As filed with the Securities and Exchange Commission on May 30, 1996
REGISTRATION NO. 333-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONTINENTAL AIRLINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4512 74-2099724
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
2929 ALLEN PARKWAY, SUITE 2010
HOUSTON, TEXAS 77019
(713) 834-2950
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
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
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE
OF THE SECURITIES TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [_]
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CALCULATION OF REGISTRATION FEE
======================================================================================================================
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PRICE PER UNIT PRICE (1) REGISTRATION FEE(2)
- ----------------------------------------------------------------------------------------------------------------------
1996-A Pass Through Certificates $269,518,000 100% $269,518,000 $ 92,937
- --------------------------------------------------------------------------------------------------------------------
1996-B Pass Through Certificates $ 94,332,000 100% $ 94,332,000 $ 32,528
- --------------------------------------------------------------------------------------------------------------------
1996-C Pass Through Certificates $ 74,117,000 100% $ 74,117,000 $ 28,558
- --------------------------------------------------------------------------------------------------------------------
1996-D Pass Through Certificates $ 51,300,000 100% $ 51,300,000 $ 17,690
- --------------------------------------------------------------------------------------------------------------------
Total $489,267,000 100% $489,267,000 $168,713
====================================================================================================================
(1) Estimated solely for the purposes of calculating the registration fee
pursuant to Rule 457.
(2) Fee was previously paid with the Registration Statement on Form S-3
(File No. 33-79688).
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PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, AS AMENDED, THE
PROSPECTUSES INCLUDED IN THIS REGISTRATION STATEMENT ALSO RELATE TO $510,733,000
IN AGGREGATE PRINCIPAL AMOUNT OF PASS THROUGH CERTIFICATES AND DEBT SECURITIES
PREVIOUSLY REGISTERED UNDER A REGISTRATION STATEMENT ON FORM S-3
(FILE NO. 33-79688).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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CONTINENTAL AIRLINES, INC.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING LOCATION IN THE PROSPECTUS
OF INFORMATION REQUIRED BY ITEMS IN FORM S-4
ITEM
----
1. Forepart of the
Registration Statement and
Outside Front Cover Page
of Prospectus.................... Facing Page of the Registration Statement; Cross Reference
Sheet; Outside Front Cover Page of Prospectus
2. Inside Front and Outside
Back Cover Pages of
Prospectus....................... Available Information; Outside Back Cover Page of Prospectus
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information............ Prospectus Summary; Risk Factors; The Company; Selected Financial Data
4. Terms of the Transaction......... Prospectus Summary; Risk Factors; The Exchange Offer;
Description of New Certificates; Plan of
Distribution; Certain Federal Income Tax Considerations
5. Pro Forma Financial
Information...................... Not Applicable
6. Material Contracts With the
Company Being Acquired........... Not Applicable
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed
to be Underwriters............... Not Applicable
8. Interests of Named Experts
and Counsel...................... Not Applicable
9. Disclosure of Commission
Position on
Indemnification for
Securities Act Liabilities....... Not Applicable
10. Information with Respect
to S-3 Registrants............... Prospectus Summary; The Company; Recent Developments
11. Incorporation of Certain
Information by Reference......... Available Information; Incorporation of Certain Documents
by Reference
12. Information with Respect
to S-2 or S-3 Registrants........ Not Applicable
13. Incorporation of Certain
Information by Reference......... Not Applicable
14. Information with Respect
to Registrants Other Than
S-3 or S-2 Registrants........... Not Applicable
15. Information with Respect
to S-3 Companies................. Not Applicable
16. Information with Respect
or S-2 to S-3 Companies.......... Not Applicable
17. Information with Respect
to Companies Other Than
S-3 or S-2 Companies............. Not Applicable
18. Information if Proxies,
Consents or Authorizations
Are to be Solicited.............. Not Applicable
19. Information if Proxies,
Consents or Authorizations
Are Not to be Solicited or
in an Exchange Offer............. Prospectus Summary; The Exchange Offer; Description of
New Certificates
INTRODUCTORY NOTE
This Registration Statement contains three forms of prospectus: (i) a
prospectus relating to the offer to exchange Pass Through Certificates, Series
1996, (ii) a prospectus relating to the Offering of Pass Through Certificates
and (iii) a prospectus relating to the Offering of Debt Securities. The
Prospectuses described in (ii) and (iii) were previously included in
Registration Statement (File No. 33-79688).
SUBJECT TO COMPLETION--DATED MAY 30, 1996
PROSPECTUS
Continental Airlines, Inc.
Offer to Exchange Pass Through Certificates, Series 1996,
which have been registered under the Securities Act of 1933, as amended,
for any and all outstanding Pass Through Certificates, Series 1996
The Exchange Offer will expire at 5:00 p.m., New York City time, on
[_____________], 1996, unless extended.
Pass Through Certificates, Series 1996 (the "New Certificates"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), pursuant to a Registration Statement of which this Prospectus is a part,
are hereby offered, upon the terms and subject to the conditions set forth in
this Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal" and, together with this Prospectus, the "Exchange Offer"), in
exchange for an equal principal amount of outstanding Pass Through Certificates,
Series 1996 (the "Old Certificates"), of which $489,267,000 aggregate principal
amount is outstanding as of the date hereof. The New Certificates and the Old
Certificates are collectively referred to herein as the "Certificates."
Any and all Old Certificates that are validly tendered and not withdrawn on
or prior to 5:00 P.M., New York City time, on the date the Exchange Offer
expires, which will be [_________], 1996 (30 calendar days following the
commencement of the Exchange Offer) unless the Exchange Offer is extended (such
date, including as extended, the "Expiration Date") will be accepted for
exchange. Tenders of Old Certificates may be withdrawn at any time prior to 5:00
P.M., New York City time on the Expiration Date. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Certificates being tendered
for exchange. However, the Exchange Offer is subject to certain customary
conditions which may be waived by the Company and to the terms of the
Registration Rights Agreement (as defined herein). Old Certificates may be
tendered only in integral multiples of $1,000. See "The Exchange Offer."
The New Certificates will be entitled to the benefits of the same Pass-
Through Trust Agreements (as defined herein) which govern the Old Certificates
and will govern the New Certificates. The form and terms of the New Certificates
are the same in all material respects as the form and terms of the Old
Certificates, except that the New Certificates do not contain terms with respect
to the interest rate step-up provisions and the New Certificates have been
registered under the Securities Act and therefore will not bear legends
restricting the transfer thereof. See "The Exchange Offer" and "Description of
New Certificates."
(continued on next page)
--------------------
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PARTICIPANTS IN THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE 28 OF
THIS PROSPECTUS.
--------------------
Final Expected
Pass Through Certificates Principal Amount Interest Rate Distribution Date
------------------------- ---------------- ------------- -----------------
1996-A................... $269,518,000 6.94% October 15, 2013
1996-B................... $ 94,332,000 7.82% October 15, 2013
1996-C................... $ 74,117,000 9.50% October 15, 2013
1996-D................... $ 51,300,000 12.48% October 15, 2013
------------
TOTAL $489,267,000
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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
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ 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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Each Certificate represents a fractional undivided interest in one of the
four Continental Airlines 1996 Pass Through Trusts (the "Class A Trust", the
"Class B Trust", the "Class C Trust" and the "Class D Trust" and, collectively,
the "Trusts") formed pursuant to four separate pass through trust agreements
(the "Pass Through Trust Agreements") between Continental and Wilmington Trust
Company (the "Trustee"), as trustee under each Trust. Pursuant to an
Intercreditor Agreement (as defined herein), (i) the Certificates of the Class B
Trust are subordinated in right of payment to the Certificates of the Class A
Trust, (ii) the Certificates of the Class C Trust are subordinated in right of
payment to the Certificates of the Class B Trust and (iii) the Certificates of
the Class D Trust are subordinated in right of payment to the Certificates of
the Class C Trust. Payments of interest on the Certificates issued by each Trust
(other than the Class D Trust) are supported by separate liquidity facilities
for the benefit of the holders of such Certificates, each such facility provided
initially by Credit Suisse, acting through its New York branch, in an amount
sufficient to pay interest thereon at the applicable interest rate for such
Trust on six successive quarterly distribution dates. The Certificates issued by
the Class D Trust were acquired by the Owner Participant (as defined herein) or
its affiliate.
The property of the Trusts includes, among other things, equipment notes
(the "Equipment Notes") issued on a nonrecourse basis by the trustees of
separate owner trusts (each, an "Owner Trustee") in connection with 18 separate
leveraged lease transactions that refinanced the indebtedness of such Owner
Trustees, originally incurred to finance the purchase of nine Boeing 737-524
aircraft and nine Boeing 757-224 aircraft (collectively, the "Aircraft") which
have been leased to Continental. The Equipment Notes in respect of each Aircraft
were issued in four series. Each Trust has purchased one series of the Equipment
Notes issued with respect to each of the Aircraft such that all of the Equipment
Notes held in each Trust will have an interest rate corresponding to the
interest rate applicable to the Certificates issued by such Trust. The maturity
dates of the Equipment Notes acquired by each Trust will occur on or before the
final expected distribution date applicable to the Certificates issued by such
Trust. The Equipment Notes issued with respect to each Aircraft are secured by a
security interest in such Aircraft and an assignment of the lease relating
thereto, including the right to receive rentals payable with respect to such
Aircraft by Continental. Although neither the Certificates nor the Equipment
Notes are direct obligations of, or guaranteed by, Continental, the amounts
unconditionally payable by Continental for lease of the Aircraft will be
sufficient to pay in full when due all amounts required to be paid on the
Equipment Notes held in the Trusts.
All of the Equipment Notes held in each Trust will accrue interest at the
applicable rate per annum for such Trust, payable on January 15, April 15, July
15 and October 15 of each year commencing on April 15, 1996. Such interest will
be passed through to Certificateholders (as defined herein) of such Trust on
each such date, in each case subject to the Intercreditor Agreement. See
"Description of New Certificates--General" and "--Payments and Distributions."
The New Certificates will accrue interest at the applicable per annum rate for
such Trust, from the last date on which interest was paid on the Old
Certificates surrendered in exchange therefor. See "The Exchange Offer--Interest
on New Certificates."
Scheduled principal payments on the Equipment Notes held in each Trust will
be passed through to the Certificateholders of each such Trust on January 15,
April 15, July 15 and October 15 in certain years, commencing on January 15,
1997, in the case of each of the Class A Trust, the Class B Trust and the Class
C Trust and January 15, 1999, in the case of the Class D Trust, in accordance
with the principal repayment schedule set forth below under "Description of New
Certificates--Pool Factors" and "Description of the Equipment Notes--Principal
and Interest Payments," in each case subject to the Intercreditor Agreement.
Under each Pass Through Trust Agreement, an Event of Default will occur if
the Trustee fails to pay within 10 business days of the due date thereof: (i)
the outstanding Pool Balance (as defined herein) of the applicable Class of
Certificates on the Final Maturity Date (as defined herein) for such Class or
(ii) interest due on such Certificates on any distribution date (unless the
Subordination Agent (as defined herein) shall have made an Interest Drawing (as
defined herein) in an amount sufficient to pay such interest and shall have
distributed such amount to the Certificateholders entitled thereto).
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), as set forth in no-action letters issued to third
parties, including Exxon Capital Holdings Corporation, SEC No-Action Letter
(available April 13, 1989) (the "Exxon Capital Letter"), Morgan Stanley & Co.
Incorporated, SEC No-Action Letter (available June 5, 1991) (the "Morgan Stanley
Letter") and Shearman & Sterling, SEC No-Action Letter (available July 2, 1993)
(the "Shearman & Sterling Letter") (collectively, the "Exchange Offer No-Action
Letters"), the Company believes that the New Certificates issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders thereof (other than a broker-dealer who acquires such New Certificates
directly from the Trustee for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act or any holder that
is an "affiliate" of the Company as defined under Rule 405 of the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Certificates are
acquired in the ordinary course of such holders' business and such holders are
not engaged in, and do not intend to engage in, a distribution of such New
Certificates and have no arrangement with any person to participate in a
distribution of such New Certificates. However, the staff of the Commission has
not considered the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
By tendering the Old Certificates in exchange for New Certificates, each holder,
other than a broker-dealer, will represent to the Company that: (i) it is not an
affiliate of the Company (as defined under Rule 405 of the Securities Act) nor a
broker-dealer tendering Old Certificates acquired directly from the Company for
its own account; (ii) any New Certificates to be received by it will be acquired
in the ordinary course of its business; and (iii) it is not engaged in, and does
not intend to engage in, a distribution of such New Certificates and has no
arrangement or understanding to participate in a distribution of the New
Certificates. If a holder of Series A Notes is engaged in or intends to engage
in a distribution of the Series B Notes or has any arrangement or understanding
with respect to the distribution of the Series B Notes to be acquired pursuant
to the Exchange Offer, such holder may not rely on the applicable
interpretations of the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each broker-dealer that
receives New Certificates for its own account pursuant to the Exchange Offer (a
"Participating Broker-Dealer") must acknowledge that it will deliver a
prospectus in connection with any resale of such New Certificates. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New Certificates received in
exchange for Old Certificates where such Old Certificates were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. Pursuant to the Registration Rights Agreement, the Company
has agreed that, starting on the Expiration Date and ending on the close of
business 180 days after the Expiration Date, it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution."
The Company will not receive any proceeds from this offering. The Company
has agreed to pay the expenses of the Exchange Offer. No underwriter is being
utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD CERTIFICATES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION.
Prior to this Exchange Offer, there has been no public market for the Old
Certificates or New Certificates. If such a market were to develop, the New
Certificates could trade at prices that may be higher or lower than their
principal amount. Neither Continental nor any Trust has applied or intends to
apply for listing of the New Certificates on any national securities exchange or
for quotation of the New Certificates through the National Association of
Securities Dealers Automated Quotation System. One or more of CS First Boston
Corporation, Morgan Stanley & Co. Incorporated, Lehman Brothers, Merrill Lynch &
Co. and FIELDSTONE FPCG SERVICES, L.P. (the "Initial Purchasers") have
previously made a market in the Old Certificates and Continental has been
advised by the Initial Purchasers that one or more of them intends to make a
market in the New Certificates, as permitted by applicable laws and regulations,
after consummation of the Exchange Offer. None of the Initial Purchasers is
obligated, however, to make a market in the Old Certificates or the New
Certificates and any such market making activity may be discontinued at any time
without notice at the sole discretion of each Initial Purchaser. There can be no
assurance as to the liquidity of the pubic market for the New Certificates or
that any active public market for the New Certificates will develop or continue.
If an active public market does not develop or continue, the market prices and
liquidity of the New Certificates may be adversely affected. See "Risk Factors--
Absence of a Public Market for the New Certificates."
AVAILABLE INFORMATION
Continental is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the following public reference facilities maintained by
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York
10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may also be obtained from the Public
Reference Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed rates. In
addition, reports, proxy statements and other information concerning Continental
may be inspected and copied at the offices of the New York Stock Exchange, Inc.,
20 Broad Street, New York, New York 10005.
Continental is the successor to Continental Airlines Holdings, Inc.
("Holdings"), which merged with and into Continental on April 27, 1993.
Holdings had also been subject to the informational requirements of the Exchange
Act.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits, the "Registration Statement") filed
by Continental with the Commission under the Securities Act, with respect to the
New Certificates offered hereby. This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement for further information with respect to
Continental and Holdings and the securities offered hereby. Although statements
concerning and summaries of certain documents are included herein, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. These documents may be
inspected without charge at the office of the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, and copies may be obtained at fees
and charges prescribed by the Commission.
REPORTS TO PASS THROUGH CERTIFICATEHOLDERS
Wilmington Trust Company, in its capacity as Pass Through Trustee under
each of the Trusts, will provide the certificateholders of each Trust certain
periodic reports concerning the distributions made from such Trust. See
"Description of New Certificates -- Reports to Certificateholders."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-9781) are
hereby incorporated by reference in this Prospectus: (i) Continental's Annual
Report on Form 10-K for the year ended December 31, 1995 (as amended by Forms
10-K/A1 and 10-K/A2 filed on March 8, 1996 and April 10, 1996, respectively),
(ii) Continental's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996, (iii) Continental's Current Reports on Form 8-K, filed on January 31,
1996, March 26, 1996 and May 7, 1996.
All reports and any definitive proxy or information statements filed by
Continental pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated herein by reference, or contained in this Prospectus, shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO
ANY PERSON TO WHOM A PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF
SUCH PERSON, FROM CONTINENTAL AIRLINES, INC., 2929 ALLEN PARKWAY, SUITE 2010,
HOUSTON, TEXAS 77019, ATTENTION: SECRETARY, TELEPHONE (713) 834-2950. IN ORDER
TO ENSURE TIMELY DELIVER OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1996.
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements (including the notes thereto)
appearing elsewhere or incorporated by reference in this Prospectus. Prospective
investors should consider carefully the matters discussed under the caption
"Risk Factors." Unless otherwise stated or unless the context otherwise
requires, references to "Continental" or the "Company" include Continental
Airlines, Inc. and its predecessors and subsidiaries. All route, fleet, traffic
and similar information appearing in this Prospectus is as of or for the period
ended March 31, 1996, unless otherwise stated herein.
THE COMPANY
Continental Airlines, Inc. is a major United States air carrier engaged in
the business of transporting passengers, cargo and mail. Continental is the
fifth largest United States airline (as measured by revenue passenger miles in
the first three months of 1996) and, together with its wholly owned subsidiary,
Continental Express, Inc. ("Express"), and its 91%-owned subsidiary, Continental
Micronesia, Inc. ("CMI"), serves 175 airports worldwide.
The Company operates its route system primarily through domestic hubs at
Newark, Houston Intercontinental and Cleveland, and a Pacific hub on Guam and
Saipan. Each of Continental's three U.S. hubs is located in a large business and
population center, contributing to a high volume of "origin and destination"
traffic. The Guam/Saipan hub is strategically located to provide service from
Japanese and other Asian cities to popular resort destinations in the western
Pacific. Continental is the primary carrier at each of these hubs, accounting
for 51%, 78%, 54% and 58% of all daily jet departures, respectively.
Continental directly serves 118 U.S. cities, with additional cities
(principally in the western and southwestern United States) connected to
Continental's route system under agreements with America West Airlines, Inc.
("America West"). Internationally, Continental flies to 57 destinations and
offers additional connecting service through alliances with foreign carriers.
Continental operates 52 weekly departures to five European cities and markets
service to four other cities through code-sharing agreements. Continental is one
of the leading airlines providing service to Mexico and Central America, serving
more destinations in Mexico than any other United States airline. In addition,
Continental flies to four cities in South America and plans to commence service
between Newark and Bogota, Colombia, with service on to Quito, Ecuador, in June
1996. Through its Guam/Saipan hub, Continental provides extensive service in the
western Pacific, including service to more Japanese cities than any other United
States carrier.
The Company is a Delaware corporation. Its executive offices are located at
2929 Allen Parkway, Suite 2010, Houston, Texas 77019, and its telephone number
is (713) 834-2950.
THE EXCHANGE OFFER
Registration Rights Agreement
The Old Certificates were issued on January 31, 1996 to the Initial Purchasers
and the Owner Participant. The Initial Purchasers placed the Old Certificates
with institutional investors. In connection therewith, the Company, the Trustee,
as trustee under each of the Trusts, and the Initial Purchasers entered into the
Registration Rights Agreement providing, among other things, for the Exchange
Offer. See "The Exchange Offer."
The Exchange Offer
New Certificates are being offered in exchange for an equal principal amount of
Old Certificates. As of the date hereof, $489,267,000 aggregate principal amount
of Old Certificates are outstanding. Old Certificates may be tendered only in
integral
5
multiples of $1000.
Resale of New Certificates
Based on interpretations by the staff of the Commission, as set forth in no-
action letters issued to third parties, including the Exchange Offer No-Action
Letters, the Company believes that the New Certificates issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders thereof (other than a broker-dealer who acquires such New Certificates
directly from the Trustee for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act or any holder that
is an "affiliate" of the Company as defined under Rule 405 of the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Certificates are
acquired in the ordinary course of such holders' business and such holders are
not engaged in, and do not intend to engage in, a distribution of such New
Certificates and have no arrangement with any person to participate in a
distribution of such New Certificates. However, the staff of the Commission has
not considered the Exchange Offer in the context of a no-action letter and there
can be no assurance that the staff of the Commission would make a similar
determination with respect to the Exchange Offer as in such other circumstances.
By tendering the Old Certificates in exchange for New Certificates, each holder,
other than a broker-dealer, will represent to the Company that: (i) it is not an
affiliate of the Company (as defined under Rule 405 of the Securities Act) nor a
broker-dealer tendering Old Certificates acquired directly from the Company for
its own account; (ii) any New Certificates to be received by it were acquired in
the ordinary course of its business; and (iii) it is not engaged in, and does
not intend to engage in, a distribution of such New Certificates and has no
arrangement or understanding to participate in a distribution of the New
Certificates. If a holder of Series A Notes is engaged in or intends to engage
in a distribution of the Series B Notes or has any arrangement or understanding
with respect to the distribution of the Series B Notes to be acquired pursuant
to the Exchange Offer, such holder may not rely on the applicable
interpretations of the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each Participating Broker-
Dealer that receives New Certificates for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Certificates. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a Participating Broker-
Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of New Certificates received in exchange for Old
Certificates where such Old Certificates were acquired by such Participating
Broker-Dealer as a result of market-making activities
6
or other trading activities. The Company has agreed that, starting on the
Expiration Date and ending on the close of business 180 days after the
Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution." To comply with the securities laws of certain jurisdictions, it
may be necessary to qualify for sale or register the New Certificates prior to
offering or selling such New Certificates. The Company has agreed, pursuant to
the Registration Rights Agreement and subject to certain specified limitations
therein, to register or qualify the New Certificates for offer or sale under the
securities or "blue sky" laws of such jurisdictions as may be necessary to
permit the holders of New Certificates to trade the New Certificates without any
restrictions or limitations under the securities laws of the several states of
the United States.
Consequences of Failure to Exchange Old Certificates
Upon consummation of the Exchange Offer, subject to certain exceptions, holders
of Old Certificates who do not exchange their Old Certificates for New
Certificates in the Exchange Offer will no longer be entitled to registration
rights and will not be able to offer or sell their Old Certificates, unless such
Old Certificates are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, the Company will have no obligation to
do), except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. See "Risk Factors--
Consequences of Failure to Exchange" and "The Exchange Offer--Terms of the
Exchange Offer."
Expiration Date
5:00 p.m., New York City time, on , 1996 (30 calendar days
following the commencement of the Exchange Offer), unless the Exchange Offer is
extended, in which case the term "Expiration Date" means the latest date and
time to which the Exchange Offer is extended.
Interest on the New Certificates
The New Certificates will accrue interest at the applicable per annum for such
Trust set forth on the cover page of this Prospectus, from the last date on
which interest was paid on the Old Certificates surrendered in exchange
therefor. Interest on the New Certificates is payable on January 15, April 15,
July 15 and October 15 of each year commencing April 15, 1996, subject to the
terms of the Intercreditor Agreement.
Conditions to the Exchange Offer
The Exchange Offer is not conditioned upon any minimum principal amount of Old
Certificates being tendered for exchange. However, the Exchange Offer is
subject to certain customary conditions, which may be waived by the Company.
See "The Exchange Offer--Conditions." Except for the requirements of applicable
Federal and state securities laws, there are no Federal or state regulatory
requirements to be complied with or obtained by the Company in connection with
the Exchange Offer.
Procedures for Tendering Old
7
Certificates
Each holder of Old Certificates wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or such facsimile, together with
the Old Certificates to be exchanged and any other required documentation to the
Exchange Agent (as defined herein) at the address set forth herein or effect a
tender of Old Certificates pursuant to the procedures for book-entry transfer as
provided for herein. See "The Exchange Offer--Procedures for Tendering" and
"--Book Entry Transfer."
Guaranteed Delivery Procedures
Holders of Old Certificates who wish to tender their Old Certificates and whose
Old Certificates are not immediately available or who cannot deliver their Old
Certificates and a properly completed Letter of Transmittal or any other
documents required by the Letter of Transmittal to the Exchange Agent prior to
the Expiration Date may tender their Old Certificates according to the
guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed
Delivery Procedures."
Withdrawal Rights
Tenders of Old Certificates may be withdrawn at any time prior to 5:00 p.m., New
York City time, on the Expiration Date. To withdraw a tender of Old
Certificates, a written or facsimile transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth herein under "The
Exchange Offer--Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Old Certificates and Delivery of New Certificates
Subject to certain conditions, any and all Old Certificates which are properly
tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the
Expiration Date will be accepted for exchange. The New Certificates issued
pursuant to the Exchange Offer will be delivered promptly following the
Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer."
Certain Tax Considerations
The exchange of New Certificates for Old Certificates should not be a sale or
exchange or otherwise a taxable event for Federal income tax purposes. See
"Certain Federal Income Tax Considerations."
Exchange Agent
Wilmington Trust Company is serving as exchange agent (the "Exchange Agent") in
connection with the Exchange Offer
Fees and Expenses
All expenses incident to the Company's consummation of the Exchange Offer and
compliance with the Registration Rights Agreement will be borne by the Company.
See "The Exchange Offer--Fees and Expenses."
8
Use of Proceeds
There will be no cash proceeds payable to Continental from the issuance of the
New Certificates pursuant to the Exchange Offer. The proceeds from the sale of
the Old Class A, B and C Certificates were used to purchase the Series A, B and
C Equipment Notes issued by the related Owner Trustees in connection with the
refinancing of the indebtedness incurred by the Owner Trustees to finance the
purchase of each Aircraft. Such Equipment Notes, together with the Series D
Equipment Notes contributed to the Class D Trust by the Owner Participant,
represent in the aggregate the entire debt portion currently outstanding of the
leveraged lease transactions relating to all of the Aircraft. Continental did
not receive any of the proceeds from the original sale of the Old Certificates.
See "Use of Proceeds."
SUMMARY OF TERMS OF NEW CERTIFICATES
The Exchange Offer relates to the exchange of up to $489,267,000
aggregate principal amount of Old Certificates for up to an equal aggregate
principal amount of New Certificates. The New Certificates will be entitled to
the benefits of the same Indenture which governs the Old Certificates and will
govern the New Certificates. The form and terms of the New Certificates are the
same in all material respects as the form and terms of the Old Certificates,
except that the New Certificates do not contain terms with respect to the
interest rate step-up provisions and the New Certificates have been registered
under the Securities Act and therefore will not bear legends restricting the
transfer thereof. See "Description of New Certificates."
For additional information concerning the New Certificates, see "Description of
New Certificates."
Trusts
Each of the Continental Airlines 1996-A Pass Through Trust, the Continental
Airlines 1996-B Pass Through Trust, the Continental Airlines 1996-C Pass Through
Trust and the Continental Airlines 1996-D Pass Through Trust was formed pursuant
to one of the four separate Pass Through Trust Agreements entered into between
the Company and Wilmington Trust Company, as trustee under each Trust. Each
Trust is a separate entity.
Certificates Offered
Pass Through Certificates issued by each Trust, representing fractional
undivided interests in such Trust. The Certificates issued by the Class A Trust,
the Class B Trust, the Class C Trust and the Class D Trust are referred to
herein as "Class A Certificates", "Class B Certificates", "Class C
Certificates:, and "Class D Certificates, respectively.
Subordination Agent
Wilmington Trust Company, as subordination agent under the Intercreditor
Agreement (the "Subordination Agent").
Liquidity Provider
Initially, Credit Suisse, a bank organized under the laws of Switzerland, acting
through its New York branch ("Credit Suisse"). Credit Suisse has provided three
separate liquidity facilities for the benefit of the holders of Class A
Certificates, Class B Certificates and Class C Certificates, respectively.
9
Trust Property
The property of each Trust (the "Trust Property") consists of (i) Equipment
Notes issued on a nonrecourse basis by each of the Owner Trustees in 18 separate
leveraged lease transactions that refinanced the indebtedness of the related
Owner Trustee, originally incurred to finance the purchase of each of nine
Boeing 737-524 Aircraft and nine Boeing 757-224 Aircraft leased by the related
Owner Trustee to Continental, (ii) the rights of such Trust under the
Intercreditor Agreement (including all monies receivable in respect of such
rights), (iii) except for the Class D Trust, all monies receivable under the
Liquidity Facility for such Trust and (iv) funds from time to time deposited
with the Trustee in accounts relating to such Trust. The Equipment Notes with
respect to each Aircraft were issued in four series under an Indenture (each, an
"Indenture") between the applicable Owner Trustee and the indenture trustee
thereunder (the "Loan Trustee"). Each Trust has acquired, pursuant to certain
Refunding Agreements (each, a "Refunding Agreement"), those Equipment Notes
having an interest rate equal to the interest rate applicable to the
Certificates to be issued by such Trust. The maturity dates of the Equipment
Notes acquired by each Trust will occur on or before the final expected Regular
Distribution Date applicable to the Certificates to be issued by such Trust. The
aggregate original principal amount of the Equipment Notes held in each Trust is
the same as the aggregate original face amount of the Certificates issued by
such Trust.
10
SUMMARY OF TERMS OF CERTIFICATES
CLASS A CLASS B CLASS C CLASS D
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
------------ ------------ ------------ ------------
Aggregate Face Amount $269,518,000 $94,332,000 $74,117,000 $51,300,000
Initial Loan to Aircraft Value
(cumulative)(1) 39.9% 53.9% 64.8% 72.4%
Expected Principal Distribution
Window (in years) 1.0-17.7 1.0-17.7 1.0-17.7 3.0-17.7
Initial Average Life (in years) 10.0 10.0 10.0 11.4
Regular Distribution Dates January 15, April 15, January 15, April 15 January 15, April 15 January 15, April 15
July 15 & July 15 & July 15 & July 15 &
October 15 October 15 October 15 October 15
Final Expected Regular
Distribution Date October 15, 2013 October 15, 2013 October 15, 2013 October 15, 2013
Final Maturity Date April 15, 2015 April 15, 2015 April 15, 2015 April 15, 2015
Minimum Denomination $100,000 $100,000 $100,000 $100,000
(S) 1110 Protection (2) Yes Yes Yes Yes
Liquidity Facility Coverage 6 quarterly 6 quarterly 6 quarterly None
interest payments interest payments interest payments
Initial Liquidity Facility
Amount (3) $30,078,208.80 $11,772,633.60 $11,117,550.00 None
- -------------------
(1) Assumes an aggregate appraised Aircraft Value of $675,428,333.
(2) The benefits of Section 1110 of the Bankruptcy Code are available to the
Loan Trustees.
(3) For each Class of Certificates (other than the Class D Certificates), the
initial amount of the Liquidity Facility covers the first six quarterly
interest payments (without regard to any future payments of principal on
such Certificates). In aggregate for Class A, B and C Certificates, the
initial amount of Liquidity Facilities is $52,968,392.40.
11
EQUIPMENT NOTES AND THE AIRCRAFT
Set forth below is certain information about the Equipment Notes held in
the Trusts and the Aircraft securing such Equipment Notes:
OUTSTANDING
AIRCRAFT PRINCIPAL AMOUNT OF
REGISTRATION AIRCRAFT MATURITY EQUIPMENT APPRAISED
NUMBER AIRCRAFT TYPE DELIVERY DATE DATE NOTES VALUE
- ----------- ------------- ------------- -------- ------------------ ---------
N17104 Boeing 757-224 July 1994 October 2013 $ 34,831,833 $ 48,690,000
N17105 Boeing 757-224 August 1994 October 2013 34,950,567 48,839,333
N14106 Boeing 757-224 September 1994 October 2013 35,069,083 48,988,333
N14107 Boeing 757-224 October 1994 October 2013 35,185,433 49,134,000
N21108 Boeing 757-224 November 1994 October 2013 35,303,950 49,283,000
N12109 Boeing 757-224 December 1994 October 2013 35,422,683 49,432,333
N13110 Boeing 757-224 December 1994 October 2013 35,422,683 49,432,333
N18112 Boeing 757-224 February 1995 October 2013 35,670,768 49,730,668
N13113 Boeing 757-224 April 1995 October 2013 35,915,850 50,025,333
N17620 Boeing 737-524 February 1995 October 2012 18,910,750 25,555,000
N19623 Boeing 737-524 January 1995 October 2012 18,875,000 25,441,000
N13624 Boeing 737-524 February 1995 October 2012 18,910,750 25,555,000
N46625 Boeing 737-524 January 1995 October 2012 18,875,000 25,441,000
N32626 Boeing 737-524 April 1995 April 2013 19,058,950 25,783,000
N17627 Boeing 737-524 April 1995 April 2013 19,058,950 25,783,000
N62631 Boeing 737-524 June 1995 July 2013 19,207,150 26,011,000
N16632 Boeing 737-524 July 1995 July 2013 19,281,250 26,125,000
N24633 Boeing 737-524 August 1995 July 2013 19,316,350 26,179,000
------------ ------------
$ 489,267,000 $ 675,428,333
- ----------------
The appraised value of each Aircraft set forth above is based upon the
lesser of the average or median fair market value of such Aircraft as appraised
by three independent appraisal and consulting firms: Aircraft Information
Services, Inc. ("AISI"), BK Associates, Inc. ("BK") and Morten Beyer and
Associates, Inc. ("MBA") (collectively, the "Appraisers") as of January 3, 1996.
See "Risk Factors--Appraisals and Realizable Value of Aircraft" and "Description
of the Aircraft and the Appraisals".
12
LOAN TO AIRCRAFT VALUE RATIOS
The following table sets forth loan to Aircraft value ratios ("LTVs") for
each Class of Certificates as of the Regular Distribution Dates specified
therein. The LTVs for each Class of Certificates were obtained for each such
Regular Distribution Date by dividing (i) the expected Pool Balance of such
Class of Certificates together in each case with the expected Pool Balance of
all other Classes of Certificates senior in right of payment to such Class of
Certificates under the Intercreditor Agreement determined immediately after
giving effect to the distributions expected to be made on such Regular
Distribution Date, by (ii) the assumed value of all of the Aircraft (the
"Assumed Aggregate Aircraft Value") on such Regular Distribution Date based on
the assumptions set forth below.
The table is based on the assumption that the value of each Aircraft
included in the Assumed Aggregate Aircraft Value opposite January 1996
depreciates by 2% per year until the fifteenth year after the year of delivery
of such Aircraft and 4% per year thereafter. Other rates or methods of
depreciation would result in materially different LTVs and no assurance can be
given (i) that the depreciation rates and method assumed for the purpose of the
table are the ones most likely to occur or (ii) as to the actual future value of
any Aircraft. Although the table is compiled on an aggregate basis, it should be
noted that, since the Equipment Notes are not cross-collateralized with respect
to the Aircraft, the excess proceeds realized from the disposition of any
particular Aircraft would not be available to offset shortfalls on the Equipment
Notes relating to any other Aircraft. Therefore, upon the occurrence of an
Indenture Default, even if the Aircraft as a group could be sold for more than
the total amounts payable in respect of all of the outstanding Equipment Notes,
if certain Aircraft were sold for less than the total amount payable in respect
of the related Equipment Notes, there would not be sufficient proceeds to pay
all Classes of Certificates in full. See "Description of the Equipment Notes--
Security" for additional information regarding LTVs for the Equipment Notes
issued in respect of each Aircraft which may be more relevant in a default
situation than the aggregate values shown in the following table. Thus, the
table should not be considered a forecast or prediction of expected or likely
LTVs but simply a mathematical calculation based on one set of assumptions.
Assumed Class A Class B Class C Class D
Regular Aggregate Certificates Class A Certificates Class B Certificates Class C Certificates Class D
Distribution Aircraft Pool Certificates Pool Certificates Pool Certificates Pool Certificates
Date Value (1) Balance LTV Balance LTV Balance LTV Balance LTV
---- --------- ------- --- ------- --- ------- --- ------- ---
January 1996 $675,428,333 $269,518,000 39.90% $94,332,000 53.87% $74,117,000 64.84% $51,300,000 72.44%
January 1997 661,919,767 264,233,332 39.92 92,482,354 53.89 72,663,725 64.87 51,300,000 72.62
January 1998 648,411,200 259,032,772 39.95 90,662,145 53.93 71,233,578 64.92 51,300,000 72.83
January 1999 634,902,633 250,794,034 39.50 87,778,554 53.33 68,967,944 64.19 47,793,051 71.72
January 2000 621,394,067 239,121,593 38.48 83,693,163 51.95 65,758,043 62.53 46,536,115 70.02
January 2001 607,885,500 225,745,475 37.14 79,011,491 50.13 62,079,627 60.35 46,536,115 68.00
January 2002 594,376,933 206,221,031 34.70 72,177,883 46.84 56,710,436 56.38 46,536,115 64.21
January 2003 580,868,367 185,903,625 32.00 65,066,737 43.21 51,123,181 52.01 46,536,115 60.02
January 2004 567,359,800 169,515,666 29.88 59,330,915 40.34 46,616,514 48.55 46,536,115 56.75
January 2005 553,851,233 152,042,236 27.45 53,215,176 37.06 41,811,345 44.61 45,865,832 52.89
January 2006 540,342,667 135,415,490 25.06 47,395,782 33.83 37,239,014 40.72 35,083,602 47.22
January 2007 526,834,100 118,271,350 22.45 41,395,298 30.31 32,524,401 36.48 22,943,184 40.84
January 2008 513,325,533 91,294,275 17.78 31,953,260 24.01 25,105,747 28.90 17,160,335 32.24
January 2009 499,816,967 69,099,185 13.82 24,184,899 18.66 19,002,151 22.47 13,255,258 25.12
January 2010 479,432,413 56,341,836 11.75 19,719,786 15.86 15,493,909 19.10 11,198,303 21.43
January 2011 452,415,280 39,790,496 8.80 13,926,766 11.87 10,942,324 14.29 9,210,679 16.33
January 2012 426,420,347 20,863,519 4.89 7,302,266 6.61 5,737,445 7.95 7,471,052 9.70
January 2013 337,185,813 2,189,921 0.65 766,473 0.88 602,228 1.06 3,284,825 2.03
- ------------------
(1) The Assumed Aggregate Aircraft Value set forth opposite January 1996 (but
not the Assumed Aggregate Aircraft Values for subsequent periods) was
determined based upon the lesser of the average or median fair market value
of all Aircraft as appraised by the Appraisers as of January 1996 (see
"Description of the Aircraft and the Appraisals"). No assuance can be given
that such value represents the realizable value of any Aircraft. See "Risk
Factors--Appraisals and Realizable Value of Aircraft" and "Description of
the Aircraft and the Appraisals".
13
CASH FLOW STRUCTURE
Set forth below is a diagram illustrating the structure for the offering of
the Certificates and certain cash flows.
[Chart appears here]
* Each Aircraft is subject to a separate Lease and the related Indenture.
14
Certificates; Denominations
The new Certificates of each Trust will be issued in a minimum denomination of
$1000 and in integral multiples thereof. See "Description of New Certificates--
General".
Regular Distribution Dates
January 15, April 15, July 15 and October 15, commencing April 15, 1996.
Special Distribution Dates
Any Business Day on which Special Payment is to be distributed.
Record Dates
The fifteenth day preceding a Regular Distribution Date or a Special
Distribution Date.
Distributions
All payments of principal, premium (if any) and interest received by the Trustee
on the Equipment Notes held in each Trust will be distributed by the Trustee to
the holders of the Certificates (the "Certificateholders") of such Trust on the
Regular Distribution Dates referred to above, subject to the provisions of the
Intercreditor Agreement. Payments on the Equipment Notes held in each Trust are
scheduled to be received in specified amounts by the Trustee of such Trust on
January 15, April 15, July 15 and October 15, commencing on April 15, 1996, and
to be distributed to the Certificateholders of such Trust on the corresponding
Regular Distribution Date, subject to the provisions of the Intercreditor
Agreement. Payments of principal, premium (if any) and interest resulting from
the early redemption or purchase (if any) of the Equipment Notes held in any
Trust will be distributed on a Special Distribution Date after not less than 20
days' notice from the Trustee to the Certificateholders of such Trust, subject
to the provisions of the Intercreditor Agreement. For a discussion of
distributions upon an Indenture Default, see "Description of New Certificates--
Indenture Defaults and Certain Rights Upon an Indenture Default".
Events of Default
Events of Default under each Pass Through Trust Agreement (each, a "PTC Event of
Default") are the failure to pay within 10 Business Days of the due date
thereof: (i) the outstanding Pool Balance of the applicable Class of
Certificates on the Final Maturity Date for such Class or (ii) interest due on
such Certificates on any distribution date (unless in the case of the Class A, B
or C Certificates the Subordination Agent shall have made an Interest Drawing
with respect thereto in an amount sufficient to pay such interest and shall have
distributed such amount to the Certificateholders entitled thereto). The Final
Maturity Dates for each of the Class A, B, C and D Certificates is April 15,
2015. Any failure to make expected principal distributions on any Class of
Certificates on any Regular Distribution Date (other than the Final Maturity
Date) will not constitute a PTC Event of Default with respect to such
Certificates.
Purchase Rights of
Certificateholders
Upon the occurrence and during the continuation of a Triggering Event (as
defined below), (i) the Class B Certificateholders shall
15
have the right to purchase all, but not less than all, of the Class A
Certificates, (ii) the Class C Certificateholders shall have the right to
purchase all, but not less than all, of the Class A Certificates and the Class B
Certificates and (iii) the Class D Certificateholders shall have the right to
purchase all, but not less than all, of the Class A Certificates, the Class B
Certificates and the Class C Certificates, in each case at a purchase price
equal to the Pool Balance of the relevant Class or Classes of Certificates plus
accrued and unpaid interest thereon to the date of purchase without premium but
including any other amounts due to the Certificateholders of such Class or
Classes.
"Triggering Event" means (x) the occurrence of an Indenture Default under all
Indentures resulting in a PTC Event of Default with respect to the most senior
Class of Certificates then outstanding, (y) the acceleration of all of the
outstanding Equipment Notes or (z) certain bankruptcy or insolvency events
involving Continental.
Equipment Notes
(a) Interest
The Equipment Notes held in each Trust accrue interest at the applicable rate
per annum for such Trust, payable on January 15, April 15, July 15 and October
15 of each year commencing on April 15, 1996, and such interest payments will be
passed through to Certificateholders of such Trust on each such date until the
final distribution date for such Certificates, in each case, subject to the
Intercreditor Agreement. Interest is calculated on the basis of a 360-day year
consisting of twelve 30-day months. See "Description of New Certificates--
General" and "--Payments and Distributions". The interest rates for the
Equipment Notes are subject to increases under certain circumstances described
in "The Exchange Offer--Terms of the Exchange Offer" to the same extent as the
interest rates for the Old Certificates. The New Certificates do not contain
terms with respect to interest rate step-up provisions of the Old Certificates.
(b) Principal
Scheduled principal payments on the Equipment Notes held in each Trust will be
passed through to the Certificateholders of each such Trust on January 15, April
15, July 15 and October 15 in certain years, commencing on January 15, 1997, in
the case of each of the Class A Trust, the Class B Trust and the Class C Trust
and January 15, 1999, in the case of the Class D Trust, in accordance with the
principal repayment schedule set forth below under "Description of New
Certificates--Pool Factors" and "Description of the Equipment Notes--Principal
and Interest Payments", in each case, subject to the Intercreditor Agreement.
(c) Redemption and Purchase
(i) The Equipment Notes issued with respect to an Aircraft will be redeemed in
whole upon the occurrence of an Event of Loss with respect to such
Aircraft if such Aircraft is not replaced by Continental under the related
Lease, in each case at a price equal to the aggregate unpaid principal
16
thereof, together with accrued interest thereon to, but not including, the
date of redemption, but without any premium.
(ii) All of the Equipment Notes issued with respect to any Aircraft may be
redeemed prior to maturity at a price equal to the aggregate unpaid
principal thereof, together with accrued interest thereon to, but not
including, the date of redemption, plus a Make-Whole Premium (as defined
herein). See "Description of the Equipment Notes--Redemption" for a
description of the manner of computing such Make-Whole Premium and the
circumstances under which the Equipment Notes may be so redeemed.
(iii) If, with respect to an Aircraft, (x) one or more Lease Events of Default
shall have occurred and be continuing, (y) the Loan Trustee with respect
to such Equipment Notes shall take action or notify the applicable Owner
Trustee that it intends to take action to foreclose the lien of the
related Indenture or otherwise commence the exercise of any significant
remedy under such Indenture or the related Lease or (z) the Equipment
Notes with respect to such Aircraft shall have been accelerated, then in
each case the Equipment Notes issued with respect to such Aircraft may
be purchased by the Owner Trustee or Owner Participant on the applicable
purchase date at a price equal to the aggregate unpaid principal
thereof, together with accrued interest thereon to, but not including,
the purchase date, but without any premium (provided that a premium
shall be payable if such Equipment Notes are to be purchased pursuant to
clause (x) above when (A) a Lease Event of Default shall have occurred
and be continuing for less than 120 days or (B) the only Lease Event of
Default under the related Lease arises from the cross-default provisions
of such Lease).
(d) Security
The Equipment Notes issued with respect to each Aircraft are secured by a
security interest in such Aircraft and an assignment to the related Loan Trustee
of certain of the related Owner Trustee's rights under the Lease with respect to
such Aircraft, including the right to receive payments of rent thereunder, with
certain exceptions. The Equipment Notes are not cross-collateralized and,
consequently, the Equipment Notes issued in respect of any one Aircraft are not
secured by any of the other Aircraft or the Leases related thereto. There are no
cross-default provisions in the Indentures. Consequently, events resulting in an
Indenture Default under any particular Indenture may or may not result in an
Indenture Default occurring under any other Indenture. However, a Lease Event of
Default under any particular Lease will constitute a Lease Event of Default
under all Leases due to the cross-default provisions in the Leases, and will
consequently result in an Indenture Default under all Indentures. If the
Equipment Notes issued with
17
respect to one or more Aircraft are in default and the Equipment Notes issued
with respect to the remaining Aircraft are not in default, no remedies will be
exercisable under the Indentures with respect to such remaining Aircraft. See
"Description of the Equipment Notes--Security" and "--Indenture Defaults, Notice
and Waiver".
Although the Equipment Notes are not obligations of, or guaranteed by,
Continental, the amounts unconditionally payable by Continental for lease of the
Aircraft will be sufficient to pay in full when due all amounts required to be
paid on the Equipment Notes. See "Description of the Equipment Notes--General".
