View:
As filed with the Securities and Exchange Commission on May 24,
1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Continental Airlines, Inc.
Continental Airlines Finance Trust
(Exact name of registrant as specified in its charter)
Delaware 74-2099724
Delaware 51-6502566
(State or other (I.R.S. employer
jurisdiction of identification
incorporation or number)
organization)
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
(713) 834-2950
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
Jeffery A. Smisek, Esq.
Senior Vice President, General Counsel and Secretary
Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
(713) 834-2950
(Name, address, including zip code, and telephone number,
including
area code, of agent for service)
Copies of correspondence to:
Michael L. Ryan, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes
effective.
If the only securities being registered on this Form are
being
offered pursuant to dividend or interest reinvestment plans,
please
check the following box: ( )
If any of the securities being registered on this Form are
to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, other than the securities
offered
only in connection with dividend or interest reinvestment plans,
check the following box. (x)
If this Form is filed to register additional securities for
an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ( )
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.(
)
If delivery of the prospectus is expected to be made
pursuant
to Rule 434, please check the following box. ( )
CALCULATION OF REGISTRATION FEE
PROPOSED
PROPOSED
MAXIMUM
MAXIMUM
OFFERING
AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER
OFFERING
SECURITIES TO BE REGISTERED REGISTERED (1) UNIT (4)
PRICE (4)
Convertible Preferred
Securities of Continental
Airlines Finance Trust 4,997,000 $66.75(1)
$333,549,750(1)
Convertible Subordinated
Deferrable Interest
Debentures of Continental
Airlines, Inc. (2) --
--
Class B common stock of
Continental Airlines,
Inc.(4) (3) --
--
Preferred Securities
Guarantee(5)
Total 4,997,000 100% $333,549,750
AMOUNT OF
REGISTRATION FEE(1)
$115,018
- - - --
__
$115,018
(1) Estimated solely for the purpose of computing the
registration
fee in accordance with Rule 457(c) of the Securities Act.
(2) $250,618,550 in aggregate principal amount of 8-1/2%
Convertible Subordinated Deferrable Interest Debentures (the
"Convertible Subordinated Debentures") of Continental
Airlines, Inc. (the "Company") were issued and sold to
Continental Airlines Finance Trust (the "Trust") in
connection
with the issuance by the Trust of 4,997,000 of its 8-1/2%
Convertible Preferred Securities (the "Preferred
Securities").
The Convertible Subordinated Debentures may be distributed,
under certain circumstances, to the holders of Preferred
Securities for no additional consideration.
(3) Such indeterminate number of shares of Continental Airlines,
Inc. Class B common stock as may be issuable upon conversion
of the Preferred Securities registered hereunder, including
such shares as may be issuable pursuant to anti-dilution
adjustments.
(4) Exclusive of accrued interest and distributions, if any.
(5) Includes the rights of holders of the Preferred Securities
under the Preferred Securities Guarantee and certain back-up
undertakings as described in the Registration Statement. No
separate consideration will be received for the Preferred
Securities Guarantee and the back-up undertakings.
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.
Information contained herein is subject to completion or
amendment.
A registration statement relating to these securities has been
filed with the Securities and Exchange Commission. These
securities may not be sold nor may offers to buy be accepted
prior
to the time the registration statement becomes effective. This
prospecuts shall not constitute an offer to sell or the
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION - DATED MAY 24, 1996
PROSPECTUS
4,997,000 Preferred Securities
Continental Airlines Finance Trust
8 1/2% Convertible Trust Originated Preferred
Securities SM (Convertible TOPrS SM)
(Liquidation Amount $50 per Preferred Security)
guaranteed to the extent set forth herein by,
and convertible into Class B common stock of,
Continental Airlines, Inc.
This Prospectus relates to the offering for resale of the 8
1/2% Convertible Trust Originated Preferred Securities SM (the
"Convertible TOPrS SM" or "Preferred Securities"), liquidation
amount $50 per Preferred Security, which represent preferred
undivided beneficial interests in the assets of Continental
Airlines Finance Trust, a statutory business trust formed under
the
laws of the State of Delaware (the "Issuer" or the "Trust") and
the
shares of Class B common stock, par value $.01 per share ("Class
B
common stock") of Continental Airlines, Inc., a Delaware
corporation ("Continental" or the "Company"), issuable upon
conversion of the Preferred Securities. The Preferred Securities
were issued and sold (the "Original Offering") on November 28,
1995
and December 12, 1995 (the "Original Offering Date") to the
Initial
Purchasers (as defined herein, see "Selling Holders") and were
simultaneously sold by the Initial Purchasers in transactions
exempt from the registration requirements of the Securities Act
of
1933, as amended (the "Securities Act"), in the United States to
persons reasonably believed by the Initial Purchasers to be
qualified institutional buyers as defined in Rule 144A under the
Securities Act and outside the United States to non-U.S. persons
in
offshore transactions in reliance on Regulation S under the
Securities Act. Continental directly or indirectly owns all the
common securities (the "Common Securities" and, together with the
Preferred Securities, the "Trust Securities") representing
undivided beneficial interests in the assets of the Issuer. The
Issuer exists for the sole purpose of issuing the Trust
Securities
and using the proceeds thereof to purchase from Continental its 8
1/2% Convertible Subordinated Deferrable Interest Debentures due
2020 (the "Convertible Subordinated Debentures") having the terms
described herein. Upon an event of default under the Declaration
(as defined herein), the holders of Preferred Securities will
have
a preference over the holders of the Common Securities with
respect
to payments in respect of distributions and payments upon
redemption, liquidation and otherwise.
The Preferred Securities and the Class B common stock
issuable
upon conversion of the Preferred Securities (the "Offered
Securities") may be offered and sold from time to time by the
holders named herein or by their transferees, pledgees, donees or
their successors (collectively, the "Selling Holders") pursuant
to
this Prospectus. The Offered Securities may be sold by the
Selling
Holders from time to time directly to purchasers or through
agents,
underwriters or dealers. See "Plan of Distribution" and "Selling
Holders." If required, the names of any such agents or
underwriters involved in the sale of the Offered Securities and
the
applicable agent's commission, dealer's purchase price or
underwriter's discount, if any, will be set forth in an
accompanying supplement to this Prospectus (the "Prospectus
Supplement"). The Selling Holders will receive all of the net
proceeds from the sale of the Offered Securities and will pay all
underwriting discounts and selling commissions, if any,
applicable
to any such sale. The Company is responsible for payment of all
other expenses incident to the offer and sale of the Offered
Securities. The Selling Holders and any broker-dealers, agents
or
underwriters which participate in the distribution of the Offered
Securities may be deemed to be "Underwriters" within the meaning
of
the Securities Act, and any commission received by them and any
profit on the resale of the Offered Securities purchased by them
may be deemed to be underwriting commissions or discounts under
the
Securities Act. See "Plan of Distribution" for a description of
indemnification arrangements.
(continued on following page)
"Convertible Trust Originated Preferred Securities" and
"Convertible TOPrS" are service marks of Merrill Lynch & Co.,
Inc.
Prospective investors should carefully consider the matters
discussed under the caption "Risk Factors" commencing on page.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL
OFFENSE.
The date of this Prospectus is , 1996.
(continued from cover page)
Holders of the Preferred Securities are entitled to receive
cumulative cash distributions at an annual rate of 8 1/2% of the
liquidation amount of $50 per Preferred Security, accruing from
the
date of original issuance and payable quarterly in arrears on
each
March 1, June 1, September 1 and December 1, commencing March 1,
1996 ("distributions"). The payment of distributions out of
moneys
held by the Issuer and payments on liquidation of the Issuer or
the
redemption of Preferred Securities, as set forth below, are
guaranteed by Continental (the "Guarantee") to the extent the
Issuer has funds available therefor as described under
"Description
of the Guarantee." Continental's obligations under the Guarantee
are subordinate and junior to all liabilities of Continental,
except any liabilities that may be made pari passu expressly by
their terms, and are pari passu with the most senior preferred
stock issued from time to time by Continental and certain other
guarantees. The obligations of Continental under the Convertible
Subordinated Debentures are subordinate and junior in right of
payment to Senior Indebtedness (as defined herein) of
Continental.
At March 31, 1996, Senior Indebtedness of Continental aggregated
approximately $ 1.7 billion.
The distribution rate and the distribution payment dates and
other payment dates for the Preferred Securities will correspond
to
the interest rate and interest payment dates and other payment
dates on the Convertible Subordinated Debentures, which are the
sole assets of the Issuer. As a result, if principal or interest
is
not paid on the Convertible Subordinated Debentures, no amounts
will be paid on the Preferred Securities. If Continental does not
make principal or interest payments on the Convertible
Subordinated
Debentures, the Issuer will not have sufficient funds to make
distributions on the Preferred Securities, in which event the
Guarantee will not apply to such distributions until the Issuer
has
sufficient funds available therefor.
Continental has the right to defer payments of interest
on the Convertible Subordinated Debentures at any time for up to
20
consecutive quarters (each, an "Extension Period"). If interest
payments are so deferred, distributions on the Preferred
Securities
also will be deferred. During any Extension Period, distributions
will continue to accrue with interest thereon (to the extent
permitted by applicable law) at a rate of 8 1/2% per annum
compounded quarterly. During any Extension Period, holders of
Preferred Securities will be required to include such deferred
interest in their gross income for United States federal income
tax
purposes in advance of receipt of the cash distributions with
respect to such deferred interest payments. There could be
multiple
Extension Periods of varying lengths throughout the term of the
Convertible Subordinated Debentures (but distributions would
continue to accumulate quarterly and accrue interest) until the
end
of any such Extension Period. See "Risk Factors - Option to
Extend Interest Payment Period," "Description of the Preferred
Securities - Distributions" and "Description of the
Convertible Subordinated Debentures - Option to Extend
Interest Payment Period." The Convertible Subordinated Debentures
will mature on December 1, 2020.
Each Preferred Security will be convertible at any time, at
the option of the holder thereof, into shares of Continental's
Class B common stock (the "Class B common stock") at a conversion
rate of 1.034 shares of Class B common stock for each Preferred
Security (equivalent to $48.36 per share of Class B common
stock),
subject to adjustment in certain circumstances. The Class B
common
stock is quoted on the New York Stock Exchange ("NYSE") under the
symbol CAI.B. On May 22, 1996, the last reported sale price of
the
Class B common stock on the NYSE was $58.00.
The Convertible Subordinated Debentures are redeemable by
Continental, in whole or in part, from time to time, on or after
December 1, 1998 at the redemption prices set forth herein. The
Convertible Subordinated Debentures may also be redeemed at any
time upon the occurrence of a Tax Event (as defined herein). If
Continental redeems Convertible Subordinated Debentures, the
Trust
must redeem Trust Securities on a pro rata basis having an
aggregate liquidation amount equal to the aggregate principal
amount of the Convertible Subordinated Debentures so redeemed at
a
redemption price corresponding to the redemption price of the
Convertible Subordinated Debentures plus accrued and unpaid
distributions thereon (the "Redemption Price") to the date fixed
for redemption. See "Description of the Preferred Securities long
dash Mandatory Redemption." The Preferred Securities will be
redeemed upon maturity of the Convertible Subordinated
Debentures.
In addition, the Trust will be dissolved upon the occurrence of a
Tax Event arising from a change in law or a change in legal
interpretation regarding tax matters, unless the Convertible
Subordinated Debentures are redeemed in the limited circumstances
described herein. The Trust will also be dissolved upon the
occurrence of an Investment Company Event (as defined herein).
Upon
dissolution of the Trust, the Convertible Subordinated Debentures
will be distributed to the holders of the Preferred Securities,
on
a pro rata basis, in lieu of any cash distribution. See
"Description of the Preferred Securities - Tax Event or
Investment Company Event Redemption or Distribution." If the
Convertible Subordinated Debentures are distributed to the
holders
of the Preferred Securities, Continental will use its best
efforts
to have the Convertible Subordinated Debentures listed on the
NYSE
or on such other exchange as the Preferred Securities are then
listed. See "Description of the Preferred Securities - Tax
Event or Investment Company Event Redemption or Distribution" and
"Description of the Convertible Subordinated Debentures."
In the event of the liquidation, winding up or termination
of
the Trust, the holders of the Preferred Securities will be
entitled
to receive for each Preferred Security a liquidation amount of
$50
plus accrued and unpaid distributions thereon (including interest
thereon) to the date of payment, unless, in connection with such
dissolution, Convertible Subordinated Debentures are distributed
to
the holders of the Preferred Securities. See "Description of the
Preferred Securities - Liquidation Distribution Upon
Dissolution."
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and in accordance therewith files reports, proxy
statements
and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other
information may be inspected and copied at the following public
reference facilities maintained by the Commission: Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
Suite 1300, Seven World Trade Center, New York, New York 10048;
and
The Citicorp Center, Suite 1400, 500 West Madison Street,
Chicago,
Illinois 60661. Copies of such material may also be obtained
from
the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
upon payment of prescribed rates. In addition, reports, proxy
statements and other information concerning Continental may be
inspected and copied at the offices of the New York Stock
Exchange,
Inc., 20 Broad Street, New York, New York 10005.
Continental is the successor to Continental Airlines
Holdings,
Inc. ("Holdings"), which merged with and into Continental on
April
27, 1993. Holdings had also been subject to the informational
requirements of the Exchange Act.
No separate financial statements of the Issuer have been
included herein. Continental does not consider that such
financial
statements would be material to holders of Preferred Securities
because (i) all of the voting securities of the Issuer are owned,
directly or indirectly, by Continental, a reporting company under
the Exchange Act, (ii) the Issuer has no independent operations
and
exists for the sole purpose of issuing securities representing
undivided beneficial interests in the assets of the Issuer and
investing the proceeds thereof in the Convertible Subordinated
Debentures issued by Continental and (iii) the obligations of the
Issuer under the Trust Securities are fully and unconditionally
guaranteed by Continental to the extent that the Issuer has funds
available to meet such obligations. See "Description of the
Convertible Subordinated Debentures" and "Description of the
Guarantee."
This Prospectus constitutes a part of a registration
statement
on Form S-3 (together with all amendments and exhibits, the
"Registration Statement") filed by Continental with the
Commission
under the Securities Act with respect to the securities offered
hereby. This Prospectus omits certain of the information
contained
in the Registration Statement, and reference is hereby made to
the
Registration Statement for further information with respect to
Continental and Holdings and the securities offered hereby.
Although statements concerning and summaries of certain documents
are included herein, reference is made to the copy of such
document
filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. These documents may be inspected
without charge at the office of the Commission at Judiciary
Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be
obtained at fees and charges prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No.
0-
9781) are hereby incorporated by reference in this Prospectus:
(i)
Continental's Annual Report on Form 10-K for the year ended
December 31, 1995 (as amended by Forms 10-K/A1 and 10-K/A2 filed
on
March 8, 1996 and April 10, 1996, respectively), (ii) the
description of Class B common stock contained in Continental's
registration statement (Registration No.0-21542 on Form 8-A,
(iii)
Continental's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 and (iv) Continental's Current Reports on Form
8-K,
filed on January 31, 1996, March 26, 1996 and May 7, 1996.
All reports and any definitive proxy or information
statements
filed by Continental pursuant to Section 13(a), 13(c), 14 or
15(d)
of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities
offered
hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of
such
documents. Any statement contained in a document incorporated or
deemed to be incorporated herein by reference, or contained in
this
Prospectus, shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document
which
also is or is deemed to be incorporated by reference herein
modifies or 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.
Continental will provide without charge to each person to
whom
this Prospectus is delivered, upon the written or oral request of
such person, a copy of any or all documents incorporated herein
by
reference, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into such
documents). Requests for such documents should be directed to
Continental Airlines, Inc., 2929 Allen Parkway, Suite 2010,
Houston, Texas 77019, Attention: Secretary, telephone (713) 834-
2950.
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE PREFERRED SECURITIES
SHOULD
CAREFULLY REVIEW THE INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING
MATTERS.
Risk Factors Relating to the Company
Continental's History of Operating Losses
Although Continental recorded net income of $224
million
in 1995 and $88 million in the three months ended March 31, 1996,
it had experienced significant operating losses in the previous
eight years. In the long term, Continental's viability depends on
its ability to sustain profitable results of operations.
Leverage and Liquidity
Continental has successfully negotiated a variety of
agreements to increase its liquidity during 1995 and 1996.
Nevertheless, Continental remains more leveraged and has
significantly less liquidity than certain of its competitors,
several of whom have available lines of credit and/or significant
unencumbered assets. Accordingly, Continental may be less able
than
certain of its competitors to withstand a prolonged recession in
the airline industry.
As of March 31, 1996, Continental and its consolidated
subsidiaries had approximately $1.7 billion (including current
maturities) of long-term indebtedness and capital lease
obligations
and had approximately $702 million of minority interest,
preferred
securities of trust, redeemable preferred stock and common
stockholders' equity. Common stockholders' equity reflects the
adjustment of the Company's balance sheet and the recording of
assets and liabilities at fair market value as of April 27, 1993
in
accordance with fresh start reporting.
During the first and second quarters of 1995, in
connection with negotiations with various lenders and lessors,
Continental ceased or reduced contractually required payments
under
various agreements, which produced a significant number of events
of default under debt, capital lease and operating lease
agreements. Through agreements reached with the various lenders
and
lessors, Continental has cured all of these events of default.
The
last such agreement was put in place during the fourth quarter of
1995.
As of March 31, 1996, Continental had approximately
$657
million of cash and cash equivalents, including restricted cash
and
cash equivalents of $124 million. Continental does not have
general lines of credit and has no significant unencumbered
assets.
Continental has firm commitments with The Boeing
Company
("Boeing") to take delivery of 43 new jet aircraft during the
years
1998 through 2002. The estimated aggregate cost of these aircraft
is $2.6 billion. In addition, six Beech 1900-D aircraft are
scheduled to be delivered later in 1996. The Company currently
anticipates that the firm financing commitments available to it
with respect to its acquisition of new aircraft from Beech
Acceptance Corporation ("Beech") will be sufficient to fund all
deliveries scheduled during 1996, and that it will have remaining
financing commitments from aircraft manufacturers of $676 million
for jet aircraft deliveries beyond 1996. However, the Company
believes that further financing will be needed to satisfy the
remaining amount of such capital commitments. There can be no
assurance that sufficient financing will be available for all
aircraft and other capital expenditures not covered by firm
financing commitments.
For 1996, Continental expects to incur cash
expenditures
under operating leases of approximately $586 million, compared
with
$521 million for 1995, relating to aircraft and approximately
$229
million relating to facilities and other rentals, the same amount
as for 1995. In addition, Continental has capital requirements
relating to compliance with regulations that are discussed below.
See " - Regulatory Matters."
Continental and CMI have secured borrowings from GE
which
aggregated $373 million as of March 31, 1996. CMI's secured
loans
contain significant financial covenants, including requirements
to
maintain a minimum cash balance and consolidated net worth,
restrictions on unsecured borrowings and mandatory prepayments on
the sale of most assets. These financial covenants limit the
ability of CMI to pay dividends to Continental. In addition,
Continental's secured loans require Continental to, among other
things, maintain a minimum cumulative operating cash flow, a
minimum monthly cash balance and a minimum ratio of operating
cash
flow to fixed charges. Continental also is prohibited generally
from paying cash dividends on its capital stock, from purchasing
or
prepaying indebtedness and from incurring certain additional
secured indebtedness.
Aircraft Fuel
Since fuel costs constitute a significant portion of
Continental's operating costs (approximately 12.5% for the year
ended December 31, 1995 and 12.9% for the three months ended
March 31, 1996), significant changes in fuel costs would
materially
affect the Company's operating results. Fuel prices continue to
be
susceptible to international events, and the Company cannot
predict
near or longer-term fuel prices. The Company has entered into
petroleum option contracts to provide some short-term protection
(currently approximately seven months) against a sharp increase
in
jet fuel prices. In the event of a fuel supply shortage
resulting
from a disruption of oil imports or otherwise, higher fuel prices
or curtailment of scheduled service could result.
Certain Tax Matters
The Company's United States federal income tax return
reflects net operating loss carryforwards ("NOLs") of $2.5
billion,
subject to audit by the Internal Revenue Service, of which $1.2
billion are not subject to the limitations of Section 382 of the
Internal Revenue Code ("Section 382"). As a result, the Company
will not pay United States federal income taxes (other than
alternative minimum tax) until it has recorded approximately an
additional $1.2 billion of taxable income following December 31,
1995. For financial reporting purposes, Continental will be
required to begin accruing tax expense on its income statement
once
it has realized an additional $122 million of taxable income
following March 31, 1996. Section 382 imposes limitations on a
corporation's ability to utilize NOLs if it experiences an
"ownership change." In general terms, an ownership change may
result from transactions increasing the ownership of certain
stockholders in the stock of a corporation by more than 50
percentage points over a three-year period. The sale of the
Company's common stock in the Secondary Offering (as defined
herein) as described under "Recent Developments" will give rise
to
an increase in percentage ownership by certain stockholders for
this purpose. Based upon the advice of counsel, the Company
believes that such percentage increase will not give rise to an
ownership change under Section 382 as a result of the Secondary
Offering. However, no assurance can be given that future
transactions, whether within or outside the control of the
Company,
will not cause a change in ownership, thereby substantially
limiting the potential utilization of the NOLs in a given future
year. In the event that an ownership change should occur,
utilization of Continental's NOLs would be subject to an annual
limitation under Section 382. This Section 382 limitation for
any
post-change year would be determined by multiplying the value of
the Company's stock (including both common and preferred stock)
of
the time of the ownership change by the applicable long-term tax
exempt rate (which is 5.31% for April 1996). Unused annual
limitation may be carried over to later years, and the limitation
may under certain circumstances be increased by the built-in
gains
in assets held by the Company at the time of the change that are
recognized in the five-year period after the change. Under
current
conditions, if an ownership change were to occur, Continental's
NOL
utilization would be limited to a minimum of approximately $90
million.
In connection with the Company's 1993 reorganization
under Chapter 11 of the U.S. bankruptcy code effective April 27,
1993 (the "Reorganization") and the recording of assets and
liabilities at fair market value under the American Institute of
Certified Public Accountants' Statement of Position 90-7 -
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"), the Company recorded a deferred
tax
liability at April 27, 1993, net of the amount of the Company's
estimated realizable net operating loss carryforwards as required
by Statement of Financial Accounting Standards No. 109 -
"Accounting for Income Taxes." Realization of a substantial
portion of the Company's net operating loss carryforwards will
require the completion during the five-year period following the
Reorganization of transactions resulting in recognition of
built-in
gains for federal income tax purposes. The Company has
consummated
one such transaction, which had the effect of realizing
approximately 40% of the built-in gains required to be realized
over the five-year period, and currently intends to consummate
one
or more additional transactions. If the Company were to determine
in the future that not all such transactions will be completed,
an
adjustment to the net deferred tax liability of up to $116
million
would be charged to income in the period such determination was
made.
CMI
CMI's operating profit margins have consistently been
greater than the Company's margins overall. In addition to its
non-
stop service between Honolulu and Tokyo, CMI's operations focus
on
the neighboring islands of Guam and Saipan, resort destinations
that cater primarily to Japanese travelers. Because the majority
of
CMI's traffic originates in Japan, its results of operations are
substantially affected by the Japanese economy and changes in the
value of the yen as compared to the dollar. Appreciation of the
yen
against the dollar during 1993 and 1994 increased CMI's
profitability and a decline of the yen against the dollar may be
expected to decrease it. To reduce the potential negative impact
on
CMI's dollar earnings, CMI from time to time purchases average
rate
options as a hedge against a portion of its expected net yen cash
flow position. Any significant and sustained decrease in traffic
or
yields to and from Japan could materially adversely affect
Continental's consolidated profitability.
Principal Stockholders
After the Secondary Offering which was completed on May
14, 1996 and the conversion by Air Canada of its Class A common
stock into Class B common stock, Air Canada holds approximately
10.1% of the common equity interests and 4.0% of the general
voting
power of the Company, and Air Partners holds approximately 9.9%
of
the common equity interests and 39.4% of the general voting power
of the Company. In addition, assuming exercise of all of the
warrants held by Air Partners, approximately 23.4% of the common
equity interests and 52.2% of the general voting power would be
held by Air Partners. See "Recent Developments."
Various provisions in the Company's Restated
Certificate
of Incorporation (the "Certificate of Incorporation"), the
Company's bylaws (the "Bylaws") and the Subscription and
Stockholders' Agreement among the Company, Air Partners and Air
Canada dated as of April 27, 1993 (the "Stockholders' Agreement")
currently provide Air Partners and Air Canada with a variety of
special rights to elect directors and otherwise affect the
corporate governance of the Company; a number of these provisions
could have the effect of delaying, deferring or preventing a
change
in control of the Company. The Company has proposed to eliminate
a number of these provisions and will propose for approval by its
stockholders the related amendments to the Certificate of
Incorporation at its annual meeting of stockholders on June 26,
1996 (the "Annual Meeting"). Air Canada and Air Partners (unless
otherwise directed by its investors) have agreed to vote in favor
of these amendments at the Annual Meeting. See "Recent
Developments."
Industry Conditions and Competition
The airline industry is highly competitive and
susceptible to price discounting. The Company has in the past
both
responded to discounting actions taken by other carriers and
initiated significant discounting actions itself. Continental's
competitors include carriers with substantially greater financial
resources, as well as smaller carriers with lower cost
structures.
Airline profit levels are highly sensitive to, and during recent
years have been severely impacted by, changes in fuel costs, fare
levels (or "average yield") and passenger demand. Passenger
demand
and yields have been adversely affected by, among other things,
the
general state of the economy, international events and actions
taken by carriers with respect to fares. From 1990 to 1993, these
factors contributed to the domestic airline industry's incurring
unprecedented losses. Although fare levels have increased
recently,
significant industry-wide discounts could be reimplemented at any
time, and the introduction of broadly available, deeply
discounted
fares by a major United States airline would likely result in
lower
yields for the entire industry and could have a material adverse
effect on the Company's operating results.
The airline industry has consolidated in past years as
a
result of mergers and liquidations and may further consolidate in
the future. Among other effects, such consolidation has allowed
certain of Continental's major competitors to expand (in
particular) their international operations and increase their
market strength. Furthermore, the emergence in recent years of
several new carriers, typically with low cost structures, has
further increased the competitive pressures on the major United
States airlines. In many cases, the new entrants have initiated
or
triggered price discounting. Aircraft, skilled labor and gates at
most airports continue to be readily available to start-up
carriers. Although management believes that Continental is better
able than some of its major competitors to compete with fares
offered by start-up carriers because of its lower cost structure,
competition with new carriers or other low cost competitors on
Continental's routes could negatively impact Continental's
operating results.
Regulatory Matters
In the last several years, the United States Federal
Aviation Administration (the "FAA") has issued a number of
maintenance directives and other regulations relating to, among
other things, retirement of older aircraft, collision avoidance
systems, airborne windshear avoidance systems, noise abatement,
commuter aircraft safety and increased inspections and
maintenance
procedures to be conducted on older aircraft. The Company expects
to continue incurring expenses for the purpose of complying with
the FAA's noise and aging aircraft regulations. In addition,
several airports have recently sought to increase substantially
the
rates charged to airlines, and the ability of airlines to contest
such increases has been restricted by federal legislation, U.S.
Department of Transportation regulations and judicial decisions.
Management believes that the Company benefitted from
the
expiration of the aviation trust fund tax (the "ticket tax") on
December 31, 1995, although the amount of any such benefit
resulting directly from the expiration of the ticket tax cannot
be
determined. Reinstatement of the ticket tax will result in
higher
costs to consumers, which may have an adverse effect on passenger
traffic, revenue and margins. The Company is unable to predict
when or in what form the ticket tax may be reenacted.
Additional laws and regulations have been proposed from
time to time that could significantly increase the cost of
airline
operations by imposing additional requirements or restrictions on
operations. Laws and regulations have also been considered that
would prohibit or restrict the ownership and/or transfer of
airline
routes or takeoff and landing slots. Also, the availability of
international routes to United States carriers is regulated by
treaties and related agreements between the United States and
foreign governments that are amendable. Continental cannot
predict
what laws and regulations may be adopted or their impact, but
there
can be no assurance that laws or regulations currently enacted or
enacted in the future will not adversely affect the Company.
Risk Factors Relating to the Preferred Securities
Ranking of Subordinate Obligations Under the Guarantee and
Convertible Subordinated Debentures
Continental's obligations under the Guarantee are
subordinate and junior in right of payment to all liabilities of
Continental and pari passu with the most senior preferred stock
issued, from time to time, if any, by Continental. The
obligations
of Continental under the Convertible Subordinated Debentures are
subordinate to all present and future Senior Indebtedness of
Continental and pari passu with obligations to or rights of
Continental's other general unsecured creditors. As of March 31,
1996, Senior Indebtedness aggregated approximately $1.7 billion.
There are no terms in the Preferred Securities, the Convertible
Subordinated Debentures or the Guarantee that limit Continental's
ability to incur additional indebtedness, including indebtedness
that ranks senior to the Convertible Subordinated Debentures and
the Guarantee. See "Description of the Guarantee - Status
of the Guarantee; Subordination" and "Description of the
Convertible Subordinated Debentures - Subordination."
Rights Under the Guarantee
It is expected that at the time the Registration
Statement becomes effective under the Securities Act, the
Guarantee
will be qualified as an indenture under the Trust Indenture Act
of
1939, as amended (the "Trust Indenture Act"). Wilmington Trust
Company will act as indenture trustee under the Guarantee for the
purposes of compliance with the Trust Indenture Act (the
"Guarantee
Trustee"). The Guarantee Trustee will hold the Guarantee for the
benefit of the holders of the Preferred Securities.
The Guarantee guarantees to the holders of the
Preferred
Securities the payment of (i) any accrued and unpaid
distributions
that are required to be paid on the Preferred Securities, to the
extent the Trust has funds available therefor, (ii) the
Redemption
Price, including all accrued and unpaid distributions with
respect
to Preferred Securities called for redemption by the Trust, to
the
extent the Trust has funds available therefor, and (iii) upon a
voluntary or involuntary dissolution, winding-up or termination
of
the Trust (other than in connection with the distribution of
Convertible Subordinated Debentures to the holders of Preferred
Securities or a redemption of all the Preferred Securities), the
lesser of (a) the aggregate of the liquidation amount and all
accrued and unpaid distributions on the Preferred Securities to
the
date of the payment to the extent the Trust has funds available
therefor or (b) the amount of assets of the Trust remaining
available for distribution to holders of the Preferred Securities
in liquidation of the Trust. The holders of a majority in
liquidation amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding
for
any remedy available to the Guarantee Trustee or to direct the
exercise of any trust or power conferred upon the Guarantee
Trustee
under the Guarantee. If the Guarantee Trustee fails to enforce
the
Guarantee, any holder of Preferred Securities may institute a
legal
proceeding directly against Continental to enforce the Guarantee
Trustee's rights under the Guarantee without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity. If Continental were to default on its
obligation to pay amounts payable on the Convertible Subordinated
Debentures, the Trust would lack available funds for the payment
of
distributions or amounts payable on redemption of the Preferred
Securities or otherwise, and, in such event, holders of the
Preferred Securities would not be able to rely upon the Guarantee
for payment of such amounts. Instead, holders of the Preferred
Securities would rely on the enforcement by the Property Trustee
(as defined herein) of its rights as registered holder of the
Convertible Subordinated Debentures against Continental pursuant
to
the terms of the Convertible Subordinated Debentures. See
"Description of the Guarantee" and "Description of the
Convertible
Subordinated Debentures." The Declaration (as defined herein)
provides that each holder of Preferred Securities, by acceptance
thereof, agrees to the provisions of the Guarantee, including the
subordination provisions thereof, and the Indenture.
Enforcement of Certain Rights by Holders of Preferred Securities
If a Declaration Event of Default (as defined herein)
occurred and were continuing, then the holders of Preferred
Securities would rely on the enforcement by the Property Trustee
of
its rights as a holder of the Convertible Subordinated Debentures
against Continental. In addition, the holders of a majority in
aggregate liquidation amount of the Preferred Securities will
have
the right to direct the time, method, and place of conducting any
proceeding for any remedy available to the Property Trustee or to
direct the exercise of any trust or power conferred upon the
Property Trustee under the Declaration, including the right to
direct the Property Trustee to exercise the remedies available to
it as a holder of the Convertible Subordinated Debentures. If the
Property Trustee fails to enforce its rights under the
Convertible
Subordinated Debentures, a holder of Preferred Securities may
institute a legal proceeding directly against Continental to
enforce the Property Trustee's rights under the Convertible
Subordinated Debentures without first instituting any legal
proceeding against the Property Trustee or any other person or
entity.
Option to Extend Interest Payment Period
Continental has the right under the Indenture (as
defined
herein), to defer payments of interest on the Convertible
Subordinated Debentures by extending the interest payment period
at
any time, and from time to time, on the Convertible Subordinated
Debentures. As a consequence of such an extension, quarterly
distributions on the Preferred Securities would be deferred (but
despite such deferral would continue to accrue with interest
thereon compounded quarterly) by the Trust during any such
extended
interest payment period. Such right to extend the interest
payment
period for the Convertible Subordinated Debentures is limited to
a
period not exceeding 20 consecutive quarters. During any
Extension
Period Continental will not (a) declare or pay dividends on, or
make a distribution with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of
its
capital stock, except for dividends or distributions in shares of
its capital stock of the same class on which such dividend or
distribution is being made and conversions of common stock of one
class into common stock of another class or (b) make any payment
of
interest, principal or premium, if any, on or repay, repurchase
or
redeem any debt securities issued by Continental that rank pari
passu with or junior to the Convertible Subordinated Debentures
(except by conversion into or exchange for shares of its capital
stock and except for purchases or other acquisition of shares of
its capital stock made for the purpose of an employee incentive
plan or benefit plan of the Company or any of its subsidiaries).
Prior to the termination of any Extension Period, Continental may
further extend the interest payment period; provided, however,
that
such Extension Period, together with all such previous and
further
extensions thereof, may not exceed 20 consecutive quarters and
may
not extend beyond the maturity of the Convertible Subordinated
Debentures. Upon the termination of any Extension Period and the
payment of all amounts then due, Continental may commence a new
Extension Period, subject to the above requirements. See
"Description of the Preferred Securities - Distributions"
and "Description of the Convertible Subordinated Debentures long
dash Option to Extend Interest Payment Period."
Should Continental exercise its right to defer payments
of interest by extending the interest payment period, each holder
of Preferred Securities will continue to accrue income (as
original
issue discount) in respect of the deferred interest allocable to
its Preferred Securities for United States federal income tax
purposes, which will be allocated but not distributed, to holders
of record of Preferred Securities. As a result, each such holder
of
Preferred Securities will recognize income for United States
federal income tax purposes in advance of the receipt of cash and
will not receive the cash from the Trust related to such income
if
such holder disposes of its Preferred Securities prior to the
record date for the date on which distributions of such amounts
are
made. Continental has no current intention of exercising its
right
to defer payments of interest by extending the interest payment
period on the Convertible Subordinated Debentures. However,
should
Continental determine to exercise such right in the future, the
market price of the Preferred Securities is likely to be
affected.
A holder that disposes of its Preferred Securities during an
Extension Period, therefore, might not receive the same return on
its investment as a holder that continues to hold its Preferred
Securities. In addition, as a result of the existence of
Continental's right to defer interest payments, the market price
of
the Preferred Securities (which represent an undivided beneficial
interest in the Convertible Subordinated Debentures) may be more
volatile than other securities on which original issue discount
accrues that do not have such rights. See "United States Taxation
- - - - Potential Extension of Interest Payment Period and
Original Issue Discount."
Tax Event or Investment Company Event Redemption or Distribution
Upon the occurrence of a Tax Event or Investment
Company
Event, the Trust shall be dissolved, except in the limited
circumstance described below, with the result that the
Convertible
Subordinated Debentures would be distributed to the holders of
the
Trust Securities in connection with the liquidation of the Trust.
Upon the occurrence of a Tax Event and in certain circumstances,
Continental will have the right to redeem the Convertible
Subordinated Debentures, in whole and not in part, in lieu of a
distribution of the Convertible Subordinated Debentures by the
Trust; in which event the Trust will redeem the Trust Securities
on
a pro rata basis to the same extent as the Convertible
Subordinated
Debentures are redeemed by Continental. See "Description of the
Preferred Securities - Tax Event or Investment Company
Event Redemption or Distribution."
Under current United States federal income tax law, a
distribution of Convertible Subordinated Debentures upon the
dissolution of the Trust would not be a taxable event to holders
of
the Preferred Securities. Upon occurrence of a Tax Event or
Investment Company Event, however, a dissolution of the Trust in
which holders of the Preferred Securities receive cash would be a
taxable event to such holders. See "United States Taxation long
dash Receipt of Convertible Subordinated Debentures or Cash Upon
Liquidation of the Trust."
There can be no assurance as to the market prices for
the
Preferred Securities or the Convertible Subordinated Debentures
that may be distributed in exchange for Preferred Securities if a
dissolution or liquidation of the Trust were to occur.
Accordingly,
the Preferred Securities that an investor may purchase, whether
pursuant to the offer made hereby or in the secondary market, or
the Convertible Subordinated Debentures that a holder of
Preferred
Securities may receive on dissolution and liquidation of the
Trust,
may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby. Because holders
of Preferred Securities may receive Convertible Subordinated
Debentures upon the occurrence of a Tax Event or Investment
Company
Event, prospective purchasers of Preferred Securities are also
making an investment decision with regard to the Convertible
Subordinated Debentures and should carefully review all the
information regarding the Convertible Subordinated Debentures
contained herein. See "Description of the Preferred Securities
long
dash Tax Event or Investment Company Event Redemption or
Distribution" and "Description of the Convertible Subordinated
Debentures - General."
Limited Voting Rights
Generally, holders of the Preferred Securities will not
have any voting rights. See "Description of the Preferred
Securities - Voting Rights."
Original Issue Discount
The Preferred Securities may trade at a price that does
not fully reflect the value of accrued but unpaid interest with
respect to the underlying Convertible Subordinated Debentures. A
holder that disposes of its Preferred Securities between record
dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Convertible
Subordinated
Debentures through the date of disposition in income as ordinary
income (i.e., original issue discount), and to add such amount to
its adjusted tax basis in its pro rata share of the underlying
Convertible Subordinated Debentures deemed disposed of. To the
extent the selling price is less than a holder's adjusted tax
basis
(which will include, in the form of original issue discount, all
accrued but unpaid interest), the holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses
cannot
be applied to offset ordinary income for United States federal
income tax purposes. See "United States Taxation -
Potential Extension of Interest Payment Period and Original Issue
Discount" and " - Disposition of Preferred Securities."
Absence of Trading Market
There is no existing trading market for the Preferred
Securities and there can be no assurance as to the liquidity of
any
such market that may develop, the ability of the holders of
Preferred Securities to sell such securities, the price at which
the holders of Preferred Securities would be able to sell such
securities or whether a trading market, if it develops, will
continue. If such a market were to exist, the Preferred
Securities
could trade at prices higher or lower than their liquidation
amount, depending on many factors, including prevailing interest
rates, the market for similar securities and the operating
results
of the Company. In the event that the Convertible Subordinated
Debentures are distributed by the Trust to the holders of the
Preferred Securities, the preceding considerations would be
equally
applicable to the Convertible Subordinated Debentures. The
Company
intends to apply for listing of the Preferred Securities on the
NYSE. See "Description of Preferred Securities -
Registration Rights."
CONTINENTAL AIRLINES FINANCE TRUST
The Trust is a statutory business trust formed under
Delaware law pursuant to (i) an amended and restated declaration
of
trust dated as of November 28, 1995 executed by Continental, as
sponsor (the "Sponsor"), and the trustees of the Trust (the
"Continental Trustees") as amended pursuant to an amendment dated
as of May 9, 1996 (the "Declaration"), and (ii) the filing of a
certificate of trust with the Secretary of State of the State of
Delaware. Upon issuance of the Preferred Securities, the
purchasers
thereof owned all of the Preferred Securities. See "Description
of
the Preferred Securities - Book-entry-only Issuance long
dash The Depository Trust Company." Continental directly or
indirectly acquired Common Securities in an aggregate liquidation
amount equal to 3% of the total capital of the Trust. The Trust
exists for the exclusive purposes of (i) issuing the Trust
Securities representing undivided beneficial interests in the
assets of the Trust, (ii) investing the gross proceeds of the
Trust
Securities in the Convertible Subordinated Debentures and (iii)
engaging in only those other activities necessary or incidental
thereto. The Trust has a term of 35 years, but may terminate
earlier as provided in the Declaration.
Pursuant to the Declaration, the number of Continental
Trustees is initially three. Two of the Continental Trustees are
persons who are employees or officers of, or who are affiliated
with, Continental (the "Regular Trustees"). The third trustee is
a
financial institution that maintains its principal place of
business in the state of Delaware and is unaffiliated with
Continental, which trustee serves as property trustee under the
Declaration and as indenture trustee for the purposes of the
Trust
Indenture Act (the "Property Trustee"). Wilmington Trust
Company,
a Delaware banking corporation, is the Property Trustee until
removed or replaced by the holder of the Common Securities and
acts
as indenture trustee under the Guarantee (the "Guarantee
Trustee").
See "Description of the Guarantee."
The Property Trustee holds title to the Convertible
Subordinated Debentures for the benefit of the holders of the
Trust
Securities and the Property Trustee has the power to exercise all
rights, powers, and privileges under the Indenture (as defined
herein) as the holder of the Convertible Subordinated Debentures.
In addition, the Property Trustee maintains exclusive control of
a
segregated non-interest bearing bank account (the "Property
Account") to hold all payments made in respect of the Convertible
Subordinated Debentures for the benefit of the holders of the
Trust
Securities. The Property Trustee will make payments of
distributions and payments on liquidation, redemption and
otherwise
to the holders of the Trust Securities out of funds from the
Property Account. The Guarantee Trustee holds the Guarantee for
the
benefit of the holders of the Preferred Securities. Continental,
as
the direct or indirect holder of all the Common Securities, has
the
right to appoint, remove or replace any Continental Trustee and
to
increase or decrease the number of Continental Trustees; provided
that, (i) the number of Continental Trustees shall be at least
three and (ii) at least two shall be Regular Trustees.
Continental
will pay all fees and expenses related to the Trust, the offering
of the Trust Securities and the issuance of the Convertible
Subordinated Debentures. See "Description of the Convertible
Subordinated Debentures - Miscellaneous."
The rights of the holders of the Preferred Securities,
including economic rights, rights to information and voting
rights,
are set forth in the Declaration, the Delaware Business Trust Act
(the "Trust Act") and the Trust Indenture Act. See "Description
of
the Preferred Securities."
The financial statements of the Trust will be
consolidated with Continental's financial statements. The
Preferred
Securities are shown on Continental's consolidated financial
statements as a minority interest consisting of Continental-
Obligated Mandatorily Redeemable Preferred Securities of Trust.
The
Convertible Subordinated Debentures are the sole assets of the
Trust.
The place of business and the telephone number of the
Trust are the principal executive offices and telephone number of
Continental. See "The Company."
THE COMPANY
Continental Airlines, Inc. is a major United States air
carrier engaged in the business of transporting passengers, cargo
and mail. Continental is the fifth largest United States airline
(as measured by revenue passenger miles in the first three months
of 1996) and, together with its wholly owned subsidiary,
Continental Express, Inc. ("Express"), and its 91%-owned
subsidiary, Continental Micronesia, Inc. ("CMI"), serves 175
airports worldwide.
The Company operates its route system primarily through
domestic hubs at Newark, Houston Intercontinental and Cleveland,
and a Pacific hub on Guam and Saipan. Each of Continental's
three
U.S. hubs is located in a large business and population center,
contributing to a high volume of "origin and destination"
traffic.
The Guam/Saipan hub is strategically located to provide service
from Japanese and other Asian cities to popular resort
destinations
in the western Pacific. Continental is the primary carrier at
each
of these hubs, accounting for 51%, 78%, 54% and 58% of all daily
jet departures, respectively.
Continental directly serves 118 U.S. cities, with
additional cities (principally in the western and southwestern
United States) connected to Continental's route system under
agreements with America West Airlines, Inc. ("America West").
Internationally, Continental flies to 57 destinations and offers
additional connecting service through alliances with foreign
carriers. Continental operates 52 weekly departures to five
European cities and markets service to four other cities through
code-sharing agreements. Continental is one of the leading
airlines providing service to Mexico and Central America, serving
more destinations in Mexico than any other United States airline.
In addition, Continental flies to four cities in South America
and
plans to commence service between Newark and Bogota, Colombia,
with
service on to Quito, Ecuador, in June 1996. Through its
Guam/Saipan hub, Continental provides extensive service in the
western Pacific, including service to more Japanese cities than
any
other United States carrier.
The Company is a Delaware corporation. Its executive
offices are located at 2929 Allen Parkway, Suite 2010, Houston,
Texas 77019, and its telephone number is (713) 834-2950.
RECENT DEVELOPMENTS
On April 19, 1996, the Company's Board of Directors
approved certain agreements (the "Agreements") with its two major
stockholders, Air Canada and Air Partners. The Agreements
contain
a variety of arrangements intended generally to reflect the
intention that Air Canada has expressed to the Company of
divesting
its investment in Continental by early 1997, subject to market
conditions. Air Canada has indicated to the Company that its
original investment in Continental has become less central to Air
Canada in light of other initiatives it has undertaken -
particularly expansion within Canada and exploitation of the 1995
Open Skies agreement to expand Air Canada's own flights into the
U.S. Because of these initiatives Air Canada has determined it
appropriate to redeploy the funds invested in the Company into
other uses in Air Canada's business. The Agreements also reflect
the recent distribution by Air Partners, effective March 29,
1996,
to its investors (the "AP Investors") of all of the shares of the
Class B common stock held by Air Partners and the desire of some
of
the AP Investors to realize the increase in value of their
investment in in the Company by selling all or a portion of their
shares of Class B common stock.
Among other things, the Agreements required the Company
to file a registration statement under the Securities Act to
permit
the sale by Air Canada of 2,200,000 shares of Class B common
stock
held by it and by certain of the AP Investors of an aggregate of
1,730,240 such shares pursuant to an underwritten public offering
arranged by the Company (the "Secondary Offering"). The
Secondary
Offering was completed on May 14, 1996. The Agreements provide
for
the following additional steps to be taken in connection with the
completion of this offering:
- in light of its then-reduced equity stake in the
Company,
Air Canada will no longer be entitled to designate
nominees to the Board of Directors of the Company, will
cause the four present or former members of the Air
Canada board who currently serve as directors of
Continental to decline nomination for reelection as
directors (except in limited circumstances), and will
convert all of its Class A common stock to Class B
common
stock;
- Air Canada and Air Partners have entered into a number
of
agreements restricting, prior to December 16, 1996,
further disposition of the common stock of the Company
held by either of them; and
- each of the existing Stockholders' Agreement and the
registration rights agreement (the ("Original
Registration Rights Agreement") among the parties will
be
modified in a number of respects to reflect, among
other
matters, the changing composition of the respective
equity interests of the parties.
After such sale and the conversion by Air Canada of its
Class A common stock into Class B common stock, Air Canada holds
approximately 10.1% of the common equity interests and 4.0% of
the
general voting power of the Company, and Air Partners holds
approximately 9.9% of the common equity interests and 39.4% of
the
general voting power of the Company. In addition, assuming
exercise of all of the warrants held by Air Partners,
approximately
23.4% of the common equity interests and 52.2% of the general
voting power would be held by Air Partners.
Reflecting the reduction of Air Canada's interest and
the
decision of the current directors designated by Air Canada not to
stand for reelection (except under certain limited
circumstances),
along with the expiration of various provisions specifically
included at the time of the Company's reorganization,
Continental's
Board of Directors has also approved changes to the Company's
Certificate of Incorporation and Bylaws (the "Proposed
Amendments")
generally eliminating special classes of directors (except for
Air
Partners' right to elect directors in certain circumstances) and
supermajority provisions, and making a variety of other
modifications aimed at streamlining the Company's corporate
governance structure.
The Proposed Amendments also provide that, at any time
after January 1, 1997, shares of Class A common stock would
become
freely convertible into an equal number of Class B common stock.
Under agreements put in place at the time of the Company's
reorganization in 1993, and designed in part to ensure compliance
with the foreign ownership limitations applicable to United
States
air carriers in light of the substantial stake in the Company
then
held by Air Canada, holders of Class A common stock (other than
Air
Canada) are not currently permitted under the Company's
Certificate
of Incorporation to convert their shares to Class B common stock.
In recent periods, the market price of Class A common stock has
generally been below the price of Class B common stock, which the
Company believes is attributable in part to the reduced liquidity
present in the trading market for Class A common stock. A number
of Class A stockholders have requested that the Company provide
for
free convertibility of Class A common stock into Class B common
stock, and in light of the reduction of Air Canada's equity
stake,
the Company has determined that the restriction is no longer
necessary. Any such conversion would effectively increase the
relative voting power of those Class B stockholders who do not
convert.
The Company and Air Canada also expect to enter into
discussions regarding modifications to the Company's existing
"synergy" agreements with Air Canada, covering items such as
maintenance and ground facilities, with a view to resolving
certain
outstanding commercial issues under the agreements and otherwise
modifying the agreements to reflect Continental's and Air
Canada's
current needs. The Company has entered into an agreement with
Air
Partners for the sale by Air Partners to the Company from time to
time at Air Partners' election for the one-year period beginning
August 15, 1996, of up to an aggregate of $50 million in
intrinsic
value (then-current Class B common stock price minus exercise
price) of Air Partners' Class B common stock warrants. The
purchase price would be payable in cash. The Board of Directors
has authorized the Company to publicly issue up to $50 million of
Class B common stock in connection with any such purchase. In
connection with this agreement, the Company will reclassify $50
million from common equity to redeemable warrants.
Because certain aspects of the Agreements raised issues
under the change in control provisions of certain of the
Company's
employment agreements and employee benefit plans, these
agreements
and plans are being modified to provide a revised change of
control
definition that the Company believes is appropriate in light of
the
prospective changes to its equity ownership structure. In
connection with the modifications, payments are being made to
certain employees, benefits are being granted to certain
employees
and options equal to 10% of the amount of the options previously
granted to each optionee are being granted (subject to certain
conditions) to substantially all employees holding outstanding
options.
Certain of the Proposed Amendments and employee benefit
actions are subject to stockholder approval at the Annual
Meeting.
Air Canada has delivered an irrevocable proxy in favor of Air
Partners, authorizing Air Partners to vote, in its sole
discretion,
all the shares of common stock beneficially owned, directly or
indirectly, by Air Canada as of the record date, April 30, 1996,
(approximately 23.6% of the voting power of all voting securities
outstanding as of such record date) with respect to the Proposed
Amendments and employee benefit actions, among other matters to
be
voted on by the Company's stockholders. Air Partners has
indicated
to the Company that it intends to vote all such shares in favor
of
all such matters and, unless otherwise directed by its investors
with respect to the shares of the Company held by Air Partners
that
are attributable to such investors' respective limited
partnership
interests, to vote the shares of common stock held by it as of
the
record date (approximately 35.7% of the voting power of all
voting
securities outstanding as of such date) in favor of all such
matters. A majority vote of shareholders is required to approve
the employee benefit matters; a two-thirds vote is required to
approve the Proposed Amendments.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following information for the years ended December
31, 1991 and 1992 and for the period January 1, 1993 through
April
27, 1993 relates to Continental's predecessor, Holdings.
Information for the period April 28, 1993 through December 31,
1993, for the two years ended December 31, 1994 and 1995, and for
the three months ended March 31, 1995 and 1996 relates to
Continental. The information as to Continental has not been
prepared on a consistent basis of accounting with the information
as to Holdings due to Continental's adoption, effective April 27,
1993, of fresh start reporting in accordance with SOP 90-7.
For the years ended December 31, 1991 and 1992, for the
periods January 1, 1993 through April 27, 1993 and April 28, 1993
through December 31, 1993, for the year ended December 31, 1994
and
for the three months ended March 31, 1995, earnings were not
sufficient to cover combined fixed charges and preferred stock
dividends. Additional earnings of $316 million, $131 million,
$979
million, $63 million, $673 million and $30 million, respectively,
would have been required to achieve ratios of earnings to
combined
fixed charges of 1.0. The ratio of earnings to combined fixed
charges and preferred stock dividends for the year ended December
31, 1995 was 1.50. The ratio of earnings to combined fixed
charges
and preferred stock dividends for the three months ended March
31,
1996 was 1.70. For purposes of calculating this ratio, earnings
consist of earnings before taxes, minority interest and
extraordinary items plus interest expense (net of capitalized
interest), the portion of rental expense deemed representative of
the interest expense and amortization of previously capitalized
interest. Combined fixed charges and preferred stock dividends
consist of preferred stock dividend requirements, interest
expense
and the portion of rental expense representative of interest
expense.
USE OF PROCEEDS
The Selling Holders will receive all of the proceeds
from
the sale of the Offered Securities. Neither Continental nor the
Trust will receive any proceeds from the sale of the Offered
Securities.
Three Months Year Ended
Ended March 31, December 31,
--------------- ---------------
1996 1995 1995 1994
---- ---- ---- ----
(In millions of dollars,
Statement of except per share data)
Operations Data: (unaudited)
Operating Revenue:
Passenger . . . . $1,375 $1,240 $5,302 $5,036
Cargo, mail
and other . . . . 114 169 523 634
------ ------ ------ ------
1,489 1,409 5,825 5,670
------ ------ ------ ------
Operating Expenses:
Wages, salaries and
related costs . . 364 366 1,432(1) 1,532
Aircraft fuel . . 177 169 681 741
Aircraft rentals. 124 123 497 433
Commissions . . . 126 119 489 439
Maintenance,
materials and
repairs . . . . . 112 97 429 495
Other rentals and
landing fees. . . 84 92 356 392
Depreciation and
amortization. . . 65 64 253 258
Other . . . . . . 317 351 1,303 1,391
------ ------ ------ ------
1,369 1,381 5,440 5,681
------ ------ ------ ------
Operating Income
(Loss) 120 28 385 (11)
------ ------ ------ ------
Nonoperating Income
(Expense):
Interest expense. (47) (53) (213) (241)
Interest
capitalized . . . 1 1 6 17
Interest
income. . . . . . 9 6 31 23
Gain on
System One
transactions. . . - - 108 -
Reorganization
items, net. . . . - - - -
Other, net. . . . 12 (10) (7)
(439)(2)
------ ------ ------ ------
(25) (56) (75) (640)
------ ------ ------ ------
Income (Loss)
before Income Taxes,
Minority Interest
and Extraordinary
Gain . . . . . . . 95 (28) 310 (651)
Net Income
(Loss) . . . . . . $88 $(30) $224 $(613)
Earnings (Loss)
per Common and
Common Equivalent
Share. . . . . . . $2.70 $(1.21) $7.20 $(23.76)
====== ====== ====== =======
Earnings (Loss)
per Common Share
Assuming Full
Dilution . . . . . $2.36 $(1.21) $6.29 $(23.76)
====== ====== ====== =======
Period from Period from
Reorganization January 1,
(April 28, 1993 1993
through through
December 31, December 31,
1993) 1993
--------------- ---------------
(In millions of dollars,
Statement of except per share data)
Operations Data:
Operating Revenue:
Passenger . . . . $3,493 $1,622
Cargo, mail
and other . . . . 417 235
------ ------
3,910 1,857
------ ------
Operating Expenses:
Wages, salaries and
related costs . . 1,000 502
Aircraft fuel . . 540 272
Aircraft rentals. 261 154
Commissions . . . 378 175
Maintenance,
materials and
repairs . . . . . 363 184
Other rentals and
landing fees. . . 258 120
Depreciation and
amortization. . . 162 77
Other . . . . . . 853 487
------ ------
3,815 1,971
------ ------
Operating Income
(Loss) 95 (114)
------ ------
Nonoperating Income
(Expense):
Interest expense. (165) (52)
Interest
capitalized . . . 8 2
Interest
income. . . . . . 14 -
Gain on
System One
transactions. . . - -
Reorganization
items, net. . . . - (818)
Other, net. . . . (4) 5
------ ------
(147) (863)
------ ------
Income (Loss)
before Income Taxes,
Minority Interest
and Extraordinary
Gain . . . . . . . (52) (977)
Net Income
(Loss) . . . . . . $(39)
$2,640(3)
Earnings (Loss)
per Common and
Common Equivalent
Share. . . . . . . $(2.33)
N.M.(4)
======
Earnings (Loss)
per Common Share
Assuming Full
Dilution . . . . . $(2.33) N.M.(4)
======
As of As of
March 31, December 31,
--------- ------------
1996 1995
--------- ------------
Balance Sheet Data: (In millions of dollars)
(unaudited)
Cash and Cash Equivalents,
including restricted Cash
and Cash Equivalents of $124
and $144, respectively(5). . . . . $657 $747
Other Current Assets . . . . . . . . 655 568
Total Property and Equipment, Net. . 1,410 1,461
Routes, Gates and Slots, Net . . . . 1,517 1,531
Other Assets, Net. . . . . . . . . . 507 514
------- -------
Total Assets. . . . . . . . . . . $4,746 $4,821
======= =======
Current Liabilities. . . . . . . . . 2,040 $1,984
Long-term Debt and Capital Leases. . 1,462 1,658
Deferred Credits and Other
Long-term Liabilities. . . . . . . 542 564
Minority Interest. . . . . . . . . . 28 27
Continental-Obligated Mandatorily
Redeemable Preferred Securities
of Trust(6). . . . . . . . . . . . 242 242
Redeemable Preferred Stock . . . . . 42 41
Common Stockholders' Equity. . . . . 390 305
------- -------
Total Liabilities and
Stockholders' Equity. . . . . . $4,746 $ 4,821
======= =======
- - - ------------------
(1) Includes a $20 million cash payment in 1995 by the Company
in connection with a 24-month collective bargaining
agreement entered into by the Company and the Independent
Association of Continental Pilots.
(2) Includes a provision of $447 million recorded in the fourth
quarter of 1994 associated with the planned early retirement
of certain aircraft and closed or underutilized airport and
maintenance facilities and other assets.
(3) Reflects a $3.6 billion extraordinary gain from
extinguishment of debt.
(4) Historical per share data for Holdings is not meaningful
since the Company has been recapitalized and has adopted
fresh start reporting as of April 27, 1993.
(5) Restricted cash and cash equivalents agreements relate
primarily to workers' compensation claims and the terms of
certain other agreements. In addition, CMI is required by
its loan agreement with GE to maintain certain minimum cash
balances and net worth levels, which effectively restrict
the amount of cash available to Continental from CMI.
(6) The sole assets of the Trust are convertible debentures
which are expected to be repaid by 2020. Upon repayment,
the Continental-Obligated Mandatorily Redeemable Preferred
Securities of Trust will be mandatorily redeemed.
DESCRIPTION OF THE PREFERRED SECURITIES
The following summary of certain material terms and
provisions of the Preferred Securities does not purport to be
complete, and reference is made to the Declaration filed as an
exhibit to the Registration Statement. The Preferred Securities
were issued pursuant to the terms of the Declaration. The
Declaration incorporates by reference terms of The Trust
Indenture
Act. The Declaration will be qualified under the Trust Indenture
Act. Wilmington Trust Company, as Trustee, acts as Indenture
Trustee for the Declaration for purposes of compliance with the
Trust Indenture Act. Capitalized terms not otherwise defined
herein have the meanings assigned to them in the Declaration.
General
The Declaration authorizes the Regular Trustees to
issue
on behalf of the Trust the Trust Securities, which represent
undivided beneficial interests in the assets of the Trust. All of
the Common Securities are owned, directly or indirectly, by
Continental. The Common Securities rank pari passu, and payments
will be made thereon on a pro rata basis, with the Preferred
Securities, except that upon the occurrence of a Declaration
Event
of Default (as defined herein), the rights of the holders of the
Common Securities to receive payment of periodic distributions
and
payments upon liquidation, redemption and otherwise are
subordinated to the rights of the holders of the Preferred
Securities. The Declaration does not permit the issuance by the
Trust of any securities other than the Trust Securities or the
incurrence of any indebtedness by the Trust. Pursuant to the
Declaration, the Property Trustee owns the Convertible
Subordinated
Debentures purchased by the Trust for the benefit of the holders
of
the Trust Securities. The payment of distributions out of money
held by the Trust, and payments upon redemption of the Preferred
Securities or liquidation of the Trust, are guaranteed by
Continental to the extent described under "Description of the
Guarantee." The Guarantee is held by Wilmington Trust Company, as
Guarantee Trustee, for the benefit of the holders of the
Preferred
Securities. The Guarantee does not cover payment of distributions
when the Trust does not have sufficient funds to pay such
distributions.
Distributions
Distributions on the Preferred Securities are fixed at
a
rate per annum of 8 1/2% of the stated liquidation amount of $50
per Preferred Security. Distributions in arrears for more than
one
quarter will bear interest thereon at the rate per annum of 8
1/2%
thereof compounded quarterly. The term "distribution" as used
herein includes any such interest payable plus any Additional
Interest or Liquidated Damages (each as defined herein) paid on
the
Convertible Subordinated Debentures unless otherwise stated. The
amount of distributions payable for any period will be computed
on
the basis of a 360-day year of twelve 30-day months.
Distributions on the Preferred Securities will be
cumulative, will accrue from November 28, 1995, and will be
payable
quarterly in arrears on March 1, June 1, September 1 and December
1 of each year, commencing March 1, 1996, when, as and if
available
for payment. Distributions will be made by the Property Trustee,
except as otherwise described below.
Continental has the right under the Indenture to defer
payments of interest on the Convertible Subordinated Debentures
by
extending the interest payment period thereon, which right, if
exercised, would defer quarterly distributions on the Preferred
Securities (though such distributions would continue to accrue
with
interest since interest would continue to accrue on the
Convertible
Subordinated Debentures) during any such Extension Period. Such
right to extend the interest payment period for the Convertible
Subordinated Debentures is limited to periods not exceeding 20
consecutive quarters. In the event that Continental exercises
this
right, Continental will not, subject to certain exceptions,
declare
or pay dividends on or make distributions with respect to any of
its capital stock, or make any payment on or repay, repurchase or
redeem any debt securities that rank pari passu with or junior to
the Convertible Subordinated Debentures. See "Description of the
Convertible Subordinated Debentures - Certain Covenants."
Prior to the termination of any such Extension Period,
Continental
may further extend the interest payment period; provided,
however,
that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive
quarters
and may not extend beyond the maturity of the Convertible
Subordinated Debentures. Upon the termination of any Extension
Period and the payment of all amounts then due, Continental may
select a new Extension Period, subject to the above requirements.
See "Description of the Convertible Subordinated Debentures long
dash Interest" and " - Option to Extend Interest Payment
Period." If distributions are deferred, the deferred
distributions
and accrued interest thereon will be paid to holders of record of
the Preferred Securities as they appear on the books and records
of
the Trust on the record date next following the termination of
such
deferral period.
Distributions on the Preferred Securities must be paid
on
the dates payable to the extent that the Trust has funds
available
for the payment of such distributions in the Property Account (as
defined herein). The Trust's funds available for distribution to
the holders of the Preferred Securities will be limited to
payments
received from Continental on the Convertible Subordinated
Debentures. See "Description of the Convertible Subordinated
Debentures." The payment of distributions out of moneys held by
the
Trust is guaranteed by Continental to the extent set forth under
"Description of the Guarantee."
Distributions on the Preferred Securities will be
payable
to the holders thereof as they appear on the books and records of
the Trust on the relevant record dates, which will be fifteen
calendar days prior to the relevant payment dates. Such
distributions will be paid through the Property Trustee who will
hold amounts received in respect of the Convertible Subordinated
Debentures in the Property Account for the benefit of the holders
of the Trust Securities. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such
payment will be made as described under "Book-entry-only Issuance
- - - - The Depository Trust Company" below. In the event that
any date on which distributions are to be made on the Preferred
Securities is not a Business Day, then payment of the
distributions
payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is
in
the next succeeding calendar year, such payment shall be made on
the immediately preceding Business Day, in each case with the
same
force and effect as if made on such record date. A "Business Day"
shall mean any day other than Saturday, Sunday or any other day
on
which banking institutions in the City of New York or Wilmington,
Delaware are permitted or required by any applicable law to
close.
Conversion Rights
General
Preferred Securities will be convertible at any time,
at
the option of the holder thereof and in the manner described
below,
into shares of Class B common stock at an initial conversion rate
of 1.034 shares of Class B common stock for each Preferred
Security
(equivalent to a conversion price of $48.36 per share of Class B
common stock), subject to adjustment as described under " -
Conversion Price Adjustments" below. A holder of a Preferred
Security wishing to exercise its conversion right shall deliver
an
irrevocable conversion notice, together, if the Preferred
Security
is a Certificated Security (as defined herein), with such
Certificated Security, to the Conversion Agent, Wilmington Trust
Company, which shall, on behalf of such holder, exchange such
Preferred Security for a portion of the Convertible Subordinated
Debentures and immediately convert such Convertible Subordinated
Debentures into Class B common stock. Holders may obtain copies
of
the required form of the conversion notice from the Conversion
Agent.
Holders of Preferred Securities at the close of
business
on a distribution record date will be entitled to receive the
distribution payable on such Preferred Securities on the
corresponding distribution payment date notwithstanding the
conversion of such Preferred Securities following such
distribution
record date but prior to such distribution payment date. Except
as
provided in the immediately preceding sentence, neither the
Issuer
nor Continental will make, or be required to make, any payment,
allowance or adjustment for accumulated and unpaid distributions,
whether or not in arrears, on converted Preferred Securities.
Continental will make no payment or allowance for distributions
on
the shares of Class B common stock issued upon such conversion,
except to the extent that such shares of Class B common stock are
held of record on the record date for any such distributions.
Each
conversion will be deemed to have been effected immediately prior
to the close of business on the day on which the related
conversion
notice was received by the Conversion Agent.
No fractional shares will be issued upon conversion of
Preferred Securities, but if such conversion results in a
fraction,
an amount will be paid in cash by Continental equal to the
Current
Market Price (as defined herein) of the fractional share of the
Class B common stock. If more than one Preferred Security is
surrendered for conversion at one time by the same holder, the
number of full shares of the Class B common stock which shall be
issuable on conversion thereof shall be computed on the basis of
the aggregate number of Preferred Securities so surrendered.
Conversion Price Adjustments - General
The conversion price will be subject to adjustment in
certain events including, without duplication: (i) the issuance
of
shares of any class of Continental common stock as a stock
dividend; (ii) the subdivision, combination or reclassification
of
any class of Continental common stock; (iii) the issuance to all
holders of any class of Continental common stock of rights or
warrants entitling them (within a 45 calendar-day period) to
subscribe for or purchase shares of Continental common stock at
less than the Current Market Price (determined as of the record
date for stockholders entitled to receive such rights or
warrants);
(iv) the payment of any dividend or distribution to holders of
any
class of Continental common stock other than (a) dividends
described in (i) above, (b) any rights or warrants described in
(iii) above and (c) any other dividends or distributions made
solely in cash, if the per share amount thereof, when added to
the
per share amount of other distributions made within the preceding
12 months (other than those distributions that resulted in a
conversion price adjustment and certain other exceptions), does
not
exceed 15% of the average of the Current Market Price per share
of
Class B common stock for 20 consecutive trading days ending not
more than ten days prior to the date of declaration of such
dividend or distribution; and (v) payments to holders of any
class
of Continental common stock in respect of a tender or exchange
offer (other than an odd-lot offer) by Continental or any
subsidiary of Continental for Continental common stock at a price
in excess of 110% of the Current Market Price per share as of the
trading day next succeeding the last date tenders or exchanges
may
be made pursuant to such tender or exchange offer. No adjustment
in
the conversion price will be required unless such adjustment
would
require a change of at least 1% in the conversion price then in
effect; provided, however, that any adjustment that would
otherwise
be required to be made shall be carried forward and taken into
account in determining whether any subsequent adjustment is
required.
The term "Current Market Price" of any class of
Continental common stock for any day means the reported last sale
price, regular way, on such day, or, if no sale takes place on
such
day, the average of the reported closing bid and asked prices on
such day, regular way, in either case as reported on the NYSE
Composite Tape, or, if such class of Continental common stock is
not then listed or admitted to trading on the NYSE, on the
principal national securities exchange on which such class of
Continental common stock is listed or admitted to trading, or if
such class of Continental common stock is not listed or admitted
to
trading on a national securities exchange, on the National Market
System of the National Association of Securities Dealers, Inc.,
or,
if such class of Continental common stock is not quoted or
admitted
to trading on such quotation system, on the principal quotation
system on which such class of Continental common stock is listed
or
admitted to trading or quoted, or, if not listed or admitted to
trading or quoted on any national securities exchange or
quotation
system, the average of the closing bid and asked prices of such
class of Continental common stock in the over-the-counter market
on
the day in question as reported by the National Quotation Bureau
Incorporated, or a similar generally accepted reporting service,
or, if not so available in such manner, as furnished by any NYSE
member firm selected from time to time by the Board of Directors
of
Continental for that purpose or, if not so available in such
manner, as otherwise determined in good faith by such Board of
Directors.
Continental from time to time may reduce the conversion
price of the Convertible Subordinated Debentures (and thus the
conversion price of the Preferred Securities) by any amount
selected by Continental for any period of at least 20 days, in
which case Continental shall give at least 15 days notice of such
reduction. Continental may, at its option, make such reductions
in
the conversion price, in addition to those set forth above, as
the
Board of Directors deems advisable to avoid or diminish any
income
tax to holders of Class B common stock resulting from any
dividend
or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. See "United States
Taxation - Adjustment of the Conversion Price."
No adjustment of the conversion price will be made upon
the issuance of any shares of Class B common stock pursuant to
any
present or future plan providing for the reinvestment of
dividends
or interest payable on securities of Continental and the
investment
of additional optional amounts in shares of Class B common stock
under any such plan or the issuance of any shares of common stock
or options or rights to purchase such shares pursuant to any
present or future employee, director or consultant benefit plan
or
program of Continental or pursuant to any option, warrant, right,
or exercisable, exchangeable or convertible security outstanding
as
of the date the Preferred Securities are first issued. There
shall
also be no adjustment of the conversion price in case of the
issuance of any Continental common stock (or securities
convertible
into or exchangeable for Continental common stock), except as
specifically described above. If any action would require
adjustment of the conversion price pursuant to more than one of
the
anti-dilution provisions, only one adjustment shall be made and
such adjustment shall be the amount of adjustment that has the
highest absolute value to holders of the Preferred Securities.
Conversion Price Adjustments - Merger,
Consolidation Or Sale Of Assets Of Continental
In case of any (i) consolidation or merger of
Continental
with or into any other entity (other than a consolidation or
merger
in which Continental is the surviving entity), (ii) sale,
transfer,
lease or conveyance of all or substantially all of the assets of
Continental, (iii) reclassification, capital reorganization or
change of the Class B common stock (other than solely a change in
par value, or from par value to no par value), or (iv)
consolidation or merger of another entity into the Company in
which
there is a reclassification or change of the Class B common stock
(other than solely a change in par value, or from par value to no
par value), then any holder of the Preferred Securities will be
entitled, on or after the occurrence of any such event, to
receive
on conversion of the Preferred Securities the kind and amount of
shares of stock or other securities, cash or other property (or
any
combination thereof) which the holder would have received had
such
holder converted such holder's Preferred Securities immediately
prior to the occurrence of such event. If the consideration into
which the Preferred Securities are convertible following any such
event consists of Class B common stock or common stock of the
surviving entity (as the case may be), then from and after the
occurrence of such event the conversion price for each Preferred
Security into such common stock shall be subject to the same
anti-
dilution and other adjustments described under " -
Conversion Price Adjustments - General" above, applied as
if such common stock were Class B common stock. In addition, the
Board is authorized, in its discretion, to make such adjustments
to
the conversion provisions applicable to the Convertible
Subordinated Debentures as may be necessary to protect the
intended
rights of the holders of Preferred Securities.
Conversion price adjustments or omissions in making
such
adjustments may, under certain circumstances, be deemed to be
distributions that could be taxable as dividends to holders of
Preferred Securities or to the holders of the Class B common
stock.
See "United States Taxation."
Optional Redemption
Continental is permitted to redeem the Convertible
Subordinated Debentures in whole or in part, from time to time,
after December 1, 1998, upon not less than 30 nor more than 60
days
notice. See "Description of the Convertible Subordinated
Debentures
- - - - Optional Redemption." Upon any redemption in whole or in
part of the Convertible Subordinated Debentures at the option of
Continental, the Issuer will, to the extent of the proceeds of
such
redemption, redeem Preferred Securities and Common Securities at
the Redemption Price.
Mandatory Redemption
The Convertible Subordinated Debentures will mature on
December 1, 2020. Upon the repayment of the Convertible
Subordinated Debentures, whether at maturity or upon redemption,
the proceeds from such repayment or redemption shall
simultaneously
be applied to redeem Trust Securities having an aggregate
liquidation amount equal to the aggregate principal amount of the
Convertible Subordinated Debentures so repaid or redeemed at the
Redemption Price. Holders of Trust Securities shall be given not
less than 30 nor more than 60 days' notice of such redemption.
Tax Event Or Investment Company Event Redemption Or Distribution
If a Tax Event (as defined herein) occurs and is
continuing, Continental will cause the Regular Trustees to
liquidate the Issuer and cause Convertible Subordinated
Debentures
to be distributed to the holders of the Preferred Securities in
liquidation of the Issuer within 90 days following the occurrence
of such Tax Event; provided, however, that such liquidation and
distribution will be conditioned on (i) the Regular Trustees'
receipt of an opinion of nationally recognized independent tax
counsel (reasonably acceptable to the Regular Trustees)
experienced
in such matters (a "No Recognition Opinion"), which opinion may
rely on published revenue rulings of the Internal Revenue
Service,
to the effect that the holders of the Preferred Securities will
not
recognize any income, gain or loss for United States federal
income
tax purposes as a result of such liquidation and distribution of
Convertible Subordinated Debentures and (ii) Continental's being
unable to avoid such Tax Event within such 90-day period by
taking
some ministerial action or pursuing some other reasonable measure
that, in the sole judgment of Continental, will have no adverse
effect on the Issuer, Continental or the holders of the Preferred
Securities and will involve no material cost. Furthermore, if (i)
Continental has received an opinion (a "Redemption Tax Opinion")
of
nationally recognized independent tax counsel (reasonably
acceptable to the Regular Trustees) experienced in such matters
that, as a result of a Tax Event, there is more than an
insubstantial risk that Continental would be precluded from
deducting the interest on the Convertible Subordinated Debentures
for United States federal income tax purposes, even after the
Convertible Subordinated Debentures were distributed to the
holders
of the Preferred Securities upon liquidation of the Issuer as
described above or (ii) the Regular Trustees shall have been
informed by such tax counsel that it cannot deliver a No
Recognition Opinion, Continental will have the right upon not
less
than 30 nor more than 60 days' notice and within 90 days
following
the occurrence of the Tax Event, to redeem the Convertible
Subordinated Debentures, in whole (but not in part) for cash, at
par plus accrued and unpaid interest (including any Additional
Interest, Compounded Interest and Liquidated Damages) and,
following such redemption, all the Preferred Securities will be
redeemed by the Issuer at the liquidation amount of $50 per
Preferred Security plus accrued and unpaid distributions;
provided,
however, that if, at the time there is available to Continental
or
the Issuer the opportunity to eliminate, within such 90-day
period,
the Tax Event by taking some ministerial action or pursuing some
other reasonable measure that, in the sole judgment of
Continental,
will have no adverse effect on the Issuer, Continental or the
holders of the Preferred Securities and will involve no material
cost, the Issuer or Continental will pursue such measure in lieu
of
redemption. See " - Mandatory Redemption." In lieu of the
foregoing options, Continental also will have the option of
causing
the Preferred Securities to remain outstanding and paying
Additional Interest (as defined herein) on the Convertible
Subordinated Debentures. See "Description of the Convertible
Subordinated Debentures - Additional Interest."
"Tax Event" means that the Regular Trustees shall have
obtained an opinion of nationally recognized independent tax
counsel experienced in such matters to the effect that, as a
result
of (a) any amendment to or change (including any announced
prospective change) in the laws (or any regulations thereunder)
of
the United States or any political subdivision or taxing
authority
thereof or therein or (b) any amendment to or change in an
interpretation or application of such laws or regulations by any
legislative body, court, governmental agency or regulatory
authority (including the enactment of any legislation and the
publication of any judicial decision or regulatory determination
on
or after the Original Offering Date), which amendment or change
is
effective or which interpretation or pronouncement is announced
on
or after the Original Offering Date, there is more than an
insubstantial risk that (i) the Issuer is or will be subject to
United States federal income tax with respect to interest accrued
or received on the Convertible Subordinated Debentures, (ii)
interest payable to the Issuer on the Convertible Subordinated
Debentures is not or will not be deductible by Continental in
whole
or in part for United States federal income tax purposes or (iii)
the Issuer is or will be subject to more than a de minimis amount
of other taxes, duties, assessments or other governmental
charges.
If an Investment Company Event (as defined herein)
shall
occur and be continuing, Continental shall cause the Regular
Trustees to liquidate the Issuer and cause the Convertible
Subordinated Debentures to be distributed to the holders of the
Preferred Securities in liquidation of the Issuer within 90 days
following the occurrence of such Investment Company Event.
The distribution by Continental of the Convertible
Subordinated Debentures will effectively result in the
cancellation
of the Preferred Securities.
"Investment Company Event" means that the Regular
Trustees shall have obtained an opinion from independent counsel
experienced in practice under the Investment Company Act of 1940,
as amended (the "1940 Act"), to the effect that, as a result of
the
occurrence of a change in law or regulation or a written change
in
interpretation or application of law or regulation by any
legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Issuer is or will be considered an
investment company which is required to be registered under the
1940 Act", which Change in 1940 Act Law becomes effective on or
after the Original Offering Date.
After the date fixed for any distribution of
Convertible
Subordinated Debentures, (i) the Preferred Securities will no
longer be deemed to be outstanding, (ii) DTC (the "Depositary")
or
its nominee, as the record holder of the Global Certificates,
will
receive a registered global certificate or certificates
representing the Convertible Subordinated Debentures to be
delivered upon such distribution and (iii) any certificates
representing Preferred Securities not held by DTC or its nominee
will be deemed to represent Convertible Subordinated Debentures
having a principal amount equal to the aggregate of the stated
liquidation amount of such Preferred Securities, with accrued and
unpaid interest equal to the amount of accrued and unpaid
distributions on such Preferred Securities, until such
certificates
are presented to Continental or its agent for transfer or
reissuance.
Redemption Procedures
The Trust may not redeem fewer than all of the
outstanding Preferred Securities unless all accrued and unpaid
distributions have been paid on all Preferred Securities for all
quarterly distribution periods terminating on or prior to the
date
of redemption.
If the Trust gives a notice of redemption in respect of
Preferred Securities (which notice will be irrevocable), and if
Continental has paid to the Property Trustee a sufficient amount
of
cash in connection with the related redemption or maturity of the
Convertible Subordinated Debentures, then, by 12:00 noon, New
York
City time, on the redemption date, the Trust will irrevocably
deposit with the Depositary funds sufficient to pay the
applicable
Redemption Price and will give the Depositary irrevocable
instructions and authority to pay the Redemption Price to the
holders of the Preferred Securities. See " - Book-entry-
only Issuance - The Depository Trust Company." If notice of
redemption shall have been given and funds deposited as required,
then, immediately prior to the close of business on the date of
such deposit, distributions will cease to accrue and all rights
of
holders of such Preferred Securities so called for redemption
will
cease, except the right of the holders of such Preferred
Securities
to receive the Redemption Price but without interest on such
Redemption Price. In the event that any date fixed for redemption
of Preferred Securities is not a Business Day, then payment of
the
Redemption Price payable on such date will be made on the next
succeeding day that is a Business Day (without any interest or
other payment in respect of any such delay), except that, if such
Business Day falls in the next calendar year, such payment will
be
made on the immediately preceding Business Day. In the event that
payment of the Redemption Price in respect of Preferred
Securities
is improperly withheld or refused and not paid either by the
Trust,
or by Continental pursuant to the Guarantee, distributions on
such
Preferred Securities will continue to accrue at the then
applicable
rate from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date
fixed for redemption for purposes of calculating the Redemption
Price.
In the event that fewer than all of the outstanding
Preferred Securities are to be redeemed, the Preferred Securities
will be redeemed pro rata as described below under " -
Book-entry-only Issuance - The Depository Trust Company."
In the event of any redemption in part, the Trust shall
not be required to (i) issue, register the transfer of or
exchange
any Certificated Security during a period beginning at the
opening
of business 15 days before any selection for redemption of
Preferred Securities and ending at the close of business on the
earliest date on which the relevant notice of redemption is
deemed
to have been given to all holders of Preferred Securities to be
so
redeemed or (ii) register the transfer of or exchange any
Certificated Securities so selected for redemption, in whole or
in
part, except for the unredeemed portion of any Certificated
Securities being redeemed in part.
Subject to the foregoing and applicable law (including,
without limitation, United States federal securities laws),
Continental or its subsidiaries may at any time, and from time to
time, purchase outstanding Preferred Securities by tender, in the
open market or by private agreement.
Liquidation Distribution Upon Dissolution
In the event of any voluntary or involuntary
liquidation,
dissolution, winding-up or termination of the Trust (each a
"Liquidation"), the then holders of the Preferred Securities will
be entitled to receive out of the assets of the Trust, after
satisfaction of liabilities to creditors, distributions in an
amount equal to the aggregate of the stated liquidation amount of
$50 per Preferred Security plus accrued and unpaid distributions
thereon to the date of payment (the "Liquidation Distribution"),
unless, in connection with such Liquidation, Convertible
Subordinated Debentures in an aggregate stated principal amount
equal to the aggregate stated liquidation amount of, with an
interest rate identical to the distribution rate of, and accrued
and unpaid interest (including any Additional Interest,
Compounded
Interest and Liquidated Damages) equal to accrued and unpaid
distributions on, the Preferred Securities have been distributed
on
a pro rata basis to the holders of the Preferred Securities.
If, upon any such Liquidation, the Liquidation
Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by
the
Trust on the Preferred Securities shall be paid on a pro rata
basis. The holders of the Common Securities will be entitled to
receive distributions upon any such dissolution pro rata with the
holders of the Preferred Securities, except that if a Declaration
Event of Default (as defined herein) has occurred and is
continuing, the Preferred Securities shall have a preference over
the Common Securities with regard to such distributions.
Pursuant to the Declaration, the Trust shall terminate
(i) on December 1, 2030, (ii) upon the bankruptcy of Continental
or
the holder of the Common Securities, (iii) upon the filing of a
certificate of dissolution or its equivalent with respect to the
holder of the Common Securities or Continental, the filing of a
certificate of cancellation with respect to the Trust, or the
revocation of the charter of the holder of the Common Securities
or
Continental and the expiration of 90 days after the date of
revocation without a reinstatement thereof, (iv) upon the
distribution of all of the Convertible Subordinated Debentures
upon
the occurrence of a Special Event, (v) upon the entry of a decree
of a judicial dissolution of the holder of the Common Securities,
Continental or the Trust or (vi) upon the redemption of all the
Trust Securities.
Merger, Consolidation Or Amalgamation Of The Issuer
The Issuer may not consolidate, amalgamate, merge with
or
into, or be replaced by, or convey, transfer or lease its
properties and assets substantially as an entirety to any
corporation or other entity or person, except as described below.
The Issuer may, without the consent of the holders of the
Preferred
Securities, the Delaware Trustee or the Property Trustee,
consolidate, amalgamate, merge with or into, or be replaced by, a
trust organized as such under the laws of any state of the United
States of America or of the District of Columbia; provided,
however, that (i) if the Issuer is not the survivor, such
successor
entity either (x) expressly assumes all of the obligations of the
Issuer under the Trust Securities or (y) substitutes for the
Preferred Securities other securities having substantially the
same
terms as the Preferred Securities (the "Successor Securities") as
long as the Successor Securities rank, with respect to
participation in the profits and distributions or in the assets
of
the successor entity, at least as high as the Preferred
Securities
rank with respect to participation in the profits and dividends
or
in the assets of the Issuer, (ii) Continental expressly
acknowledges a trustee of such successor entity that possesses
the
same powers and duties as the Property Trustee as the holder of
the
Convertible Subordinated Debentures, (iii) the Preferred
Securities
or any Successor Securities are listed, or any Successor
Securities
will be listed upon notification of issuance, on any national
securities exchange or other organization on which the Preferred
Securities are then listed or quoted, (iv) such merger,
consolidation, amalgamation or replacement does not cause the
Preferred Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating
organization, (v) such merger, consolidation, amalgamation or
replacement does not adversely affect the rights, preferences and
privileges of the holders of the Preferred Securities (including
any Successor Securities) in any material respect (other than
with
respect to any dilution of the holders' interest in the successor
entity), (vi) such successor entity has a purpose substantially
identical to that of the Issuer, (vii) Continental provides a
guarantee to the holders of the Successor Securities with respect
to such successor entity having substantially the same terms as
the
Preferred Securities Guarantee and (viii) prior to such merger,
consolidation, amalgamation or replacement, Continental has
received an opinion of nationally recognized independent counsel
(reasonably acceptable to the Property Trustee) to the Issuer
experienced in such matters to the effect that (x) such successor
entity will be treated as a grantor trust for United States
federal
income tax purposes, (y) following such merger, consolidation,
amalgamation or replacement, neither Continental nor such
successor
entity will be required to register as an investment company
under
the 1940 Act and (z) such merger, consolidation, amalgamation or
replacement will not adversely affect the rights, preferences and
privileges of the holders of the Trust Securities (including any
Successor Securities) in any material respect (other than with
respect to any dilution of the holders' interest in the new
entity). Notwithstanding the foregoing, the Issuer shall not,
except with the consent of holders of 100% in liquidation amount
of
the Common Securities, consolidate, amalgamate, merge with or
into,
or be replaced by any other entity or permit any other entity to
consolidate, amalgamate, merge with or into, or replace it, if
such
consolidation, amalgamation, merger or replacement would cause
the
Issuer or the Successor Entity to be classified as other than a
grantor trust for United States federal income tax purposes.
Declaration Events of Default
An event of default under the Indenture (an "Indenture
Event of Default") constitutes an event of default under the
Declaration with respect to the Trust Securities (a "Declaration
Event of Default"); provided, however, that pursuant to the
Declaration, the holder of the Common Securities will be deemed
to
have waived any Declaration Event of Default with respect to the
Common Securities until all Declaration Events of Default with
respect to the Preferred Securities have been cured, waived or
otherwise eliminated. Until such Declaration Events of Default
with
respect to the Preferred Securities have been so cured, waived,
or
otherwise eliminated, the Property Trustee will be deemed to be
acting solely on behalf of the holders of the Preferred
Securities
and only the holders of the Preferred Securities will have the
right to direct the Property Trustee with respect to certain
matters under the Declaration, and therefore the Indenture.
Upon the occurrence of a Declaration Event of Default,
the Property Trustee, as the sole holder of the Convertible
Subordinated Debentures, will have the right under the Indenture
to
declare the principal of and interest on the Convertible
Subordinated Debentures to be immediately due and payable.
Continental and the Trust are each required to file annually with
the Property Trustee an officer's certificate as to its
compliance
with all conditions and covenants under the Declaration.
Voting Rights
Except as described herein, under the Trust Act and
under
"Description of the Guarantee - Amendments and Assignment"
and as otherwise required by law and the Declaration, the holders
of the Preferred Securities will have no voting rights. In the
event that Continental elects to defer payments of interest on
the
Convertible Subordinated Debentures as described above under "
long
dash Distributions," the holders of the Preferred Securities do
not
have the right to appoint a special representative or trustee or
otherwise to protect their interest.
The holders of a majority in aggregate liquidation
amount
of the Preferred Securities have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Property Trustee, or direct the exercise of any
trust or power conferred upon the Property Trustee under the
Declaration including the right to direct the Property Trustee,
as
holder of the Convertible Subordinated Debentures, to (i)
exercise
the remedies available under the Indenture with respect to the
Convertible Subordinated Debentures, (ii) waive any past
Indenture
Event of Default that is waivable under the Indenture, (iii)
exercise any right to rescind or annul a declaration that the
principal of all the Convertible Subordinated Debentures shall be
due and payable or (iv) consent to any amendments, modification
or
termination of the Indenture or the Convertible Subordinated
Debentures requiring the consent of the holders of the
Convertible
Subordinated Debentures; provided, however, that where a consent
or
action under the Indenture would require the consent or act of
more
than a majority of the holders (a "Super-Majority") affected
thereby, only the holders of at least such Super-Majority of the
Preferred Securities may direct the Property Trustee to give such
consent or take such action. If the Property Trustee fails to
enforce its rights under the Convertible Subordinated Debentures
after any holder of Preferred Securities shall have made a
written
request, a record holder of Preferred Securities may institute a
legal proceeding directly against Continental to enforce the
Property Trustee's rights under the Convertible Subordinated
Debentures without first instituting any legal proceeding against
the Property Trustee or any other person or entity. The Property
Trustee shall notify all holders of the Preferred Securities of
any
notice of default received from the Indenture Trustee with
respect
to the Convertible Subordinated Debentures. Such notice shall
state
that such Indenture Event of Default also constitutes a
Declaration
Event of Default. The Property Trustee shall not take any of the
actions described in clauses (i), (ii), (iii) or (iv) above
unless
the Property Trustee has obtained an opinion of independent tax
counsel to the effect that, as a result of such action, the Trust
will not fail to be classified as a grantor trust for United
States
federal income tax purposes and each holder of Trust Securities
will be treated as owning undivided beneficial interests in the
Convertible Subordinated Debentures.
In the event the consent of the Property Trustee, as
the
holder of the Convertible Subordinated Debentures, is required
under the Indenture with respect to any amendment, modification
or
termination of the Indenture, the Property Trustee shall request
the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination and shall vote
with
respect to such amendment, modification or termination as
directed
by a majority in liquidation amount of the Trust Securities
voting
together as a single class; provided, however, that where a
consent
under the Indenture would require the consent of a
Super-Majority,
the Property Trustee may only give such consent at the direction
of
the holders of at least the proportion in liquidation amount of
the
Trust Securities which the relevant Super-Majority represents of
the aggregate principal amount of the Convertible Subordinated
Debentures outstanding. The Property Trustee shall be under no
obligation to take any such action in accordance with the
directions of the holders of the Trust Securities unless the
Property Trustee has obtained an opinion of tax counsel to the
effect that for the purposes of United States federal income
taxation the Trust will not be classified as other than a grantor
trust.
A waiver of an Indenture Event of Default will
constitute
a waiver of the corresponding Declaration Event of Default.
Any required approval or direction of holders of
Preferred Securities may be given at a separate meeting of
holders
of Preferred Securities convened for such purpose, at a meeting
of
all of the holders of Trust Securities or pursuant to written
consent. The Regular Trustee will cause a notice of any meeting
at
which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders
is
to be taken, to be mailed to each holder of record of Preferred
Securities. Each such notice will include a statement setting
forth
the following information: (i) the date of such meeting or the
date
by which such action is to be taken; (ii) a description of any
resolution proposed for adoption at such meeting on which such
holders are entitled to vote or of such matter upon which written
consent is sought; and (iii) instructions for the delivery of
proxies or consents. No vote or consent of the holders of
Preferred
Securities will be required for the Trust to redeem and cancel
Preferred Securities or distribute Convertible Subordinated
Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities
are
entitled to vote or consent under any of the circumstances
described above, any of the Preferred Securities that are owned
at
such time by Continental or any entity directly or indirectly
controlling or controlled by, or under direct or indirect common
control with, Continental, shall not be entitled to vote or
consent
and shall, for purposes of such vote or consent, be treated as if
such Preferred Securities were not outstanding.
The procedures by which holders of Preferred Securities
may exercise their voting rights are described below. See " long
dash Book-entry-only Issuance - The Depository Trust
Company" below.
Holders of the Preferred Securities will have no rights
to appoint or remove the Regular Trustees, who may be appointed,
removed or replaced solely by Continental as the indirect or
direct
holder of all of the Common Securities.
Modification of the Declaration
The Declaration may be modified and amended if approved
by the Regular Trustees (and in certain circumstances the
Property
Trustee), provided that, if any proposed amendment provides for,
or
the Regular Trustees otherwise propose to effect, (i) any action
that would adversely affect the powers, preferences or special
rights of the Trust Securities, whether by way of amendment to
the
Declaration or otherwise, or (ii) the dissolution, winding-up or
termination of the Trust other than pursuant to the terms of the
Declaration, then the holders of the Trust Securities voting
together as a single class will be entitled to vote on such
amendment or proposal and such amendment or proposal will not be
effective except with the approval of at least 66 2/3% in
liquidation amount of the Trust Securities affected thereby;
provided, however, that if any amendment or proposal referred to
in
clause (i) above would adversely affect only the Preferred
Securities or the Common Securities, then only the affected class
will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the
approval of 66 2/3% in liquidation amount of such class of Trust
Securities.
Notwithstanding the foregoing, no amendment or
modification may be made to the Declaration if such amendment or
modification would (i) cause the Trust to be classified for
purposes of United States federal income taxation as other than a
grantor trust, (ii) reduce or otherwise adversely affect the
powers
of the Property Trustee or (iii) cause the Trust to be deemed an
"investment company" which is required to be registered under the
1940 Act.
Registration Rights
In connection with the Original Offering, the Company
and
the Issuer entered into a registration rights agreement with the
Initial Purchasers dated November 28, 1995 (the "Registration
Rights Agreement") pursuant to which the Company and the Trust
agreed, at the Company's expense, for the benefit of the holders
of
the Preferred Securities, the Guarantee, the Convertible
Subordinated Debentures and the shares of Class B common stock
issuable upon conversion thereof (together, the "Registrable
Securities"), to (i) file with the Commission within 180 days
after
the Original Offering Date the Registrable Securities, a
registration statement (the "Shelf Registration Statement")
covering resales of the Registrable Securities, (ii) use their
best
efforts to cause the Shelf Registration Statement to be declared
effective under the Securities Act within 60 days after the date
of
filing of the Shelf Registration Statement and (iii) use their
best
efforts to keep effective the Shelf Registration Statement until
three years after the date it is declared effective or such
earlier
date as all Registrable Securities shall have been disposed of or
on which all Registrable Securities held by persons that are not
affiliates of Continental or the Trust may be resold without
registration pursuant to Rule 144(k) under the Securities Act
(the
"Effectiveness Period"). The Company agreed to provide to each
holder of Registrable Securities copies of the prospectus which
is
a part of the Shelf Registration Statement, notify each holder
when
the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted
resales of the Registrable Securities. A holder of Registrable
Securities that sells such Registrable Securities pursuant to the
Shelf Registration Statement will be required to be named as a
selling security holder in the related prospectus and to deliver
a
prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the
Registration
Rights Agreement, including certain indemnification obligations.
