necessary or advisable in the premises; PROVIDED that the
Security Agent shall not exercise any such rights except upon the occurrence and
during the continuance of an Event of Default hereunder.
The Company agrees that at any time and from time to time, upon the written
request of the Security Agent, the Company will promptly and duly execute and
deliver or cause to be duly executed and delivered any and all such further
instruments and documents (including without limitation UCC continuation
statements) as the Security Agent may reasonably deem necessary to perfect,
preserve or protect the mortgage, security interests and assignments created or
intended to be created hereby or to obtain for the Security Agent the full
benefits of the assignment hereunder and of the rights and powers herein
granted.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Trustee, the Liquidity Provider,
the Policy Provider and the Security Agent as follows:
SECTION 3.01 ORGANIZATION; QUALIFICATION. The Company is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware and has the corporate power and authority to conduct the business in
which it is currently engaged and to own or hold under lease its properties and
to enter into and perform its obligations under the Operative Documents to which
it is party. The Company is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which the nature and extent
of the business conducted by it, or the ownership of its properties, requires
such qualification, except where the failure to be so qualified would not give
rise to a Material Adverse Change to the Company.
SECTION 3.02 CORPORATE AUTHORIZATION. The Company has taken, or caused to
be taken, all necessary corporate action (including, without limitation, the
obtaining of any consent or approval of stockholders required by its Certificate
of Incorporation or By-Laws) to authorize the execution and delivery of each of
the Operative Documents to which it is party, and the performance of its
obligations thereunder.
SECTION 3.03 NO VIOLATION. The execution and delivery by the Company of the
Operative Documents to which it is party, the performance by the Company of its
obligations thereunder and the consummation by the Company on the Closing Date
of the transactions contemplated thereby, do not and will not (a) violate any
provision of the Certificate of Incorporation or By-Laws of the Company, (b)
violate any Law applicable to or binding on the Company or (c) violate or
constitute any default under (other than any violation or default that would not
result in a Material Adverse Change to the Company), or result in the creation
of any Lien (other than as permitted under this Security Agreement) upon the
Pledged Spare Parts under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, lease, loan or other material agreement,
instrument or document to which the Company is a party or by which the Company
or any of its properties is bound.
SECTION 3.04 APPROVALS. The execution and delivery by the Company of the
Operative Documents to which the Company is a party, the performance by the
Company of its obligations thereunder and the consummation by the Company on the
Closing Date of the transactions contemplated thereby do not and will not
require the consent or approval of, or the giving of notice to, or the
registration with, or the recording or filing of any documents with, or the
taking of any other action in respect of, (a) any trustee or other holder of any
debt of the Company and (b) any Government Entity, other than the filing of (x)
the FAA Filed Documents (with the FAA) and the Financing Statements (and
continuation statements periodically) and (y) filings, recordings, notices or
other ministerial actions pursuant to any routine recording, contractual or
regulatory requirements applicable to it.
SECTION 3.05 VALID AND BINDING AGREEMENTS. The Operative Documents to which
the Company is a party have been duly authorized, executed and delivered by the
Company and, assuming the due authorization, execution and delivery thereof by
the other party or parties thereto, constitute the legal, valid and binding
obligations of the Company and are enforceable against the Company in accordance
with the respective terms thereof, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar Laws affecting the rights of creditors generally and general principles
of equity, whether considered in a proceeding at law or in equity.
SECTION 3.06 REGISTRATION AND RECORDATION. Except for (a) the filing for
recordation (and recordation) of the FAA Filed Documents with the FAA, (b) the
filing of the Financing Statements (and continuation statements relating thereto
at periodic intervals), and (c) the deposit of the Initial Cash Collateral with,
and the holding and investment of the Initial Cash Collateral by, the Security
Agent in accordance with Article 7, no further action, including any filing or
recording of any document (including any financing statement in respect thereof
under Article 9 of the UCC) is necessary in order to establish and perfect the
Security Agent's security interest in the Pledged Spare Parts, the Warranties,
the Spare Parts Documents and the Initial Cash Collateral as against the Company
and any other Person, in each case, in any applicable jurisdictions in the
United States.
SECTION 3.07 THE COMPANY'S LOCATION. The Company's location (as such term
is used in Section 9-307 of the UCC) is Delaware. The full and correct legal
name and mailing address of the Company are correctly set forth in Section 9.05.
SECTION 3.08 COMPLIANCE WITH LAWS. (a) The Company is a Citizen of the
United States and a U.S. Air Carrier.
(b) The Company holds all licenses, permits and franchises from the
appropriate Government Entities necessary to authorize the Company to lawfully
engage in air transportation and to carry on scheduled commercial passenger
service as currently conducted, except where the failure to so hold any such
license, permit or franchise would not give rise to a Material Adverse Change to
the Company.
(c) The Company is not an "investment company" or a company controlled by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 3.09 BROKER'S FEES. No Person acting on behalf of the Company is or
will be entitled to any broker's fee, commission or finder's fee in connection
with the transactions pursuant to the Operative Documents on the Closing Date,
other than the fees and expenses payable by the Company in connection with the
sale of the Securities.
SECTION 3.10 SECTION 1110. The Security Agent is entitled to the benefits
of Section 1110 (as currently in effect) with respect to the right to take
possession of the Pledged Spare Parts and to enforce any of its other rights or
remedies as provided in the Security Agreement in the event of a case under
Chapter 11 of the Bankruptcy Code in which the Company is a debtor.
ARTICLE 4
COVENANTS
SECTION 4.01 NOTICE OF CHANGE OF LOCATION. The Company will give Security
Agent timely written notice (but in any event within 30 days prior to the
expiration of the period of time specified under applicable Law to prevent lapse
of perfection) of any change in its location (as such term is used in Section
9-307 of the UCC) or legal name and will promptly take any action required by
Section 4.04(c) as a result of such relocation.
SECTION 4.02 USE, POSSESSION AND DESIGNATED LOCATIONS.
(a) Subject to the terms of the Collateral Maintenance Agreement, the
Company shall have the right, at any time and from time to time at its own cost
and expense, without any release from or consent by the Security Agent, to deal
with the Pledged Spare Parts in any manner consistent with the Company's
ordinary course of business, including without limitation any of the following:
(i) to incorporate in, install on, attach or make appurtenant to,
or use in, any Aircraft, Engine or Qualified Spare Part leased to or owned
by the Company (whether or not subject to any Lien) any Pledged Spare Part,
free from the Lien of this Security Agreement;
(ii) to dismantle any Pledged Spare Part that has become worn out
or obsolete or unfit for use, and to sell or dispose of any such Pledged
Spare Part or any salvage resulting from such dismantling, free from the
Lien of this Security Agreement; and
(iii) to transfer any or all of the Pledged Spare Parts located
at one or more Designated Locations to one or more other Designated
Locations or to one or more locations which are not Designated Locations.
(b) The Company shall keep the Pledged Spare Parts at one or more of the
Designated Locations, except as otherwise permitted under Sections 4.02(a) or
4.03 of this Agreement or the Collateral Maintenance Agreement. If and whenever
the Company shall wish to add a location as a Designated Location, the Company
will furnish to the Security Agent the following:
(i) a Supplemental Security Agreement duly executed by the
Company, identifying each location that is to become a Designated Location
and specifically subjecting the Pledged Spare Parts at such location to the
Lien of this Security Agreement;
(ii) an Opinion of Counsel, dated the date of execution of said
Supplemental Security Agreement, stating that said Supplemental Security
Agreement has been duly filed for recording in accordance with the
provisions of the Federal Aviation Act, and either: (a) no other filing or
recording is required in any other place within the United States in order
to perfect the Lien of this Security Agreement on the Qualified Spare Parts
held at the Designated Locations specified in such Supplemental Security
Agreement under the laws of the United States, or (b) if any such other
filing or recording shall be required that said filing or recording has
been accomplished in such other manner and places, which shall be specified
in such Opinion of Counsel, as are necessary to perfect the Lien of this
Security Agreement; and
(iii) An Officers' Certificate stating that in the opinion of the
Officers executing the Officers' Certificate, all conditions precedent
provided for in this Security Agreement relating to the subjection of such
property to the Lien of this Security Agreement have been complied with.
SECTION 4.03 PERMITTED SALE OR DISPOSITIONS.
(a) So long as no Event of Default has occurred and is continuing, the
Company may sell, transfer or dispose of Pledged Spare Parts free from the Lien
of the Security Agreement, subject to the provisions of the Collateral
Maintenance Agreement.
(b) No purchaser in good faith of property purporting to be transferred
pursuant to Section 4.02(a)(ii) or 4.03(a) shall be bound to ascertain or
inquire into the authority of the Company to make any such transfer, free and
clear of the Lien of this Security Agreement. Any instrument of transfer
executed by the Company under Section 4.02(a)(ii) or 4.03 shall be sufficient
for the purposes of this Security Agreement and shall constitute a good and
valid release, assignment and transfer of the property therein described free
from any right, title or interest of the Security Agent and the Lien of this
Security Agreement.
SECTION 4.04 CERTAIN ASSURANCES. (a) The Company shall duly execute,
acknowledge and deliver, or shall cause to be executed, acknowledged and
delivered, all such further agreements, instruments, certificates or documents,
and shall do and cause to be done such further acts and things, in any case, as
Security Agent shall reasonably request for accomplishing the purposes of this
Security Agreement, PROVIDED that any instrument or other document so executed
by the Company will not expand any obligations or limit any rights of the
Company in respect of the transactions contemplated by any Operative Document.
(b) The Company shall promptly take such action with respect to the
recording, filing, re-recording and refiling of this Security Agreement and any
amendments or supplements thereto, as shall be necessary to continue the
perfection and priority of the Lien created by this Security Agreement.
(c) The Company, at its sole cost and expense, will cause the FAA Filed
Documents, the Financing Statements and all continuation statements (and any
amendments necessitated by any consolidation or merger of the Company, any
conveyance, transfer or lease of all or substantially all of the assets of the
Company, or any change of the Company's location) in respect of the Financing
Statements to be prepared and, subject only to the execution and delivery
thereof by Security Agent, duly and timely filed and recorded, or filed for
recordation, to the extent permitted under the Federal Aviation Act (with
respect to the FAA Filed Documents) or the UCC or similar law of any other
applicable jurisdiction (with respect to such other documents).
SECTION 4.05 INDENTURE OBLIGATIONS. The Company agrees to perform and
observe all of the agreements, covenants and obligations of the Company set
forth in the Indenture, the Securities and the other Operative Documents (it
being understood that this Section 4.05 shall not restrict the ability to amend
or supplement, or waive compliance with, any Operative Document in accordance
with its terms).
ARTICLE 5
INSURANCE
SECTION 5.01 APPLICATION OF INSURANCE PROCEEDS. (a) As between the Company
and the Security Agent, all insurance proceeds up to the Debt Balance paid under
policies required to be maintained by the Company pursuant to the Collateral
Maintenance Agreement as a result of the occurrence of an Event of Loss with
respect to any Pledged Spare Parts involving proceeds in excess of the Threshold
Amount will be paid to the Security Agent. If either the Security Agent or the
Company receives a payment of such insurance proceeds in excess of its
entitlement pursuant to this Section 5.01, it shall promptly pay such excess to
the other. At any time or from time to time after the receipt by the Security
Agent of insurance proceeds, upon submission to the Security Agent of an
Officers' Certificate stating that the Company has after the occurrence of such
Event of Loss purchased additional Qualified Spare Parts that are located at or
have been shipped by vendor(s) to a Designated Location, and stating the
aggregate purchase price for such additional Qualified Spare Parts, the Security
Agent shall pay the amount of such purchase price, up to the amount of such
insurance proceeds not previously disbursed pursuant to this sentence or
otherwise distributed under the Indenture in accordance with its terms, to the
Company or its designee.
(b) All proceeds of insurance required to be maintained by the Company in
accordance with the Collateral Maintenance Agreement in respect of any property
damage or loss involving proceeds of the Threshold Amount or less or not
constituting an Event of Loss with respect to any Pledged Spare Parts and
insurance proceeds in excess of the Debt Balance shall be paid over to, and
retained by, the Company.
SECTION 5.02 APPLICATION OF PAYMENTS DURING EXISTENCE OF A SPECIAL DEFAULT
OR EVENT OF DEFAULT. Any amount described in this Article 5 that is payable or
creditable to, or retainable by, the Company shall not be paid or credited to,
or retained by, the Company if at the time such payment, credit or retention
would otherwise occur a Special Default or Event of Default shall have occurred
and be continuing, but shall instead be held by or paid over to the Security
Agent as security for the obligations of the Company under this Security
Agreement and shall be invested pursuant to Article 7 hereof. At such time as
there shall not be continuing any Special Default or Event of Default, such
amount and any gains thereon shall be paid to the Company to the extent not
previously applied in accordance with this Security Agreement.
ARTICLE 6
REMEDIES
SECTION 6.01 REMEDIES. (a) If an Event of Default shall have occurred and
be continuing and so long as the same shall continue unremedied, then and in
every such case the Security Agent may exercise any or all of the rights and
powers and pursue any and all of the remedies pursuant to this Article 6, shall
have and may exercise all of the rights and remedies of a secured party under
the UCC, may take possession of all or any part of the properties covered or
intended to be covered by the Lien created hereby or pursuant hereto, may
exclude the Company and all persons claiming under it wholly or partly therefrom
and may sell the Spare Parts Collateral as a whole or from time to time in part;
PROVIDED, that the Security Agent shall give the Company twenty days' prior
written notice of its intention to sell any Spare Parts Collateral. Without
limiting any of the foregoing, it is understood and agreed that the Security
Agent may exercise any right of sale of any Spare Parts Collateral available to
it, even though it shall not have taken possession of such Spare Parts
Collateral and shall not have possession thereof at the time of such sale.
(b) If an Event of Default shall have occurred and be continuing, at the
request of the Security Agent, the Company shall assemble the Spare Parts
Collateral and make it available to the Security Agent at the Designated
Locations and shall promptly execute and deliver to the Security Agent such
instruments of title and other documents as the Security Agent may deem
necessary or advisable to enable the Security Agent or an agent or
representative designated by the Security Agent, at such time or times and place
or places as the Security Agent may specify, to obtain possession of all or any
part of the Spare Parts Collateral to which the Security Agent shall at the time
be entitled hereunder. If the Company shall for any reason fail to execute and
deliver such instruments and documents after such request by the Security Agent,
the Security Agent may (i) obtain a judgment conferring on the Security Agent
the right to immediate possession and requiring the Company to execute and
deliver such instruments and documents to the Security Agent, to the entry of
which judgment the Company hereby specifically consents to the fullest extent
permitted by Law, and (ii) pursue all or part of such Spare Parts Collateral
wherever it may be found and may enter any of the premises of Company wherever
such Spare Parts Collateral may be or are supposed to be and search for such
Spare Parts Collateral and take possession of and remove such Spare Parts
Collateral. All expenses of obtaining such judgment or of pursuing, searching
for and taking such property shall, until paid, be secured by the Lien of this
Security Agreement.
(c) Upon every such taking of possession, the Security Agent may, from time
to time, at the expense of the Spare Parts Collateral, make all such
expenditures for maintenance, use, operation, storage, insurance, leasing,
control, management, disposition, modifications or alterations to and of the
Spare Parts Collateral, as it may deem proper. In each such case, the Security
Agent shall have the right to maintain, use, operate, store, insure, lease,
control, manage, dispose of, modify or alter the Spare Parts Collateral and to
exercise all rights and powers of the Company relating to the Spare Parts
Collateral, as the Security Agent shall deem best, including the right to enter
into any and all such agreements with respect to the maintenance, use,
operation, storage, insurance, leasing, control, management, disposition,
modification or alteration of the Spare Parts Collateral or any part thereof as
the Security Agent may determine, and the Security Agent shall be entitled to
collect and receive directly all rents, revenues and other proceeds of the Spare
Parts Collateral and every part thereof, without prejudice, however, to the
right of the Security Agent under any provision of this Security Agreement to
collect and receive all cash held by, or required to be deposited with, the
Security Agent hereunder. Such rents, revenues and other proceeds shall be
applied to pay the expenses of the maintenance, use, operation, storage,
insurance, leasing, control, management, disposition, improvement, modification
or alteration of the Spare Parts Collateral and of conducting the business
thereof, and to make all payments which the Security Agent may be required or
may elect to make, if any, for taxes, assessments, insurance or other proper
charges upon the Spare Parts Collateral or any part thereof (including the
employment of engineers and accountants to examine, inspect and make reports
upon the properties and books and records of the Company), and all other
payments which the Security Agent may be required or authorized to make under
any provision of this Security Agreement, as well as just and reasonable
compensation for the services of the Security Agent, and of all persons properly
engaged and employed by the Security Agent with respect hereto.
(d) The Holders shall be entitled, at any sale pursuant to this Section
6.01, to credit against any purchase price bid at such sale by such Holder all
or any part of the unpaid obligations owing to such Holder and secured by the
Lien of this Security Agreement (only to the extent that such purchase price
would have been paid to such Holder pursuant to Section 3.2 of the Indenture if
such purchase price were paid in cash and the foregoing provisions of this
subsection (d) were not given effect).
(e) In the event of any sale of the Spare Parts Collateral, or any part
thereof, pursuant to any judgment or decree of any court or otherwise in
connection with the enforcement of any of the terms of this Security Agreement,
the unpaid principal amount of all Securities then outstanding, together with
accrued interest thereon, Break Amount, if any, Premium, if any, and other
amounts due thereunder, shall immediately become due and payable without
presentment, demand, protest or notice, all of which are hereby waived.
(f) After the occurrence and during the continuation of an Event of
Default, in taking, or refraining from taking, any action under this Security
Agreement pursuant to the exercise of remedies under Article 6, the Security
Agent shall be directed by the Controlling Party.
SECTION 6.02 APPLICATION OF PROCEEDS. If, in the case of the happening of
any Event of Default or Acceleration, the Security Agent shall exercise any of
the powers conferred upon it by Section 6.01 hereof, all payments made by the
Company to the Security Agent hereunder after such Event of Default or
Acceleration, and the proceeds of any judgment collected by the Security Agent
hereunder, and the proceeds of every sale or lease by the Security Agent
hereunder of any part or the whole of the Spare Parts Collateral, together with
any other sums which may then be held by the Security Agent under any of the
provisions hereof, shall be applied by the Security Agent in the manner set
forth in Section 7.10 of the Indenture.
After all such payments shall have been made in full, the title to any part
or the whole of the Spare Parts Collateral remaining unsold and abandoned by the
Security Agent shall be conveyed by the Security Agent to the Company or its
named designee free from any further liabilities or obligations to the Security
Agent hereunder. If after applying all such sums of money realized by the
Security Agent as aforesaid there shall remain any amount due to the Security
Agent under the provisions hereof, the Company agrees to pay the amount of such
deficit to the Security Agent for application in accordance with the Indenture.
SECTION 6.03 OBLIGATIONS OF COMPANY NOT AFFECTED BY REMEDIES. No retaking
of possession of part or the whole of the Spare Parts Collateral by the Security
Agent, nor any withdrawal, lease or sale thereof, nor any action or failure or
omission to act against the Company or in respect of the Spare Parts Collateral,
on the part of the Security Agent, the Controlling Party or the Holder of any
Securities, nor any delay or indulgence granted to the Company by the Security
Agent, the Controlling Party or any such Holder, shall affect the obligations of
the Company hereunder. The Security Agent may at any time upon notice in writing
to the Company apply to any court of competent jurisdiction for instructions as
to the application and distribution of the property held by it.
SECTION 6.04 REMEDIES CUMULATIVE. No right, power or remedy herein
conferred upon or reserved to the Security Agent, the Trustee, the Policy
Provider, the Liquidity Provider and/or the Holders of the Securities is
intended to be exclusive of any other right, power or remedy conferred upon or
reserved to any one or more of them and every right, power and remedy shall, to
the extent permitted by law, be cumulative and in addition to every other right,
power and remedy given hereunder or under the Indenture or the other Operative
Documents or now or hereafter existing at law or in equity or otherwise
(including, without limitation, under the UCC as in effect in any applicable
jurisdiction) and may be exercised from time to time and as often and in such
order as may be deemed expedient by the Security Agent, the Trustee, the Policy
Provider, the Liquidity Provider and/or the Holders of the Securities, to the
extent such right, power or remedy has been conferred upon or reserved to it.
The exercise by any of them of any right, power or remedy shall not be construed
as a waiver of the right of any of them to exercise at the same time or
thereafter any other right, power or remedy, nor as an election precluding
exercise at the same time or thereafter of any alternative right, power or
remedy.
SECTION 6.05 DISCONTINUANCE OF PROCEEDINGS. In case the Security Agent
shall have instituted any proceeding to enforce any right, power or remedy under
this Security Agreement by foreclosure, entry or otherwise, and such proceedings
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Security Agent, then and in every such case the
Company and the Security Agent shall, subject to any determination in such
proceedings, be restored to their former positions and rights hereunder with
respect to the Spare Parts Collateral, and all rights, remedies and powers of
the Company or the Security Agent shall continue as if no such proceedings had
been instituted.
SECTION 6.06 WAIVER OF PAST DEFAULTS. So long as an Event of Default has
occurred and is continuing, upon written instruction from the Controlling Party,
the Security Agent shall waive any past Default hereunder and its consequences
and upon any such waiver such Default shall cease to exist and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Security Agreement, but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.
SECTION 6.07 APPOINTMENT OF RECEIVER. The Security Agent shall, as a matter
of right, be entitled to the appointment of a receiver (who may be the Security
Agent or any successor or nominee thereof) for all or any part of the Spare
Parts Collateral, whether such receivership be incidental to a proposed sale of
the Spare Parts Collateral or the taking of possession thereof or otherwise, and
the Company hereby consents to the appointment of such a receiver and will not
oppose any such appointment. Any receiver appointed for all or any part of the
Spare Parts Collateral shall be entitled to exercise all the rights and powers
of the Security Agent with respect to the Spare Parts Collateral.
SECTION 6.08 SECURITY AGENT AUTHORIZED TO EXECUTE BILLS OF SALE, ETC. The
Company irrevocably appoints, while an Event of Default has occurred and is
continuing, the Security Agent the true and lawful attorney-in-fact of the
Company (which appointment is coupled with an interest) in its name and stead
and on its behalf, for the purpose of effectuating any sale, assignment,
transfer or delivery for the enforcement of the Lien of this Security Agreement,
whether pursuant to foreclosure or power of sale, assignments and other
instruments as may be necessary or appropriate, with full power of substitution,
the Company hereby ratifying and confirming all that such attorney or any
substitute shall do by virtue hereof in accordance with applicable law.
Nevertheless, if so requested by the Security Agent or any purchaser, the
Company shall ratify and confirm any such sale, assignment, transfer or
delivery, by executing and delivering to the Security Agent or such purchaser
all bills of sale, assignments, releases and other proper instruments to effect
such ratification and confirmation as may be designated in any such request.
ARTICLE 7
CASH COLLATERAL
SECTION 7.01 MAINTAINING THE CASH COLLATERAL. So long as any Obligation of
the Company under the Indenture or other Operative Document shall remain unpaid,
the Company will maintain all Cash Collateral only with an Eligible Institution
in an Eligible Account (as defined below). At the time the Securities are
initially issued, the Company shall deposit the Initial Cash Collateral with the
Security Agent to be held by the Security Agent as Cash Collateral under this
Agreement.
SECTION 7.02 INVESTING OF CASH COLLATERAL.
(a) The Security Agent agrees that, notwithstanding anything to the
contrary in this Security Agreement or the Indenture, (i) any Investment
Securities and any investment earnings thereon shall be credited to an Eligible
Account for which either the Security Agent or another Eligible Institution is
the "securities intermediary" (as defined in Section 8-102(a)(14) of the NY UCC)
and the Security Agent is the "entitlement holder" (as defined in Section
8-102(a)(7) of the NY UCC) of the "securities entitlement" (as defined in
Section 8-102(a)(17) of the NY UCC) with respect to each "financial asset" (as
defined in Section 8-102(a)(9) of the NY UCC) credited to such Eligible Account,
(ii) all such amounts, Investment Securities and all other property acquired
with cash credited to such Eligible Account will be credited to such Eligible
Account, (iii) all items of property (whether cash, investment property,
Investment Securities, other investments, securities, instruments or other
property) credited to any Eligible Account will be treated as a "financial
asset" under Article 8 of the NY UCC, (iv) the "securities intermediary's
jurisdiction" (as defined in Section 8-110(e) of the NY UCC) with respect to
such Eligible Account is the State of New York, and (v) all securities,
instruments and other property in order or registered form and credited to an
Eligible Account shall be payable to or to the order of, or registered in the
name of, the applicable securities intermediary or shall be indorsed to such
securities intermediary or in blank, and in no case whatsoever shall any
financial asset credited to such Eligible Account be registered in the name of
the Company, payable to or to the order of the Company or specially indorsed to
the Company except to the extent the foregoing have been specially endorsed by
the Company to such securities intermediary or in blank. The Security Agent
agrees that it will hold (and will indicate clearly in its books and records
that it holds) its "securities entitlement" to the "financial assets" credited
to any Eligible Account in trust for the benefit of the Holders and the Trustee.
The Company acknowledges that, by reason of the Security Agent being the
"entitlement holder" in respect of such Eligible Account as provided above, the
Security Agent shall have the sole right and discretion, subject only to the
terms of this Security Agreement and the Indenture, to give all "entitlement
orders" (as defined in Section 8-102(a)(8) of the NY UCC) with respect to such
Eligible Account and any and all financial assets and other property credited
thereto to the exclusion of the Company.
(b) From time to time the Security Agent will (a) invest, or direct the
applicable Eligible Institution to invest, amounts received with respect to the
applicable Cash Collateral in such Investment Securities as the Company may
select and (b) invest or direct the applicable Eligible Institution to invest,
interest paid on the Investment Securities referred to in clause (a) above, and
reinvest other proceeds of any such Investment Securities that may mature or be
sold, in each case in such Investment Securities credited in the same manner.
Interest and proceeds that are not invested or reinvested in Investment
Securities as provided above shall be deposited and held as Spare Parts
Collateral in the applicable Eligible Account.
(c) The Security Agent may sell or direct any Eligible Institution to sell
any Investment Securities and the proceeds of such a sale may be retained by the
Security Agent as Spare Parts Collateral hereunder.
SECTION 7.03 RELEASE OF CASH COLLATERAL. (a) Upon written request by the
Company to the Security Agent after notice of redemption of the Securities has
been given to Holders pursuant to Article 4 of the Indenture, the Security Agent
shall deliver to the Trustee for deposit in the Collection Account Cash
Collateral then held by the Security Agent up to the amount required to pay
amounts due with respect to the Securities to be redeemed on the applicable
Redemption Date.
(b) If the Collateral Ratio is less than the Maximum Collateral Ratio and
the Rotable Ratio is greater than the Minimum Rotable Ratio, in each case as
most recently determined pursuant to Article 2 or Section 3.1 of the Collateral
Maintenance Agreement, and the Security Agent held any Cash Collateral as of the
Valuation Date for such Collateral Ratio and Rotable Ratio (or subsequent date
as of which such ratio was recalculated pursuant to Section 3.1 of the
Collateral Maintenance Agreement), upon written request of the Company the
Security Agent shall pay to the Company an amount of the Cash Collateral such
that the Collateral Ratio would not be greater than the Maximum Collateral Ratio
and the Rotable Ratio would not be less than the Minimum Rotable Ratio, giving
effect to such payment (but otherwise using the information used as of such most
recent determination date to determine such ratio).
ARTICLE 8
SECURITY AGENT
SECTION 8.01 SECURITY AGENT. The Security Agent has been appointed pursuant
to the Indenture as Security Agent hereunder. The Security Agent shall be
obligated, and shall have the right, hereunder to make demands, to give notices,
to exercise or refrain from exercising any rights, and to take or refrain from
taking action (including, without limitation, the release of Spare Parts
Collateral) solely in accordance with this Security Agreement and the Indenture.
Upon 30 days' written notice to the Company, the Security Agent may resign and a
successor Security Agent may be appointed in the manner provided for a successor
Trustee in the Indenture. Upon the acceptance of any appointment as a Security
Agent by a successor Security Agent, that successor Security Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Security Agent under this Security Agreement, and the
retiring Security Agent shall thereupon be discharged from its duties and
obligations under this Security Agreement. After any retiring Security Agent's
resignation, the provisions of this Security Agreement shall inure to its
benefit as to any actions taken or omitted to be taken by it under this Security
Agreement while it was Security Agent. The Security Agent agrees to and shall
have the benefit of all provisions of the Indenture and the other Operative
Documents stated therein to be applicable to the Security Agent.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01 TERMINATION. The Company agrees that this is a continuing
agreement and shall remain in full force and effect until the occurrence of the
Indenture Discharge Date, at which time the Security Agent shall have no further
interest in and to the Spare Parts Collateral and will promptly release all of
the Security Agent's interest in and to the Spare Parts Collateral, including
any cash and/or Investment Securities held in accordance with the terms of this
Security Agreement. The Security Agent shall acknowledge the termination of this
Security Agreement and the release of the Spare Parts Collateral by executing
and delivering to the Company such instruments to the foregoing effect as the
Company shall reasonably request, at the sole cost and expense of the Company.
SECTION 9.02 BENEFITS OF SECURITY AGREEMENT RESTRICTED. Subject to the
provisions of Section 9.09 hereof, nothing in this Security Agreement or the
Securities, express or implied, shall give or be construed to give to any
Person, other than the parties hereto, the Controlling Party and, in the case of
Article 3, the Trustee, the Liquidity Provider and the Policy Provider, any
legal or equitable right, remedy or claim under or in respect of this Security
Agreement or under any covenant, condition or provision herein contained, all
such covenants, conditions and provisions, subject to Section 9.09 hereof, being
for the sole benefit of the parties hereto, the Controlling Party and, in the
case of Article 3, the Trustee, the Liquidity Provider and the Policy Provider.
SECTION 9.03 CERTIFICATES AND OPINIONS OF COUNSEL; STATEMENTS TO BE
CONTAINED THEREIN; BASIS THEREFOR. Upon any application or Request by the
Company to the Security Agent to take any action under any of the provisions of
this Security Agreement, the Company shall furnish to the Security Agent an
Officers' Certificate and an Opinion of Counsel in compliance with, but only if
required by, Sections 12.4 and/or 12.5 of the Indenture.
SECTION 9.04 APPRAISER'S CERTIFICATE. Unless otherwise specifically
provided, an Independent Appraiser's Certificate shall be sufficient evidence of
the Appraised Value and Fair Market Value to the Company of any property under
this Security Agreement.
SECTION 9.05 NOTICES; WAIVER. Any request, demand, authorization,
direction, notice, consent, waiver or other document provided or permitted by
this Security Agreement to be made upon, given or furnished to, or filed with
(a) the Company shall be sufficient for every purpose hereunder if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier, postage or courier charges,
as the case may be, prepaid, to the Company at:
Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002
Attention: Treasurer
Telecopier No.: (713) 324-2447
(b) the Security Agent shall be sufficient for every purpose hereunder if
in writing and sent by personal delivery, by telecopier, by registered or
certified mail or by nationally recognized overnight courier, postage or courier
charges, as the case may be, prepaid, to the Security Agent at:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
or to any of the above parties at any other address or telecopier number
subsequently furnished in writing by it to each of the other parties listed
above. Any such delivery shall be deemed made on the date of receipt by the
addressee of such delivery or of refusal by such addressee to accept delivery.
SECTION 9.06 AMENDMENTS, ETC. (a) This Security Agreement may be amended or
supplemented, and compliance with any obligation in this Security Agreement may
be waived, as provided in Article 10 of the Indenture.
(b) The Company and the Security Agent may enter into one or more
agreements supplemental hereto without the consent of the Trustee, the Policy
Provider, the Liquidity Provider or any Holder for any of the following
purposes: (i) to convey, transfer, assign, mortgage or pledge any property to or
with the Security Agent; (ii) to correct or amplify the description of any
property at any time subject to the Lien of this Security Agreement or better to
assure, convey and confirm unto the Security Agent any property subject or
required to be subject to the Lien of this Security Agreement; (iii) to add any
location as a Designated Location; or (iv) to add to the covenants of the
Company for the benefit of the Security Agent, the Trustee, the Policy Provider,
the Liquidity Provider or the Holders, or to surrender any rights or power
herein conferred upon the Company.
(c) If, in the opinion of the institution acting as Security Agent
hereunder, any document required to be executed by it pursuant to the terms of
Section 9.06 hereof affects any right, duty, immunity or indemnity with respect
to such institution under this Security Agreement, such institution may in its
discretion decline to execute such document.
SECTION 9.07 NO WAIVER. No failure on the part of the Security Agent to
exercise, and no delay in exercising any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. Failure by the Security Agent at any time or times hereafter to require
strict performance by the Company or any other Person with any of the
provisions, warranties, terms or conditions contained herein shall not waive,
affect or diminish any right of the Security Agent at any time or times
hereafter to demand strict performance thereof, and such right shall not be
deemed to have been modified or waived by any course of conduct or knowledge of
the Security Agent or any agent, officer or employee of the Security Agent.
SECTION 9.08 CONFLICT WITH TRUST INDENTURE ACT OF 1939. If and to the
extent that any provision of this Security Agreement limits, qualifies or
conflicts with the duties imposed by Sections 310 to 317, inclusive, of the TIA,
such imposed duties shall control.
SECTION 9.09 SUCCESSORS AND ASSIGNS. This Security Agreement and all
obligations of the Company hereunder shall be binding upon the successors and
permitted assigns of the Company, and shall, together with the rights and
remedies of the Security Agent hereunder, inure to the benefit of the Security
Agent, the Trustee, the Holders, and their respective successors and assigns.
The interest of the Company under this Security Agreement is not assignable and
any attempt to assign all or any portion of this Security Agreement by the
Company shall be null and void except for an assignment in connection with a
merger, consolidation or conveyance, transfer or lease of all or substantially
all the Company's assets permitted under the Indenture.
SECTION 9.10 GOVERNING LAW. THIS SECURITY AGREEMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.11 EFFECT OF HEADINGS. The Article and Section headings and the
Table of Contents contained in this Security Agreement have been inserted for
convenience of reference only, and are and shall be without substantive meaning
or content of any kind whatsoever and are not a part of this Security Agreement.
SECTION 9.12 COUNTERPART ORIGINALS. This Security Agreement may be signed
in two or more counterparts, each of which shall be deemed an original, but all
of which shall together constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Security Agreement by
telecopier shall be effective as delivery of an original executed counterpart of
this Security Agreement.
SECTION 9.13 SEVERABILITY. The provisions of this Security Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Security Agreement in any jurisdiction.
SECTION 9.14 SURVIVAL PROVISIONS. Notwithstanding any right of the Security
Agent or any of the Holders to investigate the affairs of the Company, and
notwithstanding any knowledge of facts determined or determinable by any of them
pursuant to such investigation or right of investigation, all representations
and warranties of the Company contained herein shall survive the execution and
delivery of this Security Agreement.
SECTION 9.15 BANKRUPTCY. It is the intention of the parties that the
Security Agent shall be entitled to the benefits of Section 1110 with respect to
the right to take possession of the Pledged Spare Parts and to enforce any of
its other rights or remedies as provided herein in the event of a case under
Chapter 11 of the Bankruptcy Code in which the Company is a debtor, and in any
instance where more than one construction is possible of the terms and
conditions hereof or any other pertinent Operative Document, each such party
agrees that a construction which would preserve such benefits shall control over
any construction which would not preserve such benefits.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused this Security Agreement to be
duly executed and delivered all as of the date first above written.
CONTINENTAL AIRLINES, INC.
By:
--------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY,
as Security Agent
By:
--------------------------------------
Name:
Title:
Appendix I
DEFINITIONS APPENDIX
SECTION 1. DEFINED TERMS.
"ACCELERATION" means, with respect to the amounts payable in respect of the
Securities issued under the Indenture, such amounts becoming immediately due and
payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.
"ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.
"ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral
Maintenance Agreement.
"ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral
Maintenance Agreement.
"ADVANCE" means any Advance as defined in the Liquidity Facility.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying
Agent.
"AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.
"AIRCRAFT" means any contrivance invented, used, or designed to navigate,
or fly in, the air.
"ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral, taking at least the following actions: (i)
reviewing the Parts Inventory Report prepared as of the applicable Valuation
Date; (ii) reviewing the Independent Appraiser's internal value database for
values applicable to Qualified Spare Parts included in the Spare Parts
Collateral; (iii) developing a representative sampling of a reasonable number of
the different Qualified Spare Parts included in Spare Parts Collateral for which
a market check will be conducted; (iv) checking other sources, such as
manufacturers, other airlines, U.S. government procurement data and airline
parts pooling price lists, for current market prices of the sample parts
referred to in clause (iii); (v) establishing an assumed ratio of Serviceable
Parts to Unserviceable Parts as of the applicable Valuation Date based upon
information provided by the Company and the Independent Appraiser's limited
physical review of the Spare Parts Collateral referred to in the following
clause (vi); (vi) visiting at least two locations selected by the Independent
Appraiser where the Pledged Spare Parts are kept by the Company (neither of
which was visited for purposes of the last appraisal under Section 2.1 or 2.2 of
the Collateral Maintenance Agreement, whichever was most recent), PROVIDED that
at least one such location shall be one of the top three locations at which the
Company keeps the largest number of Pledged Spare Parts, to conduct a limited
physical inspection of the Spare Parts Collateral; (vii) conducting a limited
review of the inventory reporting system applicable to the Pledged Spare Parts,
including checking information reported in such system against information
determined through physical inspection pursuant to the preceding clause (vi) and
(viii) reviewing a sampling of the Spare Parts Documents (including tear-down
reports).
"ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral
Maintenance Agreement.
"APPLIANCE" means an instrument, equipment, apparatus, a part, an
appurtenance, or an accessory used, capable of being used, or intended to be
used, in operating or controlling Aircraft in flight, including a parachute,
communication equipment, and another mechanism installed in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.
"APPLICABLE MARGIN" means 0.90%.
"APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.
"APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing
information relating to the calculation of the Collateral Ratio and Rotable
Ratio, which shall be substantially in the form of Appendix II to the Collateral
Maintenance Agreement.
"APPRAISED VALUE" means, with respect to any Collateral, the Fair Market
Value of such Collateral as most recently determined pursuant to (i) the report
attached as Appendix II to the Offering Memo or (ii) Article 2 and, if
applicable, Section 3.1 of the Collateral Maintenance Agreement.
"AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment
(as defined in the Liquidity Facility) on such date.
"AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
Section 101 ET SEQ.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of such board duly authorized to act in respect of any particular
matter.
"BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the Applicable Date pursuant to
the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below, is equal to or less than zero or (y) on or in respect of any Applicable
Date that is an Interest Payment Date (or, if such an Interest Payment Date is
not a Business Day, the next succeeding Business Day)
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum of (i) the
amount of the outstanding principal amount of such Note as of the
first day of the then applicable Interest Period plus (ii)
interest payable thereon during such entire Interest Period at
then effective LIBOR.
Y = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using then
effective LIBOR as the discount rate.
Z = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using a rate
equal to the applicable London interbank offered rate for a period
commencing on the Applicable Date and ending on the last day of
the then applicable Interest Period, determined by the Reference
Agent as of two Business Days prior to the Applicable Date as the
discount rate.
"BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank Eurodollar market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston, Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with respect to draws under any Policy, the city and state in which the
office of the Policy Provider at which notices, presentations, transmissions,
deliveries and communications are to be made under the Policy is located, and
that, solely with respect to draws under the Liquidity Facility, also is a
"Business Day" as defined in the Liquidity Facility.
"CAPPED INTEREST RATE" means a rate per annum equal to 12%.
"CASH COLLATERAL" means cash and/or Investment Securities deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.
"CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if
it shall so qualify, into which all amounts drawn under the Liquidity Facility
pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be
deposited.
"CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15).
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.
"CLOSING DATE" means the Issuance Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the Spare Parts Collateral and all other collateral in
which the Collateral Agent has a security interest pursuant to the Collateral
Agreements.
"COLLATERAL AGENT" means the Trustee in its capacity as Security Agent or
as agent on behalf of the Holders under any other Collateral Agreement.
"COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.
"COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance
Agreement, dated as of the date of the Indenture, between the Company and the
Policy Provider.
"COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the
aggregate principal amount of all Securities Outstanding minus the sum of the
Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral), as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.
"COLLECTION ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.
"COMPANY" means the party named as such in the Indenture or any obligor on
the Securities until a successor replaces it pursuant to the Indenture and
thereafter means the successor.
"CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.
"CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.
"CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents that would have been shown on the balance sheet of Continental and
its consolidated subsidiaries prepared in accordance with GAAP as of any
Valuation Date, plus (b) the amount of marketable securities that would have
been reflected on such balance sheet which had, as of such Valuation Date, a
maturity of less than one year and which, but for their maturity, would have
qualified to be reflected on such balance sheet as cash equivalents.
"CONTROLLING PARTY" means the Person entitled to act as such pursuant to
the terms of Section 3.8 of the Indenture.
"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the
office of the Trustee at which at any particular time its corporate trust
business is administered and which, at the Closing Date, is located at
Wilmington Trust Company, as Trustee, Rodney Square North 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
"DEBT BALANCE" means 110% of the principal amount of the Outstanding
Securities.
"DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period, to 2.32% and, in the case of any subsequent Interest Period, LIBOR for
such Interest Period, as determined pursuant to the Reference Agency Agreement,
plus the Applicable Margin, PROVIDED that, solely in the event no Registration
Event (as defined in the Registration Rights Agreement) occurs on or prior to
the 210th day after the Closing Date, the Debt Rate shall be increased by an
additional margin equal to 0.50% per annum, from and including such 210th day to
and excluding the earlier of (i) the date on which such Registration Event
occurs and (ii) the date on which there ceases to be any Registrable Securities
(as defined in the Registration Rights Agreement)); or if the Shelf Registration
Statement (as defined in the Registration Rights Agreement) (if it is filed),
after being declared effective by the SEC, ceases to be effective at any time
during the period specified by Section 2(b)(B) of the Registration Rights
Agreement for more than 60 days, whether or not consecutive, during any 12-month
period, the Debt Rate shall be increased by an additional margin equal to 0.50%
per annum from and including the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective to and excluding the date on
which the Shelf Registration Statement again becomes effective (or, if earlier,
the end of the period specified by Section 2(b)(B) of the Registration Rights
Agreement), PROVIDED that the additional margin added to the Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time, PROVIDED FURTHER
that, if a default in the payment of interest on the Securities occurs and is
continuing on any Interest Payment Date, then the Debt Rate applicable to the
Interest Period ending on such Interest Payment Date shall not exceed the Capped
Interest Rate, except that for purposes of any payment made by the Company
intended to cure such default, this proviso shall not apply.
"DEFAULT" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.
"DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.
"DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged Spare Parts may be maintained by or
on behalf of the Company, which initially shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.
"DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a
Payment required to be paid to the Trustee for distribution on such Scheduled
Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time, except for a
defaulted payment of interest that is not paid within five days after the
Scheduled Payment Date therefor), (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv)
the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the
Policy Election Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the
Indenture and not for purposes of any other payment or distribution under the
Indenture, the date established for such payment in accordance with the Policy.
"DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.
"DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c)
of the Indenture.
"DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.
"DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension
Drawing or a Downgrade Drawing, as the case may be.
"DTC" means The Depository Trust Company, its nominees and their respective
successors.
"ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.
"ELIGIBLE ACCOUNT" means an account established by and with an Eligible
Institution at the request of the Security Agent, which institution agrees, for
all purposes of the New York UCC including Article 8 thereof, that (a) such
account shall be a "securities account" (as defined in Section 8-501 of the New
York UCC), (b) such institution is a "securities intermediary" (as defined in
Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash)
credited to such account shall be treated as a "financial asset" (as defined in
Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the
"entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in
respect of such account, (e) it will comply with all entitlement orders issued
by the Security Agent to the exclusion of the Company, (f) it will waive or
subordinate in favor of the Security Agent all claims (including without
limitation, claims by way of security interest, lien or right of set-off or
right of recoupment), and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository institution has a long-term unsecured debt rating or issuer
credit rating, as the case may be, from Moody's of at least A-3 or its
equivalent. An Eligible Deposit Account may be maintained with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution; provided
that such Liquidity Provider shall have waived all rights of set-off and
counterclaim with respect to such account.
"ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any U.S. branch of a
foreign bank), which has a long-term unsecured debt rating or issuer credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.
"ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or
guaranteed by, the U.S. Government having maturities no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any state thereof with a short-term unsecured debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having maturities no later than 90 days following the
date of such investment or (c) investments in negotiable certificates of
deposit, time deposits, banker's acceptances, commercial paper or other direct
obligations of, or obligations guaranteed by, commercial banks organized under
the laws of the United States or of any political subdivision thereof (or any
U.S. branch of a foreign bank) with a short-term unsecured debt rating by
Moody's of at least P-1 and a short-term issuer credit rating by Standard &
Poor's of at least A-1, having maturities no later than 90 days following the
date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments
that are bank obligations shall be denominated in U.S. dollars; and (y) the
aggregate amount of Eligible Investments at any one time that are bank
obligations issued by any one bank shall not be in excess of 5% of such bank's
capital surplus; PROVIDED FURTHER that any investment of the types described in
clauses (a), (b) and (c) above may be made through a repurchase agreement in
commercially reasonable form with a bank or other financial institution
qualifying as an Eligible Institution so long as such investment is held by a
third party custodian also qualifying as an Eligible Institution; PROVIDED
FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code. Notwithstanding the
foregoing, no investment of the types described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates, and no investment
in the obligations of any one bank in excess of $10,000,000, shall be an
Eligible Investment unless written approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.
"ENGINE" means an engine used, or intended to be used, to propel an
Aircraft, including a part, appurtenance, and accessory of the Engine, except a
Propeller.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time
"EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear
System.
"EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.
"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of
the use thereof due to destruction, damage beyond repair or rendition of any of
the Pledged Spare Parts permanently unfit for normal use for any reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged Spare Parts which results in the receipt of
insurance proceeds with respect to such Pledged Spare Parts on the basis of an
actual or constructive loss; or (iii) the loss of possession of any of the
Pledged Spare Parts by the Company for ninety (90) consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section
2.1(a) of the Indenture.
"EXCHANGE OFFER" means the exchange offer which may be made pursuant to the
Registration Rights Agreement to exchange Initial Certificates for Exchange
Certificates.
"EXCHANGE OFFER REGISTRATION STATEMENT" means the registration statement
that, pursuant to the Registration Rights Agreement, is filed by the Company
with the SEC with respect to the exchange of Initial Securities for Exchange
Securities.