(e) Section 1110 Protection
Cleary, Gottlieb, Steen & Hamilton, counsel to Continental, has advised the Loan
Trustees that the Owner Trustee, as lessor under the Lease relating to each
Aircraft, and the related Loan Trustee, as assignee of such Owner Trustee's
rights under such Lease pursuant to the related Indenture, are entitled to the
benefits of 11 U.S.C. (S)1110 with respect to the airframe and engines
comprising the related Aircraft. See "Description of the Equipment Notes--
Remedies" for a description of that opinion and certain assumptions contained
therein.
The Bankruptcy Reform Act of 1994 (the "Act") amended Section 1110 by, among
other things, providing that the lessor under a lease of aircraft first placed
in service prior to the date of the enactment of the Act will be entitled to the
benefits of Section 1110 if the lessor and the lessee have expressed in the
applicable agreement or in a substantially contemporaneous writing that the
applicable agreement is to be treated as a lease for Federal income tax
purposes. Each of the Leases relating to the four Aircraft placed in service
prior to the enactment of the Act contains such a written statement.
(f) Ranking
Series B Equipment Notes issued in respect of any Aircraft are subordinated in
right of payment to Series A Equipment Notes issued in respect of such Aircraft;
Series C Equipment Notes issued in respect of such Aircraft are subordinated in
right of payment to such Series B Equipment Notes; and Series D Equipment Notes
issued in respect of such Aircraft are subordinated in right of payment to such
Series C Equipment Notes. On each Distribution Date, (i) payments of interest
and principal due on Series A Equipment Notes issued in respect of any Aircraft
will be made prior to payments of interest and principal due on Series B
Equipment Notes issued in respect of such Aircraft, (ii) payments of interest
and principal due on such Series B Equipment Notes will be made prior to
payments of interest and principal due on Series C Equipment Notes issued in
respect of such Aircraft and (iii) payments of interest and principal due on
such Series C Equipment Notes will be made prior to payments of interest and
principal due on Series D Equipment Notes issued in respect of such Aircraft.
(g) Owner Participant
General Electric Company is currently the owner participant ("Owner
Participant") with respect to all of the eighteen leveraged
18
leases for the Aircraft. The Owner Participant or its affiliate acquired all of
the Class D Certificates at the time of their issuance. The Owner Participant
and certain of its affiliates have various business relationships with
Continental, including as a secured lender and a supplier of certain equipment
and services to Continental. Due to such relationships and GE's capacities as
both the Owner Participant and the Class D Certificateholder, interests of GE
may not be consistent with, or may conflict with, interests of other
Certificateholders. General Electric Company has the right to sell, assign or
otherwise transfer its interests as Owner Participant in any or all of such
leveraged leases, subject to the terms and conditions of the relevant
Participation Agreement and related documents, and the Class D Certificateholder
will have the right to sell any or all Class D Certificates, subject to the
terms and conditions of the Pass Through Trust Agreement for the Class D Trust.
Liquidity Facilities
The Subordination Agent and the Liquidity Provider have entered into a revolving
credit agreement (each, a "Liquidity Facility") with respect to each Trust
(other than the Class D Trust). Under each of the Liquidity Facilities, the
Liquidity Provider will, if necessary, make advances ("Interest Drawings") in an
aggregate amount sufficient to pay interest on the Class A, B or C Certificates,
as the case may be, on up to six successive quarterly Regular Distribution Dates
(without regard to any future payments of principal on such Certificates) at the
respective interest rates (without any penalty or default margin but after
giving pro forma effect to adjustments arising from Registration Defaults,
provided that such adjustments shall cease to apply at such time as the interest
rate borne by such Certificates is no longer subject to increase pursuant to the
terms of the Registration Rights Agreement) on such Certificates (the "Stated
Interest Rates"). The initial amount available under the Liquidity Facilities
for the Class A Certificates, the Class B Certificates and the Class C
Certificates will be $30,078,208.80, $11,772,633.60 and $11,117,550.00,
respectively. An Interest Drawing under the relevant Liquidity Facility will be
made promptly after any Regular Distribution Date if, after giving effect to the
subordination provisions of the Intercreditor Agreement, there are insufficient
funds available to the Subordination Agent to pay interest on any Class A, B or
C Certificates; provided, however, that on any date the maximum amount available
under such Liquidity Facility to fund any shortfall in interest due on such
Certificates will not exceed an amount equal to the then stated amount of such
Liquidity Facility. The Liquidity Facility for any Class of Certificates does
not provide for drawings thereunder to pay for principal of or premium on the
Certificates of such Class, any interest on the Certificates of such Class in
excess of the Stated Interest Rates, or principal of or interest or premium on
the Certificates of any other Class.
Upon each Interest Drawing under any Liquidity Facility, the Subordination Agent
will be obligated to reimburse (to the extent that the Subordination Agent has
available funds therefor) the
19
Liquidity Provider for the amount of such drawing. Such reimbursement obligation
and any other amounts owing to the Liquidity Provider under each Liquidity
Facility or certain other agreements (the "Liquidity Obligations") will rank
pari passu with the Liquidity Obligations relating to all other Liquidity
Facilities and will rank senior to the Certificates in right of payment. Upon
reimbursement in full of the Interest Drawings (but not other Drawings),
together with any accrued interest thereon, under any Liquidity Facility, the
amount available under such Liquidity Facility will be reinstated to the then
stated amount of such Liquidity Facility; provided that the amount will not be
so reinstated if (i) a Triggering Event shall have occurred and be continuing
and (ii) less than 65% of the aggregate outstanding principal amount of all
Equipment Notes are Performing Equipment Notes.
If at any time the short-term unsecured debt rating of any Liquidity Provider
issued by either Rating Agency is lower than the Threshold Rating, the Liquidity
Facility for the related Class of Certificates will be required to be replaced
by another similar facility to be provided by a financial institution having
unsecured short-term debt ratings issued by both Rating Agencies which are equal
to or higher than the Threshold Rating. If such Liquidity Facility is not
replaced within 10 days after notice of the downgrading, such Liquidity Facility
will be drawn in full (the "Downgrade Drawing") and the proceeds will be
deposited into the Cash Collateral Account for the related Class of Certificates
and used for the same purposes and under the same circumstances and subject to
the same conditions as cash payments of Interest Drawings under such Liquidity
Facility would be used. In addition, the Intercreditor Agreement will provide
for the replacement or extension of the Liquidity Facility for any Class of
Certificates which is scheduled to expire prior to the date that is fifteen days
after the Final Maturity Date for such Class. If such Liquidity Facility cannot
be so replaced or extended by the date that is 25 days prior to the then
scheduled expiration date of such Liquidity Facility, such Liquidity Facility
will be drawn in full (the "Non-Extension Drawing") and the proceeds will be
deposited in the Cash Collateral Account for the related Class of Certificates
and used for the same purposes and under the same circumstances and subject to
the same conditions as cash payments of Interest Drawings under such Liquidity
Facility would be used. Each initial Liquidity Facility is scheduled to expire
on January 29, 1997, subject to annual extensions by mutual agreement.
Continental, in consultation with the Subordination Agent, may direct the Owner
Participants (which shall follow such direction unless they have a bona fide,
good faith reason not to) to arrange for a replacement facility at any time to
replace the Liquidity Facility for any Trust. If such replacement facility is
provided at any time after a Downgrade Drawing or Non-Extension Drawing under
such Liquidity Facility, the funds on deposit in the Cash Collateral Account for
such Trust will be returned to the Liquidity Provider
20
being replaced.
Notwithstanding the subordination provisions of the Intercreditor Agreement, the
holders of the Certificates to be issued by each Trust (other than the Class D
Trust) will be entitled to receive and retain the proceeds of drawings under the
Liquidity Facility for such Trust. See "Description of the Liquidity
Facilities".
Intercreditor Agreement
(a) Subordination
The Trusts, the Liquidity Providers and the Subordination Agent have entered
into an agreement (the "Intercreditor Agreement") which provides as follows:
(i) All payments made in respect of the Equipment Notes and certain other
payments will be made to the Subordination Agent which will distribute
such payments in accordance with the provisions of paragraphs (ii)
through (iv) below.
(ii) On any Regular Distribution Date or Special Distribution Date (each, a
"Distribution Date"), so long as no Triggering Event shall have occurred
(whether or not continuing), all payments received by the Subordination
Agent in respect of the Equipment Notes and certain other payments will
be distributed in the following order: (1) payment of the Liquidity
Obligations; (2) payment of Expected Distributions to the holders of
Class A Certificates; (3) payment of Expected Distributions to the
holders of Class B Certificates; (4) payment of Expected Distributions
to the holders of Class C Certificates; (5) payment of Expected
Distributions to the holders of Class D Certificates; and (6) payment of
certain fees and expenses of the Subordination Agent and the Trustees.
"Expected Distributions" means, with respect to the Certificates of any
Trust on any Distribution Date (the "Current Distribution Date") the sum
of (x) accrued and unpaid interest on such Certificates and (y) the
difference between (A) the Pool Balance of such Certificates as of the
immediately preceding Distribution Date and (B) the Pool Balance of such
Certificates as of the Current Distribution Date, calculated on the
basis that the principal of the Equipment Notes held in such Trust has
been paid when due (whether at stated maturity, upon redemption,
prepayment or acceleration or otherwise) and such payments have been
distributed to the holders of such Certificates.
(iii) Upon the occurrence of a Triggering Event and at all times thereafter,
subject to the provisions of paragraph (iv) below, all payments received
by the Subordination Agent in respect of the Equipment Notes and certain
other payments will be distributed in the following order: (1) to the
Liquidity Provider
21
in payment of the Liquidity Obligations and certain other parties in
payment of the Administration Expenses (as defined herein); (2) to the
holders of Class A Certificates in payment of Final Distributions; (3)
to the holders of Class B Certificates in payment of Final
Distributions; (4) to the holders of Class C Certificates in payment of
Final Distributions; and (5) to the holders of Class D Certificates in
payment of Final Distributions.
"Final Distributions" means, with respect to the Certificates of any
Trust on any Distribution Date, the sum of (x) accrued and unpaid
interest on such Certificates and (y) the Pool Balance of such
Certificates as of the immediately preceding Distribution Date.
(iv) Notwithstanding the foregoing paragraph, after the occurrence of a
Triggering Event (whether or not continuing), so long as no PTC Event of
Default shall have occurred and be continuing with respect to the most
senior Class of Certificates outstanding, any regularly scheduled
payment received on any Equipment Notes (the "Performing Equipment
Notes") with respect to which there is no payment default (without
giving effect to any acceleration thereof) shall be distributed as
follows:
(x) interest paid on all of the Performing Equipment Notes (the
"Performing Equipment Notes Interest Payment") will be distributed in
the following order: (1) to the Liquidity Providers in payment of the
Liquidity Obligations and certain other parties in payment of the
Administration Expenses (as defined herein); (2) to the holders of
Class A Certificates in payment of accrued and unpaid interest on the
Class A Certificates; (3) to the holders of Class B Certificates in
payment of accrued and unpaid interest on the Class B Certificates;
(4) to the holders of Class C Certificates in payment of accrued and
unpaid interest on the Class C Certificates; and (5) to the holders
of Class D Certificates; provided that the provisions of this
paragraph (x) will be given effect before distribution of any funds
received in respect of any Equipment Notes other than the Performing
Equipment Notes (the "Non-Performing Equipment Notes");
(y) principal paid in respect of the Performing Equipment Notes (after
paying in full the Liquidity Obligations and the Administration
Expenses) (the "Performing Equipment Notes Principal Payment") will
be distributed in the following order: (1) to the holders of Class A
Certificates in payment of the greater of (A) the Adjusted Expected
Distributions to such holders on such
22
Distribution Date and (B) such holders' pro rata portion of the
Performing Equipment Notes Principal Payment based on the Adjusted
Pool Balance of such Trust; (2) to the holders of Class B
Certificates in payment of the greater of (A) the Adjusted Expected
Distributions to such holders on such Distribution Date and (B) such
holders' pro rata portion of the Performing Equipment Notes Principal
Payment based on the Adjusted Pool Balance of such Trust; (3) to the
holders of Class C Certificates in payment of the greater of (A) the
Adjusted Expected Distributions to such holders on such Distribution
Date and (B) such holders' pro rata portion of the Performing
Equipment Notes Principal Payment based on the Adjusted Pool Balance
of such Trust; and (4) to the holders of Class D Certificates;
provided that the provisions of this paragraph (y) will be given
effect after distributing any funds received in respect of any Non-
Performing Equipment Notes;
provided that if the aggregate amount of future scheduled payments in respect of
the Performing Equipment Notes, together with the Performing Equipment Notes
Principal Payment as of such Distribution Date, will be (assuming the
distribution of such amount as contemplated by paragraphs (x) and (y) and that
no further payment will be received at any time from the Non-Performing
Equipment Notes) insufficient to pay interest on any Class of Certificates and
reduce the Pool Balance of such Class of Certificates to zero before the Final
Maturity Date thereof, the amount of distributions to be made to the holders of
such Class of Certificates on such Distribution Date will be increased by the
amount necessary to eliminate such insufficiency prior to making any
distributions to the holders of any Class of Certificates junior to such Class
of Certificates and such increase shall be taken into account for the purpose of
applying this proviso to the holders of any such junior Class of Certificates.
"Adjusted Expected Distribution" for the Certificates of any Trust means, with
respect to any Distribution Date, the sum of (x) accrued and unpaid interest on
such Certificates (after taking into account the distribution of the Performing
Equipment Notes Interest Payment and any funds received in respect of Non-
Performing Equipment Notes on such Distribution Date) plus (y) the amount (which
shall not be less than zero) equal to (A) the Adjusted Pool Balance of such
Trust as of such Distribution Date minus (B) the Pool Balance of such Trust as
of such Distribution Date, calculated on the basis that all payments on the
Equipment Notes held in such Trust have been paid when due (but without giving
effect to any acceleration of Performing Equipment Notes held in such Trust) and
such payments have been distributed to the holders of such Certificates.
23
"Adjusted Pool Balance" of any Trust means, with respect to any Current
Distribution Date, the Pool Balance of such Trust as of the immediately
preceding Distribution Date minus any amounts received in respect of any Non-
Performing Equipment Notes distributed to the holders of the Certificates of
such Trust on the Current Distribution Date other than in respect of interest or
premium thereon.
(b) Intercreditor Rights
Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity Provider
have agreed that, with respect to any Indenture at any given time, the Loan
Trustee will be directed (a) in taking, or refraining from taking, any action
thereunder by the holders of at least a majority of the outstanding principal
amount of the Equipment Notes issued thereunder as long as no Indenture Default
has occurred and is continuing thereunder and (b) subject to certain conditions,
in exercising remedies thereunder (including acceleration of such Equipment
Notes or foreclosing the lien on the Aircraft securing such Equipment Notes) by
the Controlling Party insofar as an Indenture Default thereunder has occurred
and is continuing.
"Controlling Party" with respect to any Indenture means: (w) the Class A
Trustee; (x) upon payment of Final Distributions to the holders of Class A
Certificates, the Class B Trustee; (y) upon payment of Final Distributions to
the holders of Class B Certificates, the Class C Trustee; and (z) upon payment
of Final Distributions to the holders of Class C Certificates, the Class D
Trustee. See "Description of New Certificates--Indenture Defaults and Certain
Rights Upon an Indenture Default" for a description of the rights of the
Certificateholders of each Trust to direct the respective Trustees.
Notwithstanding the foregoing, subject to certain limitations, the Liquidity
Provider shall have the right to direct such Loan Trustee at any time after 18
months from the acceleration of the Equipment Notes under such Indenture, if at
the time of such election the Liquidity Obligations have not been paid in full;
provided that if there is more than one Liquidity Provider, the Liquidity
Provider with the greatest amount of unreimbursed Liquidity Obligations shall
have such right. For purposes of giving effect to the foregoing, the Trustees
(other than the Controlling Party) shall irrevocably agree (and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) shall be deemed to agree by virtue of their purchase of
Certificates) to exercise their voting rights as directed by the Controlling
Party.
(i) Upon the occurrence and during the continuation of any Indenture Default
under any Indenture, the Controlling Party may accelerate and sell all
(but not less than all) of the Equipment Notes issued under such
Indenture to any person, subject to the provisions of paragraph (ii)
below. The proceeds of such sale will be distributed pursuant to the
provisions of the Intercreditor Agreement.
24
(ii) So long as any Certificates are outstanding, during nine months after
the earlier of (x) the acceleration of the Equipment Notes under any
Indenture or (y) the bankruptcy or insolvency of Continental, without
the consent of each Trustee, (a) no Aircraft subject to the lien of such
Indenture or such Equipment Notes may be sold, if the net proceeds from
such sale would be less than the Minimum Sale Price for such Aircraft or
such Equipment Notes, and (b) the amount and payment dates of rentals
payable by Continental under the Lease for such Aircraft may not be
adjusted, if, as a result of such adjustment, the discounted present
value of all such rentals would be less than 75% of the discounted
present value of the rentals payable by Continental under such Lease
before giving effect to such adjustment, in each case, using the
weighted average interest rate of the Equipment Notes issued under such
Indenture as the discount rate.
"Minimum Sale Price" means, with respect to any Aircraft or the
Equipment Notes issued in respect of such Aircraft, at any time, the
lesser of (1) 75% of the appraised value of such Aircraft based upon the
most recent appraisal and (2) the aggregate outstanding principal amount
of such Equipment Notes, plus accrued and unpaid interest thereon.
Certificates; Book-Entry Registration
Each New Certificate to be issued will be represented by one or more permanent
global Certificates registered in the name of Cede & Co. ("Cede"), as nominee of
The Depository Trust Company ("DTC"). See "Description of New Certificates--
Book Entry; Delivery and Form".
Method of Distribution
The persons in whose names the Certificates are registered will be treated as
the owners of such Certificates for the purpose of receiving payments of
principal of and interest on such Certificates and for all other purposes
whatsoever. Therefore, none of the Trustee, Continental, the Loan Trustee, the
Owner Participant or the Owner Trustee has any direct responsibility or
liability for distributions or payments to owners of beneficial interests in the
Certificates (the "Certificate Owners"). Distributions by the Trustee in respect
of Certificates registered in the name of Cede, as nominee of DTC, including the
final distribution of principal with respect to such Certificates of any Trust,
will be made in same-day funds to DTC. DTC will in turn make distributions in
same-day funds to those participants in DTC who are credited with ownership of
such Certificates ("DTC Participants") in amounts proportionate to the amount of
each such DTC Participant's respective holdings of beneficial interests in such
Certificates. Corresponding payments by the DTC Participants to beneficial
owners of such Certificates will be the responsibility of such DTC Participants
and will be made in accordance with customary industry practices. Distributions
by the Trustee to Certificateholders in respect of Certificates issued in
25
definitive form, other than the final distribution, will be made by check mailed
to each such Certificateholder of record on the applicable record date at its
address appearing on the register. The final distribution with respect to the
Certificates of any Trust will be made only upon surrender and presentation
thereof to the Trustee. See "Description of New Certificates--Book-Entry;
Delivery and Form".
Absence of a Public Market for the Certificates
Prior to this Exchange Offer, there has been no public market for the Old
Certificates or the New Certificates. Neither Continental nor any Trust has
applied or intends to apply for listing of the New Certificates on any national
securities exchange or for quotation of the New Certificates through the
National Association of Securities Dealers Automated Quotation System.
[Describe market making by Initial Purchasers in the Old Certificates, and
Continental has been advised by the Initial Purchasers that one or more of them
intends to make a market in the New Certificates, as permitted by applicable
laws and regulations, after consummation of the Exchange Offer. None of the
Initial Purchasers is obligated, however, to make a market in the Old
Certificates or the New Certificates and any such market making activity may be
discontinued at any time without notice at the sole discretion of each Initial
Purchaser. There can be no assurance as to the liquidity of the public market
for the Certificates or that any active public market for the Certificates will
develop. If an active public market does not develop, the market price and
liquidity of the Certificates may be adversely affected.]
Trustee
Wilmington Trust Company will act as Trustee and as paying agent and registrar
for the Certificates of each Trust. Wilmington Trust Company will also act as
Loan Trustee, as paying agent and registrar for each Series of Equipment Notes
and as Subordination Agent under the Intercreditor Agreement.
Federal Income Tax Consequences
The exchange of New Certificates for Old Certificates should not be a sale or
exchange or otherwise a taxable event for Federal income tax purposes.
ERISA Considerations
A fiduciary of any employee benefit plan which is subject to the fiduciary
responsibility provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or of a "plan" subject to Section 4975 of the
Internal Revenue Code of 1986, as amended (the "Code"), or of any governmental
plan which is subject to any federal, state or local law which is substantially
similar to the foregoing provisions of ERISA or the Code which proposes to hold
any Class A Certificates should consult with its own legal counsel with respect
to the applicability of ERISA and the Code to such investment and the
transactions contemplated by the Exchange Offer, including the availability of
any statutory or administrative
26
prohibited transaction exemption. See "ERISA Considerations".
The Class B Certificates, Class C Certificates and Class D Certificates may not
be held by any Plan or any entity that is using the assets of a Plan to hold its
interest in a Class B Certificate, a Class C Certificate or a Class D
Certificate, and holders of Class B Certificates, Class C Certificates and Class
D Certificates that tender such Old Certificates in exchange for a New
Certificates will be required to make certain representations to that effect.
Notwithstanding the foregoing, the Class B Certificates, the Class C
Certificates and the Class D Certificates may be held with the assets of an
insurance company general account, provided that the conditions of Prohibited
Transaction Class Exemption ("PTCE") 95-60 have been satisfied. Any insurance
company that uses general account assets to hold Class B Certificates, Class C
Certificates or Class D Certificates that tenders such Old Certificates in
exchange for New Certificates will be required to represent that PTCE 95-60
applies to its tender and the holding of such Class B Certificates, Class C
Certificates or Class D Certificates. See "ERISA Considerations".
27
RISK FACTORS
Holders of New Certificates should carefully consider the following risk
factors, as well as other information set forth in this Prospectus, before
tendering their New Certificates in the Exchange Offer. The risk factors set
forth below (other than "--Risk Factors Relating to the Certificates--
Consequences of Failure to Exchange") are generally applicable to the Old
Certificates as well as the New Certificates.
Risk Factors Relating to the Company
Continental's History of Operating Losses
Although Continental recorded net income of $224 million in 1995 and $88
million in the three months ended March 31, 1996, it had experienced significant
operating losses in the previous eight years. In the long term, Continental's
viability depends on its ability to sustain profitable results of operations.
Leverage and Liquidity
Continental has successfully negotiated a variety of agreements to increase
its liquidity during 1995 and 1996. Nevertheless, Continental remains more
leveraged and has significantly less liquidity than certain of its competitors,
several of whom have available lines of credit and/or significant unencumbered
assets. Accordingly, Continental may be less able than certain of its
competitors to withstand a prolonged recession in the airline industry.
As of March 31, 1996, Continental and its consolidated subsidiaries had
approximately $1.7 billion (including current maturities) of long-term
indebtedness and capital lease obligations and had approximately $702 million of
minority interest, preferred securities of trust, redeemable preferred stock and
common stockholders' equity. Common stockholders' equity reflects the adjustment
of the Company's balance sheet and the recording of assets and liabilities at
fair market value as of April 27, 1993 in accordance with fresh start reporting.
During the first and second quarters of 1995, in connection with
negotiations with various lenders and lessors, Continental ceased or reduced
contractually required payments under various agreements, which produced a
significant number of events of default under debt, capital lease and operating
lease agreements. Through agreements reached with the various lenders and
lessors, Continental has cured all of these events of default. The last such
agreement was put in place during the fourth quarter of 1995.
As of March 31, 1996, Continental had approximately $657 million of cash
and cash equivalents, including restricted cash and cash equivalents of $124
million. Continental does not have general lines of credit and has no
significant unencumbered assets.
Continental has firm commitments with The Boeing Company ("Boeing") to take
delivery of 43 new jet aircraft during the years 1998 through 2002. The
estimated aggregate cost of these aircraft is $2.6 billion. In addition, six
Beech 1900-D aircraft are scheduled to be delivered later in 1996. The Company
currently anticipates that the firm financing commitments available to it with
respect to its acquisition of new aircraft from Beech Acceptance Corporation
("Beech") will be sufficient to fund all deliveries scheduled during 1996, and
that it will have remaining financing commitments from aircraft manufacturers of
$676 million for jet aircraft deliveries beyond 1996. However, the Company
believes that further financing will be needed to satisfy the remaining amount
of such capital commitments. There can be no assurance that sufficient financing
will be available for all aircraft and other capital expenditures not covered by
firm financing commitments.
28
For 1996, Continental expects to incur cash expenditures under operating
leases of approximately $586 million, compared with $521 million for 1995,
relating to aircraft and approximately $229 million relating to facilities and
other rentals, the same amount as for 1995. In addition, Continental has capital
requirements relating to compliance with regulations that are discussed below.
See "--Regulatory Matters."
Continental and CMI have secured borrowings from 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" will give rise to an increase in percentage ownership by certain
stockholders for this purpose. Based upon the advice of counsel, the Company
believes that such percentage increase will not give rise to an ownership change
under Section 382 as a result of the Secondary Offering. However, no assurance
can be given that future transactions, whether within or outside the control of
the Company, will not cause a change in ownership, thereby substantially
limiting the potential utilization of the NOLs in a given future year. In the
event that an ownership change should occur, utilization of Continental's NOLs
would be subject to an annual limitation under Section 382. This Section 382
limitation for any post-change year would be determined by multiplying the value
of the Company's stock (including both common and preferred stock) of the time
of the ownership change by the applicable long-term tax exempt rate (which is
5.31% for April 1996). Unused annual limitation may be carried over to later
years, and the limitation may under certain circumstances be increased by the
built-in gains in assets held by the Company at the time of the change that are
recognized in the five-year period after the change. Under current conditions,
if an ownership change were to occur, Continental's NOL utilization would be
limited to a minimum of approximately $90 million.
29
In connection with the Company's 1993 reorganization under Chapter 11 of
the U.S. bankruptcy code effective April 27, 1993 (the "Reorganization") and the
recording of assets and liabilities at fair market value under the American
Institute of Certified Public Accountants' Statement of Position 90-7--
"Financial Reporting by Entities in Reorganization Under the Bankruptcy Code"
("SOP 90-7"), the Company recorded a deferred tax liability at April 27, 1993,
net of the amount of the Company's estimated realizable net operating loss
carryforwards as required by Statement of Financial Accounting Standards No.
109--"Accounting for Income Taxes." Realization of a substantial portion of the
Company's net operating loss carryforwards will require the completion during
the five-year period following the Reorganization of transactions resulting in
recognition of built-in gains for federal income tax purposes. The Company has
consummated one such transaction, which had the effect of realizing
approximately 40% of the built-in gains required to be realized over the five-
year period, and currently intends to consummate one or more additional
transactions. If the Company were to determine in the future that not all such
transactions will be completed, an adjustment to the net deferred tax liability
of up to $116 million would be charged to income in the period such
determination was made.
CMI
CMI's operating profit margins have consistently been greater than the
Company's margins overall. In addition to its non-stop service between Honolulu
and Tokyo, CMI's operations focus on the neighboring islands of Guam and Saipan,
resort destinations that cater primarily to Japanese travelers. Because the
majority of CMI's traffic originates in Japan, its results of operations are
substantially affected by the Japanese economy and changes in the value of the
yen as compared to the dollar. Appreciation of the yen against the dollar during
1993 and 1994 increased CMI's profitability and a decline of the yen against the
dollar may be expected to decrease it. To reduce the potential negative impact
on CMI's dollar earnings, CMI from time to time purchases average rate options
as a hedge against a portion of its expected net yen cash flow position. Any
significant and sustained decrease in traffic or yields to and from Japan could
materially adversely affect Continental's consolidated profitability.
Principal Stockholders
After the Secondary Offering (as defined herein), which was completed on
May 14, 1996 and the conversion by Air Canada of its Class A common stock into
Class B common stock, Air Canada holds approximately 10.1% of the common equity
interests and 4.0% of the general voting power of the Company, and Air Partners
holds approximately 9.9% of the common equity interests and 39.4% of the general
voting power of the Company. In addition, assuming exercise of all of the
warrants held by Air Partners, approximately 23.4% of the common equity
interests and 52.2% of the general voting power would be held by Air Partners.
See "Recent Developments."
Various provisions in the Company's Restated Certificate of Incorporation
(the "Certificate of Incorporation"), the Company's bylaws (the "Bylaws") and
the Subscription and Stockholders' Agreement among the Company, Air Partners and
Air Canada dated as of April 27, 1993 (the "Stockholders' Agreement") currently
provide Air Partners and Air Canada with a variety of special rights to elect
directors and otherwise affect the corporate governance of the Company; a number
of these provisions could have the effect of delaying, deferring or preventing a
change in control of the Company. The Company has proposed to eliminate a number
of these provisions and will propose for approval by its stockholders the
related amendments to the Certificate of Incorporation at its annual meeting of
stockholders on June 26, 1996 (the "Annual Meeting"). Air Canada and Air
Partners (unless otherwise directed by its investors) have agreed to vote in
favor of these amendments at the Annual Meeting. See "Recent Developments."
Industry Conditions and Competition
The airline industry is highly competitive and susceptible to price
discounting. The Company has in the past both responded to discounting actions
taken by other carriers and initiated significant discounting
30
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 benefited from the expiration of the
aviation trust fund tax (the "ticket tax") on December 31, 1995, although the
amount of any such benefit resulting directly from the expiration of the ticket
tax cannot be determined. Reinstatement of the ticket tax will result in higher
costs to consumers, which may have an adverse effect on passenger traffic,
revenue and margins. The Company is unable to predict when or in what form the
ticket tax may be reenacted.
Additional laws and regulations have been proposed from time to time that
could significantly increase the cost of airline operations by imposing
additional requirements or restrictions on operations. Laws and regulations have
also been considered that would prohibit or restrict the ownership and/or
transfer of airline routes or takeoff and landing slots. Also, the availability
of international routes to United States carriers is regulated by treaties and
related agreements between the United States and foreign governments that are
amendable. Continental cannot predict what laws and regulations may be adopted
or their impact, but there can be no assurance that laws or regulations
currently enacted or enacted in the future will not adversely affect the
Company.
RISK FACTORS RELATING TO THE CERTIFICATES
Consequences of Failure to Exchange
Holders of Old Certificates who do not exchange their Old Certificates for
New Certificates pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Certificates as set forth
31
in the legend thereon as a consequence of the issuance of the Old Certificates
pursuant to exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Certificates may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the Old
Certificates under the Securities Act. To the extent that Old Certificates are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Old Certificates could be adversely affected.
Appraisals and Realizable Value of Aircraft
Appraisals in respect of the Aircraft (without physical inspection thereof)
have been prepared by AISI, BK and MBA. According to the appraisals of the three
firms, the Aircraft had an aggregate appraised value of $711,760,000,
$652,500,000, and $687,989,000, respectively, in each case as of January 3,
1996. See "Description of the Aircraft and the Appraisals". However, an
appraisal is only an estimate of value and should not be relied upon as a
measure of realizable value; the proceeds realized upon a sale of any Aircraft
may be less than the appraised value thereof. The value of the Aircraft in the
event of the exercise of remedies under the applicable Indenture will depend on
market and economic conditions, the availability of buyers, the condition of the
Aircraft and other factors. Accordingly, there can be no assurance that the
proceeds realized upon any such exercise with respect to the Equipment Notes and
the Aircraft pursuant to the applicable Pass Through Trust Agreement and the
applicable Indenture would be sufficient to satisfy in full payments due on the
Certificates.
Priority of Distributions; Subordination
Pursuant to the Intercreditor Agreement to which the Trusts, the
Subordination Agent and the Liquidity Providers shall be parties, on each
Distribution Date, so long as no Triggering Event shall have occurred, all
payments received by the Subordination Agent will be distributed in the
following order: (1) payment of the Liquidity Obligations to the Liquidity
Providers; (2) payment of Expected Distributions to the holders of Class A
Certificates; (3) payment of Expected Distributions to the holders of Class B
Certificates; (4) payment of Expected Distributions to the holders of Class C
Certificates; (5) payment of Expected Distributions to the holders of Class D
Certificates; and (6) payment of certain fees and expenses of the Subordination
Agent and the Trustees.
In addition, upon the occurrence of a Triggering Event and at all times
thereafter, subject to the provisions of the next paragraph, all payments
received by the Subordination Agent in respect of the Equipment Notes and
certain other payments will be distributed under the Intercreditor Agreement in
the following order: (1) to the Liquidity Providers in payment of the Liquidity
Obligations and certain other parties in payment of the Administration Expenses;
(2) to the holders of Class A Certificates in payment of Final Distributions;
(3) to the holders of Class B Certificates in payment of Final Distributions;
(4) to the holders of Class C Certificates in payment of Final Distributions;
and (5) to the holders of Class D Certificates in payment of Final
Distributions.
Notwithstanding the provisions of the foregoing paragraph, after the
occurrence of a Triggering Event but so long as no PTC Event of Default shall
have occurred and be continuing with respect to the most senior Class of
Certificates outstanding, any regularly scheduled payment received on the
Performing Equipment Notes shall be distributed as follows:
(x) the Performing Equipment Notes Interest Payment will be distributed in
the following order: (1) to the Liquidity Providers in payment of the
Liquidity Obligations and certain other parties in payment of the
Administration Expenses; (2) to the holders of Class A Certificates in payment
of accrued and unpaid interest on the Class A Certificates; (3) to the holders
of Class B Certificates in payment of accrued and unpaid interest on the Class
B Certificates; (4) to the holders of Class C Certificates in payment of
accrued and unpaid interest on the Class C Certificates; and (5) to the
holders of Class D Certificates; provided that
32
the provisions of this paragraph (x) will be given effect before distribution
of any funds received in respect of any Non-Performing Equipment Notes;
(y) the Performing Equipment Notes Principal Payment will be distributed in
the following order: (1) to the holders of Class A Certificates in payment of
the greater of (A) the Adjusted Expected Distributions to such holders on such
Distribution Date and (B) such holders' pro rata portion of the Performing
Equipment Notes Principal Payment based on the Adjusted Pool Balance of such
Trust; (2) to the holders of Class B Certificates in payment of the greater of
(A) the Adjusted Expected Distributions to such holders on such Distribution
Date and (B) such holders' pro rata portion of the Performing Equipment Notes
Principal Payment based on the Adjusted Pool Balance of such Trust; (3) to the
holders of Class C Certificates in payment of the greater of (A) the Adjusted
Expected Distributions to such holders on such Distribution Date and (B) such
holders' pro rata portion of the Performing Equipment Notes Principal Payment
based on the Adjusted Pool Balance of such Trust; and (4) to the holders of
Class D Certificates; provided that the provisions of this paragraph (y) will
be given effect after distributing any funds received in respect of any Non-
Performing Equipment Notes;
provided that if the aggregate amount of future scheduled payments in respect of
the Performing Equipment Notes, together with the Performing Equipment Notes
Principal Payment as of such Distribution Date, will be (assuming the
distribution of such amount as contemplated by paragraphs (x) and (y) and that
no further payment will be received at any time from the Non-Performing
Equipment Notes) insufficient to pay interest on any Class of Certificates and
reduce the Pool Balance of such Class of Certificates to zero before the Final
Maturity Date thereof, the amount of distributions to be made to the holders of
such Class of Certificates on such Distribution Date will be increased by the
amount necessary to eliminate such insufficiency prior to making any
distributions to the holders of any Class of Certificates junior to such Class
of Certificates and such increase shall be taken into account for the purpose of
applying this proviso to the holders of any such junior Class of Certificates.
Control over Collateral; Sale of Collateral
Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity
Provider shall agree that, with respect to any Indenture at any given time, the
Loan Trustee will be directed (a) in taking, or refraining from taking, any
action thereunder by the holders of at least a majority of the outstanding
principal amount of the Equipment Notes issued thereunder as long as no
Indenture Default has occurred and is continuing thereunder and (b) subject to
certain conditions, in exercising remedies thereunder (including acceleration of
such Equipment Notes or foreclosing the lien on the Aircraft securing such
Equipment Notes) insofar as an Indenture Default has occurred and is continuing
by the Controlling Party. See "Description of New Certificates--Indenture
Defaults and Certain Rights Upon an Indenture Default" for a description of the
rights of the Certificateholders of each Trust to direct the respective
Trustees. Notwithstanding the foregoing, subject to certain limitations, the
Liquidity Provider shall have the right to direct such Loan Trustee at any time
after 18 months from the acceleration of the Equipment Notes under such
Indenture, if at the time of such election the Liquidity Obligations have not
been paid in full. For purposes of giving effect to the foregoing, the Trustees
(other than the Controlling Party) shall irrevocably agree (and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) shall be deemed to agree by virtue of their purchase of
Certificates) to exercise their voting rights as directed by the Controlling
Party.
Upon the occurrence and during the continuation of any Indenture Default
under any Indenture, the Controlling Party may accelerate and, subject to the
provisions of the immediately following sentence, sell all (but not less than
all) of the Equipment Notes issued under such Indenture to any person. So long
as any Certificates are outstanding, during nine months after the earlier of (x)
the acceleration of the Equipment Notes under any Indenture or (y) the
bankruptcy or insolvency of Continental, without the consent of each Trustee,
(a) no Aircraft subject to the lien of such Indenture or such Equipment Notes
may be sold, if the net proceeds from such sale would be less than the Minimum
Sale Price for such Aircraft or such Equipment Notes, and (b) the
33
amount and payment dates of rentals payable by Continental under the Lease for
such Aircraft may not be adjusted, if, as a result of such adjustment, the
discounted present value of all such rentals would be less than 75% of the
discounted present value of the rentals payable by Continental under such Lease
before giving effect to such adjustment, in each case, using the weighted
average interest rate of the Equipment Notes issued under such Indenture as the
discount rate.
Potential Conflict of Interest
General Electric Company is currently the Owner Participant with respect to all
of the eighteen leveraged leases for the Aircraft. The Owner Participant or its
affiliate will also acquire all of the Class D Certificates contemporaneously
with the consummation of the Offering. The Owner Participant and certain of its
affiliates have various business relationships with Continental, including as a
lender and a supplier of certain equipment and services to Continental. Certain
of the obligations of Continental to the Owner Participant with respect to the
Aircraft are currently secured by a pledge of unrelated assets, most of which
assets are also pledged to GE to secure unrelated obligations. Due to such
relationships and GE's capacities as both the Owner Participant and the Class D
Certificateholder, interests of GE may not be consistent with, or may conflict
with, interests of other Certificateholders. General Electric Company has the
right to sell, assign or otherwise transfer its interests as Owner Participant
in any or all of such leveraged leases, subject to the terms and conditions of
the relevant Participation Agreement and related documents, and the Class D
Certificateholder will have the right to sell any or all Class D Certificates,
subject to the terms and conditions of the Pass Through Trust Agreement for the
Class D Trust.
Absence of a Public Market for the Certificates
Prior to the Exchange Offer, there has been no public market for the Old
Certificates or tne New Certificates. Neither Continental nor any Trust has
applied or intends to apply for listing of the New Certificates on any national
securities exchange or for quotation of the New Certificates through the
National Association of Securities Dealers Automated Quotation System. Certain
of the Initial Purchasers have previously make a market in the Old Certificates,
and Continental has been advised by the Initial Purchasers that one or more of
them presently intends to make a market in the New Certificates, as permitted by
applicable laws and regulations, after consummation of the Exchange Offer. None
of the Initial Purchasers is obligated, however, to make a market in the Old
Certificates or the New Certificates and any such market making activity may be
discontinued at any time without notice at the sole discretion of each Initial
Purchaser. There can be no assurance as to the liquidity of the public market
for the Certificates or that any active public market for the Certificates will
develop or continue. If an active public market does not develop or continue,
the market prices and liquidity of the Certificates may be adversely affected.
34
RECENT DEVELOPMENTS
On April 19, 1996, the Company's Board of Directors approved certain
agreements (the "Agreements") with its two major stockholders, Air Canada and
Air Partners. The Agreements contain a variety of arrangements intended
generally to reflect the intention that Air Canada has expressed to the Company
of divesting its investment in Continental by early 1997, subject to market
conditions. Air Canada has indicated to the Company that its original investment
in Continental has become less central to Air Canada in light of other
initiatives it has undertaken -- particularly expansion within Canada and
exploitation of the 1995 Open Skies agreement to expand Air Canada's own flights
into the U.S. Because of these initiatives Air Canada has determined it
appropriate to redeploy the funds invested in the Company into other uses in Air
Canada's business. The Agreements also reflect the recent distribution by Air
Partners, effective March 29, 1996, to its investors (the "AP Investors") of all
of the shares of the Class B common stock held by Air Partners and the desire of
some of the AP Investors to realize the increase in value of their investment in
in the Company by selling all or a portion of their shares of Class B common
stock.
Among other things, the Agreements required the Company to file a
registration statement under the Securities Act to permit the sale by Air Canada
of 2,200,000 shares of Class B common stock held by it and by certain of the AP
Investors of an aggregate of 1,730,240 such shares pursuant to an underwritten
public offering arranged by the Company (the "Secondary Offering"). The
Secondary Offering was completed on May 14, 1996. The Agreements provide for the
following additional steps to be taken in connection with the completion of this
offering:
. in light of its then-reduced equity stake in the Company, Air Canada will
no longer be entitled to designate nominees to the Board of Directors of
the Company, will cause the four present or former members of the Air
Canada board who currently serve as directors of Continental to decline
nomination for reelection as directors (except in limited circumstances),
and will convert all of its Class A common stock to Class B common stock;
. Air Canada and Air Partners have entered into a number of agreements
restricting, prior to December 16, 1996, further disposition of the common
stock of the Company held by either of them; and
. each of the existing Stockholders' Agreement and the registration rights
agreement (the ("Original Registration Rights Agreement") among the parties
will be modified in a number of respects to reflect, among other matters,
the changing composition of the respective equity interests of the parties.
After such sale and the conversion by Air Canada of its Class A common
stock into Class B common stock, Air Canada holds approximately 10.1% of the
common equity interests and 4.0% of the general voting power of the Company, and
Air Partners holds approximately 9.9% of the common equity interests and 39.4%
of the general voting power of the Company. In addition, assuming exercise of
all of the warrants held by Air Partners, approximately 23.4% of the common
equity interests and 52.2% of the general voting power would be held by Air
Partners.
Reflecting the reduction of Air Canada's interest and the decision of the
current directors designated by Air Canada not to stand for reelection (except
under certain limited circumstances), along with the expiration of various
provisions specifically included at the time of the Company's reorganization,
Continental's Board of Directors has also approved changes to the Company's
Certificate of Incorporation and Bylaws (the "Proposed Amendments") generally
eliminating special classes of directors (except for Air Partners' right to
35
elect directors in certain circumstances) and supermajority provisions, and
making a variety of other modifications aimed at streamlining the Company's
corporate governance structure.
The Proposed Amendments also provide that, at any time after January 1,
1997, shares of Class A common stock would become freely convertible into an
equal number of Class B common stock. Under agreements put in place at the time
of the Company's reorganization in 1993, and designed in part to ensure
compliance with the foreign ownership limitations applicable to United States
air carriers in light of the substantial stake in the Company then held by Air
Canada, holders of Class A common stock (other than Air Canada) are not
currently permitted under the Company's Certificate of Incorporation to convert
their shares to Class B common stock. In recent periods, the market price of
Class A common stock has generally been below the price of Class B common stock,
which the Company believes is attributable in part to the reduced liquidity
present in the trading market for Class A common stock. A number of Class A
stockholders have requested that the Company provide for free convertibility of
Class A common stock into Class B common stock, and in light of the reduction of
Air Canada's equity stake, the Company has determined that the restriction is no
longer necessary. Any such conversion would effectively increase the relative
voting power of those Class B stockholders who do not convert.
The Company and Air Canada also expect to enter into discussions regarding
modifications to the Company's existing "synergy" agreements with Air Canada,
covering items such as maintenance and ground facilities, with a view to
resolving certain outstanding commercial issues under the agreements and
otherwise modifying the agreements to reflect Continental's and Air Canada's
current needs. The Company has entered into an agreement with Air Partners for
the sale by Air Partners to the Company from time to time at Air Partners'
election for the one-year period beginning August 15, 1996, of up to an
aggregate of $50 million in intrinsic value (then-current Class B common stock
price minus exercise price) of Air Partners' Class B common stock warrants. The
purchase price would be payable in cash. The Board of Directors has authorized
the Company to publicly issue up to $50 million of Class B common stock in
connection with any such purchase. In connection with this agreement, the
Company will reclassify $50 million from common equity to redeemable warrants.
Because certain aspects of the Agreements raised issues under the change in
control provisions of certain of the Company's employment agreements and
employee benefit plans, these agreements and plans are being modified to provide
a revised change of control definition that the Company believes is appropriate
in light of the prospective changes to its equity ownership structure. In
connection with the modifications, payments are being made to certain employees,
benefits are being granted to certain employees and options equal to 10% of the
amount of the options previously granted to each optionee are being granted
(subject to certain conditions) to substantially all employees holding
outstanding options.
Certain of the Proposed Amendments and employee benefit actions are subject
to stockholder approval at the Annual Meeting. Air Canada has delivered an
irrevocable proxy in favor of Air Partners, authorizing Air Partners to vote, in
its sole discretion, all the shares of common stock beneficially owned, directly
or indirectly, by Air Canada as of the record date, April 30, 1996,
(approximately 23.6% of the voting power of all voting securities outstanding as
of such record date) with respect to the Proposed Amendments and employee
benefit actions, among other matters to be voted on by the Company's
stockholders. Air Partners has indicated to the Company that it intends to vote
all such shares in favor of all such matters and, unless otherwise directed by
its investors with respect to the shares of the Company held by Air Partners
that are attributable to such investors' respective limited partnership
interests, to vote the shares of common stock held by it as of the record date
(approximately 35.7% of the voting power of all voting securities outstanding as
of such date) in favor of all such matters. A majority vote of shareholders is
required to approve the employee benefit matters; a two-thirds vote is required
to approve the Proposed Amendments.
36
USE OF PROCEEDS
There will be no cash proceeds payable to Continental from the issuance of
the New Certificates pursuant to the Exchange Offer. The proceeds from the sale
of the Old Certificates were used to purchase the Series A, B and C Equipment
Notes issued by the related Owner Trustees in connection with the refinancing of
the indebtedness incurred by the Owner Trustees to finance the purchase of each
of the Aircraft. Such Equipment Notes, together with the Series D Equipment
Notes contributed to the Class D Trust by the Owner Participant, represent in
the aggregate the entire debt portion currently outstanding of the leveraged
lease transactions relating to all of the Aircraft. Continental did not receive
any of the proceeds from the sale of the Old Certificates.
