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As filed with the Securities and Exchange Commission on July 9, 1996
Registration No. 333-04601
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Continental Airlines, Inc.
Continental Airlines Finance Trust
(Exact name of registrant as specified in its charter)
Delaware 74-2099724
Delaware 51-6502566
(State or other jurisdiction of (I.R.S. employer identification
incorporation or organization) number)
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
AMOUNT TO MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF BE OFFERING AGGREGATE AMOUNT OF
SECURITIES REGISTERED PRICE PER OFFERING REGISTRATION
TO BE REGISTERED (1) UNIT (4) PRICE (4) FEE(1)
- - -------------------------------------------------------------------------------
Convertible Preferred
Securities of
Continental Airlines
Finance Trust 4,997,000 $66.75(1) $333,549,750(1) $115,018
- - -------------------------------------------------------------------------------
Convertible
Subordinated
Deferrable Interest
Debentures of
Continental
Airlines, Inc. (2) -- -- --
- - -------------------------------------------------------------------------------
Class B common
stock of
Continental Airlines,
Inc. (3) -- -- --
- - -------------------------------------------------------------------------------
Preferred Securities
Guarantee of
Continental
Airlines, Inc. and
certain back-up
undertakings(5)
- - -------------------------------------------------------------------------------
Total 4,997,000 100% $333,549,750 $115,018
===============================================================================
(1) Estimated solely for the purpose of computing the
registration fee in accordance with Rule 457(c) of the
Securities Act. The registration fee was previously
paid.
(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) No separate consideration will be received for the
Preferred Securities Guarantee. The Preferred Securities
Guarantee includes the rights of holders of the Preferred
Securities under the Preferred Securities Guarantee
and certain back-up undertakings, comprised of
obligations of Continental Airlines, Inc. under the
Indenture and pursuant to the Declaration to provide
certain indemnities in respect of, and be responsible for
certain costs, expenses, debts and liabilities of
Continental Airlines Finance Trust, as described in the
Registration Statement. All obligations under the
Declaration, including the indemnity obligation, are
included in 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 prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of
these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
SUBJECT TO COMPLETION--DATED JULY 9, 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)
Fully and Unconditionally Guaranteed 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 5.
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 described under "Description of the Guarantee." The
Guarantee covers payments of distributions and other payments on
the Preferred Securities only if and to the extent that the Trust
has funds available therefor, which will not be the case unless
the Company has made a payment of interest or principal or other
payments on the Convertible Subordinated Debentures held by the
Trust as its sole asset. The Guarantee, when taken together with
the Company's obligations under the Convertible Subordinated
Debentures and the Indenture (as defined herein) and its
obligations under the Declaration (as defined herein), including
its liabilities to pay costs, expenses, debts and obligations of
the Trust (other than with respect to the Trust Securities),
provides a full and unconditional guarantee of amounts due on the
Preferred Securities. See "Risk Factors--Rights under 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 2.068 shares of Class B common stock for each Preferred
Security (equivalent to $24.18 per share of Class B common
stock), subject to adjustment in certain circumstances. Such
conversion rate and conversion price have been adjusted for
the 2-for-1 stock split announced by Continental on June 26,
1996 and payable on July 16, 1996 to holders of record of its
Class B common stock and Class A common stock on July 2, 1996.
The Class B common stock is quoted on the New York Stock Exchange
("NYSE") under the symbol CAI.B. On July 5, 1996, the last
reported sale price of the Class B common stock on the NYSE was
$59.250, which price does not give effect to the stock split.
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--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. Pursuant to the Declaration, the Trust shall
terminate on December 1, 2030 or upon the occurrence of
certain specified events (including the bankruptcy of
Continental). 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, and
any amendment or report filed for the purpose of updating such
description, (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,
May 7, 1996 and June 27, 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
1997 through 2002. The estimated aggregate cost of these aircraft
is $2.6 billion. The Company is in the process of negotiating a
revised aircraft order with Boeing, which is expected to change
the product mix and timing of delivery of aircraft without a
significant change in the aggregate cost of such order. In
addition, the Company took delivery of one Beech 1900-D aircraft
in May 1996 and an additional five such aircraft are scheduled to
be delivered later in 1996. The Company currently anticipates
that the firm financing commitments available to it with respect
to its acquisition of new aircraft from 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 its 91%-owned subsidiary, Continental
Micronesia, Inc. ("CMI"), have secured borrowings from certain
affiliates of General Electric Company (General Electric Company
and affiliates, collectively, "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" gave rise to an
increase in percentage ownership by certain stockholders for this
purpose. Based upon the advice of its counsel, Cleary, Gottlieb,
Steen & Hamilton, the Company believes that such percentage
increase 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) at the time of the ownership change
by the applicable long-term tax exempt rate (which is 5.78% for
June 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 $100 million per
year.
In connection with the Company's 1993 reorganization under
Chapter 11 of the U.S. bankruptcy code effective April 27, 1993
(the "Reorganization") and the recording of assets and liabilities
at fair market value under the American Institute of Certified Public
Accountants' Statement of Position 90-7--"Financial Reporting by
Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7"),
the Company recorded a deferred tax liability at April 27,
1993, net of the amount of the Company's estimated realizable
NOLs as required by Statement of Financial Accounting Standards
No. 109--"Accounting for Income Taxes." Realization of a
substantial portion of the Company's NOLs will require the
completion during the five-year period following the
Reorganization of transactions resulting in recognition of
built-in gains for federal income tax purposes. The Company has
consummated one such transaction, which had the effect of
realizing approximately 40% of the built-in gains required to be
realized over the five-year period, and currently intends to
consummate one or more additional transactions. If the Company
were to determine in the future that not all such transactions
will be completed, an adjustment to the net deferred tax
liability of up to $116 million would be charged to income in the
period such determination was made.
CMI
CMI's operating profit margins have consistently been
greater than the Company's margins overall. In addition to its
non-stop service between Honolulu and Tokyo, CMI's operations
focus on the neighboring islands of Guam and Saipan, resort
destinations that cater primarily to Japanese travelers. Because
the majority of CMI's traffic originates in Japan, its results of
operations are substantially affected by the Japanese economy and
changes in the value of the yen as compared to the dollar.
Appreciation of the yen against the dollar during 1993 and 1994
increased 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 (as defined) which was
completed on May 14, 1996 and the conversion by Air Canada
of its Class A common stock, $.01 par value (the "Class A
common stock"), into Class B common stock, Air Canada holds
approximately 10.0% of the common equity interests and 4.0% of
the general voting power of the Company, and Air Partners, L.P.
("Air Partners") holds approximately 9.8% 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 52.1% of the general
voting power would be held by Air Partners. At any time
after January 1, 1997, shares of Class A common stock will
become freely convertible into an equal number of shares of Class
B common stock. Such conversion would effectively increase the
relative voting power of those Class A stockholders who do not
convert. See "Recent Developments" and "Description of Capital
Stock".
Various provisions in the Company's Amended and
Restated Certificate of Incorporation (the "Certificate
of Incorporation") and Bylaws (the "Bylaws") currently
provide Air Partners with the right to elect one-third
of the directors in certain circumstances; these provisions
could have the effect of delaying, deferring or preventing
a change in control of the Company. See "Recent Developments"
and "Description of Capital Stock".
Risk Factors Relating to the Airline Industry
Industry Conditions and Competition
The airline industry is highly competitive and susceptible
to price discounting. The Company has in the past both responded
to discounting actions taken by other carriers and initiated
significant discounting actions itself. Continental's competitors
include carriers with substantially greater financial resources,
as well as smaller carriers with lower cost structures. Airline
profit levels are highly sensitive to, and during recent years
have been severely impacted by, changes in fuel costs, fare
levels (or "average yield") and passenger demand. Passenger
demand and yields have been adversely affected by, among other
things, the general state of the economy, international events
and actions taken by carriers with respect to fares. From 1990 to
1993, these factors contributed to the domestic airline
industry's incurring unprecedented losses. Although fare levels
have increased recently, significant industry-wide discounts
could be reimplemented at any time, and the introduction of
broadly available, deeply discounted fares by a major United
States airline would likely result in lower yields for the entire
industry and could have a material adverse effect on the
Company's operating results.
The airline industry has consolidated in past years as a
result of mergers and liquidations and may further consolidate in
the future. Among other effects, such consolidation has allowed
certain of Continental's major competitors to expand (in
particular) their international operations and increase their
market strength. Furthermore, the emergence in recent years of
several new carriers, typically with low cost structures, has
further increased the competitive pressures on the major United
States airlines. In many cases, the new entrants have initiated
or triggered price discounting. Aircraft, skilled labor and gates
at most airports continue to be readily available to start-up
carriers. Although management believes that Continental is better
able than some of its major competitors to compete with fares
offered by start-up carriers because of its lower cost structure,
competition with new carriers or other low cost competitors on
Continental's routes could negatively impact Continental's
operating results.
Regulatory Matters
In the last several years, the United States Federal Aviation
Administration (the "FAA") has issued a number of maintenance
directives and other regulations relating to, among other things,
retirement of older aircraft, collision avoidance systems, airborne
windshear avoidance systems, noise abatement, commuter aircraft
safety and increased inspections and maintenance procedures to be
conducted on older aircraft. The Company expects to continue
incurring expenses for the purpose of complying with the FAA's
noise and aging aircraft regulations. In addition, several
airports have recently sought to increase substantially the rates
charged to 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
significantly from the expiration of the aviation trust fund tax
(the "ticket tax") on December 31, 1995, although the amount of
any such benefit resulting directly from the expiration of the
ticket tax cannot precisely be determined. 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
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. Notwithstanding the foregoing, any
holder of Preferred Securities may institute a legal proceeding
directly against Continental to enforce such holder's rights to
receive payment 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 or otherwise, 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 (i) by
the Property Trustee (as defined herein) of its rights as
registered holder of the Convertible Subordinated Debentures or
(ii) by such holders of their rights against the Company to enforce
payments on 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--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 ori inal
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--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--Tax Event or Investment Company Event Redemption or
Distribution" and "Description of the Convertible Subordinated
Debentures--General."
Effect of Proposed Changes in Tax Laws
The Clinton Administration has proposed statutory changes
in the Federal income tax rules relating to financial
instruments. Under one such proposal, debt with a maximum
maturity of more than 20 years that is not shown as debt on the
applicable balance sheet of the issuer would be characterized as
equity of the issuer, with the result that interest would be
nondeductible to the issuer. If this proposal were enacted and
applied to the Preferred Securities, a Tax Event would occur.
The Company has been advised by counsel that, under certain
transition rules contained in the proposed legislation, the
Preferred Securities would not be subject to such legislation.
Moreover, the Chairman of the House Ways and Means Committee and
the Senate Finance Committee, as well as the Ranking Minority
Members of the House Ways and Means Committee, have publicly
indicated that the proposals, if enacted, would not apply prior to
the date of "appropriate Congressional action." Thus, the
Company believes such proposed legislation, if ultimately
enacted, will not apply to the Preferred Securities.
Nevertheless, no absolute assurance can be given in this regard.
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 applied for listing of the Preferred Securities on
the NYSE on June 21, 1996 and anticipates approval of such
listing application by the time the Registration Statement is
declared effective. 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 (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--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
ubordinated 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 and, pursuant to SAB 53,
the Trust will not be a separate reporting issuer. The Preferred
Securities are shown on Continental's consolidated financial
statements as a minority interest consisting of Continental-Obligated
Mandatorily Redeemable Preferred Securities of Subsidiary Trust holding
solely Convertible Subordinated Debentures. The Convertible
Subordinated Debentures, totalling $250 million, are the sole
assets of the Trust, bear interest at the rate of 8 1/2% per
annum and are expected to be repaid by 2020.
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 CMI,
serves 190 airports worldwide.
The Company operates its route system primarily through
domestic hubs at Newark, Houston Intercontinental and Cleveland,
and a Pacific hub on 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 52%, 79%, 53% and
72% of all daily jet departures, respectively.
Continental directly serves 131 U.S. cities, with
additional cities (principally in the western and southwestern
United States) connected to Continental's route system under
agreements with A erica West Airlines, Inc. ("America West").
Internationally, Continental flies to 59 destinations and offers
additional connecting service through alliances with foreign
carriers. Continental operates 66 weekly departures to six
European cities and markets service to eight 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,
including service between Newark and Bogota, Colombia, with
service on to Quito, Ecuador which began 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
Stock Split
On June 26, 1996, the Company announced a 2-for-1 stock
split with respect to the Company's Class A common stock and
Class B common stock, which will be distributed on July 16, 1996
to stockholders of record as of July 2, 1996.
Corporate Governance
On June 26, 1996, at the Company's annual meeting of
stockholders (the "Annual Meeting"), the Company's stockholders
approved changes proposed by the Company to the Company's
Certificate of Incorporation, which together with amendments to
the Company's Bylaws previously approved by the Company's Board
of Directors (collectively, the "Amendments"), generally
eliminate special classes of directors (except for Air Partners'
right to elect one-third of the directors in certain
circumstances as described below) and supermajority provisions,
and make a variety of other modifications aimed at streamlining
the Company's corporate governance structure. The amendments to
the Company's Certificate of Incorporation included elimination
of Class C common stock, $.01 par value (the "Class C common
stock"), of the Company as an authorized class of capital stock
and changed the rights of holders of Class D common stock, $.01
par value (the "Class D common stock"), with respect to election
of directors--holders of Class D common stock are now entitled to
elect one-third of the directors. Pursuant to the Certificate of
Incorporation, Class D common stock is solely issuable to Air
Partners and certain of its affiliates. There is currently no
Class D common stock outstanding. The Amendments, as a whole,
reflect the reduction of Air Canada's equity interest in the
Company, as described below, and the decision of the former
directors designated by Air Canada not to stand for reelection,
along with the expiration of various provisions of the Company's
Certificate of Incorporation and Bylaws specifically included at
the time of the Company's reorganization in 1993.
The Amendments also provide that, at any time after January
1, 1997, shares of Class A common stock will become freely
convertible into an equal number of shares of Class B common stock.
Under agreements put in place at the time of the Company's
reorganization in 1993, and designed in part to ensure compliance
with the foreign ownership limitations applicable to United
States air carriers in light of the substantial stake in the
Company then held by Air Canada, holders of Class A common stock
were not permitted under the Company's Certificate of
Incorporation to convert their shares to Class B common stock. In
recent periods, the market price of Class A common stock has
generally been below the price of Class B common stock, which the
Company believes is attributable in part to the reduced liquidity
present in the trading market for Class A common stock. A number
of Class A stockholders requested that the Company provide for
free convertibility of Class A common stock into Class B common
stock, and in light of the reduction of Air Canada's equity
stake, the Company determined that the restriction was no longer
necessary. Any such conversion would effectively increase the
relative voting power of those Class A stockholders who do not
convert.
On April 19, 1996, the Company's Board of Directors
approved certain agreements (the "Agreements") with its two major
stockholders, Air Canada and Air Partners. The Agreements contain
a variety of arrangements intended generally to reflect the
intention that Air Canada has expressed to the Company of
divesting its investment in Continental 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 provided for the following additional steps to be
taken in connection with the completion of the Secondary
Offering:
- in light of its reduced equity stake in the Company,
Air Canada is no longer entitled to designate nominees to
the Board of Directors of the Company, has caused the
four present or former members of the Air Canada board
who served as directors of Continental to decline
nomination for reelection as directors and converted all
of its Class A common stock to Class B common stock;
- Air Canada and Air Partners 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 were
modified in a number of respects to reflect, among
other matters, the changing composition of the
respective equity interests of the parties.
After such sale and the conversion by Air Canada of its
Class A common stock into Class B common stock, Air Canada holds
approximately 10.0% of the common equity interests and 4.0% of
the general voting power of the Company, and Air Partners holds
approximately 9.8% of the common equity interests and 39.4% of
the general voting power of the Company. In addition, assuming
exercise of all of the warrants held by Air Partners,
approximately 23.3% of the common equity interests and 52.1% of
the general voting power would be held by Air Partners.
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 has
reclassified $50 million from common equity to redeemable
warrants.
Because certain aspects of the Agreements raised issues
under the change in control provisions of certain of the
Company's employment agreements and employee benefit plans, these
agreements and plans were modified to provide a revised change of
control definition that the Company believes is appropriate in
light of the prospective changes to its equity ownership
structure. In connection with the modifications, payments were
made to certain employees, benefits were granted to certain
employees and options equal to 10% of the amount of the options
previously granted to each optionee were granted (subject to
certain conditions) to substantially all employees holding
outstanding options.
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.
SELECTED FINANCIAL DATA
The following tables set forth selected financial data of
(i) the Company for the three months ended March 31, 1996 and
1995, the two years ended December 31, 1995 and 1994 and for the
period from April 28, 1993 through December 31, 1993 and (ii)
Holdings for the period from January 1, 1993 through April 27,
1993. The consolidated financial data of both the Company, for
the two years ended December 31, 1995 and 1994 and for the period
from April 28, 1993 through December 31, 1993, and Holdings, for
the period from January 1, 1993 through April 27, 1993, are
derived from their respective audited consolidated financial
statements. On April 27, 1993, in connection with the
Reorganization, the Company adopted fresh start reporting in
accordance with SOP 90-7. A vertical black line is shown in the
table below to separate Continental's post-reorganized
consolidated financial data from the pre-reorganized consolidated
financial data of Holdings since they have not been prepared on a
consistent basis of accounting. The consolidated financial data
of the Company for the three months ended March 31, 1996 and 1995
are derived from its unaudited consolidated financial statements,
which include all adjustments (consisting solely of normal
recurring accruals) that the Company considers necessary for the
presentation of the financial position and results of operations
for these periods. Operating results for the three months ended
March 31, 1996 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1996. The
Company's selected consolidated financial data should be read in
conjunction with, and are qualified in their entirety by
reference to, the consolidated financial statements, including
the notes thereto, incorporated by reference herein.
Period
from
Reorganiz- Period
ation from
(April January
Three Months 28, 1993 1, 1993
Ended March Year Ended through through
31, December 31, December April
----------- --------------- 31, 27,
1996 1995 1995 1994 1993) 1993
---- ---- ---- ---- ---- ----
Statement of
Operations Data: (In millions of dollars, except per share data)
Operating Revenue: (unaudited)
Passenger $1,375 $1,240 $5,302 $5,036 $3,493 $1,622
Cargo, mail and
other 114 169 523 634 417 235
1,489 1,409 5,825 5,670 3,910 1,857
Operating Expenses:
Wages, salaries
and related costs 364 366 1,432(1) 1,532 1,000 502
Aircraft fuel 177 169 681 741 540 272
Aircraft rentals 124 123 497 433 261 154
Commissions 126 119 489 439 378 175
Maintenance,
materials and
repairs 112 97 429 495 363 184
Other rentals
and landing fees 84 92 356 392 258 120
Depreciation
and amortization 65 64 253 258 162 77
Other 317 351 1,303 1,391 853 487
----- ----- ----- ----- ----- -----
1,369 1,381 5,440 5,681 3,815 1,971
----- ----- ----- ----- ----- -----
Operating Income
(Loss) 120 28 385 (11) 95 (114)
----- ----- ----- ----- ----- -----
Nonoperating Income
(Expense):
Interest expense (47) (53) (213) (241) (165) (52)
Interest capitalized 1 1 6 17 8 2
Interest income 9 6 31 23 14 --
Gain on System One
transactions -- -- 108 -- -- --
Reorganization items,
net -- -- -- -- -- (818)
Other, net 12 (10) (7) (439)(2) (4) 5
-- --
(25) (56) (75) (640) (147) (863)
----- ----- ----- ----- ----- -----
Income (Loss) before
Income Taxes,
Minority Interest and
Extraordinary Gain 95 (28) 310 (651) (52) (977)
Net Income (Loss) $ 88 $(30) $ 224 $ (613) $ (39) $ 2,640(3)
Earnings (Loss)
per Common and
Common Equivalent
Share(4) 1.55 (0.60) 3.60 (11.88) (1.17) N.M.(5)
Earnings (Loss)
per Common Share
Assuming Full
Dilution(4) 1.18 (0.60) 3.15 (11.88) (1.17) N.M.(5)
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(6) $ 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 Subsidiary Trust
holding solely
Convertible Subordinated
Debentures(7) 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) On June 26, 1996, the Company announced a 2-for-1 stock split
with respect to the Company's Class A common stock and Class
B common stock. Accordingly, the earnings per share
information has been restated to give effect to the stock
split.