"EXCHANGE SECURITIES" means the securities substantially in the form of
Exhibit A to the Indenture issued in exchange for the Initial Securities
pursuant to the Registration Rights Agreement and authenticated pursuant to the
Indenture.
"EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.
"EXPENDABLES" means Qualified Spare Parts other than Rotables.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration or similar regulatory
authority established to replace it.
"FAA FILED DOCUMENTS" means the Security Agreement.
"FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider thereunder, presently located at 1585 Broadway, New
York, New York 10036, or such other office as such Liquidity Provider from time
to time shall notify the Trustee as its "Facility Office" under any such
Liquidity Facility; provided that such Liquidity Provider shall not change its
Facility Office to another Facility Office outside the United States of America
except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity
Facility.
"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market
value determined on the basis of a hypothetical sale negotiated in an arm's
length free market transaction between a willing and able seller and a willing
and able buyer, neither of whom is under undue pressure to complete the
transaction, under then current market conditions, provided that cash shall be
valued at its Dollar amount.
"FEDERAL AVIATION ACT" means Title 49 of the United States Code,
"Transportation", as amended from time to time, or any similar legislation of
the United States enacted in substitution or replacement thereof.
"FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial Liquidity Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.
"FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.
"FINAL LEGAL MATURITY DATE" means December 6, 2009.
"FINAL ORDER" has the meaning assigned to such term in the Policy.
"FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.
"FINANCING STATEMENTS" means, collectively, UCC-1 financing statements
covering the Spare Parts Collateral, by the Company, as debtor, showing the
Security Agent as secured party, for filing in Delaware, Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.
"GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Documents or relating
to the observance or performance of the obligations of any of the parties to the
Operative Documents.
"HOLDER" or "SECURITYHOLDER" means the Person in whose name a Security is
registered on the Registrar's books.
"INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or additional trustee or security agent appointed pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.
"INDENTURE" means the Indenture dated as of December 6, 2002, among the
Company, the Trustee, the Liquidity Provider and the Policy Provider under which
the Securities are issued.
"INDENTURE DISCHARGE DATE" means the date of the termination of the
effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without
giving effect to Section 9.1(b) thereof).
"INDENTURE TRUSTEE" means the Trustee.
"INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other
Person (i) engaged in a business which includes appraising Aircraft and assets
related to the operation and maintenance of Aircraft from time to time and (ii)
who does not have any material financial interest in the Company and is not
connected with the Company or any of its Affiliates as an officer, director,
employee, promoter, underwriter, partner or person performing similar functions.
"INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an
Independent Appraiser and attached as Appendix II to the Offering Memo or
delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral
Maintenance Agreement.
"INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.
"INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.
"INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.
"INITIAL SECURITIES" mean the securities issued and authenticated pursuant
to the Indenture and substantially in the form of Exhibit A thereto, other than
the Exchange Securities.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institutional investor that is
an "accredited investor" within the meaning set forth in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act.
"INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.
"INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6
of each year so long as any Security is Outstanding (commencing March 6, 2003),
PROVIDED that if any such day is not a Business Day, then the relevant Interest
Payment Date shall be the next succeeding Business Day.
"INTEREST PERIOD" means (i) in the case of the first Interest Period, the
period commencing on (and including) the Closing Date and ending on (but
excluding) the first Interest Payment Date following such date and (ii) in the
case of each subsequent Interest Period, the period commencing on (and
including) the last day of the immediately preceding Interest Period, and ending
on (but excluding) the next Interest Payment Date.
"INVESTMENT EARNINGS" means investment earnings on funds on deposit in the
Trust Accounts net of losses and investment expenses of the Trustee in making
such investments.
"INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any
obligation which is a direct obligation of or guaranteed by any state of the
U.S. or any subdivision thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's; (c)
any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment instrument relying
upon the credit and backing of any bank or trust company which is a member of
the Federal Reserve System and which has a combined capital (including capital
reserves to the extent not included in capital) and surplus and undivided
profits of not less than $250,000,000 (including the Collateral Agent and its
Affiliates if such requirements as to Federal Reserve System membership and
combined capital and surplus and undivided profits are satisfied), including,
without limitation, certificates of deposit, time and other interest-bearing
deposits, bankers' acceptances, commercial paper, loan and mortgage
participation certificates and documented discount notes accompanied by
irrevocable letters of credit and money market fund investing solely in
securities backed by the full faith and credit of the United States; or (e)
repurchase agreements collateralized by any of the foregoing.
"ISSUANCE DATE" means the date of issuance of the Initial Securities.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"LIBOR" has the meaning specified in the Reference Agency Agreement.
"LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.
"LIEN" means any mortgage, pledge, lease, security interest, encumbrance,
lien or charge of any kind affecting title to or any interest in property.
"LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the
Liquidity Facility.
"LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the
principal amount of any Drawings under the Liquidity Facility and (ii) any
interest accrued on any Liquidity Obligations.
"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
"LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date
of the Indenture, providing for the guarantee by the Liquidity Guarantor of the
obligations of the Liquidity Provider under the Liquidity Facility.
"LIQUIDITY GUARANTOR" means Morgan Stanley.
"LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other
amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee
Letter.
"LIQUIDITY PROVIDER" means Morgan Stanley Capital Services Inc., together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the
Indenture.
"LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.
"LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Documents.
"MAXIMUM COLLATERAL RATIO" means 45%.
"MINIMUM ROTABLE RATIO" means 150%.
"MOODY'S" means Moody's Investors Service, Inc.
"MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MSCS" has the meaning specified in the first paragraph of the Indenture.
"NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.
"NONAPPRAISAL COMPLIANCE REPORT" means a report providing information
relating to compliance by the Company with Section 3.2 of the Collateral
Maintenance Agreement, which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.
"NON-CONTROLLING PARTY" means, at any time, the Holders, the Liquidity
Provider and the Policy Provider, excluding whichever is the Controlling Party
at such time.
"NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.
"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.
"NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.
"NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the
Indenture.
"NON-PERFORMING" means, with respect to any Security, a Payment Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy proceeding under the Bankruptcy Code in which the
Company is a debtor, any Payment Default existing at the commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy Code or as may apply for the cure of such Payment Default under
Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into
consideration until the expiration of the applicable period.
"NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.
"NON-U.S. PERSON" means any Person other than a U.S. person, as defined in
Regulation S.
"NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the
Policy.
"NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined
in the Policy.
"OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.
"OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of
the Company relating to the offering of the Securities.
"OFFICER" means the Chairman of the Board, the President, any Vice
President of any grade, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.
"OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the
Collateral Maintenance Agreement and the Reference Agency Agreement.
"OPINION OF COUNSEL" means a written opinion from the General Counsel of
the Company, legal counsel to the Company or another legal counsel who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days following receipt) of, or its action on,
an opinion of counsel not specifically referred to above shall be sufficient
evidence that such counsel is acceptable to the Trustee.
"OUTSTANDING" or "OUTSTANDING" when used with respect to Securities or
a Security, means all Securities theretofore authenticated and delivered under
the Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Securities, or portions thereof, for whose payment or redemption
money in the necessary amount has been theretofore deposited with the Trustee in
trust for the Holders of such Securities, PROVIDED that, if such Securities are
to be redeemed, notice of such redemption has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Trustee has been made;
(c) Securities for which payment has been deposited with the Trustee
or any Paying Agent in trust pursuant to Article 9 of the Indenture (except to
the extent provided therein); and
(d) Securities which have been paid, or for which other Securities
shall have been authenticated and delivered in lieu thereof or in substitution
therefor pursuant to the terms of Section 2.12 of the Indenture, unless proof
satisfactory to the Trustee is presented that any such Securities are held by
bona fide purchasers in whose hands the Securities are valid obligations of the
Company.
A Security does not cease to be Outstanding because the Company or one of
its Affiliates holds the Security; PROVIDED, HOWEVER, that in determining
whether the Holders of the requisite aggregate principal amount of Securities
Outstanding have given any request, demand, authorization, direction, notice,
consent or waiver under the Indenture or any other Operative Document, Section
2.13 of the Indenture shall be applicable.
"OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.
"OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on the
Securities which is not in fact received by the Trustee (whether from the
Company, the Liquidity Provider, the Policy Provider or otherwise) on or within
five days after the Scheduled Payment Date relating thereto and which is not
subsequently paid in connection with the redemption or final maturity of a
Security.
"PARTS INVENTORY REPORT" means, as of any date, a list identifying the
Pledged Spare Parts by manufacturer's part number and brief description and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.
"PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.
"PAYMENT" means (i) any payment of principal of, interest on, or Premium,
if any, or Break Amount, if any, with respect to the Securities from the
Company, (ii) any payment of interest on the Securities with funds drawn under
the Liquidity Facility or from a Cash Collateral Account or (iii) any payment of
interest on or principal of Securities with funds drawn under the Policy, or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.
"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the
Indenture.
"PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the
maximum rate permitted by applicable law.
"PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance
Agreement.
"PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the
Collateral Maintenance Agreement.
"PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents; (b) Liens attributable to Security Agent (both in its capacity as
Security Agent and in its individual capacity); (c) the rights of others under
agreements or arrangements to the extent expressly permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being contested in good faith by appropriate proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged Spare Parts or the interest of Security Agent therein or
impair the Lien of the Security Agreement; (e) materialmen's, mechanics',
workers', repairers', employees' or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for more than 60 days or is being contested in good faith by appropriate
proceedings, so long as such Liens and such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award against the Company, so long as
such judgment shall, within 60 days after the entry thereof, have been
discharged or vacated, or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result, or
any such judgment or award does not involve, any material risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent
therein or any impairment of the Lien of the Security Agreement; (g) any other
Lien with respect to which the Company shall have provided a bond, cash
collateral or other security adequate in the reasonable opinion of Security
Agent.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, trustee,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.
"POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance
Policy No. 39753, issued as of the Closing Date, as amended, supplemented or
otherwise modified from time to time in accordance with its respective terms.
"POLICY ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.
"POLICY DRAWING" means any payment of a claim under the Policy.
"POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the
Indenture.
"POLICY EXPENSES" means all amounts (including amounts in respect of
premiums, fees, expenses or indemnities) due to the Policy Provider under the
Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest
accrued on any Policy Provider Obligations, and (iii) reimbursement of and
interest on the Liquidity Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider; provided that if, at the time
of determination, a Policy Provider Default exists, Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.
"POLICY FEE LETTER" means the fee letter, dated as of the date hereof, from
the Policy Provider to Continental and acknowledged by the Trustee, setting
forth the fees and premiums payable with respect to the Policy.
"POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance
company, and its successors and permitted assigns.
"POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement
dated as of the date hereof among the Trustee, the Company and the Policy
Provider, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of Written Notice of such failure to the
Policy Provider or (b) the Policy Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is
final and nonappealable, or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Policy Provider (or taking of possession of
all or any material portion of the Policy Provider's property).
"POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.
"POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity Facility in an amount equal to the amount of interest that would have
accrued on such Interest Drawing if such Interest Drawing had been made in
accordance with Section 2.02(e) of the Liquidity Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.
"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts,
including, without limitation, fees and indemnities (to the extent not included
in Policy Expenses), due to the Policy Provider under the Policy Provider
Agreement but shall not include any interest on Policy Drawings other than
Policy Provider Interest Obligations.
"PREMIUM" means, with respect to any Security redeemed pursuant to Article
4 of the Indenture, the following percentage of the principal amount of such
Security: (i) if redeemed before the first anniversary of the Issuance Date,
1.5%; (ii) if redeemed on or after such first anniversary and before the second
anniversary of the Issuance Date, 1.0%; and (iii) if redeemed on or after such
second anniversary and before the third anniversary of the Issuance Date, 0.5%;
PROVIDED that no Premium shall be payable in connection with a redemption made
by the Company to satisfy the Maximum Collateral Ratio or Minimum Rotable Ratio
requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement.
"PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the
Liquidity Facility on such Distribution Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.
"PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the
Indenture.
"PROPELLER" includes a part, appurtenance, and accessory of a propeller.
"PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the
Indenture.
"PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.
"QIB" means a qualified institutional buyer as defined in Rule 144A.
"QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.
"RATING AGENCIES" means, collectively, at any time, each nationally
recognized rating agency which shall have been requested by the Company to rate
the Securities and which shall then be rating the Securities. The initial Rating
Agency will be Moody's.
"RATINGS CONFIRMATION" means, with respect to any action proposed to be
taken, a written confirmation from each of the Rating Agencies that such action
would not result in (i) a reduction of the rating for the Securities below the
then current rating for the Securities (such rating as determined without regard
to the Policy) or (ii) a withdrawal or suspension of the rating of the
Securities.
"RECORD DATE" means the fifteenth (15th) day preceding any Scheduled
Interest Payment Date, whether or not a Business Day.
"REDEMPTION DATE", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to the Indenture and
such Security.
"REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.
"REGISTER" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of December 6, 2002, by and between the Company and the Initial
Purchaser.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the
Indenture.
"RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.
"REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit
agreement (or agreements) in substantially the form of the replaced Liquidity
Facility, including reinstatement provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating Agencies to confirm in
writing their respective ratings then in effect for the Securities (before
downgrading of such ratings, if any, as a result of the downgrading of the
Liquidity Provider), and be consented to by the Policy Provider, which consent
shall not be unreasonably withheld or delayed, in a face amount (or in an
aggregate face amount) equal to the amount of interest payable on the Securities
(at the Capped Interest Rate, and without regard to expected future principal
payments) on the eight Interest Payment Dates following the date of replacement
of such Liquidity Facility (or if such date is an Interest Payment Date, on such
day and the seven Interest Payment Dates following the date of replacement of
such Liquidity Facility) and issued by a Person (or Persons) having unsecured
short-term debt rating or issuer credit rating, as the case may be, issued by
the Rating Agencies which are equal to or higher than the Threshold Rating.
Without limitation of the form that a Replacement Liquidity Facility otherwise
may have pursuant to the preceding sentence, a Replacement Liquidity Facility
for the Securities may have a stated expiration date earlier than 15 days after
the Final Legal Maturity Date so long as such Replacement Liquidity Facility
provides for a Non-Extension Drawing as contemplated by Section 3.5(d) of the
Indenture.
"REQUEST" means a written request for the action therein specified signed
on behalf of the Company by any Officer and delivered to the Trustee. Each
Request shall be accompanied by an Officers' Certificate if and to the extent
required by Section 12.4 of the Indenture.
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of
interest, calculated at the Capped Interest Rate, that would be payable on the
Securities on each of the eight successive Interest Payment Dates immediately
following such day or, if such day is an Interest Payment Date, on such day and
the succeeding seven Interest Payment Dates, in each case calculated on the
basis of the outstanding principal amount of the Securities on such date and
without regard to expected future payments of principal on the Securities.
"REQUIRED HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.
"RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the corporate trust administration department of the Trustee or any other
officer customarily performing functions similar to those performed by the
Persons who at the time shall be such officers or to whom any corporate trust
matter is referred because of his or her knowledge of and familiarity with a
particular subject, (ii) with respect to the Liquidity Provider, any authorized
officer of the Liquidity Provider, and (iii) with respect to the Policy
Provider, any authorized officer of the Policy Provider.
"RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.
"RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.
"RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture.
"RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.
"ROTABLE" means a Qualified Spare Part that wears over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which it relates.
"ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market Value of the Rotables, as set forth in the most recent Independent
Appraiser's Certificate delivered by the Company pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities Outstanding minus the sum of the Cash Collateral held
by the Collateral Agent.
"RULE 144A" means Rule 144A under the Securities Act.
"SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.
"SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable thereto, (ii) with respect to any payment
of defaulted interest, the payment date established pursuant to Section 2.16,
(iii) with respect to amounts due on the redemption of any Security, the
Redemption Date applicable thereto, and (iv) with respect to the final maturity
of the Securities, December 6, 2007.
"SEC" means the Securities and Exchange Commission and any government
agency succeeding to its functions.
"SECTION 1110" means Section 1110 of the Bankruptcy Code.
"SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified
in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period, if any, commencing with the trustee or debtor-in-possession in such
proceeding agreeing, with court approval, to perform its obligations under the
Operative Documents within such 60 days (or longer period as agreed) and
continuing until such time as such trustee or debtor-in-possession ceases to
fully perform its obligations thereunder with the result that the period during
which the Collateral Agent is prohibited from repossessing the collateral under
any Collateral Agreement comes to an end.
"SECURITIES" means the "Securities", as defined in the Indenture, that are
issued under the Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement.
"SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of
the date of the Indenture between the Company and the Security Agent.
"SECURITYHOLDER" means any holder of one or more Securities.
"SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.
"SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral
Maintenance Agreement.
"SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation in, installation on, attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.
"SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be required to be filed by the Company with the SEC pursuant to the
Registration Rights Agreement, other than an Exchange Offer Registration
Statement.
"SPARE PART" means an accessory, appurtenance, or part of an Aircraft
(except an Engine or Propeller), Engine (except a Propeller), Propeller, or
Appliance, that is to be installed at a later time in an Aircraft, Engine,
Propeller or Appliance.
"SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the
Security Agreement.
"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.
"SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy
Event.
"SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the
Indenture.
"SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral
Maintenance Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.
"STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity
Facility).
"STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.
"SUBORDINATED SECURITIES" is defined in Section 2.18 of the Indenture.
"SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.
"SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security
Agreement substantially in the form of Exhibit A to the Security Agreement.
"SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy
Provider Agreement and the Fee Letters.
"TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs incurred or imposed with respect thereto) imposed or otherwise
assessed by the United States of America or by any state, local or foreign
government (or any subdivision or agency thereof) or other taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth and similar charges; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, taxes on goods and services, gains taxes, license, registration and
documentation fees, customs duties, tariffs, and similar charges.
"TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.
"THRESHOLD AMOUNT" means $2,000,000.
"THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by
Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial
Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply
to the Liquidity Guarantor.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is amended after such date, "TIA" means, to the extent
required by any such amendment, the TIA as so amended.
"TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.
"TRUST OFFICER" means any officer in the corporate trust department of the
Trustee, or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"TRUSTEE" means the party named as such in the Indenture until a successor
replaces it in accordance with the provisions of the Indenture and thereafter
means the successor.
"TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the
Indenture.
"TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral
Maintenance Agreement.
"TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility.
"UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable
Parts.
"U.S." or "UNITED STATES" means the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating certificate issued pursuant
to chapter 447 of title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the option of the issuer thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance
Agreement.
"WARRANTIES" is defined in clause (2) of Section 2.01 of the Security
Agreement.
"WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the
Policy Provider, a written instrument executed by the Designated Representative
of such Person. An invoice delivered by the Liquidity Provider pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing procedures
shall constitute Written Notice under such Section.
"WTC" has the meaning specified in the first paragraph of the Indenture.
SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the
following rules of construction shall apply for all purposes of the Operative
Documents (including this appendix) and of such agreements as may incorporate
this appendix by reference.
(a) In each Operative Document, unless otherwise expressly provided, a
reference to:
(i) each of the Company, the Trustee, the Collateral Agent, the Security
Agent or any other person includes, without prejudice to the
provisions of any Operative Document, any successor in interest to it
and any permitted transferee, permitted purchaser or permitted
assignee of it;
(ii) words importing the plural include the singular and words importing
the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule or
exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Document, that
agreement, instrument or document, or annex, schedule or exhibit, or
part, respectively, as amended, modified or supplemented from time to
time in accordance with its terms and in accordance with the
Operative Documents, and any agreement, instrument or document
entered into in substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as amended,
modified, supplemented, substituted, reissued or reenacted prior to
the Closing Date, and thereafter from time to time;
(v) the words "Agreement", "this Agreement", "hereby", "herein",
"hereto", "hereof" and "hereunder" and words of similar import when
used in any Operative Document refer to such Operative Document as a
whole and not to any particular provision of such Operative Document;
(vi) the words "including", "including, without limitation", "including,
but not limited to", and terms or phrases of similar import when used
in any Operative Document, with respect to any matter or thing, mean
including, without limitation, such matter or thing; and
(vii) a "Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule"
in any Operative Document, or in any annex thereto, is a reference to
a section of, or an exhibit, an annex, an appendix or a schedule to,
such Operative Document or such annex, respectively.
(b) Each exhibit, annex, appendix and schedule to each Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.
(c) Unless otherwise defined or specified in any Operative Document,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Document are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Document.
(e) For purposes of each Operative Document, the occurrence and
continuance of a Default or Event of Default referred to in Section 7.1(d), (e)
or (f) of the Indenture shall not be deemed to prohibit the Company from taking
any action or exercising any right that is conditioned on no Special Default,
Default or Event of Default having occurred and be continuing if such Special
Default, Default or Event of Default consists of the institution of
reorganization proceedings with respect to the Company under Chapter 11 of the
Bankruptcy Code and the trustee or debtor-in-possession in such proceedings
shall have agreed to perform its obligations under the Operative Documents with
the approval of the applicable court and thereafter shall have continued to
perform such obligations in accordance with Section 1110.
EXHIBIT A
FORM OF SUPPLEMENTAL SECURITY AGREEMENT
(To Add Designated Locations)
SUPPLEMENTAL SECURITY AGREEMENT No. _____
SUPPLEMENTAL SECURITY AGREEMENT NO. _______, dated as of __________ of
CONTINENTAL AIRLINES, INC., a Delaware corporation (together with its successors
and assigns, the "COMPANY").
WHEREAS, the Company, which is a certificated air carrier under Section
44705 of title 49 of the U.S. Code, and Wilmington Trust Company, as Security
Agent (the "SECURITY AGENT"), have heretofore executed and delivered a Spare
Parts Security Agreement, dated as of [ ], 2002 (the "SECURITY AGREEMENT"), and
terms defined in the Security Agreement and used herein have such defined
meanings unless otherwise defined herein;
WHEREAS, the Security Agreement grants a Lien on, among other things,
certain Spare Parts and Appliances to secure (subject to the provisions of the
Security Agreement) the payment of the Securities and the other Obligations;
WHEREAS, the Company has previously designated the locations at which the
Pledged Spare Parts may be maintained by or on behalf of the Company in the
Security Agreement [and in Supplemental Security Agreement No. __];
WHEREAS, the Security Agreement [and the Supplemental Security Agreements]
has [have] been duly recorded with the Federal Aviation Administration at
Oklahoma City, Oklahoma, pursuant to the Federal Aviation Act on the following
date as a document or conveyance bearing the following number:
DATE OF DOCUMENT OR
RECORDING CONVEYANCE NO.
Security Agreement......
WHEREAS, the Company, as provided in the Security Agreement, is hereby
executing and delivering to the Security Agent this Supplemental Security
Agreement for the purposes of adding locations at which the Pledged Spare Parts
may be maintained by or on behalf of the Company; and
WHEREAS, all things necessary to make this Supplemental Security Agreement
the valid, binding and legal obligation of the Company, including all proper
corporate action on the part of the Company, have been done and performed and
have happened;
NOW, THEREFORE, THIS SUPPLEMENTAL SECURITY AGREEMENT WITNESSETH, that the
locations listed on Schedule 1 hereto shall be Designated Locations for purposes
of the Security Agreement at which Pledged Spare Parts may be maintained by or
on behalf of the Company.
This Supplemental Security Agreement shall be construed as supplemental to
the Security Agreement and shall form a part thereof, and the Security Agreement
is hereby incorporated by reference herein and is hereby ratified, approved and
confirmed.
THIS SUPPLEMENTAL SECURITY AGREEMENT IS DELIVERED IN THE STATE OF NEW YORK.
THIS SECURITY AGREEMENT SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
Delivery of an executed counterpart of a signature page to this
Supplemental Security Agreement by telecopier shall be effective as delivery of
an original executed counterpart of this Supplemental Security Agreement.
IN WITNESS WHEREOF, this Supplemental Security Agreement has been duly
executed and delivered all as of the date first above written.
CONTINENTAL AIRLINES, INC.
By:
--------------------------------------
Name:
Title:
SCHEDULE I to EXHIBIT A
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
WAREHOUSING
- ------------------------------------------------------------------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving 5840 S. Carge Road, Cleveland, OH 44135
- ------------------------------------------------------------------------------------------------------------------------------------
Continental Airlines, Inc., Off-Site Warehouse 640 Frelinghuysen Ave., Newark, NJ 07114
- ------------------------------------------------------------------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving Brewster Road, Hangar 55C, Newark, NJ 07114
- ------------------------------------------------------------------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving 17-3120 Mariner Avenue, Tiyan Barrigada, Guam 96913
- ------------------------------------------------------------------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving Material Services - EWA Service Road. Gate 30, Honolulu International
Airport, Honolulu, HI 96819
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving 110 Lauhoe Place, Honolulu, HI 96819
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving 8401 Travelair Hangar #7, Houston, TX 77061
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving Houston Intercontinental Airport, Houston, TX 77032
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving 7300 World Way West, Los Angeles, CA 90045
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving 5410 Bear Road, Orlando, FL 32827
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc., Morales Warehouse Kitting 4849 Wright Road, Houston, TX 77032
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc., Parts Control 15851 Vickery Drive, Houston, TX 77032
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc., Stores / Receiving 4849 Wright Road / Bldg B, Houston, TX 77032
- ------------------------------------------------------- ----------------------------------------------------------------------------
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MAINTENANCE
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Atlanta Hartsfield Intl. Airport Concourse D - 8, Atlanta, GA 30320
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Logan Intl. Airport Terminal C - A/C Dept., E. Boston, MA 02128
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 5300 Riverside Drive, Cleveland, OH 44135
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Ronald Reagan Washington National Airport, Washington, DC 20001
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 26360 East 103rd Avenue, Denver, CO 80249
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 910 W. Airfield Drive, Ste. 500, Dallas, TX 75261
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Detroit Metro Airport, Detroit, MI 48242
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Hangar 54, Brewster Road, Newark, NJ 07114
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 50 Terminal Drive, Ft. Lauderdale, FL 33315
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Honolulu Intl. Airport, 110 Lauhoe Drive, Honolulu, HI 96819
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 8437 Lockheed, Bldg. 3 Upstairs, Houston, TX 77061
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 4849 Wright Road, 141-B, Hangar E, Houston, TX 77032
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 15555 Vickery Drive, Houston, TX 77032
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 5757 Wayne Newton Blvd.- Ticket Counter, Las Vegas, NV 89111
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 7300 World Way West, Los Angeles, CA 90045
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. LaGuardia Airport, Main Terminal, Flushing, NY 11371
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 8855 Tradeport Drive, Orlando, FL 32827
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Miami Int'l Airport - Concourse G, Miami, FL 33122
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. New Orleans Intl. Airport Bldg 1, East Access Road, Kenner, LA 70062
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. O'Hare Intl. Airport, Chicago, IL 60666
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 3400 Sky Harbor Blvd., Phoenix, AZ 85034
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Raleigh - Durham Intl. Airport, Raleigh, NC 27613
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 9700 Airport Blvd. Room 222, San Antonio, TX 78216
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. SEA-TAC Intl. Airport- A/C MX Dept., Seattle, WA 98158
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. San Francisco Intl. Airport-S. Terminal Bldg, San Francisco, CA 94128
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. 18601 N. Airport Way, Ste. 207, Santa Ana, CA 92707
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Tampa Intl. Airport - Airside A, Tampa, FL 33607
- ------------------------------------------------------- ----------------------------------------------------------------------------
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
REPAIR SUPPLIES
- ------------------------------------------------------------------------------------------------------------------------------------
4 Flight Industries 2057 S Grove Avenue, Ontario, CA 91761
- ------------------------------------------------------- ----------------------------------------------------------------------------
AAR Hermetic 100 Corporate Drive, Holtsville, NY 11742
- ------------------------------------------------------- ----------------------------------------------------------------------------
ACME Electric Corporation 528 West 21st Street, Tempe, AZ 85282
- ------------------------------------------------------- ----------------------------------------------------------------------------
Adams Rite Aerospace Inc 4141 N Palm St, Fullerton, CA 92835
- ------------------------------------------------------- ----------------------------------------------------------------------------
Air Cruisers Company 1740 Highway 34 North, Wall Township, NJ 07719
- ------------------------------------------------------- ----------------------------------------------------------------------------
Air Cruisers Company 15556 Dupont Avenue Building B, Chino, CA 91710
- ------------------------------------------------------- ----------------------------------------------------------------------------
Air Show Inc 15222 Del Amo, Tustin, CA 92780
- ------------------------------------------------------- ----------------------------------------------------------------------------
Air Spares 2617 East "L" Street, Tacoma, WA 98421-2201
- ------------------------------------------------------- ----------------------------------------------------------------------------
Aircraft Interiors Resources 283 Lockhaven, Suite 122, Houston, TX 77073
- ------------------------------------------------------- ----------------------------------------------------------------------------
Allen Aircraft Products Inc 6168 Woodbine Avenue, Ravenna, OH 44266
- ------------------------------------------------------- ----------------------------------------------------------------------------
Ameron Global Product Support 1350-2 Lincoln Avenue, Holbrook, NY 11741
- ------------------------------------------------------- ----------------------------------------------------------------------------
Ametek Aerospace Aerospace & Power Inst., 50 Fordham Road, Wilmington, MA 01887
- ------------------------------------------------------- ----------------------------------------------------------------------------
Ametek Aerospace 1644 Whittier Ave., Costa Mesa, CA 92627
- ------------------------------------------------------- ----------------------------------------------------------------------------
Applied Aerodynamics Inc 2265 Valley Branch Ln, Dallas, TX 75234
- ------------------------------------------------------- ----------------------------------------------------------------------------
Argo-Tech Corporation 671 West 17th Street, Costa Mesa, CA 92627
- ------------------------------------------------------- ----------------------------------------------------------------------------
Arkwin Industries, Inc 686 Main Street, Westbury, NY 11590
- ------------------------------------------------------- ----------------------------------------------------------------------------
Aviall Battery Shop 2139 Airport Rd, Waterford, MI 48327
- ------------------------------------------------------- ----------------------------------------------------------------------------
Aviall Services Inc 8210 Haskell Avenue, Van Nuys, CA 91406
- ------------------------------------------------------- ----------------------------------------------------------------------------
Aviall Services Inc 8305 B Telephone Rd, Houston, TX 77061
- ------------------------------------------------------- ----------------------------------------------------------------------------
Aviall Services Inc 140 Grand St., Teterboro Airport, Carlstadt, NJ 07072
- ------------------------------------------------------- ----------------------------------------------------------------------------
Aviation Product Support Inc 7600 Tyler Blvd, Mentor, OH 44060
- ------------------------------------------------------- ----------------------------------------------------------------------------
Av-Ox, Inc 6734 Valjean Avenue, Van Nuys, CA 91406
- ------------------------------------------------------- ----------------------------------------------------------------------------
Av-Ox, Inc 1812 Production Court, Louisville, KY 40299
- ------------------------------------------------------- ----------------------------------------------------------------------------
Avtech Corp 3400 Wallingford Avenue N, Seattle, WA 98103
- ------------------------------------------------------- ----------------------------------------------------------------------------
BAE Systems Controls Inc 2000 Taylor St, Dock #1, Fort Wayne, IN 46802
- ------------------------------------------------------- ----------------------------------------------------------------------------
Barry Controls Aerospace 4510 Van Owen Street, Burbank, CA 91505
- ------------------------------------------------------- ----------------------------------------------------------------------------
BE Aerospace 10800 Pflumm Road, Lenexa, KS 66215
- ------------------------------------------------------- ----------------------------------------------------------------------------
BE Aerospace ISG 3355 E. Lapalma Avenue, Repair Division, Anaheim, CA 92806
- ------------------------------------------------------- ----------------------------------------------------------------------------
BFGoodrich Aircraft Repairs/Cust Service, 100 Panton Road, Vergennes, VT 05491
- ------------------------------------------------------- ----------------------------------------------------------------------------
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------- ----------------------------------------------------------------------------
Boeing Company Airplane Div Cust Repair Services, M/S 34-02/Col d4, 2201 S. 142 St. Door W10,
Seatac, WA 98168
- ------------------------------------------------------- ----------------------------------------------------------------------------
Boeing Company Airplane Div 3131 Storey Road West, Irving, TX 75038
- ------------------------------------------------------- ----------------------------------------------------------------------------
Boeing Company Airplane Div 2201 S 142nd Street, Bldg 2201 Door W-10, SSA111, Seatac, WA 98168
- ------------------------------------------------------- ----------------------------------------------------------------------------
Boeing Company Airplane Div The Boeing Co Wichita Div, Attn: T Spear 316-526-7268, 3801 S. Oliver,
Building 1-198D, Wichita, KS 67277-2207
- ------------------------------------------------------- ----------------------------------------------------------------------------
Britax Aircraft Interior Kent North Corporate Park, 8011 South 187th Street, Building G,
Kent, WA 98032
- ------------------------------------------------------- ----------------------------------------------------------------------------
Carleton Technologies Inc 10 Cobham Drive, Orchard Park, NY 14127
- ------------------------------------------------------- ----------------------------------------------------------------------------
Circle Seal Corporation Return Materials, 2301 Wardlow Circle, Corona, CA 91720
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines Battery Shop, Orlando Intl Airport, 5410 Bear Rd, Suite 300,
Orlando, FL 32827
- ------------------------------------------------------- ----------------------------------------------------------------------------
Continental Airlines, Inc. Sheetmetal Sh, E250, MX10, Los Angeles Intl Airport, 7300 World Way West,
Los Angeles, CA 90045
- ------------------------------------------------------- ----------------------------------------------------------------------------
Crane Co Hydro-Aire Division 3000 Winona Avenue, Burbank, CA 91503
- ------------------------------------------------------- ----------------------------------------------------------------------------
Crissair Inc 38905 10th Street East, Palmdale, CA 93590
- ------------------------------------------------------- ----------------------------------------------------------------------------
Curtiss-Wright Flight Sys 3120 Northwest Blvd., Gastonia, NC 28052-1167
- ------------------------------------------------------- ----------------------------------------------------------------------------
Delta Airlines Inc Hartsfield Int'l Airport, TOC2 & TOC3 Breezeway, Department 380,
1775 Aviation Blvd, Atlanta, GA 30320-6001
- ------------------------------------------------------- ----------------------------------------------------------------------------
Eaton Aeroquip Inc Meadowbrook Road, Toccoa, GA 30577
- ------------------------------------------------------- ----------------------------------------------------------------------------
Eaton Aerospace LLC 3675 Patterson Avenue S.E., Grand Rapids, MI 49512
- ------------------------------------------------------- ----------------------------------------------------------------------------
EFS Aerospace Inc 643247 24910 Avenue Tibbetts, Valencia, CA 91355
- ------------------------------------------------------- ----------------------------------------------------------------------------
Eldec Corporation 1522 217th Pl. Southeast, Bothell, WA 98021
- ------------------------------------------------------- ----------------------------------------------------------------------------
Envirovac Inc 1260 Turret Drive, Rockford, IL 61115
- ------------------------------------------------------- ----------------------------------------------------------------------------
Fortner Engineering & 918 Thompson Avenue, Glendale, CA 91201-2079
- ------------------------------------------------------- ----------------------------------------------------------------------------
Frisby Aerospace, Inc 4520 Hampton Rd, Clemmons, NC 27012
- ------------------------------------------------------- ----------------------------------------------------------------------------
Gables Engineering Inc 247 Greco Avenue, Coral Gables, FL 33146
- ------------------------------------------------------- ----------------------------------------------------------------------------
GE Aircraft Engines 1200 Jaybird Road, Peebles, OH 45660
- ------------------------------------------------------- ----------------------------------------------------------------------------
GE Engine Services, Inc Aviation Service Dept, ACSC Central Rcv'g Dock 1, 199 Container Place,
Cincinnati, OH 45246
- ------------------------------------------------------- ----------------------------------------------------------------------------
GE Engine Services, Inc Strother Field Industrial Park, Arkansas City, KS 67005
- ------------------------------------------------------- ----------------------------------------------------------------------------
GE Engine Services, Inc c/o Honeywell Intl Inc, 1 Cliff Garrett Dr, Anniston, AL 36201
- ------------------------------------------------------- ----------------------------------------------------------------------------
General Dynamics OTS, Inc. Attn: CRR, 9845 Willows Rd. NE, Building 97A, Redmond, WA 98052
- ------------------------------------------------------- ----------------------------------------------------------------------------
GKN Aerospace Chem-Tronics Inc 1550 N. 105th East Avenue, Tulsa, OK 74116
- ------------------------------------------------------- ----------------------------------------------------------------------------
Goodrich Corporation 2403 Walnut Ridge, Dallas, TX 75229
- ------------------------------------------------------- ----------------------------------------------------------------------------
Goodrich Corporation 9151 King Arthur Drive, Dallas, TX 75247
- ------------------------------------------------------- ----------------------------------------------------------------------------
Goodrich Corporation Landing Gear Division, 3201 N W. 167th St, Opa Lacka, FL 33056-4253
- ------------------------------------------------------- ----------------------------------------------------------------------------
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------- ----------------------------------------------------------------------------
Goodrich Corporation Stringtown Rd., HC75, Union, WV 24983
- ------------------------------------------------------- ----------------------------------------------------------------------------
Goodrich Corporation 30 Van Nostrand Avenue, Englewood, NJ 07631-4396
- ------------------------------------------------------- ----------------------------------------------------------------------------
Goodrich Corporation Aerostructures Group, Foley Service Center, 1300 West Fern Avenue,
Foley, AL 36536
- ------------------------------------------------------- ----------------------------------------------------------------------------
Goodrich Corporation 3405 So 5th Street, Phoenix, AZ 85040
- ------------------------------------------------------- ----------------------------------------------------------------------------
Goodrich Corporation Everett Service Center, Everett, WA 98204-3500
- ------------------------------------------------------- ----------------------------------------------------------------------------
Goodrich Corporation AIS 817 W. Howard Lane, Austin, TX 78753-9710
- ------------------------------------------------------- ----------------------------------------------------------------------------
H&L Accessory Inc T824 Old Woodruff Rd, Greer, SC 29651
- ------------------------------------------------------- ----------------------------------------------------------------------------
Hamilton Sundstrand 4747 Harrison Road, Plant 6, RATN. Repair Center, Rockford, IL 61108
- ------------------------------------------------------- ----------------------------------------------------------------------------
Hamilton Sundstrand 18008B N. Black Canyon Highway, Phoenix, AZ 85023
- ------------------------------------------------------- ----------------------------------------------------------------------------
Hamilton Sundstrand Corp 1 Hamilton Rd., Doc W, Windsor Locks, CT 06096
- ------------------------------------------------------- ----------------------------------------------------------------------------
Hamilton Sundstrand Corp 4401 Donald Douglas Drive, Long Beach, CA 90808
- ------------------------------------------------------- ----------------------------------------------------------------------------
Hartman Electrical Mfg. Div.-CII Technologies, 175 North Diamond Street, Mansfield, OH 44902
- ------------------------------------------------------- ----------------------------------------------------------------------------
Hawker Pacific Inc 11310 Sherman Way, Sun Valley, CA 91352
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell Inc 1830 Industrial Avenue, Wichita, KS 67216
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell Inc 4150 Lind Ave S W, Renton, WA 98055
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell Inc 8840 Evergreen Blvd., Coon Rapids, MN 55433-6040
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell International 16580 Air Center Blvd., Suite #400, Houston, TX 77032
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell International Inc 1944 E. Sky Harbor Circle, Phoenix, AZ 85034
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell International Inc 1 Cliff Garrett Dr., Anniston, AL 36201
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell International Inc 1300 West Warner Road, R & O Receiving, Tempe, AZ 85284
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell International Inc 11100 N Oracle Rd, Tucson, AZ 85740-8001
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell International Inc 117 E. Providencia St., Burbank, CA 91502
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell International Inc 6930 N. Lakewood, Tulsa, OK 74117
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honeywell/Grimes Product Support Group, 240 Twain Ave, Urbana, OH 43078
- ------------------------------------------------------- ----------------------------------------------------------------------------
HR Textron Inc 25200 West Rye Can Rd, Valencia, CA 91355
- ------------------------------------------------------- ----------------------------------------------------------------------------
I T T Aerospace Controls Repair and Overhaul, 28150 Industry Drive, Valencia, CA 91355
- ------------------------------------------------------- ----------------------------------------------------------------------------
Iacobucci U.S.A. 200 Industrial Way West, Eatontown, NJ 07724
- ------------------------------------------------------- ----------------------------------------------------------------------------
IDC Aerospace, LLC 8050 W. Fairlane Avenue, Milwaukee, WI 53223
- ------------------------------------------------------- ----------------------------------------------------------------------------
IPECO Inc 2275 Jefferson Street, Torrance, CA 90501
- ------------------------------------------------------- ----------------------------------------------------------------------------
JAMCO America 1018 80th St SW, Everett, WA 98203
- ------------------------------------------------------- ----------------------------------------------------------------------------
Kidde Aerospace 4200 Airport Dr, NW Bldg. B, Wilson, NC 27896-9643
- ------------------------------------------------------- ----------------------------------------------------------------------------
KPS N.A. Inc 500-D Radar Road, Greensboro, NC 27410
- ------------------------------------------------------- ----------------------------------------------------------------------------
Kulite Semiconductor Prod. One Willow Tree Road, Leonia, NJ 07605
- ------------------------------------------------------- ----------------------------------------------------------------------------
L3 Communications Aviation 6000 Fruitville Road, Sarasota, FL 34232-6414
- ------------------------------------------------------- ----------------------------------------------------------------------------
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------- ----------------------------------------------------------------------------
Labinal Aero Defense Sys Inc 7505 Hardeson Road, Suite 100, Everett, WA 98203
- ------------------------------------------------------- ----------------------------------------------------------------------------
Matsushita Avionics Systems 22333 29th Drive S.E., Bothell, WA 98021
- ------------------------------------------------------- ----------------------------------------------------------------------------
Matsushita Avionics Systems 1405 South Beltline Rd #300, Coppell, TX 75019
- ------------------------------------------------------- ----------------------------------------------------------------------------
Med-Air 23015 N. 15 Ave., Suite 105, Phoenix, AZ 85027
- ------------------------------------------------------- ----------------------------------------------------------------------------
Meggitt Safety Systems, Inc 1915 Voyager Avenue, Simi Valley, CA 93063-3349
- ------------------------------------------------------- ----------------------------------------------------------------------------
Messier Services America, Inc., 45360 Severn Way, Sterling, VA 20166-8914
- ------------------------------------------------------- ----------------------------------------------------------------------------
Midway Aircraft Instrument 100 Riser Rd., Little Ferry, NJ 07643
- ------------------------------------------------------- ----------------------------------------------------------------------------
Miltope Corp Attn: Product Support, 500 Richardson Road South, Hope Hull, AL 36043
- ------------------------------------------------------- ----------------------------------------------------------------------------
Monogram Sanitation 800 West Artesia Blvd., Compton, CA 90224
- ------------------------------------------------------- ----------------------------------------------------------------------------
Moog Inc 2268 South 3270 West, Salt Lake City, UT 84119
- ------------------------------------------------------- ----------------------------------------------------------------------------