RATIOS OF EARNINGS TO FIXED CHARGES
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 fixed charges. Additional earnings of $316
million, $131 million, $979 million, $60 million, $667 million and $28 million,
respectively, would have been required to achieve ratios of earnings to fixed
charges of 1.0. The ratio of earnings to fixed charges for the year ended
December 31, 1995 was 1.53. The ratio of earnings to fixed charges 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. Fixed charges consist of interest expense and
the portion of rental expense representative of interest expense.
37
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 PERIOD FROM
REORGANIZATION JANUARY 1,
THREE MONTHS YEAR ENDED (APRIL 28,1993) 1993
ENDED MARCH 31, DECEMBER 31, THROUGH THROUGH
--------------------- ------------------- DECEMBER 31, APRIL 27,
1996 1995 1995 1994 1993 1993
--------- -------- -------- -------- ------------ ------------
STATEMENT OF OPERATIONS DATA: (IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA)
(unaudited)
Operating Revenue:
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)
------ ------ ------ ------ ------ ------
38
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............................. $ 2.70 $(1.21) $ 7.20 $(23.76) $(2.33) N.M.(4)
====== ====== ====== ======= ====== ======
Earnings (Loss) per Common
Share Assuming Full Dilution................. $ 2.36 $(1.21) $ 6.29 $(23.76) $(2.33) N.M.(4)
====== ====== ====== ======= ====== ======
AS OF AS OF
MARCH 31, DECEMBER 31,
------------- --------------
1996 1995
------------- --------------
BALANCE SHEET DATA: (In millions of dollars)
(unaudited)
Cash and Cash Equivalents, including restricted
Cash and Cash Equivalents of $124 and $144,
respectively(5)................................... $ 657 $ 747
Other Current Assets............................... 655 568
Total Property and Equipment, Net.................. 1,410 1,461
Routes, Gates and Slots, Net....................... 1,517 1,531
Other Assets, Net.................................. 507 514
------ ------
Total Assets................................... $4,746 $4,821
====== ======
Current Liabilities................................ $2,040 $1,984
Long-term Debt and Capital Leases.................. 1,462 1,658
Deferred Credits and Other Long-term Liabilities... 542 564
Minority Interest.................................. 28 27
Continental-Obligated Mandatorily Redeemable
Preferred Securities of Trust(6).................. 242 242
Redeemable Preferred Stock......................... 42 41
Common Stockholders' Equity........................ 390 305
------ ------
Total Liabilities and Stockholders' Equity..... $4,746 $4,821
====== ======
(1) Includes a $20 million cash payment in 1995 by the Company in connection
with a 24-month collective bargaining agreement entered into by the Company
and the Independent Association of Continental Pilots.
(2) Includes a provision of $447 million recorded in the fourth quarter of 1994
associated with the planned early retirement of certain aircraft and closed
or underutilized airport and maintenance facilities and other assets.
(3) Reflects a $3.6 billion extraordinary gain from extinguishment of debt.
(4) Historical per share data for Holdings is not meaningful since the Company
has been recapitalized and has adopted fresh start reporting as of April
27, 1993.
(5) Restricted cash and cash equivalents agreements relate primarily to
workers' compensation claims and the terms of certain other agreements. In
addition, CMI is required by its loan agreement with GE to maintain certain
minimum cash balances and net worth levels, which effectively restrict the
amount of cash available to Continental from CMI.
(6) The sole assets of the Trust are convertible debentures which are expected
to be repaid by 2020. Upon repayment, the Continental-Obligated
Mandatorily Redeemable Preferred Securities of Trust will be mandatorily
redeemed.
39
THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available upon
request to the Trustee.
TERMS OF THE EXCHANGE OFFER
General
In connection with the issuance of the Old Certificates pursuant to a
Purchase Agreement dated as of January 28, 1996, between the Company and the
Initial Purchasers, the Initial Purchasers and the Owner Participant and their
respective assignees became entitled to the benefits of the Registration Rights
Agreement.
Under the Registration Rights Agreement, the Company is obligated to (i)
file the Registration Statement of which this Prospectus is a part for a
registered exchange offer with respect to an issue of new certificates identical
in all material respects to the Old Certificates within 120 calendar days after
January 31, 1996, the date the Old Certificates were issued (the "Issue Date"),
(ii) use its best efforts to cause the Registration Statement to become
effective within 60 days after filing of the Registration Statement and (iii) to
consummate the Exchange Offer within 30 calendar days after the date the
Registration Statement is declared effective by the Commission. The Company will
keep the Exchange Offer open for a period of not less than 30 calendar days. The
Exchange Offer being made hereby, if commenced and consummated within the time
periods described in this paragraph, will satisfy those requirements under the
Registration Rights Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal (which together constitute the Exchange Offer),
all Old Certificates validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date will be accepted for exchange. New
Certificates of the same class will be issued in exchange for an equal principal
amount of outstanding Old Certificates accepted in the Exchange Offer. As of the
date of this Prospectus, $489,267,000 aggregate principal amount of Old
Certificates is outstanding. Old Certificates may be tendered only in integral
multiples of $1000. This Prospectus, together with the Letter of Transmittal, is
being sent to all registered holders as of , 1996. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Certificates being tendered
for exchange. However, the obligation to accept Old Certificates for exchange
pursuant to the Exchange Offer is subject to certain conditions as set forth
herein under "--Conditions."
Old Certificates shall be deemed to have been accepted validly tendered
when, as and if the Trustee has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Certificates for the purposes of receiving the New Certificates and
delivering New Certificates to such holders.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, including the Exchange Offer No-
Action Letters, the Company believes that the New Certificates issued pursuant
to the Exchange Offer may be offered for resale, resold or otherwise transferred
by holders thereof (other than a broker-dealer who acquires such New
Certificates directly from the Trustee for resale pursuant to Rule 144A under
the Securities Act or any other available exemption under the Securities Act or
any holder that is an "affiliate" of the Company as defined under Rule 405 of
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Certificates
are acquired in the ordinary course of such holders' business and such holders
are not engaged in, and do not intend to engage in, a distribution of such New
Certificates and have no arrangement with any person to participate in a
distribution of such New Certificates. However, the staff of the Commission has
not considered the Exchange
40
Offer in the context of a no-action letter and there can be no assurance that
the staff of the Commission would make a similar determination with respect to
the Exchange Offer as in such other circumstances. By tendering the Old
Certificates in exchange for New Certificates, each holder, other than a broker-
dealer, will represent to the Company that: (i) it is not an affiliate of the
Company (as defined under Rule 405 of the Securities Act) nor a broker-dealer
tendering Old Certificates acquired directly from the Company for its own
account; (ii) any New Certificates to be received by it will be acquired in the
ordinary course of its business; and (iii) it is not engaged in, and does not
intend to engage in, a distribution of such New Certificates and has no
arrangement or understanding to participate in a distribution of the New
Certificates. If a holder of Series A Notes is engaged in or intends to engage
in a distribution of the Series B Notes or has any arrangement or understanding
with respect to the distribution of the Series B Notes to be acquired pursuant
to the Exchange Offer, such holder may not rely on the applicable
interpretations of the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each Participating Broker-
Dealer that receives New Certificates for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Certificates. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a Participating Broker-
Dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer in
connection with resales of New Certificates received in exchange for Old
Certificates where such Old Certificates were acquired by such Participating
Broker-Dealer as a result of market-making activities or other trading
activities. The Company has agreed that, starting on the Expiration Date and
ending on the close of business 180 days after the Expiration Date, it will make
this Prospectus available to any Participating Broker-Dealer for use in
connection with any such resale. See "Plan of Distribution."
In the event that (i) any changes in law or the applicable interpretations
of the staff of the Commission do not permit Continental to effect the Exchange
Offer, (ii) for any reason the Registration Statement is not declared effective
within 60 calendar days after the filing thereof with the Commission or the
Exchange Offer is not consummated within 30 days after the Registration
Statement is declared effective, (iii) any holder of Old Certificates (other
than an Initial Purchaser) is not eligible to participate in the Exchange Offer
or (iv) an Initial Purchaser (with respect to Old Certificates which it acquired
directly from the Company), following consummation of the Exchange Offer, is not
permitted, in the opinion of counsel to such Initial Purchaser, to participate
in the Exchange Offer (and upon request of such Initial Purchaser), Continental
will, at its cost, (a) as promptly as practicable, file with the Commission a
shelf registration statement covering resales of the Old Certificates (the
"Shelf Registration Statement"), (b) use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act by the
210th calendar day after the Issue Date and (c) use its best efforts to keep
effective the Shelf Registration Statement for a period of three years after the
Issue Date (or for such shorter period as shall end when all of the Old
Certificates covered by the Shelf Registration Statement have been sold pursuant
thereto or may be freely sold pursuant to Rule 144 under the Securities Act).
In the event that either (i) (x) the Registration Statement was not filed
with the Commission on or prior to the 120th calendar day following the Issue
Date, or (y) the Registration Statement has not been declared effective on or
prior to the 60th calendar day following the filing thereof with the Commission
or (z) the Exchange Offer is not consummated on or prior to the 30th calendar
day following the effectiveness of the Registration Statement or (ii) a Shelf
Registration Statement is required to be filed with the Commission pursuant to
the Registration Rights Agreement and such Shelf Registration Statement is not
declared effective on or prior to the 210th calendar day following the Issue
Date (each, a "Registration Default"), the interest rate per annum borne by the
Equipment Notes and passed through to holders of Old Certificates shall be
increased by (1) 0.25% from and including the day following such Registration
Default to but excluding the 90th day following such Registration Default and
(2) 0.50% thereafter; provided, however, that such increase shall cease to be in
effect from and including the date on which such Registration Default has been
cured. In the event that the Shelf Registration Statement ceases to be effective
at any time, during the period the Company is required to keep such Shelf
Registration Statement effective, for more than 60 days, whether or not
consecutive, during any 12-month
41
period, the interest rate per annum borne by the Equipment Notes shall be
increased by 0.50% from the 61st day of the applicable 12-month period such
Shelf Registration Statement ceases to be effective until such time as the Shelf
Registration Statement again becomes effective.
Upon consummation of the Exchange Offer, subject to certain exceptions,
holders of Old Certificates who do not exchange their Old Certificates for New
Certificates in the Exchange Offer will no longer be entitled to registration
rights and will not be able to offer or sell their Old Certificates, unless such
Old Certificates are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, the Company will have no obligation to
do), except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. See "Risk Factors--Risk
Factors Relating to the Certificates--Consequences of Failure to Exchange."
Expiration Date; Extensions; Amendments; Termination
The term "Expiration Date" shall mean _________, 1996 (30 calendar days
following the commencement of the Exchange Offer), unless the Company, in its
sole discretion, extends the Exchange Offer, in which case the term "Expiration
Date" shall mean the latest date to which the Exchange Offer is extended.
Notwithstanding any extension of the Exchange Offer, if the Exchange Offer is
not consummated by , 1996, the interest rate borne by the Equipment
Notes and passed through to the Certificateholders is subject to increase. See
"--General."
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Certificates an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old
Certificates, to extend the Exchange Offer or to terminate the Exchange Offer
and not permit acceptance of Old Certificates not previously accepted if any of
the conditions set forth herein under "-- Conditions" shall have occurred and
shall not have been waived by the Company, by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, or (ii) to amend the
terms of the Exchange Offer in any manner deemed by it to be advantageous to the
holders of the Old Certificates. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the Exchange Agent. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment in a manner reasonably calculated
to inform the holders of the Old Certificates of such amendment.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE NEW CERTIFICATES
The New Certificates will accrue interest at the applicable per annum for
such Trust set forth on the cover page of this Prospectus, from the last date on
which interest was paid on the Old Certificates surrendered in exchange
therefor. Interest on the New Certificates is payable on January 15, April 15,
July 15 and October 15 of each year commencing April 15, 1996, subject to the
terms of the Intercreditor Agreement.
42
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) certificates for such Old
Certificates must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Certificates, if such procedure is available, into
the Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(iii) the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF OLD CERTIFICATES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF
SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD
CERTIFICATES SHOULD BE SENT TO THE COMPANY. Delivery of all documents must be
made to the Exchange Agent at its address set forth below. Holders may also
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect such tender for such holders.
The tender by a holder of Old Certificates will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Only a holder of Old Certificates may tender such Old Certificates in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Old Certificates are registered on the books of the Company
or any other person who has obtained a properly completed bond power from the
registered holder.
Any beneficial owner whose Old Certificates are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Certificates, either
make appropriate arrangements to register ownership of the Old Certificates in
such owner's name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the Old
Certificates tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Certificates listed therein, such Old Certificates
must be endorsed or accompanied by bond powers and a proxy which authorizes such
person to tender the Old Certificates on behalf of the registered holder, in
each case as the name of the registered holder or holders appears on the Old
Certificates.
43
If the Letter of Transmittal or any Old Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Certificates will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Certificates not properly tendered or any Old Certificates which, if accepted,
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the absolute right to waive any irregularities or conditions of tender
as to particular Old Certificates. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Old Certificates must be
cured within such time as the Company shall determine. Neither the Company, the
Exchange Agent nor any other person shall be under any duty to give notification
of defects or irregularities with respect to tenders of Old Certificates, nor
shall any of them incur any liability for failure to give such notification.
Tenders of Old Certificates will not be deemed to have been made until such
irregularities have been cured or waived. Any Old Certificates received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned without cost to
such holder by the Exchange Agent to the tendering holders of Old Certificates,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion, subject
to the provisions of the Indenture, to (i) purchase or make offers for any Old
Certificates that remain outstanding subsequent to the Expiration Date or, as
set forth under "-- Conditions," to terminate the Exchange Offer in accordance
with the terms of the Registration Rights Agreement and (ii) to the extent
permitted by applicable law, purchase Old Certificates in the open market, in
privately negotiated transactions or otherwise. The terms of any such purchases
or offers could differ from the terms of the Exchange Offer.
ACCEPTANCE OF OLD CERTIFICATES FOR EXCHANGE; DELIVERY OF NEW CERTIFICATES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Certificates properly tendered will be accepted, promptly after the
Expiration Date, and the New Certificates will be issued promptly after
acceptance of the Old Certificates. See "--Conditions" below. For purposes of
the Exchange Offer, Old Certificates shall be deemed to have been accepted
validly tendered for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
In all cases, issuance of New Certificates for Old Certificates that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Old Certificates
or a timely Book-Entry Confirmation of such Old Certificates into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Old Certificates are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Old Certificates are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Certificates will be returned without expense to the tendering
holder thereof (or, in the case of Old Certificates tendered by book-entry
transfer procedures described below, such nonexchanged Old Certificates will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
44
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Certificates at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Certificates by causing
the Book-Entry Transfer Facility to transfer such Old Certificates into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Certificates may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under "-- Exchange Agent" on or prior to the
Expiration Date or the guaranteed delivery procedures described below must be
complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Certificates desires to tender such Old
Certificates, and the Old Certificates are not immediately available, or time
will not permit such holder's Old Certificates or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedures for book-
entry transfer cannot be completed on a timely basis, a tender may be effected
if (i) the tender is made through an Eligible Institution, (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and Notice of Guaranteed Delivery, substantially in the form provided
by the Company (by facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Certificates and the amount of Old
Certificates tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Certificates, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Old Certificates, in proper form for transfer, or a Book-
Entry Confirmation, as the case may be, and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Certificates may be withdrawn at any time prior to 5:00
p.m., New York City time on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time on the
Expiration Date at one of the addresses set forth below under "--Exchange
Agent." Any such notice of withdrawal must specify the name of the person having
tendered the Old Certificates to be withdrawn, identify the Old Certificates to
be withdrawn (including the principal amount of such Old Certificates) and
(where certificates for Old Certificates have been transmitted) specify the name
in which such Old Certificates are registered, if different from that of the
withdrawing holder. If certificates for Old Certificates have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Certificates have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Old Certificates and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility
45
(including time of receipt) of such notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old
Certificates so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Old Certificates which have
been tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Certificates tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Certificates will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Certificates) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Certificates may be retendered by
following one of the procedures described under "-- Procedures for Tendering"
and "--Book-entry Transfer" above at any time on or prior to the Expiration
Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Old Certificates will
not be required to be accepted for exchange, nor will New Certificates be issued
in exchange for, any Old Certificates and the Company may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Old
Certificates, if because of any change in law, or applicable interpretations
thereof by the Commission, the Company determines that it is not permitted to
effect the Exchange Offer, and the Company has no obligation to, and will not
knowingly, permit acceptance of tenders of Old Certificates from affiliates of
the Company (within the meaning of Rule 405 under the Securities Act) or from
any other holder or holders who are not eligible to participate in the Exchange
Offer under applicable law or interpretations thereof by the Commission, or if
the New Certificates to be received by such holder or holders of Old
Certificates in the Exchange Offer, upon receipt, will not be tradable by such
holder without restriction under the Securities Act and the Exchange Act and
without material restrictions under the "blue sky" or securities laws of
substantially all of the states of the United States.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Mail, Overnight Delivery: By Hand:
Wilmington Trust Company Wilmington Trust Company
1100 North Market Street 1105 North Market Street, 1st Floor
Wilmington, Delaware 19890-0001 Wilmington, Delaware 19890
Attention: Jill Rylee Attention: Corporate Trust Operations
Facsimile Transmission:
(302) 651-1079
Confirm by Telephone:
(302) 651-8869
Jill Rylee
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy or in person by officers and regular
employees of the Company.
46
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of the Prospectus and related documents to
the beneficial owners of the Old Certificates, and in handling or forwarding
tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company, including fees and expenses of the Exchange Agent and
Trustee (as hereinafter defined) and accounting, legal, printing and related
fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Certificates pursuant to the Exchange Offer. If, however, certificates
representing New Certificates or Old Certificates for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Certificates tendered, or if tendered Old Certificates are registered
in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Certificates pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
47
DESCRIPTION OF THE NEW CERTIFICATES
The Certificates have been issued pursuant to four separate Pass Through
Trust Agreements. The following summary describes certain terms of the
Certificates and the Pass Through Trust Agreements. The summary does not purport
to be complete and reference is made to the provisions of the Certificates and
the Pass Through Trust Agreements, which have been filed as exhibits to the
Registration Statement. Except as otherwise indicated, the following summary
relates to each of the Trusts and the Certificates issued by each Trust. The
terms and conditions governing each of the Trusts will be substantially the
same, except as described under "--Subordination" below and except that the
principal amount, the interest rate, scheduled repayments of principal, and
maturity date applicable to the Equipment Notes held by each Trust and the final
Distribution Date applicable to each Trust will differ. Citations to the
relevant sections of the Pass Through Trust Agreements appear below in
parentheses unless otherwise indicated. Copies of the Pass Through Trust
Agreements are filed as exhibits to the Registration Statement and are available
from the Trustee.
GENERAL
The Certificates of each Trust have been issued in fully registered form
only. Each Certificate represents a fractional undivided interest in the Trust
created by the Pass Through Trust Agreement pursuant to which such Certificate
is issued. The Trust Property consists of (i) the Equipment Notes held in such
Trust, all monies at any time paid thereon and all monies due and to become due
thereunder, (ii) the rights of such Trust under the Intercreditor Agreement
(including all monies receivable in respect of such rights), (iii) except for
the Class D Trust, all monies receivable under the Liquidity Facility for such
Trust and (iv) funds from time to time deposited with the Trustee in accounts
relating to such Trust. Certificates represent pro rata shares of the Equipment
Notes and other property held in the related Trust and have been issued only in
minimum denominations of $100,000 and integral multiples of $1,000 in excess
thereof. (Section 3.01).
The Certificates represent interests in the respective Trusts and all
payments and distributions thereon will be made only from the Trust Property.
(Section 3.11) The Certificates do not represent an interest in or obligation of
Continental, the Trustees, any of the Loan Trustees or Owner Trustees in their
individual capacities, any Owner Participant, or any affiliate of any thereof.
The existence of each Trust will not limit the liability that Certificate
holders of such Trust would otherwise incur if such holders owned directly the
corresponding Equipment Notes or incurred directly the obligations of such
Trust.
SUBORDINATION
Pursuant to the Intercreditor Agreement to which the Trusts, the
Subordination Agent and the Liquidity Providers are parties, on each
Distribution Date, so long as no Triggering Event shall have occurred, all
payments received by the Subordination Agent will be distributed in the
following order: (1) payment of the Liquidity Obligations to the Liquidity
Providers; (2) payments of Expected Distributions to the holders of Class A
Certificates; (3) payment of Expected Distributions to the holders of Class B
Certificates; (4) payment of Expected Distributions to the holders of Class C
Certificates; (5) payment of Expected Distributions to the holders of Class D
Certificates; and (6) payment of certain fees and expenses of the Subordination
Agent and the Trustees.
In addition, upon the occurrence of a Triggering Event and at all times
thereafter, subject to the provisions set forth below, all payments received by
the Subordination Agent in respect of the Equipment Notes and certain other
payments will be distributed under the Intercreditor Agreement in the following
order: (1) to the Liquidity Provider in payment of the Liquidity Obligations and
certain other parties in payment of the Administration Expenses; (2) to the
holders of Class A Certificates in payment of Final Distributions; (3) to the
holders of Class B Certificates in payment of Final Distributions; (4) to the
holders of Class C Certificates in payment of Final Distributions; and (5) to
the holders of Class D Certificates in payment of Final Distributions.
48
For purposes of calculating Expected Distributions or Final Distributions,
any premium paid on the Equipment Notes held in any Trust which has not been
distributed to the Certificateholders of such Trust (other than such premium or
a portion thereof applied to the payment of interest on the Certificates of such
Trust or the reduction of the Pool Balance of such Trust) shall be added to the
amount of Expected Distributions or Final Distributions.
Notwithstanding the foregoing provisions, after the occurrence of a
Triggering Event but so long as no PTC Event of Default shall have occurred and
be continuing with respect to the most senior Class of Certificates outstanding,
any regularly scheduled payment received on the Performing Equipment Notes shall
be distributed as follows:
(x) the Performing Equipment Notes Interest Payment will be distributed
in the following order: (1) to the Liquidity Providers in payment of the
Liquidity Obligations and certain other parties in payment of the
Administration Expenses; (2) to the holders of Class A Certificates in
payment of accrued and unpaid interest on the Class A Certificates; (3) to
the holders of Class B Certificates in payment of accrued and unpaid
interest on the Class B Certificates; (4) to the holders of Class C
Certificates in payment of accrued and unpaid interest on the Class C
Certificates; and (5) to the holders of Class D Certificates; provided that
the provisions of this paragraph (x) will be given effect before
distribution of any funds received in respect of any Non-Performing
Equipment Notes;
(y) the Performing Equipment Notes Principal Payment will be distributed
in the following order: (1) to the holders of Class A Certificates in
payment of the greater of (A) the Adjusted Expected Distributions to such
holders on such Distribution Date and (B) such holders' pro rata portion of
the Performing Equipment Notes Principal Payment based on the Adjusted Pool
Balance of such Trust; (2) to the holders of Class B Certificates in
payment of the greater of (A) the Adjusted Expected Distributions to such
holders on such Distribution Date and (B) such holders' pro rata portion of
the Performing Equipment Notes Principal Payment based on the Adjusted Pool
Balance of such Trust; (3) to the holders of Class C Certificates in
payment of the greater of (A) the Adjusted Expected Distributions to such
holders on such Distribution Date and (B) such holders' pro rata portion of
the Performing Equipment Notes Principal Payment based on the Adjusted Pool
Balance of such Trust; and (4) to the holders of Class D Certificates;
provided that the provisions of this paragraph (y) will be given effect
after distributing any funds received in respect of any Non-Performing
Equipment Notes;
provided that if the aggregate amount of future scheduled payments in respect of
the Performing Equipment Notes, together with the Performing Equipment Notes
Principal Payment as of such Distribution Date, will be (assuming the
distribution of such amount as contemplated by paragraphs (x) and (y) and that
no further payment will be received at any time from the Non-Performing
Equipment Notes) insufficient to pay interest on any Class of Certificates and
reduce the Pool Balance of such Class of Certificates to zero before the Final
Maturity Date thereof, the amount of distributions to be made to the holders of
such Class of Certificates on such Distribution Date will be increased by the
amount necessary to eliminate such insufficiency prior to making any
distributions to the holders of any Class of Certificates junior to such Class
of Certificates and such increase shall be taken into account for the purpose of
applying this proviso to the holders of any such junior Class of Certificates.
PAYMENTS AND DISTRIBUTIONS
Payments of principal, premium (if any) and interest with respect to the
Equipment Notes or other Trust Property held in each Trust will be distributed
by the Trustee to Certificateholders of such Trust on the date receipt of such
payment is confirmed, except in the case of certain types of Special Payments
(as defined herein).
The Equipment Notes held in each Trust will accrue interest at the
applicable rate per annum for such Trust set forth on the cover page of this
Prospectus, payable on January 15, April 15, July 15 and October 15 of
49
each year commencing on April 15, 1996 and such interest payments will be passed
through to Certificateholders of such Trust on each such date until the final
Distribution Date for such Trust, in each case, subject to the Intercreditor
Agreement. Interest is calculated on the basis of a 360-day year consisting of
twelve 30-day months. The interest rates for the Certificates are subject to
increases under certain circumstances. See "The Exchange Offer--General".
Payments of interest on the Certificates to be issued by each Trust (other than
the Class D Trust) will be supported by a separate Liquidity Facility to be
provided by Credit Suisse (the "Liquidity Provider") for the benefit of the
holders of such Certificates in an amount sufficient to pay interest thereon at
the Stated Interest Rate for such Trust on six successive quarterly Distribution
Dates. Notwithstanding the subordination provisions of the Intercreditor
Agreement, the holders of the Certificates to be issued by each Trust (other
than the Class D Trust) will be entitled to receive and retain the proceeds of
drawings under the Liquidity Facility for such Trust. See "Description of the
Liquidity Facilities".
Payments of principal on the Equipment Notes held in each Trust are
scheduled to be received by the Trustee on January 15, April 15, July 15 or
December 15, in certain years depending upon the terms of the Equipment Notes
held in such Trust commencing January 15, 1997, in the case of each of the Class
A Trust, the Class B Trust and the Class C Trust and January 15, 1999, in the
case of the Class D Trust. Scheduled payments of interest and principal on the
Equipment Notes are herein referred to as "Scheduled Payments", and January 15,
April 15, July 15 and October 15 of each year are herein referred to as "Regular
Distribution Dates". See "Description of the Equipment Notes--Principal and
Interest Payments". The Final Maturity Date for each Certificate is April 15,
2015.
The Trustee of each Trust will distribute, subject to the Intercreditor
Agreement, on each Regular Distribution Date to the Certificateholders of such
Trust all Scheduled Payments, the receipt of which is confirmed by the Trustee
on such Regular Distribution Date. Each Certificateholder of each Trust will be
entitled to receive a pro rata share of any distribution in respect of Scheduled
Payments of principal and interest made on the Equipment Notes held in such
Trust. Each such distribution of Scheduled Payments will be made by the Trustee
of each Trust to the Certificateholders of record of such Trust on the Record
Date applicable to such Scheduled Payment subject to certain exceptions.
(Sections 4.01 and 4.02) If a Scheduled Payment is not received by the Trustee
on a Regular Distribution Date but is received within five days thereafter, it
will be distributed to such holders of record on the date received. If it is
received after such five-day period, it will be treated as a Special Payment (as
defined below) and distributed as described below.
Any payment in respect of, or any proceeds of, any Equipment Note or the
Trust Indenture Estate under (and as defined in) each Indenture (other than a
Scheduled Payment) (each, a "Special Payment")) will be distributed on, in the
case of an early redemption or a purchase of the Equipment Notes relating to one
or more Aircraft, the date of such early redemption or purchase (which shall be
a Business Day), and otherwise on the Business Day specified for distribution of
such Special Payment pursuant to a notice delivered by the Trustee as soon as
practicable after the Trustee has received funds for such Special Payment, in
each case subject to the Intercreditor Agreement. The Trustee will mail notice
to the Certificateholders of the applicable Trust not less than 20 days prior to
the Special Distribution Date on which any Special Payment is scheduled to be
distributed by the Trustee stating such anticipated Special Distribution Date.
(Section 4.02(c)) Each distribution of a Special Payment, other than a final
distribution, on a Special Distribution Date for any Trust will be made by the
Trustee to the Certificateholders of record of such Trust on the Record Date
applicable to such Special Payment. See "--Indenture Defaults and Certain Rights
Upon an Indenture Default" and "Description of the Equipment Notes--Redemption".
Each Pass Through Trust Agreement requires that the Trustee establish and
maintain, for the related Trust and for the benefit of the Certificateholders of
such Trust, one or more accounts (the "Certificate Account") for the deposit of
payments representing Scheduled Payments on the Equipment Notes held in such
Trust. Each Pass Through Trust Agreement also requires that the Trustee
establish and maintain, for the related Trust and for the benefit of the
Certificateholders of such Trust, one or more accounts (the "Special Payments
50
Account") for the deposit of payments representing Special Payments, which
account shall be non-interest bearing except in certain circumstances where the
Trustee may invest amounts in such account in certain permitted investments.
Pursuant to the terms of each Pass Through Trust Agreement, the Trustee is
required to deposit any Scheduled Payments relating to the applicable Trust
received by it in the Certificate Account of such Trust and to deposit any
Special Payments so received by it in the Special Payments Account of such
Trust. (Section 4.01) All amounts so deposited will be distributed by the
Trustee on a Regular Distribution Date or a Special Distribution Date, as
appropriate. (Section 4.02)
Distributions by the Trustee from the Certificate Account or the Special
Payments Account of each Trust on a Regular Distribution Date or a Special
Distribution Date in respect of Certificates issued by such Trust in definitive
form will be made to each Certificateholder of record of such Certificates on
the applicable Record Date. (Section 4.02) The final distribution for each
Trust, however, will be made only upon presentation and surrender of the
Certificates for such Trust at the office or agency of the Trustee specified in
the notice given by the Trustee of such final distribution. The Trustee will
mail such notice of the final distribution to the Certificateholders of such
Trust, specifying the date set for such final distribution and the amount of
such distribution. (Section 11.01) See "--Termination of the Trusts".
Distributions in respect of Certificates issued in global form will be made as
described in "--Book Entry; Delivery and Form" below.
If any Regular Distribution Date or Special Distribution Date is not a
Business Day, distributions scheduled to be made on such Regular Distribution
Date or Special Distribution Date will be made on the next succeeding Business
Day without additional interest.
POOL FACTORS
Unless there has been an early redemption, purchase, or a default in the
payment of principal or interest, in respect of one or more issues of the
Equipment Notes held in a Trust, as described in "--Indenture Defaults and
Certain Rights Upon an Indenture Default" and "Description of the Equipment
Notes--Redemption", the Pool Factor with respect to each Trust will decline in
proportion to the scheduled repayments of principal on the Equipment Notes held
in such Trust as described below in "Description of the Equipment Notes--
General." In the event of such redemption, purchase or default, the Pool Factor
and the Pool Balance of each Trust so affected will be recomputed after giving
effect thereto and notice thereof will be mailed to the Certificateholders of
such Trust. Each Trust will have a separate Pool Factor.
The "Pool Balance" for each Trust or for the Certificates issued by any
Trust indicates, as of any date, the original aggregate face amount of the
Certificates of such Trust less the aggregate amount of all payments made in
respect of the Certificates of such Trust other than payments made in respect of
interest or premium thereon or reimbursement of any costs and expenses in
connection therewith. The Pool Balance for each Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes or other
Trust Property held in such Trust and the distribution thereof to be made on
that date.
The "Pool Factor" for each Trust as of any Regular Distribution Date or
Special Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance by (ii) the original aggregate face
amount of the Certificates of such Trust. The Pool Factor for each Trust as of
any Regular Distribution Date or Special Distribution Date shall be computed
after giving effect to the payment of principal, if any, on the Equipment Notes
or other Trust Property held in such Trust and the distribution thereof to be
made on that date. Assuming that no early redemption or purchase, or default, in
respect of any Equipment Notes shall have occurred, the Pool Factor for each
Trust will be 1.0000000 on the date of issuance of the Certificates; thereafter,
the Pool Factor for each Trust will decline as described herein to reflect
reductions in the Pool Balance of such Trust. The amount of a
Certificateholder's pro rata share of the Pool Balance of a Trust can be
determined by multiplying the par value of the holder's Certificate of such
Trust by the Pool Factor for such
51
Trust as of the applicable Regular Distribution Date or Special Distribution
Date. Notice of the Pool Factor and the Pool Balance for each Trust will be
mailed to Certificateholders of such Trust on each Regular Distribution Date and
Special Distribution Date.
As of the date of sale by the Trustee of the Certificates and assuming that
no early redemption or purchase, or default in the payment of principal, in
respect of any Equipment Notes shall occur, the Scheduled Payments of principal
on the Equipment Notes held in the Class A Trust, the Class B Trust, the Class C
Trust and the Class D Trust, and the resulting Pool Factors for such Trusts
after taking into account each Scheduled Payment, are set forth below:
1996-A Trust 1996-B Trust 1996-C Trust 1996-D Trust
Equipment Equipment Equipment Equipment
Notes Notes Notes Notes
Scheduled 1996-A Trust Scheduled 1996-B Trust Scheduled 1996-C Trust Scheduled 1996-D Trust
Regular Payments of Expected Payments of Expected Payments of Expected Payments of Expected
Distribution Dates Principal Pool Factor Principal Pool Factor Principal Pool Factor Principal Pool Factor
- ------------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------
April 1996....... 0 1.0000000 0 1.0000000 0 1.0000000 0 1.0000000
July 1996........ 0 1.0000000 0 1.0000000 0 1.0000000 0 1.0000000
October 1996..... 0 1.0000000 0 1.0000000 0 1.0000000 0 1.0000000
January 1997..... 5,284,668 0.9803922 1,849,646 0.9803922 1,453,275 0.9803921 0 1.0000000
April 1997....... 0 0.9803922 0 0.9803922 0 0.9803921 0 1.0000000
July 1997........ 0 0.9803922 0 0.9803922 0 0.9803921 0 1.0000000
October 1997..... 0 0.9803922 0 0.9803922 0 0.9803921 0 1.0000000
January 1998..... 5,200,561 0.9610964 1,820,209 0.9610964 1,430,147 0.9610963 0 1.0000000
April 1998....... 0 0.9610964 0 0.9610964 0 0.9610963 0 1.0000000
July 1998........ 0 0.9610964 0 0.9610964 0 0.9610963 0 1.0000000
October 1998..... 1,881,631 0.9541149 658,583 0.9541149 517,441 0.9541149 0 1.0000000
January 1999..... 6,357,107 0.9305280 2,225,009 0.9305279 1,748,192 0.9305280 3,506,949 0.9316384
April 1999....... 0 0.9305280 0 0.9305279 0 0.9305280 0 0.9316384
July 1999........ 0 0.9305280 0 0.9305279 0 0.9305280 0 0.9316384
October 1999..... 5,151,648 0.9114137 1,803,084 0.9114136 1,416,700 0.9114136 856,524 0.9149467
January 2000..... 6,520,793 0.8872194 2,282,307 0.8872192 1,793,201 0.8872194 400,652 0.9071367
April 2000....... 0 0.8872194 0 0.8872192 0 0.8872194 0 0.9071367
July 2000........ 0 0.8872194 0 0.8872192 0 0.8872194 0 0.9071367
October 2000..... 5,902,865 0.8653178 2,066,003 0.8653178 1,623,289 0.8653177 0 0.9071367
January 2001..... 7,473,253 0.8375896 2,615,670 0.8375895 2,055,126 0.8375896 0 0.9071367
April 2001...... 0 0.8375896 0 0.8375895 0 0.8375896 0 0.9071367
July 2001........ 0 0.8375896 0 0.8375895 0 0.8375896 0 0.9071367
October 2001..... 6,296,432 0.8142278 2,203,755 0.8142278 1,731,518 0.8142276 0 0.9071367
January 2002..... 13,228,012 0.7651475 4,629,853 0.7651474 3,637,674 0.7651475 0 0.9071367
April 2002....... 0 0.7651475 0 0.7651474 0 0.7651475 0 0.9071367
July 2002........ 0 0.7651475 0 0.7651474 0 0.7651475 0 0.9071367
October 2002..... 4,756,545 0.7474992 1,664,791 0.7474992 1,308,051 0.7474990 0 0.9071367
January 2003..... 15,560,862 0.6897633 5,446,355 0.6897631 4,279,204 0.6897632 0 0.9071367
April 2003....... 0 0.6897633 0 0.6897631 0 0.6897632 0 0.9071367
July 2003........ 0 0.6897633 0 0.6897631 0 0.6897632 0 0.9071367
October 2003..... 4,703,788 0.6723107 1,646,326 0.6723104 1,293,542 0.6723105 0 0.9071637
January 2004..... 11,684,171 0.6289586 4,089,496 0.6289585 3,213,125 0.6289585 0 0.9071367
April 2004....... 0 0.6289586 0 0.6289585 0 0.6289585 0 0.9071367
July 2004........ 0 0.6289586 0 0.6289585 0 0.6289585 0 0.9071367
October 2004..... 7,590,687 0.6007947 2,656,749 0.6007947 2,087,434 0.6007944 81,724 0.9055437
January 2005..... 9,882,743 0.5641265 3,458,990 0.5641264 2,717,735 0.5641262 588,558 0.8940708
April 2005....... 0 0.5641265 0 0.5641264 0 0.5641262 1,283,740 0.8690466
July 2005........ 0 0.5641265 0 0.5641264 0 0.5641262 2,939,531 0.8117458
October 2005..... 8,279,727 0.5334060 2,897,911 0.5334061 2,276,920 0.5334056 4,204,644 0.7297840
January 2006..... 8,347,019 0.5024358 2,921,483 0.5024359 2,295,412 0.5024355 2,354,316 0.6838909
April 2006....... 0 0.5024358 0 0.5024359 0 0.5024355 2,972,939 0.6259388
July 2006........ 0 0.5024358 0 0.5024359 0 0.5024355 3,395,369 0.5597523
October 2006..... 12,492,889 0.4560831 4,372,538 0.4560832 3,435,525 0.4560878 3,779,755 0.4860729
January 2007..... 4,651,251 0.4388254 1,627,946 0.4388256 1,279,088 0.4388251 1,992,355 0.4472355
April 2007....... 1,762,951 0.4322843 617,033 0.4322845 484,811 0.4322839 855,654 0.4305561
July 2007........ 0 0.4322843 0 0.4322845 0 0.4322839 84,738 0.4289043
October 2007..... 19,579,916 0.3596364 6,853,032 0.3596365 5,384,436 0.3596362 3,796,117 0.3549059
January 2008..... 5,634,209 0.3387316 1,971,972 0.3387319 1,549,406 0.3387313 1,046,339 0.3345095
April 2008....... 0 0.3387316 0 0.3387319 0 0.3387313 23,463 0.3340521
July 2008........ 0 0.3387316 0 0.3387319 0 0.3387313 0 0.3340521
October 2008..... 17,480,052 0.2738749 6,118,097 0.2738749 4,806,962 0.2738749 3,005,458 0.2754662
January 2009..... 4,715,038 0.2563806 1,650,264 0.2563806 1,296,634 0.2561805 876,156 0.2583871
April 2009....... 0 0.2563806 0 0.2563806 0 0.2561805 0 0.2583871
July 2009........ 0 0.2563806 0 0.2563806 0 0.2561805 0 0.2583871
October 2009..... 9,982,773 0.2193412 3,494,004 0.2193412 2,745,240 0.2193412 1,549,605 0.2281804
January 2010..... 2,774,576 0.2090467 971,109 0.2090466 763,002 0.2090466 507,351 0.2182905
April 2010....... 229,494 0.2081952 80,323 0.2081951 63,111 0.2081951 0 0.2182905
July 2010........ 1,058,899 0.2042663 370,615 0.2042663 291,197 0.2042662 0 0.2182905
October 2010..... 9,714,697 0.1682216 3,400,172 0.1682216 2,671,523 0.1682216 1,425,031 0.1905121
January 2011..... 5,548,251 0.1476358 1,941,909 0.1476357 1,525,754 0.1476358 562,592 0.1795454
April 2011....... 125,922 0.1471686 44,073 0.1471684 34,629 0.1471686 21,726 0.1791219
July 2011........ 1,255,151 0.1425115 439,303 0.1425115 345,166 0.1425116 216,556 0.1749005
October 2011..... 8,481,267 0.1110432 2,968,462 0.1110432 2,332,336 0.1110432 719,133 0.1608823
January 2012..... 9,064,636 0.0774105 3,172,663 0.0774103 2,492,748 0.0774106 782,212 0.1456345
April 2012....... 146,241 0.0768679 51,184 0.0768677 40,216 0.0768680 0 0.1456345
52
1996-A Trust 1996-B Trust 1996-C Trust 1996-D Trust
Equipment Equipment Equipment Equipment
Notes Notes Notes Notes
Scheduled 1996-A Trust Scheduled 1996-B Trust Scheduled 1996-C Trust Scheduled 1996-D Trust
Regular Payments of Expected Payments of Expected Payments of Expected Payments of Expected
Distribution Dates Principal Pool Factor Principal Pool Factor Principal Pool Factor Principal Pool Factor
- ------------------ ----------- ----------- ----------- ----------- ----------- ------------ ------------ ------------
July 2012........ 886,893 0.0735772 310,413 0.0735770 243,895 0.0735774 79,990 0.1440753
October 2012..... 8,153,758 0.0433241 2,853,848 0.0433238 2,242,262 0.0433244 2,748,810 0.0904922
January 2013..... 9,486,707 0.0081253 3,320,348 0.0081253 2,608,844 0.0081254 1,357,427 0.0640317
April 2013....... 0 0.0081253 0 0.0081253 0 0.0081254 717,371 0.0500478
July 2013........ 532,107 0.0061510 186,238 0.0061510 146,329 0.0061511 873,473 0.0330211
October 2013..... 532,107 0.0061510 186,238 0.0061510 146,329 0.0061511 873,473 0.0330211
Any failure to make expected principal distributions on any Class of
Certificates on any Regular Distribution Date (other than the Final Maturity
Date) will not constitute a PTC Event of Default with respect to such
Certificates.
Reports to Certificateholders
On each Regular Distribution Date and Special Distribution Date, the
applicable Trustee will include with each distribution of a Scheduled Payment or
Special Payment, respectively, to Certificateholders of the related Trust a
statement, giving effect to such distribution to be made on such Regular
Distribution Date or Special Distribution Date, setting forth the following
information (per $1,000 aggregate principal amount of Certificate for such
Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the amount
allocable to premium (if any);
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Trust. (Section 4.03)
With respect to the Certificates registered in the name of Cede, as nominee
for DTC, on the record date prior to each Distribution Date, the applicable
Trustee will request from DTC a Securities Position Listing setting forth the
names of all DTC Participants reflected on DTC's books as holding interests in
the Certificates on such record date. On each Distribution Date, the applicable
Trustee will mail to each such DTC Participant the statement described above and
will make available additional copies as requested by such DTC Participant for
forwarding to holders of Certificates.
In addition, after the end of each calendar year, the applicable Trustee
will prepare for each Certificateholder of each Trust at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (i) and (ii) above with respect to the Trust for such
calendar year or, in the event such person was a Certificateholder during only a
portion of such calendar year, for the applicable portion of such calendar year,
and such other items as are readily available to such Trustee and which a
Certificateholder shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its U.S. federal income tax returns. (Section
4.03) Such report and such other items shall be prepared on the basis of
information supplied to the applicable Trustee by the DTC Participants and shall
be delivered by such Trustee to such DTC Participants to be available for
forwarding by such DTC Participants to Certificate Owners in the manner
described above.
With respect to the Certificates issued in definitive form, the applicable
Trustee will prepare and deliver the information described above to each
Certificateholder of record of each Trust as the name of such Certificateholder
appears on the records of the registrar of the Certificates.
53
INDENTURE DEFAULTS AND CERTAIN RIGHTS UPON AN INDENTURE DEFAULT
An event of default under an Indenture (an "Indenture Default") will
include an event of default under the related Lease (a "Lease Event of
Default"). Since the Equipment Notes issued under an Indenture may be held in
more than one Trust, a continuing Indenture Default under such Indenture would
affect the Equipment Notes held by each such Trust. There are no cross-default
provisions in the Indentures. Consequently, events resulting in an Indenture
Default under any particular Indenture may or may not result in an Indenture
Default under any other Indenture. However, a Lease Event of Default under any
Lease will constitute a Lease Event of Default under all Leases due to the
cross-default provisions in the Leases, and will consequently result in an
Indenture Default under all Indentures. If an Indenture Default occurs in fewer
than all of the Indentures, notwithstanding the treatment of Equipment Notes
issued under any Indenture under which an Indenture Default has occurred,
payments of principal and interest on the Equipment Notes issued pursuant to
Indentures with respect to which an Indenture Default has not occurred will
continue to be distributed to the holders of the Certificates as originally
scheduled, subject to the Intercreditor Agreement. See "Description of the
Intercreditor Agreement--Priority of Distributions".
With respect to each Aircraft, the applicable Owner Trustee and Owner
Participant will, under the related Indenture, have the right under certain
circumstances to cure Indenture Defaults that result from the occurrence of a
Lease Event of Default under the related Lease. If the Owner Trustee or the
Owner Participant exercises any such cure right, the Indenture Default will be
deemed to have been cured.
In the event that the same institution acts as Trustee of multiple Trusts,
in the absence of instructions from the Certificateholders of any such Trust,
such Trustee could be faced with a potential conflict of interest upon an
Indenture Default. In such event, each Trustee has indicated that it would
resign as Trustee of one or all such Trusts, and a successor trustee would be
appointed in accordance with the terms of the applicable Pass Through Trust
Agreement.
Upon the occurrence and continuation of any Indenture Default under any
Indenture, the Controlling Party may accelerate and sell all (but not less than
all) of the Equipment Notes issued under such Indenture to any person, subject
to certain limitations. The proceeds of such sale will be distributed pursuant
to the provisions of the Intercreditor Agreement. Any proceeds received by the
applicable Trustee upon any such sale shall be deposited in the applicable
Special Payments Account and shall be distributed to the Certificateholders of
such Trust on a Special Distribution Date. (Sections 4.01 and 4.02) The market
for Equipment Notes at the time of the existence of any Indenture Default may be
very limited, and there can be no assurance as to the price at which they could
be sold. If such Trustee sells any such Equipment Notes for less than their
outstanding principal amount, the Certificateholders will receive a smaller
amount of principal distributions than anticipated and will not have any claim
for the shortfall against Continental, any Owner Trustee, any Owner Participant
or any Trustee.