If (i) by May 27, 1996, a Shelf Registration Statement
has not been filed with the Commission, or (ii) on or prior to
the
60th day following the filing of such Shelf Registration
Statement,
such Shelf Registration Statement has not been declared effective
(each, a "Registration Default"), additional interest
("Liquidated
Damages") will accrue on the Convertible Subordinated Debentures
and, accordingly, additional distributions will accrue on the
Preferred Securities, in each case from and including the day
following such Registration Default. Liquidated Damages will be
paid quarterly in arrears, with the first quarterly payment due
on
the first interest or distribution payment date, as applicable,
following the date on which such Liquidated Damages begin to
accrue, and will accrue at a rate per annum equal to an
additional
one-quarter of one percent (0.25%) of the principal amount or
liquidation amount, as applicable, to and including the 90th day
following such Registration Default and one-half of one percent
(0.50%) thereof from and after the 91st day following such
Registration Default. In the event that the Shelf Registration
Statement ceases to be effective during the Effectiveness Period
for more than 60 days, whether or not consecutive, during any 12-
month period then the interest rate borne by the Convertible
Subordinated Debentures and the distribution rate borne by the
Preferred Securities will each increase by an additional one-half
of one percent (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
gain becomes effective.
Continental and the Trust agreed in the Registration
Rights Agreement to use their best efforts to cause the Preferred
Securities and Class B common stock issuable upon conversion of
the
Convertible Subordinated Debentures to be listed on the New York
Stock Exchange upon effectiveness of the Shelf Registration
Statement.
This summary of certain provisions of the Registration
Rights Agreement does not purport to be complete and is subject
to,
and qualified in its entirety by reference to, all the provisions
of the Registration Rights Agreement, a copy of the form of which
will be made available to prospective investors in the Preferred
Securities upon request to the Company.
Book-entry-only Issuance - The Depository Trust Company
The description of book-entry procedures in this
Prospectus includes summaries of certain rules and operating
procedures of DTC that affect transfers of interests in the
global
certificate or certificates issued in connection with sales of
Preferred Securities made pursuant to this Prospectus. The
Preferred Securities were issued only as fully registered
securities registered in the name of Cede & Co. (as nominee for
DTC). One or more fully registered global Preferred Security
certificates (the "Global Certificates") were issued,
representing,
in the aggregate, Preferred Securities sold pursuant to this
Prospectus, and were deposited with DTC. In the event of a
transfer of securities which were issued in fully registered,
certificated form, the holder of such certificates will be
required
to exchange them for interests in the Global Certificates
representing the number of Preferred Securities being
transferred.
DTC is a limited-purpose trust company organized under
the New York Banking Law, 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
New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the
Exchange Act. DTC holds securities that its participants
("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as
transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts,
thereby
eliminating the need for physical movement of securities
certificates. Participants in DTC include securities brokers and
dealers, banks, trust companies, clearing corporations and
certain
other organizations. DTC is owned by a number of its Participants
and by the NYSE, the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the
DTC
system is also available to others such as securities brokers and
dealers, banks and trust companies that clear through or maintain
a custodial relationship with a Participant, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Preferred Securities within the DTC system
must be made by or through Participants, which will receive a
credit for the Preferred Securities on DTC's records. The
ownership
interest of each actual purchaser of Preferred Securities (the
"Beneficial Owner") is in turn to be recorded on the
Participants'
and Indirect Participants' records. Beneficial Owners will not
receive written confirmation from DTC of their purchases, but
Beneficial Owners are expected to receive written confirmations
providing details of the transactions, as well as periodic
statements of their holdings, from the Participants or Indirect
Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the
Preferred Securities are to be accomplished by entries made on
the
books of Participants and Indirect Participants acting on behalf
of
Beneficial Owners. Beneficial Owners will not receive
certificates
representing their ownership interests in Preferred Securities,
except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
DTC has no knowledge of the actual Beneficial Owners of
the Preferred Securities; DTC's records reflect only the identity
of the Participants to whose accounts such Preferred Securities
are
credited, which may or may not be the Beneficial Owners. The
Participants and Indirect Participants will remain responsible
for
keeping account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner
or holder of a Global Certificate, DTC or such nominee, as the
case
may be, will be considered the sole owner or holder of the
Preferred Securities represented thereby for all purposes under
the
Declaration and the Preferred Securities. No beneficial owner of
an
interest in a Global Certificate will be able to transfer that
interest except in accordance with DTC's applicable procedures,
in
addition to those provided for under the Declaration.
Transfers between Participants in DTC will be effected
in
the ordinary way in accordance with DTC rules and will be settled
in same-day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Preferred
Securities to persons in states which require such delivery of
such
Preferred Securities or to pledge such Preferred Securities, such
holder must transfer its interest in the Global Certificate in
accordance with the normal procedures of DTC and the procedures
set
forth in the Declaration.
DTC has advised the Company that it will take any
action
permitted to be taken by a holder of Preferred Securities
(including the presentation of Preferred Securities for exchange
as
described below) only at the direction of one or more
Participants
to whose account the DTC interests in the Global Certificates are
credited and only in respect of such portion of the aggregate
liquidation amount of Preferred Securities as to which such
Participant or Participants has or have given such direction.
However, if there is an Event of Default under the Preferred
Securities, DTC will exchange the Global Certificates for
Certificated Securities, which it will distribute to its
Participants.
Conveyance of notices and other communications by DTC
to
Participants, by Participants to Indirect Participants, and by
Participants and Indirect Participants to Beneficial Owners will
be
governed by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to time.
Redemption notices in respect of the Preferred
Securities
held in book-entry form will be sent to Cede & Co. If less than
all of the Preferred Securities are being redeemed, DTC will
determine the amount of the interest of each Participant to be
redeemed in accordance with its procedures.
Although voting with respect to the Preferred
Securities
is limited, in those cases where a vote is required, neither DTC
nor Cede & Co. will itself consent or vote with respect to
Preferred Securities. Under its usual procedures, DTC would mail
an
Omnibus Proxy to the Issuer as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting
rights to those Participants to whose accounts the Preferred
Securities are credited on the record date (identified in a
listing
attached to the Omnibus Proxy).
Distributions on the Preferred Securities held in book-
entry form will be made to DTC in immediately available funds.
DTC's practice is to credit Participants' accounts on the
relevant
payment date in accordance with their respective holdings shown
on
DTC's records unless it has reason to believe that it will not
receive payments on such payment date. Payments by Participants
and
Indirect Participants to Beneficial Owners will be governed by
standing instructions and customary practices and will be the
responsibility of such Participants and Indirect Participants and
not of DTC, the Issuer or Continental, subject to any statutory
or
regulatory requirements as may be in effect from time to time.
Payment of distributions to DTC is the responsibility of the
Issuer, disbursement of such payments to Participants is the
responsibility of DTC, and disbursement of such payments to the
Beneficial Owners is the responsibility of Participants and
Indirect Participants.
Except as provided herein, a Beneficial Owner of an
interest in a Global Certificate will not be entitled to receive
physical delivery of Preferred Securities. Accordingly, each
Beneficial Owner must rely on the procedures of DTC to exercise
any
rights under the Preferred Securities.
Although DTC has agreed to the foregoing procedures in
order to facilitate transfers of interests in the Global
Certificates among Participants of DTC, DTC is under no
obligation
to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company,
the Issuer nor the Trustee will have any responsibility for the
performance by DTC or its Participants or Indirect Participants
under the rules and procedures governing DTC. DTC may discontinue
providing its services as securities depository with respect to
the
Preferred Securities at any time by giving notice to the Issuer.
Under such circumstances, in the event that a successor
securities
depository is not obtained, Preferred Security certificates are
required to be printed and delivered. Additionally, the Issuer
(with the consent of Continental) may decide to discontinue use
of
the system of book-entry transfers through DTC (or a successor
depository). In that event, certificates for the Preferred
Securities will be printed and delivered. In each of the above
circumstances, Continental will appoint a paying agent with
respect
to the Preferred Securities.
The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of securities in
definitive form. Such laws may impair the ability to transfer
beneficial interest in the Preferred Securities as represented by
a Global Certificate.
Payment And Paying Agency
Payments in respect of the Preferred Securities shall
be
made to DTC, which shall credit the relevant accounts at DTC on
the
applicable distribution dates or, in the case of Certificated
Securities, such payments shall be made by check mailed to the
address of the holder entitled thereto as such address shall
appear
on the Register. The Paying Agent will initially be Wilmington
Trust Company. The Paying Agent will be permitted to resign as
Paying Agent upon 30 days written notice to the Regular Trustees.
In the event that Wilmington Trust Company shall no longer be the
Paying Agent, the Trustee will appoint a successor to act as
Paying
Agent (which must be a bank or trust company).
Property Trustee, Transfer Agent, Registrar, Paying Agent and
Conversion Agent
Wilmington Trust Company will act as Property Trustee,
Transfer Agent, Registrar and Paying Agent, and Conversion Agent
for the Preferred Securities, but the Trust may designate an
additional or substitute Transfer Agent, Registrar and Paying
Agent, or Conversion Agent. In the event that the Preferred
Securities do not remain in book-entry-only form, registration of
transfers of Preferred Securities will be effected without charge
by or on behalf of the Trust, but upon payment in respect of any
tax or other governmental charges which may be imposed in
connection therewith (and/or the giving of such indemnity as the
Trust may require with respect thereto). Exchanges of Preferred
Securities for Convertible Subordinated Debentures will be
effected
without charge by or on behalf of the Trust, but upon payment in
respect of any tax or other governmental charges which may be
imposed (and/or the giving of such indemnity as the Trust may
require with respect thereto) in connection with the issuance of
any Convertible Subordinated Debentures in the name of any person
other than the registered holder of the Preferred Security for
which the Convertible Subordinated Debenture is being exchanged
or
for any reason other than such exchange. The Trust will not be
required to register or cause to be registered the transfer of
Preferred Securities after such Preferred Securities have been
called for redemption or exchange. The Property Trustee, prior to
the occurrence of a default with respect to the Trust Securities,
undertakes to perform only such duties as are specifically set
forth in the Declaration and, after default, shall exercise the
same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs. Subject to such provisions,
the
Property Trustee is under no obligation to exercise any of the
powers vested in it by the Declaration at the request of any
holder
of Preferred Securities, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which
might
be incurred thereby. The holders of Preferred Securities will not
be required to offer such indemnity in the event such holders, by
exercising their voting rights, direct the Property Trustee to
take
any action following a Declaration Event of Default.
Information Concerning The Property Trustee
The Property Trustee, prior to the occurrence of a
default with respect to the Trust Securities, undertakes to
perform
only such duties as are specifically set forth in the Declaration
and, after default, will exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her
own
affairs. Subject to such provisions, the Property Trustee is
under
no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities,
unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities that might be incurred thereby.
The
holders of Preferred Securities will not be required to offer
such
indemnity in the event such holders, by exercising their voting
rights, direct the Property Trustee to take any action following
a
Declaration Event of Default. The Property Trustee also serves as
trustee under the Guarantee and the Indenture.
Continental and certain of its subsidiaries maintain
deposit accounts and conduct other banking transactions with
Wilmington Trust Company in the ordinary course of their
businesses.
Governing Law
The Declaration and the Trust Securities will be
governed
by, and construed in accordance with, the internal laws of the
State of Delaware.
Miscellaneous
The Regular Trustees are authorized and directed to
operate the Trust in such a way so that the Trust will not be
required to register as an "investment company" under the 1940
Act
or characterized as other than a grantor trust for United States
federal income tax purposes. Continental is authorized and
directed
to conduct its affairs so that the Convertible Subordinated
Debentures will be treated as indebtedness of Continental for
United States federal income tax purposes. In this connection,
Continental and the Regular Trustees are authorized to take any
action, not inconsistent with applicable law, the certificate of
trust of the Trust or the Certificate of Incorporation of
Continental, that each of Continental and the Regular Trustees
determine in their discretion to be necessary or desirable to
achieve such end, as long as such action does not adversely
affect
the interests of the holders of the Preferred Securities or vary
the terms thereof.
Holders of the Preferred Securities have no preemptive
rights.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of the principal terms and
provisions of the Guarantee which was executed and delivered by
Continental for the benefit of the holders from time to time of
Preferred Securities. This summary does not purport to be
complete,
and reference is made to the Guarantee filed as an exhibit to the
Registration Statement. The Guarantee incorporates by reference
terms of the Trust Indenture Act. The Guarantee will be qualified
under the Trust Indenture Act. The Guarantee Trustee holds the
Guarantee for the benefit of the holders of the Preferred
Securities.
General
Pursuant to the Guarantee, Continental irrevocably and
unconditionally agreed, to the extent set forth herein, to pay in
full, to the holders of the Preferred Securities, the Guarantee
Payments (as defined below), as and when due, regardless of any
defense, right of set-off or counterclaim which the Issuer may
have
or assert. The following payments with respect to the Preferred
Securities, to the extent not paid by the Issuer (the "Guarantee
Payments"), will be subject to the Guarantee (without
duplication):
(i) any accrued and unpaid distributions that are required to be
paid on the Preferred Securities to the extent of funds of the
Trust available therefor, (ii) the amount payable upon redemption
of the Preferred Securities, payable out of funds of the Trust
available therefor with respect to any Preferred Securities
called
for redemption by the Issuer and (iii) upon a Liquidation of the
Issuer, the lesser of (a) the aggregate of the liquidation amount
and all accrued and unpaid distributions on the Preferred
Securities to the date of payment, to the extent of funds of the
Trust available therefor, and (b) the amount of assets of the
Issuer remaining available for distribution to holders of
Preferred
Securities. Continental's obligation to make a Guarantee Payment
may be satisfied by direct payment of the required amounts by
Continental to the holders of Preferred Securities or by causing
the Issuer to pay such amounts to such holders.
The Guarantee will be a full and unconditional
guarantee
of the Guarantee Payments with respect to the Preferred
Securities
from the time of issuance of the Preferred Securities, but will
not
apply to the payment of distributions and other payments on the
Preferred Securities when the Trustee does not have sufficient
funds in the Property Account to make such distributions or other
payments. If Continental does not make interest payments on the
Convertible Subordinated Debentures held by the Trustee, the
Trust
will not make distributions on the Preferred Securities issued by
the Trust and will not have funds available therefor. See
"Description of the Convertible Subordinated Debentures -
Certain Covenants."
Because the Guarantee is a guarantee of payment and not
of collection, holders of the Preferred Securities may proceed
directly against Continental as guarantor, rather than having to
proceed against the Issuer before attempting to collect from
Continental, and Continental waives any right or remedy to
require
that any action be brought against the Issuer or any other person
or entity before proceeding against Continental. Such obligations
will not be discharged except by payment of the Guarantee
Payments
in full. The Guarantee will be deposited with the Guarantee
Trustee
to be held for the benefit of the holders of Preferred
Securities.
Except as otherwise noted herein, the Guarantee Trustee has the
right to enforce the Guarantee on behalf of the holders of the
Preferred Securities.
Continental has also agreed separately to irrevocably
and
unconditionally guarantee the obligations of the Trust with
respect
to the Common Securities (the "Common Securities Guarantee") to
the
same extent as the Guarantee, except that upon the occurrence and
during the continuation of an Event of Default, holders of
Preferred Securities shall have priority over holders of Common
Securities with respect to distributions and payments on
liquidation, redemption or otherwise.
Certain Covenants of Continental
In the Guarantee, Continental has covenanted that, so
long as any Preferred Securities remain outstanding, if (i)
Continental has exercised its option to defer interest payments
on
the Convertible Subordinated Debentures and such deferral is
continuing, (ii) Continental shall be in default with respect to
its payment or other obligations under the Guarantee or (iii)
there
shall have occurred and be continuing any event that, with the
giving of notice of the lapse of time or both, would constitute
an
Event of Default under the Indenture, then Continental will not
(a)
declare or pay dividends on, make distributions with respect to,
or
redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock, except for dividends or
distributions in shares of its capital stock of the same class on
which such dividend or distribution is being paid and conversions
or exchanges of common stock of one class into common stock of
another class, or (b) make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any debt
securities of Continental that rank pari passu with or junior to
the Convertible Subordinated Debentures (except by conversion
into
or exchange for shares of its capital stock and except for a
redemption, purchase or other acquisition of shares of its
capital
stock made for the purpose of an employee incentive plan or
benefit
plan of the Company or any of its subsidiaries).
As part of the Guarantee, Continental has agreed that
it
will honor all obligations described therein relating to the
conversion of the Preferred Securities into Class B common stock
as
described in "Description of the Preferred Securities -
Conversion Rights."
Amendments and Assignment
Except with respect to any changes that do not
materially
adversely affect the rights of holders of Preferred Securities
(in
which case no vote will be required), the Guarantee may be
amended
only with the prior approval of the holders of not less than 66
2/3% in aggregate stated liquidation amount of the outstanding
Preferred Securities. The manner of obtaining any such approval
of
holders of the Preferred Securities will be as set forth under
"Description of the Preferred Securities - Voting Rights."
All guarantees and agreements contained in the Guarantee shall
bind
the successors, assigns, receivers, trustees and representatives
of
Continental and shall inure to the benefit of the holders of the
Preferred Securities then outstanding. Except in connection with
any permitted merger or consolidation of Continental with or into
another entity or any permitted sale, transfer or lease of
Continental's assets to another entity as described below under
"Description of the Convertible Subordinated Debentures -
Restrictions," Continental may not assign its rights or delegate
its obligations under the Guarantee without the prior approval of
the holders of at least 66 2/3% of the aggregate stated
liquidation
amount of the Preferred Securities then outstanding.
Termination of the Guarantee
The Guarantee will terminate as to each holder of
Preferred Securities and be of no further force and effect upon
(a)
full payment of the applicable redemption price of such holder's
Preferred Securities, (b) the distribution of Class B common
stock
to such holder in respect of the conversion of such holder's
Preferred Securities into Class B common stock, or (c) the
distribution of Convertible Subordinated Debentures to the
holders
of all of the Preferred Securities, and will terminate completely
upon full payment of the amounts payable upon liquidation of the
Issuer. The Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any holder of
Preferred Securities must restore payment of any sums paid under
such Preferred Securities or the Guarantee.
Events of Default
An event of default under the Guarantee will occur upon
the failure of Continental to perform any of its payment or other
obligations thereunder.
The holders of a majority in liquidation amount of the
Preferred Securities have the right to direct the time, method
and
place of conducting any proceeding for any remedy available to
the
Guarantee Trustee in respect of the Guarantee or to direct the
exercise of any trust or power conferred upon the Guarantee
Trustee
under the Guarantee. If the Guarantee Trustee fails to enforce
the
Guarantee, any holder of Preferred Securities may institute a
legal
proceeding directly against Continental to enforce the Guarantee
Trustee's rights under the Guarantee, without first instituting a
legal proceeding against the Trust, the Guarantee Trustee or any
other person or entity.
Status of the Guarantee; Subordination
The Guarantee constitutes an unsecured obligation of
Continental and ranks (i) subordinate and junior in right of
payment to all liabilities of Continental except any liabilities
that may be made pari passu expressly by their terms, (ii) pari
passu with the most senior preferred or preference stock now or
hereafter issued by Continental, which as of the date hereof
would
be Continental's Series A 12% Cumulative Preferred Stock (the
"Series A 12% Preferred"), and with any guarantee now or
hereafter
entered into by Continental in respect of any preferred or
preference stock of any affiliate of Continental and (iii) senior
to Continental's common stock. The Declaration provides that each
holder of Preferred Securities by acceptance thereof agrees to
the
subordination provisions and other terms of the Guarantee. Upon
the
bankruptcy, liquidation or winding up of Continental, its
obligations under the Guarantee will rank junior to all its other
liabilities (except as aforesaid) and, therefore, funds may not
be
available for payment under the Guarantee.
Information Concerning the Guarantee Trustee
The Guarantee Trustee, prior to the occurrence of a
default, has undertaken to perform only such duties as are
specifically set forth in the Guarantee and, after default with
respect to the Guarantee, shall exercise the same degree of care
as
a prudent individual would exercise in the conduct of his or her
own affairs. Subject to such provision, the Guarantee Trustee is
under no obligation to exercise any of the powers vested in it by
the Guarantee at the request of any holder of Preferred
Securities
unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred thereby. The
Guarantee Trustee also serves as the Property Trustee and the
Indenture Trustee.
Governing Law
The Guarantee is governed by and construed in
accordance
with the laws of the State of New York.
DESCRIPTION OF THE CONVERTIBLE SUBORDINATED DEBENTURES
Set forth below is a description of the specific terms
of
the Convertible Subordinated Debentures in which the Trust
invested
the proceeds from the issuance and sale of the Trust Securities.
The following description does not purport to be complete, and
reference is made to the Indenture (the "Indenture") between
Continental and Wilmington Trust Company as Indenture Trustee,
filed as an exhibit to the Registration Statement and a copy of
which may be obtained from Continental upon request. The
Indenture
will be qualified under the Trust Indenture Act.
Under certain circumstances involving the dissolution
of
the Trust following the occurrence of a Special Event,
Convertible
Subordinated Debentures may be distributed to the holders of the
Trust Securities in liquidation of the Trust. See "Description of
the Preferred Securities - Tax Event Or Investment Company
Event Redemption or Distribution."
If the Convertible Subordinated Debentures are
distributed to the holders of the Preferred Securities subsequent
to the effectiveness of the Shelf Registration Statement,
Continental will use its best efforts to have the Convertible
Subordinated Debentures listed on the New York Stock Exchange or
on
such other national securities exchange or similar organization
on
which the Preferred Securities are then listed or quoted.
General
The Convertible Subordinated Debentures have been
issued
as unsecured debt under the Indenture. The Convertible
Subordinated
Debentures were limited in aggregate principal amount to
approximately $258 million, such amount being the sum of the
aggregate stated liquidation amount of the Preferred Securities
and
the capital contributed by Continental in exchange for the Common
Securities (the "Continental Payment").
The Convertible Subordinated Debentures are not subject
to a sinking fund provision. The entire principal amount of the
Convertible Subordinated Debentures will mature and become due
and
payable, together with any accrued and unpaid interest thereon
including Compounded Interest (as defined herein) and Additional
Interest (as hereinafter defined), if any, on December 1, 2020.
If Convertible Subordinated Debentures are distributed
to
holders of Preferred Securities in liquidation of such holders'
interests in the Trust, such Convertible Subordinated Debentures
will initially be issued as a Global Security (as defined below).
As described herein, under certain limited circumstances,
Convertible Subordinated Debentures may be issued in certificated
form in exchange for a Global Security (as defined below). See "
- - - - Book-Entry and Settlement" below. In the event that
Convertible Subordinated Debentures are issued in certificated
form, such Convertible Subordinated Debentures will be in
denominations of $50 and integral multiples thereof and may be
transferred or exchanged at the offices described below. Payments
on Convertible Subordinated Debentures issued as a Global
Security
will be made to DTC, a successor depositary or, in the event that
no depositary is used, to a Paying Agent for the Convertible
Subordinated Debentures. In the event Convertible Subordinated
Debentures are issued in certificated form, principal and
interest
will be payable, the transfer of the Convertible Subordinated
Debentures will be registrable and Convertible Subordinated
Debentures will be exchangeable for Convertible Subordinated
Debentures of other denominations of a like aggregate principal
amount at the corporate trust office of the Indenture Trustee in
Wilmington, Delaware; provided, however, that payment of interest
may be made at the option of Continental by check mailed to the
address of the persons entitled thereto.
Subordination
The Indenture provides that the Convertible
Subordinated
Debentures are subordinated and junior in right of payment to all
existing and future Senior Indebtedness of Continental. Upon any
distribution of assets of Continental to creditors upon any
dissolution, winding up, liquidation or reorganization, whether
voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all principal, premium, if
any,
and interest due or to become due on all Senior Indebtedness of
Continental must be paid in full before the holders of
Convertible
Subordinated Debentures are entitled to receive or retain any
payment. Upon payment in full of all Senior Indebtedness then
outstanding, the rights of the holders of the Convertible
Subordinated Debentures will be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or
distributions
applicable to Senior Indebtedness until all amounts owing on the
Convertible Subordinated Debentures are paid in full.
In addition, no payment of principal (including
redemption payments), premium, if any, or interest (including any
Additional Interest, Compounded Interest or Liquidated Damages)
on
the Convertible Subordinated Debentures may be made (i) if any
payment of principal, premium, interest or any other payment due
on
any Designated Senior Indebtedness of Continental is not paid
when
due and any applicable grace period with respect to such default
has ended and such default has not been cured or waived or ceased
to exist, or (ii) if the maturity of any Designated Senior
Indebtedness of Continental has been accelerated because of a
default.
The term "Senior Indebtedness" means, with respect to
Continental, (i) the principal, premium, if any, and interest in
respect of (A) indebtedness of such obligor for money borrowed
and
(B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments issued by such obligor (ii) all capital
lease obligations of such obligor, (iii) all obligations of such
obligor issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such obligor and
all
obligations of such obligor under any title retention agreement
(but excluding trade accounts payable arising in the ordinary
course of business), (iv) all obligations of such obligor for the
reimbursement on any letter of credit, bankers acceptance,
security
purchase facility or similar credit transaction, (v) all
obligations of the type referred to in clauses (i) through (iv)
above of other persons for the payment of which such obligor is
responsible or liable as obligor, guarantor or otherwise, and
(vi)
all obligations of the type referred to in clauses (i) through
(v)
above of other persons secured by any lien on any property or
asset
of such obligor (whether or not such obligation is assumed by
such
obligor), except for (1) any such indebtedness that is by its
terms
subordinated to or pari passu with the Convertible Subordinated
Debentures and (2) any indebtedness between or among such obligor
or its affiliates, including all other debt securities and
guarantees in respect of those debt securities, initially issued
to
any other trust, or a trustee of such trust, partnership or other
entity affiliated with Continental that, directly or indirectly,
is
a financing vehicle of Continental (a "financing entity") in
connection with the issuance by such financing entity of
preferred
securities or other securities that rank pari passu with, or
junior
to, the Preferred Securities. Such Senior Indebtedness shall
continue to be Senior Indebtedness and be entitled to the
benefits
of the subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
The Indenture does not limit the aggregate amount of
Senior Indebtedness that may be issued by Continental. As of
March
31, 1996, Senior Indebtedness of Continental aggregated
approximately $1.7 billion.
The term "Designated Senior Indebtedness" means (i) all
Senior Indebtedness of Continental outstanding from time to time
under agreements between Continental, on the one hand, and
General
Electric Company, General Electric Capital Corporation, any of
their respective direct or indirect subsidiaries, or any
affiliates
of any of the foregoing, or any trust of which any of the
foregoing
is a beneficiary, on the other hand, in effect on the original
issue date of the Convertible Subordinated Debentures, and any
renewal, refunding, replacement or extension thereof and (ii) any
Senior Indebtedness of Continental incurred, issued or assumed
after the original issue date of the Convertible Subordinated
Debentures and any renewal, refunding, replacement or extension
thereof. As of the date hereof, there are no defaults under any
outstanding Designated Senior Indebtedness.
Optional Redemption
Continental will have the right to redeem the
Convertible
Subordinated Debentures, in whole or in part, at any time or from
time to time, on or after December 1, 1998, at the optional
redemption prices (expressed as a percentage of principal amount)
specified below for the twelve-month period beginning December 1,
Optional
Redemption
Year Price
____ _____
1988................... 105.95%
1999................... 105.10
2000................... 104.25
2001................... 103.40
2002................... 102.55
2003................... 101.70
2004................... 100.85
2005 and thereafter.... 100.00
plus, in each case, accrued and unpaid interest, including
Additional Interest, Compounded Interest and Liquidated Damages,
if
any, to the date set for redemption.
Continental may also redeem the Convertible
Subordinated
Debentures at any time in certain circumstances upon the
occurrence
of a Tax Event as described under "Description of the Preferred
Securities - Tax Event Or Investment Company Event
Redemption or Distribution," upon not less than 30 nor more than
60
days notice, at a redemption price equal to 100% of the principal
amount to be redeemed plus any accrued and unpaid interest,
including Additional Interest, Compounded Interest and Liquidated
Damages, if any, to the redemption date.
If a partial redemption of the Preferred Securities
resulting from a partial redemption of the Convertible
Subordinated
Debentures would result in the delisting of the Preferred
Securities, Continental may only redeem the Convertible
Subordinated Debentures in whole.
Interest
Each Convertible Subordinated Debenture bears interest
at
the rate of 8 1/2% per annum from the original date of issuance,
payable quarterly in arrears on March 1, June 1, September 1 and
December 1 of each year (each an "Interest Payment Date"),
commencing March 1, 1996, to the person in whose name such
Convertible Subordinated Debenture is registered, subject to
certain exceptions, at the close of business on the Business Day
next preceding such Interest Payment Date. At any time when
Convertible Subordinated Debentures are not held solely in book-
entry-only form, the record date for each Interest Payment Date
shall be 15 days prior to such Interest Payment Date.
The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
The amount of interest payable for any period shorter than a full
quarterly period for which interest is computed will be computed
on
the basis of the actual number of days elapsed in such a 30-day
month. In the event that any date on which interest is payable on
the Convertible Subordinated Debentures is not a Business Day,
then
payment of the interest payable on such date will be made on the
next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar
year,
then such payment shall be made on the immediately preceding
Business Day, in each case with the same force and effect as if
made on such date.
Option to Extend Interest Payment Period
Continental shall have the right, at any time and from
time to time during the term of the Convertible Subordinated
Debentures, to defer payments of interest (including Additional
Interest and Liquidated Damages, if any) by extending the
interest
payment period for a period not exceeding 20 consecutive
quarters,
at the end of which Extension Period, Continental shall pay all
interest then accrued and unpaid (including Additional Interest
and
Liquidated Damages, if any) together with interest thereon
compounded quarterly at the rate specified for the Convertible
Subordinated Debentures to the extent permitted by applicable law
("Compounded Interest"); provided, however, that during any such
Extension Period Continental will not, subject to certain
exceptions, declare or pay dividends on or make any distributions
with respect to any of its capital stock, or make any payment on
or
repay, repurchase or redeem any debt securities that rank pari
passu with or junior to the Convertible Subordinated Debentures.
See " - Certain Covenants." Prior to the termination of any
such Extension Period, Continental may further defer payments of
interest by extending the interest payment period; provided,
however, that, such Extension Period, including all such previous
and further extensions, may not exceed 20 consecutive quarters.
Upon the termination of any Extension Period and the payment of
all
amounts then due, Continental may commence a new Extension
Period,
subject to the terms set forth in this section. No interest
during
an Extension Period, except at the end thereof, shall be due and
payable. Continental has no current intention of exercising its
right to defer payments of interest by extending the interest
payment period on the Convertible Subordinated Debentures. If the
Property Trustee is the sole holder of the Convertible
Subordinated
Debentures, Continental will give the Regular Trustees and the
Property Trustee notice of its selection of such Extension Period
at least one Business Day prior to the earlier of (i) the date
distributions on the Preferred Securities are payable or (ii) if
applicable, the date the Regular Trustees are required to give
notice to the New York Stock Exchange (or other applicable self-
regulatory organization) or to holders of the Preferred
Securities
of the record date or the date such distribution is payable. The
Regular Trustees will give notice of Continental's selection of
such Extension Period to the holders of the Preferred Securities.
If the Property Trustee is not the sole holder of the Convertible
Subordinated Debentures, Continental shall give the holders of
the
Convertible Subordinated Debentures notice of its selection of
such
Extension Period at least ten (10) Business Days prior to the
earlier of (i) the Interest Payment Date or (ii) if applicable,
the
date upon which Continental is required to give notice to the New
York Stock Exchange (or other applicable self-regulatory
organization) or to holders of the Convertible Subordinated
Debentures of the record or payment date of such related interest
payment.
Conversion into Class B common stock
The Convertible Subordinated Debentures will be
convertible into Class B common stock at the option of the
holders
of the Convertible Subordinated Debentures at any time at the
initial conversion price of $48.36 principal amount of
Convertible
Subordinated Debentures per share of Class B common stock,
subject
to the conversion price adjustments described under "Description
of
the Preferred Securities - Conversion Rights." The
procedures for conversion of the Convertible Subordinated
Debentures for Class B common stock will be as described under
"Description of the Preferred Securities - Conversion
Rights." No fractional shares will be issued upon conversion. In
lieu thereof, cash will be paid by Continental based upon the
Current Market Price of Class B common stock on the date the
conversion notice was received by the Conversion Agent. Holders
of
Convertible Subordinated Debentures may obtain copies of the
required form of conversion notice from the Conversion Agent.
Continental's delivery to the holders of the Convertible
Subordinated Debentures (through the Conversion Agent or
otherwise)
of the whole number of shares of Class B common stock into which
the Convertible Subordinated Debentures so delivered are
convertible (together with the cash payment, if any, in lieu of
fractional shares) will be deemed to satisfy Continental's
obligation to pay the principal amount of such Convertible
Subordinated Debentures, and the accrued and unpaid interest
thereon, including any Additional Interest (other than any
Additional Amounts), and no payment shall be made for accrued
interest, whether or not in arrears. If, however, any Convertible
Subordinated Debenture is converted after any record date for the
payment of interest and on or prior to the related interest
payment
date, the interest payable on such succeeding interest payment
date
with respect to such Convertible Subordinated Debenture shall be
paid despite such conversion. Each conversion will be deemed to
have been effected immediately prior to the close of business on
the day on which the related conversion notice was received by
the
Conversion Agent.
Additional Interest
If at any time the Trust shall be required to pay any
taxes, duties, assessments or governmental charges of whatever
nature (other than withholding taxes) imposed by the United
States,
or any other taxing authority, then, in any such case,
Continental
will pay as additional interest ("Additional Interest") such
additional amounts as shall be required so that the net amounts
received and retained by the Trust after paying any such taxes,
duties, assessments or other governmental charges will be not
less
than the amounts the Trust would have received had no such taxes,
duties, assessments or other governmental charges been imposed.
Certain Covenants
In the Indenture, Continental has covenanted that, so
long as any Convertible Subordinated Debentures are outstanding,
if
(i) there shall have occurred and be continuing an event that,
with
the giving of notice or the lapse of time or both, would
constitute
an Event of Default, (ii) Continental shall be in default with
respect to its payment of any obligations under the Guarantee, or
(iii) Continental shall have given notice of its election to
defer
payments of interest on the Convertible Subordinated Debentures
by
extending the interest payment period as provided in the
Indenture
and such period, or any extension thereof, shall be continuing,
then Continental will not (a) declare or pay dividends on, make
distributions with respect to, or redeem, purchase or acquire, or
make a liquidation payment with respect to, any of its capital
stock, except for dividends or distributions in shares of its
capital stock of the same class on which such dividend or
distribution is being paid and conversions or exchanges of common
stock of one class into common stock of another class, or (b)
make
any payment of interest, principal or premium, if any, on or
repay,
repurchase or redeem any debt securities issued by Continental
that
rank pari passu with or junior to the Convertible Subordinated
Debentures (except by conversion into or exchange for shares of
its
capital stock and except for a redemption, purchase or other
acquisition of shares of its capital stock made for the purpose
of
an employee incentive plan or benefit plan of the Company or any
of
its subsidiaries).
For so long as the Trust Securities remain outstanding,
Continental has agreed to (i) directly or indirectly maintain
100%
ownership of the Common Securities of the Trust, provided,
however,
that any permitted successor of Continental under the Indenture
may
succeed to Continental's ownership of such Common Securities and
(ii) use its reasonable efforts to cause the Trust to (x) remain
a
statutory business trust, except in connection with the
distribution of Convertible Subordinated Debentures to the
holders
of Trust Securities in liquidation of the Trust, the redemption
of
all of the Trust Securities of the Trust, or certain mergers,
consolidations or amalgamations, each as permitted by the
Declaration, and (y) otherwise continue to be classified as a
grantor trust for United States federal income tax purposes.
Restrictions
The Indenture provides that Continental shall not
consolidate with or merge with or into any other corporation or
person, or, directly or indirectly, convey, transfer or lease all
or substantially all of the properties and assets of Continental
on
a consolidated basis to any person, unless either Continental is
the continuing corporation or such corporation or person
expressly
assumes by supplemental indenture all the obligations of
Continental under the Indenture and the Convertible Subordinated
Debentures, no default or Event of Default under the Indenture
shall exist immediately after the transaction, and the surviving
corporation or such person is a corporation, partnership or trust
organized and validly existing under the laws of the United
States
of America, any state thereof or the District of Columbia.
Events of Default
The Indenture provides that any one or more of the
following described events which has occurred and is continuing
constitutes an "Event of Default" with respect to the Convertible
Subordinated Debentures: (i) failure for 30 days to pay interest
on
the Convertible Subordinated Debentures, including any Additional
Interest, Compounded Interest and Liquidated Damages in respect
thereof, when due, provided that a valid extension of an interest
payment period will not constitute a default in the payment of
interest (including any Additional Interest, Compounded Interest
or
Liquidated Damages) for this purpose; or (ii) failure to pay
principal of or premium, if any, on the Convertible Subordinated
Debentures when due whether at maturity, upon redemption, by
declaration or otherwise; or (iii) failure by Continental to
issue
and deliver shares of Class B common stock upon an election by a
holder of Preferred Securities to convert such Preferred
Securities; or (iv) failure to observe or perform any other
covenant contained in the Indenture for 90 days after notice to
the
Company by the Trustee or by the holders of not less than 25% in
aggregate outstanding principal amount of the Convertible
Subordinated Debentures; or (v) the dissolution, winding up or
termination of the Issuer, except in connection with the
distribution of Convertible Subordinated Debentures to the
holders
of Preferred Securities in Liquidation of the Issuer or in
connection with certain mergers, consolidations or amalgamations
permitted by the Declaration; or (vi) certain events in
bankruptcy,
insolvency or reorganization of Continental.
The Indenture Trustee or the holders of not less than
25%
in aggregate principal amount of the outstanding Convertible
Subordinated Debentures may declare the principal of and interest
(including any Additional Interest, Compounded Interest and
Liquidated Damages) on the Convertible Subordinated Debentures
due
and payable immediately on the occurrence of an Event of Default;
provided, however, that, after such acceleration, but before a
judgment or decree based on acceleration, the holders of a
majority
in aggregate principal amount of outstanding Convertible
Subordinated Debentures may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than
the nonpayment of accelerated principal, have been cured or
waived
as provided in the Indenture. For information as to waiver of
defaults, see " - Modification of the Indenture."
A default under any other indebtedness of Continental
or
the Trust would not constitute an Event of Default under the
Convertible Subordinated Debentures.
Subject to the provisions of the Indenture relating to
the duties of the Indenture Trustee in case an Event of Default
occurs and is continuing, the Indenture Trustee will be under no
obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any holders of
Convertible
Subordinated Debentures, unless such holders shall have offered
to
the Indenture Trustee reasonable indemnity. Subject to such
provisions for the indemnification of the Indenture Trustee, the
holders of a majority in aggregate principal amount of the
outstanding Convertible Subordinated Debentures will have the
right
to direct the time, method and place of conducting any proceeding
for any remedy available to the Indenture Trustee, or exercising
any trust or power conferred on the Indenture Trustee.
No holder of any Convertible Subordinated Debenture
will
have any right to institute any proceeding with respect to the
Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Indenture Trustee written notice of
a
continuing Event of Default and, if the Issuer is not the sole
holder of Convertible Subordinated Debentures, unless the holders
of at least 25% in aggregate principal amount of the outstanding
Convertible Subordinated Debentures shall also have made written
request, and offered reasonable indemnity, to the Indenture
Trustee
to institute such proceeding as Indenture Trustee, and the
Indenture Trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding
Convertible Subordinated Debentures a direction inconsistent with
such request. However, such limitations do not apply to a suit
instituted by a holder of a Convertible Subordinated Debentures
for
enforcement of payment of the principal of or interest (including
any Additional Interest, Compounded Interest and Liquidated
Damages) on such Convertible Subordinated Debenture on or after
the
respective due dates expressed in such Convertible Subordinated
Debenture.
The holders of a majority in aggregate principal amount
of the outstanding Convertible Subordinated Debentures may, on
behalf of the holders of all the Convertible Subordinated
Debentures, waive any past default, except a default in the
payment
of principal, premium, if any, or interest (including any
Additional Interest, Compounded Interest and Liquidated Damages)
on
the Convertible Subordinated Debentures. The Property Trustee is
the initial holder of the Convertible Subordinated Debentures.
However, while any of the Preferred Securities are outstanding,
the
Indenture does not permit the waiver of any Event of Default with
respect to the Convertible Subordinated Debentures without the
consent of holders of 66 2/3% in aggregate liquidation amount of
the Preferred Securities then outstanding. Continental is
required
to file annually with the Indenture Trustee and the Property
Trustee a certificate as to whether or not Continental is in
compliance with all the conditions and covenants under the
Indenture.
Modification of the Indenture
The Indenture contains provisions permitting
Continental
and the Indenture Trustee, with the consent of the holders of not
less than a majority in aggregate principal amount of the
outstanding Convertible Subordinated Debentures, to modify the
Indenture or the rights of the holders of Convertible
Subordinated
Debentures; provided, however, that no such modification may,
without the consent of the holder of each outstanding Convertible
Subordinated Debenture affected thereby, (i) extend the stated
maturity of the Convertible Subordinated Debentures or reduce the
principal amount thereof, or reduce the rate or extend the time
of
payment of interest thereon, or reduce any premium payable upon
the
redemption thereof, or adversely affect the right to convert
Convertible Subordinated Debentures or the subordination
provisions
of the Indenture, or (ii) reduce the percentage in aggregate
principal amount of outstanding Convertible Subordinated
Debentures, the holders of which are required to consent to any
such supplemental indenture.
In addition, Continental and the Indenture Trustee may
execute, without the consent of any holder of Convertible
Subordinated Debentures, any supplemental indenture to cure any
ambiguities, comply with the Trust Indenture Act and for certain
other customary purposes.
Governing Law
The Indenture and the Convertible Subordinated
Debentures
are governed by, and construed in accordance with, the laws of
the
State of New York.
Information Concerning the Indenture Trustee
The Indenture Trustee, prior to default, undertakes to
perform only such duties as are specifically set forth in the
Indenture and, after default, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his
or her own affairs. Subject to such provision, the Indenture
Trustee is under no obligation to exercise any of the powers
vested
in it by the Indenture at the request of any holder of
Convertible
Subordinated Debentures, unless offered reasonable indemnity by
such holder against the costs, expenses and liabilities which
might
be incurred thereby. The Indenture Trustee is not required to
expend or risk its own funds or otherwise incur personal
financial
liability in the performance of its duties if the Indenture
Trustee
reasonably believes that repayment or adequate indemnity is not
reasonably assured to it.
Book-Entry and Settlement
If distributed to holders of Preferred Securities in
connection with the involuntary or voluntary dissolution,
winding-
up or liquidation of the Trust as a result of the occurrence of a
Tax Event, the Convertible Subordinated Debentures will be issued
in the form of one or more global certificates (each a "Global
Security") registered in the name of the depositary or its
nominee.
Except under the limited circumstances described below,
Convertible
Subordinated Debentures represented by Global Securities will not
be exchangeable for, and will not otherwise be issuable as,
Convertible Subordinated Debentures in definitive form. The
Global
Securities described above may not be transferred except by the
depositary to a nominee of the depositary or by a nominee of the
depositary to the depositary or another nominee of the depositary
or to a successor depositary or its nominee.
The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of such
securities
in definitive form. Such laws may impair the ability to transfer
beneficial interests in such a Global Security.
Except as provided below, owners of beneficial
interests
in such a Global Security will not be entitled to receive
physical
delivery of Convertible Subordinated Debentures in definitive
form
and will not be considered the holders (as defined in the
Indenture) thereof for any purpose under the Indenture, and no
Global Security representing Convertible Subordinated Debentures
shall be exchangeable, except for another Global Security of like
denomination and tenor to be registered in the name of the
Depositary or its nominee or to a successor Depositary or its
nominee. Accordingly, each Beneficial Owner must rely on the
procedures of the Depositary or if such person is not a
Participant, on the procedures of the Participant through which
such person owns its interest to exercise any rights of a holder
under the Indenture.
The Depositary
If Convertible Subordinated Debentures are distributed
to
holders of Preferred Securities in liquidation of such holders'
interests in the Trust, DTC will act as securities depositary for
the Convertible Subordinated Debentures. For a description of DTC
and the specific terms of the depositary arrangements, see
"Description of the Preferred Securities - Book-entry-only
Issuance - The Depository Trust Company." As of the date of
this Offering Memorandum, the description therein of DTC's book-
entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Preferred
Securities apply in all material respects to any debt obligations
represented by one or more Global Securities held by DTC.
Continental may appoint a successor to DTC or any successor
depositary in the event DTC or such successor depositary is
unable
or unwilling to continue as a depository for the Global
Securities.
None of Continental, the Trust, the Indenture Trustee,
any paying agent and any other agent of Continental or the
Indenture Trustee will have any responsibility or liability for
any
aspect of the records relating to or payments made on account of
beneficial ownership interests in a Global Security for such
Convertible Subordinated Debentures or for maintaining,
supervising
or reviewing any records relating to such beneficial ownership
interests.
Discontinuance of the Depositary's Services
A Global Security shall be exchangeable for Convertible
Subordinated Debentures registered in the names of persons other
than the Depositary or its nominee only if (i) the Depositary
notifies Continental that it is unwilling or unable to continue
as
a depositary for such Global Security and no successor depositary
shall have been appointed, (ii) the Depositary, at any time,
ceases
to be a clearing agency registered under the Exchange Act at
which
time the Depositary is required to be so registered to act as
such
depositary and no successor depositary shall have been appointed,
(iii) Continental, in its sole discretion, determines that such
Global Security shall be so exchangeable or (iv) there shall have
occurred an Event of Default with respect to such Convertible
Subordinated Debentures. Any Global Security that is exchangeable
pursuant to the preceding sentence shall be exchangeable for
Convertible Subordinated Debentures registered in such names as
the
Depositary shall direct. It is expected that such instructions
will
be based upon directions received by the Depositary from its
Participants with respect to ownership of beneficial interests in
such Global Security.
Miscellaneous
The Indenture will provide that Continental will pay
all
fees and expenses related to (i) the offering of the Trust
Securities and the Convertible Subordinated Debentures, (ii) the
organization, maintenance and dissolution of the Trust, (iii) the
retention of the Trustees and (iv) the enforcement by the
Property
Trustee of the rights of the holders of the Preferred Securities.
EFFECT OF OBLIGATIONS UNDER THE CONVERTIBLE SUBORDINATED
DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of
the
Trust is to issue the Trust Securities evidencing undivided
beneficial interests in the assets of the Trust, and to invest
the
proceeds from such issuance and sale in the Convertible
Subordinated Debentures.
As long as payments of interest and other payments are
made when due on the Convertible Subordinated Debentures, such
payments will be sufficient to cover distributions and payments
due
on the Trust Securities because of the following factors: (i) the
aggregate principal amount of Convertible Subordinated Debentures
will be equal to the sum of the aggregate stated liquidation
amount
of the Trust Securities; (ii) the interest rate and the interest
and other payment dates on the Convertible Subordinated
Debentures
will match the distribution rate and distribution and other
payment
dates for the Preferred Securities; (iii) Continental shall pay
all, and the Trust shall not be obligated to pay, directly or
indirectly, any costs or expenses of the Trust; and (iv) the
Declaration further provides that the Continental Trustees shall
not cause or permit the Trust to, among other things, engage in
any
activity that is not consistent with the purposes of the Trust.
Payments of distributions (to the extent funds therefor
are available) and other payments due on the Preferred Securities
(to the extent funds therefor are available) are guaranteed by
Continental as and to the extent set forth under "Description of
the Guarantee."
If Continental does not make interest payments on the
Convertible Subordinated Debentures purchased by the Trust, it is
expected that the Trust will not have sufficient funds to pay
distributions on the Preferred Securities. The Guarantee is a
full
and unconditional guarantee from the time of its issuance, but
does
not apply to any payment of distributions unless and until the
Trust has sufficient funds for the payment of such distributions.
If Continental fails to make interest or other payments
on the Convertible Subordinated Debentures when due (taking into
account any Extension Period), the Declaration provides a
mechanism
whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities
- - - - Voting Rights," may direct the Property Trustee to
enforce its rights under the Convertible Subordinated Debentures,
including proceeding directly against Continental to enforce the
Convertible Subordinated Debentures. If the Indenture Trustee
fails
to enforce its rights under the Convertible Subordinated
Debentures, a holder of Preferred Securities may institute a
legal
proceeding directly against Continental to enforce the Indenture
Trustee's rights under the Convertible Subordinated Debentures
without first instituting any legal proceeding against the
Indenture Trustee or any other person or entity, including the
Trust.
If Continental fails to make payments under the
Guarantee, the Guarantee provides a mechanism whereby the holders
of the Preferred Securities may direct the Guarantee Trustee to
enforce its rights thereunder. If the Guarantee Trustee fails to
enforce the Guarantee, any holder of Preferred Securities may
institute a legal proceeding directly against Continental to
enforce the Guarantee Trustee's rights under the Guarantee,
without
first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity.
Continental's obligations under the Declaration, the
Guarantee, the Indenture and the Convertible Subordinated
Debentures, in the aggregate provides a full and unconditional
guarantee on a subordinated basis by Continental of payments due
on
the Preferred Securities. See "Description of the Guarantee long
dash General" and "Description of the Convertible Subordinated
Debentures - Events of Default."
DESCRIPTION OF CAPITAL STOCK
The current authorized capital stock of the Company
consists of 50,000,000 shares of Class A common stock, $.01 par
value (the "Class A common stock"), 100,000,000 shares of Class B
common stock (the "Class B common stock"), 50,000,000 shares of
Class C common stock, $.01 par value (the "Class C common
stock"),
50,000,000 shares of Class D common stock, $.01 par value (the
"Class D common stock") (such classes of common stock referred to
collectively as the "common stock") and 10,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock").
Amendments
to the Certificate of Incoporation have been proposed by the
Board
of Directors for a vote at the Annual Meeting that would increase
the amount of authorized Class B common stock to 200,000,000
shares
and eliminate the Class C common stock as an authorized class of
shares. See "Recent Developments." As of April 30, 1996, there
were 6,301,056 outstanding shares of Class A common stock,
21,492,124 outstanding shares of Class B common stock and 409,662
outstanding shares of Series A 12% Cumulative Preferred Stock.
Pursuant to the Reorganization, on April 27, 1993 the
Company issued 1,900,000 shares of Class A common stock and
5,042,368 shares of Class B common stock to a distribution agent
for the benefit of the Company's Prepetition Creditors. As of
March
31, 1996, there remained 291,459 shares of Class A common stock,
762,291 shares of Class B common stock, and approximately $1
million of cash available for distribution. Pending resolution of
certain disputed claims, a distribution agent will continue to
hold
undistributed Class A common stock and Class B common stock and
will vote such shares of each class pro rata in accordance with
the
vote of all other shares of such class on any matter submitted to
a vote of stockholders. Also pursuant to the Reorganization, the
Company issued 493,621 shares of Class B common stock to its
retirement plan.
The following summary description of capital stock
accurately describes the material matters with respect thereto,
but
is not intended to be complete and reference is made to the
provisions of the Company's Certificate of Incorporation and
Bylaws
and the agreements referred to in this summary description. As
used
in this section, except as otherwise stated or required by
context,
each reference to Air Canada or Air Partners includes any
successor
by merger, consolidation or similar transaction and any wholly
owned subsidiary of such entity or such successor.
Common Stock - All Classes
Holders of common stock of all classes participate
ratably as to any dividends or distributions on the common stock,
except that dividends payable in shares of common stock, or
securities to acquire common stock, are paid in common stock, or
securities to acquire common stock, of the same class as that
upon
which the dividend or distribution is being paid. Upon any
liquidation, dissolution or winding up of the Company, holders of
common stock of all outstanding classes are entitled to share
ratably the assets of the Company available for distribution to
the
stockholders, subject to the prior rights of holders of any
outstanding Preferred Stock. Holders of common stock have no
preemptive, subscription, conversion or redemption rights (other
than preemptive, subscription and conversion rights of Air
Partners
and Air Canada described under " - Corporate Governance and
Control"), and are not subject to further calls or assessments.
Holders of common stock have no right to cumulate their votes in
the election of directors. All series of common stock vote
together
as a single class, subject to the right to a separate class vote
in
certain instances required by law and to the rights of holders of
Class C common stock and Class D common stock to vote separately
as
a class to elect directors as described under " - Special
Classes of Common Stock."
Class B Common Stock and Class A Common Stock
The holders of Class B common stock are entitled to one
vote per share, and the holders of Class A common stock are
entitled to ten votes per share, on all matters submitted to a
vote
of stockholders, except that voting rights of non-U.S. citizens
are
limited as set forth below under " - Limitation on Voting
by Foreign Owners" and no holder of Class C common stock or Class
D common stock can vote any of its Class B common stock for the
election of directors (see " - Special Classes of Common
Stock").
Air Canada and Air Partners (together, the "AP/AC
Investors") owned as of April 30, 1996 in the aggregate
approximately 28% of the outstanding Class A common stock and
Class
B common stock, representing approximately 56% of total voting
power (excluding the exercise of warrants held by Air Partners
and
the exchange of Class B common stock for Class A common stock by
Air Canada) and Air Partners has warrants to acquire an
additional
3,382,632 shares of Class B common stock and 1,519,734 of Class A
common stock (together representing approximately 21% of total
voting power, assuming exercise of such warrants). See " -
Corporate Governance and Control" below for a discussion of
arrangements regarding the composition of the Board of Directors
of
the Company.
Air Canada may at any time and from time to time
convert
shares of Class A common stock into an equal number of shares of
Class B common stock and, so long as such exchange would comply
with the Foreign Ownership Restrictions (as defined below under
the
caption " - Limitation on Voting by Foreign Owners") may
exchange up to 1,078,944 of its shares of Class B common stock
for
an equal number of shares of Class A common stock. Except for
these
special conversion and exchange rights of Air Canada, Class B
common stock is not convertible into or exchangeable for Class A
common stock and Class A common stock is not convertible into or
exchangeable for Class B common stock.
Upon the closing of the Secondary Offering, pursuant to
the amendment to the Stockholders' Agreement, Air Canada
converted
its Class A common stock into Class B common stock and
irrevocably
waived its right to exchange certain shares of Class B common
stock
for Class A common stock.
In addition, under the Proposed Amendments, the
Certificate of Incorporation would be amended to permit all
stockholders at any time and from time to time after January 1,
1997 to convert shares of Class A common stock into an equal
number
of shares of Class B common stock. Because the Class A common
stock has ten votes per share and the Class B common stock has
one
vote per share, any such conversion would effectively increase
the
relative voting power of those Class A stockholders who do not
convert. The limitation in the current charter was designed to
ensure compliance with applicable Foreign Ownership Restrictions
by
giving Air Canada a method for reducing its voting power, if
necessary, while preventing conversions by other stockholders
that
would have the effect of increasing Air Canada's voting control
without any action by Air Canada itself. In light of Air
Canada's
reduced stake in the Company, the Company has determined that
this
restriction is no longer necessary. In addition, in recent
periods, the market price of Class A common stock has generally
been below the price of Class B common stock, which the company
believes is attributable in part to the reduced liquidity present
in the trading market for Class A common stock. A number of
holders of Class A common stock have requested that the charter
be
amended to give all stockholders the right to convert Class A
common stock into Class B common stock. The effective date of
this
amendment is proposed to be January 1, 1997.
Limitation on Voting by Foreign Owners
The Company's Certificate of Incorporation defines
"Foreign Ownership Restrictions" as "applicable statutory,
regulatory and interpretive restrictions regarding foreign
ownership or control of U.S. air carriers (as amended or modified
from time to time)." Such restrictions currently require that no
more than 25% of the voting stock of the Company be owned or
controlled, directly or indirectly, by persons who are not U.S.
Citizens ("Foreigners") for purposes of the Foreign Ownership
Restrictions, and that the Company's president and at least two-
thirds of its other managing officers and directors be U.S.
Citizens. For purposes of the Certificate of Incorporation, "U.S.
Citizen" means (i) an individual who is a citizen of the United
States; (ii) a partnership each of whose partners is an
individual
who is a citizen of the United States; or (iii) a corporation or
association organized under the laws of the United States or a
State, the District of Columbia, or a territory or possession of
the United States, of which the president and at least two-thirds
of the board of directors and other managing officers are
citizens
of the United States, and in which at least 75% of the voting
interest is owned or controlled by persons that are citizens of
the
United States. The Certificate of Incorporation provides that no
shares of capital stock may be voted by or at the direction of
Foreigners, unless such shares are registered on a separate stock
record (the "Foreign Stock Record") maintained by the Company for
the registration of ownership of voting stock by Foreigners. The
Company's Bylaws further provide that no shares will be
registered
on the Foreign Stock Record if the amount so registered would
exceed the Foreign Ownership Restrictions or adversely affect the
Company's operating certificates or authorities. Registration on
the Foreign Stock Record is made in chronological order based on
the date the Company receives a written request for registration,
except that certain shares held by Air Canada, and, after such
shares, certain shares acquired by Air Partners in connection
with
its original investment in the Company that are subsequently
transferred to any Foreigner are entitled to be registered prior
to, and to the exclusion of, other shares. Shares currently owned
by Air Canada and registered on the Foreign Stock Record
constitute
a substantial portion of the shares that may be voted by
Foreigners
under the Foreign Ownership Restrictions. Accordingly, at this
time
only a very limited number of shares of Class B common stock or
Class A common stock of the Company may be registered on the
Foreign Stock Record and voted by any Foreigner other than Air
Canada.
Under the Proposed Amendments, the Bylaws would be
amended to delete Air Canada's right to have its shares included
in
the Foreign Stock Record on a preferential basis. Furthermore,
now
that Air Canada has converted its Class A common stock to Class B
common stock upon the closing of the Secondary Offering, a larger
number of shares of Class B common stock and/or Class A common
stock can be registered on the Foreign Stock Record and voted by
Foreigners other than Air Canada.
Corporate Governance and Control
Board of Directors
The Certificate of Incorporation provides that the
Company's Board of Directors must consist of eighteen directors
to
be elected by holders of common stock, exclusive of any directors
who may be elected by holders of Preferred Stock. Pursuant to the
Stockholders' Agreement, the AP/AC Investors agreed to vote their
shares to elect six directors designated by Air Partners, six
directors designated by Air Canada, and six additional directors
satisfactory to Air Partners. Pursuant to the Certificate of
Incorporation, (i) the six additional directors must be
independent
of Air Partners and Air Canada and, until the first annual
meeting
of stockholders after April 27, 1996, must include three
directors
designated by the committee representing Prepetition Creditors
(as
defined in the Stockholders' Agreement), and (ii) at each annual
meeting, the Board must nominate the chief executive officer for
election as a director.
Under the Proposed Amendments, the Certificate of
Incorporation would be amended to provide that the number of
directors may be determined from time to time by the Board in
accordance with the Bylaws, subject to the rights of holders of
preferred stock to elect additional directors as set forth in any
preferred stock designation. The Bylaws would also be amended to
provide that the number of directors will be determined from time
to time by the Board (and will initially consist of 12
directors).
In addition, provisions relating to the Board designees of Air
Canada and the committee representing Prepetition Creditors would
be deleted.
Supermajority Vote Requirements
The Certificate of Incorporation requires the
affirmative
vote of shares having at least two-thirds of the total voting
power
of all issued and outstanding shares of common stock, voting
together as a single class, to amend certain provisions of the
Certificate of Incorporation that govern the number of authorized
shares and the relative rights of classes of capital stock,
election and voting of directors, and rights of the AP/AC
Investors
to purchase additional shares of Class B common stock.
The Certificate of Incorporation also provides that,
unless prohibited by law, the affirmative vote of at least 70%
(75%
if more than one director is elected by holders of Preferred
Stock
or in certain other instances) of directors (a "Supermajority
Vote") is required to approve certain extraordinary transactions,
including (i) authorization, issuance or disposition of Class A
common stock or rights to acquire Class A common stock, (ii)
liquidation or dissolution of the Company, (iii) any fundamental
change in the lines of business of the Company, (iv) appointment
of
a receiver for the Company or commencement of bankruptcy
proceedings or (v) any amendment to the Plan of Reorganization.
In
addition, a Supermajority Vote of directors is required to
approve
the following transactions, if such Supermajority Vote
requirements
are first presented to and approved by DOT as complying with the
Foreign Ownership Restrictions: (a) approval of capital
expenditures in any fiscal year that exceed by more than
$50,000,000 the amount of capital expenditures set forth in the
Company's capital budget; (b) approval to incur indebtedness for
money borrowed in any fiscal year that exceeds by more than
$50,000,000 the maximum principal amount of indebtedness
projected
in the Company's financial plan for such year; (c) certain
acquisitions or dispositions of a significant amount of assets
other than in the ordinary course of business; and (d) the taking
of certain actions with respect to material contracts (including,
among others, contracts providing for the merger or consolidation
of the Corporation, contracts with periods in excess of four
years
or contemplating expenditures in excess of $50 million in any
year
and $150 million in the aggregate), and any compensatory plan in
which any director or executive officer of the Company
participates.
The Certificate of Incorporation further requires
approval by two-thirds of the directors in office (assuming no
vacancies) to approve contracts (or any amendments thereof)
between
the Company and any air carrier (other than Air Canada) with
respect to a code-sharing or marketing alliance or to amend
certain
provisions of the Company's Bylaws governing (i) the election and
voting of directors and committees of the Board of Directors or
(ii) the ownership and voting of stock by Foreigners. Such Bylaw
amendments also must be approved by at least a majority of the
total voting power of all issued and outstanding shares of common
stock, unless they have been approved by a majority of the
directors designated or elected by the AP/AC Investors. The
Certificate of Incorporation also requires approval by the
holders
of at least two-thirds of the voting power of all issued and
outstanding shares of common stock in order to amend the sections
of the Certificate of Incorporation relating to (i) the
Corporation's capital stock, (ii) composition and voting of the
Board of Directors, and (iii) preemptive rights of Air Partners
and
Air Canada.
Contracts and transactions between the Company and its
directors, officers or other related parties also must be
approved
by a majority (or, in cases otherwise subject to a Supermajority
Vote, by 75%) of disinterested directors, unless such contracts
or
transactions are approved by the stockholders or are otherwise
fair
to the Company.
Under the Proposed Amendments, the Certificate of
Incorporation would be amended to delete the foregoing
provisions.
Fairness Opinion; Business Combinations
The Certificate of Incorporation provides that the
Board
of Directors will not approve any merger or similar corporate
transaction unless, prior to the approval, the board receives an
opinion of an independent investment banking firm that the
consideration to be received by the holders of common stock is
fair
from a financial point of view to such holders. The Certificate
of
Incorporation provides that the Company is not governed by
Section
203 of the General Corporation Law of Delaware that, in the
absence
of such provisions, would have imposed additional requirements
regarding mergers and other business combinations.
Under the Proposed Amendments, the Certificate of
Incorporation would be amended to delete the requirement that the
board receive such opinion.
Anti-dilution Rights of AP/AC Investors
Pursuant to the Certificate of Incorporation, each
AP/AC
Investor is given the right to purchase from the Company
additional
shares of Class B common stock to the extent necessary to
maintain
its pro rata ownership of the outstanding Class B common stock.
Such anti-dilution rights terminate as to an AP/AC Investor if
the
total voting power of the common stock beneficially owned by such
AP/AC Investor is less than 20% of the total voting power of all
of
the outstanding common stock.
Under the Proposed Amendments, the Certificate of
Incorporation would be amended to delete Air Canada's
anti-dilution
rights.
Procedural Matters
The Company's Bylaws require stockholders seeking to
nominate directors or propose other matters for action at a
stockholders' meeting to deliver notice thereof to the Company
certain specified periods in advance of the meeting and to follow
certain other specified procedures.
Change in Control
The cumulative effect of the provisions of the
Certificate of Incorporation and Bylaws referred to under this
heading "Description of Capital Stock," and the Stockholders'
Agreement is to maintain certain rights of the AP/AC Investors to
elect directors and otherwise to preserve their relative
ownership
and voting positions. These provisions may have the effect of
delaying, deferring or preventing a change in control of the
Company.
The cumulative effect of the Agreement and the Proposed
Amendments will be to maintain certain rights of Air Partners to
elect directors and otherwise to preserve its relative ownership
and voting positions. Air Canada will not continue to have
similar
rights.
Special Classes of Common Stock
The Certificate of Incorporation authorizes Class C
common stock and Class D common stock as a mechanism to provide,
under certain circumstances, a specified level of Board
representation for each of the AP/AC Investors. No shares of
Class
C common stock or Class D common stock are currently outstanding,
and they may only be issued in limited circumstances upon
conversion of Class A common stock held by AP/AC Investors. In
the
event the AP/AC Investors hold shares of Class A common stock and
Class B common stock representing 50% or less of the combined
voting power of all classes of common stock, or if the
Stockholders' Agreement is no longer in effect, each of the AP/AC
Investors has the option, which may be exercised only once, to
convert all (but not less than all) shares of Class A common
stock
held by it into an equal number of shares of Class C common
stock,
in the case of Air Canada, or Class D common stock, in the case
of
Air Partners. Such right of conversion is further conditioned
upon
the AP/AC Investor holding common stock having at least 20% of
the
total voting power of all classes of common stock.
After such conversion, holders of Class C common stock
and Class D common stock are each entitled to elect six
directors,
voting as a separate class. When shares of Class C common stock
are
outstanding, Air Canada has no right to vote any of its shares of
Class B common stock for the election of directors; and if Air
Canada becomes the beneficial owner of additional shares of Class
A common stock during such time, such shares will automatically
be
converted into an equal number of shares of Class C common stock.
Likewise, when shares of Class D common stock are outstanding,
Air
Partners may not vote any of its shares of Class B common stock
for
the election of directors; and if Air Partners becomes the
beneficial owner of any additional shares of Class A common stock
during such time, such shares will automatically be converted
into
Class D common stock. Each share of Class C common stock and
Class
D common stock has ten votes and, as to matters other than the
election of directors, votes together with all other classes of
common stock as a single class. In the event the voting power of
all common stock held by an AP/AC Investor represents less than
20%
of the voting power of all classes of common stock, all Class C
common stock or Class D common stock held by such AP/AC Investor
will automatically convert into an equal number of shares of
Class
A common stock. Shares of Class C common stock and Class D common
stock also convert automatically into an equal number of shares
of
Class A common stock upon the transfer of record or beneficial
ownership of such Class C common stock or Class D common stock to
any person other than certain related parties of the original
holder. Each AP/AC Investor may also at any time voluntarily
convert all (but not less than all) shares of Class C common
stock
or Class D common stock held by it into an equal number of shares
of Class A common stock. All shares of Class C common stock or
Class D common stock surrendered by an AP/AC Investor for
conversion into Class A common stock will be canceled and may not
be reissued.
Under the Proposed Amendments, the Certificate of
Incorporation would be amended to delete the Class C common stock
and provide that the holders of Class D common stock are entitled
to elect one-third of the number of directors determined by the
Board of Directors pursuant to the Bylaws (rounded to the nearest
whole number).
Redeemable Preferred Stock
The Company has authorized and issued a class of
preferred stock, designated as Series A 12% Cumulative Preferred
Stock.
Holders of the Series A 12% Preferred are entitled to
receive, when, as and if declared by the Board of Directors,
cumulative dividends payable quarterly in additional shares of
such
preferred stock for dividends accumulating through December 31,
1996. Thereafter dividends are payable in cash at an annual rate
of
$12 per share; provided, however, that to the extent net income
(as
defined in the certificate of designation for the preferred
stock)
for any calendar quarter is less than the amount of dividends due
on all outstanding shares of the Series A 12% Preferred for such
quarter, the Board of Directors may declare dividends payable in
additional shares of Series A 12% Preferred in lieu of cash. At
any
time, the Company may redeem, in whole or in part, on a pro rata
basis among the stockholders, any outstanding shares of the
Series
A 12% Preferred. All outstanding shares of the Series A 12%
Preferred are mandatorily redeemable on April 27, 2003 out of
legally available funds. The redemption price is $100 per share
plus accrued and unpaid dividends. Shares of the Series A 12%
Preferred are not convertible into shares of common stock and
such
shares do not have voting rights, except under limited
circumstances described in the following two paragraphs. Shares
of
the Series A 12% Preferred have a liquidation preference of $100
per share plus accrued and unpaid dividends, senior to any
distribution on shares of common stock.
In the event the Company violates certain covenants set
forth in the certificate of designation relating to the Series A
12% Preferred, or fails to pay the full amount of dividends on
the
preferred stock for nine consecutive quarterly payment dates or
shall not have redeemed the preferred stock within five days of
the
date of any redemption of which the Company has given, or is
required to give, notice (a "Default"), the holders of the Series
A 12% Preferred as to which a Default exists, voting (subject to
the Foreign Ownership Restrictions) together as one class, are
entitled to elect one member of the Board of Directors. In the
event the Company pays in full all dividends accrued on the
preferred stock for three consecutive payment dates following
such
Default (and no dividend arrearages exist as to such stock), or
otherwise cures any other default that gives rise to such voting
rights, the holders of the Series A 12% Preferred will cease to
have the right to elect a director.
The consent or approval of the holders of a majority of
the then-outstanding shares of Series A 12% Preferred is required
for the creation of certain classes of senior or parity stock,
certain mergers or sales of substantially all of the Company's
assets, the voluntary liquidation or dissolution of the Company
and
amendments to the terms of the preferred stock that would
adversely
affect the Series A 12% Preferred.
The Board of Directors of the Company has the
authority,
without any vote by the stockholders, to issue additional shares
of
preferred stock, up to the number of shares authorized in the
Certificate of Incorporation, as it may be amended from time to
time, in one or more series, and to fix the number of shares
constituting any such series, the designations, preferences and
relative rights and qualifications of such series, including the
voting rights, dividend rights, dividend rate, terms of
redemption
(including sinking fund provisions), redemption price or prices,
conversion rights and liquidation preferences of the shares
constituting any series.
Limitation of Director Liability and Indemnification
The Company's Certificate of Incorporation provides, to
the fullest extent permitted by Delaware law as it may from time
to
time be amended, that no director shall be liable to the Company
or
any stockholder for monetary damages for breach of fiduciary duty
as a director. Delaware law currently provides that such waiver
may
not apply to liability (i) for any breach of the director's duty
of
loyalty to the Company or its stockholders, (ii) for acts or
omissions not in good faith or that involve intentional
misconduct
or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law (governing distributions to
stockholders), or (iv) for any transaction from which the
director
derived any improper personal benefit. The Certificate of
Incorporation further provides that the Company will indemnify
each
of its directors and officers to the full extent permitted by
Delaware law and may indemnify certain other persons as
authorized
by law. The foregoing provisions do not eliminate any monetary
liability of directors under the federal securities laws.
UNITED STATES TAXATION
General
This section is a summary of certain United States
federal income tax considerations that may be relevant to the
purchasers of Preferred Securities and represents the opinion of
Cleary, Gottlieb, Steen & Hamilton, special counsel to
Continental
and the Trust, insofar as it relates to matters of law and legal
conclusions. The conclusions expressed herein are based upon
current provisions of the Internal Revenue Code of 1986, as
amended
(the "Code"), regulations thereunder and current administrative
rulings and court decisions, all of which are subject to change.
Subsequent changes may cause tax consequences to vary
substantially
from the consequences described below.
No attempt has been made in the following discussion to
comment on all United States federal income tax matters affecting
purchasers of Preferred Securities. Moreover, the discussion
generally focuses on holders of Preferred Securities who are
individual citizens or residents of the United States and who
hold
Preferred Securities as capital assets. This discussion has only
limited application to dealers in securities, corporations,
estates, trusts or nonresident aliens. Accordingly, each
prospective purchaser of Preferred Securities should consult, and
should rely exclusively on, the purchaser's own tax advisor in
analyzing the federal, state, local and foreign tax consequences
of
the purchase, ownership or disposition of Preferred Securities.
Classification of the Convertible Subordinated Debentures
In connection with the issuance of the Convertible
Subordinated Debentures, Cleary, Gottlieb, Steen & Hamilton,
special counsel to Continental and the Trust, will render its
opinion generally to the effect that, under then current law and
assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and
assumptions contained in such opinion, the Convertible
Subordinated
Debentures held by the Trust are classified for United States
federal income tax purposes as indebtedness of Continental.
Classification of the Trust
In connection with the issuance of Preferred
Securities,
Cleary, Gottlieb, Steen & Hamilton, special counsel to
Continental
and the Trust, will render its opinion generally to the effect
that, under then current law and assuming full compliance with
the
terms of the Declaration and the Indenture (and certain other
documents), the Trust will be classified for United States
federal
income tax purposes as a grantor trust and not as an association
taxable as a corporation. Accordingly, for United States federal
income tax purposes, each holder of Preferred Securities
generally
will be considered the owner of an undivided interest in the
Convertible Subordinated Debentures, and each holder will be
required to include in its gross income any original issue
discount
("OID") accrued with respect to its allocable share of the
Convertible Subordinated Debentures.
Potential Extension of Interest Payment Period and Original Issue
Discount
Because Continental has the option, under the terms of
the Convertible Subordinated Debentures, to defer payments of
interest by extending interest payment periods for up to 20
quarters, all of the stated interest payments on the Convertible
Subordinated Debentures will be treated as "original issue
discount." Holders of debt instruments issued with OID must
include
that discount in income on an economic accrual basis before the
receipt of cash attributable to the interest, regardless of their
method of tax accounting. Generally, all of a holder's taxable
interest income with respect to the Convertible Subordinated
Debentures will be accounted for as OID. Actual payments and
distributions of stated interest will not, however, be separately
reported as taxable income. The amount of OID that accrues in any
quarter will approximately equal the amount of the interest that
accrues on the Convertible Subordinated Debentures in that
quarter
at the stated interest rate. In the event that the interest
payment
period is extended, holders will continue to accrue OID
approximately equal to the amount of the interest payment due at
the end of the extended interest payment period on an economic
accrual basis over the length of the extended interest payment
period.
Because income on the Preferred Securities will
constitute OID, corporate holders of Preferred Securities will
not
be entitled to a dividends-received deduction with respect to any
income recognized with respect to the Preferred Securities.
Market Discount and Acquisition Premium
Holders of Preferred Securities other than a holder who
purchased the Preferred Securities upon original issuance may be
considered to have acquired their undivided interests in the
Convertible Subordinated Debentures with market discount or
acquisition premium as such phrases are defined for United States
federal income tax purposes. Such holders are advised to consult
their tax advisors as to the income tax consequences of the
acquisition, ownership and disposition of the Preferred
Securities.
Receipt of the Convertible Subordinated Debentures or Cash Upon
Liquidation of the Trust
Under certain circumstances, as described under
"Description of the Preferred Securities - Tax Event or
Investment Company Event Redemption or Distribution," the
Convertible Subordinated Debentures may be distributed to holders
of Preferred Securities upon a liquidation of the Trust. Under
current United States federal income tax law, such a distribution
would be treated as a nontaxable exchange to each such holder and
would result in such holder having an aggregate tax basis in the
Convertible Subordinated Debentures received in the liquidation
equal to such holder's aggregate tax basis in the Preferred
Securities immediately before the distribution. A holder's
holding
period in the Convertible Subordinated Debentures so received in
liquidation of the Trust would include the period for which such
holder held the Preferred Securities. If, however, the related
Special Event is a Tax Event which results in the Trust being
treated as an association taxable as a corporation, the
distribution would likely constitute a taxable event to holders
of
the Preferred Securities. Under certain circumstances described
herein (see "Description of the Preferred Securities"), the
Convertible Subordinated Debentures may be redeemed for cash and
the proceeds of such redemption distributed to holders in
redemption of their Preferred Securities. Under current law, such
a redemption would, for United States federal income tax
purposes,
constitute a taxable disposition of the redeemed Preferred
Securities, and a holder would recognize gain or loss as if it
sold
such redeemed Preferred Securities for cash. See " -
Disposition of Preferred Securities."
Disposition of Preferred Securities
A holder that sells Preferred Securities will recognize
gain or loss equal to the difference between the amount realized
on
the sale of the Preferred Securities and the holder's adjusted
tax
basis in such Preferred Securities. A holder's adjusted tax basis
in the Preferred Securities generally will be its initial
purchase
price increased by OID previously includible in such holder's
gross
income to the date of disposition and decreased by payments
received on the Preferred Securities to the date of disposition.
Such gain or loss will be a capital gain or loss and will be a
long-term capital gain or loss if the Preferred Securities have
been held for more than one year at the time of sale.
The Preferred Securities may trade at a price that does
not accurately reflect the value of accrued but unpaid interest
with respect to the underlying Convertible Subordinated
Debentures.
A holder that disposes of or converts his Preferred Securities
between record dates for payments of distributions thereon will
be
required to include accrued but unpaid interest on the
Convertible
Subordinated Debentures through the date of disposition in income
as ordinary income, and to add such amount to his adjusted tax
basis in his pro rata share of the underlying Convertible
Subordinated Debentures deemed disposed of. To the extent the
selling price is less than the holder's adjusted tax basis (which
basis will include, in the form of OID, all accrued but unpaid
interest), a holder will recognize a capital loss. Subject to
certain limited exceptions, capital losses cannot be applied to
offset ordinary income for United States federal income tax
purposes.
Exchange of Preferred Securities for Continental Class B Common
Stock
A holder of Preferred Securities will not recognize
gain
or loss upon the exchange, through the Conversion Agent, of
Preferred Securities for a proportionate share of the Convertible
Subordinated Debentures held by the Trust.
A holder of Preferred Securities will not recognize
gain
or loss upon the conversion, through the Conversion Agent, of the
Convertible Subordinated Debentures into Continental Class B
common
stock. A holder of Preferred Securities will, however, recognize
gain upon the receipt of cash in lieu of a fractional share of
Continental Class B common stock equal to the amount of cash
received less such holder's tax basis in such fractional share.
The
tax basis of a holder of Preferred Securities in Continental
Class
B common stock received upon exchange and conversion should
generally be equal to such holder's tax basis in the Preferred
Securities delivered to the Conversion Agent for exchange less
the
basis allocated to any fractional share for which cash is
received
and such holder's holding period in Continental Class B common
stock generally begin on the date the holder of the Preferred
Securities acquired the Preferred Securities delivered to the
Conversion Agent for exchange.
Adjustment of the Conversion Price
Treasury Regulations promulgated under Section 305 of
the
Code would treat holders of Preferred Securities as having
received
a constructive distribution from Continental in the event the
conversion ratio of the Convertible Subordinated Debentures were
adjusted if (i) as a result of such adjustment, the proportionate
interest (measured by the quantum of Continental Class B common
stock into which the Convertible Subordinated Debentures is
convertible) of the holders of the Preferred Securities in the
assets or earnings and profits of Continental were increased, and
(ii) the adjustment was not made pursuant to a bona fide,
reasonable antidilution formula. An adjustment in the conversion
ratio would not be considered made pursuant to such a formula if
the adjustment were made to compensate for certain taxable
distributions with respect to Continental Class B common stock.
Thus, under certain circumstances, a reduction in the conversion
price for the holders of Preferred Securities may result in
deemed
dividend income to such holders to the extent of the current or
accumulated earnings and profits of Continental. Holders of
Preferred Securities would be required to include their allocable
share of such deemed dividend income in gross income but would
not
receive any cash related thereto. Corporate holders of Preferred
Securities may be eligible for a dividends received deduction
with
respect to such amount. In addition, the holders of the Preferred
Securities will receive a basis increase with respect to the
Convertible Subordinated Debentures and the Preferred Securities
in
an amount equal to such deemed dividend.
United States Alien Holders
For purposes of this discussion, a "United States Alien
Holder" is any holder that is (i) a nonresident alien individual
or
(ii) a foreign corporation, partnership or estate or trust, in
either case not subject to United States federal income tax on a
net income basis in respect of Preferred Securities.
Under current United States federal income tax law,
subject to the discussion below with respect to backup
withholding:
(i) payments by the Trust or any of its paying agents
to
any holder of Preferred Securities that is a United States Alien
Holder should not be subject to United States federal withholding
tax provided that (a) the beneficial owner of the Preferred
Securities does not actually or constructively (including by
virtue
of its interest in the underlying Convertible Subordinated
Debentures) own 10% or more of the total combined voting power of
all classes of stock of Continental entitled to vote, (b) the
beneficial owner of the Preferred Securities is not a controlled
foreign corporation that is related to Continental through stock
ownership, and (c) either (x) the beneficial owner of the
Preferred
Securities certifies to the Trust or its agent, under penalties
of
perjury, that it is a United States Alien Holder and provides its
name and address or (y) the holder of the Preferred Securities is
a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary
course
of its trade or business (a "Financial Institution"), and such
holder certifies to the Trust or its agent, under penalties of
perjury, that such statement has been received from the
beneficial
owner by it or by a Financial Institution between it and the
beneficial owner and furnishes the Trust or its agent with a copy
thereof; and
(ii) a United States Alien Holder of Preferred
Securities who is a natural person generally should not be
subject
to United States federal withholding tax on any gain realized on
the sale or exchange of Preferred Securities unless such holder
is
present in the United States for 183 days or more in the taxable
year of sale and either has a "tax home" in the United States or
certain other requirements are met.
In the event that Preferred Securities were
characterized
as stock or other equity of Continental, payments to a holder
could
be characterized as dividends and subject to a 30% withholding
tax
or such lesser amount as may be provided under an applicable
treaty. If a United States Alien Holder is treated as receiving a
deemed dividend as a result of an adjustment of the conversion
price of the Convertible Subordinated Debentures, as described
above under " - Adjustment of the Conversion Price," such
deemed dividend will be subject to a 30% withholding tax (or a
lesser amount under an applicable treaty).
Backup Withholding and Information Reporting
Subject to the qualifications discussed below, income
on
the Preferred Securities will be reported to holders on Forms
1099,
which forms should be mailed to holders of Preferred Securities
by
January 31 following each calendar year.
The Trust will be obligated to report annually to Cede
&
Co., as holder of record of the Preferred Securities, the OID
related to the Convertible Subordinated Debentures that accrued
during the year. The Trust currently intends to report such
information on Form 1099 prior to January 31 following each
calendar year even though the Trust is not legally required to
report to record holders until April 15 following each calendar
year. The Initial Purchasers have indicated to the Trust that, to
the extent that they hold Preferred Securities as nominees for
beneficial holders, they currently expect to report to such
beneficial holders on Forms 1099 by January 31 following each
calendar year. Under current law, holders of Preferred Securities
who hold as nominees for beneficial holders will not have any
obligation to report information regarding the beneficial holders
to the Trust. The Trust, moreover, will not have any obligation
to
report to beneficial holders who are not also record holders.
Thus,
beneficial holders of Preferred Securities who hold their
Preferred
Securities through the Initial Purchasers will receive Forms 1099
reflecting the income on their Preferred Securities from such
nominee holders rather than the Trust.
Payments made on, and proceeds from the sale of, the
Preferred Securities may be subject to a "backup" withholding tax
of 31% unless the holder complies with certain identification
requirements. Any withheld amounts will be allowed as a credit
against the holder's United States federal income tax, provided
the
required information is provided to the Internal Revenue Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET
FORTH
ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND MAY NOT BE
APPLICABLE DEPENDING UPON THE PARTICULAR SITUATION OF A HOLDER OF
PREFERRED SECURITIES. HOLDERS OF PREFERRED SECURITIES SHOULD
CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES
TO
THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE PREFERRED
SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to
the
Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or Section 4975 of the Code ("Plans"), may purchase
Preferred Securities, subject to the investing fiduciary's
determination that the investment in Preferred Securities
satisfies
ERISA's fiduciary standards and other requirements applicable to
investments by the Plan.
In any case, Continental and/or any of its affiliates
may
be considered a "party in interest" (within the meaning of ERISA)
or a "disqualified person" (within the meaning of Section 4975 of
the Code) with respect to certain plans (generally, Plans
maintained or sponsored by, or contributed to by, any such
persons). The acquisition and ownership of Preferred Securities
by
a Plan (or by an individual retirement arrangement or other Plans
described in Section 4975(e)(1) of the Code) with respect to
which
Continental or any of its affiliates is considered a party in
interest or a disqualified person, may constitute or result in a
prohibited transaction under ERISA or Section 4975 of the Code,
unless such Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption.
As a result, Plans with respect to which Continental or
any of its affiliates is a party in interest or a disqualified
person should not acquire Preferred Securities unless such
Preferred Securities are acquired pursuant to and in accordance
with an applicable exemption. Any other Plans or other entities
whose assets include Plan assets subject to ERISA or Section 4975
of the Code proposing to acquire Preferred Securities should
consult with their own counsel.
SELLING HOLDERS
The Preferred Securities were originally issued by the Trust
and sold by Merrill Lynch, Pierce, Fenner & Smith Incorporated,
CS
First Boston Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation and Smith Barney Inc. (the "Initial Purchasers"), in
transactions exempt from the registration requirements of the
Securities Act, to persons reasonably believed by such Initial
Purchasers to be "qualified institutional buyers" (as defined in
Rule 144A under the Securities Act) or outside the United States
to
non-U.S. persons in offshore transactions in reliance on
Regulation
S under the Securities Act. The Selling Holders may from time to
time offer and sell pursuant to this Prospectus any or all of the
Preferred Securities, any Convertible Subordinated Debentures and
Continental Class B common stock issued upon conversion of the
Preferred Securities. The term Selling Holder includes the
holders
listed below and the beneficial owners of the Preferred
Securities
and their transferees, pledgees, donees or other successors.
The following table sets forth information with respect
to the Selling Holders and the respective number of Preferred
Securities beneficially owned by each Selling Holder that may be
offered pursuant to this Prospectus. Such information has been
obtained from the Selling Holders and the Property Trustee.
Merrill Lynch, Pierce, Fenner & Smith Incorporated maintains
ongoing business relationships with Continental and in connection
therewith provides investment banking and investment advisory
services for which it receives customary fees.
Number of
Preferred
Selling Holder Securities
______________ __________
1. Bank of New York................................. 690,400
2. Bear Sterns Securities Corp...................... 687,000
3. Chase Manhattan Bank, N.A........................ 672,800
4. SSB-Custodian.................................... 556,392
5. Alpine Associates................................ 493,000
6. Merrill Lynch, Pierce, Fenner and Smith, Inc..... 227,458
7. Brown Brothers and Harriman Co................... 196,000
8. Bankers Trust Company............................. 187,652
9. Lehman Brothers, Inc. ............................ 185,000
10. Boston Safe Deposit & Trust Co. ................. 130,600
11. NatWest Securities Corporation #2................ 120,000
12. Sun Trust ....................................... 115,000
13. Investors Bank and Trust/N.A. Custody............ 108,000
14. Nomura International Trust Company Incorporated . 100,000
15. Custodial Trust Company ......................... 65,000
16. Oppenheimer and Co., Inc. ....................... 65,000
17. Paine Webber, Inc. .............................. 58,800
18. Lehman Brothers, International Europe -
Prime Broker (LGSI) ........................... 55,000
19. Merrill Lynch Canada, Inc. ...................... 50,000
20. Wachovia Bank North Carolina .................... 32,300
21. BT Securities Corporation ....................... 30,000
22. Morgan Stanley Trust Company .................... 30,000
23. Northern Trust Co. - Trust ...................... 24,567
24. Ince & Co........................................ 20,000
25. Merrill Lynch, Pierce,
Fenner and Smith Safekeeping................... 20,000
26. First Tennessee Bank, S.A. (Memphis)............. 19,100
27. Republic New York Securities Corp. .............. 15,000
28. Salomon Brothers Inc............................. 15,000
29. Core States Bank N.A............................. 10,000
30. Chemical Bank.................................... 8,500
31. First Trust National Association ................ 4,480
32. Goldman Sachs and Co. ........................... 2,098
33. Harris Trust and Savings Bank ................... 1,300
34. Huntington National Bank ........................ 1,153
35. Boatmen's Trust Company ......................... 400
36. Any other holder of Preferred Securities
or future transferee from any such holder.... _________
Total................................................ 4,997,000
None of the other Selling Holders has, or within the past
three years has had, any position, office or other material
relationship with the Trust or the Company or any of their
predecessors or affiliates, except as noted above. Because the
Selling Holders may, pursuant to this Prospectus, offer all or
some
portion of the Preferred Securities, the Convertible Subordinated
Debentures or the Continental Class B common stock issuable upon
conversion of the Preferred Securities, no estimate can be given
as
to the amount of the Preferred Securities, the Convertible
Subordinated Debentures or the Continental Class B common stock
issuable upon conversion of the Preferred Securities that will be
held by the Selling Holders upon termination of any such sales.
In
addition, the Selling Holders identified above may have sold,
transferred or otherwise disposed of all or a portion of their
Preferred Securities, since the date on which they provided the
information regarding their Preferred Securities, in transactions
exempt from the registration requirements of the Securities Act.
PLAN OF DISTRIBUTION
The Offered Securities may be sold from time to time to
purchasers directly by the Selling Holders. Alternatively, the
Selling Holders may from time to time offer the Offered
Securities
to or through underwriters, broker/dealers or agents, who may
receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the
purchasers of such securities for whom they may act as agents.
The
Selling Holders and any underwriters, broker/dealers or agents
that
participate in the distribution of Offered Securities may be
deemed
to be "underwriters" within the meaning of the Securities Act and
any profit on the sale of such securities and any discounts,
commissions, concessions or other compensation received by any
such
underwriter, broker/dealer or agent may be deemed to be
underwriting discounts and commissions under the Securities Act.
The Offered Securities may be sold from time to time in one
or
more transactions at fixed prices, at prevailing market prices at
the time of sale, at varying prices determined at the time of
sale
or at negotiated prices. The sale of the Offered Securities may
be
effected in transactions (which may involve crosses or block
transactions) (i) on any national securities exchange or
quotation
service on which the Offered Securities may be listed or quoted
at
the time of sale, (ii) in the over-the-counter market, (iii) in
transactions otherwise than on such exchanges or in the over-the-
counter market or (iv) through the writing of options. At the
time
a particular offering of the Offered Securities is made, a
Prospectus Supplement, if required, will be distributed which
will
set forth the aggregate amount and type of Offered Securities
being
offered and the terms of the offering, including the name or
names
of any underwriters, broker/dealers or agents, any discounts,
commissions and other terms constituting compensation from the
Selling Holders and any discounts, commissions or concessions
allowed or reallowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions,
if applicable, the Offered Securities will be offered or sold in
such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions the Offered
Securities may not be offered or sold unless they have been
registered or qualified for sale in such jurisdictions or any
exemption from registration or qualification is available and is
complied with.
The Selling Holders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder,
which
provisions may limit the timing of purchases and sales of any of
the Offered Securities by the Selling Holders. The foregoing may
affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, all expenses
of
the registration of the Offered Securities will be paid by the
Company, including, without limitation, Commission filing fees
and
expenses of compliance with state securities or "blue sky" laws;
provided, however, that the Selling Holders will pay all
underwriting discounts and selling commissions, if any. The
Selling Holders will be indemnified by the Company and the Trust,
jointly and severally against certain civil liabilities,
including
certain liabilities under the Securities Act, or will be entitled
to contribution in connection therewith. The Company and the
Trust
will be indemnified by the Selling Holders severally against
certain civil liabilities, including certain liabilities under
the
Securities Act, or will be entitled to contribution in connection
therewith.
LEGAL MATTERS
The validity of the Preferred Securities, the Convertible
Subordinated Debentures and the Guarantee, and certain United
States Federal income taxation matters, will be passed upon for
the
Issuer and the Company by Cleary, Gottlieb, Steen & Hamilton, New
York, New York and the validity of any Continental Class B common
stock issuable upon conversion of the Preferred Securities will
be
passed upon for the Issuer and the Company by Jeffery A. Smisek,
General Counsel of Continental.
EXPERTS
The consolidated financial statements (including schedules)
of Continental Airlines, Inc. appearing in Continental Airline,
Inc.'s Annual Report (Form 10-K) as of December 31, 1995 and
1994, and for the two years ended December 31, 1995 and the
period April 28, 1993 through December 31, 1993, and the
consolidated statements of operations, redeemable and non-
redeemable preferred stock and common stockholders' equity and
cash
flows of Continental Airlines Holdings, Inc. for the period
January
1, 1993 to April 27, 1993, incorporated by reference in this
Prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein
and
incorporated herein by reference, in reliance upon such reports
given upon the authority of such firm as experts in accounting
and
auditing.
No dealer, salesperson or other person has been authorized to
give
any information or to make any representations not contained in
this prospectus and, if given or made, such information or
representation must not be relied upon as having been authorized
by
Continental Airlines, Inc. or Continental Airlines Finance Trust
or
any of their agents. This prospectus does not constitute an
offer
to sell or a solicitation of an offer to buy any of the
securities
offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer or solicitation in such jurisdiction.
Neither the delivery of this prospectus nor any sale made
hereunder
shall, under any circumstances, create any implication that the
information contained herein is correct as of any time subsequent
to the date hereof or that there has been no change in the
affairs
of Continental Airlines, Inc. or Continental Airlines Finance
Trust
since such date.
TABLE OF CONTENTS
Page
____
Available Information
Incorporation of Certain Documents by Reference
Risk Factors Continental Airlines Finance Trust
The Company
Recent Developments
Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
Use of Proceeds
Selected Financial Data
Description of Preferred Securities
Description of the Guarantee
Description of the Convertible
Subordinated Debentures
Effect of Obligations Under the Convertible
Subordinated Debentures and the Guarantee
Description of Capital Stock
United States Taxation
ERISA Considerations
Selling Holders
Plan of Distribution
Legal Matters
Experts
_______________
CONTINENTAL AIRLINES
FINANCE TRUST
4,500,000
8 1/2% Convertible Trust Originated
Preferred Securities
guaranteed to the extent
set forth herein by,
and convertible into
Class B common stock of,
Continental Airlines, Inc.
PROSPECTUS
Dated , 1996
________________________________
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with the distribution
of
the securities being registered hereunder, other than
underwriting
discounts and commissions, are:
Securities and Exchange Commission registration filing fee.....
$ 115,018
Blue Sky qualification fees and expenses, including legal fee..
Printing and engraving expenses................................
Transfer agent and trustee fees and expenses...................
Accounting fees and expenses...................................
Legal fees and expenses........................................
Miscellaneous..................................................
________
Total................................................
$
Item 15. Indemnification of Directors and Officers of the
Company.
The Company's Certificate of Incorporation and bylaws
provide that the Company will indemnify each of its directors and
officers to the full extent permitted by the laws of the State of
Delaware and may indemnify certain other persons as authorized by
the Delaware General Corporation Law (the "GCL"). Section 145 of
the GCL provides as follows:
"(a) A corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by
or in the right of the corporation) by reason of the fact that he
is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and
amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and, with
respect
to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or
not
opposed to the best interests of the corporation, and, with
respect
to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or
is
a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and
in
a manner he reasonably believed to be in or not opposed to the
best
interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to
which
such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication
of
liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall
deem
proper.