Norco Inc 139 Ethan Allen Highway, Ridgefield, CT 06877-6294
- ------------------------------------------------------- ----------------------------------------------------------------------------
Nordam Group Inc 11200 E. Pine Street, Tulsa, OK 74116
- ------------------------------------------------------- ----------------------------------------------------------------------------
Nordam-Texas 5101 Blue Mound Rd, Ft. Worth, TX 76106
- ------------------------------------------------------- ----------------------------------------------------------------------------
P L Porter Controls, Inc 6355 Desoto, Woodland Hills, CA 91367
- ------------------------------------------------------- ----------------------------------------------------------------------------
Parker Hannifin 2220 Palmer Ave., Kalamazoo, MI 49001-4165
- ------------------------------------------------------- ----------------------------------------------------------------------------
Parker Hannifin Corp 14300 Alton Parkway, Irvine, CA 92618
- ------------------------------------------------------- ----------------------------------------------------------------------------
Parker Hannifin Corp Gull Electronics Sys. Div, 300 Marcus Boulevard, Smithtown, NY 11787
- ------------------------------------------------------- ----------------------------------------------------------------------------
Parker Hannifin Corp 200 Railroad Street, Forest, OH 45843
- ------------------------------------------------------- ----------------------------------------------------------------------------
PPG Industries Inc 1719 Highway 72 East, Huntsville, AL 35811
- ------------------------------------------------------- ----------------------------------------------------------------------------
Radiant Power Corp 6416 Parkland Drive, Ste B, Sarasota, FL 34243
- ------------------------------------------------------- ----------------------------------------------------------------------------
Rockwell Collins 7235 Corporate Center Dr., #E, Miami, FL 33126
- ------------------------------------------------------- ----------------------------------------------------------------------------
Rockwell Collins Avionics 400 Collins Road N.E., Cedar Rapids, IA 52498
- ------------------------------------------------------- ----------------------------------------------------------------------------
Rockwell Collins Avionics 5159 Southridge Parkway, Atlanta, GA 30349
- ------------------------------------------------------- ----------------------------------------------------------------------------
Rockwell Collins Avionics 2051 Airport Road, Wichita, KS 67209-1949
- ------------------------------------------------------- ----------------------------------------------------------------------------
Rockwell Collins Avionics 8304 Esters Blvd, Suite 890, Irving, TX 75062-2209
- ------------------------------------------------------- ----------------------------------------------------------------------------
Rockwell Collins Avionics 620 Naches Ave SW, Renton, WA 98055
- ------------------------------------------------------- ----------------------------------------------------------------------------
Rogerson Kratos 16940 Von Karman, Irvine, CA 92606
- ------------------------------------------------------- ----------------------------------------------------------------------------
Rosemount Aerospace Inc 14300 Judicial Road, Burnsville, MN 55306
- ------------------------------------------------------- ----------------------------------------------------------------------------
Sicma Aero Seat Services, Inc 22030 20th Ave. SE Ste 102, Bothell, WA 98021
- ------------------------------------------------------- ----------------------------------------------------------------------------
Smiths Aerospace Acuation 2720 W Washington Ave, Yakima, WA 98909
- ------------------------------------------------------- ----------------------------------------------------------------------------
Smiths Industries 14100 Roosevelt Blvd. Dock B, Clearwater, FL 33762
- ------------------------------------------------------- ----------------------------------------------------------------------------
Smiths Industries 3290 Patterson Ave., Grand Rapids, MI 49512-1991
- ------------------------------------------------------- ----------------------------------------------------------------------------
Smiths Industries Acuation Sys 110 Algonquin Parkway, Whippany, NJ 07981
- ------------------------------------------------------- ----------------------------------------------------------------------------
Soundair 15510 Wood-Red Rd., Woodinville, WA 98072
- ------------------------------------------------------- ----------------------------------------------------------------------------
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------- ----------------------------------------------------------------------------
Spirent Systems Wichita Inc 8710 E. 32nd North, Wichita, KS 67226
- ------------------------------------------------------- ----------------------------------------------------------------------------
Tactair Fluids Control 4806 West Taft Road, Liverpool, NY 13088
- ------------------------------------------------------- ----------------------------------------------------------------------------
Teledyne Controls 12333 West Olympic Boulevard, Los Angeles, CA 90064
- ------------------------------------------------------- ----------------------------------------------------------------------------
Thales Avionics, Inc. 641 Industry Drive, Seattle, WA 98188
- ------------------------------------------------------- ----------------------------------------------------------------------------
Transaero Inc 80 Crossways Park Drive, Woodbury, NY 11797
- ------------------------------------------------------- ----------------------------------------------------------------------------
Transdigital Comm Corporation 1800 E Lambert Road, Suite 230, Brea, CA 92821
- ------------------------------------------------------- ----------------------------------------------------------------------------
Unison Industries 7575 Bay Meadows Way, Jacksonville, FL 32256
- ------------------------------------------------------- ----------------------------------------------------------------------------
Verizon Airfone Inc 3600 Thayer Ct, Aurora, IL 60504
- ------------------------------------------------------- ----------------------------------------------------------------------------
Vibro-Metr Inc 10 Ammon Drve, Manchester, NH 03103
- ------------------------------------------------------- ----------------------------------------------------------------------------
Vickers Inc 5353 Highland Drive, Jackson, MS 39206
- ------------------------------------------------------- ----------------------------------------------------------------------------
Volvo Aero Services LP 23206 66th Ave South, Kent, WA 98032
- ------------------------------------------------------- ----------------------------------------------------------------------------
West Coast Specialties Inc 8158 304th Ave. S.E., Preston, WA 98050
- ------------------------------------------------------- ----------------------------------------------------------------------------
Whittaker Controls Inc 12838 Saticoy St, North Hollywood, CA 91605
- ------------------------------------------------------- ----------------------------------------------------------------------------
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
MAINLINE STATIONS
- ------------------------------------------------------------------------------------------------------------------------------------
Albuquerque Int'l Airport 2200 Sunport Blvd South East, Albuquerque, NM 87106
- ------------------------------------------------------- ----------------------------------------------------------------------------
Anchorage Int'l Airport 5000 W. International Airport, Anchorage, AK 99502
- ------------------------------------------------------- ----------------------------------------------------------------------------
Atlanta Int'l Airport 6000 North Terminal Drive, Atlanta, GA 30320
- ------------------------------------------------------- ----------------------------------------------------------------------------
Austin-Bergstrom Int'l Airport 3600 Presidential Blvd, Suite 103, Austin, TX 78719
- ------------------------------------------------------- ----------------------------------------------------------------------------
Bradley Int'l Airport Bradley International Airport, Windsor Locks, CT 06096
- ------------------------------------------------------- ----------------------------------------------------------------------------
Birmingham Int'l Airport 5900 Airport Hwy., Birmingham, AL 35212
- ------------------------------------------------------- ----------------------------------------------------------------------------
Nashville Metropolitan Airport 1 Terminal Dr, Suite 329, Nashville, TN 37214
- ------------------------------------------------------- ----------------------------------------------------------------------------
Logan Int'l Airport Logan International Airport, 300 Terminal C, East Boston, MA 02128
- ------------------------------------------------------- ----------------------------------------------------------------------------
Baton Rouge Metropolitan Airport Terminal Building, Baton Rouge, LA 70807
- ------------------------------------------------------- ----------------------------------------------------------------------------
Buffalo Niagara Int'l Airport Buffalo Niagara International Airport, East Terminal, Attn: Ticket Counter,
Buffalo, NY 14225
- ------------------------------------------------------- ----------------------------------------------------------------------------
Baltimore/Washington Int'l Airport Baltimore/Washington International Airport, Baltimore, MD 21240
- ------------------------------------------------------- ----------------------------------------------------------------------------
Charleston Int'l Airport 5500 International Blvd, Ticket Counter, Charleston, SC 29418
- ------------------------------------------------------- ----------------------------------------------------------------------------
Charlotte Douglas Int'l Airport 5501 Josh Birmingham Pkwy, Charlotte, NC 28219
- ------------------------------------------------------- ----------------------------------------------------------------------------
Port Columbus Int'l Airport 4600 International Gateway, Columbus, OH 43219
- ------------------------------------------------------- ----------------------------------------------------------------------------
Colorado Springs Int'l Airport Peterson Field, 7770 Drennan Rd., Colorado Springs, CO 80916
- ------------------------------------------------------- ----------------------------------------------------------------------------
Corpus Christi Int'l Airport 606 International Dr., Corpus Christi, TX 78406
- ------------------------------------------------------- ----------------------------------------------------------------------------
Washington National Airport Ronald Reagan Washington National Airport, Terminal B, Washington, DC 20001
- ------------------------------------------------------- ----------------------------------------------------------------------------
Denver Int'l Airport 8700 Pena Blvd., Room 3260, Denver, CO 80249
- ------------------------------------------------------- ----------------------------------------------------------------------------
Dallas/Ft.Worth Int'l Airport Terminal B, Dallas/Ft. Worth, TX 75261
- ------------------------------------------------------- ----------------------------------------------------------------------------
Detroit MetroAirport Edward H. McNamara Terminal, Building 830, Detroit, MI 48242
- ------------------------------------------------------- ----------------------------------------------------------------------------
Eagle/Vail Int'l Airport 0215 Eldon Wilson Rd., Gypsum, CO 81637
- ------------------------------------------------------- ----------------------------------------------------------------------------
El Paso Int'l Airport 6701 Convair, El Paso, TX 79925
- ------------------------------------------------------- ----------------------------------------------------------------------------
Ft. Lauderdale Int'l Airport 50 Terminal Drive, Terminal 1, Ft. Lauderdale, FL 33315
- ------------------------------------------------------- ----------------------------------------------------------------------------
Piedmont Triad Int'lAirport 6415 Airport Parkway, Greensboro, NC 27409
- ------------------------------------------------------- ----------------------------------------------------------------------------
Yampa Valley Regional Airport 11005 Routt County Rd. 51A, Hayden, CO 81639
- ------------------------------------------------------- ----------------------------------------------------------------------------
Honolulu Int'l Airport 300 Rogers Blvd. #11, Honolulu, HI 96819
- ------------------------------------------------------- ----------------------------------------------------------------------------
Washington Dulles Int'l Airport Main Ticket Counter, Washington, DC 20041
- ------------------------------------------------------- ----------------------------------------------------------------------------
Indianapolis Int'l Airport 2500 South High School Rd. Suite 33, Indianapolis, IN 46241
- ------------------------------------------------------- ----------------------------------------------------------------------------
Jacksonville Int'l Airport 2400 Yankee Clipper Drive, Suite 108, Jacksonville, FL 32218
- ------------------------------------------------------- ----------------------------------------------------------------------------
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------- ----------------------------------------------------------------------------
JFK Int'l Airport Terminal One Ticket Office, Jamaica, NY 11430
- ------------------------------------------------------- ----------------------------------------------------------------------------
McCarran Int'l Airport 5757 Wayne Newton Blvd., Las Vegas, NV 89111
- ------------------------------------------------------- ----------------------------------------------------------------------------
Los Angeles Int'l Airport 600 World Way, Los Angeles, CA 90045
- ------------------------------------------------------- ----------------------------------------------------------------------------
La Guardia Int'l Airport Central Terminal Building, Flushing, NY 11371
- ------------------------------------------------------- ----------------------------------------------------------------------------
Kansas City Int'l Airport 52 Beirut Circle, Kansas City, MO 64153
- ------------------------------------------------------- ----------------------------------------------------------------------------
Orlando Int'l Airport 9247 Airport Blvd, Orlando, FL 32827
- ------------------------------------------------------- ----------------------------------------------------------------------------
Midway Airport 5757 S. Cicero, Chicago, IL 60638
- ------------------------------------------------------- ----------------------------------------------------------------------------
Memphis Int'l Airport 2491 Winchester, Memphis, TN 38116
- ------------------------------------------------------- ----------------------------------------------------------------------------
Miller Int'l Airport 2500 South Bicentennial Blvd, Suite 101, McAllen, TX 78503
- ------------------------------------------------------- ----------------------------------------------------------------------------
Manchester Airport Manchester Airport, Airport Road, Manchester, NH 03103
- ------------------------------------------------------- ----------------------------------------------------------------------------
Miami Int'l Airport Miami International Airport, Concourse G - 3rd Fl., Miami, FL 33159
- ------------------------------------------------------- ----------------------------------------------------------------------------
General Mitchell Int'l Airport S. Howell Avenue, Milwaukee, WI 53207
- ------------------------------------------------------- ----------------------------------------------------------------------------
Minneapolis/St.Paul Int'l Airport 4300 Glumack Drive, Blue Concourse, St. Paul, MN 55111
- ------------------------------------------------------- ----------------------------------------------------------------------------
New Orleans Int'l Airport 900 Airline Hwy., Kenner, LA 70061
- ------------------------------------------------------- ----------------------------------------------------------------------------
Montrose County Airport 2100 Airport Road, Suite 104, Montrose, CO 81401
- ------------------------------------------------------- ----------------------------------------------------------------------------
Myrtle Beach Int'l Airport 1100 Jetport Rd., Myrtle Beach, SC 29577
- ------------------------------------------------------- ----------------------------------------------------------------------------
Oakland Int'l Airport 1 Airport Drive, Oakland, CA 94621
- ------------------------------------------------------- ----------------------------------------------------------------------------
Will Rogers World Airport 7100 Terminal Dr., Oklahoma City, OK 73159
- ------------------------------------------------------- ----------------------------------------------------------------------------
Eppley Airfield 4501 Abbot Drive, Omaha, NE 68119
- ------------------------------------------------------- ----------------------------------------------------------------------------
Ontario Int'l Airport 2900 E. Airport Dr., Room 1464, Ontario, CA 91761
- ------------------------------------------------------- ----------------------------------------------------------------------------
O'Hare Int'l Airport O'Hare International Airport, Chicago, IL 60666
- ------------------------------------------------------- ----------------------------------------------------------------------------
Norfolk Int'l Airport 2200 Norview Avenue, Norfolk, VA 23518
- ------------------------------------------------------- ----------------------------------------------------------------------------
Palm Beach Int'l Airport 1000 PBIA, Box #114, West Palm Beach, FL 33406
- ------------------------------------------------------- ----------------------------------------------------------------------------
Portland Int'l Airport 7000 NE Airport Way, Portland, OR 97218
- ------------------------------------------------------- ----------------------------------------------------------------------------
Philadelphia Int'l Airport Philadelphia International Airport, Concourse D, Philadelphia, PA 19153
- ------------------------------------------------------- ----------------------------------------------------------------------------
Sky Harbor Int'l Airport 3800 Sky Harbor Blvd., Phoenix, AZ 85034
- ------------------------------------------------------- ----------------------------------------------------------------------------
Pittsburgh Int'l Airport Pittsburgh International Airport, Main Terminal, Pittsburgh, PA 15231
- ------------------------------------------------------- ----------------------------------------------------------------------------
Pensacola Int'l Airport 2430 Airport Blvd., Pensacola, FL 32504
- ------------------------------------------------------- ----------------------------------------------------------------------------
Palm Springs Int'l Airport 3400 E. Tahquitz Canyon Way Suite 2, Palm Springs, CA 92262
- ------------------------------------------------------- ----------------------------------------------------------------------------
Theodore Francis Green Airport T. F. Green State Airport, Post Road, Warwick, RI 02886
- ------------------------------------------------------- ----------------------------------------------------------------------------
Raleigh Durham Int'l. Airport. 1035 Cargo Rd, Raleigh NC 27623
- ------------------------------------------------------- ----------------------------------------------------------------------------
Richmond Int'l Airport 1 Richard E. Byrd Drive, Suite 105, Richmond, VA 23231
- ------------------------------------------------------- ----------------------------------------------------------------------------
Reno Tahoe Int'l Airport 2001 East Plumb Lane, Reno, NV 89502
- ------------------------------------------------------- ----------------------------------------------------------------------------
Southwest Florida Int'l Airport 16000 Chamberlin Parkway, Ft. Myers, FL 33913
- ------------------------------------------------------- ----------------------------------------------------------------------------
SCHEDULE 1
DESIGNATED LOCATIONS
- ------------------------------------------------------- ----------------------------------------------------------------------------
San Diego Int'l Airport 3707 North Harbor Drive, Suite 115, San Diego, CA 92101
- ------------------------------------------------------- ----------------------------------------------------------------------------
San Antonio Int'l Airport 9700 Airport Blvd., San Antonio, TX 78216
- ------------------------------------------------------- ----------------------------------------------------------------------------
Savannah Int'l Aiport 424 Airways Ave., Savannah, GA 31408
- ------------------------------------------------------- ----------------------------------------------------------------------------
Louisville Int'l Airport 600 Terminal Drive, Box 6, Louisville, KY 40209
- ------------------------------------------------------- ----------------------------------------------------------------------------
Seattle-Tacoma Int'l Airport 17801 Pacific Highway South, Seattle, WA 98158
- ------------------------------------------------------- ----------------------------------------------------------------------------
San Francisco Int'l Airport South Terminal Building Tkt Counter Level, San Francisco, CA 94128
- ------------------------------------------------------- ----------------------------------------------------------------------------
San Jose Int'l Airport 1661 Airport Blvd, Terminal C, San Jose, CA 95110
- ------------------------------------------------------- ----------------------------------------------------------------------------
Salt Lake Int'l Airport 776 Terminal Rd., Salt Lake City, UT 84122
- ------------------------------------------------------- ----------------------------------------------------------------------------
Sacramento Metropolitan Airport 6850 Airport Boulevard, Sacramento, CA 95837
- ------------------------------------------------------- ----------------------------------------------------------------------------
John Wayne Airport 18601 N. Airport Way, Suite 207, Santa Ana, CA 92707
- ------------------------------------------------------- ----------------------------------------------------------------------------
Sarasota/Bradenten Airport 6008 Airport Circle, Sarasota, FL 34243
- ------------------------------------------------------- ----------------------------------------------------------------------------
Lambert Field 10701 Lambert Int'l Blvd., St. Louis, MO 63145
- ------------------------------------------------------- ----------------------------------------------------------------------------
Tampa Int'l Airport 5500 West Spruce St., Tampa, FL 33607
- ------------------------------------------------------- ----------------------------------------------------------------------------
Tulsa Int'l Airport 7777 East Apache, Tulsa, OK 74115
- ------------------------------------------------------- ----------------------------------------------------------------------------
Tucson Int'l Airport 7005 South Plumer Ave., Tucson, AZ 85706
- ------------------------------------------------------- ----------------------------------------------------------------------------
REFERENCE AGENCY AGREEMENT
REFERENCE AGENCY AGREEMENT, dated as of December 6, 2002 (this
"AGREEMENT"), between Continental Airlines, Inc., a Delaware corporation (the
"COMPANY"), Wilmington Trust Company, a Delaware banking corporation ("WTC"), as
Trustee under the Indenture referred to below, and WTC, as reference agent
hereunder (the "REFERENCE AGENT").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, certain terms used herein have the defined meanings as provided in
Section 1 below;
WHEREAS, concurrently with the execution and delivery of this Agreement,
the Company is entering into the Indenture, dated as of the date hereof (the
"INDENTURE"), with WTC, as Trustee, Morgan Stanley Capital Services Inc., as
Liquidity Provider, and MBIA Insurance Corporation, as Policy Provider;
WHEREAS, the Indenture contemplates the issuance by the Company of its
Floating Rate Secured Notes due 2007 (the "SECURITIES");
WHEREAS, the Company and the Initial Purchaser have entered into the
Purchase Agreement, which provides for the issuance of the Securities; and
WHEREAS, the Indenture provides that the Securities to be issued thereunder
bear interest at a rate per annum based on LIBOR, as determined pursuant to this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, all capitalized
terms used but not defined herein have the meanings assigned to such terms in
the Indenture. The conventions of construction and usage set forth in the
Indenture are incorporated by reference herein. In addition, the following terms
shall have the meanings specified below:
"INTEREST PAYMENT DATE" means March 1, June 1, September 1 and December 1
of each year so long as any Security is outstanding (commencing on March 1,
2003), PROVIDED that if any such day is not a Business Day, then the relevant
Interest Payment Date shall be the next succeeding Business Day.
"INTEREST PERIOD" means (i) in the case of the first Interest Period, the
period commencing on (and including) the Closing Date and ending on (but
excluding) the first Interest Payment Date following such date and (ii) in the
case of each subsequent Interest Period, the period commencing on (and
including) the last day of the immediately preceding Interest Period, and ending
on (but excluding) the next Interest Payment Date.
"INTEREST RATE DETERMINATION DATE" means, with respect to any Interest
Period, the second London Banking Day prior to the first day of such Interest
Period.
"LIBOR" means the rate determined pursuant to Section 6(b).
"LONDON BANKING DAY" means any day on which commercial banks are open for
general business (including dealings in foreign exchange and foreign currency
deposits) in London, England.
"REFERENCE BANKS" means Barclays Bank, JPMorgan Chase Bank and Deutsche
Bank (or, if any such bank is not at the relevant date a major bank in the
London interbank market, another major bank in the London interbank market in
lieu thereof selected by the Reference Agent in good faith and in a commercially
reasonable manner).
"REPRESENTATIVE AMOUNT" means an amount that is representative for a single
transaction in the London interbank market at the relevant time.
"TELERATE" means page 3750 on the Telerate Service (or such other page as
may replace that page on that service, or such other service as may be nominated
by the British Banker's Association for the purpose of displaying rates or
prices comparable to that).
SECTION 2. APPOINTMENT OF REFERENCE AGENT. The Company hereby appoints WTC
as the Reference Agent, and WTC hereby accepts such appointment and agrees to
perform the duties and obligations of Reference Agent set forth in Section 6.
SECTION 3. STATUS OF REFERENCE AGENT. Any acts taken by the Reference Agent
under this Agreement, including the calculation of any LIBOR, shall be deemed to
have been taken by the Reference Agent solely in its capacity as an agent acting
on behalf of the Company and shall not create or imply any obligation to, or any
agency, fiduciary or trust relationship with, any of the owners or holders of
the Securities.
SECTION 4. REFERENCE AGENT FEES AND EXPENSES. In consideration of the
Reference Agent's performance of the services provided for under this Agreement,
the Company shall pay to the Reference Agent an annual fee set forth under a
separate agreement between the Company and WTC. In addition, the Company shall
reimburse the Reference Agent for all reasonable out-of-pocket expenses,
disbursements and advances (including reasonable legal fees and expenses)
incurred or made by the Reference Agent from time to time in connection with the
services rendered by it under this Agreement, except any expenses, disbursements
or advances attributable to its negligence or wilful misconduct.
SECTION 5. RIGHTS AND LIABILITIES OF REFERENCE AGENT. In the absence of
negligence or wilful misconduct on the part of the Reference Agent, its
directors, officers, employees and agents, such persons may conclusively rely,
as to the truth of the statements expressed in, and shall be fully protected and
shall incur no liability for, or in respect of, any action taken, omitted to be
taken, or suffered to be taken by it, in reliance upon, any written order,
instruction, notice, request, direction, statement, certificate, consent,
report, affidavit or other instrument, paper, document or communication,
reasonably believed by it in good faith to be genuine, from the Company and
conforming to the requirements of this Agreement. Any written order,
instruction, notice, request, direction, statement, certificate, consent,
report, affidavit or other instrument, paper, document or communication from the
Company or given by it and sent, delivered or directed to the Reference Agent
under, pursuant to, or as permitted by, any provision of this Agreement shall be
sufficient for purposes of this Agreement if such written order, instruction,
notice, request, direction, statement, certificate, consent, report, affidavit
or other instrument, paper, document or communication is in writing and signed
by any officer of the Company. The Reference Agent may consult with counsel
satisfactory to it and the advice (to be confirmed in writing) or opinion of
such counsel shall constitute full and complete authorization and protection of
the Reference Agent with respect to any action taken, omitted to be taken, or
suffered to be taken by it hereunder in good faith and in accordance with and in
reliance upon the advice (to be confirmed in writing) or opinion of such
counsel. The Reference Agent shall not be liable for any error resulting from
use of or reliance on a source or publication required to be used under Section
6 to the extent such use of or reliance on such source or publication is
contemplated by Section 6.
SECTION 6. DUTIES OF REFERENCE AGENT. (a) The duties and obligations of the
Reference Agent shall be determined solely by the express provisions of this
Agreement, and no implied covenants or obligations shall be read into this
Agreement against the Reference Agent. Subject to their duty to act without
negligence, neither the Reference Agent nor its directors, officers, employees
and agents guarantee the correctness or completeness of any data or other
information furnished hereunder.
(b) For the purpose of calculating the Debt Rate payable on the Securities
"LIBOR" for each Interest Period that commences after the Closing Date (it being
understood that the Debt Rate for the Interest Period commencing on the Closing
Date shall be determined pursuant to the Purchase Agreement) shall mean the rate
determined in accordance with the following provisions:
(i) The Reference Agent will determine LIBOR for each such Interest
Period as the rate for deposits in U.S. Dollars for a period of three
months which appears on the Telerate Page 3750 as of 11:00 a.m., London
time, on the Interest Rate Determination Date for such Interest Period.
(ii) If the rate referred to in Section 6(b)(i) does not appear on the
Telerate Page 3750, the Reference Agent will determine LIBOR on the basis
of the rates at which deposits in U.S. Dollars are offered by the Reference
Banks at approximately 11:00 a.m., London time, on the Interest Rate
Determination Date for such Interest Period to prime banks in the London
interbank market for a period of three months commencing on the first day
of such Interest Period and in a Representative Amount. The Reference Agent
will request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are
provided, the rate for that Interest Period will be the arithmetic mean of
the quotations. If fewer than two quotations are provided as requested, the
rate for that Interest Period will be the arithmetic mean of the rates
quoted by major banks in New York City, selected by the Reference Agent in
good faith and in a commercially reasonable manner, at approximately 11:00
a.m., New York City time, on the first day of such Interest Period for
loans in U.S. Dollars to leading European banks for a period of three
months commencing on the first day of such Interest Period and in a
Representative Amount, except that, if the banks so selected by the
Reference Agent are not quoting as mentioned above, LIBOR shall be the
floating rate of interest in effect for the last preceding Interest Period.
(c) As soon as practicable after 11:00 a.m. (London time) on each Interest
Rate Determination Date, the Reference Agent will calculate the Debt Rate for
such Interest Period, which shall be applicable to the Securities. The Reference
Agent's determination of LIBOR and the Debt Rate (in the absence of negligence,
willful default, bad faith or manifest error) shall be conclusive and binding
upon all parties.
(d) As promptly as is practicable after the determination thereof, the
Reference Agent shall give notice of the applicable LIBOR, the Debt Rate and the
next Interest Payment Date to the Company, the Liquidity Provider, the Policy
Provider and the Trustee.
(e) The Reference Agent shall determine Break Amount if and when required
under the Indenture.
SECTION 7. AMENDMENT OF THE SECURITIES. The Company shall deliver to the
Reference Agent, at least three Business Days prior to the effective date of any
amendment of the interest rate terms of the Indenture, written notice of such
amendment describing the terms of such amendment in reasonable detail, and a
certification by the Company that such amendment is in compliance with the terms
of the Indenture.
SECTION 8. OWNERSHIP OF THE SECURITIES. The Reference Agent, its officers,
directors, employees and shareholders may become the owners of or acquire any
interest in any Securities, with the same rights that it or they would have if
it were not the Reference Agent, and may engage or be interested in any
financial or other transaction with the Company as freely as if it were not the
Reference Agent.
SECTION 9. TERM; TERMINATION, RESIGNATION OR REMOVAL OF REFERENCE AGENT.
(a) This Agreement shall have a noncancellable term commencing on the date
hereof and expiring on payment in full of the Securities or, if earlier,
termination of the Indenture. During such term, this Agreement shall not be
terminable by any party hereto except as expressly provided in Section 9(b).
(b) The Reference Agent may at any time resign by giving written notice to
the Company and the Trustee, specifying therein the date on which its desired
resignation shall become effective; PROVIDED that such notice shall be given no
less than 30 days prior to said effective date unless the Reference Agent, the
Company and the Trustee otherwise agree in writing. The Company may remove the
Reference Agent at any time by giving written notice to the Reference Agent and
to the holders of the Securities and specifying the effective date of such
removal, which shall be at least 30 days after the date of notice; PROVIDED,
HOWEVER, that no resignation by or removal of the Reference Agent shall become
effective prior to the date of appointment by the Company, as provided in
Section 10, of a successor reference agent and the acceptance of such
appointment by such successor reference agent; and PROVIDED, FURTHER, that in
the event that an instrument of acceptance by a successor reference agent shall
not have been delivered pursuant to Section 10 within 90 days after the giving
of such notice of resignation or removal, the Reference Agent may petition any
court of competent jurisdiction for the appointment of a successor reference
agent. The provisions of Sections 5, 11 and 13 hereof shall remain in effect
following termination of this Agreement or the earlier resignation or removal of
the Reference Agent.
SECTION 10. APPOINTMENT OF SUCCESSOR REFERENCE AGENT. In the event of the
resignation by or removal of the Reference Agent pursuant to Section 9, the
Company shall promptly appoint a successor reference agent. Any successor
reference agent appointed by the Company following resignation by or removal of
the Reference Agent pursuant to the provisions of Section 9 shall execute and
deliver to the incumbent Reference Agent, the Company and the Trustee an
instrument accepting such appointment. Thereupon, such successor reference agent
shall, without any further act, deed or conveyance, become vested with all the
authority, rights, powers, immunities, duties and obligations of the Reference
Agent and with like effect as if originally named as Reference Agent hereunder,
and the incumbent Reference Agent shall thereupon be obligated to transfer and
deliver such relevant records or copies thereof maintained by the Reference
Agent in connection with the performance of its obligations hereunder. The
Company shall notify each Rating Agency of any resignation by or removal of the
Reference Agent under Section 9 and of the appointment of and acceptance by any
successor Reference Agent pursuant to this Section 10.
SECTION 11. INDEMNIFICATION. The Company shall indemnify and hold harmless
the Reference Agent, its directors, officers, employees and agents from and
against any and all actions, claims, damages, liabilities, judgments, losses,
costs, charges and expenses (including reasonable legal fees and expenses)
relating to or arising out of actions or omissions from actions in any capacity
hereunder, except actions, claims, damages, liabilities, judgments, losses,
costs, charges and expenses caused by the negligence or wilful misconduct of the
Reference Agent, its directors, officers, employees or agents. The Reference
Agent shall be indemnified and held harmless by the Company for any error
resulting from use of or reliance on a source or publication required to be used
under Section 6. The Reference Agent shall be indemnified and held harmless by
the Company for, or in respect of, any actions taken, omitted to be taken or
suffered to be taken in good faith by the Reference Agent in reliance upon (a)
advice (to be confirmed in writing) or opinion of counsel or (b) a written
instruction from the Company.
SECTION 12. MERGER, CONSOLIDATION OR SALE OF BUSINESS BY REFERENCE AGENT.
Any corporation into which the Reference Agent may be merged or consolidated or
any corporation resulting from any merger or consolidation to which the
Reference Agent may be a party, or any corporation to which the Reference Agent
may sell or otherwise transfer all or substantially all of its assets and
corporation trust business, shall, to the extent permitted by applicable law,
become the Reference Agent under this Agreement without the execution or filing
of any paper or any further act by the parties hereto. The Reference Agent shall
give notice in writing to the Company and the Trustee of any such merger,
consolidation or sale.
SECTION 13. MISCELLANEOUS. (a) If there should develop any conflict between
the Reference Agent and any other Person relating to the rights or obligations
of the Reference Agent in connection with calculation of LIBOR or the Debt Rate,
the terms of this Agreement shall govern such rights and obligations.
(b) The Reference Agent agrees to cooperate with the Company and its
agents, employees, directors and officers, including by providing such
information as may reasonably be requested to permit the Company or such agents,
employees, directors and officers to monitor the Reference Agent's compliance
with its obligations under this Agreement.
(c) The Reference Agent shall not assign or delegate or otherwise
subcontract this Agreement or all or any part of its rights or obligations
hereunder to any Person without the prior written consent of the Company.
(d) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE.
(e) This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed counterpart of a
signature page to this Agreement by telecopier shall be effective as delivery of
a manually executed counterpart of this Agreement.
[Remainder of this page is blank.]
IN WITNESS WHEREOF, this Agreement has been entered into as of the date
first set forth above.
CONTINENTAL AIRLINES, INC.
By
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY, as
Reference Agent
By
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY, as
Trustee
By
---------------------------------------
Name:
Title:
================================================================================
REVOLVING CREDIT AGREEMENT
DATED AS OF DECEMBER 6, 2002
BETWEEN
WILMINGTON TRUST COMPANY,
AS TRUSTEE
UNDER THE INDENTURE
AS BORROWER
AND
MORGAN STANLEY CAPITAL SERVICES INC.
AS LIQUIDITY PROVIDER
================================================================================
RELATING TO
CONTINENTAL AIRLINES
FLOATING RATE SECURED NOTES
DUE 2007
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS.........................................................1
Section 1.01. Certain Defined Terms......................................1
ARTICLE II AMOUNT AND TERMS OF THE COMMITMENT.................................7
Section 2.01. The Advances...............................................7
Section 2.02. Making the Advances........................................7
Section 2.03. Fees.......................................................9
Section 2.04. Reduction or Termination of the Maximum Commitment.........9
Section 2.05. Repayments of Interest Advances or the Final Advance.......9
Section 2.06. Repayments of Provider Advances...........................10
Section 2.07. Payments to the Liquidity Provider Under the Indenture....11
Section 2.08. Book Entries..............................................11
Section 2.09. Payments from Available Funds Only........................11
Section 2.10. Extension of the Expiry Date; Non-Extension Advance.......11
ARTICLE III OBLIGATIONS OF THE BORROWER......................................12
Section 3.01. Increased Costs...........................................12
Section 3.02. Capital Adequacy..........................................13
Section 3.03. Payments Free of Deductions...............................13
Section 3.04. Payments..................................................14
Section 3.05. Computations..............................................14
Section 3.06. Payment on Non-Business Days..............................14
Section 3.07. Interest..................................................15
Section 3.08. Replacement of Borrower...................................16
Section 3.09. Funding Loss Indemnification..............................16
Section 3.10. Illegality................................................16
ARTICLE IV CONDITIONS PRECEDENT..............................................17
Section 4.01. Conditions Precedent to Effectiveness of Section 2.01.....17
Section 4.02. Conditions Precedent to Borrowing.........................19
ARTICLE V COVENANTS..........................................................19
Section 5.01. Affirmative Covenants of the Borrower.....................19
Section 5.02. Negative Covenants of the Borrower........................20
ARTICLE VI LIQUIDITY EVENTS OF DEFAULT; LIQUIDITY PROVIDER REIMBURSEMENT
DATE..............................................................20
Section 6.01. Liquidity Events of Default...............................20
Section 6.02. Liquidity Provider Reimbursement Date.....................20
ARTICLE VII MISCELLANEOUS....................................................20
Section 7.01. Amendments, Etc...........................................20
PAGE
Section 7.02. Notices, Etc..............................................21
Section 7.03. No Waiver; Remedies.......................................22
Section 7.04. Further Assurances........................................22
Section 7.05. Indemnification; Survival of Certain Provisions...........22
Section 7.06. Liability of the Liquidity Provider.......................22
Section 7.07. Costs, Expenses and Taxes.................................23
Section 7.08. Binding Effect; Participations............................23
Section 7.09. Severability..............................................25
Section 7.10. GOVERNING LAW.............................................25
Section 7.11. Submission to Jurisdiction; Waiver of Jury Trial; Waiver
of Immunity...............................................25
Section 7.12. Execution in Counterparts.................................26
Section 7.13. Entirety..................................................26
Section 7.14. Headings..................................................26
Section 7.15. LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES..........26
ANNEX I Interest Advance Notice of Borrowing
ANNEX II Non-Extension Advance Notice of Borrowing
ANNEX III Downgrade Advance Notice of Borrowing
ANNEX IV Final Advance Notice of Borrowing
ANNEX V Notice of Termination
ANNEX VI Notice of Replacement Trustee
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT (this "Agreement") dated as of
December 6, 2002, between WILMINGTON TRUST COMPANY, a Delaware banking
corporation, not in its individual capacity but solely as Trustee under the
Indenture (each as defined below) (the "BORROWER"), and MORGAN STANLEY CAPITAL
SERVICES INC., a corporation organized under the laws of the State of Delaware
(the "LIQUIDITY PROVIDER").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the Indenture (such term and all other
capitalized terms used in these recitals having the meanings set forth or
referred to in Section 1.01), the Company is issuing the Securities; and
WHEREAS, the Borrower, in order to support the timely payment of a
portion of the interest on the Securities in accordance with their terms, has
requested the Liquidity Provider to enter into this Agreement, providing in part
for the Borrower to request in specified circumstances that Advances be made
hereunder.
WHEREAS, the Liquidity Provider has requested Morgan Stanley (the
"GUARANTOR") to enter into a Guarantee Agreement, providing for the full and
unconditional guarantee of the Liquidity Provider's obligations under this
Agreement (the "GUARANTEE AGREEMENT").
NOW, THEREFORE, in consideration of the premises, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Certain Defined Terms. (a) DEFINITIONS. As used in this
Agreement and unless otherwise expressly indicated, or unless the context
clearly requires otherwise, the following capitalized terms shall have the
following respective meanings for all purposes of this Agreement:
"ADDITIONAL COST" has the meaning assigned to such term in Section
3.01.
"ADVANCE" means an Interest Advance, a Final Advance, a Provider
Advance or an Applied Provider Advance, as the case may be.
"APPLICABLE LIQUIDITY RATE" has the meaning assigned to such term in
Section 3.07(g).
"APPLICABLE MARGIN" means (x) with respect to any Unpaid Advance or
Applied Provider Advance, 2.00% per annum, or (y) with respect to any
Unapplied Provider Advance, the rate per annum specified in the Fee Letter.
"APPLIED DOWNGRADE ADVANCE" has the meaning assigned to such term in
Section 2.06(a).
"APPLIED NON-EXTENSION ADVANCE" has the meaning assigned to such term
in Section 2.06(a).
"APPLIED PROVIDER ADVANCE" has the meaning assigned to such term in
Section 2.06(a).
"BASE RATE" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to (a) the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such
rate is not so published for any day that is a Business Day, the average of
the quotations for such day for such transactions received by the Liquidity
Provider from three Federal funds brokers of recognized standing selected
by it, plus (b) one-quarter of one percent (1/4 of 1%).
"BASE RATE ADVANCE" means an Advance that bears interest at a rate
based upon the Base Rate.
"BORROWER" has the meaning assigned to such term in the recital of
parties to this Agreement.
"BORROWING" means the making of Advances requested by delivery of a
Notice of Borrowing.
"BUSINESS DAY" means any day other than a Saturday or Sunday or a day
on which commercial banks are required or authorized to close in Houston,
Texas, New York, New York or, so long as any Security is outstanding, the
city and state in which the Borrower maintains its Corporate Trust Office
or receives or disburses funds, and, if the applicable Business Day relates
to any Advance or other amount bearing interest based on the LIBOR Rate, on
which dealings are carried on in the London interbank market.
"CAPPED INTEREST RATE" means a rate per annum equal to 12%.
"COMPANY" means Continental Airlines, Inc., a Delaware corporation,
and its successors and permitted assigns.
"DOWNGRADE ADVANCE" means an Advance made pursuant to Section 2.02(c).
"EFFECTIVE DATE" has the meaning specified in Section 4.01. The
delivery of the certificate of the Liquidity Provider contemplated by
Section 4.01(e) shall be conclusive evidence that the Effective Date has
occurred.
"EXCLUDED TAXES" means (i) taxes imposed on the overall net income of
the Liquidity Provider or of its Facility Office by the jurisdiction where
such Liquidity Provider's principal office or such Facility Office is
located, and (ii) Excluded Withholding Taxes.
"EXCLUDED WITHHOLDING TAXES" means (i) withholding Taxes imposed by
the United States except (but only in the case of a successor Liquidity
Provider organized under the laws of a jurisdiction outside the United
States) to the extent that such United States withholding Taxes are imposed
or increased as a result of any change in applicable law (excluding from
change in applicable law for this purpose a change in an applicable treaty
or other change in law affecting the applicability of a treaty) after the
date hereof, or in the case of a successor Liquidity Provider (including a
transferee of an Advance) or Facility Office, after the date on which such
successor Liquidity Provider obtains its interest or on which the Facility
Office is changed, and (ii) any withholding Taxes imposed by the United
States which are imposed or increased as a result of the Liquidity Provider
failing to deliver to the Borrower any certificate or document (which
certificate or document in the good faith judgment of the Liquidity
Provider it is legally entitled to provide) which is reasonably requested
by the Borrower to establish that payments under this Agreement are exempt
from (or entitled to a reduced rate of) withholding Tax.
"EXPENSES" means liabilities, obligations, damages, settlements,
penalties, claims, actions, suits, costs, expenses, and disbursements
(including, without limitation, reasonable fees and disbursements of legal
counsel and costs of investigation), provided that Expenses shall not
include any Taxes.
"EXPIRY DATE" means December 4, 2003, initially, or any date to which
the Expiry Date is extended pursuant to Section 2.10.
"FACILITY OFFICE" means the office of the Liquidity Provider presently
located at New York, New York, or such other office as the Liquidity
Provider from time to time shall notify the Borrower as its Facility Office
hereunder; provided that the Liquidity Provider shall not change its
Facility Office to another Facility Office outside the United States of
America except in accordance with Section 3.01, 3.02 or 3.03 hereof.
"FINAL ADVANCE" means an Advance made pursuant to Section 2.02(d).
"GAAP" means generally accepted accounting principles as set forth in
the statements of financial accounting standards issued by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants, as such principles may at any time or from time to time be
varied by any applicable financial accounting rules or regulations issued
by the Securities and Exchange Commission and, with respect to any person,
shall mean such principles applied on a basis consistent with prior periods
except as may be disclosed in such person's financial statements.
"GUARANTOR" has the meaning assigned to such term in the preliminary
statements of this Agreement.
"GUARANTEE AGREEMENT" has the meaning assigned to such term in the
preliminary statements of this Agreement.
"INDENTURE" means the Indenture dated as of the date hereof among the
Company, the Liquidity Provider, the Policy Provider and the Trustee, as
the same may be amended, supplemented or otherwise modified from time to
time in accordance with its terms.
"INTEREST ADVANCE" means an Advance made pursuant to Section 2.02(a).
"INTEREST PERIOD" means, with respect to any LIBOR Advance, each of
the following periods:
(i) the period beginning on the third Business Day following either
(x) the Liquidity Provider's receipt of the Notice of Borrowing
for such LIBOR Advance or (y) the withdrawal of funds from the
Cash Collateral Account for the purpose of paying interest on the
Securities as contemplated by Section 2.06(a) hereof and, in
either case, ending on the next Interest Payment Date; and
(ii) each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the next
Interest Payment Date;
PROVIDED, HOWEVER, that if (x) the Final Advance shall have been made,
or (y) other outstanding Advances shall have been converted into the
Final Advance, then the Interest Periods shall be successive periods
of one month beginning on the third Business Day following the
Liquidity Provider's receipt of the Notice of Borrowing for such Final
Advance (in the case of clause (x) above) or the Interest Payment Date
following such conversion (in the case of clause (y) above).
"LIBOR ADVANCE" means an Advance bearing interest at a rate based upon
the LIBOR Rate.
"LIBOR RATE" means, with respect to any Interest Period,
(i) the rate per annum appearing on display page 3750 (British
Bankers Association-LIBOR) of the Dow Jones Markets Service (or
any successor or substitute therefor) at approximately 11:00 A.M.
(London time) two Business Days before the first day of such
Interest Period, as the rate for dollar deposits with a maturity
comparable to such Interest Period, or
(ii) if the rate calculated pursuant to clause (i) above is not
available, the average (rounded upwards, if necessary, to the
next 1/16 of 1%) of the rates per annum at which deposits in
dollars are offered for the relevant Interest Period by three
banks of recognized standing selected by the Liquidity Provider
in the London interbank market at approximately 11:00 A.M.
(London time) two Business Days before the first day of such
Interest Period in an amount approximately equal to the principal
amount of the LIBOR Advance to which such Interest Period is to
apply and for a period comparable to such Interest Period.
"LIQUIDITY EVENT OF DEFAULT" means the occurrence of either (a) the
Acceleration of the Securities or (b) a Continental Bankruptcy Event.
"LIQUIDITY INDEMNITEE" means (i) the Liquidity Provider, (ii) the
Guarantor, (iii) the respective directors, officers, employees and agents
of the Liquidity Provider and the Guarantor, and (iv) the successors and
permitted assigns of the persons described in clauses (i) through (iii),
inclusive.
"LIQUIDITY PROVIDER" has the meaning assigned to such term in the
recital of parties to this Agreement.
"MAXIMUM AVAILABLE COMMITMENT" shall mean, subject to the proviso
contained in the third sentence of Section 2.02(a), at any time of
determination, (a) the Maximum Commitment at such time LESS (b) the
aggregate amount of each Interest Advance outstanding at such time;
provided that following a Provider Advance or a Final Advance, the Maximum
Available Commitment shall be zero.
"MAXIMUM COMMITMENT" means initially $48,733,333.33 as the same may be
reduced from time to time in accordance with Section 2.04(a).
"NON-EXCLUDED TAX" has the meaning specified in Section 3.03.
"NON-EXTENSION ADVANCE" means an Advance made pursuant to Section
2.02(b).
"NOTICE OF BORROWING" has the meaning specified in Section 2.02(e).
"NOTICE OF REPLACEMENT TRUSTEE" has the meaning specified in Section
3.08.
"OFFERING MEMORANDUM" means the Offering Memorandum dated December 2,
2002 relating to the Securities, as such Offering Memorandum may be amended
or supplemented.
"PROVIDER ADVANCE" means a Downgrade Advance or a Non-Extension
Advance.
"REFERENCE BANK" has the meaning assigned to such term in Section
7.08(a).
"REGULATORY CHANGE" has the meaning assigned to such term in Section
3.01.
"REPLENISHMENT AMOUNT" has the meaning assigned to such term in
Section 2.06(b).
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount
of interest, calculated at the rate per annum equal to the Capped Interest
Rate that would be payable on the Securities on each of the eight
successive quarterly Interest Payment Dates immediately following such day
or, if such day is an Interest Payment Date, on such day and the succeeding
seven quarterly Interest Payment Dates, in each case calculated on the
basis of the principal amount of the Securities on such day and without
regard to expected future payments of principal on the Securities.
"TERMINATION DATE" means the earliest to occur of the following: (i)
the Expiry Date; (ii) the date on which the Borrower delivers to the
Liquidity Provider a certificate, signed by a Responsible Officer of the
Borrower, certifying that the Securities have been paid in full (or
provision has been made for such payment in accordance with the Indenture)
or are otherwise no longer entitled to the benefits of this Agreement;
(iii) the date on which the Borrower delivers to the Liquidity Provider a
certificate, signed by a Responsible Officer of the Borrower, certifying
that a Replacement Liquidity Facility has been substituted for this
Agreement in full pursuant to Section 3.5(e) of the Indenture; (iv) the
fifth Business Day following the receipt by the Borrower of a Termination
Notice from the Liquidity Provider pursuant to Section 6.01 hereof; (v) the
date on which no Advance is or may (including by reason of reinstatement as
herein provided) become available for a Borrowing hereunder; and (vi) the
occurrence of the Liquidity Provider Reimbursement Date.
"TERMINATION NOTICE" means the Notice of Termination substantially in
the form of Annex V to this Agreement.
"TRANSFEREE" has the meaning assigned to such term in Section 7.08(b).
"UNAPPLIED DOWNGRADE ADVANCE" means any Downgrade Advance other than
an Applied Downgrade Advance.
"UNAPPLIED NON-EXTENSION ADVANCE" means any Non-Extension Advance
other than an Applied Non-Extension Advance.
"UNAPPLIED PROVIDER ADVANCE" means any Provider Advance other than an
Applied Provider Advance.
"UNPAID ADVANCE" has the meaning assigned to such term in Section
2.05.
(b) TERMS DEFINED IN THE INDENTURE. For all purposes of this
Agreement, the following terms shall have the respective meanings assigned to
such terms in the Indenture:
"ACCELERATION", "CASH COLLATERAL ACCOUNT", "CLOSING DATE", "CONTINENTAL
BANKRUPTCY EVENT", "CONTROLLING PARTY", "CORPORATE TRUST OFFICE", "DEBT
RATE", "DISTRIBUTION DATE", "DOWNGRADED FACILITY", "FEE LETTER", "FINAL
LEGAL MATURITY DATE", "INITIAL PURCHASER", "INTEREST PAYMENT DATE",
"INVESTMENT EARNINGS", "LIQUIDITY FACILITY", "LIQUIDITY OBLIGATIONS",
"LIQUIDITY PROVIDER REIMBURSEMENT DATE", "MOODY'S", "NON-EXTENDED
FACILITY", "NON-PERFORMING", "OPERATIVE DOCUMENTS", "PAYMENT", "PERSON",
"POLICY", "POLICY DRAWINGS", "POLICY PROVIDER", "PURCHASE AGREEMENT",
"RATING AGENCY", "RATINGS CONFIRMATION", "REPLACEMENT LIQUIDITY FACILITY",
"RESPONSIBLE OFFICER", "SECURITIES", "SPARE PARTS COLLATERAL", "STANDARD &
POOR'S", "SUPPORT DOCUMENTS", "TAXES", "THRESHOLD RATING", "TRUSTEE", and
"WRITTEN NOTICE".
ARTICLE II
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01. THE ADVANCES. The Liquidity Provider hereby irrevocably
agrees, on the terms and conditions hereinafter set forth, to make Advances to
the Borrower from time to time on any Business Day during the period from the
Effective Date until 1:00 p.m. (New York City time) on the Expiry Date (unless
the obligations of the Liquidity Provider shall be earlier terminated in
accordance with the terms of Section 2.04(b)) in an aggregate amount at any time
outstanding not to exceed the Maximum Commitment.