(5) Historical per share data for Holdings is not meaningful
since the Company has been recapitalized and has adopted
fresh start reporting as of April 27, 1993.
(6) Restricted cash and cash equivalents agreements relate
primarily to workers' compensation claims and the terms of
certain other agreements. In addition, CMI is required by 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.
(7) The sole assets of the Trust are convertible subordinated
debentures totalling $250 million which bear interest at the
rate of of 8 1/2 % per annum and are expected to be repaid by 2020.
Upon repayment, the Continental-Obligated Mandatorily
Redeemable Preferred Securities of Trust will be mandatorily
redeemed. Continental and the Trust intend to rely on
SAB 53 to omit separate financial statements for the Trust.
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. In such event, the
remedy of the holder of Preferred Securities is to vote to direct
the Property Trustee to enforce the Property Trustee's rights
under the Convertible Subordinated Debentures except in the
limited circumstances in which a holder may take Direct Action
(as defined herein). See "--Voting Rights" and "--Declaration
Events of Default.
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--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 2.068 shares of Class B common stock for each
Preferred Security (equivalent to a conversion price of $24.18
per share of Class B common stock), subject to adjustment as
described under "--Conversion Price Adjustments" below. Such
conversion rate and conversion price have been adjusted for the
2-for-1 stock split announced by Continental on June 26, 1996
and payable on July 16, 1996 to holders of record of its Class B
common stock and Class A common stock on July 2, 1996. 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 Tax Event or Investment Company 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. If the Property Trustee fails to enforce
its rights under the Convertible Subordinated Debentures after a
holder of Preferred Securities has made a written request, such
holder of Preferred Securities may institute a legal proceeding
directly against the Company 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. Notwithstanding the
foregoing, if a Declaration Event of Default has occurred and is
continuing and such event is attributable to the failure of the
Company to pay interest or principal on the Convertible
Subordinated Debentures on the date such interest or principal is
otherwise payable (or in the case of a redemption, the redemption
date), then a holder of Preferred Securities may directly
institute a proceeding for enforcement of payment to such holder
directly of the principal of or interest on the Convertible
Subordinated Debentures having a principal amount equal to the
aggregate liquidation amount of the Preferred Securities of such
holder (a "Direct Action") on or after the respective due date
specified in the Convertible Subordinated Debentures. In
connection with such Direct Action, the Company will be
subrogated to the rights of such holder of Preferred Securities
under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities in such Direct
Action. The holders of Preferred Securities will not be able to
exercise directly any other remedy available to the holders of
the Convertible Subordinated Debentures.
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
"--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. Notwithstanding the foregoing, if a
Declaration Event of Default has occurred and is continuing and
such event is attributable to the failure of the Company to pay
interest or principal on the Convertible Subordinated Debentures
on the date such interest or principal is otherwise payable (or
in the case of redemption, the redemption date), then a holder
of Preferred Securities may directly institute a proceeding
for enforcement of payment to such holder of the principal of or
interest on the Convertible Subordinated Debentures having
a principal amount equal to the aggregate liquidation amount
of the Preferred Securities of such holder on or after the
respective due date specified in the Convertible Subordinated
Debentures. 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
"--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 again 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 the material provisions of the Registration
Rights Agreement does not purport to be complete, and reference is
made to the Registration Rights Agreement filed as an exhibit to
the Registration Statement.
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. 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, as amended, 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 agreed,
to the extent set forth therein, 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 not apply to the payment of
distributions and other payments on the Preferred Securities when
the Property 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 Property 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." The Guarantee, when taken together with the Company's
obligations under the Convertible Subordinated Debentures, the
Indenture and the Declaration, including its obligations to pay
costs, expenses, debts and liabilities of the Trust (other than with
respect to the Trust Securities), will provide a full and
unconditional guarantee on a subordinated basis by the Company of
amounts due on the Preferred Securities.
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. Subject to the rights of holders of the
Preferred Securities to institute legal action directly against
Continental to enforce such holder's rights under the Guarantee
without first instituting a legal proceeding against any other
person or entity, 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
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.
Notwithstanding the foregoing, if the Company has failed to make
a guarantee payment, a holder of Preferred Securities may
directly institute a proceeding against the Company for
enforcement of the Guarantee for such payment. The Company waives
any right or remedy to require that any action be brought first
against the Trust or any other person or entity before proceeding
directly against the Company.
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.
The Guarantee will constitute a guarantee of payment and
not of collection (that is, the guaranteed party may institute a
legal proceeding directly against the guarantor to enforce its
rights under the Guarantee without instituting a legal proceeding
against any other person or entity).
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, as amended, 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 Tax Event or Investment
Company 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
---- ----------
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 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. 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.
The Property Trustee is the initial holder of the
Convertible Subordinated Debentures. An Event of Default also
constitutes a Declaration Event of Default. The holders of
Preferred Securites in certain circumstances have the right to
direct the Property Trustee to exercise its rights as the holder
of the Convertible Subordinated Debentures . See "Description of
the Preferred Securities--Declaration Events of Default" and
"--Voting Rights." Notwithstanding the foregoing, if an Event of
Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or
principal on the Convertible Subordinated Debentures on the date
such interest or principal is otherwise payable (or in the case
of redemption, the redemption date), the Company acknowledges
that a holder of Preferred Securities may institute a Direct
Action for payment on or after the respective due date specified
in the Convertible Subordinated Debentures. Notwithstanding any
payments made to such holder of Preferred Securities by the
Company in connection with a Direct Action, the Company shall
remain obligated to pay the principal of or interest on the
Convertible Subordinated Debentures held by the Trust or the
Property Trustee of the Trust, and the Company shall be
subrogated to the rights of the holder of such Preferred
Securities with respect to payments on the Preferred Securities
to the extent of any payments made by the Company to such holder
in any Direct Action. The holders of Preferred Securities will
not be able to exercise directly any other remedy available to
the holders of the Convertible Subordinated Debentures.
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 provides that Continental will pay all debts
and obligations (other than with respect to the Trust Securities)
and all costs and expenses of the Trust, including, but not
limited to, the fees and expenses of the Continental Trustees and
any taxes and the costs and expenses with respect thereto, to
which the Trust may become subject, except for United States
withholding taxes.
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 does not
apply to any payment of distributions unless and until the Trust
has sufficient funds for the payment of such distributions. The
Guarantee covers the payment of distributions and other payments
on the Preferred Securities only if and to the extent that the
Company has made a payment of interest or principal on the
Convertible Subordinated Debentures held by the Trust as its sole
asset.
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. Notwithstanding the foregoing, if a Declaration Event
of Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or
principal on the Convertible Subordinated Debentures on the date
such interest or principal is otherwise payable (or in the case
of redemption, the redemption date), then a holder of Preferred
Securities may directly institute a proceeding for enforcement
of payment to such holder of the principal of or interest on
the Convertible Subordinated Debentures having a principal amount
equal to the aggregate liquidation amount of the Preferred
Securities of such holder on or after the respective due date
specified in the Convertible Subordinated Debentures. In
connection with such Direct Action, the Company will be
subrogated to the rights of such holder of Preferred Securities
under the Declaration to the extent of any payment made by the
Company to such holder of Preferred Securities. If the Company
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. Any holder of Preferred Securities may
institute a legal proceeding directly against the Company
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.
The Guarantee, when taken together with the Company's
obligations under the Convertible Subordinated Debentures and the
Indenture and its obligations under the Declaration, including
its obligations to pay costs, expenses, debts and liabilities of
the Trust (other than with respect to the Trust Securities),
provides a full and unconditional guarantee by the Company of
amounts due on the Preferred Securities. See "Description of the
Guarantee--General."
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--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,
200,000,000 shares of Class B common stock and 50,000,000
shares of Class D common stock (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"). As of May 31, 1996,
there were 4,640,000 outstanding shares of Class A common
stock, 23,276,788 outstanding shares of Class B common stock
and 421,717 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 the conversion rights of holders of Class A common stock
described under "--Class B Common Stock and Class A Common Stock"
and the anti-dilution rights 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 classes 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 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 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 owned as of May 31, 1996 in the
aggregate approximately 19.8% of the outstanding Class A common
stock and Class B common stock, representing approximately 43.3%
of total voting power (after conversion by Air Canada of its
Class A common stock into Class B common stock, but excluding the
exercise of warrants held by Air Partners) 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).
At any time after January 1, 1997 shares of Class A common
stock will become freely convertible 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.
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 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 portion of the shares that may be voted by
Foreigners under the Foreign Ownership Restrictions.
Corporate Governance and Control
Board of Directors
The Certificate of Incorporation provides that the
Company's Board of Directors shall consist of such number of
directors as may be determined from time to time by the Board of
Directors in accordance with the Bylaws. The Board of Directors
currently consists of twelve directors to be elected by holders
of common stock, subject to the rights of holders of preferred
stock to elect additional directors as set forth in any preferred
stock designation.
Business Combinations
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.
Anti-dilution Rights of Air Partners
Pursuant to the Certificate of Incorporation, Air Partners
has 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 Air Partners if the total
voting power of the common stock beneficially owned by it is less
than 20% of the total voting power of all of the outstanding
common stock. Because Air Partners currently does not own any
Class B common stock, such anti-dilution rights are not
operative.
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 Air Partners to elect
directors and otherwise to preserve its relative ownership and
voting positions. These provisions may have the effect of
delaying, deferring or preventing a change in control of the
Company.
Special Class of Common Stock
The Certificate of Incorporation authorizes Class D
common stock as a mechanism to provide, under certain
circumstances, a specified level of Board representation
for Air Partners. No shares of Class D common stock are
currently outstanding, and they may only be issued in l
imited circumstances upon conversion of Class A common
stock held by Air Partners. Air Partners 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 D common stock. Such right of
conversion is further conditioned upon Air Partners' holding
common stock having at least 20% of the total voting power of all
classes of common stock.
After such conversion, Air Partners is 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), voting as a separate class. 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 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 Air Partners
represents less than 20% of the voting power of all classes of
common stock, all Class D common stock held by Air Partners will
automatically convert into an equal number of shares of Class A
common stock. Shares of 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 D common stock to any person other than certain related
parties of the original holder. Air Partners may also at any time
voluntarily convert all (but not less than all) shares of Class D
common stock held by it into an equal number of shares of Class A
common stock. All shares of Class D common stock surrendered by
Air Partners for conversion into Class A common stock will be
canceled and may not be reissued.
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. As required under current Delaware law, the
Company's Certificate of Incorporation and Bylaws currently
provide 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. However, in the event the Delaware General Corporation
Law is amended to authorize corporate action further eliminating
or limiting the personal liability or directors, then the
liability of a director of the Company shall be eliminated or
limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. 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 the material 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
With respect to the Convertible Subordinated Debentures,
Cleary, Gottlieb, Steen & Hamilton, special counsel to
Continental and the Trust, has rendered 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
With respect to the Preferred Securities, Cleary, Gottlieb,
Steen & Hamilton, special counsel to Continental and the Trust,
has rendered 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,
a Tax Event occurs 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.
Effect of Proposed Changes in Tax Laws
The Clinton Administration has proposed statutory changes
in the Federal income tax rules relating to financial
instruments. Under one such proposal, debt with a maximum
maturity of more than 20 years that is not shown as debt on the
applicable balance sheet of the issuer would be characterized as
equity of the issuer, with the result that interest would be
nondeductible to the issuer. If this proposal were enacted and
applied to the Preferred Securities, a Tax Event would occur.
The Company has been advised by counsel that, under certain
transition rules contained in the proposed legislation, the
Preferred Securities would not be subject to such legislation.
Moreover, the Chairman of the House Ways and Means Committee and
the Senate Finance Committee, as well as the Ranking Minority
Members of the House Ways and Means Committee, have publicly
indicated that the proposals, if enacted, would not apply prior to
the date of "appropriate Congressional action." Thus, the
Company believes such proposed legislation, if ultimately
enacted, will not apply to the Preferred Securities.
Nevertheless, no absolute assurance can be given in this regard.
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.
Bear Stearns & Co. Inc. (an affiliate of Bear Stearns Securities
Corp.), BT Securities Corporation (an affiliate of Bankers Trust
Company), Goldman, Sachs & Co., Lehman Brothers, Inc. (an affiliate
of Lehman Brothers, International Europe - Prime Broker (LGSI)),
Merrill Lynch, Pierce, Fenner & Smith Incorporated (an affiliate
of Merrill Lynch Canada, Inc. and Merrill Lynch, Pierce, Fenner
and Smith Safekeeping), Morgan Stanley & Co. Incorporated (an
affiliate of Morgan Stanley Trust Company), NatWest Securities
Limited (an affiliate of NatWest Securities Corporation #2),
PaineWebber Incorporated and Salomon Brothers Inc have in the
past provided to Continental and/or its affiliates investment
banking and investment advisory services for which they have
received customary fees, and may in the future provide such
services. Bankers Trust Company (an affiliate of BT Securities
Corporation) acts as trustee under an indenture pursuant to
which Continental has issued convertible subordinated notes.
Number of
Preferred
Selling Holder Securities
-------------- ----------
Bear Sterns Securities Corp. ................. 687,000
The Chase Manhattan Bank, N.A. ............... 568,900
SSB-Custodian ................................ 556,392
Alpine Associates ............................ 493,000
Oppenheimer Main Street Funds Inc. for the
account of Oppenheimer Main Street Income &
Growth Fund .................................. 400,000
Oppenheimer Equity Income Fund ............... 250,000
Merrill Lynch, Pierce, Fenner
& Smith, Incorporated ........................ 227,458
Brown Brothers and Harriman Co. .............. 196,000
Bankers Trust Company ........................ 187,652
Lehman Brothers, Inc. ........................ 185,000
Boston Safe Deposit & Trust Co. .............. 130,600
NatWest Securities Corporation #2 ............ 120,000
Sun Trust .................................... 115,000
Investors Bank and Trust/N.A. Custody ........ 108,000
Fidelity Equity Income Fund .................. 103,700
Nomura International Trust Company 100,000
Incorporated .................................
Custodial Trust Company ...................... 65,000
Oppenheimer and Co., Inc. .................... 65,000
PaineWebber, Incorporated .................... 58,800
Lehman Brothers, International Europe -
Prime Broker (LGSI) ......................... 55,000
Merrill Lynch Canada, Inc. ................... 50,000
Wachovia Bank North Carolina ................. 32,300
BT Securities Corporation .................... 30,000
Morgan Stanley Trust Company ................. 30,000
Northern Trust Co. - Trust ................... 24,567
Bank of New York ............................. 20,400
Ince & Co. ................................... 20,000
Merrill Lynch, Pierce, Fenner
and Smith Safekeeping ........................ 20,000
Allstate Insurance Company ................... 20,000
First Tennessee Bank, S.A. (Memphis) ......... 19,100
Republic New York Securities Corp. ........... 15,000
Salomon Brothers Inc ......................... 15,000
Core States Bank N.A. ........................ 10,000
Chemical Bank ................................ 8,500
First Trust National Association ............. 4,480
Goldman, Sachs and Co......................... 2,098
Harris Trust and Savings Bank................. 1,300
Huntington National Bank...................... 1,153
Boatmen's Trust Company....................... 400
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. See "Plan of Distribution."
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 the Convertible Subordinated Debentures
and the Guarantee, and certain United States Federal income
taxation matters with respect to the Preferred Securities, will
be passed upon for the Issuer and the Company by Cleary,
Gottlieb, Steen & Hamilton, New York, New York, the validity of
the Preferred Securities will be passed upon for the Issuer and
the Company by Richards, Layton & Finger 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 Airlines,
Inc.'s Annual Report (Form 10-K) as of December 31, 1995 and
1994, and for the two years ended December 31, 1995 and the
period 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 CONTINENTAL AIRLINES FINANCE
other person has been TRUST
authorized to give any
information or to make any
representations not contained
in this prospectus and, if 4,500,000
given or made, such
information or representation
must not be relied upon as
having been authorized by 8 1/2% Convertible Trust
Continental Airlines, Inc. or Originated
Continental Airlines Finance
Trust or any of their agents. Preferred Securities
This prospectus does not
constitute an offer to sell or
a solicitation of an offer to
buy any of the securities Fully and Unconditionally
offered hereby in any Guaranteed by,
jurisdiction to any person to
whom it is unlawful to make and convertible into
such offer or solicitation in
such jurisdiction. Neither Class B common stock of,
the delivery of this
prospectus nor any sale made
hereunder shall, under any
circumstances, create any Continental Airlines, Inc.
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.............. PROSPECTUS
The Company..................
Recent Developments..........
Ratio of Earnings to
Combined Fixed Charges
and Preferred Stock
Dividends.................. Dated , 1996
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......................
=================================== ===================================
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 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 officer, director, shareholder, partner, member,
representative, employee or agent of the Trust or its affiliates
or any holder of Preferred Securities 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 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, Continental shall indemnify and hold
harmless each Indemnified Person from and against any loss,
damage, liability, tax, penalty, expense or claim 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 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
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 and expenses) incurred by an Indemnified
Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by Continental 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 Continental 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 may not be indemnified by
Continental or the Trust. The Selling Holders will be
indemnified by Continental 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. Continental 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 81/2% 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 4.4 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
4.8** Form of Second Amendment to Amended and Restated
Declaration of Trust
4.9** Form of Amendment to Preferred Securities Guarantee
4.10** Form of First Supplemental Indenture
5.1** Opinion of Richards, Layton & Finger as to the
validity of the Preferred Securities registered
hereby
5.2** Opinion of Cleary, Gottlieb, Steen & Hamilton as to
the validity of the Convertible Subordinated
Debentures and Preferred Securities Guarantee
registered hereby
5.3** Opinion of Jeffery A. Smisek, General Counsel of
Continental Airlines, Inc., as to the validity of the
Class B common stock being registered hereby
8.1** Opinion of Cleary, Gottlieb, Steen & Hamilton
relating to certain tax matters
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 Richards, Layton & Finger (included in its
opinion filed as Exhibit 5.1)
23.3** Consent of Cleary, Gottlieb, Steen & Hamilton
(included in its opinion filed as Exhibit 5.2)
23.4** Consent of Cleary, Gottlieb, Steen & Hamilton
(included in its opinion filed as Exhibit 8.1)
23.5** Consent of Jeffery A. Smisek, General Counsel of
Continental Airlines, Inc. (included in his opinion
filed as Exhibit 5.3)
23.6** Consent of Cleary, Gottlieb, Steen & Hamilton
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 81/2% 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
- - -------------------
* Previously filed
** Filed herewith
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 Securities Act of 1933 and will be governed
by the final adjudication of such issue.
(d) 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 eligibility 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 July 9, 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 July 9, 1996.
CONTINENTAL AIRLINES, INC.
By: /s/ Jeffery A. Smisek
-------------------------------
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following
persons in the capacities indicated, on July 9, 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
*
----------------------------
Patrick Foley Director
*
----------------------------
Douglas H. McCorkindale Director
----------------------------
George G.C. Parker Director
*
----------------------------
Richard W. Pogue Director
*
----------------------------
William S. Price III Director
*
----------------------------
Donald L. Sturm 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 81/2% 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 4.4 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
4.8** Form of Second Amendment to Amended and Restated
Declaration of Trust
4.9** Form of Amendment to Preferred Securities Guarantee
4.10** Form of First Supplemental Indenture
5.1** Opinion of Richards, Layton & Finger as to the
validity of the Preferred Securities registered
hereby
5.2** Opinion of Cleary, Gottlieb, Steen & Hamilton as to
the validity of the Convertible Subordinated
Debentures and Preferred Securities Guarantee
registered hereby
5.3** Opinion of Jeffery A. Smisek, General Counsel of
Continental Airlines, Inc., as to the validity of the
Class B common stock being registered hereby
8.1** Opinion of Cleary, Gottlieb, Steen & Hamilton
relating to certain tax matters
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 Richards, Layton & Finger (included in its
opinion filed as Exhibit 5.1)
23.3** Consent of Cleary, Gottlieb, Steen & Hamilton
(included in its opinion filed as Exhibit 5.2)
23.4** Consent of Cleary, Gottlieb, Steen & Hamilton
(included in its opinion filed as Exhibit 8.1)
23.5** Consent of Jeffery A. Smisek, General Counsel of
Continental Airlines, Inc. (included in his opinion
filed as Exhibit 5.3)
23.6** Consent of Cleary, Gottlieb, Steen & Hamilton
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 81/2% 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
- - -------------------
* Previously filed
** Filed herewith
SECOND AMENDMENT TO THE
AMENDED AND RESTATED DECLARATION OF TRUST
CONTINENTAL AIRLINES FINANCE TRUST
Dated as of July [__] 1996
SECOND AMENDMENT made as of July [__] 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, 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, as amended pursuant to the AMENDMENT TO AMENDED
AND RESTATED DECLARATION OF TRUST dated as of May 9, 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);
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, as further amended pursuant to an Amendment
to Amended and Restated Declaration of Trust dated as of May 9,
1996 (together the "Existing Declaration"), 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.l(a)(i) of the Existing
Declaration, the Regular Trustees wish to amend the Existing
Declaration in order to provide, on the terms and subject to the
conditions hereof, the Holders of Preferred Securities with a
Direct Action (as defined below) to enforce the payment to such
Holders of the principal of or interest on the Debentures having
a principal amount equal to the aggregate liquidation amount of
the Preferred Securities of such Holder;
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 Existing 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 Existing Declaration as follows:
1. Section 1.1 of the Existing Declaration is hereby amended by
adding the following definition after the definition of "Delaware
Trustee":
"Direct Action" has the meaning set forth in Section
3.8(e)."