(c) To the extent that a director, officer, employee
or
agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to
in subsections (a) and (b) of this section, or in defense of any
claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b)
of
this section (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has
met
the applicable standard of conduct set forth in subsections (a)
and
(b). Such determination shall be made (1) by a majority vote of
the
board of directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (2) if there are
no
such directors, or if such directors so direct, by independent
legal counsel in a written opinion, or (3) by the stockholders.
(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 he is not entitled to be
indemnified
by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and
agents
may be so paid upon such terms and conditions, if any, as the
board
of directors deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of
this
section shall not be deemed exclusive of any other rights to
which
those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability
under
this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent
of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or
agents, so that any person who is or was a director, officer,
employee or agent for such constituent corporation, or is or was
serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall
stand
in the same position under this section with respect to the
resulting or surviving corporation as he would have with respect
to
such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving
at
the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer,
employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the
interest
of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the
best
interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless
otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or
agent
and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with
exclusive jurisdiction to hear and determine all actions for
advancement of expenses or indemnification brought under this
section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may
summarily determine a 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 Directors of the Corporation
shall
be eliminated or limited to the full extent permitted by the GCL,
as so amended."
The Company maintains directors' and officers'
liability
insurance.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE TRUST
The Declaration of the Trust provides that no Trustee,
affiliate of any Regular Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives or
agent of the Trust, or any employee or agent of the trust or its
affiliates (each an "Indemnified Person") shall be liable,
responsible or accountable in damages or otherwise to the Trust
or
any employee or agent of the trust or its affiliates for any
loss,
damage or claim incurred by reason of any act or omission
performed
or omitted by such Indemnified Person in good faith on behalf of
the Trust and in a manner such indemnified Person reasonably
believed to be within the scope of the authority conferred on
such
Indemnified Person by the Declaration or by law, except that an
Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Trustee, negligence) or
willful
misconduct with respect to such acts or omissions. The
Declaration
of the Trust also provides that to the fullest extent permitted
by
applicable law, International Paper shall indemnify and hold
harmless each Indemnified Person from and against any loss,
damage
or claim incurred by such Indemnified Person by reason of any act
or omission performed or omitted by such Indemnified Person in
good
faith on behalf of the Trust and in a manner such Indemnified
Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by the Declaration, except
that no Indemnified Person shall be entitled to be indemnified in
respect of any loss, damage or claim incurred by such Indemnified
Person by reason of gross negligence (or, in the case of the
Trustee, negligence) or willful misconduct with respect to such
acts or omissions. The Declaration of the Trust further provides
that, to the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding shall,
from
time to time, be advanced by International Paper prior to the
final
disposition of such claim, demand, action, suit or proceeding
upon
receipt by or an undertaking by or on behalf of the Indemnified
Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified for the
underlying cause of action as authorized by the Declaration. The
directors and officers of International Paper and the Regular
Trustees are covered by insurance policies indemnifying them
against certain liabilities, including certain liabilities
arising
under the Securities Act of 1933, as amended (the "Securities
Act"), which might be incurred by them in such capacities and
against which they cannot be indemnified by International paper
or
the Trust. The Selling Holders will be indemnified by
International Paper and the Trust, jointly and severally, against
certain civil liabilities, including certain liabilities under
the
Securities Act, or will be entitled to contribution in connection
therewith. International Paper and the Trust will be indemnified
by the Selling Holders severally against certain civil
liabilities,
including certain liabilities under the Securities Act, or will
be
entitled to contribution in connection therewith.
Item 16. Exhibits.
Exhibit No. Exhibit Description
4.1* Declaration of Trust of Continental Airlines
Finance Trust,
dated as of November 17, 1995
4.2* Amended and Restated Declaration of Trust of
Continental
Airlines Finance Trust, dated as of November 28,
1995 among
Continental Airlines, Inc., as Sponsor, Wilmington
Trust
Company, as Property Trustee and Delaware Trustee
and Lawrence
W. Kellner and Jeffery A. Smisek, as Regular
Trustees
4.3* Amendment to the Amended and Restated Declaration
of Trust,
dated as of May 9, 1996
4.4* Indenture for the 8 1/2% Convertible Subordinated
Debentures,
dated as of November 28, 1995 among Continental
Airlines, Inc.
and Wilmington Trust Company, as Trustee
4.5* Form of 8 1/2% Preferred Securities (included in
Exhibit 4.2
above)
4.6* Form of 8 1/2% Convertible Subordinated Debentures
(included in
Exhibit 4.3 above)
4.7* Continental Airlines, Inc. Preferred Securities
Guarantee,
dated as of November 28, 1995, between Continental
Airlines,
Inc., as Guarantor, and Wilmington Trust Company,
as Preferred
Guarantee Trustee
5.1** Opinion of Cleary, Gottlieb, Steen & Hamilton as
to the
validity of the Preferred Securities, Convertible
Subordinated
Debentures and Preferred Guarantee registered
hereby
5.2** Opinion of Jeffery A. Smisek, General Counsel of
Continental
Airlines, Inc., as to the validity of the Class B
common stock
being registered hereby
10.1* Registration Rights Agreement, dated November 28,
1995,
between Continental Airlines Finance Trust,
Continental
Airlines, Inc. and Merrill Lynch & Co., Merrill
Lynch, Pierce,
Fenner & Smith Incorporated, as First Boston
Corporation,
Donaldson, Lufkin & Jenrette Securities
Corporation and Smith
Barney Inc. as Representatives of the several
Initial
Purchasers
23.1* Consent of Ernst & Young LLP
23.2** Consent of Cleary, Gottlieb, Steen & Hamilton
(included in its
opinion filed as Exhibits 5.1)
23.3** Consent of Cleary, Gottlieb, Steen & Hamilton
23.4** Consent of Jeffery A. Smisek, General Counsel of
Continental
Airlines, Inc. (included in his opinion filed as
Exhibit 5.2)
24.1* Powers of Attorney
25.1** Form T-1 Statement of Eligibility under the Trust
Indenture
Act of 1939, as amended, of Wilmington Trust
Company, as
Trustee under the 8 1/2% Convertible Subordinated
Debentures
Indenture
25.2** Form T-1 Statement of Eligibility under the Trust
Indenture
Act of 1939, as amended, of Wilmington Trust
Company, as
Property Trustee under the Amended and Restated
Declaration of
Trust
25.3** Form T-1 Statement of Eligibility under the Trust
Indenture
Act of 1939, as amended, of Wilmington Trust
Company, as
Preferred Guarantee Trustee under the Preferred
Securities
Guarantee
_____________
* Filed herewith
** To be filed by amendment
Item 17. Undertakings.
(a) 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 (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;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall
not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are
incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act 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.
(b) 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.
(c) Insofar as the indemnification for liabilities arising under
the Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the
Registrant
has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy
as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the
Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be
governed
by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) to be part of this registration statement as
of
the time it was declared effective. For purposes of
determining any liability under the Securities Act of
1933, the information omitted from the form of
prospectus
filed as part of this registration statement in
reliance
upon Rule 430A and contained in the form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or
(4)
or 497(h) under the Securities Act shall be deemed
(2) For the purpose of determining any liability
under the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to
the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the
initial
bona fide offering thereof.
(e) To the extent the registrant intends to rely on section
305(b)(2) of the Trust Indenture Act of 1939 for determining the
eligibility of the trustee under indentures for securities to be
used, offered or sold on a delayed basis by or on behalf of the
registrant, the undersigned registrant hereby undertakes to file
an
application for the purpose of determining the liability of the
trustee to act under subsection (a) of section 310 of such Act in
accordance with the rules and regulations prescribed by the
Commission under section 305(b)(2) of such Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to
believe
that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Houston, State of Texas, on May 24, 1996.
CONTINENTAL AIRLINES FINANCE TRUST
By: /s/Lawrence W. Kellner
______________________
Lawrence W. Kellner
Regular Trustee
By: /s/ Jeffery A. Smisek
_____________________
Jeffery A. Smisek
Regular Trustee
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Houston, State of Texas, on May 24, 1996.
CONTINENTAL AIRLINES, INC.
By: /s/ Jeffery A. Smisek
_____________________
Jeffery A. Smisek
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities and on the dates indicated, on May 24,
1996.
Signature Title
_________ _____
*
_______________________
Gordon M. Bethune President, Chief Executive
Officer (Principal Executive
Officer) and Director
*
_______________________
Lawrence W. Kellner Senior Vice President and Chief
Financial Officer (Principal
Financial Officer)
*
_______________________
Michael P. Bonds Staff Vice President and
Controller (Principal Accounting
Officer)
*
_______________________
Thomas J. Barrack, Jr. Director
*
_______________________
David Bonderman Director
*
_______________________
Gregory D. Brenneman Director
*
_______________________
Joel H. Cowan Director
*
_______________________
Patrick Foley Director
*
_______________________
Rowland C. Frazee, C.C. Director
*
_______________________
Hollis L. Harris Director
*
_______________________
Dean C. Kehler Director
*
_______________________
Robert L. Lumpkins Director
*
_______________________
Douglas H. McCorkindale Director
*
_______________________
David E. Mitchell, O.C. Director
*
_______________________
Richard W. Pogue Director
*
_______________________
William S. Price III Director
*
_______________________
Donald L. Sturm Director
*
_______________________
Claude I. Taylor, O.C. Director
*
_______________________
Karen Hastie Williams Director
*
_______________________
Charles A. Yamarone Director
By: /s/ Scott R. Peterson
___________________________________
Scott R. Peterson, Attorney-in-fact
EXHIBIT INDEX
Exhibit No. Exhibit Description
4.1* Declaration of Trust of Continental Airlines
Finance Trust,
Dated as of November 17, 1995
4.2* Amended and Restated Declaration of Trust of
Continental
Airlines Finance Trust, dated as of November 28,
1995 among
Continental Airlines, Inc., as Sponsor, Wilmington
Trust
Company, as Property Trustee and Delaware Trustee
and
Lawrence W. Kellner and Jeffery A. Smisek, as
Regular
Trustees
4.3* Amendment to the Amended and Restated Declaration
of Trust,
dated as of May 9, 1996
4.4* Indenture for the 8 1/2% Convertible Subordinated
Debentures,
dated as of November 28, 1995 among Continental
Airlines,
Inc. and Wilmington Trust Company, as Trustee
4.5* Form of 8 1/2% Preferred Securities (included in
Exhibit 4.2
above)
4.6* Form of 8 1/2% Convertible Subordinated
Debentures (included
in Exhibit 4.3 above)
4.7* Continental Airlines, Inc. Preferred Securities
Guarantee,
dated as of November 28, 1995, between Continental
Airlines,
Inc., as Guarantor, and Wilmington Trust Company,
as
Preferred Guarantee Trustee
5.1** Opinion of Cleary, Gottlieb, Steen & Hamilton as
to the
validity of the Preferred Securities, Convertible
Subordinated Debentures and Preferred Guarantee
registered
hereby
5.2** Opinion of Jeffery A. Smisek, General Counsel of
Continental
Airlines, Inc., as to the validity of the Class B
common
stock being registered hereby
10.1* Registration Rights Agreement, dated November 28,
1995,
between Continental Airlines Finance Trust,
Continental
Airlines, Inc. and Merrill Lynch & Co., Merrill
Lynch,
Pierce, Fenner & Smith Incorporated, as First
Boston
Corporation, Donaldson, Lufkin & Jenrette
Securities
Corporation and Smith Barney Inc. as
Representatives of the
several Initial Purchasers
23.1* Consent of Ernst & Young LLP
23.2** Consent of Cleary, Gottlieb, Steen & Hamilton
(included in
its opinion filed as Exhibits 5.1)
23.3** Consent of Cleary, Gottlieb, Steen & Hamilton
23.3** Consent of Jeffery A. Smisek, General Counsel of
Continental
Airlines, Inc. (included in his opinion filed as
Exhibit
5.2)
24.1* Powers of Attorney
25.1** Form T-1 Statement of Eligibility under the Trust
Indenture
Act of 1939, as amended, of Wilmington Trust
Company, as
Trustee under the 8 1/2% Convertible Subordinated
Debentures
Indenture
25.2** Form T-1 Statement of Eligibility under the Trust
Indenture
Act of 1939, as amended, of Wilmington Trust
Company, as
Property Trustee under the Amended and Restated
Declaration
of Trust
25.3** Form T-1 Statement of Eligibility under the Trust
Indenture
Act of 1939, as amended, of Wilmington Trust
Company, as
Preferred Guarantee Trustee under the Preferred
Securities
Guarantee
______
* Filed herewith
** To be filed by amendment
EXHIBIT 4.1
DECLARATION OF TRUST
OF
CONTINENTAL AIRLINES FINANCE TRUST
November 17, 1995
DECLARATION OF TRUST ("Declaration") dated and
effective as of November 17, 1995 by the undersigned trustees
(together with all other Persons from time to time duly appointed
and serving as trustees in accordance with the provisions of this
Declaration, the "Trustees"), the Parent as trust sponsor (the
"Sponsor"), and by the holders, from time to time, of undivided
beneficial interests in the Trust to be issued pursuant to this
Declaration;
WHEREAS, the Trustees and the Sponsor desire to
establish a trust (the "Trust") pursuant to the Delaware Business
Trust Act for the sole purpose of issuing and selling certain
securities representing undivided beneficial interests in the
assets of the Trust and investing the proceeds thereof in certain
Debentures of the Debenture Issuer;
NOW, THEREFORE, it being the intention of the parties
hereto that the Trust constitute a business trust under the
Business Trust Act and that this Declaration constitute the
governing instrument of such business trust, the Trustees declare
that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the
assets of the Trust issued hereunder, subject to the provisions
of this Declaration.
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration but not
defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this Declaration has
the same meaning throughout;
(c) all references to "the Declaration" or "this
Declaration" are to this Declaration of Trust as
modified, supplemented or amended from time to
time;
(d) all references in this Declaration to Articles and
Sections are to Articles and Sections of this
Declaration unless otherwise specified; and
(e) a reference to the singular includes the plural
and vice versa.
"Affiliate" has the same meaning as given to that term
in Rule 405 of the Securities Act or any successor rule
thereunder.
"Business Trust Act" means Chapter 38 of Title 12 of
the Delaware Code, 12 Del. Code Section 3801 et seq., as it may
be
amended from time to time.
"Business Day" means any day other than a day on which
banking institutions in New York, New York or Wilmington,
Delaware are authorized or required by law to close.
"Commission" means the Securities and Exchange
Commission.
"Common Security" means a security representing an
undivided beneficial interest in the assets of the Trust with
such terms as may be set out in any amendment to this
Declaration.
"Covered Person" means any officer, director,
shareholder, partner, member, representative, employee or agent
of the Trust or the Trust's Affiliates.
"Debenture Issuer" means the Parent in its capacity as
the issuer of the Debentures.
"Debentures" means the series of Debentures to be
issued by the Debenture Issuer and acquired by the Trust.
"Delaware Trustee" has the meaning set forth in Section
3.1.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, or any successor legislation.
"Indemnified Person" means (a) any Trustee; (b) any
Affiliate of any Trustee; (c) any officers, directors,
stockholders, members, partners, employees, representatives or
agents of any Trustee; or (d) any employee or agent of the Trust
or its Affiliates.
"Parent" means Continental Airlines, Inc., a Delaware
corporation, or any successor entity in a merger.
"Person" means a legal person, including any
individual, corporation, estate, partnership, joint venture,
association, joint stock company, limited liability company,
trust, unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever
nature.
"Preferred Security" means a security representing an
undivided beneficial interest in the assets of the Trust with
such terms as may be set out in any amendment to this
Declaration.
"Regular Trustee" means any Trustee other than the
Delaware Trustee and the Property Trustee.
"Securities" means the Common Securities and the
Preferred Securities.
"Securities Act" means the Securities Act of 1933, as
amended from time to time, or any successor legislation.
"Sponsor" means the Parent in its capacity as sponsor
of the Trust.
"Trustee" or "Trustees" means each Person who has
signed this Declaration as a trustee, so long as such Person
shall continue in office in accordance with the terms hereof, and
all other Persons who may from time to time be duly appointed,
qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the
Trustees shall refer to such Person or Persons solely in their
capacity as trustees hereunder.
ARTICLE II
ORGANIZATION
SECTION 2.1 Name.
The Trust created by this Declaration is named
"Continental Airlines Finance Trust." The Trust's activities may
be conducted under the name of the Trust or any other name deemed
advisable by the Regular Trustees.
SECTION 2.2 Office.
The address of the principal office of the Trust is
c/o Continental Airlines, Inc., 2929 Allen Parkway, Suite 2010,
Houston, Texas 77019. At any time, the Regular Trustees may
designate another principal office.
SECTION 2.3 Purpose.
The exclusive purposes and functions of the Trust are
(a) to issue and sell Securities and use the proceeds from such
sale to acquire the Debentures, and (b) except as otherwise
provided herein, to engage in only those other activities
necessary or incidental thereto. The Trust shall not borrow
money, issue debt or reinvest proceeds derived from investments,
pledge any of its assets, or otherwise undertake (or permit to be
undertaken) any activity that would cause the Trust not to be
classified for United States federal income tax purposes as a
grantor trust.
SECTION 2.4 Authority.
Subject to the limitations provided in this
Declaration, the Regular Trustees shall have exclusive and
complete authority to carry out the purposes of the Trust. Any
action taken by the Regular Trustees in accordance with their
powers shall constitute the act of and serve to bind the Trust.
In dealing with the Regular Trustees acting on behalf of the
Trust, no person shall be required to inquire into the authority
of the Regular Trustees to bind the Trust. Persons dealing with
the Trust are entitled to rely conclusively on the power and
authority of the Regular Trustees as set forth in this
Declaration.
SECTION 2.5 Title to Property of the Trust.
Legal title to all assets of the Trust shall be vested
in the Trust.
SECTION 2.6 Powers of the Trustees.
The Regular Trustees shall have the exclusive power and
authority to cause the Trust to engage in the following
activities:
(a) to issue and sell the Preferred Securities and the
Common Securities in accordance with this
Declaration; provided, however, that the Trust may
issue no more than one series of Preferred
Securities and no more than one series of Common
Securities, and, provided, further, that there
shall be no interests in the Trust other than the
Securities and the issuance of the Securities
shall be limited to two simultaneous issuances of
both Preferred Securities and Common Securities
(and any second issuance shall be solely for the
purpose of covering over-allotments in the initial
offering of the Preferred Securities);
(b) in connection with the issue and sale of the
Preferred Securities, at the direction of the
Sponsor, to:
(i) prepare an offering memorandum (the "Offering
Memorandum") in preliminary and final form
prepared by the Sponsor, in relation to the
offering and sale of Preferred Securities to
qualified institutional buyers in reliance on
Rule 144A under the Securities Act, to a
limited number of institutional "accredited
investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and
outside the United States to non-U.S. persons
in offshore transactions in reliance on
Regulation S under the Securities Act and to
execute and file with the Commission, at such
time as determined by the Sponsor pursuant to
the Registration Rights Agreement, a shelf
registration statement prepared by the
Sponsor, including any amendments thereto,
and such other forms or filings as may be
required by the Securities Act or the Trust
Indenture Act of 1939, as amended (the
"TIA"), in each case in relation to the
Preferred Securities;
(ii) execute and file any documents prepared by
the Sponsor, or take any acts as determined
by the Sponsor to be necessary in order to
qualify or register all or part of the
Preferred Securities in any State or foreign
jurisdiction in which the Sponsor has
determined to qualify or register such
Preferred Securities for sale;
(iii) execute and file an application, prepared on
behalf of the Sponsor, to the Private
Offerings, Resales and Trading through
Automated Linkages ("PORTAL") Market and, if
and at such time as determined by the
Sponsor, to the New York Stock Exchange or
any other national stock exchange or the
Nasdaq National Market for listing or
quotation of the Preferred Securities;
(iv) execute and deliver letters or documents to,
or instruments with, The Depository Trust
Company ("DTC") relating to the Preferred
Securities;
(v) execute and file with the Commission, at such
time as determined by the Sponsor, a
registration statement on Form 8-A, including
any amendments thereto, prepared by the
Sponsor relating to the registration of the
Preferred Securities under the Exchange Act;
(vi) obtain a CUSIP number for the Preferred
Securities; and
(vii) execute and enter into purchase agreements,
registration rights agreements and other
related agreements providing for the sale of
the Preferred Securities;
(c) to employ or otherwise engage employees and agents
(who may be designated as officers with titles)
and managers, contractors, advisors, and
consultants and provide for reasonable
compensation for such services;
(d) to incur expenses which are necessary or
incidental to carry out any of the purposes of
this Declaration, which expenses shall be paid for
by the Sponsor in all respects; and
(e) to execute all documents or instruments, perform
all duties and powers, and do all things for and
on behalf of the Trust in all matters necessary or
incidental to the foregoing.
SECTION 2.7 Filing of Certificate of Trust.
On or after the date of execution of this Declaration,
the Trustees shall cause the filing of the Certificate of Trust
for the Trust in the form attached hereto as Exhibit A with the
Secretary of State of the State of Delaware.
SECTION 2.8 Duration of Trust.
The Trust, absent termination pursuant to the
provisions of Section 5.2, shall have existence for 35 years from
the date hereof.
SECTION 2.9 Responsibilities of the Sponsor.
In connection with the issue and sale of the Preferred
Securities, the Sponsor shall have the exclusive right and
responsibility to engage in the following activities:
(a) to prepare the Offering Memorandum in preliminary
and final form and to prepare for filing by the
Trust with the Commission a shelf registration
statement, including any amendments thereto, and
such other forms or filings as may be required by
the Securities Act or the TIA;
(b) to determine the States and foreign jurisdictions
in which to take appropriate action to qualify or
register for sale all or part of the Preferred
Securities and to do any and all such acts, other
than actions which must be taken by the Trust, and
advise the Trust of actions it must take, and
prepare for execution and filing any documents to
be executed and filed by the Trust, as the Sponsor
deems necessary or advisable in order to comply
with the applicable laws of any such States and
foreign jurisdictions;
(c) to prepare or cause to be prepared for filing by
the Trust an application to PORTAL and to the New
York Stock Exchange or any other national stock
exchange or the Nasdaq National Market for listing
or quotation of the Preferred Securities;
(d) to prepare letters or documents to, or instruments
with, DTC relating to the Preferred Securities;
(e) to prepare for filing by the Trust with the
Commission a registration statement on Form 8-A,
including any amendments thereto, relating to the
registration of the Preferred Securities under the
Exchange Act; and
(f) to negotiate the terms of purchase agreements,
registration rights agreements and other related
agreements providing for the sale of the Preferred
Securities.
ARTICLE III
TRUSTEES
SECTION 3.1 Trustees.
The initial number of Trustees shall be three (3), and
thereafter the number of Trustees shall be such number as shall
be fixed from time to time by a written instrument signed by the
Sponsor. The Sponsor is entitled to appoint or remove without
cause any Trustee at any time; provided, however, that the number
of Trustees shall in no event be less than three (3); and
provided, further that one Trustee shall be a person who is a
resident of the State of Delaware (in the case of a natural
person) or (if not a natural person) an entity which has its
principal place of business in the State of Delaware (the
"Delaware Trustee"). Except as expressly set forth in this
Declaration, any power of the Regular Trustees may be exercised
by, or with the consent of, a majority of the Regular Trustees.
The initial Regular Trustees shall be:
Lawrence W. Kellner and
Jeffery A. Smisek
c/o Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
The initial Delaware Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Prior to the issuance of the Preferred Securities and
Common Securities, the Sponsor shall appoint another trustee (the
"Property Trustee") meeting the requirements of the TIA by the
execution of an amendment to this Declaration executed by the
Regular Trustees, the Sponsor, the Property Trustee and the
Delaware Trustee.
SECTION 3.2 Delaware Trustee.
Notwithstanding any other provision of this
Declaration, the Delaware Trustee in its capacity as Delaware
Trustee shall not be entitled to exercise any of the powers, nor
shall the Delaware Trustee in its capacity as Delaware Trustee
have any of the duties and responsibilities of the Regular
Trustees described in this Declaration. The Delaware Trustee in
its capacity as Delaware Trustee shall be a Trustee for the sole
and limited purpose of fulfilling the requirements of Section
3807 of the Business Trust Act.
SECTION 3.3 Execution of Documents.
(a) Unless otherwise determined by the Regular
Trustees, and except as otherwise required by the Business Trust
Act, any Regular Trustee is authorized to execute on behalf of
the Trust any documents which the Regular Trustees have the power
and authority to cause the Trust to execute pursuant to Section
2.6; provided, that, the shelf registration statement referred to
in Section 2.6(b)(i), including any amendments thereto, shall be
signed by a majority of the Regular Trustees; and
(b) a Regular Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural
Person over the age of 21 his or her power for the purposes of
signing any documents which the Regular Trustees have power and
authority to cause the Trust to execute pursuant to Section 2.6.
ARTICLE IV
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 4.1 Exculpation.
(a) No Indemnified Person shall be liable, responsible
or accountable in damages or otherwise to the Trust or any
Covered Person for any loss, damage or claim incurred by reason
of any act or omission performed or omitted by such Indemnified
Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of
such Indemnified Person's negligence or willful misconduct with
respect to such acts or omissions; and
(b) an Indemnified Person shall be fully protected in
relying in good faith upon the records of the Trust and upon such
information, opinions, reports or statements presented to the
Trust by any Person as to matters the Indemnified Person
reasonably believes are within such other Person's professional
or expert competence and who has been selected with reasonable
care by or on behalf of the Trust, including information,
opinions, reports or statements as to the value and amount of the
assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which
distributions to holders of Securities might properly be paid.
SECTION 4.2 Fiduciary Duty.
(a) To the extent that, at law or in equity, an
Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered
Person, an Indemnified Person acting under this Declaration shall
not be liable to the Trust or to any other Covered Person for its
good faith reliance on the provisions of this Declaration. The
provisions of this Declaration, to the extent that they restrict
the duties and liabilities of an Indemnified Person otherwise
existing at law or in equity, are agreed by the parties hereto to
replace such other duties and liabilities of such Indemnified
Person;
(b) unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or
arises between Covered Persons; or
(ii) whenever this Declaration or any other
agreement contemplated herein or therein
provides that an Indemnified Person shall act
in a manner that is, or provides terms that
are, fair and reasonable to the Trust or any
holder of Securities,
the Indemnified Person shall resolve such conflict of interest,
take such action or provide such terms, considering in each case
the relative interest of each party (including its own interest)
to such conflict, agreement, transaction or situation and the
benefits and burdens relating to such interests, any customary or
accepted industry practices, and any applicable generally
accepted accounting practices or principles. In the absence of
bad faith by the Indemnified Person, the resolution, action or
term so made, taken or provided by the Indemnified Person shall
not constitute a breach of this Declaration or any other
agreement contemplated herein or of any duty or obligation of the
Indemnified Person at law or in equity or otherwise; and
(c) whenever in this Declaration an Indemnified Person
is permitted or required to make a decision:
(i) in its "discretion" or under a grant of
similar authority, the Indemnified Person
shall be entitled to consider such interests
and factors as it desires, including its own
interests, and shall have no duty or
obligation to give any consideration to any
interests of or factors affecting the Trust
or any other Person; or
(ii) in its "good faith" or under another express
standard,
the Indemnified Person shall act under such express standard and
shall not be subject to any other or different standard imposed
by this Declaration or by applicable law or rules of equity.
SECTION 4.3 Indemnification.
(a) To the fullest extent permitted by applicable law,
the Sponsor shall indemnify and hold harmless each Indemnified
Person from and against any loss, damage or claim incurred by
such Indemnified Person by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred
on such Indemnified Person by this Declaration, except that no
Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Indemnified Person
by reason of negligence or willful misconduct with respect to
such acts or omissions; and
(b) to the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by an Indemnified Person
in defending any claim, demand, action, suit or proceeding shall,
from time to time, be advanced by the Sponsor prior to the final
disposition of such claim, demand, action, suit or proceeding
upon receipt by the Sponsor of an undertaking by or on behalf of
the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be
indemnified as authorized in Section 4.3(a).
SECTION 4.4 Outside Businesses.
Any Covered Person and the Delaware Trustee may engage
in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust and the
Holders of Securities shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or
profits derived therefrom and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be
deemed wrongful or improper. No Covered Person or the Delaware
Trustee shall be obligated to present any particular investment
or other opportunity to the Trust even if such opportunity is of
a character that, if presented to the Trust, could be taken by
the Trust, and any Covered Person and the Delaware Trustee shall
have the right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Covered Person
and the Delaware Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate
of the Sponsor, or may act as depositary for, trustee or agent
for or may act on any committee or body of holders of, securities
or other obligations of the Sponsor or its Affiliates.
ARTICLE V
AMENDMENTS, TERMINATION, MISCELLANEOUS
SECTION 5.1 Amendments.
At any time before the issue of any Securities, this
Declaration may be amended by, and only by, a written instrument
executed by all of the Regular Trustees and the Sponsor.
SECTION 5.2 Termination of Trust.
(a) The Trust shall terminate and be of no further
force or effect:
(i) upon the bankruptcy of the Sponsor; or
(ii) upon the filing of a certificate of
dissolution or its equivalent with respect to
the Sponsor or the revocation of the
Sponsor's charter or of the Trust's
certificate of trust; or
(iii) upon the entry of a decree of judicial
dissolution of the Sponsor or the Trust; or
(iv) before the issue of any Securities, with the
consent of all of the Regular Trustees and
the Sponsor; and
(b) as soon as is practicable after the occurrence of
an event referred to in Section 5.2(a), the
Trustees shall file a certificate of cancellation
with the Secretary of State of the State of
Delaware.
SECTION 5.3 Governing Law.
This Declaration and the rights of the parties
hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware and all rights and remedies
shall be governed by such laws without regard to principles of
conflict of laws.
SECTION 5.4 Headings.
Headings contained in this Declaration are inserted for
convenience of reference only and do not affect the
interpretation of this Declaration or any provision hereof.
SECTION 5.5 Successors and Assigns.
Whenever in this Declaration any of the parties hereto
is named or referred to, the successors and assigns of such party
shall be deemed to be included, and all covenants and agreements
in this Declaration by the Sponsor and the Trustees shall bind
and inure to the benefit of their respective successors and
assigns, whether or not so expressed.
SECTION 5.6 Partial Enforceability.
If any provision of this Declaration, or the
application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the
application of such provision to persons or circumstances other
than those to which it is held invalid, shall not be affected
thereby.
SECTION 5.7 Counterparts.
This Declaration may contain more than one counterpart
of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees to one of such
counterpart signature pages. All of such counterpart signature
pages shall be read as though one, and they shall have the same
force and effect as though all of the signers had signed a single
signature page.
IN WITNESS WHEREOF, the undersigned has caused these
presents to be executed as of the day and year first above
written.
Lawrence W. Kellner,
as Regular Trustee
__________________________
Jeffery A. Smisek,
as Regular Trustee
__________________________
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Delaware Trustee
By: ______________________
Name:
Title:
Continental Airlines, Inc.,
as Sponsor
By: ______________________
Name:
Title:
EXHIBIT A
CERTIFICATE OF TRUST
The undersigned, the trustees of Continental Airlines
Finance Trust, desiring to form a business trust pursuant to the
Delaware Business Trust Act, 12 Del. C. Section 3810, hereby
certify as follows:
(a) The name of the business trust being formed hereby
(the "Trust") is Continental Airlines Finance
Trust.
(b) The name and business address of the trustee of
the Trust which has its principal place of
business in the State of Delaware is as follows:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Dated: November 17, 1995
Lawrence W. Kellner,
as Regular Trustee
_________________________
Jeffery A. Smisek,
as Regular Trustee
_________________________
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Delaware Trustee
By: __________________________
Name:
Title:
EXHIBIT 4.2
AMENDED AND RESTATED DECLARATION
OF TRUST
CONTINENTAL AIRLINES FINANCE TRUST
Dated as of November 28, 1995
TABLE OF CONTENTS
Page
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions . . . . . . . . . . . . . 2
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application. . 10
SECTION 2.2 Lists of Holders of Securities. . . . 10
SECTION 2.3 Reports by the Property Trustee . . . 11
SECTION 2.4 Periodic Reports to Property
Trustee. . . . . . . . . . . . . 11
SECTION 2.5 Evidence of Compliance with
Conditions Precedent . . . . . . 11
SECTION 2.6 Event of Default; Waiver. . . . . . . 11
SECTION 2.7 Event of Default; Notice. . . . . . . 13
ARTICLE III
ORGANIZATION
SECTION 3.1 Name. . . . . . . . . . . . . . . . . 14
SECTION 3.2 Office. . . . . . . . . . . . . . . . 14
SECTION 3.3 Purpose . . . . . . . . . . . . . . . 14
SECTION 3.4 Authority . . . . . . . . . . . . . . 15
SECTION 3.5 Title to Property of the Trust. . . . 15
SECTION 3.6 Powers and Duties of the Regular
Trustees . . . . . . . . . . . . 15
SECTION 3.7 Prohibition of Actions by the Trust
and the Trustees.. . . . . . . . 19
SECTION 3.8 Powers and Duties of the Property
Trustee. . . . . . . . . . . . . 20
SECTION 3.9 Certain Duties and Responsibilities
of the Property Trustee. . . . . 22
SECTION 3.10 Certain Rights of Property Trustee. . 24
SECTION 3.11 Delaware Trustee. . . . . . . . . . . 27
SECTION 3.12 Execution of Documents. . . . . . . . 27
SECTION 3.13 Not Responsible for Recitals or
Issuance of Securities . . . . . 27
SECTION 3.14 Duration of Trust . . . . . . . . . . 28
SECTION 3.15 Mergers . . . . . . . . . . . . . . . 28
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common
Securities . . . . . . . . . . . 30
SECTION 4.2 Responsibilities of the Sponsor . . . 30
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees. . . . . . . . . . 31
SECTION 5.2 Delaware Trustee. . . . . . . . . . . 31
SECTION 5.3 Property Trustee; Eligibility . . . . 32
SECTION 5.4 Qualifications of Regular Trustees
and Delaware Trustee
Generally. . . . . . . . . . . . 32
SECTION 5.5 Initial Trustees. . . . . . . . . . . 33
SECTION 5.6 Appointment, Removal and
Resignation of Trustees. . . . . 33
SECTION 5.7 Vacancies Among Trustees. . . . . . . 35
SECTION 5.8 Effect of Vacancies . . . . . . . . . 35
SECTION 5.9 Meetings. . . . . . . . . . . . . . . 36
SECTION 5.10 Delegation of Power . . . . . . . . . 36
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions . . . . . . . . . . . . 37
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding
Securities . . . . . . . . . . . 37
SECTION 7.2 Execution and Authentication. . . . . 38
SECTION 7.3 Form and Dating . . . . . . . . . . . 39
SECTION 7.4 Registrar, Paying Agent and Conver-
sion Agent . . . . . . . . . . . 41
SECTION 7.5 Paying Agent to Hold Money in
Trust. . . . . . . . . . . . . . 42
SECTION 7.6 [reserved]. . . . . . . . . . . . . . 42
SECTION 7.7 Replacement Securities. . . . . . . . 42
SECTION 7.8 Outstanding Preferred Securities. . . 43
SECTION 7.9 Preferred Securities in Treasury. . . 43
SECTION 7.10 Temporary Securities. . . . . . . . . 43
SECTION 7.11 Cancellation. . . . . . . . . . . . . 45
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust. . . . . . . . . 45
ARTICLE IX
TRANSFER AND EXCHANGE
SECTION 9.1 General . . . . . . . . . . . . . . . 46
SECTION 9.2 Transfer Procedures and
Restrictions . . . . . . . . . . 47
SECTION 9.3 Deemed Security Holders . . . . . . . 57
SECTION 9.4 Book Entry Interests. . . . . . . . . 57
SECTION 9.5 Notices to the Depositary . . . . . . 58
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability . . . . . . . . . . . . . . 58
SECTION 10.2 Exculpation . . . . . . . . . . . . . 59
SECTION 10.3 Fiduciary Duty. . . . . . . . . . . . 60
SECTION 10.4 Indemnification . . . . . . . . . . . 61
SECTION 10.5 Outside Businesses. . . . . . . . . . 61
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year . . . . . . . . . . . . . 62
SECTION 11.2 Certain Accounting Matters. . . . . . 62
SECTION 11.3 Banking . . . . . . . . . . . . . . . 63
SECTION 11.4 Withholding . . . . . . . . . . . . . 63
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments. . . . . . . . . . . . . . 64
SECTION 12.2 Meetings of the Holders of
Securities; Action by Written
Consent. . . . . . . . . . . . . 66
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of
Property Trustee . . . . . . . . 68
SECTION 13.2 Representations and Warranties of
Delaware Trustee . . . . . . . . 69
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights . . . . . . . . . 70
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices . . . . . . . . . . . . . . . 72
SECTION 15.2 Governing Law . . . . . . . . . . . . 73
SECTION 15.3 Intention of the Parties. . . . . . . 73
SECTION 15.4 Headings. . . . . . . . . . . . . . . 73
SECTION 15.5 Successors and Assigns. . . . . . . . 73
SECTION 15.6 Partial Enforceability. . . . . . . . 73
SECTION 15.7 Counterparts. . . . . . . . . . . . . 73
ANNEX I - Terms of Securities
EXHIBIT A-1 - Form of Preferred Security
EXHIBIT A-2 - Form of Exchanged Preferred
Security
EXHIBIT A-3 - Form of Common Security
EXHIBIT B - Specimen of Debenture
EXHIBIT C - Purchase Agreement
CROSS-REFERENCE TABLE*
Section of
Trust Indenture Act Section of
of 1939, as amended Declaration
310(a). . . . . . . . . . . . . . . . . . 5.3(a)
310(c). . . . . . . . . . . . . . . . . . Inapplicable
311(c). . . . . . . . . . . . . . . . . . Inapplicable
312(a). . . . . . . . . . . . . . . . . . 2.2(a)
312(b). . . . . . . . . . . . . . . . . . 2.2(b)
313 . . . . . . . . . . . . . . . . . . . 2.3
314(a). . . . . . . . . . . . . . . . . . 2.4
314(b). . . . . . . . . . . . . . . . . . Inapplicable
314(c). . . . . . . . . . . . . . . . . . 2.5
314(d). . . . . . . . . . . . . . . . . . Inapplicable
314(f). . . . . . . . . . . . . . . . . . Inapplicable
315(a). . . . . . . . . . . . . . . . . . 3.9(b)
315(c). . . . . . . . . . . . . . . . . . 3.9(a)
315(d). . . . . . . . . . . . . . . . . . 3.9(a)
316(a). . . . . . . . . . . . . . . . . . Annex I
316(c). . . . . . . . . . . . . . . . . . 3.6(e)
_______________
* This Cross-Reference Table does not constitute part
of the Declaration and shall not affect the inter-
pretation of any of its terms or provisions.
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
CONTINENTAL AIRLINES FINANCE TRUST
November 28, 1995
AMENDED AND RESTATED DECLARATION OF TRUST
("Declaration") dated and effective as of November 28,
1995, by the undersigned trustees (together with all
other Persons from time to time duly appointed and
serving as trustees in accordance with the provisions of
this Declaration, the "Trustees"), Continental Airlines,
Inc., a Delaware corporation, as trust sponsor (the
"Sponsor"), and by the holders, from time to time, of
undivided beneficial interests in the Trust issued
pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor
established a trust (the "Trust") under the Delaware
Business Trust Act pursuant to a Declaration of Trust
dated as of November 17, 1995 (the "Original
Declaration") and a Certificate of Trust filed with the
Secretary of State of Delaware on November 17, 1995, for
the sole purpose of issuing and selling certain
securities representing undivided beneficial interests in
the assets of the Trust and investing the proceeds
thereof in certain Debentures of the Debenture Issuer;
WHEREAS, as of the date hereof, no interests in
the Trust have been issued;
WHEREAS, all of the Trustees and the Sponsor,
by this Declaration, amend and restate each and every
term and provision of the Original Declaration; and
NOW, THEREFORE, it being the intention of the
parties hereto to continue the Trust as a business trust
under the Business Trust Act and that this Declaration
constitute the governing instrument of such business
trust, the Trustees declare that all assets contributed
to the Trust will be held in trust for the benefit of the
holders, from time to time, of the securities
representing undivided beneficial interests in the assets
of the Trust issued hereunder, subject to the provisions
of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1 Definitions.
Unless the context otherwise requires:
(a) Capitalized terms used in this Declaration
but not defined in the preamble above have the respective
meanings assigned to them in this Section 1.1;
(b) a term defined anywhere in this
Declaration has the same meaning throughout;
(c) all references to "the Declaration" or
"this Declaration" are to this Declaration as modified,
supplemented or amended from time to time;
(d) all references in this Declaration to
Articles and Sections and Exhibits are to Articles and
Sections of and Exhibits to this Declaration unless
otherwise specified;
(e) a term defined in the Trust Indenture Act
has the same meaning when used in this Declaration unless
otherwise defined in this Declaration or unless the
context otherwise requires; and
(f) a reference to the singular includes the
plural and vice versa.
"Affiliate" has the same meaning as given to
that term in Rule 405 of the Securities Act or any
successor rule thereunder.
"Agent" means any Registrar, Paying Agent,
Conversion Agent or co-registrar.
"Authorized Officer" of a Person means any
Person that is authorized to bind such Person.
"Book Entry Interest" means a beneficial
interest in a global Certificate, ownership and transfers
of which shall be maintained and made through book
entries by a Depositary as described in Section 9.4.
"Business Day" means any day other than a
Saturday or a Sunday or a day on which banking
institutions in The City of New York or Wilmington,
Delaware are authorized or required by law or executive
order to remain closed.
"Business Trust Act" means Chapter 38 of Title
12 of the Delaware Code, 12 Del. Code Section 3801 et
seq., as it may be amended from time to time.
"Certificate" means a certificate in global or
definitive form representing a Common Security or a
Preferred Security.
"Closing Date" means November 28, 1995 or any
subsequent date on which the sale of Additional Preferred
Securities (as defined in the Purchase Agreement) is
settled.
"Code" means the Internal Revenue Code of 1986
as amended.
"Commission" means the Securities and Exchange
Commission.
"Common Securities" has the meaning set forth
in Section 7.1(a).
"Common Securities Guarantee" means the
guarantee agreement dated as of November 28, 1995, of the
Sponsor in respect of the Common Securities.
"Conversion Agent" has the meaning set forth in
Section 7.4.
"Covered Person" means: (a) any officer,
director, shareholder, partner, member, representative,
employee or agent of (i) the Trust or (ii) the Trust's
Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means the Sponsor in its
capacity as issuer of the Debentures.
"Debenture Trustee" means Wilmington Trust
Company, not in its individual capacity but solely as
trustee under the Indenture, until a successor is
appointed thereunder, and thereafter means such successor
trustee.
"Debentures" means the series of Debentures to
be issued by the Debenture Issuer under the Indenture to
be held by the Property Trustee, a specimen certificate
for such series of Debentures being Exhibit B.
"Definitive Preferred Securities" means any
Regulation S Definitive Preferred Security, any
Restricted Definitive Preferred Security and any other
Preferred Securities in definitive form issued by the
Trust.
"Delaware Trustee" has the meaning set forth in
Section 5.2.
"Distribution" means a distribution payable to
Holders of Securities in accordance with Section 6.1.
"Depositary" means The Depository Trust
Company.
"Exchange Act" means the Securities Exchange
Act of 1934, as amended from time to time, or any
successor legislation.
"Exchanged Global Preferred Security" has the
meaning set forth in Section 9.2(b).
"Event of Default" in respect of the Securities
means an Event of Default (as defined in the Indenture)
has occurred and is continuing in respect of the
Debentures.
"Holder" means a Person in whose name a
Certificate representing a Security is registered, such
Person being a beneficial owner within the meaning of the
Business Trust Act.
"Indemnified Person" means (a) any Trustee; (b)
any Affiliate of any Trustee; (c) any officers,
directors, shareholders, members, partners, employees,
representatives or agents of any Trustee; and (d) any
employee or agent of the Trust or its Affiliates.
"Indenture" means the Indenture dated as of
November 28, 1995, between the Debenture Issuer and
Wilmington Trust Company, not in its individual capacity
but solely as Debenture Trustee, and any indenture
supplemental thereto pursuant to which the Debentures are
to be issued.
"Investment Company" means an investment
company as defined in the Investment Company Act.
"Investment Company Act" means the Investment
Company Act of 1940, as amended from time to time, or any
successor legislation.
"Investment Company Event" means the Regular
Trustees shall have obtained an opinion from independent
counsel experienced in practice under the Investment
Company Act to the effect that, as a result of the
occurrence of a change in law or regulation or a written
change in interpretation or application of law or
regulation by any legislative body, court, governmental
agency or regulatory authority (a "Change in 1940 Act
Law"), there is more than an insubstantial risk that the
Trust is or will be considered an investment company
which is required to be registered under the Investment
Company Act, which Change in 1940 Act Law becomes
effective on or after the original issue date of the
Preferred Securities and Common Securities.
"Legal Action" has the meaning set forth in
Section 3.6(g).
"Ministerial Action" has the meaning set forth
in the terms of the Securities as set forth in Annex I.
"Majority in liquidation amount of the
Securities" means, except as provided in the terms of the
Preferred Securities and by the Trust Indenture Act,
Holder(s) of outstanding Securities voting together as a
single class or, as the context may require, Holder(s) of
outstanding Preferred Securities or Holder(s) of
outstanding Common Securities voting separately as a
class, who are the record owners of more than 50% of the
aggregate liquidation amount (including the stated amount
that would be paid on redemption, liquidation or
otherwise, plus accrued and unpaid Distributions to the
date upon which the voting percentages are determined) of
all outstanding Securities of the relevant class.
"No Recognition Opinion" has the meaning set
forth in paragraph 4 of Annex I.
"Offering Memorandum" means the confidential
offering memorandum, dated as of November 21, 1995,
relating to the issuance by the Trust of the Preferred
Securities.
"Officers' Certificate" means, with respect to
any Person, a certificate signed by two Authorized
Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or
covenant provided for in this Declaration shall include:
(a) a statement that each officer signing
the Certificate has read the covenant
or condition and the definitions
relating thereto;
(b) a brief statement of the nature and
scope of the examination or
investigation undertaken by each
officer in rendering the Certificate;
(c) a statement that each such officer
has made such examination or
investigation as, in such officer's
opinion, is necessary to enable such
officer to express an informed
opinion as to whether or not such
covenant or condition has been
complied with; and
(d) a statement as to whether, in the
opinion of each such officer, such
condition or covenant has been
complied with.
"Participants" has the meaning set forth in
Section 7.3(b).
"Paying Agent" has the meaning set forth in
Section 7.4.
"Person" means a legal person, including any
individual, corporation, estate, partnership, joint
venture, association, joint stock company, limited
liability company, trust, unincorporated association, or
government or any agency or political subdivision
thereof, or any other entity of whatever nature.
"Preferred Securities Guarantee" means the
guarantee agreement dated as of November 28, 1995, of the
Sponsor in respect of the Preferred Securities.
"Preferred Securities" has the meaning set
forth in Section 7.1(a).
"Preferred Security Beneficial Owner" means,
with respect to a Book Entry Interest, a Person who is
the beneficial owner of such Book Entry Interest, as
reflected on the books of the Depositary, or on the books
of a Person maintaining an account with such Depositary
(directly as a Participant or as an indirect participant,
in each case in accordance with the rules of such
Depositary).
"Property Trustee" means the Trustee meeting
the eligibility requirements set forth in Section 5.3.
"Property Trustee Account" has the meaning set
forth in Section 3.8(c).
"Purchase Agreement" shall have the meaning set
forth in Section 7.3(a).
"Quorum" means a majority of the Regular
Trustees or, if there are only two Regular Trustees, both
of them.
"Redemption Tax Opinion" has the meaning set
forth in paragraph 4 of Annex I.
"Registrar" has the meaning set forth in
Section 7.4.
"Registration Rights Agreement" means the
Registration Rights Agreement, dated November 28, 1995,
among the Sponsor, the Trust, and the Initial Purchasers
named in the Purchase Agreement.
"Regular Trustee" means any Trustee other than
the Property Trustee, the Guarantee Trustee, the
Debenture Trustee and the Delaware Trustee.
"Regulation S Definitive Preferred Security"
has the meaning set forth in Section 7.3(c).
"Related Party" means, with respect to the
Sponsor, any direct or indirect wholly owned subsidiary
of the Sponsor or any other Person that owns, directly or
indirectly, 100% of the outstanding voting securities of
the Sponsor.
"Responsible Officer" means, with respect to
the Property Trustee, any vice-president, any assistant
vice-president, the treasurer, any assistant treasurer,
any trust officer or assistant trust officer or any other
officer in the Corporate Trust Department of the Property
Trustee customarily performing functions similar to those
performed by any of the above designated officers and
also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity
with the particular subject.
"Restricted Definitive Preferred Security" has
the meaning set forth in Section 7.3(c).
"Restricted Period" means the one-year period
following the last issue date for the Preferred
Securities (including Preferred Securities issued to
cover overallotments and Common Securities issued in
connection with related capital contributions). The
Sponsor shall inform the Trustee as to the termination of
the restricted period and the Trustee may rely
conclusively thereon.
"Restricted Preferred Securities" shall include
the Regulation S Definitive Preferred Securities, the
Restricted Definitive Preferred Securities and the Rule
144A Global Preferred Securities.
"Restricted Security Legend" has the meaning
set forth in Section 9.2(j).
"Rule 144A Global Preferred Security" has the
meaning set forth in Section 7.3(a).
"Securities" means the Common Securities and
the Preferred Securities.
"Securities Act" means the Securities Act of
1933, as amended.
"Securities Custodian" means the custodian with
respect to the Rule 144A Global Preferred Security and
any other Preferred Security in global form.
"Shelf Registration Statement" has the meaning
set forth in Section 14.1.
"66-2/3% in liquidation amount of the
Securities" means, except as provided in the terms of the
Preferred Securities and by the Trust Indenture Act,
Holders of outstanding Securities voting together as a
single class or, as the context may require, Holders of
Preferred Securities or Holder(s) of outstanding Common
Securities voting separately as a class, representing at
least 66 2/3% of the aggregate stated liquidation amount
(including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and
unpaid Distributions to the date upon which the voting
percentages are determined) of all outstanding Securities
of the relevant class.
"Sponsor" means Continental Airlines, Inc., a
Delaware corporation, or any successor entity in a
merger, consolidation or amalgamation, in its capacity as
sponsor of the Trust.
"Super Majority" has the meaning set forth in
Section 2.6(a)(ii).
"Tax Event" means the Regular Trustees shall
have received an opinion of nationally recognized
independent tax counsel experienced in such matters to
the effect that, as a result of (a) any amendment to or
change (including any announced prospective change) in
the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority
thereof or therein or (b) any amendment to or change in
an interpretation or application of such laws or
regulations by any legislative body, court, governmental
agency or regulatory authority (including the enactment
of any legislation and the publication of any judicial
decision or regulatory determination on or after the date
of the Offering Memorandum), which amendment or change is
effective or which interpretation or pronouncement is
announced on or after the date of the Offering
Memorandum, there is more than an insubstantial risk that
(i) the Trust is or will be subject to United States
federal income tax with respect to income accrued or
received on the Debentures, (ii) interest payable by the
Debenture Issuer to the Trust on the Debentures is not or
will not be deductible by the Debenture Issuer in whole
or in part for United States federal income tax purposes
or (iii) the Trust is or will be subject to more than a
de minimis amount of other taxes, duties, assessments or
other governmental charges.
"10% in liquidation amount of the Securities"
means, except as provided in the terms of the Preferred
Securities or by the Trust Indenture Act, Holders of
outstanding Securities voting together as a single class
or, as the context may require, Holder(s) of outstanding
Preferred Securities or Holder(s) of outstanding Common
Securities, voting separately as a class, representing
10% of the aggregate stated liquidation amount (including
the stated amount that would be paid on redemption,
liquidation or otherwise, plus accrued and unpaid Dis-
tributions to the date upon which the voting percentages
are determined) of all outstanding Securities of the
relevant class.
"Treasury Regulations" means the income tax
regulations, including temporary and proposed
regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from
time to time (including corresponding provisions of
succeeding regulations).
"Trustee" or "Trustees" means each Person who
has signed this Declaration as a trustee, so long as such
Person shall continue in office in accordance with the
terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees
in accordance with the provisions hereof, and references
herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees
hereunder.
"Trust Indenture Act" means the Trust Indenture
Act of 1939, as amended.
"Unrestricted Definitive Preferred Security"
has the meaning set forth in Section 9.2(c).
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Declaration is subject to the
provisions of the Trust Indenture Act that are required
to be part of this Declaration, which are incorporated by
reference in and made part of this Indenture and shall,
to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only
Trustee which is a Trustee for the purposes of the Trust
Indenture Act.
(c) If and to the extent that any provision of
this Declaration limits, qualifies or conflicts with the
duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.
(d) The application of the Trust Indenture Act
to this Declaration shall not affect the nature of the
Securities as equity securities representing undivided
beneficial interests in the assets of the Trust.
SECTION 2.2 Lists of Holders of Securities.
(a) Each of the Sponsor and the Regular
Trustees on behalf of the Trust shall provide the
Property Trustee (i) within 14 days after each record
date for payment of Distributions, a list, in such form
as the Property Trustee may reasonably require, of the
names and addresses of the Holders of the Securities
("List of Holders") as of such record date, provided,
that neither the Sponsor nor the Regular Trustees on
behalf of the Trust shall be obligated to provide such
List of Holders at any time the List of Holders does not
differ from the most recent List of Holders given to the
Property Trustee by the Sponsor and the Regular Trustees
on behalf of the Trust, and (ii) at any other time,
within 30 days of receipt by the Trust of a written
request for a List of Holders as of a date no more than
14 days before such List of Holders is given to the
Property Trustee. The Property Trustee shall preserve,
in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or
which it receives in the capacity as Paying Agent (if
acting in such capacity) provided, that the Property
Trustee may destroy any List of Holders previously given
to it on receipt of a new List of Holders.
(b) The Property Trustee shall comply with its
obligations under Sections 311(a), 311(b) and 312(b) of
the Trust Indenture Act.
SECTION 2.3 Reports by the Property Trustee.
Within 60 days after May 15 of each year, the
Property Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by
Section 313 of the Trust Indenture Act, if any, in the
form and in the manner provided by Section 313 of the
Trust Indenture Act. The Property Trustee shall also
comply with the requirements of Section 313(d) of the
Trust Indenture Act.
SECTION 2.4 Periodic Reports to Property Trustee.
Each of the Sponsor and the Regular Trustees on
behalf of the Trust shall provide to the Property Trustee
such documents, reports and information (if any) and the
compliance certificate required by Section 314 of the
Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with Conditions
Precedent.
Each of the Sponsor and the Regular Trustees on
behalf of the Trust shall provide to the Property Trustee
such evidence of compliance with any conditions
precedent, if any, provided for in this Declaration that
relate to any of the matters set forth in Section 314(c)
of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to
Section 314(c)(1) of the Trust Indenture Act may be given
in the form of an Officers' Certificate.
SECTION 2.6 Event of Default; Waiver.
(a) The Holders of a Majority in liquidation
amount of Preferred Securities may, by vote, on behalf of
the Holders of all of the Preferred Securities, waive any
past Event of Default in respect of the Preferred
Securities and its consequences, provided, that if the
underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture,
the Event of Default under the Declaration also
shall not be waivable; or
(ii) requires the consent or vote of
greater than a majority in principal amount of the
holders of the Debentures (a "Super Majority") to be
waived under the Indenture, the Event of Default
under the Declaration may only be waived by the vote
of the Holders of at least the proportion in
liquidation amount of the Preferred Securities that
the relevant Super Majority represents of the aggre-
gate principal amount of the Debentures outstanding.
Upon such waiver, any such default shall cease
to exist, and any Event of Default with respect to the
Preferred Securities arising therefrom shall be deemed to
have been cured, for every purpose of this Declaration,
but no such waiver shall extend to any subsequent or
other default or Event of Default with respect to the
Preferred Securities or impair any right consequent
thereon. Any waiver by the Holders of the Preferred
Securities of an Event of Default with respect to the
Preferred Securities shall also be deemed to constitute a
waiver by the Holders of the Common Securities of any
such Event of Default with respect to the Common
Securities for all purposes of this Declaration without
any further act, vote, or consent of the Holder(s) of the
Common Securities.
(b) The Holders of a Majority in liquidation
amount of the Common Securities may, by vote, on behalf
of the Holders of all of the Common Securities, waive any
past Event of Default with respect to the Common
Securities and its consequences, provided, that if the
underlying Event of Default under the Indenture:
(i) is not waivable under the Indenture,
except where the Holders of the Common Securities
are deemed to have waived such Event of Default
under the Declaration as provided below in this
Section 2.6(b), the Event of Default under the
Declaration also shall not be waivable; or
(ii) requires the consent or vote of a
Super Majority to be waived, except where the
Holders of the Common Securities are deemed to have
waived such Event of Default under the Declaration
as provided below in this Section 2.6(b), the Event
of Default under the Declaration may only be waived
by the vote of the Holders of at least the
proportion in aggregate liquidation amount of the
Common Securities that the relevant Super Majority
represents of the aggregate principal amount of the
Debentures outstanding;
provided, further, each Holder of Common Securities shall
be deemed to have waived any such Event of Default and
all Events of Default with respect to the Common
Securities and its or their consequences until all Events
of Default with respect to the Preferred Securities have
been cured, waived or otherwise eliminated, and until
such Events of Default have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed
to be acting solely on behalf of the Holders of the
Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the
Property Trustee in accordance with the terms of the
Securities. Subject to the foregoing provisions of this
Section 2.6(b), upon such waiver, any such default shall
cease to exist and any Event of Default with respect to
the Common Securities arising therefrom shall be deemed
to have been cured for every purpose of this Declaration,
but no such waiver shall extend to any subsequent or
other default or Event of Default with respect to the
Common Securities or impair any right consequent thereon.
(c) A waiver of an Event of Default under the
Indenture by the Property Trustee at the direction of the
Holders of the Preferred Securities constitutes a waiver
of the corresponding Event of Default under this
Declaration.
SECTION 2.7 Event of Default; Notice.
(a) The Property Trustee shall, within 90 days
after the occurrence of an Event of Default, transmit by
mail, first class postage prepaid, to the Holders of the
Securities, notices of all defaults with respect to the
Securities known to the Property Trustee, unless such
defaults have been cured before the giving of such notice
(the term "defaults" for the purposes of this Section
2.7(a) being hereby defined to be an Event of Default as
defined in the Indenture, not including any periods of
grace provided for therein and irrespective of the giving
of any notice provided therein); provided, that except
for a default in the payment of principal of (or premium,
if any) or interest (including Compounded Interest,
Additional Interest and Liquidated Damages, if any (each
as defined in the Indenture)) on any of the Debentures or
in the payment of any sinking fund installment
established for the Debentures, the Property Trustee
shall be protected in withholding such notice if and so
long as the board of directors, the executive committee,
or a trust committee of directors and/or Responsible
Officers of the Property Trustee in good faith determines
that the withholding of such notice is in the interests
of the Holders of the Securities.
(b) The Property Trustee shall not be deemed
to have knowledge of any default except:
(i) a default under Sections 501(1) and
501(2) of the Indenture; or
(ii) any default as to which the Property
Trustee shall have received written notice.
ARTICLE III
ORGANIZATION
SECTION 3.1 Name.
The Trust is named "Continental Airlines
Finance Trust," as such name may be modified from time to
time by the Regular Trustees following written notice to
the Holders of Securities. The Trust's activities may be
conducted under the name of the Trust or any other name
deemed advisable by the Regular Trustees.
SECTION 3.2 Office.
The address of the principal office of the
Trust is c/o Continental Airlines, Inc., 2929 Allen
Parkway, Suite 2010, Houston, Texas 77019, Attention:
General Counsel. On ten Business Days written notice to
the Holders of Securities, the Regular Trustees may
designate another principal office.
SECTION 3.3 Purpose.
The exclusive purposes and functions of the
Trust are (a) to issue and sell Securities and use the
proceeds from such sale to acquire the Debentures, and
(b) except as otherwise provided herein, to engage in
only those other activities necessary or incidental
thereto. The Trust shall not borrow money, issue debt or
reinvest proceeds derived from investments, pledge any of
its assets, or otherwise undertake (or permit to be
undertaken) any activity that would cause the Trust not
to be classified for United States federal income tax
purposes as a grantor trust.
SECTION 3.4 Authority.
Subject to the limitations provided in this
Declaration and to the specific duties of the Property
Trustee, the Regular Trustees shall have exclusive and
complete authority to carry out the purposes of the
Trust. Any action taken by the Regular Trustees in
accordance with their powers shall constitute the act of
and serve to bind the Trust and any action taken by the
Property Trustee in accordance with its powers shall
constitute the act of and serve to bind the Trust. In
dealing with the Trustees acting on behalf of the Trust,
no person shall be required to inquire into the authority
of the Trustees to bind the Trust. Persons dealing with
the Trust are entitled to rely conclusively on the power
and authority of the Trustees as set forth in this
Declaration.
SECTION 3.5 Title to Property of the Trust.
Except as provided in Section 3.8 with respect
to the Debentures and the Property Trustee Account or as
otherwise provided in this Declaration, legal title to
all assets of the Trust shall be vested in the Trust.
The Holders shall not have legal title to any part of the
assets of the Trust, but shall have an undivided
beneficial interest in the assets of the Trust.
SECTION 3.6 Powers and Duties of the Regular Trustees.
The Regular Trustees shall have the exclusive
power, duty and authority to cause the Trust to engage in
the following activities:
(a) to issue and sell the Preferred Securities
and the Common Securities in accordance with this
Declaration; provided, however, that the Trust may issue
no more than one series of Preferred Securities and no
more than one series of Common Securities, and provided,
further, that there shall be no interests in the Trust
other than the Securities, and the issuance of Securities
shall be limited to a one-time, simultaneous issuance of
both Preferred Securities and Common Securities on the
Closing Date and one additional simultaneous issuance of
Preferred Securities and Common Securities solely to
cover overallotments in connection with the sale of the
Preferred Securities;
(b) in connection with the issue and sale of
the Preferred Securities, at the direction of the
Sponsor, to:
(i) prepare the Offering Memorandum in
preliminary and final form prepared by the Sponsor,
in relation to the offering and sale of Preferred
Securities to qualified institutional buyers in
reliance on Rule 144A under the Securities Act, to a
limited number of "accredited investors" (as defined
in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) and outside the United States to
non-U.S. persons in offshore transactions in
reliance on Regulation S under the Securities Act
and to execute and file with the Commission, at such
time as determined by the Sponsor pursuant to the
Registration Rights Agreement, a shelf registration
statement prepared by the Sponsor, including any
amendments thereto, and such other forms or filings
as may be required by the Securities Act, the
Exchange Act or the Trust Indenture Act, in each
case in relation to the Preferred Securities;
(ii) execute and file any documents pre-
pared by the Sponsor, or take any acts as determined
by the Sponsor to be necessary in order to qualify
or register all or part of the Preferred Securities
in any State or foreign jurisdiction in which the
Sponsor has determined to qualify or register such
Preferred Securities for sale;
(iii) execute and file an application,
prepared on behalf of the Sponsor, to the Private
Offerings, Resales and Trading through Automated
Linkages ("PORTAL") Market and, if and at such time
as determined by the Sponsor, to the New York Stock
Exchange or any other national stock exchange or the
Nasdaq National Market for listing or quotation of
the Preferred Securities;
(iv) execute and deliver letters or
documents, or instruments with, The Depository Trust
Company ("DTC") relating to the Preferred
Securities;
(v) execute and file with the Commission,
at such time as determined by the Sponsor, a regis-
tration statement on Form 8-A, including any amend-
ments thereto, prepared by the Sponsor relating to
the registration of the Preferred Securities under
the Exchange Act;
(vi) obtain a CUSIP number for the
Preferred Securities; and
(vii) execute and enter into the Purchase
Agreement, the Registration Rights Agreement and
other related agreements providing for the sale of
the Preferred Securities;
(c) to acquire the Debentures with the
proceeds of the sale of the Preferred Securities and the
Common Securities; provided, however, that the Regular
Trustees shall cause legal title to the Debentures to be
held of record in the name of the Property Trustee for
the benefit of the Holders of the Preferred Securities
and the Holders of Common Securities;
(d) to give the Sponsor and the Property
Trustee prompt written notice of the occurrence of a Tax
Event or an Investment Company Event; provided, that the
Regular Trustees shall consult with the Sponsor and the
Property Trustee before taking or refraining from taking
any Ministerial Action in relation to a Tax Event or an
Investment Company Event;
(e) to establish a record date with respect to
all actions to be taken hereunder that require a record
date be established, including and with respect to, for
the purposes of Section 316(c) of the Trust Indenture
Act, Distributions, voting rights, redemptions and
exchanges, and to issue relevant notices to the Holders
of Preferred Securities and Holders of Common Securities
as to such actions and applicable record dates;
(f) to take all actions and perform such
duties as may be required of the Regular Trustees
pursuant to the terms of the Securities;
(g) to bring or defend, pay, collect,
compromise, arbitrate, resort to legal action, or
otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section
3.8(e), the Property Trustee has the exclusive power to
bring such Legal Action;
(h) to employ or otherwise engage employees
and agents (who may be designated as officers with
titles) and managers, contractors, advisors, and
consultants and pay reasonable compensation for such
services;
(i) to cause the Trust to comply with the
Trust's obligations under the Trust Indenture Act;
(j) to give the certificate required by
Section 314(a)(4) of the Trust Indenture Act to the
Property Trustee, which certificate may be executed by
any Regular Trustee;
(k) to incur expenses that are necessary or
incidental to carry out any of the purposes of the Trust;
(l) to act as, or appoint another Person to
act as, registrar and transfer agent for the Securities;
(m) to give prompt written notice to the
Holders of the Securities of any notice received from the
Debenture Issuer of its election to (i) defer payments of
interest on the Debentures by extending the interest
payment period under the Indenture or (ii) extend the
scheduled maturity date on the Debentures;
(n) to execute all documents or instruments,
perform all duties and powers, and do all things for and
on behalf of the Trust in all matters necessary or
incidental to the foregoing;
(o) to take all action that may be necessary
or appropriate for the preservation and the continuation
of the Trust's valid existence, rights, franchises and
privileges as a statutory business trust under the laws
of the State of Delaware and of each other jurisdiction
in which such existence is necessary to protect the
limited liability of the Holders of the Preferred
Securities or to enable the Trust to effect the purposes
for which the Trust was created;
(p) to take any action, not inconsistent with
this Declaration or with applicable law, that the Regular
Trustees determine in their discretion to be necessary or
desirable in carrying out the activities of the Trust as
set out in this Section 3.6, including, but not limited
to:
(i) causing the Trust not to be deemed to
be an Investment Company required to be registered
under the Investment Company Act;
(ii) causing the Trust to be classified
for United States federal income tax purposes as a
grantor trust; and
(iii) cooperating with the Debenture Issuer
to ensure that the Debentures will be treated as
indebtedness of the Debenture Issuer for United
States federal income tax purposes,
provided, that such action does not adversely affect the
interests of Holders; and
(q) to take all action necessary to cause all
applicable tax returns and tax information reports that
are required to be filed with respect to the Trust to be
duly prepared and filed by the Regular Trustees, on
behalf of the Trust.
The Regular Trustees must exercise the powers
set forth in this Section 3.6 in a manner that is
consistent with the purposes and functions of the Trust
set out in Section 3.3, and the Regular Trustees shall
not take any action that is inconsistent with the
purposes and functions of the Trust set forth in Section
3.3.
Subject to this Section 3.6, the Regular
Trustees shall have none of the powers or the authority
of the Property Trustee set forth in Section 3.8.
SECTION 3.7 Prohibition of Actions by the Trust and
the Trustees.
(a) The Trust shall not, and the Trustees
(including the Property Trustee) shall not, engage in any
activity other than as required or authorized by this
Declaration. In particular, the Trust shall not and the
Trustees (including the Property Trustee) shall cause the
Trust not to:
(i) invest any proceeds received by the
Trust from holding the Debentures, but shall
distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration
and of the Securities;
(ii) acquire any assets other than as
expressly provided herein;
(iii) possess Trust property for other
than a Trust purpose;
(iv) make any loans or incur any
indebtedness other than loans represented by the
Debentures;
(v) possess any power or otherwise act in
such a way as to vary the Trust assets or the terms
of the Securities in any way whatsoever, including
the power to convert the Debentures;
(vi) issue any securities or other
evidences of beneficial ownership of, or beneficial
interest in, the Trust other than the Securities; or
(vii) (A) direct the time, method and place
of exercising any trust or power conferred upon the
Debenture Trustee with respect to the Debentures,
(B) waive any past default that is waivable under
Section 513 of the Indenture, (C) exercise any right
to rescind or annul any declaration that the
principal of all the Debentures shall be due and
payable, or (D) consent to any amendment,
modification or termination of the Indenture or the
Debentures where such consent shall be required
unless the Trust shall have received an opinion of
counsel to the effect that such modification will
not cause more than an insubstantial risk that
(x) the Trust will be deemed an Investment Company
required to be registered under the Investment
Company Act, or (y) for United States federal income
tax purposes the Trust will not be classified as a
grantor trust or partnership.
SECTION 3.8 Powers and Duties of the Property Trustee.
(a) The legal title to the Debentures shall be
owned by and held of record in the name of the Property
Trustee in trust for the benefit of the Holders of the
Securities. The right, title and interest of the
Property Trustee to the Debentures shall vest
automatically in each Person who may hereafter be
appointed as Property Trustee in accordance with Section
5.6. Such vesting and cessation of title shall be
effective whether or not conveyancing documents with
regard to the Debentures have been executed and
delivered.
(b) The Property Trustee shall not transfer
its right, title and interest in the Debentures to the
Regular Trustees or to the Delaware Trustee (if the
Property Trustee does not also act as Delaware Trustee).
(c) The Property Trustee shall:
(i) establish and maintain a segregated
non-interest bearing trust account (the "Property
Trustee Account") in the name of and under the
exclusive control of the Property Trustee on behalf
of the Holders of the Securities and, upon the
receipt of payments of funds made in respect of the
Debentures held by the Property Trustee, deposit
such funds into the Property Trustee Account and
make payments to the Holders of the Preferred
Securities and Holders of the Common Securities from
the Property Trustee Account in accordance with
Section 6.1. Funds in the Property Trustee Account
shall be held uninvested until disbursed in
accordance with this Declaration;
(ii) engage in such ministerial activities
as so directed and as shall be necessary or
appropriate to effect the redemption of the
Preferred Securities and the Common Securities to
the extent the Debentures are redeemed or
mature; and
(iii) upon notice of distribution issued by
the Regular Trustees in accordance with the terms of
the Securities, engage in such ministerial
activities as so directed as shall be necessary or
appropriate to effect the distribution of the
Debentures to Holders of Securities upon the
occurrence of an Investment Company Event or a Tax
Event arising from a change in law or a change in
legal interpretation or other specified
circumstances pursuant to the terms of the
Securities.
(d) The Property Trustee shall take all
actions and perform such duties as may be specifically
required of the Property Trustee pursuant to the terms of
the Securities.
(e) The Property Trustee shall take any Legal
Action which arises out of or in connection with an Event
of Default or the Property Trustee's duties and
obligations under this Declaration or the Trust Indenture
Act.
(f) The Property Trustee shall not resign as a
Trustee unless either:
(i) the Trust has been completely
liquidated and the proceeds of the liquidation
distributed to the Holders of Securities pursuant to
the terms of the Securities; or
(ii) a Successor Property Trustee has been
appointed and has accepted that appointment in
accordance with Section 5.6.
(g) The Property Trustee shall have the legal
power to exercise all of the rights, powers and
privileges of a holder of Debentures under the Indenture
and, if an Event of Default occurs and is continuing, the
Property Trustee shall, for the benefit of Holders of the
Securities, enforce its rights as holder of the
Debentures subject to the rights of the Holders pursuant
to the terms of such Securities. In no event, however,
shall the Property Trustee, in its capacity as holder of
the Debentures, have the power to convert the Debentures.
(h) The Property Trustee will act as
Registrar, Paying Agent and Conversion Agent in Delaware
to pay Distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all
Securities and any such Paying Agent shall comply with
Section 317(b) of the Trust Indenture Act. Any Paying
Agent may be removed by the Property Trustee at any time
and a successor Paying Agent or additional Paying Agents
may be appointed at any time by the Property Trustee.
(i) Subject to this Section 3.8, the Property
Trustee shall have none of the duties, liabilities,
powers or the authority of the Regular Trustees set forth
in Section 3.6.
The Property Trustee must exercise the powers
set forth in this Section 3.8 in a manner that is
consistent with the purposes and functions of the Trust
set out in Section 3.3, and the Property Trustee shall
not take any action that is inconsistent with the
purposes and functions of the Trust set out in Section
3.3.
SECTION 3.9 Certain Duties and Responsibilities of the
Property Trustee.
(a) The Property Trustee, before the
occurrence of any Event of Default and after the curing
of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants
shall be read into this Declaration against the Property
Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.6),
the Property Trustee shall exercise such of the rights
and powers vested in it by this Declaration, and use the
same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circum-
stances in the conduct of his or her own affairs.
(b) No provision of this Declaration shall be
construed to relieve the Property Trustee from liability
for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(i) prior to the occurrence of an Event
of Default and after the curing or waiving of all
such Events of Default that may have occurred:
(A) the duties and obligations of
the Property Trustee shall be determined
solely by the express provisions of this
Declaration and the Property Trustee shall
not be liable except for the performance
of such duties and obligations as are
specifically set forth in this
Declaration, and no implied covenants or
obligations shall be read into this
Declaration against the Property Trustee;
and
(B) in the absence of bad faith on
the part of the Property Trustee, the
Property Trustee may conclusively rely, as
to the truth of the statements and the
correctness of the opinions expressed
therein, upon any certificates or opinions
furnished to the Property Trustee and
conforming to the requirements of this
Declaration; but in the case of any such
certificates or opinions that by any
provision hereof are specifically required
to be furnished to the Property Trustee,
the Property Trustee shall be under a duty
to examine the same to determine whether
or not they conform to the requirements of
this Declaration;
(ii) the Property Trustee shall not be
liable for any error of judgment made in good faith
by a Responsible Officer of the Property Trustee,
unless it shall be proved that the Property Trustee
was negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be
liable with respect to any action taken or omitted
to be taken by it in good faith in accordance with
the direction of the Holders of not less than a
Majority in liquidation amount of the Securities
relating to the time, method and place of conducting
any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this
Declaration;
(iv) no provision of this Declaration
shall require the Property Trustee to expend or risk
its own funds or otherwise incur personal financial
liability in the performance of any of its duties or
in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that
the repayment of such funds or liability is not
reasonably assured to it under the terms of this
Declaration or adequate indemnity against such risk
or liability is not reasonably assured to it;
(v) the Property Trustee's sole duty with
respect to the custody, safe keeping and physical
preservation of the Debentures and the Property
Trustee Account shall be to deal with such property
in a similar manner as the Property Trustee deals
with similar property for its own account, subject
to the protections and limitations on liability
afforded to the Property Trustee under this
Declaration and the Trust Indenture Act;
(vi) the Property Trustee shall have no
duty or liability for or with respect to the value,
genuineness, existence or sufficiency of the
Debentures or the payment of any taxes or
assessments levied thereon or in connection
therewith;
(vii) the Property Trustee shall not be
liable for any interest on any money received by it
except as it may otherwise agree with the Sponsor.
Money held by the Property Trustee need not be
segregated from other funds held by it except in
relation to the Property Trustee Account maintained
by the Property Trustee pursuant to Section
3.8(c)(i) and except to the extent otherwise
required by law; and
(viii) the Property Trustee shall not be
responsible for monitoring the compliance by the
Regular Trustees or the Sponsor with their
respective duties under this Declaration, nor shall
the Property Trustee be liable for the default or
misconduct of the Regular Trustees or the Sponsor.
SECTION 3.10 Certain Rights of Property Trustee.
(a) Subject to the provisions of Section 3.9:
(i) the Property Trustee may rely and
shall be fully protected in acting or refraining
from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper
or document believed by it to be genuine and to have
been signed, sent or presented by the proper party
or parties;
(ii) any direction or act of the Sponsor
or the Regular Trustees contemplated by this
Declaration shall be sufficiently evidenced by an
Officers' Certificate;
(iii) whenever in the administration of
this Declaration, the Property Trustee shall deem it
desirable that a matter be proved or established
before taking, suffering or omitting any action
hereunder, the Property Trustee (unless other
evidence is herein specifically prescribed) may, in
the absence of bad faith on its part, request and
rely upon an Officers' Certificate which, upon
receipt of such request, shall be promptly delivered
by the Sponsor or the Regular Trustees;
(iv) the Property Trustee shall have no
duty to see to any recording, filing or registration
of any instrument (including any financing or
continuation statement or any filing under tax or
securities laws) or any rerecording, refiling or
registration thereof;
(v) the Property Trustee may consult with
counsel or other experts and the advice or opinion
of such counsel and experts with respect to legal
matters or advice within the scope of such experts'
area of expertise shall be full and complete
authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in
good faith and in accordance with such advice or
opinion, and such counsel may be counsel to the
Sponsor or any of its Affiliates, and may include
any of its employees. The Property Trustee shall
have the right at any time to seek instructions
concerning the administration of this Declaration
from any court of competent jurisdiction;
(vi) the Property Trustee shall be under
no obligation to exercise any of the rights or
powers vested in it by this Declaration at the
request or direction of any Holder, unless such
Holder shall have provided to the Property Trustee
adequate security and indemnity, which would satisfy
a reasonable person in the position of the Property
Trustee, against the costs, expenses (including
attorneys' fees and expenses) and liabilities that
might be incurred by it in complying with such
request or direction, including such reasonable
advances as may be requested by the Property
Trustee, provided, that nothing contained in this
Section 3.10(a)(vi) shall be taken to relieve the
Property Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights
and powers vested in it by this Declaration;
(vii) the Property Trustee shall not be
bound to make any investigation into the facts or
matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice,
request, direction, consent, order, security, bond,
debenture, note, other evidence of indebtedness or
other paper or document, but the Property Trustee,
in its discretion, may make such further inquiry or
investigation into such facts or matters as it may
see fit;
(viii) the Property Trustee may execute any
of the trusts or powers hereunder or perform any
duties hereunder either directly or by or through
agents or attorneys and the Property Trustee shall
not be responsible for any misconduct or negligence
on the part of any agent or attorney appointed with
due care by it hereunder;
(ix) any action taken by the Property
Trustee or its agents hereunder shall bind the Trust
and the Holders of the Securities, and the signature
of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action
and no third party shall be required to inquire as
to the authority of the Property Trustee to so act
or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall
be conclusively evidenced by the Property Trustee's
or its agent's taking such action;
(x) whenever in the administration of
this Declaration the Property Trustee shall deem it
desirable to receive instructions with respect to
enforcing any remedy or right or taking any other
action hereunder the Property Trustee (i) may
request instructions from the Holders of the
Securities which instructions may only be given by
the Holders of the same proportion in liquidation
amount of the Securities as would be entitled to
direct the Property Trustee under the terms of the
Securities in respect of such remedy, right or
action, (ii) may refrain from enforcing such remedy
or right or taking such other action until such
instructions are received, and (iii) shall be
protected in acting in accordance with such
instructions; and
(xi) except as otherwise expressly
provided by this Declaration, the Property Trustee
shall not be under any obligation to take any action
that is discretionary under the provisions of this
Declaration.
(b) No provision of this Declaration shall be
deemed to impose any duty or obligation on the Property
Trustee to perform any act or acts or exercise any right,
power, duty or obligation conferred or imposed on it, in
any jurisdiction in which it shall be illegal, or in
which the Property Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform
any such act or acts, or to exercise any such right,
power, duty or obligation. No permissive power or
authority available to the Property Trustee shall be
construed to be a duty.
SECTION 3.11 Delaware Trustee.
Notwithstanding any provision of this
Declaration other than Section 5.2, the Delaware Trustee
shall not be entitled to exercise any powers, nor shall
the Delaware Trustee have any of the duties and
responsibilities of the Regular Trustees or the Property
Trustee described in this Declaration. Except as set
forth in Section 5.2, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling
the requirements of Section 3807 of the Business Trust
Act.
SECTION 3.12 Execution of Documents.
Unless otherwise determined by the Regular
Trustees, and except as otherwise required by the
Business Trust Act, any Regular Trustee is authorized to
execute on behalf of the Trust any documents that the
Regular Trustees have the power and authority to execute
pursuant to Section 3.6; provided, that the registration
statement referred to in Section 3.6(b)(i), including any
amendments thereto, shall be signed by a majority of the
Regular Trustees.
SECTION 3.13 Not Responsible for Recitals or Issuance
of Securities.
The recitals contained in this Declaration and
the Securities shall be taken as the statements of the
Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make
no representations as to the value or condition of the
property of the Trust or any part thereof. The Trustees
make no representations as to the validity or sufficiency
of this Declaration or the Securities.
SECTION 3.14 Duration of Trust.
The Trust, unless terminated pursuant to the
provisions of Article VIII hereof, shall exist until
December 1, 2030.
SECTION 3.15 Mergers.
(a) The Trust may not consolidate, amalgamate,
merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets substantially
as an entirety to any corporation or other entity or
person, except as described in Section 3.15(b) and (c).
(b) The Trust may, without the consent of the
Holders of the Preferred Securities, the Delaware Trustee
or the Property Trustee, consolidate, amalgamate, merge
with or into, or be replaced by a trust organized as such
under the laws of any State or the District of Columbia;
provided, that:
(i) if the Trust is not the surviving
entity, the successor entity (the "Successor
Entity") either:
(A) expressly assumes all of the
obligations of the Trust under the
Securities; or
(B) substitutes for the Preferred
Securities other securities having
substantially the same terms as the Pre-
ferred Securities (the "Successor
Securities") as long as the Successor
Securities rank, with respect to
participation in the profits and
distributions or in the assets of the
Successor Entity, at least as high as the
Preferred Securities rank with respect to
participation in the profits and dividends
or in the assets of the Trust;
(ii) the Debenture Issuer expressly ac-
knowledges a trustee of such Successor Entity that
possesses the same powers and duties as the Property
Trustee as the Holder of the Debentures;
(iii) the Preferred Securities or any Suc-
cessor Securities are listed, or any Successor
Securities will be listed upon notification of issu-
ance, on any national securities exchange or with
any other organization on which the Preferred
Securities are then listed or quoted;
(iv) such merger, consolidation, amalgam-
ation or replacement does not cause the Preferred
Securities (including any Successor Securities) to
be downgraded by any nationally recognized statis-
tical rating organization;
(v) such merger, consolidation, amalgam-
ation or replacement does not adversely affect the
rights, preferences and privileges of the Holders of
the Preferred Securities (including any Successor
Securities) in any material respect (other than with
respect to any dilution of such Holders' interest in
the Successor Entity);
(vi) such Successor Entity has a purpose
substantially identical to that of the Trust;
(vii) prior to such merger, consolidation,
amalgamation or replacement, the Sponsor has
received an opinion of a nationally recognized
independent counsel (reasonably acceptable to the
Trustees) to the Trust experienced in such matters
to the effect that:
(A) the Successor Entity will be
treated as a grantor trust for United States
federal income tax purposes;
(B) following such merger, con-
solidation, amalgamation or replacement,
neither the Sponsor nor the Successor Entity
will be required to register as an Investment
Company; and
(C) such merger, consolidation,
amalgamation or replacement will not adversely
affect the limited liability of the Holders of
the Securities (including any Successor Securi-
ties); and
(viii) the Sponsor provides a guarantee to
the Holders of the Successor Securities with respect
to the Successor Entity having substantially the
same terms as the Preferred Securities Guarantee.
(c) Notwithstanding Section 3.15(b), the Trust
shall not, except with the consent of Holders of 100% in
liquidation amount of the Common Securities, consolidate,
amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if such
consolidation, amalgamation, merger or replacement would
cause the Trust or Successor Entity to be classified as
other than a grantor trust for United States federal
income tax purposes.
ARTICLE IV
SPONSOR
SECTION 4.1 Sponsor's Purchase of Common Securities.
On each Closing Date the Sponsor will purchase
all the Common Securities issued by the Trust, in an
aggregate liquidation amount equal to approximately 3% of
the total capital of the Trust, at the same time as the
Preferred Securities are sold.
SECTION 4.2 Responsibilities of the Sponsor.
In connection with the issue and sale of the
Preferred Securities, the Sponsor shall have the exclu-
sive right and responsibility to engage in the following
activities:
(a) to prepare the Offering Memorandum in
preliminary and final form and to prepare for filing by
the Trust with the Commission a shelf registration state-
ment, including any amendments thereto and such other
forms or filings as may be required by the Securities
Act, the Exchange Act and the Trust Indenture Act;
(b) to determine the States and foreign juris-
dictions in which to take appropriate action to qualify
or register for sale all or part of the Preferred
Securities and to do any and all such acts, other than
actions which must be taken by the Trust, and advise the
Trust of actions it must take, and prepare for execution
and filing any documents to be executed and filed by the
Trust, as the Sponsor deems necessary or advisable in
order to comply with the applicable laws of any such
States and foreign jurisdictions;
(c) to prepare or cause to be prepared for
filing by the Trust an application to PORTAL and to the
New York Stock Exchange or any other national stock
exchange or the Nasdaq National Market for listing or
quotation of the Preferred Securities;
(d) to prepare letters or documents to, or
instruments for filing with, DTC relating to the
Preferred Securities;
(e) to prepare for filing by the Trust with
the Commission a registration statement on Form 8-A
relating to the registration of the Preferred Securities
under the Exchange Act, including any amendments thereto;
and
(f) to negotiate the terms of the Purchase
Agreement, the Registration Rights Agreement and other
related agreements providing for the sale of the Pre-
ferred Securities.
ARTICLE V
TRUSTEES
SECTION 5.1 Number of Trustees.
The number of Trustees shall initially be three
(3), and:
(a) at any time before the issuance of any Se-
curities, the Sponsor may, by written instrument,
increase or decrease the number of Trustees; and
(b) after the issuance of any Securities:
the number of Trustees may be increased or de-
creased by vote of the Holders of a Majority in liquida-
tion amount of the Common Securities voting as a class at
a meeting of the Holders of the Common Securities,
provided, that if the Property Trustee does not also act
as Delaware Trustee, the number of Trustees shall be at
least five (5).
SECTION 5.2 Delaware Trustee.
If required by the Business Trust Act, one
Trustee (the "Delaware Trustee") shall be an entity which
has its principal place of business in the State of
Delaware, and otherwise meets the requirements of
applicable law, provided, that if the Property Trustee
has its principal place of business in the State of
Delaware and otherwise meets the requirements of
applicable law, then the Property Trustee shall also be
the Delaware Trustee and Section 3.11 shall have no
application.
SECTION 5.3 Property Trustee; Eligibility.
(a) There shall at all times be one Trustee
which shall act as Property Trustee which shall:
(i) not be an Affiliate of the Sponsor;
and
(ii) be a corporation organized and doing
business under the laws of the United States of
America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person
permitted by the Commission to act as an
institutional trustee under the Trust Indenture Act,
authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus
of at least 50 million U.S. dollars ($50,000,000),
and subject to supervision or examination by
Federal, State, Territorial or District of Columbia
authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to
the requirements of the supervising or examining
authority referred to above, then for the purposes
of this Section 5.3(a)(ii), the combined capital and
surplus of such corporation shall be deemed to be
its combined capital and surplus as set forth in its
most recent report of condition so published.
(b) If at any time the Property Trustee shall
cease to be eligible to so act under Section 5.3(a), the
Property Trustee shall immediately resign in the manner
and with the effect set forth in Section 5.6(c).
(c) If the Property Trustee has or shall
acquire any "conflicting interest" within the meaning of
Section 310(b) of the Trust Indenture Act, the Property
Trustee and the Holder of the Common Securities (as if it
were the obligor referred to in Section 310(b) of the
Trust Indenture Act) shall in all respects comply with
the provisions of Section 310(b) of the Trust Indenture
Act.
(d) The Preferred Securities Guarantee shall
be deemed to be specifically described in this
Declaration for purposes of clause (i) of the first
provision contained in Section 310(b) of the Trust
Indenture Act.
SECTION 5.4 Qualifications of Regular Trustees and
Delaware Trustee Generally.
Each Regular Trustee and the Delaware Trustee
(unless the Property Trustee also acts as Delaware Trust-
ee) shall be either a natural person who is at least 21
years of age or a legal entity that shall act through one
or more Authorized Officers.
SECTION 5.5 Initial Trustees.
The initial Regular Trustees shall be:
Lawrence W. Kellner
c/o Continental Airlines, Inc.
2929 Allen Parkway
Suite 2010
Houston, Texas 77019
and
Jeffery A. Smisek
c/o Continental Airlines, Inc.
2929 Allen Parkway
Suite 2010
Houston, Texas 77019
The initial Delaware Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
The initial Property Trustee shall be:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
SECTION 5.6 Appointment, Removal and Resignation of
Trustees.
(a) Subject to Section 5.6(b), Trustees may be
appointed or removed without cause at any time:
(i) until the issuance of any Securities,
by written instrument executed by the Sponsor; and
(ii) after the issuance of any Securities,
by vote of the Holders of a Majority in liquidation
amount of the Common Securities voting as a class at
a meeting of the Holders of the Common Securities.
(b) The Trustee that acts as Property Trustee
shall not be removed in accordance with Section 5.6(a)
until a Successor Property Trustee has been appointed and
has accepted such appointment by written instrument exe-
cuted by such Successor Property Trustee and delivered to
the Regular Trustees and the Sponsor; and
(c) The Trustee that acts as Delaware Trustee
shall not be removed in accordance with this Section
5.6(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Sections
5.2 and 5.4 (a "Successor Delaware Trustee") has been ap-
pointed and has accepted such appointment by written
instrument executed by such Successor Delaware Trustee
and delivered to the Regular Trustees and the Sponsor.
(d) A Trustee appointed to office shall hold
office until his successor shall have been appointed or
until his death, removal or resignation. Any Trustee may
resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the
Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon
such later date as is specified therein; provided, how-
ever, that:
(i) No such resignation of the Trustee
that acts as the Property Trustee shall be
effective:
(A) until a Successor Property Trustee
has been appointed and has accepted such
appointment by instrument executed by such
Successor Property Trustee and delivered
to the Trust, the Sponsor and the
resigning Property Trustee; or
(B) until the assets of the Trust have
been completely liquidated and the pro-
ceeds thereof distributed to the holders
of the Securities;
(ii) no such resignation of the Trustee
that acts as the Delaware Trustee shall be effective
until a Successor Delaware Trustee has been ap-
pointed and has accepted such appointment by
instrument executed by such Successor Delaware
Trustee and delivered to the Trust, the Sponsor and
the resigning Delaware Trustee.
(e) The Holder(s) of the Common Securities
shall use its or their best efforts to promptly appoint a
Successor Property Trustee or Successor Delaware Trustee,
as the case may be, if the Property Trustee or the
Delaware Trustee delivers an instrument of resignation in
accordance with this Section 5.6.
(f) If no Successor Property Trustee or
Successor Delaware Trustee shall have been appointed and
accepted such appointment as provided in this Section 5.6
within 60 days after delivery to the Sponsor and the
Trust of an instrument of resignation, the resigning
Property Trustee or Delaware Trustee, as applicable, may
petition any court of competent jurisdiction for
appointment of a Successor Property Trustee or Successor
Delaware Trustee. Such court may thereupon, after
prescribing such notice, if any, as it may deem proper,
appoint a Successor Property Trustee or Successor
Delaware Trustee, as the case may be.
(g) No Property Trustee or Delaware Trustee
shall be liable for the acts or omissions to act of any
Successor Property Trustee or Successor Delaware Trustee.
SECTION 5.7 Vacancies Among Trustees.
If a Trustee ceases to hold office for any
reason and the number of Trustees is not reduced pursuant
to Section 5.1, or if the number of Trustees is increased
pursuant to Section 5.1, a vacancy shall occur. A reso-
lution certifying the existence of such vacancy by a ma-
jority of the Regular Trustees shall be conclusive evi-
dence of the existence of such vacancy. The vacancy
shall be filled with a Trustee appointed in accordance
with Section 5.6.
SECTION 5.8 Effect of Vacancies.
The death, resignation, retirement, removal,
bankruptcy, dissolution, liquidation, incompetence or
incapacity to perform the duties of a Trustee shall not
operate to annul the Trust. Whenever a vacancy in the
number of Regular Trustees shall occur, until such
vacancy is filled by the appointment of a Regular Trustee
in accordance with Section 5.6, the Regular Trustees in
office, regardless of their number, shall have all the
powers granted to the Regular Trustees and shall dis-
charge all the duties imposed upon the Regular Trustees
by this Declaration.
SECTION 5.9 Meetings.
Meetings of the Regular Trustees shall be held
from time to time upon the call of any Regular Trustee.
Regular meetings of the Regular Trustees may be held at a
time and place fixed by resolution of the Regular Trust-
ees. Notice of any in-person meetings of the Regular
Trustees shall be hand delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by
overnight courier) not less than 48 hours before such
meeting. Notice of any telephonic meetings of the Regul-
ar Trustees or any committee thereof shall be hand deliv-
ered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not
less than 24 hours before a meeting. Notices shall con-
tain a brief statement of the time, place and anticipated
purposes of the meeting. The presence (whether in person
or by telephone) of a Regular Trustee at a meeting shall
constitute a waiver of notice of such meeting except
where a Regular Trustee attends a meeting for the express
purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully
called or convened. Unless provided otherwise in this
Declaration, any action of the Regular Trustees may be
taken at a meeting by vote of a majority of the Regular
Trustees present (whether in person or by telephone) and
eligible to vote with respect to such matter, provided
that a Quorum is present, or without a meeting by the
unanimous written consent of the Regular Trustees.
SECTION 5.10 Delegation of Power.
(a) Any Regular Trustee may, by power of
attorney consistent with applicable law, delegate to any
other natural person over the age of 21 his or her power
for the purpose of executing any documents contemplated
in Section 3.6, including any registration statement or
amendments thereto filed with the Commission, or making
any other governmental filing; and
(b) the Regular Trustees shall have power to
delegate from time to time to such of their number or to
officers of the Trust the doing of such things and the
execution of such instruments either in the name of the
Trust or the names of the Regular Trustees or otherwise
as the Regular Trustees may deem expedient, to the extent
such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth
herein.
ARTICLE VI
DISTRIBUTIONS
SECTION 6.1 Distributions.
Holders shall receive Distributions (as defined
herein) in accordance with the applicable terms of the
relevant Holder's Securities. Distributions shall be
made on the Preferred Securities and the Common Securi-
ties in accordance with the preferences set forth in
their respective terms. If and to the extent that the
Debenture Issuer makes a payment of interest (including
Compounded Interest, Liquidated Damages and Additional
Interest (each as defined in the Indenture)), principal
or premium, if any, on the Debentures held by the
Property Trustee (the amount of any such payment being a
"Payment Amount"), the Property Trustee shall and is
directed, to the extent funds are available for that pur-
pose, to make a distribution (a "Distribution") of the
Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 7.1 General Provisions Regarding Securities.