Section 2.02. MAKING THE ADVANCES. (a) Interest Advances shall be made
in one or more Borrowings by delivery to the Liquidity Provider of one or more
written and completed Notices of Borrowing in substantially the form of Annex I
attached hereto, signed by a Responsible Officer of the Borrower, in an amount
not exceeding the Maximum Available Commitment at such time and shall be used
solely for the payment when due of interest on the Securities at the Debt Rate
(not to exceed the Capped Interest Rate) for the applicable Interest Period in
accordance with Section 3.5(a) of the Indenture. Each Interest Advance made
hereunder shall automatically reduce the Maximum Available Commitment and the
amount available to be borrowed hereunder by subsequent Advances by the amount
of such Interest Advance (subject to reinstatement as provided in the next
sentence). Upon repayment to the Liquidity Provider in full of the amount of any
Interest Advance made pursuant to this Section 2.02(a), together with accrued
interest thereon (as provided herein), the Maximum Available Commitment shall be
reinstated by the amount of such repaid Interest Advance, but not to exceed the
Maximum Commitment; PROVIDED, HOWEVER, that the Maximum Available Commitment
shall not be so reinstated at any time if (i) a Liquidity Event of Default shall
have occurred and be continuing and the Securities are Non-Performing or (ii)
the Liquidity Provider Reimbursement Date shall have occurred.
(b) A Non-Extension Advance shall be made in a single Borrowing if
this Agreement is not extended in accordance with Section 3.5(d) of the
Indenture (unless a Replacement Liquidity Facility to replace this Agreement
shall have been delivered to the Borrower as contemplated by said Section 3.5(d)
within the time period specified in such Section) by delivery to the Liquidity
Provider of a written and completed Notice of Borrowing in substantially the
form of Annex II attached hereto, signed by a Responsible Officer of the
Borrower, in an amount equal to the Maximum Available Commitment at such time,
and shall be used to fund the Cash Collateral Account in accordance with said
Section 3.5(d) and Section 3.5(f) of the Indenture.
(c) A Downgrade Advance shall be made in a single Borrowing upon a
downgrading of the Guarantor's short-term unsecured debt rating issued by
Moody's or Standard & Poor's below the applicable Threshold Rating or the
Guarantee Agreement ceasing to be in full force and effect or becoming invalid
or unenforceable or the Guarantor denying its liability thereunder (as provided
for in Section 3.5(c) of the Indenture) unless a Replacement Liquidity Facility
to replace this Agreement shall have been previously delivered to the Borrower
in accordance with said Section 3.5(c), by delivery to the Liquidity Provider of
a written and completed Notice of Borrowing in substantially the form of Annex
III attached hereto, signed by a Responsible Officer of the Borrower, in an
amount equal to the Maximum Available Commitment at such time, and shall be used
to fund the Cash Collateral Account in accordance with said Section 3.5(c) and
Section 3.5(f) of the Indenture.
(d) A Final Advance shall be made in a single Borrowing upon the
receipt by the Borrower of a Termination Notice from the Liquidity Provider
pursuant to Section 6.01 hereof by delivery to the Liquidity Provider of a
written and completed Notice of Borrowing in substantially the form of Annex IV
attached hereto, signed by a Responsible Officer of the Borrower, in an amount
equal to the Maximum Available Commitment at such time, and shall be used to
fund the Cash Collateral Account (in accordance with Sections 3.5(f) and 3.5(i)
of the Indenture).
(e) Each Borrowing shall be made on notice in writing (a "NOTICE OF
BORROWING") in substantially the form required by Section 2.02(a), 2.02(b),
2.02(c) or 2.02(d), as the case may be, given by the Borrower to the Liquidity
Provider. If a Notice of Borrowing is delivered by the Borrower in respect of
any Borrowing no later than 1:00 p.m. (New York City time) on a Business Day,
upon satisfaction of the conditions precedent set forth in Section 4.02 with
respect to a requested Borrowing, the Liquidity Provider shall make available to
the Borrower, in accordance with its payment instructions, the amount of such
Borrowing in U.S. dollars and immediately available funds, before 4:00 p.m. (New
York City time) on such Business Day or on such later Business Day specified in
such Notice of Borrowing. If a Notice of Borrowing is delivered by the Borrower
in respect of any Borrowing on a day that is not a Business Day or after 1:00
p.m. (New York City time) on a Business Day, upon satisfaction of the conditions
precedent set forth in Section 4.02 with respect to a requested Borrowing, the
Liquidity Provider shall make available to the Borrower, in accordance with its
payment instructions, the amount of such Borrowing in U.S. dollars and in
immediately available funds, before 12:00 Noon (New York City time) on the first
Business Day next following the day of receipt of such Notice of Borrowing or on
such later Business Day specified by the Borrower in such Notice of Borrowing.
Payments of proceeds of a Borrowing shall be made by wire transfer of
immediately available funds to the Borrower in accordance with such wire
transfer instructions as the Borrower shall furnish from time to time to the
Liquidity Provider for such purpose. Each Notice of Borrowing shall be
irrevocable and binding on the Borrower.
(f) Upon the making of any Advance requested pursuant to a Notice of
Borrowing, in accordance with the Borrower's payment instructions, the Liquidity
Provider shall be fully discharged of its obligation hereunder with respect to
such Notice of Borrowing, and the Liquidity Provider shall not thereafter be
obligated to make any further Advances hereunder in respect of such Notice of
Borrowing to the Borrower or to any other Person. If the Liquidity Provider
makes an Advance requested pursuant to a Notice of Borrowing before 12:00 Noon
(New York City time) on the second Business Day after the date of payment
specified in Section 2.02(e), the Liquidity Provider shall have fully discharged
its obligations hereunder with respect to such Advance and an event of default
shall not have occurred hereunder. Following the making of any Advance pursuant
to Section 2.02(b), (c) or (d) hereof to fund the Cash Collateral Account, the
Liquidity Provider shall have no interest in or rights to the Cash Collateral
Account, the funds constituting such Advance or any other amounts from time to
time on deposit in the Cash Collateral Account; PROVIDED that the foregoing
shall not affect or impair the obligations of the Trustee to make the
distributions contemplated by Section 3.5(e) or 3.5(f) of the Indenture, and
PROVIDED FURTHER, that the foregoing shall not affect or impair the rights of
the Liquidity Provider to provide written instructions with respect to the
investment and reinvestment of amounts in the Cash Collateral Account to the
extent provided in Section 8.13(b) of the Indenture. By paying to the Borrower
proceeds of Advances requested by the Borrower in accordance with the provisions
of this Agreement, the Liquidity Provider makes no representation as to, and
assumes no responsibility for, the correctness or sufficiency for any purpose of
the amount of the Advances so made and requested.
Section 2.03. FEES. The Borrower agrees to pay to the Liquidity
Provider the fees set forth in the Fee Letter applicable to this Agreement.
Section 2.04. REDUCTION OR TERMINATION OF THE MAXIMUM COMMITMENT.
(a) AUTOMATIC REDUCTION. Promptly following each date on which the
Required Amount is reduced as a result of a payment of the principal amount of
the Securities or otherwise, the Maximum Commitment shall automatically be
reduced to an amount equal to such reduced Required Amount (as calculated by the
Borrower). The Borrower shall give notice of any such automatic reduction of the
Maximum Commitment to the Liquidity Provider within two Business Days thereof.
The failure by the Borrower to furnish any such notice shall not affect such
automatic reduction of the Maximum Commitment.
(b) TERMINATION. Upon the making of any Provider Advance or Final
Advance hereunder or the occurrence of the Termination Date or the Liquidity
Provider Reimbursement Date, the obligation of the Liquidity Provider to make
further Advances hereunder shall automatically and irrevocably terminate, and
the Borrower shall not be entitled to request any further Borrowing hereunder.
Section 2.05. REPAYMENTS OF INTEREST ADVANCES OR THE FINAL ADVANCE.
Subject to Sections 2.06, 2.07 and 2.09 hereof, the Borrower hereby agrees,
without notice of an Advance or demand for repayment from the Liquidity Provider
(which notice and demand are hereby waived by the Borrower), to pay, or to cause
to be paid, to the Liquidity Provider on each date on which the Liquidity
Provider shall make an Interest Advance or the Final Advance, an amount equal to
(a) the amount of such Advance (any such Advance, until repaid, is referred to
herein as an "UNPAID ADVANCE"), plus (b) interest on the amount of each such
Unpaid Advance as provided in Section 3.07 hereof; PROVIDED that if (i) the
Liquidity Provider shall make a Provider Advance at any time after making one or
more Interest Advances which shall not have been repaid in accordance with this
Section 2.05 or (ii) this Liquidity Facility shall become a Downgraded Facility
or Non-Extended Facility at any time when unreimbursed Interest Advances have
reduced the Maximum Available Commitment to zero, then such Interest Advances
shall cease to constitute Unpaid Advances and shall be deemed to have been
changed into an Applied Downgrade Advance or an Applied Non-Extension Advance,
as the case may be, for all purposes of this Agreement (including, without
limitation, for the purpose of determining when such Interest Advance is
required to be repaid to the Liquidity Provider in accordance with Section 2.06
and for the purposes of Section 2.06(b)). The Borrower and the Liquidity
Provider agree that the repayment in full of each Interest Advance and Final
Advance on the date such Advance is made is intended to be a contemporaneous
exchange for new value given to the Borrower by the Liquidity Provider.
Section 2.06. REPAYMENTS OF PROVIDER ADVANCES.
(a) Amounts advanced hereunder in respect of a Provider Advance shall
be deposited in the Cash Collateral Account, invested and withdrawn from the
Cash Collateral Account as set forth in Sections 3.5(c), (d) and (f) of the
Indenture. The Borrower agrees to pay to the Liquidity Provider, on each
Interest Payment Date, commencing on the first Interest Payment Date after the
making of a Provider Advance, interest on the principal amount of any such
Provider Advance as provided in Section 3.07; PROVIDED, HOWEVER, that amounts in
respect of a Provider Advance withdrawn from the Cash Collateral Account for the
purpose of paying interest on the Securities in accordance with Section 3.5(f)
of the Indenture (the amount of any such withdrawal being (y) in the case of a
Downgrade Advance, an "APPLIED DOWNGRADE ADVANCE" and (z) in the case of a
Non-Extension Advance, an "APPLIED NON-EXTENSION ADVANCE" and, together with an
Applied Downgrade Advance, an "APPLIED PROVIDER ADVANCE") shall thereafter
(subject to Section 2.06(b)) be treated as an Interest Advance under this
Agreement for purposes of determining the Applicable Liquidity Rate for interest
payable thereon; PROVIDED FURTHER, HOWEVER, that if, following the making of a
Provider Advance, the Liquidity Provider delivers a Termination Notice to the
Borrower pursuant to Section 6.01 hereof, such Provider Advance shall thereafter
be treated as a Final Advance under this Agreement for purposes of determining
the Applicable Liquidity Rate for interest payable thereon and the obligation
for repayment thereof. Subject to Sections 2.07 and 2.09 hereof, immediately
upon the withdrawal of any amounts from the Cash Collateral Account on account
of a reduction in the Required Amount, the Borrower shall repay to the Liquidity
Provider a portion of the Provider Advances in a principal amount equal to such
reduction, plus interest on the principal amount prepaid as provided in Section
3.07 hereof.
(b) At any time when an Applied Provider Advance (or any portion
thereof) is outstanding, upon the deposit in the Cash Collateral Account of any
amount pursuant to clause "FOURTH" of Section 3.2 of the Indenture (any such
amount being a "REPLENISHMENT AMOUNT") for the purpose of replenishing or
increasing the balance thereof up to the Required Amount at such time, (i) the
aggregate outstanding principal amount of all Applied Provider Advances (and of
Provider Advances treated as an Interest Advance for purposes of determining the
Applicable Liquidity Rate for interest payable thereon) shall be automatically
reduced by the amount of such Replenishment Amount and (ii) the aggregate
outstanding principal amount of all Unapplied Provider Advances shall be
automatically increased by the amount of such Replenishment Amount.
(c) Upon the provision of a Replacement Liquidity Facility in
replacement of this Agreement in accordance with Section 3.5(e) of the
Indenture, amounts remaining on deposit in the Cash Collateral Account after
giving effect to any Applied Provider Advance on the date of such replacement
shall be reimbursed to the Liquidity Provider, but only to the extent such
amounts are necessary to repay in full to the Liquidity Provider all amounts
owing to it hereunder.
Section 2.07. PAYMENTS TO THE LIQUIDITY PROVIDER UNDER THE INDENTURE.
In order to provide for payment or repayment to the Liquidity Provider of any
amounts hereunder, the Indenture provides that amounts available and referred to
in Article 3 of the Indenture, to the extent payable to the Liquidity Provider
pursuant to the terms of the Indenture (including, without limitation, Section
3.5(f) and 3.6(d) of the Indenture), shall be paid to the Liquidity Provider in
accordance with the terms thereof. Amounts so paid to the Liquidity Provider
shall be applied by the Liquidity Provider to Liquidity Obligations then due and
payable in accordance with the Indenture or, if not provided for in the
Indenture, then in such manner as the Liquidity Provider shall deem appropriate.
Section 2.08. BOOK ENTRIES. The Liquidity Provider shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower resulting from Advances made from time to time and
the amounts of principal and interest payable hereunder and paid from time to
time in respect thereof; PROVIDED, HOWEVER, that the failure by the Liquidity
Provider to maintain such account or accounts shall not affect the obligations
of the Borrower in respect of Advances.
Section 2.09. PAYMENTS FROM AVAILABLE FUNDS ONLY. All payments to be
made by the Borrower under this Agreement (including, without limitation,
Section 7.05 and 7.07 hereof) shall be made only from amounts that constitute
Payments or payments under Section 3.9 or Article 6 of the Indenture or any
other amounts available for distribution under the Indenture and only to the
extent that the Borrower shall have sufficient income or proceeds therefrom to
enable the Borrower to make payments in accordance with the terms hereof after
giving effect to the priority of payments provisions set forth in the Indenture.
The Liquidity Provider agrees that it will look solely to such amounts in
respect of payments to be made by the Borrower hereunder to the extent available
for distribution to it as provided in the Indenture and this Agreement and that
the Borrower, in its individual capacity, is not personally liable to it for any
amounts payable or liability under this Agreement except as expressly provided
in this Agreement or the Indenture. Amounts on deposit in the Cash Collateral
Account shall be available to the Borrower to make payments under this Agreement
only to the extent and for the purposes expressly contemplated in Section 3.5(f)
of the Indenture. Nothing herein shall limit or otherwise affect the right of
the Liquidity Provider to receive payment from the Policy Provider under Section
3.6(d) of the Indenture.
Section 2.10. EXTENSION OF THE EXPIRY DATE; NON-EXTENSION ADVANCE. The
Expiry Date shall be automatically extended, effective on the 25th day prior to
each Expiry Date (unless such Expiry Date is on or after the date that is 15
days after the Final Legal Maturity Date), for a period of 364 days after such
Expiry Date (unless the obligations of the Liquidity Provider are earlier
terminated in accordance with the terms hereof), without the necessity of any
act on the part of the Borrower or the Liquidity Provider, unless the Liquidity
Provider shall advise the Borrower prior to such 25th day that it does not agree
to such extension of such Expiry Date, in which event (and if the Liquidity
Provider shall not have been replaced in accordance with Section 3.5(e) of the
Indenture), the Borrower shall be entitled on and after such 25th day (but prior
to such Expiry Date) to request a Non-Extension Advance in accordance with
Section 2.02(b) hereof and Section 3.5(d) of the Indenture.
ARTICLE III
OBLIGATIONS OF THE BORROWER
Section 3.01. INCREASED COSTS. The Borrower shall pay to the Liquidity
Provider from time to time such amounts as may be necessary to compensate the
Liquidity Provider for any increased costs incurred by the Liquidity Provider
which are attributable to its making or maintaining any LIBOR Advances hereunder
or its obligation to make any such Advances hereunder, or any reduction in any
amount receivable by the Liquidity Provider under this Agreement or the
Indenture in respect of any such Advances or such obligation (such increases in
costs and reductions in amounts receivable being herein called "ADDITIONAL
COSTS"), resulting from any change after the date of this Agreement in U.S.
federal, state, municipal, or foreign laws or regulations (including Regulation
D of the Board of Governors of the Federal Reserve System), or the adoption or
making after the date of this Agreement of any interpretations, directives, or
requirements applying to a class of banks including the Liquidity Provider under
any U.S. federal, state, municipal, or any foreign laws or regulations (whether
or not having the force of law) by any court, central bank or monetary authority
charged with the interpretation or administration thereof (a "REGULATORY
CHANGE"), which: (1) changes the basis of taxation of any amounts payable to the
Liquidity Provider under this Agreement in respect of any such Advances or such
obligation (other than Excluded Taxes); or (2) imposes or modifies any reserve,
special deposit, compulsory loan or similar requirements relating to any
extensions of credit or other assets of, or any deposits with other liabilities
of, the Liquidity Provider (including any such Advances or such obligation or
any deposits referred to in the definition of LIBOR Rate or related
definitions). The Liquidity Provider agrees to use reasonable efforts
(consistent with applicable legal and regulatory restrictions) to change the
jurisdiction of its Facility Office if making such change would avoid the need
for, or reduce the amount of, any amount payable under this Section that may
thereafter accrue and would not, in the reasonable judgment of the Liquidity
Provider, be otherwise disadvantageous to the Liquidity Provider.
The Liquidity Provider will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Liquidity Provider to
compensation pursuant to this Section 3.01 as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, which
notice shall describe in reasonable detail the calculation of the amounts owed
under this Section. Determinations by the Liquidity Provider for purposes of
this Section 3.01 of the effect of any Regulatory Change on its costs of making
or maintaining Advances or on amounts receivable by it in respect of Advances,
and of the additional amounts required to compensate the Liquidity Provider in
respect of any Additional Costs, shall be prima facie evidence of the amount
owed under this Section.
Notwithstanding the preceding two paragraphs, the Liquidity Provider
and the Trustee agree that the initial Liquidity Provider (i.e., Morgan Stanley
Capital Services Inc.) shall not be entitled to the benefits of the preceding
two paragraphs; PROVIDED, however, that any permitted assignee or participant of
the initial Liquidity Provider which is a bank organized under the laws of the
United States or any State thereof shall be entitled to the benefits of the
preceding two paragraphs (subject, in the case of any permitted participant, to
the limitation set forth in Section 7.08 hereof).
Section 3.02. CAPITAL ADEQUACY. If (1) the adoption, after the date
hereof, of any applicable governmental law, rule or regulation regarding capital
adequacy, (2) any change, after the date hereof, in the interpretation or
administration of any such law, rule or regulation by any central bank or other
governmental authority charged with the interpretation or administration thereof
or (3) compliance by the Liquidity Provider or any corporation controlling the
Liquidity Provider with any applicable guideline or request of general
applicability, issued after the date hereof, by any central bank or other
governmental authority (whether or not having the force of law) that constitutes
a change of the nature described in clause (2), has the effect of requiring an
increase in the amount of capital required to be maintained by the Liquidity
Provider or any corporation controlling the Liquidity Provider, and such
increase is based upon the Liquidity Provider's obligations hereunder and other
similar obligations, the Borrower shall pay to the Liquidity Provider from time
to time such additional amount or amounts as are necessary to compensate the
Liquidity Provider for such portion of such increase as shall be reasonably
allocable to the Liquidity Provider's obligations to the Borrower hereunder. The
Liquidity Provider agrees to use reasonable efforts (consistent with applicable
legal and regulatory restrictions) to change the jurisdiction of its Facility
Office if making such change would avoid the need for, or reduce the amount of,
any amount payable under this Section that may thereafter accrue and would not,
in the reasonable judgment of the Liquidity Provider, be otherwise materially
disadvantageous to the Liquidity Provider.
The Liquidity Provider will notify the Borrower of any event occurring
after the date of this Agreement that will entitle the Liquidity Provider to
compensation pursuant to this Section 3.02 as promptly as practicable after it
obtains knowledge thereof and determines to request such compensation, which
notice shall describe in reasonable detail the calculation of the amounts owed
under this Section. Determinations by the Liquidity Provider for purposes of
this Section 3.02 of the effect of any increase in the amount of capital
required to be maintained by the Liquidity Provider and of the amount allocable
to the Liquidity Provider's obligations to the Borrower hereunder shall be prima
facie evidence of the amounts owed under this Section.
Notwithstanding the preceding two paragraphs, the Liquidity Provider
and the Trustee agree that the initial Liquidity Provider (i.e., Morgan Stanley
Capital Services Inc.) shall not be entitled to the benefits of the preceding
two paragraphs; PROVIDED, however, that any permitted assignee or participant of
the initial Liquidity Provider which is a bank organized under the laws of the
United States or any State thereof shall be entitled to the benefits of the
preceding two paragraphs (subject, in the case of any permitted participant, to
the limitation set forth in Section 7.08 hereof).
Section 3.03. PAYMENTS FREE OF DEDUCTIONS.
All payments made by the Borrower under this Agreement shall be made
free and clear of, and without reduction for or on account of, any present or
future stamp or other taxes, levies, imposts, duties, charges, fees, deductions,
withholdings, restrictions or conditions of any nature whatsoever now or
hereafter imposed, levied, collected, withheld or assessed, excluding Excluded
Taxes (such non-excluded taxes being referred to herein, collectively, as
"NON-EXCLUDED TAXES" and each, individually, as a "NON-EXCLUDED TAX"). If any
Non-Excluded Taxes are required to be withheld from any amounts payable to the
Liquidity Provider under this Agreement, (i) the Borrower shall within the time
prescribed therefor by applicable law pay to the appropriate governmental or
taxing authority the full amount of any such Non-Excluded Taxes (and any
additional Non-Excluded Taxes in respect of the additional amounts payable under
clause (ii) hereof) and make such reports or returns in connection therewith at
the time or times and in the manner prescribed by applicable law, and (ii) the
amounts so payable to the Liquidity Provider shall be increased to the extent
necessary to yield to the Liquidity Provider (after payment of all Non-Excluded
Taxes) interest or any other such amounts payable under this Agreement at the
rates or in the amounts specified in this Agreement. The Liquidity Provider
agrees to use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its Facility Office
if making such change would avoid the need for, or reduce the amount of, any
such additional amounts that may thereafter accrue and would not, in the
reasonable judgment of the Liquidity Provider, be otherwise disadvantageous to
the Liquidity Provider. From time to time upon the reasonable request of the
Borrower, the Liquidity Provider agrees to provide to the Borrower, if
applicable, two original Internal Revenue Service Form W-9 (or, in the case of a
successor Liquidity Provider that is organized under the laws of a jurisdiction
outside the United States, Internal Revenue Service Form W-8BEN or W-8ECI), or
any successor or other form prescribed by the Internal Revenue Service,
certifying that the Liquidity Provider is exempt from or entitled to a reduced
rate of United States withholding tax on payments pursuant to this Agreement.
Within 30 days after the date of each payment hereunder, the Borrower shall
furnish to the Liquidity Provider the original or a certified copy of (or other
documentary evidence of) the payment of the Non-Excluded Taxes applicable to
such payment.
Section 3.04. PAYMENTS. The Borrower shall make or cause to be made
each payment to the Liquidity Provider under this Agreement so as to cause the
same to be received by the Liquidity Provider not later than 1:00 P.M. (New York
City time) on the day when due. The Borrower shall make all such payments in
lawful money of the United States of America, to the Liquidity Provider in
immediately available funds, by wire transfer to Citibank, N.A., New York, New
York, ABA 021 000 089 in favor of account number 4072 4601, account name: Morgan
Stanley Capital Services Inc., reference: Continental Liquidity Facility, attn:
Kevin Hyland.
Section 3.05. COMPUTATIONS. All computations of interest based on the
Base Rate shall be made on the basis of a year of 365 or 366 days, as the case
may be, and all computations of interest based on the LIBOR Rate shall be made
on the basis of a year of 360 days, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such interest is payable.
Section 3.06. PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to be
made hereunder shall be stated to be due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day and no additional
interest shall be due as a result (and if so made, shall be deemed to have been
made when due). If any payment in respect of interest on an Advance is so
deferred to the next succeeding Business Day, such deferral shall not delay the
commencement of the next Interest Period for such Advance (if such Advance is a
LIBOR Advance) or reduce the number of days for which interest will be payable
on such Advance on the next interest payment date for such Advance.
Section 3.07. INTEREST.
(a) Subject to Section 2.09, the Borrower shall pay, or shall cause to
be paid, without duplication, interest on (i) the unpaid principal amount of
each Advance from and including the date of such Advance (or, in the case of an
Applied Provider Advance, from and including the date on which the amount
thereof was withdrawn from the Cash Collateral Account to pay interest on the
Securities) to but excluding the date such principal amount shall be paid in
full (or, in the case of an Applied Provider Advance, the date on which the Cash
Collateral Account is fully replenished in respect of such Advance) and (ii) any
other amount due hereunder (whether fees, commissions, expenses or other amounts
or, to the extent permitted by law, installments of interest on Advances or any
such other amount) which is not paid when due (whether at stated maturity, by
acceleration or otherwise) from and including the due date thereof to but
excluding the date such amount is paid in full, in each such case, at a
fluctuating interest rate per annum for each day equal to the Applicable
Liquidity Rate (as defined below) for such Advance or such other amount as in
effect for such day, but in no event at a rate per annum greater than the
maximum rate permitted by applicable law; PROVIDED, HOWEVER, that, if at any
time the otherwise applicable interest rate as set forth in this Section 3.07
shall exceed the maximum rate permitted by applicable law, then any subsequent
reduction in such interest rate will not reduce the rate of interest payable
pursuant to this Section 3.07 below the maximum rate permitted by applicable law
until the total amount of interest accrued equals the amount of interest that
would have accrued if such otherwise applicable interest rate as set forth in
this Section 3.07 had at all times been in effect.
(b) Except as provided in clause (e) below, each Advance (including,
without limitation, each outstanding Unapplied Downgrade Advance) will be either
a Base Rate Advance or a LIBOR Advance as provided in this Section. Each such
Advance will be a Base Rate Advance for the period from the date of its
borrowing to (but excluding) the third Business Day following the Liquidity
Provider's receipt of the Notice of Borrowing for such Advance. Thereafter, such
Advance shall be a LIBOR Advance; provided that the Borrower (at the direction
of the Controlling Party, so long as the Liquidity Provider is not the
Controlling Party) may (x) convert the Final Advance into a Base Rate Advance on
the last day of an Interest Period for such Advance by giving the Liquidity
Provider no less than four Business Days' prior written notice of such election
or (y) elect to maintain the Final Advance as a Base Rate Advance by not
requesting a conversion of the Final Advance to a LIBOR Advance under Clause (5)
of the applicable Notice of Borrowing (or, if such Final Advance is deemed to
have been made, without delivery of a Notice of Borrowing pursuant to Section
2.06, by requesting, prior to 11:00 A.M. (New York City time) on the first
Business Day immediately following the Borrower's receipt of the applicable
Termination Notice, that such Final Advance not be converted from a Base Rate
Advance to a LIBOR Advance).
(c) Each LIBOR Advance shall bear interest during each Interest Period
at a rate per annum equal to the LIBOR Rate for such Interest Period plus the
Applicable Margin for such LIBOR Advance, payable in arrears on the last day of
such Interest Period and, in the event of the payment of principal of such LIBOR
Advance on a day other than such last day, on the date of such payment (to the
extent of interest accrued on the amount of principal repaid).
(d) Each Base Rate Advance shall bear interest at a rate per annum
equal to the Base Rate plus the Applicable Margin for such Base Rate Advance,
payable in arrears on each Interest Payment Date and, in the event of the
payment of principal of such Base Rate Advance on a day other than a Interest
Payment Date, on the date of such payment (to the extent of interest accrued on
the amount of principal repaid).
(e) Each outstanding Unapplied Non-Extension Advance shall bear
interest in an amount equal to the Investment Earnings on amounts on deposit in
the Cash Collateral Account plus the Applicable Margin for such Unapplied
Non-Extension Advance on the amount of such Unapplied Non-Extension Advance from
time to time, payable in arrears on each Interest Payment Date.
(f) Each amount not paid when due hereunder (whether fees,
commissions, expenses or other amounts or, to the extent permitted by applicable
law, installments of interest on Advances but excluding Advances) shall bear
interest at a rate per annum equal to the Base Rate plus 2.00% until paid.
(g) Each change in the Base Rate shall become effective immediately.
The rates of interest specified in this Section 3.07 with respect to any Advance
or other amount shall be referred to as the "APPLICABLE LIQUIDITY RATE".
Section 3.08. REPLACEMENT OF BORROWER. From time to time and subject
to the successor Borrower's meeting the eligibility requirements set forth in
Section 8.10 of the Indenture applicable to the Trustee, upon the effective date
and time specified in a written and completed Notice of Replacement Trustee in
substantially the form of Annex VI attached hereto (a "NOTICE OF REPLACEMENT
TRUSTEE") delivered to the Liquidity Provider by the then Borrower, the
successor Borrower designated therein shall be substituted for as the Borrower
for all purposes hereunder.
Section 3.09. FUNDING LOSS INDEMNIFICATION. The Borrower shall pay to
the Liquidity Provider, upon the request of the Liquidity Provider, such amount
or amounts as shall be sufficient (in the reasonable opinion of the Liquidity
Provider) to compensate it for any loss, cost, or expense incurred by reason of
the liquidation or redeployment of deposits or other funds acquired by the
Liquidity Provider to fund or maintain any LIBOR Advance (but excluding loss of
anticipated profits) incurred as a result of:
(1) Any repayment of a LIBOR Advance on a date other than the last day
of the Interest Period for such Advance; or
(2) Any failure by the Borrower to borrow a LIBOR Advance on the date
for borrowing specified in the relevant notice under Section 2.02.
Section 3.10. ILLEGALITY. Notwithstanding any other provision in this
Agreement, if any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Liquidity Provider (or its Facility
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall make it unlawful
or impossible for the Liquidity Provider (or its Facility Office) to maintain or
fund its LIBOR Advances, then upon notice to the Borrower by the Liquidity
Provider, the outstanding principal amount of the LIBOR Advances shall be
converted to Base Rate Advances (a) immediately upon demand of the Liquidity
Provider, if such change or compliance with such request, in the judgment of the
Liquidity Provider, requires immediate repayment; or (b) at the expiration of
the last Interest Period to expire before the effective date of any such change
or request. The Liquidity Provider agrees to use reasonable efforts (consistent
with applicable legal and regulatory restrictions) to change the jurisdiction of
its Facility Office if making such change would avoid or cure the aforesaid
illegality and would not, in the reasonable judgment of the Liquidity Provider,
be otherwise disadvantageous to the Liquidity Provider.
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.01. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SECTION 2.01.
Section 2.01 of this Agreement shall become effective on and as of the first
date (the "EFFECTIVE DATE") on which the following conditions precedent have
been satisfied or waived:
(a) The Liquidity Provider shall have received each of the following,
and in the case of each document delivered pursuant to paragraphs (i), (ii)
and (iii), each in form and substance satisfactory to the Liquidity
Provider:
(i) This Agreement duly executed on behalf of the Borrower and
the Fee Letter applicable to this Agreement duly executed on behalf of
the Borrower;
(ii) The Indenture duly executed on behalf of each of the parties
thereto (other than the Liquidity Provider);
(iii) Fully executed copies of each of the Operative Documents
and Support Documents executed and delivered on the Closing Date
(other than this Agreement, the Fee Letter applicable to this
Agreement and the Indenture);
(iv) A copy of the Offering Memorandum and specimen copies of the
Securities;
(v) An executed copy of each document, instrument, certificate
and opinion delivered on the Closing Date pursuant to the Indenture,
the other Operative Documents and the Support Documents (in the case
of each such opinion, other than the opinion of counsel for the
Initial Purchaser, either addressed to the Liquidity Provider or
accompanied by a letter from the counsel rendering such opinion to the
effect that the Liquidity Provider is entitled to rely on such opinion
as of its date as if it were addressed to the Liquidity Provider);
(vi) Evidence that there shall have been made and shall be in
full force and effect, all filings, recordings and/or registrations,
and there shall have been given or taken any notice or other similar
action as may be reasonably necessary or, to the extent reasonably
requested by the Liquidity Provider, reasonably advisable, in order to
establish, perfect, protect and preserve the right, title and
interest, remedies, powers, privileges, liens and security interests
of, or for the benefit of, the Borrower and the Liquidity Provider
created by the Operative Documents and the Support Documents executed
and delivered on the Closing Date;
(vii) An agreement from the Company, pursuant to which (i) the
Company agrees to provide to the Liquidity Provider (A) within 90 days
after the end of each of the first three fiscal quarters in each
fiscal year of the Company, a consolidated balance sheet of the
Company as of the end of such quarter and related statements of income
and cash flows for the period commencing at the end of the previous
fiscal year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the
corresponding period in the preceding fiscal year, prepared in
accordance with GAAP; PROVIDED, that so long as the Company is subject
to the reporting requirements of the Securities Exchange Act of 1934,
as amended, a copy of the Company's report on Form 10-Q for such
fiscal quarter (excluding exhibits) or a written notice executed by an
authorized officer of the Company that such report has been filed with
the Securities and Exchange Commission, providing a website address at
which such report may be accessed and confirming that the report
accessible at such website address conforms to the original report
filed with the Securities and Exchange Commission, will satisfy this
subclause (A), and (B) within 120 days after the end of each fiscal
year of the Company, a consolidated balance sheet of the Company as of
the end of such fiscal year and related statements of income and cash
flows of the Company for such fiscal year, in comparative form with
the preceding fiscal year, prepared in accordance with GAAP, together
with a report of the Company's independent certified public
accountants with respect to their audit of such financial statements;
PROVIDED, that so long as the Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, a
copy of the Company's report on Form 10-K for such fiscal year
(excluding exhibits) or a written notice executed by an authorized
officer of the Company that such report has been filed with the
Securities and Exchange Commission, providing a website address at
which such report may be accessed and confirming that the report
accessible at such website address conforms to the original report
filed with the Securities and Exchange Commission, will satisfy this
subclause (B), and (ii) the Company agrees to allow the Liquidity
Provider to inspect the Company's books and records regarding the
transactions contemplated hereby or by the other Operative Documents
or Support Documents, and to discuss such transactions with officers
and employees of the Company; and
(viii) Such other documents, instruments, opinions and approvals
pertaining to the transactions contemplated hereby or by the other
Operative Documents or the Support Documents as the Liquidity Provider
shall have reasonably requested.
(b) The following statement shall be true on and as of the Effective
Date: no event has occurred and is continuing, or would result from the
entering into of this Agreement or the making of any Advance, which
constitutes a Liquidity Event of Default.
(c) The Liquidity Provider shall have received payment in full of all
fees and other sums required to be paid to or for the account of the
Liquidity Provider on or prior to the Effective Date.
(d) All conditions precedent to the issuance of the Securities under
the Indenture shall have been satisfied or waived, and all conditions
precedent to the purchase of the Securities by the Initial Purchaser under
the Purchase Agreement shall have been satisfied or waived.
(e) The Borrower shall have received a certificate, dated the date
hereof, signed by a duly authorized representative of the Liquidity
Provider, certifying that all conditions precedent to the effectiveness of
Section 2.01 have been satisfied or waived.
Section 4.02. CONDITIONS PRECEDENT TO BORROWING. The obligation of the
Liquidity Provider to make an Advance on the occasion of each Borrowing shall be
subject to the conditions precedent that the Effective Date shall have occurred
and, on or prior to the date of such Borrowing, the Borrower shall have
delivered a Notice of Borrowing which conforms to the terms and conditions of
this Agreement and has been completed as may be required by the relevant form of
the Notice of Borrowing for the type of Advances requested.
ARTICLE V
COVENANTS
Section 5.01. AFFIRMATIVE COVENANTS OF THE BORROWER. So long as any
Advance shall remain unpaid or the Liquidity Provider shall have any Maximum
Commitment hereunder or the Borrower shall have any obligation to pay any amount
to the Liquidity Provider hereunder, the Borrower will, unless the Liquidity
Provider shall otherwise consent in writing:
(a) PERFORMANCE OF THIS AND OTHER AGREEMENTS. Punctually pay or cause
to be paid all amounts payable by it under this Agreement, the other
Operative Documents and Support Documents and observe and perform in all
material respects the conditions, covenants and requirements applicable to
it contained in this Agreement, the other Operative Documents and Support
Documents.
(b) REPORTING REQUIREMENTS. Furnish to the Liquidity Provider with
reasonable promptness, such other information and data with respect to the
transactions contemplated by the Operative Documents and Support Documents
as from time to time may be reasonably requested by the Liquidity Provider;
and permit the Liquidity Provider, upon reasonable notice, to inspect the
Borrower's books and records with respect to such transactions and to meet
with officers and employees of the Borrower to discuss such transactions.
(c) CERTAIN OPERATIVE DOCUMENTS AND SUPPORT DOCUMENTS. Furnish to the
Liquidity Provider with reasonable promptness, such Operative Documents and
Support Documents entered into after the date hereof as from time to time
may be reasonably requested by the Liquidity Provider.
Section 5.02. NEGATIVE COVENANTS OF THE BORROWER. So long as any
Advance shall remain unpaid or the Liquidity Provider shall have any Maximum
Commitment hereunder or the Borrower shall have any obligation to pay any amount
to the Liquidity Provider hereunder, the Borrower will not appoint or permit or
suffer to be appointed any successor Borrower without the prior written consent
of the Liquidity Provider, which consent shall not be unreasonably withheld or
delayed.
ARTICLE VI
LIQUIDITY EVENTS OF DEFAULT;
LIQUIDITY PROVIDER REIMBURSEMENT DATE
Section 6.01. LIQUIDITY EVENTS OF DEFAULT. If (a) any Liquidity Event
of Default has occurred and is continuing and (b) the Securities are
Non-Performing, the Liquidity Provider may, in its discretion, deliver to the
Borrower a Termination Notice, the effect of which shall be to cause (i) the
obligation of the Liquidity Provider to make Advances hereunder to expire on the
fifth Business Day after the date on which such Termination Notice is received
by the Borrower, (ii) the Borrower to promptly request, and the Liquidity
Provider to promptly make, a Final Advance in accordance with Section 2.02(d)
hereof and Section 3.5(i) of the Indenture, (iii) all other outstanding Advances
to be automatically converted into Final Advances for purposes of determining
the Applicable Liquidity Rate for interest payable thereon and (iv) subject to
Sections 2.07 and 2.09 hereof, all Advances (including, without limitation, any
Provider Advance and Applied Provider Advance), any accrued interest thereon and
any other amounts outstanding hereunder to become immediately due and payable to
the Liquidity Provider.
Section 6.02. LIQUIDITY PROVIDER REIMBURSEMENT DATE. Upon the
occurrence of the Liquidity Provider Reimbursement Date, (i) the obligation of
the Liquidity Provider to make Advances hereunder shall automatically expire,
(ii) all outstanding Advances shall be automatically converted into Final
Advances, and (iii) subject to Sections 2.07 and 2.09 hereof, all Advances
(including, without limitation, any Provider Advance and Applied Provider
Advance), any accrued interest thereon and any other amounts outstanding
hereunder shall become immediately due and payable to the Liquidity Provider. On
and after such date, no Advances shall be permitted hereunder.
ARTICLE VII
MISCELLANEOUS
Section 7.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Liquidity Provider, and, in the case of an amendment or of a waiver by the
Borrower, the Borrower, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
Section 7.02. NOTICES, ETC. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telecopier and mailed or delivered or sent by telecopier):
Borrower: WILMINGTON TRUST COMPANY
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-1605
Attention: Corporate Capital Market Services
Telephone: (302) 636-6296
Telecopy: (302) 636-4140
Liquidity MORGAN STANLEY CAPITAL SERVICES, INC.
Provider: 1585 Broadway
New York, New York 10036
Attention: David Rogers
Telephone: (212) 761-3336
Telecopy: (212) 761-0350
with a copy of any Notice of Borrowing to:
Morgan Stanley
1585 Broadway
New York, New York 10036
Attention: Patrick Sieb
Telephone: (212) 761-1864
Telecopy: (212) 761-1864
or, as to each of the foregoing, at such other address as shall be designated by
such Person in a written notice to the others. All such notices and
communications shall be effective (i) if given by telecopier, when transmitted
to the telecopier number specified above, (ii) if given by mail, when deposited
in the mails addressed as specified above, and (iii) if given by other means,
when delivered at the address specified above, except that written notices to
the Liquidity Provider pursuant to the provisions of Article II and Article III
hereof shall not be effective until received by the Liquidity Provider. A copy
of all notices delivered hereunder to either party shall in addition be
delivered to each of the parties to the Indenture at their respective addresses
set forth therein.
Section 7.03. NO WAIVER; REMEDIES. No failure on the part of the
Liquidity Provider to exercise, and no delay in exercising, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 7.04. FURTHER ASSURANCES. The Borrower agrees to do such
further acts and things and to execute and deliver to the Liquidity Provider
such additional assignments, agreements, powers and instruments as the Liquidity
Provider may reasonably require or deem advisable to carry into effect the
purposes of this Agreement, the other Operative Documents and Support Documents
or to better assure and confirm unto the Liquidity Provider its rights, powers
and remedies hereunder and under the other Operative Documents and Support
Documents.
Section 7.05. INDEMNIFICATION; SURVIVAL OF CERTAIN PROVISIONS. The
Liquidity Provider shall be indemnified hereunder to the extent and in the
manner described in Article 6 of the Indenture. In addition, the Borrower agrees
to indemnify, protect, defend and hold harmless the Liquidity Provider from,
against and in respect of, and shall pay on demand, all Expenses of any kind or
nature whatsoever (other than any Expenses of the nature described in Section
3.01, 3.02 or 7.07 hereof or in the Fee Letter applicable to this Agreement
(regardless of whether indemnified against pursuant to said Sections or in such
Fee Letter)), that may be imposed, incurred by or asserted against any Liquidity
Indemnitee, in any way relating to, resulting from, or arising out of or in
connection with any action, suit or proceeding by any third party against such
Liquidity Indemnitee and relating to this Agreement, the Fee Letter applicable
to this Agreement or the Indenture; PROVIDED, HOWEVER, that the Borrower shall
not be required to indemnify, protect, defend and hold harmless any Liquidity
Indemnitee in respect of any Expense of such Liquidity Indemnitee to the extent
such Expense is (i) attributable to the gross negligence or willful misconduct
of such Liquidity Indemnitee or any other Liquidity Indemnitee, (ii) ordinary
and usual operating overhead expense, or (iii) attributable to the failure by
such Liquidity Indemnitee or any other Liquidity Indemnitee to perform or
observe any agreement, covenant or condition on its part to be performed or
observed in this Agreement, the Indenture, the Fee Letter applicable to this
Agreement or any other Operative Document or Support Document to which it is a
party. The indemnities contained in Article 6 of the Indenture, and the
provisions of Sections 3.01, 3.02, 3.03, 3.09, 7.05 and 7.07 hereof, shall
survive the termination of this Agreement.
Section 7.06. LIABILITY OF THE LIQUIDITY PROVIDER.
(a) Neither the Liquidity Provider nor any of its officers, employees,
directors or Affiliates shall be liable or responsible for: (i) the use which
may be made of the Advances or any acts or omissions of the Borrower or any
beneficiary or transferee in connection therewith; (ii) the validity,
sufficiency or genuineness of documents, or of any endorsement thereon, even if
such documents should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; or (iii) the making of Advances by the Liquidity Provider
against delivery of a Notice of Borrowing and other documents which do not
comply with the terms hereof; PROVIDED, HOWEVER, that the Borrower shall have a
claim against the Liquidity Provider, and the Liquidity Provider shall be liable
to the Borrower, to the extent of any damages suffered by the Borrower which
were the result of (A) the Liquidity Provider's willful misconduct or negligence
in determining whether documents presented hereunder comply with the terms
hereof, or (B) any breach by the Liquidity Provider of any of the terms of this
Agreement, including, but not limited to, the Liquidity Provider's failure to
make lawful payment hereunder after the delivery to it by the Borrower of a
Notice of Borrowing strictly complying with the terms and conditions hereof.
(b) Neither the Liquidity Provider nor any of its officers, employees,
directors or Affiliates shall be liable or responsible in any respect for (i)
any error, omission, interruption or delay in transmission, dispatch or delivery
of any message or advice, however transmitted, in connection with this Agreement
or any Notice of Borrowing delivered hereunder, or (ii) any action, inaction or
omission which may be taken by it in good faith, absent willful misconduct or
negligence (in which event the extent of the Liquidity Provider's potential
liability to the Borrower shall be limited as set forth in the immediately
preceding paragraph), in connection with this Agreement or any Notice of
Borrowing.
Section 7.07. COSTS, EXPENSES AND TAXES. The Borrower agrees to pay,
or cause to be paid, (A) on the Effective Date and on such later date or dates
on which the Liquidity Provider shall make demand, all reasonable out-of-pocket
costs and expenses (including, without limitation, the reasonable fees and
expenses of outside counsel for the Liquidity Provider) of the Liquidity
Provider in connection with the preparation, negotiation, execution, delivery,
filing and recording of this Agreement, any other Operative Document or Support
Document and any other documents which may be delivered in connection with this
Agreement and (B) on demand, all reasonable costs and expenses (including
reasonable counsel fees and expenses) of the Liquidity Provider in connection
with (i) the enforcement of this Agreement or any other Operative Document or
Support Document, (ii) the modification or amendment of, or supplement to, this
Agreement or any other Operative Document or Support Document or such other
documents which may be delivered in connection herewith or therewith (whether or
not the same shall become effective) or (iii) any action or proceeding relating
to any order, injunction, or other process or decree restraining or seeking to
restrain the Liquidity Provider from paying any amount under this Agreement, the
Indenture or any other Operative Document or Support Document or otherwise
affecting the application of funds in the Cash Collateral Account. In addition,
the Borrower shall pay any and all recording, stamp and other similar taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing and recording of this Agreement, any other Operative Document
or Support Document and such other documents, and agrees to save the Liquidity
Provider harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes or fees.