Any amount, other than Scheduled Payments received on a Regular
Distribution Date, distributed to the Trustee of any Trust by the Subordination
Agent on account of the Equipment Notes or other Trust Property held in such
Trust following an Indenture Default under any Indenture shall be deposited in
the Special Payments Account for such Trust and shall be distributed to the
Certificateholders of such Trust on a Special Distribution Date. (Section 4.02)
In addition, if, following an Indenture Default under any Indenture relating to
an Aircraft, the applicable Owner Trustee exercises its option to redeem or
purchase the outstanding Equipment Notes issued under such Indenture, the price
paid by such Owner Trustee for the Equipment Notes issued under such Indenture
and distributed to such Trust by the Subordination Agent shall be deposited in
the Special Payments Account for such Trust and shall be distributed to the
Certificateholders of such Trust on a Special Distribution Date. (Section 4.02)
54
Any funds representing payments received with respect to any defaulted
Equipment Notes held in a Trust, or the proceeds from the sale of any Equipment
Notes, held by such Trustee in the Special Payments Account for such Trust
shall, to the extent practicable, be invested and reinvested by such Trustee in
Permitted Investments pending the distribution of such funds on a Special
Distribution Date. (Section 4.04) Permitted Investments are defined as
obligations of the United States or agencies or instrumentalities thereof the
payment of which is backed by the full faith and credit of the United States and
which mature in not more than 60 days or such lesser time as is required for the
distribution of any such funds on a Special Distribution Date. (Section 1.01)
Each Pass Through Trust Agreement provides that the Trustee of the related
Trust shall, within 90 days after the occurrence of any Indenture Default, give
to the Certificateholders of such Trust notice, transmitted by mail, of all
uncured or unwaived defaults with respect to such Trust known to it, provided
that, except in the case of default in the payment of principal, premium, if
any, or interest on any of the Equipment Notes or other Trust Property held in
such Trust, the applicable Trustee shall be protected in withholding such notice
if it in good faith determines that the withholding of such notice is in the
interests of such Certificateholders. (Section 7.02)
Each Pass Through Trust Agreement contains a provision entitling the
Trustee of the related Trust, subject to the duty of such Trustee during a
default to act with the required standard of care, to be offered reasonable
security or indemnity by the holders of the Certificates of such Trust before
proceeding to exercise any right or power under such Pass Through Agreement at
the request of such Certificateholders. (Section 7.03(e))
In certain cases, the holders of the Certificates of a Trust evidencing
fractional undivided interests aggregating not less than a majority in interest
of such Trust may on behalf of the holders of all the Certificates of such Trust
waive any past default under the related Pass Through Trust Agreement or, if the
Trustee of such Trust is the Controlling Party, may direct the Trustee to
instruct the applicable Loan Trustee to waive any past Indenture Default with
respect to such Trust and thereby annul any direction given by such holders to
such Loan Trustee with respect thereto, except (i) a default in the deposit of
any Scheduled Payment or Special Payment or in the distribution thereof, (ii) a
default in payment of the principal, premium, if any, or interest with respect
to any of the Equipment Notes held in such Trust and (iii) a default in respect
of any covenant or provision of the related Pass through Trust Agreement that
cannot be modified or amended without the consent of each Certificateholder of
such Trust affected thereby. (Section 6.05) Each Indenture will provide that,
with certain exceptions, the holders of the majority in aggregate unpaid
principal amount of the Equipment Notes issued thereunder may on behalf of all
such holders waive any past default or Indenture Default thereunder.
Notwithstanding the foregoing provisions of this paragraph, however, pursuant to
the Intercreditor Agreement, only the Controlling Party will be entitled to
waive any such past default or Indenture Default.
PURCHASE RIGHTS OF CERTIFICATEHOLDERS
Upon the occurrence and during the continuation of a Triggering Event, (i)
the Class B Certificateholders shall have the right to purchase all, but not
less than all, of the Class A Certificates, (ii) the Class C Certificateholders
shall have the right to purchase all, but not less than all, of the Class A
Certificates and the Class B Certificates and (iii) the Class D
Certificateholders shall have the right to purchase all, but not less than all,
of the Class A Certificates, the Class B Certificates and the Class C
Certificates, in each case at a purchase price equal to the Pool Balance of the
relevant Class or Classes of Certificates plus accrued and unpaid interest
thereon to the date of purchase without premium but including any other amounts
due to the Certificateholders of such Class or Classes.
55
PTC EVENT OF DEFAULT
A PTC Event of Default is defined under each Pass Through Trust Agreement
as the failure to pay within 10 Business Days of the due date thereof: (i) the
outstanding Pool Balance of the applicable Class of Certificates on the Final
Maturity Date for such Class or (ii) interest due on such Certificates on any
Distribution Date (unless the Subordination Agent shall have made an Interest
Drawing with respect thereto in an amount sufficient to pay such interest and
shall have distributed such amount to the Certificateholders entitled thereto).
A PTC Event of Default with respect to the most senior Class of Certificates
resulting from an Indenture Default under all Indentures will constitute a
Triggering Event.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Continental is prohibited from consolidating with or merging into any other
corporation or transferring substantially all of its assets as an entirety to
any other corporation unless (i) the surviving successor or transferee
corporation shall (a) be a "citizen of the United States" as defined in Section
40102(a)(15) of Title 49 of the United States Code, as amended, relating to
aviation (the "Aviation Act"), (b) be a United States certificated air carrier
and (c) expressly assume all of the obligations of Continental contained in the
Pass Through Trust Agreements, the Refunding Agreements, the Indentures, the
Participation Agreements and the Leases, and any other operative documents; (ii)
immediately after giving effect to such transaction, no Lease Event of Default
shall have occurred and be continuing; and (iii) Continental shall have
delivered a certificate and an opinion or opinions of counsel indicating that
such transaction complies with such conditions. (Section 5.02; Leases, Section
13.2)
The Pass Through Trust Agreements and the Indentures do not contain any
covenants or provisions which may afford the applicable Trustee or
Certificateholders protection in the event of a highly leveraged transaction,
including transactions effected by management or affiliates, which may or may
not result in a change in control of Continental.
MODIFICATIONS OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS
Each Pass Through Trust Agreement contains provisions permitting the
execution of supplemental trust agreements, without the consent of the holders
of any of the Certificates of such Trust, (i) to evidence the succession of
another corporation to Continental and the assumption by such corporation of
Continental's obligations under such Pass Through Trust Agreement, (ii) to add
to the covenants of Continental for the benefit of holders of such Certificates
or to surrender any right or power in such Pass Through Trust Agreement
conferred upon Continental, (iii) to correct or supplement any defective or
inconsistent provision of such Pass Through Trust Agreement or to modify any
other provisions with respect to matters or questions arising thereunder,
provided such action shall not materially adversely affect the interests of the
holders of such Certificates, or to cure any ambiguity or correct any mistake,
(iv) to add to such Pass Through Trust Agreement such other provisions as may be
expressly permitted by the Trust Indenture Act and (v) to provide for a
successor Trustee or to add to or change any provision of such Pass Through
Trust Agreement as shall be necessary to facilitate the administration of the
Trust thereunder by more than one Trustee. In addition, each Pass Through Trust
Agreement provides that the Trustee will be permitted to enter into any
amendment or supplement to the Intercreditor Agreement or the Liquidity
Facilities, without the consent of the holders of any Certificates, to cure any
ambiguity or correct any mistake or to correct or supplement any defective or
inconsistent provision thereof or to modify any other provision with respect to
matters or questions arising thereunder; provided that such action shall not
materially adversely affect the interests of the Certificateholders. (Section
9.01)
Each Pass Through Trust Agreement also contains provisions permitting the
execution, with the consent of the holders of the Certificates of the related
Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust, and with the consent of the applicable Owner
Trustee (such consent
56
not to be unreasonably withheld), of supplemental trust agreements adding any
provisions to or changing or eliminating any of the provisions of such Pass
Through Trust Agreement or modifying the rights of the Certificateholders,
except that no such supplemental trust agreement may, without the consent of the
holder of each Certificate so affected thereby, (a) reduce in any manner the
amount of, or delay the timing of, any receipt by the Trustee of payments on the
Equipment Notes or other Trust Property held in such Trust or distributions in
respect of any Certificate related to such Trust, or change the date or place of
any payment in respect of any Certificate, or make distributions payable in coin
or currency other than that provided for in such Certificates, or impair the
right of any Certificateholder of such Trust to institute suit for the
enforcement of any such payment when due, (b) permit the disposition of any
Equipment Note held in such Trust, except as provided in such Pass Through Trust
Agreement, or otherwise deprive any Certificateholder of the benefit of the
ownership of the applicable Equipment Notes, (c) alter the priority of
distributions specified in the Intercreditor Agreement, (d) reduce the
percentage of the aggregate fractional undivided interests of the Trust provided
for in such Pass Through Trust Agreement, the consent of the holders of which is
required for any such supplemental trust agreement or for any waiver provided
for in such Pass Through Trust Agreement or (e) modify any of the provisions
relating to the rights of the Certificateholders in respect of the waiver of
Events of Default or receipt of payment. (Section 9.02)
TERMINATION OF THE TRUSTS
The obligations of Continental and the applicable Trustee with respect to a
Trust will terminate upon the distribution to Certificateholders of such Trust
of all amounts required to be distributed to them pursuant to applicable Pass
Through Trust Agreement and the disposition of all property held in such Trust.
The applicable Trustee will send to each Certificateholder of record of such
Trust notice of the termination of such Trust, the amount of the proposed final
payment and the proposed date for the distribution of such final payment for
such Trust. The final distribution to any Certificateholder of such Trust will
be made only upon surrender of such Certificateholder's Certificates at the
office or agency of the applicable Trustee specified in such notice of
termination. (Section 11.01)
DELAYED PURCHASE
In the event that on the date of the consummation of the Offering, the
conditions to delivery of the Equipment Notes are not all satisfied and, as a
result, any portion of the proceeds from the sale of the Certificates is not
used to purchase the Equipment Notes issuable under any Indenture, such
Equipment Notes may be purchased by the Trustees at any time on or prior to
March 31, 1996. In such event, the Trustees will hold such proceeds not used to
purchase Equipment Notes in an escrow account pending the purchase of the
Equipment Notes not so purchased. Such proceeds will be invested in certain
specified investments at the direction and risk of, and for the account of,
Continental. Earnings on such investments in the escrow account for each Trust
will be paid to Continental periodically, and Continental will be responsible
for any losses. (Section 2.01(b))
THE TRUSTEES
The Trustee for each Trust is Wilmington Trust Company.
With certain exceptions, the Trustee makes no representations as to the
validity or sufficiency of the Pass Through Trust Agreements, the Certificates,
the Equipment Notes, the Indentures, the Leases or other related documents.
(Sections 7.04 and 7.15) The Trustee of any Trust shall not be liable, with
respect to the Certificates of such Trust, for any action taken or omitted to be
taken by it in good faith in accordance with the direction of the holders of a
majority in principal amount of outstanding Certificates of such Trust. Subject
to certain provisions, the Trustees shall be under no obligation to exercise any
of their rights or powers under any Pass Through Trust Agreement at the request
of any holders of Certificates issued thereunder unless there shall
57
have been offered to the Trustees indemnity satisfactory to them. (Section
7.03(d)) Each Pass Through Trust Agreement provides that the Trustees in their
individual or any other capacity may acquire and hold Certificates issued
thereunder and, subject to certain conditions, may otherwise deal with
Continental and with any Owner Trustee with the same rights they would have if
they were not the Trustees. (Section 7.05)
Any Trustee may resign with respect to any or all of the Trusts of which it
is the Trustee at any time, in which event Continental will be obligated to
appoint a successor trustee. If any Trustee ceases to be eligible to continue as
Trustee with respect to a Trust or becomes incapable of acting as Trustee or
becomes insolvent, Continental may, with the consent of the Owner Participants
for the Aircraft (which consent shall not be unreasonably withheld), remove such
Trustee or any holder of the Certificates of such Trust for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of such Trustee and the appointment of
a successor trustee. Any resignation or removal of the Trustee with respect to a
Trust and appointment of a successor trustee for such Trust does not become
effective until acceptance of the appointment by the successor trustee.
(Sections 7.09 and 7.10)
Each Pass Through Trust Agreement provides that Continental or the Owner
Participant will pay the applicable Trustee's fees and expenses. (Section 7.07)
BOOK-ENTRY; DELIVERY AND FORM
The New Certificates of each Trust will be represented by a single,
permanent global Certificate, in definitive, fully registered form without
interest coupons (the "Global Certificate"), to be deposited with the Trustee as
custodian for DTC and registered in the name of a nominee of DTC.
Old Certificates originally issued in definitive, fully registered form
with respect to any Trust ("Definitive Certificates") will be exchanged for
beneficial interests in the Global Certificate, representing the New
Certificates of such Trust.
DTC has advised Continental as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold securities
for its participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Upon the issuance of the Global Certificates, DTC or its custodian
credited, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Certificates to the
accounts of persons who have accounts with such depositary. Ownership of
beneficial interests in the Global Certificates is limited to persons who have
accounts with DTC ("participants") or persons who hold interests through
participants. Ownership of beneficial interests in the Global Certificates is
shown on, and the transfer of that ownership is effected only through, records
maintained by DTC or its nominee (with respect to interests of participants) and
the records of participants (with respect to interests of persons other than
participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities. Such limits and such laws
may limit the market for beneficial interests in the Global Certificates.
Qualified institutional buyers may hold their interests in the Global
Certificates directly through DTC if they are participants in such system, or
indirectly through organizations which are participants in such system.
58
So long as DTC or its nominee is the registered owner or holder of the
Global Certificates, DTC or such nominee, as the case may be, will be considered
the sole record owner or holder of the Certificates represented by such Global
Certificates for all purposes under the related Pass Through Trust Agreements.
No beneficial owners of an interest in the Global Certificates will be able to
transfer that interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the Pass Through Trust Agreements and, if
applicable, Euroclear or Cedel.
Payments of the principal of, premium, if any, and interest on the Global
Certificates will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither Continental, the Trustee, nor any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Certificates or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
Continental expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Certificates
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial ownership interests in the principal amount of such
Global Certificates, as shown on the records of DTC or its nominee. Continental
also expects that payments by participants to owners of beneficial interests in
such Global Certificates held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Neither Continental nor the Trustee has any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Certificates and a successor depositary is not appointed by within 90
days, the Trusts will issue Definitive Certificates in exchange for the Global
Certificates.
59
DESCRIPTION OF THE LIQUIDITY FACILITIES
The following summary describes certain terms of the Liquidity Facilities
and certain provisions of the Intercreditor Agreement relating to the Liquidity
Facilities. The summary does not purport to be complete and reference is made to
the provisions of the Liquidity Facilities and such provisions of the
Intercreditor Agreement, which has been filed as an exhibit to the Registration
Statement. The provisions of the Liquidity Facilities are substantially
identical except as otherwise indicated. Upon request, copies of such documents
will be furnished to any prospective investor in the Certificates. Copies of
such documents are filed as exhibits to the Registration Statement and are
available from the Trustee.
GENERAL
With respect to the Certificates of each Trust (other than the Class D
Trust), the Subordination Agent has entered into a Liquidity Facility with the
Liquidity Provider pursuant to which the Liquidity Provider will make one or
more advances to the Subordination Agent to pay interest on such Certificates
subject to certain limitations. The Liquidity Facility for any Trust is intended
to enhance the likelihood of timely receipt by the Certificateholders of such
Trust of the interest payable on the Certificates of such Trust at the Stated
Interest Rate therefor on six consecutive Regular Distribution Dates. If
interest payment defaults occur which exceed the amount covered by or available
under the Liquidity Facility for any Trust, the Certificateholders of such Trust
will bear their allocable share of the deficiencies to the extent that there are
no other sources of funds. Although Credit Suisse is the initial Liquidity
Provider for each of the Class A Trust, the Class B Trust and the Class C Trust,
Credit Suisse may be replaced by another entity with respect to one or more
Trusts under certain circumstances. Therefore, the liquidity provider for any
Trust may be different from the liquidity provider for any other Trust.
DRAWINGS
The initial stated amount available under each of the Liquidity Facilities
for the Class A Trust, the Class B Trust and the Class C Trust is
$30,078,208.00, $11,772,633.60 and $11,117,550.00, respectively. Except as
otherwise provided below, the Liquidity Facility for each Trust will enable the
Subordination Agent to make Interest Drawings thereunder promptly after any
Regular Distribution Date to pay interest then due and payable on the
Certificates of such Trust at the Stated Interest Rate for such Trust to the
extent that the amount, if any, available to the Subordination Agent on such
Regular Distribution Date is not sufficient to pay such interest; provided,
however, that the maximum amount available to be drawn under such Liquidity
Facility on any Regular Distribution Date to fund any shortfall of interest on
such Certificates will not exceed an amount equal to the then stated amount of
such Liquidity Facility. The Liquidity Facility for any Trust does not provide
for drawings thereunder to pay for principal of or premium on the Certificates
of such Trust or any interest on the Certificates of such Trust in excess of the
Stated Interest Rate for such Trust or more than six quarterly installments of
interest thereon or principal of or interest or premium on the Certificates of
any other Trust. (Liquidity Facilities, Section 2.02; Intercreditor Agreement,
Section 3.6(b))
Each payment by the Liquidity Provider under each Liquidity Facility
reduces pro tanto the amount available to be drawn under such Liquidity
Facility, subject to reinstatement as hereinafter described. With respect to any
Interest Drawings under the Liquidity Facility for any Trusts, upon
reimbursement of the Liquidity Provider in full for the amount of such Interest
Drawings plus interest thereon, the amount available to be drawn under such
Liquidity Facility in respect of interest on the Certificates of such Trust
shall be reinstated to an amount equal to the then stated amount of such
Liquidity Facility; provided, however, that such Liquidity Facility shall not be
so reinstated at any time after (i) a Triggering Event shall have occurred and
be continuing and (ii) less than 65% of the then aggregate outstanding principal
amount of all Equipment Notes are Performing Equipment Notes. With respect to
any other drawings under such Liquidity Facility, amounts available to be drawn
thereunder are not subject to reinstatement. The stated amount of the Liquidity
Facility for any Trust will
60
be automatically reduced from time to time to an amount equal to the next six
successive interest payments due on the Certificates of such Trust (without
regard to expected future payment of principal of such Certificates) at the
Stated Interest Rate for such Trust. (Liquidity Facilities, Section 2.04(a);
Intercreditor Agreement, Section 3.6(j))
If at any time the short-term unsecured debt rating of the Liquidity
Provider for any Trust then issued by either Rating Agency is lower than the
Threshold Rating, the Liquidity Facility for such Trust will be required to be
replaced by a Replacement Facility (as defined below). In the event that such
Liquidity Facility is not replaced with a Replacement Facility within 10 days
after notice of the downgrading and as otherwise provided in the Intercreditor
Agreement, the Subordination Agent shall request the Downgrade Drawing in an
amount equal to all available and undrawn amounts thereunder and shall hold the
proceeds thereof in the Cash Collateral Account for such Trust as cash
collateral to be used for the same purposes and under the same circumstances as
cash payments of Interest Drawings under such Liquidity Facility would be used.
(Liquidity Facilities, Section 2.02(c); Intercreditor Agreement, Section 3.6(c))
A "Replacement Facility" for any Trust means an irrevocable liquidity
facility in substantially the form of the initial Liquidity Facility for such
Trust, including reinstatement provisions, or in such other form (which may
include a letter of credit) as shall permit the Rating Agencies to confirm in
writing their respective ratings then in effect for the Certificates (before
downgrading of such ratings, if any, as a result of the downgrading of the
Liquidity Provider), in a face amount equal to the amount of interest payable on
the Certificates of such Trust (at the Stated Interest Rate for such Trust, and
without regard to expected future principal payments) on the six Regular
Distribution Dates following the date of replacement of such Liquidity Facility
and issued by a Person having unsecured short-term debt ratings issued by both
Rating Agencies which are (i) equal to or higher than the Threshold Rating and
(ii) equal to or higher than the unsecured short-term debt ratings of the
Liquidity Provider being replaced issued by both Rating Agencies. (Intercreditor
Agreement, Section 1.1)
"Threshold Rating" means the short-term unsecured debt rating of P-2 by
Moody's and A-1 by Standard & Poor's.
The Liquidity Facility for each Trust provides that the Liquidity
Provider's obligations thereunder will expire on the earliest of (i) January 29,
1997; (ii) the date on which such Liquidity Facility is surrendered to the
Liquidity Provider together with a certification that all of the Certificates of
such Trust have been paid in full; (iii) the date such Liquidity Facility is
surrendered to the Liquidity Provider together with a certification that a
Replacement Facility has been substituted for such Liquidity Facility; (iv) the
fifth Business Day following receipt by the Subordination Agent of a Termination
Notice from the Liquidity Provider (see "--Liquidity Events of Default"); and
(v) the date on which no amount is or may (by reason of reinstatement) become
available for drawing under such Liquidity Facility. Each Liquidity Facility
provides that the scheduled expiration date thereof may be extended for
additional one-year periods by mutual agreement. The Intercreditor Agreement
provides for the replacement of the Liquidity Facility for any Trust (other than
a Liquidity Facility which expires no earlier than 15 days later than the final
maturity date) in the event that such Liquidity Facility is not extended at
least 25 days prior to its then scheduled expiration date. In the event such
Liquidity Facility is not so extended or replaced within 25 days prior to its
then scheduled expiration date, the Subordination Agent shall request the Non-
Extension Drawing in an amount equal to all available and undrawn amounts
thereunder and hold the proceeds thereof in the Cash Collateral Account for such
Trust as cash collateral to be used for the same purposes and under the same
circumstances, and subject to the same conditions, as cash payments of Interest
Drawings under such Liquidity Facility would be used. (Liquidity Facilities,
Section 2.02(b); Intercreditor Agreement, Section 3.6(d))
Continental, in consultation with the Subordination Agent, may direct the
Owner Participants (which shall follow such direction unless they have a bona
fide, good faith reason not to) to arrange for a replacement facility at any
time to replace the Liquidity Facility for any Trust. If such replacement
facility is provided at any
61
time after the Downgrade Drawing or the Non-Extension Drawing under such
Liquidity Facility, the funds on deposit in the Cash Collateral Account for such
Trust will be returned to the Liquidity Provider being replaced. (Intercreditor
Agreement, Section 3.6(e))
The Intercreditor Agreement provides that, upon receipt by the
Subordination Agent of a Termination Notice with respect to any Liquidity
Facility from the Liquidity Provider, the Subordination Agent shall request a
final drawing (the "Final Drawing") under such Liquidity Facility in an amount
equal to all available and undrawn amounts thereunder and shall hold the
proceeds thereof in the Cash Collateral Account for the related Trust as cash
collateral to be used for the same purposes and under the same circumstances,
and subject to the same conditions, as cash payments of Interest Drawings under
such Liquidity Facility would be used. (Liquidity Facilities, Section 2.02(d);
Intercreditor Agreement, Section 3.6(i))
Drawings under any Liquidity Facility will be made by delivery by the
Subordination Agent of a certificate in the form required by such Liquidity
Facility. Upon receipt of such a certificate, the Liquidity Provider is
obligated to make payment of the drawing requested thereby in immediately
available funds. Upon payment by the Liquidity Provider of the amount specified
in any drawing under any Liquidity Facility, the Liquidity Provider will be
fully discharged of its obligations under such Liquidity Facility with respect
to such drawing and will not thereafter be obligated to make any further
payments under such Liquidity Facility in respect of such drawing to the
Subordination Agent or any other person or entity who makes a demand for payment
in respect of interest on the related Certificates.
REIMBURSEMENT OF DRAWINGS
Amounts drawn under any Liquidity Facility by reason of an Interest Drawing
or the Final Drawing will be immediately due and payable, together with interest
on the amount of such drawing at a rate equal to the applicable LIBOR plus 2.00%
per annum; provided that the Subordination Agent will be obligated to reimburse
such amounts only to the extent that the Subordination Agent has available funds
therefor.
The amount drawn under the Liquidity Facility for any Trust by reason of
the Downgrade Drawing or the Non-Extension Drawing will be treated as follows:
(i) such amount will be released on any Regular Distribution Date to the
Liquidity Provider to the extent that such amount exceeds the amount of interest
payable on the then outstanding aggregate principal amount of the Certificates
of such Trust at the Stated Interest Rate for such Trust on six consecutive
Regular Distribution Dates (without regard to expected future payments of
principal of such Certificates) minus any unreimbursed Interest Drawings under
such Liquidity Facility; (ii) any portion of such amount withdrawn from the Cash
Collateral Account for such Certificates to pay interest on such Certificates
will be treated in the same way as Interest Drawings; and (iii) the balance of
such amount will be invested in Eligible Investments. Any portion of the
Downgrade Drawing or the Non-Extension Drawing under any Liquidity Facility
remaining unreimbursed as of the tenth anniversary of the consummation of the
Offering (or, if such Liquidity is extended beyond such tenth anniversary, the
expiration date thereof so extended) shall be payable in eight quarterly
installments, commencing on the Regular Distribution Date immediately following
such date; provided that such principal installments shall not be required to be
paid so long as Continental complies with its obligation to purchase
participation interests in the Liquidity Facilities pursuant to a separate
agreement with Credit Suisse. The Downgrade Drawing or the Non-Extension Drawing
under any Liquidity Facility will bear interest at a rate equal to the
applicable LIBOR plus 0.75% per annum. (Liquidity Facilities, Section 2.06)
LIQUIDITY EVENTS OF DEFAULT
Events of Default under each Liquidity Facility (each, a "Liquidity Event
of Default") will consist of: (i) the acceleration of all the Equipment Notes;
and (ii) certain bankruptcy or similar events involving Continental. (Liquidity
Facilities, Section 1.01)
62
If (i) any Liquidity Event of Default occurs under any Liquidity Facility
and (ii) less than 65% of the aggregate outstanding principal amount of all
Equipment Notes are Performing Equipment Notes, the Liquidity Provider may, in
its discretion, give a notice of termination of the related Liquidity Facility
and accelerate the reimbursement obligations thereunder (a "Termination Notice")
the effect of which shall be to cause (i) such Liquidity Facility to expire on
the fifth Business Day after the date on which such Termination Notice is
received by the Subordination Agent, (ii) any Drawing remaining unreimbursed as
of the date of termination to be automatically converted into a Final Drawing
under such Liquidity Facility, and (iii) all amounts owing to the Liquidity
Provider automatically to become accelerated. Notwithstanding the foregoing, the
Subordination Agent will be obligated to pay amounts owing to the Liquidity
Provider only to the extent of funds available therefor after giving effect to
the payments in accordance with the provisions set forth under "Description of
the Intercreditor Agreement--Priority of Distributions". (Liquidity Facilities,
Section 6.01)
Upon the circumstances described below under "Description of the
Intercreditor Agreement--Intercreditor Rights", the Liquidity Provider may
become the Controlling Party with respect to the exercise of remedies under the
Indentures. (Intercreditor Agreement, Section 2.6(c))
LIQUIDITY PROVIDER
The initial Liquidity Provider is Credit Suisse.
Founded in 1856, Credit Suisse is the oldest of Switzerland's three major
banks and maintains its corporate headquarters in Zurich, Switzerland. Within
Switzerland, Credit Suisse conducts its operations through 311 offices and
branches. Internationally, Credit Suisse maintains a presence on five continents
through its 73 foreign branches, representative offices and subsidiaries.
Banking operations of Credit Suisse in the United States began in 1940 and
currently include branches in New York and Los Angeles, an agency in Miami, and
representative offices in San Francisco, Atlanta, Chicago and Houston.
63
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following summary describes certain provisions of the Intercreditor
Agreement. The summary does not purport to be complete and reference is made to
the provisions of the Intercreditor Agreement. The Intercreditor Agreement is
filed as an exhibit to the Registration Statement and is available from the
Trustee.
INTERCREDITOR RIGHTS
Controlling Party
Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity
Provider have agreed that, with respect to any Indenture at any given time, the
Loan Trustee is directed (a) in taking, or refraining from taking, any action
thereunder by the holders of at least a majority of the outstanding principal
amount of the Equipment Notes issued thereunder (provided that, for so long as
the Subordination Agent is the registered holder of the Equipment Notes, the
Subordination Agent shall act with respect to this clause (a) in accordance with
the directions of the Trustees), so long as no Indenture Default shall have
occurred and be continuing thereunder and (b) after the occurrence and during
the continuance of an Indenture Default thereunder, in taking, or refraining
from taking, any action thereunder, including exercising remedies thereunder
(including acceleration of such Equipment Notes or foreclosing the lien on the
Aircraft securing such Equipment Notes), by the Controlling Party. See
"Description of New Certificates--Indenture Defaults and Certain Rights Upon an
Indenture Default" for a description of the rights of the Certificateholders of
each Trust to direct the respective Trustees. Notwithstanding the foregoing, the
Liquidity Provider shall have the right to direct such Loan Trustee with respect
to such matters at any time after 18 months from the acceleration of the
Equipment Notes under such Indenture, if at the time of such election the
Liquidity Obligations have not been paid in full; provided that if there is more
than one Liquidity Provider, the Liquidity Provider with the greatest amount of
unreimbursed Liquidity Obligations shall have such right; provided that at any
time after Continental has acquired 100% participation interests in the
Liquidity Facilities, the Liquidity Provider shall not have the right to become
the Controlling Party. For purposes of giving effect to the foregoing, the
Trustees (other than the Controlling Party) shall irrevocably agree (and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) shall be deemed to agree by virtue of their purchase of
Certificates) to exercise their voting rights as directed by the Controlling
Party. (Intercreditor Agreement, Section 2.6)
The Controlling Party may not, without the consent of the Liquidity
Provider (which consent shall not be unreasonably withheld or delayed), amend
the provisions of or direct the exercise of any remedy or the taking of any
other action (including the sale of any Equipment Note, Lease or Aircraft unless
its market value is paid within two years from the earliest such amendment,
exercise or other action) under the Indentures or various other agreements, if
the effect thereof would be to impair the ability of the Subordination Agent to
cause all Liquidity Obligations to be paid in full within one year of the date
when due; provided that, if the Controlling Party is an Owner Participant or its
affiliate, the consent requirements will apply to any disposition of any
Equipment Note, Lease or Aircraft, regardless of the terms of disposition.
Sale of Equipment Notes or Aircraft
Upon the occurrence and during the continuation of any Indenture Default
under any Indenture, the Controlling Party may accelerate and, subject to the
provisions of the immediately following sentence, sell all (but not less than
all) of the Equipment Notes issued under such Indenture to any person. So long
as any Certificates are outstanding, during nine months after the earlier of (x)
the acceleration of the Equipment Notes under any Indenture or (y) the
bankruptcy or insolvency of Continental, without the consent of each Trustee,
(a) no Aircraft subject to the lien of such Indenture or such Equipment Notes
may be sold, if the net proceeds from such sale would be less than the Minimum
Sale Price for such Aircraft or such Equipment Notes, and (b) the amount and
payment dates of rentals payable by Continental under the Lease for such
Aircraft may not be
64
adjusted, if, as a result of such adjustment, the discounted present value of
all such rentals would be less than 75% of the discounted present value of the
rentals payable by Continental under such Lease before giving effect to such
adjustment, in each case, using the weighted average interest rate of the
Equipment Notes issued under such Indenture as the discount rate.
The Subordination Agent may from time to time during the continuance of an
Indenture Default commission an Appraisal with respect to the related Aircraft
at the request of the Controlling Party. (Intercreditor Agreement, Section 4.1)
"Appraisal" means a fair market value appraisal (which may be a "desktop"
appraisal) performed by any Appraiser or any other nationally recognized
appraiser on the basis of an arm's-length transaction between an informed and
willing purchaser under no compulsion to buy and an informed and willing seller
under no compulsion to sell and both having knowledge of all relevant facts.
"Appraised Value" means at any time with respect to any Aircraft, the
appraised value thereof as set forth in the most recent Appraisal, provided that
initially, the Appraised Value of any Aircraft means the lower of the average or
the median of the three appraisals provided by the Appraisers for such Aircraft.
Priority of Distributions
So long as no Triggering Event shall have occurred, the payments in respect
of the Equipment Notes and certain other payments received on any Distribution
Date will be promptly distributed by the Subordination Agent on such
Distribution Date in the following order of priority:
(i) to pay the Liquidity Obligations (other than any interest accrued
thereon or the principal amount of any Drawing) (the "Liquidity Expenses")
to the Liquidity Provider;
(ii) to pay interest accrued on the Liquidity Obligations to the
Liquidity Provider;
(iii) to pay or reimburse the Liquidity Provider for the Liquidity
Obligations and, if applicable, to replenish each Cash Collateral Account
up to the amount of interest payable on the related Class of Certificates
at the Stated Interest Rate therefor on six consecutive Regular
Distribution Dates (the "Required Amount");
(iv) to pay Expected Distributions to the holders of Class A
Certificates;
(v) to pay Expected Distributions to the holders of Class B
Certificates;
(vi) to pay Expected Distributions to the holders of Class C
Certificates;
(vii) to pay Expected Distributions to the holders of Class D
Certificates; and
(viii) to pay certain fees and expenses of the Subordination Agent and
the Trustees.
Subject to the terms of the Intercreditor Agreement, upon the occurrence of
a Triggering Event and at all times thereafter, all funds received by the
Subordination Agent in respect of the Equipment Notes and certain other payments
will be promptly distributed by the Subordination Agent in the following order
of priority:
(i) to pay certain out-of-pocket costs and expenses actually incurred
by the Subordination Agent, any Trustee, any Certificateholder or the
Liquidity Provider in connection with the protection and realization of the
Equipment Notes or the Trust Indenture Estate;
65
(ii) to the Liquidity Provider, to pay the Liquidity Expenses;
(iii) to the Liquidity Provider, to pay interest accrued on the
Liquidity Obligations;
(iv) to the Liquidity Provider, to pay the outstanding amount of all
Liquidity Obligations and, if applicable, so long as at least 65% of the
aggregate outstanding principal amount of all Equipment Notes are
Performing Equipment Notes, to replenish each Cash Collateral Account up to
the Required Amount for the related Class of Certificates;
(v) to pay certain fees, taxes, charges and other amounts payable to
the Subordination Agent, any Trustee or any Certificateholder;
(vi) to pay Final Distributions to the holders of Class A Certificates
(reducing the Pool Balance thereof to zero);
(vii) to pay Final Distributions to the holders of Class B
Certificates (reducing the Pool Balance thereof to zero);
(viii) to pay Final Distributions to the holders of Class C
Certificates (reducing the Pool Balance thereof to zero); and
(ix) to pay Final Distributions to the holders of Class D Certificates
(reducing the Pool Balance thereof to zero).
Notwithstanding the foregoing provisions, so long as no PTC Event of
Default shall have occurred and be continuing with respect to the most senior
Class of Certificates outstanding, any regularly scheduled payment received on
the Performing Equipment Notes shall be distributed as follows:
(x) the Performing Equipment Notes Interest Payment will be
distributed in the following order:
(1) to the Liquidity Provider in payment of the Liquidity
Obligations, and to the Subordination Agent, the Trustees, the
Certificateholders or the Liquidity Provider, as the case may be, in
payment of the amounts payable to such parties in clauses (i) and (v)
immediately above (the "Administration Expenses");
(2) to the holders of Class A Certificates in payment of accrued
and unpaid interest on the Class A Certificates;
(3) to the holders of Class B Certificates in payment of accrued
and unpaid interest on the Class B Certificates;
(4) to the holders of Class C Certificates in payment of accrued
and unpaid interest on the Class C Certificates; and
(5) to the holders of Class D Certificates;
provided that the provisions of this paragraph (x) will be given effect before
distribution of any funds received in respect of any Non-Performing Equipment
Notes;
(y) the Performing Equipment Notes Principal Payment will be
distributed in the following order:
66
(1) to the holders of Class A Certificates in payment of the
greater of (A) the Adjusted Expected Distributions to such holders on
such Distribution Date and (B) such holders' pro rata portion of the
Performing Equipment Notes Principal Payment based on the Adjusted
Pool Balance of such Trust;
(2) to the holders of Class B Certificates in payment of the
greater of (A) the Adjusted Expected Distributions to such holders on
such Distribution Date and (B) such holders' pro rata portion of the
Performing Equipment Notes Principal Payment based on the Adjusted
Pool Balance of such Trust;
(3) to the holders of Class C Certificates in payment of the
greater of (A) the Adjusted Expected Distributions to such holders on
such Distribution Date and (B) such holders' pro rata portion of the
Performing Equipment Notes Principal Payment based on the Adjusted
Pool Balance of such Trust; and
(4) to the holders of Class D Certificates;
provided that the provisions of this paragraph (y) will be given effect
after distributing any funds received in respect of any Non-Performing
Equipment Notes;
provided that if the aggregate amount of future scheduled payments in respect of
the Performing Equipment Notes, together with the Performing Equipment Notes
Principal Payment as of such Distribution Date, will be (assuming the
distribution of such amount as contemplated by paragraphs (x) and (y) and that
no further payment will be received at any time from the Non-Performing
Equipment Notes) insufficient to pay interest on any Class of Certificates and
reduce the Pool Balance of such Class of Certificates to zero before the Final
Maturity Date thereof, the amount of distributions to be made to the holders of
such Class of Certificates on such Distribution Date will be increased by the
amount of such deficiency prior to making any distributions to the holders of
any Class of Certificates junior to such Class of Certificates and such increase
shall be taken into account for the purpose of applying this proviso to the
holders of any such junior Class of Certificates.
Interest Drawings under the Liquidity Facility and withdrawals from the
Cash Collateral Account, in each case in respect of interest on the Certificates
of any Trust (other than the Class D Trust), will be distributed to the Trustee
for such Trust, notwithstanding the priority of distributions set forth in the
Intercreditor Agreement and otherwise described herein. All amounts on deposit
in the Cash Collateral Account for any Trust which are in excess of amounts
required to be maintained therein to pay interest on the Certificates of such
Trust at the Stated Interest Rate for such Trust on six consecutive Regular
Distribution Dates and all investment earnings on such amounts on deposit in the
Cash Collateral Account will be paid to the Liquidity Provider.
VOTING OF EQUIPMENT NOTES
In the event that the Subordination Agent, as the registered holder of any
Equipment Note, receives a request for its consent to any amendment,
modification or waiver under such Equipment Note, the Indenture, the Lease, the
Participation Agreement or other related document, (i) if no Indenture Default
shall have occurred and be continuing, the Subordination Agent shall request
instructions from the Certificateholders and shall vote or consent in accordance
with the vote of the Certificateholders and (ii) if any Indenture Default shall
have occurred and be continuing with respect to such Indenture, the
Subordination Agent will exercise its voting rights as directed by the
Controlling Party. (Intercreditor Agreement, Section 9.1)
67
THE SUBORDINATION AGENT
Wilmington Trust Company is the Subordination Agent under the Intercreditor
Agreement. Continental and its affiliates may from time to time enter into
banking and trustee relationships with the Subordination Agent and its
affiliates. The Subordination Agent's address is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
The Subordination Agent may resign at any time, in which event a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. The Controlling Party may remove the Subordination Agent for cause as
provided in the Intercreditor Agreement. In such circumstances, a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. Any resignation or removal of the Subordination Agent and appointment
of a successor Subordination Agent does not become effective until acceptance of
the appointment by the successor Subordination Agent.
68
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
THE AIRCRAFT
The Aircraft are comprised of nine Boeing 737-500 aircraft and nine Boeing
757-200 aircraft. The Aircraft are designed to be in compliance with Stage III
noise level standards, which constitute the most restrictive regulatory
standards currently in effect in the United States for aircraft noise abatement.
The table below sets forth certain additional information for the Aircraft.
Appraised Value
FAA Aircraft Engine Delivery ------------------------------
Number Type Type Date AISI BK MBA
- ------ -------- ------ -------- ----- ---- ----
(dollars in millions)
N17104 757-200 RB21 1-535E4B July 1994 $48.80 $47.50 $49.77
N17105 757-200 RB21 1-535E4B Aug. 1994 49.02 47.50 50.00
N14106 757-200 RB21 1-535E4B Sept. 1994 49.24 47.50 50.23
N14107 757-200 RB21 1-535E4B Oct. 1994 49.45 47.50 50.45
N21108 757-200 RB21 1-535E4B Nov. 1994 49.67 47.50 50.68
N12109 757-200 RB21 1-535E4B Dec. 1994 49.89 47.50 50.91
N13110 757-200 RB21 1-535E4B Dec. 1994 49.89 47.50 50.91
N18112 757-200 RB21 1-535E4B Feb. 1995 50.33 47.50 51.36
N13113 757-200 RB21 1-535E4B April 1995 50.76 47.50 51.82
N17620 737-500 CFM56-3B 1 Feb. 1995 28.93 25.00 25.56
N19623 737-500 CFM56-3B 1 Jan. 1995 28.68 25.00 25.44
N13624 737-500 CFM56-3B 1 Feb. 1995 28.93 25.00 25.56
N46625 737-500 CFM56-3B 1 Jan. 1995 28.68 25.00 25.44
N32626 737-500 CFM56-3B 1 April 1995 29.44 25.00 25.78
N17627 737-500 CFM56-3B 1 April 1995 29.44 25.00 25.78
N62631 737-500 CFM56-3B 1 June 1995 29.95 25.00 26.01
N16632 737-500 CFM56-3B 1 July 1995 30.20 25.00 26.13
N24633 737-500 CFM56-3B 1 Aug. 1995 30.46 25.00 26.18
APPRAISED VALUE
The appraised values set forth in the foregoing chart were determined by
the following three independent aircraft appraisal and consulting firms: AISI,
BK and MBA. Each Appraiser was asked to provide its opinion as to the fair
market value of each Aircraft as of January 3, 1996. As part of this process,
all three Appraisers performed "desk-top" appraisals without any physical
inspection of the Aircraft.
However, an appraisal is only an estimate of value and should not be relied
upon as a measure of realizable value; the proceeds realized upon a sale of any
Aircraft may be less than the appraised value thereof. The value of the Aircraft
in the event of the exercise of remedies under the applicable Indenture will
depend on market and economic conditions, the availability of buyers, the
condition of the Aircraft and other similar factors. Accordingly, there can be
no assurance that the proceeds realized upon any such exercise with respect to
the Equipment Notes and the Aircraft pursuant to the applicable Indenture would
be as appraised or sufficient to satisfy in full payments due on the Equipment
Notes issued thereunder.
69
DESCRIPTION OF THE EQUIPMENT NOTES
The statements under this caption are summaries and do not purport to be
complete. The summaries make use of terms defined in the Equipment Notes, the
Indentures, the Leases, the Participation Agreements, the Trust Agreements and
the Refunding Agreements and reference is made to all of the provisions of such
documents. Except as otherwise indicated, the following summaries relate to the
Equipment Notes, the Indenture, the Lease, the Participation Agreement, the
Trust Agreement and the Refunding Agreement relating to each Aircraft, forms of
which are filed as exhibits to the Registration Statement.
GENERAL
The Equipment Notes have been issued in four series with respect to each
Aircraft. The Equipment Notes with respect to each Aircraft were issued under a
separate Indenture between First Security Bank of Utah, National Association, as
Owner Trustee of a trust for the benefit of the Owner Participant who is the
beneficial owner of such Aircraft, and Wilmington Trust Company, as Loan
Trustee.
The related Owner Trustee leases each Aircraft to Continental pursuant to a
separate Lease between such Owner Trustee and Continental with respect to such
Aircraft. Under each Lease, Continental is obligated to make or cause to be made
rental and other payments to the related Loan Trustee on behalf of the related
Owner Trustee, which rental and other payments will be at least sufficient to
pay in full when due all payments required to be made on the Equipment Notes
issued with respect to such Aircraft. The Equipment Notes are not, however,
direct obligations of, or guaranteed by, Continental. Continental's rental
obligations under each Lease are general obligations of Continental.
General Electric Company is currently the Owner Participant with respect to
all of the eighteen leveraged leases for the Aircraft. The Owner Participant or
its affiliate also acquired all of the Class D Certificates contemporaneously
with the consummation of the Offering. General Electric Company has the right to
sell, assign or otherwise transfer its interests as Owner Participant in any or
all of such leveraged leases, subject to the terms and conditions of the
relevant Participation Agreement and related documents, and the Class D
Certificateholder will have the right to sell any or all Class D Certificates,
subject to the terms and conditions of the Pass Through Trust Agreement for the
Class D Trust.
SUBORDINATION
Series B Equipment Notes issued in respect of any Aircraft are subordinated
in right of payment to Series A Equipment Notes issued in respect of such
Aircraft; Series C Equipment Notes issued in respect of such Aircraft are
subordinated in right of payment to such Series B Equipment Notes; and Series D
Equipment Notes issued in respect of such Aircraft are subordinated in right of
payment to such Series C Equipment Notes. On each Equipment Note payment date,
(i) payments of interest and principal due on Series A Equipment Notes issued in
respect of any Aircraft will be made prior to payments of interest and principal
due on Series B Equipment Notes issued in respect of such Aircraft, (ii) payment
of interest and principal due on such Series B Equipment Notes will be made
prior to payments of interest and principal due on Series C Equipment Notes
issued in respect of such Aircraft and (iii) payments of interest and principal
due on such Series C Equipment Notes will be made prior to payments of interest
and principal due on Series D Equipment Notes issued in respect of such
Aircraft.
PRINCIPAL AND INTEREST PAYMENTS
Subject to the provisions of the Intercreditor Agreement, interest paid on
the Equipment Notes held in each Trust will be passed through to the
Certificateholders of such Trust on the dates and at the rate per annum set
forth on the cover page of this Prospectus until the final expected Regular
Distribution Date for such Trust.
70
Subject to the provisions of the Intercreditor Agreement, principal paid on the
Equipment Notes held in each Trust will be passed through to the
Certificateholders of such Trust in scheduled amounts on the dates set forth
herein until the final expected Regular Distribution Date for such Trust.