(a) The Regular Trustees shall on behalf of
the Trust issue one class of convertible preferred
securities, representing undivided beneficial interests
in the assets of the Trust (the "Preferred Securities"),
having such terms (the "Terms") as are set forth in
Annex I hereto and one class of convertible common
securities, representing undivided beneficial interests
in the assets of the Trust (the "Common Securities"),
having such terms as are set forth in Annex I hereto.
The Trust shall have no securities or other interests in
the assets of the Trust other than the Preferred Securi-
ties and the Common Securities. The Trust shall issue no
Securities in bearer form.
(b) The consideration received by the Trust
for the issuance of the Securities shall constitute a
contribution to the capital of the Trust and shall not
constitute a loan to the Trust.
(c) Upon issuance of the Securities as provid-
ed in this Declaration, the Securities so issued shall be
deemed to be validly issued, fully paid and non-
assessable, subject to Section 10.1 with respect to the
Common Securities.
(d) Every Person, by virtue of having become a
Holder or a Preferred Security Beneficial Owner in
accordance with the terms of this Declaration, shall be
deemed to have expressly assented and agreed to the terms
of, and shall be bound by, this Declaration.
(e) The Securities shall have no preemptive
rights.
SECTION 7.2 Execution and Authentication.
(a) The Securities shall be signed on behalf
of the Trust by one Regular Trustee. In case any Regular
Trustee of the Trust who shall have signed any of the
Securities shall cease to be such Regular Trustee before
the Securities so signed shall be delivered by the Trust,
such Securities nevertheless may be delivered as though
the person who signed such Securities had not ceased to
be such Regular Trustee; and any Securities may be signed
on behalf of the Trust by such persons who, at the actual
date of execution of such Securities, shall be the
Regular Trustees of the Trust, although at the date of
the execution and delivery of the Declaration any such
person was not such a Regular Trustee.
(b) One Regular Trustee shall sign the Pre-
ferred Securities for the Trust by manual or facsimile
signature. Unless otherwise determined by the Trust,
such signature shall, in the case of Common Securities,
be a manual signature.
A Preferred Security shall not be valid until
authenticated by the manual signature of an authorized
officer of the Property Trustee. Such signature shall be
conclusive evidence that the Preferred Security has been
authenticated under this Declaration.
Upon a written order of the Trust signed by one
Regular Trustee, the Property Trustee shall authenticate
the Preferred Securities for original issue as set forth
in paragraph 5 of the Securities. The aggregate number
of Preferred Securities outstanding at any time shall not
exceed the number set forth in the Terms in Annex I
hereto except as provided in Section 7.7.
The Property Trustee may appoint an
authenticating agent acceptable to the Trust to
authenticate Preferred Securities. An authenticating
agent may authenticate Preferred Securities whenever the
Property Trustee may do so. Each reference in this
Declaration to authentication by the Property Trustee
includes authentication by such agent. Any au-
thenticating agent has the same rights as the Property
Trustee to deal with the Sponsor or an Affiliate of the
Sponsor.
SECTION 7.3 Form and Dating.
The Preferred Securities and the Property
Trustee's certificate of authentication shall be
substantially in the forms of Exhibits A-1 and A-2 and
the Common Securities shall be substantially in the form
of Exhibit A-3, each of which is hereby incorporated in
and expressly made a part of this Declaration. Certifi-
cates may be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable
to the Regular Trustees, as conclusively evidenced by
their execution thereof. The Securities may have
letters, numbers, notations or other marks of
identification or designation and such legends or en-
dorsements required by law, stock exchange rule, agree-
ments to which the Trust is subject, if any, or usage
(provided that any such notation, legend or endorsement
is in a form acceptable to the Trust). The Trust at the
direction of the Sponsor shall furnish any such legend
not contained in Exhibit A-1 or Exhibit A-2 to the
Property Trustee in writing. Each Preferred Security
shall be dated the date of its authentication. The terms
and provisions of the Securities set forth in Annex I and
the forms of Securities set forth in Exhibits A-1, A-2
and A-3 are part of the terms of this Declaration and to
the extent applicable, the Property Trustee and the
Sponsor, by their execution and delivery of this
Declaration, expressly agree to such terms and provisions
and to be bound thereby.
(a) Global Securities. The Preferred Securi-
ties are being offered and sold by the Trust pursuant to
a Purchase Agreement relating to the Preferred Securi-
ties, dated November 28, 1995, among the Trust, the
Sponsor and the Initial Purchasers named therein (the
"Purchase Agreement").
Securities offered and sold to Qualified Insti-
tutional Buyers ("QIBs") in reliance on Rule 144A under
the Securities Act ("Rule 144A") as provided in the
Purchase Agreement, shall be issued in the form of one or
more, permanent global Securities in definitive, fully
registered form without distribution coupons with the
appropriate global legends and Restricted Securities
Legend set forth in Exhibit A-1 hereto (each, a "Rule
144A Global Preferred Security"), which shall be deposit-
ed on behalf of the purchasers of the Preferred
Securities represented thereby with the Property Trustee,
at its Wilmington, Delaware office, as custodian for the
Depositary, and registered in the name of the Depositary
or a nominee of the Depositary, duly executed by the
Trust and authenticated by the Property Trustee as here-
inafter provided. The number of Preferred Securities
represented by the Rule 144A Global Preferred Security
may from time to time be increased or decreased by ad-
justments made on the records of the Property Trustee and
the Depositary or its nominee as hereinafter provided.
(b) Book-Entry Provisions. This Section
7.3(b) shall apply only to the Rule 144A Global Preferred
Securities and such other Preferred Securities in global
form as may be authorized by the Trust to be deposited
with or on behalf of the Depositary.
The Trust shall execute and the Property
Trustee shall, in accordance with this Section 7.3,
authenticate and deliver initially one or more Rule 144A
Global Preferred Securities that (a) shall be registered
in the name of Cede & Co. or other nominee of such
Depositary and (b) shall be delivered by the Property
Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Property Trustee
as custodian for the Depositary.
Members of, or participants in, the Depositary
("Participants") shall have no rights under this Decla-
ration with respect to any Rule 144A Global Preferred
Security held on their behalf by the Depositary or by the
Property Trustee as the custodian of the Depositary or
under such Rule 144A Global Preferred Security, and the
Depositary may be treated by the Trust, the Property
Trustee and any agent of the Trust or the Property
Trustee as the absolute owner of such Rule 144A Global
Preferred Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall
prevent the Trust, the Property Trustee or any agent of
the Trust or the Property Trustee from giving effect to
any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the
Depositary and its Participants, the operation of cus-
tomary practices of such Depositary governing the exer-
cise of the rights of a holder of a beneficial interest
in any Rule 144A Global Preferred Security.
(c) Certificated Securities. Except as pro-
vided in Section 7.10, owners of beneficial interests in
the Rule 144A Global Preferred Security will not be
entitled to receive physical delivery of certificated
Preferred Securities. Preferred Securities offered and
sold in reliance on Regulation S under the Securities Act
("Regulation S"), as provided in the Purchase Agreement,
shall be issued initially in the form of individual
certificates in definitive, fully registered form without
distribution coupons and shall bear the Restricted
Securities Legend set forth in Exhibit A-1 hereto (the
"Regulation S Definitive Preferred Securities").
Purchasers of Securities who are institutional
"accredited investors" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act) and did not
purchase Preferred Securities in reliance on Regulation S
under the Securities Act will receive Preferred Securi-
ties in the form of individual certificates in defini-
tive, fully registered form without distribution coupons
and with the Restricted Securities Legend set forth in
Exhibit A-1 hereto ("Restricted Definitive Preferred
Securities"); provided, however, that upon transfer of
such Restricted Definitive Preferred Securities to a QIB,
such Restricted Definitive Preferred Securities will,
unless the Rule 144A Global Preferred Security has
previously been exchanged, be exchanged for an interest
in a Rule 144A Global Security pursuant to the provisions
set forth in Section 9.2. Restricted Definitive
Preferred Securities will bear the Restricted Securities
Legend set forth in Exhibit A-1 hereto unless removed in
accordance with this Section 7.3 or Section 9.2.
SECTION 7.4 Registrar, Paying Agent and Conversion
Agent.
The Trust shall maintain in Wilmington,
Delaware, (i) an office or agency where Securities may be
presented for registration of transfer or exchange
("Registrar"), (ii) an office or agency where Securities
may be presented for payment ("Paying Agent") and
(iii) an office or agency where Securities may be
presented for conversion ("Conversion Agent"). The
Registrar shall keep a register of the Securities and of
their transfer and exchange. The Trust may appoint the
Registrar, the Paying Agent and the Conversion Agent and
may appoint one or more co-registrars, one or more
additional paying agents and one or more additional
conversion agents in such other locations as it shall
determine. The term "Paying Agent" includes any
additional paying agent and the term "Conversion Agent"
includes any additional conversion agent. The Trust may
change any Paying Agent, Registrar, co-registrar or
Conversion Agent without prior notice to any Holder. The
Trust shall notify the Property Trustee of the name and
address of any Agent not a party to this Declaration. If
the Trust fails to appoint or maintain another entity as
Registrar, Paying Agent or Conversion Agent, the Property
Trustee shall act as such for the Preferred Securities.
The Trust or any of its Affiliates may act as Paying
Agent, Registrar, or Conversion Agent. The Trust shall
act as Paying Agent, Registrar, co-registrar, and
Conversion Agent for the Common Securities.
The Trust initially appoints the Property
Trustee as Registrar, Paying Agent, and Conversion Agent
for the Preferred Securities.
SECTION 7.5 Paying Agent to Hold Money in Trust.
The Trust shall require each Paying Agent other
than the Property Trustee to agree in writing that the
Paying Agent will hold in trust for the benefit of
Holders or the Property Trustee all money held by the
Paying Agent for the payment of principal or distribution
on the Securities, and will notify the Property Trustee
if there are insufficient funds. While any such
insufficiency continues, the Property Trustee may require
a Paying Agent to pay all money held by it to the
Property Trustee. The Trust at any time may require a
Paying Agent to pay all money held by it to the Property
Trustee and to account for any money disbursed by it.
Upon payment over to the Property Trustee, the Paying
Agent (if other than the Trust or an Affiliate of the
Trust) shall have no further liability for the money. If
the Trust or the Sponsor or an Affiliate of the Trust or
the Sponsor acts as Paying Agent, it shall segregate and
hold in a separate trust fund for the benefit of the
Holders all money held by it as Paying Agent.
SECTION 7.6 [reserved]
SECTION 7.7 Replacement Securities.
If the holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken or
if such Security is mutilated and is surrendered to the
Trust or in the case of the Preferred Securities to the
Property Trustee, the Trust shall issue and the Property
Trustee shall authenticate a replacement Security if the
Property Trustee's and the Trust's requirements, as the
case may be, are met. If required by the Property
Trustee or the Trust, an indemnity bond must be posted in
an amount sufficient in the judgment of both to protect
the Trustees, the Property Trustee, the Sponsor or any
authenticating agent from any loss which any of them may
suffer if a Security is replaced. The Company may charge
for its expenses in replacing a Security.
In case any such mutilated, destroyed, lost or
stolen Security has become or is about to become due and
payable, or is about to be purchased by the Sponsor
pursuant to Article III hereof, the Sponsor in its dis-
cretion may, instead of issuing a new Security, pay or
purchase such Security, as the case may be.
Every replacement Security is an additional
obligation of the Trust.
SECTION 7.8 Outstanding Preferred Securities.
The Preferred Securities outstanding at any
time are all the Preferred Securities authenticated by
the Property Trustee except for those canceled by it,
those delivered to it for cancellation, and those
described in this Section as not outstanding.
If a Preferred Security is replaced, paid or
purchased pursuant to Section 7.7 hereof, it ceases to be
outstanding unless the Property Trustee receives proof
satisfactory to it that the replaced, paid or purchased
Preferred Security is held by a bona fide purchaser.
If Preferred Securities are considered paid in
accordance with the terms of this Declaration, they cease
to be outstanding and interest on them ceases to accrue.
A Preferred Security does not cease to be
outstanding because one of the Trust, the Sponsor or an
Affiliate of the Sponsor holds the Security.
SECTION 7.9 Preferred Securities in Treasury.
In determining whether the Holders of the
required amount of Securities have concurred in any
direction, waiver or consent, Preferred Securities owned
by the Trust, the Sponsor or an Affiliate of the Sponsor,
as the case may be, shall be disregarded and deemed not
to be outstanding, except that for the purposes of
determining whether the Property Trustee shall be
protected in relying on any such direction, waiver or
consent, only Securities which the Property Trustee knows
are so owned shall be so disregarded.
SECTION 7.10 Temporary Securities.
(a) Until definitive Securities are ready for
delivery, the Trust may prepare and, in the case of the
Preferred Securities, the Property Trustee shall
authenticate temporary Securities. Temporary Securities
shall be substantially in the form of definitive
Securities but may have variations that the Trust
considers appropriate for temporary Securities. Without
unreasonable delay, the Trust shall prepare and, in the
case of the Preferred Securities, the Property Trustee
shall authenticate definitive Securities in exchange for
temporary Securities.
(b) A Global Preferred Security deposited with
the Depositary or with the Property Trustee as custodian
for the Depositary pursuant to Section 7.3 shall be
transferred to the beneficial owners thereof in the form
of certificated Preferred Securities only if such
transfer complies with Section 9.2 and (i) the Depositary
notifies the Company that it is unwilling or unable to
continue as Depositary for such Global Preferred Security
or if at any time such Depositary ceases to be a
"clearing agency" registered under the Exchange Act and a
successor depositary is not appointed by the Sponsor
within 90 days of such notice, or (ii) an Event of
Default has occurred and is continuing.
(c) Any Global Preferred Security that is
transferable to the beneficial owners thereof in the form
of certificated Preferred Securities pursuant to this
Section 7.10 shall be surrendered by the Depositary to
the Property Trustee located in Wilmington, Delaware, to
be so transferred, in whole or from time to time in part,
without charge, and the Property Trustee shall
authenticate and deliver, upon such transfer of each
portion of such Global Preferred Security, an equal
aggregate liquidation amount of Securities of authorized
denominations in the form of certificated Securities.
Any portion of a Global Preferred Security transferred
pursuant to this Section shall be registered in such
names as the Depositary shall direct. Any Preferred
Security in the form of certificated Preferred Securities
delivered in exchange for an interest in the Restricted
Global Preferred Security shall, except as otherwise
provided by Sections 7.3 and 9.1, bear the Restricted
Securities Legend set forth in Exhibit A-1 hereto.
(d) Subject to the provisions of Section
7.10(c), the registered holder of a Global Preferred
Security may grant proxies and otherwise authorize any
person, including Participants and persons that may hold
interests through Participants, to take any action which
a holder is entitled to take under this Declaration or
the Securities.
(e) In the event of the occurrence of either
of the events specified in Section 7.10(b), the Trust
will promptly make available to the Property Trustee a
reasonable supply of certificated Preferred Securities in
definitive, fully registered form without distribution
coupons.
SECTION 7.11 Cancellation.
The Trust at any time may deliver Securities to
the Property Trustee for cancellation. The Registrar,
Paying Agent and Conversion Agent shall forward to the
Property Trustee any Securities surrendered to them for
registration of transfer, redemption, conversion,
exchange or payment. The Property Trustee shall promptly
cancel all Securities surrendered for registration of
transfer, redemption, conversion, exchange, payment,
replacement or cancellation and shall dispose of canceled
Securities as the Trust directs. The Trust may not issue
new Securities to replace Securities that it has paid or
that have been delivered to the Property Trustee for
cancellation or that any holder has converted.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 8.1 Termination of Trust.
(a) The Trust shall terminate upon the
earliest to occur of the following:
(i) the bankruptcy of the Holder of the
Common Securities or the Sponsor;
(ii) the filing of a certificate of
dissolution or its equivalent with respect to the
Holder of the Common Securities or the Sponsor; the
filing of a certificate of cancellation with respect
to the Trust or the revocation of the charter of the
Holder of the Common Securities or the Sponsor and
the expiration of 90 days after the date of
revocation without a reinstatement thereof;
(iii) the entry of a decree of judicial
dissolution of the Holder of the Common Securities,
the Sponsor or the Trust;
(iv) all of the Securities shall have been
called for redemption and the amounts necessary for
redemption thereof shall have been paid to the
Holders in accordance with the terms of the Securi-
ties;
(v) the occurrence and continuation of a
Tax Event or Investment Company Event pursuant to
which the Trust shall have been dissolved in accor-
dance with the terms of the Securities and all of
the Debentures shall have been distributed to the
Holders of Securities in exchange for all of the
Securities; or
(vi) the expiration of the term of the
Trust on December 1, 2030.
(b) As soon as is practicable after the
occurrence of an event referred to in Section 8.1(a), the
Trustees shall file a certificate of cancellation with
the Secretary of State of the State of Delaware.
(c) The provisions of Article X shall survive
the termination of the Trust.
ARTICLE IX
TRANSFER AND EXCHANGE
SECTION 9.1 General.
(a) Where Preferred Securities are presented
to the Registrar or a co-registrar with a request to
register a transfer or to exchange them for an equal
number of Preferred Securities represented by different
certificates, the Registrar shall register the transfer
or make the exchange if its requirements for such
transactions are met. To permit registrations of
transfers and exchanges, the Trust shall issue and the
Property Trustee shall authenticate Preferred Securities
at the Registrar's request.
(b) Securities may only be transferred, in
whole or in part, in accordance with the terms and
conditions set forth in this Declaration and in the terms
of the Securities. Any transfer or purported transfer of
any Security not made in accordance with this Declaration
shall be null and void.
Subject to this Article IX, the Sponsor and any
Related Party may only transfer Common Securities to the
Sponsor or a Related Party of the Sponsor; provided, that
any such transfer is subject to the condition precedent
that the transferor obtain the written opinion of
nationally recognized independent counsel experienced in
such matters that such transfer would not cause more than
an insubstantial risk that:
(i) the Trust would not be classified for
United States federal income tax purposes as a
grantor trust; and
(ii) the Trust would be an Investment
Company or the transferee would become an Investment
Company.
(c) The Regular Trustees shall provide for the
registration of Securities and of transfers of
Securities, which will be effected without charge but
only upon payment (with such indemnity as the Regular
Trustees may require) in respect of any tax or other
governmental charges that may be imposed in relation to
it. Upon surrender for registration of transfer of any
Securities, the Regular Trustees shall cause one or more
new Securities to be issued in the name of the designated
transferee or transferees. Every Security surrendered
for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to
the Regular Trustees duly executed by the Holder or such
Holder's attorney duly authorized in writing. Each
Security surrendered for registration of transfer shall
be canceled by the Regular Trustees. A transferee of a
Security shall be entitled to the rights and subject to
the obligations of a Holder hereunder upon the receipt by
such transferee of a Security. By acceptance of a
Security, each transferee shall be deemed to have agreed
to be bound by this Declaration.
(d) The Trust shall not be required (i) to
issue, register the transfer of, or exchange, Preferred
Securities during a period beginning at the opening of
business 15 days before the day of any selection of
Preferred Securities for redemption set forth in the
terms and ending at the close of business on the day of
selection, or (ii) to register the transfer or exchange
of any Preferred Security so selected for redemption in
whole or in part, except the unredeemed portion of any
Preferred Security being redeemed in part.
SECTION 9.2 Transfer Procedures and Restrictions.
(a) General. Except in connection with a
Shelf Registration Statement contemplated by and in
accordance with the terms of the Registration Rights
Agreement, if Preferred Securities are issued upon the
transfer, exchange or replacement of Preferred Securities
bearing the Restricted Securities Legend set forth in
Exhibit A-1 hereto, or if a request is made to remove
such Restricted Securities Legend on Preferred
Securities, the Preferred Securities so issued shall bear
the Restricted Securities Legend, or the Restricted
Securities Legend shall not be removed, as the case may
be, unless there is delivered to the Trust such
satisfactory evidence, which may include an opinion of
counsel licensed to practice law in the State of New
York, as may be reasonably required by the Trust, that
neither the legend nor the restrictions on transfer set
forth therein are required to ensure that transfers
thereof comply with the provisions of Rule 144A, Rule 144
or Regulation S under the Securities Act or, with respect
to Restricted Securities, that such Securities are not
"restricted" within the meaning of Rule 144 under the
Securities Act. Upon provision of such satisfactory
evidence, the Property Trustee, at the written direction
of the Trust, shall authenticate and deliver Preferred
Securities that do not bear the legend.
(b) Transfers After Effectiveness of Shelf
Registration Statement. After the effectiveness of a
Shelf Registration Statement for any Preferred Securi-
ties, all requirements pertaining to legends on such
Preferred Security will cease to apply, and beneficial
interests in a Preferred Security in global form without
legends will be available to transferees of such
Preferred Securities upon exchange of the transferring
holder's Restricted Definitive Preferred Security or
directions to transfer such Holder's beneficial interest
in the Rule 144A Global Preferred Security, as the case
may be. After the effectiveness of the Shelf
Registration Statement, the Trust shall issue and the
Property Trustee shall authenticate a Preferred Security
in global form without the Restricted Securities Legend
(the "Exchanged Global Preferred Security") to deposit
with the Depositary to evidence transfers of (i)
beneficial interests from the Rule 144A Global Preferred
Security, (ii) Restricted Definitive Preferred
Securities, and (iii) Unrestricted Definitive Preferred
Securities.
(c) Regulation S Definitive Preferred Security
to Unrestricted Definitive Preferred Security;
Termination of Restricted Period. Following the
termination of the one-year "restricted period" with
respect to the issuance of the Preferred Securities,
Regulation S Definitive Preferred Securities may be
exchanged for an interest in a Preferred Security in
definitive, fully registered form without distribution
coupons, but without the Restricted Securities Legend (an
"Unrestricted Definitive Preferred Security"), that is
free from any restriction on transfer (other than such as
are solely attributable to any holder's status).
Unrestricted Definitive Preferred Securities will bear a
CUSIP number different from that of the Exchanged Global
Preferred Securities and transfers or exchanges from an
Unrestricted Definitive Preferred Security or Regulation
S Definitive Preferred Security to an Exchanged Preferred
Security must be effected pursuant to Section 9.2(b).
(d) Transfer and Exchange of Definitive Pre-
ferred Securities. When Definitive Preferred Securities
are presented to the Registrar or co-registrar
(x) to register the transfer of such
Definitive Preferred Securities; or
(y) to exchange such Definitive Preferred
Securities for an equal number of Definitive
Preferred Securities of another number,
the Registrar or co-registrar shall register the transfer
or make the exchange as requested if its reasonable
requirements for such transaction are met; provided,
however, that the Definitive Preferred Securities
surrendered for transfer or exchange:
(i) shall be duly endorsed or accompanied
by a written instrument of transfer in form
reasonably satisfactory to the Trust and the
Registrar or co-registrar, duly executed by the
Holder thereof or his attorney duly authorized in
writing; and
(ii) in the case of Definitive Preferred
Securities that are Restricted Definitive Preferred
Securities, are being transferred or exchanged
pursuant to an effective registration statement
under the Securities Act or pursuant to clause (A)
or (B) below, and are accompanied by the following
additional information and documents, as applicable:
(A) if such Restricted Preferred
Securities are being delivered to the Reg-
istrar by a Holder for registration in the
name of such Holder, without transfer, a
certification from such Holder to that
effect (in the form set forth on the
reverse of the Preferred Security); or
(B) if such Restricted Preferred
Securities are being transferred pursuant
to an exemption from registration in
accordance with Rule 144 or Regulation S
under the Securities Act: (i) a certifi-
cation to that effect (in the form set
forth on the reverse of the Preferred
Security) and (ii) if the Trust or
Registrar so requests, evidence reasonably
satisfactory to them as to the compliance
with the restrictions set forth in the
Restricted Securities Legend.
With respect to Definitive Preferred Securities
that are transferred to QIBs in accordance with Rule 144A
under the Securities Act, the transferee QIBs must take
delivery of their interests in the Preferred Securities
in the form of a beneficial interest in the Rule 144A
Global Preferred Security in accordance with Section
9.2(e).
(e) Restrictions on Transfer of a Definitive
Preferred Security for a Beneficial Interest in a Global
Preferred Security. A Definitive Preferred Security may
not be exchanged for a beneficial interest in a Global
Preferred Security except upon satisfaction of the re-
quirements set forth below. Upon receipt by the Property
Trustee of a Definitive Preferred Security, duly endorsed
or accompanied by appropriate instruments of transfer, in
form satisfactory to the Property Trustee, together with:
(i) if such Definitive Preferred Security
is a Restricted Preferred Security, certification,
in the form set forth on the reverse of the
Preferred Security, that such Definitive Preferred
Security is being transferred to a QIB in accordance
with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive
Preferred Security is a Restricted Preferred
Security, written instructions directing the
Property Trustee to make, or to direct the
Depositary to make, an adjustment on its books and
records with respect to such Global Preferred Secu-
rity to reflect an increase in the number of the
Preferred Securities represented by the Global
Preferred Security,
then the Property Trustee shall cancel such Definitive
Preferred Security and cause, or direct the Depositary to
cause, the aggregate number of Preferred Securities
represented by the Global Preferred Security to be
increased accordingly. If no Global Preferred Securities
are then outstanding, the Trust shall issue and the
Property Trustee shall authenticate, upon written order
of any Regular Trustee, an appropriate number of
Preferred Securities in global form.
(f) Transfer and Exchange of Global Preferred
Securities. The transfer and exchange of Global Pre-
ferred Securities or beneficial interests therein shall
be effected through the Depositary, in accordance with
this Declaration (including applicable restrictions on
transfer set forth herein, if any) and the procedures of
the Depositary therefor.
(g) Transfer of a Beneficial Interest in a
Global Preferred Security for a Definitive Preferred
Security.
(i) Any person having a beneficial
interest in a Global Preferred Security that is
being transferred or exchanged pursuant to an
effective registration statement under the
Securities Act or pursuant to clause (A) or (B)
below may upon request, and if accompanied by the
information specified below, exchange such
beneficial interest for a Definitive Preferred
Security representing the same number of Preferred
Securities. Upon receipt by the Property Trustee
from the Depositary or its nominee on behalf of any
Person having a beneficial interest in a Global
Preferred Security of written instructions or such
other form of instructions as is customary for the
Depositary or the person designated by the
Depositary as having such a beneficial interest in a
Restricted Preferred Security and the following
additional information and documents (all of which
may be submitted by facsimile):
(A) if such beneficial interest is
being transferred to the person designated
by the Depositary as being the owner of a
beneficial interest in a Global Preferred
Security, a certification from such Person
to that effect (in the form set forth on
the reverse of the Preferred Security); or
(B) if such beneficial interest is
being transferred pursuant to an exemption
from registration in accordance with Rule
144 or Regulation S under the Securities
Act: (i) a certification to that effect
from the transferee or transferor (in the
form set forth on the reverse of the
Preferred Security) and (ii) if the
Property Trustee or Registrar so requests,
evidence reasonably satisfactory to them
as to the compliance with the restrictions
set forth in the legend set forth in
Section 9.2(j),
then the Property Trustee or the Securities Custodi-
an, at the direction of the Property Trustee, will
cause, in accordance with the standing instructions
and procedures existing between the Depositary and
the Securities Custodian, the aggregate principal
amount of the Global Preferred Security to be re-
duced on its books and records and, following such
reduction, the Trust will execute and the Property
Trustee will authenticate and deliver to the trans-
feree a Definitive Preferred Security.
(ii) Definitive Preferred Securities
issued in exchange for a beneficial interest in a
Global Preferred Security pursuant to this Section
9.2(g) shall be registered in such names and in such
authorized denominations as the Depositary, pursuant
to instructions from its Participants or indirect
participants or otherwise, shall instruct the
Property Trustee. The Property Trustee shall deliv-
er such Preferred Securities to the persons in whose
names such Preferred Securities are so registered in
accordance with the instructions of the Depositary.
Beneficial interests in the Rule 144A
Global Security may not be exchanged for a Definitive
Preferred Security except a Regulation S Definitive
Preferred Security and except as provided in Section
9.2(i).
(h) Restrictions on Transfer and Exchange of
Global Preferred Securities. Notwithstanding any other
provisions of this Declaration (other than the provisions
set forth in subsection (i) of this Section 9.2), a
Global Preferred Security may not be transferred as a
whole except by the Depositary to a nominee of the
Depositary or another nominee of the Depositary or by the
Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
With respect to Definitive Preferred Securities
that are transferred to QIBs in accordance with Rule 144A
under the Securities Act, the transferee QIBs must take
delivery of their interests in the Preferred Securities
in the form of a beneficial interest in the Rule 144A
Global Preferred Security in accordance with Section
9.2(e).
(i) Authentication of Definitive Preferred
Securities. If at any time:
(i) the Depositary notifies the Trust
that the Depositary is unwilling or unable to con-
tinue as Depositary for the Global Preferred Securi-
ties and a successor Depositary for the Global
Preferred Securities is not appointed by the Trust
at the direction of the Sponsor within 90 days after
delivery of such notice; or
(ii) the Trust, in its sole discretion,
notifies the Property Trustee in writing that it
elects to cause the issuance of Definitive Preferred
Securities under this Declaration,
then the Trust will execute, and the Property Trustee,
upon receipt of a written order of the Trust signed by
One Regular Trustee requesting the authentication and
delivery of Definitive Preferred Securities to the Per-
sons designated by the Trust, will authenticate and
deliver Definitive Preferred Securities, in an aggregate
principal amount equal to the principal amount of Global
Preferred Securities, in exchange for such Global Pre-
ferred Securities.
(j) Legend.
(i) Except as permitted by the following
paragraph (ii), each Preferred Security certificate
evidencing the Global Preferred Securities and the
Definitive Preferred Securities (and all Preferred
Securities issued in exchange therefor or substi-
tution thereof) shall bear a legend (the "Restricted
Securities Legend") in substantially the following
form:
THIS SECURITY, ANY CONVERTIBLE
SUBORDINATED DEBENTURE ISSUED IN EXCHANGE FOR
THIS SECURITY AND ANY CLASS B COMMON STOCK
ISSUED ON CONVERSION THEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE
DATE WHICH IS THREE YEARS AFTER THE LATER OF
THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH CONTINENTAL AIRLINES, INC. (THE
"COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS
THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR
OF THIS SECURITY) (THE "RESALE RESTRICTION
TERMINATION DATE") ONLY (A) TO THE COMPANY, (B)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER
IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S.
PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT THAT IS ACQUIRING
THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION
WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE
THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH
OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING
ON THIS SECURITY IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE TRANSFER AGENT. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF A
HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
(ii) Upon any sale or transfer of a
Restricted Preferred Security (including any Re-
stricted Preferred Security represented by a Global
Preferred Security) pursuant to Rule 144 under the
Securities Act or an effective registration state-
ment under the Securities Act:
(A) in the case of any Restricted
Preferred Security that is a Definitive
Preferred Security, the Registrar shall permit
the Holder thereof to exchange such Restricted
Preferred Security for a Definitive Preferred
Security that does not bear the Restricted
Securities Legend and rescind any restriction
on the transfer of such Restricted Preferred
Security; and
(B) in the case of any Restricted
Preferred Security that is represented by a
Global Preferred Security, the Registrar shall
permit the Holder thereof to exchange such
Restricted Preferred Security (in connection
with the sale of a Preferred Security pursuant
to the Registration Rights Agreement) for
another Global Preferred Security that does not
bear the Restricted Securities Legend.
(k) Cancellation or Adjustment of Global
Preferred Security. At such time as all beneficial
interests in a Global Preferred Security have either been
exchanged for Definitive Preferred Securities to the
extent permitted by the Declaration or redeemed, repur-
chased or canceled in accordance with the terms of this
Declaration, such Global Preferred Security shall be re-
turned to the Depositary for cancellation or retained and
canceled by the Property Trustee. At any time prior to
such cancellation, if any beneficial interest in a Global
Preferred Security is exchanged for Definitive Preferred
Securities, Preferred Securities represented by such
Global Preferred Security shall be reduced and an adjust-
ment shall be made on the books and records of the Prop-
erty Trustee (if it is then the Securities Custodian for
such Global Preferred Security) with respect to such
Global Preferred Security, by the Property Trustee or the
Securities Custodian, to reflect such reduction.
(l) Obligations with Respect to Transfers and
Exchanges of Preferred Securities.
(i) To permit registrations of transfers
and exchanges, the Trust shall execute and the
Property Trustee shall authenticate Definitive Pref-
erred Securities and Global Preferred Securities at
the Registrar's or co-Registrar's request.
(ii) Registrations of transfers or
exchanges will be effected without charge, but only
upon payment (with such indemnity as the Trust or
the Sponsor may require) in respect of any tax or
other governmental charge that may be imposed in
relation to it.
(iii) The Registrar or co-registrar shall
not be required to register the transfer of or
exchange of (a) any Definitive Preferred Security
selected for redemption in whole or in part pursuant
to Article 3, except the unredeemed portion of any
Definitive Preferred Security being redeemed in
part, or (b) any Preferred Security for a period
beginning 15 Business Days before the mailing of a
notice of an offer to repurchase or redeem Preferred
Securities or 15 Business Days before a quarterly
distribution date.
(iv) Prior to the due presentation for
registration of transfer of any Preferred Security,
the Trust, the Property Trustee, the Paying Agent,
the Registrar or any co-registrar may deem and treat
the person in whose name a Preferred Security is
registered as the absolute owner of such Preferred
Security for the purpose of receiving Distributions
on such Preferred Security and for all other pur-
poses whatsoever, and none of the Trust, the
Property Trustee, the Paying Agent, the Registrar or
any co-registrar shall be affected by notice to the
contrary.
(v) All Preferred Securities issued upon
any transfer or exchange pursuant to the terms of
this Declaration shall evidence the same security
and shall be entitled to the same benefits under
this Declaration as the Preferred Securities
surrendered upon such transfer or exchange.
(m) No Obligation of the Property Trustee.
(i) The Property Trustee shall have no
responsibility or obligation to any beneficial owner
of a Global Preferred Security, a Participant in the
Depositary or other Person with respect to the
accuracy of the records of the Depositary or its
nominee or of any Participant thereof, with respect
to any ownership interest in the Preferred
Securities or with respect to the delivery to any
Participant, beneficial owner or other Person (other
than the Depositary) of any notice (including any
notice of redemption) or the payment of any amount,
under or with respect to such Preferred Securities.
All notices and communications to be given to the
Holders and all payments to be made to Holders under
the Preferred Securities shall be given or made only
to or upon the order of the registered Holders
(which shall be the Depositary or its nominee in the
case of a Global Preferred Security). The rights of
beneficial owners in any Global Preferred Security
shall be exercised only through the Depositary
subject to the applicable rules and procedures of
the Depositary. The Property Trustee may rely and
shall be fully protected in relying upon information
furnished by the Depositary with respect to its
Participants and any beneficial owners.
(ii) The Property Trustee and Registrar
shall have no obligation or duty to monitor,
determine or inquire as to compliance with any
restrictions on transfer imposed under this
Declaration or under applicable law with respect to
any transfer of any interest in any Preferred
Security (including any transfers between or among
Depositary Participants or beneficial owners in any
Global Preferred Security) other than to require
delivery of such certificates and other docu-
mentation or evidence as are expressly required by,
and to do so if and when expressly required by, the
terms of this Declaration, and to examine the same
to determine substantial compliance as to form with
the express requirements hereof.
SECTION 9.3 Deemed Security Holders.
The Trustees may treat the Person in whose name
any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certifi-
cate and of the Securities represented by such Certifi-
cate for purposes of receiving Distributions and for all
other purposes whatsoever and, accordingly, shall not be
bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities repre-
sented by such Certificate on the part of any Person,
whether or not the Trust, the Property Trustee, the
Registrar or an co-registrar shall have actual or other
notice thereof.
SECTION 9.4 Book Entry Interests.
Global Preferred Securities shall initially be
registered on the books and records of the Trust in the
name of Cede & Co., the nominee of the Depositary, and no
Preferred Security Beneficial Owner will receive a
definitive Preferred Security Certificate representing
such Preferred Security Beneficial Owner's interests in
such Global Preferred Securities, except as provided in
Section 9.2(g). Unless and until definitive, fully
registered Preferred Securities Certificates have been
issued to the Preferred Security Beneficial Owners pursu-
ant to Sections 7.10 or 9.2(g):
(a) the provisions of this Section 9.4 shall
be in full force and effect;
(b) the Trust and the Trustees shall be enti-
tled to deal with the Depositary for all purposes of this
Declaration (including the payment of Distributions on
the relevant Global Preferred Securities and receiving
approvals, votes or consents hereunder) as the Holder of
the Preferred Securities and the sole holder of the Glob-
al Preferred Securities and shall have no obligation to
the Preferred Security Beneficial Owners;
(c) to the extent that the provisions of this
Section 9.4 conflict with any other provisions of this
Declaration, the provisions of this Section 9.4 shall
control; and
(d) the rights of the Preferred Security Bene-
ficial Owners shall be exercised only through the
Depositary and shall be limited to those established by
law and agreements between such Preferred Security
Beneficial Owners and the Depositary and/or the
Participants and receive and transmit payments of Distri-
butions on the Global Certificates to such Participants.
The Depositary will make book entry transfers among the
Participants.
SECTION 9.5 Notices to the Depositary.
Whenever a notice or other communication to the
Preferred Security Holders is required under this Decla-
ration, the Regular Trustees shall, in the case of any
Global Preferred Security, give all such notices and
communications specified herein to be given to the
Preferred Security Holders to the Depositary, and shall
have no notice obligations to the Preferred Security
Beneficial Owners.
ARTICLE X
LIMITATION OF LIABILITY OF
HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
SECTION 10.1 Liability.
(a) Except as expressly set forth in this
Declaration, the Securities Guarantees and the terms of
the Securities the Sponsor shall not be:
(i) personally liable for the return of
any portion of the capital contributions (or any
return thereon) of the Holders of the Securities
which shall be made solely from assets of the Trust;
or
(ii) required to pay to the Trust or to
any Holder of Securities any deficit upon dissolu-
tion of the Trust or otherwise.
(b) The Holder of the Common Securities shall
be liable for all of the debts and obligations of the
Trust (other than with respect to the Securities) to the
extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the
Business Trust Act, the Holders of the Preferred
Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private
corporations for profit organized under the General
Corporation Law of the State of Delaware.
SECTION 10.2 Exculpation.
(a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the
Trust or any Covered Person for any loss, damage or claim
incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified
Person reasonably believed to be within the scope of the
authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person
shall be liable for any such loss, damage or claim in-
curred by reason of such Indemnified Person's negligence
or willful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully pro-
tected in relying in good faith upon the records of the
Trust and upon such information, opinions, reports or
statements presented to the Trust by any Person as to
matters the Indemnified Person reasonably believes are
within such other Person's professional or expert compe-
tence and who has been selected with reasonable care by
or on behalf of the Trust, including information, opin-
ions, reports or statements as to the value and amount of
the assets, liabilities, profits, losses, or any other
facts pertinent to the existence and amount of assets
from which Distributions to Holders of Securities might
properly be paid.
SECTION 10.3 Fiduciary Duty.
(a) To the extent that, at law or in equity,
an Indemnified Person has duties (including fiduciary du-
ties) and liabilities relating thereto to the Trust or to
any other Covered Person, an Indemnified Person acting
under this Declaration shall not be liable to the Trust
or to any other Covered Person for its good faith reli-
ance on the provisions of this Declaration. The provi-
sions of this Declaration, to the extent that they re-
strict the duties and liabilities of an Indemnified
Person otherwise existing at law or in equity (other than
the duties imposed on the Property Trustee under the
Trust Indenture Act), are agreed by the parties hereto to
replace such other duties and liabilities of such Indem-
nified Person.
(b) Unless otherwise expressly provided here-
in:
(i) whenever a conflict of interest ex-
ists or arises between an Indemnified Person and any
Covered Person; or
(ii) whenever this Declaration or any
other agreement contemplated herein or therein
provides that an Indemnified Person shall act in a
manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities,
the Indemnified Person shall resolve such conflict of in-
terest, take such action or provide such terms,
considering in each case the relative interest of each
party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and
burdens relating to such interests, any customary or
accepted industry practices, and any applicable generally
accepted accounting practices or principles. In the
absence of bad faith by the Indemnified Person, the
resolution, action or term so made, taken or provided by
the Indemnified Person shall not constitute a breach of
this Declaration or any other agreement contemplated
herein or of any duty or obligation of the Indemnified
Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indem-
nified Person is permitted or required to make a decision
(i) in its "discretion" or under a grant
of similar authority, the Indemnified Person shall
be entitled to consider such interests and factors
as it desires, including its own interests, and
shall have no duty or obligation to give any
consideration to any interests of or factors
affecting the Trust or any other Person; or
(ii) in its "good faith" or under another
express standard, the Indemnified Person shall act
under such express standard and shall not be subject
to any other or different standard imposed by this
Declaration or by applicable law or rules of equity.
SECTION 10.4 Indemnification.
(a) To the fullest extent permitted by appli-
cable law, the Sponsor shall indemnify and hold harmless
each Indemnified Person from and against any loss,
damage, liability, tax, penalty, expense or claim of any
kind or nature whatsoever incurred by such Indemnified
Person by reason of the creation, operation or
termination of the Trust or any act or omission performed
or omitted by such Indemnified Person in good faith on
behalf of the Trust and in a manner such Indemnified
Person reasonably believed to be within the scope of
authority conferred on such Indemnified Person by this
Declaration, except that no Indemnified Person shall be
entitled to be indemnified in respect of any loss, damage
or claim incurred by such Indemnified Person by reason of
negligence or willful misconduct with respect to such
acts or omissions.
(b) To the fullest extent permitted by appli-
cable law, expenses (including legal fees and expenses)
incurred by an Indemnified Person in defending any claim,
demand, action, suit or proceeding shall, from time to
time, be advanced by the Sponsor prior to the final
disposition of such claim, demand, action, suit or
proceeding upon receipt by the Sponsor of an undertaking
by or on behalf of the Indemnified Person to repay such
amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified as authorized in
Section 10.4(a). The indemnification shall survive the
termination of this Declaration.
SECTION 10.5 Outside Businesses.
Any Covered Person, the Sponsor, the Delaware
Trustee and the Property Trustee may engage in or possess
an interest in other business ventures of any nature or
description, independently or with others, similar or
dissimilar to the business of the Trust, and the Trust
and the Holders of Securities shall have no rights by
virtue of this Declaration in and to such independent
ventures or the income or profits derived therefrom and
the pursuit of any such venture, even if competitive with
the business of the Trust, shall not be deemed wrongful
or improper. No Covered Person, the Sponsor, the
Delaware Trustee, or the Property Trustee shall be obli-
gated to present any particular investment or other
opportunity to the Trust even if such opportunity is of a
character that, if presented to the Trust, could be taken
by the Trust, and any Covered Person, the Sponsor, the
Delaware Trustee and the Property Trustee shall have the
right to take for its own account (individually or as a
partner or fiduciary) or to recommend to others any such
particular investment or other opportunity. Any Covered
Person, the Delaware Trustee and the Property Trustee may
engage or be interested in any financial or other trans-
action with the Sponsor or any Affiliate of the Sponsor,
or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of, securities or
other obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 11.1 Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust
shall be the calendar year, or such other year as is
required by the Code.
SECTION 11.2 Certain Accounting Matters.
(a) At all times during the existence of the
Trust, the Regular Trustees shall keep, or cause to be
kept, full books of account, records and supporting
documents, which shall reflect in reasonable detail, each
transaction of the Trust. The books of account shall be
maintained on the accrual method of accounting, in
accordance with generally accepted accounting principles,
consistently applied. The Trust shall use the accrual
method of accounting for United States federal income tax
purposes. The books of account and the records of the
Trust shall be examined by and reported upon as of the
end of each Fiscal Year by a firm of independent
certified public accountants selected by the Regular
Trustees.
(b) The Regular Trustees shall cause to be
prepared and delivered to each of the Holders of
Securities, within 90 days after the end of each Fiscal
Year of the Trust, annual financial statements of the
Trust, including a balance sheet of the Trust as of the
end of such Fiscal Year, and the related statements of
income or loss;
(c) The Regular Trustees shall cause to be
duly prepared and delivered to each of the Holders of
Securities, any annual United States federal income tax
information statement, required by the Code, containing
such information with regard to the Securities held by
each Holder as is required by the Code and the Treasury
Regulations. Notwithstanding any right under the Code to
deliver any such statement at a later date, the Regular
Trustees shall endeavor to deliver all such statements
within 30 days after the end of each Fiscal Year of the
Trust.
(d) The Regular Trustees shall cause to be
duly prepared and filed with the appropriate taxing
authority, an annual United States federal income tax
return, on a Form 1041 or such other form required by
United States federal income tax law, and any other annu-
al income tax returns required to be filed by the Regular
Trustees on behalf of the Trust with any state or local
taxing authority.
SECTION 11.3 Banking.
The Trust shall maintain one or more bank
accounts in the name and for the sole benefit of the
Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Property Trustee
shall be made directly to the Property Trustee Account
and no other funds of the Trust shall be deposited in the
Property Trustee Account. The sole signatories for such
accounts shall be designated by the Regular Trustees;
provided, however, that the Property Trustee shall desig-
nate the signatories for the Property Trustee Account.
SECTION 11.4 Withholding.
The Trust and the Regular Trustees shall comply
with all withholding requirements under United States
federal, state and local law. The Trust shall request,
and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption
from withholding with respect to each Holder, and any
representations and forms as shall reasonably be
requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding
obligations. The Regular Trustees shall file required
forms with applicable jurisdictions and, unless an exemp-
tion from withholding is properly established by a Hold-
er, shall remit amounts withheld with respect to the
Holder to applicable jurisdictions. To the extent that
the Trust is required to withhold and pay over any
amounts to any authority with respect to Distributions or
allocations to any Holder, the amount withheld shall be
deemed to be a distribution in the amount of the with-
holding to the Holder. In the event of any claimed over
withholding, Holders shall be limited to an action
against the applicable jurisdiction. If the amount
required to be withheld was not withheld from actual
Distributions made, the Trust may reduce subsequent
Distributions by the amount of such withholding.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 12.1 Amendments.
(a) Except as otherwise provided in this Dec-
laration or by any applicable terms of the Securities,
this Declaration may only be amended by a written instru-
ment approved and executed by:
(i) the Regular Trustees (or, if there
are more than two Regular Trustees, a majority of
the Regular Trustees);
(ii) if the amendment affects the rights,
powers, duties, obligations or immunities of the
Property Trustee, the Property Trustee; and
(iii) if the amendment affects the rights,
powers, duties, obligations or immunities of the
Delaware Trustee, the Delaware Trustee;
(b) no amendment shall be made, and any such
purported amendment shall be void and ineffective:
(i) unless, in the case of any proposed
amendment, the Property Trustee shall have first
received an Officers' Certificate from each of the
Trust and the Sponsor that such amendment is
permitted by, and conforms to, the terms of this
Declaration (including the terms of the Securities);
(ii) unless, in the case of any proposed
amendment which affects the rights, powers, duties,
obligations or immunities of the Property Trustee,
the Property Trustee shall have first received:
(A) an Officers' Certificate from
each of the Trust and the Sponsor that such
amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms
of the Securities); and
(B) an opinion of counsel (who may
be counsel to the Sponsor or the Trust) that
such amendment is permitted by, and conforms
to, the terms of this Declaration (including
the terms of the Securities); and
(iii) to the extent the result of such
amendment would be to:
(A) cause the Trust to fail to
continue to be classified for purposes of
United States federal income taxation as a
grantor trust;
(B) reduce or otherwise adversely
affect the powers of the Property Trustee in
contravention of the Trust Indenture Act; or
(C) cause the Trust to be deemed to
be an Investment Company required to be
registered under the Investment Company Act;
(c) at such time after the Trust has issued
any Securities that remain outstanding, any amendment
that would adversely affect the rights, privileges or
preferences of any Holder of Securities may be effected
only with such additional requirements as may be set
forth in the terms of such Securities;
(d) Section 9.1(c) and this Section 12.1 shall
not be amended without the consent of all of the Holders
of the Securities;
(e) Article IV shall not be amended without
the consent of the Holders of a Majority in liquidation
amount of the Common Securities;
(f) the rights of the holders of the Common
Securities under Article V to increase or decrease the
number of, and appoint and remove Trustees shall not be
amended without the consent of the Holders of a Majority
in liquidation amount of the Common Securities; and
(g) notwithstanding Section 12.1(c), this
Declaration may be amended without the consent of the
Holders of the Securities to:
(i) cure any ambiguity;
(ii) correct or supplement any provision
in this Declaration that may be defective or
inconsistent with any other provision of this
Declaration;
(iii) add to the covenants, restrictions or
obligations of the Sponsor; and
(iv) conform to any change in Rule 3a-5 of
the Investment Company Act or written change in
interpretation or application of Rule 3a-5 of the
Investment Company Act by any legislative body,
court, government agency or regulatory authority
which amendment does not have a material adverse
effect on the rights, preferences or privileges of
the Holders.
SECTION 12.2 Meetings of the Holders of Securities;
Action by Written Consent.
(a) Meetings of the Holders of any class of
Securities may be called at any time by the Regular
Trustees (or as provided in the terms of the Securities)
to consider and act on any matter on which Holders of
such class of Securities are entitled to act under the
terms of this Declaration, the terms of the Securities or
the rules of any stock exchange on which the Preferred
Securities are listed or admitted for trading. The Regu-
lar Trustees shall call a meeting of the Holders of such
class if directed to do so by the Holders of at least 10%
in liquidation amount of such class of Securities. Such
direction shall be given by delivering to the Regular
Trustees one or more requests in a writing stating that
the signing Holders of Securities wish to call a meeting
and indicating the general or specific purpose for which
the meeting is to be called. Any Holders of Securities
calling a meeting shall specify in writing the Certifi-
cates held by the Holders of Securities exercising the
right to call a meeting and only those Securities
represented by the Certificates so specified shall be
counted for purposes of determining whether the required
percentage set forth in the second sentence of this para-
graph has been met.
(b) Except to the extent otherwise provided in
the terms of the Securities, the following provisions
shall apply to meetings of Holders of Securities:
(i) notice of any such meeting shall be
given to all the Holders of Securities having a
right to vote thereat at least 7 days and not more
than 60 days before the date of such meeting. When-
ever a vote, consent or approval of the Holders of
Securities is permitted or required under this
Declaration or the rules of any stock exchange on
which the Preferred Securities are listed or
admitted for trading, such vote, consent or approval
may be given at a meeting of the Holders of
Securities. Any action that may be taken at a
meeting of the Holders of Securities may be taken
without a meeting if a consent in writing setting
forth the action so taken is signed by the Holders
of Securities owning not less than the minimum
aggregate liquidation amount of Securities that
would be necessary to authorize or take such action
at a meeting at which all Holders of Securities
having a right to vote thereon were present and vot-
ing. Prompt notice of the taking of action without
a meeting shall be given to the Holders of Securi-
ties entitled to vote who have not consented in
writing. The Regular Trustees may specify that any
written ballot submitted to the Security Holders for
the purpose of taking any action without a meeting
shall be returned to the Trust within the time
specified by the Regular Trustees;
(ii) each Holder of a Security may autho-
rize any Person to act for it by proxy on all mat-
ters in which a Holder of Securities is entitled to
participate, including waiving notice of any
meeting, or voting or participating at a meeting.
No proxy shall be valid after the expiration of 11
months from the date thereof unless otherwise
provided in the proxy. Every proxy shall be
revocable at the pleasure of the Holder of
Securities executing it. Except as otherwise
provided herein, all matters relating to the giving,
voting or validity of proxies shall be governed by
the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations
thereunder, as if the Trust were a Delaware corpora-
tion and the Holders of the Securities were stock-
holders of a Delaware corporation;
(iii) each meeting of the Holders of the
Securities shall be conducted by the Regular
Trustees or by such other Person that the Regular
Trustees may designate; and
(iv) unless the Business Trust Act, this
Declaration, the terms of the Securities, the Trust
Indenture Act or the listing rules of any stock
exchange on which the Preferred Securities are then
listed or trading provide otherwise, the Regular
Trustees, in their sole discretion, shall establish
all other provisions relating to meetings of Holders
of Securities, including notice of the time, place
or purpose of any meeting at which any matter is to
be voted on by any Holders of Securities, waiver of
any such notice, action by consent without a
meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any
other matter with respect to the exercise of any
such right to vote.
ARTICLE XIII
REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE
SECTION 13.1 Representations and Warranties of Property
Trustee.
The Trustee that acts as initial Property
Trustee represents and warrants to the Trust and to the
Sponsor at the date of this Declaration and at the time
of Closing, and each Successor Property Trustee
represents and warrants to the Trust and the Sponsor at
the time of the Successor Property Trustee's acceptance
of its appointment as Property Trustee that:
(a) The Property Trustee is a banking
corporation with trust powers, duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its organization, with corporate power
and authority to execute and deliver, and to carry out
and perform its obligations under the terms of, the
Declaration.
(b) The execution, delivery and performance by
the Property Trustee of the Declaration have been duly
authorized by all necessary corporate action on the part
of the Property Trustee. The Declaration has been duly
executed and delivered by the Property Trustee, and con-
stitutes a legal, valid and binding obligation of the
Property Trustee, enforceable against it in accordance
with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general
principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of
the Declaration by the Property Trustee does not conflict
with or constitute a breach of the certificate of
incorporation or by-laws of the Property Trustee.
(d) At the Closing Date, the Property Trustee
will have valid ownership interest in the Debentures for
the benefit of the holders of the Securities in each case
free from liens, encumbrances and defects.
(e) No consent, approval or authorization of,
or registration with or notice to, any State or Federal
banking authority is required for the execution, delivery
or performance by the Property Trustee of the Decla-
ration.
SECTION 13.2 Representations and Warranties of Delaware
Trustee.
The Trustee that acts as initial Delaware
Trustee represents and warrants to the Trust and to the
Sponsor at the date of this Declaration and at the time
of Closing, and each Successor Delaware Trustee
represents and warrants to the Trust and the Sponsor at
the time of the Successor Delaware Trustee's acceptance
of its appointment as Delaware Trustee that:
(a) The Delaware Trustee is a banking
corporation with trust powers, duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its organization, with corporate power
and authority to execute and deliver, and to carry out
and perform its obligations under the terms of, the
Declaration.
(b) The execution, delivery and performance by
the Delaware Trustee of the Declaration has been duly
authorized by all necessary corporate action on the part
of the Delaware Trustee. The Declaration has been duly
executed and delivered by the Delaware Trustee, and con-
stitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance
with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general
principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).
(c) The execution, delivery and performance of
the Declaration by the Delaware Trustee does not conflict
with or constitute a breach of the certificate of
incorporation or by-laws of the Delaware Trustee.
(d) No consent, approval or authorization of,
or registration with or notice to, any United States
state or federal banking authority is required for the
execution, delivery or performance by the Delaware Trust-
ee of the Declaration.
(e) The Delaware Trustee is an entity which
has its principal place of business in the State of
Delaware.
(f) The Delaware Trustee has been authorized
to perform its obligations under the Certificate of Trust
and the Declaration. The Declaration under Delaware law
constitutes a legal, valid and binding obligation of the
Delaware Trustee, enforceable against it in accordance
with its terms, subject to applicable bankruptcy, reor-
ganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general
principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies
is considered in a proceeding in equity or at law).
ARTICLE XIV
REGISTRATION RIGHTS
SECTION 14.1 Registration Rights.
The Holders of the Preferred Securities, the
Debentures and the Class B common stock of the Sponsor
issuable upon conversion thereof are entitled to the
benefits of the Registration Rights Agreement. Pursuant
to the Registration Rights Agreement, the Trust and the
Sponsor have agreed for the benefit of the Holders from
time to time of the Preferred Securities, the Guarantee,
the Debentures and the Class B common stock of the
Sponsor issuable upon conversion thereof that they will,
at the Sponsor's expense, (i) within 180 days after the
date of issuance of the Securities (the "Filing Date"),
file a shelf registration statement (the "Shelf
Registration Statement") with the Commission with respect
to resales of the Preferred Securities, the Guarantee,
the Debentures and the Class B Common Stock issuable upon
conversion thereof, (ii) within 60 days after the Filing
Date (the "Effectiveness Date"), use their best efforts
to cause such Shelf Registration Statement to be declared
effective by the Commission and (iii) use their best
efforts to maintain such Shelf Registration Statement
continuously effective under the Securities Act until the
third anniversary of the effectiveness of the Shelf
Registration Statement or such earlier date as is
provided in the Registration Rights Agreement (the
"Effectiveness Period").
If (i) on or prior to 180 days following the
date of original issuance of the Preferred Securities, a
Shelf Registration Statement has not been filed with the
Commission, or (ii) on or prior to the 60th day following
the filing of such Shelf Registration Statement, such
Shelf Registration Statement is not declared effective
(each, a "Registration Default"), additional interest
("Liquidated Damages") will accrue on the Debentures and,
accordingly, additional distributions will accrue on the
Preferred Securities, in each case from and including the
day following such Registration Default to but excluding
the day on which such Registration Default has been
cured. Liquidated Damages will be paid quarterly in
arrears, with the first quarterly payment due on the
first distribution payment date following the date on
which such Liquidated Damages begin to accrue, and will
accrue at a rate per annum equal to an additional one-
quarter of one percent (0.25%) of the liquidation amount
of the Securities to and including the 90th day following
such Registration Default and at a rate per annum equal
to one-half of one percent (0.50%) thereof from and after
the 91st day following such Registration Default. In the
event that the Shelf Registration Statement ceases to be
effective during the Effectiveness Period for more than
60 days, whether or not consecutive, during any 12-month
period, then the distribution rate borne by the Preferred
Securities shall increase by an additional one-half of
one percent (0.50%) per annum from the 61st day of the
applicable 12-month period such Shelf Registration
Statement ceases to be effective to but excluding the day
on which the Shelf Registration Statement again becomes
effective.
During the Effectiveness Period the Trust and
Continental shall notify DTC and the Paying Agent(s) with
respect to the Securities then outstanding within three
business days after each Registration Default and each
lapse in effectiveness of a Shelf Registration Statement.
Any Liquidated Damages due and payable hereunder shall be
paid by depositing with the Paying Agent(s), in trust,
for the benefit of the Holders quarterly on or before the
applicable quarterly distribution payment date,
immediately available funds in sums sufficient to pay the
Liquidated Damages then due. Any Liquidated Damages due
and payable hereunder shall be payable on each payment
date to the record Holder of Securities entitled to
receive the payment to be paid on such date.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1 Notices.
All notices provided for in this Declaration
shall be in writing, duly signed by the party giving such
notice, and shall be delivered, telecopied or mailed by
registered or certified mail, as follows:
(a) if given to the Trust, in care of the Reg-
ular Trustees at the Trust's mailing address set forth
below (or such other address as the Trust may give notice
of to the Holders of the Securities):
c/o Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: General Counsel
(b) if given to the Property Trustee, at the
mailing address set forth below (or such other address as
the Property Trustee may give notice of to the Holders of
the Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
(c) if given to the Holder of the Common Secu-
rities, at the mailing address of the Sponsor set forth
below (or such other address as the Holder of the Common
Securities may give notice to the Trust):
c/o Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: General Counsel
(d) if given to any other Holder, at the ad-
dress set forth on the books and records of the Trust or
the Registrar, as applicable.
All such notices shall be deemed to have been
given when received in person, telecopied with receipt
confirmed, or mailed by first class mail, postage pre-
paid, except that if a notice or other document is
refused delivery or cannot be delivered because of a
changed address of which no notice was given, such notice
or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.
SECTION 15.2 Governing Law.
This Declaration and the rights of the parties
hereunder shall be governed by and interpreted in accor-
dance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws with-
out regard to principles of conflict of laws.
SECTION 15.3 Intention of the Parties.
It is the intention of the parties hereto that
the Trust be classified for United States federal income
tax purposes as a grantor trust. The provisions of this
Declaration shall be interpreted to further this inten-
tion of the parties.
SECTION 15.4 Headings.
Headings contained in this Declaration are
inserted for convenience of reference only and do not
affect the interpretation of this Declaration or any
provision hereof.
SECTION 15.5 Successors and Assigns
Whenever in this Declaration any of the parties
hereto is named or referred to, the successors and as-
signs of such party shall be deemed to be included, and
all covenants and agreements in this Declaration by the
Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns,
whether so expressed.
SECTION 15.6 Partial Enforceability.
If any provision of this Declaration, or the
application of such provision to any Person or circum-
stance, shall be held invalid, the remainder of this
Declaration, or the application of such provision to
persons or circumstances other than those to which it is
held invalid, shall not be affected thereby.
SECTION 15.7 Counterparts.
This Declaration may contain more than one
counterpart of the signature page and this Declaration
may be executed by the affixing of the signature of each
of the Trustees to one of such counterpart signature
pages. All of such counterpart signature pages shall be
read as though one, and they shall have the same force
and effect as though all of the signers had signed a
single signature page.
IN WITNESS WHEREOF, the undersigned has caused
these presents to be executed as of the day and year
first above written.
Lawrence W. Kellner,
as Regular Trustee
_________________________
Jeffery A. Smisek,
as Regular Trustee
_________________________
Wilmington Trust Company,
not in its individual
capacity but solely as
Delaware Trustee
By:_______________________
Name:
Title:
Wilmington Trust Company,
not in its individual
capacity but solely as
Property Trustee
By:_______________________
Name:
Title:
CONTINENTAL AIRLINES, INC.,
as Sponsor
By:_______________________
Name:
Title:
ANNEX I
TERMS OF
8-1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED SECURITIES
8-1/2% CONVERTIBLE COMMON SECURITIES
Pursuant to Section 7.1 of the Amended and Restated
Declaration of Trust, dated as of November 28, 1995 by and among
Continental Airlines, Inc., as sponsor ("Continental"),
Wilmington Trust Company, as Property Trustee and Delaware
Trustee and the Regular Trustees listed on the signature page
thereto (as amended from time to time, the "Declaration"), the
designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Preferred Securities and the
Common Securities are set out below (each capitalized term used
but not defined herein has the meaning set forth in the
Declaration or, if not defined in such Declaration, as defined in
the Offering Memorandum referred to below):
1. Designation and Number.
A. "Preferred Securities." 4,500,000 Preferred Securities
of the Trust with an aggregate liquidation amount with
respect to the assets of the Trust of Two Hundred
Twenty-Five Million Dollars ($225,000,000), plus up to
an additional 675,000 Preferred Securities of the Trust
with an aggregate liquidation amount with respect to
the assets of the Trust of Thirty-Three Million Seven
Hundred Fifty Thousand Dollars ($33,750,000) solely to
cover over-allotments, as provided for in the Purchase
Agreement (the "Additional Preferred Securities"), and
a liquidation amount with respect to the assets of the
Trust of $50 per Preferred Security, are hereby
designated for the purposes of identification only as
"8-1/2% Convertible Trust Originated Preferred
Securities (liquidation amount $50 per Preferred
Security)" (the "Preferred Securities"). The
certificates evidencing the Preferred Securities shall
be substantially in the form attached hereto as Exhibit
A-1 and Exhibit A-2, with such changes and additions
thereto or deletions therefrom as may be required by
ordinary usage, custom or practice or to conform to the
rules of any stock exchange or other organization on
which the Preferred Securities are listed.
B. "Common Securities." 139,175 Common Securities of the
Trust with an aggregate liquidation amount with respect
to the assets of the Trust of Six Million Nine Hundred
Fifty-Eight Thousand Seven Hundred Fifty Dollars
($6,958,750), plus up to an additional 20,877 Common
Securities of the Trust with an aggregate liquidation
amount with respect to the assets of the Trust of One
Million Forty-Three Thousand Eight Hundred Fifty
Dollars ($1,043,850) to meet the capital requirements
of the Trust in the event of an issuance of Additional
Preferred Securities, and a liquidation amount with
respect to the assets of the Trust of $50 per Common
Security, are hereby designated for the purposes of
identification only as "8-1/2% Convertible Common
Securities (liquidation amount $50 per Convertible
Common Security)" (the "Common Securities"). The
certificates evidencing the Common Securities shall be
substantially in the form attached hereto as Exhibit A-
3, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom
or practice.
2. Distributions.
A. Distributions payable on each Security will be fixed at
a rate per annum of 8-1/2% (the "Coupon Rate") of the
stated liquidation amount of $50 per Security, such
rate being the rate of interest payable on the
Debentures to be held by the Property Trustee.
Distributions in arrears for more than one quarter will
bear interest thereon compounded quarterly at the
Coupon Rate (to the extent permitted by applicable
law). The term "Distributions" as used herein includes
such cash distributions and any such interest payable
unless otherwise stated. A Distribution is payable
only to the extent that payments are made in respect of
the Debentures held by the Property Trustee and to the
extent the Property Trustee has funds available
therefor. The amount of Distributions payable for any
period will be computed for any full quarterly
Distribution period on the basis of a 360-day year of
twelve 30-day months, and for any period shorter than a
full quarterly Distribution period for which
Distributions are computed, Distributions will be
computed on the basis of the actual number of days
elapsed per 30-day month.
B. Distributions on the Securities will be cumulative,
will accrue from the date of original issuance and will
be payable quarterly in arrears, on the following
dates, which dates correspond to the interest payment
dates on the Debentures: March 1, June 1, September 1
and December 1 of each year, commencing on March 1,
1996, except as otherwise described below. The
Debenture Issuer has the right under the Indenture, at
any time and from time to time, to defer payments of
interest by extending the interest payment period on
the Debentures for successive periods not exceeding 20
consecutive quarters (each an "Extension Period") and,
as a consequence of such deferral, Distributions will
also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest
thereon (to the extent permitted by applicable law) at
the Coupon Rate compounded quarterly during any such
Extension Period. Prior to the termination of any such
Extension Period, the Debenture Issuer may further
extend such Extension Period; provided, that such
Extension Period together with all such further
extensions thereof may not exceed 20 consecutive
quarters. Payments of accrued Distributions will be
payable to Holders as they appear on the books and
records of the Trust on the first record date after the
end of the Extension Period. Upon the termination of
any Extension Period and the payment of all amounts
then due, the Debenture Issuer may commence a new
Extension Period, subject to the above requirements.
C. Distributions on the Securities will be payable to the
Holders thereof as they appear on the books and records
of the Trust on the relevant record dates. The
relevant record dates for the Preferred Securities
shall be 15 days prior to the relevant payment dates,
except as otherwise described in this Annex I to the
Declaration. Subject to any applicable laws and
regulations and the provisions of the Declaration, the
relevant record date in respect of Preferred Securities
being held solely in book-entry form through The
Depository Trust Company (the "Depositary") will be one
Business Day prior to the relevant payment dates, and
each such payment will be made as described under the
heading "Description of the Preferred Securities --
Book-entry only issuance -- The Depository Trust
Company" in the Offering Memorandum. The relevant
record dates for the Common Securities shall be the
same record dates as for the Preferred Securities.
Distributions payable on any Securities that are not
punctually paid on any Distribution payment date, as a
result of the Debenture Issuer having failed to make a
payment under the Debentures, will cease to be payable
to the Person in whose name such Securities are
registered on the relevant record date, and such
defaulted Distribution will instead be payable to the
Person in whose name such Securities are registered on
the special record date or other specified date
determined in accordance with the Indenture. If any
date on which Distributions are payable on the
Securities is not a Business Day, then payment of the
Distribution payable on such date will be made on the
next succeeding day that is a Business Day (and without
any interest or other payment in respect of any such
delay) except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on
the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
D. In the event of an election by the Holder to convert
its Securities through the Conversion Agent into Class
B Common Stock, $.01 par value per share, of
Continental ("Class B Common Stock") pursuant to the
terms of the Securities as forth in this Annex I to the
Declaration, no payment, allowance or adjustment shall
be made with respect to accumulated and unpaid
Distributions on such Securities, or be required to be
made; provided, that Holders of Securities at the close
of business on any record date for the payment of
Distributions will be entitled to receive the
Distributions payable on such Securities on the
corresponding payment date notwithstanding the
conversion of such Securities into Class B Common Stock
following such record date.
E. In the event that there is any money or other property
held by or for the Trust that is not accounted for
hereunder, such property shall be distributed Pro Rata
(as defined herein) among the Holders of the
Securities.
3. Liquidation Distribution Upon Dissolution.
In the event of any voluntary or involuntary
dissolution, winding-up or termination of the Trust, the Holders
of the Securities on the date of the dissolution, winding-up or
termination, as the case may be, will be entitled to receive out
of the assets of the Trust available for distribution to Holders
of Securities after satisfaction of liabilities of creditors an
amount equal to the aggregate of the stated liquidation amount of
$50 per Security plus accrued and unpaid Distributions thereon to
the date of payment (such amount being the "Liquidation
Distribution"), unless, in connection with such dissolution,
winding-up or termination, Debentures in an aggregate principal
amount equal to the aggregate stated liquidation amount of such
Securities, with an interest rate equal to the Coupon Rate of,
and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on, such Securities, shall be
distributed on a Pro Rata basis to the Holders of the Securities
in exchange for such Securities.
If, upon any such dissolution, the Liquidation
Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate
Liquidation Distribution, then the amounts payable directly by
the Trust on the Securities shall be paid on a Pro Rata basis in
accordance with paragraph 9 of this Annex I.
4. Redemption and Distribution.
A. Upon the repayment or payment of the Debentures in
whole or in part, whether at maturity or upon
acceleration, redemption or otherwise, the proceeds
from such repayment or redemption shall be
simultaneously applied to the extent of such proceeds
to redeem Securities having an aggregate liquidation
amount equal to the aggregate principal amount of the
Debentures so repaid or redeemed at a redemption price
of $50 per Security together with accrued and unpaid
Distributions thereon through the date of the
redemption, payable in cash (the "Redemption Price").
Holders will be given not less than 30 nor more than 60
days' notice of such redemption.
B. If fewer than all the outstanding Securities are to be
so redeemed, the Common Securities and the Preferred
Securities will be redeemed Pro Rata and the Preferred
Securities to be redeemed will be determined as
described in Paragraph 4(e)(ii) below.
C. If, at any time, a Tax Event shall occur and be
continuing the Sponsor shall cause the Regular Trustees
to liquidate the Trust and, after satisfaction of
creditors of the Trust, cause Debentures to be
distributed to the Holders of the Securities in
liquidation of the Trust within 90 days following the
occurrence of such Tax Event (the "90 Day Period");
provided, however, that such liquidation and
distribution shall be conditioned on (i) the Regular
Trustees' receipt of an opinion of a nationally
recognized independent tax counsel experienced in such
matters (a "No Recognition Opinion"), which opinion may
rely on published revenue rulings of the Internal
Revenue Service, to the effect that the Holders of the
Securities will not recognize any income, gain or loss
for United States federal income tax purposes as a
result of such liquidation and distribution of
Debentures, and (ii) the Sponsor being unable to avoid
such Tax Event within such 90-day period by taking some
ministerial action or pursuing some other reasonable
measure that, in the sole judgment of the Sponsor, will
have no adverse effect on the Trust, the Sponsor or the
Holders of the Securities and will involve no material
cost ("Ministerial Action").
If (i) the Debenture Issuer has received an
opinion (a "Redemption Tax Opinion") of a nationally
recognized independent tax counsel (reasonably
acceptable to the Regular Trustees) experienced in such
matters that, as a result of a Tax Event, there is more
than an insubstantial risk that the Debenture Issuer
would be precluded from deducting the interest on the
Debentures for United States federal income tax
purposes, even after the Debentures were distributed to
the Holders of Securities upon liquidation of the Trust
as described in this paragraph 4(c), or (ii) the
Regular Trustees shall have been informed by such tax
counsel that it cannot deliver a No Recognition
Opinion, the Debenture Issuer shall have the right,
upon not less than 30 nor more than 60 days' notice,
and within 90 days following the occurrence of such Tax
Event, to redeem the Debentures in whole (but not in
part) for cash, at par plus accrued and unpaid
interest, including any Additional Payments, and,
following such redemption, all the Securities will be
redeemed by the Trust at the liquidation amount of $50
per Security plus accrued and unpaid distributions;
provided, however, that, if at the time there is
available to the Debenture Issuer or the Trust the
opportunity to eliminate, within such 90 day period,
the Tax Event by taking some Ministerial Action, the
Trust or the Debenture Issuer will pursue such
Ministerial Action in lieu of redemption.
"Tax Event" means the Regular Trustees shall have
obtained an opinion of a nationally recognized
independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that as a
result of (a) any amendment to or change (including any
announced prospective change) in the laws (or any
regulations thereunder) of the United States or any
political subdivision or taxing authority therefor or
therein, or (b) any amendment to or change in an
interpretation or application of such laws or
regulations by any legislative body, court,
governmental agency or regulatory authority (including
the enactment of any legislation and the publication of
any judicial decision or regulatory determination on or
after the date of the Offering Memorandum), which
amendment or change is effective or which
interpretation or pronouncement is announced on or
after the date of the Offering Memorandum, there is
more than an insubstantial risk that (i) the Trust is
or will be subject to United States federal income tax
with respect to interest accrued or received on the
Debentures, (ii) interest payable by the Debenture
Issuer to the Trust on the Debentures is not or will
not be deductible by the Debenture Issuer in whole or
in part for United States federal income tax purposes,
or (iii) the Trust is or will be subject to more than a
de minimis amount of taxes, duties, assessments or
other governmental charges.
If an Investment Company Event (as hereinafter
defined) shall occur and be continuing, the Sponsor
shall cause the Regular Trustees to liquidate the Trust
and cause the Debentures to be distributed to the
Holders of the Securities in liquidation of the Trust
within 90 days following the occurrence of such
Investment Company Event.
"Investment Company Event" means the Regular
Trustees shall have obtained an opinion from
independent counsel experienced in practice under the
Investment Company Act of 1940, as amended (the
"Investment Company Act"), to the effect that, as a
result of the occurrence of a change in law or
regulation or a written change in interpretation or
application of law or regulation by any legislative
body, court, governmental agency or regulatory
authority (a "Change in Investment Company Act Law"),
there is more than an insubstantial risk that the Trust
is or will be considered an investment company which is
required to be registered under the Investment Company
Act, which Change in Investment Company Act Law becomes
effective on or after the original issue date of the
Securities.
After the date fixed for any distribution of
Debentures: (i) the Securities will no longer be
deemed to be outstanding, (ii) the Depositary or its
nominee (or any successor depositary or its nominee),
as record Holder of Preferred Securities represented by
global certificates, will receive a registered global
certificate or certificates representing the Debentures
to be delivered upon such distribution and (iii) any
certificates representing Securities, except for
certificates representing Preferred Securities held by
the Depositary or its nominee (or any successor
depositary or its nominee), will be deemed to represent
Debentures having an aggregate principal amount equal
to the aggregate stated liquidation amount of such
Securities, with accrued and unpaid interest equal to
accrued and unpaid Distributions on such Securities
until such certificates are presented to the Debenture
Issuer or its agent for transfer or reissuance.
D. The Issuer shall not redeem fewer than all of the
outstanding Securities unless all accrued and unpaid
Distributions have been paid on all Securities for all
quarterly Distribution periods terminating on or before
the date of redemption.
E. Redemption or Distribution Procedures.
1. Notice of any redemption of, or notice of
distribution of Debentures in exchange for the
Securities (a "Redemption/Distribution Notice")
will be given by the Trust by mail to each Holder
of Securities to be redeemed or exchanged not
fewer than 30 nor more than 60 days before the
date fixed for redemption or exchange thereof
which, in the case of a redemption, will be the
date fixed for redemption of the Debentures. For
purposes of the calculation of the date of
redemption or exchange and the dates on which
notices are given pursuant to this paragraph
4(e)(i), a Redemption/ Distribution Notice shall
be deemed to be given on the day such notice is
first mailed by first-class mail, postage prepaid,
to Holders of Securities. Each
Redemption/Distribution Notice shall be addressed
to the Holders of Securities at the address of
each such Holder appearing in the books and
records of the Trust. No defect in the
Redemption/Distribution Notice or in the mailing
of either thereof with respect to any Holder shall
affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
2. In the event that fewer than all the outstanding
Securities are to be redeemed, the Securities to
be redeemed shall be redeemed Pro Rata from each
Holder of Preferred Securities, it being
understood that, in respect of Preferred
Securities registered in the name of and held of
record by the Depositary (or any successor
depositary) or any nominee, the distribution of
the proceeds of such redemption will be made in
accordance with the procedures of such agency or
nominee.
3. If Securities are to be redeemed and the Trust
gives a Redemption/Distribution Notice, which
notice may only be issued if the Debentures are
redeemed as set out in this paragraph 4 (which
notice will be irrevocable), then (A) with respect
to Preferred Securities held in book-entry form,
by 12:00 noon, New York City time, on the
redemption date, provided that the Debenture
Issuer has paid the Property Trustee a sufficient
amount of cash in connection with the related
redemption or maturity of the Debentures, the
Property Trustee will deposit irrevocably with the
Depositary (or successor depositary) funds
sufficient to pay the amount payable on redemption
with respect to such Preferred Securities and will
give the Depositary irrevocable instructions and
authority to pay the amount payable on redemption
to the Holders of such Preferred Securities, and
(B) with respect to Preferred Securities issued in
certificated form and Common Securities, provided
that the Debenture Issuer has paid the Property
Trustee a sufficient amount of cash in connection
with the related redemption or maturity of the
Debentures, the Property Trustee will irrevocably
deposit with the Paying Agent funds sufficient to
pay the amount payable on redemption to the
Holders of such Securities upon surrender of their
certificates. If a Redemption/Distribution Notice
shall have been given and funds deposited as
required, then, immediately prior to the close of
business on the date of such deposit,
Distributions will cease to accrue and all rights
of Holders of such Securities so called for
redemption will cease, except the right of the
Holders of such Securities to receive the
Redemption Price, but without interest on such
Redemption Price. Neither the Regular Trustees
nor the Trust shall be required to register or
cause to be registered the transfer of any
Securities that have been so called for
redemption. If any date fixed for redemption of
Securities is not a Business Day, then payment of
the amount payable on such date will be made on
the next succeeding day that is a Business Day
(without any interest or other payment in respect
of any such delay) except that, if such Business
Day falls in the next calendar year, such payment
will be made on the immediately preceding Business
Day, in each case with the same force and effect
as if made on such date fixed for redemption. If
payment of the redemption price in respect of any
Securities is improperly withheld or refused and
not paid either by the Trust or by the Sponsor as
guarantor pursuant to the relevant Securities
Guarantee, Distributions on such Securities will
continue to accrue at the then applicable rate,
from the original redemption date to the date of
payment, in which case the actual payment date
will be considered the date fixed for redemption
for purposes of calculating the amount payable
upon redemption (other than for purposes of
calculating any premium).
4. Redemption/Distribution Notices shall be sent by
the Regular Trustees on behalf of the Trust to (A)
in the case of Preferred Securities held in book-
entry form, the Depositary and, in the case of
Securities held in certificated form, the Holders
of such certificates and (B) in respect of the
Common Securities, the Holder(s) thereof.
5. Subject to the foregoing and applicable law
(including, without limitation, United States
federal securities laws), the Sponsor or any of
its subsidiaries may at any time and from time to
time purchase outstanding Preferred Securities by
tender, in the open market or by private
agreement.
5. Conversion Rights.
The Holders of Securities shall have the right at any time,
at their option, to cause the Conversion Agent to convert
Securities, on behalf of the converting Holders, into shares
of Class B Common Stock in the manner described herein on
and subject to the following terms and conditions:
A. The Securities will be convertible at the office of the
Conversion Agent into fully paid and nonassessable
shares of Class B Common Stock pursuant to the Holder's
direction to the Conversion Agent to exchange such
Securities for a portion of the Debentures theretofor
held by the Trust on the basis of one Security per $50
principal amount of Debentures, and immediately convert
such amount of Debentures into fully paid and
nonassessable shares of Class B Common Stock at an
initial rate of 1.034 shares of Class B Common Stock
per $50 principal amount of Debentures (which is
equivalent to a conversion price of $48.36 per share of
Class B Common Stock, subject to certain adjustments
set forth in the terms of the Debentures (as so
adjusted, "Conversion Price")).
B. In order to convert Securities into Class B Common
Stock the Holder shall submit to the Conversion Agent
at the office referred to above an irrevocable request
to convert Securities on behalf of such Holder (the
"Conversion Request"), together, if the Securities are
in certificated form, with such certificates. The
Conversion Request shall (i) set forth the number of
Securities to be converted and the name or names, if
other than the Holder, in which the shares of Class B
Common Stock should be issued and (ii) direct the
Conversion Agent (a) to exchange such Securities for a
portion of the Debentures held by the Trust (at the
rate of exchange specified in the preceding paragraph)
and (b) to immediately convert such Debentures on
behalf of such Holder, into Class B Common Stock (at
the conversion rate specified in the preceding
paragraph). The Conversion Agent shall notify the
Trust of the Holder's election to exchange Securities
for a portion of the Debentures held by the Trust and
the Trust shall, upon receipt of such notice, deliver
to the Conversion Agent the appropriate principal
amount of Debentures for exchange in accordance with
this Section. The Conversion Agent shall thereupon
notify Continental of the Holder's election to convert
such Debentures into shares of Class B Common Stock.
Holders of Securities at the close of business on a
Distribution record date will be entitled to receive
the Distribution payable on such securities on the
corresponding Distribution payment date notwithstanding
the conversion of such Securities following such record
date but prior to such distribution payment date.
Except as provided above, neither the Trust nor the
Sponsor will make, or be required to make, any payment,
allowance or adjustment upon any conversion on account
of any accumulated and unpaid Distributions whether or
not in arrears accrued on the Securities surrendered
for conversion, or on account of any accumulated and
unpaid dividends on the shares of Class B Common Stock
issued upon such conversion. Securities shall be
deemed to have been converted immediately prior to the
close of business on the day on which a Notice of
Conversion relating to such Securities is received the
Trust in accordance with the foregoing provision (the
"Conversion Date"). The Person or Persons entitled to
receive the Class B Common Stock issuable upon
conversion of the Debentures shall be treated for all
purposes as the record holder or holders of such Class
B Common Stock at such time. As promptly as
practicable on or after the Conversion Date,
Continental shall issue and deliver at the office of
the Conversion Agent a certificate or certificates for
the number of full shares of Class B Common Stock
issuable upon such conversion, together with the cash
payment, if any, in lieu of any fraction of any share
to the Person or Persons entitled to receive the same,
unless otherwise directed by the Holder in the notice
of conversion and the Conversion Agent shall distribute
such certificate or certificates to such Person or
Persons.
C. Each Holder of a Security by his acceptance thereof
appoints Wilmington Trust Company, not in its
individual capacity but solely as Trustee as conversion
agent (the "Conversion Agent") for the purpose of
effecting the conversion of Securities in accordance
with this Section. In effecting the conversion and
transactions described in this Section, the Conversion
Agent shall be acting as agent of the Holders of
Securities directing it to effect such conversion
transactions. The Conversion Agent is hereby
authorized (i) to exchange Securities from time to time
for Debentures held by the Trust in connection with the
conversion of such Securities in accordance with this
Section and (ii) to convert all or a portion of the
Debentures into Class B Common Stock and thereupon to
deliver such shares of Class B Common Stock in
accordance with the provisions of this Section and to
deliver to the Trust a new Debenture or Debentures for
any resulting unconverted principal amount provided,
however, that the Conversion Agent shall not reflect
any conversion of Securities if, after giving effect to
such conversion, the aggregate liquidation amount of
Common Securities outstanding shall be less than 3% of
the aggregate liquidation amount of Securities.
D. No fractional shares of Class B Common Stock will be
issued as a result of conversion, but in lieu thereof,
such fractional interest will be paid in cash by
Continental to the Trust in an amount equal to the
Current Market Price of the fractional share of the
Class B Common Stock, which in turn will make such
payment to the Holder or Holders of Securities so
converted.
E. Continental shall at all times reserve and keep
available out of its authorized and unissued Class B
Common Stock, solely for issuance upon the conversion
of the Debentures, such number of shares of Class B
Common Stock as shall from time to time be issuable
upon the conversion of all the Debentures then
outstanding. Notwithstanding the foregoing,
Continental shall be entitled to deliver upon
conversion of Debentures, shares of Class B Common
Stock reacquired and held in the treasury of
Continental (in lieu of the issuance of authorized and
unissued shares of Class B Common Stock), so long as
any such treasury shares are free and clear of all
liens, charges, security interests or encumbrances.
Any shares of Class B Common Stock issued upon
conversion of the Debentures shall be duly authorized,
validly issued and fully paid and nonassessable. The
Trust shall deliver the shares of Class B Common Stock
received upon conversion of the Debentures to the
converting Holder free and clear of all liens, charges,
security interests and encumbrances, except for United
States withholding taxes. Each of Continental and the
Trust shall prepare and shall use its best efforts to
obtain and keep in force such governmental or
regulatory permits or other authorizations as may be
required by law, and shall comply with all applicable
requirements as to registration or qualification of the
Class B Common Stock (and all requirements to list the
Class B Common Stock issuable upon conversion of
Debentures that are at the time applicable), in order
to enable Continental to lawfully issue Class B Common
Stock to the Trust upon conversion of the Debentures
and the Trust to lawfully deliver the Class B Common
Stock to each Holder upon conversion of the Securities.
F. Continental will pay any and all taxes that may be
payable in respect of the issue or delivery of shares
of Class B Common Stock on conversion of Debentures and
the delivery of the shares of Class B Common Stock by
the Trust upon conversion of the Securities.
Continental shall not, however, be required to pay any
tax which may be payable in respect of any transfer
involved in the issue and delivery of shares of Class B
Common Stock in a name other than that in which the
Securities so converted were registered, and no such
issue or delivery shall be made unless and until the
person requesting such issue has paid to the Trust the
amount of any such tax, or has established to the
satisfaction of the Trust that such tax has been paid.
G. Nothing in the preceding Paragraph (f) shall limit the
requirement of the Trust to withhold taxes pursuant to
the terms of the Securities or set forth in this Annex
I to the Declaration or to the Declaration itself or
otherwise require the Property Trustee or the Trust to
pay any amounts on account of such withholdings.
6. Voting Rights - Preferred Securities.
A. Except as provided under paragraph 6(b), in the
Business Trust Act and as otherwise required by law,
the Holders of the Preferred Securities will have no
voting rights.
B. Subject to the requirements set forth in this
paragraph, the Holders of a majority in liquidation
amount of the Preferred Securities, voting separately
as a class may direct the time, method, and place of
conducting any proceeding for any remedy available to
the Property Trustee, or direct the exercise of any
trust or power conferred upon the Property Trustee
under the Declaration, including the right to direct
the Property Trustee, as holder of the Debentures, to
(i) exercise the remedies available under the Indenture
with respect to the Debentures, (ii) waive any past
default and its consequences that is waivable under
Section 513 of the Indenture, (iii) exercise any right
to rescind or annul a declaration that the principal of
all the Debentures shall be due and payable or (iv)
consent to any amendment, modification or termination
of the Indenture or the Debentures requiring the
consent of the holders of the Debentures, provided,
however, that, where a consent or action under the
Indenture would require the consent or act of the
Holders of greater than a majority of the Holders in
principal amount of Debentures affected thereby (a
"Super Majority"), the Property Trustee may only give
such consent or take such action at the direction of
the Holders of at least the proportion in liquidation
amount of the Preferred Securities which the relevant
Super Majority represents of the aggregate principal
amount of the Debentures outstanding. The Property
Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the
Preferred Securities. Other than with respect to
directing the time, method and place of conducting any
remedy available to the Property Trustee or the
Debenture Trustee as set forth above, the Property
Trustee shall not take any action in accordance with
the directions of the Holders of the Preferred
Securities under this paragraph unless the Property
Trustee has obtained an opinion of independent tax
counsel to the effect that, as a result of such action,
the Trust will not fail to be classified as a grantor
trust or partnership for United States federal income
tax purposes and each Holder of Preferred Securities
will be treated as owning undivided beneficial
interests in the Debentures. If the Property Trustee
fails to enforce its rights, as holder of the
Debentures, under the Indenture, any Holder of
Preferred Securities may, after a period of 30 days has
elapsed from such Holder's written request to the
Property Trustee to enforce such rights, institute a
legal proceeding directly against the Debenture Issuer,
to enforce the rights of the Property Trustee, as
holder of the Debentures, under the Indenture, without
first instituting any legal proceeding against the
Property Trustee or any other Person.
Any approval or direction of Holders of Preferred
Securities may be given at a separate meeting of
Holders of Preferred Securities convened for such
purpose, at a meeting of all of the Holders of
Securities in the Trust or pursuant to written consent.
The Regular Trustees will cause a notice of any meeting
at which Holders of Preferred Securities are entitled
to vote, or of any matter upon which action by written
consent of such Holders is to be taken, to be mailed to
each Holder of record of Preferred Securities. Each
such notice will include a statement setting forth the
following information: (i) the date of such meeting or
the date by which such action is to be taken; (ii) a
description of any resolution proposed for adoption at
such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought;
and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the Holders of the Preferred
Securities will be required for the Trust to redeem and
cancel Preferred Securities or to distribute the
Debentures in accordance with the Declaration and the
terms of the Securities.
Notwithstanding that Holders of Preferred Securities
are entitled to vote or consent under any of the
circumstances described above, any of the Preferred
Securities that are owned by the Sponsor or any
Affiliate of the Sponsor shall not be entitled to vote
or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
7. Voting Rights - Common Securities.
A. Except as provided under paragraphs 7(b), (c) and 8, in
the Business Trust Act and as otherwise required by law
and the Declaration, the Holders of the Common
Securities will have no voting rights.
B. The Holders of the Common Securities are entitled, in
accordance with Article V of the Declaration, to vote
to appoint, remove or replace any Trustee.
C. Subject to Section 2.6 of the Declaration and only
after the Event of Default with respect to the
Preferred Securities has been cured, waived, or
otherwise eliminated and subject to the requirements of
the second to last sentence of this paragraph, the
Holders of a Majority in liquidation amount of the
Common Securities, voting separately as a class, may
direct the time, method, and place of conducting any
proceeding for any remedy available to the Property
Trustee, or exercising any trust or power conferred
upon the Property Trustee under the Declaration,
including (i) directing the time, method, place of
conducting any proceeding for any remedy waivable to
the Debenture Trustee, or exercising any trust or power
conferred on the Debenture Trustee with respect to the
Debentures, (ii) waive any past default and its
consequences that is waivable under Section 606 of the
Indenture, or (iii) exercise any right to rescind or
annul a declaration that the principal of all the
Debentures shall be due and payable, provided, that
where a consent or action under the Indenture would
require the consent or act of the Holders of greater
than a majority in principal amount of Debentures
affected thereby (a "Super Majority"), the Property
Trustee may only give such consent or take such action
at the direction of the Holders of at least the
proportion in liquidation amount of the Common
Securities which the relevant Super Majority represents
of the aggregate principal amount of the Debentures
outstanding. Pursuant to this paragraph 7(c), the
Property Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the
Preferred Securities. Other than with respect to
directing the time, method and place of conducting any
remedy available to the Property Trustee or the
Debenture Trustee as set forth above, the Property
Trustee shall not take any action in accordance with
the directions of the Holders of the Common Securities
under this paragraph unless the Property Trustee has
obtained an opinion of independent tax counsel to the
effect that, as a result of such action the Trust will
not fail to be classified as a grantor trust or a
partnership for United States federal income tax
purposes and each Holder of Common Securities will be
treated as owning undivided beneficial interests in the
Debentures. If the Property Trustee fails to enforce
its rights, as holder of the Debentures, under the
Indenture, any Holder of Common Securities may, after a
period of 30 days has elapsed from such Holder's
written request to the Property Trustee to enforce such
rights, institute a legal proceeding directly against
the Debenture Issuer, to enforce the Property Trustee's
rights, as holder of the Debentures, under the
Indenture, without first instituting any legal
proceeding against the Property Trustee or any other
Person.
Any approval or direction of Holders of Common
Securities may be given at a separate meeting of
Holders of Common Securities convened for such purpose,
at a meeting of all of the Holders of Securities in the
Trust or pursuant to written consent. The Regular
Trustees will cause a notice of any meeting at which
Holders of Common Securities are entitled to vote, or
of any matter upon which action by written consent of
such Holders is to be taken, to be mailed to each
Holder of record of Common Securities. Each such
notice will include a statement setting forth the
following information: (i) the date of such meeting or
the date by which such action is to be taken; (ii) a
description of any resolution proposed for adoption at
such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought;
and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the Holders of the Common
Securities will be required for the Trust to redeem and
cancel Common Securities or to distribute the
Debentures in accordance with the Declaration and the
terms of the Securities.
8. Amendments to Declaration and Indenture.
A. In addition to any requirements under Section 12.1 of
the Declaration, if any proposed amendment to the
Declaration provides for, or the Regular Trustees
otherwise propose to effect, (i) any action that would
adversely affect the powers, preferences or special
rights of the Securities, whether by way of amendment
to the Declaration or otherwise, or (ii) the
dissolution, winding-up or termination of the Trust,
other than as described in Section 8.1 of the
Declaration, then the Holders of outstanding Securities
voting together as a single class, will be entitled to
vote on such amendment or proposal (but not on any
other amendment or proposal) and such amendment or
proposal shall not be effective except with the
approval of the Holders of at least 66 2/3% in
liquidation amount of the Securities affected thereby,
provided, however, that if any amendment or proposal
referred to in clause (i) above would adversely affect
only the Preferred Securities or only the Common
Securities, then only the affected class will be
entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except
with the approval of 66 2/3% in liquidation amount of
such class of Securities.
B. In the event the consent of the Property Trustee as the
holder of the Debentures is required under the
Indenture with respect to any amendment, modification
or termination of the Indenture or the Debentures, the
Property Trustee shall request the direction of the
Holders of the Securities with respect to such
amendment, modification or termination and shall vote
with respect to such amendment, modification or
termination as directed by a Majority in liquidation
amount of the Securities voting together as a single
class; provided, however, that where a consent under
the Indenture would require the consent of the holders
of greater than a majority in aggregate principal
amount of the Debentures (a "Super Majority"), the
Property Trustee may only give such consent at the
direction of the Holders of at least the same
proportion in aggregate stated liquidation amount of
the Securities; provided, further, that the Property
Trustee shall not take any action in accordance with
the directions of the Holders of the Securities under
this paragraph 8(b) unless the Property Trustee has
obtained an opinion of tax counsel to the effect that
for the purposes of United States federal income tax
the Trust will not be classified as other than a
grantor trust or partnership on account of such action.