Section 7.08. BINDING EFFECT; PARTICIPATIONS.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower and the Liquidity Provider and their respective successors and
assigns, except that neither the Liquidity Provider (except as otherwise
provided in this Section 7.08) nor (except as contemplated by Section 3.08) the
Borrower shall have the right to assign its rights or obligations hereunder or
any interest herein without the prior written consent of the other party,
subject to the requirements of Section 7.08(b). The Liquidity Provider may grant
participations herein or in any of its rights hereunder (including, without
limitation, funded participations and participations in rights to receive
interest payments hereunder) and under the other Operative Documents and Support
Documents to such Persons (other than the Company and its Affiliates) as the
Liquidity Provider may in its sole discretion select, subject to the
requirements of Section 7.08(b). No such granting of participations by the
Liquidity Provider, however, will relieve the Liquidity Provider of its
obligations hereunder. In connection with any participation or any proposed
participation, the Liquidity Provider may disclose to the participant or the
proposed participant any information that the Borrower is required to deliver or
to disclose to the Liquidity Provider pursuant to this Agreement. The Borrower
acknowledges and agrees that the Liquidity Provider's source of funds may derive
in part from its participants. Accordingly, references in this Agreement and the
other Operative Documents and Support Documents to determinations, reserve and
capital adequacy requirements, increased costs, reduced receipts, additional
amounts due pursuant to Section 3.03 and the like as they pertain to the
Liquidity Provider shall be deemed also to include those of each of its
participants that are banks (subject, in each case, if any such participant is
not a bank that is (i) organized under the laws of the United States or any
State thereof and (ii) a member bank of the Federal Reserve System with deposits
exceeding $1,000,000,000 (such a bank, a "REFERENCE BANK"), to the maximum
amount that would have been directly incurred by any Reference Bank organized
under the laws of the United States or any State thereof if such Reference Bank,
rather than the participant, had held the interest participated).
(b) If, pursuant to subsection (a) above, the Liquidity Provider sells
any participation in this Agreement to any bank or other entity (each, a
"TRANSFEREE"), then, concurrently with the effectiveness of such participation,
the Transferee shall (i) represent to the Liquidity Provider (for the benefit of
the Liquidity Provider and the Borrower) either (A) that it is incorporated
under the laws of the United States or a state thereof or (B) that under
applicable law and treaties, no taxes will be required to be withheld with
respect to any payments to be made to such Transferee in respect of this
Agreement, (ii) furnish to the Liquidity Provider and the Borrower either (x) a
statement that it is incorporated under the laws of the United States or a state
thereof or (y) if it is not so incorporated, two copies of a properly completed
United States Internal Revenue Service Form W-8ECI or Form W-8BEN, as
appropriate, or other applicable form, certificate or document prescribed by the
Internal Revenue Service certifying, in each case, such Transferee's entitlement
to a complete exemption from United States federal withholding tax in respect to
any and all payments to be made hereunder, and (iii) agree (for the benefit of
the Liquidity Provider and the Borrower) to provide the Liquidity Provider and
the Borrower a new Form W-8ECI or Form W-8BEN, as appropriate, (A) on or before
the date that any such form expires or becomes obsolete or (B) after the
occurrence of any event requiring a change in the most recent form previously
delivered by it and prior to the immediately following due date of any payment
by the Borrower hereunder, certifying in the case of a Form W-8BEN or Form
W-8ECI that such Transferee is entitled to a complete exemption from United
States federal withholding tax on payments under this Agreement. Unless the
Borrower has received forms or other documents reasonably satisfactory to it
(and required by applicable law) indicating that payments hereunder are not
subject to United States federal withholding tax, the Borrower will withhold
taxes as required by law from such payments at the applicable statutory rate.
(c) Notwithstanding the other provisions of this Section 7.08, the
Liquidity Provider may assign and pledge all or any portion of the Advances
owing to it to any Federal Reserve Bank or the United States Treasury as
collateral security pursuant to Regulation A of the Board of Governors of the
Federal Reserve System and any Operating Circular issued by such Federal Reserve
Bank, provided that any payment in respect of such assigned Advances made by the
Borrower to the Liquidity Provider in accordance with the terms of this
Agreement shall satisfy the Borrower's obligations hereunder in respect of such
assigned Advance to the extent of such payment. No such assignment shall release
the Liquidity Provider from its obligations hereunder.
Section 7.09. SEVERABILITY. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or non-authorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
Section 7.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
Section 7.11. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; WAIVER
OF IMMUNITY.
(a) Each of the parties hereto hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement, any other Operative Document or
Support Document, or for recognition and enforcement of any judgment in
respect hereof or thereof, to the nonexclusive general jurisdiction of the
courts of the State of New York, the courts of the United States of America
for the Southern District of New York, and the appellate courts from any
thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(iii) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to each party
hereto at its address set forth in Section 7.02 hereof, or at such other
address of which the Liquidity Provider shall have been notified pursuant
thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(b) THE BORROWER AND THE LIQUIDITY PROVIDER EACH HEREBY AGREE TO WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS AGREEMENT AND THE RELATIONSHIP THAT IS BEING
ESTABLISHED, including, without limitation, contract claims, tort claims, breach
of duty claims and all other common law and statutory claims. The Borrower and
the Liquidity Provider each warrant and represent that it has reviewed this
waiver with its legal counsel, and that it knowingly and voluntarily waives its
jury trial rights following consultation with such legal counsel. THIS WAIVER IS
IRREVOCABLE, AND CANNOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS AGREEMENT.
Section 7.12. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
Section 7.13. ENTIRETY. This Agreement, the Indenture, the other
Operative Documents and Support Documents to which the Liquidity Provider is a
party constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersedes all prior understandings and agreements of
such parties.
Section 7.14. HEADINGS. Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
Section 7.15. LIQUIDITY PROVIDER'S OBLIGATION TO MAKE ADVANCES. EXCEPT
AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE OBLIGATIONS OF THE LIQUIDITY
PROVIDER TO MAKE ADVANCES HEREUNDER, AND THE BORROWER'S RIGHTS TO DELIVER
NOTICES OF BORROWING REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE
UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED, IN EACH CASE
STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first set forth above.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee,
as Borrower
By:
---------------------------------
Name:
Title:
MORGAN STANLEY CAPITAL SERVICES INC.,
as Liquidity Provider
By:
---------------------------------
Name:
Title:
ANNEX I TO
REVOLVING CREDIT AGREEMENT
INTEREST ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to Morgan Stanley Capital Services
Inc. (the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit
Agreement dated as of December 6, 2002, between the Borrower and the Liquidity
Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not otherwise
defined herein being used herein as therein defined or referenced), that:
(1) The Borrower is the Trustee under the Indenture.
(2) The Borrower is delivering this Notice of Borrowing for the making
of an Interest Advance by the Liquidity Provider to be used, subject to
clause (3) below, for the payment of interest on the Securities which was
payable on ____________, ____ (the "DISTRIBUTION DATE") in accordance with
the terms and provisions of the Indenture and the Securities, which Advance
is requested to be made on ____________, ____. The Interest Advance should
be transferred to [name of bank/wire instructions/ABA number] in favor of
account number [ ], reference [ ].
(3) The amount of the Interest Advance requested hereby (i) is
$[_________________], to be applied in respect of the payment of the
interest which was due and payable on the Securities on the Distribution
Date, (ii) does not include any amount with respect to the payment of
principal of, Break Amount, Premium or other premium on, the Securities or
interest on the Securities calculated at a rate in excess of the Capped
Interest Rate, (iii) was computed in accordance with the provisions of the
Securities, the Liquidity Agreement and the Indenture (a copy of which
computation is attached hereto as Schedule I), (iv) does not exceed the
Maximum Available Commitment on the date hereof and (v) has not been and is
not the subject of a prior or contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will apply the same in accordance with
the terms of Section 3.5(b) of the Indenture, (b) no portion of such amount
shall be applied by the Borrower for any other purpose and (c) no portion
of such amount until so applied shall be commingled with other funds held
by the Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, the making of the Interest Advance as requested by this Notice of
Borrowing shall automatically reduce, subject to reinstatement in accordance
with the terms of the Liquidity Agreement, the Maximum Available Commitment by
an amount equal to the amount of the Interest Advance requested to be made
hereby as set forth in clause (i) of paragraph (3) of this Notice of Borrowing
and such reduction shall automatically result in corresponding reductions in the
amounts available to be borrowed pursuant to a subsequent Advance.
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ____ day of _________, ____.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Trustee, as Borrower
By:
---------------------------------
Name:
Title:
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
[Insert copy of computations in accordance
with Interest Advance Notice of Borrowing]
ANNEX II TO
REVOLVING CREDIT AGREEMENT
NON-EXTENSION ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to Morgan Stanley Capital Services
Inc. (the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit
Agreement dated as of December 6, 2002, between the Borrower and the Liquidity
Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not otherwise
defined herein being used herein as therein defined or referenced), that:
(1) The Borrower is the Trustee under the Indenture.
(2) The Borrower is delivering this Notice of Borrowing for the making
of the Non-Extension Advance by the Liquidity Provider to be used for the
funding of the Cash Collateral Account in accordance with Section 3.5(d) of
the Indenture, which Advance is requested to be made on __________, ____.
The Non-Extension Advance should be transferred to [name of bank/wire
instructions/ABA number] in favor of account number [ ], reference [ ].
(3) The amount of the Non-Extension Advance requested hereby (i) is
$_______________.__, which equals the Maximum Available Commitment on the
date hereof and is to be applied in respect of the funding of the Cash
Collateral Account in accordance with Section 3.5(d) of the Indenture, (ii)
does not include any amount with respect to the payment of the principal
of, Break Amount, Premium or other premium on, the Securities, (iii) was
computed in accordance with the provisions of the Securities, the Liquidity
Agreement and the Indenture (a copy of which computation is attached hereto
as Schedule I), and (iv) has not been and is not the subject of a prior or
contemporaneous Notice of Borrowing under the Liquidity Agreement.
(4) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the Cash
Collateral Account and apply the same in accordance with the terms of
Section 3.5(d) of the Indenture, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of such
amount until so applied shall be commingled with other funds held by the
Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Non-Extension Advance as requested by this
Notice of Borrowing shall automatically and irrevocably terminate the obligation
of the Liquidity Provider to make further Advances under the Liquidity
Agreement; and (B) following the making by the Liquidity Provider of the
Non-Extension Advance requested by this Notice of Borrowing, the Borrower shall
not be entitled to request any further Advances under the Liquidity Agreement.
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ____ day of _________, ____.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee, as Borrower
By:
---------------------------------
Name:
Title:
SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING
[Insert copy of computations in accordance
with Non-Extension Advance Notice of Borrowing]
ANNEX III TO
REVOLVING CREDIT AGREEMENT
DOWNGRADE ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to Morgan Stanley Capital Services
Inc. (the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit
Agreement dated as of December 6, 2002, between the Borrower and the Liquidity
Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not otherwise
defined herein being used herein as therein defined or referenced), that:
(1) The Borrower is the Trustee under the Indenture.
(2) The Borrower is delivering this Notice of Borrowing for the making
of the Downgrade Advance by the Liquidity Provider to be used for the
funding of the Cash Collateral Account in accordance with Section 3.5(c) of
the Indenture (i) by reason of the downgrading of the short-term unsecured
debt rating of the Guarantor issued by Moody's or Standard and Poor's below
the Threshold Rating or (ii) because the Guarantee Agreement has ceased to
be in full force and effect or has become invalid or unenforceable or the
Guarantor has denied its liability thereunder, which Advance is requested
to be made on __________, ____. The Downgrade Advance should be transferred
to [name of bank/wire instructions/ABA number] in favor of account number [
], reference [ ].
(3) The amount of the Downgrade Advance requested hereby (i) is
$_______________.__, which equals the Maximum Available Commitment on the
date hereof and is to be applied in respect of the funding of the Cash
Collateral Account in accordance with Section 3.5(c) of the Indenture, (ii)
does not include any amount with respect to the payment of the principal
of, Break Amount, Premium or other premium on, the Securities, (iii) was
computed in accordance with the provisions of the Securities, the Liquidity
Agreement and the Indenture (a copy of which computation is attached hereto
as Schedule I), and (iv) has not been and is not the subject of a prior or
contemporaneous Notice of Borrowing under the Liquidity Agreement.
(4) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the Cash
Collateral Account and apply the same in accordance with the terms of
Section 3.5(c) of the Indenture, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of such
amount until so applied shall be commingled with other funds held by the
Borrower.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Downgrade Advance as requested by this Notice
of Borrowing shall automatically and irrevocably terminate the obligation of the
Liquidity Provider to make further Advances under the Liquidity Agreement; and
(B) following the making by the Liquidity Provider of the Downgrade Advance
requested by this Notice of Borrowing, the Borrower shall not be entitled to
request any further Advances under the Liquidity Agreement.
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ____ day of _________, ____.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Trustee, as Borrower
By:
---------------------------------
Name:
Title:
SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING
[Insert copy of computations in accordance
with Downgrade Advance Notice of Borrowing]
ANNEX IV TO
REVOLVING CREDIT AGREEMENT
FINAL ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
borrower (the "BORROWER"), hereby certifies to Morgan Stanley Capital Services
Inc. (the "LIQUIDITY PROVIDER"), with reference to the Revolving Credit
Agreement dated as of December 6, 2002, between the Borrower and the Liquidity
Provider (the "LIQUIDITY AGREEMENT"; the terms defined therein and not otherwise
defined herein being used herein as therein defined or referenced), that:
(1) The Borrower is the Trustee under the Indenture.
(2) The Borrower is delivering this Notice of Borrowing for the making
of the Final Advance by the Liquidity Provider to be used for the funding
of the Cash Collateral Account in accordance with Section 3.5(i) of the
Indenture by reason of the receipt by the Borrower of a Termination Notice
from the Liquidity Provider pursuant to Section 6.01 of the Liquidity
Agreement, which Advance is requested to be made on ____________, ____. The
Final Advance should be transferred to [name of bank/wire instructions/ABA
number] in favor of account number [ ], reference [ ].
(3) The amount of the Final Advance requested hereby (i) is
$_________________.__, which equals the Maximum Available Commitment on the
date hereof and is to be applied in respect of the funding of the Cash
Collateral Account in accordance with Section 3.5(i) of the Indenture, (ii)
does not include any amount with respect to the payment of principal of,
Break Amount, Premium or other premium on, the Securities, (iii) was
computed in accordance with the provisions of the Securities, the Liquidity
Agreement and the Indenture (a copy of which computation is attached hereto
as Schedule I), and (iv) has not been and is not the subject of a prior or
contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Borrower of the amount
requested hereby, (a) the Borrower will deposit such amount in the Cash
Collateral Account and apply the same in accordance with the terms of
Section 3.5(i) of the Indenture, (b) no portion of such amount shall be
applied by the Borrower for any other purpose and (c) no portion of such
amount until so applied shall be commingled with other funds held by the
Borrower.
(5) The Borrower hereby requests that the Advance requested hereby be
a Base Rate Advance [and that such Base Rate Advance be converted into a
LIBOR Advance on the third Business Day following your receipt of this
notice.]
- ------------
Bracketed language may be included at Borrower's option.
The Borrower hereby acknowledges that, pursuant to the Liquidity
Agreement, (A) the making of the Final Advance as requested by this Notice of
Borrowing shall automatically and irrevocably terminate the obligation of the
Liquidity Provider to make further Advances under the Liquidity Agreement; and
(B) following the making by the Liquidity Provider of the Final Advance
requested by this Notice of Borrowing, the Borrower shall not be entitled to
request any further Advances under the Liquidity Agreement.
IN WITNESS WHEREOF, the Borrower has executed and delivered this
Notice of Borrowing as of the ____ day of _________, ____.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Trustee, as Borrower
By:
---------------------------------
Name:
Title:
SCHEDULE I TO FINAL ADVANCE NOTICE OF BORROWING
[Insert copy of computations in accordance
with Final Advance Notice of Borrowing]
ANNEX V TO
REVOLVING CREDIT AGREEMENT
NOTICE OF TERMINATION
[Date]
Wilmington Trust Company,
as Trustee, as Borrower
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Revolving Credit Agreement dated as of December 6, 2002 between
Wilmington Trust Company, as Trustee, as Borrower, and Morgan Stanley
Capital Services Inc. (the "LIQUIDITY AGREEMENT")
Ladies and Gentlemen:
You are hereby notified that pursuant to Section 6.01 of the Liquidity
Agreement, by reason of Securities being Non-Performing and the occurrence and
continuance of a Liquidity Event of Default (each as defined therein), we are
giving this notice to you in order to cause (i) our obligations to make Advances
(as defined therein) under such Liquidity Agreement to terminate on the fifth
Business Day after the date on which you receive this notice and (ii) you to
request a Final Advance under the Liquidity Agreement pursuant to Section 3.5(i)
of the Indenture (as defined in the Liquidity Agreement) as a consequence of
your receipt of this notice.
THIS NOTICE IS THE "NOTICE OF TERMINATION" PROVIDED FOR UNDER THE
LIQUIDITY AGREEMENT. OUR OBLIGATIONS TO MAKE ADVANCES UNDER THE LIQUIDITY
AGREEMENT WILL TERMINATE ON THE FIFTH BUSINESS DAY AFTER THE DATE ON WHICH YOU
RECEIVE THIS NOTICE.
Very truly yours,
MORGAN STANLEY CAPITAL SERVICES INC.,
as Liquidity Provider
By:
----------------------------------
Name:
Title:
ANNEX VI TO
REVOLVING CREDIT AGREEMENT
NOTICE OF REPLACEMENT TRUSTEE
[Date]
Attention:
Revolving Credit Agreement dated as of December 6, 2002, between
Wilmington Trust Company, as Trustee, as Borrower, and Morgan Stanley
Capital Services Inc. (the "LIQUIDITY AGREEMENT")
Ladies and Gentlemen:
For value received, the undersigned beneficiary hereby irrevocably
transfers to:
------------------------------
[Name of Transferee]
------------------------------
[Address of Transferee]
all rights and obligations of the undersigned as Borrower under the Liquidity
Agreement referred to above. The transferee has succeeded the undersigned as
Trustee under the Indenture referred to in the first paragraph of the Liquidity
Agreement, pursuant to the terms of Section 8.8 of the Indenture.
By this transfer, all rights of the undersigned as Borrower under the
Liquidity Agreement are transferred to the transferee and the transferee shall
hereafter have the sole rights and obligations as Borrower thereunder. The
undersigned shall pay any costs and expenses of such transfer, including, but
not limited to, transfer taxes or governmental charges.
We ask that this transfer be effective as of _______________, ____.
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Trustee, as Borrower
By:
---------------------------------
Name:
Title:
MORGAN STANLEY MORGAN STANLEY
1585 BROADWAY
NEW YORK, NY 10036-8293
December 6, 2002
Wilmington Trust Company, as Trustee
under the Indenture (as defined in the Agreement
referenced below) ("Counterparty")
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Ladies and Gentlemen:
In consideration of that certain Revolving Credit Agreement dated as of
December 6, 2002 between Morgan Stanley Capital Services Inc., a Delaware
corporation (hereinafter "MSCS") and Counterparty relating to the Continental
Airlines Floating Rate Secured Notes due 2007 (hereinafter the "Agreement"),
Morgan Stanley, a Delaware corporation (hereinafter "MS"), hereby irrevocably
and unconditionally guarantees to Counterparty, with effect from the date of the
Agreement, the due and punctual payment of all amounts payable by MSCS under the
Agreement when the same shall become due and payable, whether on Scheduled
Payment Dates, upon demand, upon declaration of termination or otherwise, in
accordance with the terms of the Agreement and giving effect to any applicable
grace period. Upon failure of MSCS punctually to pay any such amounts, and upon
written demand by Counterparty to MS at its address set forth in the signature
block of this Guarantee (or to such other address as MS may specify in writing),
MS agrees to pay or cause to be paid such amounts; provided that delay by
Counterparty in giving such demand shall in no event affect MS's obligations
under this Guarantee.
MS hereby agrees that its obligations hereunder shall be unconditional and
will not be discharged except by complete payment of the amounts payable under
the Agreement, irrespective of any claim as to the Agreement's validity,
regularity or enforceability or the lack of authority of MSCS to execute or
deliver the Agreement; or any change in or amendment to the Agreement; or any
waiver or consent by Counterparty with respect to any provisions thereof; or the
absence of any action to enforce the Agreement or the recovery of any judgment
against MSCS or of any action to enforce a judgment against MSCS under the
Agreement; or any similar circumstance which might otherwise constitute a legal
or equitable discharge or defense of a guarantor generally. MS hereby waives
diligence, presentment, demand on MSCS for payment or otherwise (except as
provided hereinabove), filing of claims, requirement of a prior proceeding
against MSCS and protest or notice, except as provided for in the Agreement with
respect to amounts payable by MSCS. If at any time payment under the Agreement
is rescinded or must be otherwise restored or returned by Counterparty upon the
insolvency, bankruptcy or reorganization of MSCS or MS or otherwise, MS's
obligations hereunder with respect to such payment shall be reinstated upon such
restoration or return being made by Counterparty.
MS represents to Counterparty as of the date hereof that:
(1) it is duly organized and validly existing under the laws of the
jurisdiction of its incorporation and has full power and legal right to execute
and deliver this Guarantee and to perform the provisions of this Guarantee on
its part to be performed;
(2) its execution, delivery and performance of this Guarantee have been and
remain duly authorized by all necessary corporate action and do not contravene
any provision of its certificate of incorporation or by-laws or any law,
regulation or contractual restriction binding on it or its assets;
(3) all consents, authorizations, approvals and clearances (including,
without limitation, any necessary exchange control approval) and notifications,
reports and registrations requisite for its due execution, delivery and
performance of this Guarantee have been obtained from or, as the case may be,
filed with the relevant governmental authorities having jurisdiction and remain
in full force and effect and all conditions thereof have been duly complied with
and no other action by, and no notice to or filing with, any governmental
authority having jurisdiction is required for such execution, delivery or
performance; and
(4) this Guarantee is its legal, valid and binding obligation enforceable
against it in accordance with its terms except as enforcement hereof may be
limited by applicable bankruptcy, insolvency, reorganization or other similar
laws affecting the enforcement of creditors' rights or by general equity
principles.
By accepting this Guarantee and entering into the Agreement, Counterparty
agrees that MS shall be subrogated to all rights of Counterparty against MSCS in
respect of any amounts paid by MS pursuant to this Guarantee, provided that MS
shall be entitled to enforce or to receive any payment arising out of or based
upon such right of subrogation only to the extent that it has paid all amounts
payable by MSCS under the Agreement.
This Guarantee shall be governed by and construed in accordance with the
laws of the State of New York. All capitalized terms not otherwise defined
herein shall have the respective meanings assigned to them in the Agreement.
MORGAN STANLEY
By:
---------------------------------
Name:
Title:
Address: 1585 Broadway
3rd Floor
New York, NY 10036
Attention: Derivative Products Group
Fax No.: (212) 761-0162
MBIA INSURANCE CORPORATION
FINANCIAL GUARANTY INSURANCE POLICY
December 6, 2002
Policy No. 39753
Re: $200,000,000 CONTINENTAL AIRLINES FLOATING RATE SECURED
NOTES DUE 2007 (THE "NOTES")
Insured PAYMENT OF INTEREST AT THE DEBT RATE FOR THE NOTES AND
Obligation: PRINCIPAL ON THE NOTES AND PAYMENT FOR REIMBURSEMENT TO THE
LIQUIDITY PROVIDER PURSUANT TO CLAUSE (VII) OF THE
DEFINITION OF DEFICIENCY AMOUNT SET FORTH HEREIN.
Beneficiary: WILMINGTON TRUST COMPANY, AS TRUSTEE AND AS AGENT FOR THE
LIQUIDITY PROVIDER (TOGETHER WITH ANY SUCCESSOR TRUSTEE DULY
APPOINTED AND QUALIFIED UNDER THE AGREEMENT (AS DEFINED
BELOW), THE "TRUSTEE")
MBIA INSURANCE CORPORATION ("MBIA"), for consideration received,
hereby unconditionally, absolutely and irrevocably and without the assertion of
any defenses to payment, including fraud in the inducement or fact or any other
circumstances (other than payment in full) that would have the effect of
discharging a surety in law or in equity guarantees to the Trustee, subject only
to the terms of this Policy (the "POLICY"), payment of the Insured Obligation.
MBIA agrees to pay to the Trustee, in respect of each Distribution Date, an
amount equal to (each a "DEFICIENCY AMOUNT"):
(i) with respect to any Distribution Date (other than the Final Legal
Maturity Date, the Non-Performance Payment Date, the Final Scheduled
Payment Date or a Distribution Date established pursuant to the succeeding
clause (ii), clause (iv) or clause (v) below), any shortfall in amounts
available to the Trustee, after giving effect to the subordination
provisions of Section 3.2 of the Agreement, any drawing paid under the
Liquidity Facility in respect of interest due on the Notes on such
Distribution Date and any withdrawal from the Cash Collateral Account in
respect of interest due on the Notes on such Distribution Date in
accordance with the Agreement, for the payment of accrued and unpaid
interest on the Notes at the Debt Rate (without giving effect to any
Acceleration and calculated assuming that Continental will not cure the
Default in the payment of interest);
(ii) with respect to the Distribution Date (other than the Final Legal
Maturity Date, the Non-Performance Payment Date, the Final Scheduled
Payment Date or a Distribution Date established pursuant to the succeeding
clause (iv) or clause (v) below) established by the Trustee by reason of
its receipt of a payment constituting the proceeds from the sale of Pledged
Spare Parts comprising all of the Pledged Spare Parts subject to the lien
of the Security Agreement at the time of such sale, any shortfall in the
amounts available to the Trustee after giving effect to the subordination
provisions of Section 3.2 of the Agreement and, if such payment is received
prior to a Policy Provider Election, the application of any drawing paid
under the Liquidity Facility in respect of interest due on the Notes on
such Distribution Date and any withdrawal from the Cash Collateral Account
in respect of interest due on the Notes on such Distribution Date in
accordance with the Agreement, required to pay in full the then outstanding
principal balance of the Notes together with accrued and unpaid interest
thereon at the Debt Rate (excluding any accrued and unpaid Premium or Break
Amount and calculated assuming that Continental will not cure the Default
in the payment of interest) (the "OUTSTANDING AMOUNT");
(iii) with respect to the Distribution Date that is the 25th day (or
if such 25th day is not a Business Day, the next Business Day) following
(a) the Interest Payment Date on which a Payment Default under the Notes
(without giving effect to any Acceleration or any payments by the Liquidity
Provider or the Policy Provider) exists and is continuing for eight
consecutive Interest Periods (the "NON-PERFORMING PERIOD") (regardless of
whether any proceeds from the sale of any Collateral are distributed by the
Trustee during such Non-Performing Period) or (b) if applicable, the
Relevant Date (the "NON-PERFORMANCE PAYMENT DATE") any shortfall in the
amounts available to the Trustee, after giving effect to the subordination
provisions of Section 3.2 of the Agreement, the application of any drawing
paid under the Liquidity Facility in respect of interest due on the Notes
on such Non-Performance Payment Date and any withdrawal from the Cash
Collateral Account in respect of interest due on the Notes on such
Non-Performance Payment Date in accordance with the Agreement, required to
pay in full the Outstanding Amount as of such Non-Performance Payment Date;
PROVIDED, HOWEVER, if the Non-Performance Payment Date is scheduled to
occur before the Final Scheduled Payment Date and if MBIA shall have duly
given a Policy Provider Election (as defined below) at the end of such
Non-Performing Period and at least ten (10) days prior to such
Non-Performance Payment Date, the Deficiency Amount shall be an amount
equal to (A) with respect to such Non-Performance Payment Date, the accrued
but unpaid interest on the Notes at the Debt Rate (after giving effect to
the application of any drawing paid under the Liquidity Facility and any
withdrawal from the Cash Collateral Account, attributable to such interest
on the Notes) and (B) thereafter, on each Distribution Date following such
Non-Performance Payment Date as to which a Policy Provider Election has
been given, and prior to the establishment of an Election Distribution Date
or a Distribution Date pursuant to the immediately succeeding clause (iv),
an amount equal to the scheduled principal (on the Final Scheduled Payment
Date) and interest (without regard to any Acceleration) payable on the
Notes on the related payment date;
(iv) following the giving of any Policy Provider Election, with
respect to any Business Day elected by MBIA upon twenty (20) days prior
notice (which shall be a Distribution Date) and upon request by MBIA to the
Trustee to make a drawing under this Policy, an amount equal to the
Outstanding Amount as of such Distribution Date;
(v) with respect to any Distribution Date which is an Election
Distribution Date, an amount equal to the Outstanding Amount as of such
Election Distribution Date;
(vi) with respect to the Final Legal Maturity Date, any shortfalls in
amounts available to the Trustee after giving effect to the subordination
provisions of the Agreement and to the application of any drawing paid
under the Liquidity Facility in respect of interest included in the
Outstanding Amount and any withdrawal from the Cash Collateral Account in
respect of interest included in the Outstanding Amount in accordance with
the Agreement, for the payment in full of the Outstanding Amount
(calculated as of such date) on the Notes; and
(vii) with respect to any Distribution Date elected by the Trustee on
behalf of the Liquidity Provider upon twenty (20) days prior notice (which
notice can be given in advance of the expiry of such twenty-four-month
period) to MBIA that is a Business Day which is no earlier than twenty-four
(24) months from the earliest to occur of (1) the date on which an Interest
Drawing was made under the Liquidity Facility and remains unreimbursed from
payments made by Continental at the end of such twenty-four-month period,
(2) the date on which any Downgrade Drawing, Non-Extension Drawing or Final
Drawing that was deposited into the Cash Collateral Account has been
applied to pay any scheduled payment of interest for the Notes (each amount
so applied, an "APPLIED DOWNGRADE ADVANCE", "APPLIED NON-EXTENSION ADVANCE"
or "APPLIED FINAL ADVANCE", respectively, and together, an "APPLIED
PROVIDER ADVANCE") and is not reimbursed from payments made by Continental
at the end of such twenty-four-month period and (3) the date on which all
of the Notes have been accelerated and remain unpaid by Continental at the
end of such twenty-four-month period (in each case, disregarding any
reimbursements from payments by the Policy Provider and from proceeds from
the sale of the Spare Parts Collateral distributed by the Trustee during
such twenty-four-month period), the amount of all outstanding Drawings PLUS
accrued interest thereon (as determined pursuant to the Liquidity
Facility).
For the avoidance of doubt, no Deficiency Amount described in clauses
(i)-(vii) above or payment to be made in respect of an Avoided Payment described
below shall constitute an Accelerated or Acceleration payment.
If any amount paid or required to be paid in respect of the Insured
Obligation is voided (a "PREFERENCE EVENT") under any applicable bankruptcy,
insolvency, receivership or similar law in an Insolvency Proceeding, and, as a
result of such a Preference Event, the Beneficiary, the Liquidity Provider or
any Noteholder is required to return such voided payment, or any portion of such
voided payment made or to be made in respect of the Notes (including any
disgorgement from the Noteholders or the Liquidity Provider resulting from any
such Insolvency Proceeding, whether such disgorgement is determined on a theory
of preferential conveyance or otherwise) (an "AVOIDED PAYMENT"), MBIA will pay
an amount equal to each such Avoided Payment, irrevocably, absolutely and
unconditionally and without the assertion of any defenses to payment, including
fraud in inducement or fact or any other circumstances that would have the
effect of discharging a surety in law or in equity, upon receipt by MBIA from
the Beneficiary, the Liquidity Provider or such Noteholder of (x) a certified
copy of a final (non-appealable) order of a court exercising jurisdiction in
such Insolvency Proceeding to the effect that the Beneficiary, the Liquidity
Provider or such Noteholder is required to return any such payment or portion
thereof because such payment was voided under applicable law, with respect to
which order the appeal period has expired without an appeal having been filed
(the "FINAL ORDER"), (y) an assignment, in the form of EXHIBIT D hereto,
irrevocably assigning to MBIA all rights and claims of the Beneficiary, the
Liquidity Provider or such Noteholder relating to or arising under such Avoided
Payment and (z) a Notice of Avoided Payment in the form of EXHIBIT B hereto
appropriately completed and executed by the Beneficiary, the Liquidity Provider
or such Noteholder. Such payment shall be disbursed to the receiver,
conservator, debtor-in-possession or trustee in bankruptcy named in the Final
Order and not to the Beneficiary, the Liquidity Provider or such Noteholder
directly unless such Beneficiary, the Liquidity Provider or Noteholder has
returned such payment to such receiver, conservator, debtor-in-possession or
trustee in bankruptcy, in which case such payment shall be disbursed to such
Noteholder, Liquidity Provider or the Beneficiary, as the case may be.
Notwithstanding the foregoing, in no event shall MBIA be obligated to
make any payment in respect of any Avoided Payment, which payment represents a
payment of the principal amount of the Notes, prior to the time MBIA would have
been required to make a payment in respect of such principal pursuant to
sub-paragraphs (ii)-(vi) of the definition of Deficiency Amount in this Policy;
PROVIDED, FURTHER, that no payment of principal under this Policy on any
Distribution Date, other than with respect to an Avoided Payment, shall exceed
the Net Principal Policy Amount (as defined below) for such Distribution Date;
PROVIDED, FURTHER, that no payment, other than with respect to an Avoided
Payment, of a Deficiency Amount (not including any payment of accrued interest
on the outstanding Advances of the Liquidity Provider pursuant to sub-paragraph
(vii) under this Policy) shall be in excess of the then outstanding principal
balance of the Notes and accrued and unpaid interest thereon at the Debt Rate
(calculated assuming that Continental will not cure the Default in the payment
of interest). This Policy does not cover (i) any premium, break amount,
prepayment penalty or other accelerated payment, which at any time may become
due on or with respect to any Note, (ii) shortfalls, if any, attributable to the
liability of the Trustee, for withholding taxes, if any (including interest and
penalties in respect of any such liability) or (iii) any failure of the Trustee
to make any payment due to the Noteholders.
Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to them in the Indenture (the "AGREEMENT"), dated as
of December 6, 2002, among MBIA, as Policy Provider, Continental, Morgan Stanley
Capital Services Inc., as Liquidity Provider, and the Trustee, without regard to
any amendment or supplement thereto unless such amendment or supplement has been
executed, or otherwise approved in writing, by MBIA.
"BUSINESS DAY" shall mean any day other than a Saturday, a Sunday or
other day on which insurance companies in New York, New York or commercial
banking institutions in the cities in which the corporate trust office of the
Trustee, the Fiscal Agent (as defined herein) or the office of MBIA specified in
this Policy are located are authorized or obligated by law or executive order to
close.
"CONTINENTAL" means Continental Airlines, Inc.
"ELECTION DISTRIBUTION DATE" shall mean any Distribution Date
established by the Trustee upon 20 days' notice to the Policy Provider by reason
of the occurrence and continuation of a Policy Provider Default occurring after
a Policy Provider Election.
"FINAL LEGAL MATURITY DATE" shall mean December 6, 2009.
"INSOLVENCY PROCEEDING" means the commencement, after the date hereof,
of any bankruptcy, insolvency, readjustment of debt, reorganization, marshalling
of assets and liabilities or similar proceedings by or against Continental or
any Liquidity Provider and the commencement, after the date hereof, of any
proceedings by Continental or any Liquidity Provider for the winding up or
liquidation of its affairs or the consent, after the date hereof, to the
appointment of a trustee, conservator, receiver, or liquidator in any
bankruptcy, insolvency, readjustment of debt, reorganization, marshalling of
assets and liabilities or similar proceedings of or relating to Continental or
any Liquidity Provider.
"INSURANCE AGREEMENT" shall mean the Insurance and Indemnity Agreement
(as may be amended, modified or supplemented from time to time), dated as of
December 6, 2002 by and among MBIA, Continental and the Trustee.
"INSURED AMOUNTS" shall mean, with respect to any Distribution Date,
the Deficiency Amount for such Distribution Date.
"NET PRINCIPAL POLICY AMOUNT" shall mean the aggregate principal
balance of the Notes as of the Closing Date MINUS all amounts previously drawn
on this Policy with respect to principal.
"NONPAYMENT" shall mean, with respect to any Distribution Date, a
Deficiency Amount owing to the Trustee for distribution to the Noteholders or
the Liquidity Provider.
"NOTEHOLDER" shall mean any person who is the registered owner or
beneficial owner of any of the Notes and who, on the applicable Distribution
Date, is entitled under the terms of the Notes to payment thereunder.
"NOTICE OF AVOIDED PAYMENT" shall mean the notice, substantially in
the form of EXHIBIT B hereto, delivered pursuant to this Policy and sent to the
contact person at the address and/or fax number set forth in this Policy, and
specifying the Avoided Payment which shall be due and owing on the applicable
Distribution Date.
"NOTICE OF NONPAYMENT" shall mean the notice, substantially in the
form of EXHIBIT A hereto, delivered pursuant to this Policy and sent to the
contact person at the address and/or fax numbers set forth in this Policy
specifying the Insured Amount which shall be due and owing to the Trustee for
distribution to the Noteholders or, in the case of a Deficiency Amount under
clause (vii) of the definition of "Deficiency Amount", the Liquidity Provider on
the applicable Distribution Date.
"POLICY PROVIDER ELECTION" shall mean a notice given by MBIA when no
Policy Provider Default shall have occurred and be continuing, stating that MBIA
elects to make payments of Deficiency Amounts as defined under the proviso to
clause (iii) of the definition of Deficiency Amount in lieu of applying clause
(iii) (without the proviso) of the definition of Deficiency Amount, which notice
shall be given to the Trustee not less than ten (10) days prior to the
Distribution Date established for payment of a Deficiency Amount under clause
(iii) of the definition thereof.
Payment of amounts hereunder shall be made in immediately available
funds (x) with respect to Deficiency Amounts no later than 3:00 p.m., New York
City time, on the later of (a) the relevant Distribution Date and (b) the
Business Day of presentation to Wilmington Trust Company, as fiscal agent for
MBIA or any successor fiscal agent appointed by MBIA (the "FISCAL AGENT"), of a
Notice of Nonpayment, appropriately completed and executed by the Beneficiary
(if such Notice of Nonpayment is received by 1:00 p.m. on such day), and (y)
with respect to Avoided Payments, prior to 3:00 p.m. New York City time (i) in
the case of any Noteholder, on the third Business Day following MBIA's receipt
of the documents required under clauses (x) through (z) of the third paragraph
of this Policy and (ii) in the case of the Liquidity Provider, on the
Distribution Date determined as provided above and PROVIDED that MBIA has
received such documents as referred to in (i) above at least three Business Days
prior to such Distribution Date. Any such documents received by MBIA after 1:00
p.m. New York City time on any Business Day or on any day that is not a Business
Day shall be deemed to have been received by MBIA prior to 1:00 p.m. on the next
succeeding Business Day. All payments made by MBIA hereunder in respect of
Avoided Payments will be made with MBIA's own funds. A Notice of Nonpayment or
Notice of Avoided Payment under this Policy may be presented to the Fiscal Agent
on any Business Day by (a) delivery of the original Notice of Nonpayment or
Notice of Avoided Payment to the Fiscal Agent at its address set forth below, or
(b) facsimile transmission of the original Notice of Nonpayment or Notice of
Avoided Payment to the Fiscal Agent at its facsimile number set forth below. If
presentation is made by facsimile transmission, the Beneficiary shall (i)
simultaneously confirm transmission by telephone to the Fiscal Agent at its
telephone number set forth below, and (ii) as soon as reasonably practicable,
deliver the original Notice of Nonpayment or Notice of Avoided Payment to the
Fiscal Agent at its address set forth below. Each Notice of Nonpayment or Notice
of Avoided Payment shall be delivered by facsimile and mail to MBIA
simultaneously with its delivery to the Fiscal Agent.
If any Notice of Nonpayment or Notice of Avoided Payment received by
the Fiscal Agent is not in proper form or is otherwise insufficient for the
purpose of making a claim hereunder, it shall be deemed not to have been
received by the Fiscal Agent, and MBIA or the Fiscal Agent, as the case may be,
shall promptly so advise the Beneficiary, and the Beneficiary may submit an
amended Notice of Nonpayment or Notice of Avoided Payment, as the case may be.
Payments due hereunder unless otherwise stated herein will be
disbursed by the Fiscal Agent to the Trustee for the benefit of the Noteholders
or the Liquidity Provider by wire transfer of immediately available funds in the
amount of such payment. Other than amounts payable in respect of Avoided
Payments, MBIA's obligations under this Policy shall be discharged to the extent
funds to be applied to pay the Insured Obligations under and in accordance with
the Indenture are received by the Trustee (including funds disbursed by MBIA as
provided in this Policy and received by the Trustee) whether or not such funds
are properly applied by the Trustee. MBIA's obligations to make payments in
respect of any Avoided Payments shall be discharged to the extent such payments
are made by MBIA hereunder and are received by the Trustee, the applicable
Noteholder, the Liquidity Provider or the receiver, conservator,
debtor-in-possession or trustee in bankruptcy as applicable, whether or not such
payments are properly applied by the Trustee.
The Fiscal Agent is the agent of MBIA only, and the Fiscal Agent shall
in no event be liable to Noteholders for any acts of the Fiscal Agent or any
failure of MBIA to deposit or cause to be deposited sufficient funds to make
payments due under this Policy.
Any notice hereunder delivered to the Fiscal Agent or MBIA may be made
at the address listed below for the Fiscal Agent or MBIA or such other address
as MBIA shall specify in writing to the Trustee.
The notice address of the Fiscal Agent is Rodney Square North, 1100
North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration, Facsimile: (302) 636-4140, Telephone: (302) 651-1000.
All notices, presentations, transmissions, deliveries and
communications made by the Beneficiary to MBIA with respect to this Policy shall
specifically refer to the number of this Policy and shall be made to MBIA at:
MBIA Insurance Corporation
113 King Street
Armonk, NY 10504
Attention: Insured Portfolio Management,
Structured Finance
Telephone: (914) 273-4949
Facsimile: (914) 765-3163
or such other address, telephone number or facsimile number as MBIA may
designate to the Beneficiary in writing from time to time. Each such notice,
presentation, transmission, delivery and communication shall be effective only
upon actual receipt by MBIA.
To the extent and in the manner specified in the Indenture, MBIA shall
be subrogated to the rights of each Noteholder and the Liquidity Provider, as
the case may be, to receive payments under the Notes to the extent of any
payment made by it hereunder.
This Policy is neither transferable nor assignable, in whole or in
part, except to a successor Trustee duly appointed and qualified under the
Agreement. Such transfer and assignment shall be effective upon receipt by MBIA
of a copy of the instrument effecting such transfer and assignment signed by the
transferor and by the transferee, and a certificate, properly completed and
signed by the transferor and the transferee, in the form of EXHIBIT C hereto
(which shall be conclusive evidence of such transfer and assignment), and, in
such case, the transferee instead of the transferor shall, without the necessity
of further action, be entitled to all the benefits of and rights under this
Policy in the transferor's place, PROVIDED THAT, in such case, the Notice of
Nonpayment presented hereunder shall be a certificate of the transferee and
shall be signed by one who states therein that he is a duly authorized officer
of the transferee.
There shall be no acceleration payment due under this Policy unless
such acceleration is at the sole option of MBIA, in accordance with the
definition of Deficiency Amount in this Policy.
This Policy shall terminate and the obligations of MBIA hereunder
shall be discharged on the day (the "TERMINATION DATE") which is one year and
one day following the Distribution Date upon which the Outstanding Amount of the
Notes is paid in full. The foregoing notwithstanding, if an Insolvency
Proceeding is existing during the one year and one day period set forth above,
then this Policy and MBIA's obligations hereunder shall terminate on the later
of (i) the date of the conclusion or dismissal of such Insolvency Proceeding
without continuing jurisdiction by the court in such Insolvency Proceeding, and
(ii) the date on which MBIA has made all payments required to be made under the
terms of this Policy in respect of Avoided Payments.
This Policy is not covered by the property/casualty insurance fund
specified in Article Seventy-Six of the New York State insurance law.
This Policy sets forth in full the undertaking of MBIA, and, except as
expressly provided in the Insurance Agreement and the Agreement, shall not be
modified, altered or affected by any other agreement or instrument, including
any modification or amendment to any other agreement or instrument, or by the
merger, consolidation or dissolution of Continental or any other Person and may
not be canceled or revoked by MBIA prior to the time it is terminated in
accordance with the express terms hereof. The Premium on this Policy is not
refundable for any reason.
This Policy shall be returned to MBIA upon termination.
THIS POLICY SHALL BE CONSTRUED, AND THE OBLIGATIONS, RIGHTS AND
REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED, IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES OR
THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.
IN WITNESS WHEREOF, MBIA has caused this Policy to be duly executed on
the date first written above.
MBIA INSURANCE CORPORATION
--------------------------------
President
--------------------------------
Assistant Secretary
EXHIBIT A TO POLICY NUMBER 39753
NOTICE OF NONPAYMENT AND DEMAND
FOR PAYMENT OF INSURED AMOUNTS
Date: [____________]
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management,
Structured Finance
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Reference is made to Policy No. 39753, dated December 6, 2002
(the "POLICY"), issued by MBIA Insurance Corporation ("MBIA") with respect to
the $200,000,000 Continental Airlines Floating Rate Secured Notes due 2007.
Terms capitalized herein and not otherwise defined shall have the meanings
ascribed to such terms in or pursuant to the Policy unless the context otherwise
requires.
The Trustee hereby certifies as follows:
1. The Trustee is the trustee under the Agreement.
2. The relevant Distribution Date is [__________]. Such
Distribution Date is a [Scheduled Payment Date, a Non-Performance Payment
Date, an Election Distribution Date or the Final Legal Maturity Date].
[3. Payment of accrued and unpaid interest on the Notes at the Debt
Rate on the outstanding principal balance of the Notes accrued to such
Distribution Date which is a Scheduled Payment Date as determined pursuant to
paragraph (i) of the definition of "Deficiency Amount" in the Policy is an
amount equal to $____________.]
[3. The amount determined for payment to the Noteholders pursuant to
paragraph (ii) of the definition of "Deficiency Amount" in the Policy on such
Distribution Date in respect of the outstanding principal balance of such Notes
and accrued and unpaid interest at the Debt Rate for the Notes is
$____________.]
[3. The Trustee has not received a timely Policy Provider Election
pursuant to the Policy and the amount determined for payment to the Noteholders
pursuant to paragraph (iii) of the definition of "Deficiency Amount" in the
Policy on the Distribution Date which is a Non-Performance Payment Date in
respect of the outstanding principal balance of the Notes and accrued and unpaid
interest accrued thereon at the Debt Rate for the Notes is $________.]
[3. The Trustee has received a timely Policy Provider Election
pursuant to the Policy and the amount determined for payment to the Noteholders
pursuant to the provision in paragraph (iii)(A) of the definition of "Deficiency
Amount" in the Policy on the Distribution Date which is a Non-Performance
Payment Date in respect of accrued interest at the Debt Rate for the Notes
payable but not paid on the Notes is $_________.]