2. Section 2.7(a) of the Existing Declaration is hereby amended
by adding the following sentence at the end thereof:
"Each notice given pursuant to this Section 2.7(a) shall
state that an Event of Default under the Indenture constitutes an
Event of Default with respect to the Securities."
3. Section 3.8 of the Existing Declaration is hereby amended by
deleting Section 3.8(e) therefrom and adding the following as a
new Section 3.8(e) thereof:
"(e) Subject to Section 3.9, 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 in accordance with Section
3.9; provided, however, that if an Event of Default has
occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to
pay interest or principal on the Debentures on the date
such interest or principal is otherwise payable (or in
the case of redemption, on the redemption date), then a
Holder of Preferred Securities may directly institute a
proceeding for enforcement of payment to such Holder of
the principal of or interest on the Debentures having a
principal amount equal to the aggregate liquidation
amount of the Preferred Securities of such Holder (a
"Direct Action") on or after the respective due date
specified in the Indenture. In connection with such
Direct Action, the rights of the Holder of the Common
Securities will be subrogated to the rights of such
Holder of Preferred Securities to the extent of any
payment made by the Debenture Issuer to such Holder of
Preferred Securities in such Direct Action. Except as
provided in the preceding sentences, the Holders of
Preferred Securities will not be able to exercise
directly any other remedy available to the holders of
the Debentures."
4. Annex I of the Existing Declaration is hereby amended by
deleting the first paragraph of Section 6(b) on pages 1-13 and 1-
14 therefrom and adding the following as a new Section 6(b)
thereof:
"(b) 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, including directing
the time, method, and place of conducting any
proceeding for any remedy available 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 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. If the Property Trustee fails to
enforce its rights, as holder of the Debentures, under
the Indenture, after a Holder of Preferred Securities
has made a written request to the Property Trustee to
enforce such rights, such Holder may institute a legal
proceeding directly against any Person to enforce the
Property Trustee's rights under the Debentures, without
first instituting a legal proceeding against the
Property Trustee or any other Person. Notwithstanding
the foregoing, if an Event of Default has occurred and
is continuing and such event is attributable to the
failure of the Debenture Issuer to pay interest or
principal on the Debentures on the date such interest
or principal is otherwise payable (or in the case of
redemption, on the redemption date), then a Holder of
Preferred Securities may directly institute a
proceeding for enforcement of payment to such Holder of
the principal of or interest on the Debentures having a
principal amount equal to the aggregate liquidation
amount of the Preferred Securities of such Holder (a
"Direct Action") on or after the respective due date
specified in the Debentures. In connection with such
Direct Action, the Holder of the Common Securities will
be subrogated to the rights of such Holder of Preferred
Securities to the extent of any payment made by the
Debenture Issuer to such Holder of Preferred Securities
in such Direct Action. Other than with respect to
directing the time, method and place of conducting any
proceeding for a remedy available to the Property
Trustee or the Debenture Trustee as set forth above,
the Property Trustee shall not take any of the actions
described in clauses (i), (ii), (iii) or (iv) above in
accordance with the directions of the Holders of the
Preferred Securities 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. Except as provided in the preceding
sentences, the Holders of Preferred Securities will not
be able to exercise directly any other remedy available
to the holders of the Debentures."
5. Annex I of the Existing Declaration is hereby amended by
adding the following proviso at the end of the sentence
constituting Section 8(a) thereof, on page 1-17:
"; provided, further, that the rights of Holders of
Preferred Securities under Section 3.8(e) of the
Declaration to take a Direct Action shall not be
amended without the consent of each Holder of Preferred
Securities"
6. This Amendment shall become effective when executed by each
of the Regular Trustees. Upon the execution of this Amendment,
the Existing 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 Existing Declaration shall continue to be and shall remain in
full force and effect.
7. Securities authenticated and delivered after the execution
of this Amendment may, but need not, bear a notation in form
approved by the Regular Trustees and 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.
8. 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.
9. In accordance with Section 12.1(b)(i) of the Existing
Declaration, 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
Existing Declaration (including the terms of the Securities).
10. 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
conflicts 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
___________________________
_____________________________________________________________
AMENDMENT TO THE
PREFERRED SECURITIES GUARANTEE AGREEMENT
CONTINENTAL AIRLINES, INC.
Dated as of July [__], 1996
____________________________________________________________
AMENDMENT made as of July [__], 1996 by Continental
Airlines, Inc., a Delaware corporation (the "Guarantor"), and
Wilmington Trust Company, a Delaware banking corporation, not in
its individual capacity but solely as trustee (the "Preferred
Guarantee Trustee"), to the PREFERRED SECURITIES GUARANTEE
AGREEMENT dated and effective as of November 28, 1995 (as
modified, supplemented or amended from time to time, the
"Preferred Securities Guarantee"; capitalized terms used but not
defined herein shall have the meanings given to them in the
Preferred Securities Guarantee);
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust dated as of November 28, 1995, among the trustees of
Continental Airlines Finance Trust, a Delaware statutory business
trust (the "Issuer"), the Guarantor, as trust sponsor, and the
holders from time to time of undivided beneficial interests in
the assets of the Issuer, as amended by the Amendment to Amended
and Restated Declaration of Trust dated as of May 9, 1996
executed by the trustees thereto, as further amended by the
Second Amendment to Amended and Restated Declaration of Trust
dated as of July [__], 1996 executed by the trustees thereto (the
"Declaration"), the Issuer has issued 4,997,000 preferred
securities, having an aggregate stated liquidation amount of
$249,850,000, designated the 8-1/2% Convertible Trust Originated
Preferred Securities (collectively the "Preferred Securities");
WHEREAS, pursuant to Section 9.2 of the Preferred Securities
Guarantee dated and effective as of November 28, 1995, the
Guarantor and the Preferred Guarantee Trustee wish to amend the
Preferred Securities Guarantee in order to provide that,
notwithstanding the other provisions of the Preferred Securities
Guarantee, if the Guarantor has failed to make a Guarantee
Payment, a Holder of Preferred Securities may directly institute
a proceeding against the Guarantor for enforcement of the
Preferred Securities Guarantee for such payment;
NOW THEREFORE, the Guarantor and the Preferred Guarantee
Trustee execute and deliver this Amendment to the Preferred
Securities Guarantee for the benefit of the Holders.
1. Section 5.5(1)) of the Preferred Securities Guarantee dated
and effective as of November 28, 1995 is hereby amended by adding
the following two sentences as the second and third
sentences thereof:
"Notwithstanding the foregoing, if the Guarantor has
failed to make a Guarantee Payment, a Holder of
Preferred Securities may directly institute a
proceeding against the Guarantor for enforcement of the
Preferred Securities Guarantee for such payment. The
Guarantor waives any right or remedy to require that
any action be brought first against the Issuer or any
other Person or entity before proceeding directly
against the Guarantor."
2. This Amendment shall become effective when executed by the
Guarantor and the Preferred Guarantee Trustee. Upon the execution
of this Amendment, the Preferred Securities Guarantee shall be
modified in accordance herewith, and this Amendment shall form a
part of the Preferred Securities Guarantee for all purposes. This
Amendment and the Preferred Securities Guarantee are solely for
the benefit of the Holders of the Preferred Securities and,
subject to Section 3.1(a) of the Preferred Securities Guarantee,
are not separately transferable from the Preferred Securities.
Except as expressly amended hereby, the Preferred Securities
Guarantee shall continue to be and shall remain in full force and
effect.
3. Governing Law. THIS AMENDMENT 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 AMENDMENT to the PREFERRED SECURITIES GUARANTEE
AGREEMENT 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:
_________________________________________________________________
CONTINENTAL AIRLINES, INC.,
Issuer
and
WILMINGTON TRUST COMPANY,
not in its individual capacity,
but solely as Trustee
_________________________________
FIRST SUPPLEMENTAL INDENTURE
Dated as of July ___, 1996
_________________________________________________________________
Supplemental to Indenture dated as of November 28, 1995
FIRST SUPPLEMENTAL INDENTURE dated as of July ___, 1996
(this "Supplemental Indenture"), made and entered into by and
between Continental Airlines, Inc., a corporation duly organized
and existing under the laws of the State of Delaware (herein called
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") under the Indenture of the Company dated as of November
28, 1995 (such Indenture as supplemented to the date hereof, the
"Indenture").
WHEREAS, Section 901 of the Indenture provides that the
Company, when authorized by a Board Resolution, and the Trustee may
enter into one or more indentures supplemental to the Indenture
without the consent of any Holders to, among other things, make any
provision with respect to matters or questions arising under the
Indenture which shall not be inconsistent with the provisions of
the Indenture, provided that such action shall not adversely affect
the interests of the Holders of the Securities or, so long as any
of the Preferred Securities shall remain outstanding, the holders
of the Preferred Securities;
WHEREAS, the Company desires to provide, on the terms and
subject to the conditions set forth below, holders of Preferred
Securities with the right to directly institute a proceeding for
enforcement of payment to such holder of Preferred Securities of
the principal of or interest on the Securities having a principal
amount equal to the aggregate liquidation amount of the Preferred
Securities of such holder; and
WHEREAS, the entry into this Supplemental Indenture by
the parties hereto is in all respects authorized by the provisions
of the Indenture; and
WHEREAS, the Company has duly authorized the execution
and delivery of this Supplemental Indenture, and all things
necessary to make this Supplemental Indenture a valid agreement of
the Company, in accordance with its terms, have been done:
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
For and in consideration of the premises set forth
herein, it is mutually agreed, for the equal and proportionate
benefit of all Holders of the Securities, as follows:
1. Article Five of the Indenture is hereby amended by
replacing in its entirety Section 516 as follows:
"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 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. Notwithstanding the foregoing, if an Event of
Default has occurred and is continuing and such event is
attributable to the failure of the Company to pay interest or
principal on the Securities on the date such interest or principal
is otherwise payable (or in the case of redemption, on
the redemption date), then a holder of Preferred Securities may
directly institute a proceeding for enforcement of payment to
such holder of Preferred Securities of the principal of or
interest on the Securities having a principal amount equal to
the aggregate liquidation amount of the Preferred Securities of
such holder on or after the respective due date specified in
the Securities.
2. For all purposes of the Indenture and this
Supplemental Indenture, except as otherwise expressly provided or
unless the context otherwise requires:
a. the terms defined in this Supplemental Indenture have
the meanings assigned to them in this Supplemental Indenture;
b. the words "herein", "hereof" and "hereunder" and
other words of similar import refer to the Indenture and this
Supplemental Indenture as a whole and not to any particular
Article, Section, Clause or other subdivision; and
c. capitalized terms used but not defined herein are
used as they are defined in the Indenture.
3. All covenants and agreements in this Supplemental
Indenture by the Company shall bind its successors and assigns,
whether so expressed or not.
4. In case any provision in this Supplemental Indenture
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.
5. If any provision of this Supplemental Indenture
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 Supplemental Indenture 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
Supplemental Indenture as so modified or to be excluded, as the
case may be.
6. Nothing in this Supplemental Indenture, expressed 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 Supplemental
Indenture.
7. THIS SUPPLEMENTAL INDENTURE 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.
8. The Indenture, as supplemented and amended by this
Supplemental Indenture and all other indentures supplemental
thereto, is in all respects ratified and confirmed, and the
Indenture, this Supplemental Indenture and all indentures
supplemental thereto shall be read, taken and construed as one
and the same instrument.
9. This Supplemental Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed
to be an original, but all such counterparts shll together
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental 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:___________________________
Name:
Title:
WILMINGTON TRUST COMPANY, not in its
individual capacity but solely as Trustee
By:______________________
Name:
Title:
Attest:___________________________
Name:
Title:
July 3, 1996
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Continental Airlines Finance Trust
c/o Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Re: Continental Airlines Finance Trust - Registration
Statement on Form S-3
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 above-referenced Registration Statement on
Form S-3 (File No. 333-04601) (the "Registration Statement")
filed on May 24, 1996 with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended, which
registers resales of the, inter alia, 8-1/2% Convertible Trust
Originated Preferred Securities (the "Preferred Securities") of
the Trust. At your request, this opinion is being furnished to
you.
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 (collectively, the "Trustees"), filed as Exhibit 4.1 to
the Registration Statement, as amended and restated pursuant to
an Amended and Restated Declaration of Trust of the Trust, dated
as of November 28, 1995, filed as Exhibit 4.2 to the Registration
Statement, among Continental, the Trustees and the holders, from
time to time, of the undivided beneficial interests in the assets
of the Trust (collectively, the "Beneficiaries") and as further
amended by the Amendment to the Amended and Restated Declaration
of Trust, dated as of May 9, 1996 filed as Exhibit 4.3 to the
Registration Statement, the form of the Second Amendment to the
Amended and Restated Declaration of Trust, filed as Exhibit 4.8
to the Registration Statement, in each case among Continental,
the Trustees and the Beneficiaries (collectively, the "Declaration");
(c) The Registration Statement; and
(d) A Certificate of Good Standing for the Trust, dated
July 3, 1996, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise
defined are used as defined in, or by reference in, the Trust
Agreement.
For purposes of this opinion we have not reviewed any
documents other than the documents listed in paragraphs (a)
through (d) above. In particular, we have not reviewed any
document (other than the documents listed in paragraphs (a)
through (d) 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 bears upon or 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 (i) that the
Declaration constitutes the entire agreement among the parties
thereto with respect to the subject matter thereof, including
with respect to the creation, operation and termination of the
Trust, and that 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, the due creation or due
organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents
examined by us under the laws of the jurisdiction governing its
creation, organization or formation, (iii) the legal capacity of
natural persons who are parties to the documents examined by us,
(iv) that 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) the due authorization,
execution and delivery by all parties thereto of all documents
examined by us, (vi) the receipt by each Person to whom a
Preferred Security is to be issued by the Trust (collectively,
the "Preferred Security Holders") of a Preferred Securities
Certificate for such Preferred Security and the payment for the
Preferred Security acquired by it, in accordance with the
Declaration and the Registration Statement, and (vii) that the
Preferred Securities are issued and sold to the Preferred
Security Holders in accordance with the Declaration and the
Registration Statement. We have not participated in the
preparation of the Registration Statement 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 which 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.
2. The Preferred Securities to be issued to the Preferred
Security Holders have been duly authorized and will be validly
issued and, subject to the qualifications set forth in paragraph
3 below, will be fully paid and nonassessable undivided
beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of
the Trust, 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 Preferred Security Holders may be
obligated to make payments as set forth in the Declaration.
We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Registration
Statement. In addition, we hereby consent to the use of our name
under the heading "Legal Matters" in the related prospectus. In
giving the foregoing consents, we do not thereby admit that we
come within the category of Persons whose consent is required
under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations of the Securities and Exchange Commission
thereunder. Except as stated above, without our prior written
consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.
Very truly yours,
RICHARDS, LAYTON & FINGER
EAM/aet
Writer's Direct Dial: (212) 225-2420
July 9, 1996
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Continental Airlines Finance Trust
c/o Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
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 registration under the Securities Act of
1933, as amended (the "Act"), of resales of (i) the 8 1/2%
Convertible Trust Originated Preferred SecuritiesSM (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, (ii) the Company's 8 1/2%
Convertible Subordinated Deferrable Interest Debentures Due 2020
(the "Debentures") issued under the indenture dated as of
November 28, 1995, between the Company and Wilmington Trust
Company, as trustee, (iii) the Preferred Securities Guarantee
Agreement of the Company 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 (the "Guarantee"), and (iv) the shares (the
"Conversion Shares") of the Company's Class B common stock, $.01
par value, into which the Debentures are convertible. The
Preferred Securities, the Debentures, the Guarantee and the
Conversion Shares are being registered under a registration
statement of the Company and the Trust (File No. 333-04601) on
Form S-3 (the "Registration Statement") under the Act which has
been filed with the Securities and Exchange Commission.
We have participated in the preparation of the
Registration Statement and have reviewed originals or copies
certified or otherwise identified to our satisfaction of all such
documents and 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 and (ii) that the Debentures have been
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 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.
2. The execution and delivery of the Guarantee has
been duly authorized by all necessary corporate action of the
Company, and the Guarantee has been duly executed and delivered
by the Company, and is a legal, valid, binding and enforceable
agreement of the Company.
Insofar as the foregoing opinions relate to the
legality, validity, binding effect or enforceability of any
agreement or obligation of the Company, (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 law of the
State of New York and the General Corporation Law of the State of
Delaware.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to
this firm under the heading "Legal Matters" in the Prospectus
included in the Registration Statement. In giving such consent,
we do not thereby admit that we are "experts" within the meaning
of the Act or the rules and regulations of the Securities and
Exchange Commission issued thereunder with respect to any part of
the Registration Statement, including this exhibit.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By /s/ Stephen H. Shalen
------------------------------
Stephen H. Shalen, a partner
July 3, 1996
Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Continental Airlines Finance Trust
do Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Ladies and Gentlemen:
I am Senior Vice President, General Counsel and
Secretary of Continental Airlines, Inc., a Delaware corporation
(the "Company"). You have requested my opinion in my capacity as
General Counsel of the Company in connection with the
registration under the Securities Act of 1933, as amended (the
"Act"), of resales of (i) the 8 1/2% Convertible Trust Originated
Preferred Securities SM (the "Preferred Securities") of
Continental Airlines Finance Trust, a Delaware statutory business
trust (the "Trust"), (ii) the Company's 8 1/2% Convertible
Subordinated Debentures Due 2020 (the "Debentures") issued under
the indenture dated as of November 28, 1995, between the Company
and Wilmington Trust Company, as trustee, as it may be amended
from time to time (the "Indenture"), (iii) the Preferred
Securities Guarantee, as it may be amended from time to time (the
"Guarantee"), of the Company and (iv) the shares (the "Conversion
Shares") of the Company's Class B common stock, $.01 par value,
into which the Debentures are convertible. The Preferred
Securities, the Debentures, the Guarantee and the Conversion
Shares are being registered under a registration statement of the
Company and the Trust (File No.333-04601) on Form S-3 (the
"Registration Statement") under the Act which has been filed with
the Securities and Exchange Commission.
I have participated in the preparation of the
Registration Statement and have reviewed the originals or copies
certified or otherwise identified to my satisfaction of all such
instruments and other documents, and I have made such
investigations of law, as I have deemed appropriate as a basis
for the opinion expressed below.
Based on the foregoing, it is my opinion that the
Conversion Shares have been duly authorized by all necessary
corporate action on the part of the Company and reserved for
issuance 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.
I express no opinion other than as to the General
Corporation Law of the State of Delaware.
The opinion expressed herein is rendered solely for the
benefit of the Company in connection with the filing of the
Registration Statement. This opinion may not be used or relied
upon by any other person, nor may this letter or any copy thereof
be furnished to a third party, filed with a governmental agency,
quoted, cited or otherwise referred to without my prior written
consent.
I hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to me
under the caption "Legal Matters" therein. In so doing, I do not
admit that I am in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations
thereunder.