The aggregate original principal amounts of the Equipment Notes issued with
respect to each Aircraft, as such Equipment Notes will be held in each of the
Trusts, are as follows:
Trust 1996-A Trust 1996-B Trust 1996-C Trust 1996-D
% % % %
Aircraft No. Equipment Notes Equipment Notes Equipment Notes Equipment Notes Total
- ------------ --------------- --------------- --------------- --------------- -----
N17620.......... $ 10,222,000.00 $ 3,577,700.00 $ 2,811,050.00 $ 2,300,000.00 $ 18,910,750.00
N19623.......... 10,200,000.00 3,570,000.00 2,805,000.00 2,300,000.00 18,875,000.00
N13624.......... 10,222,000.00 3,577,700.00 2,811,050.00 2,300,000.00 18,910,750.00
N46625.......... 10,200,000.00 3,570,000.00 2,805,000.00 2,300,000.00 18,875,000.00
N32626.......... 10,313,200.00 3,609,620.00 2,836,130.00 2,300,000.00 19,058,950.00
N17627.......... 10,313,200.00 3,609,620.00 2,836,130.00 2,300,000.00 19,058,950.00
N62631.......... 10,404,400.00 3,641,540.00 2,861,210.00 2,300,000.00 19,207,150.00
N16632.......... 10,450,000.00 3,657,500.00 2,873,750.00 2,300,000.00 19,281,250.00
N24633.......... 10,471,600.00 3,665,060.00 2,879,690.00 2,300,000.00 19,316,350.00
N17104.......... 19,342,666.67 6,769,933.33 5,319,233.33 3,400,000.00 34,831,833.33
N17105.......... 19,415,733.33 6,795,506.67 5,339,326.67 3,400,000.00 34,950,566.67
N14106.......... 19,488,666.67 6,821,033.33 5,359,383.33 3,400,000.00 35,069,083.33
N14107.......... 19,560,266.67 6,846,093.33 5,379,073.33 3,400,000.00 35,185,433.33
N21108.......... 19,633,200.00 6,871,620.00 5,399,130.00 3,400,000.00 35,303,950.00
N12109.......... 19,706,266.67 6,897,193.33 5,419,223.33 3,400,000.00 35,422,683.33
N13110.......... 19,706,266.67 6,897,193.33 5,419,223.33 3,400,000.00 35,422,683.33
N18112.......... 19,858,933.33 6,950,626.67 5,461,206.67 3,400,000.00 35,670,766.67
N13113.......... 20,009,599.99 7,004,060.01 5,502,190.01 3,400,000.00 35,915,850.01
--------------- -------------- -------------- -------------- ---------------
Total......... $269,518,000.00 $94,332,000.00 $74,117,000.00 $51,300,000.00 $489,267,000.00
=============== ============== ============== ============== ===============
Interest is payable on the unpaid principal amount of each Equipment Note
at the rate applicable to such Equipment Note on January 15, April 15, July 15
and October 15 in each year, commencing April 15, 1996. Such interest is
computed on the basis of a 360-day year of twelve 30-day months. Under certain
circumstances described in "The Exchange Offer--General", the interest
rates for the Equipment Notes may be increased to the extent described therein.
If any date scheduled for any payment of principal, premium (if any) or
interest with respect to the Equipment Notes is not a Business Day, such payment
will be made on the next succeeding Business Day without any additional
interest.
REDEMPTION
The Equipment Notes issued with respect to any Aircraft will be redeemed,
in whole, at a price equal to the aggregate unpaid principal amount thereof,
together with accrued interest thereon to, but not including, the date of
redemption, but without premium, on a Special Distribution Date upon the
occurrence of an Event of Loss to such Aircraft if such Aircraft is not
replaced. (Indentures, Section 2.10(a))
The Equipment Notes relating to an Aircraft will be redeemed, in whole, on
a Special Distribution Date in connection with Continental's exercise of its
right to terminate the applicable Lease under Section 9 of such Lease at a price
equal to the aggregate unpaid principal amount thereof, together with accrued
interest thereon to, but not including, the date of redemption, plus a Make-
Whole Premium (as defined below). (Indentures, Section 2.10(b)). See "--The
Leases--Lease Termination".
71
All of the Equipment Notes issued with respect to an Aircraft may be
redeemed prior to maturity as part of a refunding or refinancing thereof under
Section 13 of the applicable Participation Agreement at a price equal to the
aggregate unpaid principal thereof, together with accrued interest thereon to,
but not including, the date of redemption, plus a Make-Whole Premium, if any.
(Indentures, Section 2.11)
If notice of such a redemption shall have been given in connection with a
refinancing of such Equipment Notes, such notice may be revoked not later than
three days prior to the proposed redemption date. (Indentures, Section 2.12)
If, with respect to an Aircraft, (x) one or more Lease Events of Default
shall have occurred and be continuing, (y) the Loan Trustee with respect to such
Equipment Notes shall take action or notify the applicable Owner Trustee that it
intends to take action to foreclose the lien of the related Indenture or
commence the exercise of any significant remedy under such Indenture or the
related Lease or (z) the Equipment Notes with respect to such Aircraft shall
have been accelerated, then in each case the Equipment Notes issued with respect
to such Aircraft may be purchased by the Owner Trustee or Owner Participant on
the applicable purchase date at a price equal to the Redemption Price, but
without any premium (provided that a Make-Whole Premium shall be payable if such
Equipment Notes are to be purchased pursuant to clause (x) when (A) a Lease
Event of Default shall have occurred and be continuing for less than 120 days or
(B) the only Lease Event of Default under the related Lease arises from the
cross-default provisions of such Lease (in which event the option to purchase
may not be exercised for 60 days after the date of notice thereof). (Indentures,
Section 2.14)
"Make-Whole Premium" means, with respect to a redemption or purchase of an
Equipment Note, an amount equal to the greater of (i) zero and (ii) (x) the
present value, discounted on a quarterly compounded basis utilizing an interest
factor equal to the Reinvestment Yield, of the principal payments provided for
in the amortization schedule for such Equipment Note (including the payment at
final maturity) and the scheduled interest payments from the respective dates on
which, but for such redemption or purchase, such principal payments and interest
payments would have been payable on such Equipment Note, minus (y) the principal
amount of such Equipment Note so to be redeemed or purchased plus accrued but
unpaid interest thereon.
For purposes of the foregoing definition, "Reinvestment Yield" shall mean
the arithmetic mean of the two most recent weekly average yields to maturity for
actively traded marketable U.S. Treasury fixed interest rate securities
(adjusted to constant maturities equal to the remaining Weighted Average Life to
Maturity of such Equipment Note as of the date of the proposed redemption or
purchase), as published by the Federal Reserve Board in its Statistical Release
H.15(519) or any successor publication for the two calendar weeks ending on the
Saturday next preceding such date or, if such average is not published for such
period, of such reasonably comparable index as may be designated in good faith
by the Independent Investment Banker for such period. If no possible maturity
exactly corresponds to such Weighted Average Life to Maturity, yields for the
two most closely corresponding published maturities shall be calculated pursuant
to the immediately preceding sentence and the Reinvestment Yield shall be
interpolated from such yields on a straight-line basis, rounding each of such
relevant periods to the nearest month.
"Weighted Average Life to Maturity" of each Equipment Note means at the
time of the determination thereof the number of years obtained by dividing the
then Remaining Dollar-years of such Equipment Note by the then-outstanding
principal amount of such Equipment Note. The term "Remaining Dollar-years" shall
mean the amount obtained by (1) multiplying the amount of each then-remaining
principal payment on such Equipment Note provided for in the amortization
schedule for such Equipment Note by the number of years (calculated at the
nearest one-twelfth) that will elapse between the date of determination of the
Weighted Average Life to Maturity of such Equipment Note and the date of that
required payment and (2) totaling all the products obtained in clause (1) above.
72
SECURITY
The Equipment Notes issued with respect to each Aircraft are secured by (i)
an assignment by the related Owner Trustee to the related Loan Trustee of such
Owner Trustee's rights, except for certain limited rights, under the Lease with
respect to the related Aircraft, including the right to receive payments of rent
thereunder, (ii) a mortgage to such Loan Trustee of such Aircraft, subject to
the rights of Continental under such Lease, and (iii) an assignment to such Loan
Trustee of certain of such Owner Trustee's rights under the purchase agreement
between Continental and the related manufacturer. Unless and until an Indenture
Default with respect to an Aircraft has occurred and is continuing, the Loan
Trustee may not exercise the rights of the Owner Trustee under the related
Lease, except the Owner Trustee's right to receive payments of rent due
thereunder. The assignment by the Owner Trustee to the Loan Trustee of its
rights under the related Lease will exclude rights of such Owner Trustee and the
related Owner Participant relating to indemnification by Continental for certain
matters, insurance proceeds payable to such Owner Trustee in its individual
capacity and to such Owner Participant under liability insurance maintained by
Continental under such Lease or by such Owner Trustee or such Owner Participant,
insurance proceeds payable to such Owner Trustee in its individual capacity or
to such Owner Participant under certain casualty insurance maintained by such
Owner Trustee or such Owner Participant under such Lease and certain
reimbursement payments made by Continental to such Owner Trustee. (Indenture,
Granting Clause) The Equipment Notes are not cross-collateralized, and,
consequently, the Equipment Notes issued in respect of any one Aircraft are not
secured by any of the other Aircraft or replacement aircraft (as described in
"--The Leases--Events of Loss") or the Leases related thereto.
Funds, if any, held from time to time by the Loan Trustee with respect to
any Aircraft, including funds held as the result of an Event of Loss to such
Aircraft or termination of the Lease, if any, relating thereto, will be invested
and reinvested by such Loan Trustee, at the direction of the related Owner
Trustee (except in the case of certain Indenture Defaults), in investments
described in the related Indenture.
73
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
The following table sets forth loan to Aircraft value ratios for the
Equipment Notes issued in respect of each Aircraft as of the dates specified and
was obtained by dividing (i) the outstanding balance (assuming no payment
default) of such Equipment Notes determined immediately after giving effect to
the payments scheduled to be made in each such month by (ii) the assumed value
(the "Assumed Aircraft Value") of the Aircraft securing such Equipment Notes.
Loan to value ratios below cannot be recalculated due to rounding.
The table is based on the assumption that the value of each Aircraft set
forth opposite January 1996 depreciates by 2% per year until the fifteenth year
after the year of delivery of such Aircraft and 4% per year thereafter. Other
rates or methods of depreciation would result in materially different loan-to-
value ratios and no assurance can be given (i) that the depreciation rates and
method assumed for the purposes of the table are the ones most likely to occur
or (ii) as to the actual value of any Aircraft. Thus the table should not be
considered a forecast or prediction of expected or likely loan to Aircraft value
ratios but simply a mathematical calculation based on one set of assumptions.
Aircraft No. N17620 Aircraft No. N19623 Aircraft No. N13624
-------------------------------- ---------------------------------- ---------------------------------
Equipment Equipment Equipment
Note Assumed Note Assumed Note Assumed
Outstanding Aircraft Outstanding Aircraft Outstanding Aircraft
Balance Value Loan to Balance Value Loan to Balance Value Loan to
(millions) (millions) Value Ratio (millions) (millions) Value Ratio (millions) (millions) Value Ratio
------------ ---------- ----------- ---------- ---------- ----------- ---------- ---------- -----------
January 1996 $18.91 $25.56 74.00% $18.88 $25.44 74.19% $18.91 $25.56 74.00%
January 1997 18.59 25.04 74.21 18.55 24.93 74.40 18.59 25.04 74.21
January 1998 18.27 24.53 74.45 18.23 24.42 74.65 18.27 24.53 74.45
January 1999 17.82 24.02 74.18 17.79 23.91 74.37 17.82 24.02 74.18
January 2000 17.38 23.51 73.91 17.40 23.41 74.34 17.37 23.51 73.90
January 2001 16.44 23.00 71.49 16.45 22.90 71.84 16.44 23.00 71.47
January 2002 15.44 22.49 68.65 15.42 22.39 68.89 15.43 22.49 68.62
January 2003 14.34 21.98 65.23 14.32 21.88 65.46 14.35 21.98 65.29
January 2004 13.09 21.47 60.99 13.08 21.37 61.20 13.10 21.47 61.04
January 2005 11.73 20.96 55.99 11.78 20.86 56.46 11.81 20.96 56.35
January 2006 9.84 20.44 48.13 9.91 20.35 48.68 9.94 20.44 48.64
January 2007 7.13 19.93 35.79 7.81 19.84 39.36 7.81 19.93 39.19
January 2008 5.42 19.42 27.90 5.46 19.34 28.23 5.45 19.42 28.08
January 2009 4.52 18.91 23.90 4.53 18.83 24.05 4.52 18.91 23.91
January 2010 3.49 18.40 18.97 3.45 18.32 18.84 3.40 18.40 18.71
January 2011 2.40 17.38 13.79 2.27 17.30 13.12 2.26 17.38 12.99
January 2012 0.54 16.36 3.30 1.01 16.28 6.21 0.99 16.36 6.06
January 2013 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
74
Aircraft No. N46625 Aircraft No. N32626 Aircraft No. N17627
------------------------------------ ------------------------------------ ------------------------------------
Equipment Equipment Equipment
Note Assumed Note Assumed Note Assumed
Outstanding Aircraft Outstanding Aircraft Outstanding Aircraft
Balance Value Loan to Balance Value Loan to Balance Value Loan to
(millions) (millions) Value Ratio (millions) (millions) Value Ratio (millions) (millions) Value Ratio
----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
January 1996 $18.88 $25.44 74.19% $19.06 $25.78 73.92% $19.06 $25.78 73.92%
January 1997 18.55 24.93 74.40 18.73 25.27 74.13 18.73 25.27 74.13
January 1998 18.23 24.42 74.65 18.41 24.75 74.37 18.41 24.75 74.37
January 1999 17.79 23.91 74.37 17.96 24.24 74.10 17.96 24.24 74.10
January 2000 17.40 23.41 74.35 17.53 23.72 73.91 17.53 23.72 73.91
January 2001 16.45 22.90 71.84 16.54 23.20 71.28 16.55 23.20 71.30
January 2002 15.43 22.39 68.91 15.47 22.69 68.17 15.47 22.69 68.18
January 2003 14.33 21.88 65.48 14.28 22.17 64.41 14.28 22.17 64.42
January 2004 13.08 21.37 61.21 13.03 21.66 60.16 13.03 21.66 60.17
January 2005 11.78 20.86 56.47 11.78 21.14 55.72 11.79 21.14 55.75
January 2006 9.92 20.35 48.72 9.91 20.63 48.05 9.92 20.63 48.09
January 2007 7.81 19.84 39.37 7.84 20.11 39.00 7.84 20.11 39.00
January 2008 5.46 19.34 28.23 5.50 19.60 28.09 5.50 19.60 28.09
January 2009 4.53 18.83 24.05 4.61 19.08 24.15 4.61 19.08 24.15
January 2010 3.45 18.32 18.84 3.59 18.56 19.32 3.58 18.56 19.30
January 2011 2.27 17.30 13.13 2.48 17.53 14.15 2.48 17.53 14.13
January 2012 1.01 16.28 6.20 1.30 16.50 7.91 1.30 16.50 7.88
January 2013 0.00 0.00 0.00 0.36 15.47 2.32 0.36 15.47 2.32
Aircraft No. N62631 Aircraft No. N16632 Aircraft No. N24633
------------------------------------ ------------------------------------ ------------------------------------
Equipment Equipment Equipment
Note Assumed Note Assumed Note Assumed
Outstanding Aircraft Outstanding Aircraft Outstanding Aircraft
Balance Value Loan to Balance Value Loan to Balance Value Loan to
(millions) (millions) Value Ratio (millions) (millions) Value Ratio (millions) (millions) Value Ratio
----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
January 1996.... $19.2 $26.0 73.84 $19.2 $26.1 73.80 $19.3 $26.1 73.79
January 1997.... 18.8 25.4 74.05 18.9 25.6 74.01 18.9 25.6 73.99
January 1998.... 18.5 24.9 74.29 18.6 25.0 74.25 18.6 25.1 74.23
January 1999.... 18.1 24.4 74.02 18.1 24.5 73.99 18.2 24.6 73.97
January 2000.... 17.5 23.9 73.37 17.5 24.0 73.10 17.5 24.0 73.00
January 2001.... 16.5 23.4 70.62 16.5 23.5 70.45 16.5 23.5 70.36
January 2002.... 15.4 22.8 67.42 15.4 22.9 67.39 15.5 23.0 67.27
January 2003.... 14.2 22.3 63.57 14.3 22.4 63.69 14.3 22.5 63.54
January 2004.... 12.9 21.8 59.23 13.0 21.9 59.51 13.0 21.9 59.33
January 2005.... 11.6 21.3 54.58 11.8 21.4 55.30 11.8 21.4 55.11
January 2006.... 9.7 20.8 46.85 9.9 20.9 47.78 9.9 20.9 47.58
January 2007.... 7.5 20.2 37.34 7.8 20.3 38.66 7.8 20.4 38.34
January 2008.... 5.2 19.7 26.45 5.6 19.8 28.30 5.5 19.9 28.11
January 2009.... 4.6 19.2 24.09 4.7 19.3 24.57 4.7 19.3 24.37
January 2010.... 3.6 18.7 19.22 3.7 18.8 19.95 3.7 18.8 19.75
January 2011.... 2.4 17.6 14.00 2.6 17.7 15.07 2.6 17.8 14.82
January 2012.... 1.3 16.6 7.79 1.5 16.7 9.28 1.5 16.7 8.95
January 2013.... 0.3 15.6 2.34 0.6 15.6 3.88 0.5 15.7 3.70
75
Aircraft No. N17104 Aircraft No. N17105 Aircraft No. N14106
------------------------------------ ------------------------------------ ------------------------------------
Equipment Equipment Equipment
Note Assumed Note Assumed Note Assumed
Outstanding Aircraft Outstanding Aircraft Outstanding Aircraft
Balance Value Loan to Balance Value Loan to Balance Value Loan to
(millions) (millions) Value Ratio (millions) (millions) Value Ratio (millions) (millions) Value Ratio
----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
January 1996 $34.83 $48.69 71.54% $34.95 $48.84 71.56% $35.07 $48.99 71.59%
January 1997 34.22 47.72 71.71 34.33 47.86 71.73 34.45 48.01 71.75
January 1998 33.61 46.74 71.91 33.73 46.89 71.93 33.84 47.03 71.95
January 1999 32.56 45.77 71.15 32.55 45.91 70.90 32.82 46.05 71.27
January 2000 30.76 44.79 68.66 30.69 44.93 68.31 31.08 45.07 68.97
January 2001 29.33 43.82 66.92 29.24 43.96 66.53 29.65 44.09 67.24
January 2002 26.85 42.85 62.66 26.74 42.98 62.22 27.19 43.11 63.07
January 2003 24.34 41.87 58.12 24.28 42.00 57.80 24.56 42.13 58.29
January 2004 22.63 40.90 55.34 22.56 41.03 55.00 22.85 41.15 55.53
January 2005 20.67 39.93 51.77 20.62 40.05 51.48 20.90 40.17 52.03
January 2006 18.37 38.95 47.15 18.29 39.07 46.82 18.73 39.19 47.80
January 2007 16.24 37.98 42.76 16.14 38.09 42.38 15.55 38.21 40.70
January 2008 13.01 37.00 35.15 13.15 37.12 35.42 10.77 37.23 28.92
January 2009 9.29 36.03 25.77 9.24 36.14 25.57 9.37 36.25 25.85
January 2010 7.79 34.08 22.86 7.69 34.19 22.50 7.88 34.29 22.97
January 2011 6.07 32.14 18.89 5.96 32.23 18.48 6.25 32.33 19.35
January 2012 4.13 30.19 13.68 4.07 30.28 13.44 4.50 30.37 14.80
January 2013 0.37 28.24 1.32 2.01 28.33 7.08 0.01 28.41 0.04
Aircraft No. N14107 Aircraft No. N21108 Aircraft No. N12109
------------------------------------ ------------------------------------ ------------------------------------
Equipment Equipment Equipment
Note Assumed Note Assumed Note Assumed
Outstanding Aircraft Outstanding Aircraft Outstanding Aircraft
Balance Value Loan to Balance Value Loan to Balance Value Loan to
(millions) (millions) Value Ratio (millions) (millions) Value Ratio (millions) (millions) Value Ratio
----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
January 1996 $35.19 $49.13 71.61% $35.30 $49.28 71.64% $35.42 $49.43 71.66%
January 1997 34.56 48.15 71.78 34.68 48.30 71.80 34.79 48.44 71.83
January 1998 33.95 47.17 71.98 34.07 47.31 72.00 34.18 47.46 72.02
January 1999 32.44 46.19 70.23 32.64 46.33 70.46 32.69 46.47 70.36
January 2000 30.69 45.20 67.90 30.83 45.34 68.00 31.05 45.48 68.27
January 2001 29.23 44.22 66.09 29.41 44.35 66.30 29.65 44.49 66.65
January 2002 26.74 43.24 61.84 26.94 43.37 62.11 27.18 43.50 62.49
January 2003 24.25 42.26 57.39 24.47 42.38 57.74 24.61 42.51 57.88
January 2004 22.54 41.27 54.62 22.76 41.40 54.98 22.92 41.52 55.19
January 2005 20.59 40.29 51.11 20.83 40.41 51.53 20.94 40.53 51.67
January 2006 18.22 39.31 46.35 18.51 39.43 46.94 18.57 39.55 46.97
January 2007 15.86 38.32 41.39 16.40 38.44 42.65 16.46 38.56 42.69
January 2008 12.70 37.34 34.02 13.47 37.46 35.95 13.54 37.57 36.05
January 2009 8.77 36.36 24.11 9.63 36.47 26.41 9.73 36.58 26.60
January 2010 7.66 34.39 22.28 8.14 34.50 23.59 8.41 34.60 24.29
January 2011 5.88 32.43 18.13 6.48 32.53 19.93 6.69 32.63 20.49
January 2012 3.94 30.46 12.92 4.61 30.56 15.09 3.14 30.65 10.24
January 2013 1.85 28.50 6.50 0.10 28.58 0.36 0.10 28.67 0.36
76
Aircraft No. N13110 Aircraft No. N18112 Aircraft No. N13113
------------------------------------ ------------------------------------ ------------------------------------
Equipment Equipment Equipment
Note Assumed Note Assumed Note Assumed
Outstanding Aircraft Outstanding Aircraft Outstanding Aircraft
Balance Value Loan to Balance Value Loan to Balance Value Loan to
(millions) (millions) Value Ratio (millions) (millions) Value Ratio (millions) (millions) Value Ratio
----------- ---------- ----------- ----------- ---------- ----------- ----------- ---------- -----------
January 1996 $35.42 $49.43 71.66% $35.67 $49.73 71.73% $35.92 $50.03 71.80%
January 1997 34.79 48.44 71.83 35.04 48.74 71.89 35.28 49.02 71.96
January 1998 34.18 47.46 72.02 34.42 47.74 72.09 34.62 48.02 72.09
January 1999 32.67 46.47 70.31 32.64 46.75 69.82 32.72 47.02 69.58
January 2000 30.94 45.48 68.03 30.88 45.75 67.49 30.85 46.02 67.04
January 2001 29.54 44.49 66.39 29.40 44.76 65.69 29.39 45.02 65.29
January 2002 27.06 43.50 62.22 26.93 43.76 61.54 26.93 44.02 61.17
January 2003 24.60 42.51 57.87 24.38 42.77 57.01 24.42 43.02 56.76
January 2004 22.89 41.52 55.12 22.68 41.77 54.30 22.70 42.02 54.01
January 2005 20.92 40.53 51.60 20.75 40.78 50.88 20.74 41.02 50.55
January 2006 18.56 39.55 46.93 18.38 39.78 46.21 18.36 40.02 45.88
January 2007 16.44 38.56 42.64 16.26 38.79 41.93 16.24 39.02 41.62
January 2008 13.52 37.57 35.98 13.04 37.80 34.49 13.09 38.02 34.43
January 2009 9.70 36.58 26.52 9.16 36.80 24.88 9.24 37.02 24.95
January 2010 8.37 34.60 24.18 7.35 35.81 20.52 7.40 36.02 20.55
January 2011 6.64 32.63 20.37 2.78 33.82 8.22 5.17 34.02 15.20
January 2012 3.09 30.65 10.08 0.87 31.83 2.74 2.53 32.02 7.90
January 2013 0.10 28.67 0.36 0.01 29.84 0.03 0.01 30.02 0.03
LIMITATION OF LIABILITY
The Equipment Notes are not direct obligations of, or guaranteed by,
Continental, the Owner Participant or the Owner Trustees in their individual
capacity. None of the Owner Trustees, the Owner Participants or the Loan
Trustees, or any affiliates thereof, shall be personally liable to any holder of
an Equipment Note or, in the case of the Owner Trustees and the Owner
Participants, to the Loan Trustees for any amounts payable under the Equipment
Notes or, except as provided in each Indenture, for any liability under such
Indenture. All payments of principal of, premium, if any, and interest on the
Equipment Notes issued with respect to any Aircraft (other than payments made in
connection with an optional redemption or purchase of Equipment Notes by the
related Owner Trustee or the related Owner Participant) will be made only from
the assets subject to the lien of the Indenture with respect to such Aircraft or
the income and proceeds received by the related Loan Trustee therefrom
(including rent payable by Continental under the Lease with respect to such
Aircraft).
Except as otherwise provided in the Indentures, each Owner Trustee in its
individual capacity shall not be answerable or accountable under the Indentures
or under the Equipment Notes under any circumstances except for its own willful
misconduct or gross negligence. None of the Owner Participants will have any
duty or responsibility under any of the Indentures or the Equipment Notes to the
Loan Trustees or to any holder of any Equipment Note.
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Defaults under each Indenture include: (a) the occurrence of any
Lease Event of Default under the related Lease (other than the failure to make
certain indemnity payments and other payments to the related Owner Trustee or
Owner Participant unless a notice is given by such Owner Trustee that such
failure shall constitute an Indenture Default), (b) the failure by the Owner
Trustee (other than as a result of a Lease Default or Lease Event of Default) to
pay any interest or principal or premium, if any, when due, under such Indenture
or under any Equipment Note issued thereunder continued for more than 10
business days, (c) the failure by the Owner Participant or the Owner Trustee to
discharge certain liens, continued after notice and specified cure periods, (d)
any representation or warranty made by the related Owner Trustee or Owner
Participant in such Indenture, the related Participation Agreement, the related
Refunding Agreement or certain related documents furnished to the Loan Trustee
pursuant thereto being false or incorrect when made and continuing to be
material and remaining unremedied after notice and specified cure periods, (e)
failure by the related Owner Trustee or Owner Participant to perform or observe
any covenant or obligation for the benefit of
77
the Loan Trustee or holders of Equipment Notes under such Indenture or certain
related documents, continued after notice and specified cure periods, (f) the
registration of the related Aircraft ceasing to be effective as a result of the
Owner Participant not being a citizen of the United States or (g) the occurrence
of certain events of bankruptcy, reorganization or insolvency of the related
Owner Trustee or Owner Participant. (Indentures, Section 4.02) There are no
cross-default provisions in the Indentures. Consequently, events resulting in an
Indenture Default under any particular Indenture may or may not result in an
Indenture Default occurring under any other Indenture. However, a Lease Event of
Default under any Lease will constitute a Lease Event of Default under all
Leases due to the cross-default provisions in the Leases, and will consequently
result in an Indenture Default under all Indentures. (Leases, Section 14.8)
If Continental fails to make any quarterly basic rental payment due under
any Lease, within a specified period after such failure the applicable Owner
Trustee may furnish to the Loan Trustee the amount due on the Equipment Notes,
together with any interest thereon on account of the delayed payment thereof, in
which event the Loan Trustee and the holders of outstanding Equipment Notes
issued under such Indenture may not exercise any remedies otherwise available
under such Indenture or such Lease as the result of such failure to make such
rental payment, unless Continental has failed to make a rental payment when due
on the six or more immediately preceding quarterly basic rental payment dates or
on any twelve or more previous quarterly basic rental payment dates. The
applicable Owner Trustee also may cure any other default by Continental in the
performance of its obligations under any Lease which can be cured with the
payment of money. (Indentures, Section 4.03)
The holders of a majority in principal amount of the outstanding Equipment
Notes issued with respect to any Aircraft, by notice to the Loan Trustee, may on
behalf of all the holders waive any existing default and its consequences under
the Indenture with respect to such Aircraft, except a default in the payment of
the principal of or interest on any such Equipment Notes or a default in respect
of any covenant or provision of such Indenture that cannot be modified or
amended without the consent of each holder of Equipment Notes affected thereby.
(Indentures, Section 4.08)
REMEDIES
If an Indenture Default occurs and is continuing under an Indenture, the
related Loan Trustee or the holders of a majority in principal amount of the
Equipment Notes outstanding under such Indenture may, subject to the applicable
Owner Participant's or Owner Trustee's right to cure, as discussed above,
declare the principal of all such Equipment Notes issued thereunder immediately
due and payable, together with all accrued but unpaid interest thereon. The
holders of a majority in principal amount of Equipment Notes outstanding under
such Indenture may rescind any such declaration at any time before the judgment
or decree for the payment of the money so due shall be entered if (i) there has
been paid to the related Loan Trustee an amount sufficient to pay all principal,
interest, and premium, if any, on any such Equipment Notes, to the extent such
amounts have become due otherwise than by such declaration of acceleration and
(ii) all other Indenture Defaults and potential Indenture Defaults under such
Indenture have been cured or waived. (Indentures, Section 4.04(b))
Each Indenture provides that if an Indenture Default under such Indenture
has occurred and is continuing, the related Loan Trustee may exercise certain
rights or remedies available to it under such Indenture or under applicable law,
including (if the corresponding Lease has been declared in default) one or more
of the remedies under such Indenture or such Lease with respect to the Aircraft
subject to such Lease. The related Loan Trustee's right to exercise remedies
under such Indenture is subject, with certain exceptions, to its having
proceeded to exercise one or more of the dispossessory remedies under the Lease
with respect to such Aircraft; provided that the requirement to exercise such
remedies under such Lease shall not apply in circumstances where such exercise
has been involuntarily stayed or prohibited by applicable law or court order for
a continuous period in excess of 60 days or such other period as may be
specified in Section 1110(a)(1)(A) of the Federal Bankruptcy Code (the
"Bankruptcy Code") (plus an additional period, if any, resulting from (i) the
trustee in such proceeding assuming, or agreeing to perform its obligations
under, such Lease with the approval of the
78
applicable court or such Loan Trustee's consent to an extension of such period,
(ii) such Loan Trustee's failure to give any requisite notice, or (iii)
Continental's assumption of such Lease with the approval of the relevant court).
See "--The Leases--Lease Events of Default." Such remedies may be exercised by
the related Loan Trustee to the exclusion of the related Owner Trustee, subject
to certain conditions specified in such Indenture, and Continental, subject to
the terms of such Lease. Any Aircraft sold in the exercise of such remedies will
be free and clear of any rights of those parties, including the rights of
Continental under the Lease with respect to such Aircraft; provided that no
exercise of any remedies by the related Loan Trustee may affect the rights of
Continental under any Lease unless a Lease Event of Default has occurred and is
continuing. (Indentures, Section 4.04; Leases, Section 15)
If the Equipment Notes issued in respect of one Aircraft are in default,
the Equipment Notes issued in respect of the other Aircraft may not be in
default, and, if not, no remedies will be exercisable under the applicable
Indentures with respect to such other Aircraft.
Section 1110 of the Bankruptcy Code provides that the right of lessors,
conditional vendors and holders of security interests with respect to
"equipment" (as defined in Section 1110 of the Bankruptcy Code) to take
possession of such equipment in compliance with the provisions of a lease,
conditional sale contract or security agreement, as the case may be, is not
affected by (a) the automatic stay provision of the Bankruptcy Code, which
provision enjoins repossessions by creditors for the duration of the
reorganization period, (b) the provision of the Bankruptcy Code allowing the
trustee in reorganization to use property of the debtor during the
reorganization period, (c) Section 1129 of the Bankruptcy Code (which governs
the confirmation of plans of reorganization in Chapter 11 cases) and (d) any
power of the bankruptcy court to enjoin a repossession. Section 1110 provides,
however, that the right of a lessor, conditional vendor or holder of a security
interest to take possession of an aircraft in the event of an event of default
may not be exercised for 60 days following the date of commencement of the
reorganization proceedings (unless specifically permitted by the bankruptcy
court) and may not be exercised at all if, within such 60-day period (or such
longer period consented to by the lessor, conditional vendor or holder of a
security interest), the trustee in reorganization agrees to perform the debtor's
obligations that become due on or after such date and cures all existing
defaults (other than defaults resulting solely from the financial condition,
bankruptcy, insolvency or reorganization of the debtor). "Equipment" is defined
in Section 1110 of the Bankruptcy Code, in part, as "an aircraft, aircraft
engine, propeller, appliance, or spare part (as defined in section 40102 of
title 49) that is subject to a security interest granted by, leased to, or
conditionally sold to a debtor that is a citizen of the United States (as
defined in section 40102 of title 49) holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to chapter 447 of
title 49 for aircraft capable of carrying 10 or more individuals or 6,000 pounds
or more of cargo".
The Bankruptcy Reform Act of 1994 amended Section 1110 by, among other
things, providing that the lessor under a lease of aircraft first placed in
service on or prior to the date of the enactment of that Act will be entitled to
the benefits of Section 1110 if the lessor and the lessee have expressed in the
applicable agreement or in a substantially contemporaneous writing that the
applicable agreement is to be treated as a lease for Federal income tax
purposes. Each of the Leases relating to the four Aircraft placed in service
prior to the enactment of the Act contains such a written statement.
Cleary, Gottlieb, Steen & Hamilton, counsel to Continental, has advised the
Loan Trustees that the right of the Owner Trustee, as lessor under each of the
Leases, and the Loan Trustee, as assignee of such Owner Trustee's rights under
each of the Leases pursuant to each of the related Indentures, to exercise its
right to take possession of the respective Aircraft under each of the Leases is
entitled to the benefits of Section 1110 of the Bankruptcy Code with respect to
the airframe and engines comprising the related Aircraft. This opinion assumes
that Continental is and will be a citizen of the United States holding an air
carrier operating certificate issued by the Secretary of Transportation pursuant
to chapter 447 of title 49 of the U.S. Code for aircraft capable of carrying 10
or more individuals or 6,000 pounds or more of cargo. For a description of
certain limitations on the Loan Trustee's exercise of rights contained in the
Indenture, see "--Indenture Defaults, Notice and Waiver".
79
The opinion of Cleary, Gottlieb, Steen & Hamilton does not address the
possible replacement of an Aircraft after an Event of Loss in the future, the
consummation of which is conditioned upon the contemporaneous delivery of an
opinion of counsel to the effect that the related Loan Trustee's entitlement to
Section 1110 benefits should not be diminished as a result of such replacement.
See "--The Leases--Events of Loss". The opinion of Cleary, Gottlieb, Steen &
Hamilton will also not address the availability of Section 1110 with respect to
any possible sublessee of an Aircraft subleased by Continental.
If an Indenture Default under any Indenture occurs and is continuing, any
sums held or received by the related Loan Trustee may be applied to reimburse
such Loan Trustee for any tax, expense or other loss incurred by it and to pay
any other amounts due to such Loan Trustee prior to any payments to holders of
the Equipment Notes issued under such Indenture. (Indentures, Section 3.03)
In the event of bankruptcy, insolvency, receivership or like proceedings
involving an Owner Participant, it is possible that, notwithstanding that the
applicable Aircraft is owned by the related Owner Trustee in trust, such
Aircraft and the related Lease and Equipment Notes might become part of such
proceeding. In such event, payments under such Lease or on such Equipment Notes
might be interrupted and the ability of the related Loan Trustee to exercise its
remedies under the related Indenture might be restricted, although such Loan
Trustee would retain its status as a secured creditor in respect of the related
Lease and the related Aircraft.
MODIFICATION OF INDENTURES AND LEASES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture and the Lease, the Participation Agreement and the Trust Agreement
corresponding thereto may not be amended or modified, except to the extent
indicated below.
Certain provisions of any Indenture, and of the Lease (so long as no
Indenture Default has occurred and is continuing), the Participation Agreement,
and the Trust Agreement related thereto, may be amended or modified by the
parties thereto without the consent of any holders of the Equipment Notes
outstanding under such Indenture. In the case of each Lease, such provisions
include, among others, provisions relating to (i) the return to the related
Owner Trustee of the related Aircraft at the end of the term of such Lease and
(ii) the renewal of such Lease and the option of Continental at the end of the
term of such Lease to purchase the related Aircraft. (Indentures, Section 9.01)
Without the consent of the holder of each Equipment Note outstanding under
any Indenture affected thereby, no amendment or modification of such Indenture
may among other things (a) reduce the principal amount of, or premium, if any,
or interest payable on, any Equipment Notes issued under such Indenture or
change the date on which any principal or premium, if any, or interest is due
and payable, (b) create any security interest with respect to the property
subject to the lien of such Indenture, except as provided in such Indenture, or
deprive any holder of an Equipment Note issued under such Indenture of the lien
of such Indenture upon the property subject thereto or (c) reduce the percentage
in principal amount of outstanding Equipment Notes issued under such Indenture
necessary to modify or amend any provision of such Indenture or to waive
compliance therewith. (Indentures, Section 9.01(a))
OWNER PARTICIPANT'S RIGHT TO RESTRUCTURE
So long as GE or any of its affiliates is the Owner Participant with
respect to the leveraged lease of any Aircraft, subject to certain conditions,
such Owner Participant will have the right to restructure such leveraged lease
transaction using a "cross-border lease", a tax lease or head-lease/sublease
structure and any other type of transaction. In no event, however, shall any
such restructuring (i) change the terms and conditions of the rights and
obligations of any holder of Equipment Notes under the relevant Operative
Agreements or any holder of Certificates or (ii) expose any such holder to any
additional risks. As a precondition to any such restructuring,
80
the Owner Participant will be obligated to deliver to the Loan Trustee an
appropriate officer's certificate as to the satisfaction of the foregoing
conditions and obtain a written confirmation from the Rating Agencies prior to
the implementation of such restructuring to the effect that such restructuring
will not adversely affect the ratings of the Certificates.
INDEMNIFICATION
Continental is required to indemnify each Loan Trustee, each Owner
Participant and each Owner Trustee for certain losses, claims and other matters.
Continental is required under certain circumstances to indemnify each Owner
Participant against the loss of depreciation deductions and certain other
benefits allowable for certain income tax purposes with respect to the related
Aircraft. Each Owner Participant is required to indemnify the related Loan
Trustee and the holders of the Equipment Notes issued with respect to the
Aircraft in which such Owner Participant has an interest for certain losses that
may be suffered as a result of the failure of such Owner Participant to
discharge certain liens or claims on or against the assets subject to the lien
of the related Indenture.
THE LEASES
Each Aircraft is leased to Continental by the relevant Owner Trustee under
the relevant Lease.
Lease Term Rentals
Each Aircraft has been leased separately by the relevant Owner Trustee to
Continental for a term commencing on the date on which the Aircraft was acquired
by the Owner Trustee and expiring on a date not earlier than the latest maturity
date of the relevant Equipment Notes, unless terminated prior to the originally
scheduled expiration date as permitted by the applicable Lease. The quarterly
basic rent payment under each Lease is payable by Continental on each related
Lease Payment Date (as defined below) (or, if such day is not a business day, on
the next business day), and has been assigned by the Owner Trustee under the
corresponding Indenture to provide the funds necessary to make payments of
principal and interest due from the Owner Trustee on the Equipment Notes issued
under such Indenture. In certain cases, the quarterly basic rent payments under
the Leases may be adjusted, but each lease provides that under no circumstances
will rent payments by Continental be less than the scheduled payments on the
related Equipment Notes. In addition, the amount of basic rent may be increased
in an amount equal to any increase in the amount of interest due on the
Equipment Notes on the relevant Lease Payment Date as a result of the resetting
of the rate of interest on the Equipment Notes as required by the terms thereof-
- -for example, if certain terms of the Registration Rights Agreement require such
a resetting. See "The Exchange Offer--General". Any balance of each such
quarterly basic rent payment under each Lease, after payment of amounts due on
the Equipment Notes issued under the Indenture corresponding to such Lease, will
be paid over to the Owner Trustee. (Leases, Section 3; Indentures, Section 3.01)
"Lease Payment Date" means, with respect to each Lease, January 15, April
15, July 15 or October 15 during the term of such Lease.
Net Lease
Under the terms of each Lease, Continental's obligations in respect of each
Aircraft will be those of a lessee under a "net lease". Accordingly, under each
Lease Continental is obligated, among other things and at its expense, to keep
each Aircraft duly registered and insured, to pay all costs of operating the
Aircraft and to maintain, service, repair and overhaul the Aircraft so as to
keep it in as good an operating condition as when delivered to Continental,
ordinary wear and tear excepted, and in such condition as required to maintain
the
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airworthiness certificate for the Aircraft in good standing at all times.
(Leases, Sections 7.1 and 8.1 and Annex C)
Possession, Sublease and Transfer
Each Aircraft may be operated by Continental or under lease, sublease or
interchange arrangements, subject to certain restrictions. Normal interchange
and pooling agreements with respect to any Engine are permitted with U.S. air
carriers and foreign air carriers in countries with which the United States
maintains normal diplomatic relations and which recognize and give effect to the
rights of lessors and mortgagees. Subleases for a term of up to 60 months are
also permitted with solvent U.S. air carriers and with certain specified foreign
air carriers, so long as they are solvent, subject to a reasonably satisfactory
opinion that such country would give effect to the title of the Owner Trustee in
and to the Aircraft and would give effect to the priority and validity of the
lien of the Indenture, as the case may be, as if such country were a party to
the Convention on the International Recognition of Rights in Aircraft (Geneva
1948) (the "Convention"). (Leases, Section 7) It is uncertain to what extent the
relevant Loan Trustee's security interest would be recognized in an Aircraft
located in a country that is not a party to the Convention, and to what extent
such security interest would be recognized in a jurisdiction adhering to the
Convention if the Aircraft is registered in a jurisdiction not a party to the
Convention. Moreover, in the case of an Event of Default under an Indenture, the
ability of the related Loan Trustee to realize upon its security interest in an
Aircraft could be adversely affected as a legal or practical matter if such
Aircraft were registered or located outside the United States.
Registration
Continental is required to keep each Aircraft duly registered under the
Transportation Code with the FAA, except if the relevant Owner Trustee or the
relevant Owner Participant fails to meet the applicable citizenship
requirements, and to record each Lease and Indenture and certain other documents
under the Transportation Code. (Leases, Section 7) Such recordation of the
Indenture and other documents with respect to each Aircraft will give the
relevant Loan Trustee a first-priority, perfected security interest in such
Aircraft whenever it is located in the United States or any of its territories
and possessions. The Convention provides that such security interest will also
be recognized, with certain limited exceptions, in those jurisdictions that have
ratified or adhere to the Convention. (Leases, Section 7.1.1)
So long as no Lease default or Lease Event of Default exists, Continental
has the right to register the Aircraft subject to such Lease in a country other
than the United States at its own expense in connection with a permitted
sublease of the Aircraft to certain specified foreign air carriers, subject to
certain conditions set forth in the related Participation Agreement. These
conditions include a requirement that the country of registration recognizes the
interests of lessors, owner participants and mortgagees and provides
substantially equivalent protection to such interests as provided by law in the
United States. (Leases, Section 7.1.2; Participation Agreements, Section 8.7.12)
Liens
Continental is required to maintain each Aircraft free of any liens, other
than the rights of the relevant Loan Trustee, the holders of the related
Equipment Notes, Continental, the Owner Participant and Owner Trustee arising
under the applicable Indenture, the Lease or the other operative documents
related thereto, and other than certain limited liens permitted under such
documents, including (i) liens for taxes either not yet due or being contested
in good faith by appropriate proceedings; (ii) materialmen's, mechanics' and
other similar liens arising in the ordinary course of business and securing
obligations that either are not yet delinquent or are being contested in good
faith by appropriate proceedings; and (iii) judgment liens so long as such
judgment is discharged or vacated within 30 days or the execution of such
judgment is stayed pending appeal and discharged, vacated or reversed within 30
days after expiration of such stay; provided that in the case of each of the
liens
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described in the foregoing clauses (i), (ii) and (iii), such liens and
proceedings do not involve any material risk of the sale, forfeiture or loss of
such Aircraft or any interest therein or any discernible risk of criminal
liability or any material risk of civil penalty against the relevant Loan
Trustee, Owner Trustee or Owner Participant. (Leases, Section 6)
Replacement of Parts; Alterations
Continental is obligated to replace all parts at its expense that may from
time to time be incorporated or installed in or attached to any Aircraft and
that may become lost, damaged beyond repair, worn out, stolen, seized,
confiscated or rendered permanently unfit for use (other than severable parts
added at the option of Continental and obsolete or unsuitable parts that
Continental is permitted to remove to the extent described below). Continental
or any permitted sublessee has the right, at its own expense, to make such
alterations, modifications and additions with respect to each Aircraft as it
deems desirable in the proper conduct of its business and to remove parts which
it deems to be obsolete or no longer suitable or appropriate for use; provided
that such alteration, modification, addition or removal does not diminish the
value, utility, performance or the remaining useful life of the related
Aircraft, Airframe or Engine or adversely affect the commercial use of the
Aircraft for passenger service in the United States or invalidate the Aircraft's
airworthiness certificate, except that the value of the Aircraft may be reduced
by the removal of obsolete or unsuitable parts so long as the aggregate original
cost of all such parts removed from any one Aircraft and not replaced shall not
exceed $250,000 for each 757-224 Aircraft and $200,000 for each 737-524
Aircraft. (Leases, Section 8.1 and Annex C)
Insurance
The Leases require Continental to maintain, at its expense (or at the
expense of a permitted sublessee), all-risk aircraft hull insurance covering
each Aircraft, at all times in an amount not less than the stipulated loss value
of the Aircraft (which exceeds the aggregate outstanding principal amount of the
Equipment Notes related to such Aircraft, together with accrued interest
thereon), and all-risk property damage insurance covering Engines and parts
while removed from an aircraft in an amount not less than the replacement cost
of such Engines and parts. All insurance proceeds with respect to a total loss
of an Aircraft, Airframe or Engine and all insurance proceeds in excess of
$3,000,000 per occurrence with respect to repairable damage to an Aircraft,
Airframe or Engine are payable to the relevant Owner Trustee or to the
applicable Loan Trustee, for so long as the relevant Indenture shall be in
effect. Insurance proceeds of up to $3,000,000 per occurrence with respect to
repairable damage to an Aircraft, Airframe or engine are payable directly to
Continental so long as the Owner Trustee has not notified the insurance
underwriters that a Lease default or a Lease Event of Default exists. So long as
the loss does not constitute an Event of Loss (as defined below), insurance
proceeds will be applied to repair or replace the property. (Leases, Sections
11.1 and 11.5 and Annex D)
In addition, Continental is obligated to maintain comprehensive airline
liability insurance at its expense (or at the expense of a permitted sublessee),
including, without limitation, third-party and passenger liability and property
damage, cargo and products liability and contractual liability insurance with
respect to each Aircraft. Such liability insurance shall be of the type usually
carried by prudent major United States commercial air carriers and cover the
kind of risks against which prudent United States commercial air carriers
customarily insure. Such liability insurance shall be underwritten by nationally
or internationally recognized insurers of substantial financial capacity used by
other major United States commercial air carriers. The amount of such liability
insurance coverage per occurrence shall be not less than the amount of
comprehensive airline liability insurance from time to time applicable to
aircraft owned or leased and operated by Continental of the same type as such
Aircraft. Continental (but no permitted sublessee) shall have the right to self-
insure to the extent of any applicable minimum amount per aircraft (or, if
applicable, per annum or other period) hull or liability insurance deductible
imposed by the insurer providing such aircraft hull or liability insurance,
which are commensurate
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with the standard deductibles in the airline insurance industry available to
major U.S. airlines. (Leases, Section 11.1 and Annex D, Section A)
Continental is also required to maintain war-risk, hijacking or allied
perils insurance if it (or any permitted sublessee) operates any Aircraft,
Airframe or Engine in any area of recognized or threatened hostilities or if
Continental (or any permitted sublessee) maintains such insurance with respect
to other aircraft on the same routes or areas or if the Aircraft is operated
outside the United States or Canada. Continental (but no permitted sublessee)
may self-insure to the extent of any hull or liability insurance deductible
imposed by the insurer, provided such deductibles are commensurate with standard
deductibles in the aircraft insurance industry. (Leases, Annex D, Section H)
In respect of each Aircraft, Continental is required to cause the relevant
Loan Trustee, holders of the Equipment Notes, Owner Participant and Owner
Trustee, in its individual capacity and as owner of such Aircraft, and certain
other parties to be named as additional insured parties under all liability,
hull and property and war risk, hijacking and allied perils insurance policies
required with respect to such Aircraft. In addition, the insurance policies
maintained under the Leases will be required to provide that, in respect of the
interests of such additional insured persons, the insurance shall not be
invalidated or impaired by any act or omission of Continental or any other
person and to insure the respective interests of such additional insured
persons, regardless of any breach or violation of any representation, warranty,
declaration, term or condition contained in such policies by Continental, any
permitted sublessee or any other person. (Leases, Annex D, Section D)
Lease Termination
Unless a Lease default or Lease Event of Default shall have occurred and be
continuing, Continental may terminate any Lease on any Lease Payment Date
occurring on or after the tenth anniversary of the date on which such Lease
commenced and on or before one year prior to the date on which such Lease is
scheduled to expire, if it determines that such Aircraft is economically
obsolete or surplus to its requirements. Such determination must be made on a
nondiscriminatory basis with respect to the Aircraft subject to such Lease and
all similar aircraft operated by Continental which could also be terminated.