9. Pro Rata.
A reference in these terms of the Securities to any
payment, distribution or treatment as being "Pro Rata" shall mean
pro rata to each Holder of Securities according to the aggregate
liquidation amount of the Securities held by the relevant Holder
in relation to the aggregate liquidation amount of all Securities
outstanding unless, on any distribution date or redemption date
an Event of Default under the Declaration has occurred and is
continuing, in which case no payment of any distribution on, or
amount payable upon redemption of, any Common Security, and no
other payment on account of the redemption, liquidation or other
acquisition of Common Securities, shall be made unless payment in
full in cash of all accumulated and unpaid distributions on all
outstanding Preferred Securities for all distribution periods
terminating on or prior thereto, or in the case of payment of the
amount payable upon redemption of the Preferred Securities, the
full amount of such amount in respect of all outstanding
Preferred Securities shall have been made or provided for, and
all funds available to the Property Trustee shall first be
applied to the payment in full in cash of all Distributions on,
or the amount payable upon redemption of Preferred Securities
then due and payable.
10. Ranking.
The Preferred Securities rank pari passu and payment
thereon shall be made Pro Rata with the Common Securities except
that, where an Event of Default occurs and is continuing under
the Indenture in respect of the Debentures held by the Property
Trustee, the rights of Holders of the Common Securities to
payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the
rights to payment of the Holders of the Preferred Securities.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Preferred Securities and Common
Securities, by the acceptance thereof, agrees to the provisions
of the Preferred Securities Guarantee and the Common Securities
Guarantee, respectively, including the subordination provisions
therein and to the provisions of the Indenture.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive
rights to subscribe for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration.
The Sponsor will provide a copy of the Declaration, the
Preferred Securities Guarantee or the Common Securities Guarantee
(as may be appropriate), and the Indenture to a Holder without
charge on written request to the Sponsor at its principal place
of business.
EXHIBIT A-1
FORM OF PREFERRED SECURITY
[FORM OF FACE OF SECURITY]
[Include the following Restricted Securities Legend on all
Preferred Securities, including Rule 144A Global Preferred
Securities, Regulation S Global Preferred Securities, and Re-
stricted Definitive Preferred Securities, unless otherwise
determined by the Sponsor in accordance with applicable law --
THIS SECURITY, ANY CONVERTIBLE SUBORDINATED DEBENTURE ISSUED IN
EXCHANGE FOR THIS SECURITY AND ANY CLASS B COMMON STOCK ISSUED ON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CONTINENTAL
AIRLINES, INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THE SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE"), ONLY (A)
TO THE COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE
144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE
SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF
RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY
FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
"ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A
VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT
TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER
AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i)
PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM, AND (ii) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE FORM
APPEARING ON THIS SECURITY IS COMPLETED AND DELIVERED BY THE
TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
[Include if Preferred Security is a Regulation S Definitive
Preferred Security or any other Security issue in respect of a
Preferred Security initially issued in reliance on Regulation S
under the Securities Act -- SUBSEQUENT TRANSFERS OF THIS
SECURITY (OR ANY OTHER SECURITY REFERRED TO ABOVE) AND
REGISTRATION OF SUCH TRANSFERS ARE SUBJECT TO THE PRIOR
SATISFACTION OF THE CERTIFICATION REQUIREMENTS AS THE REGISTRAR
OR TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.]
[Include if Preferred Security is Restricted Definitive
Preferred Security -- IN CONNECTION WITH ANY TRANSFER, THE HOLDER
WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH
CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY
REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE
FOREGOING RESTRICTIONS.]
[Include if Preferred Security is in global form and The
Depository Trust Company is the U. S. Depository -- UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW
YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
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.]
[Include if Preferred Security is in global form --
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 THE DECLARATION
REFERRED TO BELOW.]
Certificate Number Number of Preferred
Securities
CUSIP NO. [ ]
Preferred Securities
of
Continental Airlines Finance Trust
8 1/2% Convertible Trust Originated Preferred Securities
(liquidation amount $50 per Preferred Security)
Continental Airlines Finance Trust, a statutory
business trust formed under the laws of the State of Delaware
(the "Trust"), hereby certifies that
_________________________________________________________________
(the "Holder") is the registered owner of preferred securities of
the Trust representing undivided beneficial interests in the
assets of the Trust designated the 8 1/2% Convertible Trust
Originated Preferred Securities (liquidation amount $50 per
Preferred Security) (the "Preferred Securities") . The Preferred
Securities are transferable on the books and records of the
Trust, in person or by a duly authorized attorney, upon surrender
of this certificate duly endorsed and in proper form for
transfer. The designation, rights, privileges, restrictions,
preferences and other terms and provisions of the Preferred
Securities represented hereby are issued and shall in all
respects be subject to the provisions of the Amended and Restated
Declaration of Trust of the Trust dated as of November 28, 1995,
as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Preferred
Securities as set forth in Annex I to the Declaration.
Capitalized terms used herein but not defined shall have the
meaning given them in the Declaration. The Holder is entitled to
the benefits of the Preferred Securities Guarantee to the extent
provided therein. The Sponsor will provide a copy of the
Declaration, the Preferred Securities Guarantee and the Indenture
to a Holder without charge upon written request to the Trust at
its principal place of business.
Reference is hereby made to select provisions of the
Preferred Securities set forth on the reverse hereof, which
select provisions shall for all purposes have the same effect as
if set forth at this place.
Upon receipt of this certificate, the Holder is bound
by the Declaration and is entitled to the benefits thereunder.
By acceptance of this Preferred Security, the Holder
agrees to treat, for United States federal income tax purposes,
the Debentures as indebtedness and the Preferred Securities as
evidence of indirect beneficial ownership in the Debentures.
By acceptance of this Preferred Security, the Holder
agrees to be bound by the terms of the Registration Rights
Agreement relating to the Preferred Securities and the Class B
Common Stock issuable upon conversion thereof.
Unless the Property Trustee's Certificate of Authenti-
cation hereon has been properly executed, these Preferred Securi-
ties shall not be entitled to any benefit under the Declaration
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Trust has executed this
certificate this day of _____________, l99_.
Continental Airlines Finance Trust
By: ______________________
Name: Jeffery A. Smisek
Title: Regular Trustee
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in
the within-mentioned Declaration.
Dated: __________, _____
WILMINGTON TRUST COMPANY,
not in its individual capacity but
solely as Property Trustee
By: ____________________
Authorized Signatory
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will
be fixed at a rate per annum of 8 1/2% (the "Coupon Rate") of the
stated liquidation amount of $50 per Preferred Security, such
rate being the rate of interest payable on the Debentures to be
held by the Property Trustee. Distributions in arrears for more
than one quarter will bear interest thereon compounded quarterly
at the Coupon Rate (to the extent permitted by applicable law)
The term "Distributions" as used herein includes such cash
distributions and any such interest payable unless otherwise
stated. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds
available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution
period on the basis of a 360-day year of twelve 30-day months,
and for any period shorter than a full quarterly Distribution
period for which Distributions are computed, Distributions will
be computed on the basis of the actual number of days elapsed per
30-day month.
Except as otherwise described below, distributions on
the Preferred Securities will be cumulative, will accrue from the
date of original issuance and will be payable quarterly in
arrears, on March 1, June 1, September 1, and December of each
year, commencing on March 1, 1996, to Holders of record on the
Business Day next preceding such payment dates, except as
otherwise provided in the indenture, which payment dates shall
correspond to the interest payment dates on the Debentures. The
Debenture Issuer has the right under the Indenture to defer
payments of interest by extending the interest payment period
from time to time on the Debentures for a period not exceeding 20
consecutive quarters (each an "Extension Period") and, as a
consequence of such deferral, Distributions will also be
deferred. Despite such deferral, quarterly Distributions will
continue to accrue with interest thereon (to the extent permitted
by applicable law) at the Coupon Rate compounded quarterly during
any such Extension Period. Prior to the termination of any such
Extension Period, the Debenture Issuer may further extend such
Extension Period; provided that such Extension Period together
with all such previous and further extensions thereof may not
exceed 20 consecutive quarters. Payments of accrued
Distributions will be payable to Holders as they appear on the
books and records of the Trust on the first record date after the
end of the Extension Period. Upon the termination of any
Extension Period and the payment of all amounts then due, the
Debenture Issuer may commence a new Extension Period, subject to
the above requirements.
The Preferred Securities shall be redeemable as
provided in the Declaration.
The Preferred Securities shall be convertible into
shares of Class B common stock of Continental Airlines, Inc.
("Class B Common Stock") , through (i) the exchange of Preferred
Securities for a portion of the Debentures and (ii) the immediate
conversion of such Debentures into Class B Common Stock, in the
manner and according to the terms set forth in the Declaration.
CONVERSION REQUEST
To: Wilmington Trust Company,
not in its individual capacity
but solely as Property Trustee of
Continental Airlines Finance Trust
The undersigned owner of these Preferred Securities
hereby irrevocably exercises the option to convert these
Preferred Securities, or the portion below designated, into Class
B Common Stock of CONTINENTAL AIRLINES, INC. (the "Class B Common
Stock") in accordance with the terms of the Amended and Restated
Declaration of Trust (the "Declaration") , dated as of November
28, 1995, by and among Lawrence W. Kellner and Jeffery A. Smisek,
as Regular Trustees, Wilmington Trust Company, not in its
individual capacity but solely as Delaware Trustee and as
Property Trustee, and Continental Airlines, Inc., as Sponsor.
Pursuant to the aforementioned exercise of the option to convert
these Preferred Securities, the undersigned hereby directs the
Conversion Agent (as that term is defined in the Declaration) to
(i) exchange such Preferred Securities for a portion of the
Debentures (as that term is defined in the Declaration) held by
the Trust (at the rate of exchange specified in the terms of the
Preferred Securities set forth as Annex I to the Declaration) and
(ii) immediately convert such Debentures on behalf of the
undersigned, into Class B Common Stock (at the conversion rate
specified in the terms of the Preferred Securities set forth as
Annex I to the Declaration).
The undersigned does also hereby direct the Conversion
Agent that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be
issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If
shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.
Any holder, upon the exercise of its conversion rights
in accordance with the terms of the Declaration and the Preferred
Securities, agrees to be bound by the terms of the Registration
Rights Agreement relating to the Class B Common Stock issuable
upon conversion of the Preferred Securities.
Date: __________, ____
in whole __ in part __
Number of Preferred Securities
to be converted:
____________________
If a name or names other than the
undersigned, please indicate in the
spaces below the name or names in
which the shares of Class B Common
Stock are to be issued, along with
the address or addresses of such
person or persons
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip code, and
Social Security or Other
Identifying Number
_______________________________________
_______________________________________
_______________________________________
Signature Guarantee:*__________________
__________________
* (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition
to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security to:
________________________________________________________________
________________________________________________________________
________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________
________________________________________________________________
________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________
________________________________________________________________
________________________________________________________________
agent to transfer this Preferred Security on the books of the
Trust. The agent may substitute another to act for him or her.
Date: ________________________
Signature: ___________________
(Sign exactly as your name appears on the other side of this
Preferred Security certificate)
Signature Guarantee: **_________________________________________
__________________
** (Signatuare must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or
participation in the Securities rnasfer Agents Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition
to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
____________________
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF
RESTRICTED PREFERRED SECURITIES
This certificate relates to ______________ Preferred Securities
held in (check applicable space) ____ book-entry or ____
definitive form by the undersigned.
(A) The undersigned (check one box below):
/ / has requested the Property Trustee by written order to
deliver in exchange for its beneficial interest in the Rule
144A Global Preferred Security held by the Depositary a
Preferred Security or Preferred Securities in definitive,
registered form in such number equal to its beneficial
interest in such Rule 144A Global Preferred Security (or the
number thereof indicated above); or
/ / has requested the Property Trustee by written order to
exchange its Preferred Security in definitive registered
form for an interest in the Rule 144A Global Preferred
Security held by the Depositary in such number equal to
number of Preferred Securities in definitive registered form
so held; or
/ / has requested the Property Trustee by written order to
exchange or register the transfer of a Preferred Security or
Preferred Securities.
(B) The undersigned confirms that such Securities are being
(check one box below)
(1) / / acquired for the undersigned's own account,
without
transfer (in satisfaction of Section 9.2(d) (i-i)
(A) ; or
(2) / / pursuant to and in compliance with Rule 144A under
the Securities Act of 1933; or
(3) / / pursuant to and in compliance with Regulation S
under the Securities Act of 1933; or
(4) / / pursuant to Rule 144 of the Securities Act of
1933.
Unless one of the boxes in (B) above is checked, the Property
Trustee will refuse to register any of the Preferred Securities
evidenced by this certificate in the name of any person other
than the registered Holder thereof; provided, however, that if
box (3) or (4) is checked, the Property Trustee may require,
prior to registering any such transfer of the Preferred
Securities such legal opinions, certifications and other
information as the Trust has reasonably requested to confirm that
such transfer is being made pursuant to an exemption from, or in
a transaction not subject to, the registration requirements of
the Securities Act of 1933, such as the exemption provided by
Rule 144 under such Act.
_____________________________
Signature
Signature Guarantee:***
___________________________ _____________________________
Signature must be guaranteed Signature
_________________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is
purchasing these Preferred Securities 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, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Trust 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: ________________
_____________________________________
NOTICE: To be executed by an
executive officer
__________________
*** (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition
to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
EXHIBIT A-2
FORM OF EXCHANGED PREFERRED SECURITY
[FORM OF FACE OF SECURITY]
[Include if Preferred Security is in global form and
the Depository Trust Company is the U. S. Depositary -- UNLESS
THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW
YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
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.]
[Include if Preferred Security is in global form --
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 THE DECLARATION
REFERRED TO BELOW.]
Certificate Number Number of Preferred Securities
CUSIP NO. [ ]
Preferred Securities
of
Continental Airlines Finance Trust
8-1/2% Convertible Preferred Securities
(liquidation amount $50 per Preferred Security)
Continental Airlines Finance Trust, a statutory
business trust formed under the laws of the State of Delaware
(the "Trust"), hereby certifies that (the "Holder") is the
registered owner of preferred securities of the Trust
representing undivided beneficial interests in the assets of the
Trust designated the 8-1/2% Convertible Trust Originated
Preferred Securities (liquidation amount $50 per Preferred
Security) (the "Preferred Securities"). The Preferred Securities
are transferable on the books and records of the Trust, in person
or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer. The
designation, rights, privileges, restrictions, preferences and
other terms and provisions of the Preferred Securities
represented hereby are issued and shall in all respects be
subject to the provisions of the Amended and Restated Declaration
of Trust of the Trust dated as of November 28, 1995, as the same
may be amended from time to time (the "Declaration"), including
the designation of the terms of the Preferred Securities as set
forth in Annex I to the Declaration. Capitalized terms used
herein but not defined shall have the meaning given them in the
Declaration. The Holder is entitled to the benefits of the
Preferred Securities Guarantee to the extent provided therein.
The Sponsor will provide a copy of the Declaration, the Preferred
Securities Guarantee and the Indenture to a Holder without charge
upon written request to the Trust at its principal place of
business.
Reference is hereby made to select provisions of the
Preferred Securities set forth on the reverse hereof, which
select provisions shall for all purposes have the same effect as
if set forth at this place.
Upon receipt of this certificate, the Holder is bound
by the Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United
States federal income tax purposes, the Debentures as
indebtedness and the Preferred Securities as evidence of indirect
beneficial ownership in the Debentures.
Unless the Property Trustee's Certificate of
Authentication hereon has been properly executed, these Preferred
Securities shall not be entitled to any benefit under the
Declaration or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Trust has executed this
certificate this day of ____________, 199__.
Continental Airlines Finance Trust
By: _____________________________
Name:
Title:
PROPERTY TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Preferred Securities referred to in
the within-mentioned Declaration.
Dated: _________, _____
WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Property Trustee
By: ___________________________
Authorized Signatory
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Security will
be fixed at a rate per annum of 8-1/2% (the "Coupon Rate") of the
stated liquidation amount of $50 per Preferred Security, such
rate being the rate of interest payable on the Debentures to be
held by the Property Trustee. Distributions in arrears for more
than one quarter will bear interest thereon compounded quarterly
at the Coupon Rate (to the extent permitted by applicable law).
The term "Distributions" as used herein includes such cash
distributions and any such interest payable unless otherwise
stated. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds
available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution
period on the basis of a 360-day year of twelve 30-day months,
and for any period shorter than a full quarterly Distribution
period for which Distributions are computed, Distributions will
be computed on the basis of the actual number of days elapsed per
30-day month.
Except as otherwise described below and in the
Declaration, distributions on the Preferred Securities will be
cumulative, will accrue from the date of original issuance and
will be payable quarterly in arrears, on March 1, June 1,
September 1 and December 1 of each year, commencing on March 1,
1996, to Holders of record one Business Day prior to such payment
dates, which payment dates shall correspond to the interest
payment dates on the Debentures. The Debenture Issuer has the
right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the
Debentures for a period not exceeding 20 consecutive quarters
(each an "Extension Period") and, as a consequence of such
deferral, Distributions will also be deferred. Despite such
deferral, quarterly Distributions will continue to accrue with
interest thereon (to the extent permitted by applicable law) at
the Coupon Rate compounded quarterly during any such Extension
Period. Prior to the termination of any such Extension Period,
the Debenture Issuer may further extend such Extension Period;
provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 20
consecutive quarters. Payments of accrued Distributions will be
payable to Holders as they appear on the books and records of the
Trust on the first record date after the end of the Extension
Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may
commence a new Extension Period, subject to the above
requirements.
The Preferred Securities shall be redeemable as
provided in the Declaration.
The Preferred Securities shall be convertible into
shares of Class B Common Stock of Continental Airlines, Inc.
("Class B Common Stock"), through (i) the exchange of Preferred
Securities for a portion of the Debentures and (ii) the immediate
conversion of such Debentures into Class B Common Stock, in the
manner and according to the terms set forth in the Declaration.
CONVERSION REQUEST
To: Wilmington Trust Company, not in its individual
capacity but solely as Property Trustee of Continental
Airlines Finance Trust
The undersigned owner of these Preferred Securities
hereby irrevocably exercises the option to convert these
Preferred Securities, or the portion below designated, into Class
B Common Stock of Continental Airlines, Inc. (the "Class B Common
Stock") in accordance with the terms of the Amended and Restated
Declaration of Trust (the "Declaration"), dated as of November
28, 1995, by and among Lawrence W. Kellner and Jeffery A. Smisek,
as Regular Trustees, Wilmington Trust Company, not in its
individual capacity but solely as Delaware Trustee and Property
Trustee and Continental Airlines, Inc., as Sponsor. Pursuant to
the aforementioned exercise of the option to convert these
Preferred Securities, the undersigned hereby directs the
Conversion Agent (as that term is defined in Annex I to the
Declaration) to (i) exchange such Preferred Securities for a
portion of the Debentures (as that term is defined in the
Declaration) held by the Trust (at the rate of exchange specified
in the terms of the Preferred Securities set forth as Annex I to
the Declaration) and (ii) immediately convert such Debentures on
behalf of the undersigned, into Class B Common Stock (at the
conversion rate specified in the terms of the Preferred
Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion
Agent that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be
issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If
shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.
Any holder, upon the exercise of its conversion rights
in accordance with the terms of the Declaration and the Preferred
Securities, agrees to be bound by the terms of the Registration
Rights Agreement relating to the Class B Common Stock issuable
upon conversion of the Preferred Securities.
Date: ____________, ____
in whole __ in part __
Number of Preferred Securities to
be converted: ___________________
If a name or names other than the
undersigned, please indicate in the
spaces below the name or names in
which the shares of Class B Common
Stock are to be issued, along with
the address or addresses of such
person or persons
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
_______________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other
Identifying Number
_______________________________________
_______________________________________
_______________________________________
Signature Guarantee:___________________
_______________
* (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requriements of the
Registrar, which requriements include membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition
to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Security Certificate to:
________________________________________________________________
________________________________________________________________
________________________________________________________________
(Insert assignee's social security or tax identification number)
________________________________________________________________
________________________________________________________________
________________________________________________________________
________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints
________________________________________________________________
________________________________________________________________
________________________________________________________________
agent to transfer this Preferred Security Certificate on the
books of the Trust. The agent may substitute another to act for
him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this
Preferred Security Certificate)
Signature Guarantee**:__________________________________________
** (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or partici-
pation in the Securities Transfer Agents Medallion Program
("STAMP") or such other "signature guarantee program" as may
be determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
EXHIBIT A-3
FORM OF COMMON SECURITY
[FORM OF FACE OF SECURITY]
[THIS COMMON SECURITY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION
FROM REGISTRATION OR AN EFFECTIVE REGISTRATION STATEMENT.]
[OTHER THAN AS PROVIDED IN THE DECLARATION (AS DEFINED
HEREIN), THIS SECURITY MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT TO A RELATED PARTY (AS DEFINED IN
THE DECLARATION) OF CONTINENTAL AIRLINES, INC.]
Certificate Number Number of Common Securities
Common Securities
of
Continental Airlines Finance Trust
8-1/2% Convertible Common Securities
(liquidation amount $50 per Convertible Common Security)
Continental Airlines Finance Trust, a statutory
business trust formed under the laws of the State of Delaware
(the "Trust"), hereby certifies that
_______________________________________________________________
(the "Holder") is the registered owner of common securities of
the Trust representing undivided beneficial interests in the
assets of the Trust designated the 8-1/2% Convertible Common
Securities (liquidation amount $50 per Convertible Common
Security) (the "Common Securities"). The Common Securities are
transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate
duly endorsed and in proper form for transfer. The designation,
rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities represented hereby are issued
and shall in all respects be subject to the provisions of the
Amended and Restated Declaration of Trust of the Trust dated as
of November 28, 1995, as the same may be amended from time to
time (the "Declaration"), including the designation of the terms
of the Common Securities as set forth in Annex I to the
Declaration. Capitalized terms used herein but not defined shall
have the meaning given them in the Declaration. The Holder is
entitled to the benefits of the Common Securities Guarantee to
the extent provided therein. The Sponsor will provide a copy of
the Declaration, the Common Securities Guarantee and the
Indenture to a Holder without charge upon written request to the
Sponsor at its principal place of business.
Reference is hereby made to select provisions of the
Common Securities set forth on the reverse hereof, which select
provisions shall for all purposes have the same effect as if set
forth at this place.
Upon receipt of this certificate, the Sponsor is bound
by the Declaration and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat for United
States federal income tax purposes the Debentures as indebtedness
and the Common Securities as evidence of indirect beneficial
ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this
certificate this day of ____________, 199__.
Continental Airlines Finance Trust
By: _____________________________
Name:
Title:
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Common Security will be
fixed at a rate per annum of 8-1/2% (the "Coupon Rate") of the
stated liquidation amount of $50 per Common Security, such rate
being the rate of interest payable on the Debentures to be held
by the Property Trustee. Distributions in arrears for more than
one quarter will bear interest thereon compounded quarterly at
the Coupon Rate (to the extent permitted by applicable law). The
term "Distributions" as used herein includes such cash
distributions and any such interest payable unless otherwise
stated. A Distribution is payable only to the extent that
payments are made in respect of the Debentures held by the
Property Trustee and to the extent the Property Trustee has funds
available therefor. The amount of Distributions payable for any
period will be computed for any full quarterly Distribution
period on the basis of a 360-day year of twelve 30-day months,
and for any period shorter than a full quarterly Distribution
period for which Distributions are computed, Distributions will
be computed on the basis of the actual number of days elapsed per
30-day month.
Except as otherwise described below and in the
Declaration, distributions on the Common Securities will be
cumulative, will accrue from the date of original issuance and
will be payable quarterly in arrears, on March 1, June 1,
September 1 and December 1 of each year, commencing on March 1,
1996, to Holders of record one (1) Business Day prior to such
payment dates, which payment dates shall correspond to the
interest payment dates on the Debentures. The Debenture Issuer
has the right under the Indenture to defer payments of interest
by extending the interest payment period from time to time on the
Debentures for a period not exceeding 20 consecutive quarters
(each an "Extension Period") and, as a consequence of such
deferral, Distributions will also be deferred. Despite such
deferral, quarterly Distributions will continue to accrue with
interest thereon (to the extent permitted by applicable law) at
the Coupon Rate compounded quarterly during any such Extension
Period. Prior to the termination of any such Extension Period,
the Debenture Issuer may further extend such Extension Period;
provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 20
consecutive quarters. Payments of accrued Distributions will be
payable to Holders as they appear on the books and records of the
Trust on the first record date after the end of the Extension
Period. Upon the termination of any Extension Period and the
payment of all amounts then due, the Debenture Issuer may
commence a new Extension Period, subject to the above
requirements.
The Common Securities shall be redeemable as provided
in the Declaration.
The Common Securities shall be convertible into shares
of Class B Common Stock of Continental Airlines, Inc. ("Class B
Common Stock") through (i) the exchange of Common Securities for
a portion of the Debentures and (ii) the immediate conversion of
such Debentures into Class B Common Stock, in the manner and
according to the terms set forth in the Declaration.
CONVERSION REQUEST
To: Wilmington Trust Company
not in its individual
capacity but solely as
Property Trustee of
Continental Airlines
Finance Trust
The undersigned owner of these Common Securities hereby
irrevocably exercises the option to convert these Common
Securities, or the portion below designated, into Class B Common
Stock of Continental Airlines Inc. (the "Class B Common Stock")
in accordance with the terms of the Amended and Restated
Declaration of Trust (the "Declaration"), dated as of November
28, 1995, by and among Lawrence W. Kellner and Jeffery A. Smisek,
as Regular Trustees, Wilmington Trust Company, not in its
individual capacity but solely as Delaware Trustee and Property
Trustee and Continental Airlines Inc., as Sponsor. Pursuant to
the aforementioned exercise of the option to convert these Common
Securities, the undersigned hereby directs the Conversion Agent
(as that term is defined in Annex I to the Declaration) to (i)
exchange such Common Securities for a portion of the Debentures
(as that term is defined in the Declaration) held by the Trust
(at the rate of exchange specified in the terms of the Common
Securities set forth as Annex I to the Declaration) and (ii)
immediately convert such Debentures on behalf of the undersigned,
into Class B Common Stock (at the conversion rate specified in
the terms of the Common Securities set forth as Annex I to the
Declaration).
The undersigned does also hereby direct the Conversion
Agent that the shares issuable and deliverable upon conversion,
together with any check in payment for fractional shares, be
issued in the name of and delivered to the undersigned, unless a
different name has been indicated in the assignment below. If
shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable
with respect thereto.
Any holder, upon the exercise of its conversion rights
in accordance with the terms of the Declaration and the Common
Securities, agrees to be bound by the terms of the Registration
Rights Agreement relating to the Class B Common Stock issuable
upon conversion of the Common Securities.
Date: ____________, ____
in whole __ in part __
Number of Common Securities to be
converted: _____________________
If a name or names other than the
undersigned, please indicate in the
spaces below the name or names in
which the shares of International
Paper Common Stock are to be
issued, along with the address or
addresses of such person or persons
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other
Identifying Number
________________________________________
________________________________________
________________________________________
Signature Guarantee:* __________________
_________________
* (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition
to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
_____________________
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Common Security Certificate to:
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Insert assignee's social security or tax identification number)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Insert address and zip code of assignee)
and irrevocably appoints ________________________________________
_________________________________________________________________
______________________________________________ agent to transfer
this Common Security Certificate on the books of the Trust. The
agent may substitute another to act for him or her.
Date: _______________________
Signature: __________________
(Sign exactly as your name appears on the other side of this
Common Security Certificate)
Signature Guarantee**: ___________________________________
___________________
** (Signature must be guaranteed by an "eligible guarantor
institution" that is, a bank, stockbroker, savings and loan
association or credit union meeting the requirements of the
Registrar, which requirements include membership or
participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Registrar in addition
to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.)
EXHIBIT B
FORM OF SECURITY
(Filed as Exhibit A-1 to Exhibit 4.4
to this Registration Statement)
EXHIBIT C
CONTINENTAL AIRLINES FINANCE TRUST
4,500,000
8 1/2% Convertible Trust Originated Preferred
Securitiessm ("Convertible TOPrSsm")
guaranteed by and convertible into
shares of Class B common stock of
CONTINENTAL AIRLINES, INC.
PURCHASE AGREEMENT
Dated: November 21, 1995
CONTINENTAL AIRLINES FINANCE TRUST
4,500,000
8 1/2% Convertible Trust Originated Preferred
Securitiessm ("Convertible TOPrSsm")
PURCHASE AGREEMENT
November 21, 1995
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SMITH BARNEY INC.
As representatives of the several
initial purchasers listed on Schedule A hereof
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
Continental Airlines Finance Trust (the "Trust"), a
statutory business trust organized under the Business Trust Act
(the "Delaware Act") of the State of Delaware (Chapter 38,
Title 12, of the Delaware Code, 12 Del. C. Section 3801 et
seq.), proposes to issue and sell to Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith & Co. Incorporated
("Merrill Lynch") and each of the other Initial Purchasers
named on Schedule A hereto (the "Initial Purchasers", which
term shall also include any initial purchaser substituted as
hereinafter provided in Section 12 hereof), for whom Merrill
Lynch, CS First Boston Corporation, Donaldson, Lufkin &
Jenrette Securities Corporation and Smith Barney Inc. are
acting as representatives (in such capacity, the
"Representatives"), in the respective amounts set forth on
Schedule A hereto, an aggregate of 4,500,000 8 1/2% Convertible
Trust Originated Preferred Securities, liquidation amount $50
per security (the "Firm Preferred Securities"), and, at the
election of the Initial Purchasers, solely to cover
overallotments, if any, in connection with the offering of the
Firm Preferred Securities, up to 675,000 additional 8 1/2%
Convertible Trust Originated Preferred Securities (the
"Additional Preferred Securities"). The Firm Preferred
Securities and any Additional Preferred Securities that the
Initial Purchasers elect to purchase are collectively referred
to as the "Preferred Securities." The Preferred Securities
will be convertible at the option of the holder thereof into
shares of Class B Common Stock, par value $.01 per share (the
"Class B Common Stock"), of Continental Airlines, Inc.
("Continental")
The Preferred Securities will be guaranteed by
Continental, to the extent set forth in the Offering Memorandum
(as defined below), with respect to distributions and amounts
payable upon liquidation or redemption (the "Preferred
Securities Guarantee") pursuant to the Preferred Securities
Guarantee Agreement (the "Preferred Securities Guarantee
Agreement") to be dated as of the Closing Time executed and
delivered by Continental and Wilmington Trust Company, not in
its individual capacity but solely as trustee, for the benefit
of the holders from time to time of the Preferred Securities.
The entire proceeds from the sale of the Preferred Securities
will be combined with the entire proceeds from the sale by the
Trust to Continental of its common securities (the "Common
Securities") guaranteed by Continental, to the extent set forth
in the Offering Memorandum, with respect to distributions and
amounts payable upon liquidation or redemption (the "Common
Securities Guarantee" and, together with the Preferred
Securities Guarantee, the "Guarantees") pursuant to the Common
Securities Guarantee Agreement (the "Common Securities
Guarantee Agreement" and, together with the Preferred
Securities Guarantee Agreement, the "Guarantee Agreements"), to
be dated as of the Closing Time, executed and delivered by
Continental for the benefit of the holders from time to time of
the Common Securities, and will be used by the Trust to
purchase the 8 1/2% Convertible Subordinated Deferrable Interest
Debentures due 2020 (the "Convertible Subordinated Debentures")
issued by Continental. The Preferred Securities and the Common
Securities will be issued pursuant to the amended and restated
declaration of trust of the Trust, to be dated as of the
Closing Time (the "Declaration"), among Continental, as
Sponsor, the trustees named therein (the "Trustees") and the
holders from time to time of undivided beneficial interests in
the assets of the Trust. The Convertible Subordinated
Debentures will be issued pursuant to an Indenture, to be dated
as of the Closing Time (the "Indenture"), among Continental and
Wilmington Trust Company, as trustee (the "Indenture Trustee").
The Preferred Securities, Preferred Securities Guarantee,
Convertible Subordinated Debentures and Conversion Shares (as
defined below) are collectively referred to herein as the
"Securities". This Agreement, the Indenture, the Declaration,
the Guarantee Agreements, the Securities and the Registration
Rights Agreement (as defined below) are referred to
collectively as the "Operative Documents." Capitalized terms
used herein without definition have the respective meanings
specified in the Offering Memorandum.
The Preferred Securities will be offered and sold to
the Initial Purchasers without registration under the
Securities Act of 1933, as amended (the "Act"), in reliance
upon exemptions from the registration requirements of the Act.
In connection with the sale of the Preferred Securities, the
Trust and Continental have prepared a preliminary offering
memorandum dated November 9, 1995 (the "Preliminary Offering
Memorandum") and a final offering memorandum dated the date
hereof (such final offering memorandum, in the form first
furnished to the Initial Purchasers for use in connection with
the offering of the Preferred Securities, or if such form is
not so used, in the form subsequently furnished for such use,
the "Offering Memorandum"), each setting forth certain
information concerning the Trust, Continental and the
Securities. The Trust and Continental hereby confirm that they
have authorized the use of the Preliminary Offering Memorandum
and the Offering Memorandum in connection with the offer and
resale of the Preferred Securities by the Initial Purchasers.
Unless stated to the contrary, all references herein to the
Offering Memorandum are to the Offering Memorandum at the date
hereof (the "Execution Time") and are not meant to include any
amendment or supplement thereto subsequent to the Execution
Time. If the Trust and Continental prepare a supplement dated
the date hereof to the Preliminary Offering Memorandum
containing only pricing related information, then the term
"Offering Memorandum" for purposes of this Agreement shall
refer collectively to the Preliminary Offering Memorandum and
such supplement.
The Trust and Continental understand that the Initial
Purchasers propose to make an offering of the Preferred
Securities only on the terms, subject to the conditions and in
the manner set forth in the Offering Memorandum and Section 4
hereof, as soon as the Initial Purchasers deem advisable after
this Agreement has been executed and delivered.
The Initial Purchasers and other holders of
Securities (including subsequent transferees) will be entitled
to the benefits of the registration rights agreement, to be
dated as of the Closing Time (as defined below) (the
"Registration Rights Agreement") among the Trust, Continental
and the Initial Purchasers, in the form attached hereto as
Exhibit A. Pursuant to the Registration Rights Agreement, the
Trust and Continental will agree to file with the Securities
and Exchange Commission (the "Commission") under the
circumstances set forth therein a shelf registration statement
pursuant to Rule 415 under the Act relating to the resale of
(i) the Preferred Securities, (ii) the Convertible Subordinated
Debentures and (iii) the shares of Class B Common Stock of
Continental initially issuable upon conversion of the
Convertible Subordinated Debentures (the "Conversion Shares")
by holders thereof, and to use their best efforts to cause such
shelf registration statement to be declared effective.
SECTION 1. Representations and Warranties. (a) The
Trust and Continental represent and warrant, jointly and
severally, to the Initial Purchasers as of the date hereof
that:
(i) As of their respective dates, none of the
Offering Memorandum or any amendment or supplement
thereto, and as of the Closing Time, the Offering
Memorandum, as amended or supplemented to such time,
contained or will contain an untrue statement of a
material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made,
not misleading; provided, that this representation and
warranty does not apply to statements or omissions made in
reliance upon and in conformity with information furnished
in writing by the Initial Purchasers to Continental
expressly for use in the Offering Memorandum or any
amendment or supplement thereto.
(ii) Each of the Preferred Securities, the
Preferred Securities Guarantee and the Convertible
Subordinated Debentures satisfy the eligibility
requirements of Rule 144A(d)(3) under the Act.
(iii) None of the Trust, Continental, any of their
affiliates (as such term is defined in Rule 501(b) of
Regulation D under the Act ("Regulation D")), or any
person acting on behalf of the foregoing (other than the
Initial Purchasers, as to which no representation or
warranty is made) has, directly or indirectly, made offers
or sales of any security, or solicited offers to buy any
security, under circumstances that would require the
registration of the Securities under the Act.
(iv) None of the Trust, Continental or any of
their affiliates (as such term is defined in Rule 501(b)
of Regulation D) or any person (other than the Initial
Purchasers, as to which no representation or warranty is
made) acting on the Trust's or Continental's behalf has
engaged, in connection with the offering of the
Securities, (A) in any form of general solicitation or
general advertising within the meaning of Rule 502(c)
under the Act or (B) in any directed selling efforts
within the meaning of Rule 902 under the Act in the United
States in connection with the Securities being offered and
sold pursuant to Regulation S under the Act, and each of
them has complied with the offering restrictions
requirement of Regulation S under the Act.
(v) Assuming the accuracy of the representations
and warranties and compliance with the agreements of the
Initial Purchasers in Section 4, it is not necessary in
connection with the offer, sale and delivery of the
Preferred Securities to the Initial Purchasers, or in
connection with the initial resale of the Preferred
Securities by the Initial Purchasers in accordance with
this Agreement, to register the Securities under the Act
or to qualify the Indenture, the Guarantees or the
Declaration under the Trust Indenture Act of 1939, as
amended (the "TIA").
(vi) The accountants that examined and certified
the consolidated financial statements of Continental
included in the Offering Memorandum are independent public
accountants within the meaning of the Act and the
applicable rules and regulations thereunder.
(vii) The audited and unaudited consolidated
financial statements of Continental included in the
Offering Memorandum, together with the related notes
thereto, present fairly in all material respects the
financial position, results of operations and cash flows
of Continental and its consolidated subsidiaries, at the
dates and for the periods to which they relate, and,
except as otherwise stated in the Offering Memorandum,
have been prepared in accordance with United States
generally accepted accounting principles ("GAAP").
(viii) Since the respective dates as of which
information is given in the Offering Memorandum, except as
otherwise specifically stated therein, there has been no
(A) material adverse change in the financial condition,
properties, assets or results of operations of Continental
and its consolidated subsidiaries taken as a whole,
whether or not arising in the ordinary course of business
(a "Material Adverse Change"), (B) transaction entered
into by Continental or any of its consolidated
subsidiaries, other than in the ordinary course of
business, that is material to Continental and its
consolidated subsidiaries, taken as a whole, or (C) divi-
dend or distribution of any kind declared, paid or made by
Continental on its capital stock (other than declarations
or scheduled payments of dividends on Continental's
outstanding preferred stock in additional shares of such
preferred stock).
(ix) The only subsidiaries of Continental that
are "significant subsidiaries" within the meaning of Rule
1-02(w) of Regulation S-X under the Act as of the date
hereof are Air Micronesia, Inc. and Continental
Micronesia, Inc., each a Delaware corporation
(collectively, together with Continental Express, Inc., a
Delaware corporation, the "Subsidiaries"). Continental
and each of the Subsidiaries has been duly incorporated
and is validly existing in good standing as a corporation
under the laws of its respective jurisdiction of
incorporation, with corporate power and authority, (a) to
own, lease and operate its respective properties and to
conduct its respective business as now conducted and as
described in the Offering Memorandum and (b) with respect
to Continental, to enter into, deliver, incur and perform
its obligations under the Operative Documents; and each is
duly qualified to transact business as a foreign
corporation in good standing in each jurisdiction where
the ownership or leasing of its respective properties or
the conduct of its respective businesses requires such
qualification, except where the failure to be so qualified
would not have a material adverse effect on the business,
financial condition, assets or results of operations of
Continental and its consolidated subsidiaries taken as a
whole (a "Material Adverse Effect").
(x) Except for subsequent issuances, if any,
pursuant to this Agreement, upon conversion or exchange of
capital stock of Continental as permitted or required
under Continental's charter or upon issuance of stock or
exercise of stock options or warrants pursuant to employee
benefit plans or outstanding as of the date hereof,
Continental has the authorized, issued and outstanding
capitalization set forth in the Offering Memorandum under
the caption "Capitalization"; all of the outstanding
capital stock of Continental has been duly authorized and
validly issued, is fully paid and nonassessable; and the
authorized capital stock of Continental conforms in all
material respects to the statements relating thereto in
the Offering Memorandum. All of the outstanding capital
stock of each of the Subsidiaries has been duly authorized
and validly issued, is fully paid and nonassessable and,
except as set forth in the Offering Memorandum, the
outstanding shares of capital stock of the Subsidiaries
owned by Continental, directly or indirectly, are owned
free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity.
(xi) The Trust has been duly created and is
validly existing in good standing as a business trust
under the Delaware Act with the power and authority to own
property and to conduct its business as described in the
Offering Memorandum and to enter into and perform its
obligations under this Agreement, the Preferred
Securities, the Common Securities and the Declaration; the
Trust is duly qualified to transact business as a foreign
corporation in good standing in each jurisdiction in which
such qualification is necessary, except to the extent that
the failure to so qualify would not have a material
adverse effect on the Trust; the Trust is not a party to
or otherwise bound by any agreement other than those
described in the Offering Memorandum; the Trust is not
and, assuming compliance by the Trust with the
Declaration, will not be classified as an association
taxable as a corporation for United States federal income
tax purposes.
(xii) The Common Securities have been duly
authorized by the Declaration and, when issued and
delivered by the Trust to Continental against payment
therefor as described in the Offering Memorandum, will be
validly issued and (subject to the terms of the
Declaration) fully paid and nonassessable undivided
beneficial interests in the assets of the Trust and will
conform in all material respects to all statements
relating thereto in the Offering Memorandum; the issuance
of the Common Securities is not subject to preemptive or
other similar rights; and at the Closing Time, all of the
issued and outstanding Common Securities of the Trust will
be directly owned by Continental free and clear of any
security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
(xiii) The Declaration has been duly authorized by
Continental and, at the Closing Time, will have been duly
executed and delivered by Continental and the Regular
Trustees (as defined in the Declaration), and assuming due
authorization, execution and delivery of the Declaration
by the Property Trustee (as defined in the Declaration),
the Declaration will, at the Closing Time, be a valid and
binding obligation of Continental and the Regular
Trustees, enforceable against Continental and the Regular
Trustees in accordance with its terms, subject to
applicable bankruptcy, insolvency and similar laws
affecting creditors' rights generally and to general
principles of equity (the "Bankruptcy Exceptions") and
will conform in all material respects to all statements
relating thereto in the Offering Memorandum.
(xiv) Each of the Common Securities Guarantee
Agreement and the Preferred Securities Guarantee Agreement
has been duly authorized by Continental and, when validly
executed and delivered by Continental (and assuming due
authorization, execution and delivery of the Preferred
Securities Guarantee Agreement by Wilmington Trust
Company, not in its individual capacity but solely as
trustee), will constitute a valid and binding obligation
of Continental, enforceable against Continental in
accordance with its terms, subject to the Bankruptcy
Exceptions, and the Guarantees and the Guarantee
Agreements will conform in all material respects to all
statements relating thereto in the Offering Memorandum.
(xv) The Preferred Securities have been duly
authorized by the Declaration and, when authenticated in
the manner provided for in the Declaration and issued and
delivered pursuant to this Agreement against payment of
the consideration set forth herein, will be validly issued
and (subject to the terms of the Declaration) fully paid
and nonassessable undivided beneficial interests in the
assets of the Trust and will conform in all material
respects to all statements relating thereto in the
Offering Memorandum; the issuance of the Preferred
Securities is not subject to preemptive or other similar
rights; and holders of Preferred Securities will be
entitled to the same limitation of personal liability
extended to stockholders of private corporations for
profit incorporated under the General Corporation Law of
the State of Delaware.
(xvi) The Indenture has been duly authorized by
Continental and, when validly executed and delivered by
Continental (and assuming due authorization, execution and
delivery by the Indenture Trustee), will constitute a
valid and binding agreement of Continental, enforceable
against Continental in accordance with its terms, subject
to the Bankruptcy Exceptions; and the Indenture will
conform in all material respects to all statements
relating thereto in the Offering Memorandum.
(xvii) The Convertible Subordinated Debentures have
been duly authorized by Continental and, at the Closing
Time, will have been duly executed by Continental and,
when authenticated in the manner provided for in the
Indenture and delivered against payment therefor as
described in the Offering Memorandum, will constitute
valid and binding obligations of Continental, enforceable
against Continental in accordance with their terms,
subject to the Bankruptcy Exceptions; and the Convertible
Subordinated Debentures will be entitled to the benefits
of the Indenture and will conform in all material respects
to all statements relating thereto in the Offering
Memorandum.
(xviii) Continental's obligations under the
Preferred Securities Guarantee and Common Securities
Guarantee are (a) subordinate and junior in right of
payment to all other liabilities of Continental, except any
liabilities that may be made pari passu expressly by their
terms, and (b) pari passu with the most senior preferred
stock issued by Continental and any guarantee now or
hereafter entered into by Continental in respect of any
preferred or preference stock or preferred securities of
any affiliate of Continental.
(xix) The Convertible Subordinated Debentures are
subordinated and junior in right of payment to all Senior
Indebtedness (as defined in the Indenture) of Continental.
(xx) Neither the Trust nor Continental is an
"investment company" within the meaning of the Investment
Company Act of 1940.
(xxi) The Conversion Shares have been duly
authorized and validly reserved for issuance upon
conversion of the Convertible Subordinated Debentures by
all necessary corporate action of Continental and, when
duly issued by Continental upon such conversion, will be
validly issued, fully paid and nonassessable; no holder
thereof will be subject to personal liability for
obligations of Continental solely by reason of being such
a holder; and, except as disclosed in the Offering
Memorandum, the issuance of the Conversion Shares will not
be subject to preemptive or similar rights.
(xxii) Neither Continental nor any of the
Subsidiaries is in violation of its respective charter and
the Trust is not in violation of the Declaration, and none
of Continental, any of the Subsidiaries or the Trust,
except as disclosed in the Offering Memorandum, is in
default (or, with notice or lapse of time or both, would
be in default) in the performance or observance of any
obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease or other instrument to which it is
a party or by which it is bound, or to which any of its
respective assets or properties is subject, which default
or violation would have a Material Adverse Effect.
(xxiii) The Trust and Continental each have all
corporate power to enter into this Agreement and the
Registration Rights Agreement. This Agreement has been
and, as of the Closing Time, the Registration Rights
Agreement will have been, duly authorized, executed and
delivered by each of the Trust and Continental and upon
such execution by each of the Trust and Continental
(assuming the due authorization, execution and delivery of
such agreements by the other parties thereto) this
Agreement and the Registration Rights Agreement will
constitute the valid and binding obligations of each of
the Trust and Continental enforceable against each of the
Trust and Continental in accordance with the terms hereof
or thereof, subject to the Bankruptcy Exceptions and
except as the enforcement of indemnification and
contribution provisions hereof and thereof may be limited
by applicable law.
(xxiv) The issuance, sale and delivery of the
Securities, the execution, delivery and performance by
Continental of this Agreement, the Declaration, the
Indenture, the Guarantee Agreements and the Registration
Rights Agreement, the consummation by Continental and the
Trust of the transactions contemplated hereby and thereby
and the application of the proceeds of the Preferred
Securities as described in the Offering Memorandum and the
compliance by Continental and the Trust with the terms of
the foregoing do not, and, at the Closing Time, will not,
conflict with or constitute or result in a breach or
violation by Continental, the Trust or any of the
Subsidiaries of (A) any of the terms or provisions of, or
constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) by
Continental, the Trust or any of the Subsidiaries, or give
rise to any right to accelerate the maturity or require
the prepayment of any indebtedness under, or result in the
creation or imposition of any lien, charge or encumbrance
upon any property or assets of Continental, the Trust or
any of the Subsidiaries under, any contract, indenture,
mortgage, deed of trust, loan agreement, note, lease, or
other instrument to which Continental, the Trust or any of
the Subsidiaries is a party or by which any of them may be
bound, or to which any of them or any of their respective
assets or properties is subject, which individually or in
the aggregate would (1) have or result in a Material
Adverse Effect, or (2) materially affect the consummation
of the transactions contemplated in the Operative
Documents and the application of the proceeds of the
Preferred Securities as described in the Offering
Memorandum; and Continental has no knowledge of any
conflict, breach or violation of such terms or provisions
or of any such default, in any such case, which has
occurred or will so result, (B) the respective charters or
by-laws of Continental and the Subsidiaries or (C) any
applicable law, administrative regulation or
administrative or court decree which would have or result
in a Material Adverse Effect, or materially affect the
consummation of the transactions contemplated in the
Operative Documents and the application of the proceeds of
the Preferred Securities as described in the Offering
Memorandum.
(xxv) Except as disclosed in the Offering
Memorandum, to the knowledge of Continental, no material
labor problem, dispute or disturbance with the employees
of Continental or any of the Subsidiaries exists or is
threatened.
(xxvi) Except as disclosed in the Offering
Memorandum, there is no legal action, suit or proceeding
before or by any court or governmental body or agency,
domestic or foreign, now pending or, to the knowledge of
Continental, threatened against Continental or any of the
Subsidiaries which would, individually or in the
aggregate, have a Material Adverse Effect or which could
reasonably be expected to have a material adverse effect
on the power or ability of Continental to perform its
obligations under the Operative Documents or to consummate
the transactions contemplated hereby or thereby. Except
as disclosed in the Offering Memorandum, neither
Continental nor any of the Subsidiaries has received any
notice or claim of any default (or event which with notice
or lapse of time or both would result in a default) under
any of its respective material contracts or has knowledge
of any breach of any of such contracts by the other party
or parties thereto, except such defaults or breaches as
would not result in a Material Adverse Effect.
(xxvii) No authorization, approval or consent of any
court or governmental authority or agency is necessary in
connection with the offering, issuance or sale of the
Preferred Securities by the Trust and the Guarantees,
Convertible Subordinated Debentures and Conversion Shares
by Continental in the United States hereunder, except such
as may be required under the Act, the Securities Exchange
Act of 1934, as amended, the Trust Indenture Act of 1939
or National Association of Securities Dealers, Inc.
("NASD") rules in connection with the registration under
the Act of the Securities pursuant to the Registration
Rights Agreement, and except such as may be required under
state securities laws.
(xxviii) Except as could not reasonably be expected
to have a Material Adverse Effect, Continental and the
Subsidiaries possess such permits issued by the
appropriate state, federal or foreign regulatory agencies
or bodies necessary to conduct their respective businesses
in the manner described in the Offering Memorandum.
Neither Continental nor any of the Subsidiaries has
received any notice of proceedings relating to the
revocation or modification of any such certificate,
authority or permit which, singly or in the aggregate, if
the subject of any unfavorable decision, ruling or
finding, would have a Material Adverse Effect.
(xxix) Except as disclosed in the Offering
Memorandum, there is no claim pending or to the knowledge
of Continental threatened under any Environmental Law (as
defined below) against Continental or the Subsidiaries
which could reasonably be expected, singly or in the
aggregate, to result in a Material Adverse Effect; to the
knowledge of Continental there are no past or present
actions, conditions, events, circumstances or practices,
including, without limitation, the release of any
Hazardous Material (as defined below) that could
reasonably be expected to form the basis of any such claim
under any Environmental Law against Continental or the
Subsidiaries which would, singly or in the aggregate,
result in a Material Adverse Effect. The term
"Environmental Law" means the common law and any federal,
state, local or foreign law, rule or regulation, code,
order, decree, judgment or injunction, issued,
promulgated, approved or entered thereunder relating to
pollution or protection of public or employee health or
the environment, including, without limitation, the
Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, the Resource
Conservation and Recovery Act, as amended, the Toxic
Substance Control Act, as amended, the Clean Air Act, as
amended, and the Federal Water Pollution Act, as amended,
and their foreign, state and local counterparts or
equivalents and any other laws relating to (i) releases of
any Hazardous Material into the environment (including,
without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport, presence or handling of any
Hazardous Material, or (iii) underground storage tanks and
related piping, and releases therefrom. The term
"Hazardous Material" means any pollutant, contaminant,
chemical, hazardous material, or industrial, toxic or
hazardous substance or waste (including, without
limitation, petroleum, including crude oil or any fraction
thereof or any petroleum product) regulated by or the
subject of any Environmental Law.
(xxx) There are no persons with registration
rights or other similar rights to have any securities of
Continental (other than the Securities) registered under
any registration statement contemplated by the
Registration Rights Agreement, other than (i) the holders
of each of the Series A 6% Convertible Secured Debentures
due 2002, the Series B 8% Convertible Secured Debentures
due 2000 and the 10.22% Series A Unsecured Sinking Fund
Notes due 2000 of Continental, (ii) Air Partners, L.P. and
(iii) Air Canada.
(xxxi) The Preferred Securities have been
designated
PORTAL eligible securities in accordance with the rules
and regulations of the NASD.
(b) Any certificate signed by any officer of
Continental and delivered to the Initial Purchasers or to
counsel for the Initial Purchasers pursuant to the terms of
this Agreement shall be deemed a representation and warranty by
Continental to the Initial Purchasers as to the matters covered
thereby.
SECTION 2. Purchase and Sale of the Securities.
Subject to the terms and conditions and in reliance
on the representations and warranties of the Initial Purchasers
set forth herein, the Trust agrees to sell to the Initial
Purchasers and, subject to the terms and conditions and in
reliance upon the representations and warranties of the Trust
and Continental herein set forth, the Initial Purchasers agree,
severally and not jointly, to purchase from the Trust, at a
purchase price of $50 per Firm Preferred Security, (a) an
aggregate of 4,500,000 Firm Preferred Securities, and (b) in
the event and to the extent that the Initial Purchasers shall
elect to purchase Additional Preferred Securities pursuant to
the paragraph immediately following, an aggregate of up to
675,000 Additional Preferred Securities.
The Trust hereby grants to the Initial Purchasers the
right to purchase at their election up to 675,000 Additional
Preferred Securities, at the purchase price per security set
forth in the immediately preceding paragraph, for the sole
purpose of covering overallotments in the sale of the Firm
Preferred Securities. Any such election to purchase Additional
Preferred Securities shall be exercised by written notice from
the Initial Purchasers to Continental and the Trust, within 30
days after the date of this Agreement, setting forth the
aggregate number of Additional Preferred Securities to be
purchased and the date on which such Additional Preferred
Securities are to be delivered. Any such time and date of
delivery (a "Date of Delivery") shall be determined by the
Representatives, but shall not be later than three business
days after the exercise of said option, nor in any event prior
to the Closing Time, as hereinafter defined, unless otherwise
agreed by the Representatives, Continental and the Trust. If
the option is exercised as to all or any portion of the
Additional Preferred Securities, each of the Initial
Purchasers, acting severally and not jointly, will purchase
that proportion of the total number of Additional Preferred
Securities then being purchased which the number of Firm
Preferred Securities set forth in Schedule A opposite the name
of such Initial Purchaser bears to the total number of Firm
Preferred Securities, subject in each case to such adjustments
as the Representatives in their discretion shall make to
eliminate any sales or purchases of fractional securities.
As compensation to the Initial Purchasers for their
commitments hereunder and in view of the fact that the proceeds
of the sale of the Securities will be used to purchase the
Convertible Subordinated Debentures, Continental hereby agrees
to pay at the Closing Time and at any Date of Delivery to the
Representatives, for the accounts of the Initial Purchasers, a
commission of $1.50 per Preferred Security purchased by the
Initial Purchasers.
SECTION 3. Delivery and Payment. Delivery of and
payment for the Firm Preferred Securities shall be made at
10:00 A.M., New York City time, on November 28, 1995, or such
later date and time not more than two (2) business days
thereafter as the Representatives, Continental and the Trust
shall agree (such date and time of delivery and payment for the
Firm Preferred Securities being herein called the "Closing
Time"). In addition, in the event that any or all of the
Additional Preferred Securities are purchased by the Initial
Purchasers, payment of the purchase price for, and delivery of
certificates for, such Additional Preferred Securities shall be
made at the offices of Cahill Gordon & Reindel, 80 Pine Street,
New York, New York, or at such other place as shall be agreed
upon by the Representatives, Continental and the Trust, on the
Date of Delivery as specified in the notice from the
Representatives to Continental and the Trust. Delivery of the
Firm Preferred Securities and the Additional Preferred
Securities, if any, shall be made to the Initial Purchasers
against payment by the Initial Purchasers of the purchase price
thereof by wire transfer or certified or official bank check or
checks payable in New York Clearing House (next day) funds to
the order of the Trust or as the Trust may direct. Delivery of
the Firm Preferred Securities and the Additional Preferred
Securities, if any, in definitive form shall be made at such
location as the Initial Purchasers shall reasonably designate
at least two business days in advance of the Closing Time or
the Date of Delivery, as the case may be, and payment for the
Securities shall be made at the offices of Cahill Gordon &
Reindel, 80 Pine Street, New York, New York. Certificates for
the Firm Preferred Securities and the Additional Preferred
Securities, if any, shall be registered in such names and in
such denominations as the Initial Purchasers may request not
less than two full business days in advance of the Closing Time
or the Date of Delivery, as the case may be.
The Trust agrees to have the Preferred Securities
available for inspection, checking and packaging by the Initial
Purchasers in New York, New York, not later than 10:00 A.M. on
the business day prior to the Closing Time or the Date of
Delivery, as the case may be.
SECTION 4. Resale of the Securities. (a) The
Initial Purchasers have advised the Trust and Continental that
they propose to offer the Securities for resale upon the terms
and conditions set forth in this Agreement and in the Offering
Memorandum. The Initial Purchasers hereby represent and
warrant to, and agree with, the Trust and Continental that the
Initial Purchasers are Qualified Institutional Buyers, and
they, their affiliates and any person acting on behalf of them
or their affiliates, (i) have not and will not solicit offers
for, or offer or sell, the Securities by means of any form of
general solicitation or general advertising (as those terms are
used in Regulation D under the Act) or in any manner involving
a public offering within the meaning of Section 4(2) of the Act
and have not engaged and will not engage in any directed
selling efforts within the meaning of Rule 902 under the Act in
the United States in connection with the Securities being
offered and sold pursuant to Regulation S under the Act, and
have complied and will comply with the offering restrictions
requirement of Regulation S under the Act (ii) are not
purchasing with a view to or for offer or sale in connection
with any distribution that would be in violation of federal or
state law and (iii) have solicited and will solicit offers for
such Securities pursuant to Rule 144A, Regulation S or resales
not involving a public offering, as applicable, only from, and
will offer, sell or deliver the Securities, as part of their
initial offering, only to (A) persons in the United States whom
the Initial Purchasers reasonably believe to be Qualified
Institutional Buyers or, if any such person is buying for one
or more institutional accounts for which such person is acting
as fiduciary or agent, only when such person has represented to
the Initial Purchasers that each such account is a Qualified
Institutional Buyer, to whom notice has been given that such
sale or delivery is being made in reliance on Rule 144A, and,
in each case, in transactions under Rule 144A, (B) a limited
number of other institutional investors whom the Initial
Purchasers reasonably believe to be "accredited investors" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D)
that are purchasing for their own accounts or for the account
of an institutional accredited investor for investment purposes
and not with a view to, or for offer or sale in connection
with, any distribution of the Securities in violation of
federal or state law and (C) non-U.S. persons outside the
United States to whom offers and sales of the Securities may be
made in reliance upon Regulation S under the Act in
transactions meeting the requirements of Regulation S; provided
that with respect to clauses (B) and (C), each such transfer of
Securities is effected by the delivery to such purchaser of
Securities in definitive form and registered in its name (or
its nominee's name) on the books maintained by the transfer
agent; and provided, further, that with respect to clauses (B)
and (C), such institutional accredited investors and non-U.S.
persons shall be required to complete and deliver a purchaser
questionnaire (substantially in the form of Exhibit A to the
Offering Memorandum) to the Initial Purchasers prior to the
confirmation of any order.
(b) In connection with sales outside the United
States pursuant to clause (C) of Section 4(a), each Initial
Purchaser represents and warrants to and agrees with
Continental and the Trust that it has not offered or sold, and
will not offer, sell or deliver Securities to, or for the
account or benefit of, U.S. persons (within the meaning of
Regulation S under the Act) (i) as part of their distribution
at any time or (ii) otherwise until one year after the later of
the commencement of the offering and the Closing Time, and it
will send to each distributor, dealer or person receiving a
selling concession, fee or other remuneration to whom it sells
such Preferred Securities during such period, a confirmation or
other notice setting forth the restrictions on offers and sales
of the Preferred Securities within the United States or to, or
for the account or benefit of, U.S. persons.
(c) Each Initial Purchaser represents and agrees
that (a) it has not offered or sold and will not offer or sell
any 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 do not constitute an offer to the public in
the United Kingdom for purposes of the Public Offers of
Securities Regulations 1995, (b) it has complied and will
comply with all applicable provisions of the Financial Services
Act 1986 of Great Britain with respect to anything done by it
in relation to the Securities in, from or otherwise involving
the United Kingdom, and (c) it has only issued or passed on and
will only issue or pass on in the United Kingdom any document
in connection with the issue of the Securities to a person who
is of a kind described in Article 8 of the Financial Services
Act 1986 (Investment Advertisements) (Exemptions) (No. 2) Order
1995 of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
(d) Each Initial Purchaser acknowledges that, other
than as may be required pursuant to Section 5(k) hereof,
(i) neither Continental nor the Trust is obligated to take any
action that would permit the offer or sale of the Preferred
Securities or the distribution of any Offering Memorandum or
any other offering material relating to the Securities in any
jurisdiction where action for that purpose is required and
(ii) neither Continental nor the Trust will have responsibility
with respect to the right of any person to offer or sell
Preferred Securities or to distribute any Offering Memorandum
or any other offering material relating to the Securities in
any jurisdiction. Therefore, except as may be required
pursuant to Section 5(k) hereof, each Initial Purchaser will
obtain any consent, approval or authorization required for it
to offer or sell Preferred Securities, or to distribute any
Offering Memorandum or any other offering material relating to
the Preferred Securities, under the laws or regulations of any
jurisdiction where it proposes to make offers or sales of
Preferred Securities, or to distribute any Offering Memorandum
or any other offering material relating to the Preferred
Securities.
SECTION 5. Covenants of the Trust and Continental.
The Trust and Continental covenant with the Initial Purchasers
as follows:
(a) The Trust and Continental will furnish to the
Initial Purchasers and counsel for the Initial Purchasers,
without charge, such number of copies of the Preliminary
Offering Memorandum and the Offering Memorandum and any
amendments or supplements thereto as the Initial
Purchasers and their counsel may reasonably request.
(b) Continental and the Trust will give the
Representatives notice of their intention to prepare any
amendment or supplement to the Preliminary Offering
Memorandum or the Offering Memorandum, will furnish the
Representatives and counsel to the Initial Purchasers with
copies of any such amendment or supplement and will not
distribute any such amendment or supplement to which the
Representatives or counsel for the Initial Purchasers
shall reasonably object.
(c) If at any time prior to completion of the
distribution of the Securities by the Initial Purchasers
to purchasers who are not their affiliates (as determined
by the Representatives) any event shall occur as a result
of which it is necessary, in the reasonable opinion of the
Representatives or counsel for the Initial Purchasers, to
amend or supplement the Offering Memorandum in order that
the Offering Memorandum, as then amended or supplemented,
will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances
existing at the time it is delivered to a purchaser, not
misleading or, if in the reasonable opinion of the
Representatives or counsel to the Initial Purchasers, such
amendment or supplement is necessary to comply with
applicable law, the Trust and Continental will, subject to
paragraph (b) of this Section 5, promptly prepare such
amendment or supplement as may be necessary to correct
such untrue statement or omission or to effect such
compliance (in form and substance reasonably agreed upon
by counsel to the Initial Purchasers), so that as so
amended or supplemented, the statements in the Offering
Memorandum will not include an untrue statement of a
material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of
the circumstances existing at the time it is delivered to
a purchaser, not misleading or so that such Offering
Memorandum as so amended or supplemented will comply with
applicable law, as the case may be, and furnish to the
Initial Purchasers such number of copies of such amendment
or supplement as the Initial Purchasers may reasonably
request. The Trust and Continental agree to notify the
Initial Purchasers in writing to suspend use of the
Offering Memorandum as promptly as practicable after the
occurrence of an event specified in this paragraph (c),
and the Initial Purchasers hereby agree upon receipt of
such notice from the Trust and Continental to suspend use
of the Offering Memorandum until the Trust and Continental
have amended or supplemented the Offering Memorandum to
correct such misstatement or omission or to effect such
compliance.
(d) Notwithstanding any provision of paragraph (b)
or (c) to the contrary, however, the Trust's and
Continental's obligations under paragraphs (b) and (c) and
the Initial Purchasers' obligations under paragraph (c)
shall terminate on the earlier to occur of (i) the
effective date of a shelf registration statement with
respect to the Securities filed pursuant to the
Registration Rights Agreement and (ii) the date upon which
the Initial Purchasers and their affiliates cease to hold
Securities acquired as part of their initial distribution,
but in any event not later than one year from the Closing
Time.
(e) Neither Continental, the Trust nor any of their
affiliates (as defined in Rule 501(b) under the Act), nor
any person acting on behalf of the foregoing (other than
the Initial Purchasers), will engage in any form of
general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or
sale of the Securities in the United States, or engage in
any directed selling efforts (as defined in Rule 902 under
the Act) with respect to the Securities prior to the
effectiveness of a registration statement with respect to
the Securities, and each of them will comply with the
offering restrictions requirement of Regulation S. Terms
used in this clause 5(e) have the meanings given to them
by Regulation S.
(f) Neither Continental nor any of its affiliates
(including the Trust) (as defined in Rule 501(b) under the
Act) will, directly or indirectly, make offers or sales of
any security, or solicit offers to buy any security, under
circumstances that would require the registration of the
Securities under the Act.
(g) So long as any of the Securities are "restricted
securities" within the meaning of Rule 144(a)(3) under the
Act, Continental will, during any period in which it is
not subject to and in compliance with, Section 13 or 15(d)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), provide to each holder of such restricted
securities and to each prospective purchaser (as
designated by such holder) of such restricted securities,
upon the request of such holder or prospective purchaser,
any information required to be provided by Rule 144A(d)(4)
under the Act. This covenant is intended to be for the
benefit of the holders, and the prospective purchasers
designated by such holders, from time to time of such
restricted securities.
(h) Continental will use reasonable efforts to
cooperate with the Initial Purchasers to permit the
Preferred Securities to be eligible for clearance and
settlement through The Depository Trust Company and to be
designated PORTAL eligible securities in accordance with
the rules and regulations of the NASD.
(i) Each Preferred Security (and each Convertible
Subordinated Debenture distributed to holders of Preferred
Securities pursuant to the terms of the Declaration) will
bear the following legend until such legend shall no
longer be necessary or advisable because the Preferred
Securities (or the Convertible Subordinated Debentures)
are no longer subject to the restrictions on transfer
described herein:
THIS SECURITY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR
ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS
SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO
OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE WHICH IS THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF AND THE LAST DATE ON WHICH
CONTINENTAL AIRLINES FINANCE TRUST (THE
"TRUST"), CONTINENTAL AIRLINES, INC.
("CONTINENTAL") OR ANY AFFILIATE OF THE
FOREGOING WAS THE OWNER OF THIS SECURITY (THE
"RESALE RESTRICTION TERMINATION DATE") ONLY
(A) TO THE TRUST OR CONTINENTAL, (B) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT
TO RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED
IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE
ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE
THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO
AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPH (a)(1), (2), (3)
OR (7) OF RULE 501 UNDER THE SECURITIES ACT
THAT IS ACQUIRING THE SECURITY FOR ITS OWN
ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL "ACCREDITED INVESTOR," FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO,
OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, SUBJECT TO THE
TRUST'S, CONTINENTAL'S AND THE TRANSFER
AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER (I) PURSUANT TO CLAUSES (D), (E)
OR (F) TO REQUIRE THE DELIVERY OF AN OPINION
OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND
(II) IN EACH OF THE FOREGOING CASES, TO
REQUIRE THAT A CERTIFICATE OF TRANSFER IN THE
FORM APPEARING ON THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE
TRANSFER AGENT. THIS LEGEND WILL BE REMOVED
UPON THE REQUEST OF A HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.
(j) Each Conversion Share, if any, will bear the
following legend until such legend shall no longer be
necessary or advisable because the Conversion Shares are
no longer subject to the restrictions on transfer
described herein:
THE CLASS B COMMON STOCK EVIDENCED
HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST
OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED,
ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY
BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY,
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER
THE LATER OF THE ORIGINAL ISSUE DATE OF THE
CONVERTIBLE SUBORDINATED DEBENTURES UPON THE
CONVERSION OF WHICH THE CLASS B COMMON STOCK
EVIDENCED HEREBY WAS ISSUED AND THE LAST DATE
ON WHICH CONTINENTAL AIRLINES FINANCE TRUST
(THE "TRUST"), CONTINENTAL AIRLINES, INC.
(THE "COMPANY") OR ANY AFFILIATE OF THE
FOREGOING WAS THE OWNER OF THIS SECURITY (OR
ANY PREDECESSOR OF THIS SECURITY) (THE
"RESALE RESTRICTION TERMINATION DATE"), ONLY
(A) TO CONTINENTAL, (B) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE
CLASS B COMMON STOCK IS ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR
OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR"
WITHIN THE MEANING OF SUBPARAGRAPH (a)(1),
(2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE
SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR," FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN
CONNECTION WITH, ANY DISTRIBUTION IN
VIOLATION OF THE SECURITIES ACT OR
(F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO CONTINENTAL'S AND
THE TRANSFER AGENT'S RIGHT PRIOR TO ANY
OFFER, SALE OR TRANSFER (i) PURSUANT TO
CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM AND (ii) IN EACH
OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING
ON THIS SECURITY IS COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE TRANSFER AGENT.
THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
(k) Continental will, or will cause the Trust to,
arrange for the registration and qualification of the
Securities for offering and sale under the applicable
securities or "blue sky" laws of such states and other
jurisdictions as the Initial Purchasers may reasonably
designate in connection with the resale of the Securities
as contemplated by this Agreement and the Offering
Memorandum and will continue such qualifications in effect
for as long as may be necessary to complete the
distribution of the Securities; provided that in no event
shall the Trust or Continental be obligated to (i) qualify
as a foreign corporation or as a dealer in securities in
any jurisdiction where it would not otherwise be required
to so qualify but for this Section 5(k), (ii) file any
general consent to service of process in any jurisdiction
where it is not at the Closing Time then so subject or
(iii) subject itself to taxation in any such jurisdiction
if it is not so subject. Continental will, or will cause
the Trust to, file such statements and reports as may be
required by the laws of each jurisdiction to continue such
qualification in effect for a period of not less than one
year from the Closing Time or such shorter period that
will terminate when all Securities to be sold subject to
such qualification have been sold or withdrawn.
Continental shall promptly advise the Initial Purchasers
of the receipt by Continental of any notification with
respect to the suspension of the qualification or
exemption from qualification of the Securities for
offering or sale in any jurisdiction or the institution of
any proceeding for such purpose.
(l) The Trust will use the proceeds received from
the sale of the Preferred Securities and Continental will
use the proceeds received from the issue and sale of the
Convertible Subordinated Debentures in the manner
specified in the Offering Memorandum under the heading
"Use of Proceeds."
(m) The Trust and Continental shall not, directly or
indirectly, for a period of 90 days after the date hereof,
except with the prior written consent of Merrill Lynch,
offer, sell or enter into any agreement to sell, or
otherwise dispose of (a) any trust certificates or other
securities of the Trust (other than the Preferred
Securities and the Common Securities of the Trust),
(b) any preferred stock or any other security of
Continental that is substantially similar to the Preferred
Securities, (c) any shares of any class of common stock of
Continental (other than (i) shares of Class B Common Stock
issuable upon conversion of the Preferred Securities or
pursuant to the exercise of options and warrants
outstanding as of the date hereof, (ii) the grant of stock
options or other stock-based awards (and the exercise or
vesting thereof) to directors, officers and employees of
Continental or its Subsidiaries and (iii) as may be
required pursuant to the certificate of incorporation of
Continental) or (d) any other securities which are
convertible into, or exercisable or exchangeable for, any
of (a) through (c).
SECTION 6. Payment of Expenses. (a) Continental
will pay and bear all costs and expenses incident to the
performance of its obligations under this Agreement, including
(i) the preparation and printing of the Preliminary Offering
Memorandum, the Offering Memorandum and any amendments or
supplements thereto and the cost of furnishing copies thereof
to the Initial Purchasers, (ii) the preparation, issuance,
printing and distribution of the Securities and any survey of
state securities or "blue sky" laws or legal investment
memoranda, (iii) the delivery to the Initial Purchasers of the
Preferred Securities, (iv) the fees and disbursements of
Continental's counsel and accountants, (v) the qualification of
the Securities under the applicable state securities or "blue
sky" laws in accordance with the provisions of Section 5(k)
hereof and any filing for review of the offering with the NASD,
if required, including filing fees and reasonable fees and
disbursements of counsel to the Initial Purchasers in
connection therewith and in connection with the preparation of
any survey of state securities or "blue sky" laws or legal
investment memoranda, (vi) any fees charged by rating agencies
for rating the Securities, (vii) the fees and expenses of the
Indenture Trustee, Property Trustee, Guarantee Trustee and
Delaware Trustee and the transfer agent and registrar for the
Class B Common Stock, including the fees and disbursements of
counsel for such trustees and the transfer agent and registrar,
(viii) all expenses and listing fees in connection with the
application for designation of the Preferred Securities as
PORTAL eligible securities and (ix) the cost of qualifying the
Preferred Securities with The Depository Trust Company.
(b) If the sale of the Preferred Securities provided
for herein is not consummated because any condition to the
obligations of the Initial Purchasers set forth in Section 7
hereof is not satisfied or because this Agreement is terminated
pursuant to Section 11(a)(i) hereof other than by reason of a
default by the Initial Purchasers in payment for the Preferred
Securities at the Closing Time, Continental shall reimburse the
Initial Purchasers promptly upon demand for all reasonable out-
of-pocket expenses (including reasonable fees and disbursements
of counsel to the Initial Purchasers) that shall have been
incurred by them in connection with the proposed purchase and
sale of the Preferred Securities.
SECTION 7. Conditions of the Initial Purchasers'
Obligations. The obligations of the Initial Purchasers to
purchase and pay for the Preferred Securities are subject to
the accuracy, as of the Closing Time, of the representations
and warranties of Continental and the Trust herein contained,
to the accuracy of the statements of Continental and the Trust
and officers of Continental or Regular Trustees made in any
certificate pursuant to the provisions hereof, to the
performance by Continental and the Trust of their respective
obligations hereunder, and to the following further conditions:
(a) At the Closing Time, the Initial Purchasers
shall have received the favorable opinion and letter of
Cleary, Gottlieb, Steen & Hamilton, special counsel for
Continental and the Trust, dated as of the Closing Time,
in the forms set forth in Exhibit B and Exhibit C.
(b) At the Closing Time, the Initial Purchasers
shall have received the favorable opinion of Jeffery A.
Smisek, Senior Vice President and General Counsel of
Continental, dated as of the Closing Time in the form set
forth in Exhibit D.
(c) At the Closing Time, the Initial Purchasers
shall have received the favorable opinion, dated as of the
Closing Time, of Cahill Gordon & Reindel, counsel for the
Initial Purchasers, substantially in the form set forth in
Exhibit E.
(d) At the Closing Time, the Trust shall have
received opinions of Richards Layton & Finger, counsel to
the Delaware Trustee and special Delaware counsel to
Continental and the Trust, dated as of the Closing Time
substantially in the forms set forth in Exhibit F and
Exhibit G.
(e) At the Closing Time, Continental shall have
received the favorable opinion of Cleary, Gottlieb, Steen
& Hamilton, special tax counsel to Continental and the
Trust, dated as of the Closing Time substantially in the
form set forth in Exhibit H.
(f) At the Closing Time, there shall not have been,
since the date hereof or since the respective dates as of
which information is given in the Offering Memorandum
except as stated therein, any Material Adverse Change or
any development resulting in a prospective Material
Adverse Change, and the Representatives shall have
received a certificate of the President or a Vice
President of Continental and of the principal financial or
accounting officer of Continental, dated as of Closing
Time, to the effect that (i) there has been no such
Material Adverse Change or development resulting in a
prospective Material Adverse Change, (ii) the
representations and warranties of Continental in this
Agreement are true and correct with the same force and
effect as though expressly made at and as of Closing Time,
and (iii) Continental has complied with all agreements and
satisfied all conditions on its part to be performed or
satisfied at or prior to the Closing Time.
(g) At the time that this Agreement is signed and at
the Closing Time, Ernst & Young LLP shall have furnished
to the Initial Purchasers a letter or letters, dated
respectively as of the date of this Agreement and as of
the Closing Time, in form and substance satisfactory to
the Initial Purchasers, confirming that they are
independent certified public accountants within the
meaning of the Act and the applicable published rules and
regulations thereunder and stating in effect that:
(i) in their opinion the audited financial
statements included in the Offering Memorandum comply
as to form in all material respects with the
applicable accounting requirements of the Act and the
rules and regulations promulgated thereunder;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by
Continental; carrying out certain specified
procedures (but not an examination in accordance with
generally accepted auditing standards) which would
not necessarily reveal matters of significance with
respect to the comments set forth in such letter; a
reading of the minutes of the meetings of the
stockholders, the board of directors and committees
thereof of Continental; and inquiries of certain
officials of Continental who have responsibility for
financial and accounting matters of Continental as to
transactions and events subsequent to September 30,
1995, and such other inquiries and procedures as may
be specified in such letter, nothing came to their
attention which caused them to believe that:
(A) the unaudited financial statements
included in the Offering Memorandum do not
comply as to form in all material respects with
applicable accounting requirements of the Act
and with the published rules and regulations of
the Commission; and said unaudited financial
statements are not in conformity with generally
accepted accounting principles applied on a
basis substantially consistent with that of the
audited financial statements included in the
Offering Memorandum; or
(B) with respect to the period sub-
sequent to September 30, 1995, that at a speci-
fied date not more than five business days
prior to the date of the letter, there were any
changes in the capital stock or any increases
in the consolidated long-term debt or consoli-
dated net current liabilities or any decreases
in stockholders' equity of Continental, as
compared with the amounts shown on the
September 30, 1995 unaudited balance sheet
included in the Offering Memorandum, or for the
period from September 30, 1995 to such
specified date there were any decreases, as
compared with the corresponding
period in the preceding year, in consolidated
operating revenues, net income or primary or
fully-diluted income per common share or any
increases in net loss or primary or fully-
diluted loss per common share of Continental,
except in all instances for increases or
decreases that are described in such letter or
that the Offering Memorandum discloses have
occurred or may occur; and
(iii) they have performed certain other
specified
procedures, not constituting an audit, with respect
to certain amounts, percentages and financial
information that are derived from the general
accounting records of Continental and are included in
the Offering Memorandum, and have compared such
amounts, percentages and financial information with
such records of Continental and with information
derived from such records and have found them to be
in agreement, excluding any questions of legal
interpretation. References to the Offering
Memorandum in this subsection (e) include any
supplement thereto at the date of the applicable
letter.
(h) At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such documents
as they may reasonably require for the purpose of enabling
them to pass upon the issuance and sale of the Securities
as contemplated herein and related proceedings, or in
order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any
of the conditions, herein contained.
(i) Each of Air Partners, L.P. and Air Canada shall
have executed and delivered a 90-day lock-up agreement
with respect to the shares of capital stock of Continental
owned by it substantially to the effect described in the
Offering Memorandum.
(j) The Trust, Continental and the Initial
Purchasers shall have entered into the Registration Rights
Agreement.
(k) In the event that the Initial Purchasers
exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Additional Preferred
Securities, the obligations of the Initial Purchasers to
consummate such purchase are subject to the further
conditions that the representations and warranties of
Continental contained herein and the statements in any
certificates furnished by Continental hereunder shall be
true and correct as of each Date of Delivery and, at the
relevant Date of Delivery, the Representatives shall have
received:
(1) A certificate, dated such Date of Delivery, of
the President or a Vice President of
Continental
and of the principal financial or accounting
officer of Continental confirming that the
certificate delivered at the Closing Time
pursuant to Section 7(f) remains true and
correct as of such Date of Delivery.
(2) The opinions of Cleary, Gottlieb, Steen &
Hamilton and Richards Layton & Finger, dated
such Date of Delivery, relating to the
Additional Preferred Securities to be purchased
on such Date of Delivery and otherwise to the
same effect as the opinions required by
Sections
7(a) and 7(d).
(3) The opinion of Cahill Gordon & Reindel, counsel
for the Underwriters, dated such Date of
Delivery, relating to the Additional Preferred
Securities to be purchased on such Date of
Delivery and otherwise to the same effect as
the
opinion required by Section 7(c) hereof.
(4) A letter from Ernst & Young, dated such Date of
Delivery, substantially the same in form and
substance as the letter furnished to the
Representatives pursuant to Section 7(g)
hereof,
except that the "specified date" shall be a
date
not more than five days prior to such Date of
Delivery.
If any condition specified in this Section 7 shall
not have been fulfilled in all material respects when and as
required to be fulfilled, this Agreement may be terminated by
the Initial Purchasers by notice to Continental, and such
termination shall be without liability of any party to any
other party except as provided in Section 6. Notwithstanding
any such termination, the provisions of Sections 8 and 9 shall
remain in effect. Immediate notice of such cancellation shall
be given to Continental in writing or by telephone, facsimile
transmission or telegraph confirmed in writing.
SECTION 8. Indemnification. (a) Continental agrees
to indemnify and hold harmless the Trust, each Initial
Purchaser, and each person, if any, who controls the Trust or
each Initial Purchaser within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, and their respective
directors, officers, employees and agents, as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, including any amounts paid
in settlement of any investigation, litigation, proceeding
or claim, joint or several, as incurred, arising out of
any untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Offering
Memorandum or the Offering Memorandum or any amendment or
supplement thereto, or the omission or alleged omission
therefrom of a material fact necessary to make the
statements therein, in the light of the circumstances
under which they were made, not misleading; provided, that
Continental shall not be liable under this clause (i) for
any settlement of any action effected without its written
consent, which consent shall not be unreasonably withheld;
and
(ii) against any and all expenses whatsoever, as
incurred (including, subject to Section 8(c) hereof, the
reasonable fees and disbursements of counsel chosen by
Merrill Lynch to represent the Initial Purchasers),
reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or
proceeding by any court or governmental agency or body,
commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that
any such expense is not paid under clause (i) above;
provided that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising
out of an untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity
with information furnished to Continental by such Initial
Purchasers in writing expressly for use in the Preliminary
Offering Memorandum or the Offering Memorandum (or any
amendment or supplement thereto). The foregoing
indemnification with respect to any Preliminary Offering
Memorandum shall not inure to the benefit of any Initial
Purchaser from whom the person asserting any such losses,
claims, damages or liabilities purchased Preferred Securities,
or any person controlling such Initial Purchaser, if a copy of
the Offering Memorandum was not sent or given by or on behalf
of such Initial Purchaser to such person in connection with the
written confirmation of the sale of such Preferred Securities
to such person and if the Offering Memorandum corrected the
untrue statement or omission giving rise to such loss, claim,
damage or liability.
(b) The Initial Purchasers, severally and not
jointly, agree to indemnify and hold harmless Continental, the
Trust, their directors, officers, employees, trustees and
agents, and each person, if any, who controls Continental or
the Trust within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act from and against any and all
loss, liability, claim, damage and expense whatsoever described
in the indemnity contained in subsection (a) of this Section 8,
as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in
the Offering Memorandum (or any amendment or supplement
thereto), or any Preliminary Offering Memorandum (or any
amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to Continental by
such Initial Purchasers expressly for use in the Offering
Memorandum (or any amendment or supplement thereto) or such
Preliminary Offering Memorandum (or any amendment or supplement
thereto).
(c) Each indemnified party shall give prompt notice
to each indemnifying party of any action commenced against it
in respect of which indemnity may be sought hereunder,
enclosing a copy of all papers served on such indemnified
party, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may
have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the
defense of any such action. If an indemnifying party so elects
within a reasonable time after receipt of such notice, such
indemnifying party may assume the defense of such action with
counsel chosen by it and approved by the indemnified party or
parties defendant in such action; provided that if any such
indemnified party reasonably determines that there may be legal
defenses available to such indemnified party which are
different from or in addition to those available to such
indemnifying party or that representation of such indemnifying
party and any indemnified party by the same counsel would
present a conflict of interest, then such indemnifying party
shall not be entitled to assume such defense. If an
indemnifying party is not entitled to assume the defense of
such action as a result of the proviso to the preceding
sentence, counsel for such indemnifying party shall be entitled
to conduct the defense of such indemnifying party and counsel
for each indemnified party or parties shall be entitled to
conduct the defense of such indemnified party or parties. If
an indemnifying party assumes the defense of an action in
accordance with and as permitted by the provisions of this
paragraph, such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action. In no
event shall the indemnifying parties be liable for fees and
expenses of more than one counsel (in addition to any local
counsel) separate from its own counsel for all indemnified
parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances.
SECTION 9. Contribution. In order to provide for
just and equitable contribution in circumstances in which the
indemnity agreement provided for in Section 8 is for any reason
held to be unavailable to the indemnified parties although
applicable in accordance with its terms, Continental and the
Initial Purchasers shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature
contemplated by said indemnity agreement incurred by
Continental and the Initial Purchasers, as incurred, in such
proportions that the Initial Purchasers are responsible for
that portion represented by the percentage that the commission
to the Initial Purchasers appearing on the cover page of the
Offering Memorandum bears to the price to investors appearing
thereon and Continental is responsible for the balance;
provided that no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. For purposes of this
Section, each director, officer, employee and agent of the
Initial Purchasers, and each person, if any, who controls the
Initial Purchasers within the meaning of Section 15 of the Act
shall have the same rights to contribution as such Initial
Purchasers, and each director, officer, employee, trustee and
agent of Continental and the Trust, and each person, if any,
who controls Continental or the Trust within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, shall
have the same rights to contribution as Continental. No party
shall be liable for contribution with respect to any action,
suit, proceeding or claim settled without its written consent.
SECTION 10. Representations, Warranties and
Agreements to Survive Delivery. All representations,
warranties, indemnities, agreements and other statements of the
Trust, Continental and its officers and of the Initial
Purchasers contained in or made pursuant to this Agreement
shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any Initial
Purchasers or any controlling person, or by or on behalf of
Continental, and shall survive delivery of and payment for the
Securities hereunder.
SECTION 11. Termination of Agreement. (a) The
Initial Purchasers may terminate this Agreement, by notice to
the Trust and Continental, at any time on or prior to the
Closing Time (i) if there has been, since the date of this
Agreement or since the respective dates as of which information
is given in the Offering Memorandum, except as stated therein,
and on or prior to the Closing Time, any Material Adverse
Change, or (ii) if, since the date of this Agreement and on or
prior to the Closing Time, (A) there has occurred any outbreak
of hostilities or escalation of existing hostilities or other
national or international calamity or crisis, the effect of
which on the financial securities markets of the United States
is such as to make it, in the judgment of the Initial
Purchasers, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (B)
trading generally on the New York Stock Exchange, the American
Stock Exchange or the over-the-counter market has been
suspended, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices for securities generally
have been required, by any such exchange or by order of the
Commission, the NASD or any other governmental authority or (C)
a general banking moratorium has been declared by either
Federal or New York authorities. As used in this Section
11(a), the term "Offering Memorandum" means the Offering
Memorandum in the form first used to confirm sales of the
Securities.
(b) If this Agreement is terminated pursuant to this
Section 11, such termination shall be without liability of any
party to any other party except as provided in Section 6.
Notwithstanding any such termination, the provisions of
Sections 8 and 9 shall remain in effect.
(c) This Agreement may also terminate pursuant to
the provisions of Section 7, with the effect stated in such
Section.
SECTION 12. Default by One or More of the Initial
Purchasers. If one or more of the Initial Purchasers shall
fail at Closing Time to purchase the Firm Preferred Securities
which it or they are obligated to purchase under this Agreement
(the "Defaulted Securities"), the Representatives shall have
the right, within 24 hours thereafter, to make arrangements for
one or more of the non-defaulting Initial Purchasers, or any
other Initial Purchasers, to purchase all, but not less than
all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth. If, however,
the Representatives shall not have completed such arrangements
within such 24-hour period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the number of Firm Preferred Securities,
each of the non-defaulting Initial Purchasers shall be
obligated, severally and not jointly, to purchase the full
amount thereof in the proportions that their respective
purchase obligations hereunder bear to the purchase
obligations of all non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds
10% of the number of Firm Preferred Securities, this
Agreement shall terminate without liability on the part of
any non-defaulting Initial Purchasers.
No action taken pursuant to this Section shall
relieve any defaulting Initial Purchasers from liability in
respect of its default.
In the event of any such default which does not
result in a termination of this Agreement, either the
Representatives or Continental shall have the right to postpone
Closing Time for a period not exceeding seven days in order to
effect any required changes in the Offering Memorandum or in
any other documents or arrangements.
SECTION 13. Notices. All notices and other
communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Initial Purchasers, c/o
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Merrill Lynch World Headquarters, North Tower,
World Financial Center, New York, New York 10281-1305,
Attention: Mark J. Schulte, Managing Director; notices to the
Trust shall be directed to Wilmington Trust Company, Rodney
Square North, 1100 North Market Street, Wilmington, Delaware
19890, Attention: Corporate Trust Administration; and notices
to Continental shall be directed to Continental Airlines, Inc.,
2929 Allen Parkway, Suite 2010, Houston, Texas 77019,
Attention: General Counsel.
SECTION 14. Information Supplied by the Initial
Purchasers. The statements set forth in the last paragraph on
the front cover page, the fifth paragraph on page 4 and under
the heading "Plan of Distribution" in the Preliminary Offering
Memorandum or the Offering Memorandum (to the extent such
statements relate to the Initial Purchasers) constitute the
only information furnished by the Initial Purchasers to
Continental for the purposes of Sections 1 and 8 hereof.
SECTION 15. Parties. This Agreement shall inure to
the benefit of and be binding upon the Initial Purchasers, the
Trust and Continental and their respective successors and legal
representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person,
firm or corporation, other than the Initial Purchasers and the
Trust, Continental and their respective successors and legal
representatives and the controlling persons and officers,
directors, employees, trustees and agents referred to in
Sections 8 and 9 and their heirs and legal representatives, any
legal or equitable right, remedy or claim under, by virtue of
or in respect of this Agreement or any provision herein
contained, except as expressly set forth in Section 5(g)
hereof. This Agreement and all conditions and provisions
hereof are intended to be for the sole and exclusive benefit of
the Initial Purchasers and the Trust, Continental and their
respective successors and legal representatives, and said
controlling persons and officers, directors, employees,
trustees and agents and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation,
except as expressly set forth in Section 5(g) hereof. No
purchaser of Securities from any Initial Purchaser shall be
deemed to be a successor by reason merely of such purchase.
SECTION 16. Governing Law and Time. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY
PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified times of
day refer to New York City time.
SECTION 17. Counterparts. This Agreement may be
executed in one or more counterparts and, when a counterpart
has been executed by each party, all such counterparts taken
together shall constitute one and the same agreement.
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to
Continental and the Trust a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding
agreement between the Initial Purchasers, Continental and the
Trust in accordance with their terms.
Very truly yours,
CONTINENTAL AIRLINES FINANCE TRUST
By: __
Wilmington Trust Company, not
in
its individual capacity but
solely as trustee of
Continental
Airlines Finance Trust
By:
Name: Lawrence W. Kellner
Title: Regular Trustee
By:
Name: Jeffery A. Smisek
Title: Regular Trustee
CONTINENTAL AIRLINES, INC.
By:
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SMITH BARNEY INC.
For themselves and on behalf of
the several Initial Purchasers
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: _______________________________
Name: Howard Bochner
Title: Vice President
Schedule A
Initial Number of Firm
Purchaser Preferred
Securities
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 975,000
CS First Boston Corporation 975,000
Donaldson, Lufkin & Jenrette
Securities Corporation 975,000
Smith Barney Inc. 975,000
BT Securities Corporation 200,000
PaineWebber Incorporated 200,000
S.G. Warburg & Co. Inc. 200,000
4,500,000
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
(Filed as Exhibit 10.1 to this Registration Statement)
Exhibit B
November 28, 1995
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CS First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
Smith Barney Inc.
as Representatives of the several Initial Purchasers
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
We have acted as special counsel to Continental
Airlines, Inc., a Delaware corporation (the "Company"), and
Continental Airlines Finance Trust, a statutory business trust
formed under the laws of the State of Delaware (the "Trust"), in
connection with the Trust's offering of 4,500,000 convertible
trust originated preferred securities (the "Preferred
Securities") representing preferred undivided beneficial
interests in the assets of the Trust issued pursuant to an
amended and restated declaration of trust dated as of November
28, 1995 (the "Declaration") by the trustees of the Trust, the
Company, as trust sponsor, and the holders from time to time of
undivided beneficial interests in the Trust. The Preferred
Securities will be guaranteed by the Company in the manner and to
the extent set forth in a Preferred Securities Guarantee
Agreement dated as of November 28, 1995 (the "Preferred
Securities Guarantee Agreement") executed by the Company and
Wilmington Trust Company, as trustee for the benefit of the
holders from time to time of the Preferred Securities. The
Company will own all the common securities (the "Common
Securities" and, together with the Preferred Securities, the
"Trust Securities") representing undivided beneficial interests
in the assets of the Trust issued pursuant to the Declaration and
guaranteed by the Company in the manner and to the extent set
forth in a Common Securities Guarantee Agreement dated as of
November 28, 1995 (the "Common Securities Guarantee Agreement"
and, together with the Preferred Securities Guarantee Agreement,
the "Guarantee Agreements") executed by the Company for the
benefit of the holders from time to time of the Common
Securities.
The Trust will issue the Trust Securities and invest
the proceeds thereof in an equivalent aggregate principal amount
of Convertible Subordinated Deferrable Interest Debentures (the
"Debentures") of the Company to be issued under an indenture
dated as of November 28, 1995 (the "Indenture") between the
Company and Wilmington Trust Company, as trustee. The Debentures
will be convertible into shares of Class B common stock, $.01 par
value per share (the "Class B Common Stock"), of the Company.
This opinion letter is furnished pursuant to Section 7(a) of the
purchase agreement dated November 21, 1995 (the "Purchase
Agreement") among the Company, the Trust and the several initial
purchasers named in Schedule A thereto (the "Initial
Purchasers").
In arriving at the opinions expressed below, we have
reviewed the following documents:
(a) an executed copy of the Purchase Agreement;
(b) the Offering Memorandum dated November 21, 1995
relating to the offering of the Preferred
Securities;
(c) an executed copy of each of the Guarantee
Agreements;
(d) an executed copy of the Indenture;
(e) an executed copy of the Declaration;
(f) the Debentures as executed by the Company;
(g) a specimen of the certificates representing the
Class B Common Stock issuable upon conversion of
the Convertible Subordinated Debentures (the
"Conversion Shares");
(h) an executed copy of the Registration Rights
Agreement dated November 28, 1995 among the
Company, the Trust and the Initial Purchasers (the
"Registration Rights Agreement"); and
(i) the documents delivered to you by the Company and
the Trust at the closing pursuant to the Purchase
Agreement, including copies of the Company's
Restated Certificate of Incorporation (the
"Certificate of Incorporation") and By-Laws
certified by the Secretary of State of the State
of Delaware and the corporate secretary of the
Company, respectively.