Very truly yours,
/s/ Jeffery A. Smisek
July 9, 1996
Writer's Direct Dial
(212) 225-2360
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019-4607
Continental Airlines Finance Trust
c/o Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019-4607
Re: Continental Airlines Finance Trust - Registration
Statement on Form S-3
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 registration under the Securities Act of
1933, as amended (the "Act"), of resales of (i) the 8 1/2%
Convertible Trust Originated Preferred SecuritiesSM (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 of Trust"), 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, (ii)
the Company's 8 1/2% Convertible Subordinated Deferrable Interest
Debentures Due 2020 (the "Debentures") issued under the indenture
dated as of November 28, 1995 (the "Indenture"), between the
Company and Wilmington Trust Company, as trustee, (iii) the
Preferred Securities Guarantee Agreement of the Company 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 (the "Guarantee"), and
(iv) the shares (the "Conversion Shares") of the Company's Class
B common stock, $.01 par value, into which the Debentures are
convertible. The Preferred Securities, the Debentures, the
Guarantee and the Conversion Shares are being registered under a
registration statement of the Company and the Trust (File No.
333-04601) on Form S-3 (the "Registration Statement") under the
Act which has been filed with the Securities and Exchange
Commission.
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 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 or entity purported to
be bound thereby. In addition, for purposes of rendering the
opinions express below, we have assumed, without investigation on
our part, that the 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 Debentures will constitute indebtedness of the
Company; and
(ii) 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.
The opinions expressed above are based on the Internal
Revenue Code of 1986, as amended and other law and regulations,
rulings and decisions in effect on the date hereof, all of which
are subject to change (which change could apply retroactively).
We also hereby confirm, subject to the assumptions,
qualifications and conditions contained herein, that the
statements set forth in the form of the Prospectus included in
the Registration Statement under the heading "United States
Taxation" accurately describe the material United States federal
income tax consequences of the purchase of the Preferred
Securities.
We note that this opinion letter speaks only as of the
date hereof, and we assume no obligation to update this opinion
letter.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to
this firm under the headings "Legal Matters" and "United States
Taxation" in the Prospectus included in the Registration
Statement. In giving such consent, we do not thereby admit that
we are "experts" within the meaning of the Act or the rules and
regulations of the Securities and Exchange Commission issued
thereunder with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By: /s/ Dana L. Trier
______________________________
Dana L. Trier, a Partner
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption
"Experts" in 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.
Ernst & Young LLP
Houston, Texas
July 9, 1996
[LETTERHEAD OF CLEARY, GOTTLIEB, STEEN & HAMILTON]
July 9, 1996
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
Re: Registration Statement on Form S-3
(File No. 333-04601)
Ladies & Gentlemen:
We hereby consent to the reference to this firm under
the headings "Legal Matters" and "United States Taxation" in the
Prospectus included in the above-referenced Registration
Statement. In giving such consent, we do not thereby admit that
we are "experts" within the meaning of the Act or the rules and
regulations of the Securities and Exchange Commission issued
thereunder with respect to any part of the Registration
Statement, including this exhibit.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By /s/ Dana L. Trier
-------------------------------
Dana L. Trier, a Partner
Registration No.
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO
SECTION 305(b)(2) X
---
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
CONTINENTAL AIRLINES, INC.
(Exact name of obligor as specified in its charter)
Delaware 74-2099724
(State of incorporation (I.R.S. employer identification no.)
or formation)
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
(Address of principal executive offices) (Zip Code)
Convertible Subordinated Deferrable Interest Debentures
(Title of the indenture securities)
- - -----------------------------------------------------------------
- - -----------------------------------------------------------------
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Federal Deposit Insurance Co. State Bank
Five Penn Center Commissioner
Suite #2901 Dover, Delaware
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee,
describe each affiliation:
Based upon an examination of the books and records of
the trustee and upon information furnished by the
obligor, the obligor is not an affiliate of the
trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this
Statement of Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington
Trust Company to commence business and the
authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by
Section 321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington
Trust Company.
Pursuant to the requirements of the Trust Indenture Act of
1939, the trustee, Wilmington Trust Company, a corporation
organized and existing under the laws of Delaware, has duly
caused this Statement of Eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in the City of
Wilmington and State of Delaware on the 23rd day of May, 1996.
[SEAL] WILMINGTON TRUST COMPANY
Attest:/s/ Sharon M. Brendle By: /s/ Emmett R. Harmon
----------------- ----------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act
of the General Assembly of the State of Delaware, entitled "An
Act to Incorporate the Delaware Guarantee and Trust Company",
approved March 2, A.D. 1901, and the name of which company was
changed to "Wilmington Trust Company" by an amendment filed in
the Office of the Secretary of State on March 18, A.D. 1903, and
the Charter or Act of Incorporation of which company has been
from time to time amended and changed by merger agreements
pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend
its Charter or Act of Incorporation so that the same as so
altered and amended shall in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust
Company.
Second: - The location of its principal office in the State
of Delaware is at Rodney Square North, in the City of
Wilmington, County of New Castle; the name of its resident
agent is Wilmington Trust Company whose address is Rodney
Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware,
the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New
Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open,
maintain and operate branch offices at Ninth and Shipley
Streets, 418 Delaware Avenue, 2120 Market Street, and 3605
Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the
agency or agencies of the government of the State of
Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and
purposes proposed to be transacted, promoted or carried on
by this Corporation are to do any or all of the things
herein mentioned as fully and to the same extent as natural
persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any
Court of law or equity and to make and use a common
seal, and alter the seal at pleasure, to hold,
purchase, convey, mortgage or otherwise deal in real
and personal estate and property, and to appoint such
officers and agents as the business of the Corporation
shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences
of debt, to receive deposits of money, or securities
for money, to buy gold and silver bullion and foreign
coins, to buy and sell bills of exchange, and generally
to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation
which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or
any estate or interests therein, and to guarantee the
holder of such property, real or personal, against any
claim or claims, adverse to his interest therein, and
to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management
of funds, and the purchase, sale, management and
disposal of property of all descriptions, and to
prepare and execute all papers which may be necessary
or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers
of every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money,
jewelry, plate, deeds, bonds and any and all other
personal property of every sort and kind, from
executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all
fiduciaries, and from all other persons and
individuals, and from all corporations whether state,
municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking
fund therefor on such terms as may be agreed upon
between the two parties, and in like manner may act as
Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust,
mortgage, bond or other instrument issued by any state,
municipality, body politic, corporation, association or
person, either alone or in conjunction with any other
person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect
of any contract or agreement, and the fidelity of
persons holding places of responsibility or trust; to
become surety for any person, or persons, for the
faithful performance of any trust, office, duty,
contract or agreement, either by itself or in
conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation,
judgment, suit, order, or decree to be entered in any
court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of
Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee,
assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and
all estates and property, real, personal or mixed, and
to be appointed as such trustee, trustee in bankruptcy,
receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any
other trust capacity, it shall not be required to give
bond with surety, but its capital stock shall be taken
and held as security for the performance of the duties
devolving upon it by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake
or be called upon to perform, or for the assumption of
any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds,
mortgages, debentures, shares of capital stock, and
other securities, obligations, contracts and evidences
of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware,
or of the Government of the United States, or of any
state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect,
receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and
other property held and owned by it, and to exercise in
respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and
other property, any and all the rights, powers and
privileges of individual owners thereof, including the
right to vote thereon; to invest and deal in and with
any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by
pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and
when the Board of Directors shall determine, and in the
promotion of its said corporate business of investment
and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge,
mortgage and convey real and personal property of any
name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have
the following powers:
(1) To do any or all of the things herein set forth,
to the same extent as natural persons might or could
do, and in any part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of
the assets and liabilities of any person, firm,
association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to
hold or in any manner to dispose of the whole or any
part of the property so purchased; to conduct in any
lawful manner the whole or any part of any business so
acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of
such business.
(3) To take, hold, own, deal in, mortgage or otherwise
lien, and to lease, sell, exchange, transfer, or in any
manner whatever dispose of property, real, personal or
mixed, wherever situated.
(4) To enter into, make, perform and carry out
contracts of every kind with any person, firm,
association or corporation, and, without limit as to
amount, to draw, make, accept, endorse, discount,
execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or
any of its operations and businesses, without
restriction to the same extent as natural persons might
or could do, to purchase or otherwise acquire, to hold,
own, to mortgage, sell, convey or otherwise dispose of,
real and personal property, of every class and
description, in any State, District, Territory or
Colony of the United States, and in any foreign country
or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this
paragraph shall (except where otherwise expressed in
said paragraph) be nowise limited or restricted by
reference to or inference from the terms of any other
clause of this or any other paragraph in this charter,
but that the objects, purposes and powers specified in
each of the clauses of this paragraph shall be regarded
as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
forty-one million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock,
par value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock,
par value $1.00 per share (hereinafter referred to as
"Common Stock").
(b) Shares of Preferred Stock may be issued from time to
time in one or more series as may from time to time be
determined by the Board of Directors each of said series to
be distinctly designated. All shares of any one series of
Preferred Stock shall be alike in every particular, except
that there may be different dates from which dividends, if
any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative,
participating, optional and other special rights of each
such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any
and all other series at any time outstanding; and, subject
to the provisions of subparagraph 1 of Paragraph (c) of this
Article Fourth, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock, the voting powers and
the designations, preferences and relative, optional and
other special rights, and the qualifications, limitations
and restrictions of such series, including, but without
limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of
shares of Preferred Stock which shall constitute such
series, which number may be increased (except where
otherwise provided by the Board of Directors) or
decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred
Stock of such series shall be paid, the extent of the
preference or relation, if any, of such dividends to
the dividends payable on any other class or classes, or
series of the same or other class of stock and whether
such dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred
Stock of such series to convert the same into or
exchange the same for, shares of any other class or
classes or of any series of the same or any other class
or classes of stock of the Corporation and the terms
and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series
shall be subject to redemption, and the redemption
price or prices and the time or times at which, and the
terms and conditions on which, Preferred Stock of such
series may be redeemed.
(5) The rights, if any, of the holders of Preferred
Stock of such series upon the voluntary or involuntary
liquidation, merger, consolidation, distribution or
sale of assets, dissolution or winding-up, of the
Corporation.
(6) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the
Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such
series of Preferred Stock which may, without limiting
the generality of the foregoing include the right,
voting as a series or by itself or together with other
series of Preferred Stock or all series of Preferred
Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the
payment of dividends on any one or more series of
Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to
preferential dividends on the Preferred Stock (fixed in
accordance with the provisions of section (b) of this
Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements,
if any, with respect to the setting aside of sums as sinking
funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this
Article Fourth), and subject further to any conditions which
may be fixed in accordance with the provisions of section
(b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board
of Directors.
(2) After distribution in full of the preferential
amount, if any, (fixed in accordance with the
provisions of section (b) of this Article Fourth), to
be distributed to the holders of Preferred Stock in the
event of voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding-
up, of the Corporation, the holders of the Common Stock
shall be entitled to receive all of the remaining
assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to
stockholders ratably in proportion to the number of
shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by
the provisions of such resolution or resolutions as may
be adopted by the Board of Directors pursuant to
section (b) of this Article Fourth, each holder of
Common Stock shall have one vote in respect of each
share of Common Stock held on all matters voted upon by
the stockholders.
(d) No holder of any of the shares of any class or series
of stock or of options, warrants or other rights to purchase
shares of any class or series of stock or of other
securities of the Corporation shall have any preemptive
right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or
series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or
series, or bonds, certificates of indebtedness, debentures
or other securities convertible into or exchangeable for
stock of the Corporation of any class or series, or carrying
any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares
of any class or series of stock or securities convertible
into or exchangeable for stock, or carrying any right to
purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms,
corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by
the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each
series of Preferred Stock in relation to the relative
powers, preferences and rights of each other series of
Preferred Stock shall, in each case, be as fixed from time
to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section
(b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the
series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the
Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such
other series shall be fixed by the Board of Directors as
senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred
Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the
outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of
Preferred Stock.
(f) Subject to the provisions of section (e), shares of any
series of Preferred Stock may be issued from time to time as
the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be
fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time
as the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be
fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be
increased or decreased from time to time by the affirmative
vote of the holders of a majority of the stock of the
Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation
shall be conducted and managed by a Board of Directors. The
number of directors constituting the entire Board shall be
not less than five nor more than twenty-five as fixed from
time to time by vote of a majority of the whole Board,
provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the
time in office, and provided further, that the number of
directors constituting the whole Board shall be twenty-four
until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three
classes, as nearly equal in number as the then total number
of directors constituting the whole Board permits, with the
term of office of one class expiring each year. At the
annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of
the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and
directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting.
Any vacancies in the Board of Directors for any reason, and
any newly created directorships resulting from any increase
in the directors, may be filled by the Board of Directors,
acting by a majority of the directors then in office,
although less than a quorum, and any directors so chosen
shall hold office until the next annual election of
directors. At such election, the stockholders shall elect a
successor to such director to hold office until the next
election of the class for which such director shall have
been chosen and until his successor shall be elected and
qualified. No decrease in the number of directors shall
shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and
notwithstanding the fact that some lesser percentage may be
specified by law, this Charter or Act of Incorporation or
the By-Laws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any
time without cause, but only by the affirmative vote of the
holders of two-thirds or more of the outstanding shares of
capital stock of the Corporation entitled to vote generally
in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for
that purpose.
(d) Nominations for the election of directors may be made
by the Board of Directors or by any stockholder entitled to
vote for the election of directors. Such nominations shall
be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the Secretary
of the Corporation not less than 14 days nor more than 50
days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than
21 days' notice of the meeting is given to stockholders,
such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later
than the close of the seventh day following the day on which
notice of the meeting was mailed to stockholders. Notice of
nominations which are proposed by the Board of Directors
shall be given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i)
the name, age, business address and, if known, residence
address of each nominee proposed in such notice, (ii) the
principal occupation or employment of such nominee and (iii)
the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was
not made in accordance with the foregoing procedure, and if
he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at
any annual or special meeting of stockholders of the
Corporation may be taken without a meeting, and the power of
stockholders to consent in writing, without a meeting, to
the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from
time to time find necessary or proper.
Seventh: - The Corporation hereby created is hereby given
the same powers, rights and privileges as may be conferred
upon corporations organized under the Act entitled "An Act
Providing a General Corporation Law", approved March 10,
1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private
Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a
majority of the whole Board, may designate any of their
number to constitute an Executive Committee, which
Committee, to the extent provided in said resolution, or in
the By-Laws of the Company, shall have and may exercise all
of the powers of the Board of Directors in the management of
the business and affairs of the Corporation, and shall have
power to authorize the seal of the Corporation to be affixed
to all papers which may require it.
Eleventh: - The private property of the stockholders shall
not be liable for the payment of corporate debts to any
extent whatever.
Twelfth: - The Corporation may transact business in any part
of the world.
Thirteenth: - The Board of Directors of the Corporation is
expressly authorized to make, alter or repeal the By-Laws of
the Corporation by a vote of the majority of the entire
Board. The stockholders may make, alter or repeal any By-
Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election
of directors (considered for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time
to time designated by the Board, and the Directors may keep
the books of the Company outside of the State of Delaware at
such places as may be from time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote
required by law, and except as otherwise expressly provided
in sections (b) and (c) of this Article Fifteenth:
(A) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with or into
(i) any Interested Stockholder (as hereinafter defined)
or (ii) any other corporation (whether or not itself an
Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter
defined) of an Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of related transactions) to or with any
Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation
or any Subsidiary having an aggregate fair market value
of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or
any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for
cash, securities or other property (or a combination
thereof) having an aggregate fair market value of
$1,000,000 or more, or
(D) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the
effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any
class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder, or any
Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least
two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors, considered for the purpose of this Article Fifteenth
as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required,
or that some lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
(2) The term "business combination" as used in
this Article Fifteenth shall mean any transaction
which is referred to any one or more of clauses
(A) through (E) of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article
Fifteenth shall not be applicable to any particular
business combination and such business combination
shall require only such affirmative vote as is required
by law and any other provisions of the Charter or Act
of Incorporation of By-Laws if such business
combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation
or other entity.
(2) "Interested Stockholder" shall mean, in respect of any
business combination, any person (other than the Corporation
or any Subsidiary) who or which as of the record date for
the determination of stockholders entitled to notice of and
to vote on such business combination, or immediately prior
to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly,
of more than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial
owner, directly or indirectly, of not less than 10% of
the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in
any share of capital stock of the Corporation which
were at any time within two years prior thereto
beneficially owned by any Interested Stockholder, and
such assignment or succession shall have occurred in
the course of a transaction or series of transactions
not involving a public offering within the meaning of
the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting
Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own,
directly or indirectly, or
(B) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or
options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or
indirectly, by any other person with which such first
mentioned person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares
deemed owned through application of paragraph (3) above but
shall not include any other Voting Shares which may be
issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of
1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a
majority of any class of equity security (as defined in Rule
3a11-1 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect in December
31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Investment Stockholder set forth in paragraph
(2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and
duty to determine for the purposes of this Article
Fifteenth on the basis of information known to them,
(1) the number of Voting Shares beneficially owned by
any person (2) whether a person is an Affiliate or
Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as
to the matters referred to in paragraph (3) of section
(c), or (4) whether the assets subject to any business
combination or the consideration received for the
issuance or transfer of securities by the Corporation,
or any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall
be construed to relieve any Interested Stockholder from
any fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this
Charter or Act of Incorporation or the By-Laws of the
Corporation (and in addition to any other vote that may be
required by law, this Charter or Act of Incorporation by the
By-Laws), the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election
of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this
Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not
be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a Director,
except to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter
be amended.
(b) Any repeal or modification of the foregoing
paragraph shall not adversely affect any right or
protection of a Director of the Corporation existing
hereunder with respect to any act or omission occurring
prior to the time of such repeal or modification."
I ___________________________________________
_________________ Secretary of Wilmington Trust
Company, do hereby certify that the foregoing is a
true and correct copy of the Charter or Act of
Incorporation of Wilmington Trust Company, as
heretofore amended and changed from time to time,
copies of which, certified by the Secretary of the
State of Delaware, are on file in the office of
Wilmington Trust Company.
Date __________________
_______________________________________
Secretary
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on February 21, 1991
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held
on the third Thursday in April each year at the principal office
at the Company or at such other date, time, or place as may be
designated by resolution by the Board of Directors.
Section 2. Special meetings of all stockholders may be
called at any time by the Board of Directors, the Chairman of the
Board or the President.
Section 3. Notice of all meetings of the stockholders shall
be given by mailing to each stockholder at least ten (10 days
before said meeting, at his last known address, a written or
printed notice fixing the time and place of such meeting.
Section 4. A majority in the amount of the capital stock of
the Company issued and outstanding on the record date, as herein
determined, shall constitute a quorum at all meetings of
stockholders for the transaction of any business, but the holders
of a small number of shares may adjourn, from time to time,
without further notice, until a quorum is secured. At each
annual or special meeting of stockholders, each stockholder shall
be entitled to one vote, either in person or by proxy, for each
shares of stock registered in the stockholder's name on the books
of the Company on the record date for any such meeting as
determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of
Directors shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-
two (72) years shall be nominated for election to the Board of
Directors of the Company, provided, however, that this limitation
shall not apply to any person who was serving as director of the
Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold
office for three years or until their successors are elected and
qualified.
Section 4. The affairs and business of the Company shall be
managed and conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall
be held on the third Thursday of each month at the principal
office of the Company, or at such other place and time as may be
designated by the Board of Directors, the Chairman of the Board,
or the President.
Section 6. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board of Directors
or by the President, and shall be called upon the written request
of a majority of the directors.
Section 7. A majority of the directors elected and
qualified shall be necessary to constitute a quorum for the
transaction of business at any meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each
director of any special meeting of the Board of Directors, and of
any change in the time or place of any regular meeting, stating
the time and place of such meeting, which shall be mailed not
less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board
of Directors, although less than a quorum, shall have the right
to elect the successor who shall hold office for the remainder of
the full term of the class of directors in which the vacancy
occurred, and until such director's successor shall have been
duly elected and qualified.
Section 10. The Board of Directors at its first meeting
after its election by the stockholders shall appoint an Executive
Committee, a Trust Committee, an Audit Committee and a
Compensation Committee, and shall elect from its own members a
Chairman of the Board of Directors and a President who may be the
same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person,
may appoint at any time such other committees and elect or
appoint such other officers as it may deem advisable. The Board
of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove,
with or without cause, any member of any Committee appointed by
it or any associate director or officer elected by it and may
appoint or elect his successor.
Section 12. The Board of Directors may designate an officer
to be in charge of such of the departments or division of the
Company as it may deem advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed
of not more than nine members who shall be selected by the Board
of Directors from its own members and who shall hold office
during the pleasure of the Board.
(B) The Executive Committee shall have all the
powers of the Board of Directors when it is not in session to
transact all business for and in behalf of the Company that may
be brought before it.