[3. The Trustee has received a timely Policy Provider Election
pursuant to the Policy, no Election Distribution Date has been established
pursuant to the Policy, no Distribution Date has been established pursuant to
clause (iv) of the definition of "Deficiency Amount" and the amount determined
for payment to the Noteholders pursuant to paragraph (iii)(B) of the definition
of "Deficiency Amount" in the Policy on the Distribution Date which is a
Scheduled Payment Date in respect of scheduled interest (without regard to any
Acceleration thereof) payable at the Debt Rate for the Notes due on such
Distribution Date on the Notes is $____________] [and on the Distribution Date
which is the Final Scheduled Payment Date in respect of scheduled principal
payable on the Notes on such Distribution Date is $_____________].]
[3. The Trustee has received a timely Policy Provider Election
pursuant to the Policy, the Distribution Date related hereto is a Business Day
elected by MBIA upon 20 days prior notice and the amount determined for payment
to the Noteholders pursuant to paragraph (iv) of the definition of "Deficiency
Amount" in the Policy in respect of outstanding principal on the Notes and
accrued and unpaid interest thereon at the Debt Rate is $__________.]
[3. The amount determined for payment to the Noteholders pursuant to
paragraph (v) of the definition of "Deficiency Amount" in the Policy on the
Distribution Date which is an Election Distribution Date in respect of the
outstanding principal balance of the Notes and accrued and unpaid interest
thereon at the Debt Rate for the Notes as of such Election Distribution Date is
$___________.]
[3. The amount determined for payment to the Noteholders pursuant to
paragraph (vi) of the definition of "Deficiency Amount" in the Policy on the
Distribution Date which is the Final Legal Maturity Date in respect of payment
in full of the Outstanding Amount of the Notes is $__________.]
[3. The amount determined for payment to the Liquidity Provider
pursuant to paragraph (vii) of the definition of "Deficiency Amount" in the
Policy on the Distribution Date elected by the Trustee on behalf of the
Liquidity Provider upon twenty (20) days prior notice to MBIA is $___________.]
4. The sum of $_________________ is the Insured Amount that is due.
5. The Trustee has not heretofore made a demand for the Insured Amount
in respect of such Distribution Date.
6. The Trustee hereby requests payment of such Insured Amount that is
due for payment be made by MBIA under the Policy and directs that payment under
the Policy be made to the following account by bank wire transfer of federal or
other immediately available funds in accordance with the terms of the Policy to:
[_____]
ABA #: [_____]
Acct #: [_____]
FBO: [_____]
[Policy Account number]
7. The Trustee hereby agrees that, following receipt of the Insured
Amount from MBIA, it shall (a) cause such funds to be deposited in the Policy
Account and not permit such funds to be held in any other account, (b) cause
such funds paid by MBIA pursuant to paragraphs (i) through (vi) of the Policy to
be paid to the Trustee for distribution to the Noteholders in payment of
interest on, or principal of, the Notes (as applicable) and not apply such funds
for any other purpose, (c) cause such funds paid by MBIA pursuant to paragraph
(vii) of the Policy to be paid to the Liquidity Provider for reimbursement of
payments made by the Liquidity Provider with respect to the Notes and (d)
maintain an accurate record of such payments with respect to the Notes and the
corresponding claim on the Policy and proceeds thereof.
WILMINGTON TRUST COMPANY,
as Trustee
By:
-----------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
EXHIBIT B TO POLICY NUMBER 39753
NOTICE OF AVOIDED PAYMENT AND DEMAND
FOR PAYMENT OF AVOIDED PAYMENTS
Date: [____________]
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management,
Structured Finance
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
Reference is made to Policy No. 39753, dated December 6, 2002 (the
"POLICY"), issued by MBIA Insurance Corporation ("MBIA") with respect to the
$200,000,000 Continental Airlines Floating Rate Secured Notes due 2007. Terms
capitalized herein and not otherwise defined shall have the meanings ascribed to
such terms in or pursuant to the Policy unless the context otherwise requires.
The [Noteholder/Trustee/Liquidity Provider] hereby certifies as
follows:
1. The Trustee is the trustee under the Agreement.
[2. The Trustee has established ______________ as a Distribution Date
pursuant to the Agreement for amounts claimed hereunder.]
3. A Final Order providing for the recovery of an Avoided Payment of
$________________ has been issued.
4. $_________________ of the amount set forth in item No. 3 above has
been paid by the [Noteholder/Trustee/Liquidity Provider] and $_________________
is required to be paid to the receiver, conservator, debtor-in-possession or
trustee in bankruptcy named in the Final Order.
5. The [Noteholder/Trustee/Liquidity Provider] has not heretofore made
a demand for such Avoided Payment.
6. The [Noteholder/Trustee/Liquidity Provider] has delivered to MBIA
or has attached hereto all documents required by the Policy to be delivered in
connection with such Avoided Payment.
[7. The [Noteholder/Trustee] hereby requests that payment of
$______________ of such Avoided Payment be made to the receiver, conservator,
debtor-in-possession or trustee in bankruptcy named in the Final Order and
$________________ of such Avoided Payment be paid to the [Noteholder] [Trustee
for distribution to the Noteholder], in each case, by MBIA under the Policy and
directs that payment under the Policy be made to the following account by bank
wire transfer of federal or other immediately available funds in accordance with
the terms of the Policy to:
For the portion to be paid to the receiver, conservator,
debtor-in-possession or trustee, to ________________:
ABA #: [_____]
Acct #: [_____]
FBO: [_____]
[relevant account number]
For the portion to be paid to the [Noteholder/Trustee]:
ABA #: [_____]
Acct #: [_____]
FBO: [_____]
[Policy Account Number]]
[7. The Liquidity Provider hereby requests that payment of $____________
of such Avoided Payment be made to the Liquidity Provider by MBIA
under the Policy and directs that payment under the Policy be made to
the following account by bank wire transfer of federal or other
immediately available funds in accordance with the terms of the Policy
to:
[____________]:
ABA # [ ]
Acct # [ ]
FBO: [ ]
[relevant account number]]
[Name of Trustee]
By:
----------------------------------
Name:
Title: (Officer)
EXHIBIT C TO POLICY NUMBER 39753
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management, Structured Finance
Dear Sirs:
Reference is made to that certain Policy, Number 39753, dated December
6, 2002 (the "POLICY"), which has been issued by MBIA Insurance Corporation in
favor of the Trustee with respect to the $200,000,000 Continental Airlines
Floating Rate Secured Notes due 2007.
The undersigned [Name of Transferor] has transferred and assigned (and
hereby confirms to you said transfer and assignment) all of its rights in and
under said Policy to [Name of Transferee] and confirms that [Name of Transferor]
no longer has any rights under or interest in said Policy.
Transferor and Transferee have indicated on the face of said Policy
that it has been transferred and assigned to Transferee.
Transferee hereby certifies that it is a duly authorized transferee
under the terms of said Policy and is accordingly entitled, upon presentation of
the document(s) called for therein, to receive payment thereunder.
--------------------------------
[Name of Transferor]
By:
---------------------------
[Name and Title of Authorized
Officer of Transferor]
EXHIBIT D TO POLICY NUMBER 39753
FORM OF ASSIGNMENT
Reference is made to that certain Policy No. 39753, dated December 6,
2002 (the "POLICY"), issued by MBIA Insurance Corporation ("MBIA") relating to
the $200,000,000 Continental Airlines Floating Rate Secured Notes due 2007.
Unless otherwise defined herein, capitalized terms used in this Assignment shall
have the meanings assigned thereto in the Policy as incorporated by reference
therein. In connection with the Avoided Payment of [$_________] paid by the
undersigned (the "[NOTEHOLDER/BENEFICIARY/Liquidity Provider]") on [______] and
the payment by MBIA in respect of such Avoided Payment pursuant to the Policy,
the [Noteholder/Beneficiary/Liquidity Provider] hereby irrevocably and
unconditionally, without recourse, representation or warranty (except as
provided below), sells, assigns, transfers, conveys and delivers to MBIA all of
such [Noteholder's/Beneficiary's/Liquidity Provider's] rights, title and
interest in and to any rights or claims, whether accrued, contingent or
otherwise, which the [Noteholder/Beneficiary/Liquidity Provider] now has or may
hereafter acquire, against any person relating to, arising out of or in
connection with such Avoided Payment. The [Noteholder/Beneficiary/Liquidity
Provider] represents and warrants that such claims and rights are free and clear
of any lien or encumbrance created or incurred by such
[Noteholder/Beneficiary/Liquidity Provider].
[Noteholder/Beneficiary/Liquidity Provider]
WILMINGTON TRUST COMPANY,
as Trustee
By:
-----------------------------------
Name:
Title:
- --------
In the event that the terms of this form of assignment are reasonably determined
to be insufficient solely as a result of a change of law or applicable rules
after the date of the Policy to fully vest all of the
[Noteholder's/Beneficiary's/Liquidity Provider's] right, title and interest in
such rights and claims, the [Noteholder/Beneficiary/Liquidity Provider] and MBIA
shall agree on such other form as is reasonably necessary to effect such
assignment, which assignment shall be without recourse, representation or
warranty except as provided above.
================================================================================
Exchange and Registration Rights Agreement
Dated as of December 6, 2002
between
Continental Airlines, Inc.
and
Morgan Stanley & Co. Incorporated.
Continental Airlines
Floating Rate Secured Notes due 2007
================================================================================
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
THIS EXCHANGE AND REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is
made and entered into as of December 6, 2002, between Continental Airlines,
Inc., a Delaware corporation (the "COMPANY") and Morgan Stanley & Co.
Incorporated (the "INITIAL PURCHASER").
This Agreement is made pursuant to the Purchase Agreement dated
December 2, 2002 between the Company and the Initial Purchaser (the "PURCHASE
AGREEMENT"), which provides that the Company will issue and sell an aggregate of
$200,000,000 principal amount of Floating Rate Secured Notes due 2007 (the
"INITIAL SECURITIES"). In order to induce the Initial Purchaser to enter into
the Purchase Agreement, the Company has agreed to provide to the Initial
Purchaser and its successors, assigns and direct and indirect transferees the
exchange and registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the closing under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. DEFINITIONS. The definitions set forth in this Agreement shall
apply equally to both singular and plural forms of the terms defined. As used in
this Agreement, the following capitalized defined terms shall have the following
meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"AGREEMENT" shall have the meaning set forth in the preamble of this
Agreement.
"BUSINESS DAY" shall mean any day on which the New York Stock
Exchange, Inc. is open for trading and banks in The City of New York are
open for business; references to "day" shall mean a calendar day.
"CLOSING DATE" shall mean the Closing Date as defined in the Purchase
Agreement.
"COMPANY" shall have the meaning set forth in the preamble of this
Agreement and shall include the Company's successors.
"DTC" shall mean the Depository Trust Company or any other depositary
appointed by the Company; PROVIDED, HOWEVER, that any such depositary must
have an address in the Borough of Manhattan, in The City of New York.
"EXCHANGE OFFER" shall mean the exchange offer by the Company of
Exchange Securities for Registrable Securities pursuant to Section 2(a)
hereof.
"EXCHANGE OFFER REGISTRATION" shall mean a registration under the 1933
Act effected pursuant to Section 2(a) hereof.
"EXCHANGE OFFER REGISTRATION STATEMENT" shall mean a Registration
Statement on Form S-4 (or, if applicable, on another appropriate form)
filed with the SEC pursuant to Section 2(a) hereof, and all amendments and
supplements to such Registration Statement, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"EXCHANGE SECURITIES" shall mean the securities issued under the
Indenture and otherwise containing terms identical in all material respects
to the Initial Securities (except that, with respect to the Exchange
Securities, (i) interest thereon shall accrue as set forth in Section 2(a)
hereof, (ii) the transfer restrictions thereon shall be eliminated, (iii)
certain provisions relating to an increase in the stated rate of interest
thereon shall be eliminated and (iv) such Exchange Securities shall
initially be available only in book-entry form) to be offered to Holders of
Initial Securities in exchange for Initial Securities pursuant to the
Exchange Offer.
"HOLDER INFORMATION" shall have the meaning set forth in Section 5(a)
of this Agreement.
"HOLDERS" shall mean the Initial Purchaser, for so long as it owns any
Registrable Securities, and its successors, assigns and direct and indirect
transferees who become registered owners of Registrable Securities under
the Indenture; PROVIDED that for purposes of Section 5 hereof, the term
"Holder" shall include Participating Broker-Dealers.
"INDENTURE" shall mean the Indenture entered into as of December 6,
2002, among (i) the Company, (ii) the Trustee, (iii) the Liquidity Provider
and (iv) the Policy Provider under which the Initial Securities are issued,
as amended from time to time in accordance with the provisions thereof.
"INITIAL PURCHASER" shall have the meaning set forth in the preamble
of this Agreement.
"INITIAL SECURITIES" shall have the meaning set forth in the preamble
of this Agreement.
"LIQUIDITY PROVIDER" shall have the meaning set forth in the
Indenture.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities; PROVIDED
that whenever the consent or approval of Holders of a specified percentage
of Registrable Securities is required hereunder, Registrable Securities
held by the Company or any of its "affiliates" (as such term is defined in
Rule 405 under the 1933 Act) (other than the Initial Purchaser or
subsequent holders of Registrable Securities if such subsequent holders are
deemed to be affiliates solely by reason of their holding of such
Registrable Securities) shall be disregarded in determining whether such
consent or approval was given by the Holders of such required percentage or
amount.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"PARTICIPATING BROKER-DEALER" shall have the meaning set forth in
Section 3(f) hereof.
"PERSON" shall mean an individual, partnership, limited liability
company, corporation, trust or unincorporated organization, or a government
or agency or political subdivision thereof.
"POLICY PROVIDER" shall have the meaning set forth in the Indenture.
"POLICY PROVIDER INFORMATION" shall have the meaning set forth in the
Indemnification Agreement.
"PROSPECTUS" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"PURCHASE AGREEMENT" shall have the meaning set forth in the preamble
of this Agreement.
"REGISTRABLE SECURITIES" shall mean the Initial Securities; PROVIDED,
HOWEVER, that the Initial Securities shall cease to be Registrable
Securities when (i) a Shelf Registration Statement with respect to such
Initial Securities shall have been declared effective under the 1933 Act
and such Initial Securities shall have been disposed of pursuant to such
Shelf Registration Statement, (ii) such Initial Securities shall have been
sold to the public pursuant to Rule 144 (or any similar provision then in
force, but not Rule 144A) under the 1933 Act or may then be sold to the
public pursuant to paragraph (k) of said Rule 144 (or any similar provision
then in force) by Holders other than "affiliates" or former "affiliates"
(as such term is defined in paragraph (a) of Rule 144) of the Company,
(iii) such Initial Securities shall have ceased to be outstanding or (iv)
such Initial Securities have been exchanged for Exchange Securities upon
consummation of the Exchange Offer.
"REGISTRATION DEFAULT" shall have the meaning set forth in Section
2(b) hereof.
"REGISTRATION EVENT" shall mean the declaration of the effectiveness
by the SEC of an Exchange Offer Registration Statement or a Shelf
Registration Statement.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or NASD registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state or other securities or blue sky laws and compliance
with the rules of the NASD (including reasonable fees and disbursements of
counsel for any underwriters or Holders in connection with state or other
securities or blue sky qualification of any of the Exchange Securities or
Registrable Securities), (iii) all expenses of any Persons in preparing or
assisting in preparing, word processing, printing and distributing any
Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this
Agreement, (iv) all rating agency fees, (v) all fees and expenses incurred
in connection with the listing, if any, of any of the Registrable
Securities on any securities exchange or exchanges, (vi) all fees and
disbursements relating to the qualification of the Indenture under
applicable securities laws, (vii) the fees and disbursements of counsel for
the Company and of the independent public accountants of the Company,
including the expenses of any special audits or "cold comfort" letters
required by or incident to such performance and compliance, (viii) the fees
and expenses of the Trustee, including its counsel, and any custodian, and
(ix) any reasonable fees and disbursements of the underwriters, if any, and
the reasonable fees and expenses of any special experts retained by the
Company in connection with any Registration Statement, in each case as are
customarily required to be paid by issuers or sellers of securities, but
excluding fees of counsel to the underwriters or the Holders and
underwriting discounts and commissions and transfer taxes, if any relating
to the sale or disposition of Registrable Securities by a Holder.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company which covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement, and all amendments
and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission, as from time
to time constituted or created under the 1934 Act, or, if at any time after
the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body
performing such duties on such date.
"SHELF REGISTRATION" shall mean a registration under the 1933 Act
effected pursuant to Section 2(b) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) hereof
which covers some or all of the Registrable Securities on an appropriate
form under Rule 415 under the 1933 Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"STAFF" shall mean the Staff of the Division of Corporation Finance of
the SEC.
"TIA" shall have the meaning set forth in Section 3(l) hereof.
"TRUSTEE" shall mean the trustee under the Indenture.
"UPDATED POLICY PROVIDER INFORMATION" shall mean the Policy Provider
Information as updated by the Company in accordance with the Policy
Provider's instructions, if any.
2. REGISTRATION UNDER THE 1933 ACT. (a) EXCHANGE OFFER REGISTRATION.
To the extent not prohibited by any applicable law or applicable interpretation
of the Staff, the Company shall use its best efforts (A) to file with the SEC
within 120 days after the Closing Date an Exchange Offer Registration Statement
covering the offer by the Company to the Holders to exchange all of the
Registrable Securities for Exchange Securities, (B) to cause such Exchange Offer
Registration Statement to be declared effective by the SEC within 180 days after
the Closing Date, (C) to cause such Registration Statement to remain effective
until the closing of the Exchange Offer and (D) to consummate the Exchange Offer
within 210 days after the Closing Date. Upon the effectiveness of the Exchange
Offer Registration Statement, the Company shall promptly commence the Exchange
Offer, it being the objective of such Exchange Offer to enable each Holder
(other than Participating Broker-Dealers) eligible and electing to exchange
Registrable Securities for Exchange Securities (assuming that such Holder is not
an affiliate of the Company within the meaning of Rule 405 under the 1933 Act,
acquires the Exchange Securities in the ordinary course of such Holder's
business and has no arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing the Exchange
Securities) to trade such Exchange Securities from and after their receipt
without any limitations or restrictions under the 1933 Act and without material
restrictions under the securities laws of a substantial proportion of the
several states of the United States.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days after the
date notice thereof is mailed to the Holders (or longer if required by
applicable law);
(iii) use the services of DTC for the Exchange Offer with respect to
Initial Securities evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Securities at any
time prior to the close of business, New York City time, on the last
Business Day on which the Exchange Offer shall remain open, by sending to
the institution specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Registrable Securities delivered for exchange, and a statement
that such Holder is withdrawing its election to have such Registrable
Securities exchanged;
(v) use its best efforts to ensure that (i) any Exchange Offer
Registration Statement and any amendment thereto and any Prospectus forming
part thereof and any supplement thereto complies in all material respects
with the 1933 Act and the rules and regulations thereunder, (ii) any
Exchange Offer Registration Statement and any amendment thereto does not,
when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading and (iii) any Prospectus
forming part of any Exchange Offer Registration Statement, and any
supplement to such Prospectus (as amended or supplemented from time to
time), does not include an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements, in the
light of the circumstances under which they were made, not misleading;
PROVIDED, HOWEVER, that in no such case shall the Company be responsible
for the Updated Policy Provider Information or Holder Information included
in the Exchange Offer Registration Statement, any Prospectus forming a part
thereof, or any amendment or supplement thereto, as the case may be; and
(vi) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the .
Company shall:
(i) accept for exchange Registrable Securities duly tendered and not
validly withdrawn pursuant to the Exchange Offer in accordance with the
terms of the Exchange Offer Registration Statement and the letter of
transmittal which is an exhibit thereto;
(ii) cancel or cause to be canceled all Registrable Securities so
accepted for exchange by the Company; and
(iii) promptly cause to be authenticated and delivered Exchange
Securities to each Holder of Registrable Securities equal in amount to the
Registrable Securities of such Holder so accepted for exchange.
Interest on each Exchange Security will accrue from the last date on
which interest was paid on the Registrable Securities surrendered in exchange
therefor or, if no interest has been paid on the Registrable Securities, from
the Closing Date. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer, or the making of any exchange by a Holder,
does not violate applicable law or any applicable interpretation of the Staff.
Each Holder of Registrable Securities (other than Participating Broker-Dealers)
who wishes to exchange such Registrable Securities for Exchange Securities in
the Exchange Offer shall represent that (i) it is not an "affiliate" of the
Company within the meaning of Rule 405 under the 1933 Act, (ii) any Exchange
Securities to be received by it were acquired in the ordinary course of business
and (iii) it has no arrangement with any Person to participate in the
distribution (within the meaning of the 1933 Act) of the Exchange Securities.
(b) SHELF REGISTRATION. (i) If, because of any change in law or
applicable interpretations thereof by the Staff, the Company is not permitted to
effect the Exchange Offer as contemplated by Section 2(a) hereof, or (ii) if for
any other reason the Exchange Offer Registration Statement is not declared
effective within 180 days after the Closing Date or the Exchange Offer is not
consummated within 210 days after the Closing Date (a "REGISTRATION DEFAULT"),
or (iii) if any Holder (other than the Initial Purchaser) is not eligible to
participate in the Exchange Offer or (iv) upon the request of the Initial
Purchaser (with respect to any Registrable Securities which it acquired directly
from the Company) following the consummation of the Exchange Offer if the
Initial Purchaser shall hold Registrable Securities which it acquired directly
from the Company and if the Initial Purchaser is not permitted, in the opinion
of counsel to the Initial Purchaser, pursuant to applicable law or applicable
interpretation of the Staff to participate in the Exchange Offer, the Company
shall, at its cost:
(A) as promptly as practicable, file with the SEC a Shelf Registration
Statement relating to the offer and sale of the Registrable Securities by
the Holders from time to time in accordance with the methods of
distribution elected by the Majority Holders of such Registrable Securities
and set forth in such Shelf Registration Statement, and use its best
efforts to cause such Shelf Registration Statement to be declared effective
by the SEC by the 180th day after the Closing Date (or promptly in the
event of a request by any Holder pursuant to clause (iii) above or the
Initial Purchaser pursuant to clause (iv) above). In the event that the
Company is required to file a Shelf Registration Statement upon the request
of any Holder (other than the Initial Purchaser) not eligible to
participate in the Exchange Offer pursuant to clause (iii) above or upon
the request of the Initial Purchaser pursuant to clause (iv) above, the
Company shall file and have declared effective by the SEC both an Exchange
Offer Registration Statement pursuant to Section 2(a) hereof with respect
to all Registrable Securities and a Shelf Registration Statement (which may
be a combined Registration Statement with the Exchange Offer Registration
Statement) with respect to offers and sales of Registrable Securities held
by such Holder or the Initial Purchaser after completion of the Exchange
Offer. If the Company files a Shelf Registration Statement pursuant to
Section 2(b)(i) or (ii) hereof, the Company will no longer be required to
effect the Exchange Offer;
(B) use its best efforts to keep the Shelf Registration Statement
continuously effective, in order to permit the Prospectus forming part
thereof to be usable by Holders, until the end of the period referred to in
Rule 144(k) (or one year from the Closing Date if such Shelf Registration
Statement is filed upon the request of the Initial Purchaser pursuant to
clause (iv) above) or such shorter period as shall end when all of the
Registrable Securities covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement; and
(C) notwithstanding any other provisions hereof, use its best efforts
to ensure that (i) any Shelf Registration Statement and any amendment
thereto and any Prospectus forming part thereof and any supplement thereto
complies in all material respects with the 1933 Act and the rules and
regulations thereunder, (ii) any Shelf Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading and (iii) any Prospectus forming part of any Shelf Registration
Statement, and any supplement to such Prospectus (as amended or
supplemented from time to time), does not include an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that in no such case shall the
Company be responsible for the Updated Policy Provider Information or
Holder Information included in the Shelf Offer Registration Statement, any
Prospectus forming a part thereof, or any amendment or supplement thereto,
as the case may be.
The Company further agrees, if necessary, to supplement or amend the
Shelf Registration Statement if reasonably requested by the Majority Holders
with respect to information relating to the Holders and otherwise as required by
Section 3(b) hereof, to use all reasonable efforts to cause any such amendment
to become effective and such Shelf Registration Statement to become usable as
soon as practicable thereafter and to furnish to the Holders of Registrable
Securities copies of any such supplement or amendment promptly after its being
used or filed with the SEC.
The Company shall be allowed a period of five days, beginning on the
first day a Registration Default occurs, to cure such Registration Default
before the Company will be required to comply with the requirements of Section
2(b) hereof.
(c) EXPENSES. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or 2(b) hereof and, in
the case of any Shelf Registration Statement, will reimburse the Holders or the
Initial Purchaser for the reasonable fees and disbursements of one firm or
counsel designated in writing by the Majority Holders to act as counsel for the
Holders of the Registrable Securities in connection therewith. Each Holder shall
pay all expenses of its counsel, other than as set forth in the preceding
sentence, underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
(d) EFFECTIVE REGISTRATION STATEMENT. (i) The Company will be deemed
not to have used its best efforts to cause the Exchange Offer Registration
Statement or the Shelf Registration Statement, as the case may be, to become, or
to remain, effective during the requisite period if the Company voluntarily
takes any action that would result in any such Registration Statement not being
declared effective or in the Holders of Registrable Securities covered thereby
not being able to exchange or offer and sell such Registrable Securities during
that period unless (A) such action is required by applicable law or (B) such
action is taken by the Company in good faith and for valid business reasons (not
including avoidance of the Company's obligations hereunder), including, without
limitation, the acquisition or divestiture of assets, so long as the Company
promptly complies with the requirements of Section 3(j) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to Section 2(a)
hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; PROVIDED, HOWEVER, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to a Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have been effective during the period of such
interference, until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume.
(e) INCREASE IN INTEREST RATE. In the event that no Registration Event
has occurred on or prior to the 210th day after the Closing Date, the interest
rate per annum payable in respect of the Initial Securities shall be increased
by 0.50%, effective from and including such 210th day to but excluding the
earlier of (i) the date on which a Registration Event occurs and (ii) the date
on which there cease to be any Registrable Securities. In the event that the
Shelf Registration Statement (if it is filed), after it is declared effective by
the SEC, ceases to be effective at any time during the period specified by
Section 2(b)(B) hereof for more than 60 days, whether or not consecutive, during
any 12-month period, the interest rate payable in respect of the Initial
Securities shall be increased by 0.50% per annum from the 61st day of the
applicable 12-month period such Shelf Registration Statement ceases to be
effective until such time as the Shelf Registration Statement again becomes
effective (or, if earlier, the end of the period specified by Section 2(b)(B)
hereof).
3. REGISTRATION PROCEDURES. In connection with the obligations of the
Company with respect to the Registration Statements pursuant to Sections 2(a)
and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement, within the
time period specified in Section 2 hereof, on the appropriate form under
the 1933 Act, which form (i) shall be selected by the Company, (ii) shall,
in the case of a Shelf Registration, be available for the sale of the
Registrable Securities by the selling Holders thereof and (iii) shall
comply as to form in all material respects with the requirements of the
applicable form;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary under
applicable law to keep such Registration Statement effective for the
applicable period; cause each Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule
424 under the 1933 Act;
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities when a Shelf Registration Statement with respect to
the Registrable Securities has been filed and advise such Holders that the
distribution of Registrable Securities will be made in accordance with the
method elected by the Majority Holders; (ii) furnish to each Holder of
Registrable Securities included within the coverage of the Shelf
Registration Statement at least one copy of such Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
reports, other documents and exhibits (including those incorporated by
reference) at the expense of the Company; (iii) furnish to each Holder of
Registrable Securities included within the coverage of the Shelf
Registration Statement, to counsel for the Holders and to each underwriter
of an underwritten offering of Registrable Securities, if any, without
charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto as such Holder or
underwriter may reasonably request in order to facilitate the public sale
or other disposition of the Registrable Securities; and (iv) subject to the
last paragraph of Section 3 hereof, consent to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Holders of
Registrable Securities included in the Shelf Registration Statement in
connection with the offering and sale of the Registrable Securities covered
by the Prospectus or any amendment or supplement thereto;
(d) use its best efforts to register or qualify the Registrable
Securities or cooperate with the Holders of Registrable Securities and
their counsel in the registration or qualification of such Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement and each underwriter of an underwritten offering of
Registrable Securities shall reasonably request in writing to cooperate
with the Holders in connection with any filings required to be made with
the NASD, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such Holders to consummate the disposition
in each such jurisdiction of such Registrable Securities owned by such
Holders; PROVIDED, HOWEVER, that in no event shall the Company be required
to (i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d) or (ii) take any action which would subject it to general
service of process or taxation in any such jurisdiction if it is not then
so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities promptly and, if requested by such Holder or its
counsel, confirm such advice in writing promptly (i) when a Shelf
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of any request by
the SEC or any state securities authority for post-effective amendments and
supplements to a Shelf Registration Statement and Prospectus or for
additional information after the Shelf Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Shelf
Registration Statement or the initiation of any proceedings for that
purpose, (iv) at the closing of any sale of Registrable Securities if,
between the effective date of a Shelf Registration Statement and such
closing, the representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to such offering cease to be true and correct
in all material respects, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (vi) of the happening of
any material event or the discovery of any material facts during the period
a Shelf Registration Statement is effective which makes any statement made
in such Registration Statement or the related Prospectus untrue or which
requires the making of any changes in such Registration Statement or
Prospectus in order to make the statements therein (in the case of the
Prospectus in the light of the circumstances under which they were made)
not misleading and (vii) of any determination by the Company that a
post-effective amendment to a Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the Exchange
Offer Registration Statement a "Plan of Distribution" section covering the
use of the Prospectus included in the Exchange Offer Registration Statement
by broker-dealers who have exchanged their Registrable Securities for
Exchange Securities for the resale of such Exchange Securities, (ii)
furnish to each broker-dealer who desires to participate in the Exchange
Offer, without charge, as many copies of each Prospectus included in the
Exchange Offer Registration Statement, including any preliminary
prospectus, and any amendment or supplement thereto, as such broker-dealer
may reasonably request, (iii) include in the Exchange Offer Registration
Statement a statement that any broker-dealer who holds Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities (a "PARTICIPATING BROKER-DEALER"),
and who receives Exchange Securities for Registrable Securities pursuant to
the Exchange Offer, may be a statutory underwriter and must deliver a
prospectus meeting the requirements of the 1933 Act in connection with any
resale of such Exchange Securities, (iv) subject to the last paragraph of
Section 3 hereof, hereby consent to the use of the Prospectus forming part
of the Exchange Offer Registration Statement or any amendment or supplement
thereto, by any broker-dealer in connection with the sale or transfer of
the Exchange Securities covered by the Prospectus or any amendment or
supplement thereto, and (v) include in the transmittal letter or similar
documentation to be executed by an exchange offeree in order to participate
in the Exchange Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a
distribution of Exchange Securities. If the undersigned is a
broker-dealer that will receive Exchange Securities for its own
account in exchange for Registrable Securities, it represents that the
Registrable Securities to be exchanged for Exchange Securities were
acquired by it as a result of market-making activities or other
trading activities and acknowledges that it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with any resale
of such Exchange Securities pursuant to the Exchange Offer; however,
by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the
meaning of the 1933 Act"; and
(y) a statement to the effect that a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a
Prospectus in connection with the exchange of Registrable
Certificates, the broker-dealer will not be deemed to admit that it is
an underwriter within the meaning of the 1933 Act;
(B) to the extent any Participating Broker-Dealer participates in the
Exchange Offer, use its best efforts to cause to be delivered at the
request of an entity representing the Participating Broker-Dealers (which
entity shall be the Initial Purchaser, unless it elects not to act as such
representative) only one, if any, "cold comfort" letter with respect to the
Prospectus in the form existing on the last date for which exchanges are
accepted pursuant to the Exchange Offer and with respect to each subsequent
amendment or supplement, if any, effected during the period specified in
clause (C) below;
(C) to the extent any Participating Broker-Dealer participates in the
Exchange Offer, use its best efforts to maintain the effectiveness of the
Exchange Offer Registration Statement for the 180-day period specified in
clause (D) below; and
(D) not be required to amend or supplement the Prospectus contained in
the Exchange Offer Registration Statement as would otherwise be
contemplated by Section 3(b) hereof, or take any other action as a result
of this Section 3(f), for a period exceeding 180 days after the last date
for which exchanges are accepted pursuant to the Exchange Offer (as such
period may be extended by the Company) and Participating Broker-Dealers
shall not be authorized by the Company to, and shall not, deliver such
Prospectus after such period in connection with resales contemplated by
this Section 3;
(g) (A) in the case of an Exchange Offer, furnish counsel for the
Initial Purchaser and (B) in the case of a Shelf Registration, furnish
counsel for the Holders of Registrable Securities copies of any request by
the SEC or any state securities authority for amendments or supplements to
a Registration Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement as soon as
practicable and provide immediate notice to each Holder of the withdrawal
of any such order;
(i) unless any Registrable Securities are in book entry form only, in
the case of a Shelf Registration, cooperate with the selling Holders of
Registrable Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold free from any
restrictive legends; and cause such Registrable Securities to be in such
denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders or the underwriters, if
any, may reasonably request at least one Business Day prior to the closing
of any sale of Registrable Securities;
(j) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Sections
2(d)(i)(B) or 3(e)(ii)-(vi) hereof, use its best efforts to prepare a
post-effective amendment to a Registration Statement or an amendment or
supplement to the related Prospectus or file any other required document so
that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain at the time of such delivery
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. The Company agrees to notify
each Holder to suspend use of the Prospectus as promptly as practicable
after the occurrence of such an event, and each Holder hereby agrees to
suspend use of the Prospectus as promptly as practicable upon receipt of
such notice until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission, PROVIDED that the Company shall
cause such suspension not to last more than 30 days per occurrence or more
than 60 days in aggregate in a calendar year. At such time as such public
disclosure is otherwise made or the Company determines that such disclosure
is not necessary, in each case to correct any misstatement of a material
fact or to include any omitted material fact, the Company agrees promptly
to notify each Holder of such determination and to furnish each Holder such
numbers of copies of the Prospectus, as amended or supplemented, as such
Holder may reasonably request;
(k) obtain a CUSIP number for all Exchange Securities, or Registrable
Securities, as the case may be, not later than the effective date of an
Exchange Offer Registration Statement or Shelf Registration Statement, as
the case may be, and provide the Trustee with printed certificates
evidencing the Exchange Securities or the Registrable Securities, as the
case may be, held in book entry form, in a form eligible for deposit with
DTC;
(l) (i) cause the Indenture to be qualified under the Trust Indenture
Act of 1939, as amended (the "TIA"), in connection with the registration of
the Exchange Securities, or Registrable Securities, as the case may be,
(ii) cooperate with the Trustee and the Holders to effect such changes to
the Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the TIA and (iii) execute, and use its best
efforts to cause the Trustee to execute, all documents as may be required
to effect such changes, and all other forms and documents required to be
filed with the SEC to enable the Indenture to be so qualified in a timely
manner;
(m) in the case of a Shelf Registration, enter into such customary
agreements (including underwriting agreements in customary form) and take
all other customary and appropriate actions (including those reasonably
requested by the Holders of a majority in principal amount of Registrable
Securities being sold) in order to expedite or facilitate the disposition
of such Registrable Securities and in such connection whether or not an
underwriting agreement is entered into and whether or not the registration
is an underwritten registration:
(i) make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in form,
substance and scope as are customarily made by the Company to
underwriters in similar underwritten offerings as may be reasonably
requested by them;
(ii) obtain opinions of counsel to the Company (who may be the
general counsel of the Company) and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters, if any, or if there are no
such managing underwriters, to the Holders of a majority in principal
amount of the Registrable Securities being sold) addressed to each
selling Holder and the underwriters, if any, covering the matters
customarily covered in opinions requested in sales of securities or
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
(iii) obtain a "cold comfort" letter and updates thereof from the
Company's independent certified public accountants addressed to the
underwriters, if any, and use its best efforts to have such letter
addressed to the selling Holders of Registrable Securities, such
letter to be in customary form and covering such matters of the type
customarily covered in "cold comfort" letters in connection with
similar underwritten offerings as the Holders of a majority in
principal amount of the Registrable Securities being sold shall
request;
(iv) enter into a securities sales agreement with the Holders and
an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Securities, which agreement shall
be in form, substance and scope customary for similar offerings;
(v) if an underwriting agreement is entered into, cause the same
to set forth indemnification provisions and procedures substantially
equivalent to the indemnification provisions and procedures set forth
in Section 5 hereof with respect to all parties to be indemnified
pursuant to said Section; and
(vi) deliver such other documents and certificates as may be
reasonably requested by Holders of a majority in principal amount of
Registrable Securities being sold and as are customarily delivered in
similar offerings.
The above shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective amendment thereto) if
appropriate in connection with any particular disposition of Registrable
Securities and (ii) each closing under any underwriting or similar
agreement as and to the extent required thereunder. In the case of any
underwritten offering, the Company shall provide written notice to the
Holders of all Registrable Securities of such underwritten offering at
least 30 days prior to the filing of a prospectus supplement for such
underwritten offering. Such notice shall (x) offer each such Holder the
right to participate in such underwritten offering, (y) specify a date,
which shall be no earlier than 10 days following the date of such notice,
by which such Holder must inform the Company of its intent to participate
in such underwritten offering and (z) include the instructions such Holder
must follow in order to participate in such underwritten offering;
(n) in the case of a Shelf Registration, make available for inspection
by representatives of the Holders of the Registrable Securities and any
underwriters participating in any disposition pursuant to a Shelf
Registration Statement and any counsel or accountant retained by such
Holders or underwriters, all financial and other records, pertinent
corporate documents and properties of the Company reasonably requested by
it, and cause the respective officers, directors, employees, and any other
agents of the Company to make reasonably available all relevant information
reasonably requested by any such representative, underwriter, counsel or
accountant in connection with a Registration Statement, in each case as is
customary for similar due diligence examinations; PROVIDED, HOWEVER, that
any information that is designated in writing by the Company, in good
faith, as confidential at the time of delivery of such information shall be
kept confidential by such representatives, underwriters, counsel or
accountant, unless such disclosure is made in connection with a court
proceeding or required by law, or such information becomes available to the
public generally or through a third party without an accompanying
obligation of confidentiality; and PROVIDED FURTHER that the foregoing
inspection and information gathering shall, to the extent reasonably
possible, be coordinated on behalf of the Holders and the other parties
entitled thereto by one counsel designated by and on behalf of such Holders
and other parties;
(o) (i) a reasonable time prior to the filing of any Exchange Offer
Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or
supplement to a Prospectus, provide copies of such document to the Initial
Purchaser, and use its best efforts to reflect in any such document when
filed such comments as the Initial Purchaser or its counsel may reasonably
request; (ii) in the case of a Shelf Registration, a reasonable time prior
to filing any Shelf Registration Statement, any Prospectus forming a part
thereof, any amendment to such Shelf Registration Statement or amendment or
supplement to such Prospectus, provide copies of such document to the
Holders of Registrable Securities, to the Initial Purchaser, to counsel on
behalf of the Holders and to the underwriter or underwriters of an
underwritten offering of Registrable Securities, if any, and use its best
efforts to reflect such comments in any such document when filed as the
Holders of Registrable Securities, their counsel and any
underwriter may reasonably request; and (iii) cause the representatives of
the Company to be available for discussion of such document as shall be
reasonably requested by the Holders of Registrable Securities, the Initial
Purchaser on behalf of such Holders or any underwriter and shall not at any
time make any filing of any such document of which such Holders, the
Initial Purchaser on behalf of such Holders, their counsel or any
underwriter shall not have previously been advised and furnished a copy or
to which such Holders, the Initial Purchaser on behalf of such Holders,
their counsel or any underwriter shall reasonably object;
(p) in the case of a Shelf Registration, use its best efforts to cause
the Registrable Securities to be rated with the appropriate rating agency
at the time of effectiveness of such Shelf Registration Statement, unless
the Registrable Securities are already so rated; and
(q) otherwise use its best efforts to comply with all applicable rules
and regulations of the SEC and make generally available to its security
holders, as soon as reasonably practicable after the effective date of a
Registration Statement, an earnings statement which shall satisfy the
provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder.
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Company such information
regarding such Holder and the proposed distribution by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
and the Company may exclude from such registration the Registrable Securities of
any Holder that fails to furnish such information within a reasonable time after
receiving such request.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
or the discovery of any facts, each of the kind described in Sections 2(d)(i)(B)
or 3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to such Shelf Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(j) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at the Company's expense) all copies in its
possession other than permanent file copies then in such Holder's possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice. If the Company shall give any such notice to suspend the
disposition of Registrable Securities pursuant to a Shelf Registration Statement
as a result of the happening of any event or the discovery of any facts, each of
the kind described in Sections 2(d)(i)(B) or 3(e)(ii)-(vi) hereof, the Company
shall be deemed to have used its best efforts to keep the Shelf Registration
Statement effective during such period of suspension provided that the Company
shall use its best efforts to file and have declared effective (if an amendment)
as soon as practicable an amendment or supplement to the Shelf Registration
Statement and shall extend the period during which the Registration Statement
shall be maintained effective pursuant to this Agreement by the number of days
during the period from and including the date of the giving of such notice to
and including the date when the Holders shall have received copies of the
supplemented or amended Prospectus necessary to resume such dispositions.
4. UNDERWRITTEN OFFERING. The Holders of Registrable Securities
covered by a Shelf Registration Statement who desire to do so may sell such
Registrable Securities in an underwritten offering. In any such underwritten
offering, the investment banker or bankers and manager or managers that will
administer the offering will be selected by, and the underwriting arrangements
with respect thereto will be approved by, the Holders of a majority of the
Registrable Securities to be included in such offering; PROVIDED, HOWEVER, that
(i) such investment bankers and managers and underwriting arrangements must be
reasonably satisfactory to the Company and (ii) the Company shall not be
obligated to arrange for more than one underwritten offering during the period
such Shelf Registration Statement is required to be effective pursuant to
Section 2(b)(B) hereof. No Holder may participate in any underwritten offering
contemplated hereby unless such Holder (a) agrees to sell such Holder's
Registrable Securities in accordance with any approved underwriting
arrangements, (b) completes and executes all reasonable questionnaires, powers
of attorney, indemnities, underwriting agreements, lock-up letters and other
documents required under the terms of such approved underwriting arrangements
and (c) at least 20% of the outstanding Registrable Securities are included in
such underwritten offering. The Holders participating in any underwritten
offering shall be responsible for any expenses customarily borne by selling
securityholders, including underwriting discounts and commissions and fees and
expenses of counsel to the selling securityholders.
5. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Holder and each Person, if any, who controls
any such Holder within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act, from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by any Holder or any such controlling Person in connection
with defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which Exchange
Securities or Registrable Securities were registered under the 1933 Act,
including all documents incorporated therein by reference, or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (as amended or supplemented if the Company shall
have furnished or filed with the Commission any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein in the light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon Updated Policy
Provider Information or information relating to any Holder furnished to the
Company in writing by any selling Holder expressly for use therein ("HOLDER
INFORMATION"); PROVIDED, HOWEVER, that the foregoing indemnity agreement with
respect to any preliminary Prospectus shall not inure to the benefit of any
Person from whom the Person asserting any such losses, claims, damages or
liabilities purchased Registrable Securities, or any Person controlling such
seller, if a copy of the final Prospectus (as then amended or supplemented if
the Company shall have furnished or filed with the Commission any amendments or
supplements thereto) was not sent or given by or on behalf of such seller to
such purchaser with or prior to the written confirmation of the sale of the
Registrable Securities to such Person, and if the final Prospectus (as so
amended or supplemented) would have cured the defect giving rise to such losses,
claims, damages or liabilities. In connection with any underwritten offering
permitted by Section 4 hereof, the Company will also indemnify the underwriters
participating in the distribution, their officers and directors and each Person
who controls such Persons (within the meaning of the 1933 Act and the 1934 Act)
to the same extent as provided above with respect to the indemnification of the
Holders, if requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Company and the other selling Holders, and each of their
respective directors, officers who sign the Registration Statement and each
Person, if any, who controls the Company and any other selling Holder within the
meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to
the same extent as the foregoing indemnity from the Company to the Holders, but
only with reference to information relating to such Holder furnished to the
Company in writing by such Holder expressly for use in any Registration
Statement (or any amendment thereto) or any Prospectus (or any amendment or
supplement thereto).
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any Person in respect of which indemnity may be
sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the
"INDEMNIFIED PARTY") shall promptly notify the Person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, or (iii) the indemnifying party shall have
failed to retain counsel as required by the prior sentence to represent the
indemnified party within a reasonable amount of time. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by (x) Morgan
Stanley & Co. Incorporated, if Morgan Stanley & Co. Incorporated is a Holder at
such time, or (y) otherwise, the Majority Holders in the case of parties
indemnified pursuant to paragraph (a) above. Such firm shall be designated by
the Company in the case of parties indemnified pursuant to paragraph (b) above.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but, if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested in writing an indemnifying
party to reimburse the indemnified party for fees and expenses of counsel as
contemplated by the second and third sentences of this Section 5(c), the
indemnifying party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 90 days after receipt by such indemnifying party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified party for such fees and expenses of counsel in accordance with such
request prior to the date of such settlement, unless such fees and expenses are
being disputed in good faith. The indemnifying party at any time may, subject to
the last sentence of this Section 5(c), settle or compromise any proceeding
described in this Section 5(c) at the expense of the indemnifying party. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement (i) includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding and (ii)
does not include a statement as to, or an admission of, fault, culpability or a
failure to act by or on behalf of an indemnified party.
(d) To the extent the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 5 is required to be made but is unavailable to an
indemnified party or insufficient in respect of any losses, claims, damages or
liabilities, then the applicable indemnifying party under such paragraph, in
lieu of indemnifying such indemnified party thereunder, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the indemnifying party or parties on the one hand and of
the indemnified party or parties on the other hand in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations. The
relative fault of the Company and the Holders shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Holders and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Holders' respective
obligations to contribute pursuant to this Section 5(d) are several in
proportion to the respective aggregate principal amount of Registrable
Securities of such Holder that were registered pursuant to a Registration
Statement, and not joint.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by PRO RATA
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages
and liabilities referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Securities
were sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of any Holder or any Person controlling such Holder or by or on behalf of the
Company, its officers or directors or any Person controlling the Company, (iii)
acceptance of and payment for any of the Exchange Securities and (iv) any sale
of Registrable Certificates pursuant to a Shelf Registration Statement. The
remedies provided for in this Section 5 are not exclusive and shall not limit
any rights or remedies which may otherwise be available to any indemnified party
at law or in equity.