In addition, we have reviewed the originals or copies certified
or otherwise identified to our satisfaction of all such corporate
records of the Company and such other instruments and other
certificates of public officials, officers and representatives of
the Company and such other persons, and we have made such
investigations of law, as we have deemed appropriate as a basis
for the opinions expressed below.
In rendering the opinions expressed below, we have
assumed the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents
submitted to us as copies. In addition, we have assumed and have
not verified (i) the accuracy as to factual matters of each
document we have reviewed (including, without limitation, the
accuracy of the representations and warranties of the Company and
the Trust in the Purchase Agreement) and (ii) that the
certificates representing the Conversion Shares conform to the
specimens thereof that we have reviewed and that the Debentures
will be duly authenticated in accordance with the terms of the
Indenture.
Based on the foregoing, and subject to the further
assumptions and qualifications set forth below, it is our opinion
that:
1. The Company is validly existing as a corporation in
good standing under the laws of its jurisdiction of
incorporation.
2. The Company has corporate power to own its
properties and conduct its business as described in the Offering
Memorandum, and the Company has corporate power to issue the
Debentures, to enter into the Purchase Agreement, the Guarantee
Agreements, the Indenture, the Declaration and the Registration
Rights Agreement and to perform its obligations thereunder.
3. The execution and delivery of the Indenture have
been duly authorized by all necessary corporate action of the
Company, and the Indenture has been duly executed and delivered
by the Company, and is a legal, valid, binding and enforceable
agreement of the Company.
4. The execution and delivery of the Debentures have
been duly authorized by all necessary corporate action of the
Company, and the Debentures have been duly executed and delivered
by the Company and are the legal, valid, binding and enforceable
obligations of the Company, entitled to the benefits of the
Indenture.
5. The execution and delivery of the Declaration have
been duly authorized by all necessary corporate action of the
Company, and the Declaration has been duly executed and delivered
by the Company.
6. The execution and delivery of each of the Guarantee
Agreements have been duly authorized by all necessary corporate
action of the Company, and each of the Guarantee Agreements has
been duly executed and delivered by the Company, and is a legal,
valid, binding and enforceable agreement of the Company.
7. The holders of outstanding shares of capital stock
of the Company are not entitled to any preemptive rights under
the Certificate of Incorporation or By-Laws of the Company or the
law of Delaware to subscribe for the Preferred Securities, the
Debentures or the Conversion Shares, other than the preemptive
rights of Air Partners, L.P. and Air Canada under the Certificate
of Incorporation; and the Conversion Shares into which the
Debentures are convertible at the initial conversion price have
been duly authorized by all necessary corporate action of the
Company and reserved for issuance upon conversion and, upon
issuance thereof on conversion of the Debentures in accordance
with the Indenture and the terms of the Debentures at conversion
prices at or in excess of the par value of such Conversion
Shares, will be validly issued, fully paid and nonassessable.
8. The statements set forth under the headings
"Description of the Preferred Securities", "Description of the
Guarantee", "Description of the Convertible Subordinated
Debentures", "Effect of Obligations under the Convertible
Subordinated Debentures and the Guarantee" and "Description of
Capital Stock" in the Offering Memorandum, insofar as such
statements purport to summarize certain provisions of the Trust
Securities, the Debentures, the Guarantees, the Indenture, the
Declaration and the Certificate of Incorporation of the Company,
provide a fair summary of such provisions, and the statements set
forth under the heading "United States Taxation", insofar as such
statements purport to summarize certain federal income tax laws
of the United States, constitute a fair summary of the principal
U.S. federal income tax consequences of an investment in the
Preferred Securities.
9. The execution and delivery of the Purchase
Agreement have been duly authorized by all necessary corporate
action of the Company, and the Purchase Agreement has been duly
executed and delivered by the Company.
10. The execution and delivery of the Registration
Rights Agreement have been duly authorized by all necessary
corporate action of the Company, and the Registration Rights
Agreement has been duly executed and delivered by the Company and
is a legal, valid, binding and enforceable agreement of the
Company (except that we express no opinion with respect to
Section 5 of the Registration Rights Agreement providing for
indemnification and contribution).
11. Assuming the execution and delivery of the
Registration Rights Agreement have been duly authorized by the
Trust, and assuming the Registration Rights Agreement has been
duly executed and delivered by the Trust, the Registration Rights
Agreement is a legal, valid, binding and enforceable agreement of
the Trust (except that we express no opinion with respect to
Section 5 of the Registration Rights Agreement providing for
indemnification and contribution).
12. The issuance and sale of the Preferred Securities
by the Trust to the Initial Purchasers pursuant to the Purchase
Agreement, the performance by the Trust and the Company of their
respective obligations in the Purchase Agreement, the Indenture,
the Debentures, the Guarantees, the Declaration, the Trust
Securities and the Registration Rights Agreement and the
application of the net proceeds of the Debentures by the Company
in the manner described in the Offering Memorandum do not require
any consent, approval, authorization, registration or
qualification of or with any governmental authority of the United
States or the State of New York, except such as may be required
pursuant to the Registration Rights Agreement (but we express no
opinion as to any consent, approval, authorization, registration
or qualification that may be required under state securities or
Blue Sky laws).
13. When the Preferred Securities, the Preferred
Securities Guarantee Agreement and the Debentures are issued and
delivered pursuant to the Purchase Agreement, such securities
will not be of the same class (within the meaning of Rule 144A
under the Securities Act of 1933, as amended (the "Securities
Act")) as securities of the Company listed on a national
securities exchange registered under Section 6 of the Securities
Exchange Act of 1934, as amended, or quoted in a U.S. automated
inter-dealer quotation system.
14. Assuming the accuracy of the representations and
warranties and compliance with the agreements contained in the
Purchase Agreement, and except as may be required pursuant to the
Registration Rights Agreement, no registration of the Preferred
Securities, the Preferred Securities Guarantee Agreement, the
Debentures or the Conversion Shares under the Securities Act, and
no qualification of the Declaration, the Preferred Securities
Guarantee Agreement or the Indenture under the Trust Indenture
Act of 1939, as amended, are required for the offer and sale of
the Preferred Securities in the manner contemplated by the
Purchase Agreement.
15. Neither the Company nor the Trust is an
"investment company", and, based solely on a certificate of Air
Partners, L.P., the Company is not a company "controlled" by an
"investment company", within the meaning of the Investment
Company Act of 1940, as amended.
Insofar as the foregoing opinions relate to the valid
existence and good standing of the Company, they are based solely
on a certificate of good standing received from the Secretary of
State of the State of Delaware and on a telephonic confirmation
from such Secretary of State. Insofar as the foregoing opinions
relate to the legality, validity, binding effect or
enforceability of any agreement or obligation of the Company or
the Trust, (a) we have assumed that each other party to such
agreement or obligation has satisfied those legal requirements
that are applicable to it to the extent necessary to make such
agreement or obligation enforceable against it, and (b) such
opinions are subject to applicable bankruptcy, insolvency and
similar laws affecting creditors' rights generally and to general
principles of equity.
The foregoing opinions are limited to the federal law
of the United States of America (other than federal aviation law,
as to which we express no opinion), the law of the State of New
York and the General Corporation Law of the State of Delaware.
We are furnishing this opinion letter to you, as
Representatives of the Initial Purchasers, solely for the benefit
of the Initial Purchasers in connection with the offering of the
Preferred Securities. This opinion letter is not to be used,
circulated, quoted or otherwise referred to for any other
purpose.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By________________________________
Michael L. Ryan, a Partner
Exhibit C
November 28, 1995
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CS First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
Smith Barney Inc.
as Representatives of the several Initial Purchasers
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
We have acted as special counsel to Continental
Airlines, Inc., a Delaware corporation (the "Company"), and
Continental Airlines Finance Trust, a statutory business trust
formed under the laws of the State of Delaware (the "Trust"), in
connection with the Trust's offering of 4,500,000 convertible
trust originated preferred securities (the "Preferred
Securities") representing preferred undivided beneficial
interests in the assets of the Trust issued pursuant to an
amended and restated declaration of trust dated as of November
28, 1995 by the trustees of the Trust, the Company, as trust
sponsor, and the holders from time to time of undivided
beneficial interests in the Trust. The Preferred Securities will
be guaranteed by the Company in the manner and to the extent set
forth in a Preferred Securities Guarantee Agreement dated as of
November 28, 1995 executed by the Company and Wilmington Trust
Company, as trustee for the benefit of the holders from time to
time of the Preferred Securities. This letter is furnished
pursuant to Section 7(a) of the purchase agreement dated
November 21, 1995 (the "Purchase Agreement") among the Company,
the Trust and the several initial purchasers named in Schedule A
thereto (the "Initial Purchasers").
Because the primary purpose of our professional
engagement was not to establish or confirm factual matters or
financial, accounting or statistical information, and because
many determinations involved in the preparation of the offering
memorandum dated November 21, 1995 relating to the offering of
the Preferred Securities (the "Offering Memorandum") are of a
wholly or partially non-legal character or relate to legal
matters outside the scope of our opinion letter to you of even
date herewith, we are not passing upon and do not assume any
responsibility for the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum (except to the
extent expressly set forth in numbered paragraph 8 of our opinion
letter to you of even date herewith) and we make no
representation that we have independently verified the accuracy,
completeness or fairness of such statements (except as
aforesaid).
However, in the course of our acting as special counsel
to the Company and the Trust in connection with the Company's
preparation of the Offering Memorandum, we participated in
conferences and telephone conversations with representatives of
the Company, representatives of the independent public
accountants for the Company, your representatives and
representatives of your counsel, during which conferences and
conversations the contents of the Offering Memorandum and related
matters were discussed, and we reviewed certain corporate records
and documents furnished to us by the Company.
Based on our participation in such conferences and
conversations and our review of such records and documents as
described above, our understanding of the U.S. federal securities
laws and the experience we have gained in our practice
thereunder, we advise you that no information has come to our
attention that causes us to believe that the Offering Memorandum
(except the financial statements and other financial and
statistical data of a financial nature included therein, as to
which we express no view), as of the date thereof or hereof,
contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances
under which they were made, not misleading.
We are furnishing this letter to you, as
Representatives of the Initial Purchasers, solely for the benefit
of the Initial Purchasers in connection with the offering of the
Preferred Securities. This letter is not to be used, circulated,
quoted or otherwise referred to for any other purpose.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By______________________________
Michael L. Ryan, a Partner
Exhibit D
DRAFT
November 1995
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
CS First Boston Corporation
Donaldson, Lufkin & Jenrette Securities Corporation
Smith Barney Inc.
as Representatives of the several Initial Purchasers
c/o Merrill Lynch & Co.
MerriLl Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of
Continental Airlines, Inc., a Delaware corporation (the
"Company"). In such capacity, I have acted as counsel to the
Company in connection with an offering by Continental Airlines
Finance Trust, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), of convertible trust
originated preferred securities with an aggregate initial
offering price of $[225,000,000] (the "Preferred Securities")
representing preferred undivided beneficial interests in the
assets of the Trust issued pursuant to an amended and restated
declaration of trust dated as of November __, 1995 (the
"Declaration") by the trustees of the Trust, the Company, as
trust sponsor, and the holders from time to time of undivided
beneficial interests in the Trust.
This opinion letter is furnished pursuant to Section
7(b) of the purchase agreement dated November __, 1995 (the
"Purchase Agreement") between the Company, the Trust and the
several initial purchasers named in Schedule [A] thereto (the
"Initial Purchasers"). Capitalized terms used herein without
definition are defined in the Purchase Agreement and are used
herein with the same meanings as therein.
In arriving at the opinions expressed herein, I or
members of my legal staff have reviewed the following documents:
(a) an executed copy of the Purchase Agreement;
(b) the Offering Memorandum dated November __, 1995
relating to the offering of the Preferred
Securities;
(c) an executed copy of each of the Guarantee
Agreements;
(d) an executed copy of the Indenture;
(e) an executed copy of the Declaration;
(f) the Debentures as executed by the Company;
(g) a specimen of the Class B Common Stock issuable
upon conversion of the Debentures;
(h) an executed copy of the Registration Rights
Agreement; and
(i) the documents delivered to you by the Company and
the Trust at the closing pursuant to the Purchase
Agreement, including copies of the Company's and
theSubsidiaries' respective certificates of
incorporation and bylaws, certified by the
Secretary of State of the State of Delaware and
the Secretary of the Company, respectively.
In addition, I or members of my legal staff have
reviewed the originals or copies certified or otherwise
identified to my or their satisfaction of all such corporate
records of the Company and the Subsidiaries and such other
instruments and other certificates of public officials, officers
and representatives of the Company and such other persons, and I
or members of my legal staff have made such investigations of
law, as I deem appropriate as a basis for the opinions expressed
below.
In rendering the opinions expressed below, I have
assumed the authenticity of all documents submitted to me or
members of my legal staff as originals and the conformity to the
originals of all documents so submitted as copies. In addition, I
or members of my legal staff have assumed and have not verified
the accuracy as to factual matters of each document I or they
have reviewed (including, without limitation, the accuracy of the
representations and warranties of the Company and the Trust in
the Purchase Agreement). As used herein, the phrase "to my
knowledge" shall mean to my actual knowledge after reasonable
investigation, but shall not be interpreted to impute to me
knowledge of others.
Based on the foregoing, and subject to the further
assumptions and qualification set forth below, it is my opinion
that:
1. Each of the Subsidiaries has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware, with corporate
power to own or lease its assets and conduct its business as
described in the Offering Memorandum;
2. To my knowledge, the Company and each of the
Subsidiaries is duly qualified to do business as a foreign
corporation and is in good standing under the laws of all other
jurisdictions in the United States where the ownership or leasing
of its respective assets or the conduct of its business as
described in the Offering Memorandum requires such qualification,
except where the failure to be so qualified would not have a
Material Adverse Effect;
3. All of the issued and outstanding capital stock of
each of the Subsidiaries has been duly authorized and validly
issued, is fully paid and nonassessable and, except as set forth
in the Offering Memorandum and except as would not have a
Material Adverse Effect, is owned beneficially and of record
directly or indirectly by the Company free and clear of all
security interests, pledges, liens, encumbrances, equities or
claims;
4. To my knowledge other than as described in the
Offering Memorandum, no legal, regulatory or governmental
proceedings are pending to which the Company or any of its
Subsidiaries is a party or to which the assets of the Company or
any of the Subsidiaries are subject which, individually or in the
aggregate, would have a Material Adverse Effect;
5. To my knowledge, none of the Company or any of
the Subsidiaries is, except as disclosed in the Offering
Memorandum, in default (or, with notice or lapse of time or both,
would be in default) in the performance or observance of any
material obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease or other instrument to which it is a party
or by which it is bound, or to which any of its respective assets
is subject, or in violation of any law, statute, judgment,
decree, order, rule or regulation of any domestic or foreign
court with jurisdiction over the Company or any of its
Subsidiaries or any of their respective assets, or other
governmental or regulatory authority, agency or other body, other
than such defaults or violations which, individually or in the
aggregate, would not have a Material Adverse Effect; and
6. To my knowledge, the issuance, sale and delivery
of the Securities, the execution, delivery and performance by the
Company and the Trust of the Agreement and the Registration
Rights Agreement, the filing of the Declaration with the
Secretary of State of the State of Delaware, consummation by the
Company and the Trust of the transactions contemplated by such
documents and the application of the proceeds from the sale of
the Securities as contemplated by the Offering Memorandum do not,
and, at the Closing Time will not, conflict with or constitute a
breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any assets of
the Company or any of its Subsidiaries pursuant to, any material
contract, indenture, mortgage, loan agreement, note, lease other
instrument to which the Company or any of its Subsidiaries is a
party or by which any of them is bound, or to which any of the
assets of the Company or any of its Subsidiaries is subject, nor
will such action result in any violation of the provisions of the
charter of the Company or any applicable law, administrative
regulation or administrative or court decree.
Insofar as the foregoing opinions relate to the valid
existence and good standing of the Subsidiaries, they are based
solely on certificates of good standing received from the
Secretary of State of the State of Delaware and on a telephonic
confirmation from the office of such Secretary of State. Insofar
as the foregoing opinions relate to qualification to do business
of the Company and the Subsidiaries, they are based solely on
certificates of foreign qualification received from the
applicable Secretary of State's office, although I have made
inquiry as to the jurisdictions in the United States in which the
Company and its Subsidiaries conduct business.
The foregoing opinions are limited to the federal law
of the United States of America, the General Corporation Law of
the State of Delaware and the law of the State of Texas.
I am furnishing this opinion letter to you, as
Representatives of the Initial Purchasers, solely for the benefit
of the Initial Purchasers in connection with the offering of the
Preferred Securities. This opinion letter is not to be used,
circulated, quoted, filed with any governmental authority or
otherwise referred to for any other purpose.
Very truly yours,
DRAFT
Jeffery A. Smisek
Senior Vice President and
General Counsel
EXHIBIT E
November 28, 1995
(212) 701-3000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SMITH BARNEY INC.
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Re: Continental Airlines Finance Trust
Ladies and Gentlemen:
This opinion is being furnished to you pursuant to Section 7(c)
of the purchase agreement dated November 21, 1995 (the "Purchase
Agreement") among Continental Airlines Finance Trust, a Delaware
business trust (the "Trust"), Continental Airlines, Inc., a
Delaware corporation ("Continental") and the initial purchasers
named on Schedule A thereto (the "Initial Purchasers"). We have
acted as counsel to the Initial Purchasers in connection with the
transactions contemplated by (i) the Purchase Agreement, (ii) the
declaration of trust dated November 17, 1995, and the amended and
restated declaration of trust dated November 28, 1995 (together,
the "Declaration"), in each case between Continental, the regular
trustees named on the signature page thereof and Wilmington Trust
Company, as trustee (the "Delaware Trustee"), (iii) the indenture
dated November 28, 1995 (the "Indenture") between Continental and
Wilmington Trust Company, as trustee (the "Indenture Trustee"),
(iv) the registration rights agreement dated November 28, 1995
(the Registration Rights Agreement"), among Continental, the
Trust and the Initial Purchasers, (v) the preferred securities
guarantee agreement dated November 28, 1995 (the "Preferred
Securities Guarantee Agreement") executed by Continental and (vi)
the common securities guarantee agreement dated November 28, 1995
(the "Common Securities Guarantee Agreement") executed by
continental and (vi) the common securities guarantee agreement
dated November 28, 1995 (the "Common securities Guarantee
Agreement") executed by Continental.
The Purchase Agreement relates to the issuance pursuant to the
Declaration and the sale by the Trust to the Initial Purchasers
of up to 4,175,000 8 1/2% Convertible Trust Originated Preferred
Securities (the "Preferred Securities") and also contemplates the
issuance and sale by the Trust to Continental of up to 160,052 of
the Trust's Common Securities (the "Common Securities" and,
together with the Preferred Securities, the "Trust Securities")
and the issuance pursuant to the Indenture and the sale by
Continental to the Trust of up to $266,752,600 aggregate
principal amount of Continental's 8 1/2% Convertible Subordinated
Deferrable Interest Debentures due 2020 (the "Debentures" and,
together with the Trust Securities and the guarantees created by
the Preferred Securities Guarantee Agreement and the Common
Securities Guarantee Agreement, the "Securities"). Under the
terms of the Indenture, the Debentures are convertible into Class
B Common Stock (the "Conversion Shares") of Continental. An
offering memorandum relating to the offering of the Preferred
Securities, dated November 21, 1995 (the "Offering Memorandum"),
has been prepared by Continental and the Trust for the
information of the Initial Purchasers and for delivery to
prospective purchasers of the Preferred Securities.
Capitalized terms used herein without definition have the
meanings specified in the Purchase Agreement.
We have examined the originals, photocopies or conformed copies
of all such records, all such agreements and certificates of
officers and representatives of the various parties to the
transaction described in the Offering Memorandum and such other
documents as we have deemed relevant and necessary as a basis for
the opinions hereinafter expressed. In such examinations, we
have assumed the genuineness of all signatures on original
documents and the conformity to the originals of all copies
submitted to us as conformed or photocopies. Based on the
foregoing, we advise you that in our opinion:
1. The Purchase Agreement has been duly authorized, executed and
delivered by Continental. Each of the Indentures, the
Registration Rights Agreement, the Preferred Securities Guarantee
Agreement and the Common Securities Guarantee Agreement has been
duly authorized, executed and delivered by Continental and
(assuming the due execution and delivery of each such agreement
by the other parties thereto) is a legal, valid and binding
agreement of Continental (except that we express no opinion as to
the enforceability of Section 5 of the Registration Rights
Agreement providing for indemnification and contribution).
2. The Debentures are in the form contemplated by the Indenture,
have been duly authorized by Continental and, when executed and
authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Trust, will be legal, valid and
binding obligations of Continental.
3. The Conversion Shares have been duly authorized by
Continental reserved for issuance upon conversion and, when
issued in accordance with the Indenture at conversion prices at
or in excess of the par value of such Conversion Shares, will be
validly issued, fully paid and non-assessable.
4. The Securities, the Conversion Shares, the Declaration, the
Registration Rights Agreement, the Preferred Securities Guarantee
Agreement and the Indenture conform in all material respects to
the descriptions thereof in the Offering Memorandum under the
captions "Description of the Preferred Securities", "Description
of the Guarantee", "Description of the Convertible Subordinated
Debentures", "Effect of Obligations Under the Convertible
Subordinated Debentures" and "Description of Capital Stock".
5. Assuming the accuracy of the representations of Continental
and the Trust in Section 1 of the Purchase Agreement and your
representations set forth in Section 4 of the Purchase Agreement,
(i) it is not necessary in connection with the offer, sale and
delivery of the Preferred Securities to the Initial Purchasers
under the Purchase Agreement or in connection with the initial
resale of such Preferred Securities by the Initial Purchasers in
accordance with Section 4 of the Purchase Agreement to register
the Preferred Securities under the Securities Act of 1933, as
amended, or to qualify the Indenture, the Declaration or the
Preferred Securities Guarantee Agreement under the Trust
Indenture Act of 1939, as amended, it being understood that no
opinion is expressed as to any subsequent resale of Preferred
Securities and, (ii) neither the Trust nor Continental is
required to be registered as an "investment company" under the
Investment Company Act of 1940, as amended.
We have participated in conferences with officers and other
representatives of Continental, representatives of the
independent public accountants for Continental, representatives
of counsel for the Delaware Trustee and Property Trustee and your
representatives at which the contents of the Offering Memorandum
and related matters were discussed and, although we are not
passing upon and do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in
the Offering Memorandum (except to the extent stated in paragraph
4 above), on the basis of the foregoing (relying as to
materiality to a large extent upon the opinions of officers and
other representatives of Continental), no facts have come to our
attention that lead us to believe that the Offering Memorandum as
of its date contained an untrue statements of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading (it being understood that we have
not been requested to and do not express any comment with respect
to the financial statements and schedules and other financial and
statistical data included or incorporated by reference in the
Offering Memorandum).
In rendering this opinion, we express no opinion as to the laws
of any jurisdiction other than the law of the State of New York,
the General Corporation Law of the State of Delaware (the "GCL")
and the federal laws of the United States of America. Insofar as
the foregoing opinions relate to the legality, validity or
binding effect of any agreement of Continental, such opinions are
subject to applicable bankruptcy, insolvency, fraudulent
conveyance and similar laws affecting creditors' rights generally
and to general principles of equity.
This opinion is being delivered solely to the addressees of this
letter and may not be referred to or relied upon by any other
person or firm without our express written consent.
Very truly yours,
Exhibit F
C" Deals #3/ConAirTr.15
JLJ/SEK 11/22/95 2:29pm
November 28, 1995
To Each of the Persons Listed
on Schedule I Hereto
Re: Continental Airlines Finance Trust
Ladies and Gentlemen:
We have acted as special Delaware counsel for
Continental Airlines Finance Trust, a Delaware business trust
(the "Trust"), in connection with the matters set forth herein.
For purposes of giving the opinions hereinafter set
forth, our examination of documents has been limited to the
examination of originals or copies of the following:
(a) The Certificate of Trust of the Trust, dated
November 17,1995 (the "Certificate"), as filed in the office of
the Secretary of State of the State of Delaware (the "Secretary
of State") on November 17, 1995;
(b) The Declaration of Trust of the Trust, dated as of
November 17, 1995, among Continental Airlines, Inc., a Delaware
corporation ("Continental") and the trustees of the Trust named
therein, as amended and restated pursuant to an Amended and
Restated Declaration of Trust of the Trust, dated as of November
28, 1995 (the "Declaration"), among Continental, the trustees of
the Trust named therein (collectively, the "Trustees") and the
holders, from time to time, of the undivided beneficial interests
in the assets of the Trust;
(c) The Purchase Agreement, dated November 21, 1995
(the "Purchase Agreement"), among the Trust, Continental and
Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, CS First Boston Corporation, Donaldson, Lufkin &
Jenerette Securities Corporation and Smith Barney Inc.,
individually and as representatives (the "Representatives") of
the several initial purchasers named in Schedule A to the
Purchase Agreement (the "Initial Purchasers");
(d) The Registration Rights Agreement dated
November 28, 1995, among the Representatives, the Trust and
Continental (the "Registration Rights Agreement");
(e) The Offering Memorandum, dated November 21, 1995
(the "Offering Memorandum"), relating to the 8-1/2_% Trust
Originated Preferred Securities of the Trust representing
preferred undivided beneficial interests in the assets of the
Trust (each, a "Preferred Security" and collectively, the
"Preferred Securities"); and
(f) A Certificate of Good Standing for the Trust,
dated November 28, 1995, obtained from the Secretary of State.
Initially capitalized terms used herein and not
otherwise defined are used as defined in the Declaration.
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a)
through (f) above. In particular, we have not reviewed any
document (other than the documents listed in paragraphs (a)
through (f) above) that is referred to in or incorporated by
reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not
reviewed that is inconsistent with the opinions stated herein.
We have conducted no independent factual investigation of our own
but rather have relied solely upon the foregoing documents, the
statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed
to be true, complete and accurate in all material respects.
With respect to all documents examined by us, we have
assumed (i) the authenticity of all documents submitted to us as
authentic originals, (ii) the conformity with the originals of
all documents submitted to us as copies or forms, and (iii) the
genuineness of all signatures.
For purposes of this opinion, we have assumed that (i)
the Declaration and the Certificate are in full force and effect
and have not been amended, (ii) except to the extent provided in
paragraph 1 below, each of the parties to the documents examined
by us has been duly organized or duly formed, as the case may be,
and is validly existing in good standing under the laws of the
jurisdiction governing its organization or formation, (iii) each
natural person who is a party to the documents examined by us has
the legal capacity to execute, deliver and perform such
documents, (iv) except to the extent provided in paragraph 2
below, each of the parties to the documents examined by us has
the power and authority to execute and deliver, and to perform
its obligations under, such documents, (v) each of the parties to
the documents examined by us has duly authorized, executed and
delivered such documents, (vi) each Person to whom a Preferred
Security is to be issued by the Trust (each, a "Holder" and
collectively, the "Holders") has received an appropriate
Preferred Securities Certificate for such Preferred Security, and
the Trust has received payment for the Preferred Security
acquired by each such Holder, in accordance with the Declaration
and the Offering Memorandum and (vii) the Preferred Securities
are issued and sold to the Holders in accordance with the
Declaration and the Offering Memorandum. We have not
participated in the preparation of the Offering Memorandum and
assume no responsibility for its contents.
This opinion is limited to the laws of the State of
Delaware (excluding the securities laws of the State of
Delaware), and we have not considered and express no opinion on
the laws of any other jurisdiction, including federal laws and
rules and regulations relating thereto. Our opinions are
rendered only with respect to Delaware laws and rules,
regulations and orders thereunder that are currently in effect.
Based upon the foregoing, and upon our examination of
such questions of law and statutes of the State of Delaware as we
have considered necessary or appropriate, and subject to the
assumptions, qualifications, limitations and exceptions set forth
herein, we are of the opinion that:
1. The Trust has been duly created and is validly
existing in good standing as a business trust under the Delaware
Business Trust Act, 12 Del. C. Section 3801, et seq. (the "Act").
2. Under the Act and the Declaration, the Trust has
the power and authority to (i) execute and deliver, and to
perform its obligations under, the Purchase Agreement and the
Registration Rights Agreement, (ii) issue and perform its
obligations under the Preferred Securities and the Common
Securities and (iii) purchase and hold the Convertible
Subordinated Debentures.
3. The Preferred Securities have been duly authorized
by the Declaration and will represent, subject to the
qualifications set forth in paragraph 5 hereof, fully paid and
nonassessable beneficial interests in the assets of the Trust and
will entitle the holders thereof to the benefits of the
Declaration.
4. The Common Securities have been duly authorized by
the Declaration and, when issued and sold in accordance with the
Declaration, will represent, subject to the qualifications set
forth in paragraph 5 hereof, fully paid and nonassessable
beneficial interests in the assets of the Trust.
5. The holders of the Preferred Securities and the
Common Securities will be entitled to the same limitation of
personal liability extended to stockholders of private
corporations for profit organized under the General Corporation
Law of the State of Delaware. We note that the holders of the
Preferred Securities and the holders of the Common Securities may
be obligated to make payments as set forth in the Declaration and
that the holders of Common Securities are liable for all of the
debts and obligations of the Trust to the extent specified in
Section 10.1(b) of the Declaration.
6. Under the Act and the Declaration, the issuance of
the Preferred Securities and the Common Securities is not subject
to preemptive rights.
7. The issuance, sale and delivery by the Trust of
the Preferred Securities and of the Common Securities, the
execution and delivery by the Trust of the Purchase Agreement and
the Registration Rights Agreement, the purchase by the Trust of
the Convertible Subordinated Debentures and the performance by
the Trust of its obligations thereunder does not (a) result in
any violation of the Declaration or any Delaware statute, order,
rule or regulation of any Delaware court or other Delaware
governmental agency or body having jurisdiction over the Trust or
any of its properties or assets, (b) require the approval of any
such Delaware court or Delaware governmental agency or body, or
(c) to our knowledge, without independent investigation, conflict
with or result in breach or violation of any of the provisions
of, or constitute a default under any contract, indenture,
mortgage loan agreement, deed of trust, note, lease or other
instrument to which the Trust is a party or to which any of its
property or assets is subject.
8. The Purchase Agreement and the Registration Rights
Agreement have been duly authorized, executed and delivered by
the Trust.
9. The Declaration constitutes a valid and binding
obligation of Continental and the Trustees and is enforceable
against Continental and the Trustees in accordance with its
terms.
The opinions expressed in paragraphs 3 and 9 above are
subject to the effect upon the Declaration of (i) bankruptcy,
insolvency, moratorium, receivership, reorganization,
liquidation, fraudulent conveyance and other similar laws
relating to or affecting the rights and remedies of creditors
generally, (ii) principles of equity including applicable law
relating to fiduciary duties (regardless of whether considered
and applied in a proceeding in equity or at law), and (iii) the
effect of applicable public policy on the enforceability of
provisions relating to indemnification or contribution.
This opinion may be relied upon by you in connection
with the matters set forth herein. Otherwise, without our prior
written consent, this opinion may not be furnished or quoted to,
or relied upon by any other person or entity or any purpose.
Very truly yours,
EAM/JLJ/sek
Schedule I
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
as Representatives of the
Initial Purchasers named in Schedule A
to the Purchase Agreement
CS First Boston Corporation
Donaldson Lufkin & Jenrette Securities Corporation
Smith Barney Inc.
as Representatives of the
Initial Purchasers named in Schedule A
to the Purchase Agreement
Continental Airlines, Inc.
Cahill Gordon & Reindel
Cleary, Gottlieb, Steen & Hamilton
Exhibit G
"C" Deals #3/CAFT1.15
JLJ 11/22/95 2:13pm
November 28, 1995
To Each of the Parties Listed on
Schedule I Attached Hereto
Re: Continental Airlines Finance Trust
Ladies and Gentlemen:
We have acted as counsel to Wilmington Trust Company, a
Delaware banking corporation ("Wilmington Trust"), in connection
with the transactions contemplated by (i) the Amended and
Restated Declaration of Trust, dated as of November 28, 1995 (the
"Declaration"), among Continental Airlines, Inc., a Delaware
corporation ("Continental"), Wilmington Trust, as Property
Trustee and Delaware Trustee, the Regular Trustees named therein
and the holders, from time to time, of undivided beneficial
interests in the assets of Continental Airlines Finance Trust, a
Delaware business trust (the "Trust"), (ii) the indenture, dated
as of November __ 1995 (the "Indenture"), between Continental and
Wilmington Trust, as Trustee, and (iii) the Preferred Securities
Guarantee Agreement, dated as of November __, 1995 (the
"Preferred Securities Guarantee") between Continental and
Wilmington Trust, as Guarantee Trustee. This opinion is being
furnished to you pursuant to Section 7(d) of the Purchase
Agreement, dated November __, 1995 (the "Purchase Agreement"),
among Continental, the Trust and Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, CS First Boston
Corporation, Donaldson, Lufkin & Jenrette Securities Corporation
and Smith Barney Inc., individually and as Representatives of the
Initial Purchasers named in Schedule A to the Purchase Agreement.
Capitalized terms used herein and not otherwise defined are used
as defined in the Declaration, except that reference herein to
any document shall mean such document as in effect on the date
hereof.
We have examined originals or copies of the
Declaration, the Preferred Securities Guarantee and the
Indenture. We have also examined originals or copies of such
other documents and such corporate records, certificates and
other statements of governmental officials and corporate officers
and other representatives of Wilmington Trust as we have deemed
necessary or appropriate for the purposes of this opinion.
Moreover, as to certain facts material to the opinions expressed
herein, we have relied upon the representations and warranties
contained in the documents referred to in this paragraph.
Based upon the foregoing and upon an examination of
such questions of law as we have considered necessary or
appropriate, and subject to the assumptions, exceptions and
qualifications set forth below, we advise you that, in our
opinion:
1. Wilmington Trust is duly incorporated and is
validly existing in good standing as a banking corporation with
trust powers under the laws of the State of Delaware.
2. Wilmington Trust has the power and authority to
execute, deliver and perform its obligations under the
Declaration, the Indenture and the Preferred Securities
Guarantee.
3. Each or the Declaration, the Indenture and the
Preferred Securities Guarantee has been duly authorized, executed
and delivered by Wilmington Trust and the Declaration constitutes
a legal, valid and binding obligation of Wilmington Trust,
enforceable against Wilmington Trust, in accordance with its
terms.
4. The execution, delivery and performance by
Wilmington Trust of the Declaration, the Indenture and the
Preferred Securities Guarantee does not conflict with or
constitute a breach of the charter of by-laws of Wilmington
Trust.
5. No consent, approval or authorization of, or
registration with or notice to, any governmental authority or
agency of the State of Delaware or the United States of America
governing the banking or trust powers of Wilmington Trust is
required for the execution, delivery or performance by Wilmington
Trust of the Declaration, the Indenture or the Preferred
Securities Guarantee.
The foregoing opinions are subject to the following
assumptions, exceptions and qualifications:
A. We are admitted to practice law in the State of
Delaware and we do not hold ourselves out as being experts on the
law of any other jurisdiction. The foregoing opinions are
limited to the laws of the State of Delaware and the federal laws
of the United States of America governing the banking and trust
powers of Wilmington Trust (except that we express no opinion
with respect to (i) state securities or blue sky laws and (ii)
federal securities laws, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act
of 1934, as amended, the Trust Indenture Act of 1939, as amended,
and the Investment Company Act of 1940, as amended) and we have
not considered and express no opinion on the laws, rules and
regulations of any other jurisdiction.
B. The foregoing opinions regarding enforceability
are subject to (i) applicable bankruptcy, insolvency,
reorganization, moratorium, receivership, fraudulent conveyance
and similar laws relating to or affecting the rights and remedies
of creditors generally, (ii) principles of equity (regardless of
whether considered and applied in a proceeding in equity or at
law), and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification or
contribution.
C. We have assumed the due authorization, execution
and delivery by each of the parties thereto, other than
Wilmington Trust, of each of the Declaration, the Indenture and
the Preferred Securities Guarantee and that each of such parties
has the power and authority to execute, deliver and perform each
such document.
D. We have assumed that all signatures on documents
examined by us are genuine, that all documents submitted to us as
originals are authentic, and that all documents submitted to us
as copies or specimens conform with the originals, which facts we
have not independently verified.
E. We express no opinion as to the nature or validity
of title to any property.
F. We have not participated in the preparation of any
offering materials with respect to the Securities and we assume
no responsibility for their contents.
This opinion may be relied upon by you in connection
with the matters set forth herein and, without our prior written
consent, may not be furnished or quoted to, or relied upon by,
any other person or entity for any purpose.
Very truly yours,
EAM/JLJ/dmm
SCHEDULE I
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner
& Smith Incorporated
as Representatives of the
Initial Purchasers named in Schedule A
to the Purchase Agreement
CS First Boston Corporation
Donaldson Lufkin & Jenrette Securities Corporation
Smith Barney Inc.
as Representatives of the
Initial Purchasers named in Schedule A
to the Purchase Agreement
Continental Airlines, Inc.
Cahill Gordon & Reindel
Cleary, Gottlieb, Steen & Hamilton
Exhibit H
November 28, 1995
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019-4607
Re: 4,500,000 8 1/2% Convertible Trust Originated Preferred
Securities SM (the "Preferred Securities") of
Continental Airlines Finance Trust
Ladies and Gentlemen:
We have acted as special counsel to Continental
Airlines, Inc., a Delaware corporation (the "Company"), and
Continental Airlines Finance Trust, a statutory business trust
formed under the laws of the State of Delaware (the "Trust"), in
connection with the Trust's offering of the Preferred Securities
representing preferred undivided beneficial interests in the
assets of the Trust. This opinion letter is furnished pursuant
to Section 7(e) of the purchase agreement dated November 21, 1995
(the "Purchase Agreement") among the Company, the Trust and the
several initial purchasers named in Schedule A thereto (the
"Initial Purchasers"). Capitalized terms used but not defined
herein shall have the meaning ascribed to them in the Purchase
Agreement.
In arriving at the opinions expressed below, we have
examined and relied upon the originals or copies, certified or
otherwise identified to our satisfaction, of the declaration of
trust of the Trust dated as of November 17, 1995 (the
"Declaration of Trust"), the amended and restated declaration of
trust of the Trust dated as of November 28, 1995 (the "Amended
and Restated Declaration of Trust") and the Indenture, and of
such records, documents, instruments and certificates, and we
have made such investigations of law, as we have deemed
appropriate as a basis for the opinions expressed below. We have
assumed and have not verified that the signatures on all
documents that we have examined are genuine and that each person
signing each such document was duly authorized to sign such
document on behalf of the person or entity purported to be bound
thereby. In addition, for purposes of rendering the opinions
expressed below, we have assumed, without investigation on our
part, that the Declaration of Trust, the Amended and Restated
Declaration of Trust and the Indenture have been duly authorized
and validly executed and delivered by the Company, the Trust and
the Trustees and are legal, valid, binding and enforceable
instruments of the Company, the Trust and the Trustees.
Based on the foregoing, we are of the opinion that:
(i) The Trust will be characterized as a grantor trust
for U.S. federal income tax purposes and not as a
partnership or as an association subject to tax as
a corporation; and
(ii) The Convertible Subordinated Debentures will
constitute indebtedness of the Company.
The opinions expressed above are based on the Internal
Revenue Code of 1986, as amended and other laws and regulations,
rulings and decisions in effect on the date hereof, all of which
are subject to change (which change could apply retroactively).
We are furnishing this opinion letter to you solely for
your benefit, and this opinion letter may not be used,
circulated, quoted or otherwise referred to by you for any other
purpose without our consent. We hereby consent to your provision
of this opinion letter to the Initial Purchasers and to the
Initial Purchasers' and your reliance on this opinion letter.
We note that this opinion letter speaks only as of the
date hereof, and we assume no obligation to update this opinion
letter.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By:_______________________________
Dana L. Trier, a Partner
EXHIBIT 4.3
===========================================
AMENDMENT TO THE
AMENDED AND RESTATED DECLARATION OF TRUST
CONTINENTAL AIRLINES FINANCE TRUST
Dated as of May 9, 1996
==========================================
AMENDMENT made as of May 9, 1996 by the undersigned
Regular Trustees, to the AMENDED AND RESTATED DECLARATION OF
TRUST of Continental Airlines Finance Trust dated and effective
as of November 28, 1996 (as modified, supplemented or amended
from time to time, the "Declaration"; capitalized terms used but
not defined herein shall have the meanings given to them in the
Declaration) by the Trustees signatories thereto, Continental
Airlines, Inc., a Delaware corporation, as Sponsor, and by the
holders, from time to time, of undivided beneficial interests in
the Trust issued pursuant to the Declaration;
WHEREAS, the Trustees and the Sponsor established the
Trust under the Delaware Business Trust Act pursuant to a
Declaration of Trust dated as of November 17, 1995, as amended
and restated pursuant to an Amended and Restated Declaration of
Trust dated as of November 28, 1995, and a Certificate of Trust
filed with the Secretary of State of the State of Delaware on
November 17, 1995, for the sole purpose of issuing and selling
certain securities representing undivided beneficial interests in
the assets of the Trust and investing the proceeds thereof in
certain Debentures of the Debenture Issuer;
WHEREAS, pursuant to Section 12.1(a)(i) of the Amended
and Restated Declaration of Trust dated and effective as of
November 28, 1995, the Regular Trustees wish to amend the
Declaration in order to provide for a regular record date for the
Preferred Securities of fifteen (15) days prior to the relevant
payment date;
NOW THEREFORE, it being the intention of the Regular
Trustees to continue the Trust as a business trust under the
Business Trust Act and that the Declaration, as amended by this
Amendment, constitute the governing instrument of such business
trust, the Regular Trustees declare that all assets contributed
to the Trust will be held in trust for the benefit of the
holders, from time to time, of the securities representing
undivided beneficial interests under the Declaration, subject to
the provisions of the Declaration, and, in consideration of the
premises and mutual covenants herein contained, the Regular
Trustees agree to amend the Amended and Restated Declaration of
Trust dated and effective as of November 28, 1995 as follows:
1. Section 2(c) of Annex I of the Amended and Restated
Declaration of Trust dated and effective as of November 28, 1995
is hereby amended by deleting the third sentence thereof on page
I-3 and adding the following sentence as the third sentence
thereof:
"Subject to any applicable laws and regulations and the
provisions of the Declaration, the relevant record date
in respect of Preferred Securities being held in book-
entry form through The Depository Trust Company (the
"Depositary") will be fifteen (15) days prior to the
relevant payment dates, and each such payment will be
made as described under the heading "Description of the
Preferred Securities -- Book-entry only issuance -- The
Depository Trust Company" in the Offering Memorandum."
2. Exhibit A-1 of the Amended and Restated Declaration of Trust
dated and effective as of November 28, 1995 is hereby amended by
deleting the first sentence of the second paragraph on the form
of reverse of the Preferred Security on page A1-6 and adding the
following sentence as the first sentence thereof:
"Except as otherwise described below and in the
Declaration, distributions on the Preferred Securities
will be cumulative, will accrue from the date of
original issuance and will be payable quarterly in
arrears, on March 1, June 1, September 1 and December 1
of each year, commencing on March 1, 1996, to Holders
of record fifteen (15) days prior to such payment
dates, which payment dates shall correspond to the
interest payment dates on the Debentures."
3. Exhibit A-2 of the Amended and Restated Declaration of Trust
dated and effective as of November 28, 1995 is hereby amended by
deleting the first sentence of the second paragraph on the form
of reverse of the Exchanged Preferred Security on page A2-4 and
adding the following sentence as the first sentence thereof:
"Except as otherwise described below and in the
Declaration, distributions on the Preferred Securities
will be cumulative, will accrue from the date of
original issuance and will be payable quarterly in
arrears, on March 1, June 1, September 1 and December 1
of each year, commencing on March 1, 1996, to Holders
of record fifteen (15) days prior to such payment
dates, which payment dates shall correspond to the
interest payment dates on the Debentures."
4. This Amendment shall become effective when executed by each
of the Regular Trustees. Upon the execution of this Amendment,
the Declaration shall be modified in accordance herewith, and
this Amendment shall form a part of the Declaration for all
purposes; and every Holder of Securities heretofore or hereafter
authenticated and delivered under the Declaration shall be bound
hereby and thereby. Except as expressly amended hereby, the
Declaration shall continue to be and shall remain in full force
and effect.
5. Securities authenticated and delivered after the execution of
this Amendment may, but need not, bear a notation in form
approved by the Property Trustee as to any matter provided for in
this Amendment. If the Regular Trustees shall so determine, new
Securities so modified as to conform, in the opinion of the
Property Trustee and the Regular Trustees, to this Amendment may
be prepared and executed by the Trust and authenticated and
delivered by the Property Trustee in exchange for outstanding
Securities.
6. Unless the context otherwise requires, all references in the
Declaration to Articles and Sections and Exhibits and the Annex
are to Articles and Sections of, and Exhibits and the Annex to,
the Declaration, as amended hereby, unless otherwise specified.
7. In accordance with Section 12.1(b)(i) of the Amended and
Restated Declaration of Trust dated and effective as of November
28, 1995, each of the Trust and the Sponsor has delivered to the
Property Trustee an Officers' Certificate stating that this
Amendment is permitted by, and conforms to, the terms of the
Amended and Restated Declaration of Trust dated and effective as
of November 28, 1995 (including the terms of the Securities).
8. Governing Law. This Amendment and the rights of the parties
hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware and all rights and remedies
shall be governed by such laws without regard to principles of
conflict of laws.
IN WITNESS WHEREOF, the undersigned have caused these
presents to be executed as of the day and year first above
written.
Lawrence W. Kellner,
as Regular Trustee
________________________
Jeffery A. Smisek,
as Regular Trustee
________________________
- - - ----------------------------------------------------------------
CONTINENTAL AIRLINES, INC.
TO
WILMINGTON TRUST COMPANY,
not in its individual capacity,
but solely as Trustee
EXHIBIT 4.4
________________
Indenture
Dated as of November 28, 1995
________________
$231,958,750
(subject to increase to up to $266,752,600 in
the event an overallotment option is exercised)
8 1/2% Convertible Subordinated
Deferrable Interest Debentures Due 2020
- - - ----------------------------------------------------------------
Continental Airlines, Inc.
Certain Sections of this Indenture relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture
Indenture
Act Section Section
Section 310(a)(1) . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . Not
Applicable
(a)(4) . . . . . . . . . . . . . . . Not
Applicable
(b) . . . . . . . . . . . . . . . 608, 610
Section 311(a) . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . 613
Section 312(a) . . . . . . . . . . . . . . . 701
702(a)
(b) . . . . . . . . . . . . . . . 702(b)
(c) . . . . . . . . . . . . . . . 702(c)
Section 313(a) . . . . . . . . . . . . . . . 703(a)
(a)(4) . . . . . . . . . . . . . . . 101, 1004
(b) . . . . . . . . . . . . . . . 703(a)
(c) . . . . . . . . . . . . . . . 703(a)
(d) . . . . . . . . . . . . . . . 703(b)
Section 314(a) . . . . . . . . . . . . . . . 704
(b) . . . . . . . . . . . . . . . Not
Applicable
(c)(1) . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . Not
Applicable
(d) . . . . . . . . . . . . . . . Not
Applicable
(e) . . . . . . . . . . . . . . . 102
Section 315(a) . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . 514
Section 316(a) . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . 502
512
(a)(1)(B) . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . Not
Applicable
(b) . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . 104(c)
Section 317(a)(1) . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . 1003
Section 318(a) . . . . . . . . . . . . . . . 107
______________
Note: This reconciliation and tie shall not, for any
purpose, be
deemed to be a part of the Indenture.
TABLE OF CONTENTS
Page
Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals of the Company. . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions . . . . . . . . . . . . . . . . . . 2
SECTION 102. Compliance Certificates and Opinions. . . . . . 10
SECTION 103. Form of Documents Delivered to Trustee. . . . . 11
SECTION 104. Acts of Holders; Record Dates . . . . . . . . . 11
SECTION 105. Notices, Etc., to Trustee and the Company . . . 13
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . 13
SECTION 107. Conflict with Trust Indenture Act . . . . . . . 14
SECTION 108. Effect of Headings and Table of Contents. . . . 14
SECTION 109. Successors and Assigns. . . . . . . . . . . . . 14
SECTION 110. Separability Clause . . . . . . . . . . . . . . 14
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . 14
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . 14
SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . 14
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . 15
SECTION 202. Initial Issuance to Property Trustee. . . . . . 15
ARTICLE THREE
The Securities
SECTION 301. Title and Terms . . . . . . . . . . . . . . . . 16
SECTION 302. Denominations . . . . . . . . . . . . . . . . . 18
SECTION 303. Execution, Authentication, Delivery and Dat-
ing. . . . . . . . . . . . . . . . . . . . 18
SECTION 304. Temporary Securities. . . . . . . . . . . . . . 18
SECTION 305. Registration, Registration of Transfer and
Exchange . . . . . . . . . . . . . . . . . 19
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securi-
ties . . . . . . . . . . . . . . . . . . . 20
SECTION 307. Payment of Interest; Interest Rights Pre-
served . . . . . . . . . . . . . . . . . . 21
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . 23
SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . 23
SECTION 310. Right of Setoff . . . . . . . . . . . . . . . . 24
SECTION 311. CUSIP Numbers . . . . . . . . . . . . . . . . . 24
SECTION 312. Extension of Interest Payment Period; Notice
of Extension . . . . . . . . . . . . . . . 24
SECTION 313. Paying Agent, Security Registrar and Conver-
sion Agent . . . . . . . . . . . . . . . . 25
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture . . . . 25
SECTION 402. Application of Trust Money. . . . . . . . . . . 27
ARTICLE FIVE
Remedies
SECTION 501. Events of Default . . . . . . . . . . . . . . . 27
SECTION 502. Acceleration of Maturity; Rescission and
Annulment. . . . . . . . . . . . . . . . . 29
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . 30
SECTION 504. Trustee May File Proofs of Claim. . . . . . . . 31
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities. . . . . . . . . . . . . . . 32
SECTION 506. Application of Money Collected. . . . . . . . . 32
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . 32
SECTION 508. Unconditional Right of Holders to Receive
Principal and Interest and to Convert. . . 33
SECTION 509. Restoration of Rights and Remedies. . . . . . . 33
SECTION 510. Rights and Remedies Cumulative. . . . . . . . . 34
SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . 34
SECTION 512. Control by Holders. . . . . . . . . . . . . . . 34
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . 34
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . 35
SECTION 515. Waiver of Stay or Extension Laws. . . . . . . . 35
SECTION 516. Enforcement by Holders of Preferred Securi-
ties . . . . . . . . . . . . . . . . . . . 36
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities . . . . . . 36
SECTION 602. Notice of Defaults. . . . . . . . . . . . . . . 36
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . 36
SECTION 604. Not Responsible for Recitals or Issuance of
Securities . . . . . . . . . . . . . . . . 38
SECTION 605. May Hold Securities . . . . . . . . . . . . . . 38
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . 38
SECTION 607. Compensation and Reimbursement. . . . . . . . . 38
SECTION 608. Disqualification; Conflicting Interests . . . . 39
SECTION 609. Corporate Trustee Required; Eligibility . . . . 39
SECTION 610. Resignation and Removal; Appointment of Suc-
cessor . . . . . . . . . . . . . . . . . . 39
SECTION 611. Acceptance of Appointment by Successor. . . . . 41
SECTION 612. Merger, Conversion, Consolidation or Succes-
sion to Business . . . . . . . . . . . . . 41
SECTION 613. Preferential Collection of Claims Against
Company. . . . . . . . . . . . . . . . . . 42
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Address-
es of Holders. . . . . . . . . . . . . . . 42
SECTION 702. Preservation of Information; Communications
to Holders . . . . . . . . . . . . . . . . 42
SECTION 703. Reports by Trustee. . . . . . . . . . . . . . . 43
SECTION 704. Reports by Company. . . . . . . . . . . . . . . 43
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Cer-
tain Terms . . . . . . . . . . . . . . . . 44
SECTION 802. Successor Substituted . . . . . . . . . . . . . 45
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of
Holders. . . . . . . . . . . . . . . . . . 45
SECTION 902. Supplemental Indentures with Consent of Hold-
ers. . . . . . . . . . . . . . . . . . . . 46
SECTION 903. Execution of Supplemental Indentures. . . . . . 48
SECTION 904. Effect of Supplemental Indentures . . . . . . . 48
SECTION 905. Conformity with Trust Indenture Act . . . . . . 48
SECTION 906. Reference in Securities to Supplemental In-
dentures . . . . . . . . . . . . . . . . . 48
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. Payment of Principal and Interest . . . . . . . 49
SECTION 1002. Maintenance of Office or Agency . . . . . . . . 49
SECTION 1003. Money for Security Payments to Be Held in
Trust. . . . . . . . . . . . . . . . . . . 49
SECTION 1004. Statement by Officers as to Default . . . . . . 50
SECTION 1005. Limitation on Dividends; Transactions with
Affiliates; Covenants as to the Trust. . . 51
SECTION 1006. Payment of Expenses of the Trust. . . . . . . . 52
SECTION 1007. Registration Rights . . . . . . . . . . . . . . 52
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption . . . . . . . . . . . . . . 53
SECTION 1102. Applicability of Article. . . . . . . . . . . . 54
SECTION 1103. Election to Redeem; Notice to Trustee . . . . . 54
SECTION 1104. Selection by Trustee of Securities to Be
Redeemed . . . . . . . . . . . . . . . . . 54
SECTION 1105. Notice of Redemption. . . . . . . . . . . . . . 55
SECTION 1106. Deposit of Redemption Price . . . . . . . . . . 55
SECTION 1107. Securities Payable on Redemption Date . . . . . 56
SECTION 1108. Securities Redeemed in Part . . . . . . . . . . 56
SECTION 1109. Optional Redemption . . . . . . . . . . . . . . 57
SECTION 1110. Tax Event Redemption. . . . . . . . . . . . . . 57
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Agreement to Subordinate. . . . . . . . . . . . 58
SECTION 1202. Default on Designated Senior Indebtedness . . . 58
SECTION 1203. Liquidation; Dissolution; Bankruptcy. . . . . . 59
SECTION 1204. Subrogation . . . . . . . . . . . . . . . . . . 61
SECTION 1205. Trustee to Effectuate Subordination . . . . . . 62
SECTION 1206. Notice by the Company . . . . . . . . . . . . . 62
SECTION 1207. Rights of the Trustee; Holders of Senior
Indebtedness . . . . . . . . . . . . . . . 63
SECTION 1208. Subordination May Not Be Impaired . . . . . . . 64
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Rights . . . . . . . . . . . . . . . 64
SECTION 1302. Conversion Procedures . . . . . . . . . . . . . 65
SECTION 1303. Conversion Price Adjustments. . . . . . . . . . 67
SECTION 1304. Merger, Consolidation or Sale of Assets . . . . 73
SECTION 1305. Notice of Adjustments of Conversion Price . . . 73
SECTION 1306. Prior Notice of Certain Events. . . . . . . . . 74
SECTION 1307. [Reserved]. . . . . . . . . . . . . . . . . . . 75
SECTION 1308. Dividend or Interest Reinvestment Plans . . . . 75
SECTION 1309. Certain Additional Rights . . . . . . . . . . . 75
SECTION 1310. Restrictions on Common Stock Issuable upon
Conversion.. . . . . . . . . . . . . . . . 76
SECTION 1311. Trustee Not Responsible for Determining Con-
version Price or Adjustments . . . . . . . 78
EXHIBIT A-1 Form of the Security
EXHIBIT A-2 Form of the Exchange Security
ANNEX A Form of Amended and Restated Declaration of Trust among
the Company, as Sponsor, Wilmington Trust Company, as
Delaware Trustee, and Lawrence W. Kellner and Jeffery
A. Smisek, each as Regular Trustees, dated as of Novem-
ber 28, 1995.
______________
Note: This table of contents shall not, for any purpose, be
deemed to be a part of the Indenture.
INDENTURE, dated as of November 28, 1995, between
Continental Airlines, Inc., a corporation duly organized and
existing under the laws of the State of Delaware (herein called
"Continental" or the "Company"), having its principal office at
2929 Allen Parkway, Suite 2010, Houston, Texas 77019, and
Wilmington Trust Company, not in its individual capacity but
solely as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
WHEREAS, Continental Airlines Finance Trust, a Delaware
business trust (the "Trust") formed under the Amended and Restat-
ed Declaration of Trust among the Company, as Sponsor, Wilmington
Trust Company, not in its individual capacity but solely in its
capacities as property trustee (the "Property Trustee") and
Delaware trustee (the "Delaware Trustee"), and Lawrence W.
Kellner and Jeffery A. Smisek, as trustees (the "Regular Trust-
ees"), dated as of November 28, 1995 (the "Declaration"), pursu-
ant to the Purchase Agreement (the "Purchase Agreement") dated
November 21, 1995, among the Company, the Trust and the Initial
Purchasers named therein, will issue and sell 4,500,000 (or up to
5,175,000 if the overallotment option granted to the Initial
Purchasers is exercised in full) of its 8 1/2% Convertible Trust
Originated Preferred Securities SM (the "Preferred Securities"),
with a liquidation amount of $50 per Preferred Security and
having an aggregate liquidation amount with respect to the assets
of the Trust of $225,000,000 (or up to $258,750,000 if the
overallotment option is exercised in full);
WHEREAS, the trustees of the Trust, on behalf of the
Trust, will execute and deliver to the Company common securities
evidencing an ownership interest in the Trust (the "Common
Securities"), registered in the name of the Company, in an
aggregate amount equal to approximately three percent (3%) of the
capitalization of the Trust, equivalent to 139,175 Common Securi-
ties (or up to 160,052 Common Securities if the overallotment
option is exercised in full), with a liquidation amount of $50
per Common Security and having an aggregate liquidation amount
with respect to the assets of the Trust of $6,958,750 (or up to
$8,002,600 if the overallotment option is exercised in full);
WHEREAS, the Trust will use the proceeds from the sale
of the Preferred Securities and the Common Securities to pur-
chase, from the Company, Securities (as defined below) in an
aggregate principal amount of $231,958,750 (or up to $266,752,600
if the overallotment option is exercised in full);
WHEREAS, the Company is guaranteeing the payment of all
distributions (including Additional Interest, Compounded Interest
and Liquidated Damages, if any) on the Preferred Securities,
payment of the Redemption Price, as applicable, and payments on
liquidation with respect to the Preferred Securities, to the
extent provided in the Preferred Securities Guarantee Agreement
(the "Guarantee") between the Company and Wilmington Trust
Company, not in its individual capacity but solely in its capaci-
ty as guarantee trustee, for the benefit of the holders from time
to time of the Preferred Securities;
WHEREAS, the Company has duly authorized the creation
of an issue of its 8 1/2% Convertible Subordinated Deferrable
Interest Debentures Due 2020 (the "Securities") of substantially
the tenor and amount hereinafter set forth and, to provide
therefor, the Company has duly authorized the execution and
delivery of this Indenture; and
WHEREAS, so long as the Trust is a Holder of Securi-
ties, and any Preferred Securities are outstanding, the Declara-
tion provides that the holders of Preferred Securities may cause
the Conversion Agent to (a) exchange such Preferred Securities
for Securities held by the Trust and (b) immediately convert such
Securities into Class B Common Stock of Continental;
WHEREAS, all things necessary to make the Securities,
when executed by the Company and authenticated and delivered
hereunder and duly issued by the Company, the valid obligations
of the Company, and to make this Indenture a valid agreement of
the Company, in accordance with their and its terms, have been
done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the
purchase of the Securities by the Holders thereof, it is mutually
agreed, for the equal and proportionate benefit of all Holders of
the Securities, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the
meanings assigned to them in this Article and include
the plural as well as the singular;
(2) all other terms used herein which are defined
in the Trust Indenture Act, either directly or by
reference therein, have the meanings assigned to them
therein;
(3) all accounting terms not otherwise defined
herein have the meanings assigned to them in accordance
with generally accepted accounting principles; and
(4) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Inden-
ture as a whole and not to any particular Article,
Section, Clause or other subdivision.
"Act", when used with respect to any Holder, has the
meaning specified in Section 104.
"Additional Interest" has the meaning specified in
Section 301.
"Additional Payments" means Compounded Interest,
Additional Interest and Liquidated Damages, if any.
"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 specified Person means the power to direct
the management and policies of such Person, directly or indirect-
ly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "con-
trolled" have meanings correlative to the foregoing.
"Agent" means any Registrar, Paying Agent, Conversion
Agent or co-registrar.
"Board of Directors" means either the board of direc-
tors of the Company or any duly authorized committee of that
board.
"Board Resolution" means a copy of a resolution certi-
fied by the Secretary or an Assistant Secretary of the Company to
have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification, and
delivered to the Trustee.
"Business Day" means any day other than a Saturday or a
Sunday or a day on which banking institutions in The City of New
York or Wilmington, Delaware are authorized or required by law or
executive order to remain closed.
"Class B Common Stock" means the Class B Common Stock,
$.01 par value per share, of the Company.
"Commission" means the Securities and Exchange Commis-
sion, as from time to time constituted, created under the Securi-
ties Exchange Act of 1934, or, if at any time after the execution
of this instrument such Commission is not existing and performing
the duties now assigned to it under the Trust Indenture Act, then
the body performing such duties at such time.
"Common Securities" has the meaning specified in the
Recitals to this Instrument.
"Common Stock" includes any stock of any class of the
Company which has no preference in respect of dividends or of
amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company and which
is not subject to redemption by the Company. However, subject to
the provisions of Article Thirteen, shares issuable on conversion
of Securities shall include only shares of the class designated
as Class B Common Stock of the Company at the date of this
instrument or shares of any class or classes resulting from any
reclassification or reclassifications thereof and which have no
preference in respect of dividends or of amounts payable in the
event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company and which are not subject to redemption
by the Company; provided, that if at any time there shall be more
than one such resulting class, the shares of each such class then
so issuable on conversion shall be substantially in the propor-
tion which the total number of shares of such class resulting
from all such reclassifications bears to the total number of
shares of all such classes resulting from all such reclassifica-
tions.
"Company" means the Person named as the "Company" in
the first paragraph of this instrument until a successor Person
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Company" shall mean such succes-
sor Person.
"Company Request" or "Company Order" means a written
request or order signed in the name of the Company by its Chair-
man of the Board, its President or a Vice President, and by its
Treasurer, an Assistant Treasurer, its Secretary or an Assistant
Secretary, and delivered to the Trustee.
"Compounded Interest" has the meaning specified in
Section 312.
"Conversion Agent" means the Person or Persons
appointed to act on behalf of the holders of Preferred Securities
and/or on behalf of the holders of Common Securities in effecting
the conversion of Preferred Securities and/or Common Securities
as and in the manner set forth in the Declaration and Section
1302 hereof.
"Conversion Date" has the meaning specified in Section
1302.
"Corporate Trust Office" means the principal office of
Wilmington Trust Company at which at any particular time its
corporate trust business shall be administered and which at the
date of this Indenture is at Rodney Square North, 1100 North
Market Street, Wilmington, Delaware 19890, Attention: Corporate
Trust Administration.
"Current Market Price" has the meaning specified in
Section 1303(vi).
"Declaration" has the meaning specified in the Recitals
to this instrument.
"Defaulted Interest" has the meaning specified in
Section 307.
"Delaware Trustee" has the meaning specified in the
Recitals to this instrument.
"Designated Senior Indebtedness" means (i) all Senior
Indebtedness of the Company outstanding from time to time under
agreements between the Company, on the one hand, and General
Electric Company, General Electric Capital Corporation, any of
their respective direct or indirect subsidiaries, or any affili-
ates (as such term is defined in Rule 12b-2 under the Exchange
Act) of any of the foregoing (each of which is a "GE Party") or
any trust of which any GE Party is a beneficiary, on the other
hand, in effect on the original issue date of the Securities, and
any renewal, refunding, replacement or extension thereof and
(ii) any Senior Indebtedness of the Company incurred, issued or
assumed after the original issue date of the Securities, and any
renewal, refunding, replacement or extension thereof.
"Event of Default" has the meaning specified in Sec-
tion 501.
"Exchanged Securities" means the 8 1/2% Convertible
Subordinated Deferrable Interest Debentures Due 2020 to be issued
in connection with sales of such Securities pursuant to an
effective Shelf Registration Statement.
"Extended Interest Payment Period" has the meaning
specified in Section 312.
"Guarantee" has the meaning specified in the Recitals
to this instrument.
"Holder" means a Person in whose name a Security is
registered in the Security Register.
"Indenture" means this instrument as originally execut-
ed or as it may from time to time be supplemented or amended by
one or more indentures supplemental hereto entered into pursuant
to the applicable provisions hereof, including, for all purposes
of this instrument and any such supplemental indenture, the
provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental
indenture, respectively.
"Initial Purchasers", with respect to the Preferred
Securities, means Merrill Lynch, Pierce, Fenner & Smith Incorpo-
rated, CS First Boston Corporation, Donaldson, Lufkin & Jenrette
Securities Corporation, Smith Barney Inc., BT Securities Corpora-
tion, PaineWebber Incorporated and S.G. Warburg & Co. Inc.
"Interest Payment Date" has the meaning specified in
Section 301.
"Investment Company Event" has the meaning specified in
the Declaration.
"Liquidated Damages" has the meaning specified in
Section 1007.
"Maturity", when used with respect to any Security,
means the date on which the principal of such Security becomes
due and payable as therein or herein provided, whether at the
Stated Maturity or by declaration of acceleration, call for
redemption or otherwise.
"90 Day Period" has the meaning specified in Section
1110.
"No Recognition Opinion" has the meaning specified in
the Declaration.
"Notice of Conversion" means the notice to be given by
a holder of Preferred Securities or Common Securities to the
Conversion Agent directing the Conversion Agent to exchange such
Preferred Securities or Common Securities for Securities and to
convert such Securities into Class B Common Stock on behalf of
such holder.
"Officers' Certificate" means a certificate signed by
the Chairman of the Board, the President or a Vice President, and
by the Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary of the Company, and delivered to the Trustee.
One of the officers signing an Officers' Certificate given
pursuant to Section 1004 shall be the principal executive,
financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of coun-
sel, who may be counsel for the Company, and who shall be reason-
ably acceptable to the Trustee.
"Outstanding", when used with respect to Securities,
means, as of the date of determination, all Securities thereto-
fore authenticated and delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered
to the Trustee for cancellation; (ii) Securities for whose
payment or redemption money in the necessary amount has been
theretofore deposited with the Trustee or any Paying Agent (other
than the Company) in trust or set aside and segregated in trust
by the Company (if the Company shall act as its own Paying Agent)
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 this Indenture or provision therefor
satisfactory to the Trustee has been made; and (iii) Securities
which have been paid pursuant to Section 306, converted into
Class B Common Stock pursuant to Section 1301, or in exchange for
or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securi-
ties in respect of which there shall have been presented to the
Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company.
"Paying Agent" means any Person authorized by the
Company to pay the principal of or interest on any Securities on
behalf of the Company.
"Person" means any individual, corporation, company,
partnership, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Security means
every previous Security evidencing all or a portion of the same
debt as that evidenced by such particular Security; and, for the
purposes of this definition, any Security authenticated and
delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or
stolen Security.
"Preferred Securities" has the meaning specified in the
Recitals to this instrument.
"Property Trustee" has the meaning specified in the
Recitals to this instrument.
"Purchase Agreement" has the meaning specified in the
Recitals to this instrument.
"Redemption Date", when used with respect to any
Security to be redeemed, means the date fixed for such redemption
by or pursuant to this Indenture.
"Redemption Price", when used with respect to any
Security to be redeemed, means the price at which it is to be
redeemed pursuant to this Indenture.
"Redemption Tax Opinion" has the meaning specified in
the Declaration.
"Reference Date" has the meaning specified in Section
1303(iv).
"Registration Rights Agreement" has the meaning speci-
fied in Section 1007.
"Regular Record Date" has the meaning specified in
Section 301.
"Responsible Officer", when used with respect to the
Trustee, means the chairman or any vice-chairman of the board of
directors, the chairman or any vice-chairman of the executive
committee of the board of directors, the chairman of the trust
committee, the president, any vice president, any assistant vice
president, the treasurer, any assistant treasurer, the cashier,
any assistant cashier, any trust officer or assistant trust
officer, the controller or any assistant controller or any other
officer of the Trustee customarily performing functions similar
to those performed by any of the above designated officers and
also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Securities Legend" has the meaning speci-
fied in Section 202.
"Securities" has the meaning specified in the Recitals
to this instrument.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 305.
"Senior Indebtedness" means, with respect to the
Company, (i) the principal, premium, if any, and interest in
respect of (A) indebtedness of such obligor for money borrowed
and (B) indebtedness evidenced by securities, debentures, bonds
or other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations
of such obligor issued or assumed as the deferred purchase price
of property, all conditional sale obligations of such obligor and
all obligations of such obligor under any title retention agree-
ment (but excluding trade accounts payable arising in the ordi-
nary course of business), (iv) all obligations of such obligor
for the reimbursement of any letter of credit, banker's accep-
tance, security purchase facility or similar credit transaction,
(v) all obligations of the type referred to in clauses (i)
through (iv) above of other persons for the payment of which such
obligor is responsible or liable as obligor, guarantor or other-
wise, and (vi) all obligations of the type referred to in clauses
(i) through (v) above of other persons secured by any lien on any
property or asset of such obligor (whether or not such obligation
is assumed by such obligor), except for (1) any such indebtedness
that is by its terms subordinated to or pari passu with the
Securities and (2) any indebtedness between or among such obligor
or its Affiliates, including all other debt securities and
guarantees in respect of those debt securities, initially issued
to any other trust, or a trustee of such trust, partnership, or
other entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing
Entity") in connection with the issuance by such Financing Entity
of preferred securities or other securities that rank pari passu
with or junior to the Preferred Securities.
"Shelf Registration Statement" has the meaning speci-
fied in Section 1007.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by the Trustee pursuant to
Section 307.
"Stated Maturity", when used with respect to any
Security or any installment of interest thereon, means the date
specified in such Security as the fixed date on which the princi-
pal, together with any accrued and unpaid interest (including
Compounded Interest), of such Security or such installment of
interest is due and payable.
"Subsidiary" of any Person means (i) a corporation more
than 50% of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more
Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsid-
iaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and power to direct the policies, management
and affairs thereof.
"Tax Event" has the meaning specified in the Declara-
tion.
"Trading Day" means a day on which Common Stock is
traded on the national securities exchange or the quotation
system used to determine the Current Market Price.
"Trust" has the meaning specified in the Recitals to
this instrument.
"Trustee" means the Person named as the "Trustee" in
the first paragraph of this instrument until a successor Trustee
shall have become such pursuant to the applicable provisions of
this Indenture, and thereafter "Trustee" shall mean such succes-
sor Trustee.
"Trust Indenture Act" means the Trust Indenture Act of
1939 as in force at the date as of which this instrument was
executed; provided, however, that in the event the Trust Inden-
ture Act of 1939 is amended after such date, "Trust Indenture
Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trust Securities" means Common Securities and Pre-
ferred Securities.
"Vice President", when used with respect to the Company
or the Trustee, means any vice president, whether or not desig-
nated by a number or a word or words added before or after the
title "vice president".
"Voting Stock" of any Person means capital stock of
such Person which ordinarily has voting power for the election of
directors (or Persons performing similar functions) of such
Person, whether at all times or only so long as no senior class
of securities has such voting power by reason of any contingency.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Trustee such certificates and
opinions as may be required under the Trust Indenture Act or
reasonably requested by the Trustee in connection with such
application or request. Each such certificate or opinion shall
be given in the form of an Officers' Certificate, if to be given
by an officer of the Company, or an Opinion of Counsel, if to be
given by counsel, and shall comply with the applicable require-
ments of the Trust Indenture Act and any other applicable re-
quirement set forth in this Indenture.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an officer of the Company
may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless
such officer knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with
respect to the matters upon which his certificate or opinion is
based are erroneous. Any such certificate or opinion of counsel
may be based, insofar as it relates to factual matters, upon a
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 the possession of the Company,
unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations
with respect to such matters are erroneous.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Indenture,
they may, but need not, be consolidated and form one instrument.
SECTION 104. Acts of Holders; Record Dates.
(a) Any request, demand, authorization, direction,
notice, consent, waiver or other action provided by this Inden-
ture to be given or taken by Holders may be embodied in and
evidenced by one or more instruments of substantially similar
tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument
or instruments are delivered to the Trustee and, where it is
hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
Holders signing such instrument or instruments. Proof of execu-
tion of any such instrument or of a writing appointing any such
agent shall be sufficient for any purpose of this Indenture and
(subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the affidavit
of a witness of such execution or by a certificate of a notary
public or other officer authorized by law to take acknowledgments
of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also
constitute sufficient proof of his authority. The fact and date
of the execution of any such instrument or writing, or the
authority of the Person executing the same, may also be proved in
any other manner which the Trustee or the Company, as the case
may be, deems sufficient.
(c) The Company may, in the circumstances permitted by
the Trust Indenture Act, fix any day as the record date for the
purpose of determining the Holders entitled to give or take any
request, demand, authorization, direction, notice, consent,
waiver or other action, or to vote on any action, authorized or
permitted to be given or taken by Holders. If not set by the
Company prior to the first solicitation of a Holder made by any
Person in respect of any such action, or, in the case of any such
vote, prior to such vote, the record date for any such action or
vote shall be the 30th day (or, if later, the date of the most
recent list of Holders required to be provided pursuant to
Section 701) prior to such first solicitation or vote, as the
case may be. With regard to any record date, only the Holders on
such date (or their duly designated proxies) shall be entitled to
give or take, or vote on, the relevant action.
(d) The ownership of Securities shall be proved by the
Security Register.
(e) Any request, demand, authorization, direction,
notice, consent, waiver or other Act of the Holder of any Securi-
ty shall bind every future Holder of the same Security and the
Holder of every Security issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or
the Company in reliance thereon, whether or not notation of such
action is made upon such Security.
SECTION 105. Notices, Etc., to Trustee and the Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or
permitted by this Indenture to be made upon, given or furnished
to, or filed with,
(1) the Trustee by any Holder or by the Company
shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with
the Trustee at its Corporate Trust Office, Attention:
Corporate Trust Trustee Administration, or
(2) the Company by the Trustee or by any Holder
shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing and
mailed, first-class postage prepaid, to the Company
addressed to it at the address of its principal office
specified in the first paragraph of this instrument or
at any other address previously furnished in writing to
the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of
any event, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed,
first-class postage prepaid, to each Holder affected by such
event, at such Holder's address as it appears in the Security
Register, not later than the latest date (if any), and not
earlier than the earliest date (if any), prescribed for the
giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any
defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other
Holders. 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 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.
In case by reason of the suspension of regular mail
service or by reason of any other cause it shall be impracticable
to give such notice by mail, then such notification as shall be
made with the approval of the Trustee shall constitute a suffi-
cient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts
with a provision of the Trust Indenture Act that is required
under such Act to be a part of and govern this Indenture, the
latter provision shall control. If any provision of this Inden-
ture modifies or excludes any provision of the Trust Indenture
Act that may be so modified or excluded, the latter provision
shall be deemed to apply to this Indenture as so modified or to
be excluded, as the case may be.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the
Company shall bind its successors and assigns, whether so ex-
pressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the
Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express
or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, the holders of Senior
Indebtedness, the holders of Preferred Securities (to the extent
provided herein) and the Holders of Securities, any benefit or
any legal or equitable right, remedy or claim under this Inden-
ture.
SECTION 112. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption
Date or Stated Maturity of any Security or the last date on which
a Holder has the right to convert his Securities shall not be a
Business Day, then (notwithstanding any other provision of this
Indenture or of the Securities) payment of interest or principal
or conversion of the Securities need not be made on such date,
but may be made on the next succeeding Business Day (except that,
if such Business Day is in the next succeeding calendar year,
such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be, shall be the immediately preceding Business
Day) with the same force and effect as if made on the Interest
Payment Date or Redemption Date, or at the Stated Maturity or on
such last day for conversion, provided, that no interest shall
accrue for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be.
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally.
The Securities and the Trustee's certificates of
authentication shall be substantially in the form of Exhibit A-1
which is hereby incorporated in and expressly made a part of this
Indenture. The Exchanged Securities and the Trustee's certifi-
cates of authentication shall be substantially in the form of
Exhibit A-2, which is hereby incorporated by reference and
expressly made a part of this Indenture. The Securities may have
notations, legends or endorsements required by law, stock ex-
change rule, agreements to which the Company is subject, if any,
or usage (provided that any such notation, legend or endorsement
is in a form acceptable to the Company). The Company shall
furnish any such legend not contained in Exhibit A-1 to the
Trustee in writing. Each Security shall be dated the date of its
authentication. The terms and provisions of the Securities set
forth in Exhibits A-1 and A-2 are part of the terms of this
Indenture and to the extent applicable, the Company and the
Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound
thereby.
The definitive Securities shall be typewritten or
printed, lithographed or engraved or produced by any combination
of these methods or may be produced in any other manner permitted
by the rules of any securities exchange on which the Securities
may be listed, all as determined by the officers executing such
Securities, as conclusively evidenced by their execution of such
Securities.
SECTION 202. Initial Issuance to Property Trustee.
The Securities initially issued to the Property Trustee
of the Trust shall be in the form of one or more individual
certificates in definitive, fully registered form without distri-
bution coupons and shall bear the Restricted Securities Legend
set forth in Exhibit A-1 unless the Company determines otherwise
in accordance with applicable law.
ARTICLE THREE
The Securities
SECTION 301. Title and Terms.
The aggregate principal amount of Securities that may
be authenticated and delivered under this Indenture is limited to
the sum of (a) $231,958,750 and (b) such aggregate principal
amount (which may not exceed $34,793,850 aggregate principal
amount) of Securities, if any, as shall be purchased by the Trust
pursuant to an over-allotment option in accordance with the terms
and provisions of the Purchase Agreement, except for Securities
authenticated and delivered upon registration of transfer of, or
in exchange for, or in lieu of, other Securities pursuant to
Section 304, 305, 306, 906, 1108 or 1301.
The Securities shall be known and designated as the "8
1/2% Convertible Subordinated Deferrable Interest Debentures Due
2020" of the Company. Their Stated Maturity shall be December 1,
2020, and they shall bear interest at the rate of 8 1/2% per
annum, from November 28, 1995 or from the most recent Interest
Payment Date (as defined below) to which interest has been paid
or duly provided for, as the case may be, payable quarterly
(subject to deferral as set forth herein), in arrears, on
March 1, June 1, September 1 and December 1 (each an "Interest
Payment Date") of each year, commencing March 1, 1996, until the
principal thereof is paid or made available for payment, and they
shall be paid to the Person in whose name the Security is regis-
tered at the close of business on the regular record date for
such interest installment, which shall be the close of business
on the Business Day next preceding each Interest Payment Date
(the "Regular Record Date"). In the event the Securities are not
held solely by the Trust or are not in book-entry only form, the
Regular Record Date shall be the date that is 15 calendar days
prior to the Interest Payment Date. Interest will compound
quarterly and will accrue at the rate of 8 1/2% per annum on any
interest installment in arrears for more than one quarter or
during an extension of an interest payment period as set forth in
Section 312 hereof.
The amount of interest payable for any period will be
computed on the basis of a 360-day year of twelve 30-day months.
Except as provided in the following sentence, the amount of
interest payable for any period shorter than a full quarterly
period for which interest in computed, will be computed on the
basis of the actual number of days elapsed in such a 30-day
month. In the event that any date on which interest is payable
on the Securities is not a Business Day, then payment of interest
payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in
respect of any such delay), except that, if such Business Day is
in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the
same force and effect as if made on such date.
If at any time while the Property Trustee is the Holder
of any Securities, the Trust or the Property Trustee is required
to pay any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the
United States, or any other taxing authority, then, in any case,
the Company will pay as additional interest ("Additional Inter-
est") on the Securities held by the Property Trustee, such
additional amounts as shall be required so that the net amounts
received and retained by the Trust and the Property Trustee after
paying such taxes, duties, assessments or other governmental
charges will be equal to the amounts the Trust and the Property
Trustee would have received had no such taxes, duties, assess-
ments or other government charges been imposed.
The principal of and interest on the Securities shall
be payable at the office or agency of the Company in the United
States maintained for such purpose and at any other office or
agency maintained by the Company for such purpose in such coin or
currency of the United States of America as at the time of
payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of
interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security
Register.
The Securities shall be redeemable as provided in
Article Eleven hereof.
The Securities shall be subordinated in right of
payment to Senior Indebtedness as provided in Article Twelve
hereof.
The Securities shall be convertible as provided in
Article Thirteen hereof.
SECTION 302. Denominations.
The Securities shall be issuable only in registered
form without coupons and only in denominations of $50 and inte-
gral multiples thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the
Company by its Chairman of the Board, its President or one of its
Vice Presidents, under its corporate seal reproduced thereon
attested by its Secretary or one of its Assistant Secretaries.
The signature of any of these officers on the Securities may be
manual or facsimile.
Securities bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such indi-
viduals or any of them have ceased to hold such offices prior to
the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution
and delivery of this Indenture, the Company may deliver Securi-
ties executed by the Company to the Trustee for authentication,
together with a Company Order for the authentication and delivery
of such Securities; and the Trustee in accordance with such
Company Order shall authenticate and make available for delivery
such Securities as in this Indenture provided and not otherwise.
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 substan-
tially in the form provided for herein executed by the Trustee by
manual signature, 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 304. Temporary Securities.
Pending the preparation of definitive Securities, the
Company may execute, and upon Company Order the Trustee shall
authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in
any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may deter-
mine, as conclusively evidenced by their execution of such
Securities.
If temporary Securities are issued, the Company will
cause definitive Securities to be prepared without unreasonable
delay. After the preparation of definitive Securities, the
temporary Securities shall be exchangeable for definitive Securi-
ties upon surrender of the temporary Securities at any office or
agency of the Company designated pursuant to Section 1002,
without charge to the Holder. Upon surrender for cancellation of
any one or more temporary Securities the Company shall execute
and the Trustee shall authenticate and make available for deliv-
ery in exchange therefor a like principal amount of definitive
Securities of authorized denominations. Until so exchanged the
temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
SECTION 305. Registration, Registration of Transfer and
Exchange.
(a) General.
The Company shall cause to be kept at the Corporate
Trust Office of the Trustee a register (the register maintained
in such office and in any other office or agency designated
pursuant to Section 1002 being herein sometimes collectively
referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of
Securities. The Trustee is hereby appointed "Security Registrar"
for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any
Security at an office or agency of the Company designated pursu-
ant to Section 1002 for such purpose, the Company shall execute,
and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securi-
ties of any authorized denominations and of a like aggregate
principal amount.
At the option of the Holder, Securities may be ex-
changed for other Securities of any authorized denominations and
of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at such office or agency. Whenever
any Securities are so surrendered for exchange, the Company shall
execute, and the Trustee shall authenticate and make available
for delivery, the Securities which the Holder making the exchange
is entitled to receive.
All Securities issued upon any registration of transfer
or exchange of Securities shall be the valid obligations of the
Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
Every Security presented or surrendered for registra-
tion of transfer or for exchange shall (if so required by the
Company or the Trustee) be duly endorsed, or be accompanied by a
written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed, by the Holder
thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmen-
tal charge that may be imposed in connection with any registra-
tion of transfer or exchange of Securities, other than exchanges
pursuant to Section 304, 906, 1108 or 1301 not involving any
transfer.
The Company shall not be required (i) in the case of a
partial redemption of the Securities, to issue, register the
transfer of or exchange any Security during a period beginning at
the opening of business 15 days before the day of the mailing of
a notice of redemption of Securities selected for redemption
under Section 1104 and ending at the close of business on the day
of such mailing, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in
part.
(b) Transfer Procedures and Restrictions.
The Securities may not be transferred except in compli-
ance with the Restricted Securities Legend, unless otherwise
determined by the Company in accordance with applicable law.
Upon any distribution of the Securities to the holders of the
Preferred Securities in accordance with the Declaration, the
Company and the Trustee shall enter into a supplemental indenture
pursuant to Section 901(6) to provide for transfer procedures and
restrictions with respect to the Securities substantially similar
to those contained in the Declaration to the extent applicable in
the circumstances existing at the time of such distribution.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trust-
ee, the Company shall execute and the Trustee shall authenticate
and deliver in exchange therefor a new Security of like tenor and
principal amount and bearing a number not contemporaneously
outstanding.
If there shall be delivered to the Company and the
Trustee (i) evidence to their satisfaction of the destruction,
loss or theft of any Security and (ii) such security or indemnity
as may be required by them to save each of them and any agent of
either of them harmless, then, 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, in lieu of any such destroyed,
lost or stolen Security, a new Security of like tenor and princi-
pal amount and bearing a number not contemporaneously outstand-
ing.
In case any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the
Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this
Section, 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.
Every new Security issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute
an original additional contractual obligation of the Company,
whether or not the destroyed, lost or stolen Security shall be at
any time enforceable by anyone, and shall be entitled to all the
benefits of this Indenture equally and proportionately with any
and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated, de-
stroyed, lost or stolen Securities.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is
punctually paid or duly provided for, on any Interest Payment
Date shall be paid to the Person in whose name that Security (or
one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date.
Any interest on any Security which is payable, but is
not punctually paid or duly provided for, on any Interest Payment
Date (herein called "Defaulted Interest") shall forthwith cease
to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest
may be paid by the Company, at its election in each case, as
provided in Clause (1) or (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securi-
ties (or their respective Predecessor Securities) are regis-
tered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed
in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such
Defaulted Interest or shall make arrangements satisfactory
to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such De-
faulted Interest as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of
such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed
payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record
Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address
as it appears in the Security Register, not less than
10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the
Securities (or their respective Predecessor Securities) are
registered at the close of business on such Special Record
Date and shall no longer be payable pursuant to the follow-
ing Clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the
Securities may be listed, and, if so listed, upon such
notice as may be required by such exchange, if, after notice
given by the Company to the Trustee of the proposed payment
pursuant to this Clause, such manner of payment shall be
deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section,
each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security
shall carry the rights to interest accrued and unpaid, and to
accrue (including in each such case Compounded Interest), which
were carried by such other Security.
In the case of any Security which is converted after
any Regular Record Date and on or prior to the next succeeding
Interest Payment Date (other than any Security whose Maturity is
prior to such Interest Payment Date), interest whose Stated
Maturity is on such Interest Payment Date shall be payable on
such Interest Payment Date notwithstanding such conversion, and
such interest (whether or not punctually paid or duly provided
for) shall be paid to the Person in whose name that Security (or
one or more Predecessor Securities) is registered at the close of
business on such Regular Record Date. Except as otherwise
expressly provided in the immediately preceding sentence, in the
case of any Security that is converted, interest whose Stated
Maturity is after the date of conversion of such Security shall
not be payable, and the Company shall not make nor be required to
make any other payment, adjustment or allowance with respect to
accrued but unpaid interest (including Additional Payments, if
any) on the Securities being converted, which shall be deemed to
be paid in full.
SECTION 308. Persons Deemed Owners.
Prior to due presentment of a Security for registration
of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such
Security is registered as the owner of such Security for the
purpose of receiving payment of principal of and (subject to
Section 307) interest (including Additional Payments, if any) on
such Security and for all other purposes whatsoever, whether or
not such Security is overdue, and neither the Company, the
Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. Cancellation.
All Securities surrendered for payment, redemption,
registration of transfer or exchange or conversion shall, if
surrendered to any Person other than the Trustee, be delivered to
the Trustee and shall be promptly cancelled by it. The Company
may at any time deliver to the Trustee for cancellation any
Securities previously authenticated and delivered hereunder which
the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly cancelled by the
Trustee. No Securities shall be authenticated in lieu of or in
exchange for any Securities cancelled as provided in this Sec-
tion, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be disposed of as
directed by a Company Order; provided, however, that the Trustee
shall not be required to destroy the certificates representing
such cancelled Securities.
SECTION 310. Right of Setoff.
Notwithstanding anything to the contrary in this
Indenture, the Company shall have the right to set off any
payment it is otherwise required to make hereunder to the extent
the Company has theretofore made, or is concurrently on the date
of such payment making, a payment under the Guarantee.
SECTION 311. CUSIP Numbers.
At any time when the Securities are not held solely by
the Trust, the Company shall obtain and use "CUSIP" numbers, and
the Trustee shall use "CUSIP" numbers in notices of redemption as
a convenience to Holders; provided, 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 312. Extension of Interest Payment Period; Notice of
Extension.
(a) The Company shall have the right, at any time and
from time to time during the term of the Securities, to defer
payments of interest (including Additional Payments, if any) by
extending any interest payment period for successive periods not
exceeding 20 consecutive quarters for each such period (an
"Extended Interest Payment Period"). To the extent permitted by
applicable law, interest the payment of which has been deferred
because of the extension of the interest payment period pursuant
to this Section 312 will bear interest at the per annum rate
specified in Section 301 compounded quarterly for each quarter of
the Extended Interest Payment Period, to the extent permitted by
applicable law ("Compounded Interest"). At the end of the
Extended Interest Payment Period, the Company shall pay all
interest then accrued and unpaid on the Securities, including any
Additional Payments, that shall be payable to the Holders of the
Securities in whose names the Securities are registered in the
Security Register on the first Regular Record Date after the end
of the Extended Interest Payment Period. Before the termination
of any Extended Interest Payment Period, the Company may further
extend such period, provided that such period together with all
such further extensions thereof shall not exceed 20 consecutive
quarters. Upon the termination of any Extended Interest Payment
Period and upon the payment of all Additional Payments then due,
the Company may commence a new Extended Payment Period, subject
to the foregoing requirements. No interest shall be due and
payable during an Extended Interest Payment Period except at the
end thereof.
(b) If the Property Trustee is the sole Holder of the
Securities, the Company shall give the Holder of the Securities
and the Trustee notice of its selection of an Extended Interest
Payment Period at least one Business Day prior to the earlier of
(i) the Interest Payment Date or (ii) if the Preferred Securities
are listed on the New York Stock Exchange or other stock exchange
or quotation system, the date the Trust is required to give
notice to the New York Stock Exchange or other applicable self-
regulatory organization or to holders of the Preferred Securities
of the record date or the date such distributions are payable.
(c) If the Property Trustee is not the sole holder of
the Securities, the Company shall give the Holders of the Securi-
ties and the Trustee notice of its selection of an Extended
Interest Payment Period at least ten Business Days prior to the
earlier of (i) the Interest Payment Date or (ii) if the Preferred
Securities are listed on the New York Stock Exchange or other
stock exchange or quotation system, the date the Trust is re-
quired to give notice to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the
Securities of the record date or the date such distributions are
payable.
(d) The quarter in which any notice is given pursuant
to paragraphs (b) and (c) hereof shall be counted as one of the
20 quarters permitted in the maximum Extended Interest Payment
Period permitted under paragraph (a) hereof.
SECTION 313. Paying Agent, Security Registrar and Conversion
Agent.
The Trustee will initially act as Paying Agent, Securi-
ty Registrar and Conversion Agent. The Company may change any
Paying Agent, Security Registrar, co-registrar or Conversion
Agent without prior notice. The Company or any of its Affiliates
may act in any such capacity.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect
(except as to any surviving rights of conversion, registration of
transfer or exchange of Securities herein expressly provided
for), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfac-
tion and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authen-
ticated and delivered (other than (i) Securi-
ties which have been destroyed, lost or sto-
len and which have been replaced or paid as
provided in Section 306 and (ii) Securities
for whose payment money has theretofore been
deposited in trust or segregated and held in
trust by the Company and thereafter repaid to
the Company or discharged from such trust, as
provided in Section 1003) have been delivered
to the Trustee for cancellation; or
(B) all such Securities not theretofore
delivered to the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at
their Stated Maturity within one year,
or
(iii) are to be called for redemption
within one year under arrangements sat-
isfactory to the Trustee for the giving
of notice of redemption by the Trustee
in the name, and at the expense, of the
Company
and the Company, in the case of (i), (ii) or
(iii) above, has deposited or caused to be
deposited with the Trustee as trust funds in
trust for the purpose an amount sufficient to
pay and discharge the entire indebtedness on
such Securities not theretofore delivered to
the Trustee for cancellation, for principal
and interest (including Compounded Interest,
Additional Interest and Liquidated Damages,
if any) to the date of such deposit (in the
case of Securities which have become due and
payable) or to the Stated Maturity or Redemp-
tion Date, as the case may be;
(2) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that all conditions precedent herein provided
for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 607
and, if money shall have been deposited with the Trustee pursuant
to subclause (B) of Clause (1) of this Section, the obligations
of the Trustee under Section 402 and the last paragraph of
Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of
Section 1003, all money deposited with the Trustee pursuant to
Section 401 shall be held in trust and applied by it, in accor-
dance with the provisions of the Securities and this Indenture,
to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the
Trustee may determine, to the Persons entitled thereto, of the
principal and interest for whose payment such money has been
deposited with the Trustee. All moneys deposited with the
Trustee pursuant to Section 401 (and held by it or any Paying
Agent) for the payment of Securities subsequently converted shall
be returned to the Company upon Company Request.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default," wherever used herein, means any one
of the following events that has occurred and is continuing
(whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be
voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any
order, rule or regulation of any administrative or governmental
body):
(1) default in the payment of the prin-
cipal of (or premium, if any, on) any Securi-
ty when due whether at Maturity, upon redemp-
tion, by declaration or otherwise; or
(2) default in the payment of any in-
terest upon any Security, including any Com-
pounded Interest, Additional Interest and
Liquidated Damages in respect thereof, when
it becomes due and payable, and continuance
of such default for a period of 30 days;
provided, that a valid extension of the in-
terest payment period by the Company pursuant
to this Indenture shall not constitute a
default in the payment of any interest (in-
cluding any Additional Payments) for this
purpose; or
(3) failure by the Company to issue and
deliver Class B Common Stock upon an election
to convert the Securities into Class B Common
Stock; or
(4) default in the performance, or
breach, of any covenant or warranty of the
Company in this Indenture (other than a de-
fault that is specifically provided for else-
where in this Section), and continuance of
such default or breach for a period of 90
days after there has been given, by regis-
tered or certified mail, to the Company by
the Trustee or to the Company and the Trustee
by the Holders of at least 25% in aggregate
principal amount of the Outstanding Securi-
ties a written notice specifying such default
or breach and requiring it to be remedied and
stating that such notice is a "Notice of
Default" hereunder; or
(5) entry by a court having jurisdic-
tion in the premises of (A) a decree or order
for relief in respect of the Company in an
involuntary case or proceeding under any
applicable Federal or State bankruptcy, in-
solvency, reorganization or other similar law
or (B) a decree or order adjudging the Compa-
ny a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganiza-
tion, arrangement, adjustment or composition
of or in respect of the Company under any
applicable Federal or State law, or appoint-
ing a custodian, receiver, liquidator, as-
signee, trustee, sequestrator or other simi-
lar official of the Company or of substan-
tially all of the property of the Company, or
ordering the winding up or liquidation of its
affairs, and the continuance of any such
decree or order for relief or any such other
decree or order unstayed and in effect for a
period of 60 consecutive days; or
(6) the commencement by the Company of
a voluntary case or proceeding under any
applicable Federal or State bankruptcy, in-
solvency, reorganization or other similar law
or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the
consent by the Company to the entry of a
decree or order for relief in respect of
itself in an involuntary case or proceeding
under any applicable Federal or State bank-
ruptcy, insolvency, reorganization or other
similar law or to the commencement of any
bankruptcy or insolvency case or proceeding
against the Company, or the filing by the
Company of a petition or answer or consent
seeking reorganization or relief under any
applicable Federal or State law, or the con-
sent by the Company to the filing of such
petition or to the appointment of or taking
possession by a custodian, receiver, liquida-
tor, assignee, trustee, sequestrator or other
similar official of the Company or of sub-
stantially all of the property of the Compa-
ny, or the making by the Company of an as-
signment for the benefit of creditors, or the
admission by the Company in writing of its
inability to pay its debts generally as they
become due, or the taking of corporate action
by the Company in furtherance of any such
action; or
(7) the voluntary or involuntary disso-
lution, winding up or termination of the
Trust, except in connection with (i) the
distribution of Securities to holders of
Preferred Securities in liquidation or re-
demption of their interests in the Trust,
(ii) the redemption of all of the outstanding
Preferred Securities of the Trust or
(iii) certain mergers, consolidations or
amalgamations, each as permitted by the Dec-
laration.