(C) The Executive Committee shall meet at the
principal office of the Company or elsewhere in its discretion at
least once a week in each week the Board is not regularly
scheduled to meet. A majority of its members shall be necessary
to constitute a quorum for the transaction of business. Special
meetings of the Executive Committee may be held at any time when
a quorum is present.
(D) Minutes of each meeting of the Executive
Committee shall be kept and submitted to the Board of Directors
at its next meeting.
(E) The Executive Committee shall advise and
superintend all investments that may be made of the funds of the
Company, and shall direct the disposal of the same, in accordance
with such rules and regulations as the Board of Directors from
time to time make.
(F) In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the
affairs and business of the Company by its directors and officers
as contemplated by these By-Laws any two available members of the
Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company
in accordance with the provisions of Article III of these By-
Laws; and if less than three members of the Trust Committee is
constituted immediately prior to such disaster shall be available
for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to
the Trust Committee under Article III Section 2 hereof. In the
event of the unavailability, at such time, of a minimum of two
members of such Executive Committee, any three available
directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company
in accordance with the foregoing provisions of this Section.
This By-Law shall be subject to implementation by Resolutions of
the Board of Directors presently existing or hereafter passed
from time to time for that purpose, and any provisions of these
By-Laws(other than this Section) and any resolutions which are
contrary to the provisions of this Section or to the provisions
of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any
interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct
and management of its affairs and business under all of the other
provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of
not more than thirteen members who shall be selected by the Board
of Directors, a majority of whom shall be members of the Board of
Directors and who shall hold office during the pleasure of the
Board.
(B) The Trust Committee shall have general
supervision over the Trust Department and the investment of trust
funds, in all matters, however, being subject to the approval of
the Board of Directors.
(C) The Trust Committee shall meet at the
principal office of the Company or elsewhere in its discretion at
least once a month. A majority of its members shall be necessary
to constitute a quorum for the transaction of business. Special
meetings of the Trust Committee may be held at any time when a
quorum is present.
(D) Minutes of each meeting of the Trust
Committee shall be kept and promptly submitted to the Board of
Directors.
(E) The Trust Committee shall have the power to
appoint Committees and/or designate officers or employees of the
Company to whom supervision over the investment of trust funds
may be delegated when the Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of
five members who shall be selected by the Board of Directors from
its own members, none of whom shall be an officer of the Company,
and shall hold office at the pleasure of the Board.
(B) The Audit Committee shall have general
supervision over the Audit Division in all matters however
subject to the approval of the Board of Directors; it shall
consider all matters brought to its attention by the officer in
charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such
recommendations to the Board of Directors with respect thereto or
with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and
wherever the majority of its members shall deem it to be proper
for the transaction of its business, and a majority of its
Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be
composed of not more than five (5) members who shall be selected
by the Board of Directors from its own members who are not
officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general
advise upon all matters of policy concerning the Company brought
to its attention by the management and from time to time review
the management of the Company, major organizational matters,
including salaries and employee benefits and specifically shall
administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may
be called at any time by the Chairman of the Compensation
Committee, the Chairman of the Board of Directors, or the
President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may
be elected by the Board of Directors as an associate director, to
serve during the pleasure of the Board.
(B) An associate director shall be entitled to
attend all directors meetings and participate in the discussion
of all matters brought to the Board, with the exception that he
would have no right to vote. An associate director will be
eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active
directors.
Section 6. Absence or Disqualification of Any Member of a
Committee
(A) In the absence or disqualification of any
member of any Committee created under Article III of the By-Laws
of this Company, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall
preside at all meetings of the Board and shall have such further
authority and powers and shall perform such duties as the Board
of Directors may from time to time confer and direct. He shall
also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of
the Company.
Section 2. The President shall have the powers and duties
pertaining to the office of the President conferred or imposed
upon him by statute or assigned to him by the Board of Directors
in the absence of the Chairman of the Board the President shall
have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the
President as designated by the Board of Directors, shall carry
into effect all legal directions of the Executive Committee and
of the Board of Directors, and shall at all times exercise
general supervision over the interest, affairs and operations of
the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents,
however denominated by the Board of Directors, who may at any
time perform all the duties of the Chairman of the Board of
Directors and/or the President and such other powers and duties
as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or
the President and by the officer in charge of the department or
division to which they are assigned.
Section 5. The Secretary shall attend to the giving of
notice of meetings of the stockholders and the Board of
Directors, as well as the Committees thereof, to the keeping of
accurate minutes of all such meetings and to recording the same
in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and
mailed well in advance of the scheduled date of any other
meeting. He shall have custody of the corporate seal and shall
affix the same to any documents requiring such corporate seal and
to attest the same.
Section 6. The Treasurer shall have general supervision
over all assets and liabilities of the Company. He shall be
custodian of and responsible for all monies, funds and valuables
of the Company and for the keeping of proper records of the
evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of
Directors at each regular meeting of the condition of the
Company, and perform such other duties as may be assigned to him
from time to time by the Board of Directors of the Executive
Committee.
Section 7. There may be a Controller who shall exercise
general supervision over the internal operations of the Company,
including accounting, and shall render to the Board of Directors
at appropriate times a report relating to the general condition
and internal operations of the Company.
There may be one or more subordinate accounting or
controller officers however denominated, who may perform the
duties of the Controller and such duties as may be prescribed by
the Controller.
Section 8. The officer designated by the Board of Directors
to be in charge of the Audit Division of the Company with such
title as the Board of Directors shall prescribe, shall report to
and be directly responsible only to the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of
the Auditor and such duties as may be prescribed by the officer
in charge of the Audit Division.
Section 9. There may be one or more officers, subordinate
in rank to all Vice Presidents with such functional titles as
shall be determined from time to time by the Board of Directors,
who shall ex officio hold the office Assistant Secretary of this
Company and who may perform such duties as may be prescribed by
the officer in charge of the department or division to whom they
are assigned.
Section 10. The powers and duties of all other officers of
the Company shall be those usually pertaining to their respective
offices, subject to the direction of the Board of Directors, the
Executive Committee, Chairman of the Board of Directors or the
President and the officer in charge of the department or division
to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the
books of the Company and a transfer book shall be kept in which
all transfers of stock shall be recorded.
Section 2. Certificate of stock shall bear the signature of
the President or any Vice President, however denominated by the
Board of Directors and countersigned by the Secretary or
Treasurer or an Assistant Secretary, and the seal of the
corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only
upon the books of the Company by the holder thereof or his
attorney, upon surrender of the certificate properly endorsed.
Any certificate of stock surrendered to the Company shall be
cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate
certificates of stock shall be issued only upon giving such
security as may be satisfactory to the Board of Directors or the
Executive Committee.
Section 3. The Board of Directors of the Company is
authorized to fix in advance a record date for the determination
of the stockholders entitled to notice of, and to vote at, any
meeting of stockholders and any adjournment thereof, or entitled
to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change,
conversion or exchange of capital stock, or in connection with
obtaining the consent of stockholders for any purpose, which
record date shall not be more than 60 nor less than 10 days
proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in
the following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the
calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any
Vice President, however denominated by the Board of Directors,
shall have full power and authority to enter into, make, sign,
execute, acknowledge and/or deliver and the Secretary or any
Assistant Secretary shall have full power and authority to attest
and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds,
notes, mortgages and all other instruments incident to the
business of this Company or in acting as executor, administrator,
guardian, trustee, agent or in any other fiduciary or
representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in
the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of
Directors or the Executive Committee, and any and all such
instruments shall have the same force and validity as although
expressly authorized by the Board of Directors and/or the
Executive Committee.
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the
Company, other than salaried officers of the Company, shall be
paid such reasonable honoraria or fees for attending meetings of
the Board of Directors as the Board of Directors may from time to
time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for
services as members of committees as the Board of Directors shall
from time to time determine and directors and associate directors
may be employed by the Company for such special services as the
Board of Directors may from time to time determine and shall be
paid for such special services so performed reasonable
compensation as may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was
or is made or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, 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, fiduciary or agent
of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect
to employee benefit plans, against all liability and loss
suffered and expenses reasonably incurred by such person. The
Corporation shall indemnify a person in connection with a
proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses
incurred in defending any proceeding in advance of its final
disposition, provided, however, that the payment of expenses
-------- -------
incurred by a Director officer in his capacity as a Director or
officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if it should be
ultimately determined that the Director or officer is not
entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment
of expenses, under this Article X is not paid in full within
ninety days after a written claim therefor has been received by
the Corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden
of proving that the claimant was not entitled to the requested
indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this
Article X shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision
of the Charter or Act of Incorporation, these By-Laws, agreement,
vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right
or protection hereunder of any person in respect of any act or
omission occurring prior to the time of such repeal or
modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or
repealed, in whole or in part, and any new By-Law or By-Laws
adopted at any regular or special meeting of the Board of
Directors by a vote of the majority of all the members of the
Board of Directors then in office.
I, . . . . . . . . . . . . . . . . . . . . .
Assistant Secretary of Wilmington Trust
Company, do hereby certify that the foregoing
is a true and correct copy of the By-Laws of
the Wilmington Trust Company.
Date . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Assistant Secretary
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of
1939, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District
authorities may be furnished by such authorities to the
Securities Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: May 23, 1996 By: /s/ Emmett R. Harmon
----------------
Name: Emmett R. Harmon
Title: Vice President
EXHIBIT "D"
NOTICE
This form is intended to assist state
nonmember banks and savings banks with
state publication requirements. It has not
been approved by any state banking
authorities. Refer to your appropriate
state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- - ------------------------ ----------
Name of Bank City
in the State of DELAWARE, at the close of business on March 31,
1996. --------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency
and coins. . . . . . . . . . . . . . . . . . . . .198,158
Interest-bearing balances. . . . . . . . . . . . . . . . .0
Held-to-maturity securities. . . . . . . . . . . . . . . .536,638
Available-for-sale securities. . . . . . . . . . . . . . .862,050
Federal funds sold . . . . . . . . . . . . . . . . . . . . 82,000
Securities purchased under agreements to resell. . . . . . 25,000
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . .3,404,372
LESS: Allowance for loan and lease losses . . . . . 48,153
LESS: Allocated transfer risk reserve . . . . . . . . . .0
Loans and leases, net of unearned income,
allowance, and reserve . . . . . . . . . . . . .3,356,219
Assets held in trading accounts. . . . . . . . . . . . . . . . .0
Premises and fixed assets (including capitalized
leases). . . . . . . . . . . . . . . . . . . . . . . . . 76,915
Other real estate owned. . . . . . . . . . . . . . . . . . 16,314
CONTINUED ON NEXT PAGE
Investments in unconsolidated subsidiaries and
associated companies . . . . . . . . . . . . . . . . . . . .146
Customers' liability to this bank on acceptances
outstanding. . . . . . . . . . . . . . . . . . . . . . . . . .0
Intangible assets. . . . . . . . . . . . . . . . . . . . . .4,403
Other assets . . . . . . . . . . . . . . . . . . . . . . .107,240
Total assets . . . . . . . . . . . . . . . . . . . . . .5,265,083
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . .3,450,823
Noninterest-bearing. . . . . . . . . . . . . . . . .689,843
Interest-bearing . . . . . . . . . . . . . . . . .2,760,980
Federal funds purchased. . . . . . . . . . . . . . . . . . 99,885
Securities sold under agreements to repurchase . . . . . .198,506
Demand notes issued to the U.S. Treasury . . . . . . . . . 38,856
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . .0
Other borrowed money:. . . . . . . . . . . . . . . . . . .///////
With original maturity of one year or less . . . . .930,611
With original maturity of more than one year . . . . 28,000
Mortgage indebtedness and obligations under
capitalized leases . . . . . . . . . . . . . . . . . . . . . .0
Bank's liability on acceptances executed and
outstanding. . . . . . . . . . . . . . . . . . . . . . . . . .0
Subordinated notes and debentures. . . . . . . . . . . . . . . .0
Other liabilities. . . . . . . . . . . . . . . . . . . . .100,832
Total liabilities. . . . . . . . . . . . . . . . . . . .4,847,513
Limited-life preferred stock and related surplus . . . . . . . .0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . .0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . .500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . .354,791
Net unrealized holding gains (losses) on
available-for-sale securities. . . . . . . . . . . . . . . .161
Total equity capital . . . . . . . . . . . . . . . . . . .417,570
Total liabilities, limited-life preferred stock,
and equity capital . . . . . . . . . . . . . . . . . .5,265,083
Registration No.
___________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) X
___
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
CONTINENTAL AIRLINES, INC.
CONTINENTAL AIRLINES FINANCE TRUST
(Exact name of obligor as specified in its charter)
Delaware 74-2099724
Delaware [to come]
(State of incorporation (I.R.S. employer identification no.)
or formation)
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
(Address of principal executive offices) (Zip Code)
Convertible Preferred Securities of
Continental Airlines Finance Trust
(Title of the indenture securities)
___________________________________________________________________________
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee,
describe each affiliation:
Based upon an examination of the books and records of
the trustee and upon information furnished by the
obligor, the obligor is not an affiliate of the
trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this
Statement of Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington
Trust Company to commence business and the
authorization of Wilmington Trust Company to exercise
corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by
Section 321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington
Trust Company.
Pursuant to the requirements of the Trust Indenture Act of
1939, the trustee, Wilmington Trust Company, a corporation
organized and existing under the laws of Delaware, has duly
caused this Statement of Eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in the City of
Wilmington and State of Delaware on the 23rd day of May, 1996.
[SEAL] WILMINGTON TRUST COMPANY
Attest:/s/ Sharon M. Brendle By: /s/ Emmett R. Harmon
--------------------- --------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act
of the General Assembly of the State of Delaware, entitled "An
Act to Incorporate the Delaware Guarantee and Trust Company",
approved March 2, A.D. 1901, and the name of which company was
changed to "Wilmington Trust Company" by an amendment filed in
the Office of the Secretary of State on March 18, A.D. 1903, and
the Charter or Act of Incorporation of which company has been
from time to time amended and changed by merger agreements
pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend
its Charter or Act of Incorporation so that the same as so
altered and amended shall in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust
Company.
Second: - The location of its principal office in the State
of Delaware is at Rodney Square North, in the City of
Wilmington, County of New Castle; the name of its resident
agent is Wilmington Trust Company whose address is Rodney
Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware,
the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New
Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open,
maintain and operate branch offices at Ninth and Shipley
Streets, 418 Delaware Avenue, 2120 Market Street, and 3605
Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the
agency or agencies of the government of the State of
Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and
purposes proposed to be transacted, promoted or carried on
by this Corporation are to do any or all of the things
herein mentioned as fully and to the same extent as natural
persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any
Court of law or equity and to make and use a common
seal, and alter the seal at pleasure, to hold,
purchase, convey, mortgage or otherwise deal in real
and personal estate and property, and to appoint such
officers and agents as the business of the Corporation
shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences
of debt, to receive deposits of money, or securities
for money, to buy gold and silver bullion and foreign
coins, to buy and sell bills of exchange, and generally
to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation
which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or
any estate or interests therein, and to guarantee the
holder of such property, real or personal, against any
claim or claims, adverse to his interest therein, and
to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management
of funds, and the purchase, sale, management and
disposal of property of all descriptions, and to
prepare and execute all papers which may be necessary
or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers
of every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money,
jewelry, plate, deeds, bonds and any and all other
personal property of every sort and kind, from
executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all
fiduciaries, and from all other persons and
individuals, and from all corporations whether state,
municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking
fund therefor on such terms as may be agreed upon
between the two parties, and in like manner may act as
Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust,
mortgage, bond or other instrument issued by any state,
municipality, body politic, corporation, association or
person, either alone or in conjunction with any other
person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect
of any contract or agreement, and the fidelity of
persons holding places of responsibility or trust; to
become surety for any person, or persons, for the
faithful performance of any trust, office, duty,
contract or agreement, either by itself or in
conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation,
judgment, suit, order, or decree to be entered in any
court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of
Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee,
assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and
all estates and property, real, personal or mixed, and
to be appointed as such trustee, trustee in bankruptcy,
receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any
other trust capacity, it shall not be required to give
bond with surety, but its capital stock shall be taken
and held as security for the performance of the duties
devolving upon it by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake
or be called upon to perform, or for the assumption of
any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds,
mortgages, debentures, shares of capital stock, and
other securities, obligations, contracts and evidences
of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware,
or of the Government of the United States, or of any
state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect,
receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and
other property held and owned by it, and to exercise in
respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and
other property, any and all the rights, powers and
privileges of individual owners thereof, including the
right to vote thereon; to invest and deal in and with
any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by
pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and
when the Board of Directors shall determine, and in the
promotion of its said corporate business of investment
and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge,
mortgage and convey real and personal property of any
name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have
the following powers:
(1) To do any or all of the things herein set forth,
to the same extent as natural persons might or could
do, and in any part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of
the assets and liabilities of any person, firm,
association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to
hold or in any manner to dispose of the whole or any
part of the property so purchased; to conduct in any
lawful manner the whole or any part of any business so
acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of
such business.
(3) To take, hold, own, deal in, mortgage or otherwise
lien, and to lease, sell, exchange, transfer, or in any
manner whatever dispose of property, real, personal or
mixed, wherever situated.
(4) To enter into, make, perform and carry out
contracts of every kind with any person, firm,
association or corporation, and, without limit as to
amount, to draw, make, accept, endorse, discount,
execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or
any of its operations and businesses, without
restriction to the same extent as natural persons might
or could do, to purchase or otherwise acquire, to hold,
own, to mortgage, sell, convey or otherwise dispose of,
real and personal property, of every class and
description, in any State, District, Territory or
Colony of the United States, and in any foreign country
or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this
paragraph shall (except where otherwise expressed in
said paragraph) be nowise limited or restricted by
reference to or inference from the terms of any other
clause of this or any other paragraph in this charter,
but that the objects, purposes and powers specified in
each of the clauses of this paragraph shall be regarded
as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
forty-one million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock,
par value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock,
par value $1.00 per share (hereinafter referred to as
"Common Stock").
(b) Shares of Preferred Stock may be issued from time to
time in one or more series as may from time to time be
determined by the Board of Directors each of said series to
be distinctly designated. All shares of any one series of
Preferred Stock shall be alike in every particular, except
that there may be different dates from which dividends, if
any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative,
participating, optional and other special rights of each
such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any
and all other series at any time outstanding; and, subject
to the provisions of subparagraph 1 of Paragraph (c) of this
Article Fourth, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock, the voting powers and
the designations, preferences and relative, optional and
other special rights, and the qualifications, limitations
and restrictions of such series, including, but without
limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of
shares of Preferred Stock which shall constitute such
series, which number may be increased (except where
otherwise provided by the Board of Directors) or
decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred
Stock of such series shall be paid, the extent of the
preference or relation, if any, of such dividends to
the dividends payable on any other class or classes, or
series of the same or other class of stock and whether
such dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred
Stock of such series to convert the same into or
exchange the same for, shares of any other class or
classes or of any series of the same or any other class
or classes of stock of the Corporation and the terms
and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series
shall be subject to redemption, and the redemption
price or prices and the time or times at which, and the
terms and conditions on which, Preferred Stock of such
series may be redeemed.
(5) The rights, if any, of the holders of Preferred
Stock of such series upon the voluntary or involuntary
liquidation, merger, consolidation, distribution or
sale of assets, dissolution or winding-up, of the
Corporation.
(6) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the
Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such
series of Preferred Stock which may, without limiting
the generality of the foregoing include the right,
voting as a series or by itself or together with other
series of Preferred Stock or all series of Preferred
Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the
payment of dividends on any one or more series of
Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to
preferential dividends on the Preferred Stock (fixed in
accordance with the provisions of section (b) of this
Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements,
if any, with respect to the setting aside of sums as sinking
funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this
Article Fourth), and subject further to any conditions which
may be fixed in accordance with the provisions of section
(b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board
of Directors.
(2) After distribution in full of the preferential
amount, if any, (fixed in accordance with the
provisions of section (b) of this Article Fourth), to
be distributed to the holders of Preferred Stock in the
event of voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding-
up, of the Corporation, the holders of the Common Stock
shall be entitled to receive all of the remaining
assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to
stockholders ratably in proportion to the number of
shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by
the provisions of such resolution or resolutions as may
be adopted by the Board of Directors pursuant to
section (b) of this Article Fourth, each holder of
Common Stock shall have one vote in respect of each
share of Common Stock held on all matters voted upon by
the stockholders.