Continental is required to give notice of its intention to exercise its right of
termination described in this paragraph at least six months prior to the
proposed date of termination (which notice may be withdrawn up to 25 days prior
to such proposed date if Continental determines that no bid for the Aircraft of
a reasonable amount has been received); provided that Continental may give only
three such termination notices. In such a situation, if the Owner Trustee elects
(subject to the rights of Continental to purchase the Aircraft as described
below) to sell such Aircraft, Continental is required to use best reasonable
efforts to sell such Aircraft as an agent for such Owner Trustee. If the Owner
Trustee elects to accept any bid, such Owner Trustee shall sell such Aircraft on
the date of termination to the highest cash bidder. If such sale occurs, the
Equipment Notes related thereto are required to be prepaid. The net proceeds of
such sale shall be payable to the applicable Owner Trustee. If the net proceeds
to be received from such sale are less than the termination value for such
Aircraft (which is set forth in a schedule to each Lease), Continental is
required to pay to the applicable Owner Trustee an amount equal to the excess,
if any, of the applicable termination value for such Aircraft over such net
proceeds. Upon payment of termination value for such Aircraft and an amount
equal to the Make-Whole Premium, if any, payable on such date of payment,
together with certain additional amounts and together with all accrued and
unpaid interest thereon, the lien of the relevant Indenture shall be released,
the relevant Lease shall terminate, and the obligation of Continental thereafter
to make scheduled rent payments under such Lease shall cease. However, certain
payment obligations of Continental shall survive the termination of the Lease.
If such Aircraft is not sold by the proposed termination date, such Lease,
including all of Continental's obligations thereunder, shall continue in effect,
and the Equipment Notes related thereto will not be prepaid. (Leases, Section 9;
Indentures, Section 2.10(b))
The Owner Trustee has the option to retain title to the Aircraft if
Continental has given a notice of termination under the Lease. In such event,
such Owner Trustee shall pay to the applicable Loan Trustee an
84
amount sufficient to prepay the outstanding Equipment Notes issued with respect
to such Aircraft, and Continental shall pay to the Owner Trustee an amount equal
to the excess, if any, of the termination value of such Aircraft over the
highest bona fide cash bid made for the Aircraft, together with the Make-Whole
Premium, if any, on such Equipment Notes and all other amounts due and payable
to the Owner Trustee and Owner Participant under such Lease, the related
Participation Agreement or any other related operative document. (Leases,
Section 9; Indentures, Section 2.10(b))
Events of Loss
If an Event of Loss occurs with respect to the Airframe or the Airframe and
Engines of an Aircraft, Continental must elect within 20 days after such
occurrence either to make payment with respect to such Event of Loss or to
replace such Airframe and any such Engines. Not later than the first business
day following the sixty-first day following the date of occurrence of such Event
of Loss, or, if earlier, the second business day following the receipt of the
insurance proceeds in respect of such Event of Loss, Continental must either (i)
pay to the applicable Owner Trustee the stipulated loss value of such Aircraft,
together with certain additional amounts, but, in any case, without any Make-
Whole Premium or (ii) unless a Lease default or any Lease Event of Default shall
have occurred and be continuing, substitute an aircraft (or airframe and one or
more engines, as the case may be) for the Aircraft, Airframe or Engine(s) that
suffered such Event of Loss. (Leases, Sections 10.1.1 and 10.1.2; Indentures,
Section 2.10(a))
If Continental elects to replace an Aircraft (or Airframe or Airframe and
one or more Engines, as the case may be) that suffered such Event of Loss, it
shall convey to the related Owner Trustee title to an aircraft (or airframe or
airframe and one or more engines, as the case may be), and (i) in the case of
any replacement airframe, such airframe must be (a) manufactured by Boeing under
a certain purchase agreement between The Boeing Company and Continental and (b)
delivered under such agreement after the Airframe to be replaced was delivered
to Continental, (ii) such replacement airframe or airframe and engines must be
the same model as the Airframe or Airframe and Engines to be replaced or an
improved model, with performance and durability characteristics and a value,
utility and remaining useful life at least equal to, and in at least as good an
operating condition as, the Airframe or Airframe and Engines to be replaced
(assuming that such Airframe and such Engines were of the value and utility and
in the condition and repair required by the terms of such Lease immediately
prior to the occurrence of such Event of Loss). Continental is also required to
provide to the relevant Owner Trustee, Owner Participant and Loan Trustee (a) a
certification as to compliance with the foregoing requirements from a qualified
aircraft appraiser, together with a certified report setting forth such
appraiser's opinion as to the fair market value of such replacement airframe or
engine and (b) reasonably acceptable opinions of counsel to the effect that (i)
such Owner Trustee will acquire good title to such replacement airframe and, if
applicable, replacement engine, free and clear of all liens (other than
permitted liens), (ii) such replacement airframe and, if applicable, engine will
be made subject to the applicable Indenture to the same extent as the Airframe
and, if applicable, Engine replaced thereby, (iii) such Owner Trustee and Loan
Trustee (as assignee of lessor's rights and interests under the Lease) will be
entitled to receive the benefits and protections of Section 1110 of the
Bankruptcy Code with respect to any such replacement airframe and (to the extent
such opinion can be rendered, in view of applicable law) such replacement engine
and (iv) such replacement airframe has been duly registered and each supplement
to such Lease or Indenture has been duly recorded. (Leases, Sections 10.1.3 and
10.3)
If Continental elects not to replace such Aircraft, then upon payment of
the stipulated loss value for such Aircraft, together with all additional
amounts then due and unpaid with respect to the Aircraft, which must be at least
sufficient to pay in full as of the date of payment thereof the aggregate unpaid
principal amount under such Equipment Notes together with accrued but unpaid
interest thereon and all other amounts due and owing in respect of such
Equipment Notes, the lien of the Indenture and the Lease relating to such
Aircraft shall terminate with respect to such Aircraft, the obligation of
Continental thereafter to make the scheduled rent payments with respect thereto
shall cease and the related Owner Trustee shall transfer all of its right, title
and interest in and to
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the related Aircraft to Continental. The stipulated loss value and other
payments made under the Leases by Continental shall be deposited with the
applicable Loan Trustee. Amounts in excess of the amounts due and owing under
the Equipment Notes issued with respect to such Aircraft will be distributed by
such Loan Trustee to the applicable Owner Trustee. (Leases, Section 10.1.2;
Indentures, Sections 2.06 and 3.02)
If the Owner Trustee and the Loan Trustee are not entitled to Section 1110
benefits with respect to any replacement airframe or engine or if certain Lease
defaults or any Lease Event of Default has occurred and is continuing,
Continental shall not be entitled to replace such Airframe and shall be required
instead to pay the stipulated loss value applicable to such Airframe and the
related Engines, plus certain additional amounts. (Leases, Section 10.3.2)
If an Event of Loss occurs with respect to an Engine alone, Continental
will be required to replace such Engine within 60 days after the occurrence of
such Event of Loss with another engine, free and clear of all liens (other than
certain permitted liens). Such replacement engine shall be the same make and
model as the Engine to be replaced, suitable for installation and use on the
Aircraft, and having performance and durability characteristics and a value and
utility at least equal to, and in at least as good an operating condition as,
the Engine to be replaced (assuming that such Engine was of the value and
utility and in the condition and repair required by the terms of the relevant
Lease immediately prior to the occurrence of the Event of Loss). (Leases,
Section 10.2)
An Event of Loss with respect to an Aircraft, Airframe or any Engine means
any of the following events with respect to such property: (i) the destruction
of such property, damage to such property beyond practical or economic repair or
rendition of such property permanently unfit for normal use; (ii) the actual or
constructive total loss of such property or any damage to such property or
requisition of title or use of such property which results in an insurance
settlement with respect to such property on the basis of a total loss or a
constructive or compromised total loss; (iii) any loss of such property or loss
of use of such property for a period of 90 days or more as a consequence of any
theft, hijacking or disappearance of such property; (iv) any seizure,
condemnation, confiscation, taking or requisition of title to such property by
any governmental entity or purported non-U.S. governmental entity; (v) any
seizure, condemnation, confiscation, taking or requisition of use of such
property that continues until the earliest to occur of (A) the last day of the
Lease term, (B) the date on which the Aircraft is modified in such a manner as
would render conversion of such property for use in normal commercial passenger
service impractical or uneconomical, (C) the date on which such property is
operated or located in any area excluded from coverage by any insurance policy
required to be maintained by such Lease (unless an indemnity from the U.S.
Government is obtained in lieu of such insurance), and (D) the date that is 90
days following the commencement of such loss of use (unless such loss of use
results from action by the U.S. Government); or (vi) as a result of any law,
rule, regulation, order or other action by the FAA or any governmental entity,
the use of such property in the normal course of Continental's business of
passenger air transportation is prohibited for 180 days (or 360 days, if
Continental diligently implements all steps which are necessary or desirable to
permit the normal use of such property by it) or for a period expiring on the
last day of the Lease term, whichever is earlier. (Leases, Annex A)
Purchase Options under the Leases
So long as no Lease default or Lease Event of Default has occurred and is
continuing, Continental will have the option to purchase any Aircraft subject to
a Lease on the last business day of the original Lease or on the last business
day of either of the two, in the case of the 757-224 Aircraft, or four, in the
case of the 737-524 Aircraft, one-year renewal terms at a purchase price equal
to the fair market sales value of such Aircraft. The fair market sales value of
such Aircraft shall be determined not more than 170 days nor less than 150 days
prior to the date of purchase by mutual agreement of Continental and the Owner
Trustee or, if they are unable to agree, by an appraisal. Continental may
exercise its purchase option by delivering an irrevocable notice to the Owner
Trustee not more than 180 days nor less than 120 days prior to the proposed date
of purchase. The Owner
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Trustee shall not be under any obligation to sell the Aircraft to Continental if
the fair market sales value of the Aircraft is determined to be less than a
certain minimum residual value amount. Upon receipt by the Owner Trustee of
payment of the applicable fair market sales value of the Aircraft and all other
amounts due and payable by Continental under the relevant Lease, Participation
Agreement and any other related operative document, the Owner Trustee shall
transfer title to the Aircraft to Continental, provided that all related
Equipment Notes have previously been paid in full. (Leases, Section 17.3;
Indentures, Section 10.01)
The holder of the Equipment Notes issued under an Indenture shall not have
any right to amounts payable by Continental in connection with its exercise of
purchase options for the related Aircraft to the extent that all amounts payable
by the relevant Owner Trustee to such holder under such Equipment Notes, such
Indenture and related operative agreements have been paid in full.
Lease Events of Default
Lease Events of Default under each Lease include, among other things, (i)
failure by Continental to make any payment of basic rent, renewal rent,
stipulated loss value or termination value under such Lease within five business
days after the same shall have become due, or failure by Continental to pay any
other amount due under such Lease or under any other related operative document
within five business days from and after the date of any written demand therefor
from the owner trustee; (ii) failure by Continental to make any excluded payment
within five business days after written notice that such failure constitutes a
Lease Event of Default is given by the relevant Owner Participant to Continental
and the relevant Loan Trustee; (iii) failure by Continental to carry and
maintain insurance on and in respect of the Aircraft, Airframe and Engines
subject to such Lease, in accordance with the provisions of such Lease or the
operation of the Aircraft, Airframe or Engines subject to such Lease at any time
when such insurance is not in effect; (iv) failure by Continental to maintain
its corporate existence except as permitted by the Lease, or the winding up,
liquidation or dissolution of Continental; (v) failure to maintain the
registration of the Aircraft with the FAA or with a permitted foreign registry,
failure to record the Indenture or maintain the Indenture of record as a first-
priority, perfected mortgage (subject to permitted liens) or operation of the
Aircraft in any area excluded by insurance coverage required by such Lease or in
any recognized or threatened area of hostilities unless fully covered by war-
risk insurance, as required by Section 11 of such Lease (subject to certain
exceptions); (vi) breach of the covenants in such Lease pertaining to
possession, interchange and pooling of Engines and subleasing; (vii) breach of
certain prohibitions against attempted assignments by Continental of its
obligations under such Lease and against the merger of Continental with any
other person, except as expressly permitted by such Lease; and (viii) failure by
Continental to perform or observe any other covenant or agreement to be
performed or observed by it under such Lease or the related Participation
Agreement or any other related operative document (other than (a) the agreement
by Continental to treat the Lease as a lease for U.S. Federal income tax
purposes and (b) nonpayment provisions under the related tax indemnity agreement
between Continental and the Owner Participant), and such failure shall continue
unremedied for a period of 30 days (or such other shorter applicable period)
after written notice of such failure by the applicable Owner Trustee or Loan
Trustee; (ix) (a) any representation or warranty made by Continental in such
Lease or the related Participation Agreement or in any other related operative
document (other than in the related tax indemnity agreement between Continental
and the Owner Participant) shall prove to have been untrue, inaccurate or
misleading in any material respect at the time made, (b) such representation or
warranty is material at the time in question and (c) the same shall remain
uncured for more than 30 days after the date of written notice thereof to
Continental; (x) the occurrence of certain voluntary events of bankruptcy,
reorganization or insolvency of Continental or the occurrence of involuntary
events of bankruptcy, reorganization or insolvency which shall continue
undismissed or unstayed for a period of 60 days; and (xi) a Lease Event of
Default under any other Lease. (Leases, Section 14)
Remedies Exercisable upon Lease Events of Default
87
If a Lease Event of Default has occurred and is continuing, the applicable
Owner Trustee may (or, so long as the Indenture shall be in effect, the
applicable Loan Trustee may, subject to the terms of the Indenture) exercise one
or more of the remedies provided in such Lease with respect to the related
Aircraft. These remedies include the right to repossess and use or operate such
Aircraft, to rescind or terminate such Lease, to sell or re-lease such Aircraft
free and clear of Continental's rights, except as set forth in the Lease, and
retain the proceeds, and to require Continental to pay, as liquidated damages
any due and unpaid basic rent or renewal rent plus an amount equal to the excess
of the termination value for such Aircraft (specified in schedules to such
Lease) over, at such Owner Trustee's (or, subject to the terms of the relevant
Indenture, the Loan Trustee's) option, any of (i) the discounted fair market
rental value of such Aircraft for the remainder of the term of the Lease
relating to such Aircraft (using a discount rate equal to 10 per cent per
annum), (ii) the fair market sales value of such Aircraft or (iii) if such
Aircraft has been sold, the net sales proceeds from the sale of such Aircraft
(unless such Aircraft is sold at a private sale to the Owner Trustee, Loan
Trustee, Owner Participant or any of their affiliates, in which case the fair
market sales value shall be used). (Leases, Section 15; Indenture, Section
4.04). If the Loan Trustee has validly terminated such Lease, the Loan Trustee
may not sell or lease or otherwise afford the use of such Aircraft to
Continental or any of its affiliates. (Indentures, Sections 4.03 and 4.04)
Notwithstanding that an Event of Default under an Indenture has occurred
and is continuing, so long as the Equipment Notes thereunder have not been
accelerated or the Loan Trustee has not taken action or notified the Owner
Trustee that it intends to take action to foreclose the lien of such Indenture
or otherwise commence the exercise of any significant remedy under such
Indenture or the related Lease, the Loan Trustee may not, without the consent of
the Owner Trustee, enter into any amendment, modification, waiver or consent in
respect of any of the provisions of the related Lease, which consent shall not
be unreasonably withheld if no right or interest of the relevant Owner Trustee
or Owner Participant would be diminished or impaired thereby. (Indentures,
Section 5.02)
Transfer of Owner Participant Interests
Subject to certain restrictions, each Owner Participant may transfer all or
any part of, or grant participations in, its interest in the related Aircraft.
(Participation Agreements, Section 12.1.1)
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
EXCHANGE OF OLD CERTIFICATES FOR NEW CERTIFICATES
The following summary describes the principal U.S. federal income tax
consequences to Certificateholders of the exchange of the Old Certificates for
New Certificates. This summary is intended to address the beneficial owners of
Certificates that are citizens or residents of the United States, corporations,
partnerships or other entities created or organized in or under the laws of the
United States or any State, or estates or trusts the income of which is subject
to U.S. federal income taxation regardless of its source that will hold the
Certificates as capital assets.
The exchange of Old Certificates for New Certificates (the "Exchange")
pursuant to the Exchange Offer will not be a taxable event for U.S. federal
income tax purposes. As a result, a holder of an Old Certificate whose Old
Certificate is accepted in an Exchange Offer will not recognize gain on the
Exchange. A tendering holder's tax basis in the New Certificates will be the
same as such holder's tax basis in its Old Certificates. A tendering holder's
holding period for the New Certificates received pursuant to the Exchange Offer
will include its holding period for the Old Certificates surrendered therefor.
ALL HOLDERS OF OLD CERTIFICATES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES
OF THE EXCHANGE OF OLD CERTIFICATES FOR NEW CERTIFICATES AND OF THE OWNERSHIP
AND DISPOSITION OF NEW CERTIFICATES RECEIVED IN THE EXCHANGE OFFER IN LIGHT OF
THEIR OWN PARTICULAR CIRCUMSTANCES.
ERISA CONSIDERATIONS
IN GENERAL
ERISA imposes certain requirements on employee benefit plans subject to
ERISA ("ERISA Plans"), and on those persons who are fiduciaries with respect to
ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including the requirement of investment prudence and
diversification and the requirement that an ERISA Plan's investments be made in
accordance with the documents governing the ERISA Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of an ERISA Plan (as well as those plans that
are not subject to ERISA but which are subject to Section 4975 of the Code, such
as individual retirement accounts (together with ERISA Plans, "Plans")) and
certain persons (referred to as "parties in interest" or "disqualified persons")
having certain relationships to such Plans, unless a statutory or administrative
exemption is applicable to the transaction. A party in interest or disqualified
person who engages in a prohibited transaction may be subject to excise taxes
and other penalties and liabilities under ERISA and the Code.
The Department of Labor has promulgated a regulation, 29 CFR Section 2510.
3-101 (the "Plan Asset Regulation"), describing what constitutes the assets of a
Plan with respect to the Plan's investment in an entity for purposes of ERISA
and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan invests
in a Certificate, the Plan's assets would include both the Certificate and an
undivided interest in each of the underlying assets of the corresponding Trust,
including the Equipment Notes held by such Trust, unless it is established that
equity participation in the Trust by employee benefit plans (including Plans and
entities whose underlying assets include plan assets by reason of an employee
benefit plan's investment in the entity) is not "significant" within the meaning
of the Plan Asset Regulation. In that regard, the extent to which there is
equity participation in a particular Trust on the part of employee benefit plans
is not being monitored. If the assets of a
89
Trust were deemed to constitute the assets of a Plan, transactions involving the
assets of such Trust could be subject to the prohibited transaction provisions
of ERISA and Section 4975 of the Code unless a statutory or administrative
exemption were applicable to the transaction.
The fiduciary of a Plan that holds any Old Certificate or proposes to
exchange such Old Certificate and hold any New Certificates should consider
whether such holding or exchange may involve the indirect extension of credit to
a party in interest or a disqualified person. In addition, whether or not the
assets of a Trust are deemed to be Plan assets under the Plan Asset Regulation,
if Certificates are held by a Plan and Certificates of a subordinate Class are
held by a party in interest or a disqualified person with respect to such Plan,
the exercise by the holder of the subordinate Class of Certificates of its right
to purchase the senior Classes of Certificates upon the occurrence and during
the continuation of a Triggering Event could be considered to constitute a
prohibited transaction unless a statutory or administrative exemption were
applicable. Depending on the identity of the Plan fiduciary making the decision
to hold Certificates on behalf of a Plan, PTCE 91-38 (relating to investments by
bank collective investment funds), PTCE 84-14 (relating to transactions effected
by a "qualified professional asset manager"), PTCE 95-60 (relating to
investments by an insurance company general account), PTCE 96-23 (relating to
transactions directed by an in-house professional asset manager) or PTCE 90-1
(relating to investments by insurance company pooled separate accounts)
(collectively, the "Class Exemptions") could provide an exemption from the
prohibited transaction provisions of ERISA and Section 4975 of the Code. There
can be no assurance that any of the Class Exemptions or any other exemption will
be available with respect to any particular transaction involving the
Certificates.
Governmental plans and certain church plans, while not subject to the
fiduciary responsibility provisions of ERISA or the provisions of Section 4975
of the Code, may nevertheless be subject to state or other federal laws that are
substantially similar to the foregoing provisions of ERISA and the Code.
Fiduciaries of any such plans should consult with their counsel before
exchanging or holding any Certificates.
Any Plan fiduciary which proposes to cause a Plan to hold or exchange any
Certificates should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code to such an investment, and to confirm that such holding
or exchange will not constitute or result in a non-exempt prohibited transaction
or any other violation of an applicable requirement of ERISA.
CLASS A CERTIFICATES
In addition to the Class Exemptions referred to above, an individual
exemption may apply to the holding of Class A Certificates and the exchange of
Old Certificates that are Class A Certificates for New Certificates that are
Class A Certificates by Plans, provided that certain specified conditions are
met. In particular, the Department of Labor has issued individual administrative
exemptions to certain of the Initial Purchasers which are substantially the same
as the administrative exemption issued to The First Boston Corporation,
Prohibited Transaction Exemption 89-90 (54 Fed. Reg. 42597, October 17, 1989),
as amended (the "Underwriter Exemption"), which generally exempts from the
application of certain, but not all, of the prohibited transaction provisions of
Section 406 of ERISA and Section 4975 of the Code certain transactions relating
to the initial purchase, holding and subsequent secondary market sale of pass-
through certificates which represent an interest in a trust, the assets of which
include equipment notes secured by leases, provided that certain conditions set
forth in the Underwriter Exemption are satisfied.
The Underwriter Exemption sets a number of general and specific conditions
which must be satisfied for a transaction involving the initial purchase,
holding or secondary market sale of Class A Certificates to be eligible for
exemptive relief thereunder. In particular, the acquisition of Class A
Certificates by a Plan must be on terms that are at least as favorable to the
Plan as they would be in an arm's-length transaction with an unrelated party;
the rights and interests evidenced by the Certificates must not be subordinated
to the rights and
90
interests evidenced by other Certificates of the same trust estate; the
Certificates at the time of acquisition by the Plan must be rated in one of the
three highest generic rating categories by Moody's Investors Service, Inc.,
Standard & Poor's Ratings Group, Duff & Phelps Inc. or Fitch Investors Service,
Inc. (although not entirely clear, it would appear that the exchange of an Old
Certificate for a New Certificate should not constitute an "acquisition" of the
New Certificate for this purpose); and the investing Plan must be an accredited
investor as defined in Rule 501(a)(1) of Regulation D of the Commission under
the Securities Act.
The Underwriter Exemption does not apply to the Class B Certificates, the
Class C Certificates and the Class D Certificates. Even if all of the conditions
of the Underwriter Exemption are satisfied with respect to the Class A
Certificates, no assurance can be given that the Underwriter Exemption would
apply with respect to all transactions involving the Class A Certificates or the
assets of the Class A Trust. In particular, it appears that the Underwriter
Exemption would not apply to the purchase by Class B Certificateholders, Class C
Certificateholders or Class D Certificateholders of Class A Certificates in
connection with the exercise of their rights upon the occurrence and during the
continuance of a Triggering Event. Therefore, the fiduciary of a Plan
considering the continued holding of a Class A Certificate or the exchange of
Old Certificates for New Certificates should consider the availability of the
exemptive relief provided by the Underwriter Exemption, as well as the
availability of any other exemptions with respect to transactions to which the
Underwriter Exemption may not apply.
CLASS B CERTIFICATES, CLASS C CERTIFICATES AND CLASS D CERTIFICATES
The Class B Certificates, Class C Certificates Class D Certificates may not
be acquired by any Plan or by any entity that is using the assets of any Plan to
purchase or hold its interest in a Class B Certificate, Class C Certificate or
Class D Certificate (a "Plan Transferee"), except that such Certificates may be
acquired with the assets of an insurance company general account that may be
deemed to constitute Plan assets if the conditions of PTCE 95-60 have been
satisfied. Any insurance company that uses general account assets to hold Class
B Certificates, Class C Certificates or Class D Certificates that tenders such
Old Certificates in exchange for New Certificates will be required to represent
that PTCE 95-60 applies to its tender and the holding of such Class B
Certificates, Class C Certificates or Class D Certificates.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Certificates for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Certificates. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Certificates received in
exchange for Old Certificates where such Old Certificates were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, starting on the Expiration Date and ending on the close of business
180 days after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until such date all broker-dealers effecting transactions
in the New Certificates may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Certificates
by broker-dealers. New Certificates received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in on or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Certificates or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Certificates. Any broker-
dealer that resells New Certificates that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New
91
Certificates may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit of any such resale of New Certificates and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
Holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify the Holders of the New Certificates (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the New Certificates is being passed upon for Continental
by Cleary, Gottlieb, Steen & Hamilton, New York, New York. Cleary, Gottlieb,
Steen & Hamilton will rely on the opinion of Richards, Layton & Finger,
Wilmington, Delaware, counsel for Wilmington Trust Company, as Trustee, as to
matters relating to the authorization, execution and delivery of the New
Certificates under the Pass Through Trust Agreements.
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 through April 27, 1993,
incorporated by reference in this Prospectus have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference, in reliance upon such reports
given upon the authority of such firm as experts in accounting and auditing.
92
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus and the accompanying Letter of Transmittal and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or the Exchange Agent. Neither this Prospectus nor
the accompanying Letter of Transmittal, or both together, constitute an offer to
sell or the solicitation of an offer to buy securities in any jurisdiction to
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus, nor the accompanying Letter of Transmittal, or
both together, nor any sale made hereunder shall, under any circumstances,
create an implication that there has been no change in the affairs of the
Company since the date hereof or that the information contained herein is
correct at any time subsequent to the date hereof or thereof.
TABLE OF CONTENTS
Page
Available Information...........................................
Incorporation of Certain Documents by Reference.................
Prospectus Summary..............................................
Risk Factors....................................................
Recent Developments.............................................
Use of Proceeds.................................................
Ratio of Earnings to Fixed Charges..............................
Selected Financial Data.........................................
The Exchange Offer..............................................
Description of New Certificates.................................
Description of the Liquidity Facilities.........................
Description of the Intercreditor Agreement......................
Description of the Aircraft and Appraisals......................
Description of the Equipment Notes..............................
Certain U.S. Federal Income Tax Consequences....................
ERISA Considerations............................................
Plan of Distribution............................................
Legal Matters...................................................
Experts.........................................................
Continental Airlines, Inc.
Offer to Exchange
Pass Through Certificates, Series 1996,
which have been registered under the
Securities Act of 1933, as amended,
for any and all outstanding
Pass Through Certificates, Series 1996
PROSPECTUS
, 1996
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 MAY 30, 1996
PROSPECTUS
Continental Airlines, Inc.
Pass Through Certificates
Up to $510,733,000 aggregate principal amount of Pass
Through Certificates (the "Certificates") (or such greater
amount, if Certificates are issued at an original issue discount,
as shall result in aggregate proceeds of $510,733,000 may be
offered for sale from time to time pursuant to this Prospectus
and related Prospectus Supplements (as defined below).
Certificates may be issued in one or more series in amounts, at
prices and on terms to be determined at the time of the offering.
In respect of each offering of Certificates, a separate
Continental Airlines Pass Through Trust for each series of
Certificates being offered (each, a "Trust") will be formed
pursuant to a Pass Through Trust Agreement (a "Basic Agreement")
and the supplement thereto (a "Trust Supplement") relating to
such Trust between Continental Airlines, Inc. (the "Company"),
and Shawmut Bank Connecticut, National Association, or First
Security Bank of Utah, National Association (each a "Trustee"),
as trustee. Each Certificate of a series will represent a
fractional undivided interest in the related Trust and, except as
described in the applicable Prospectus Supplement, will have no
rights, benefits or interests in respect of any other Trust. The
property of the Trusts will consist of securities including,
equipment notes issued (a) on a nonrecourse basis by one or more
owner trustees pursuant to separate leveraged lease transactions
(the "Leased Aircraft Notes") to finance or refinance a portion
of the equipment cost of aircraft, including engines (each, a
"Leased Aircraft" and collectively, the "Leased Aircraft"), which
have been or will be leased to the Company, or (b) with recourse
to the Company (the "Owned Aircraft Notes" and, together with any
Leased Aircraft Notes, the "Equipment Notes") to finance all or a
portion of the equipment cost of, or to purchase all or a portion
of the outstanding debt with respect to, aircraft, including
engines (each, an "Owned Aircraft" and collectively, the "Owned
Aircraft" and, together with Leased Aircraft, the "Aircraft"),
which have been or will be purchased and owned by the Company.
Certain specific terms of the particular Certificates in
respect of which this Prospectus is being delivered are set forth
in the accompanying Prospectus Supplement (the "Prospectus
93
Supplement"), including, where applicable, the specific
designation, form, aggregate principal amount, initial public
offering price and distribution dates relating to such
Certificates, the Trustees, the Trust or Trusts relating to such
Certificates, the Equipment Notes to be purchased by such Trust
or Trusts, the Aircraft relating to such Equipment Notes, the
leveraged lease transactions or financing arrangements, as the
case may be, relating to such Equipment Notes, a description of
any other securities to be purchased by such Trust or Trusts and
other special terms relating to such Certificates and the net
proceeds from the offering of such Certificates. If so specified
in the applicable Prospectus Supplement, the Certificates may be
issued in accordance with a book-entry system.
Equipment Notes may be issued in respect of an Aircraft in
one or more series, each series having its own interest rate and
final maturity date. One or more series of Equipment Notes
issued in respect of an Aircraft may be senior or subordinate to
one or more other series of Equipment Notes. A separate Trust
will purchase all of the series of the Equipment Notes relating
to the respective Aircraft and having an interest rate equal to
the interest rate applicable to the Certificates issued by such
Trust and maturity dates occurring on or before the final
distribution date applicable to such Certificates. Interest paid
on the Equipment Notes and other securities, if any, held in each
Trust will be passed through to the holders of the Certificates
relating to such Trust on the dates and at the rate per annum set
forth in the Prospectus Supplement relating to such Certificates
until the final distribution date for such Trust. Principal paid
on the Equipment Notes and other securities, if any, held in each
Trust will be passed through to the holders of the Certificates
relating to such Trust in scheduled amounts on the dates set
forth in the Prospectus Supplement relating to such Certificates
until the final distribution date for such Trust.
The Equipment Notes issued with respect to each Aircraft
will be secured by a security interest in the owner's right,
title and interest in such Aircraft and, in the case of the
Leased Aircraft, by a security interest in the lessor's right,
title and interest in the lease relating thereto, including the
right to receive rentals payable by the Company in respect of
such Leased Aircraft. Although the Leased Aircraft Notes will
not be direct obligations of, or guaranteed by, the Company, the
amounts unconditionally payable by the Company for lease of
Leased Aircraft will be sufficient to pay in full when due all
payments scheduled to be made on the corresponding Leased
Aircraft Notes.
The Certificates may be sold to or through underwriters,
through dealers or agents or directly to purchasers. See "Plan
of Distribution". The accompanying Prospectus Supplement sets
forth the names of any underwriters, dealers or agents involved
in the sale of the Certificates in respect of which this
Prospectus is being delivered and any applicable fee, commission
or discount arrangements with them. See "Plan of Distribution"
for information concerning secondary trading of the Certificates.
This Prospectus may not be used to consummate sales of
Certificates unless accompanied by a Prospectus Supplement.
94
--------------------------------
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.
95
No dealer, salesman or other person has been authorized to
give any information or to make any representation not contained
in this Prospectus or any accompanying Prospectus Supplement and,
if given or made, such information or representation must not be
relied upon as having been authorized by the Company or any
underwriter, dealer, broker or agent. This Prospectus and any
accompanying Prospectus Supplement do not constitute an offer to
sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction.
--------------------------------
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.
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 of 1933, as amended (the
"Securities Act"). This Prospectus omits certain of the
information contained in the Registration Statement, and
reference is hereby made to the Registration Statement for further
information with respect to Continental and 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:
96
(i) Continental's Annual Report on Form 10-K for the year ended
December 31, 1995 (as amended by Forms 10-K/A1 and 10-K/A2 filed
on March 8, 1996 and April 10, 1996, respectively), (ii) Continental's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1996
and (iii) Continental's Current Reports on Forms 8-K, filed on
January 31, 1996, March 26, 1996 and May 7, 1996.
All reports and any definitive proxy or information
statements filed by Continental pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the
Securities offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated herein by
reference, or contained in this Prospectus, shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
Continental will provide without charge to each person to
whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all documents
incorporated herein by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such documents
should be directed to Continental Airlines, Inc., 2929 Allen
Parkway, Suite 2010, Houston, Texas 77019, Attention: Secretary,
telephone (713) 834-2950.
THE COMPANY
Continental Airlines, Inc. is a major United States air
carrier engaged in the business of transporting passengers, cargo
and mail. Continental is the fifth largest United States airline
(as measured by revenue passenger miles in the first three months
of 1996) and, together with its wholly owned subsidiary,
Continental Express, Inc. ("Express"), and its 91%-owned
subsidiary, Continental Micronesia, Inc. ("CMI"), serves 175
airports worldwide.
The Company operates its route system primarily through
domestic hubs at Newark, Houston Intercontinental and Cleveland,
and a Pacific hub on Guam and Saipan. Each of Continental's
three U.S. hubs is located in a large business and population
center, contributing a high volume of "origin and destination"
traffic. The Guam/Saipan hub is strategically located to provide
service from Japanese and other Asian cities to popular resort
destinations in the western Pacific. Continental is the primary
carrier at each of these hubs, accounting for 51%, 78%, 54% and
58% of all daily jet departures, respectively.
Continental directly serves 118 U.S. cities, with additional
cities (principally in the western and southwestern United
States) connected to Continental's route system under agreements
with America West Airlines, Inc. ("America West"). Internationally,
97
Continental flies to 57 destinations and offers
additional connecting service through alliances with foreign
carriers. Continental operates 52 weekly departures to five
European cities and markets service to four other cities through
code-sharing agreements. Continental is one of the leading
airlines providing service to Mexico and Central America, serving
more destinations in Mexico than any other United States airline.
In addition, Continental flies to four cities in South America
and plans to commence service between Newark and Bogota,
Colombia, with service on to Quito, Ecuador, in June 1996.
Through its Guam/Saipan hub, Continental provides extensive
service in the western Pacific, including service to more
Japanese cities than any other United States carrier.
The Company is a Delaware corporation. Its executive
offices are located at 2929 Allen Parkway, Suite 2010, Houston,
Texas 77019, and its telephone number is (713) 834-2950.
FORMATION OF THE TRUSTS
In respect of each offering of Certificates, one or more
Trusts will be formed, and the related Certificates issued,
pursuant to separate Trust Supplements to be entered into between
a Trustee and Continental in accordance with the terms of the
relevant Basic Agreement. Concurrently with the execution and
delivery of each Trust Supplement, the relevant Trustee, on
behalf of the Trust formed thereby, will enter into a separate
financing, refinancing or purchase agreement with respect to one
or more Equipment Notes (each such financing, refinancing or
purchase agreement being herein referred to as a "Note Purchase
Agreement") relating to one or more of the Aircraft described in
the applicable Prospectus Supplement. Pursuant to the applicable
Note Purchase Agreement or Note Purchase Agreements, the
Trustee, on behalf of each Trust, will purchase all of the
series of Equipment Notes relating to the respective Aircraft
and having an interest rate equal to the interest rate
applicable to the Certificates issued by such Trust. The
maturity dates of the Equipment Notes acquired by each Trust
will occur on or before the final distribution date applicable
to the Certificates that will be issued by such Trust. The
Trustee will distribute the amount of payments of principal,
premium, if any, and interest received by it as holder of
the Equipment Notes to the Certificateholders (as defined
in the Basic Agreements) of the Trust in which such
Equipment Notes are held. See "Description of the Certificates"
and "Description of the Equipment Notes".
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus
Supplement, the Certificates offered pursuant to any Prospectus
Supplement will be issued in order to facilitate (a) the
financing or refinancing of the debt portion and, in certain
cases, the refinancing of some of the equity portion of one or
more separate leveraged lease transactions entered into by
Continental, as lessee, with respect to the Leased Aircraft as
described in the applicable Prospectus Supplement, (b) the
financing of the aggregate principal amount of debt to be issued,
or the purchase of the aggregate principal amount of the debt
previously issued, by Continental in respect of the Owned
98
Aircraft as described in the applicable Prospectus Supplement and
(c) the purchase of certain merchandise, insurance and services,
as described in the Prospectus Supplement. Unless otherwise
specified in the applicable Prospectus Supplement, the proceeds
from the sale of the Certificates offered pursuant to any
Prospectus Supplement will be used by the Trustee on behalf of
the applicable Trust or Trusts to purchase either (a) Leased
Aircraft Notes issued by the respective Owner Trustee or Owner
Trustees (as defined below) to finance or refinance a portion (as
specified in the applicable Prospectus Supplement) of the
equipment cost of the related Leased Aircraft or (b) Owned
Aircraft Notes issued by Continental to finance all or a portion
(as specified in the applicable Prospectus Supplement) of the
equipment cost of the related Owned Aircraft, as described in the
Prospectus Supplement. Unless otherwise specified in the
applicable Prospectus Supplement, any portion of the proceeds
from the sale of Certificates not used by the Trustee to purchase
Equipment Notes on or prior to the date specified therefor
in the applicable Prospectus Supplement will be distributed
on a Special Distribution Date (as hereinafter defined)
to the applicable Certificateholders, together with
interest, but without premium. See "Description of the
Certificates -- Special Distribution Upon Unavailability of
Aircraft".
The Leased Aircraft Notes will be issued under separate
Trust Indenture and Security Agreements (the "Leased Aircraft
Indentures") between an institution specified in the related
Prospectus Supplement as trustee thereunder (in such capacity,
herein referred to as the "Loan Trustee") and an institution
specified in the related Prospectus Supplement acting, not in its
individual capacity, but solely as owner trustee (an "Owner
Trustee") of a separate trust for the benefit of one or more
institutional investors (each individually, and collectively as
to each such trust, the "Owner Participant"). With respect to
each Leased Aircraft, the related Owner Participant will have
provided or will provide from sources other than the Leased
Aircraft Notes a portion (as specified in the applicable
Prospectus Supplement) of the equipment cost of the related
Leased Aircraft. No Owner Participant, however, will be
personally liable for any amount payable under the related Leased
Aircraft Indenture or the Leased Aircraft Notes issued
thereunder. Simultaneously with the acquisition of each Leased
Aircraft, the related Owner Trustee leased or will lease such
Aircraft to Continental pursuant to a separate lease agreement
(each such lease agreement being herein referred to as a
"Lease"). The Owned Aircraft Notes will be issued under separate
Trust Indenture and Security Agreements (the "Owned Aircraft
Indentures" and, collectively, with any Leased Aircraft
Indentures, the "Indentures") between the applicable Loan Trustee
and Continental.
RATIOS OF EARNINGS TO FIXED CHARGES
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 years ended December 31, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996 relates
99
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 the American
Institute of Certified Public Accountants' Statement of Position
90-7 "Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code".
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 fixed charges. Additional earnings
of $316 million, $131 million, $979 million, $60 million,
$667 million and $28 million, respectively, would have been
required to achieve ratios of earnings to fixed charges of
1.0. The ratio of earnings to fixed charges for the year
ended December 31, 1995 was 1.53. The ratio of earnings to
fixed charges for the three months ended March 31, 1996 was
1.70. For purposes of calculating this ratio, earnings
consist of earnings before taxes and minority interest plus
interest expense (net of capitalized interest), the portion of
rental expense representative of interest expense and
amortization of previously capitalized interest. Fixed charges
consist of interest expense and the portion of rental expense
representative of interest expense.
DESCRIPTION OF THE CERTIFICATES
In connection with each offering of Certificates, one or
more separate trusts will be formed and one or more series of
Certificates will be issued pursuant to a Basic Agreement either
between Continental and Shawmut Bank Connecticut, National
Association, as Trustee, or between Continental and First
Security Bank of Utah, National Association, as Trustee, and one
or more separate Trust Supplements to be entered into between
Continental and the relevant Trustee. The statements made under
this caption are summaries, and reference is made to the detailed
provisions of the Basic Agreements, which have been filed as
exhibits to the Registration Statement of which this Prospectus
is a part. The Basic Agreements are substantially identical,
except for the identity of the Trustee. The summaries relate to
the Basic Agreements and each of the Trust Supplements, the
Trusts to be formed thereby and the Certificates to be issued by
each Trust except to the extent, if any, described in the
applicable Prospectus Supplement. The Prospectus Supplement that
accompanies this Prospectus contains a glossary of the material
terms used with respect to the specific series of Certificates
being offered thereby and identifies which Trustee will act with
respect to each specific series of Certificates. The Trust
Supplement relating to each series of Certificates and the forms
of the related Note Purchase Agreement and Indenture and, if the
Certificates relate to Leased Aircraft, the forms of the related
Lease, Trust Agreement and Participation Agreement will be filed as
exhibits to a Current Report on Form 8-K, Quarterly Report on
Form 10-Q or Annual Report on Form 10-K, to be filed by
Continental with the Commission. Citations to certain relevant
sections of the Basic Agreements appear below in parentheses.
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The Certificates offered pursuant to this Prospectus will be
limited to $510,733,000 aggregate principal amount (or such
greater amount if Certificates are issued at an original issue
discount, as shall result in aggregate proceeds to Continental of
$510,733,000).
Certain provisions of the description of the Certificates in
this Prospectus do not necessarily apply to one Certificate of
each Trust which may be issued in a denomination of less than
$1,000.
General
Each Certificate will represent a fractional undivided
interest in the Trust created by the Trust Supplement pursuant to
which such Certificate was issued and all payments and
distributions shall be made only from the related Trust Property
(as defined below). The property of each Trust (the "Trust
Property") will include the Equipment Notes held in such Trust,
all monies at any time paid thereon, all monies due and to
become due thereunder and funds from time to time deposited
with the Trustee for the benefit of Certificateholders in
accounts relating to such Trust. Each Certificate will
represent a pro rata share of the outstanding principal
amount of the Equipment Notes held in the related Trust
and, unless otherwise specified in the applicable Prospectus
Supplement, will be issued in minimum denominations of
$1,000 or any integral multiple thereof. (Sections 2.1
and 3.1) The Certificates do not represent an interest
in or obligation of Continental, the Trustee, any of the
Loan Trustees or Owner Trustees in their individual capacities,
any Owner Participant, or any affiliate of any of the foregoing.
Reference is made to the Prospectus Supplement that
accompanies this Prospectus for a description of the specific
series of Certificates being offered thereby, including: (1) the
specific designation and title of such Certificates; (2) the
Regular Distribution Dates (as hereinafter defined) and Special
Distribution Dates (as hereinafter defined) applicable to such
Certificates; (3) the specific form of such Certificates,
including whether or not such Certificates are to be issued in
accordance with a book-entry system; (4) a description of the
Equipment Notes to be purchased by the related Trust, including
(a) whether or not such Equipment Notes are senior or subordinate
to any other Equipment Notes and if so, the terms and conditions
pursuant to which such Equipment Notes are senior to or
subordinate to other Equipment Notes, and (b) the period or
periods within which, the price or prices at which, and the terms
and conditions upon which such Equipment Notes may or must be
redeemed, in whole or in part; (5) a description of each related
Aircraft, including whether the Aircraft is a Leased Aircraft or
an Owned Aircraft; (6) a description of each related Note
Purchase Agreement and Indenture, including a description of the
events of default under each such related Indenture, the remedies
exercisable upon the occurrence of such events of default and any
limitations on the exercise of such remedies with respect to the
related Equipment Notes; (7) if such Certificates relate to
Leased Aircraft, a description of each related Lease, Trust
Agreement and Participation Agreement, including (a) the names of
each related Owner Trustee, (b) a description of the events of
101
default under each such related Lease, the remedies exercisable
upon the occurrence of such events of default and any limitations
on the exercise of such remedies, and (c) the rights, if any, of
each related Owner Trustee and/or Owner Participant to cure
failures of Continental to pay rent under the related Lease;
(8) the extent, if any, to which the provisions of the operative
documents applicable to such Equipment Notes may be amended by
the parties thereto without the consent of the holders of, or
only upon the consent of the holders of a specified percentage of
aggregate principal amount of, such Equipment Notes; (9) the
extent, if any, to which the Company may acquire Certificates and
deliver such Certificates or cash to the respective Trusts and
obtain the release of Equipment Notes held by such Trusts; (10)
whether the Certificates are issuable as registered Certificates,
bearer Certificates or both, and the terms upon which bearer
Certificates may be exchanged for registered Certificates; and
(11) any other special terms pertaining to such Certificates,
including any modification of the terms set forth herein.