6. MISCELLANEOUS. (a) RULE 144 AND RULE 144A. The Company covenants
that (A) for so long as the Company is subject to the reporting requirements of
Section 13 or 15 of the 1934 Act, it will file the reports required to be filed
by it under Section 13(a) or 15(d) of the 1934 Act and the rules and regulations
adopted by the SEC thereunder, and (B) if it ceases to be so required to file
such reports, it will upon the request of any Holder of Registrable Securities
(i) make publicly available such information as is necessary to permit sales
pursuant to Rule 144 under the 1933 Act, (ii) deliver such information to a
prospective purchaser as is necessary to permit sales pursuant to Rule 144A
under the 1933 Act and it will take such further action as any Holder of
Registrable Securities may reasonably request, and (iii) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Securities without registration under the 1933 Act within the limitation of the
exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may be
amended from time to time, or (z) any similar rules or regulations hereafter
adopted by the SEC. Upon the request of any Holder of Registrable Securities,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) OTHER REGISTRATION RIGHTS. The Company may grant registration
rights that would permit any Person the right to piggyback on any Shelf
Registration Statement, PROVIDED that if the managing underwriter, if any, of an
offering pursuant to such Shelf Registration Statement delivers an opinion of
the selling Holders that the total amount of securities which they and the
holders of such piggyback rights intend to include in any Shelf Registration
Statement materially adversely affects the success of such offering (including
the price at which such securities can be sold), then the amount, number or kind
of securities to be offered for the account of holders of such piggyback rights
will be reduced to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount, number or kind recommended by
such managing underwriter; and PROVIDED FURTHER that such piggyback registration
rights shall in no event materially adversely affect the interests of any
Holder.
(c) NO INCONSISTENT AGREEMENTS. The Company has not entered into nor
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
(d) AMENDMENTS AND WAIVERS. Except as otherwise expressly permitted in
the Indenture, the provisions of this Agreement, including the provisions of
this sentence, may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given unless the
Company has obtained the written consent of Holders of at least a majority in
aggregate principal amount of the outstanding Registrable Securities affected by
such amendment, modification, supplement, waiver or consent to a departure;
PROVIDED, HOWEVER, that no amendment, modification, supplement or waiver or
consent to any departure from the provisions of Section 5 hereof shall be
effective as against any Holder of Registrable Securities unless consented to in
writing by such Holder.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(e), which address initially is, with respect to the Initial Purchaser,
the address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 6(e).
All such notices and communications shall be deemed to have been duly
given; at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; PROVIDED that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms hereof or of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities, such Person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(g) THIRD PARTY BENEFICIARIES. The Holders shall be third party
beneficiaries to the agreements made hereunder and to the obligations of the
Company hereunder and shall have the right to enforce such agreements and
obligations directly to the extent any such Holder deems such enforcement
necessary or advisable to protect its rights hereunder.
(h) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(k) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(l) TERMINATION. This Agreement shall terminate and be of no further
force or effect when there shall not be any Registrable Securities outstanding,
except that the provisions of Sections 2(c), 2(e), 5, 6(g) and 6(j) hereof shall
survive any such termination.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CONTINENTAL AIRLINES, INC.
BY:
--------------------------------------
Name: Gerald Laderman
Title: Senior Vice President - Finance
Confirmed and accepted as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
BY:
--------------------------------------
Name: Cecilia Park
Title: Vice President
CONTINENTAL AIRLINES, INC.
$200,000,000
Floating Rate Secured Notes due 2007
PURCHASE AGREEMENT
December 2, 2002
MORGAN STANLEY & CO. INCORPORATED
1585 Broadway
New York, New York 10036
Ladies and Gentlemen:
Continental Airlines, Inc., a Delaware corporation (the "COMPANY"),
proposes to issue and sell to Morgan Stanley & Co. Incorporated (the "INITIAL
PURCHASER") $200,000,000 principal amount of its Floating Rate Secured Notes due
2007 bearing interest at the rate of USD 3-Month LIBOR + 0.90% (the "OFFERED
SECURITIES") to be issued pursuant to the provisions of an Indenture to be dated
as of the Closing Date (as defined below) (the "INDENTURE") among the Company,
Wilmington Trust Company, as trustee (the "TRUSTEE"), Morgan Stanley Capital
Services Inc., as Liquidity Provider (the "LIQUIDITY PROVIDER"), and MBIA
Insurance Corporation, as Policy Provider (the "POLICY PROVIDER").
The holders of the Offered Securities will be entitled to the benefits
of an Exchange and Registration Rights Agreement, in a form reasonably
satisfactory to the Initial Purchaser to be dated as of the Closing Date (the
"REGISTRATION RIGHTS AGREEMENT") between the Company and the Initial Purchaser,
pursuant to which the Company will file a registration statement with the
Securities and Exchange Commission (the "COMMISSION") registering the Exchange
Securities referred to in such Registration Rights Agreement (the "EXCHANGE
SECURITIES") or the Offered Securities under the Securities Act of 1933, as
amended (the "SECURITIES ACT").
The Offered Securities will only be offered (A) in the case of offers
inside the United States, to persons reasonably believed by the Initial
Purchaser to be (1) "qualified institutional buyers" (as defined in Rule 144A
under the Securities Act) ("QIBS") in reliance on Rule 144A under the Securities
Act or (2) institutional "accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) ("INSTITUTIONAL ACCREDITED INVESTORS")
that deliver a letter in the form annexed as Annex III to the Final Memorandum
(as defined below) and (B) in the case of offers outside the United States, to
persons other than U.S. persons (including dealers or other professional
fiduciaries in the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)) in accordance with Regulation
S under the Securities Act ("REGULATION S").
In connection with the sale of the Offered Securities, the Company has
prepared a preliminary offering memorandum dated November 26, 2002 (the
"PRELIMINARY MEMORANDUM") and a final offering memorandum dated the date of this
Agreement (the "FINAL MEMORANDUM" and, with the Preliminary Memorandum, each a
"MEMORANDUM") including or incorporating by reference a description of the terms
of the Offered Securities, the terms of the offering and a description of the
Company. As used herein, the terms "Preliminary Memorandum", "Final Memorandum"
and "Memorandum" shall include, in each case, the documents incorporated by
reference therein. The terms "SUPPLEMENT", "AMENDMENT" and "AMEND" as used
herein with respect to a Memorandum shall include all documents deemed to be
incorporated by reference in such Memorandum that are filed subsequent to the
date of such Memorandum with the Commission pursuant to the Securities Exchange
Act of 1934, as amended (the "EXCHANGE ACT").
The Offered Securities and the Exchange Securities will be secured by
a lien on the Collateral (as defined in the Indenture), which includes certain
aircraft spare parts and related assets owned by the Company. The Offered
Securities and the Exchange Securities will rank equally in right of payment
with all of the Company's other unsubordinated obligations, except to the extent
of the assets subject to such lien, as to which the Offered Securities and the
Exchange Securities will effectively rank senior.
Certain amounts of interest payable on the Offered Securities and the
Exchange Securities will be entitled to the benefits of a liquidity facility.
The Liquidity Provider and the Trustee will enter into a revolving credit
agreement to be dated as of the Closing Date (the "LIQUIDITY FACILITY") for the
benefit of the holders of the Offered Securities and the Exchange Securities.
Payments of interest on the Offered Securities and the Exchange
Securities will be supported by a financial guaranty insurance policy (the
"POLICY") issued by the Policy Provider to the extent the Liquidity Facility and
any funds contained in the Cash Collateral Account (as defined in the Indenture)
are insufficient or unavailable for that purpose. The Policy will also support
the payment of the principal of the Offered Securities and the Exchange
Securities on the Final Legal Maturity Date (as defined in the Indenture) as
well as the payment of principal of the Offered Securities and the Exchange
Securities prior to the Final Legal Maturity Date under certain circumstances
described in the Indenture and the Policy. The Policy will be issued pursuant to
an Insurance and Indemnity Agreement to be dated as of the Closing Date (the
"POLICY PROVIDER AGREEMENT") among the Policy Provider, the Company and the
Trustee. Under the Indenture and the Policy Provider Agreement, the Policy
Provider will be entitled to reimbursement for amounts paid pursuant to claims
made under the Policy, subject to certain limitations.
The Company understands that the Initial Purchaser proposes to make an
offering of the Offered Securities on the terms, subject to the conditions and
in the manner set forth in the Final Memorandum and Section 5 hereof, as soon as
the Initial Purchaser deems advisable after this Agreement (as defined below)
has been executed and delivered.
Capitalized terms used but not defined in this Purchase Agreement (the
"AGREEMENT") shall have the meanings specified therefor in the Indenture. As
used in this Agreement, the term "OPERATIVE AGREEMENTS" shall mean the
Indenture, the Security Agreement, the Collateral Maintenance Agreement, the
Reference Agency Agreement, the Registration Rights Agreement, the Liquidity
Facility, the Policy, the Policy Provider Agreement and the Indemnification
Agreement dated the date hereof (the "INDEMNIFICATION AGREEMENT") among the
Policy Provider, the Company and the Initial Purchaser.
1. REPRESENTATIONS AND WARRANTIES. (a) The Company represents and
warrants to, and agrees with, the Initial Purchaser that:
(i) In connection with the sale of the Offered Securities, the Company
has prepared the Preliminary Memorandum and the Final Memorandum. The
Company hereby confirms that it has authorized the use of the Preliminary
Memorandum in connection with the offer of the Offered Securities by the
Initial Purchaser on and prior to the date of this Agreement and the Final
Memorandum in connection with the offer and resale of the Offered
Securities by the Initial Purchaser after the date of this Agreement. On
the date of this Agreement, the Final Memorandum does not contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The preceding
sentence does not apply to statements in or omissions from the Final
Memorandum based upon (A) information furnished in writing by the Initial
Purchaser to the Company expressly for use therein ("INITIAL PURCHASER
INFORMATION") or (B) information under the caption "Description of the
Policy Provider" in the Final Memorandum or documents incorporated by
reference under such caption (collectively, the "POLICY PROVIDER
INFORMATION").
(ii) The documents incorporated by reference in the Final Memorandum
(excluding the Policy Provider Information), at the time they were or
hereafter, during the period mentioned in Section 4(a) hereof, are filed
with the Commission, complied or will comply, as the case may be, in all
material respects with the requirements of the Exchange Act.
(iii) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Delaware, with
corporate power and authority to own, lease and operate its property and to
conduct its business as described in the Final Memorandum; and the Company
is duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), business, properties or results of
operations of the Company and its consolidated subsidiaries taken as a
whole (a "CONTINENTAL MATERIAL ADVERSE EFFECT").
(iv) Each of Continental Micronesia, Inc., Air Micronesia, Inc. and
ExpressJet Airlines, Inc. (together, the "SUBSIDIARIES") has been duly
incorporated and is an existing corporation in good standing under the laws
of the jurisdiction of its incorporation, with corporate power and
authority to own, lease and operate its properties and to conduct its
business as described in the Final Memorandum; and each Subsidiary is duly
qualified to do business as a foreign corporation in good standing in all
other jurisdictions in which its ownership or lease of property or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not have a Continental Material Adverse
Effect; all of the issued and outstanding capital stock of each Subsidiary
has been duly authorized and validly issued and is fully paid and
nonassessable; and, except as described in the Final Memorandum, each
Subsidiary's capital stock owned by the Company, directly or through
subsidiaries, is owned free from liens, encumbrances and defects.
(v) Except as described in the Final Memorandum, the Company is not in
default in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by
which it may be bound or to which any of its properties may be subject,
except for such defaults that would not have a Continental Material Adverse
Effect. The execution, delivery and performance of this Agreement, the
Offered Securities, the Exchange Securities and the Operative Agreements to
which the Company is or will be a party, the consummation of the
transactions contemplated herein and therein, the issuance and sale of the
Offered Securities and the issuance and exchange of the Exchange Securities
have been duly authorized by all necessary corporate action of the Company
and will not result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance (other than any lien, charge
or encumbrance created under any Operative Agreement) upon any property or
assets of the Company pursuant to, any indenture, loan agreement, contract,
mortgage, note, lease or other instrument to which the Company is a party
or by which the Company may be bound or to which any of the property or
assets of the Company is subject, which breach, default, lien, charge or
encumbrance, individually or in the aggregate, would have a Continental
Material Adverse Effect, nor will any such execution, delivery or
performance result in any violation of the provisions of the charter or
by-laws of the Company or any statute, rule, regulation or order of any
governmental agency or body or any court having jurisdiction over the
Company.
(vi) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the valid
authorization, execution and delivery by the Company of this Agreement, the
Offered Securities, the Exchange Securities and the Operative Agreements to
which it is or will be a party and for the consummation of the transactions
contemplated herein and therein, except (x) such as may be required under
the Securities Act, the Trust Indenture Act of 1939, as amended (the "TRUST
INDENTURE ACT"), the securities or "blue sky" or similar laws of the
various states and of foreign jurisdictions or rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD") in connection
with the registration of the Offered Securities under the Securities Act
pursuant to the Registration Rights Agreement, (y) filings or recordings
with the Federal Aviation Administration (the "FAA") and under the UCC or
other laws in effect in any applicable jurisdiction governing the
perfection of security interests in the Collateral, which filings or
recordings referred to in this clause (y) shall have been made, or duly
presented for filing or recordation, or shall be in the process of being
duly filed or filed for recordation, on or prior to the Closing Date and
(z) the order of the Commission declaring the Exchange Offer Registration
Statement or the Shelf Registration Statement effective.
(vii) This Agreement has been duly executed and delivered by the
Company, and the Operative Agreements to which the Company will be a party
and the Offered Securities will be duly executed and delivered by the
Company on or prior to the Closing Date, as the case may be, and the
Exchange Securities will be duly executed and delivered by the Company on
the date of their delivery as described in the Registration Rights
Agreement.
(viii) The Operative Agreements to which the Company is or will be a
party, when duly executed and delivered by the Company, assuming that such
Operative Agreements have been duly authorized, executed and delivered by,
and constitute the legal, valid and binding obligations of, each other
party thereto, will constitute valid and binding obligations of the Company
enforceable in accordance with their terms, except (w) as enforcement
thereof may be limited by bankruptcy, insolvency (including, without
limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, (x) as enforcement thereof is subject to
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and (y) with respect to
indemnification and contribution provisions, as enforcement thereof may be
limited by applicable law. The Operative Agreements to which the Company is
or will be a party will, upon execution and delivery thereof, conform in
all material respects to the descriptions thereof in the Final Memorandum.
(ix) The consolidated financial statements of the Company incorporated
by reference in the Final Memorandum, together with the related notes
thereto, present fairly in all material respects the financial position of
the Company and its consolidated subsidiaries at the dates indicated and
the consolidated results of operations and cash flows of the Company and
its consolidated subsidiaries for the periods specified. Such financial
statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved, except as otherwise stated therein and except that unaudited
financial statements do not have all required footnotes. The financial
statement schedules of the Company, if any, incorporated by reference in
the Final Memorandum present the information required to be stated therein.
(x) The Company is a "citizen of the United States" within the meaning
of Section 40102(a)(15) of Title 49 of the United States Code, as amended,
and holds an air carrier operating certificate issued pursuant to Chapter
447 of Title 49 of the United States Code, as amended, for aircraft capable
of carrying 10 or more individuals or 6,000 pounds or more of cargo. All of
the outstanding shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and non-assessable.
(xi) When duly executed, authenticated, issued and delivered in the
manner provided for in the Indenture and sold and paid for as provided in
this Agreement, the Offered Securities will constitute valid and binding
obligations of the Company enforceable in accordance with their terms,
except (w) as enforcement thereof may be limited by bankruptcy, insolvency
(including, without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, (x) as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law) and (y) with respect to
indemnification provisions, as enforcement thereof may be limited by
applicable law, and the holders thereof will be entitled to the benefits of
the Indenture. The Offered Securities will conform in all material respects
to the description thereof in the Final Memorandum.
(xii) When duly executed, authenticated, issued and delivered in the
manner provided for in the Indenture and the Registration Rights Agreement,
the Exchange Securities will constitute valid and binding obligations of
the Company enforceable in accordance with their terms, except (w) as
enforcement thereof may be limited by bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers),
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, (x) as enforcement thereof is
subject to general principles of equity (regardless of whether enforcement
is considered in a proceeding in equity or at law) and (y) with respect to
indemnification provisions, as enforcement thereof may be limited by
applicable law, and the holders thereof will be entitled to the benefits of
the Indenture. The Exchange Securities will conform in all material
respects to the description thereof in the Final Memorandum.
(xiii) The security interest created by the Security Agreement will be
for the benefit of the Holders and the Indemnitees and will constitute, on
and at all times after the Closing Date until the termination of the
Security Agreement, valid and perfected Liens on the Collateral purported
to be covered thereby, subject to no equal or prior Lien, except Permitted
Liens.
(xiv) Except as disclosed in the Final Memorandum, the Company and the
Subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, in each case free from liens,
encumbrances and defects except where the failure to have such title would
not have a Continental Material Adverse Effect; and except as disclosed in
the Final Memorandum, the Company and the Subsidiaries hold any leased real
or personal property under valid and enforceable leases with no exceptions
that would have a Continental Material Adverse Effect.
(xv) Except as disclosed in the Final Memorandum, there is no action,
suit or proceeding before or by any governmental agency or body or court,
domestic or foreign, now pending or, to the knowledge of the Company,
threatened against the Company or any of its subsidiaries or any of their
respective properties that individually (or in the aggregate in the case of
any class of related lawsuits), could reasonably be expected to result in a
Continental Material Adverse Effect or that could reasonably be expected to
materially and adversely affect the consummation of the transactions
contemplated by this Agreement, the Offered Securities, the Exchange
Securities or the Operative Agreements.
(xvi) Except as disclosed in the Final Memorandum, no labor dispute
with the employees of the Company or any subsidiary exists or, to the
knowledge of the Company, is imminent that could reasonably be expected to
have a Continental Material Adverse Effect.
(xvii) Each of the Company and the Subsidiaries has all necessary
consents, authorizations, approvals, orders, certificates and permits of
and from, and has made all declarations and filings with, all federal,
state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, to own, lease, license
and use its properties and assets and to conduct its business in the manner
described in the Final Memorandum, except to the extent that the failure to
so obtain, declare or file would not have a Continental Material Adverse
Effect.
(xviii) Except as disclosed in the Final Memorandum, (x) neither the
Company nor any of the Subsidiaries is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances (collectively, "ENVIRONMENTAL LAWS"), owns or
operates any real property contaminated with any substance that is subject
to any environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
individually or in the aggregate is reasonably expected to have a
Continental Material Adverse Effect, and (y) the Company is not aware of
any pending investigation which might lead to such a claim that is
reasonably expected to have a Continental Material Adverse Effect.
(xix) The accountants that examined and issued an auditors' report
with respect to the consolidated financial statements of the Company and
the financial statement schedules of the Company, if any, included or
incorporated by reference in the Final Memorandum are independent public
accountants within the meaning of the Securities Act.
(xx) The Company is not (based on applicable law as in effect on the
date hereof) an "investment company", or an entity "controlled" by an
"investment company", within the meaning of the Investment Company Act of
1940, as amended (the "INVESTMENT COMPANY ACT"), required to register under
the Investment Company Act.
(xxi) The Offered Securities satisfy the eligibility requirements of
Rule 144A(d)(3) under the Securities Act.
(xxii) Assuming the accuracy of the representations and warranties and
compliance with the agreements made by the Initial Purchaser in this
Agreement, the offer and sale of the Offered Securities to the Initial
Purchaser in the manner contemplated by this Agreement will be exempt from
the registration requirements of the Securities Act by reason of Section
4(2) thereof and Regulation S thereunder and, except as required under the
Registration Rights Agreement, it is not necessary to qualify the Indenture
under the Trust Indenture Act in respect of any such offer or sale.
(xxiii) Neither the Company nor any of its affiliates, nor any person
acting on their behalf, (i) has, within the six-month period prior to the
date hereof, offered or sold in the United States or to any U.S. person (as
such terms are defined in Regulation S under the Securities Act) the
Offered Securities or any security of the same class or series as the
Offered Securities or (ii) has offered or will solicit any offer to buy, or
will offer or sell the Offered Securities (x) in the United States by any
form of "general solicitation" or "general advertising" within the meaning
of Rule 502(c) under the Securities Act or in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act or (y)
with respect to any securities sold in reliance on Rule 903 of Regulation S
under the Securities Act, by means of any "directed selling efforts" within
the meaning of Rule 902(c) of Regulation S. The Company has not entered and
will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except for this Agreement. The
Company and its affiliates and any person acting on its or their behalf
have complied and will comply with the offering restrictions requirement of
Regulation S.
(xxiv) Simat, Helliesen & Eichner, Inc. ("SH&E") is not an affiliate
of the Company and, to the knowledge of the Company, does not have a
substantial interest, direct or indirect, in the Company. To the knowledge
of the Company, none of the officers and directors of SH&E is connected
with the Company or any of its affiliates as an officer, employee,
promoter, underwriter, trustee, partner, director or person performing
similar functions.
(b) The parties agree that any certificate signed by a duly authorized
officer of the Company and delivered to the Initial Purchaser, or to counsel for
the Initial Purchaser, on the Closing Date and in connection with this Agreement
or the offering of the Offered Securities, shall be deemed a representation and
warranty by (and only by) the Company to the Initial Purchaser as to the matters
covered thereby.
2. PURCHASE, SALE AND DELIVERY OF OFFERED SECURITIES. (a) On the basis
of the representations, warranties and agreements herein contained, but subject
to the terms and the conditions herein set forth, the Company agrees to sell to
the Initial Purchaser, and the Initial Purchaser agrees to purchase from the
Company, the aggregate principal amount of Offered Securities at a purchase
price of 98.875% of the principal amount thereof plus accrued interest, if any,
from the date of issuance.
(b) The Company shall issue and deliver against payment of the
purchase price the Offered Securities purchased by the Initial Purchaser
hereunder and to be offered and sold by the Initial Purchaser in reliance on
Regulation S under the Securities Act (the "REGULATION S SECURITIES") in the
form of one or more global securities in definitive, fully registered form
without interest coupons (the "REGULATION S GLOBAL SECURITIES") which shall be
deposited with the Trustee as custodian for The Depository Trust Company ("DTC")
and registered in the name of a nominee of DTC, for the respective accounts of
the DTC participants for Euroclear Bank S.A./N.V., as operator of the Euroclear
System ("EUROCLEAR"), and Clearstream Banking, societe anonyme ("CLEARSTREAM").
On or prior to the 40th day after the later of the day on which the Offered
Securities are first offered to persons other than distributors (as defined in
Regulation S under the Securities Act) and the Closing Date, beneficial
interests in the Regulation S Global Securities may be held only through
Euroclear and Clearstream. Regulation S Securities shall be available only in
book-entry form, except in the limited circumstances described in the Final
Memorandum.
(c) The Company shall issue and deliver against payment of the
purchase price the Offered Securities to be purchased by the Initial Purchaser
hereunder and to be offered and sold by the Initial Purchaser to QIBs in
reliance on Rule 144A under the Securities Act (the "144A SECURITIES") in the
form of one or more permanent global securities in definitive, fully registered
form without interest coupons (the "RESTRICTED GLOBAL SECURITIES" and, together
with the Regulation S Global Securities, the "GLOBAL SECURITIES") which shall be
deposited with the related Trustee as custodian for DTC and registered in the
name of a nominee of DTC for credit to the account of the Initial Purchaser.
Each Restricted Global Security shall include the legend regarding restrictions
on transfer set forth under "Transfer Restrictions" in the Final Memorandum. The
Regulation S Securities and the 144A Securities shall be assigned separate CUSIP
numbers.
(d) Payment for the Offered Securities shall be made by the Initial
Purchaser in federal (same day) funds by official check or checks or wire
transfer to an account previously designated to the Initial Purchaser by the
Company at 10:00 a.m. (New York time), on December 6, 2002, or at such other
date and time as may be agreed upon by the Company and the Initial Purchaser
(such date and time of delivery and payment for the Offered Securities being
herein referred to as the "CLOSING DATE"), against delivery to the Trustee as
custodian for DTC at the offices of Hughes Hubbard & Reed LLP at One Battery
Park Plaza, New York, New York 10004 (or at such other location as may be agreed
to by the Initial Purchaser and the Company) of (i) the Regulation S Global
Securities representing all of the Regulation S Securities for the respective
accounts of the DTC participants for Euroclear and Clearstream and (ii) the
Restricted Global Securities representing all of the 144A Securities. The
Regulation S Global Securities and the Restricted Global Securities shall be
made available for checking at the office of Hughes Hubbard & Reed LLP (or at
such other location as may be agreed to by the Initial Purchaser and the
Company) not later than 1:00 p.m. on the business day prior to the Closing Date.
(e) Notwithstanding the foregoing, any Offered Securities sold by the
Initial Purchaser pursuant to Section 5(a) hereof to Institutional Accredited
Investors who are not QIBs and are not purchasers of interests in the Regulation
S Global Securities shall be issued in definitive, fully registered form without
interest coupons ("DEFINITIVE SECURITIES") and shall bear the legend relating
thereto set forth under "Transfer Restrictions" in the Final Memorandum, but
shall be paid for in the manner set forth in Section 2(d) hereof. Upon transfer
of Definitive Securities to a QIB or in accordance with Regulation S under the
Securities Act, such Definitive Securities shall be exchanged for an interest in
the appropriate Global Security. Definitive Securities shall be registered in
such names and in such authorized denominations as the Initial Purchaser may
request not less than two full business days in advance of the Closing Date.
3. CONDITIONS OF THE OBLIGATIONS OF THE INITIAL PURCHASER. The Initial
Purchaser's obligations to purchase and pay for the Offered Securities pursuant
to this Agreement are subject to the following conditions:
(a) On the Closing Date, the Initial Purchaser shall have received an
opinion of Hughes Hubbard & Reed LLP, counsel for the Company, dated the Closing
Date, in form and substance reasonably satisfactory to the Initial Purchaser.
(b) On the Closing Date, the Initial Purchaser shall have received an
opinion of the General Counsel of the Company, dated the Closing Date, in form
and substance reasonably satisfactory to the Initial Purchaser.
(c) On the Closing Date, the Initial Purchaser shall have received an
opinion of Richards, Layton & Finger, P.A., counsel for Wilmington Trust
Company, individually and as Trustee, dated the Closing Date, in form and
substance reasonably satisfactory to the Initial Purchaser.
(d) On the Closing Date, the Initial Purchaser shall have received an
opinion of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel for the
Liquidity Provider and the Liquidity Provider Guarantor, dated the Closing Date,
in form and substance reasonably satisfactory to the Initial Purchaser.
(e) On the Closing Date, the Initial Purchaser shall have received an
opinion of in-house counsel for the Liquidity Provider and the Liquidity
Provider Guarantor, dated the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchaser.
(f) On the Closing Date, the Initial Purchaser shall have received an
opinion of Latham & Watkins, special New York counsel for the Policy Provider,
dated the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchaser.
(g) On the Closing Date, the Initial Purchaser shall have received an
opinion of in-house counsel for the Policy Provider, dated the Closing Date, in
form and substance reasonably satisfactory to the Initial Purchaser.
(h) On the Closing Date, the Initial Purchaser shall have received an
opinion of Lytle, Soule & Curlee, special counsel in Oklahoma City, Oklahoma,
dated the Closing Date, in form and substance reasonably satisfactory to the
Initial Purchaser.
(i) On the Closing Date, the Initial Purchaser shall have received an
opinion of Milbank, Tweed, Hadley & McCloy LLP, counsel for the Initial
Purchaser, dated the Closing Date, with respect to the validity of the Offered
Securities, the Final Memorandum, the exemption from registration for the offer
and sale of the Offered Securities to the Initial Purchaser as contemplated
hereby and other related matters as the Initial Purchaser may reasonably
require, and the Company shall have furnished to such counsel such documents as
they reasonably request for the purpose of enabling them to pass upon such
matters.
(j) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred any change, or any development involving a prospective
change, in the condition (financial or other), business, properties or results
of operations of the Company and its subsidiaries considered as one enterprise
that, in the Initial Purchaser's judgment, is material and adverse and that
makes it, in the Initial Purchaser's judgment, impracticable to market the
Offered Securities on the terms and in the manner contemplated by the Final
Memorandum.
(k) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred any change, or any development involving a prospective
change, in the condition (financial or other), business, properties or results
of operations of the Policy Provider and its subsidiaries considered as one
enterprise that, in the Initial Purchaser's judgment, is material and adverse
and that makes it, in the Initial Purchaser's judgment, impracticable to market
the Offered Securities on the terms and in the manner contemplated by the Final
Memorandum.
(l) The Initial Purchaser shall have received on the Closing Date a
certificate, dated the Closing Date and signed by the President or any Vice
President of the Company, to the effect that the representations and warranties
of the Company contained in this Agreement are true and correct as of the
Closing Date as if made on the Closing Date (except to the extent that they
relate solely to an earlier date, in which case they shall be true and accurate
as of such earlier date), that the Company has performed all its obligations to
be performed hereunder on or prior to the Closing Date and that, subsequent to
the execution and delivery of this Agreement, there shall not have occurred any
material adverse change, or any development or event involving a prospective
material adverse change, in the condition (financial or other), business,
properties or results of operations of the Company and its subsidiaries
considered as one enterprise, except as set forth in or contemplated by the
Final Memorandum.
(m) As of the Closing Date, the representations and warranties of the
Policy Provider contained in the Indemnification Agreement shall be true and
correct in all material respects as of the Closing Date (except to the extent
that they relate solely to an earlier or later date, in which case they shall be
true and correct as of such earlier or later date) and the Initial Purchaser
shall have received a certificate of the President or a Vice President of the
Policy Provider, dated the Closing Date, to such effect.
(n) The Initial Purchaser shall have received from Ernst & Young LLP a
letter, dated the date hereof, in form and substance satisfactory to the Initial
Purchaser.
(o) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have been any downgrading in the
rating accorded any of the Company's securities (except for any pass through
certificates) by any "nationally recognized statistical rating organization", as
such term is defined for purposes of Rule 436(g)(2) under the Securities Act, or
any public announcement that any such organization has under surveillance or
review, in each case for possible change, its ratings of any such securities
other than pass through certificates (other than an announcement with positive
implications of a possible upgrading, and no implication of a possible
downgrading, of such rating).
(p) SH&E shall have furnished to the Initial Purchaser a letter,
addressed to the Company and dated the Closing Date, confirming that SH&E and
each of its directors and officers (i) is not an affiliate of the Company or any
of its affiliates, (ii) does not have any substantial interest, direct or
indirect, in the Company or any of its affiliates and (iii) is not connected
with the Company or any of its affiliates as an officer, employee, promoter,
underwriter, trustee, partner, director or person performing similar functions.
(q) At the Closing Date, each of the Operative Agreements shall have
been duly executed and delivered by each of the parties thereto; and the
representations and warranties of the Company contained in each of such executed
Operative Agreements shall be true and correct as of the Closing Date (except to
the extent that they relate solely to an earlier date, in which case they shall
be true and correct as of such earlier date) and the Initial Purchaser shall
have received a certificate of the President or a Vice President of the Company,
dated as of the Closing Date, to such effect.
(r) On the Closing Date, the Offered Securities shall be rated "Aaa"
by Moody's Investors Service, Inc.
(s) The Initial Purchaser shall have received from Ernst & Young LLP a
letter, dated the Closing Date, which meets the requirements of subsection (n)
of this Section 3, except that the specified date referred to in such subsection
will be a date not more than three business days prior to the Closing Date for
the purposes of this subsection.
(t) On the Closing Date (a) the Security Agreement shall have been
duly filed for recordation with the FAA in accordance with the Federal Aviation
Act and (b) each Financing Statement shall have been duly filed in the
appropriate jurisdiction.
The Company will furnish the Initial Purchaser with such conformed
copies of such opinions, certificates, letters and documents as the Initial
Purchaser reasonably requests.
4. CERTAIN AGREEMENTS OF THE COMPANY. The Company agrees with the
Initial Purchaser that:
(a) During the period described in the following sentence of this
Section 4(a), the Company shall advise the Initial Purchaser promptly of any
proposal to amend or supplement the Final Memorandum (except by documents filed
under the Exchange Act) and will not effect such amendment or supplement (except
by documents filed under the Exchange Act) without the Initial Purchaser's
consent, which consent will not be unreasonably withheld. If, at any time prior
to the completion of the resale of the Offered Securities by the Initial
Purchaser, any event shall occur as a result of which it is necessary to amend
or supplement the Final Memorandum in order to make the statements therein, in
the light of the circumstances when the Final Memorandum is delivered to a
purchaser, not misleading in any material respect, the Company shall prepare and
furnish to the Initial Purchaser, at the Company's own expense, either
amendments or supplements to the Final Memorandum so that the statements in the
Final Memorandum as so amended or supplemented will not, in the light of the
circumstances when the Final Memorandum is delivered to a purchaser, be
misleading in any material respect. Neither the Initial Purchaser's consent to,
nor the Initial Purchaser's delivery to offerees or investors of, any such
amendment or supplement shall constitute a waiver of any of the conditions set
forth in Section 3 hereof.
(b) Notwithstanding any provision of Section 4(a) hereof to the
contrary, the Company's obligations under Section 4(a) hereof shall terminate on
the earlier to occur of (i) the effective date of the Exchange Offer
Registration Statement or Shelf Registration Statement and (ii) the date upon
which the Initial Purchaser and the Initial Purchaser's affiliates cease to hold
Offered Securities acquired as part of the Initial Purchaser's initial
distributions.
(c) The Company will furnish to the Initial Purchaser copies of the
Preliminary Memorandum, the Final Memorandum and all amendments and supplements
to such documents (excluding all documents incorporated by reference therein),
in each case as soon as available and in such quantities as the Initial
Purchaser reasonably requests. So long as any of the Offered Securities are
Registrable Securities (as defined in the Registration Rights Agreement), at any
time when the Company is not subject to Section 13 or 15(d) of the Exchange Act,
the Company will provide to any holder of such Registrable Securities, or to any
prospective purchaser of such Registrable Securities designated by a holder,
upon the request of such holder or prospective purchaser, any information
required to be delivered to holders and prospective purchasers of the Offered
Securities pursuant to Rule 144A(d)(4) under the Securities Act. This covenant
is intended to be for the benefit of the holders, and prospective purchasers
designated by such holders from time to time, of such Registrable Securities.
(d) If requested by the Initial Purchaser, the Company shall use its
reasonable efforts to permit the Offered Securities to be designated PORTAL
securities in accordance with the rules and regulations adopted by the NASD
relating to trading in the PORTAL Market.
(e) The Company shall, in cooperation with the Initial Purchaser,
endeavor to arrange for the qualification of the Offered Securities for offer
and sale under the applicable securities or "blue sky" laws of such
jurisdictions in the United States as the Initial Purchaser reasonably
designates and will endeavor to maintain such qualifications in effect so long
as required for the resale of the Offered Securities by the Initial Purchaser;
PROVIDED that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities, (ii) file a general consent to service
of process or (iii) subject itself to taxation in any such jurisdiction.
(f) During the period of ten years after the Closing Date, the Company
will promptly furnish to the Initial Purchaser, upon request, copies of all
Annual Reports on Form 10-K and any definitive proxy statement of the Company
filed with the Commission; PROVIDED that providing a website address at which
such Annual Reports and any such definitive proxy statements may be accessed
will satisfy this clause (f).
(g) Between the date of this Agreement and the Closing Date, the
Company shall not, without the prior written consent of the Initial Purchaser,
offer, sell, or enter into any agreement to sell (as public debt securities
registered under the Securities Act or as debt securities which may be resold in
a transaction exempt from the registration requirements of the Securities Act in
reliance on Rule 144A thereunder (other than the Offered Securities) and which
are marketed through the use of a disclosure document containing substantially
the same information as a prospectus for similar debt securities registered
under the Securities Act), any notes of the Company secured by Spare Parts or
Appliances (or rights relating thereto).
(h) During the period of two years after the Closing Date, the Company
will, upon request, furnish to the Initial Purchaser and any holder of Offered
Securities or Exchange Securities, as the case may be, a copy of the
restrictions on transfer applicable to such Offered Securities or Exchange
Securities.
(i) During the period of two years after the Closing Date, the Company
will not, and will not permit any of its affiliates (as defined in Rule 144
under the Securities Act) to, resell any of the Offered Securities or Exchange
Securities that have been reacquired by any of them.
(j) During the period of two years after the Closing Date (or, if
shorter, the period beginning on the Closing Date and ending on the date on
which there ceases to be any Registrable Securities), the Company will not be or
become an open-end investment company, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8 of
the Investment Company Act, or a closed-end investment company required to be
registered, but not registered, under the Investment Company Act.
(k) Neither the Company nor any affiliate of the Company will sell,
offer for sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in the Securities Act) which would be integrated with the
sale of the Offered Securities in a manner which would require the registration
under the Securities Act of the Offered Securities sold to the Initial Purchaser
pursuant to this Agreement.
(l) The Company shall not take any action prohibited by Regulation M
under the Exchange Act in connection with the distribution of the Offered
Securities contemplated hereby.
5. OFFERING OF SECURITIES; RESTRICTIONS ON TRANSFER.
(a) The Initial Purchaser represents and warrants that it is an
"accredited investor" within the meaning of Regulation D under the Securities
Act. The Initial Purchaser represents, warrants and agrees with the Company that
(i) it has not solicited and will not solicit offers for, or offer or sell, the
Offered Securities by any form of "general solicitation" or "general
advertising" (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it has solicited and will solicit offers for the
Offered Securities only from, and has offered and will offer and sell the
Offered Securities only to (A) in the case of offers and sales inside the United
States, persons that it reasonably believes to be (1) QIBs in compliance with
Rule 144A under the Securities Act or (2) Institutional Accredited Investors
that, prior to their purchase of the Offered Securities, execute and deliver to
the Initial Purchaser a letter in the form annexed as Annex III to the Final
Memorandum and (B) in the case of offers and sales outside the United States,
persons other than U.S. persons (including dealers or other professional
fiduciaries in the United States acting on a discretionary basis for foreign
beneficial owners (other than an estate or trust)) in accordance with Regulation
S under the Securities Act; provided, in the case of each of clauses (A) and (B)
that, in purchasing such Offered Securities, such persons are deemed to have
represented and agreed as provided in the Final Memorandum under the caption
"Transfer Restrictions".
(b) The Initial Purchaser represents, warrants and agrees with respect
to offers and sales outside the United States that:
(i) it understands that no action has been or will be taken in any
jurisdiction by the Company that would permit a public offering of the
Offered Securities, or possession or distribution of either the Preliminary
Memorandum or the Final Memorandum or any other offering or publicity
material relating to the Offered Securities, in any country or jurisdiction
where action for that purpose is required;
(ii) it will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Offered
Securities or has in its possession or distributes either the Preliminary
Memorandum or the Final Memorandum or any other offering or publicity
material relating to the Offered Securities, in all cases at its own
expense;
(iii) the Offered Securities have not been registered under the
Securities Act and may not be offered or sold within the United States or
to, or for the account or benefit of, U.S. persons except in accordance
with Rule 144A or Regulation S under the Securities Act or pursuant to
another exemption from the registration requirements of the Securities Act;
(iv) it has offered the Offered Securities and will offer and sell the
Offered Securities (A) as part of its distribution at any time and (B)
otherwise until 40 days after the later of the commencement of the offering
and the Closing Date, only in accordance with Rule 903 of Regulation S or
as otherwise permitted in Section 5(a) hereof; neither the Initial
Purchaser, its affiliates nor any persons acting on its or their behalf
have engaged or will engage in any "directed selling efforts" (within the
meaning of Regulation S) with respect to the Offered Securities, and the
Initial Purchaser, its affiliates and any such persons have complied and
will comply with the offering restrictions requirement of Regulation S;
(v) it (A) has not offered or sold and, prior to the date six months
after the Closing Date, will not offer or sell any Offered Securities to
persons in the United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of investments
(as principal or agent) for the purposes of their businesses or otherwise
in circumstances which have not resulted and will not result in an offer to
the public in the United Kingdom within the meaning of the Public Offers of
Securities Regulations 1995; (B) has complied and will comply with all
applicable provisions of the Financial Services and Markets Act 2000 (the
"FSMA") with respect to anything done by it in relation to the Offered
Securities in, from or otherwise involving the United Kingdom; and (C) will
only communicate or cause to be communicated any invitation or inducement
to engage in investment activity (within the meaning of section 21 of the
FSMA) received by it in connection with the issue or sale of the Offered
Securities in circumstances in which section 21(1) of the FSMA does not
apply to the Company;
(vi) it agrees that, at or prior to confirmation of sales of the
Offered Securities, it will have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Offered Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Offered Securities covered hereby have not been registered under
the U.S. Securities Act of 1933 (the "Securities Act") and may not be
offered and sold within the United States or to, or for the account or
benefit of, U.S. persons (i) as part of their distribution at any time
or (ii) otherwise until 40 days after the later of the commencement of
the offering and the closing date, except in either case in accordance
with Regulation S (or Rule 144A if available) under the Securities
Act. Terms used above have the meaning given to them by Regulation S."
Terms used in this Section 5 have the meanings given to them by Regulation S.
6. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless the Initial
Purchaser, and each Person, if any, who controls the Initial Purchaser within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by the Initial Purchaser or any such controlling person in
connection with defending or investigating any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained in
the Preliminary Memorandum or the Final Memorandum (in each case, as
supplemented or amended) or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission based upon Initial
Purchaser Information or Policy Provider Information; PROVIDED, HOWEVER, that
the foregoing indemnity agreement with respect to the Preliminary Memorandum
shall not inure to the benefit of the Initial Purchaser, or to the benefit of
any person controlling the Initial Purchaser, with respect to any such losses,
claims, damages or liabilities asserted by a person who purchased Offered
Securities from the Initial Purchaser, if a copy of the Final Memorandum (as
then amended or supplemented if the Company shall have furnished or filed with
the Commission any amendments or supplements thereto) was not sent or given by
or on behalf of the Initial Purchaser to such person at or prior to the written
confirmation of the sale of such Offered Securities to such person, and if the
Final Memorandum (as so amended or supplemented) would have cured the defect
giving rise to such losses, claims, damages or liabilities unless such failure
to deliver the Final Memorandum was a result of noncompliance by the Company
with its delivery requirements set forth in Section 4(a) hereof.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, its directors, its officers and each person, if any, who controls the
Company within the meaning of either Section 15 of the Securities Act or Section
20 of the Exchange Act to the same extent as the foregoing indemnity from the
Company to the Initial Purchaser, but only with reference to the Initial
Purchaser Information.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either Section 6(a) or Section 6(b) hereof, such person (the
"INDEMNIFIED PARTY") shall promptly notify the person against whom such
indemnity may be sought (the "INDEMNIFYING PARTY") in writing. The indemnifying
party, upon request of the indemnified party, shall, and the indemnifying party
may elect to, retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and the indemnifying party shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel, (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, or (iii) the indemnifying party shall have
failed to retain counsel as required by the prior sentence to represent the
indemnified party within a reasonable amount of time. It is understood that the
indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the fees and expenses of
more than one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by the Initial
Purchaser in the case of parties indemnified pursuant to Section 6(a) hereof and
by the Company in the case of parties indemnified pursuant to Section 6(b)
hereof. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested in
writing an indemnifying party to reimburse the indemnified party for fees and
expenses of counsel as contemplated by the second and third sentences of this
Section 6(c), the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 90 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement, unless such fees and expenses are being disputed in
good faith. The indemnifying party at any time may, subject to the last sentence
of this Section 6(c), settle or compromise any proceeding described in this
Section 6(c) at the expense of the indemnifying party. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement (i) includes
an unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding and (ii) does not include a
statement as to, or an admission of, fault, culpability or a failure to act by
or on behalf of an indemnified party.
(d) To the extent the indemnification provided for in Section 6(a) or
Section 6(b) hereof is required to be made but is unavailable to an indemnified
party or insufficient in respect of any losses, claims, damages or liabilities,
then the applicable indemnifying party under such Section, in lieu of
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Initial
Purchaser, on the other hand, from the offering of the Offered Securities or
(ii) if the allocation provided by clause (i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (i) above but also the relative fault of
the Company on the one hand and the Initial Purchaser on the other hand in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Initial Purchaser on the other hand in connection with the offering of
the Offered Securities shall be deemed to be in the same respective proportions
as the proceeds from the offering of the Offered Securities received by the
Company (before deducting expenses) and the total underwriting discounts
received by the Initial Purchaser, bear to the aggregate offering price of the
Offered Securities. The relative fault of the Company on the one hand and of the
Initial Purchaser on the other hand shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or information supplied by the Initial
Purchaser, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(e) The Company and the Initial Purchaser agree that it would not be
just or equitable if contribution pursuant to this Section 6 were determined by
PRO RATA allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in Section 6(d) hereof. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in Section 6(d) hereof shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6, the Initial Purchaser shall not be required to
contribute any amount in excess of the amount by which the total price at which
the Offered Securities resold by it in the initial placement of such Offered
Securities were offered to investors exceeds the amount of any damages that the
Initial Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The indemnity and contribution
provisions contained in this Section 6 and the representations and warranties of
the Company contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of the Initial Purchaser or any person
controlling the Initial Purchaser or by or on behalf of the Company, its
officers or directors or any person controlling the Company, and (iii)
acceptance of and payment for any of the Offered Securities. The remedies
provided for in this Section 6 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified party at law or
in equity.
7. SURVIVAL OF CERTAIN REPRESENTATIONS AND OBLIGATIONS. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or its officers and of the Initial Purchaser set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any termination of this Agreement, any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchaser, the Company or
any of their respective representatives, officers or directors or any
controlling person and will survive delivery of and payment for the Offered
Securities. If for any reason the purchase of the Offered Securities by the
Initial Purchaser is not consummated, the Company shall remain responsible for
the expenses to be paid or reimbursed by it pursuant to Section 9 hereof and the
respective obligations of the Company and the Initial Purchaser pursuant to
Section 6 hereof shall remain in effect. If the purchase of the Offered
Securities by the Initial Purchaser is not consummated for any reason other than
solely because of the occurrence of the termination of the Agreement pursuant to
Section 8 hereof, the Company will reimburse the Initial Purchaser for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
reasonably incurred by the Initial Purchaser in connection with the offering of
such Offered Securities and will comply with its obligations under Sections 6
and 9 hereof.