(d) No holder of any of the shares of any class or series
of stock or of options, warrants or other rights to purchase
shares of any class or series of stock or of other
securities of the Corporation shall have any preemptive
right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or
series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or
series, or bonds, certificates of indebtedness, debentures
or other securities convertible into or exchangeable for
stock of the Corporation of any class or series, or carrying
any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares
of any class or series of stock or securities convertible
into or exchangeable for stock, or carrying any right to
purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms,
corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by
the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each
series of Preferred Stock in relation to the relative
powers, preferences and rights of each other series of
Preferred Stock shall, in each case, be as fixed from time
to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section
(b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the
series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the
Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such
other series shall be fixed by the Board of Directors as
senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred
Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the
outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of
Preferred Stock.
(f) Subject to the provisions of section (e), shares of any
series of Preferred Stock may be issued from time to time as
the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be
fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time
as the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be
fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be
increased or decreased from time to time by the affirmative
vote of the holders of a majority of the stock of the
Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation
shall be conducted and managed by a Board of Directors. The
number of directors constituting the entire Board shall be
not less than five nor more than twenty-five as fixed from
time to time by vote of a majority of the whole Board,
provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the
time in office, and provided further, that the number of
directors constituting the whole Board shall be twenty-four
until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three
classes, as nearly equal in number as the then total number
of directors constituting the whole Board permits, with the
term of office of one class expiring each year. At the
annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of
the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and
directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting.
Any vacancies in the Board of Directors for any reason, and
any newly created directorships resulting from any increase
in the directors, may be filled by the Board of Directors,
acting by a majority of the directors then in office,
although less than a quorum, and any directors so chosen
shall hold office until the next annual election of
directors. At such election, the stockholders shall elect a
successor to such director to hold office until the next
election of the class for which such director shall have
been chosen and until his successor shall be elected and
qualified. No decrease in the number of directors shall
shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and
notwithstanding the fact that some lesser percentage may be
specified by law, this Charter or Act of Incorporation or
the By-Laws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any
time without cause, but only by the affirmative vote of the
holders of two-thirds or more of the outstanding shares of
capital stock of the Corporation entitled to vote generally
in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for
that purpose.
(d) Nominations for the election of directors may be made
by the Board of Directors or by any stockholder entitled to
vote for the election of directors. Such nominations shall
be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the Secretary
of the Corporation not less than 14 days nor more than 50
days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than
21 days' notice of the meeting is given to stockholders,
such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later
than the close of the seventh day following the day on which
notice of the meeting was mailed to stockholders. Notice of
nominations which are proposed by the Board of Directors
shall be given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i)
the name, age, business address and, if known, residence
address of each nominee proposed in such notice, (ii) the
principal occupation or employment of such nominee and (iii)
the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was
not made in accordance with the foregoing procedure, and if
he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at
any annual or special meeting of stockholders of the
Corporation may be taken without a meeting, and the power of
stockholders to consent in writing, without a meeting, to
the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from
time to time find necessary or proper.
Seventh: - The Corporation hereby created is hereby given
the same powers, rights and privileges as may be conferred
upon corporations organized under the Act entitled "An Act
Providing a General Corporation Law", approved March 10,
1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private
Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a
majority of the whole Board, may designate any of their
number to constitute an Executive Committee, which
Committee, to the extent provided in said resolution, or in
the By-Laws of the Company, shall have and may exercise all
of the powers of the Board of Directors in the management of
the business and affairs of the Corporation, and shall have
power to authorize the seal of the Corporation to be affixed
to all papers which may require it.
Eleventh: - The private property of the stockholders shall
not be liable for the payment of corporate debts to any
extent whatever.
Twelfth: - The Corporation may transact business in any part
of the world.
Thirteenth: - The Board of Directors of the Corporation is
expressly authorized to make, alter or repeal the By-Laws of
the Corporation by a vote of the majority of the entire
Board. The stockholders may make, alter or repeal any By-
Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election
of directors (considered for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time
to time designated by the Board, and the Directors may keep
the books of the Company outside of the State of Delaware at
such places as may be from time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote
required by law, and except as otherwise expressly provided
in sections (b) and (c) of this Article Fifteenth:
(A) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with or into
(i) any Interested Stockholder (as hereinafter defined)
or (ii) any other corporation (whether or not itself an
Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter
defined) of an Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of related transactions) to or with any
Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation
or any Subsidiary having an aggregate fair market value
of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or
any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for
cash, securities or other property (or a combination
thereof) having an aggregate fair market value of
$1,000,000 or more, or
(D) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the
effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any
class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder, or any
Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least
two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors, considered for the purpose of this Article Fifteenth
as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required,
or that some lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
(2) The term "business combination" as used in
this Article Fifteenth shall mean any transaction
which is referred to any one or more of clauses
(A) through (E) of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article
Fifteenth shall not be applicable to any particular
business combination and such business combination
shall require only such affirmative vote as is required
by law and any other provisions of the Charter or Act
of Incorporation of By-Laws if such business
combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation
or other entity.
(2) "Interested Stockholder" shall mean, in respect of any
business combination, any person (other than the Corporation
or any Subsidiary) who or which as of the record date for
the determination of stockholders entitled to notice of and
to vote on such business combination, or immediately prior
to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly,
of more than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial
owner, directly or indirectly, of not less than 10% of
the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in
any share of capital stock of the Corporation which
were at any time within two years prior thereto
beneficially owned by any Interested Stockholder, and
such assignment or succession shall have occurred in
the course of a transaction or series of transactions
not involving a public offering within the meaning of
the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting
Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own,
directly or indirectly, or
(B) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or
options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or
indirectly, by any other person with which such first
mentioned person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares
deemed owned through application of paragraph (3) above but
shall not include any other Voting Shares which may be
issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of
1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a
majority of any class of equity security (as defined in Rule
3a11-1 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect in December
31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Investment Stockholder set forth in paragraph
(2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and
duty to determine for the purposes of this Article
Fifteenth on the basis of information known to them,
(1) the number of Voting Shares beneficially owned by
any person (2) whether a person is an Affiliate or
Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as
to the matters referred to in paragraph (3) of section
(c), or (4) whether the assets subject to any business
combination or the consideration received for the
issuance or transfer of securities by the Corporation,
or any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall
be construed to relieve any Interested Stockholder from
any fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this
Charter or Act of Incorporation or the By-Laws of the
Corporation (and in addition to any other vote that may be
required by law, this Charter or Act of Incorporation by the
By-Laws), the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election
of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this
Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not
be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a Director,
except to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter
be amended.
(b) Any repeal or modification of the foregoing
paragraph shall not adversely affect any right or
protection of a Director of the Corporation existing
hereunder with respect to any act or omission occurring
prior to the time of such repeal or modification."
I ___________________________________________
_________________ Secretary of Wilmington Trust
Company, do hereby certify that the foregoing is a
true and correct copy of the Charter or Act of
Incorporation of Wilmington Trust Company, as
heretofore amended and changed from time to time,
copies of which, certified by the Secretary of the
State of Delaware, are on file in the office of
Wilmington Trust Company.
Date __________________
_______________________________________
Secretary
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on February 21, 1991
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held
on the third Thursday in April each year at the principal office
at the Company or at such other date, time, or place as may be
designated by resolution by the Board of Directors.
Section 2. Special meetings of all stockholders may be
called at any time by the Board of Directors, the Chairman of the
Board or the President.
Section 3. Notice of all meetings of the stockholders shall
be given by mailing to each stockholder at least ten (10 days
before said meeting, at his last known address, a written or
printed notice fixing the time and place of such meeting.
Section 4. A majority in the amount of the capital stock of
the Company issued and outstanding on the record date, as herein
determined, shall constitute a quorum at all meetings of
stockholders for the transaction of any business, but the holders
of a small number of shares may adjourn, from time to time,
without further notice, until a quorum is secured. At each
annual or special meeting of stockholders, each stockholder shall
be entitled to one vote, either in person or by proxy, for each
shares of stock registered in the stockholder's name on the books
of the Company on the record date for any such meeting as
determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of
Directors shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-
two (72) years shall be nominated for election to the Board of
Directors of the Company, provided, however, that this limitation
shall not apply to any person who was serving as director of the
Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold
office for three years or until their successors are elected and
qualified.
Section 4. The affairs and business of the Company shall be
managed and conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall
be held on the third Thursday of each month at the principal
office of the Company, or at such other place and time as may be
designated by the Board of Directors, the Chairman of the Board,
or the President.
Section 6. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board of Directors
or by the President, and shall be called upon the written request
of a majority of the directors.
Section 7. A majority of the directors elected and
qualified shall be necessary to constitute a quorum for the
transaction of business at any meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each
director of any special meeting of the Board of Directors, and of
any change in the time or place of any regular meeting, stating
the time and place of such meeting, which shall be mailed not
less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board
of Directors, although less than a quorum, shall have the right
to elect the successor who shall hold office for the remainder of
the full term of the class of directors in which the vacancy
occurred, and until such director's successor shall have been
duly elected and qualified.
Section 10. The Board of Directors at its first meeting
after its election by the stockholders shall appoint an Executive
Committee, a Trust Committee, an Audit Committee and a
Compensation Committee, and shall elect from its own members a
Chairman of the Board of Directors and a President who may be the
same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person,
may appoint at any time such other committees and elect or
appoint such other officers as it may deem advisable. The Board
of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove,
with or without cause, any member of any Committee appointed by
it or any associate director or officer elected by it and may
appoint or elect his successor.
Section 12. The Board of Directors may designate an officer
to be in charge of such of the departments or division of the
Company as it may deem advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed
of not more than nine members who shall be selected by the Board
of Directors from its own members and who shall hold office
during the pleasure of the Board.
(B) The Executive Committee shall have all the
powers of the Board of Directors when it is not in session to
transact all business for and in behalf of the Company that may
be brought before it.
(C) The Executive Committee shall meet at the
principal office of the Company or elsewhere in its discretion at
least once a week in each week the Board is not regularly
scheduled to meet. A majority of its members shall be necessary
to constitute a quorum for the transaction of business. Special
meetings of the Executive Committee may be held at any time when
a quorum is present.
(D) Minutes of each meeting of the Executive
Committee shall be kept and submitted to the Board of Directors
at its next meeting.
(E) The Executive Committee shall advise and
superintend all investments that may be made of the funds of the
Company, and shall direct the disposal of the same, in accordance
with such rules and regulations as the Board of Directors from
time to time make.
(F) In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the
affairs and business of the Company by its directors and officers
as contemplated by these By-Laws any two available members of the
Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company
in accordance with the provisions of Article III of these By-
Laws; and if less than three members of the Trust Committee is
constituted immediately prior to such disaster shall be available
for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to
the Trust Committee under Article III Section 2 hereof. In the
event of the unavailability, at such time, of a minimum of two
members of such Executive Committee, any three available
directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company
in accordance with the foregoing provisions of this Section.
This By-Law shall be subject to implementation by Resolutions of
the Board of Directors presently existing or hereafter passed
from time to time for that purpose, and any provisions of these
By-Laws(other than this Section) and any resolutions which are
contrary to the provisions of this Section or to the provisions
of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any
interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct
and management of its affairs and business under all of the other
provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of
not more than thirteen members who shall be selected by the Board
of Directors, a majority of whom shall be members of the Board of
Directors and who shall hold office during the pleasure of the
Board.
(B) The Trust Committee shall have general
supervision over the Trust Department and the investment of trust
funds, in all matters, however, being subject to the approval of
the Board of Directors.
(C) The Trust Committee shall meet at the
principal office of the Company or elsewhere in its discretion at
least once a month. A majority of its members shall be necessary
to constitute a quorum for the transaction of business. Special
meetings of the Trust Committee may be held at any time when a
quorum is present.
(D) Minutes of each meeting of the Trust
Committee shall be kept and promptly submitted to the Board of
Directors.
(E) The Trust Committee shall have the power to
appoint Committees and/or designate officers or employees of the
Company to whom supervision over the investment of trust funds
may be delegated when the Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of
five members who shall be selected by the Board of Directors from
its own members, none of whom shall be an officer of the Company,
and shall hold office at the pleasure of the Board.
(B) The Audit Committee shall have general
supervision over the Audit Division in all matters however
subject to the approval of the Board of Directors; it shall
consider all matters brought to its attention by the officer in
charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such
recommendations to the Board of Directors with respect thereto or
with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and
wherever the majority of its members shall deem it to be proper
for the transaction of its business, and a majority of its
Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be
composed of not more than five (5) members who shall be selected
by the Board of Directors from its own members who are not
officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general
advise upon all matters of policy concerning the Company brought
to its attention by the management and from time to time review
the management of the Company, major organizational matters,
including salaries and employee benefits and specifically shall
administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may
be called at any time by the Chairman of the Compensation
Committee, the Chairman of the Board of Directors, or the
President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may
be elected by the Board of Directors as an associate director, to
serve during the pleasure of the Board.
(B) An associate director shall be entitled to
attend all directors meetings and participate in the discussion
of all matters brought to the Board, with the exception that he
would have no right to vote. An associate director will be
eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active
directors.
Section 6. Absence or Disqualification of Any Member of a
Committee
(A) In the absence or disqualification of any
member of any Committee created under Article III of the By-Laws
of this Company, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall
preside at all meetings of the Board and shall have such further
authority and powers and shall perform such duties as the Board
of Directors may from time to time confer and direct. He shall
also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of
the Company.
Section 2. The President shall have the powers and duties
pertaining to the office of the President conferred or imposed
upon him by statute or assigned to him by the Board of Directors
in the absence of the Chairman of the Board the President shall
have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the
President as designated by the Board of Directors, shall carry
into effect all legal directions of the Executive Committee and
of the Board of Directors, and shall at all times exercise
general supervision over the interest, affairs and operations of
the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents,
however denominated by the Board of Directors, who may at any
time perform all the duties of the Chairman of the Board of
Directors and/or the President and such other powers and duties
as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or
the President and by the officer in charge of the department or
division to which they are assigned.
Section 5. The Secretary shall attend to the giving of
notice of meetings of the stockholders and the Board of
Directors, as well as the Committees thereof, to the keeping of
accurate minutes of all such meetings and to recording the same
in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and
mailed well in advance of the scheduled date of any other
meeting. He shall have custody of the corporate seal and shall
affix the same to any documents requiring such corporate seal and
to attest the same.
Section 6. The Treasurer shall have general supervision
over all assets and liabilities of the Company. He shall be
custodian of and responsible for all monies, funds and valuables
of the Company and for the keeping of proper records of the
evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of
Directors at each regular meeting of the condition of the
Company, and perform such other duties as may be assigned to him
from time to time by the Board of Directors of the Executive
Committee.
Section 7. There may be a Controller who shall exercise
general supervision over the internal operations of the Company,
including accounting, and shall render to the Board of Directors
at appropriate times a report relating to the general condition
and internal operations of the Company.
There may be one or more subordinate accounting or
controller officers however denominated, who may perform the
duties of the Controller and such duties as may be prescribed by
the Controller.
Section 8. The officer designated by the Board of Directors
to be in charge of the Audit Division of the Company with such
title as the Board of Directors shall prescribe, shall report to
and be directly responsible only to the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of
the Auditor and such duties as may be prescribed by the officer
in charge of the Audit Division.
Section 9. There may be one or more officers, subordinate
in rank to all Vice Presidents with such functional titles as
shall be determined from time to time by the Board of Directors,
who shall ex officio hold the office Assistant Secretary of this
Company and who may perform such duties as may be prescribed by
the officer in charge of the department or division to whom they
are assigned.
Section 10. The powers and duties of all other officers of
the Company shall be those usually pertaining to their respective
offices, subject to the direction of the Board of Directors, the
Executive Committee, Chairman of the Board of Directors or the
President and the officer in charge of the department or division
to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the
books of the Company and a transfer book shall be kept in which
all transfers of stock shall be recorded.
Section 2. Certificate of stock shall bear the signature of
the President or any Vice President, however denominated by the
Board of Directors and countersigned by the Secretary or
Treasurer or an Assistant Secretary, and the seal of the
corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only
upon the books of the Company by the holder thereof or his
attorney, upon surrender of the certificate properly endorsed.
Any certificate of stock surrendered to the Company shall be
cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate
certificates of stock shall be issued only upon giving such
security as may be satisfactory to the Board of Directors or the
Executive Committee.
Section 3. The Board of Directors of the Company is
authorized to fix in advance a record date for the determination
of the stockholders entitled to notice of, and to vote at, any
meeting of stockholders and any adjournment thereof, or entitled
to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change,
conversion or exchange of capital stock, or in connection with
obtaining the consent of stockholders for any purpose, which
record date shall not be more than 60 nor less than 10 days
proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in
the following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the
calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any
Vice President, however denominated by the Board of Directors,
shall have full power and authority to enter into, make, sign,
execute, acknowledge and/or deliver and the Secretary or any
Assistant Secretary shall have full power and authority to attest
and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds,
notes, mortgages and all other instruments incident to the
business of this Company or in acting as executor, administrator,
guardian, trustee, agent or in any other fiduciary or
representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in
the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of
Directors or the Executive Committee, and any and all such
instruments shall have the same force and validity as although
expressly authorized by the Board of Directors and/or the
Executive Committee.
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the
Company, other than salaried officers of the Company, shall be
paid such reasonable honoraria or fees for attending meetings of
the Board of Directors as the Board of Directors may from time to
time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for
services as members of committees as the Board of Directors shall
from time to time determine and directors and associate directors
may be employed by the Company for such special services as the
Board of Directors may from time to time determine and shall be
paid for such special services so performed reasonable
compensation as may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was
or is made or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, 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, fiduciary or agent
of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect
to employee benefit plans, against all liability and loss
suffered and expenses reasonably incurred by such person. The
Corporation shall indemnify a person in connection with a
proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses
incurred in defending any proceeding in advance of its final
disposition, provided, however, that the payment of expenses
incurred by a Director officer in his capacity as a Director or
officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if it should be
ultimately determined that the Director or officer is not
entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment
of expenses, under this Article X is not paid in full within
ninety days after a written claim therefor has been received by
the Corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden
of proving that the claimant was not entitled to the requested
indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this
Article X shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision
of the Charter or Act of Incorporation, these By-Laws, agreement,
vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right
or protection hereunder of any person in respect of any act or
omission occurring prior to the time of such repeal or
modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or
repealed, in whole or in part, and any new By-Law or By-Laws
adopted at any regular or special meeting of the Board of
Directors by a vote of the majority of all the members of the
Board of Directors then in office.
I, . . . . . . . . . . . . . . . . . . . . .
Assistant Secretary of Wilmington Trust
Company, do hereby certify that the foregoing
is a true and correct copy of the By-Laws of
the Wilmington Trust Company.
Date . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Assistant Secretary
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of
1939, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District
authorities may be furnished by such authorities to the
Securities Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: May 23, 1996 By: /s/ Emmett R. Harmon
------------------------
Name: Emmett R. Harmon
Title: Vice President
EXHIBIT "D"
NOTICE
This form is intended to assist state
nonmember banks and savings banks with state
publication requirements. It has not been
approved by any state banking authorities.