Book-Entry Registration
The Certificates of each Trust may be issued in bearer or
fully registered form and may be issued pursuant to a book-entry
system. In the event that the Certificates of any series in
registered form are issued pursuant to a book-entry system, it is
anticipated that such Certificates will be registered in the name
of Cede & Co. ("Cede") as the nominee of The Depository Trust
Company ("DTC"). No person acquiring an interest in such
Certificates ("Certificate Owner") will be entitled to receive a
certificate representing such person's interest in such
Certificates, except as set forth below under "Definitive
Certificates." Unless and until Definitive Certificates are
issued under the limited circumstances described herein, all
references to actions by Certificateholders shall refer to
actions taken by DTC upon instructions from DTC Participants (as
defined below), and all references herein to distributions,
notices, reports and statements to Certificateholders shall
refer, as the case may be, to distributions, notices, reports and
statements to DTC or Cede, as the registered holder of such
Certificates, or to DTC Participants for distribution to
Certificate Owners in accordance with DTC procedures. (Section
3.9)
Continental has been advised that 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
section 17A of the Exchange Act. DTC was created to hold
securities for its participants ("DTC Participants") and to
facilitate the clearance and settlement of securities
transactions between DTC Participants through electronic
book-entries, thereby eliminating the need for physical transfer
of certificates. DTC Participants include securities brokers and
dealers, banks, trust companies and clearing corporations.
Indirect access to the DTC system also is available to others
such as banks, brokers, dealers and trust companies that clear
through or maintain a custodial relationship with a DTC
Participant either directly or indirectly ("Indirect
102
Participants").
Certificate Owners that are not DTC Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer
ownership of, or other interests in, the Certificates may do so
only through DTC Participants and Indirect Participants. In
addition, Certificate Owners will receive all distributions of
principal and interest, as well as notices and other reports,
from the relevant Trustee through DTC Participants or Indirect
Participants, as the case may be. Under a book-entry format,
Certificate Owners may experience some delay in their receipt of
payments, as well as notices and other reports, since such
payments, notices and other reports will be forwarded by the
relevant Trustee to Cede, as nominee for DTC. DTC will forward
such payments, notices and other reports to DTC Participants,
which will thereafter forward such payments, notices and other
reports to Indirect Participants or Certificate Owners, as the
case may be, in accordance with customary industry practices.
The forwarding of such distributions to the Certificate Owners
will be the responsibility of such DTC Participants. Unless and
until the Definitive Certificates are issued under the limited
circumstances described herein, it is anticipated that the only
"Certificateholder" will be Cede, as nominee of DTC. Certificate
Owners will not be recognized by the relevant Trustee as
Certificateholders, as such term is used in the Basic Agreements,
and Certificate Owners will be permitted to exercise the rights
of Certificateholders only indirectly through DTC and DTC
Participants.
Under the rules, regulations and procedures creating and
affecting DTC and its operations (the "Rules"), DTC is required
to make book-entry transfers of the Certificates among DTC
Participants on whose behalf it acts with respect to the
Certificates and to receive and transmit distributions of
principal, premium, if any, and interest with respect to the
Certificates. DTC Participants and Indirect Participants with
which Certificate Owners have accounts with respect to the
Certificates similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their
respective customers. Accordingly, although Certificate Owners
will not possess the Certificates, the Rules provide a mechanism
by which Certificate Owners will receive payments and will be
able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who
in turn act on behalf of Indirect Participants or Certificate
Owners, the ability of a Certificate Owner to pledge the
Certificates to persons or entities that do not participate in
the DTC system, or to otherwise act with respect to such
Certificates, may be limited due to the inability of Certificate
Owners to obtain a physical certificate for such Certificates.
Continental has been advised that DTC will take any action
permitted to be taken by a Certificateholder under a Basic
Agreement only at the direction of one or more DTC Participants
to whose accounts with DTC the Certificates are credited.
Additionally, Continental has been advised that in the event any
action requires approval by Certificateholders of a certain
percentage of beneficial interest in each Trust, DTC will take
such action only at the direction of and on behalf of DTC
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Participants whose holders include undivided interests that
satisfy any such percentage. DTC may take conflicting actions
with respect to other undivided interests to the extent that such
actions are taken on behalf of DTC Participants whose holders
include such undivided interests.
Neither Continental nor the relevant Trustee will have any
liability for any aspect of the records relating to or payments
made on account of beneficial ownership interests in the
Certificates held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
Definitive Certificates
In the event Certificates in registered form are issued
pursuant to a book-entry system as described above, such
Certificates may be issued in certificated form ("Definitive
Certificates") to Certificate Owners or their nominees, rather
than to DTC or its nominee, only if (i) Continental advises the
relevant Trustee in writing that DTC is no longer willing or able
to discharge properly its responsibilities as depository with
respect to such Certificates and Continental is unable to locate
a qualified successor, (ii) Continental, at its option, elects to
terminate participation in the book-entry system through DTC in
respect of the Certificates or (iii) after the occurrence of an
Indenture Default (as hereinafter defined), Certificate Owners
with fractional undivided interests aggregating not less than a
majority in interest in such Trust advise the relevant Trustee
and Continental through DTC in writing that the continuation of a
book-entry system through DTC (or a successor thereto) is no
longer in the Certificate Owners' best interest. (Section 3.9)
Upon the occurrence of any event described in the
immediately preceding paragraph, the relevant Trustee will be
required to notify all Certificate Owners through DTC of the
availability of Definitive Certificates. Upon surrender by DTC
of the certificates representing the Certificates and receipt of
written instructions for re-registration, the relevant Trustee
will reissue the Certificates as Definitive Certificates to the
persons designated by DTC in such written instructions.
(Section 3.9)
Distributions of principal, premium, if any, and interest
with respect to Certificates will thereafter be made by the
relevant Trustee directly in accordance with the procedures set
forth in the applicable Basic Agreement and the applicable Trust
Supplements, to holders in whose names the Definitive
Certificates were registered at the close of business on the
applicable record date. Such distributions will be made by check
mailed to the address of each such holder as it appears on the
register maintained by the relevant Trustee. The final payment
on any Certificate, however, will be made only upon presentation
and surrender of such Certificate at the office or agency
specified in the notice of final distribution to
Certificateholders. (Sections 4.2 and 11.1)
Definitive Certificates in registered form will be freely
transferable and exchangeable at the office of the relevant
Trustee upon compliance with the requirements set forth in the
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applicable Basic Agreement and the applicable Trust Supplements.
No service charge will be imposed for any registration of
transfer or exchange, but payment of a sum sufficient to cover
any tax or other governmental charge shall be required. (Section
3.4)
Payments and Distributions
Payments of principal, premium, if any, and interest with
respect to the Equipment Notes held in each Trust will be
distributed by the relevant Trustee to Certificateholders
of such Trust on the dates specified in the applicable
Prospectus Supplement, except in certain cases when some
or all of such Equipment Notes are in default. See
"-- Events of Default and Certain Rights Upon an Event
of Default". Payments of principal of, and interest on,
the unpaid principal amount of the Equipment Notes held in each
Trust will be scheduled to be received by the relevant Trustee on
the dates specified in the applicable Prospectus Supplement (such
scheduled payments of interest and principal on the Equipment
Notes are herein referred to as "Scheduled Payments," and the
dates specified in the applicable Prospectus Supplement are
herein referred to as "Regular Distribution Dates"). See
"Description of the Equipment Notes -- General". Except as
otherwise specified in the applicable Prospectus Supplement, each
Certificateholder of each Trust will be entitled to receive a pro
rata share of any distribution in respect of Scheduled Payments
of principal and interest made on the Equipment Notes held in the
Trust.
Payments of principal, premium, if any, and interest
received by the relevant Trustee on account of the early
redemption, if any, of the Equipment Notes relating to one or
more Aircraft held in a Trust, and payments, other than Scheduled
Payments received on a Regular Distribution Date, received by the
relevant Trustee following a default in respect of Equipment
Notes held in a Trust relating to one or more Aircraft ("Special
Payments") will be distributed on the date determined as
described in the applicable Prospectus Supplement (a "Special
Distribution Date"). The relevant Trustee will mail notice to
the Certificateholders of record of the applicable Trust not less
than 20 days prior to the Special Distribution Date on which any
Special Payment is scheduled to be distributed by the relevant
Trustee stating such anticipated Special Distribution Date.
(Section 4.2)
Pool Factors
Unless there has been an early redemption, a purchase of an
issue of Equipment Notes by the related Owner Trustee after an
Indenture Default (as defined below) or a default in the payment
of principal or interest, in respect of one or more issues of the
Equipment Notes held in a Trust, as described in the applicable
Prospectus Supplement or below in "-- Events of Default and
Certain Rights Upon an Event of Default", the Pool Factor (as
defined below) for the Trusts will decline in proportion to the
scheduled repayments of principal on the Equipment Notes held in
such Trust as described in the applicable Prospectus Supplement.
In the event of such redemption, purchase or default, the Pool
Factor and the Pool Balance (as defined below) of each Trust so
105
affected will be recomputed after giving effect thereto and
notice thereof will be mailed to the Certificateholders of such
Trust. Each Trust will have a separate Pool Factor.
The "Pool Balance" for each Trust indicates, as of any date,
the aggregate unpaid principal amount of the Equipment Notes held
in such Trust on such date plus any amounts in respect of
principal on such Equipment Notes held by the Trustee and not yet
distributed. The Pool Balance for each Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed
after giving effect to the payment of principal, if any, on the
Equipment Notes held in such Trust and distribution thereof to be
made on that date.
The "Pool Factor" for each Trust as of any Regular
Distribution Date or Special Distribution Date is the quotient
(rounded to the seventh decimal place) computed by dividing
(i) the Pool Balance by (ii) the aggregate original principal
amount of the Equipment Notes held in such Trust. The Pool
Factor for each Trust as of any Regular Distribution Date or
Special Distribution Date shall be computed after giving effect
to the payment of principal, if any, on the Equipment Notes held
in such Trust and distribution thereof to be made on that date.
The Pool Factor for each Trust will initially be l.0000000;
thereafter, the Pool Factor for each Trust will decline as
described above to reflect reductions in the Pool Balance of such
Trust. The amount of a Certificateholder's pro rata share of the
Pool Balance of a Trust can be determined by multiplying the
original denomination of the holder's Certificate of such Trust
by the Pool Factor for such Trust as of the applicable Regular
Distribution Date or Special Distribution Date. The Pool Factor
and the Pool Balance for each Trust will be mailed to
Certificateholders of such Trust on each Regular Distribution
Date and Special Distribution Date.
Reports to Certificateholders
On each Regular Distribution Date and Special Distribution
Date, the relevant Trustee will include with each distribution of
a Scheduled Payment or Special Payment to Certificateholders of
record of the related Trust as of the immediately preceding
record date a statement, giving effect to such distribution to be
made on such Regular Distribution Date or Special Distribution
Date, setting forth the following information (per $1,000
aggregate principal amount of Certificates for such Trust, as to
(i) and (ii) below):
(i) the amount of such distribution allocable to
principal and the amount allocable to premium, if any;
(ii) the amount of such distribution allocable to
interest; and
(iii) the Pool Balance and the Pool Factor for
such Trust. (Section 4.3(a))
So long as the Certificates are registered in the name of
Cede, as nominee for DTC, (a) on the record date immediately
prior to each Regular Distribution Date and Special Distribution
Date, the Trustee will request from DTC a Securities Position
106
Listing setting forth the names of all DTC Participants reflected
on DTC's books as holding interests in the Certificates on such
record date and (b) on each Regular Distribution Date and Special
Distribution Date, the relevant Trustee will deliver to each such
DTC Participant the statement described above and will make
available additional copies as requested by such DTC Participant
for forwarding by such DTC Participant to Certificate Owners.
(Section 3.9(c))
In addition, after the end of each calendar year, the
relevant Trustee will prepare for each Certificateholder of
record of each Trust at any time during the preceding calendar
year a report containing the sum of the amounts determined
pursuant to clauses (i) and (ii) above with respect to the Trust
for such calendar year or, in the event such person was a
Certificateholder of record during only a portion of such
calendar year, for the applicable portion of such calendar year,
and such other items as are readily available to the relevant
Trustee and which a Certificateholder shall reasonably request as
necessary for the purpose of such Certificateholder's preparation
of its federal income tax returns. (Section 4.3(b)) Such report
and such other items shall be prepared on the basis of
information supplied to the relevant Trustee by the DTC
Participants and shall be delivered by the relevant Trustee to
such DTC Participants to be available for forwarding by such DTC
Participants to Certificate Owners in the manner described above.
At such time, if any, as the Certificates are issued in the
form of Definitive Certificates, the relevant Trustee will
prepare and deliver the information described above to each
Certificateholder of record of each Trust as the name and period
of beneficial ownership of such Certificateholder appears on the
records of the registrar of the Certificates.
Voting of Equipment Notes
The Trustee, as holder of the Equipment Notes held in each
Trust, has the right to vote and give consents and waivers with
respect to such Equipment Notes under the related Indentures.
Each Basic Agreement sets forth the circumstances in which the
Trustee thereunder shall direct any action or cast any vote as
the holder of the Equipment Notes held in the applicable Trust at
its own discretion and the circumstances in which such Trustee
shall seek instructions from the Certificateholders of such
Trust. Prior to an Event of Default (as defined below) with
respect to any Trust, the principal amount of the Equipment Notes
held in such Trust directing any action or being voted for or
against any proposal shall be in proportion to the principal
amount of Certificates held by the Certificateholders of such
Trust taking the corresponding position. (Sections 6.1 and 10.1)
Events of Default and Certain Rights Upon an Event of Default
An event of default under the Basic Agreement (an "Event of
Default") is defined as the occurrence and continuance of an
event of default under one or more of the Indentures (an
"Indenture Default"). The Indenture Defaults under an Indenture
will be described in the applicable Prospectus Supplement and,
with respect to the Leased Aircraft, will include an event of
default under the related Lease (a "Lease Event of Default").
107
Since the Equipment Notes issued under an Indenture may be held
in more than one Trust, a continuing Indenture Default under such
Indenture would result in an Event of Default under each such
Trust. There will be, however, no cross-default provisions in
the Indentures, and events resulting in an Indenture Default
under any particular Indenture will not necessarily result in an
Indenture Default occurring under any other Indenture. If an
Indenture Default occurs in fewer than all of the Indentures,
notwithstanding the treatment of Equipment Notes issued under any
Indenture under which an Indenture Default has occurred, payments
of principal and interest on the Equipment Notes issued pursuant
to Indentures with respect to which an Indenture Default has not
occurred will continue to be distributed to the holders of the
Certificates as originally scheduled.
With respect to each Leased Aircraft, the applicable Owner
Trustee and Owner Participant will, under the related Indenture,
have the right under certain circumstances to cure Indenture
Defaults that result from the occurrence of a Lease Event of
Default under the related Lease. If the Owner Trustee or the
Owner Participant exercises such cure right, the Indenture
Default and consequently the Event of Default with respect to the
related Trust or Trusts will be deemed to have been cured.
The Basic Agreements provide that, as long as an Indenture
Default under any Indenture relating to the Equipment Notes held
in a Trust shall have occurred and be continuing, the Trustee of
such Trust may vote all of the Equipment Notes issued under such
Indenture that are held in such Trust and, upon the direction of
the holders of Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of
such Trust, shall vote a corresponding majority of such Equipment
Notes in favor of directing the Loan Trustee under such Indenture
to declare the unpaid principal amount of all Equipment Notes
issued under such Indenture and any accrued and unpaid interest
thereon to be due and payable. The Basic Agreements also provide
that, if an Indenture Default under any Indenture relating to the
Equipment Notes held in a Trust shall have occurred and be
continuing, the Trustee of such Trust may, and upon the direction
of the holders of Certificates evidencing fractional undivided
interests aggregating not less than a majority in interest of
such Trust shall, vote all of the Equipment Notes issued under
such Indenture that are held in such Trust in favor of directing
the Loan Trustee as to the time, method and place of conducting
any proceeding for any remedy available to the Loan Trustee or of
exercising any trust or power conferred on the Loan Trustee under
such Indenture. (Sections 6.1 and 6.4)
The ability of the holders of the Certificates issued with
respect to any one Trust to cause the Loan Trustee with respect
to any Equipment Notes held in such Trust to accelerate the
Equipment Notes under the related Indenture or to direct the
exercise of remedies by the Loan Trustee under the related
Indenture will depend, in part, upon the proportion between the
aggregate principal amount of the Equipment Notes outstanding
under such Indenture and held in such Trust and the aggregate
principal amount of all Equipment Notes outstanding under such
Indenture. If, for example, the Equipment Notes held in such
Trust constitute only 45% in aggregate principal amount of the
Equipment Notes issued under such Indenture, even if all of the
108
Certificateholders of such Trust were to instruct the Trustee of
such Trust to direct the Loan Trustee to declare the acceleration
of the Equipment Notes issued under such Indenture, the Equipment
Notes so voted by such Trust in favor of acceleration would not
alone be sufficient under the terms of the Indenture to compel
the Loan Trustee to act. Moreover, there can be no assurance
that the Certificateholders of any of the other Trusts would at
such time vote the Equipment Notes held in such Trusts in favor
of acceleration. Each Trust will hold Equipment Notes with
different terms from the Equipment Notes held in the other Trusts
and therefore the Certificateholders of a Trust may have
divergent or conflicting interests from those of the
Certificateholders of the other Trusts holding Equipment Notes
relating to the same Aircraft. In addition, so long as the same
institution acts as Trustee of two or more Trusts, in the absence
of instructions from the Certificateholders of any such Trust,
the Trustee for such Trust could for the same reason be faced
with a potential conflict of interest upon an Indenture Default.
In such event, each Trustee has indicated that it would resign as
trustee of one or all such Trusts, and a successor trustee would
be appointed in accordance with the terms of the applicable Basic
Agreement.
As an additional remedy, if an Indenture Default shall have
occurred and be continuing, the Basic Agreements provide that the
Trustee of the Trust holding Equipment Notes issued under such
Indenture may, and upon the direction of the holders of the
Certificates evidencing fractional undivided interests
aggregating not less than a majority in interest of such Trust
shall, sell for cash to any person all or part of such Equipment
Notes in accordance with applicable laws, including any
applicable securities laws. (Sections 6.1 and 6.2) Any proceeds
received by such Trustee upon any such sale shall be deposited in
an account established by such Trustee for the benefit of the
Certificateholders of such Trust for the deposit of such Special
Payments (the "Special Payments Account") and shall be
distributed to the Certificateholders of such Trust on a Special
Distribution Date. (Sections 4.1 and 4.2) The market for
Equipment Notes in default may be very limited, and there can be
no assurance that they could be sold for a reasonable price or
that the net proceeds from such sale would be equal to the unpaid
principal amount of and interest on such Equipment Notes.
Furthermore, so long as the same institution acts as Trustee of
multiple Trusts, it may be faced with a conflict in deciding from
which Trust to sell Equipment Notes to available buyers. If the
Trustee of any Trust sells any such Equipment Notes with respect
to which an Indenture Default exists for less than their
outstanding principal amount, the Certificateholders of such
Trust will receive a smaller amount of principal distributions
than anticipated and will not have any claim for the shortfall
against Continental, any Owner Trustee, any Owner Participant or
such Trustee. Furthermore, neither such Trustee nor the
Certificateholders of such Trust could take any action with
respect to any remaining Equipment Notes held in such Trust so
long as no Indenture Defaults existed with respect thereto.
Any amount, other than Scheduled Payments received on a
Regular Distribution Date, distributed to the Trustee of any
Trust by the Loan Trustee under any Indenture on account of the
Equipment Notes held in such Trust following an Indenture Default
109
under such Indenture shall be deposited in the Special Payments
Account for such Trust and shall be distributed to the
Certificateholders of such Trust on a Special Distribution Date.
In addition, if, following an Indenture Default under any
Indenture relating to a Leased Aircraft, the applicable Owner
Trustee exercises its option to redeem or purchase the
outstanding Equipment Notes issued under such Indenture as
described in the related Prospectus Supplement, the price paid by
such Owner Trustee to the Trustee of any Trust for the Equipment
Notes issued under such Indenture and held in such Trust shall be
deposited in the Special Payments Account for such Trust and
shall be distributed to the Certificateholders of such Trust on a
Special Distribution Date. (Sections 4.1, 4.2 and 6.2)
Any funds representing payments received with respect to any
Equipment Notes held in a Trust in default, or the proceeds from
the sale by the Trustee of any such Equipment Notes, held by the
Trustee in the Special Payments Account for such Trust shall, to
the extent practicable, be invested and reinvested by the Trustee
in Permitted Investments pending the distribution of such funds
on a Special Distribution Date. Permitted Investments are
defined as obligations of the United States or agencies or
instrumentalities thereof, the payment of which is backed by the
full faith and credit of the United States and which mature in
not more than 60 days or such lesser time as is required for the
distribution of any such funds on a Special Distribution Date.
(Sections 1.1 and 4.4)
The Basic Agreements provide that the Trustee of each Trust
shall, within 90 days after the occurrence of any event known to
it to be a default in respect of such Trust, give to the
Certificateholders of such Trust notice, transmitted by mail, of
all uncured or unwaived defaults with respect to such Trust known
to it, provided that, except in the case of default in the
payment of principal of, premium, if any, or interest on any of
the Equipment Notes held in such Trust, the Trustee shall be
protected in withholding such notice if it in good faith
determines that the withholding of such notice is in the
interests of such Certificateholders. (Section 7.1)
Each Basic Agreement contains a provision entitling the
Trustee of each Trust, subject to the duty of the Trustee during
a default to act with the required standard of care, to be
offered reasonable security or indemnity by the holders of the
Certificates of such Trust before proceeding to exercise any
right or power under such Basic Agreement at the request of such
Certificateholders. (Section 7.2)
In certain cases, the holders of the Certificates of a Trust
evidencing fractional undivided interests aggregating not less
than a majority in interest of such Trust may on behalf of the
holders of all the Certificates of such Trust waive any past
default or Event of Default with respect to such Trust and its
consequences and may instruct the Trustees to waive any past
default under the related Indenture or the Basic Agreement or the
applicable Trust Supplement and its consequences, except (i) a
default in the deposit of any Scheduled Payment or Special
Payment or in the distribution thereof, (ii) a default in payment
of the principal, premium, if any, or interest with respect to
any of the Equipment Notes held in such Trust and (iii) a default
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in respect of any covenant or provision of the Basic Agreement or
the related Trust Supplement that cannot be modified or amended
without the consent of each Certificateholder of such Trust
affected thereby. (Section 6.5) Each Indenture will provide
that, with certain exceptions, the holders of a majority in
aggregate unpaid principal amount of the Equipment Notes issued
thereunder may on behalf of all such holders waive any past
default or Indenture Default thereunder. In the event of a
waiver with respect to a Trust as described above, the principal
amount of the Equipment Notes issued under the related Indenture
and held in such Trust shall be counted as waived in the
determination of the majority in aggregate unpaid principal
amount of Equipment Notes required to waive a default or an
Indenture Default. Therefore, if the Certificateholders of a
Trust or Trusts waive a past default or Event of Default such
that the principal amount of the Equipment Notes held either
individually in such Trust or in the aggregate in such Trusts
constitutes the required majority in aggregate unpaid principal
amount under the applicable Indenture, such past default or
Indenture Default shall be waived.
Merger, Consolidation and Transfer of Assets
Continental will be prohibited from consolidating with or
merging into any other corporation or transferring substantially
all of its assets as an entirety to any other Person unless
(i) the surviving successor or transferee shall (a) be organized
and validly existing under the laws of the United States or any
jurisdiction thereof, (b) be a United States certificated air
carrier, if and so long as such status is a condition of
entitlement to the benefits of section 1110 of the Bankruptcy
Code (as defined below) with respect to the Owned Aircraft
Indentures and the Leases and (c) expressly assume all of the
obligations of Continental contained in the Basic Agreements, any
Trust Supplement, the Note Purchase Agreements and the Indentures
and, with respect to the Leased Aircraft Notes, the Participation
Agreements and the Leases, and any other operative documents to
which Continental was a party immediately prior to such
transaction; (ii) no Indenture Default or Lease Event of Default
shall arise as a result of such consolidation, merger or transfer
of assets and (iii) Continental shall have delivered a
certificate and an opinion or opinions of counsel indicating that
such transaction, in effect, complies with such conditions.
(Section 5.2)
The Basic Agreements do not and, except as otherwise
described in the applicable Prospectus Supplement, the Indentures
will not contain any covenants or provisions which may afford the
Trustee or Certificateholders protection in the event of a highly
leveraged transaction, including transactions effected by
management or affiliates, which may or may not result in a change
in control of Continental.
Modifications of the Basic Agreements
Each Basic Agreement contains provisions permitting
Continental and the Trustee of each Trust to enter into a
supplemental trust agreement, without the consent of the holders
of any of the Certificates held in such Trust, (i) to provide for
the formation of such Trust and the issuance of a series of
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Certificates, (ii) to evidence the succession of another
corporation to Continental and the assumption by such corporation
of Continental's obligations under such Basic Agreement and the
applicable Trust Supplement, (iii) to add to the covenants of
Continental for the benefit of holders of such Certificates or to
surrender any right or power in such Basic Agreement conferred
upon Continental, (iv) to correct or supplement any defective or
inconsistent provision of such Basic Agreement or the applicable
Trust Supplement or to make any other provisions with respect to
matters or questions arising thereunder, provided such action
shall not adversely affect the interests of the holders of such
Certificates or to cure any ambiguity or correct any mistake,
(v) to modify, eliminate or add to the provisions of such Basic
Agreement to such extent as shall be necessary to continue the
qualification of such Basic Agreement (including any supplemental
agreement) under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act") and to add to such Basic Agreement such
other provisions as may be expressly permitted by the Trust
Indenture Act, (vi) to provide for a successor Trustee or to add
to or change any provision of such Basic Agreement as shall be
necessary to facilitate the administration of the Trusts
thereunder by more than one Trustee, and (vii) to make any other
amendments or modifications to such Basic Agreement, provided
such amendments or modifications shall only apply to Certificates
issued thereafter. (Section 9.1)
The Basic Agreements also contain provisions permitting
Continental and the Trustee of each Trust, with the consent of
the holders of the Certificates of such Trust evidencing
fractional undivided interests aggregating not less than a
majority in interest of such Trust, and, with respect to any
Leased Aircraft in certain cases, with the consent of the
applicable Owner Trustee (such consent not to be unreasonably
withheld), to execute supplemental trust agreements adding any
provisions to or changing or eliminating any of the provisions of
the Basic Agreements, to the extent relating to such Trust, and
the applicable Trust Supplement, or modifying the rights of the
Certificateholders, except that no such supplemental trust
agreement may, without the consent of the holder of each
Certificate so affected thereby, (a) reduce in any manner the
amount of, or delay the timing of, any receipt by the Trustee of
payments on the Equipment Notes held in such Trust or
distributions in respect of any Certificate related to such
Trust, or change the date or place of any payment in respect of
any Certificate, or make distributions payable in coin or
currency other than that provided for in such Certificates, or
impair the right of any Certificateholder of such Trust to
institute suit for the enforcement of any such payment when due,
(b) permit the disposition of any Equipment Note held in such
Trust, except as provided in the Basic Agreements or the
applicable Trust Supplement, or otherwise deprive any
Certificateholder of the benefit of the ownership of the
applicable Equipment Notes, (c) reduce the percentage of the
aggregate fractional undivided interests of the Trust provided
for in the Basic Agreements or the applicable Trust Supplement,
the consent of the holders of which is required for any such
supplemental trust agreement or for any waiver provided for in
the Basic Agreements or such Trust Supplement, or (d) modify any
of the provisions relating to the rights of the
Certificateholders in respect of the waiver of events of default
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or receipt of payment. (Section 9.2)
Modification of Indenture and Related Agreements
In the event that a Trustee, as the holder of any Equipment
Notes held in a Trust, receives a request for its consent to any
amendment, modification or waiver under the Indenture or other
documents relating to such Equipment Notes (including any Lease
with respect to Leased Aircraft Notes), such Trustee shall send a
notice of such proposed amendment, modification or waiver to each
Certificateholder of such Trust of record as of the date of such
notice. Such Trustee shall request instructions from the
Certificateholders of such Trust as to whether or not to consent
to such amendment, modification or waiver. Such Trustee shall
vote or consent with respect to such Equipment Notes in such
Trust in the same proportion as the Certificates of such Trust
were actually voted by the holders thereof by a certain date.
Notwithstanding the foregoing, if an Event of Default in respect
of such Trust shall have occurred and be continuing, such Trustee
may, in the absence of instructions from Certificateholders
holding a majority in interest of such Trust, in its own
discretion consent to such amendment, modification or waiver and
may so notify the relevant Loan Trustee. (Section 10.1)
Termination of the Trusts
The obligations of Continental and the Trustee with respect
to a Trust will terminate upon the distribution to
Certificateholders of such Trust of all amounts required to be
distributed to them pursuant to the Basic Agreements and the
applicable Trust Supplement and the disposition of all property
held in such Trust. Such Trustee will send to each
Certificateholder of record of such Trust notice of the
termination of such Trust, the amount of the proposed final
payment and the proposed date for the distribution of such final
payment for such Trust. The final distribution to any
Certificateholder of such Trust will be made only upon surrender
of such Certificateholder's Certificates at the office or agency
of such Trustee specified in such notice of termination.
(Section 11.1)
Delayed Purchase
In the event that, on the delivery date of any Certificates,
all of the proceeds from the sale of such Certificates are not
used to purchase the Equipment Notes contemplated to be held
in the related Trust, such Equipment Notes may be purchased
by the relevant Trustee at any time on or prior to the date
specified in the applicable Prospectus Supplement. In such
event, such Trustee will hold the proceeds from the sale of
such Certificates not used to purchase such Equipment Notes
in an escrow account pending the purchase of such Equipment
Notes not so purchased. Such proceeds will be invested at
the direction and risk of, and for the account of, Continental
in certain specified investments, which may include:
(i) obligations of, or guaranteed by, the United States
Government or agencies thereof, (ii) open market commercial paper
of any corporation incorporated under the laws of the United
States of America or any State thereof rated at least P-2 or its
equivalent by Moody's Investors Service, Inc. or at least A-2 or
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its equivalent by Standard & Poor's Corporation,
(iii) certificates of deposit issued by commercial banks
organized under the laws of the United States or of any political
subdivision thereof having a combined capital and surplus in
excess of $100,000,000, which banks or their holding companies
have a short-term deposit rating of P1 by Moody's Investors
Service, Inc. or its equivalent by Standard & Poor's Corporation;
provided, however, that the aggregate amount at any one time so
invested in certificates of deposit issued by any one bank shall
not exceed 5% of such bank's capital and surplus, (iv) U.S.
dollar denominated offshore certificates of deposit issued by, or
offshore time deposits with, any commercial bank described in
(iii) or any subsidiary thereof and (v) repurchase agreements
with any financial institution having combined capital and
surplus of at least $100,000,000 with any of the obligations
described in (i) through (iv) as collateral; provided that if all
of the above investments are unavailable, the entire amounts to
be invested may be used to purchase federal funds from an entity
described in clause (iii) above; and provided further that no
investment shall be eligible as a "specified investment" unless
the final maturity date or date of return of such investment is
on or before (x) the scheduled date for the purchase of such
Equipment Notes, or (y) if no date has been scheduled for the
purchase of such Equipment Notes, the next Business Day, or
(z) if Continental has given notice that such Equipment Notes
will not be purchased, the next applicable Special Distribution
Date. Earnings on such investments in the escrow account for
each Trust will be paid to Continental periodically, upon its
demand, and Continental will be responsible for any losses.
(Section 2.2(b))
Unless otherwise specified in the applicable Prospectus
Supplement, on the next Regular Distribution Date specified in
the applicable Prospectus Supplement, Continental will pay to the
relevant Trustee an amount equal to the interest that would have
accrued on any Equipment Notes purchased after the date of the
issuance of such Certificates from the date of the issuance of
such Certificates to, but excluding, the date of the purchase
of such Equipment Notes by such Trustee. (Section 2.2(b))
Special Distribution Upon Unavailability of Aircraft
To the extent, due to a casualty to, or other event causing
the unavailability of, one or more Aircraft, that the full amount
of the proceeds from the sale of any Certificates held in the
escrow account referred to above is not used to purchase
Equipment Notes on or prior to the date specified in the
applicable Prospectus Supplement, an amount equal to the unused
proceeds will be distributed by the relevant Trustee to the
holders of record of such Certificates on a pro rata basis upon
not less than 20 days' prior notice to them as a Special
Distribution on the date specified in the applicable Prospectus
Supplement together with interest thereon at a rate equal to the
rate applicable to such Certificates, but without premium, and
Continental will pay to the relevant Trustee on such date an
amount equal to such interest. (Section 2.2(b))
The Trustees
With certain exceptions, no Trustee makes any
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representations as to the validity or sufficiency of the Basic
Agreement to which it is a party, the Trust Supplements, the
Certificates, the Equipment Notes, the Indentures, the Leases or
other related documents. No Trustee shall be liable with respect
to any series of Certificates, for any action taken or omitted to
be taken by it in good faith in accordance with the direction of
the holders of a majority in principal amount of outstanding
Certificates of such series issued under the Basic Agreement to
which it is a party. Subject to such provisions, such Trustee
shall be under no obligation to exercise any of its rights or
powers under such Basic Agreement at the request of any holders
of Certificates issued thereunder unless they shall have offered
to such Trustee indemnity satisfactory to it. Each Basic
Agreement provides that the Trustee thereunder in its individual
or any other capacity may acquire and hold Certificates issued
thereunder and, subject to certain conditions, may otherwise deal
with Continental and, with respect to the Leased Aircraft, with
any Owner Trustee or Owner Participant with the same rights it
would have if it were not the Trustee. (Sections 7.2, 7.3 and
7.4)
A Trustee may resign with respect to any or all of the
Trusts at any time, in which event Continental will be obligated
to appoint a successor trustee. If a Trustee ceases to be
eligible to continue as Trustee with respect to a Trust or
becomes incapable of acting as Trustee or becomes insolvent,
Continental may remove such Trustee, or any holder of the
Certificates of such Trust for at least six months may, on behalf
of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of such Trustee and the
appointment of a successor trustee. Any resignation or removal
of a Trustee with respect to a Trust and appointment of a
successor trustee for such Trust does not become effective until
acceptance of the appointment by the successor trustee. (Section
7.8) Pursuant to such resignation and successor trustee
provisions, it is possible that a different trustee could be
appointed to act as the successor trustee with respect to each
Trust. All references in this Prospectus to a Trustee should be
read to take into account the possibility that the Trusts could
have different successor trustees in the event of such a
resignation or removal.
Each Basic Agreement provides that Continental will pay the
reasonable fees and expenses of the Trustee thereunder and
indemnify such Trustee against certain losses and liabilities.
To secure such obligation of the Company, such Trustee will have
a lien prior to the Certificates of a series on all property and
funds held by it with respect to the Certificates of such series.
(Section 7.6)
DESCRIPTION OF THE EQUIPMENT NOTES
The statements made under this caption are summaries and
reference is made to the entire Prospectus and detailed
information appearing in the applicable Prospectus Supplement.
Where no distinction is made between the Leased Aircraft Notes
and the Owned Aircraft Notes or between their respective
Indentures, such statements refer to any Equipment Notes and any
Indenture.
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General
Each Equipment Note issued under the same Indenture will
relate to a single Aircraft. The Equipment Notes with respect to
each Aircraft will be issued under a separate Indenture either
(a) between the related Owner Trustee of a trust for the benefit
of the Owner Participant who is the beneficial owner of such
Aircraft, and the related Loan Trustee, or (b) between
Continental and the related Loan Trustee.
The Equipment Notes issued under an Indenture may rank pari
passu with each other or may be issued in two or more series of
different rank. If such Equipment Notes are issued in two or
more series of different rank, the terms and conditions upon
which each such series is senior to or subordinate to each other
such series will be set forth in the applicable Prospectus
Supplement.
With respect to each Leased Aircraft, the related Owner
Trustee has acquired or will acquire such Aircraft from
Continental or the manufacturer of such Aircraft, as the case may
be, has granted or will grant a security interest in its right,
title and interest in such Aircraft to the related Loan Trustee
as security for the payments of the related Leased Aircraft
Notes, and has leased or will lease such Aircraft to Continental
pursuant to the related Lease which has been or will be assigned
as security to the related Loan Trustee. Pursuant to each such
Lease, Continental will be obligated to make or cause to be made
rental and other payments to the related Owner Trustee in amounts
that will be sufficient to make payments of the principal and
interest scheduled to be made in respect of such Leased Aircraft
Notes when and as due and payable.
The rental obligations of Continental under each Lease and
the obligations of Continental under each Owned Aircraft
Indenture and under the Owned Aircraft Notes will be general
obligations of Continental. Except in certain circumstances
involving Continental's purchase of a Leased Aircraft and the
assumption of the Leased Aircraft Notes related thereto, the
Leased Aircraft Notes are not obligations of, or guaranteed by,
Continental. See "--Assumption of Obligations by Continental".
Principal and Interest Payments
Interest paid on the Equipment Notes held in each Trust will
be passed through to the Certificateholders of such Trust on the
dates and at the rate per annum set forth in the applicable
Prospectus Supplement until the final distribution for such
Trust. Principal paid on the Equipment Notes held in each Trust
will be passed through to the Certificateholders of such Trust in
scheduled amounts on the dates set forth in the applicable
Prospectus Supplement until the final distribution date for such
Trust.
If any date scheduled for any payment of principal, premium,
if any, or interest with respect to the Equipment Notes is not a
Business Day, such payment will be made on the next succeeding
Business Day without any additional interest.
Security
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The Leased Aircraft Notes will be secured by (i) an
assignment by the related Owner Trustee to the related Loan
Trustee of such Owner Trustee's rights (except for certain
rights, including those described below) under the Lease with
respect to the related Leased Aircraft, including the right to
receive payments of rent thereunder, (ii) a mortgage granted to
such Loan Trustee of the Owner Trustee's right, title and
interest in such Aircraft, subject to the rights of Continental
under such Lease and (iii) an assignment to such Loan Trustee of
certain of such Owner Trustee's rights with respect to such
Aircraft under the purchase agreement for such Aircraft. Under
the terms of each Lease, Continental's obligations in respect of
each Leased Aircraft will be those of a lessee under a "net
lease". Accordingly, Continental will be obligated, among other
things and at its expense, to cause each Leased Aircraft to be
duly registered, to pay (or cause to be paid) all costs of
operating such Aircraft and to maintain, service, repair and
overhaul (or cause to be maintained, serviced, repaired and
overhauled) such Aircraft.
The Owned Aircraft Notes will be secured by a mortgage
granted to the related Loan Trustee of all of Continental's
right, title and interest in and to the related Owned Aircraft
and a security interest in certain of Continental's rights with
respect to such Aircraft under the purchase agreement between
Continental and the related manufacturer. If so specified in a
Prospectus Supplement, prior to the delivery of an Owned
Aircraft, the Equipment Notes with respect thereto may be secured
by the Company's interest in the purchase agreement for such
Owned Aircraft. Under the terms of each Owned Aircraft
Indenture, Continental will be obligated, among other things and
at its expense, to cause each Owned Aircraft to be duly
registered, to pay (or cause to be paid) all costs of operating
such Aircraft and to maintain, service, repair and overhaul (or
cause to be maintained, serviced, repaired and overhauled) such
Aircraft.
Continental will be required, except under certain
circumstances, to keep each Aircraft registered under the Federal
Aviation Act of 1958, as amended (the "Aviation Act"), and to
record the Indenture and the Lease, if any, among other
documents, with respect to each Aircraft under the Aviation Act.
Such recordation of the Indenture, the Lease, if any, and other
documents with respect to each Aircraft will give the related
Loan Trustee a perfected security interest in the related
Aircraft whenever it is located in the United States or any of
its territories and possessions and, with certain exceptions, in
those jurisdictions that have ratified or adhered to the
Convention on the International Recognition of Rights in Aircraft
(the "Convention"). Continental will have the right, subject to
certain conditions, at its own expense to register each Aircraft
in countries other than the United States. Unless otherwise
specified in the applicable Prospectus Supplement, prior to any
such change in the jurisdiction of registry, the related Loan
Trustee shall have received an opinion of Continental's counsel
that, among other things, confirms that the Loan Trustee's right
to repossession under the Indenture is valid and enforceable
under the laws of such country in each case subject, in certain
cases, to certain filings, recordations or other actions.
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Subject to certain limitations, each Aircraft may also be
operated by Continental or under lease, sublease or interchange
arrangements in countries that are not parties to the Convention.
The extent to which the related Loan Trustee's security interest
would be recognized in an Aircraft located in a country that is
not a party to the Convention, and the extent to which such
security interest would be recognized in a jurisdiction adhering
to the Convention if the Aircraft is registered in a jurisdiction
not a party to the Convention, is uncertain. Moreover, in the
case of an Indenture Default, the ability of the related Loan
Trustee to realize upon its security interest in an Aircraft
could be adversely affected as a legal or practical matter if
such Aircraft were registered or located outside the United
States.
Unless otherwise specified in the applicable Prospectus
Supplement, the Equipment Notes are not cross-collateralized and
consequently the Equipment Notes issued in respect of any one
Aircraft will not be secured by any other Aircraft or, in the
case of Leased Aircraft Notes, any other Lease. Unless and until
an Indenture Default with respect to a Leased Aircraft has
occurred and is continuing, the related Loan Trustee may not
exercise any of the rights of the related Owner Trustee under the
related Lease, except the right to receive payments thereunder.
With respect to the Leased Aircraft, the assignment by the
related Owner Trustee to the related Loan Trustee of its rights
under the related Lease will exclude, among other things, rights
of such Owner Trustee and the related Owner Participant relating
to indemnification by Continental for certain matters, insurance
proceeds payable to such Owner Trustee in its individual capacity
and to such Owner Participant under liability insurance
maintained by Continental pursuant to such Lease or by such Owner
Trustee or such Owner Participant, insurance proceeds payable to
such Owner Trustee in its individual capacity or to such Owner
Participant under certain casualty insurance maintained by such
Owner Trustee or such Owner Participant pursuant to such Lease
and any rights of such Owner Participant or such Owner Trustee to
enforce payment of the foregoing amounts and their respective
rights to the proceeds of the foregoing.
Unless otherwise indicated in the applicable Prospectus
Supplement, Continental will be obligated to carry insurance with
insurers of recognized responsibility with respect to each
Aircraft, at its own cost and expense, against such risks, in
such amounts, with such deductibles or self-insurance amounts and
in such form as Continental customarily maintains with respect to
other aircraft owned or operated by Continental, in each case
similar to the respective Aircraft, and operating on similar
routes in similar geographic locations. Continental may be
permitted to maintain coverage below certain stipulated values
and, with respect to certain Aircraft, may be permitted to self-
insure, in certain circumstances. Therefore, no assurance will
be given that any insurance will be carried in the future, or, if
it is carried, as to the amount of such insurance. Continental
and any permitted sublessee of an Aircraft will be named as
insured parties under all insurance policies required by the
related Lease. The related Trustee, Loan Trustee, Owner Trustee,
if any, and Owner Participant, if any, will be named additional
insureds, which will afford each of them the rights but not the
obligations of a coinsured or an additional insured.
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Funds, if any, held from time to time by the Loan Trustee
with respect to any Aircraft, prior to the distribution thereof,
will be invested and reinvested by such Loan Trustee. Such
investment and reinvestment will be at the direction of
Continental (except in the case of a Lease Event of Default under
the applicable Lease, if any, or, in the case of an Indenture
Default under the applicable Indenture) in certain investments
described in the related Indenture. The net amount of any loss
resulting from any such investments will be paid by Continental.
Section 1110 of Title 11 of the United States Code (the
"Bankruptcy Code") provides that the right of a secured party
with a purchase money equipment security interest in, or of a
lessor or conditional vendor of, aircraft, aircraft engines,
propellers, appliances, or spare parts, as defined in Section 101
of the Aviation Act, that are subject to a purchase money
equipment security interest granted by, leased to, or
conditionally sold to, an air carrier operating under a
certificate of convenience and necessity issued by the Civil
Aeronautics Board, to take possession of such equipment in
compliance with the provisions of a purchase money equipment
security agreement, lease, or conditional sale contract, as the
case may be, is not affected by (i) the automatic stay provision
of the Bankruptcy Code, which provision enjoins repossessions by
creditors for the duration of the reorganization period, (ii) the
provision of the Bankruptcy Code allowing the debtor in
possession and/or the bankruptcy trustee to use property of the
bankruptcy estate during the bankruptcy case and (iii) any power
of the bankruptcy court to enjoin a repossession. Section 1110
of the Bankruptcy Code provides, however, that the right of a
lessor, conditional vendor or holder of a purchase money
equipment security interest to take possession of an aircraft in
the event of an event of default may not be exercised for 60 days
following the date of commencement of the reorganization
proceedings (unless specifically permitted by the bankruptcy
court) and may not be exercised at all if within such 60-day
period, the debtor in possession and/or the bankruptcy trustee
agrees to perform the debtor's obligations that become due on or
after such date and cures all existing defaults (other than
defaults resulting solely from the financial condition,
bankruptcy, insolvency or reorganization of the debtor). The
Prospectus Supplement for each offering will discuss the
availability of Section 1110 of the Bankruptcy Code with respect
to the related Aircraft.
Payments and Limitation of Liability
Each Leased Aircraft will be leased separately by the
related Owner Trustee to Continental for a term commencing on the
delivery date thereof to such Owner Trustee and expiring on a
date not earlier than the latest maturity date of the Leased
Aircraft Notes, unless previously terminated as permitted by the
terms of the related Lease. The basic rent and other payments
under each such Lease will be payable by Continental in
accordance with the terms specified in the applicable Prospectus
Supplement, and will be assigned by the related Owner Trustee
under the related Indenture to provide the funds necessary to pay
scheduled principal and interest due from such Owner Trustee on
the Leased Aircraft Notes issued under such Indenture. In
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certain cases, the basic rent payments under a Lease may be
adjusted, but each Lease will provide that under no circumstances
will rent payments by Continental be less than the scheduled
payments on the related Leased Aircraft Notes. The balance of
any basic rent payment under each Lease, after payment of amounts
due on the Leased Aircraft Notes issued under the Indenture
corresponding to such Lease, will be paid over to the applicable
Owner Trustee. Continental's obligation to pay rent and to cause
other payments to be made under each Lease will be general
obligations of Continental.