SECTION 502. Acceleration of Maturity; Rescission and Annul-
ment.
If an Event of Default occurs and is continuing, then
and in every such case the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Outstanding Securi-
ties may declare the principal of all the Securities and any
other amounts payable hereunder (including any Additional Pay-
ments) to be due and payable immediately, by a notice in writing
to the Company (and to the Trustee if given by Holders), and upon
any such declaration such principal and all accrued interest
shall become immediately due and payable.
At any time after such a declaration of acceleration
has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as provided in this
Article hereinafter, the Holders of a majority in aggregate
principal amount of the Outstanding Securities, by written notice
to the Company and the Trustee, may rescind and annul such
declaration and its consequences if
(1) the Company has paid or deposited with the
Trustee a sum sufficient to pay
(A) all overdue interest (including any
Additional Payments) on all Securities,
(B) the principal of any Securities
which have become due otherwise than by such
declaration of acceleration and interest
thereon at the rate borne by the Securities,
and
(C) all sums paid or advanced by the
Trustee hereunder and the reasonable compen-
sation, expenses, disbursements and advances
of the Trustee, its agents and counsel;
and
(2) all Events of Default, other than the non-
payment of the principal of Securities which have
become due solely by such declaration of acceleration,
have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default
or impair any right consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforce-
ment by Trustee.
The Company covenants that if
(1) default is made in the payment of any inter-
est (including any Additional Payments) on any Security
when such interest becomes due and payable and such
default continues for a period of 30 days (provided
that a valid extension of the interest payment period
by the Company pursuant to this Indenture shall not
constitute a default in the payment of any interest
(including any Additional Payments) for this purpose),
or
(2) default is made in the payment of the princi-
pal of any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the
benefit of the Holders of such Securities, the whole amount then
due and payable on such Securities for principal and interest
(including any Additional Payments) and, to the extent that
payment thereof shall be legally enforceable, interest on any
overdue principal and on any overdue interest (including any
Additional Interest or Liquidated Damages), at the rate borne by
the Securities, and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collec-
tion, including the reasonable compensation, expenses, disburse-
ments and advances of the Trustee, its agents and counsel.
If an Event of Default occurs and is continuing, the
Trustee may in its discretion proceed to protect and enforce its
rights and the rights of the Holders by such appropriate judicial
proceedings as the Trustee shall deem most effectual to protect
and enforce any such rights, whether for the specific enforcement
of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other
proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the
Company (or any other obligor upon the Securities), its property
or its creditors, the Trustee shall be entitled and empowered, by
intervention in such proceeding or otherwise, to take any and all
actions authorized under the Trust Indenture Act in order to have
claims of the Holders and the Trustee allowed in any such pro-
ceeding. In particular, the Trustee shall be authorized to
collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and
any custodian, receiver, assignee, trustee, liquidator, seques-
trator or other similar official in any such judicial proceeding
is hereby authorized by each Holder 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 Holders, to pay to the
Trustee any amount due it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Sec-
tion 607.
No provision of this Indenture shall be deemed to
authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, ar-
rangement, 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 Holder in any such proceed-
ing.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or
the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such proceed-
ing instituted by the Trustee shall be brought in its own name as
trustee of an express trust, and any recovery of judgment shall,
after provision for the payment of the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders of the
Securities in respect of which such judgment has been recovered.
SECTION 506. Application of Money Collected.
Subject to Article Twelve, any money collected by the
Trustee pursuant to this Article shall be applied in the follow-
ing order, at the date or dates fixed by the Trustee and, in case
of the distribution of such money on account of principal or
interest (including any Additional Payments), upon presentation
of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the
Trustee under Section 607; and
SECOND: To the payment of the amounts then due
and unpaid for principal of and interest (including any
Additional Payments) on the Securities in respect of
which or for the benefit of which such money has been
collected, ratably, without preference or priority of
any kind, according to the amounts due and payable on
such Securities for principal and interest (including
any Compounded Interest), respectively.
SECTION 507. Limitation on Suits.
No Holder of any Security shall have any right to
institute any proceeding, judicial or otherwise, with respect to
this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless
(1) such Holder has previously given written
notice to the Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate
principal amount of the Outstanding Securities shall
have made written request to the Trustee to institute
proceedings in respect of such Event of Default in its
own name as Trustee hereunder;
(3) such Holder or Holders have offered to the
Trustee reasonable indemnity against the costs, expens-
es and liabilities to be incurred in compliance with
such request;
(4) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed
to institute any such proceeding; and
(5) no direction inconsistent with such written
request has been given to the Trustee during such 60-
day period by the Holders of a majority in aggregate
principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders
shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other Holders, or to obtain or to
seek to obtain priority or preference over any other Holders or
to enforce any right under this Indenture, except in the manner
herein provided and for the equal and ratable benefit of all the
Holders.
SECTION 508. Unconditional Right of Holders to Receive Princi-
pal and Interest and to Convert.
Notwithstanding any other provision in this Indenture,
the Holder of any Security shall have the right, which is abso-
lute and unconditional, to receive payment of the principal of
and (subject to Section 307) interest (including any Additional
Payments) on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the
Redemption Date) and to convert such Security in accordance with
Article Thirteen and to institute suit for the enforcement of any
such payment and right to convert, and such rights shall not be
impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any pro-
ceeding to enforce any right or remedy under this Indenture and
such proceeding has been discontinued or abandoned for any
reason, or has been determined adversely to the Trustee or to
such Holder, then and in every such case, subject to any determi-
nation in such proceeding, the Company, the Trustee and the
Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies
of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the
replacement or payment of mutilated, destroyed, lost or stolen
Securities in the last paragraph of Section 306, no right or
remedy herein conferred upon or reserved to the Trustee or to the
Holders 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 asser-
tion or employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of
any Security to exercise any right or remedy accruing upon any
Event of Default shall impair any such right or remedy or consti-
tute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to
time, and as often as may be deemed expedient, by the Trustee or
by the Holders, as the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in aggregate principal amount
of the Outstanding Securities shall have the right to direct the
time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power
conferred on the Trustee; provided, that
(1) such direction shall not be in conflict with
any rule of law or with this Indenture; and
(2) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with
such direction.
SECTION 513. Waiver of Past Defaults.
Subject to Section 902 hereof, the Holders of not less
than a majority in aggregate principal amount of the Outstanding
Securities may on behalf of the Holders of all the Securities
waive any past default hereunder and its consequences, except a
default
(1) in the payment of the principal of, premium,
if any, or interest (including any Additional Payments)
on any Security (unless such default has been cured and
a sum sufficient to pay all matured installments of
interest and principal due otherwise than by accelera-
tion has been deposited with the Trustee); or
(2) in respect of a covenant or provision hereof
which under Article Nine cannot be modified or amended
without the consent of the Holder of each Outstanding
Security affected.
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 Indenture; but no
such waiver shall extend to any subsequent or other default or
impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
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, suffered or omitted by it as Trustee, a court may
require any party litigant in such suit to file an undertaking to
pay the costs of such suit, and may assess costs against any such
party litigant, in the manner and to the extent provided in the
Trust Indenture Act; provided, that neither this Section nor the
Trust Indenture Act shall be deemed to authorize any court to
require such an undertaking or to make such an assessment in any
suit instituted by the Company or the Trustee or in any suit for
the enforcement of the right to receive the principal of and
interest (including any Additional Payments) on any Security or
to convert any Security in accordance with Article Thirteen.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or
the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 516. Enforcement by Holders of Preferred Securities.
Notwithstanding anything to the contrary contained
herein, if the Property Trustee fails to enforce its rights under
the Securities for a period of 30 days after any holder of
Preferred Securities shall have made a written request to the
Property Trustee to enforce such rights, such holder of Preferred
Securities may institute a legal proceeding directly against the
Company to enforce the Property Trustee's rights, as Holder of
the Securities, without first instituting any legal proceeding
against the Property Trustee or any other Person.
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
The duties and responsibilities of the Trustee shall be
as provided by the Trust Indenture Act. Notwithstanding the
foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if
it shall have reasonable grounds for believing that repayment of
such funds or adequate indemnity against such risk or liability
is not reasonably assured to it. Whether or not therein express-
ly so provided, every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Trustee shall be subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any
default hereunder as and to the extent provided by the Trust
Indenture Act; provided, however, that in the case of any default
of the character specified in Section 501(4), no such notice to
Holders shall be given until at least 30 days after the occur-
rence thereof. For the purpose of this Section, the term "de-
fault" means any event which is, or after notice or lapse of time
or both would become, an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected
in acting or refraining from acting upon any resolu-
tion, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness
or other paper or document believed by it to be genuine
and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Company
mentioned herein shall be sufficiently evidenced by a
Company Request or Company Order and any resolution of
the Board of Directors may be sufficiently evidenced by
a Board Resolution;
(c) whenever in the administration of this Inden-
ture the Trustee shall deem it desirable that a matter
be proved or established prior to taking, suffering or
omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an
Officers' Certificate;
(d) the Trustee may consult with counsel of its
choice and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by
this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance
with such request or direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opin-
ion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebt-
edness or other paper or document, but the Trustee, in
its discretion, may make such further inquiry or inves-
tigation into such facts or matters as it may see fit,
and, if the Trustee shall determine to make such fur-
ther inquiry or investigation, it shall be entitled to
reasonable examination of the books, records and pre-
mises of the Company, personally or by agent or attor-
ney;
(g) the Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney ap-
pointed with the prior written consent of the Company
and with due care by it hereunder; and
(h) the Trustee shall not be liable for any
action taken or omitted to be taken by it in good faith
and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred
upon it by this Indenture, unless it shall be proven
that the Trustee was negligent in ascertaining the
pertinent facts.
SECTION 604. Not Responsible for Recitals or Issuance of Secu-
rities.
The recitals contained herein and in the Securities,
except the Trustee's certificates of authentication, shall be
taken as the statements of the Company, and the Trustee assumes
no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Inden-
ture or of the Securities. The Trustee shall not be accountable
for the use or application by the Company of the Securities or
the proceeds thereof.
SECTION 605. May Hold Securities.
The Trustee, any Paying Agent, any Security Registrar
or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and,
subject to Sections 608 and 613, may otherwise deal with the
Company with the same rights it would have if it were not Trust-
ee, Paying Agent, Security Registrar, or such other agent.
SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not
be segregated from other funds except to the extent required by
law. The Trustee shall be under no liability for interest on any
money received by it hereunder except as otherwise agreed with
the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such
reasonable compensation as the Company and the Trustee
shall from time to time agree in writing for all ser-
vices rendered by it hereunder;
(2) except as otherwise expressly provided here-
in, to reimburse the Trustee upon its request for all
reasonable expenses, disbursements and advances in-
curred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable
compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disburse-
ment or advance as may be attributable to its negli-
gence or bad faith; and
(3) to indemnify the Trustee, its agents and
counsel and any predecessor Trustee for, and to hold it
harmless against, any loss, liability or expense in-
curred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or
administration of this trust, including the costs and
expenses of defending itself against any claim or
liability in connection with the exercise or perfor-
mance of any of its powers or duties hereunder.
SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting
interest within the meaning of the Trust Indenture Act, the
Trustee shall either eliminate such interest or resign, to the
extent and in the manner provided by, and subject to the provi-
sions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which
shall be a Person that is eligible pursuant to the Trust Inden-
ture Act to act as such and has a combined capital and surplus of
at least $50,000,000. If such Person publishes reports of
condition at least annually, pursuant to law or to the require-
ments of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of
such Person shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so
published. If at any time the Trustee shall cease to be eligible
in accordance with the provisions of this Section, it shall
resign immediately in the manner and with the effect hereinafter
specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 611.
(b) The Trustee may resign at any time by giving
written notice thereof to the Company. If an instrument of
acceptance by a successor Trustee shall not have been delivered
to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trust-
ee.
(c) The Trustee may be removed at any time by Act of
the Holders of a majority in aggregate principal amount of the
Outstanding Securities, delivered to the Trustee and to the
Company. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the appoint-
ment of a successor Trustee.
(d) If at any time:
(1) the Trustee shall fail to comply with Sec-
tion 608 after written request therefor by the Company
or by any Holder who has been a bona fide Holder of a
Security for at least six months, or
(2) the Trustee shall cease to be eligible under
Section 609 and shall fail to resign after written
request therefor by the Company or by any such Holder,
or
(3) the Trustee shall become incapable of acting
or shall be adjudged a bankrupt or insolvent or a
receiver of the Trustee or of its property shall be
appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs
for the purpose of rehabilitation, conservation or
liquidation,
then, in any such case, (i) the Company may remove the Trustee,
or (ii) subject to Section 514, any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of
Trustee for any cause, the Company, by a Board Resolution, shall
promptly appoint a successor Trustee. If, within one year after
such resignation, removal or incapability, or the occurrence of
such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in aggregate principal amount of the
Outstanding Securities delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon
its acceptance of such appointment, become the successor Trustee
and supersede the successor Trustee appointed by the Company. If
no successor Trustee shall have been so appointed by the Company
or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Securi-
ty for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation
and each removal of the Trustee and each appointment of a succes-
sor Trustee to all Holders in the manner provided in Section 106.
Each notice shall include the name of the successor Trustee and
the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall
execute, acknowledge and deliver to the Company and to the
retiring Trustee an instrument accepting such appointment, and
thereupon the resignation or removal of the retiring Trustee
shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee;
provided, that on request of the Company or the successor Trust-
ee, such retiring Trustee shall, upon payment of its charges,
execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee
and shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee
hereunder. Upon request of any such successor Trustee, the
Company shall execute any and all instruments required to more
fully and certainly vest in and confirm to such successor Trustee
all such rights, powers and trusts.
No successor Trustee shall accept its appointment
unless at the time of such acceptance such successor Trustee
shall be qualified and eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corpora-
tion resulting from any merger, conversion or consolidation to
which the Trustee shall be a party, or any corporation succeeding
to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the Trustee hereunder, provid-
ed such corporation shall be otherwise qualified and eligible
under this Article, without the execution or filing of any paper
or any further act on the part of any of the parties hereto. In
case any Securities shall have been authenticated, but not
delivered, by the Trustee then in office, any successor by
merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor
Trustee had itself authenticated such Securities.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor
of the Company (or any other obligor upon the Securities), the
Trustee shall be subject to the provisions of the Trust Indenture
Act regarding the collection of claims against the Company (or
any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of
Holders.
The Company will furnish or cause to be furnished to
the Trustee
(a) semiannually, not later than February 15 and
August 15 in each year, a list, in such form as the
Trustee may reasonably require, of the names and ad-
dresses of the Holders as of a date not more than 15
days prior to the delivery thereof, and
(b) at such other times as the Trustee may re-
quest in writing, within 30 days after the receipt by
the Company of any such request, a list of similar form
and content as of a date not more than 15 days prior to
the time such list is furnished;
excluding from any such list names and addresses received by the
Trustee in its capacity as Security Registrar.
SECTION 702. Preservation of Information; Communications to
Holders.
(a) The Trustee shall preserve, in as current a form
as is reasonably practicable, the names and addresses of Holders
contained in the most recent list furnished to the Trustee as
provided in Section 701 and the names and addresses of Holders
received by the Trustee in its capacity as Security Registrar.
The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other
Holders with respect to their rights under this Indenture or
under the Securities, and the corresponding rights and duties of
the Trustee, shall be as provided by the Trust Indenture Act.
(c) Every Holder of Securities, by receiving and
holding the same, agrees with the Company and the Trustee that
neither the Company nor the Trustee nor any agent of either of
them shall be held accountable by reason of any disclosure of
information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) Within 60 days after May 15 of each year, commenc-
ing May 15, 1996, the Trustee shall transmit to Holders such
reports concerning the Trustee and its actions under this Inden-
ture as may be required pursuant to the Trust Indenture Act in
the manner provided pursuant thereto.
(b) A copy of each such report shall, at the time of
such transmission to Holders, be filed by the Trustee with each
stock exchange upon which the Securities are listed, with the
Commission and with the Company. The Company will notify the
Trustee when the Securities are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commis-
sion, and transmit to Holders, such information, documents and
other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant to such Act; provided, that any such
information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 shall be filed with the Trustee within
15 days after the same is so required to be filed with the
Commission.
Delivery of such reports, information and documents to
the Trustee is for informational purposes only and the Trustee's
receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information
contained therein, including the Company's compliance with any of
its covenants hereunder (as to which the Trustee is entitled to
rely exclusively on Officers' Certificates).
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Company May Consolidate, Etc., Only on Certain
Terms.
The Company shall not consolidate with or merge with or
into any other Person or, directly or indirectly, convey, trans-
fer or lease all or substantially all of its properties and
assets on a consolidated basis to any Person, unless:
(1) in case the Company shall consolidate with or
merge with or into another Person or convey, transfer
or lease all or substantially all of its properties and
assets on a consolidated basis to any Person, the
Person formed by such consolidation or into which the
Company is merged or the Person which acquires by
conveyance, transfer or lease, all or substantially all
of the properties and assets of the Company on a con-
solidated basis shall be a corporation, partnership or
trust, shall be organized and validly existing under
the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed
and delivered to the Trustee, in form reasonably satis-
factory to the Trustee, the due and punctual payment of
the principal of and interest (including any Additional
Payments) on all the Securities and the performance or
observance of every covenant of this Indenture on the
part of the Company to be performed or observed and
shall have provided for conversion rights in accordance
with Article Thirteen;
(2) immediately after giving effect to such
transaction and treating any indebtedness which becomes
an obligation of the Company or a Subsidiary as a
result of such transaction as having been incurred by
the Company or such Subsidiary at the time of such
transaction, no Event of Default, and no event which,
after notice or lapse of time or both, would become an
Event of Default, shall have happened and be continu-
ing;
(3) such consolidation or merger or conveyance,
transfer or lease of assets of the Company is permitted
under, and does not give rise to any breach or viola-
tion of, the Declaration or the Guarantee; and
(4) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, conveyance,
transfer or lease and, if a supplemental indenture is
required in connection with such transaction, such
supplemental indenture, comply with this Article and
that all conditions precedent herein provided for
relating to such transaction have been complied with.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger
of the Company into, any other Person or any conveyance, transfer
or lease of all or substantially all the properties and assets of
the Company on a consolidated basis in accordance with
Section 801, the successor Person formed by such consolidation or
into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person
had been named as the Company herein, and thereafter, except in
the case of a lease, the predecessor Person shall be relieved of
all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Hold-
ers.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution, and the Trustee, at any time
and from time to time, may enter into one or more indentures
supplemental hereto, in form satisfactory to the Trustee, for any
of the following purposes:
(1) to evidence the succession of another Person
to the Company and the assumption by any such successor
of the covenants of the Company herein and in the
Securities; or
(2) to add to the covenants of the Company for
the benefit of the Holders, or to surrender any right
or power herein conferred upon the Company; or
(3) to make provision with respect to the conver-
sion rights of Holders pursuant to the requirements of
Article Thirteen; or
(4) to cure any ambiguity, to correct or supple-
ment any provision herein which may be inconsistent
with any other provision herein, or to make any other
provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent
with the provisions of this Indenture; provided, that
such action pursuant to this clause (4) shall not
adversely affect the interests of the Holders of the
Securities or, so long as any of the Preferred Securi-
ties shall remain outstanding, the holders of the
Preferred Securities; or
(5) to comply with the requirements of the Com-
mission in order to effect or maintain the qualifica-
tion of this Indenture under the Trust Indenture Act;
or
(6) to make provision for transfer procedures, certif-
ication, book-entry provisions, the form of restricted
securities legends, if any, to be placed on Securities, and
all other matters required pursuant to Section 305(b) or
otherwise necessary, desirable or appropriate in connection
with the issuance of Securities to holders of Preferred
Securities in the event of a distribution of Securities by
the Trust if a Special Event occurs and is continuing; or
(7) to comply with the requirements of the New York
Stock Exchange or such other national securities exchange or
automated quotation system, if any, on which the Securities
are then listed.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a
majority in aggregate principal amount of the Outstanding Securi-
ties, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemen-
tal hereto for the purpose of adding any provisions to or chang-
ing in any manner or eliminating any of the provisions of this
Indenture or of modifying in any manner the rights of the Holders
under this Indenture; provided, however, that no such supplemen-
tal indenture shall, without the consent of the Holder of each
Outstanding Security affected thereby,
(1) extend the Stated Maturity of the principal
of, or (except as permitted by Section 312) any in-
stallment of interest (including any Additional Pay-
ments) on, any Security, or reduce the principal amount
thereof, or reduce the rate or (except as permitted by
Section 312) extend the time for payment of interest
thereon, or reduce any premium payable upon the redemp-
tion thereof, or change the place of payment where, or
the coin or currency in which, any Security or interest
thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or
after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or ad-
versely affect the right to convert any Security as
provided in Article Thirteen (except as permitted by
Section 901(3)), or modify the provisions of this
Indenture with respect to the subordination of the
Securities in a manner adverse to the Holders,
(2) reduce the percentage in aggregate principal
amount of the Outstanding Securities, the consent of
whose Holders is required for any such supplemental
indenture, or the consent of whose Holders is required
for any waiver (of compliance with certain provisions
of this Indenture or certain defaults hereunder and
their consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section
or Section 513, except to increase any such percentage
or to provide that certain other provisions of this
Indenture cannot be modified or waived without the
consent of the Holder of each Outstanding Security
affected thereby;
provided, that so long as any of the Preferred Securities remains
outstanding, no waiver of any Event of Default shall be effec-
tive, without the prior consent of the holders of at least 66-
2/3% of the aggregate liquidation amount of the outstanding
Preferred Securities.
It shall not be necessary for any Act of Holders under
this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act
shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a
record date for the purpose of determining the Persons entitled
to consent to any indenture supplemental hereto. If a record
date is fixed, the Holders on such record date, or their duly
designated proxies, and only such Persons, shall be entitled to
consent to such supplemental indenture, whether or not such
Holders remain Holders after such record date; provided, that
unless such consent shall have become effective by virtue of the
requisite percentage having been obtained prior to the date which
is 90 days after such record date, any such consent previously
given shall automatically and without further action by any
Holder be cancelled and of no further effect.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts
created by, any supplemental indenture permitted by this Article
or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject
to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemen-
tal indenture is authorized or permitted by this Indenture. The
Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under
this Article, this Indenture shall be modified in accordance
therewith, and such supplemental indenture shall form a part of
this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. No such supplemental indenture shall
directly or indirectly modify the provisions of Article Twelve in
any manner which might terminate or impair the rights of the
Senior Indebtedness pursuant to such subordination provisions.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this
Article shall conform to the requirements of the Trust Indenture
Act.
SECTION 906. Reference in Securities to Supplemental Inden-
tures.
Securities authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article
may, and shall if required by the Trustee, bear a notation in
form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the
Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and
delivered by the Trustee in exchange for Outstanding Securities.
ARTICLE TEN
Covenants; Representations and Warranties
SECTION 1001. Payment of Principal and Interest.
The Company will duly and punctually pay the principal
of and interest (including any Additional Payments) on the
Securities when due in accordance with the terms of the Securi-
ties and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the United States an
office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may
be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such
office or agency. 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 of the Trustee, and the Company hereby
appoints the Trustee as its agent to receive all such presenta-
tions, surrenders, notices and demands.
The Company may also from time to time designate one or
more other offices or agencies (in the United States) 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 United States 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.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying
Agent, it will, on or before each due date of the principal of or
interest on any of the Securities, segregate and hold in trust
for the benefit of the Persons entitled thereto a sum sufficient
to pay the principal or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or
failure so to act.
Whenever the Company shall have one or more Paying
Agents, it will, prior to each due date of the principal of or
interest on any Securities, deposit with a Paying Agent a sum
sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of its
action or failure so to act.
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
(i) comply with the provisions of the Trust Indenture Act appli-
cable to it as a Paying Agent and (ii) during the continuance of
any default by the Company (or any other obligor upon the Securi-
ties) in the making of any payment in respect of the Securities,
upon the written request of the Trustee, forthwith pay to the
Trustee all sums held in trust by such Paying Agent as such.
The Company may at any time, for the purpose of obtain-
ing the satisfaction and discharge of this Indenture or for any
other purpose, pay, or by Company Order direct any Paying Agent
to pay, to the Trustee all sums held in trust by the Company or
such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the
Company or such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying
Agent, or then held by the Company, in trust for the payment of
the principal of or interest on any Security and remaining
unclaimed for two years after such principal or interest has
become due and payable shall be paid to the Company on Company
Request, or (if then held by the Company) shall be discharged
from such trust; and the Holder of any 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 respect to such trust money, and all
liability of the Company as trustee thereof, shall thereupon
cease.
SECTION 1004. Statement by Officers as to Default.
The Company will deliver to the Trustee, within
120 days after the end of each fiscal year of the Company ending
after the date hereof, an Officers' Certificate, stating whether
or not to the best knowledge of the signers thereof the Company
is in default in the performance and observance of any of the
material terms, provisions and conditions of this Indenture
(without regard to any period of grace or requirement of notice
provided hereunder) and, if the Company shall be in default,
specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 1005. Limitation on Dividends; Covenants as to the
Trust.
(a) The Company covenants that the Company shall not
so long as any Securities remain outstanding, (i) declare or pay
dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock, except for dividends or distribu-
tions of the Company's capital stock of the same class as that on
which such dividend or distribution is being paid and conversions
or exchanges of Common Stock of one class into Common Stock of
another class of the Company, or (ii) make any payment of
interest, principal or premium, if any, on or repay, repurchase
or redeem any debt securities issued by the Company that rank
pari passu with or junior to the Securities (except by conversion
into or exchange for shares of its capital stock and except for a
redemption, purchase or other acquisition of shares of its
capital stock made for the purpose of an employee incentive plan
or benefit plan of the Company or any of its subsidiaries), in
each case if at such time (i) there shall have occurred and be
continuing any event that with the giving of notice or the lapse
of time or both, would constitute an Event of Default hereunder,
(ii) the Company shall be in default with respect to its payment
of any obligations under the Guarantee or (iii) the Company shall
have given notice of its selection of an Extended Interest
Payment Period as provided herein and such period, or any exten-
sion thereof, shall be continuing.
(b) The Company also covenants and agrees (i) that it
shall directly or indirectly maintain 100% ownership of the
Common Securities of the Trust; provided, however, that any
permitted successor of the Company hereunder may succeed to the
Company's ownership of such Common Securities and (ii) that it
shall use its reasonable efforts, consistent with the terms and
provisions of the Declaration, to cause the Trust (x) to remain a
statutory business trust, except in connection with the distribu-
tion of the Securities to the holders of Trust Securities in
liquidation of the Trust, the redemption of all of the Trust
Securities of the Trust, or certain mergers, consolidations or
amalgamations, each as permitted by the Declaration, and (y) to
otherwise continue to be classified as a grantor trust for United
States federal income tax purposes.
SECTION 1006. Payment of Expenses of the Trust.
In connection with the offering, sale and issuance of
the Securities to the Property Trustee in connection with the
sale of the Trust Securities by the Trust, the Company shall:
(a) pay for all costs and expenses relating to the
offering, sale and issuance of the Securities, including commis-
sions to the Initial Purchasers payable pursuant to the Purchase
Agreement and compensation of the Trustee in accordance with the
provisions of Section 607;
(b) be responsible for and pay for all debts and
obligations (other than with respect to the Trust Securities) of
the Trust, pay for all costs and expenses of the Trust (includ-
ing, but not limited to, costs and expenses relating to the
organization of the Trust, the offering, sale and issuance of the
Trust Securities, the fees and expenses of the Property Trustee
and the Delaware Trustee, the costs and expenses relating to the
operation of the Trust, including without limitation, costs and
expenses of accountants, attorneys, statistical or bookkeeping
services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer
agent(s), duplicating, travel and telephone and other telecommu-
nications expenses and costs and expenses incurred in connection
with the acquisition, financing, and disposition of Trust as-
sets); and
(c) pay any and all taxes (other than United States
withholding taxes attributable to the Trust or its assets) and
all liabilities, costs and expenses with respect to such taxes of
the Trust.
SECTION 1007. Registration Rights.
The holders of the Preferred Securities, the Guarantee,
the Securities and the Class B Common Stock issuable upon conver-
sion thereof are entitled to the benefits of a Registration
Rights Agreement, dated as of November 28, 1995, among the Trust,
the Company and the Initial Purchasers (the "Registration Rights
Agreement"). Pursuant to the Registration Rights Agreement, the
Trust and the Company have agreed for the benefit of the holders
from time to time of the Preferred Securities, the Guarantee, the
Securities and the Class B Common Stock issuable upon conversion
thereof that they will, at the Company's expense, (i) within 180
days after the date of issuance of the Preferred Securities, file
a shelf registration statement (the "Shelf Registration State-
ment") with the Commission with respect to resales of the Pre-
ferred Securities, the Guarantee, the Securities and the Class B
Common Stock issuable upon conversion thereof, (ii) within 60
days after the date on which the Shelf Registration Statement is
filed, use their best efforts to cause such Shelf Registration
Statement to be declared effective by the Commission and (iii)
use their best efforts to maintain such Shelf Registration
Statement continuously effective under the Securities Act of
1933, as amended, until the third anniversary of the date of the
effectiveness of the Shelf Registration Statement or such earlier
date as is provided in the Registration Rights Agreement.
If (i) on or prior to 180 days following the date of
original issuance of the Preferred Securities, a Shelf Registra-
tion Statement has not been filed with the Commission, or (ii) on
or prior to the 60th day following the filing of such Shelf
Registration Statement, such Shelf Registration Statement is not
declared effective (each, a "Registration Default"), additional
interest ("Liquidated Damages") will accrue on the Securities
from and including the day following such Registration Default to
but excluding the day on which such Registration Default has been
cured. Liquidated Damages will be paid quarterly in arrears,
with the first quarterly payment due on the first interest
payment date in respect of the Securities following the date on
which such Liquidated Damages begin to accrue, and will accrue at
a rate per annum equal to an additional one-quarter of one
percent (0.25%) of the principal amount of the Securities to and
including the 90th day following such Registration Default and at
a rate per annum equal to one-half of one percent (0.50%) thereof
from and after the 91st day following such Registration Default.
In the event that the Shelf Registration Statement ceases to be
effective prior to the third anniversary of the initial effective
date of the Shelf Registration Statement or such earlier date as
is provided in the Registration Rights Agreement for a period in
excess of 60 days, whether or not consecutive, during any
12-month period, then the interest rate borne by the Securities
shall increase by an additional one-half of one percent (0.50%)
per annum from the 61st day of the applicable 12-month period
such Shelf Registration Statement ceases to be effective to but
excluding the day on which the Shelf Registration Statement again
becomes effective.
ARTICLE ELEVEN
Redemption of Securities
SECTION 1101. Right of Redemption.
(a) The Securities may be redeemed at the election of
the Company, as a whole or in part, at any time or from time to
time on or after December 1, 1998, at the Redemption Prices set
forth in Section 1109 below.
(b) The Securities may be redeemed as a whole but not
in part at the election of the Company at any time within 90 days
following the occurrence of a Tax Event; provided, however, that,
subject to Section 1110 of this Article Eleven, if, at the time
there is available to the Company or the Trust the opportunity to
eliminate, within such 90-day period, the Tax Event by taking
some ministerial action, including but not limited to filing a
form or making an election, or pursuing some other similar
reasonable measure, which, in the sole judgment of the Company,
has or will cause no adverse effect on the Trust or the Company
or involves or will involve no material cost, then the Company or
the Trust shall pursue such measure in lieu of redemption.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Compa-
ny, as permitted by Section 1101, shall be made in accordance
with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem Securities
pursuant to Section 1101 shall be evidenced by a Board Resolu-
tion. In case of any redemption at the election of the Company,
the Company shall, at least 60 days and no more than 90 days
prior to the Redemption Date fixed by the Company, notify the
Trustee of such Redemption Date and of the principal amount of
Securities to be redeemed and provide a copy of the notice of
redemption given to Holders of Securities to be redeemed pursuant
to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed
(unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more
than 60 days prior to the Redemption Date by the Trustee, from
the Outstanding Securities not previously called for redemption,
on a pro rata basis, in portions equal to $50 (or any integral
multiple thereof) of the principal amount of the Securities.
The Trustee shall promptly notify the Company in
writing of the Securities selected for redemption as aforesaid
and, in case of any Securities selected for partial redemption as
aforesaid, the principal amount thereof to be redeemed.
The provisions of the two preceding paragraphs shall
not apply with respect to any redemption affecting only a single
Security, whether such Security is to be redeemed in whole or in
part. In the case of any such redemption in part, the unredeemed
portion of the principal amount of the Security shall be in an
authorized denomination (which shall not be less than the minimum
authorized denomination) for such Security.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of
Securities shall relate, in the case of any Securities redeemed
or to be redeemed only in part, to the portion of the principal
amount of such Securities which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class
mail, postage prepaid, mailed not less than 30 nor more than 60
days prior to the Redemption Date, to each Holder of Securities
to be redeemed, at such Holder's address appearing in the Securi-
ty Register.
All notices of redemption shall identify the Securities
to be redeemed (including the CUSIP number) and shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) that on the Redemption Date the Redemption Price
will become due and payable upon each such Security to be
redeemed and that interest thereon will cease to accrue on
and after said date, and
(4) the place or places where such Securities are to
be surrendered for payment of the Redemption Price.
Notice of redemption of Securities to be redeemed at
the election of the Company shall be given by the Company or, at
the Company's request, by the Trustee in the name and at the
expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is
acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay
the Redemption Price of, and (except if the Redemption Date shall
be an Interest Payment Date) accrued interest (including Addi-
tional Payments, if any) on, all the Securities which are to be
redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid,
the Securities so to be redeemed shall, on the Redemption Date,
become due and payable at the Redemption Price therein specified,
and from and after such date (unless the Company shall default in
the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such
Security shall be paid by the Company at the Redemption Price,
together with accrued interest (including Additional Payments, if
any) to the Redemption Date; provided, however, that installments
of interest whose Stated Maturity is on or prior to the Redemp-
tion Date shall be payable to the Holders of such Securities, or
one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to the
terms and the provisions of Section 307.
If any Security called for redemption shall not be so
paid upon surrender thereof for redemption, the principal shall,
until paid, bear interest from the Redemption Date at the rate
borne by the Security.
SECTION 1108. Securities Redeemed in Part.
In the event of any redemption in part, the Company
shall not be required to (i) issue, register the transfer of or
exchange any Security during a period beginning at the opening of
business 15 days before any selection for redemption of Securi-
ties and ending at the close of business on the earliest date on
which the relevant notice of redemption is deemed to have been
given to all holders of Securities to be so redeemed and (ii)
register the transfer of or exchange any Securities so selected
for redemption, in whole or in part, except for the unredeemed
portion of any Securities being redeemed in part.
Any Security which is to be redeemed only in part shall
be surrendered at a place of payment therefor (with, if the
Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and make available
for delivery to the Holder of such Security without service
charge, a new Security or Securities, of any authorized denomina-
tion as requested by such Holder, in aggregate principal amount
equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
SECTION 1109. Optional Redemption.
(a) The Company shall have the right to redeem the
Securities, in whole or in part, at any time or from time to time
on or after December 1, 1998, upon not less than 30 nor more than
60 days' notice, at the following Redemption Prices, expressed as
a percentage of the principal amount of the Securities, if
redeemed during the 12-month period beginning December 1:
Percentage of
Principal
Year Amount
1998 . . . . . . . . . . 105.95%
1999 . . . . . . . . . . 105.10%
2000 . . . . . . . . . . 104.25%
2001 . . . . . . . . . . 103.40%
2002 . . . . . . . . . . 102.55%
2003 . . . . . . . . . . 101.70%
2004 . . . . . . . . . . 100.85%
2005 and thereafter. . . 100.00%
plus, in each case, accrued and unpaid interest, including
Additional Payments, if any, to the Redemption Date. Any redemp-
tion pursuant to this Section 1109 shall be made pursuant to the
provisions of Sections 1101 through 1108 hereof.
(b) If a partial redemption of the Securities would
result in the delisting of the Preferred Securities issued by the
Trust from any national securities exchange or other organization
on which the Preferred Securities are listed, the Company shall
not be permitted to effect such partial redemption and may only
redeem the Securities in whole.
SECTION 1110. Tax Event Redemption.
If a Tax Event has occurred and is continuing and:
(a) the Company has received a Redemption Tax Opinion;
or
(b) the Trustee shall have been informed by tax
counsel that a No Recognition Opinion cannot be delivered to the
Trust, then, notwithstanding Section 1109(a) but subject to
Section 1109(b), the Company shall have the right upon not less
than 30 nor more than 60 days' notice to the Holders of the
Securities to redeem the Securities in whole (but not in part),
for cash at $50 per $50 principal amount of the Securities plus
accrued and unpaid interest, including Additional Payments, if
any, within 90 days following the occurrence of such Tax Event
(the "90 Day Period"); provided, however, that if, at the time
there is available to the Company or the Trust the opportunity to
eliminate within the 90 Day Period, the Tax Event by taking some
ministerial action, including, but not limited to, filing a form
or making an election, or pursuing some other similar reasonable
measure that, in the sole judgment of the Company, will have no
adverse effect on the Company, the Trust or the Holders of the
Trust Securities issued by the Trust and will involve no material
cost, then the Company or the Trust shall pursue such ministerial
action or other measure in lieu of redemption, and provided,
further, that the Company shall have no right to redeem the
Securities while the Trust is pursuing any ministerial action or
other similar measure pursuant to its obligations under the
Declaration. The redemption payment of $50 per $50 principal
amount of the Securities plus accrued and unpaid interest,
including Additional Payments, if any, shall be made prior to
12:00 noon, Delaware time, on the date of such redemption or such
earlier time as the Company determines provided that the Company
shall deposit with the Trustee an amount sufficient to make such
redemption payment by 10:00 a.m., Delaware time, on the date such
redemption payment is to be made.
ARTICLE TWELVE
Subordination of Securities
SECTION 1201. Agreement to Subordinate.
The Company covenants and agrees, and each Holder of
Securities by such Holder's acceptance thereof likewise covenants
and agrees, that all Securities shall be issued subject to the
provisions of this Article Twelve; and each Holder of a Security,
whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions. The
payment by the Company of the principal of, premium, if any, and
interest (including any Additional Payments) on all Securities
issued hereunder shall, to the extent and in the manner hereinaf-
ter set forth, be subordinated and junior in right of payment to
the prior payment in full of all Senior Indebtedness, whether
outstanding at the date of this Indenture or thereafter incurred;
provided, however, that no provision of this Article Twelve shall
prevent the occurrence of any default or Event of Default hereun-
der.
SECTION 1202. Default on Designated Senior Indebtedness.
In the event and during the continuation of any default
by the Company in the payment of principal, premium, interest or
any other payment due on any Designated Senior Indebtedness
continuing beyond the period of grace, if any, specified in the
instrument evidencing such Designated Senior Indebtedness, unless
and until such default shall have been cured or waived or shall
have ceased to exist, and in the event that the maturity of any
Designated Senior Indebtedness has been accelerated because of a
default, then no payment shall be made by the Company with
respect to the principal of (including redemption payments),
premium, if any, or interest (including any Additional Payments)
on the Securities.
In the event that, notwithstanding the foregoing, any
payment shall be received by the Trustee when such payment is
prohibited by the preceding paragraph of this Section 1202, such
payment shall be held in trust for the benefit of, and shall be
paid over or delivered to, the holders of Senior Indebtedness or
their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any of such Senior Indebt-
edness may have been issued, as their respective interests may
appear, but only to the extent that the holders of the Senior
Indebtedness (or their representative or representatives or a
trustee) notify the Trustee within 90 days of such payment of the
amounts then due and owing on the Senior Indebtedness and only
the amounts specified in such notice to the Trustee shall be paid
to the holders of Senior Indebtedness.
SECTION 1203. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of
assets of the Company of any kind or character, whether in cash,
property or securities, to creditors upon any dissolution or
winding up or liquidation or reorganization of the Company,
whether voluntary or involuntary, or in bankruptcy, insolvency,
receivership or other proceedings, all amounts (including princi-
pal, premium, if any, and interest) due or to become due upon all
Senior Indebtedness shall first be paid in full, or payment
thereof provided for in money in accordance with its terms,
before any payment is made on account of the principal (and
premium, if any) or interest (including any Additional Payments)
on the Securities; and upon any such dissolution or winding up or
liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders of
the Securities or the Trustee would be entitled, except for the
provisions of this Article Twelve, shall be paid by the Company
or by any receiver, trustee in bankruptcy, liquidating trustee,
agent or other Person making such payment or distribution, or by
the Holders of the Securities or by the Trustee under this
Indenture if received by them or it, directly to the holders of
Senior Indebtedness (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders,
as calculated by the Company) or their representative or repre-
sentatives, or to the trustee or trustees under any indenture
pursuant to which any instruments evidencing such Senior Indebt-
edness may have been issued, as their respective interests may
appear, to the extent necessary to pay such Senior Indebtedness
in full, in money or money's worth, after giving effect to any
concurrent payment or distribution to or for the holders of such
Senior Indebtedness, before any payment or distribution is made
to the Holders of Securities or to the Trustee.
In the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities, prohibited by
the foregoing, shall be received by the Trustee or the Holders of
the Securities before all Senior Indebtedness is paid in full, or
provision is made for such payment in money in accordance with
its terms, such payment or distribution shall be held in trust
for the benefit of and shall be paid over or delivered to the
holders of Senior Indebtedness or their representative or repre-
sentatives, or to the trustee or trustees under any indenture
pursuant to which any instruments evidencing such Senior Indebt-
edness may have been issued, and their respective interests may
appear, as calculated by the Company, for application to the
payment of all Senior Indebtedness remaining unpaid to the extent
necessary to pay such Senior Indebtedness in full in money in
accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior
Indebtedness.
For purposes of this Article Twelve, the words, "cash,
property or securities" shall not be deemed to include shares of
stock of the Company as reorganized or readjusted, or securities
of the Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is subordi-
nated at least to the extent provided in this Article Twelve with
respect to the Securities to the payment of all Senior Indebted-
ness which may at the time be outstanding; provided, that
(i) such Senior Indebtedness is assumed by the new corporation,
if any, resulting from any such reorganization or readjustment,
and (ii) the rights of the holders of such Senior Indebtedness
are not, without the consent of such holders, altered by such
reorganization or readjustment. The consolidation of the Company
with, or the merger of the Company with or into, another Person
or the liquidation or dissolution of the Company following the
conveyance, transfer or lease of all or substantially all its
properties and assets on a consolidated basis to another Person
upon the terms and conditions provided for in Article Eight
hereof shall not be deemed a dissolution, winding up, liquidation
or reorganization for the purposes of this Section 1203 if such
other Person shall, as a part of such consolidation, merger,
conveyance, transfer or lease, comply with the conditions stated
in Article Eight hereof. Nothing in Section 1202 or in this
Section 1203 shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607 hereof.
SECTION 1204. Subrogation.
Subject to the payment in full of all Senior Indebted-
ness, the rights of the Holders of the Securities shall be
subrogated to the rights of the holders of such Senior Indebted-
ness to receive payments or distributions of cash, property or
securities of the Company, as the case may be, applicable to such
Senior Indebtedness until the principal of (and premium, if any)
and interest (including any Additional Payments) on the Securi-
ties shall be paid in full; and, for the purposes of such subro-
gation, no payments or distributions to the holders of such
Senior Indebtedness of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled
except for the provisions of this Article Twelve, and no payment
over pursuant to the provisions of this Article Twelve, to or for
the benefit of the holders of such Senior Indebtedness by Holders
of the Securities or the Trustee, shall, as between the Company,
its creditors other than holders of Senior Indebtedness, and the
Holders of the Securities, be deemed to be a payment by the
Company to or on account of such Senior Indebtedness. It is
understood that the provisions of this Article Twelve are and are
intended solely for the purposes of defining the relative rights
of the Holders of the Securities, on the one hand, and the
holders of such Senior Indebtedness on the other hand.
Nothing contained in this Article Twelve or elsewhere
in this Indenture or in the Securities is intended to or shall
impair, as between the Company, its creditors other than the
holders of Senior Indebtedness, and the Holders of the Securi-
ties, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the
principal of (and premium, if any) and interest (including any
Additional Payments) on the Securities as and when the same shall
become due and payable in accordance with their terms (except as
permitted by Section 312), or is intended to or shall affect the
relative rights of the Holders of the Securities and creditors of
the Company, as the case may be, other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the
Trustee or the Holder of any Security from exercising all reme-
dies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article
Twelve of the holders of such Senior Indebtedness in respect of
cash, property or securities of the Company, as the case may be,
received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the
Company referred to in this Article Twelve, the Trustee, subject
to the provisions of Section 603, and the Holders of the Securi-
ties shall be entitled to rely upon any order or decree made by
any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pend-
ing, or a certificate of the receiver, trustee in bankruptcy,
liquidation trustee, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of the
Securities, for the purposes of ascertaining the Persons entitled
to participate in such distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, as the case
may be, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article Twelve.
SECTION 1205. Trustee to Effectuate Subordination.
Each Holder of Securities by such Holder's acceptance
thereof authorizes and directs the Trustee on such Holder's
behalf to take such action as may be necessary or appropriate to
effectuate the subordination provided in this Article Twelve and
appoints the Trustee as such Holder's attorney-in-fact for any
and all such purposes.
SECTION 1206. Notice by the Company.
The Company shall give prompt written notice to a
Responsible Officer of the Trustee of any fact known to the
Company which would prohibit the making of any payment of monies
to or by the Trustee in respect of the Securities pursuant to the
provisions of this Article Twelve. Notwithstanding the provi-
sions of this Article Twelve or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any
payment of monies to or by the Trustee in respect of the Securi-
ties pursuant to the provision of this Article Twelve, unless and
until a Responsible Officer of the Trustee shall have received
written notice thereof at the Corporate Trust Office of the
Trustee from the Company or a holder or holders of Senior Indebt-
edness or from any trustee therefor; and before the receipt of
any such written notice, the Trustee, subject to the provisions
of Section 603 hereof, shall be entitled in all respects to
assume that no such facts exist; provided, however, that if the
Trustee shall not have received the notice provided for in this
Section 1206 at least two Business Days prior to the date upon
which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the
principal of (and premium, if any) or interest (including any
Additional Payments) on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have
full power and authority to receive such money and to apply the
same to the purposes for which they were received, and shall not
be affected by any notice to the contrary which may be received
by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Section 603,
shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Senior
Indebtedness (or a trustee on behalf of such holder) to establish
that such notice has been given by a holder of such Senior
Indebtedness or a trustee on behalf of any such holder or hold-
ers. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any
Person as a holder of Senior Indebtedness to participate in any
payment or distribution pursuant to this Article Twelve, the
Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior
Indebtedness held by such Person, the extent to which such Person
is entitled to participate in such payment or distribution and
any other facts pertinent to the right of such Person under this
Article Twelve, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial
determination as to the right of such Person to receive such
payment.
SECTION 1207. Rights of the Trustee; Holders of Senior Indebted-
ness.
The Trustee in its individual capacity shall be enti-
tled to all the rights set forth in this Article Twelve in
respect of any Senior Indebtedness at any time held by it, to the
same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
With respect to the holders of Senior Indebtedness of
the Company, the Trustee undertakes to perform or to observe only
such of its covenants and obligations as are set forth in this
Article Twelve, and no implied covenants or obligations with
respect to the holders of such Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not
be deemed to owe any fiduciary duty to the holders of such Senior
Indebtedness and, subject to the provisions of Section 603, the
Trustee shall not be liable to any holder of such Senior Indebt-
edness if it shall pay over or deliver to Holders of Securities,
the Company or any other Person money or assets to which any
holder of such Senior Indebtedness shall be entitled by virtue of
this Article Twelve or otherwise. With respect to the holders of
Senior Indebtedness, the Trustee undertakes to perform or to
observe only such of its covenants or obligations as are specifi-
cally set forth in this Article Twelve and no implied covenants
or obligations with respect to holders of Senior Indebtedness
shall be read into this Indenture against the Trustee.
SECTION 1208. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or
failure to act on the part of the Company or by any act or
failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and
covenants of this Indenture, regardless of any knowledge thereof
which any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the
foregoing paragraph, the holders of Senior Indebtedness may, at
any time and from time to time, without the consent of or notice
to the Trustee or the Holders of the Securities, without incur-
ring responsibility to the holders of the Securities and without
impairing or releasing the subordination provided in this Article
Twelve or the obligations hereunder of the Holders of the Securi-
ties to the holders of Senior Indebtedness, do any one or more of
the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, such Senior
Indebtedness, or otherwise amend or supplement in any manner such
Senior Indebtedness or any instrument evidencing the same or any
agreement under which such Senior Indebtedness is outstanding;
(ii) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing such Senior Indebted-
ness; (iii) release any Person liable in any manner for the
collection of such Senior Indebtedness; and (iv) exercise or
refrain from exercising any rights against the Company and any
other Person.
ARTICLE THIRTEEN
Conversion of Securities
SECTION 1301. Conversion Rights.
Subject to and upon compliance with the provisions of
this Article, the Securities are convertible, at the option of
the Holder, at any time on or before redemption as provided below
or the close of business at their Stated Maturity, into fully
paid and nonassessable shares of Class B Common Stock of the
Company at an initial conversion rate of 1.034 shares of Class B
Common Stock for each $50 in aggregate principal amount of
Securities (equal to a conversion price of $48.36 per share of
Class B Common Stock), subject to adjustment as described in this
Article Thirteen. A Holder of Securities may convert any portion
of the principal amount of the Securities into that number of
fully paid and nonassessable shares of Class B Common Stock
(calculated as to each conversion to the nearest 1/100th of a
share) obtained by dividing the principal amount of the Securi-
ties to be converted by such conversion price. In case a Securi-
ty or portion thereof is called for redemption, such conversion
right in respect of the Security or portion so called shall
expire at the close of business on the corresponding Redemption
Date, unless the Company defaults in making the payment due upon
redemption.
SECTION 1302. Conversion Procedures.
(a) In order to convert all or a portion of the
Securities, the Holder thereof shall deliver to the Conversion
Agent an irrevocable Notice of Conversion setting forth the
principal amount of Securities to be converted, together with the
name or names, if other than the Holder, in which the shares of
Class B Common Stock should be issued upon conversion and, if
such Securities are definitive Securities, surrender to the
Conversion Agent the Securities to be converted, duly endorsed or
assigned to the Company or in blank. In addition, a holder of
Preferred Securities or Common Securities may exercise its right
under the Declaration to convert such Preferred Securities or
Common Securities into Class B Common Stock by delivering to the
Conversion Agent an irrevocable Notice of Conversion setting
forth the information called for by the preceding sentence and
directing the Conversion Agent (i) to exchange such Preferred
Security or Common Security for a portion of the Securities held
by the Trust (at an exchange rate of $50 principal amount of
Securities for each Preferred Security or Common Security) and
(ii) to immediately convert such Securities, on behalf of such
holder, into Class B Common Stock of the Company pursuant to this
Article Thirteen and, if such Preferred Securities or Common
Securities are in definitive form, surrendering such Preferred
Securities or Common Securities, duly endorsed or assigned to the
Company or in blank.
If a Notice of Conversion is delivered on or after the
Regular Record Date and prior to the subsequent Interest Payment
Date, the Holder will be entitled to receive the interest payable
on the subsequent Interest Payment Date on the portion of Securi-
ties to be converted notwithstanding the conversion thereof prior
to such Interest Payment Date. Except as otherwise provided in
the immediately preceding sentence, in the case of any Security
which is converted, interest (including any Additional Payments)
shall not be payable, and the Company shall not make nor be
required to make any other payment, adjustment or allowance with
respect to accrued but unpaid interest on the Securities being
converted, which shall be deemed to be paid in full. Each
conversion shall be deemed to have been effected immediately
prior to the close of business on the day on which the Notice of
Conversion was received (the "Conversion Date") by the Conversion
Agent from the Holder or from a holder of the Preferred Securi-
ties or the Common Securities effecting a conversion thereof
pursuant to its conversion rights under the Declaration, as the
case may be. The Person or Persons entitled to receive the Class
B Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such Class B
Common Stock as of the Conversion Date. As promptly as practica-
ble on or after the Conversion Date, the Company shall issue and
deliver at the office of the Conversion Agent, unless otherwise
directed by the Holder in the Notice of Conversion, a certificate
or certificates for the number of full shares of Class B Common
Stock issuable upon such conversion, together with the cash
payment, if any, in lieu of any fraction of any share to the
Person or Persons entitled to receive the same. The Conversion
Agent shall deliver such certificate or certificates to such
Person or Persons.
(b) The Company's delivery upon conversion of the
fixed number of shares of Class B Common Stock into which the
Securities are convertible (together with the cash payment, if
any, in lieu of fractional shares) shall be deemed to satisfy the
Company's obligation to pay the principal amount at Maturity of
the portion of Securities so converted and any unpaid interest
(including Compounded Interest, Additional Interest and Liquidat-
ed Damages, if any) accrued on such Securities at the time of
such conversion.
(c) No fractional shares of Class B Common Stock will
be issued as a result of conversion, but in lieu thereof, the
Company shall pay to the Conversion Agent a cash adjustment in an
amount equal to the same fraction of the Current Market Price of
the Class B Common Stock of such fractional interest on the date
on which the Securities, the Common Securities or the Preferred
Securities, as the case may be, were duly surrendered to the
Conversion Agent for conversion, or, if such day is not a Trading
Day, on the next Trading Day, and the Conversion Agent in turn
will make such payment, if any, to the Holder of the Securities
or the holder of the Preferred Securities or the Common Securi-
ties so converted.
(d) In the event of the conversion of any Security in
part only, a new Security or Securities for the unconverted
portion thereof will be issued in the name of the Holder thereof
upon the cancellation thereof in accordance with Section 305.
(e) In effecting the conversion transactions described
in this Section, the Conversion Agent is acting as agent of the
holders of Preferred Securities (in the exchange of Preferred
Securities for Securities), as agent of the holders of Common
Securities (in the exchange of Common Securities for Securities)
and as agent of the Holders of Securities (in the conversion of
Securities into Class B Common Stock), as the case may be,
directing it to effect such conversion transactions. The Conver-
sion Agent is hereby authorized (i) to exchange Securities held
by the Trust from time to time for Preferred Securities in
connection with the conversion of such Preferred Securities in
accordance with this Article Thirteen, (ii) to exchange
Securities held by the Trust from time to time for Common
Securities in connection with the conversion of such Common
Securities in accordance with this Article Thirteen and (iii) to
convert all or a portion of the Securities into Class B Common
Stock and thereupon to deliver such shares of Class B Common
Stock in accordance with the provisions of this Article Thirteen
and to deliver to the Trust a new Security or Securities for any
resulting unconverted principal amount.
(f) All shares of Class B Common Stock delivered upon
any conversion of Restricted Preferred Securities shall bear the
restrictive legend set forth in Section 1310(a) and shall be
subject to the restrictions on transfer provided in such legend
and in Section 305(b) hereof. Neither the Trustee nor the
Conversion Agent shall have any responsibility for the inclusion
or content of any such restrictive legend on such Class B Common
Stock; provided, however, that the Trustee or the Conversion
Agent shall have provided to the Company or to the Company's
transfer agent for such Class B Common Stock, prior to or concur-
rently with a request to the Company to deliver to such Conver-
sion Agent certificates for such Class B Common Stock, written
notice that the Securities delivered for conversion are Restrict-
ed Preferred Securities.
SECTION 1303. Conversion Price Adjustments.
The conversion price shall be subject to adjustment
(without duplication) from time to time as follows:
(i) In case the Company after the date hereof
shall pay or make a dividend or other distribution on any
class of capital stock of the Company exclusively in Common
Stock of the Company, the conversion price in effect at the
opening of business on the day following the date fixed for
the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiply-
ing such conversion price by a fraction of which the numera-
tor shall be the number of shares of Common Stock outstand-
ing at the close of business on the date fixed for such
determination and the denominator shall be the sum of such
number of shares of Common Stock and the total number of
shares of Common Stock constituting such dividend or other
distribution, such reduction to become effective immediately
after the opening of business on the day following the date
fixed for such determination. If after any such date fixed
for determination any dividend or distribution is not paid,
the conversion price shall be immediately readjusted,
effective as of the date the Board of Directors determines
not to pay such dividend or distribution, to the conversion
price that would have been in effect if such determination
date had not been fixed. For the purposes of this
subparagraph (i), the number of shares of Common Stock at
any time outstanding shall not include shares held in the
treasury of the Company. The Company shall not pay any
dividend or make any distribution exclusively in Common
Stock on shares of any class or series of capital stock of
the Company held in the treasury of the Company.
(ii) In case the Company after the date hereof
shall pay or make a dividend or other distribution on any
class of Common Stock consisting exclusively of, or shall
otherwise issue to all holders of any class of Common Stock,
rights or warrants entitling the holders thereof, within a
45 calendar-day period, to subscribe for or purchase shares
of any class of Common Stock at a price per share less than
the Current Market Price per share of such class of Common
Stock on the date fixed for the determination of stockhold-
ers entitled to receive such rights or warrants, the conver-
sion price in effect at the opening of business on the day
following the date fixed for such determination shall be
reduced by multiplying such conversion price by a fraction
of which the numerator shall be the number of shares of
Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares
of Common Stock which the aggregate of the offering price of
the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such Current
Market Price and the denominator shall be the number of
shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or pur-
chase, such reduction to become effective immediately after
the opening of business on the day following the date fixed
for such determination. To the extent that shares of any
class of Common Stock are not so delivered after the expira-
tion of such rights or warrants, the conversion price shall
be immediately readjusted to the conversion price which
would then be in effect if such date fixed for the determi-
nation of stockholders entitled to receive such rights or
warrants had not been fixed. For the purposes of this
subparagraph (ii), the number of shares of Common Stock at
any time outstanding shall not include shares held in the
treasury of the Company. The Company shall not issue any
rights or warrants in respect of shares of Common Stock held
in the treasury of the Company. In case any rights or
warrants referred to in this subparagraph (ii) in respect of
which an adjustment shall have been made shall expire unex-
ercised within 45 days after the same shall have been dis-
tributed or issued by the Company, the conversion price
shall be readjusted at the time of such expiration to the
conversion price that would have been in effect if no ad-
justment had been made on account of the distribution or
issuance of such expired rights or warrants.
(iii) In case after the date hereof outstanding
shares of any class of Common Stock shall be subdivided into
a greater number of shares of such class of Common Stock,
and in case outstanding shares of any class of Common Stock
shall be combined into a smaller number of shares of such
class of Common Stock, the conversion price in effect at the
opening of business on the day following the day upon which
such subdivision or combination becomes effective shall be
adjusted so that the same shall equal the price determined
by multiplying the conversion price in effect immediately
prior to the effectiveness of the conversion price adjust-
ment contemplated by this subparagraph (iii) by a fraction
of which the numerator shall be the number of shares of
Common Stock outstanding immediately prior to such subdivi-
sion or combination and the denominator shall be the number
of shares of Common Stock outstanding immediately after
giving effect to such subdivision or combination, such
adjustment to become effective immediately after the opening
of business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) Subject to the last sentence of this sub-
paragraph (iv), in case after the date hereof the Company
shall, by dividend or otherwise, distribute to all holders
of its Common Stock evidences of its indebtedness, shares of
any class or series of capital stock, cash or assets (in-
cluding securities, but excluding (A) any dividend or dis-
tribution referred to in subparagraph (i) of this Section
1303, (B) any rights or warrants referred to in subparagraph
(ii) of this Section 1303, and (C) any dividends or distri-
butions made solely in cash if the per share amount thereof,
when added to the per share amount of other distributions
made within the preceding 12 months (other than those dis-
tributions that resulted in a conversion price adjustment
pursuant to this Section 1303) does not exceed 15% of the
average of the Current Market Prices per share of Class B
Common Stock for 20 consecutive Trading Days ending not more
than ten days prior to the date of declaration of such
dividend or distribution), the conversion price shall be
reduced so that the same shall equal the price determined by
multiplying the conversion price in effect immediately prior
to the effectiveness of the conversion price reduction
contemplated by this subparagraph (iv) by a fraction of
which the numerator shall be the Current Market Price per
share of the Class B Common Stock on the third Trading Day
prior to the date fixed for the determination of stockhold-
ers entitled to receive such distribution (the "Reference
Date") less the fair market value (as determined in good
faith by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of
Directors), on the Reference Date, of the portion of the
evidences of indebtedness, shares of capital stock, cash and
assets so distributed applicable to one share of Class B
Common Stock and the denominator shall be such Current
Market Price per share of the Class B Common Stock on the
Reference Date, such reduction to become effective
immediately prior to the opening of business on the day
following the Reference Date. In the event that such divi-
dend or distribution is not so paid or made, the conversion
price shall be adjusted immediately to be the conversion
price which would then be in effect if such dividend or
distribution had not occurred. If the Board of Directors
determines the fair market value of any distribution for
purposes of this subparagraph (iv) by reference to the
actual or when issued trading market for any securities
comprising such distribution, it must in doing so consider
the prices in such market over the same period used in
computing 15% of the average of the Current Market Prices
per share of Class B Common Stock pursuant to this
subparagraph (iv). For purposes of this subparagraph (iv),
any dividend or distribution that includes shares of Class B
Common Stock or rights or warrants to subscribe for or
purchase shares of Class B Common Stock shall be deemed
instead to be (1) a dividend or distribution of the evidenc-
es of indebtedness, shares of capital stock, cash or assets
other than such shares of Class B Common Stock or such
rights or warrants (making any conversion price reduction
required by this subparagraph (iv)) immediately followed by
(2) a dividend or distribution of such shares of Class B
Common Stock or such rights or warrants (making any further
conversion price reduction required by subparagraph (i) or
(ii)), except (x) the Reference Date of such dividend or
distribution as defined in this subparagraph (iv) shall be
substituted in place of the phrases (a) "the date fixed for
the determination of stockholders entitled to receive such
dividend or other distribution" and (b) "the date fixed for
such determination" within the meaning of subparagraphs (i)
and (ii), respectively, of this Section 1303 and (y) any
shares of Class B Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close
of business on the date fixed for such determination" within
the meaning of subparagraph (i) of this Section 1303.
(v) In case after the date hereof a tender or
exchange offer (other than an odd-lot offer) made by the
Company or any subsidiary of the Company for all or any
portion of any class of Common Stock shall expire and such
tender or exchange offer shall involve the payment by the
Company or such subsidiary of consideration per share of
such class of Common Stock having a fair market value (as
determined in good faith by the Board of Directors, whose
determination shall be conclusive and described in a resolu-
tion of the Board of Directors) at the last time (the "Expi-
ration Time") tenders or exchanges may be made pursuant to
such tender or exchange offer (as it shall have been amend-
ed) that exceeds 110% of the Current Market Price per share
of such class of Common Stock as of the Trading Day next
succeeding the Expiration Time, the conversion price shall
be reduced so that the same shall equal the price determined
by multiplying the conversion price in effect immediately
prior to the effectiveness of the conversion price reduction
contemplated by this subparagraph (v) by a fraction of which
the numerator shall be the sum of the products of the number
of shares of each class of Common Stock outstanding (includ-
ing any tendered or exchanged shares) at the Expiration Time
multiplied by the respective Current Market Price per share
of each such class of Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be
the sum of (x) the fair market value (determined as
aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum
specified in the terms of the tender or exchange offer) of
all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up
to any such maximum, being referred to as the "Purchased
Shares") and (y) the sum of the products of the number of
shares of each class of Common Stock outstanding (less any
Purchased Shares) at the Expiration Time and the respective
Current Market Price per share of each such class of Common
Stock on the Trading Day next succeeding the Expiration
Time, such reduction to become effective immediately prior
to the opening of business on the day following the
Expiration Time.
(vi) For the purpose of any computation under
subparagraphs (ii), (iv) and (v) of this Section 1303, the
current market price per share ("Current Market Price") of
any class of Common Stock for any day shall mean the report-
ed last sale price regular way on such day or, in case no
such reported sale takes place on such day, the average of
the reported closing bid and asked prices regular way of
such Common Stock on such day, in each case as reported on
the New York Stock Exchange Composite Tape, or, if such
class of Common Stock is not then listed or admitted to
trading on the New York Stock Exchange, on the principal
national securities exchange on which such class of Common
Stock is listed or admitted to trading, or, if not listed or
admitted to trading on any national securities exchange, on
the National Market System of the National Association of
Securities Dealers, Inc., or, if such class of Common Stock
is not quoted or admitted to trading on such quotation
system, on the principal quotation system on which such
class of Common Stock is listed or admitted to trading or
quoted, or, if not listed or admitted to trading or quoted
on any national securities exchange or quotation system, the
average of the closing bid and asked prices of such class of
Common Stock in the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incor-
porated, or a similar generally accepted reporting service,
or, if not so available in such manner, as furnished by any
New York Stock Exchange member firm selected from time to
time by the Board of Directors of the Company for that
purpose, or, if not so available in such manner, as other-
wise determined in good faith by the Board of Directors.
(vii) The Company may make such reductions in the
conversion price, in addition to those required by subpara-
graphs (i), (ii), (iii), and (v), as it considers to be
advisable to avoid or diminish any income tax to holders of
any class of Common Stock or rights to purchase any class of
Common Stock resulting from any dividend or distribution of
stock (or rights to acquire stock) or from any event treated
as such for income tax purposes. The Company from time to
time may reduce the conversion price by any amount for any
period of time if the period is at least twenty (20) days,
the reduction is irrevocable during the period and the Board
of Directors of the Company shall have made a determination
that such reduction would be in the best interest of the
Company, which determination shall be conclusive. Whenever
the conversion price is reduced pursuant to the preceding
sentence, the Company shall mail to holders of record of the
Securities a notice of the reduction at least fifteen (15)
days prior to the date the reduced conversion price takes
effect, and such notice shall state the reduced conversion
price and the period it will be in effect.
(viii) No adjustment in the conversion price
shall be required unless such adjustment would require an
increase or decrease of at least 1% in the conversion price;
provided, however, that any adjustments which by reason of
this subparagraph (viii) are not required to be made shall
be carried forward and taken into account in determining
whether any subsequent adjustment shall be required. All
calculations under this Section 1303(viii) shall be made to
the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
SECTION 1304. Merger, Consolidation or Sale of Assets.
In case of any (i) consolidation or merger of Continen-
tal with or into any other entity (other than a consolidation or
merger in which Continental is the surviving entity), (ii) sale,
transfer, lease or conveyance of all or substantially all of the
assets of Continental, (iii) reclassification, capital reorgani-
zation or change of the Class B Common Stock (other than solely a
change in par value, or from par value to no par value) or (iv)
consolidation or merger of another entity into the Company in
which there is a reclassification or change of the Class B Common
Stock (other than solely a change in par value, or from par value
to no par value), then any holder of Securities will be entitled,
on or after the occurrence of any such event, to receive on
conversion of such Securities the kind and amount of shares of
stock or other securities, cash or other property (or any combi-
nation thereof) which the holder would have received had such
holder converted such holder's Securities immediately prior to
the occurrence of such event. If the consideration into which
the Securities are convertible following any such event consists
of Class B Common Stock or common stock of the surviving entity
(as the case may be), then from and after the occurrence of such
event the conversion price for each Security into such common
stock shall be subject to the same anti-dilution and other
adjustments described in the preceding Section 1303, applied as
if such common stock were Class B Common Stock.
The Company or the Person formed by such consolidation
or resulting from such merger or which acquired such assets or
which acquires the Company's shares, as the case may be, shall
make provision in its certificate or articles of incorporation or
other constituent document to establish the rights of the Holders
set forth in the preceding paragraph. Such certificate or
articles of incorporation or other constituent document shall
provide for adjustments which, for events subsequent to the
effective date of such certificate or articles of incorporation
or other constituent document, shall be as nearly equivalent as
may be practicable to the adjustments provided for in this
Article Thirteen. The above provisions shall similarly apply to
successive transactions of the foregoing type.
SECTION 1305. Notice of Adjustments of Conversion Price.
Whenever the conversion price is adjusted as herein
provided:
(a) the Company shall compute the adjusted conversion
price and shall prepare a certificate signed by the Chief Finan-
cial Officer or the Treasurer of the Company setting forth the
adjusted conversion price and showing in reasonable detail the
facts upon which such adjustment is based, and such certificate
shall forthwith be filed with the Trustee and the transfer agent
for the Preferred Securities, the Common Securities and the
Securities; and
(b) a notice stating the conversion price has been
adjusted and setting forth the adjusted conversion price shall as
soon as practicable be mailed by the Company to all record
holders of the Preferred Securities, the Common Securities and
the Securities at their last addresses as they appear upon the
stock transfer books of the Company and the Trust.
SECTION 1306. Prior Notice of Certain Events.
In case:
(i) the Company shall (1) declare any dividend
(or any other distribution) on its Common Stock, other than
(A) a dividend payable in shares of Common Stock or (B) a
dividend payable in cash that would not require an adjust-
ment pursuant to Section 1303(iv);
(ii) the Company shall authorize the granting to
all holders of Common Stock of rights or warrants to sub-
scribe for or purchase any shares of stock of any class or
series or of any other rights or warrants;
(iii) of any reclassification of Common Stock
(other than a subdivision or combination of the outstanding
Common Stock, or a change in par value, or from par value to
no par value, or from no par value to par value), or of any
consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company shall
be required, or of the sale or transfer of all or substan-
tially all of the assets of the Company or of any compulsory
share exchange whereby the Common Stock is converted into
other securities, cash or other property; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall (a) if any Preferred Securities or Common
Securities are outstanding, cause to be filed with the transfer
agent(s) for the Preferred Securities and the Common Securities,
and shall cause to be mailed to the holders of record of the
Preferred Securities and the Common Securities, at their last
addresses as they shall appear upon the stock transfer books of
the Trust or (b) shall cause to be mailed to all Holders at their
last addresses as they shall appear in the Security Register, at
least fifteen days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on
which a record (if any) is to be taken for the purpose of such
dividend, distribution, rights or warrants or, if a record is not
to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or
warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer, share
exchange, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation,
merger, sale, transfer, share exchange, dissolution, liquidation
or winding up (but no failure to mail such notice or any defect
therein or in the mailing thereof shall affect the validity of
the corporate action required to be specified in such notice).
SECTION 1307. [Reserved]
SECTION 1308. Dividend or Interest Reinvestment Plans.
Notwithstanding the foregoing provisions, the issuance
of any shares of Common Stock pursuant to any plan providing for
the reinvestment of dividends or interest payable on securities
of the Company and the investment of additional optional amounts
in shares of Common Stock under any such plan, and the issuance
of any shares of Common Stock or options or rights to purchase
such shares pursuant to any employee benefit plan or program of
the Company or pursuant to any option, warrant, right or exercis-
able, exchangeable or convertible security outstanding as of the
date the Securities were first issued, shall not be deemed to
constitute an issuance of Common Stock or exercisable, exchange-
able or convertible securities by the Company to which any of the
adjustment provisions described above applies. There shall also
be no adjustment of the conversion price in case of the issuance
of any stock (or securities convertible into or exchangeable for
stock) of the Company except as specifically described in this
Article Thirteen.
SECTION 1309. Certain Additional Rights.
In case the Company shall, by dividend or otherwise,
declare or make a distribution on its Common Stock referred to in
Section 1303(iv) (including, without limitation, dividends or
distributions referred to in the last sentence of Section
1303(iv)), the Holder of the Securities, upon the conversion
thereof subsequent to the close of business on the date fixed for
the determination of stockholders entitled to receive such
distribution and prior to the effectiveness of the conversion
price adjustment in respect of such distribution, shall also be
entitled to receive for each share of Class B Common Stock into
which the Securities are converted, the portion of the shares of
Class B Common Stock, rights, warrants, evidences of indebted-
ness, shares of capital stock, cash and assets so distributed
applicable to one share of Class B Common Stock; provided,
however, that, at the election of the Company (whose election
shall be conclusively evidenced by a resolution of the Board of
Directors) with respect to all Holders so converting, the Company
may, in lieu of distributing to such Holder any portion of such
distribution not consisting of cash or securities of the Company,
pay such Holder an amount in cash equal to the fair market value
thereof (as determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a
resolution of the Board of Directors). If any conversion of
Securities described in the immediately preceding sentence occurs
prior to the payment date for a distribution to holders of Class
B Common Stock which the Holder of Securities so converted is
entitled to receive in accordance with the immediately preceding
sentence, the Company may elect (such election to be conclusively
evidenced by a resolution of the Board of Directors) to distrib-
ute to such Holder a due bill for the shares of Class B Common
Stock, rights, warrants, evidences of indebtedness, shares of
capital stock, cash or assets to which such Holder is so enti-
tled, provided, that such due bill (i) meets any applicable
requirements of the principal national securities exchange or
other market on which the Class B Common Stock is then traded and
(ii) requires payment or delivery of such shares of Class B
Common Stock, rights, warrants, evidences of indebtedness, shares
of capital stock, cash or assets no later than the date of
payment or delivery thereof to holders of shares of Class B
Common Stock receiving such distribution.
SECTION 1310. Restrictions on Common Stock Issuable upon Conver-
sion.
(a) Shares of Class B Common Stock to be issued upon
conversion of a Security in respect of Restricted Preferred
Securities (as defined in the Declaration) shall bear a restric-
tive legend to the following effect:
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAW.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL
OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE
WHICH IS THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUE DATE OF THE CONVERTIBLE SUBORDINATED DEBENTURES
UPON THE CONVERSION OF WHICH THE COMMON STOCK EVIDENCED
HEREBY WAS ISSUED AND THE LAST DATE ON WHICH CONTINEN-
TAL AIRLINES FINANCE TRUST, CONTINENTAL AIRLINES, INC.
(THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY WAS THE
OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS
SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION
STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE COMMON STOCK
EVIDENCED HEREBY IS ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A
PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITU-
TIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES
FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS THAT
OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT, (E) TO AN INSTI-
TUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING OF
SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR
ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITU-
TIONAL "ACCREDITED INVESTOR", FOR INVESTMENT PURPOSES
AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNEC-
TION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURI-
TIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMP-
TION FROM THE REGISTRATION REQUIREMENTS OF THE SECURI-
TIES ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER
AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
(i) PURSUANT TO CLAUSES (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
(ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THE
OTHER SIDE OF THIS SECURITY IS COMPLETED AND DELIVERED
BY THE TRANSFEROR TO THE TRANSFER AGENT. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
(b) If shares of Class B Common Stock to be issued
upon conversion of a Security in respect of Restricted Preferred
Securities are to be registered in a name other than that of the
Holder of such Restricted Preferred Security, then the Person in
whose name such shares of Class B Common Stock are to be regis-
tered must deliver to the Conversion Agent a certificate satis-
factory to the Company and signed by such Person, as to compli-
ance with the restrictions on transfer applicable to such Re-
stricted Preferred Security. Neither the Trustee nor any Conver-
sion Agent or Registrar shall be required to register in a name
other than that of such Holder shares of Class B Common Stock
issued upon conversion of any such Security in respect of such
Preferred Securities not so accompanied by a properly completed
certificate.
SECTION 1311. Trustee Not Responsible for Determining Conversion
Price or Adjustments.
Neither the Trustee nor any Conversion Agent shall at
any time be under any duty or responsibility to any Holder of any
Security to determine whether any facts exist which may require
any adjustment of the conversion price, or with respect to the
nature or extent of any such adjustment when made, or with
respect to the method employed herein or in any supplemental
indenture provided to be employed, in making the same. Neither
the Trustee nor any Conversion Agent shall be accountable with
respect to the validity or value (or the kind of account) of any
shares of Class B Common Stock or of any securities or property,
which may at any time be issued or delivered upon the conversion
of any Security; and neither the Trustee nor any Conversion Agent
makes any representation with respect thereto. Neither the
Trustee nor any Conversion Agent shall be responsible for any
failure of the Company to make any cash payment or to issue,
transfer or deliver any shares of Class B Common Stock or stock
certificates or other securities or property upon the surrender
of any Security for the purpose of conversion, or, except as
expressly herein provided, to comply with any of the covenants of
the Company contained in Article Ten or this Article Thirteen.
____________________
This instrument may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate
seals to be hereunto affixed and attested, all as of the day and
year first above written.
CONTINENTAL AIRLINES, INC.
By:_________________________
Name:
Title:
Attest:
_____________________________
Secretary/Assistant Secretary
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:__________________________
Name:
Title:
Attest:
_____________________________
EXHIBIT A-1
FORM OF SECURITY
[FORM OF FACE OF SECURITY]
THIS SECURITY AND ANY COMMON STOCK TO BE ISSUED ON
CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANS-
FERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE
HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY,
PRIOR TO THE DATE WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH CONTINENTAL
AIRLINES, INC. (THE "COMPANY") OR ANY AFFILIATE OF THE COMPANY
WAS THE OWNER OF THE SECURITY (OR ANY PREDECESSOR OF THIS SECURI-
TY) (THE "RESALE RESTRICTION TERMINATION DATE"), ONLY (A) TO THE
COMPANY, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS
BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
(E) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN THE MEANING
OF SUBPARAGRAPH (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN AC-
COUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL "ACCREDITED
INVESTOR", FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S AND THE TRANSFER AGENT'S RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (i) PURSUANT TO CLAUSE
(D), (E) OR (F), TO REQUIRE THE DELIVERY OF AN OPINION OF COUN-
SEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH
OF THEM, AND (ii) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT
A CERTIFICATE OF TRANSFER IN THE FORM APPEARING ON THIS SECURITY
IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE TRANSFER
AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF A HOLDER
AFTER THE RESALE RESTRICTION TERMINATION DATE.
CONTINENTAL AIRLINES, INC.
8 1/2% Convertible Subordinated
Deferrable Interest Debenture Due 2020
No._________ $___________
CUSIP No. _________
CONTINENTAL AIRLINES, INC., a corporation duly orga-
nized and existing under the laws of the State of Delaware
(herein called "the Company", which term includes any successor
corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ____________________,
or registered assigns, the principal sum [indicated on Schedule A
hereof]* [of ______ Dollars]** ($ ) on December 1,
2020.
_________________
* Applicable to Global Securities only.
** Applicable to certificated Securities only.
Interest Payment Dates: March 1, June 1, September 1 and Decem-
ber 1, commencing March 1, 1996
Regular Record Dates: except as otherwise provided in the
Indenture, the close of business on the
Business Day next preceding each
Interest Payment Date
Reference is hereby made to the further provisions of
this Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instru-
ment to be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed
hereto or imprinted hereon.
Dated: _________, ____
CONTINENTAL AIRLINES, INC.
By:
Name:
Title:
[Seal]
Attest:
_______________
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated: November 28, 1995 Wilmington Trust Company,
not in its individual
capacity but solely
as Trustee
By: _______________________
Authorized Signatory
[FORM OF REVERSE OF SECURITY]
CONTINENTAL AIRLINES, INC.
8 1/2% Convertible Subordinated
Deferrable Interest Debenture Due 2020*
(1) Interest. Continental Airlines, Inc., a Delaware
corporation (the "Company"), is the issuer of this 8 1/2% Con-
vertible Subordinated Deferrable Interest Debenture Due 2020 (the
"Security") limited in aggregate principal amount to $231,958,750
(or up to $266,752,600 if the overallotment option is exercised
in full), issued under the Indenture hereinafter referred to.
The Company promises to pay interest on the Securities in cash
from November 28, 1995 or from the most recent interest payment
date to which interest has been paid or duly provided for,
quarterly (subject to deferral for up to 20 consecutive quarters
as described in Section 3 hereof) in arrears on March 1, June 1,
September 1 and December 1 of each year (each such date, an
"Interest Payment Date"), commencing March 1, 1996, at the rate
of 8 1/2% per annum (subject to increase as provided in Section
13 hereto) plus Additional Interest and Liquidated Damages, if
any, until the principal hereof shall have become due and pay-
able.
___________________
All terms used in this Security which are defined in the
Indenture or in the Declaration attached as Annex A thereto
shall have the meanings assigned to them in the Indenture or
the Declaration, as the case may be.
The amount of interest payable for any period will be
computed on the basis of twelve 30-day months and a 360-day year.
To the extent lawful, the Company shall pay interest on overdue
installments of interest (without regard to any applicable grace
period) at the rate borne by the Securities, compounded quarter-
ly. Any interest paid on this Security shall be increased to the
extent necessary to pay Additional Interest as set forth in this
Security.
(2) Additional Interest. The Company shall pay to
Continental Airlines Finance Trust (and its permitted successors
or assigns under the Declaration) (the "Trust") such additional
amounts as may be necessary in order that the amount of dividends
or other distributions then due and payable by the Trust on the
Preferred Securities that at any time remain outstanding in
accordance with the terms thereof shall not be reduced as a
result of any additional taxes, duties, assessments and other
governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any other taxing authori-
ty.
(3) Extension of Interest Payment Period. The Company
shall have the right, at any time during the term of this Securi-
ty, from time to time to defer payments of interest (including
Compounded Interest, Additional Interest and Liquidated Damages,
if any) by extending the interest payment period of such Security
for up to 20 consecutive quarters (an "Extended Interest Payment
Period"). To the extent permitted by applicable law, interest,
the payment of which has been deferred because of the extension
of the interest payment period pursuant to Section 312 of the
Indenture, will bear interest thereon at 8 1/2% compounded
quarterly for each quarter of the Extended Interest Payment
Period, to the extent permitted by applicable law ("Compounded
Interest"). At the end of the Extended Interest Payment Period,
the Company shall pay all interest then accrued and unpaid on the
Securities, including any Compounded Interest that shall be
payable to the Holders of the Securities in whose names the
Securities are registered in the Security Register on the first
Regular Record Date after the end of the Extended Interest
Payment Period. Before the termination of any Extended Interest
Payment Period, the Company may further extend such period,
provided that such period together with all such further
extensions thereof shall not exceed 20 consecutive quarters.
Upon the termination of any Extended Interest Payment Period and
upon the payment of all Compounded Interest, Additional Interest
and Liquidated Damages, if any, then due, the Company may
commence a new Extended Interest Payment Period, subject to the
foregoing requirements. No interest shall be due and payable
during an Extended Interest Payment Period except at the end
thereof.
If the Property Trustee is the sole holder of the
Securities, the Company shall give the Holder of the Securities
and the Trustee notice of its selection of an Extended Interest
Payment Period at least one Business Day prior to the earlier of
(i) the Interest Payment Date or (ii) if the Preferred Securities
are listed on the New York Stock Exchange or other stock exchange
or quotation system, the date the Trust is required to give
notice to the New York Stock Exchange or other applicable self-
regulatory organization or to holders of the Preferred Securities
on the record date or the date such distributions are payable.
If the Property Trustee is not the sole holder of the
Securities, the Company shall give the Holders of the Securities
and the Trustee notice of its selection of an Extended Interest
Payment Period at least ten Business Days prior to the earlier of
(i) the Interest Payment Date or (ii) if the Preferred Securities
are listed on the New York Stock Exchange or other stock exchange
or quotation system, the date the Trust is required to give
notice to the New York Stock Exchange or other applicable self-
regulatory organization or to holders of the Securities on the
record date or the date such distributions are payable.
The quarter in which any notice is given pursuant to
the second and third paragraphs of this Section 3 shall be
counted as one of the 20 quarters permitted in the maximum
Extended Interest Payment Period permitted under the first
paragraph of this Section 3.
(4) Method of Payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on the regular record date
for such interest installment, which, except as otherwise provid-
ed in the Indenture, shall be the close of business on the
Business Day next preceding each Interest Payment Date (the
"Regular Record Date"), commencing March 1, 1996. Any such
interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is regis-
tered at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee,
notice whereof shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or be paid at any
time in any other lawful manner not inconsistent with the re-
quirements of any securities exchange on which the Securities may
be listed, and upon such notice as may be required by such
exchange, all as more fully provided in said Indenture.
Payment of the principal of and interest on this
Security will be made at the office or agency of the Company
maintained for that purpose in Wilmington, Delaware or New York,
New York, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that, at the option
of the Company, payment of interest may be made by check mailed
to the address of the Person entitled thereto as such address
shall appear in the Security Register.
(5) Paying Agent and Security Registrar. The Trustee
will act as Paying Agent, Security Registrar and Conversion
Agent. The Company may change any Paying Agent, Security Regis-
trar, co-registrar or Conversion Agent without prior notice. The
Company or any of its Affiliates may act in any such capacity.
(6) Indenture. The Company issued the Securities
under an indenture, dated as of November 28, 1995 (the "Inden-
ture"), between the Company and Wilmington Trust Company, not in
its individual capacity but solely as Trustee (herein called the
"Trustee", which term includes any successor trustee under the
Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respec-
tive rights, limitations of rights, duties and immunities there-
under of the Trustee, the Company and the Holders of the Securi-
ties, and of the terms upon which the Securities are, and are to
be, authenticated and delivered. The terms of the Securities
include those stated in the Indenture and those made part of the
Indenture by the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) ("TIA") as in effect on the date of the
Indenture. The Securities are subject to, and qualified by, all
such terms, certain of which are summarized hereon, and holders
are referred to the Indenture and the TIA for a more complete
statement of such terms. The Securities are unsecured general
obligations of the Company limited to $231,958,750 in aggregate
principal amount (or up to $266,752,600 if the overallotment
option is exercised in full) and subordinated in right of payment
to all existing and future Senior Indebtedness of the Company.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation
of the Company, which is absolute and unconditional, to pay the
principal of and interest on this Security when due at the times,
place and rate, and in the coin or currency, herein prescribed or
to convert this Security as provided in the Indenture.
(7) Optional Redemption. The Securities are redeem-
able, in whole or in part, at the Company's option at any time
and from time to time after December 1, 1998, upon not less than
30 or more than 60 days' notice, at the following Redemption
Prices, expressed as a percentage of the principal amount of the
Securities, if redeemed during the 12-month period beginning
December 1 of the applicable year set forth below:
Percentage of
Principal
Year Amount
1998. . . . . . . . . . . . . . . . . . 105.95%
1999. . . . . . . . . . . . . . . . . . 105.10%
2000. . . . . . . . . . . . . . . . . . 104.25%
2001. . . . . . . . . . . . . . . . . . 103.40%
2002. . . . . . . . . . . . . . . . . . 102.55%
2003. . . . . . . . . . . . . . . . . . 101.70%
2004. . . . . . . . . . . . . . . . . . 100.85%
2005 and thereafter . . . . . . . . . . 100.00%
plus, in each case, accrued and unpaid interest, including
Additional Payments, if any, to the Redemption Date (subject to
the right of holders of record on the relevant record date to
receive interest due on the Interest Payment Date). From and
after the Redemption Date, interest will cease to accrue on the
Securities, or portion thereof, called for redemption.
(8) Optional Redemption Upon Tax Event. The
Securities are subject to redemption in whole, but not in part,
at the Company's option at any time within 90 days, if a Tax
Event (as defined in the Declaration) shall occur and be continu-
ing, at a redemption price equal to $50 per $50 principal amount
thereof plus accrued but unpaid interest, including Additional
Interest, if any, to the Redemption Date. Any redemption pursu-
ant to this Section 8 will be made upon not less than 30 nor more
than 60 days' notice.
(9) Notice of Redemption. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the
Redemption Date to each Holder of the Securities to be redeemed
at his address of record. The Securities in denominations larger
than $50 may be redeemed in part but only in integral multiples
of $50. In the event of a redemption of less than all of the
Securities, the Securities will be chosen for redemption by the
Trustee in accordance with the Indenture. On and after the
Redemption Date, interest ceases to accrue on the Securities or
portions thereof called for redemption.
If this Security is redeemed subsequent to a Regular
Record Date with respect to any Interest Payment Date specified
above and on or prior to such Interest Payment Date, then any
accrued interest will be paid to the person in whose name this
Security is registered at the close of business on such record
date.
(10) Mandatory Redemption. The Securities will mature
on December 1, 2020. There are no sinking fund payments with
respect to the Securities.
(11) Subordination. The payment of the principal of,
premium (if any), interest on or any other amounts due on the
Securities is subordinated and junior in right of payment to all
existing and future Senior Indebtedness (as defined below) of the
Company, as described in the Indenture. Each holder, by accept-
ing a Security, agrees to such subordination and authorizes and
directs the Trustee on its behalf to take such action as may be
necessary or appropriate to effectuate the subordination so
provided and appoints the Trustee as its attorney-in-fact for
such purpose.
In addition, no payment of principal (including redemp-
tion payments) of, premium, if any, or interest (including any
Additional Interest, Compounded Interest or Liquidated Damages)
on the Securities may be made (i) if any payment of principal,
premium, interest or any other payment due on any Designated
Senior Indebtedness of the Company is not paid when due and any
applicable grace period with respect to such default has ended
and such default has not been cured or waived or ceased to exist,
or (ii) if the maturity of any Designated Senior Indebtedness of
the Company has been accelerated because of a default.
"Senior Indebtedness" means in respect of the Company
(i) the principal, premium, if any, and interest in respect of
(A) indebtedness of such obligor for money borrowed and
(B) indebtedness evidenced by securities, debentures, bonds or
other similar instruments issued by such obligor, (ii) all
capital lease obligations of such obligor, (iii) all obligations
of such obligor issued or assumed as the deferred purchase price
of property, all conditional sale obligations of such obligor and
all obligations of such obligor under any title retention agree-
ment (but excluding trade accounts payable arising in the ordi-
nary course of business), (iv) all obligations of such obligor
for the reimbursement of any letter of credit, banker's accep-
tance, security purchase facility or similar credit transaction,
(v) all obligations of the type referred to in clauses (i)
through (iv) above of other persons for the payment of which such
obligor is responsible or liable as obligor, guarantor or other-
wise, and (vi) all obligations of the type referred to in clauses
(i) through (v) above of other persons secured by any lien on any
property or asset of such obligor (whether or not such obligation
is assumed by such obligor), except for (1) any such indebtedness
that is by its terms subordinated to or pari passu with the
Securities and (2) any indebtedness between or among such obligor
or its Affiliates, including all other debt securities and
guarantees in respect of those debt securities, initially issued
to any other trust, or a trustee of such trust, partnership, or
other entity affiliated with the Company that is, directly or
indirectly, a financing vehicle of the Company (a "Financing
Entity") in connection with the issuance by such Financing Entity
of preferred securities or other securities that rank pari passu
with, or junior to, such preferred securities. Such Senior
Indebtedness shall continue to be Senior Indebtedness and be
entitled to the benefits of the subordination provisions irre-
spective of any amendment, modification or waiver of any term of
such Senior Indebtedness.
"Designated Senior Indebtedness" means (i) all Senior
Indebtedness of the Company outstanding from time to time under
agreements between the Company, on the one hand, and General
Electric Company, General Electric Capital Corporation, any of
their respective direct or indirect subsidiaries, or any affili-
ates (as such term is defined in Rule 12b-2 under the Exchange
Act) of any of the foregoing (each of which is a "GE Party"), or
any trust of which any GE Party is a beneficiary, on the other
hand, in effect on the original issue date of the Securities, and
any renewal, refunding, replacement or extension thereof, and
(ii) any Senior Indebtedness of the Company incurred, issued or
assumed after the original issue date of the Securities, and any
renewal, refunding, replacement or extension thereof.
(12) Conversion. The Holder of any Security has the
right, exercisable at any time prior to the close of business
(New York time) on the date of the Security's maturity, to
convert the principal amount thereof (or any portion thereof that
is an integral multiple of $50) into shares of Class B Common
Stock at the initial conversion price of 1.034 shares of Class B
Common Stock for each Security (equivalent to a conversion price
of $48.36 per share of Class B Common Stock of the Company),
subject to adjustment under certain circumstances, except that if
a Security is called for redemption, the conversion right will
terminate at the close of business on the Redemption Date.
To convert a Security, a Holder must (1) complete and
sign a conversion notice substantially in the form attached
hereto, (2) surrender the Security to a Conversion Agent, (3)
furnish appropriate endorsements or transfer documents if re-
quired by the Security Registrar or Conversion Agent and (4) pay
any transfer or similar tax, if required. Upon conversion, no
adjustment or payment will be made for interest or dividends, but
if any Holder surrenders a Security for conversion after the
close of business on the Regular Record Date for the payment of
an installment of interest and prior to the opening of business
on the next Interest Payment Date, then, notwithstanding such
conversion, the interest payable on such Interest Payment Date
will be paid to the registered Holder of such Security on such
Regular Record Date. In such event, such Security, when surren-
dered for conversion, need not be accompanied by payment of an
amount equal to the interest payable on such Interest Payment
Date on the portion so converted. The number of shares issuable
upon conversion of a Security is determined by dividing the
principal amount of the Security converted by the conversion
price in effect on the Conversion Date. No fractional shares
will be issued upon conversion but a cash adjustment will be made
for any fractional interest. The outstanding principal amount of
any Security shall be reduced by the portion of the principal
amount thereof converted into shares of Common Stock.
(13) Registration Rights. The holders of the Preferred
Securities, the Guarantee, the Securities and the Class B Common
Stock of the Company issuable upon conversion thereof are enti-
tled to the benefits of a Registration Rights Agreement, dated as
of November 28, 1995, among the Trust, the Company and the
Initial Purchasers (the "Registration Rights Agreement").
Pursuant to the Registration Rights Agreement, the Trust and the
Company have agreed for the benefit of the holders from time to
time of the Preferred Securities, the Guarantee, the Securities
and the Class B Common Stock issuable upon conversion thereof
that they will, at the Company's expense, (a) within 180 days
after the date of issuance of the Preferred Securities, file a
shelf registration statement (the "Shelf Registration Statement")
with the Commission with respect to resales of the Preferred
Securities, the Guarantee, the Securities and the Class B Common
Stock issuable upon conversion thereof, (b) within 60 days after
the date on which the Shelf Registration Statement is filed, use
their best efforts to cause such Shelf Registration Statement to
be declared effective by the Commission and (c) use their best
efforts to maintain such Shelf Registration Statement continuous-
ly effective under the Securities Act of 1933, as amended, until
the third anniversary of the date of the effectiveness of the
Shelf Registration Statement or such earlier date as is provided
in the Registration Rights Agreement.