Refer to your appropriate state banking
authorities for your state publication
requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
------------------------ ----------
Name of Bank City
in the State of DELAWARE, at the close of business on March 31,
1996. --------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins . .198,158
Interest-bearing balances . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . 536,638
Available-for-sale securities. . . . . . . . . . . . . . .862,050
Federal funds sold . . . . . . . . . . . . . . . . . . . . 82,000
Securities purchased under agreements to resell. . . . . . 25,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . 3,404,372
LESS: Allowance for loan and lease losses. . . . . . . 48,153
LESS: Allocated transfer risk reserve. . . . . . . . . . . .0
Loans and leases, net of unearned income, allowance, and
reserve . . . . . . . . . . . . . . . . . . . . . .3,356,219
Assets held in trading accounts. . . . . . . . . . . . . . . . .0
Premises and fixed assets (including capitalized leases) . 76,915
Other real estate owned. . . . . . . . . . . . . . . . . . 16,314
Investments in unconsolidated subsidiaries and associated
companies. . . . . . . . . . . . . . . . . . . . . . . . . .. 146
Customers' liability to this bank on acceptances outstanding . .0
Intangible assets. . . . . . . . . . . . . . . . . . . . . .4,403
Other assets . . . . . . . . . . . . . . . . . . . . . . .107,240
Total assets . . . . . . . . . . . . . . . . . . . . . .5,265,083
CONTINUED ON NEXT PAGE
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . .3,450,823
Noninterest-bearing . . . . . . . . . . . . . . . . . .689,843
Interest-bearing. . . . . . . . . . . . . . . . . . .2,760,980
Federal funds purchased. . . . . . . . . . . . . . . . . . 99,885
Securities sold under agreements to repurchase . . . . . .198,506
Demand notes issued to the U.S. Treasury . . . . . . . . . 38,856
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . .0
Other borrowed money:. . . . . . . . . . . . . . . . . . .///////
With original maturity of one year or less. . . . . . .930,611
With original maturity of more than one year. . . . . . 28,000
Mortgage indebtedness and obligations under capitalized leases .0
Bank's liability on acceptances executed and outstanding . . . .0
Subordinated notes and debentures. . . . . . . . . . . . . . . .0
Other liabilities. . . . . . . . . . . . . . . . . . . . .100,832
Total liabilities. . . . . . . . . . . . . . . . . . . .4,847,513
Limited-life preferred stock and related surplus . . . . . . . .0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . .0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . .500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . .354,791
Net unrealized holding gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . . . . . . .161
Total equity capital . . . . . . . . . . . . . . . . . . .417,570
Total liabilities, limited-life preferred stock, and equity
capital . . . . . . . . . . . . . . . . . . . . . . . . 5,265,083
Registration No.
- - -----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) [ X ]
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer
identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
CONTINENTAL AIRLINES, INC.
(Exact name of obligor as specified in its charter)
Delaware 74-2099724
(State of incorporation (I.R.S. employer
or formation) identification no.)
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
(Address of principal executive offices) (Zip Code)
Guarantee of Convertible Preferred Securities of
Continental Airlines Finance Trust
(Title of the indenture securities)
- - -----------------------------------------------------------------
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising
authority to which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust
powers.
The trustee is authorized to exercise corporate trust
powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee,
describe each affiliation:
Based upon an examination of the books and records of
the trustee and upon information furnished by the obligor,
the obligor is not an affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this
Statement of Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which
includes the certificate of authority of Wilmington
Trust Company to commence business and the authorization
of Wilmington Trust Company to exercise corporate trust
powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by
Section 321(b) of Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington
Trust Company.
Pursuant to the requirements of the Trust Indenture Act of
1939, the trustee, Wilmington Trust Company, a corporation
organized and existing under the laws of Delaware, has duly
caused this Statement of Eligibility to be signed on its behalf
by the undersigned, thereunto duly authorized, all in the City of
Wilmington and State of Delaware on the 23rd day of May, 1996.
[SEAL] WILMINGTON TRUST COMPANY
Attest: /s/ Sharon M. Brendle By: /s/ Emmett R. Harmon
------------------------ ---------------------------
Assistant Secretary Name: Emmett R. Harmon
Title: Vice President
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act
of the General Assembly of the State of Delaware, entitled "An
Act to Incorporate the Delaware Guarantee and Trust Company",
approved March 2, A.D. 1901, and the name of which company was
changed to "Wilmington Trust Company" by an amendment filed in
the Office of the Secretary of State on March 18, A.D. 1903, and
the Charter or Act of Incorporation of which company has been
from time to time amended and changed by merger agreements
pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend
its Charter or Act of Incorporation so that the same as so
altered and amended shall in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust
Company.
Second: - The location of its principal office in the State
of Delaware is at Rodney Square North, in the City of
Wilmington, County of New Castle; the name of its resident
agent is Wilmington Trust Company whose address is Rodney
Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch
offices in the City of Newark, New Castle County, Delaware,
the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New
Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open,
maintain and operate branch offices at Ninth and Shipley
Streets, 418 Delaware Avenue, 2120 Market Street, and 3605
Market Street, all in the City of Wilmington, New Castle
County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the
agency or agencies of the government of the State of
Delaware empowered to confer such authority.
Third: - (a) The nature of the business and the objects and
purposes proposed to be transacted, promoted or carried on
by this Corporation are to do any or all of the things
herein mentioned as fully and to the same extent as natural
persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any
Court of law or equity and to make and use a common
seal, and alter the seal at pleasure, to hold,
purchase, convey, mortgage or otherwise deal in real
and personal estate and property, and to appoint such
officers and agents as the business of the Corporation
shall require, to make by-laws not inconsistent with
the Constitution or laws of the United States or of
this State, to discount bills, notes or other evidences
of debt, to receive deposits of money, or securities
for money, to buy gold and silver bullion and foreign
coins, to buy and sell bills of exchange, and generally
to use, exercise and enjoy all the powers, rights,
privileges and franchises incident to a corporation
which are proper or necessary for the transaction of
the business of the Corporation hereby created.
(2) To insure titles to real and personal property, or
any estate or interests therein, and to guarantee the
holder of such property, real or personal, against any
claim or claims, adverse to his interest therein, and
to prepare and give certificates of title for any lands
or premises in the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the
receipt, collection, custody, investment and management
of funds, and the purchase, sale, management and
disposal of property of all descriptions, and to
prepare and execute all papers which may be necessary
or proper in such business.
(4) To prepare and draw agreements, contracts, deeds,
leases, conveyances, mortgages, bonds and legal papers
of every description, and to carry on the business of
conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money,
jewelry, plate, deeds, bonds and any and all other
personal property of every sort and kind, from
executors, administrators, guardians, public officers,
courts, receivers, assignees, trustees, and from all
fiduciaries, and from all other persons and
individuals, and from all corporations whether state,
municipal, corporate or private, and to rent boxes,
safes, vaults and other receptacles for such property.
(6) To act as agent or otherwise for the purpose of
registering, issuing, certificating, countersigning,
transferring or underwriting the stock, bonds or other
obligations of any corporation, association, state or
municipality, and may receive and manage any sinking
fund therefor on such terms as may be agreed upon
between the two parties, and in like manner may act as
Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust,
mortgage, bond or other instrument issued by any state,
municipality, body politic, corporation, association or
person, either alone or in conjunction with any other
person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect
of any contract or agreement, and the fidelity of
persons holding places of responsibility or trust; to
become surety for any person, or persons, for the
faithful performance of any trust, office, duty,
contract or agreement, either by itself or in
conjunction with any other person, or persons,
corporation, or corporations, or in like manner become
surety upon any bond, recognizance, obligation,
judgment, suit, order, or decree to be entered in any
court of record within the State of Delaware or
elsewhere, or which may now or hereafter be required by
any law, judge, officer or court in the State of
Delaware or elsewhere.
(9) To act by any and every method of appointment as
trustee, trustee in bankruptcy, receiver, assignee,
assignee in bankruptcy, executor, administrator,
guardian, bailee, or in any other trust capacity in the
receiving, holding, managing, and disposing of any and
all estates and property, real, personal or mixed, and
to be appointed as such trustee, trustee in bankruptcy,
receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the
State of Delaware or elsewhere; and whenever this
Corporation is so appointed by any person, corporation,
court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any
other trust capacity, it shall not be required to give
bond with surety, but its capital stock shall be taken
and held as security for the performance of the duties
devolving upon it by such appointment.
(10) And for its care, management and trouble, and the
exercise of any of its powers hereby given, or for the
performance of any of the duties which it may undertake
or be called upon to perform, or for the assumption of
any responsibility the said Corporation may be entitled
to receive a proper compensation.
(11) To purchase, receive, hold and own bonds,
mortgages, debentures, shares of capital stock, and
other securities, obligations, contracts and evidences
of indebtedness, of any private, public or municipal
corporation within and without the State of Delaware,
or of the Government of the United States, or of any
state, territory, colony, or possession thereof, or of
any foreign government or country; to receive, collect,
receipt for, and dispose of interest, dividends and
income upon and from any of the bonds, mortgages,
debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and
other property held and owned by it, and to exercise in
respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and
other property, any and all the rights, powers and
privileges of individual owners thereof, including the
right to vote thereon; to invest and deal in and with
any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and
proper, and from time to time to vary or realize such
investments; to issue bonds and secure the same by
pledges or deeds of trust or mortgages of or upon the
whole or any part of the property held or owned by the
Corporation, and to sell and pledge such bonds, as and
when the Board of Directors shall determine, and in the
promotion of its said corporate business of investment
and to the extent authorized by law, to lease,
purchase, hold, sell, assign, transfer, pledge,
mortgage and convey real and personal property of any
name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers
conferred by the laws of the State of Delaware, it is hereby
expressly provided that the said Corporation shall also have
the following powers:
(1) To do any or all of the things herein set forth,
to the same extent as natural persons might or could
do, and in any part of the world.
(2) To acquire the good will, rights, property and
franchises and to undertake the whole or any part of
the assets and liabilities of any person, firm,
association or corporation, and to pay for the same in
cash, stock of this Corporation, bonds or otherwise; to
hold or in any manner to dispose of the whole or any
part of the property so purchased; to conduct in any
lawful manner the whole or any part of any business so
acquired, and to exercise all the powers necessary or
convenient in and about the conduct and management of
such business.
(3) To take, hold, own, deal in, mortgage or otherwise
lien, and to lease, sell, exchange, transfer, or in any
manner whatever dispose of property, real, personal or
mixed, wherever situated.
(4) To enter into, make, perform and carry out
contracts of every kind with any person, firm,
association or corporation, and, without limit as to
amount, to draw, make, accept, endorse, discount,
execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or
any of its operations and businesses, without
restriction to the same extent as natural persons might
or could do, to purchase or otherwise acquire, to hold,
own, to mortgage, sell, convey or otherwise dispose of,
real and personal property, of every class and
description, in any State, District, Territory or
Colony of the United States, and in any foreign country
or place.
(6) It is the intention that the objects, purposes and
powers specified and clauses contained in this
paragraph shall (except where otherwise expressed in
said paragraph) be nowise limited or restricted by
reference to or inference from the terms of any other
clause of this or any other paragraph in this charter,
but that the objects, purposes and powers specified in
each of the clauses of this paragraph shall be regarded
as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of
stock which the Corporation shall have authority to issue is
forty-one million (41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock,
par value $10.00 per share (hereinafter referred to as
"Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock,
par value $1.00 per share (hereinafter referred to as
"Common Stock").
(b) Shares of Preferred Stock may be issued from time to
time in one or more series as may from time to time be
determined by the Board of Directors each of said series to
be distinctly designated. All shares of any one series of
Preferred Stock shall be alike in every particular, except
that there may be different dates from which dividends, if
any, thereon shall be cumulative, if made cumulative. The
voting powers and the preferences and relative,
participating, optional and other special rights of each
such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any
and all other series at any time outstanding; and, subject
to the provisions of subparagraph 1 of Paragraph (c) of this
Article Fourth, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or
resolutions adopted prior to the issuance of any shares of a
particular series of Preferred Stock, the voting powers and
the designations, preferences and relative, optional and
other special rights, and the qualifications, limitations
and restrictions of such series, including, but without
limiting the generality of the foregoing, the following:
(1) The distinctive designation of, and the number of
shares of Preferred Stock which shall constitute such
series, which number may be increased (except where
otherwise provided by the Board of Directors) or
decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of
the Board of Directors;
(2) The rate and times at which, and the terms and
conditions on which, dividends, if any, on Preferred
Stock of such series shall be paid, the extent of the
preference or relation, if any, of such dividends to
the dividends payable on any other class or classes, or
series of the same or other class of stock and whether
such dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred
Stock of such series to convert the same into or
exchange the same for, shares of any other class or
classes or of any series of the same or any other class
or classes of stock of the Corporation and the terms
and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series
shall be subject to redemption, and the redemption
price or prices and the time or times at which, and the
terms and conditions on which, Preferred Stock of such
series may be redeemed.
(5) The rights, if any, of the holders of Preferred
Stock of such series upon the voluntary or involuntary
liquidation, merger, consolidation, distribution or
sale of assets, dissolution or winding-up, of the
Corporation.
(6) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the
Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such
series of Preferred Stock which may, without limiting
the generality of the foregoing include the right,
voting as a series or by itself or together with other
series of Preferred Stock or all series of Preferred
Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the
payment of dividends on any one or more series of
Preferred Stock or under such circumstances and on such
conditions as the Board of Directors may determine.
(c) (1) After the requirements with respect to
preferential dividends on the Preferred Stock (fixed in
accordance with the provisions of section (b) of this
Article Fourth), if any, shall have been met and after the
Corporation shall have complied with all the requirements,
if any, with respect to the setting aside of sums as sinking
funds or redemption or purchase accounts (fixed in
accordance with the provisions of section (b) of this
Article Fourth), and subject further to any conditions which
may be fixed in accordance with the provisions of section
(b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such
dividends as may be declared from time to time by the Board
of Directors.
(2) After distribution in full of the preferential
amount, if any, (fixed in accordance with the
provisions of section (b) of this Article Fourth), to
be distributed to the holders of Preferred Stock in the
event of voluntary or involuntary liquidation,
distribution or sale of assets, dissolution or winding-
up, of the Corporation, the holders of the Common Stock
shall be entitled to receive all of the remaining
assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to
stockholders ratably in proportion to the number of
shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by
the provisions of such resolution or resolutions as may
be adopted by the Board of Directors pursuant to
section (b) of this Article Fourth, each holder of
Common Stock shall have one vote in respect of each
share of Common Stock held on all matters voted upon by
the stockholders.
(d) No holder of any of the shares of any class or series
of stock or of options, warrants or other rights to purchase
shares of any class or series of stock or of other
securities of the Corporation shall have any preemptive
right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or
series to be issued by reason of any increase of the
authorized capital stock of the Corporation of any class or
series, or bonds, certificates of indebtedness, debentures
or other securities convertible into or exchangeable for
stock of the Corporation of any class or series, or carrying
any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares
of any class or series of stock or securities convertible
into or exchangeable for stock, or carrying any right to
purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms,
corporations or associations, whether such holders or
others, and upon such terms as may be deemed advisable by
the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each
series of Preferred Stock in relation to the relative
powers, preferences and rights of each other series of
Preferred Stock shall, in each case, be as fixed from time
to time by the Board of Directors in the resolution or
resolutions adopted pursuant to authority granted in section
(b) of this Article Fourth and the consent, by class or
series vote or otherwise, of the holders of such of the
series of Preferred Stock as are from time to time
outstanding shall not be required for the issuance by the
Board of Directors of any other series of Preferred Stock
whether or not the powers, preferences and rights of such
other series shall be fixed by the Board of Directors as
senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them; provided,
however, that the Board of Directors may provide in the
resolution or resolutions as to any series of Preferred
Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such
greater proportion as shall be therein fixed) of the
outstanding shares of such series voting thereon shall be
required for the issuance of any or all other series of
Preferred Stock.
(f) Subject to the provisions of section (e), shares of any
series of Preferred Stock may be issued from time to time as
the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be
fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time
as the Board of Directors of the Corporation shall determine
and on such terms and for such consideration as shall be
fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of
Preferred Stock may, without a class or series vote, be
increased or decreased from time to time by the affirmative
vote of the holders of a majority of the stock of the
Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation
shall be conducted and managed by a Board of Directors. The
number of directors constituting the entire Board shall be
not less than five nor more than twenty-five as fixed from
time to time by vote of a majority of the whole Board,
provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the
time in office, and provided further, that the number of
directors constituting the whole Board shall be twenty-four
until otherwise fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three
classes, as nearly equal in number as the then total number
of directors constituting the whole Board permits, with the
term of office of one class expiring each year. At the
annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of
the second class shall be elected to hold office for a term
expiring at the second succeeding annual meeting and
directors of the third class shall be elected to hold office
for a term expiring at the third succeeding annual meeting.
Any vacancies in the Board of Directors for any reason, and
any newly created directorships resulting from any increase
in the directors, may be filled by the Board of Directors,
acting by a majority of the directors then in office,
although less than a quorum, and any directors so chosen
shall hold office until the next annual election of
directors. At such election, the stockholders shall elect a
successor to such director to hold office until the next
election of the class for which such director shall have
been chosen and until his successor shall be elected and
qualified. No decrease in the number of directors shall
shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or
Act of Incorporation or the By-Laws of the Corporation (and
notwithstanding the fact that some lesser percentage may be
specified by law, this Charter or Act of Incorporation or
the By-Laws of the Corporation), any director or the entire
Board of Directors of the Corporation may be removed at any
time without cause, but only by the affirmative vote of the
holders of two-thirds or more of the outstanding shares of
capital stock of the Corporation entitled to vote generally
in the election of directors (considered for this purpose as
one class) cast at a meeting of the stockholders called for
that purpose.
(d) Nominations for the election of directors may be made
by the Board of Directors or by any stockholder entitled to
vote for the election of directors. Such nominations shall
be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the Secretary
of the Corporation not less than 14 days nor more than 50
days prior to any meeting of the stockholders called for the
election of directors; provided, however, that if less than
21 days' notice of the meeting is given to stockholders,
such written notice shall be delivered or mailed, as
prescribed, to the Secretary of the Corporation not later
than the close of the seventh day following the day on which
notice of the meeting was mailed to stockholders. Notice of
nominations which are proposed by the Board of Directors
shall be given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i)
the name, age, business address and, if known, residence
address of each nominee proposed in such notice, (ii) the
principal occupation or employment of such nominee and (iii)
the number of shares of stock of the Corporation which are
beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant,
determine and declare to the meeting that a nomination was
not made in accordance with the foregoing procedure, and if
he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at
any annual or special meeting of stockholders of the
Corporation may be taken without a meeting, and the power of
stockholders to consent in writing, without a meeting, to
the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and
servants as may be provided in the By-Laws as they may from
time to time find necessary or proper.
Seventh: - The Corporation hereby created is hereby given
the same powers, rights and privileges as may be conferred
upon corporations organized under the Act entitled "An Act
Providing a General Corporation Law", approved March 10,
1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private
Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a
majority of the whole Board, may designate any of their
number to constitute an Executive Committee, which
Committee, to the extent provided in said resolution, or in
the By-Laws of the Company, shall have and may exercise all
of the powers of the Board of Directors in the management of
the business and affairs of the Corporation, and shall have
power to authorize the seal of the Corporation to be affixed
to all papers which may require it.
Eleventh: - The private property of the stockholders shall
not be liable for the payment of corporate debts to any
extent whatever.
Twelfth: - The Corporation may transact business in any part
of the world.
Thirteenth: - The Board of Directors of the Corporation is
expressly authorized to make, alter or repeal the By-Laws of
the Corporation by a vote of the majority of the entire
Board. The stockholders may make, alter or repeal any By-
Law whether or not adopted by them, provided however, that
any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-
thirds or more of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election
of directors (considered for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time
to time designated by the Board, and the Directors may keep
the books of the Company outside of the State of Delaware at
such places as may be from time to time designated by them.
Fifteenth: - (a) In addition to any affirmative vote
required by law, and except as otherwise expressly provided
in sections (b) and (c) of this Article Fifteenth:
(A) any merger or consolidation of the Corporation or
any Subsidiary (as hereinafter defined) with or into
(i) any Interested Stockholder (as hereinafter defined)
or (ii) any other corporation (whether or not itself an
Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter
defined) of an Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of related transactions) to or with any
Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation
or any Subsidiary having an aggregate fair market value
of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of related
transactions) of any securities of the Corporation or
any Subsidiary to any Interested Stockholder or any
Affiliate of any Interested Stockholder in exchange for
cash, securities or other property (or a combination
thereof) having an aggregate fair market value of
$1,000,000 or more, or
(D) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation, or
(E) any reclassification of securities (including any
reverse stock split), or recapitalization of the
Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any similar
transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the
effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any
class of equity or convertible securities of the
Corporation or any Subsidiary which is directly or
indirectly owned by any Interested Stockholder, or any
Affiliate of any Interested Stockholder,
shall require the affirmative vote of the holders of at least
two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of
directors, considered for the purpose of this Article Fifteenth
as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required,
or that some lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
(2) The term "business combination" as used in
this Article Fifteenth shall mean any transaction
which is referred to any one or more of clauses
(A) through (E) of paragraph 1 of the section (a).
(b) The provisions of section (a) of this Article
Fifteenth shall not be applicable to any particular
business combination and such business combination
shall require only such affirmative vote as is required
by law and any other provisions of the Charter or Act
of Incorporation of By-Laws if such business
combination has been approved by a majority of the
whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation
or other entity.