8. TERMINATION. This Agreement shall be subject to termination by
notice given by the Initial Purchaser to the Company, if (a) after the execution
and delivery of this Agreement and prior to the Closing Date (i) trading
generally shall have been materially suspended or materially limited on or by,
as the case may be, any of the New York Stock Exchange, the American Stock
Exchange or the NASD, (ii) trading of any securities of the Company shall have
been suspended on any exchange or in any over-the-counter market, (iii) a major
disruption of settlements of securities or clearance services in the United
States that would materially impair settlement and clearance with respect to the
Offered Securities, (iv) any general moratorium on commercial banking activities
in New York shall have been declared by either Federal or New York State
authorities or (v) there shall have occurred any attack on, outbreak or
escalation of hostilities or act of terrorism involving, the United States, or
any change in financial markets or any calamity or crisis that, in each case, in
the judgment of the Initial Purchaser, is material and adverse and (b) in the
case of any of the events specified in clauses (a)(i) through (v), such event
singly or together with any other such event makes it, in the judgment of the
Initial Purchaser, impracticable to market the Offered Securities on the terms
and in the manner contemplated in the Final Memorandum.
9. PAYMENT OF EXPENSES. (a) As between the Company and the Initial
Purchaser, the Company shall pay all expenses incidental to the performance of
the Company's obligations under this Agreement, including the following:
(i) expenses incurred in connection with (A) qualifying the Offered
Securities or the Exchange Securities for offer and sale under the
applicable securities or "blue sky" laws of such jurisdictions in the
United States as the Initial Purchaser reasonably designates (including
filing fees and fees and disbursements of counsel for the Initial Purchaser
in connection therewith), (B) endeavoring to maintain such qualifications
in effect so long as required for the distribution of such Offered
Securities, (C) the review (if any) of the offering of the Offered
Securities or the Exchange Securities by the NASD, (D) the determination of
the eligibility of the Offered Securities or the Exchange Securities for
investment under the laws of such jurisdictions as the Initial Purchaser
may designate, (E) the preparation and distribution of any blue sky or
legal investment memorandum by counsel for the Initial Purchaser and (F)
qualifying the Offered Securities for trading in The PortalSM Market of the
Nasdaq Stock Market and any expenses incidental thereto;
(ii) expenses incurred in connection with the preparation and
distribution to the Initial Purchaser and the dealers (whose names and
addresses the Initial Purchaser will furnish to the Company) to which
Offered Securities or Exchange Securities may have been sold by the Initial
Purchaser on its behalf and to any other dealers upon request, of
amendments or supplements to the Final Memorandum (excluding Policy
Provider Information) in order to make the statements therein, in the light
of the circumstances when the Final Memorandum is delivered to a purchaser,
not materially misleading;
(iii) expenses incurred in connection with the preparation, printing
and distribution of the Preliminary Memorandum, the Final Memorandum and
any amendments thereof or supplements thereto (excluding Policy Provider
Information);
(iv) expenses incurred in connection with the preparation, printing
and distribution of this Agreement, the Offered Securities, the Exchange
Securities and the Operative Agreements;
(v) expenses incurred in connection with the delivery of the Offered
Securities to the Initial Purchaser;
(vi) reasonable fees and disbursements of the counsel and accountants
for the Company;
(vii) to the extent the Company is so required under any Operative
Agreement to which it is a party, the fees and expenses of the Trustee, the
Liquidity Provider and the Policy Provider and the reasonable fees and
disbursements of their respective counsel;
(viii) fees charged by rating agencies for rating the Offered
Securities or the Exchange Securities at the Company's request (including
annual surveillance fees related to the Offered Securities or the Exchange
Securities as long as they are outstanding);
(ix) reasonable fees and disbursements of counsel for the Initial
Purchaser in an amount to be agreed between the Initial Purchaser and the
Company;
(x) all fees and expenses relating to appraisals of the Pledged Spare
Parts; and
(xi) all other reasonable out-of-pocket expenses incurred by the
Initial Purchaser in connection with the transactions contemplated by this
Agreement.
(b) In connection with the offering, until the Initial Purchaser shall
have notified the Company of the completion of the resale of the Offered
Securities, neither the Company nor any of its affiliates has bid for or
purchased or will bid for or purchase, either alone or with one or more other
persons, for any account in which it or any of its affiliates has a beneficial
interest any Offered Securities; and neither it nor any of its affiliates will
make bids or purchases for the purpose of creating actual, or apparent, active
trading in, or of raising the price of, the Offered Securities.
10. NOTICES. All communications hereunder will be in writing and, if
sent to the Initial Purchaser, will be mailed, delivered or sent by facsimile
transmission and confirmed to Morgan Stanley & Co. Incorporated, 1585 Broadway,
New York, NY 10036, Attention: Equipment Finance Group, facsimile number (212)
761-0786 and, if sent to the Company, will be mailed, delivered or sent by
facsimile transmission and confirmed to it at 1600 Smith Street, HQSEO, Houston,
TX 77002, Attention: Treasurer and General Counsel, facsimile number (713)
324-2447.
11. SUCCESSORS. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the
controlling persons referred to in Section 6 hereof, and no other person will
have any right or obligation hereunder.
12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
13. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
14. JURISDICTION. Each of the parties hereto agrees that any legal
suit, action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby may be instituted in any U.S. federal or New
York State court in the Borough of Manhattan in The City of New York and each of
the parties hereto hereby irrevocably waives any objection which it may now or
hereafter have to the laying of venue of any such proceeding, and irrevocably
submits to the jurisdiction of such courts, with respect to actions brought
against it as defendant, in any suit, action or proceeding. Each of the parties
to this Agreement agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law in accordance with
applicable law.
15. LIBOR FOR INITIAL INTEREST PERIOD. The interest rate applicable
for the initial Interest Period under the Indenture shall be LIBOR, determined
by the Initial Purchaser as the rate for deposits in U.S. dollars for a period
of three months which appears on the Telerate Page 3750 as of 11:00 a.m., London
time, on December 4, 2002.
If the foregoing is in accordance with the Initial Purchaser's
understanding of our agreement, kindly sign and return to the Company one of the
counterparts hereof, whereupon it will become a binding agreement between the
Initial Purchaser and the Company in accordance with its terms.
Very truly yours,
CONTINENTAL AIRLINES, INC.
By:
-------------------------------------
Name: Gerald Laderman
Title: Senior Vice President-Finance
The foregoing Purchase Agreement
is hereby confirmed and accepted
as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
By:
-------------------------------------
Name:
Title:
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004
April 21, 2003
Continental Airlines, Inc.
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
Re: Continental Airlines, Inc. - Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as your counsel in connection with the above-referenced
Registration Statement on Form S-4 (the "Registration Statement") to be filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the "Act"), in respect of the registration under the Act of
the Floating Rate Secured Notes due 2007 (the "New Notes"), to be offered in
exchange for all outstanding Floating Rate Secured Notes due 2007 (the "Old
Notes"), issued pursuant to an indenture (the "Indenture") among Continental
Airlines, Inc. (the "Company"), Wilmington Trust Company, as trustee (the
"Trustee"), Morgan Stanley Capital Services Inc., as liquidity provider, and
MBIA Insurance Corporation, as policy provider.
In connection with this opinion letter, we have examined: the
Registration Statement, including the Prospectus which forms a part of the
Registration Statement, the Indenture, the forms of Old Note and New Note and
originals, or copies certified or otherwise identified to our satisfaction, of
such other documents, records, instruments and certificates of public officials
as we have deemed necessary or appropriate to enable us to render this opinion.
In addition, we have assumed: (i) that all signatures are genuine, (ii) that all
documents submitted to us as originals are genuine, (iii) that all copies
submitted to us conform to the originals, (iv) that the Indenture has been duly
authorized, executed and delivered by all parties thereto (other than the
Company) and is the legal, valid, binding and enforceable agreement of all
parties thereto (other than the Company) and (v) that the Old Notes were duly
and validly authenticated and delivered by the Trustee pursuant to the terms of
the Indenture.
We are members of the bar of the State of New York, and the opinion
set forth below is restricted to matters controlled by federal laws, the laws of
the State of New York and the General Corporation Law of the State of Delaware.
Based on the foregoing, it is our opinion that, when (i) the
applicable provisions of the Act and such "Blue Sky" or other state securities
laws as may be applicable shall have been complied with and (ii) the New Notes,
in the form included in the Indenture, have been duly executed and authenticated
in accordance with the Indenture, and duly issued and delivered by the Company
in exchange for an equal principal amount of Old Notes pursuant to the terms of
the Exchange Offer described in the Registration Statement, the New Notes will
be legal, valid, binding and enforceable obligations of the Company, subject to
(i) limitations imposed by bankruptcy, reorganization, moratorium, insolvency,
fraudulent conveyance, fraudulent transfer, preferential transfer and other laws
of general application relating to or affecting the enforceability of creditors'
rights and to general principles of equity, including, without limitation,
reasonableness, good faith and fair dealing, and considerations of
impracticability or impossibility or performance and defenses based upon
unconscionability (regardless of whether such enforceability is considered or
applied in a proceeding in equity or at law) and (b) the qualifications that the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the court
before which any proceeding therefor may be brought.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the heading
"Legal Matters" in the Prospectus included in the Registration Statement. In
giving such consent, we do not thereby admit that we are "experts" within the
meaning of the Act or the rules and regulations of the Securities and Exchange
Commission issued thereunder with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
/s/ Hughes Hubbard & Reed LLP
CONTINENTAL AIRLINES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS)
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
----------------- -------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
------ ----- ------- ------ ------- ------- -------
Earnings:
Earnings (Loss) Before Income Taxes and
Minority Interest (310) (254) (615) (114) 562 798 642
Plus:
Interest Expense 95 82 356 295 251 233 178
Capitalized Interest (7) (11) (36) (57) (57) (55) (55)
Amortization of Capitalized Interest 10 8 35 28 21 16 6
Portion of Rent Expense
Representative of Interest
Expense 207 218 852 834 778 714 461
------ ----- ------- ------ ------- ------- -------
(5) 43 592 986 1,555 1,706 1,232
------ ----- ------- ------ ------- ------- -------
Fixed Charges:
Interest Expense 95 82 356 295 251 233 178
Portion of Rent Expense
Representative of Interest
Expense 207 218 852 834 778 714 461
------ ----- ------- ------ ------- ------- -------
Total Fixed Charges 302 300 1,208 1,129 1,029 947 639
------ ----- ------- ------ ------- ------- -------
Coverage Adequacy (Deficiency) (307) (257) (616) (143) 526 759 593
====== ===== ======= ====== ======= ======= =======
Coverage Ratio NA NA NA NA 1.51 1.80 1.93
====== ===== ======= ====== ======= ======= =======
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Continental
Airlines, Inc. (the "Company") for the registration of $200,000,000 of Floating
Rate Secured Notes Due 2007 and to the incorporation by reference therein of our
reports dated January 15, 2003, with respect to the consolidated financial
statements and schedule of the Company included in its Annual Report (Form
10-K), as amended, for the year ended December 31, 2002, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
Houston, Texas
April 21, 2003
CONSENT OF INDENDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus Supplement
of Continental Airlines, Inc., relating to Floating Rate Secured Notes due 2007,
of our reports, dated January 31, 2003, each of which is included or
incorporated by reference in MBIA Inc.'s Annual Report on Form 10-K for the year
ended December 31, 2002, relating to our audits of: the consolidated financial
statements of MBIA Inc. and Subsidiaries as of December 31, 2002 and 2001 and
for each of the three years in the period ended December 31, 2002, the
consolidated financial statement schedules of MBIA Inc. and Subsidiaries as of
December 31, 2002 and 2001 and for each of the three years in the period ended
December 31, 2002; and, the consolidated financial statements of MBIA Insurance
Corporation and Subsidiaries as of December 31, 2002 and 2001 and for each of
the three years in the period ended December 31, 2002. We also consent to the
reference to our firm under the caption "Experts."
/s/ PRICEWATERHOUSECOOPERS LLP
April 22, 2003
SIMAT, HELLIESEN & EICHNER, INC.
90 Park Avenue
New York, NY 10016
April 21, 2003
CONTINENTAL AIRLINES, INC.
1600 Smith Street
Houston, TX 77002
Re: Registration Statement on Form S-4 of Continental
Airlines, Inc. relating to Floating Rate Secured Notes
Due 2007
-------------------------------------------------------
Ladies and Gentlemen:
We consent to the use of the reports, dated as of October 31, 2002 and
January 24, 2003, prepared by us with respect to the spare parts referred to
therein, to the summary of such reports in the text under the headings
"Prospectus Summary--Collateral", "Risk Factors--Risk Factors Relating to the
Notes and the Exchange Offer--Appraisal and Realizable Value of Collateral" and
"Description of the Appraisal" in the above-captioned Registration Statement and
to the references to our name under the headings "Prospectus
Summary--Collateral", "Risk Factors--Risk Factors Relating to the Notes and the
Exchange Offer--Appraisal and Realizable Value of Collateral", "Description of
the Notes--Collateral--Appraisals and Maintenance of Ratios", "Description of
the Appraisal" and "Experts" in such Registration Statement.
Sincerely,
SIMAT, HELLIESEN & EICHNER, INC.
/S/ CLIVE G. MEDLAND
----------------------------------------
Name: Clive G. Medland
Title: Senior Vice President
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ THOMAS J. BARRACK
---------------------------------------
(Signature)
Name: Thomas J. Barrack
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ GORDON M. BETHUNE
---------------------------------------
(Signature)
Name: Gordon M. Bethune
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ DAVID BONDERMAN
---------------------------------------
(Signature)
Name: David Bonderman
Dated and effective as of January 28, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ KIRBYJON H. CALDWELL
---------------------------------------
(Signature)
Name: Kirbyjon H. Caldwell
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ PATRICK FOLEY
---------------------------------------
(Signature)
Name: Patrick Foley
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ KAREN HASTIE WILLIAMS
---------------------------------------
(Signature)
Name: Karen Hastie Williams
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ LAWRENCE W. KELLNER
---------------------------------------
(Signature)
Name: Lawrence W. Kellner
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ DOUGLAS H. MCCORKINDALE
---------------------------------------
(Signature)
Name: Douglas H. McCorkindale
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ GEORGE G.C. PARKER
---------------------------------------
(Signature)
Name: George G.C. Parker
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ RICHARD W. POGUE
---------------------------------------
(Signature)
Name: Richard W. Pogue
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ WILLIAM S. PRICE
---------------------------------------
(Signature)
Name: William S. Price
Dated and effective as of January 27, 2003
POWER OF ATTORNEY
The undersigned director and/or officer of Continental Airlines, Inc.,
a Delaware corporation (the "Company"), does hereby constitute and appoint
Lawrence W. Kellner, Jeffery A. Smisek, Jennifer L. Vogel and Scott R. Peterson,
or any of them, as the undersigned's true and lawful attorneys-in-fact and
agents to do any and all things in the undersigned's name and behalf in the
undersigned's capacity as a director and/or officer of the Company, and to
execute any and all instruments for the undersigned and in the undersigned's
name and capacity as a director and/or officer that such person or persons may
deem necessary or advisable to enable the Company to comply with the Securities
Act of 1933, as amended, and any rules, regulations or requirements of the
Securities and Exchange Commission in connection with that certain Registration
Statement on Form S-4 relating to an exchange offer for the Company's Floating
Rate Secured Notes due 2007 (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for the
undersigned in the capacity as a director and/or officer of the Company the
Registration Statement, and any and all amendments thereto, including
post-effective amendments, and the undersigned does hereby ratify and confirm
all that such person or persons shall do or cause to be done by virtue hereof.
/S/ CHARLES A. YAMARONE
---------------------------------------
(Signature)
Name: Charles A. Yamarone
Dated and effective as of January 27, 2003
LETTER OF TRANSMITTAL
CONTINENTAL AIRLINES, INC.
OFFER TO EXCHANGE
FLOATING RATE SECURED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING
FLOATING RATE SECURED NOTES DUE 2007
Pursuant to the Prospectus, dated ____________, 2003.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
____________, 2003, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE EXPIRATION DATE.
BY MAIL: BY OVERNIGHT DELIVERY OR HAND:
Wilmington Trust Company Wilmington Trust Company
DC-1615 Reorg Services Corporate Trust Reorg Services
PO Box 8861 1100 North Market Street
Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615
FACSIMILE TRANSMISSION:
(302) 636-4145
CONFIRM BY TELEPHONE:
(302) 636-6472
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus, dated
[____________], 2003 (the "Prospectus"), of Continental Airlines, Inc., a
Delaware corporation (the "Company"), and this Letter of Transmittal (this
"Letter"), which together constitute the offer (the "Exchange Offer") to
exchange an aggregate principal amount of up to $200,000,000 of the Company's
Floating Rate Secured Notes due 2007, which have been registered under the
Securities Act of 1933, as amended (the "New Notes"), for an equal principal
amount of the Company's outstanding Floating Rate Secured Notes due 2007 (the
"Old Notes"). The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement, dated as of December 6, 2002, between the Company and the Initial
Purchaser named therein (the "Registration Rights Agreement").
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. New Notes will accrue interest at the variable rate per annum set
forth on the cover page of the Prospectus (plus, if applicable, 0.50% during the
period specified in the Registration Rights Agreement), subject to a maximum
rate of 12% applicable only for periods as to which the Company has failed to
pay accrued interest when due and failed to cure such nonpayment, from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid, from the date on which the Old Notes surrendered in exchange
therefor were originally issued (the "Issuance Date"). Interest on the New Notes
is payable on March 6, June 6, September 6 and December 6 of each year,
commencing on March 6, 2003. In the event that neither the consummation of the
Exchange Offer nor the declaration by the Securities and Exchange Commission of
a shelf registration statement relating to the sale of the Old Notes to be
effective (each, a "Registration Event") occurs on or prior to the 210th
calendar day following the Issuance Date, the interest rate borne by the Notes
shall be increased by 0.50% from and including such 210th day to but excluding
the earlier of (i) the date on which a Registration Event occurs and (ii) the
date on which all of the Notes otherwise become transferable by Noteholders
(other than affiliates or former affiliates of Continental) without further
registration under the Securities Act. In the event that such shelf registration
statement ceases to be effective at any time during the period specified by the
Registration Rights Agreement for more than 60 days, whether or not consecutive,
during any 12-month period, the interest rate borne by the Notes shall be
increased by 0.50% from the 61st day of the applicable 12-month period such
shelf registration statement ceases to be effective until such time as such
shelf registration statement again becomes effective (or, if earlier, the end of
such period specified by the Registration Rights Agreement). The Company
reserves the right, at any time or from time to time, to extend the Exchange
Offer at its discretion, in which event the term "Expiration Date" shall mean
the latest time and date to which the Exchange Offer is extended. The Company
shall notify the holders of the Old Notes of any extension by means of a press
release or other public announcement prior to 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
This Letter is to be completed by a holder of Old Notes if Old Notes are to
be forwarded herewith or if a tender of Old Notes, if available, is to be made
by book-entry transfer to the account maintained by Wilmington Trust Company
(the "Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the
procedure set forth in "The Exchange Offer" section of the Prospectus and an
Agent's Message (as defined below) is not delivered. Tenders by book-entry
transfer may also be made by delivering an Agent's Message in lieu of this
Letter. The term "Agent's Message" means a message, transmitted by DTC and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation
(as defined below), that states that DTC has received an express acknowledgment
from a participant tendering Old Notes that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by this
Letter, and that the Company may enforce this Letter against such participant.
Holders of Old Notes whose certificates are not immediately available, or who
are unable to deliver their certificates or confirmation of the book-entry
tender of their Old Notes into the Exchange Agent's account at DTC (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- --------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESS(ES) CERTIFICATE PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF REGISTERED HOLDER(S) NUMBER(S) OF OLD NOTE(S) TENDERED
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
- --------------------------------------------------------------------------------
Need to be completed by Holders of Notes being tendered by book-entry transfer
(see below).
Unless otherwise indicated in this column, it will be assumed that all Notes
represented by certificates delivered to the Exchange Agent are being tendered.
See Instruction 1.
- --------------------------------------------------------------------------------
_
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------
Account Number: Transaction Code Number:
------------------ ------------------
By crediting the Old Notes to the Exchange Agent's account at DTC's
Automated Tender Offer Program ("ATOP") and by complying with applicable
ATOP procedures with respect to the Exchange Offer, including transmitting
to the Exchange Agent a computer-generated Agent's Message in which the
holder of the Old Notes acknowledges and agrees to be bound by the terms
of, and makes the representations and warranties contained in, this Letter,
the participant in DTC confirms on behalf of itself and the beneficial
owners of such Old Notes all provisions of this Letter (including all
representations and warranties) applicable to it and such beneficial owner
as fully as if it had completed the information required herein and
executed and transmitted this Letter to the Exchange Agent.
_
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s):
------------------------------------------------
Window Ticket Number (if any):
--------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
Name of Institution which Guaranteed Delivery:
----------------------------------
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number: Transaction Code Number:
------------------ ------------------
_
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as agent and attorney-in-fact (with full knowledge that the Exchange Agent
also acts as Trustee under the Indenture (each as defined in the Prospectus))
with respect to the tendered Old Notes with full power of substitution to (i)
deliver certificates for such Old Notes to the Company, or transfer ownership of
such Old Notes on the account books maintained by DTC, together, in either such
case, with all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (ii) present such Old Notes for transfer on the
books of the registrar and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Notes, all in accordance with the
terms of the Exchange Offer. The power of attorney granted in this paragraph
shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the holder of such Old Notes nor any such other
person is engaged in, or intends to engage in a distribution of such New Notes,
or has an arrangement or understanding with any person to participate in the
distribution of such New Notes, and that neither the holder of such Old Notes
nor any such other person is an "affiliate", as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company.
The undersigned also acknowledges that this Exchange Offer is being made
based upon the Company's understanding of an interpretation by the staff of the
Securities and Exchange Commission (the "Commission"), as set forth in no-action
letters issued to third parties, that the New Notes issued in exchange for the
Old Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than a broker-dealer who
acquires such New Notes directly from the Company for resale pursuant to Rule
144A under the Securities Act or any other available exemption under the
Securities Act or any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holders'
business and such holders are not engaged in, and do not intend to engage in, a
distribution of such New Notes and have no arrangement with any person to
participate in the distribution of such New Notes. If a holder of Old Notes is
engaged in or intends to engage in a distribution of the New Notes or has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such holder could not rely on the
applicable interpretations of the staff of the Commission and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. If the undersigned is a broker-dealer
that will receive New Notes for its own account in exchange for Old Notes, it
represents that the Old Notes to be exchanged for the New Notes were acquired by
it as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer -- Withdrawal of Tenders"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at DTC. Similarly,
unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, please send the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) to the
undersigned at the address shown above in the box entitled "Description of Old
Notes".
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
- ----------------------------------- -----------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if To be completed ONLY if
certificates for Old Note not certificates for Old Notes not
exchanged and/or New Notes are to exchanged and/or New Notes are to
be issued in the name of and sent be sent to someone other than the
to someone other than the person(s) person(s) whose signature(s)
whose signature(s) appear(s) on appear(s) on this letter below, or
this Letter below, or if Old Notes to the undersigned at an address
delivered by book-entry transfer other than shown in the box
which are not accepted for exchange entitled "Description of Old Notes"
are to be returned by credit to an on this Letter above. indicated
account maintained at DTC other above.
than the account indicated above.
Issue New Notes and/or Old Notes to: Mail New Notes and/or Old Notes to:
Name(s): Name(s):
---------------------------- ----------------------------
(Please Type or Print) (Please Type or Print)
---------------------------- ----------------------------
(Please Type or Print) (Please Type or Print)
Address: Address:
---------------------------- ----------------------------
---------------------------- ----------------------------
(Including Zip Code) (Including Zip Code)
- ------------------------------------
Social Security or Employer
Identification Number
Credit unexchanged Old Notes
delivered by book-entry transfer to
DTC account set forth below.
- ------------------------------------
(DTC Account Number,
if applicable)
- ----------------------------------- -----------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING ANY BOX ABOVE.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
Dated: , 2003
-----------------------------
- -------------------------------------------------------------------------------x
- -------------------------------------------------------------------------------x
(Signature(s) of Owner) (Date)
Area Code and Telephone Number:
-------------------------------------------------
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old
Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s):
------------------------------------------------------------------------
------------------------------------------------------------------------
(Please Type or Print)
Capacity:
-----------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by an Eligible Institution:
-----------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name and Firm)
Dated: , 2003
------------------------------
- --------------------------------------------------------------------------------
INSTRUCTIONS
Forming part of the Terms and Conditions of
the Offer to Exchange
Floating Rate Secured Notes due 2007,
which have been registered under the Securities Act of 1933,
for any and all outstanding Floating Rate Secured Notes due 2007.
1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders of Old Notes if certificates are
to be forwarded herewith or if tenders are to be made pursuant to the procedures
for delivery by book-entry transfer set forth in "The Exchange Offer--Book-Entry
Transfer" section of the Prospectus and an Agent's Message is not delivered.
Tenders by book-entry transfer may also be made by delivering an Agent's Message
in lieu of this Letter. Certificates for all physically tendered Old Notes, or
Book-Entry Confirmation, as the case may be, as well as a properly completed and
duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof)
and any other documents required by this Letter, must be received by the
Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures set forth below. Old Notes tendered hereby must be in integral
multiples of $1,000.
Holders of Old Notes whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange trading days after the date of execution of the Notice of Guaranteed
Delivery, the certificates for all physically tendered Old Notes, or a
Book-Entry Confirmation, as the case may be, together with a properly completed
and duly executed Letter (or facsimile thereof or Agent's Message in lieu
thereof) and any other documents required by this Letter will be deposited by
the Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or Book-Entry
Confirmation, as the case may be, together with a properly completed and duly
executed Letter (or facsimile thereof or Agent's Message in lieu thereof) and
all other documents required by this Letter, are received by the Exchange Agent
within three New York Stock Exchange trading days after the date of execution of
the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that the mailing be made
sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY
BOOK-ENTRY TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of Old
Notes--Principal Amount Tendered". A reissued certificate representing the
balance of nontendered Old Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this Letter, promptly after the
Expiration Date. All of the Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
3. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder of the Old Notes
specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificates must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder of
any certificates specified herein, such certificates must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name of the registered holder appears on the certificates and the signatures on
such certificates must be guaranteed by an Eligible Institution.
If this Letter or any certificates or bond powers are signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and, unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., by a commercial bank or trust company
having an office or correspondent in the United States or by an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934 (an "Eligible Institution").
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Old Notes are tendered: (i) by a registered holder of
Old Notes (which term, for purposes of the Exchange Offer, includes any
participant in the DTC system whose name appears on a security position listing
as the holder of such Old Notes) who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on this Letter, or
(ii) for the account of an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and/or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. A holder of
Old Notes tendering Old Notes by book-entry transfer may request that Old Notes
not exchanged be credited to such account maintained at DTC as such holder of
Old Notes may designate hereon. If no such instructions are given, such Old
Notes not exchanged will be returned to the name or address of the person
signing this Letter.
5. TAXPAYER IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Exchange Agent with such
Holders correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which, in the case of a tendering holder who is an individual, is his or
her social security number. If a tendering holder does not provide the Exchange
Agent with its current TIN or an adequate basis for an exemption, such tendering
holder may be subject to backup withholding in an amount currently equal to 30%
of all reportable payments made after the exchange. If withholding results in an
overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Exchange Agent a completed Form W-8 BEN,
Certificate of Foreign Status. These forms may be obtained from the Exchange
Agent. If the Old Notes are in more than one name or are not in the name of the
actual owner, such holder should consult the W-9 Guidelines for information on
which TIN to report. If such holder does not have a TIN, such holder should
consult the W-9 Guidelines for instructions on applying for a TIN, check the box
in Part 1 of the Substitute Form W-9 and write "applied for" in lieu of its TIN.
Note: checking this box and writing "applied for" on the form means that such
holder has already applied for a TIN or that such holder intends to apply for
one in the near future. If such holder does not provide its TIN to the Exchange
Agent within 60 days, backup withholding will begin and continue until such
holder furnishes its TIN to the Exchange Agent.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged are to be delivered to, or are
to be registered or issued in the name of, any person other than the registered
holder of the Old Notes tendered hereby, or if tendered Old Notes are registered
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed for any reason other than the transfer of Old Notes to
the Company or its order pursuant to the Exchange Offer, the amount of any such
transfer taxes (whether imposed on the registered holder or any other persons)
will be payable by the tendering holder. If satisfactory evidence of payment of
such taxes or exemption therefrom is not submitted herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it is not necessary for transfer
tax stamps to be affixed to the Old Notes specified in this Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
- --------------------------------------------------------------------------------
SUBSTITUTE FORM
W-9
Requestfor Taxpayer Identification Number (TIN) and Certification
Give form to the requester. Do not send to the IRS.
- --------------------------------------------------------------------------------
NAME
---------------------------------------------------------------------------
BUSINESS NAME, IF DIFFERENT FROM ABOVE
-----------------------------------------
CHECK APPROPRIATE BOX:
_ _ _
|_| Individual/Sole proprietor |_| Corporation |_| Partnership
_
|_| Other
----------------------------------------------
ADDRESS:
-----------------------------------------------------------------------
ADDRESS (LINE 2):
--------------------------------------------------------------
_
CHECK THE BOX IF YOU ARE EXEMPT FROM WITHHOLDING |_|
- --------------------------------------------------------------------------------
PART 1 - PLEASE PROVIDE YOUR TIN IN THE BOX BELOW AND CERTIFY BY SIGNING AND
DATING BELOW. For individuals, your TIN is your social security number. However,
for a resident alien, sole proprietor, or disregarded entity, see the W-9
Guidelines. For other entities, it is your employer identification number (EIN).
If you do not have a number, see HOW TO GET A TIN in the W-9 Guidelines.
Tax Identification Number (SSN or EIN)
- ------------------------------------------
NOTE: If the account is in more than one name, see the chart in the W-9
Guidelines on whose number to enter.
- --------------------------------------------------------------------------------
PART 2 - CERTIFICATION
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), AND
2. I am not subject to backup withholding because: (A) I am exempt from backup
withholding, or (B) I have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (C) the IRS has notified me
that I am no longer subject to backup withholding, AND
3. I am a U.S. person (including a U.S. resident alien).
CERTIFICATION INSTRUCTIONS. You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest and dividends on your tax return.
Signature Date
----------------------------------- -----------------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 30% OF ANY REPORTABLE PAYMENT MADE TO YOU. PLEASE REVIEW
THE W-9 GUIDELINES FOR ADDITIONAL DETAILS.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER--
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer Identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the Payer.
- ------------------------------------------------------------ ------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION NUMBER OF--
NUMBER OF -- NUMBER OF--
- ------------------------------------------------------------ ------------------------------------------------------------
1. Individual The individual. 6. Sole proprietorship or The owner
single-owner LLC
2. Two or more individuals The actual owner of the 7. A valid trust, trust, The legal entity
(joint account) account or, if combined estate, or pension trust
funds, any one of the
individuals
3. Custodian account of a The minor 8. Corporate or LLC electing The corporation
minor (Uniform Gift to corporate status of Form
Minors Act) 8832
4. a.The usual revocable The grantor-trustee 9. Association, club, The organization
savings trust grantor religious, charitable,
is also trustee) educational or other
tax-exempt organization
b.So-called trust The actual owner
account that is not a
legal or valid trust
under state law
5. Sole proprietorship or The owner 10. Partnership The partnership
single-owner LLC
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as State
or local government,
school district, or
prison) that receives
agricultural program
payments
List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN,
that person's number must be furnished.
Circle the minor's name and furnish the minor's social security number.
YOU MUST SHOW YOUR INDIVIDUAL NAME, but you may also enter your business or "DBA" name. You may use either your SSN or EIN
(if you have one).
List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal
representative or trustee unless the legal entity itself is not designated in the account title.)
NOTE:If no name is circled when there is more than one name, the number will be considered to be that of the first name
listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Section references are to the Internal Revenue Code.
HOW TO GET A TIN 1. The treaty country. Generally,
this must be the same treaty under
If you don't have a taxpayer If you which you claimed exemption from
don't have a taxpayer tax as a nonresident alien.
identification number or you don't 2. The treaty article addressing
know your number, obtain Form SS-5, the income.
Application for a Social Security 3. The article number (or
Card, from your local Social location) in the tax treaty that
Security Administration office or contains the saving clause and its
get this form on-line at exceptions.
WWW.SSA.GOV/ONLINE/SS5.HTML. You 4. The type and amount of income
may also get this form by calling that qualifies for the exemption
1-800-772-1213. Use Form W-7 to from tax.
apply for an ITIN (for resident 5. Sufficient facts to justify
aliens not eligible for an SSN), or the exemption from tax under the
Form SS-4, Application for Employer terms of the treaty article.
Identification Number, to apply for
an EIN. You can get Forms SS-4 and PAYEES EXEMPT FROM BACKUP WITHHOLDING
W-7 from the IRS by calling Backup withholding is not required
1-800-TAX-FORM or from the IRS on any payments made to the
website at WWW.IRS.GOV. following payees:
1. An organization exempt from
NONRESIDENT ALIEN WHO BECOMES A tax under section 501(a), any IRA,
RESIDENT ALIEN or a custodial account under
Generally, only a nonresident alien section 403(b)(7) if the account
individual may use the terms of a satisfies the requirements of
tax treaty to reduce or eliminate section 401(f)(2);
U.S. tax on certain types of 2. The United States or any of
income. However, most tax treaties its agencies or instrumentalities;
contain a provision known as a 3. A state, the District of
"saving clause." Exceptions Columbia, a possession of the
specified in the saving clause may United States, or any of their
permit an exemption from tax to political subdivisions or
continue for certain types of instrumentalities;
income even after the recipient has 4. A foreign government or any of
otherwise become a U.S. resident its political subdivisions,
alien for tax purposes. agencies, or instrumentalities; or
5. An international organization
If you are a U.S. resident alien or any of its agencies or
who is relying on an exception instrumentalities.
contained in the saving clause of a
tax treaty to claim an exemption Payments made to the following
from U.S. tax on certain types of payees MAY BE EXEMPT from backup
income, you must attach a statement withholding:
that specifies the following five
items:
6. A corporation; payee, the acquisition or
7. A foreign central bank of abandonment of secured property,
issue; cancellation of debt, or
8. A dealer in securities or contributions made to an IRA or
commodities required to register in Archer MSA. The IRS uses the
the United States, the District of numbers for identification purposes
Columbia, or a possession of the and to help verify the accuracy of
United States; tax returns. The IRS may also
9. A futures commission merchant provide this information to the
registered with the Commodity Department of Justice for civil and
Futures Trading commission; criminal litigation, and to cities,
10. A real estate investment states, and the District of
trust; Columbia to carry out their tax
11. An entity registered at all laws. The IRS may also disclose
times during the tax year under the this information to other countries
Investment Company Act of 1940; under a Tax Treaty or to Federal
12. A common trust fund operated and state agencies to enforce
by a bank under section 584(a); Federal nontax criminal laws and to
13. A financial institution; combat terrorism.
14. A middleman known in the
investment community as a nominee Payees must provide taxpayer
or custodian; or identification numbers whether or
15. A trust exempt from tax under not they are required to file a tax
section 664 or described in return. Payers must generally
section 4947. withhold 30.5% of taxable interest,
INTEREST AND DIVIDEND PAYMENTS. All dividend, and certain other
of the payees listed above, except payments to a payee who does not
for that listed in item 9, are furnish a taxpayer identification
exempt from backup withholding for number to a payer. Certain
interest and dividend payments. penalties may also apply.
BROKER TRANSACTIONS. All of the
payees listed in items 1 through 13 PENALTIES
are exempt if the payment is for (1) FAILURE TO FURNISH TIN. If a
broker transactions. A person payee fails to furnish the
registered under the Investment correct TIN to a payer, he or
Advisors Act of 1940 who regularly she is subject to a penalty of
acts as a broker is also exempt. $50 for each such failure
PAYMENTS REPORTABLE UNDER SECTIONS unless the failure is due to
6041 AND 6041A. These payments are reasonable cause and not to
generally exempt from backup willful neglect.
withholding only if made to payees (2) CIVIL PENALTY FOR FALSE
listed in items 1 through 7. INFORMATION WITH RESPECT TO
BARTER EXCHANGE TRANSACTIONS AND WITHHOLDING A payee who makes
PATRONAGE DIVIDENDS. Only payees false statements with no
listed in items 1 through 5 are reasonable basis that results
exempt from backup withholding on in no backup withholding is
these payments. subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR
Exempt Payees described above FALSIFYING INFORMATION
should file a Substitute Form W-9 Willfully falsifying
to avoid possible erroneous backup certifications or affirmations
withholding. EXEMPT PAYEES SHOULD may subject a payee to
FURNISH THE APPROPRIATE TIN, CHECK criminal penalties including
THE BOX FOR TAXPAYERS EXEMPT FROM fines and/or imprisonment.
BACKUP WITHHOLDING, AND SIGN AND (4) MISUSE OF TINS. If the payer
RETURN THE FORM TO THE PAYER. discloses or uses TINs in
violation of Federal law, the
PRIVACY ACT NOTICE payer may be subject to civil
Section 6109 requires a payee to and criminal penalties.
give his or her correct TIN to
persons who must file information FOR ADDITIONAL INFORMATION CONTACT
returns with the IRS to report YOUR TAX CONSULTANT OR THE INTERNAL
interest, dividends, and certain REVENUE SERVICE
other income paid to the payee,
mortgage interest paid by the
NOTICE OF GUARANTEED DELIVERY
FOR
CONTINENTAL AIRLINES, INC.
FLOATING RATE SECURED NOTES DUE 2007
This form or one substantially equivalent hereto must be used to accept the
Exchange Offer of Continental Airlines, Inc. (the "Company") made pursuant to
the Prospectus, dated [____________], 2003 (the "Prospectus"), and the enclosed
Letter of Transmittal (the "Letter of Transmittal") if certificates for Old
Notes are not immediately available or if the procedure for book-entry transfer
cannot be completed on a timely basis or time will not permit all required
documents to reach Wilmington Trust Company (the "Exchange Agent") prior to 5:00
p.m., New York City time, on the Expiration Date of the Exchange Offer. Such
form may be delivered or transmitted by facsimile transmission, mail or hand
delivery to the Exchange Agent as set forth below. In addition, in order to
utilize the guaranteed delivery procedure to tender Old Notes pursuant to the
Exchange Offer, a completed, signed and dated Letter of Transmittal (or
facsimile thereof or Agent's Message in lieu thereof) must also be received by
the Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration
Date. Capitalized terms not defined herein are defined in the Prospectus.
DELIVERY TO: Wilmington Trust Company, Exchange Agent
BY MAIL: BY OVERNIGHT DELIVERY OR HAND:
Wilmington Trust Company Wilmington Trust Company
DC-1615 Reorg Services Corporate Trust Reorg Services
PO Box 8861 1100 North Market Street
Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615
FACSIMILE TRANSMISSION:
(302) 636-4145
CONFIRM BY TELEPHONE:
(302) 636-6472
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
Ladies and Gentlemen:
Upon the terms and conditions set forth in the Prospectus and the
accompanying Letter of Transmittal, the undersigned hereby tenders to the
Company the principal amount of Old Notes set forth below, pursuant to the
guaranteed delivery procedure described in "The Exchange Offer--Guaranteed
Delivery Procedures" section of the Prospectus.
Principal Amount of Old Notes Name(s) of Record Holder(s):
Tendered:
------------------------------------
$
----------------------------------- ------------------------------------
Certificate Nos. (if available): Address(es):
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
If Old Notes will be delivered by Area Code and Telephone Number(s):
book-entry transfer to the
Depositary Trust Company, provide ------------------------------------
account number.
------------------------------------
Account Signature(s):
Number
----------------------------- ------------------------------------
------------------------------------
Dated:
------------------------------
THE ACCOMPANYING GUARANTEE MUST BE COMPLETED.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or any "eligible guarantor institution" within the meaning of Rule
17Ad-15 of the Securities Exchange Act of 1934, as amended, hereby guarantees to
deliver to the Exchange Agent, at one of its addresses set forth above, the
certificates representing all tendered Old Notes, in proper form for transfer,
or a Book-Entry Confirmation, together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof), with any required signature guarantees, and any other documents
required by the Letter of Transmittal within three New York Stock Exchange
trading days after the date of execution ofhis Notice of Guaranteed Delivery.
Name of Firm:
----------------------- ------------------------------------
(Authorized Signature)
Address:
----------------------------
- ------------------------------------
Area Code and
Telephone
Number:
----------------------------- Title:
------------------------------
Name:
------------------------------
Date:
------------------------------
CONTINENTAL AIRLINES, INC.
OFFER TO EXCHANGE
FLOATING RATE SECURED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING
FLOATING RATE SECURED NOTES DUE 2007
To: Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
Upon and subject to the terms and conditions set forth in the Prospectus,
dated [_________], 2003 (the "Prospectus"), and the enclosed Letter of
Transmittal (the "Letter of Transmittal"), an offer to exchange (the "Exchange
Offer") the registered Floating Rate Secured Notes due 2007 (the "New Notes")
for any and all outstanding Floating Rate Secured Notes due 2007 (the "Old
Notes") (CUSIP Nos. 210795PE4, U21105AD0 and 210795PF1) is being made pursuant
to such Prospectus. The Exchange Offer is being made in order to satisfy certain
obligations of Continental Airlines, Inc. (the "Company") contained in the
Exchange and Registration Rights Agreement dated as of December 6, 2002, between
the Company and the initial purchaser referred to therein.
We are requesting that you contact your clients for whom you hold Old Notes
regarding the Exchange Offer. For your information and for forwarding to your
clients for whom you hold Old Notes registered in your name or in the name of
your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated [__________], 2003;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time
will not permit all required documents to reach the Exchange Agent prior to
the Expiration Date (as defined below) or if the procedure for book-entry
transfer cannot be completed on a timely basis; and
4. A form of letter which may be sent to your clients for whose
account you hold Old Notes registered in your name or the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Exchange Offer.
Your prompt action is requested. The Exchange Offer will expire at 5:00
p.m., New York City time, on [___________], 2003 (the "Expiration Date") (30
calendar days following the commencement of the Exchange Offer), unless extended
by the Company. The Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time before 5:00 p.m., New York City time, on the Expiration
Date.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu
thereof), with any required signature guarantees and any other required
documents, should be sent to the Exchange Agent and certificates representing
the Old Notes should be delivered to the Exchange Agent, all in accordance with
the instructions set forth in the Letter of Transmittal and the Prospectus.
If holders of Old Notes wish to tender, but it is impracticable for them to
forward their certificates for Old Notes prior to the expiration of the Exchange
Offer or to comply with the book-entry transfer procedures on a timely basis, a
tender may be effected by following the guaranteed delivery procedures described
in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures".
Additional copies of the enclosed materials may be obtained from Wilmington
Trust Company, the Exchange Agent, at Wilmington Trust Company, Corporate Trust
Reorg Services, 1100 North Market Street, Wilmington, Delaware 19890-0001, phone
(302) 636-6472 and facsimile (302) 636-4145.
CONTINENTAL AIRLINES, INC.
CONTINENTAL AIRLINES, INC.
OFFER TO EXCHANGE
FLOATING RATE SECURED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING
FLOATING RATE SECURED NOTES DUE 2007
To Our Clients:
Enclosed for your consideration is a Prospectus of Continental Airlines,
Inc., a Delaware corporation (the "Company"), dated [_______], 2003 (the
"Prospectus"), and the related Letter of Transmittal (the "Letter of
Transmittal") relating to the offer to exchange (the "Exchange Offer") the
registered Floating Rate Secured Notes due 2007 (the "New Notes") for any and
all outstanding Floating Rate Secured Notes due 2007 (the "Old Notes ") (CUSIP
Nos. 210795PE4, U21105AD0 and 21079PF1), upon the terms and subject to the
conditions described in the Prospectus and the Letter of Transmittal. The
Exchange Offer is being made in order to satisfy certain obligations of the
Company contained in the Exchange and Registration Rights Agreement dated as of
December 6, 2002, between the Company and the initial purchaser referred to
therein.
This material is being forwarded to you as the beneficial owner of the Old
Notes carried by us in your account but not registered in your name. A tender of
such Old Notes may only be made by us as the holder of record and pursuant to
your instructions.
Accordingly, we request instructions as to whether you wish us to tender on
your behalf the Old Notes held by us for your account, pursuant to the terms and
conditions set forth in the enclosed Prospectus and Letter of Transmittal.
Your instructions should be forwarded to us as promptly as possible in
order to permit us to tender the Old Notes on your behalf in accordance with the
provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on [______________], 2003 (the "Expiration Date") (30
calendar days following the commencement of the Exchange Offer), unless extended
by the Company. Any Old Notes tendered pursuant to the Exchange Offer may be
withdrawn at any time before 5:00 p.m., New York City time, on the Expiration
Date.
Your attention is directed to the following:
1. The Exchange Offer is for any and all Old Notes.
2. The Exchange Offer is subject to certain conditions set forth in
the Prospectus in the section captioned "The Exchange Offer--Conditions".
3. Any transfer taxes incident to the transfer of Old Notes from the
holder to the Company will be paid by the Company, except as otherwise
provided in the Instructions in the Letter of Transmittal.
4. The Exchange Offer expires at 5:00 p.m., New York City time, on the
Expiration Date, unless extended by the Company.
If you wish to have us tender your Old Notes, please so instruct us by
completing, executing and returning to us the instruction form set forth below.
The Letter of Transmittal is furnished to you for information only and may not
be used directly by you to tender Old Notes.
Instructions with Respect to the Exchange Offer
The undersigned acknowledge(s) receipt of your letter enclosing the
Prospectus, dated [________________], 2003, of Continental Airlines, Inc., a
Delaware corporation, and the related specimen Letter of Transmittal.
- --------------------------------------------------------------------------------
This will instruct you to tender the number of Old Notes indicated below
held by you for the account of the undersigned, pursuant to the terms and
conditions set forth in the Prospectus and the related Letter of Transmittal.
(Check one).
The undersigned expressly agrees to be bound by the enclosed Letter of
Transmittal and that such Letter of Transmittal may be enforced against the
undersigned.
_
Box 1 |_| Please tender my Old Notes held by you for my account. If I do
not wish to tender all of the Old Notes held by you for my
account, I have identified on a signed schedule attached hereto
the number of Old Notes that I do not wish tendered.
_
Box 2 |_| Please do not tender any Old Notes held by you for my account.
- --------------------------------------------------------------------------------
Date , 2003
------------------------ ------------------------------------
Signature(s)
------------------------------------
------------------------------------
Please print name(s) here
------------------------------------
Area Code and Telephone No.
Unless a specific contrary instruction is given in the space provided, your
signature(s) hereon shall constitute an instruction to us to tender all Old
Notes.