If (i) on or prior to 180 days following the date of
original issuance of the Preferred Securities, a Shelf Registra-
tion Statement has not been filed with the Commission, or (ii) on
or prior to the 60th day following the filing of such Shelf
Registration Statement, such Shelf Registration Statement is not
declared effective (each, a "Registration Default"), additional
interest ("Liquidated Damages") will accrue on the Securities
from and including the day following such Registration Default to
but excluding the day on which such Registration Default has been
cured. Liquidated Damages will be paid quarterly in arrears,
with the first quarterly payment due on the first interest
payment date in respect of the Securities following the date on
which such Liquidated Damages begin to accrue, and will accrue at
a rate per annum equal to an additional one-quarter of one
percent (0.25%) of the principal amount of the Securities to and
including the 90th day following such Registration Default and at
a rate per annum equal to one-half of one percent (0.50%) thereof
from and after the 91st day following such Registration Default.
In the event that the Shelf Registration Statement ceases to be
effective prior to the third anniversary of the initial effective
date of the Shelf Registration Statement or such earlier date as
is provided in the Registration Rights Agreement for a period in
excess of 60 days, whether or not consecutive, during any
12-month period, then the interest rate borne by the Securities
shall increase by an additional one-half of one percent (0.50%)
per annum on the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective to but
excluding the day on which the Shelf Registration Statement again
becomes effective.
Each Holder of Securities, by its acceptance thereof,
agrees to be bound by the terms of the Registration Rights
Agreement relating to the Securities and the Class B Common Stock
issuable upon conversion thereof.
(14) Registration, Transfer, Exchange and Denomina-
tions. As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this
Security for registration of transfer at the office or agency of
the Company in Wilmington, Delaware, duly endorsed by, or accom-
panied by a written instrument of transfer in form satisfactory
to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Securities, of authorized denominations
and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.
The Securities are issuable only in registered form
without coupons in denominations of $50 and integral multiples
thereof. No service charge shall be made for any such registra-
tion of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith. Prior to due presentment of
this Security for registration of transfer, the Company, the
Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue,
and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary. In the event of redemption
or conversion of this Security in part only, a new Security or
Securities for the unredeemed or unconverted portion hereof will
be issued in the name of the Holder hereof upon the cancellation
hereof.
(15) Persons Deemed Owners. The registered Holder of a
Security may be treated as its owner for all purposes.
(16) Unclaimed Money. If money for the payment of
principal or interest remains unclaimed for two years, the
Trustee and the Paying Agent shall pay the money back to the
Company at its written request. After that, holders of Securi-
ties entitled to the money must look to the Company for payment
unless an abandoned property law designates another Person and
all liability of the Trustee and such Paying Agent with respect
to such money shall cease.
(17) Defaults and Remedies. The Securities shall have
the Events of Default as set forth in Section 501 of the Inden-
ture. Subject to certain limitations in the Indenture, if an
Event of Default occurs and is continuing, the Trustee by notice
to the Company or the holders of at least 25% in aggregate
principal amount of the then outstanding Securities by notice to
the Company and the Trustee may declare all the Securities to be
due and payable immediately.
The holders of a majority in aggregate principal amount
of the Securities then outstanding by written notice to the
Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if
all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely
because of the acceleration. Holders may not enforce the Inden-
ture or the Securities except as provided in the Indenture.
Subject to certain limitations, holders of a majority in aggre-
gate principal amount of the then outstanding Securities issued
under the Indenture may direct the Trustee in its exercise of any
trust or power. The Company must furnish annually compliance
certificates to the Trustee. The above description of Events of
Default and remedies is qualified in its entirety by reference
to, and subject to, the more complete description thereof con-
tained in the Indenture.
(18) Amendments, Supplements and Waivers. The Inden-
ture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obliga-
tions of the Company and the rights of the Holders of the Securi-
ties under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in aggre-
gate principal amount of the Securities at the time Outstanding.
The Indenture also contains provisions permitting the Holders of
specified percentages in aggregate principal amount of the
Securities at the time Outstanding, on behalf of the Holders of
all the Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or
waiver by the Holder of this Security shall be conclusive and
binding upon such Holder and upon all future Holders of this
Security and of any Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof, whether
or not notation of such consent or waiver is made upon this
Security.
(19) Trustee Dealings with the Company. The Trustee,
in its individual or any other capacity may become the owner or
pledgee of the Securities and may otherwise deal with the Company
or an Affiliate with the same rights it would have, as if it were
not Trustee, subject to certain limitations provided for in the
Indenture and in the TIA. Any Agent may do the same with like
rights.
(20) No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have
any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each
Holder of the Securities 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.
(21) Governing Law. THE INDENTURE AND THE SECURITIES
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.
(22) Authentication. The Securities shall not be valid
until authenticated by the manual signature of an authorized
officer of the Trustee.
(23) 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).
The Company will furnish to any Holder of the Securi-
ties upon written request and without charge a copy of the
Indenture. Request may be made to:
Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attn: General Counsel
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
- - - -----------------------------------------------------------------
(Insert assignee's social security or tax I.D. no.)
- - - -----------------------------------------------------------------
- - - -----------------------------------------------------------------
- - - -----------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________
agent to transfer this Security on the books of the Company. The
agent may substitute another to act for him.
Your Signature: ______________________________________
(Sign exactly as your name appears on
the other side of this Security)
Date: ___________________
Signature Guarantee:* ___________________________________
_________________
* Signature must be guaranteed by a commercial bank, trust
company or member firm of the New York Stock Exchange.
[Include the following if the Security bears a Restricted Securi-
ties Legend --
In connection with any transfer of any of the Securities
evidenced by this certificate, the undersigned confirms that such
Securities are being:
CHECK ONE BOX BELOW
(1) / / exchanged for the undersigned's own account
without transfer; or
(2) / / transferred pursuant to and in compliance with
Rule 144A under the Securities Act of 1933; or
(3) / / transferred pursuant to and in compliance with
Regulation S under the Securities Act of 1933; or
(4) / / transferred pursuant to another available
exemption from the registration requirements of
the Securities Act of 1933.
Unless one of the boxes is checked, the Trustee will refuse to
register any of the Securities evidenced by this certificate in
the name of any person other than the registered Holder thereof;
provided, however, that if box (3) or (4) is checked, the Trustee
may require, prior to registering any such transfer of the
Securities such legal opinions, certifications and other informa-
tion as the Company has reasonably requested to confirm that such
transfer is being made pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act of 1933, such as the exemption provided by Rule
144 under such Act.
__________________________
Signature
Signature Guarantee:*
___________________________ ___________________________]
Signature must be guaranteed Signature
_________________
* Signature must be guaranteed by a commercial bank, trust
company or member firm of the New York Stock Exchange.
- - - ----------------------------------------------------------------
[TO BE COMPLETED BY PURCHASER IF (2) 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,
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: ________________ ________________________________
NOTICE: To be executed by
an executive officer]
(TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global Security
shall be $__________. The following increases or decreases in
the principal amount of this Global Security have been made:
Amount of
increase in
Principal
Amount of
this Global Principal
Security Amount of Amount of
including decrease in this Global Signature of
upon Principal Security authorized
exercise Amount following officer
of over- of this such of Trustee
Date allotment Global decrease or
Securities
Made option Security or increase Custodian
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
ELECTION TO CONVERT
To: Continental Airlines, Inc.
The undersigned owner of this Security hereby
irrevocably exercises the option to convert this Security, or the
portion below designated, into Class B Common Stock of
CONTINENTAL AIRLINES, INC. in accordance with the terms of the
Indenture referred to in this Security, and directs that the
shares issuable and deliverable upon conversion, together with
any check in payment for fractional shares, be issued in the name
of and delivered to the undersigned, unless a different name has
been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect
thereto.
Any holder, upon the exercise of its conversion rights
in accordance with the terms of the Indenture and the Security,
agrees to be bound by the terms of the Registration Rights
Agreement relating to the Class B Common Stock issuable upon
conversion of the Securities.
Date: ____________, ____
in whole __
Portions of Security to be
converted (or integral multiples
thereof): $_________________
_______________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other
Identifying Number
________________________________________
________________________________________
________________________________________
Signature Guarantee:* __________________
________________
* Signature must be guaranteed by a commercial bank, trust
company or member firm of the New York Stock Exchange.
EXHIBIT A-2
FORM OF EXCHANGE SECURITY
[FORM OF FACE OF SECURITY]
CONTINENTAL AIRLINES, INC.
8 1/2% Convertible Subordinated
Deferrable Interest Debenture Due 2020
No._________ $___________
CUSIP No. _________
CONTINENTAL AIRLINES, INC., a corporation duly
organized and existing under the laws of the State of Delaware
(herein called "the Company", which term includes any successor
corporation under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ____________________,
or registered assigns, the principal sum [indicated on Schedule A
hereof]* [of ______ Dollars]** ($ ) on December 1,
2020.
Interest Payment Dates: March 1, June 1, September 1 and Decem-
ber 1, commencing March 1, 1996
Regular Record Dates: except as otherwise provided in the
Indenture, the close of business on the
Business Day next preceding each
Interest Payment Date
Reference is hereby made to the further provisions of
this Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
____________________
* Applicable to Global Securities only.
** Applicable to certificated Securities only.
IN WITNESS WHEREOF, the Company has caused this instru-
ment to be signed manually or by facsimile by its duly authorized
officers and a facsimile of its corporate seal to be affixed
hereto or imprinted hereon.
Dated: _________________
CONTINENTAL AIRLINES, INC.
By:________________________
Name:
Title:
[Seal]
Attest:
_______________
TRUSTEE'S CERTIFICATE
OF AUTHENTICATION
This is one of the Securities referred to in the
within-mentioned Indenture.
Dated: November 28, 1995 Wilmington Trust Company,
not in its individual
capacity but solely
as Trustee
By: _______________________
Authorized Signatory
[FORM OF REVERSE OF SECURITY]
CONTINENTAL AIRLINES, INC.
8 1/2% Convertible Subordinated
Deferrable Interest Debenture Due 2020*
(1) Interest. Continental Airlines, Inc., a Delaware
corporation (the "Company"), is the issuer of this 8 1/2%
Convertible Subordinated Deferrable Interest Debenture Due 2020
(the "Security") limited in aggregate principal amount to
$231,958,750 (or up to $266,752,600 if the overallotment option
is exercised in full), issued under the Indenture hereinafter
referred to. The Company promises to pay interest on the
Securities in cash from November 28, 1995 or from the most recent
interest payment date to which interest has been paid or duly
provided for, quarterly (subject to deferral for up to 20
consecutive quarters as described in Section 3 hereof) in arrears
on March 1, June 1, September 1 and December 1 of each year (each
such date, an "Interest Payment Date"), commencing March 1, 1996,
at the rate of 8 1/2% per annum (subject to increase as provided
in Section 13 hereto) plus Additional Interest and Liquidated
Damages, if any, until the principal hereof shall have become due
and payable.
__________________
* All terms used in this Security which are defined in the
Indenture or in the Declaration attached as Annex A thereto
shall have the meanings assigned to them in the Indenture or
the Declaration, as the case may be.
The amount of interest payable for any period will be
computed on the basis of twelve 30-day months and a 360-day year.
To the extent lawful, the Company shall pay interest (including
post-petition interest in any proceeding under any Bankruptcy
Law) on overdue installments of interest (without regard to any
applicable grace period) at the rate borne by the Securities,
compounded quarterly. Any interest paid on this Security shall
be increased to the extent necessary to pay Additional Interest
as set forth in this Security.
(2) Additional Interest. The Company shall pay to
Continental Airlines Finance Trust (and its permitted successors
or assigns under the Declaration) (the "Trust") such additional
amounts as may be necessary in order that the amount of dividends
or other distributions then due and payable by the Trust on the
Preferred Securities that at any time remain outstanding in
accordance with the terms thereof shall not be reduced as a
result of any additional taxes, duties, assessments and other
governmental charges of whatever nature (other than withholding
taxes) imposed by the United States or any other taxing
authority.
(3) Extension of Interest Payment Period. The Company
shall have the right, at any time during the term of this
Security, from time to time to defer payments of interest
(including Compounded Interest, Additional Interest and
Liquidated Damages, if any) by extending the interest payment
period of such Security for up to 20 consecutive quarters (an
"Extended Interest Payment Period"). To the extent permitted by
applicable law, interest, the payment of which has been deferred
because of the extension of the interest payment period pursuant
to Section 312 of the Indenture, will bear interest thereon at 8
1/2% compounded quarterly for each quarter of the Extended
Interest Payment Period, to the extent permitted by applicable
law ("Compounded Interest"). At the end of the Extended Interest
Payment Period, the Company shall pay all interest then accrued
and unpaid on the Securities, including any Compounded Interest
that shall be payable to the Holders of the Securities in whose
names the Securities are registered in the Security Register on
the first Regular Record Date after the end of the Extended
Interest Payment Period. Before the termination of any Extended
Interest Payment Period, the Company may further extend such
period, provided that such period together with all such further
extensions thereof shall not exceed 20 consecutive quarters.
Upon the termination of any Extended Interest Payment Period and
upon the payment of all Compounded Interest, Additional Interest
and Liquidated Damages, if any, then due, the Company may
commence a new Extended Interest Payment Period, subject to the
foregoing requirements. No interest shall be due and payable
during an Extended Interest Payment Period except at the end
thereof.
If the Property Trustee is the sole holder of the
Securities, the Company shall give the Holder of the Securities
and the Trustee notice of its selection of an Extended Interest
Payment Period at least one Business Day prior to the earlier of
(i) the Interest Payment Date or (ii) if the Preferred Securities
are listed on the New York Stock Exchange or other stock exchange
or quotation system, the date the Trust is required to give
notice to the New York Stock Exchange or other applicable self-
regulatory organization or to holders of the Preferred Securities
on the record date or the date such distributions are payable.
If the Property Trustee is not the sole holder of the
Securities, the Company shall give the Holders of these
Securities and the Trustee notice of its selection of an Extended
Interest Payment Period at least ten Business Days prior to the
earlier of (i) the Interest Payment Date or (ii) if the Preferred
Securities are listed on the New York Stock Exchange or other
stock exchange or quotation system, the date the Trust is
required to give notice to the New York Stock Exchange or other
applicable self-regulatory organization or to holders of the
Securities on the record date or the date such distributions are
payable.
The quarter in which any notice is given pursuant to
the second and third paragraphs of this Section 3 shall be
counted as one of the 20 quarters permitted in the maximum
Extended Interest Payment Period permitted under the first
paragraph of this Section 3.
(4) Method of Payment. The interest so payable, and
punctually paid or duly provided for, on any Interest Payment
Date will, as provided in the Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on the regular record date
for such interest installment, which, except as otherwise
provided in the Indenture, shall be the close of business on the
Business Day next preceding each Interest Payment Date (the
"Regular Record Date"), commencing March 1, 1996. Any such
interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name
this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities
not less than 10 days prior to such Special Record Date, or be
paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required
by such exchange, all as more fully provided in said Indenture.
Payment of the principal of and interest on this
Security will be made at the office or agency of the Company
maintained for that purpose in Wilmington, Delaware or New York,
New York, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that, at the option
of the Company, payment of interest may be made by check mailed
to the address of the Person entitled thereto as such address
shall appear in the Security Register.
(5) Paying Agent and Security Registrar. The Trustee
will act as Paying Agent, Security Registrar and Conversion
Agent. The Company may change any Paying Agent, Security
Registrar, co-registrar or Conversion Agent without prior notice.
The Company or any of its Affiliates may act in any such
capacity.
(6) Indenture. The Company issued the Securities
under an indenture, dated as of November 28, 1995 (the
"Indenture"), between the Company and Wilmington Trust Company,
not in its individual capacity but solely as Trustee (herein
called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and
immunities thereunder of the Trustee, the Company and the Holders
of the Securities, and of the terms upon which the Securities
are, and are to be, authenticated and delivered. The terms of
the Securities include those stated in the Indenture and those
made part of the Indenture by the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb) ("TIA") as in effect on the date
of the Indenture. The Securities are subject to, and qualified
by, all such terms, certain of which are summarized hereon, and
holders are referred to the Indenture and the TIA for a more
complete statement of such terms. The Securities are unsecured
general obligations of the Company limited to $231,958,750 in
aggregate principal amount (or to $266,752,600 if the
overallotment option is exercised in full) and subordinated in
right of payment to all existing and future Senior Indebtedness
of the Company. No reference herein to the Indenture and no
provision of this Security or of the Indenture shall alter or
impair the obligation of the Company, which is absolute and
unconditional, to pay the principal of and interest on this
Security when due at the times, place and rate, and in the coin
or currency, herein prescribed or to convert this Security as
provided in the Indenture.
(7) Optional Redemption. The Securities are
redeemable, in whole or in part, at the Company's option at any
time and from time to time after December 1, 1998, upon not less
than 30 or more than 60 days' notice, at the following Redemption
Prices, expressed as a percentage of the principal amount of the
Securities, if redeemed during the 12-month period beginning
December 1 of the applicable year set forth below:
Percentage of
Principal
Year Amount
1998. . . . . . . . . . . . . . . . . . 105.95%
1999. . . . . . . . . . . . . . . . . . 105.10%
2000. . . . . . . . . . . . . . . . . . 104.25%
2001. . . . . . . . . . . . . . . . . . 103.40%
2002. . . . . . . . . . . . . . . . . . 102.55%
2003. . . . . . . . . . . . . . . . . . 101.70%
2004. . . . . . . . . . . . . . . . . . 100.85%
2005 and thereafter . . . . . . . . . . 100.00%
plus, in each case, accrued and unpaid interest, including
Additional Payments, if any, to the Redemption Date (subject to
the right of holders of record on the relevant record date to
receive interest due on the Interest Payment Date). From and
after the Redemption Date, interest will cease to accrue on the
Securities, or portion thereof, called for redemption.
(8) Optional Redemption Upon Tax Event. The Securities are
subject to redemption in whole, but not in part, at the Company's
option at any time within 90 days, if a Tax Event (as defined in
the Declaration) shall occur and be continuing, at a redemption
price equal to $50 per $50 principal amount thereof plus accrued
but unpaid interest, including Additional Interest, if any, to
the Redemption Date. Any redemption pursuant to this Section 8
will be made upon not less than 30 nor more than 60 days' notice.
(9) Notice of Redemption. Notice of redemption will be
mailed at least 30 days but not more than 60 days before the
Redemption Date to each Holder of the Securities to be redeemed
at his address of record. The Securities in denominations larger
than $50 may be redeemed in part but only in integral multiples
of $50. In the event of a redemption of less than all of the
Securities, the Securities will be chosen for redemption by the
Trustee in accordance with the Indenture. On and after the
Redemption Date, interest ceases to accrue on the Securities or
portions thereof called for redemption.
If this Security is redeemed subsequent to a Regular
Record Date with respect to any Interest Payment Date specified
above and on or prior to such Interest Payment Date, then any
accrued interest will be paid to the person in whose name this
Security is registered at the close of business on such record
date.
(10) Mandatory Redemption. The Securities will mature
on December 1, 2020. There are no sinking fund payments with
respect to the Securities.
(11) Subordination. The payment of the principal of,
interest on or any other amounts due on the Securities is
subordinated and junior in right of payment to all existing and
future Senior Indebtedness (as defined below) of the Company, as
described in the Indenture. Each holder, by accepting a
Security, agrees to such subordination and authorizes and directs
the Trustee on its behalf to take such action as may be necessary
or appropriate to effectuate the subordination so provided and
appoints the Trustee as its attorney-in-fact for such purpose.
In addition, no payment of principal (including redemp-
tion payments) of, premium, if any, or interest (including any
Additional Interest, Compounded Interest or Liquidated Damages)
on the Securities may be made (i) if any payment of principal,
premium, interest or any other payment due on any Designated
Senior Indebtedness of the Company is not paid when due and any
applicable grace period with respect to such default has ended
and such default has not been cured or waived or ceased to exist,
or (ii) if the maturity of any Designated Senior Indebtedness of
the Company has been accelerated because of a default.
"Senior Indebtedness" means in respect of the Company
(i) the principal, premium, if any, and interest in respect of
(A) indebtedness of such obligor for money borrowed and (B) in-
debtedness evidenced by securities, debentures, bonds or other
similar instruments issued by such obligor, (ii) all capital
lease obligations of such obligor, (iii) all obligations of such
obligor issued or assumed as the deferred purchase price of
property, all conditional sale obligations of such obligor and
all obligations of such obligor under any title retention
agreement (but excluding trade accounts payable arising in the
ordinary course of business), (iv) all obligations of such
obligor for the reimbursement of any letter of credit, banker's
acceptance, security purchase facility or similar credit
transaction, (v) all obligations of the type referred to in
clauses (i) through (iv) above of other persons for the payment
of which such obligor is responsible or liable as obligor,
guarantor or otherwise, and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other persons
secured by any lien on any property or asset of such obligor
(whether or not such obligation is assumed by such obligor),
except for (1) any such indebtedness that is by its terms
subordinated to or pari passu with the Securities and (2) any
indebtedness between or among such obligor or its Affiliates,
including all other debt securities and guarantees in respect of
those debt securities, initially issued to any other trust, or a
trustee of such trust, partnership, or other entity affiliated
with the Company that is, directly or indirectly, a financing
vehicle of the Company (a "Financing Entity") in connection with
the issuance by such Financing Entity of preferred securities or
other securities that rank pari passu with, or junior to, such
preferred securities. Such Senior Indebtedness shall continue to
be Senior Indebtedness and be entitled to the benefits of the
subordination provisions irrespective of any amendment,
modification or waiver of any term of such Senior Indebtedness.
"Designated Senior Indebtedness" means (i) all Senior
Indebtedness of the Company outstanding from time to time under
agreements between the Company, on the one hand, and General
Electric Company, General Electric Capital Corporation, any of
their respective direct or indirect subsidiaries, or any affili-
ates (as such term is defined in Rule 12b-2 under the Exchange
Act) of any of the foregoing (each of which is a "GE Party"), or
any trust of which any GE Party is a beneficiary, on the other
hand, in effect on the original issue date of the Securities, and
any renewal, refunding, replacement or extension thereof, and
(ii) any Senior Indebtedness of the Company incurred, issued or
assumed after the original issue date of the Securities, and any
renewal, refunding, replacement or extension thereof.
(12) Conversion. The Holder of any Security has the
right, exercisable at any time prior to the close of business
(New York time) on the date of the Security's maturity, to
convert the principal amount thereof (or any portion thereof that
is an integral multiple of $50) into shares of Class B Common
Stock at the initial conversion price of 1.034 shares of Class B
Common Stock for each Security (equivalent to a conversion price
of $48.36 per share of Class B Common Stock of the Company),
subject to adjustment under certain circumstances, except that if
a Security is called for redemption, the conversion right will
terminate at the close of business on the Redemption Date.
To convert a Security, a Holder must (1) complete and
sign a conversion notice substantially in the form attached
hereto, (2) surrender the Security to a Conversion Agent, (3)
furnish appropriate endorsements or transfer documents if
required by the Security Registrar or Conversion Agent and (4)
pay any transfer or similar tax, if required. Upon conversion,
no adjustment or payment will be made for interest or dividends,
but if any Holder surrenders a Security for conversion after the
close of business on the Regular Record Date for the payment of
an installment of interest and prior to the opening of business
on the next Interest Payment Date, then, notwithstanding such
conversion, the interest payable on such Interest Payment Date
will be paid to the registered Holder of such Security on such
Regular Record Date. In such event, such Security, when
surrendered for conversion, need not be accompanied by payment of
an amount equal to the interest payable on such Interest Payment
Date on the portion so converted. The number of shares issuable
upon conversion of a Security is determined by dividing the
principal amount of the Security converted by the conversion
price in effect on the Conversion Date. No fractional shares
will be issued upon conversion but a cash adjustment will be made
for any fractional interest. The outstanding principal amount of
any Security shall be reduced by the portion of the principal
amount thereof converted into shares of Common Stock.
(13) Registration, Transfer, Exchange and
Denominations. As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this
Security is registrable in the Security Register, upon surrender
of this Security for registration of transfer at the office or
agency of the Company in New York, New York, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Securities, of authorized
denominations and for the same aggregate principal amount, will
be issued to the designated transferee or transferees.
The Securities are issuable only in registered form
without coupons in denominations of $50 and integral multiples
thereof. No service charge shall be made for any such
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Prior to
due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name this Security is
registered as the owner hereof for all purposes, whether or not
this Security be overdue, and neither the Company, the Trustee
nor any such agent shall be affected by notice to the contrary.
In the event of redemption or conversion of this Security in part
only, a new Security or Securities for the unredeemed or
unconverted portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
(14) Persons Deemed Owners. The registered Holder of a
Security may be treated as its owner for all purposes.
(15) Unclaimed Money. If money for the payment of
principal or interest remains unclaimed for two years, the
Trustee and the Paying Agent shall pay the money back to the
Company at its written request. After that, holders of
Securities entitled to the money must look to the Company for
payment unless an abandoned property law designates another
Person and all liability of the Trustee and such Paying Agent
with respect to such money shall cease.
(16) Defaults and Remedies. The Securities shall have
the Events of Default as set forth in Section 501 of the
Indenture. Subject to certain limitations in the Indenture, if
an Event of Default occurs and is continuing, the Trustee by
notice to the Company or the holders of at least 25% in aggregate
principal amount of the then outstanding Securities by notice to
the Company and the Trustee may declare all the Securities to be
due and payable immediately.
The holders of a majority in aggregate principal amount
of the Securities then outstanding by written notice to the
Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if
all existing Events of Default have been cured or waived except
nonpayment of principal or interest that has become due solely
because of the acceleration. Holders may not enforce the
Indenture or the Securities except as provided in the Indenture.
Subject to certain limitations, holders of a majority in
aggregate principal amount of the then outstanding Securities
issued under the Indenture may direct the Trustee in its exercise
of any trust or power. The Company must furnish annually
compliance certificates to the Trustee. The above description of
Events of Default and remedies is qualified in its entirety by
reference to, and subject to, the more complete description
thereof contained in the Indenture.
(17) Amendments, Supplements and Waivers. The
Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the
Securities under the Indenture at any time by the Company and the
Trustee with the consent of the Holders of a majority in
aggregate principal amount of the Securities at the time
Outstanding. The Indenture also contains provisions permitting
the Holders of specified percentages in aggregate principal
amount of the Securities at the time Outstanding, on behalf of
the Holders of all the Securities, to waive compliance by the
Company with certain provisions of the Indenture and certain past
defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be
conclusive and binding upon such Holder and upon all future
Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made
upon this Security.
(18) Trustee Dealings with the Company. The Trustee,
in its individual or any other capacity may become the owner or
pledgee of the Securities and may otherwise deal with the Company
or an Affiliate with the same rights it would have, as if it were
not Trustee, subject to certain limitations provided for in the
Indenture and in the TIA. Any Agent may do the same with like
rights.
(19) No Recourse Against Others. A director, officer,
employee or stockholder, as such, of the Company shall not have
any liability for any obligations of the Company under the
Securities or the Indenture or for any claim based on, in respect
of or by reason of such obligations or their creation. Each
Holder of the Securities 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.
(20) Governing Law. THE INDENTURE AND THE SECURITIES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAWS.
(21) Authentication. The Securities shall not be valid
until authenticated by the manual signature of an authorized
officer of the Trustee.
(22) 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).
The Company will furnish to any Holder of the
Securities upon written request and without charge a copy of the
Indenture. Request may be made to:
Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attn: General Counsel
ASSIGNMENT FORM
To assign this Security, fill in the form below:
(I) or (we) assign and transfer this Security to
_________________________________________________________________
(Insert assignee's social security or tax I.D. no.)
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________
agent to transfer this Security on the books of the Company. The
agent may substitute another to act for him.
Your Signature:_________________________________________________
(Sign exactly as your name appears on the other
side of this Security)
Date: ________________________
Signature Guarantee:* _________________________________
_____________________
* Signature must be guaranteed by a commercial bank, trust
company of member firm of the New York Stock Exchange.
(TO BE ATTACHED TO GLOBAL SECURITIES]
SCHEDULE A
The initial principal amount of this Global Security
shall be $__________. The following increases or decreases in
the principal amount of this Global Security have been made:
Amount of
increase in
Principal
Amount of
this Global Principal
Security Amount of Amount of
including decrease in this Global Signature of
upon Principal Security authorized
exercise Amount following officer
of over- of this such of Trustee
Date allotment Global decrease or
Securities
Made option Security or increase Custodian
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
_____ ____________ ____________ ____________ ____________
ELECTION TO CONVERT
To: Continental Airlines, Inc.
The undersigned owner of this Security hereby
irrevocably exercises the option to convert this Security, or the
portion below designated, into Class B Common Stock of
CONTINENTAL AIRLINES, INC. in accordance with the terms of the
Indenture referred to in this Security, and directs that the
shares issuable and deliverable upon conversion, together with
any check in payment for fractional shares, be issued in the name
of and delivered to the undersigned, unless a different name has
been indicated in the assignment below. If shares are to be
issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect
thereto.
Any holder, upon the exercise of its conversion rights
in accordance with the terms of the Indenture and the Security,
agrees to be bound by the terms of the Registration Rights
Agreement relating to the Class B Common Stock issuable upon
conversion of the Securities.
Date: ____________, ____
in whole __
Portions of Security to be
converted ($50 or integral
multiples thereof):
$_________________
_________________________________________
Signature (for conversion only)
Please Print or Typewrite Name and
Address, Including Zip Code, and
Social Security or Other
Identifying Number
________________________________________
________________________________________
________________________________________
Signature Guarantee:* __________________
_____________________
* Signature must be guaranteed by a commercial bank, trust
company of member firm of the New York Stock Exchange.
ANNEX A
AMENDED AND RESTATED
DECLARATION OF TRUST
(Filed as Exhibit 4.2 to this Registration Statement)
EXHIBIT 4.7
====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
CONTINENTAL AIRLINES, INC.
Dated as of November 28, 1995
====================================
PREFERRED SECURITIES GUARANTEE AGREEMENT
This PREFERRED SECURITIES GUARANTEE AGREEMENT
(the "Preferred Securities Guarantee"), dated as of
November 28, 1995, is executed and delivered by Conti-
nental Airlines, Inc., a Delaware corporation (the "Guar-
antor"), and Wilmington Trust Company, a Delaware banking
corporation, not in its individual capacity but solely as
trustee (the "Preferred Guarantee Trustee") for the
benefit of the Holders (as defined herein) from time to
time of the Preferred Securities (as defined herein) of
Continental Airlines Finance Trust, a Delaware statutory
business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated
Declaration of Trust (the "Declaration"), dated as of
November 28, 1995, among the trustees of the Issuer named
therein, the Guarantor, as Sponsor, and the holders from
time to time of undivided beneficial interests in the
assets of the Issuer, the Issuer is issuing on the date
hereof 4,500,000 preferred securities, having an aggre-
gate stated liquidation amount of $225,000,000, desig-
nated the 8 1/2% Convertible Trust Originated Preferred
Securities (and may issue up to an additional 675,000
Convertible Trust Originated Preferred Securities, having
an aggregate liquidation amount of $33,750,000, solely to
cover over-allotments) (collectively the "Preferred Secu-
rities");
WHEREAS, as incentive for the Holders to pur-
chase the Preferred Securities, the Guarantor desires
irrevocably and unconditionally to agree, to the extent
set forth in this Preferred Securities Guarantee, to pay
to the Holders of the Preferred Securities the Guarantee
Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein;
and
WHEREAS, the Guarantor is also executing and
delivering a common securities guarantee agreement (the
"Common Securities Guarantee") in substantially identical
terms to this Preferred Securities Guarantee for the
benefit of the holders of the Common Securities (as
defined herein), except that if an Event of Default (as
defined in the Indenture (as defined herein)) has oc-
curred and is continuing, the rights of holders of the
Common Securities to receive Guarantee Payments under the
Common Securities Guarantee are subordinated to the
rights of Holders of Preferred Securities to receive
Guarantee Payments under this Preferred Securities Guar-
antee.
NOW, THEREFORE, in consideration of the pur-
chase by each Holder of Preferred Securities, which
purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor executes and delivers this
Preferred Securities Guarantee for the benefit of the
Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.1 Definitions and Interpretation.
In this Preferred Securities Guarantee, unless
the context otherwise requires:
(a) Capitalized terms used in this Preferred
Securities Guarantee but not defined in
the preamble above have the respective
meanings assigned to them in this Section
1.1;
(b) a term defined anywhere in this Preferred
Securities Guarantee has the same meaning
throughout;
(c) all references to "the Preferred Securi-
ties Guarantee" or "this Guarantee" are to
this Preferred Securities Guarantee as
modified, supplemented or amended from
time to time;
(d) all references in this Preferred Securi-
ties Guarantee to Articles and Sections
are to Articles and Sections of this Pre-
ferred Securities Guarantee unless other-
wise specified;
(e) a term defined in the Trust Indenture Act
has the same meaning when used in this
Preferred Securities Guarantee unless
otherwise defined in this Preferred Secu-
rities Guarantee or unless the context
otherwise requires; and
(f) a reference to the singular includes the
plural and vice versa.
"Affiliate" has the same meaning as given to
that term in Rule 405 of the Securities Act of 1933, as
amended, or any successor rule thereunder.
"Common Securities" means the convertible
common securities representing common undivided benefi-
cial interests in the assets of the Issuer.
"Covered Person" means any Holder or beneficial
owner of Preferred Securities.
"Debentures" means the series of convertible
subordinated debt securities of the Guarantor designated
the 8 1/2% Convertible Subordinated Deferrable Interest
Debentures Due 2020 held by the Property Trustee of the
Issuer.
"Event of Default" means a default by the
Guarantor on any of its payment or other obligations
under this Preferred Securities Guarantee.
"Guarantee Payments" means the following pay-
ments or distributions, without duplication, with respect
to the Preferred Securities, to the extent not paid or
made by the Issuer: (i) any accrued and unpaid Distribu-
tions (as defined in the Declaration) that are required
to be paid on such Preferred Securities to the extent the
Issuer shall have funds available therefor, (ii) the
amount payable upon redemption to the extent the Issuer
has funds available therefor, with respect to any Pre-
ferred Securities called for redemption by the Issuer,
and (iii) upon a voluntary or involuntary dissolution,
winding-up or termination of the Issuer (other than in
connection with the distribution of Debentures to the
Holders in exchange for Preferred Securities as provided
in the Declaration), the lesser of (a) the aggregate of
the liquidation amount and all accrued and unpaid Distri-
butions on the Preferred Securities to the date of pay-
ment, to the extent the Issuer shall have funds available
therefor, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders upon
liquidation of the Issuer (in either case, the "Liquida-
tion Distribution"). If an event of default under the
Indenture has occurred and is continuing, the rights of
holders of the Common Securities to receive payments
under the Common Securities Guarantee are subordinated to
the rights of Holders of Preferred Securities to receive
Guarantee Payments.
"Holder" shall mean any holder, as registered
on the books and records of the Issuer of any Preferred
Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Pre-
ferred Securities have given any request, notice, consent
or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliate of the Guarantor.
"Indemnified Person" means the Preferred Guar-
antee Trustee, any Affiliate of the Preferred Guarantee
Trustee, or any officers, directors, shareholders, mem-
bers, partners, employees, representatives or agents of
the Preferred Guarantee Trustee.
"Indenture" means the Indenture dated as of
November 28, 1995, among the Guarantor (the "Debenture
Issuer") and Wilmington Trust Company, not in its indi-
vidual capacity but solely as trustee, and any indenture
supplemental thereto pursuant to which the Debentures are
to be issued to the Property Trustee of the Issuer.
"Majority in liquidation amount of the Securi-
ties" means, except as provided by the Trust Indenture
Act, Holders of Preferred Securities, voting separately
as a class, representing more than 50% of the stated
liquidation amount (including the stated amount that
would be paid on redemption, liquidation or otherwise,
plus accrued and unpaid Distributions to the date upon
which the voting percentages are determined) of all
Preferred Securities then outstanding.
"Officers' Certificate" means, with respect to
any Person, a certificate signed by two Authorized Offi-
cers of such Person. Any Officers' Certificate delivered
with respect to compliance with a condition or covenant
provided for in this Preferred Securities Guarantee shall
include:
(a) a statement that each officer signing the
Certificate has read the covenant or condition and the
definition relating thereto;
(b) a brief statement of the nature and scope
of the examination or investigation undertaken by each
officer in rendering the Certificate;
(c) a statement that each such officer has
made such examination or investigation as, in such offic-
er's opinion, is necessary to enable such officer to
express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(d) a statement as to whether, in the opinion
of each such officer, such condition or covenant has been
complied with.
"Person" means a legal person, including any
individual, corporation, estate, partnership, joint
venture, association, joint stock company, limited lia-
bility company, trust, unincorporated association, or
government or any agency or political subdivision there-
of, or any other entity of whatever nature.
"Preferred Guarantee Trustee" means Wilmington
Trust Company not in its individual capacity but solely
as trustee until a Successor Preferred Guarantee Trustee
has been appointed and has accepted such appointment
pursuant to the terms of this Preferred Securities Guar-
antee and thereafter means each such Successor Preferred
Guarantee Trustee.
"Responsible Officer" means, with respect to
the Preferred Guarantee Trustee, the chairman of the
board of directors, the president, any vice-president,
any assistant vice-president, the secretary, any assis-
tant secretary, the treasurer, any assistant treasurer,
any trust officer or assistant trust officer or any other
officer of the Preferred Guarantee Trustee customarily
performing functions similar to those performed by any of
the above designated officers and also means, with re-
spect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particu-
lar subject.
"Successor Preferred Guarantee Trustee" means a
successor Preferred Guarantee Trustee possessing the
qualifications to act as Preferred Guarantee Trustee
under Section 4.1.
"Trust Indenture Act" means the Trust Indenture
Act of 1939, as amended.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.1 Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee is
subject to the provisions of the Trust Indenture Act that
are required to be part of this Preferred Securities
Guarantee, which are incorporated by reference herein,
and shall, to the extent applicable, be governed by such
provisions; and
(b) if and to the extent that any provision of
this Preferred Securities Guarantee limits, qualifies or
conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed
duties shall control.
SECTION 2.2 Lists of Holders of Securities.
(a) The Guarantor shall provide the Preferred
Guarantee Trustee (i) within 14 days after January 1 and
June 30 of each year, a list, in such form as the Pre-
ferred Guarantee Trustee may reasonably require, of the
names and addresses of the Holders of the Preferred
Securities ("List of Holders") as of such date, provided
that the Guarantor shall not be obligated to provide such
List of Holders at any time the List of Holders does not
differ from the most recent List of Holders given to the
Preferred Guarantee Trustee by the Guarantor, and (ii) at
any other time, within 30 days of receipt by the Guar-
antor of a written request for a List of Holders as of a
date no more than 14 days before such List of Holders is
given to the Preferred Guarantee Trustee. The Preferred
Guarantee Trustee may destroy any List of Holders previ-
ously given to it on receipt of a new List of Holders.
(b) The Preferred Guarantee Trustee shall
comply with its obligations under Sections 311(a), 311(b)
and 312(b) of the Trust Indenture Act.
SECTION 2.3 Reports by the Preferred
Guarantee Trustee.
Within 60 days after May 15 of each year, the
Preferred Guarantee Trustee shall provide to the Holders
of the Preferred Securities such reports as are required
by Section 313 of the Trust Indenture Act, if any, in the
form and in the manner provided by Section 313 of the
Trust Indenture Act. The Preferred Guarantee Trustee
shall also comply with the requirements of Section 313(d)
of the Trust Indenture Act.
SECTION 2.4 Periodic Reports to Preferred
Guarantee Trustee.
The Guarantor shall provide to the Preferred
Guarantee Trustee such documents, reports and information
(if any) and the compliance certificate required by
Section 314 of the Trust Indenture Act in the form, in
the manner and at the times required by Section 314 of
the Trust Indenture Act.
SECTION 2.5 Evidence of Compliance with
Conditions Precedent.
The Guarantor shall provide to the Preferred
Guarantee Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Pre-
ferred Securities Guarantee which relate to any of the
matters set forth in Section 314(c) of the Trust Inden-
ture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) of the
Trust Indenture Act may be given in the form of an Offic-
ers' Certificate.
SECTION 2.6 Events of Default; Waiver.
The Holders of a Majority in liquidation amount
of Preferred Securities may, by vote, on behalf of the
Holders of all of the Preferred Securities, waive any
past Event of Default and its consequences. Upon such
waiver, any such Event of Default shall cease to exist,
and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this
Preferred Securities Guarantee, but no such waiver shall
extend to any subsequent or other default or Event of
Default or impair any right consequent thereon.
SECTION 2.7 Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall,
within 90 days after the occurrence of an Event of De-
fault, transmit by mail, first class postage prepaid, to
the Holders of the Preferred Securities, notices of all
Events of Default known to the Preferred Guarantee Trust-
ee, unless such defaults have been cured before the
giving of such notice, provided, that the Preferred
Guarantee Trustee shall be protected in withholding such
notice if and so long as the board of directors, the
executive committee, or a trust committee of directors
and/or Responsible Officers of the Preferred Guarantee
Trustee in good faith determines that the withholding of
such notice is in the interests of the Holders of the
Preferred Securities.
(b) The Preferred Guarantee Trustee shall not
be deemed to have knowledge of any Event of Default
except any Event of Default as to which the Preferred
Guarantee Trustee shall have received written notice or a
Responsible Officer charged with the administration of
the Declaration shall have obtained written notice.
SECTION 2.8 Conflicting Interests.
The Declaration shall be deemed to be specifi-
cally described in this Preferred Securities Guarantee
for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF
PREFERRED GUARANTEE TRUSTEE
SECTION 3.1 Powers and Duties of the
Preferred Guarantee Trustee.
(a) This Preferred Securities Guarantee shall
be held by the Preferred Guarantee Trustee for the bene-
fit of the Holders of the Preferred Securities, and the
Preferred Guarantee Trustee shall not transfer this
Preferred Securities Guarantee to any Person except a
Holder of Preferred Securities exercising his or her
rights pursuant to Section 5.4(b) or to a Successor
Preferred Guarantee Trustee on acceptance by such Succes-
sor Preferred Guarantee Trustee of its appointment to act
as Successor Preferred Guarantee Trustee. The right,
title and interest of the Preferred Guarantee Trustee
shall automatically vest in any Successor Preferred
Guarantee Trustee, and such vesting and cessation of
title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to
the appointment of such Successor Preferred Guarantee
Trustee.
(b) If an Event of Default has occurred and is
continuing, the Preferred Guarantee Trustee shall enforce
this Preferred Securities Guarantee for the benefit of
the Holders of the Preferred Securities.
(c) The Preferred Guarantee Trustee, before
the occurrence of any Event of Default and after the
curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are spe-
cifically set forth in this Preferred Securities Guaran-
tee, and no implied covenants shall be read into this
Preferred Securities Guarantee against the Preferred
Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to
Section 2.6), the Preferred Guarantee Trustee shall
exercise such of the rights and powers vested in it by
this Preferred Securities Guarantee, and use the same
degree of care and skill in its exercise thereof, as a
prudent person would exercise or use under the circum-
stances in the conduct of his or her own affairs.
(d) No provision of this Preferred Securities
Guarantee shall be construed to relieve the Preferred
Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) prior to the occurrence of any
Event of Default and after the curing or waiv-
ing of all such Events of Default that may have
occurred:
(A) the duties and obligations
of the Preferred Guarantee Trustee shall be
determined solely by the express provisions of
this Preferred Securities Guarantee, and the
Preferred Guarantee Trustee shall not be liable
except for the performance of such duties and
obligations as are specifically set forth in
this Preferred Securities Guarantee, and no
implied covenants or obligations shall be read
into this Preferred Securities Guarantee
against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith
on the part of the Preferred Guarantee Trustee,
the Preferred Guarantee Trustee may conclusive-
ly rely, as to the truth of the statements and
the correctness of the opinions expressed ther-
ein, upon any certificates or opinions fur-
nished to the Preferred Guarantee Trustee and
conforming to the requirements of this Preferr-
ed Securities Guarantee; but in the case of any
such certificates or opinions that by any pro-
vision hereof are specifically required to be
furnished to the Preferred Guarantee Trustee,
the Preferred Guarantee Trustee shall be under
a duty to examine the same to determine whether
or not they conform to the requirements of this
Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee
shall not be liable for any error of judgment
made in good faith by a Responsible Officer of
the Preferred Guarantee Trustee, unless it
shall be proved that the Preferred Guarantee
Trustee was negligent in ascertaining the per-
tinent facts upon which such judgment was made;
(iii) the Preferred Guarantee Trustee
shall not be liable with respect to any action
taken or omitted to be taken by it in good
faith in accordance with the direction of the
Holders of not less than a Majority in liquida-
tion amount of the Preferred Securities at the
time outstanding, relating to the time, method
and place of conducting any proceeding for any
remedy available to the Preferred Guarantee
Trustee, or exercising any trust or power con-
ferred upon the Preferred Guarantee Trustee
under this Preferred Securities Guarantee; and
(iv) no provision of this Preferred
Securities Guarantee shall require the Pre-
ferred Guarantee Trustee to expend or risk its
own funds or otherwise incur personal financial
liability in the performance of any of its
duties or in the exercise of any of its rights
or powers, if the Preferred Guarantee Trustee
shall have reasonable grounds for believing
that the repayment of such funds or liability
is not reasonably assured to it under the terms
of this Preferred Securities Guarantee or ade-
quate indemnity against such risk or liability
is not reasonably assured to it.
SECTION 3.2 Certain Rights of Preferred
Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee
may rely and shall be fully protected in acting
or refraining from acting upon any resolution,
certificate, statement, instrument, opinion,
report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of
indebtedness or other paper or document be-
lieved by it to be genuine and to have been
signed, sent or presented by the proper party
or parties;
(ii) any direction or act of the
Preferred Securities Guarantor contemplated by
this Preferred Securities Guarantee shall be
sufficiently evidenced by an Officers' Certifi-
cate;
(iii) whenever, in the administration
of this Preferred Securities Guarantee, the
Preferred Guarantee Trustee shall deem it de-
sirable that a matter be proved or established
before taking, suffering or omitting any action
hereunder, the Preferred Guarantee Trustee
(unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on
its part, request and rely upon an Officers'
Certificate which, upon receipt of such re-
quest, shall be promptly delivered by the Guar-
antor;
(iv) the Preferred Guarantee Trustee
shall have no duty to see to any recording,
filing or registration of any instrument (or
any rerecording, refiling or re-registration
thereof);
(v) the Preferred Guarantee Trustee
may consult with counsel, and the written ad-
vice or opinion of such counsel with respect to
legal matters shall be full and complete autho-
rization and protection in respect of any ac-
tion taken, suffered or omitted by it hereunder
in good faith and in accordance with such ad-
vice or opinion. Such counsel may be counsel
to the Guarantor or any of its Affiliates and
may include any of the Guarantor's employees.
The Preferred Guarantee Trustee shall have the
right at any time to seek instructions concern-
ing the administration of this Guarantee Agree-
ment from any court of competent jurisdiction;
(vi) the Preferred Guarantee Trustee
shall be under no obligation to exercise any of
the rights or powers vested in it by this Pre-
ferred Securities Guarantee at the request or
direction of any Holder, unless such Holder
shall have provided to the Preferred Guarantee
Trustee such adequate security and indemnity as
would satisfy a reasonable person in the posi-
tion of the Preferred Guarantee Trustee,
against the costs, expenses (including
attorneys' fees and expenses) and liabilities
that might be incurred by it in complying with
such request or direction, including such
reasonable advances as may be requested by the
Preferred Guarantee Trustee; provided, that
nothing contained in this Section 3.2(a)(vi)
shall be taken to relieve the Preferred
Guarantee Trustee, upon the occurrence of an
Event of Default, of its obligation to exercise
the rights and powers vested in it by this
Preferred Securities Guarantee;
(vii) the Preferred Guarantee Trustee
shall not be bound to make any investigation
into the facts or matters stated in any resolu-
tion, certificate, statement, instrument, opin-
ion, report, notice, request, direction, con-
sent, order, bond, debenture, note, other evi-
dence of indebtedness or other paper or docu-
ment, but the Preferred Guarantee Trustee, in
its discretion, may make such further inquiry
or investigation into such facts or matters as
it may see fit;
(viii) the Preferred Guarantee Trustee
may execute any of the trusts or powers here-
under or perform any duties hereunder either
directly or by or through agents or attorneys,
and the Preferred Guarantee Trustee shall not
be responsible for any misconduct or negligence
on the part of any agent or attorney appointed
with due care by it hereunder;
(ix) any action taken by the Pre-
ferred Guarantee Trustee or its agents hereun-
der shall bind the Holders of the Preferred
Securities, and the signature of the Preferred
Guarantee Trustee or its agent alone shall be
sufficient and effective to perform any such
action. No third party shall be required to
inquire as to the authority of the Preferred
Guarantee Trustee to so act or as to its com-
pliance with any of the terms and provisions of
this Preferred Securities Guarantee, both of
which shall be conclusively evidenced by the
Preferred Guarantee Trustee's or its agent's
taking such action; and
(x) whenever in the administration
of this Preferred Securities Guarantee the Pre-
ferred Guarantee Trustee shall deem it desir-
able to receive instructions with respect to
enforcing any remedy or right or taking any
other action hereunder, the Preferred Guarantee
Trustee (i) may request instructions from the
Holders of the Preferred Securities or the
Guarantor, (ii) may refrain from enforcing such
remedy or right or taking such other action
until such instructions are received, and (iii)
shall be protected in acting in accordance with
such instructions.
(b) No provision of this Preferred Securities
Guarantee shall be deemed to impose any duty or obliga-
tion on the Preferred Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obliga-
tion conferred or imposed on it, in any jurisdiction in
which it shall be illegal, or in which the Preferred
Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act
or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available
to the Preferred Guarantee Trustee shall be construed to
be a duty.
SECTION 3.3. Not Responsible for Recitals
or Issuance of Guarantee.
The recitals contained in this Preferred Secu-
rities Guarantee shall be taken as the statements of the
Guarantor, and the Preferred Guarantee Trustee does not
assume any responsibility for their correctness. The
Preferred Guarantee Trustee makes no representations as
to the validity or sufficiency of this Preferred Securi-
ties Guarantee.
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION 4.1 Preferred Guarantee Trustee; Eligibility.
(a) There shall at all times be a Preferred
Guarantee Trustee which shall:
(i) not be an Affiliate of the Guar-
antor; and
(ii) be a corporation organized and
doing business under the laws of the United
States of America or any State or Territory
thereof or of the District of Columbia, or a
corporation or Person permitted by the Secu-
rities and Exchange Commission to act as an
institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise
corporate trust powers, having a combined capi-
tal and surplus of at least 50 million U.S.
dollars ($50,000,000), and subject to supervi-
sion or examination by Federal, State, Territo-
rial or District of Columbia authority. If
such corporation publishes reports of condition
at least annually, pursuant to law or to the
requirements of the supervising or examining
authority referred to above, then, for the
purposes of this Section 4.1(a)(ii), the com-
bined capital and surplus of such corporation
shall be deemed to be its combined capital and
surplus as set forth in its most recent report
of condition so published.
(b) If at any time the Preferred Guarantee
Trustee shall cease to be eligible to so act under Sec-
tion 4.1(a), the Preferred Guarantee Trustee shall imme-
diately resign in the manner and with the effect set out
in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or
shall acquire any "conflicting interest" within the
meaning of Section 310(b) of the Trust Indenture Act, the
Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.
SECTION 4.2 Appointment, Removal and Resignation
of Preferred Guarantee Trustee.
(a) Subject to Section 4.2(b), the Preferred
Guarantee Trustee may be appointed or removed without
cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not
be removed in accordance with Section 4.2(a) until a
Successor Preferred Guarantee Trustee has been appointed
and has accepted such appointment by written instrument
executed by such Successor Preferred Guarantee Trustee
and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed
to office shall hold office until a Successor Preferred
Guarantee Trustee shall have been appointed or until its
removal or resignation. The Preferred Guarantee Trustee
may resign from office (without need for prior or subse-
quent accounting) by an instrument in writing executed by
the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until
a Successor Preferred Guarantee Trustee has been appoint-
ed and has accepted such appointment by instrument in
writing executed by such Successor Preferred Guarantee
Trustee and delivered to the Guarantor and the resigning
Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trust-
ee shall have been appointed and accepted appointment as
provided in this Section 4.2 within 60 days after deliv-
ery to the Guarantor of an instrument of resignation, the
resigning Preferred Guarantee Trustee may petition any
court of competent jurisdiction for such appointment of a
Successor Preferred Guarantee Trustee. Such court may
thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Preferred Guarantee
Trustee.
ARTICLE V
GUARANTEE
SECTION 5.1 Guarantee.
The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Pay-
ments (without duplication of amounts theretofore paid by
the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have
or assert. The Guarantor's obligation to make a Guaran-
tee Payment may be satisfied by direct payment of the re-
quired amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders.
SECTION 5.2 Subordination.
If an Event of Default (as defined in the
Indenture), has occurred and is continuing, the rights of
Holders of the Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subor-
dinated to the rights of Holders of Preferred Securities
to receive Guarantee Payments under this Preferred Secu-
rities Guarantee.
SECTION 5.3 Waiver of Notice and Demand.
The Guarantor hereby waives notice of accep-
tance of this Preferred Securities Guarantee and of any
liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding
first against the Issuer or any other Person before
proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and
all other notices and demands.
SECTION 5.4 Obligations Not Affected.
The obligations, covenants, agreements and
duties of the Guarantor under this Preferred Securities
Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law
or otherwise, of the performance or observance by the
Issuer of any express or implied agreement, covenant,
term or condition relating to the Preferred Securities to
be performed or observed by the Issuer;
(b) the extension of time for the payment by
the Issuer of all or any portion of the Distributions,
the amount payable upon redemption, Liquidation Distribu-
tion or any other sums payable under the terms of the
Preferred Securities or the extension of time for the
performance of any other obligation under, arising out
of, or in connection with, the Preferred Securities
(other than an extension of time for payment of Distribu-
tions, the amount payable upon redemption, Liquidation
Distribution or other sum payable that results from the
extension of any interest payment period on the Deben-
tures permitted by the Indenture);
(c) any failure, omission, delay or lack of
diligence on the part of the Holders to enforce, assert
or exercise any right, privilege, power or remedy con-
ferred on the Holders pursuant to the terms of the Pre-
ferred Securities, or any action on the part of the
Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation,
dissolution, sale of any collateral, receivership, insol-
vency, bankruptcy, assignment for the benefit of credi-
tors, reorganization, arrangement, composition or read-
justment of debt of, or other similar proceedings affect-
ing, the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency
in the Preferred Securities;
(f) the settlement or compromise of any obli-
gation guaranteed hereby or hereby incurred; or
(g) any other circumstance whatsoever that
might otherwise constitute a legal or equitable discharge
or defense of a guarantor, it being the intent of this
Section 5.4 that the obligations of the Guarantor hereun-
der shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders or
any other Person to give notice to, or obtain consent of,
the Guarantor with respect to the happening of any of the
foregoing.
SECTION 5.5 Rights of Holders.
(a) The Holders of a Majority in liquidation
amount of the Preferred Securities have the right to
direct the time, method and place of conducting any
proceeding for any remedy available to the Preferred
Guarantee Trustee in respect of this Preferred Securities
Guarantee or exercising any trust or power conferred upon
the Preferred Guarantee Trustee under this Preferred
Securities Guarantee.
(b) If the Preferred Guarantee Trustee fails
to enforce this Preferred Securities Guarantee, any
Holder of Preferred Securities may institute a legal
proceeding directly against the Guarantor to enforce the
Preferred Guarantee Trustee's rights under this Preferred
Securities Guarantee, without first instituting a legal
proceeding against the Issuer, the Preferred Guarantee
Trustee or any other Person.
SECTION 5.6 Guarantee of Payment.
This Preferred Securities Guarantee creates a
guarantee of payment and not of collection.
SECTION 5.7 Subrogation.
The Guarantor shall be subrogated to all (if
any) rights of the Holders of Preferred Securities
against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities
Guarantee; provided, however, that the Guarantor shall
not (except to the extent required by mandatory provi-
sions of law) be entitled to enforce or exercise any
right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Preferred Securities
Guarantee, if, at the time of any such payment, any
amounts are due and unpaid under this Preferred Securi-
ties Guarantee. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the
Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.
SECTION 5.8 Independent Obligations.
The Guarantor acknowledges that its obligations
hereunder are independent of the obligations of the
Issuer with respect to the Preferred Securities, and that
the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the
terms of this Preferred Securities Guarantee notwith-
standing the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 5.4
hereof.
SECTION 5.9 Conversion.
The Guarantor acknowledges its obligation to
issue and deliver shares of its Class B common stock,
$.01 par value per share, upon the conversion of the
Preferred Securities.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.1 Limitation of Transactions.
So long as any Preferred Securities remain
outstanding, if there shall have occurred an Event of
Default, an event that, with the giving of notice or the
lapse of time or both, would constitute an Event of
Default under the Indenture or a selection by the
Guarantor of an Extended Interest Payment Period as
provided in the Indenture and such period, or any exten-
sion thereof, shall be continuing, then the Guarantor
shall not (a) declare or pay any dividend on, or make any
distribution with respect to, or redeem, purchase or ac-
quire, or make a liquidation payment with respect to, any
of its capital stock, except for dividends or
distributions in shares of the Guarantor's capital stock
of the same class as that on which such dividend or
distribution is being paid and conversions or exchanges
of common stock of one class into common stock of another
class, or (b) make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Guarantor that rank pari
passu with or junior to the Debentures (except by
conversion into or exchange for shares of its capital
stock and except for a redemption, purchase or other
acquisition of shares of its capital stock made for the
purpose of an employee incentive plan or benefit plan of
the Guarantor or any of its subsidiaries).
SECTION 6.2 Ranking.
This Preferred Securities Guarantee will con-
stitute an unsecured obligation of the Guarantor and will
rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor, except any lia-
bilities that may be made pari passu expressly by their
terms, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by the Guar-
antor, which, as of the date hereof, is limited to the
Series A 12% Cumulative Preferred Stock of the Guarantor,
and with any guarantee now or hereafter entered into by
the Guarantor in respect of any preferred or preference
stock or Preferred Security of any Affiliate of the Guar-
antor, and (iii) senior to all classes of the Guarantor's
common stock.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination.
This Preferred Securities Guarantee shall
terminate as to each Holder upon (i) full payment of the
amount payable upon redemption of such holder's Preferred
Securities, (ii) the distribution of the Guarantor's
Class B common stock to such Holder in respect of the
conversion of such Holder's Preferred Securities into the
Guarantor's Class B common stock or (iii) the distribu-
tion of the Debentures to the Holders of all of the
Preferred Securities, and will terminate completely upon
full payment of the amounts payable in accordance with
the Declaration upon liquidation of the Issuer. Notwith-
standing the foregoing, this Preferred Securities Guaran-
tee will continue to be effective or will be reinstated,
as the case may be, if at any time any Holder of Pre-
ferred Securities must restore payment of any sums paid
under the Preferred Securities or under this Preferred
Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1 Exculpation.
(a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the
Guarantor or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed
or omitted by such Indemnified Person in good faith in
accordance with this Preferred Securities Guarantee and
in a manner that such Indemnified Person reasonably
believed to be within the scope of the authority con-
ferred on such Indemnified Person by this Preferred
Securities Guarantee or by law, except that an Indemni-
fied Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's
negligence or willful misconduct with respect to such
acts or omissions.
(b) An Indemnified Person shall be fully
protected in relying in good faith upon the records of
the Guarantor and upon such information, opinions, re-
ports or statements presented to the Guarantor by any
Person as to matters the Indemnified Person reasonably
believes are within such other Person's professional or
expert competence and who has been selected with reason-
able care by or on behalf of the Guarantor, including
information, opinions, reports or statements as to the
value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of
Preferred Securities might properly be paid.
SECTION 8.2 Indemnification.
(a) To the fullest extent permitted by appli-
cable law, the Guarantor shall indemnify and hold harm-
less each Indemnified Person from and against any loss,
damage or claim incurred by such Indemnified Person by
reason of any act or omission performed or omitted by
such Indemnified Person in good faith in accordance with
this Preferred Securities Guarantee and in a manner such
Indemnified Person reasonably believed to be within the
scope of authority conferred on such Indemnified Person
in accordance with this Preferred Securities Guarantee,
except that no Indemnified Person shall be entitled to be
indemnified in respect of any loss, damage or claim
incurred by such Indemnified Person by reason of negli-
gence or willful misconduct with respect to such acts or
omissions.
(b) To the fullest extent permitted by appli-
cable law, expenses (including legal fees and expenses)
incurred by an Indemnified Person in defending any claim,
demand, action, suit or proceeding shall, from time to
time, be advanced by the Guarantor prior to the final
disposition of such claim, demand, action, suit or pro-
ceeding upon receipt by the Guarantor of an undertaking
by or on behalf of the Indemnified Person to repay such
amount if it shall be determined that the Indemnified
Person is not entitled to be indemnified as authorized in
Section 8.2(a).
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Successors and Assigns.
All guarantees and agreements contained in this
Preferred Securities Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the
Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in
connection with any permitted merger or consolidation of
the Guarantor with or into another entity or any permit-
ted sale, transfer or lease of the Guarantor's assets to
another entity, the Guarantor may not assign its rights
or delegate its obligations under the Preferred Securi-
ties Guarantee without the prior approval of the Holders
of at least 66-2/3% of the aggregate stated liquidation
amount of the Preferred Securities then outstanding.
SECTION 9.2 Amendments.
Except with respect to any changes that do not
adversely affect the rights of Holders (in which case no
consent of Holders will be required), this Preferred
Securities Guarantee may only be amended with the prior
approval of the Holders of at least 66-2/3% in aggregate
stated liquidation amount of all the outstanding Pre-
ferred Securities. The provisions of Section 12.2 of the
Declaration with respect to meetings of Holders of the
Securities apply to the giving of such approval.
SECTION 9.3 Notices.
All notices provided for in this Preferred
Securities Guarantee shall be in writing, duly signed by
the party giving such notice, and shall be delivered,
telecopied or mailed by registered or certified mail, as
follows:
(a) If given to the Preferred Guarantee Trust-
ee, at the Preferred Guarantee Trustee's mailing address
set forth below (or such other address as the Preferred
Guarantee Trustee may give notice of to the Holders of
the Preferred Securities):
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
(b) If given to the Guarantor, at the Guarant-
or's mailing address set forth below (or such other
address as the Guarantor may give notice of to the Hold-
ers of the Preferred Securities):
Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Attention: General Counsel
(c) If given to any Holder of Preferred Secu-
rities, at the address set forth on the books and records
of the Issuer.
All such notices shall be deemed to have been
given when received in person, telecopied with receipt
confirmed, or mailed by first class mail, postage prepaid
except that if a notice or other document is refused
delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or
other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 9.4 Benefit.
This Preferred Securities Guarantee is solely
for the benefit of the Holders of the Preferred Securi-
ties and, subject to Section 3.1(a), is not separately
transferable from the Preferred Securities.
SECTION 9.5 Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS.
THIS PREFERRED SECURITIES GUARANTEE is executed
as of the day and year first above written.
CONTINENTAL AIRLINES,
INC.,
as Guarantor
By:______________________
Name:
Title:
Wilmington Trust Company,
not in its individual
capacity but solely as
Preferred Guarantee Trustee
By:______________________
Name:
Title:
EXHIBIT 10.1
CONTINENTAL AIRLINES FINANCE TRUST
8>% Convertible Trust Originated Preferred Securitiessm
("Convertible TOPrSsm")
guaranteed by and convertible into shares of
Class B Common Stock of Continental Airlines, Inc.
REGISTRATION RIGHTS AGREEMENT
November 28, 1995
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
SMITH BARNEY INC.
As representatives of the several Initial Purchasers
c/o MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
Continental Airlines Finance Trust, a statutory
business trust formed under the laws of the State of Delaware
(the "Trust") by Continental Airlines, Inc., a Delaware
corporation ("Continental"), proposes to issue and sell to the
Initial Purchasers named in the Purchase Agreement referred to
below (the "Initial Purchasers"), for whom Merrill Lynch,
Pierce, Fenner & Smith Incorporated, CS First Boston
Corporation, Donaldson, Lufkin & Jenrette Securities
Corporation and Smith Barney Inc. are acting as representatives
_____________________
sm "Convertible Trust Originated Preferred Securities" and
"Convertible TOPrSsm" are service marks of Merrill Lynch &
Co. Inc.
(the "Representatives"), upon the terms set forth in a purchase
agreement dated November 21, 1995 (the "Purchase Agreement"),
among the Initial Purchasers, Continental and the Trust, 8>%
Convertible Trust Originated Preferred Securitiessm
(liquidation amount $50 per Convertible Trust Originated
Preferred Securitysm) (the "Preferred Securities"). As an
inducement to the Initial Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations
of the Initial Purchasers thereunder, the Trust and Continental
agree with you, (i) for the benefit of the Initial Purchasers
and (ii) for the benefit of the holders from time to time of
the Preferred Securities, the 8>% Convertible Subordinated
Deferrable Interest Debentures Due 2020 (the "Debentures") and
the Class B Common Stock, par value $0.01 per share (the
"Class B Common Stock"), of Continental initially issuable upon
conversion of the Preferred Securities or the Debentures
(collectively, together with the Guarantee of Continental of
the Preferred Securities, the "Registrable Securities"),
including the Initial Purchasers (each of the foregoing a
"Holder" and together the "Holders"), as follows:
1. DEFINITIONS. Capitalized terms used herein
without definition shall have their respective meanings set
forth in or pursuant to the Purchase Agreement or the
Confidential Offering Memorandum dated November 21, 1995, in
respect of the Preferred Securities. As used in this
Agreement, the following capitalized defined terms shall have
the following meanings:
"Act" or "Securities Act" means the Securities Act of
1933, as amended.
"Affiliate" of any specified person means any other
person which, directly or indirectly, is in control of, is
controlled by, or is under common control with such specified
person. For purposes of this definition, control of a person
means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Commission" means the Securities and Exchange
Commission.
"DTC" means The Depository Trust Company.
"Effectiveness Period" has the meaning set forth in
Section 2(b) hereof.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Managing Underwriters" means the investment banker
or investment bankers and manager or managers that shall
administer an underwritten offering, if any, as set forth in
Section 6 hereof.
"Person" shall mean an individual, partnership,
corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Prospectus" means the prospectus included in any
Shelf Registration Statement (including, without limitation, a
prospectus that discloses information previously omitted from a
prospectus filed as part of an effective registration statement
in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable
Securities.
"Shelf Registration" means a registration effected
pursuant to Section 2 hereof.
"Shelf Registration Statement" means a "shelf"
registration statement of the Trust and Continental pursuant to
the provisions of Section 2 hereof filed with the Commission
which covers some or all of the Registrable Securities, as
applicable, on an appropriate form under Rule 415 under the
Act, or any similar rule that may be adopted by the Commission,
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.
"underwriter" means any underwriter of Registrable
Securities in connection with an offering thereof under a Shelf
Registration Statement.
2. SHELF REGISTRATION. (a) The Trust and
Continental shall, within 180 days following the date of
original issuance (the "Issue Date") of the Preferred
Securities, file with the Commission 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 such Holders and set
forth in such Shelf Registration Statement and, thereafter,
shall each use its best efforts to cause such Shelf
Registration Statement to be declared effective under the Act
within 60 calendar days after the date of filing of such Shelf
Registration Statement; provided, however, that no Holder shall
be entitled to have the Registrable Securities held by it
covered by such Shelf Registration unless such Holder is in
compliance with Section 3(m) hereof.
(b) The Trust and Continental shall each use its
best efforts (i) to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus
forming part thereof to be usable by Holders for a period of
three years from the date the Shelf Registration Statement is
declared effective or such shorter period that will terminate
upon the earlier of the following: (A) when all the Preferred
Securities covered by the Shelf Registration Statement have
been sold pursuant to the Shelf Registration Statement,
(B) when all Debentures issued to Holders in respect of
Preferred Securities that had not been sold pursuant to the
Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement, (C) when all shares of Class B
Common Stock issued upon conversion of any such Preferred
Securities or any such Debentures that had not been sold
pursuant to the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement and (D) when, in
the written opinion of counsel to the Trust and Continental,
all outstanding Registrable Securities held by persons that are
not affiliates of the Trust or Continental may be resold
without registration under the Act pursuant to Rule 144(k)
under the Act or any successor provision thereto (in any such
case, such period being called the "Effectiveness Period") and
(ii) after the effectiveness of the Shelf Registration
Statement, promptly upon the request of any Holder to take any
action reasonably necessary to register the sale of any
Registrable Securities of such Holder and to identify such
Holder as a selling securityholder. The Trust and Continental
shall be deemed not to have used their best efforts to keep the
Shelf Registration Statement effective during the requisite
period if either the Trust or Continental voluntarily takes any
action that would result in Holders of Registrable Securities
covered thereby not being able to offer and sell any such
Registrable Securities during that period, unless (i) such
action is required by applicable law, (ii) upon the occurrence
of any event contemplated by paragraph 3(c)(2)(iii) below, and
such action is taken by the Trust or Continental in good faith
and for valid business reasons or (iii) the continued
effectiveness of the Shelf Registration Statement would require
Continental to disclose a material financing, acquisition or
other corporate transaction, and the Board of Directors shall
have determined in good faith that such disclosure is not in
the best interests of Continental and its stockholders, and, in
the case of clause (i) or (ii) above, the Trust and Continental
thereafter promptly comply with the requirements of paragraph
3(i) below.
3. REGISTRATION PROCEDURES. In connection with
any
Shelf Registration Statement, the following provisions shall
apply:
(a) The Trust and Continental shall furnish to the
Initial Purchasers, prior to the filing thereof with the
Commission, a copy of any Shelf Registration Statement,
and each amendment thereof and each amendment or
supplement, if any, to the Prospectus included therein and
shall each use its best efforts to reflect in each such
document, when so filed with the Commission, such comments
as the Initial Purchasers reasonably may propose.
(b) The Trust and Continental shall take such action
as may be necessary so that (i) any Shelf Registration
Statement and any amendment thereto and any Prospectus
forming part thereof and any amendment or supplement
thereto (and each report or other document incorporated
therein by reference in each case) complies in all
material respects with the Securities Act and the Exchange
Act and the respective 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 amendment or supplement to
such Prospectus, 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.
(c) (1) Continental shall advise the Initial
Purchasers and, in the case of clause (i), the Holders
and, if requested by the Initial Purchasers or any such
Holder, confirm such advice in writing:
(i) when a Shelf Registration Statement and
any
amendment thereto has been filed with the Commission
and when the Shelf Registration Statement or any
post-effective amendment thereto has become
effective; and
(ii) of any request by the Commission for
amendments or supplements to the Shelf Registration
Statement or the Prospectus included therein or for
additional information.
(2) Continental shall advise the Initial Purchasers
and the Holders and, if requested by the Initial
Purchasers or any such Holder, confirm such advice in
writing of:
(i) the issuance by the Commission of any
stop
order suspending effectiveness of the Shelf
Registration Statement or the initiation of any
proceedings for that purpose;
(ii) the receipt by the Trust or Continental
of
any notification with respect to the suspension of
the qualification of the securities included therein
for sale in any jurisdiction or the initiation of any
proceeding for such purpose; and
(iii) the happening of any event that requires
the making of any changes in the Shelf Registration
Statement or the Prospectus so that, as of such date,
the Shelf Registration Statement and the Prospectus
do not contain an untrue statement of a material fact
and do not omit to state a material fact required to
be stated therein or necessary to make the statements
therein (in the case of the Prospectus, in light of
the circumstances under which they were made) not
misleading (which advice shall be accompanied by an
instruction to suspend the use of the Prospectus
until the requisite changes have been made).
(d) Continental shall use its best efforts to
prevent the issuance, and if issued to obtain the
withdrawal, of any order suspending the effectiveness of
any Shelf Registration Statement at the earliest possible
time.
(e) The Trust and Continental shall furnish to each
Holder of Registrable Securities included within the
coverage of any Shelf Registration Statement, without
charge, 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).
(f) The Trust and Continental shall, during the
Effectiveness Period, deliver to each Holder of
Registrable Securities included within the coverage of any
Shelf Registration Statement, without charge, as many
copies of the Prospectus (including each preliminary
Prospectus) included in such Shelf Registration Statement
and any amendment or supplement thereto as such Holder may
reasonably request; and each of the Trust and Continental
consents (except upon and during the continuance of any
event described in paragraph 3(c)(2)(iii) above) to the
use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable
Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any
amendment or supplement thereto during the Shelf
Registration Period.
(g) Prior to any offering of Registrable Securities
pursuant to any Shelf Registration Statement, the Trust
and Continental shall register or qualify or cooperate
with the Holders of Registrable Securities included
therein and their respective counsel in connection with
the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as any such Holders
reasonably request in writing and do any and all other
acts or things necessary or advisable to enable the offer
and sale in such jurisdictions of the Registrable
Securities covered by such Shelf Registration Statement;
provided, however, that in no event shall the Trust or
Continental be obligated to (i) qualify as a foreign
corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to
so qualify but for this Section 3(g), (ii) file any
general consent to service of process in any jurisdiction
where it is not as of the date hereof then so subject or
(iii) subject itself to taxation in any such jurisdiction
if it is not so subject.
(h) Unless any Registrable Securities shall be in
book-entry only form, the Trust and Continental shall
cooperate with the Holders of Registrable Securities to
facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be
sold pursuant to any Shelf Registration Statement free of
any restrictive legends and in such permitted
denominations and registered in such names as Holders may
request in connection with the sale of Registrable
Securities pursuant to such Shelf Registration Statement.
(i) Upon the occurrence of any event contemplated by
paragraph 3(c)(2)(iii) above, the Trust and Continental
shall promptly prepare a post-effective amendment to any
Shelf Registration Statement or an amendment or supplement
to the related Prospectus or file any other required
document so that, as thereafter delivered to purchasers of
the Registrable Securities included therein, the
Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary
to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
If the Trust or Continental notifies the Holders of the
occurrence of any event contemplated by paragraph
3(c)(2)(iii) above, the Holders shall suspend the use of
the Prospectus until the requisite changes to the
Prospectus have been made.
(j) Not later than the effective date of any Shelf
Registration Statement hereunder, the Trust and
Continental shall provide a CUSIP number for the Preferred
Securities registered under such Shelf Registration
Statement; in the event of and at the time of any
distribution of the Debentures to Holders, Continental
shall provide a CUSIP number for the Debentures and
provide the applicable trustee with certificates for such
Registrable Securities, in a form eligible for deposit
with DTC.
(k) The Trust and Continental shall use their best
efforts to comply with all applicable rules and
regulations of the Commission and shall make generally
available to their security holders or otherwise provide
in accordance with Section 11(a) of the Securities Act as
soon as practicable after the effective date of the
applicable Shelf Registration Statement an earnings
statement satisfying the provisions of Section 11(a) of
the Securities Act.
(l) The Trust and Continental shall cause the
Indenture, the Declaration and the Preferred Securities
Guarantee Agreement to be qualified under the Trust
Indenture Act in a timely manner.
(m) The Trust and Continental may require each
Holder of Registrable Securities to be sold pursuant to
any Shelf Registration Statement to furnish to the Trust
and Continental such information regarding the Holder and
the distribution of such Registrable Securities as the
Trust and Continental may from time to time reasonably
require for inclusion in such Shelf Registration Statement
and Continental and the Trust 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.
(n) The Trust and Continental shall, if requested,
promptly include or incorporate in a Prospectus supplement
or post-effective amendment to a Shelf Registration
Statement, such information as the Managing Underwriters
reasonably agree should be included therein and to which
the Trust and Continental do not reasonably object and
shall make all required filings of such Prospectus
supplement or post-effective amendment as soon as
practicable after they are notified of the matters to be
included or incorporated in such Prospectus supplement or
post-effective amendment.
(o) The Trust and Continental shall enter into such
customary agreements (including underwriting agreements in
customary form) to take all other appropriate actions in
order to expedite or facilitate the registration or the
disposition of the Registrable Securities, and in
connection therewith, if an underwriting agreement is
entered into, cause the same to contain indemnification
provisions and procedures substantially identical to those
set forth in Section 5 (or such other provisions and
procedures acceptable to the Managing Underwriters, if
any) with respect to all parties to be indemnified
pursuant to Section 5.
(p) The Trust and Continental shall (i) make
reasonably available for inspection by the Holders of
Registrable Securities to be registered thereunder, any
underwriter participating in any disposition pursuant to
such Shelf Registration Statement, and any attorney,
accountant or other agent retained by such Holders or any
such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Trust
and Continental and its subsidiaries; (ii) cause
Continental's officers, directors and employees and the
Regular Trustees to make reasonably available for
inspection all relevant information reasonably requested
by such Holders or any such underwriter, attorney,
accountant or agent in connection with any such Shelf
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
Trust and Continental, in good faith, as confidential at
the time of delivery of such information shall be kept
confidential by such Holders or any such underwriter,
attorney, accountant or agent, 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 greatest extent 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; (iii) make such representations and
warranties to the Holders of Registrable Securities
registered thereunder and the underwriters, if any, in
form, substance and scope as are customarily made by
Continental and the Trust to underwriters in primary
underwritten offerings and covering matters including, but
not limited to, those set forth in the Purchase Agreement;
(iv) obtain opinions of counsel to the Trust and
Continental (who may be the general counsel of
Continental) and updates thereof (which counsel and
opinions (in form, scope and substance) shall be
reasonably satisfactory to the Managing Underwriters, if
any) in customary form addressed to each selling Holder
and the underwriters, if any, covering such matters as are
customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably
requested by such Holders and underwriters (it being
agreed that the matters to be covered by such opinion or a
written statement by such counsel delivered in connection
with such opinions shall include, without limitation, as
of the date of the opinion and as of the effective date of
the Shelf Registration Statement or most recent
post-effective amendment thereto, as the case may be, the
absence from such Shelf Registration Statement and the
prospectus included therein, as then amended or
supplemented, including the documents incorporated by
reference therein, of an untrue statement of a material
fact or the omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading; (v) obtain "cold
comfort" letters and updates thereof from the independent
public accountants of Continental (and, if necessary, any
other independent public accountants of any subsidiary of
Continental or of any business acquired by Continental for
which financial statements and financial data are, or are
required to be, included in the Shelf Registration
Statement), addressed to each such Holder of Registrable
Securities registered thereunder and the underwriters, if
any, in customary form and covering matters of the type
customarily covered in "cold comfort" letters in
connection with primary underwritten offerings; and
(vi) deliver such other customary documents and
certificates as may be reasonably requested by any such
Holders and the Managing Underwriters, if any, including
those to evidence compliance with Section 3(i) and with
any customary conditions contained in the underwriting
agreement or other agreement entered into by the Trust and
Continental. The foregoing actions set forth in clauses
(iii), (iv), (v) and (vi) of this Section 3(p) shall be
performed at each closing under any underwritten offering
to the extent required thereunder.
(q) The Trust and Continental will each use its best
efforts to cause the Preferred Securities and the Class B
Common Stock issuable upon conversion thereof to be listed
on the New York Stock Exchange on or prior to the
effective date of any Shelf Registration Statement
hereunder.
(r) In the event that any broker-dealer registered
under the Exchange Act shall underwrite any Registrable
Securities or participate as a member of an underwriting
syndicate or selling group or "assist in the distribution"
(within the meaning of the Rules of Fair Practice and the
By-Laws of the National Association of Securities Dealers,
Inc. ("NASD")) thereof, whether as a Holder of such
Registrable Securities or as an underwriter, a placement
or sales agent or a broker or dealer in respect thereof,
or otherwise, assist such broker-dealer in complying with
the requirements of such Rules and By-Laws, including,
without limitation, by (A) if such Rules or By-Laws,
including Schedule E thereto, shall so require, engaging a
"qualified independent underwriter" (as defined in
Schedule E) to participate in the preparation of the Shelf
Registration Statement relating to such Registrable
Securities and to exercise usual standards of due
diligence in respect thereto, (B) indemnifying any such
qualified independent underwriter to the extent of the
indemnification of underwriters provided in Section 5
hereof and (C) providing such information to such
broker-dealer as may be required in order for such
broker-dealer to comply with the requirements of the Rules
of Fair Practice of the NASD.
(s) The Trust and Continental shall use their best
efforts to take all other steps necessary to effect the
registration, offering and sale of the Registrable
Securities covered by the Shelf Registration Statement
contemplated hereby.
4. REGISTRATION EXPENSES. Except as otherwise
provided in Section 6, Continental shall bear all fees and
expenses incurred in connection with the performance of its
obligations under Sections 2 and 3 hereof and shall bear or
reimburse the Holders for the reasonable fees and disbursements
of one firm of counsel designated by Continental and reasonably
acceptable to the Holders of a majority of the Registrable
Securities covered by the Shelf Registration Statement to act
as counsel therefor in connection therewith.
5. INDEMNIFICATION AND CONTRIBUTION. (a) In
connection with any Shelf Registration Statement, Continental
shall indemnify and hold harmless the Trust, the Initial
Purchasers, each Holder, each underwriter who participates in
an offering of Registrable Securities, each person, if any, who
controls any of such parties within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act and
each of their respective directors, officers, employees,
trustees and agents, as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, including any amounts paid
in settlement of any investigation, litigation, proceeding
or claim, joint or several, as incurred, arising out of
any untrue statement or alleged untrue statement of a
material fact contained in any Shelf Registration
Statement (or any amendment thereto) covering Registrable
Securities, including all documents incorporated therein
by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein
or necessary to make the statements therein not misleading
or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus
(or any amendment or supplement thereto) or the omission
or alleged omission therefrom of a material fact necessary
in order to make the statements therein, in the light of
the circumstances under which they were made, not
misleading; provided, that Continental shall not be liable
under this clause (i) for any settlement of any action
effected without its written consent, which consent shall
not be unreasonably withheld; and
(ii) against any and all expenses whatsoever, as
incurred (including reasonable fees and disbursements of
counsel chosen by the Holders, such Holder or any
underwriter (except to the extent otherwise expressly
provided in Section 5(c) hereof)), reasonably incurred in
investigating, preparing or defending against any
litigation, or any investigation or proceeding by any
court or governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense
is not paid under subparagraph (i) of this Section 5(a);
provided that this indemnity shall not apply to any loss,
liability, claim, damage or expense to the extent arising out
of an untrue statement or omission or alleged untrue statement
or omission (i) made in reliance upon and in conformity with
written information furnished to the Trust or Continental by
the Initial Purchasers, such Holder or any underwriter in
writing expressly for use in the Shelf Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment
or supplement thereto) or (ii) contained in any preliminary
prospectus if the Initial Purchasers, such Holder or such
underwriter failed to send or deliver a copy of the Prospectus
(or any amendment or supplement thereto) to the Person
asserting such losses, claims, damages or liabilities on or
prior to the delivery of written confirmation of any sale of
securities covered thereby to such Person in any case where
such Prospectus (or any amendment or supplement thereto)
corrected such untrue statement or omission. Any amounts
advanced by Continental to an indemnified party pursuant to
this Section 5 as a result of such losses shall be returned to
Continental if it shall be finally determined by such a court
in a judgment not subject to appeal or final review that such
indemnified party was not entitled to indemnification by
Continental.
(b) Each Holder agrees, severally and not jointly,
to indemnify and hold harmless the Trust, Continental, the
Initial Purchasers, each underwriter who participates in an
offering of Registrable Securities and the other selling
Holders and each of their respective directors, officers
(including each officer of Continental who signed the Shelf
Registration Statement), employees, trustees and agents and
each Person, if any, who controls the Trust, Continental, the
Initial Purchasers, any underwriter or any other selling Holder
within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all
loss, liability, claim, damage and expense whatsoever described
in the indemnity contained in Section 5(a) hereof, as incurred,
but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Shelf
Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to
Continental by such selling Holder expressly for use in the
Shelf Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto); provided,
however, that, no such Holder shall be liable for any claims
hereunder in excess of the amount of net proceeds received by
such Holder from the sale of Registrable Securities pursuant to
the Shelf Registration Statement.
(c) Each indemnified party shall give prompt notice
to each indemnifying party of any action commenced against it
in respect of which indemnity may be sought hereunder,
enclosing a copy of all papers served on such indemnified
party, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability which it may
have other than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the
defense of any such action. If an indemnifying party so elects
within a reasonable time after receipt of such notice, such
indemnifying party, jointly with any other indemnifying party,
may assume the defense of such action with counsel chosen by it
and approved by the indemnified party or parties defendant in
such action, provided that if any such indemnified party
reasonably determines that there may be legal defenses
available to such indemnified party which are different from or
in addition to those available to such indemnifying party or
that representation of such indemnifying party and any
indemnified party by the same counsel would present a conflict
of interest, then such indemnifying party or parties shall not
be entitled to assume such defense. If an indemnifying party
is not entitled to assume the defense of such action as a
result of the proviso to the preceding sentence, counsel for
such indemnifying party shall be entitled to conduct the
defense of such indemnifying party and counsel for each
indemnified party or parties shall be entitled to conduct the
defense of such indemnified party or parties. If an
indemnifying party assumes the defense of an action in
accordance with and as permitted by the provisions of this
paragraph, such indemnifying party shall not be liable for any
fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action. In no
event shall the indemnifying party or parties be liable for the
fees and expenses of more than one counsel (in addition to any
local counsel) separate from its own counsel for all
indemnified parties in connection with any one action or
separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or
circumstances.
(d) In order to provide for just and equitable
contribution in circumstances in which the indemnity provision
agreement provided for in this Section 5 is for any reason held
to be unavailable to the indemnified parties although
applicable in accordance with its terms, Continental, the
Initial Purchasers and the Holders shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by
Continental, the Initial Purchasers and the Holders, as
incurred; provided that 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 that was not guilty of such fraudulent
misrepresentation. As between Continental, the Initial
Purchasers and the Holders, such parties shall contribute to
such aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement
in such proportion as shall be appropriate to reflect the
relative fault of Continental, on the one hand, and the Initial
Purchasers and the Holders, on the other hand, with respect to
the statements or omissions which resulted in such loss,
liability, claim, damage or expense, or action in respect
thereof, as well as any other relevant equitable
considerations. The relative fault of Continental, on the one
hand, and of the Initial Purchasers and the Holders, 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 Continental,
on the one hand, or by or on behalf of the Initial Purchasers
or the Holders, on the other, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. Continental, the Initial
Purchasers and the Holders of the Registrable Securities agree
that it would not be just and equitable if contribution
pursuant to this Section 5 were to be determined by pro rata
allocation or by any other method of allocation that does not
take into account the relevant equitable considerations. For
purposes of this Section 5(d), each director, officer,
employee, trustee, agent and Person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Initial Purchaser or
Holder, and each director, officer, employee, trustee and agent
of Continental and the Trust, and each Person, if any, who
controls Continental or the Trust within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange
Act shall have the same rights to contribution as Continental.
No party shall be liable for contribution with respect to any
action, suit, proceeding or claim settled without its written
consent.
6. UNDERWRITTEN OFFERING. The Holders of
Registrable Securities covered by the 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 Continental and the Trust and (ii) Continental shall not be
obligated to arrange for more than one underwritten offering
during the Effectiveness Period. 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 and shall reimburse the
Trust and Continental for the fees and disbursements of their
counsel, their independent public accountants and any printing
expenses incurred in connection with such underwritten
offering. Notwithstanding the foregoing or the provisions of
Section 3(n) hereof, upon receipt of a request from the
Managing Underwriter or a representative of Holders of a
majority of the Registrable Securities outstanding to prepare
and file an amendment or supplement to the Shelf Registration
Statement and Prospectus in connection with an underwritten
offering, Continental may delay the filing of any such
amendment or supplement for up to 90 days if Continental in
good faith has a valid business reason for such delay.
7. MISCELLANEOUS.
(a) OTHER REGISTRATION RIGHTS. Continental may
grant registration rights that would permit any Person that is
a third party the right to piggy-back on any Shelf Registration
Statement, provided that if the Managing Underwriter, if any,
of such offering delivers an opinion to the selling Holders
that the total amount of securities which they and the holders
of such piggy-back rights intend to include in any Shelf
Registration Statement is so large as to materially adversely
affect the success of such offering (including the price at
which such securities can be sold), then only the amount,
number or kind of securities to be offered for the account of
holders of such piggy-back 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 the Managing Underwriter prior to any reduction
in the amount of Registrable Securities to be included.
(b) AMENDMENTS AND WAIVERS. The provision of this
Agreement, including the provisions of this sentence, may not
be amended, qualified, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be
given, unless the Trust and Continental have obtained the
written consent of the Initial Purchasers.
(c) NOTICES. All notices and other communications
provided for or permitted hereunder shall be made in writing by
hand-delivery, first-class mail, telex, telecopier, or air
courier guaranteeing overnight delivery:
1. if to a Holder, at the most current address
given by such Holder to Continental in accordance with the
provisions of this Section 6(c);
2. if to the Initial Purchasers, initially at the
address set forth in the Purchase Agreement; and
3. if to the Trust or Continental, initially at
its
address set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have
duly given when received.
The Initial Purchasers or the Trust and Continental
by notice to the other may designate additional or different
addresses for subsequent notices or communications.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall
inure to the benefit of and be binding upon the successors and
assigns of each of the parties and the Holders, including,
without the need for an express assignment or any consent by
the Trust or Continental thereto, subsequent Holders of
Registrable Securities. The Trust and Continental hereby agree
to extend the benefits of this Agreement to any Holder of
Registrable Securities and any such Holder may specifically
enforce the provisions of this Agreement as if an original
party hereto.
(e) 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.
(f) HEADINGS. The headings in this agreement are
for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.
(g) GOVERNING LAW. This agreement shall be governed
by and construed in accordance with the laws of the State of
New York, without giving effect to any provisions relating to
conflicts of laws.
(h) SEVERABILITY. In the event that any one of more
of the provisions contained herein, or the application thereof
in any circumstances, is held invalid, illegal or unenforceable
in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way
impaired or affected thereby, it being intended that all of the
rights and privileges of the parties shall be enforceable to
the fullest extent permitted by law.
Please confirm that the foregoing correctly sets
forth the agreement between Continental, the Trust and you.
Very truly yours,
CONTINENTAL AIRLINES FINANCE
TRUST
By:
Name: Lawrence W.
Kellner
Title: Regular Trustee
By:_______________________________
Name: Jeffery A. Smisek
Title: Regular Trustee
CONTINENTAL AIRLINES, INC.
By:_______________________________
Name: Jeffery A. Smisek
Title: Senior Vice
President
and General
Counsel
The foregoing Registration Rights Agreement is hereby confirmed
and accepted as of the date first above written.
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
CS FIRST BOSTON CORPORATION
DONALDSON LUFKIN & JENRETTE SECURITIES CORPORATION
SMITH BARNEY INC.
on behalf of themselves and
as the Representatives of the
several Initial Purchasers
By: Merrill Lynch, Pierce Fenner &
Smith Incorporated
By:___________________________________
Name:
Title:
Exhibit 23.1
We consent to the reference to our firm under the caption
"Experts" to the Registration Statement (Form S-3) and related
Prospectus of Continental Airlines, Inc. for the registration of
4,997,000 Preferred Securities of Continental Airlines Finance
Trust and to the incorporation by reference therein of our
reports dated February 12, 1996, with respect to the consolidated
financial statements and schedules of Continental Airlines, Inc.
included in its Annual Report (Form 10-K) for the year ended
December 31, 1995, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
Houston, Texas
May 23, 1996
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 an
officer or director of the Company, and to execute any and all
instruments for the undersigned and in the undersigned's name and
capacity as an officer or director 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-3 relating to the Company's 8-1/2% Convertible Trust
Originated Preferred Securities (the "Registration Statement"),
including specifically, but not limited to, power and authority
to sign for the undersigned in the capacity as an officer or
director 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
_________________________
Printed Name: Gordon M. Bethune
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Jeffery A. Smisek 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 an officer of the Company, and to
execute any and all instruments for the undersigned and in the
undersigned's name and capacity as an 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-3 relating to the Company's 8-1/2% Convertible Trust
Originated Preferred Securities (the "Registration Statement"),
including specifically, but not limited to, power and authority
to sign for the undersigned in the capacity as an 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
_________________________
Printed Name: Lawrence W. Kellner
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Jeffery A. Smisek 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 an officer of the Company, and to
execute any and all instruments for the undersigned and in the
undersigned's name and capacity as an 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-3 relating to the Company's 8-1/2% Convertible Trust
Originated Preferred Securities (the "Registration Statement"),
including specifically, but not limited to, power and authority
to sign for the undersigned in the capacity as an 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/ Michael P. Bonds
_________________________
Printed Name: Michael P. Bonds
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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, Jr.
__________________________
Printed Name: Thomas J. Barrack, Jr.
__________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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
_________________________
Printed Name: David Bonderman
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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/ Gregory D. Brenneman
_________________________
Printed Name: Gregory D. Brenneman
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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/ Joel H. Cowan
_________________________
Printed Name: Joel H. Cowan
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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
_________________________
Printed Name: Patrick Foley
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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/ Rowland C. Frazee
___________________________
Printed Name: Rowland C. Frazee
___________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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/ Hollis L. Harris
_________________________
Printed Name: Hollis L. Harris
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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/ Dean C. Kehler
_________________________
Printed Name: Dean C. Kehler
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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/ Robert L. Lumpkins
_________________________
Printed Name: Robert L. Lumpkins
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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
___________________________
Printed Name: Douglas H. McCorkindale
___________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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 E. Mitchell
___________________________
Printed Name: David E. Mitchell
___________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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
_________________________
Printed Name: Richard W. Pogue
_________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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 III
___________________________
Printed Name: William S. Price III
___________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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/ Donald L. Sturm
___________________________
Printed Name: Donald L. Sturm
___________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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/ Claude I. Taylor
__________________________
Printed Name: Claude I. Taylor
__________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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
___________________________
Printed Name: Karen Hastie Williams
___________________________
Dated and effective as of April 30, 1996
POWER OF ATTORNEY
The undersigned director of Continental Airlines, Inc., a
Delaware corporation (the "Company"), does hereby constitute and
appoint Lawrence W. Kellner, Jeffery A. Smisek 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 of the Company, and to execute any and all instruments
for the undersigned and in the undersigned's name and capacity as
a director 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-3 relating to the
Company's 8-1/2% Convertible Trust Originated Preferred
Securities (the "Registration Statement"), including
specifically, but not limited to, power and authority to sign for
the undersigned in the capacity as a director 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
__________________________
Printed Name: Charles A. Yamarone
__________________________
Dated and effective as of April 30, 1996