(2) "Interested Stockholder" shall mean, in respect of any
business combination, any person (other than the Corporation
or any Subsidiary) who or which as of the record date for
the determination of stockholders entitled to notice of and
to vote on such business combination, or immediately prior
to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly,
of more than 10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time
within two years prior thereto was the beneficial
owner, directly or indirectly, of not less than 10% of
the then outstanding voting Shares, or
(C) is an assignee of or has otherwise succeeded in
any share of capital stock of the Corporation which
were at any time within two years prior thereto
beneficially owned by any Interested Stockholder, and
such assignment or succession shall have occurred in
the course of a transaction or series of transactions
not involving a public offering within the meaning of
the Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting
Shares:
(A) which such person or any of its Affiliates and
Associates (as hereafter defined) beneficially own,
directly or indirectly, or
(B) which such person or any of its Affiliates or
Associates has (i) the right to acquire (whether such
right is exercisable immediately or only after the
passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or
options, or otherwise, or (ii) the right to vote
pursuant to any agreement, arrangement or
understanding, or
(C) which are beneficially owned, directly or
indirectly, by any other person with which such first
mentioned person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares
deemed owned through application of paragraph (3) above but
shall not include any other Voting Shares which may be
issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective
meanings given those terms in Rule 12b-2 of the General
Rules and Regulations under the Securities Exchange Act of
1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a
majority of any class of equity security (as defined in Rule
3a11-1 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect in December
31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Investment Stockholder set forth in paragraph
(2) of this section (c), the term "Subsidiary" shall mean
only a corporation of which a majority of each class of
equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and
duty to determine for the purposes of this Article
Fifteenth on the basis of information known to them,
(1) the number of Voting Shares beneficially owned by
any person (2) whether a person is an Affiliate or
Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as
to the matters referred to in paragraph (3) of section
(c), or (4) whether the assets subject to any business
combination or the consideration received for the
issuance or transfer of securities by the Corporation,
or any Subsidiary has an aggregate fair market value of
$1,00,000 or more.
(e) Nothing contained in this Article Fifteenth shall
be construed to relieve any Interested Stockholder from
any fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this
Charter or Act of Incorporation or the By-Laws of the
Corporation (and in addition to any other vote that may be
required by law, this Charter or Act of Incorporation by the
By-Laws), the affirmative vote of the holders of at least
two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election
of directors (considered for this purpose as one class)
shall be required to amend, alter or repeal any provision of
Articles Fifth, Thirteenth, Fifteenth or Sixteenth of this
Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not
be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a Director,
except to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter
be amended.
(b) Any repeal or modification of the foregoing
paragraph shall not adversely affect any right or
protection of a Director of the Corporation existing
hereunder with respect to any act or omission occurring
prior to the time of such repeal or modification."
I ___________________________________________
_________________ Secretary of Wilmington Trust
Company, do hereby certify that the foregoing is a
true and correct copy of the Charter or Act of
Incorporation of Wilmington Trust Company, as
heretofore amended and changed from time to time,
copies of which, certified by the Secretary of the
State of Delaware, are on file in the office of
Wilmington Trust Company.
Date __________________
_______________________________________
Secretary
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on February 21, 1991
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held
on the third Thursday in April each year at the principal office
at the Company or at such other date, time, or place as may be
designated by resolution by the Board of Directors.
Section 2. Special meetings of all stockholders may be
called at any time by the Board of Directors, the Chairman of the
Board or the President.
Section 3. Notice of all meetings of the stockholders shall
be given by mailing to each stockholder at least ten (10 days
before said meeting, at his last known address, a written or
printed notice fixing the time and place of such meeting.
Section 4. A majority in the amount of the capital stock of
the Company issued and outstanding on the record date, as herein
determined, shall constitute a quorum at all meetings of
stockholders for the transaction of any business, but the holders
of a small number of shares may adjourn, from time to time,
without further notice, until a quorum is secured. At each
annual or special meeting of stockholders, each stockholder shall
be entitled to one vote, either in person or by proxy, for each
shares of stock registered in the stockholder's name on the books
of the Company on the record date for any such meeting as
determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of
Directors shall be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-
two (72) years shall be nominated for election to the Board of
Directors of the Company, provided, however, that this limitation
shall not apply to any person who was serving as director of the
Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold
office for three years or until their successors are elected and
qualified.
Section 4. The affairs and business of the Company shall be
managed and conducted by the Board of Directors.
Section 5. Regular meetings of the Board of Directors shall
be held on the third Thursday of each month at the principal
office of the Company, or at such other place and time as may be
designated by the Board of Directors, the Chairman of the Board,
or the President.
Section 6. Special meetings of the Board of Directors may
be called at any time by the Chairman of the Board of Directors
or by the President, and shall be called upon the written request
of a majority of the directors.
Section 7. A majority of the directors elected and
qualified shall be necessary to constitute a quorum for the
transaction of business at any meeting of the Board of Directors.
Section 8. Written notice shall be sent by mail to each
director of any special meeting of the Board of Directors, and of
any change in the time or place of any regular meeting, stating
the time and place of such meeting, which shall be mailed not
less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal,
inability to act, or disqualification of any director, the Board
of Directors, although less than a quorum, shall have the right
to elect the successor who shall hold office for the remainder of
the full term of the class of directors in which the vacancy
occurred, and until such director's successor shall have been
duly elected and qualified.
Section 10. The Board of Directors at its first meeting
after its election by the stockholders shall appoint an Executive
Committee, a Trust Committee, an Audit Committee and a
Compensation Committee, and shall elect from its own members a
Chairman of the Board of Directors and a President who may be the
same person. The Board of Directors shall also elect at such
meeting a Secretary and a Treasurer, who may be the same person,
may appoint at any time such other committees and elect or
appoint such other officers as it may deem advisable. The Board
of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove,
with or without cause, any member of any Committee appointed by
it or any associate director or officer elected by it and may
appoint or elect his successor.
Section 12. The Board of Directors may designate an officer
to be in charge of such of the departments or division of the
Company as it may deem advisable.
ARTICLE III
Committees
Section I. Executive Committee
(A) The Executive Committee shall be composed
of not more than nine members who shall be selected by the Board
of Directors from its own members and who shall hold office
during the pleasure of the Board.
(B) The Executive Committee shall have all the
powers of the Board of Directors when it is not in session to
transact all business for and in behalf of the Company that may
be brought before it.
(C) The Executive Committee shall meet at the
principal office of the Company or elsewhere in its discretion at
least once a week in each week the Board is not regularly
scheduled to meet. A majority of its members shall be necessary
to constitute a quorum for the transaction of business. Special
meetings of the Executive Committee may be held at any time when
a quorum is present.
(D) Minutes of each meeting of the Executive
Committee shall be kept and submitted to the Board of Directors
at its next meeting.
(E) The Executive Committee shall advise and
superintend all investments that may be made of the funds of the
Company, and shall direct the disposal of the same, in accordance
with such rules and regulations as the Board of Directors from
time to time make.
(F) In the event of a state of disaster of
sufficient severity to prevent the conduct and management of the
affairs and business of the Company by its directors and officers
as contemplated by these By-Laws any two available members of the
Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full
conduct and management of the affairs and business of the Company
in accordance with the provisions of Article III of these By-
Laws; and if less than three members of the Trust Committee is
constituted immediately prior to such disaster shall be available
for the transaction of its business, such Executive Committee
shall also be empowered to exercise all of the powers reserved to
the Trust Committee under Article III Section 2 hereof. In the
event of the unavailability, at such time, of a minimum of two
members of such Executive Committee, any three available
directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company
in accordance with the foregoing provisions of this Section.
This By-Law shall be subject to implementation by Resolutions of
the Board of Directors presently existing or hereafter passed
from time to time for that purpose, and any provisions of these
By-Laws(other than this Section) and any resolutions which are
contrary to the provisions of this Section or to the provisions
of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any
interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct
and management of its affairs and business under all of the other
provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of
not more than thirteen members who shall be selected by the Board
of Directors, a majority of whom shall be members of the Board of
Directors and who shall hold office during the pleasure of the
Board.
(B) The Trust Committee shall have general
supervision over the Trust Department and the investment of trust
funds, in all matters, however, being subject to the approval of
the Board of Directors.
(C) The Trust Committee shall meet at the
principal office of the Company or elsewhere in its discretion at
least once a month. A majority of its members shall be necessary
to constitute a quorum for the transaction of business. Special
meetings of the Trust Committee may be held at any time when a
quorum is present.
(D) Minutes of each meeting of the Trust
Committee shall be kept and promptly submitted to the Board of
Directors.
(E) The Trust Committee shall have the power to
appoint Committees and/or designate officers or employees of the
Company to whom supervision over the investment of trust funds
may be delegated when the Trust Committee is not in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of
five members who shall be selected by the Board of Directors from
its own members, none of whom shall be an officer of the Company,
and shall hold office at the pleasure of the Board.
(B) The Audit Committee shall have general
supervision over the Audit Division in all matters however
subject to the approval of the Board of Directors; it shall
consider all matters brought to its attention by the officer in
charge of the Audit Division, review all reports of examination
of the Company made by any governmental agency or such
independent auditor employed for that purpose, and make such
recommendations to the Board of Directors with respect thereto or
with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and
wherever the majority of its members shall deem it to be proper
for the transaction of its business, and a majority of its
Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be
composed of not more than five (5) members who shall be selected
by the Board of Directors from its own members who are not
officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general
advise upon all matters of policy concerning the Company brought
to its attention by the management and from time to time review
the management of the Company, major organizational matters,
including salaries and employee benefits and specifically shall
administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may
be called at any time by the Chairman of the Compensation
Committee, the Chairman of the Board of Directors, or the
President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may
be elected by the Board of Directors as an associate director, to
serve during the pleasure of the Board.
(B) An associate director shall be entitled to
attend all directors meetings and participate in the discussion
of all matters brought to the Board, with the exception that he
would have no right to vote. An associate director will be
eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and
Compensation Committee, which must be comprised solely of active
directors.
Section 6. Absence or Disqualification of Any Member of a
Committee
(A) In the absence or disqualification of any
member of any Committee created under Article III of the By-Laws
of this Company, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place of
any such absence or disqualified member.
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall
preside at all meetings of the Board and shall have such further
authority and powers and shall perform such duties as the Board
of Directors may from time to time confer and direct. He shall
also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of
the Company.
Section 2. The President shall have the powers and duties
pertaining to the office of the President conferred or imposed
upon him by statute or assigned to him by the Board of Directors
in the absence of the Chairman of the Board the President shall
have the powers and duties of the Chairman of the Board.
Section 3. The Chairman of the Board of Directors or the
President as designated by the Board of Directors, shall carry
into effect all legal directions of the Executive Committee and
of the Board of Directors, and shall at all times exercise
general supervision over the interest, affairs and operations of
the Company and perform all duties incident to his office.
Section 4. There may be one or more Vice Presidents,
however denominated by the Board of Directors, who may at any
time perform all the duties of the Chairman of the Board of
Directors and/or the President and such other powers and duties
as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or
the President and by the officer in charge of the department or
division to which they are assigned.
Section 5. The Secretary shall attend to the giving of
notice of meetings of the stockholders and the Board of
Directors, as well as the Committees thereof, to the keeping of
accurate minutes of all such meetings and to recording the same
in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable
under the circumstances, all such notices shall be in writing and
mailed well in advance of the scheduled date of any other
meeting. He shall have custody of the corporate seal and shall
affix the same to any documents requiring such corporate seal and
to attest the same.
Section 6. The Treasurer shall have general supervision
over all assets and liabilities of the Company. He shall be
custodian of and responsible for all monies, funds and valuables
of the Company and for the keeping of proper records of the
evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the
expenditures of the Company and shall report to the Board of
Directors at each regular meeting of the condition of the
Company, and perform such other duties as may be assigned to him
from time to time by the Board of Directors of the Executive
Committee.
Section 7. There may be a Controller who shall exercise
general supervision over the internal operations of the Company,
including accounting, and shall render to the Board of Directors
at appropriate times a report relating to the general condition
and internal operations of the Company.
There may be one or more subordinate accounting or
controller officers however denominated, who may perform the
duties of the Controller and such duties as may be prescribed by
the Controller.
Section 8. The officer designated by the Board of Directors
to be in charge of the Audit Division of the Company with such
title as the Board of Directors shall prescribe, shall report to
and be directly responsible only to the Board of Directors.
There shall be an Auditor and there may be one or more Audit
Officers, however denominated, who may perform all the duties of
the Auditor and such duties as may be prescribed by the officer
in charge of the Audit Division.
Section 9. There may be one or more officers, subordinate
in rank to all Vice Presidents with such functional titles as
shall be determined from time to time by the Board of Directors,
who shall ex officio hold the office Assistant Secretary of this
Company and who may perform such duties as may be prescribed by
the officer in charge of the department or division to whom they
are assigned.
Section 10. The powers and duties of all other officers of
the Company shall be those usually pertaining to their respective
offices, subject to the direction of the Board of Directors, the
Executive Committee, Chairman of the Board of Directors or the
President and the officer in charge of the department or division
to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the
books of the Company and a transfer book shall be kept in which
all transfers of stock shall be recorded.
Section 2. Certificate of stock shall bear the signature of
the President or any Vice President, however denominated by the
Board of Directors and countersigned by the Secretary or
Treasurer or an Assistant Secretary, and the seal of the
corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only
upon the books of the Company by the holder thereof or his
attorney, upon surrender of the certificate properly endorsed.
Any certificate of stock surrendered to the Company shall be
cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate
certificates of stock shall be issued only upon giving such
security as may be satisfactory to the Board of Directors or the
Executive Committee.
Section 3. The Board of Directors of the Company is
authorized to fix in advance a record date for the determination
of the stockholders entitled to notice of, and to vote at, any
meeting of stockholders and any adjournment thereof, or entitled
to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change,
conversion or exchange of capital stock, or in connection with
obtaining the consent of stockholders for any purpose, which
record date shall not be more than 60 nor less than 10 days
proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of
rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with
obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in
the following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the
calendar year.
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any
Vice President, however denominated by the Board of Directors,
shall have full power and authority to enter into, make, sign,
execute, acknowledge and/or deliver and the Secretary or any
Assistant Secretary shall have full power and authority to attest
and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds,
notes, mortgages and all other instruments incident to the
business of this Company or in acting as executor, administrator,
guardian, trustee, agent or in any other fiduciary or
representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in
the State of Delaware, or elsewhere, without any specific
authority, ratification, approval or confirmation by the Board of
Directors or the Executive Committee, and any and all such
instruments shall have the same force and validity as although
expressly authorized by the Board of Directors and/or the
Executive Committee.
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the
Company, other than salaried officers of the Company, shall be
paid such reasonable honoraria or fees for attending meetings of
the Board of Directors as the Board of Directors may from time to
time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the
Company, shall be paid such reasonable honoraria or fees for
services as members of committees as the Board of Directors shall
from time to time determine and directors and associate directors
may be employed by the Company for such special services as the
Board of Directors may from time to time determine and shall be
paid for such special services so performed reasonable
compensation as may be determined by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold
harmless, to the fullest extent permitted by applicable law as it
presently exists or may hereafter be amended, any person who was
or is made or is threatened to be made a party or is otherwise
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding") by
reason of the fact that he, or a person for whom he is the legal
representative, 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, fiduciary or agent
of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect
to employee benefit plans, against all liability and loss
suffered and expenses reasonably incurred by such person. The
Corporation shall indemnify a person in connection with a
proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses
incurred in defending any proceeding in advance of its final
disposition, provided, however, that the payment of expenses
incurred by a Director officer in his capacity as a Director or
officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the Director
or officer to repay all amounts advanced if it should be
ultimately determined that the Director or officer is not
entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment
of expenses, under this Article X is not paid in full within
ninety days after a written claim therefor has been received by
the Corporation the claimant may file suit to recover the unpaid
amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such
claim. In any such action the Corporation shall have the burden
of proving that the claimant was not entitled to the requested
indemnification of payment of expenses under applicable law.
(D) The rights conferred on any person by this
Article X shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision
of the Charter or Act of Incorporation, these By-Laws, agreement,
vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing
provisions of this Article X shall not adversely affect any right
or protection hereunder of any person in respect of any act or
omission occurring prior to the time of such repeal or
modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or
repealed, in whole or in part, and any new By-Law or By-Laws
adopted at any regular or special meeting of the Board of
Directors by a vote of the majority of all the members of the
Board of Directors then in office.
I, . . . . . . . . . . . . . . . . . . . . .
Assistant Secretary of Wilmington Trust
Company, do hereby certify that the foregoing
is a true and correct copy of the By-Laws of
the Wilmington Trust Company.
Date . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
Assistant Secretary
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of
1939, Wilmington Trust Company hereby consents that reports of
examinations by Federal, State, Territorial or District
authorities may be furnished by such authorities to the
Securities Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: May 23, 1996 By: /s/ Emmett R. Harmon
--------------------------
Name: Emmett R. Harmon
Title: Vice President
EXHIBIT "D"
NOTICE
This form is intended to assist state nonmember banks and savings
banks with state publication requirements. It has not been
approved by any state banking authorities. Refer to your
appropriate state banking authorities for your state publication
requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- - --------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business
------------
on March 31, 1996.
ASSETS
Thousands of dollars
Cash and balances due from
depository institutions:
Noninterest-bearing balances and
currency and coins . . . . . . . . . . . . . . . . . .198,158
Interest-bearing balances . . . . . . . . . . . . . . . . . 0
Held-to-maturity securities. . . . . . . . . . . . . . . .536,638
Available-for-sale securities. . . . . . . . . . . . . . .862,050
Federal funds sold . . . . . . . . . . . . . . . . . . . . 82,000
Securities purchased under agreements to resell. . . . . . 25,000
Loans and lease financing receivables:
Loans and leases, net of unearned income. . . . . . .3,404,372
LESS: Allowance for loan and lease losses. . . . . . . 48,153
LESS: Allocated transfer risk reserve. . . . . . . . . . . .0
Loans and leases, net of unearned income,
allowance, and reserve . . . . . . . . . . . . . . .3,356,219
Assets held in trading accounts. . . . . . . . . . . . . . . . .0
Premises and fixed assets (including
capitalized leases) . . . . . . . . . . . . . . . . . . . 76,915
Other real estate owned. . . . . . . . . . . . . . . . . . 16,314
Investments in unconsolidated subsidiaries
and associated companies. . . . . . . . . . . . . . . . . . .146
Customers' liability to this bank on
acceptances outstanding . . . . . . . . . . . . . . . . . . . .0
Intangible assets. . . . . . . . . . . . . . . . . . . . . .4,403
Other assets . . . . . . . . . . . . . . . . . . . . . . .107,240
Total assets . . . . . . . . . . . . . . . . . . . . . .5,265,083
LIABILITIES
Deposits:
In domestic offices. . . . . . . . . . . . . . . . . . .3,450,823
Noninterest-bearing . . . . . . . . 689,843
Interest-bearing. . . . . . . . . . 2,760,980
Federal funds purchased. . . . . . . . . . . . . . . . . . 99,885
Securities sold under agreements to repurchase . . . . . .198,506
Demand notes issued to the U.S. Treasury . . . . . . . . . 38,856
Trading liabilities. . . . . . . . . . . . . . . . . . . . . . .0
Other borrowed money:. . . . . . . . . . . . . . . . . . .///////
With original maturity of one year or less. . . . . . .930,611
With original maturity of more than one year. . . . . . 28,000
Mortgage indebtedness and obligations
under capitalized leases. . . . . . . . . . . . . . . . . . . .0
Bank's liability on acceptances executed and outstanding . . . .0
Subordinated notes and debentures. . . . . . . . . . . . . . . .0
Other liabilities. . . . . . . . . . . . . . . . . . . . 100,832
Total liabilities. . . . . . . . . . . . . . . . . . . .4,847,513
Limited-life preferred stock and related surplus . . . . . . . .0
EQUITY CAPITAL
Perpetual preferred stock and related surplus. . . . . . . . . .0
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . .500
Surplus. . . . . . . . . . . . . . . . . . . . . . . . . . 62,118
Undivided profits and capital reserves . . . . . . . . . .354,791
Net unrealized holding gains (losses) on
available-for-sale securities . . . . . . . . . . . . . . . .161
Total equity capital . . . . . . . . . . . . . . . . . . .417,570
Total liabilities, limited-life preferred
stock, and equity capital . . . . . . . . . . . . . . .5,265,083