With respect to the Leased Aircraft Notes, except in certain
circumstances involving Continental's purchase of a Leased
Aircraft and the assumption of the Leased Aircraft Notes related
thereto, the Leased Aircraft Notes will not be obligations of, or
guaranteed by, Continental. With respect to the Leased Aircraft
Notes, none of the Owner Trustees, the Owner Participants or the
Loan Trustees shall be personally liable in respect of such
Leased Aircraft Notes for amounts payable under such Leased
Aircraft Notes, or, except as provided in the Indentures relating
thereto in the case of the Owner Trustees and the Indenture
Trustees, for any liability under such Indentures. Except in the
circumstances referred to above, all amounts payable under any
Leased Aircraft Notes (other than payments made in connection
with an optional redemption or purchase by the related Owner
Trustee or the related Owner Participant) will be made only from
the assets subject to the lien of the related Indenture with
respect to such Aircraft or the income and proceeds received by
the related Loan Trustee therefrom (including rent payable by
Continental).
With respect to the Leased Aircraft Notes, except as
otherwise provided in the related Indentures, no Owner Trustee
shall be personally liable for any amount payable or for any
statements, representations, warranties, agreements or
obligations under such Indentures or under such Leased Aircraft
Notes except for its own willful misconduct or gross negligence.
None of the Owner Participants shall have any duty or
responsibility under the Leased Aircraft Indentures or under such
Leased Aircraft Notes.
Continental's obligations under each Owned Aircraft
Indenture and under the Owned Aircraft Notes will be general
obligations of Continental.
Defeasance and Covenant Defeasance in Certain Circumstances
Unless otherwise specified in the applicable Prospectus
Supplement, (i) the obligations of Continental with respect to
Owned Aircraft Notes of or within any series and the obligations
of the Owner Trustee with respect to any Leased Aircraft Notes of
or within any series shall be deemed to have been discharged and
paid in full ("defeasance") (except for certain obligations,
including the obligations to register the transfer or exchange of
Equipment Notes, to replace stolen, lost, destroyed or mutilated
Equipment Notes and to maintain paying agencies and hold money
for payment in trust) or (ii) Continental shall be deemed to have
been released from its obligations with respect to certain
covenants applicable to the Equipment Notes of or within any
series ("covenant defeasance"), on the 91st day after the date of
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irrevocable deposit with the related Loan Trustee of money or
certain obligations of the United States or any agency or
instrumentality thereof the payment of which is backed by the
full faith and credit of the United States which, through the
payment of principal and interest in respect thereof in
accordance with their terms, will provide money in an aggregate
amount sufficient to pay when due (including as a consequence of
redemption in respect of which notice is given on or prior to the
date of such deposit) principal of, premium, if any, and interest
on all Equipment Notes issued thereunder in accordance with the
terms of such Indenture. Such defeasance may occur only if,
among other things, the Loan Trustee has received (a) an opinion
of counsel, to the effect that holders of such Equipment Notes
will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance or covenant
defeasance, as the case may be (such opinion of counsel, in the
case of defeasance, must refer to and be based upon a ruling of
the Internal Revenue Service or a change in applicable Federal
income tax law occurring after the date such Equipment Notes were
issued), and will be subject to federal income tax on the same
amount and in the same manner and at the same time as would have
been the case if such defeasance or covenant defeasance had not
occurred, (b) an officers' certificate and an opinion of counsel
with respect to compliance with the conditions precedent to such
defeasance or covenant defeasance and (c) any additional
conditions to such defeasance or covenant defeasance which may be
imposed on the Company. In addition, a nationally recognized
firm of independent public accounts must deliver to the Loan
Trustee a written certification as to the sufficiency of the
trust funds deposited for the defeasance or covenant defeasance
of such Equipment Notes. The Indentures do not provide the
holders of the Equipment Notes with recourse against such firm.
The Company may exercise its defeasance option with respect
to such Equipment Notes notwithstanding its prior exercise of its
covenant defeasance option. If the Company exercises its
defeasance option, payment of such Equipment Notes may not be
accelerated because of a Default or an Event of Default. If the
Company exercises its covenant defeasance option, payment of such
Equipment Notes may not be accelerated by reason of a Default or
an Event of Default with respect to the covenants to which such
covenant defeasance is applicable. However, if such acceleration
were to occur, the realizable value at the acceleration date of
the money and Government Obligations in the defeasance trust
could be less than the principal and interest then due on such
Equipment Notes, in that the required deposit in the defeasance
trust is based upon scheduled cash flow rather than market value,
which will vary depending upon interest rates and other factors.
Upon such defeasance, or upon payment in full of the
principal of, premium, if any, and interest on all Equipment
Notes issued under any Indenture on the maturity date therefor or
deposit with the applicable Loan Trustee of money sufficient
therefor no earlier than one year prior to the date of such
maturity, the holders of such Equipment Notes will have no
beneficial interest in or other rights with respect to the
related Aircraft or other assets subject to the lien of such
Indenture and such lien shall terminate. Upon the occurrence of
a covenant defeasance, the holder of the Equipment Notes will
have no beneficial interest in or other rights with respect to
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the related Aircraft or other assets subject to the lien of such
Indenture and such lien shall terminate and the Company will be
released only from its obligations to comply with certain
covenants contained in the Indenture, as more fully discussed in
the applicable Prospectus Supplement.
Assumption of Obligations by Continental
Unless otherwise specified in the applicable Prospectus
Supplement with respect to Leased Aircraft, upon the exercise by
Continental of any purchase options it may have under the related
Lease prior to the end of the term of such Lease, Continental may
assume on a full recourse basis all of the obligations of the
Owner Trustee (other than its obligations in its individual
capacity) under the Indenture with respect to such Aircraft,
including the obligations to make payments in respect of the
related Leased Aircraft Notes. In such event, certain relevant
provisions of the related Lease, including (among others)
provisions relating to maintenance, possession and use of the
related Aircraft, liens, insurance and events of default will be
incorporated into such Indenture, and the Leased Aircraft Notes
issued under such Indenture will not be redeemed and will
continue to be secured by such Aircraft. It is a condition to
such assumption that, if such Aircraft is registered under the
laws of the United States, an opinion of counsel be delivered at
the time of such assumption substantially to the effect that the
related Loan Trustee under such Indenture should, immediately
following such assumption, be entitled to the benefits of Section
1110 of the Bankruptcy Code with respect to such Aircraft
(including the engines related thereto), but such opinion need
not be delivered to the extent that the benefits of such Section
1110 are not available to the Loan Trustee with respect to such
Aircraft or any engine related thereto immediately prior to such
assumption.
FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of the anticipated
material United States federal income tax consequences of the
purchase, ownership and disposition of the Certificates to the initial
purchasers thereof and should be read in conjunction with any
additional discussion of federal income tax consequences included
in the applicable Prospectus Supplement. The discussion is based
on laws, regulations, rulings and decisions, all as in effect on
the date of this Prospectus and all of which are subject to
change or different interpretations. The discussion below does
not purport to address all of the federal income tax consequences
that may be applicable to particular categories of investors,
some of which (for example, insurance companies and foreign
investors) may be subject to special rules. The statements of
law and legal conclusions set forth herein are based upon the
opinion of Hughes Hubbard & Reed, counsel to Continental.
Investors should consult their own tax advisors in determining
the federal, state, local and any other tax consequences to them
of the purchase, ownership and disposition of the Certificates.
The Trusts are not indemnified for any federal income taxes that
may be imposed upon them, and the imposition of any such taxes
could result in a reduction in the amounts available for
distribution to the Certificate Owners of the affected Trust.
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General
Based upon an interpretation of analogous authorities under
currently applicable law, and assuming that the Trusts'
activities are limited to those currently set forth in the
relevant Basic Agreement, the Trusts should not be classified as
associations taxable as corporations, but, rather, each should be
classified as a grantor trust under subpart E, Part I of
Subchapter J of the Internal Revenue Code of 1986, as amended
(the "Code"), and each Certificate Owner of each Trust should be
treated as the owner of a pro rata undivided interest in each of
the Equipment Notes and any other property held by such Trust.
Each Certificate Owner should be required to report on its
federal income tax return its pro rata share of the entire income
from the Equipment Notes and any other property held by the
related Trust, in accordance with such Certificate Owner's method
of accounting. A Certificate Owner using the cash method of
accounting must take into account its pro rata share of income as
and when received (or deemed received) by the Trustee of such
Trust. A Certificate Owner using an accrual method of accounting
must take into account its pro rata share of income as it accrues
or is received by the Trustee of such Trust, whichever is
earlier.
A purchaser of a Certificate should be treated as purchasing
an interest in each Equipment Note and any other property in the
related Trust at a price determined by allocating the purchase
price paid for the Certificate among such Equipment Notes and
other property in proportion to their fair market values at the
time of purchase of the Certificate. Unless otherwise indicated
in a Prospectus Supplement, the Company believes that when all
the Equipment Notes have been acquired by the related Trust the
purchase price paid for a Certificate by an original purchaser of
a Certificate should be allocated among the Equipment Notes in
the related Trust in proportion to their respective principal
amounts.
If an Equipment Note held by a Trust is sold, redeemed, or
otherwise disposed of, a Certificate Owner should be considered
to have sold its pro rata share of that Equipment Note, and will
recognize gain or loss equal to the difference between its
adjusted tax basis in its interest in the Equipment Note and its
pro rata share of the amount realized by the Trust on the sale,
redemption, or disposition (except to the extent attributable to
accrued interest, which would be taxable as interest income if
not previously included in income). Subject to the market
discount provisions of the Code (described below), any such gain
or loss will be capital gain or loss if the Equipment Note is a
capital asset in the hands of the Certificate Owner and will be
long-term capital gain or loss if the Equipment Note is
considered to have been held for more than one year. Net long-
term capital gains of individuals are, under certain
circumstances, taxed at lower rates than items of ordinary
income.
Sales of Certificates
A Certificate Owner that sells a Certificate should
recognize gain or loss as though it sold its pro rata portion of
123
the assets held by the Trust, with the federal income tax
consequences described above.
Original Issue Discount
The Equipment Notes may be issued with original issue
discount ("OID"). The Prospectus Supplement will state whether
any Equipment Notes to be held by the related Trust will be
issued with OID. Generally, a holder of a debt instrument issued
with OID that is not de minimis must include such OID in income
for federal income tax purposes as it accrues, in advance of the
receipt of the cash attributable to such income, under a method
that takes into account the compounding of interest.
Market Discount
A Certificate Owner should be considered to have acquired an
interest in an Equipment Note at a "market discount" to the
extent the remaining principal amount of the Equipment Note (or,
in the case of an Equipment Note issued with OID, its adjusted
issue price) allocable to such Certificate Owner's Certificate
exceeds such Certificate Owner's tax basis allocable to such
Equipment Note, unless the excess does not exceed a prescribed de
minimis amount. In the event such excess exceeds the de minimis
amount, the Certificate Owner should be subject to the market
discount rules of Sections 1276 to 1278 of the Code with regard
to its interest in the Equipment Note.
In the case of a sale, redemption or certain other
dispositions of indebtedness subject to the market discount
rules, Section 1276 of the Code requires that gain, if any, from
such sale, redemption, or disposition be treated as ordinary
income to the extent such gain represents market discount that
has accrued during the period in which such indebtedness was
held.
In the case of a partial principal payment on indebtedness
subject to the market discount rules, Section 1276 of the Code
requires that such payment be included in gross income as
ordinary income to the extent such payment does not exceed the
market discount that has accrued during the period such
indebtedness was held. The amount of any accrued market discount
later required to be included in gross income as ordinary income
upon a sale or disposition or subsequent partial principal
payment will be reduced by the amount of accrued market discount
previously so included.
Generally, market discount accrues under a straight line
method, or, at the election of the taxpayer, a constant interest
method. However, in the case of installment obligations (such as
certain or all of the Equipment Notes), the manner in which
market discount is to be accrued has been left to Treasury
regulations not yet issued. Until such Treasury regulations are
issued, the explanatory Conference Committee Report to the Tax
Reform Act of 1986 (the "Conference Report") indicates that
holders of installment obligations with market discount may elect
to accrue market discount either on the basis of a constant
interest rate or as follows: in the case of an installment
obligation issued without OID, the amount of market discount that
is deemed to accrue during any accrual period is the amount of
124
market discount that bears the same ratio to the total amount of
remaining market discount that the amount of stated interest paid
in the accrual period bears to the total amount of stated
interest remaining to be paid on the installment obligation as of
the beginning of such period, and, in the case of an installment
obligation issued with OID, market discount is deemed to occur
during any accrual period in proportion to the accrual of OID for
such period.
Under Section 1277 of the Code, if in any taxable year
interest paid or accrued on indebtedness incurred or continued to
purchase or carry indebtedness subject to the market discount
rules exceeds the interest currently includible in income with
respect to such indebtedness, deduction of the excess interest
must be deferred to the extent of the market discount allocable
to the taxable year. The deferred portion of any interest
expense will generally be deductible when such market discount is
included in income upon the sale or other disposition (including
repayment) of the indebtedness.
Section 1278 of the Code allows a taxpayer to make an
election to include market discount in his gross income as it
accrues. If such election is made, the rules of Sections 1276
and 1277 (described above) will not apply to the taxpayer.
Premium
A Certificate Owner should generally be considered to have
acquired an interest in an Equipment Note at a premium to the
extent such Certificate Owner's tax basis allocable to such
Equipment Note exceeds the remaining principal amount of the
Equipment Note allocable to such Certificate Owner's Certificate.
In that event, a Certificate Owner that holds such Certificate as
a capital asset may elect to amortize such premium as an offset
to interest income under Section 171 of the Code with
corresponding reductions in such Certificate Owner's tax basis in
such Equipment Note. Generally, such amortization is on a
constant yield basis. However, in the case of installment
obligations (such as certain or all of the Equipment Notes), the
Conference Report indicates a Congressional intent that
amortization will be in accordance with the same rules that will
apply to the accrual of market discount on installment
obligations. See "Federal Income Tax Consequences -- Market
Discount".
If Equipment Notes may be called at a premium prior to
maturity, amortizable premium may be determined by reference to
an early call date. Due to the complexities of the amortizable
premium rules, particularly where there is more than one possible
call date and the amount of any premium is uncertain, Certificate
Owners are urged to consult their own tax advisors as to the
amount of any such amortizable premium.
Backup Withholding
Payments made on the Certificates, and proceeds from the
sale of the Certificates to or through certain brokers, may be
subject to a "backup" withholding tax of 31% unless the
Certificate Owner complies with certain reporting procedures or
is exempt from such requirements (and adequately demonstrates
125
such exemption) under section 6049(b)(4) of the Code. Any such
withheld amounts are allowed as a credit against the Certificate
Owner's federal income tax.
Information Reporting
Information reports will be made by the relevant Trustee to
the Internal Revenue Service, and to Certificate Owners that are
not exempt from the reporting requirements, annually or as
otherwise required with respect to interest paid (and accrued
OID, if any) on the Certificates.
CERTAIN STATE TAX CONSEQUENCES
In respect of each offering of Certificates, a separate Trust for
each series of Certificates being offered will be formed pursuant
to a Basic Agreement between the Company and either Shawmut Bank
Connecticut, a National Association with its corporate trust
office in Connecticut ("Shawmut"), as trustee, or First Security
Bank of Utah, a National Association with its corporate trust
office in Utah ("First Security Bank"), as trustee. Set forth
below is a description of the opinion of Shipman & Goodman as to
certain Connecticut state tax consequences for each Trust under
which Shawmut is Trustee and the opinion of Ray, Quinney &
Nebeker as to certain Utah state tax consequences for each Trust
under with First Security Bank is Trustee.
Each of Shipman & Goodwin, counsel to Shawmut, and Ray, Quinney &
Nebeker, counsel to First Security Bank, has advised the Company
that, in its opinion, under currently applicable law, assuming
that the Trusts will not be taxable as corporations, but, rather,
will be classified as grantor trusts under subpart E, Part I of
Subchapter J of the Code, and that the Trusts' activities are
limited to those currently set forth in the relevant Basic
Agreement (i) the Trusts will not be subject to any tax
(including, without limitation, net or gross income, tangible or
intangible property, net worth, capital, franchise or doing
business tax), fee or other governmental charge under the laws of
the State of Connecticut or the State of Utah, respectively, or
any political subdivision thereof and (ii) Certificate Owners
that are not residents of or otherwise subject to tax in
Connecticut or Utah, respectively, will not be subject to any tax
(including, without limitation, net or gross income, tangible or
intangible property, net worth, capital, franchise or doing
business tax), fee or other governmental charge under the laws of
the State of Connecticut or the State of Utah, respectively, or
any political subdivision thereof as a result of purchasing,
holding (including receiving payments with respect to) or selling
a Certificate. Neither the Trusts nor the Certificate Owners
will be indemnified for any state or local taxes imposed on them,
and the imposition of any such taxes on a Trust could result in a
reduction in the amounts available for distribution to the
Certificate Owners of such Trust. In general, should a
Certificate Owner or a Trust be subject to any state or local tax
which would not be imposed if the Trustee were located in a
different jurisdiction in the United States, the Trustee will
resign and a new Trustee in such other jurisdiction will be
appointed.
ERISA CONSIDERATIONS
126
Unless otherwise indicated in the applicable Prospectus
Supplement, the Certificates may, subject to certain legal
restrictions, be purchased and held by an employee benefit plan
(a "Plan") subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or an individual
retirement account or an employee benefit plan subject to section
4975 of the Code. A fiduciary of a Plan must determine that the
purchase and holding of a Certificate is consistent with its
fiduciary duties under ERISA and does not result in a non-exempt
prohibited transaction as defined in section 406 of ERISA or
section 4975 of the Code. Employee benefit plans which are
governmental plans (as defined in section 3(32) of ERISA) and
certain church plans (as defined in section 3(33) of ERISA) are
not subject to Title I of ERISA or section 4975 of the Code. The
Certificates may, subject to certain legal restrictions, be
purchased and held by such plans.
INFORMATION TO BE PROVIDED BY PROSPECTUS SUPPLEMENT
The Prospectus Supplement which accompanies this Prospectus
provides (i) more detailed information on use of proceeds
(including the interest rate and maturity date of debt to be
repaid, if any, with the proceeds of Certificates offered by such
Prospectus Supplement), (ii) the amount of debt ranking senior to
or in parity with the securities being offered by such Prospectus
Supplement and (iii) the anticipated market for the securities
being offered by such Prospectus Supplement. The Prospectus
Supplement also provides a diagram illustrating the transactions
pursuant to which the specific series of Certificates are being
offered.
PLAN OF DISTRIBUTION
The Certificates being offered hereby may be sold in any one or
more of the following ways from time to time: (i) through agents;
(ii) to or through underwriters; (iii) through dealers; and (iv)
directly to other purchasers.
The distribution of the Certificates may be effected from time to
time in one or more transactions at a fixed price or prices,
which may be changed, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at
negotiated prices.
Offers to purchase the Certificates may be solicited by agents
designated by Continental from time to time. Any such agent
involved in the offer or sale of the Certificates in respect of
which this Prospectus is delivered will be named, and any
commissions payable by Continental to such agent will be set
forth, in the applicable Prospectus Supplement. Unless otherwise
indicated in such Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment.
Any such agent may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the Certificates so offered
and sold.
If the Certificates are sold by means of an underwritten
offering, Continental will execute an underwriting agreement with
an underwriter or underwriters at the time an agreement for such
127
sale is reached, and the names of the specific managing
underwriter or underwriters, as well as any other underwriters,
and the terms of the transaction, including commissions,
discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in the Prospectus Supplement
which will be used by the underwriters to make offers and sales
of the Certificates in respect of which this Prospectus is
delivered to the public. If underwriters are utilized in the
sale of the Certificates in respect of which this Prospectus is
delivered, the Certificates will be acquired by the underwriters
for their own account and may be resold from time to time in one
or more transactions, including negotiated transactions, at fixed
public offering prices or at varying prices determined by the
underwriters at the time of sale. The Certificates may be
offered to the public either through underwriting syndicates
represented by managing underwriters or directly by the managing
underwriters. If any underwriter or underwriters are utilized in
the sale of the Certificates, unless otherwise indicated in the
Prospectus Supplement, the underwriting agreement will provide
that the obligations of the underwriters are subject to certain
conditions precedent and that the underwriters with respect to a
sale of the Certificates will be obligated to purchase all such
Certificates if any are purchased. Continental does not intend
to apply for listing of the Certificates on a national securities
exchange. If the Certificates are sold by means of an
underwritten offering, the underwriters may make a market in the
Certificates as permitted by applicable laws and regulations. No
underwriter would be obligated, however, to make a market in the
Certificates and any such market making could be discontinued at
any time at the sole discretion of such underwriter.
Accordingly, no assurance can be given as to the liquidity of, or
trading markets for, the Certificates.
If a dealer is utilized in the sale of the Certificates in
respect of which this Prospectus is delivered, such Certificates
will be sold to the dealer as principal. The dealer may then
resell such Certificates to the public at varying prices to be
determined by such dealer at the time of resale. Any such dealer
may be deemed to be an underwriter, as such term is defined in
the Securities Act, of the Certificates so offered and sold. The
name of the dealer and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Offers to purchase the Certificates may be solicited directly and
the sale thereof may be made directly to institutional investors
or others, who may be deemed to be underwriters within the
meaning of the Securities Act with respect to any resale thereof.
In addition, certain executive officers of the Company may engage
in solicitations of offers to purchase Certificates. The terms
of any such sales will be described in the Prospectus Supplement
relating thereto.
Agents, underwriters and dealers may be entitled under relevant
agreements to indemnification or contribution by Continental
against certain liabilities, including liabilities under the
Securities Act.
Agents, underwriters and dealers may engage in transactions with,
or perform services for, Continental in the ordinary course of
business.
128
The following information is included in this Prospectus because
Certificates are to be offered and sold in the State of Florida.
The Company pays a small fee (approximately $83,000 in 1995) to
Cubana Airlines, a company located in Cuba, in connection with
overflights of Cuba. This information is accurate as of the date
of this Prospectus. Current information concerning the business
dealings of the Company or its affiliates with the government of
Cuba or with any person or affiliate located in Cuba may be
obtained from the Florida Department of Banking and Finance,
Division of Securities and Investor Protection, The Capitol,
Tallahassee, Florida 32399-0350, telephone number (904) 488-9805.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus
Supplement, the validity of the Certificates offered hereby has
been passed upon for Continental by Hughes Hubbard & Reed, 1
Battery Park Plaza, New York, New York 10004. Unless otherwise
indicated in the applicable Prospectus Supplement, Hughes Hubbard
& Reed will rely on the opinions of counsel for each Trustee for
the Certificates of each Trust, as to certain matters relating to
the authorization, execution and delivery of such Certificates
by, and the valid and binding effect thereof on, such Trustee.
EXPERTS
The consolidated financial statements (including schedules
incorporated by reference) of Continental Airlines, Inc. at
December 31, 1995 and 1994 and for each of the two years ended
December 31, 1995 and for 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 through April 27,
1993, incorporated by reference in this Prospectus and
Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon
included therein and incorporated herein by reference, in
reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
129
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No person has been authorized to give any
information or to make any representations other
than those contained or incorporated by reference
in this Prospectus or in any accompanying
Prospectus Supplement in connection with the offer
contained in this Prospectus and any accompanying
Prospectus Supplement, and, if given or made, such
information or representations must not be relied
upon as having been authorized by the Company or
any underwriters, agents or dealers. Neither this
Prospectus nor any accompanying Prospectus
Supplement constitutes an offer to sell or the
solicitation of an offer to buy securities in any
jurisdiction to any person to whom it is unlawful
to make such offer or solicitation. Neither the
delivery of this Prospectus or any accompanying
Prospectus Supplement nor any sale made hereunder
and thereunder shall, under any circumstances,
create an implication that there has been no
change in the affairs of the Company since the
date hereof or thereof or that the information
contained herein or therein is correct at any time
subsequent to the date hereof or thereof.
_______________________
TABLE OF CONTENTS
Available Information
Incorporation of Certain Documents by
Reference
The Company
Formation of the Trusts
Use of Proceeds
Ratio of Earnings to Fixed Charges
Description of the Certificates
Description of the Equipment Notes
Federal Income Tax Consequences
Certain State Tax Consequences
ERISA Considerations
Information to be Provided by Prospectus
Supplement
Plan of Distribution
Legal Opinions
Experts
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130
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Continental
Airlines, Inc.
Pass Through Certificates
-------------------
PROSPECTUS
-------------------
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131
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 MAY 30, 1996
PROSPECTUS
Continental Airlines, Inc.
Debt Securities
Continental Airlines, Inc. (the "Company" or "Continental")
may from time to time offer, together or separately, its debt
securities, consisting of debentures, notes and/or other evidences
of indebtedness representing unsecured obligations of the Company
(the "Debt Securities"), in amounts, at prices and on terms to be
determined at the time of offering. The Debt Securities offered
pursuant to this Prospectus may be issued as unsecured and
unsubordinated Debt Securities ("Senior Debt Securities") or as
unsecured and subordinated Debt Securities ("Subordinated Debt
Securities"), in one or more series and will be limited to
$510,733,000 aggregate principal amount (or (i) its equivalent
(based on the applicable exchange rate at the time of sale), if
Debt Securities are issued with principal amounts denominated in
one or more foreign currencies or currency units as shall be
designated by the Company, or (ii) such greater amount, if Debt
Securities are issued at an original issue discount, as shall
result in aggregate proceeds of up to $510,733,000). The Debt
Securities will effectively rank junior to (i) any secured
indebtedness of the Company to the extent of the assets securing
such indebtedness and (ii) any indebtedness of the Company's
subsidiaries to the extent of the assets of such subsidiaries.
As March 31, 1996, the Company had aggregate indebtedness
of $986 million secured by various of its assets, and
its subsidiaries had aggregate indebtedness of $261 million
outstanding to third parties. At the same date, the Company had
$117 million of indebtedness that ranked pari passu with the
Senior Debt Securities and senior to the Subordinated Debt
Securities. Certain specific terms of the particular Debt
Securities in respect of which this Prospectus is being delivered
(the "Offered Securities") are set forth in the accompanying
Prospectus Supplement (the "Prospectus Supplement"), including,
where applicable: the specific designation (including whether the
Offered Securities are Senior Debt Securities or Subordinated
Debt Securities); the aggregate principal amount; the
denomination; the maturity; the prepayment premium, if any; the
rate (which may be fixed or variable) at which such Debt
Securities will bear interest or the method of calculating such
132
rate, if any; the time of payment of interest, if any; the place
or places where principal of, premium, if any, and interest, if
any, on such Debt Securities will be payable; the currency in
which principal of, premium, if any, and interest, if any, on
such Debt Securities will be payable; terms, if any, for
conversion into shares of the Company's Class B common stock, par
value $.01 per share ("Class B common stock"); any terms of
redemption at the option of the Company or the holder; any sinking
fund provisions; the initial public offering price; and other
special terms. The Debt Securities may be denominated in United
States dollars or, at the option of the Company if so specified in
the applicable Prospectus Supplement, in one or more foreign
currencies or currency units. The Debt Securities may be issued in
registered form or bearer form, or both. If so specified in the
applicable Prospectus Supplement, Debt Securities of a series may
be issued in whole or in part in the form of one or more temporary
or permanent global securities.
--------------------------------
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 Company may sell the Debt Securities to or through
underwriters, through dealers or agents or directly to purchasers.
See "Plan of Distribution". The accompanying Prospectus Supplement
sets forth the names of any underwriters, dealers or agents
involved in the sale of the Offered Securities in respect of which
this Prospectus is being delivered and any applicable fee,
commission or discount arrangements with them.
This Prospectus may not be used to consummate sales of Debt
Securities unless accompanied by a Prospectus Supplement.
The date of this Prospectus is , 1996.
133
No dealer, salesman or other person has been authorized to
give any information or to make any representation not contained in
this Prospectus or any accompanying Prospectus Supplement and, if
given or made, such information or representation must not be
relied upon as having been authorized by the Company or any
underwriter, broker, dealer or agent. This Prospectus and any
accompanying Prospectus Supplement do not constitute an offer to
sell or a solicitation of an offer to buy any of the securities
offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction.
--------------------------------
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.
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 of 1933, as amended (the "Securities
Act"). This Prospectus omits certain of the information contained
in the Registration Statement, and reference is hereby made to the
Registration Statement for further information with respect to
Continental and Holdings and the securities offered hereby. Although
statements concerning and summaries of certain documents are contained
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
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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 the 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 Forms 8-K, filed on January 31,
1996, March 26, 1996 and May 7, 1996.
All reports and any definitive proxy or information statements
filed by Continental pursuant to Section 13(a), 13(c), 14 or 15(d)
of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Securities offered
hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or
deemed to be incorporated herein by reference, or contained in this
Prospectus, shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
Continental will provide without charge to each person to whom
this Prospectus is delivered, upon the written or oral request of
such person, a copy of any or all documents incorporated herein by
reference, other than exhibits to such documents (unless such
exhibits are specifically incorporated by reference into such
documents). Requests for such documents should be directed to
Continental Airlines, Inc., 2929 Allen Parkway, Suite 2010,
Houston, Texas 77019, Attention: Secretary, telephone (713) 834-
2950.
THE COMPANY
Continental Airlines, Inc. is a major United States air
carrier engaged in the business of transporting passengers, cargo
and mail. Continental is the fifth largest United States airline
(as measured by revenue passenger miles in the first three months
of 1996) and, together with its wholly owned subsidiary,
Continental Express, Inc. ("Express"), and its 91%-owned
subsidiary, Continental Micronesia, Inc. ("CMI"), serves 175
airports worldwide.
The Company operates its route system primarily through
domestic hubs at Newark, Houston Intercontinental and Cleveland,
and a Pacific hub on Guam and Saipan. Each of Continental's
three U.S. hubs is located in a large business and population
center, contributing to a high volume of "origin and destination"
traffic. The Guam/Saipan hub is strategically located to provide
service from Japanese and other Asian cities to popular resort
destinations in the western Pacific. Continental is the primary
carrier at each of these hubs, accounting for 51%, 78%, 54% and
58% of all daily jet departures, respectively.
Continental directly serves 118 U.S. cities, with additional
cities (principally in the western and southwestern United
135
States) connected to Continental's route system under agreements
with America West Airlines, Inc. ("America West"). Internationally,
Continental flies to 57 destinations and offers
additional connecting service through alliances with foreign
carriers. Continental operates 52 weekly departures to five
European cities and markets service to four other cities through
code-sharing agreements. Continental is one of the leading
airlines providing service to Mexico and Central America, serving
more destinations in Mexico than any other United States airline.
In addition, Continental flies to four cities in South America
and plans to commence service between Newark and Bogota,
Colombia, with service on to Quito, Ecuador, in June 1996.
Through its Guam/Saipan hub, Continental provides extensive
service in the western Pacific, including service to more
Japanese cities than any other United States carrier.
The Company is a Delaware corporation. Its executive offices
are located at 2929 Allen Parkway, Suite 2010, Houston, Texas
77019, and its telephone number is (713) 834-2950.
RATIOS OF EARNINGS TO FIXED CHARGES
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
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 the American Institute of Certified
Public Accountants' Statement of Position 90-7 "Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code".
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 fixed charges. Additional earnings
of $316 million, $131 million, $979 million, $60 million,
$667 million and $28 million, respectively, would have been
required to achieve ratios of earnings to fixed charges of
1.0. The ratio of earnings to fixed charges for the year
ended December 31, 1995 was 1.53. The ratio of earnings to
fixed charges for the three months ended March 31, 1996 was 1.70.
For purposes of calculating this ratio, earnings consist of
earnings before taxes and minority interest plus interest expense
(net of capitalized interest), the portion of rental expense
representative of interest expense and amortization of previously
capitalized interest. Fixed charges consist of interest expense
and the portion of rental expense representative of interest
expense.
USE OF PROCEEDS
Unless otherwise indicated in an applicable Prospectus
Supplement, the net proceeds to Continental from the sale of the
Securities offered by Continental hereby will be added to the
working capital of Continental and will be available for general
136
corporate purposes, among which may be repayment of outstanding
indebtedness and the financing of capital expenditures by
Continental.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued either as Senior Debt
Securities or Subordinated Debt Securities. The Senior Debt
Securities are to be issued under an Indenture between Continental
and Bank One, Texas, National Association, as Trustee (the "Senior
Indenture"). The Subordinated Debt Securities are to be issued
under an Indenture between Continental and WTC Corporate Trust
Services, as Trustee (the "Subordinated Indenture"). In this
Prospectus, the Senior Indenture and the Subordinated Indenture are
sometimes collectively referred to as the "Indentures" and
individually as an "Indenture", and the trustees thereunder are
sometimes collectively referred to as the "Trustees" and
individually as a "Trustee". A copy of each Indenture is filed as
an exhibit to the Registration Statement of which this Prospectus
is a part. The following descriptions are summaries, and reference
is made to the detailed provisions of the Indentures. Capitalized
terms used but not defined below under "Description of Debt
Securities" are used as defined in the Indentures. The Indentures
are substantially identical, except for certain provisions relating
to subordination.
The Debt Securities offered pursuant to this Prospectus will
be limited to $1,000,000,000 aggregate principal amount (or (i) its
equivalent (based on the applicable exchange rate at the time of
sale), if Debt Securities are issued with principal amounts
denominated in one or more foreign currencies or currency units as
shall be designated by the Company, or (ii) such greater amount, if
Debt Securities are issued at an original issue discount, as shall
result in aggregate proceeds of up to $510,733,000). The
statements herein relating to the Debt Securities and the
Indentures are summaries, and reference is made to the detailed
provisions of the Indentures, including the definitions therein of
certain terms capitalized in this Prospectus. Without limiting the
generality of the preceding sentence, whenever particular sections
or defined terms of the Indentures are referred to herein or in a
Prospectus Supplement, such sections or defined terms are
incorporated herein or therein by reference. A glossary of certain
defined terms used herein with respect to the Debt Securities is
set forth under the heading "Glossary" below. Citations to certain
relevant sections of the Indentures appear below in parentheses.
General
The Indentures do not limit the aggregate principal amount
of Debt Securities which may be issued thereunder and provide
that Debt Securities may be issued from time to time in one or
more series. Senior Debt Securities will be unsecured and
unsubordinated obligations of the Company and will rank on a
parity with all other unsecured and unsubordinated indebtedness
of the Company. Subordinated Debt Securities will be unsecured
obligations of the Company and will be subordinate in right of
payment to all Senior Debt. The Debt Securities will effectively
rank junior to (i) any secured indebtedness of the Company to the
extent of the assets securing such indebtedness and (ii) any
indebtedness of the Company's subsidiaries to the extent of the
137
assets of such subsidiaries. As of March 31, 1996, the Company
had aggregate indebtedness of $986 million secured by
various of its assets, and its subsidiaries had aggregate
indebtedness of $261 million outstanding to third parties. At
the same date, the Company had $117 million of indebtedness
that ranked pari passu with the Senior Debt Securities and senior
to the Subordinated Debt Securities. The accompanying Prospectus
Supplement or the information incorporated herein by reference
will set forth the amount of secured indebtedness of the Company
and indebtedness of the Company's subsidiaries that effectively
ranks senior to the Debt Securities and the indebtedness of the
Company that ranks pari passu with the Senior Debt Securities and
senior to the Subordinated Debt Securities.
Reference is made to the Prospectus Supplement which
accompanies this Prospectus for a description of the specific
series of Debt Securities being offered thereby, including: (1)
the specific designation of such Debt Securities, including whether
the Debt Securities are Senior Debt Securities or Subordinated Debt
Securities; (2) any limit upon the aggregate principal amount of
such Debt Securities; (3) the date or dates on which the principal
of such Debt Securities will mature or the method of determining
such date or dates; (4) the rate or rates (which may be fixed or
variable) at which such Debt Securities will bear interest, if any,
or the method of calculating such rate or rates; (5) the date or
dates from which interest, if any, will accrue or the method by
which such date or dates will be determined; (6) the date or dates
on which interest, if any, will be payable and the record date or
dates therefor; (7) the place or places where principal of,
premium, if any, and interest, if any, on such Debt Securities will
be payable; (8) the period or periods within which, the price or
prices at which, the currency or currencies (including currency
units) in which, and the terms and conditions upon which, such Debt
Securities may be redeemed, in whole or in part, at the option of
the Company; (9) the obligation, if any, of the Company to redeem
or purchase such Debt Securities pursuant to any sinking fund or
analogous provisions, upon the happening of a specified event, or
at the option of a holder thereof or of the Company and the period
or periods within which, the price or prices at which and the terms
and conditions upon which, such Debt Securities shall be redeemed
or purchased, in whole or in part, pursuant to such rights or
obligations; (10) the denominations in which such Debt Securities
are authorized to be issued; (11) the currency or currency units
for which Debt Securities may be purchased or in which Debt
Securities may be denominated and/or the currency or currency units
in which principal of, premium, if any, and/or interest, if any, on
such Debt Securities will be payable and whether the Company or the
holders of any such Debt Securities may elect to receive payments
in respect of such Debt Securities in a currency or currency units
other than that in which such Debt Securities are stated to be
payable; (12) if other than the principal amount thereof, the
portion of the principal amount of such Debt Securities which will
be payable upon declaration of the acceleration of the maturity
thereof or the method by which such portion shall be determined;
(13) the person to whom any interest on any such Debt Security
shall be payable if other than the person in whose name such Debt
Security is registered on the applicable record date; (14) any
addition to, or modification or deletion of, any Event of Default
or any covenant of the Company specified in the Indenture with
respect to such Debt Securities; (15) the application, if any, of
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such means of defeasance or covenant defeasance as may be specified
for such Debt Securities and coupons; (16) whether such Debt
Securities are to be issued in whole or in part in the form of one
or more temporary or permanent global securities and, if so, the
identity of the depositary for such global security or securities;
(17) the terms, if any, upon which Debt Securities may be converted
into stock or other securities of the Company, including the
initial conversion price or conversion rate, the conversion period
and other conversion provisions; (18) whether the Debt Securities
are issuable as registered Debt Securities, bearer Debt Securities
or both, and the terms upon which bearer Debt Securities may be
exchanged for registered Debt Securities; (19) if applicable, the
terms of any blockage periods and any other special terms of
subordination; and (20) any other special terms pertaining to such
Debt Securities, including any modification of the terms set forth
herein. Unless otherwise specified in the applicable Prospectus
Supplement, the Debt Securities will not be listed on any
securities exchange. (Section 3.1)
Unless otherwise specified in the applicable Prospectus
Supplement, Debt Securities will be issued in fully registered form
without coupons. Where Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including
special offering restrictions and special Federal income tax
considerations, applicable to any such Debt Securities and to
payment on and transfer and exchange of such Debt Securities will
be described in the applicable Prospectus Supplement. Bearer Debt
Securities will be transferable by delivery. (Section 3.5)
Debt Securities may be sold at a substantial discount below
their stated principal amount, bearing no interest or interest at
a rate which at the time of issuance is below market rates.
Certain Federal income tax consequences and special considerations
applicable to any such Debt Securities will be described in the
applicable Prospectus Supplement.
If the purchase price of any Debt Securities is payable in one
or more foreign currencies or currency units or if any Debt
Securities are denominated in one or more foreign currencies or
currency units or if the principal of, premium, if any, or
interest, if any, on any Debt Securities is payable in one or more
foreign currencies or currency units, the restrictions, elections,
certain Federal income tax considerations, specific terms and other
information with respect to such issue of Debt Securities and such
foreign currency or currency units will be set forth in the
applicable Prospectus Supplement.
The Indentures do not contain any covenant or provision which
may afford holders of the Debt Securities protection in the event
of a highly leveraged transaction which may or may not result in a
change of control of the Company.
Any covenants or other provisions included in a supplement or
amendment to the Indentures for the benefit of the holders of any
particular series of Debt Securities will be described in the
applicable Prospectus Supplement.
Glossary
Set forth below is a glossary of certain of the defined terms
139
used in this Prospectus with respect to the Debt Securities.
Reference is made to the Indentures for the full definition of such
terms, as well as any capitalized terms used herein for which no
definition is provided.
"Debt Securities" shall have the meaning set forth on the
cover page.
"Default" shall have the meaning set forth in the Section
entitled "Events of Default, Notice and Certain Rights on Default."
"Depositary" shall have the meaning set forth in the Section
entitled "Global Debt Securities."
"Offered Securities" shall have the meaning set forth on the
cover page.
"Registered Global Security" shall have the meaning set forth
in the Section entitled "Global Debt Securities."
"Senior Debt Securities" shall have the meaning set forth on
the cover page.
"Subordinated Debt Securities" shall have the meaning set
forth on the cover page.
Payment, Registration, Transfer and Exchange
Unless otherwise provided in the applicable Prospectus
Supplement, payments in respect of the Debt Securities will be made
in the designated currency at such office or agency of the Company
maintained for that purpose as the Company may designate from time
to time, except that, at the option of the Company, interest
payments, if any, on Debt Securities in registered form may be made
(i) by checks mailed by the Trustee to the holders of Debt
Securities entitled thereto at their registered addresses or (ii)
by wire transfer to an account maintained by the Person entitled
thereto as specified in the Register. (Sections 3.7(a) and 9.2)
Unless otherwise indicated in an applicable Prospectus Supplement,
payment of any installment of interest on Debt Securities in
registered form will be made to the Person in whose name such Debt
Security is registered at the close of business on the regular
record date for such interest. (Section 3.7(a))
Payment in respect of Debt Securities in bearer form will be
payable in the currency and in the manner designated in the
Prospectus Supplement, subject to any applicable laws and
regulations, at such paying agencies outside the United States as
the Company may appoint from time to time. The paying agents
outside the United States initially appointed by the Company for a
series of Debt Securities will be named in the Prospectus
Supplement. The Company may at any time designate additional
Paying Agents or rescind the designation of any paying agents,
except that, if Debt Securities of a series are issuable as
Registered Securities, the Company will be required to maintain at
least one paying agent in each Place of Payment for such series
and, if Debt Securities of a series are issuable as Bearer
Securities, the Company will be required to maintain a Paying Agent
in a Place of Payment outside the United States where Debt
Securities of such series and any coupons appertaining thereto may
140
be presented and surrendered for payment. (Section 9.2)
Unless otherwise provided in the applicable Prospectus
Supplement, Debt Securities in registered form will be transferable
or exchangeable at the agency of the Company maintained for such
purpose as designated by the Company from time to time. (Sections
3.5 and 9.2) Debt Securities may be transferred or exchanged
without service charge, other than any tax or other governmental
charge imposed in connection therewith. (Section 3.5)
Global Debt Securities
The Debt Securities of a series may be issued in whole or in
part in the form of one or more fully registered global securities
(a "Registered Global Security") that will be deposited with a
depositary (the "Depositary") or with a nominee or custodian for
the Depositary identified in the applicable Prospectus Supplement.
In such a case, one or more Registered Global Securities will be
issued in a denomination or aggregate denominations equal to the
portion of the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Registered
Global Security or Securities. Unless and until it is exchanged in
whole or in part for Debt Securities in definitive certificated
form, a Registered Global Security may not be registered for
transfer or exchange except as a whole by the Depositary for such
Registered Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of
such Depositary or by such Depositary or any such nominee to a
successor Depositary for such series or a nominee of such successor
Depositary and except in the circumstances described in the
applicable Prospectus Supplement. (Section 3.5)
The specific terms of the depositary arrangement with respect
to any portion of a series of Debt Securities to be represented by
a Registered Global Security will be described in the applicable
Prospectus Supplement. The Company expects that the following
provisions will apply to depositary arrangements.
Upon the issuance of any Registered Global Security, and the
deposit of such Registered Global Security with or on behalf of the
Depositary for such Registered Global Security, the Depositary will
credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by
such Registered Global Security to the accounts of institutions
("participants") that have accounts with the Depositary or its
nominee. The accounts to be credited will be designated by the
underwriters or agents engaging in the distribution of such Debt
Securities or by the Company, if such Debt Securities are offered
and sold directly by the Company. Ownership of beneficial
interests in a Registered Global Security will be limited to
participants or persons that may hold interests through
participants. Ownership of beneficial interests by participants in
such Registered Global Security will be shown on, and the transfer
of that ownership interest will be effected only through, records
maintained by the Depositary for such Registered Global Security or
by its nominee. Ownership of beneficial interests in such
Registered Global Security by persons that hold through
participants will be shown on, and the transfer of that ownership
interest within such participant will be effected only through,
records maintained by such participant. The laws of some
141
jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. The
foregoing limitations and such laws may impair the ability to
transfer beneficial interests in such Registered Global Securities.
So long as the Depositary for a Registered Global Security, or
its nominee, is the registered owner of such Registered Global
Security, such Depositary or such nominee, as the case may be, will
be considered the sole owner or holder of the Debt Securities
represented by such Registered Global Security for all purposes
under the Indentures. Unless otherwise specified in the applicable
Prospectus Supplement and except as specified below, owners of
beneficial interests in such Registered Global Security will not be
entitled to have Debt Securities of the series represented by such
Registered Global Security registered in their names, will not
receive or be entitled to receive physical delivery of Debt
Securities of such series in certificated form and will not be
considered the holders thereof for any purposes under the
Indentures. (Section 3.8) Accordingly, each person owning a
beneficial interest in such Registered Global Security must rely on
the procedures of the Depositary and, 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 Indentures. The Depositary may grant proxies and
otherwise authorize participants to give or take any request,
demand, authorization, direction, notice, consent, waiver or other
action which a holder is entitled to give or take under the
Indentures. The Company understands that, under existing industry
practices, if the Company requests any action of holders or an
owner of a beneficial interest in such Registered Global Security
desires to give any notice or take any action a holder is entitled
to give or take under the Indentures, the Depositary would
authorize the participants to give such notice or take such action,
and participants would authorize beneficial owners owning through
such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning
through them.
Unless otherwise specified in the applicable Prospectus
Supplement, payments with respect to principal, premium, if any,
and interest, if any, on Debt Securities represented by a
Registered Global Security registered in the name of a Depositary
or its nominee will be made to such Depositary or its nominee, as
the case may be, as the registered owner of such Registered Global
Security.
The Company expects that the Depositary for any Debt
Securities represented by a Registered Global Security, upon
receipt of any payment of principal, premium, if any, or interest,
if any, will immediately credit participants' accounts with
payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Registered Global
Security as shown on the records of such Depositary. The Company
also expects that payments by participants to owners of beneficial
interests in such Registered Global Security held through such
participants will be governed by standing instructions and
customary practices, as is now the case with the securities held
for the accounts of customers registered in "street name", and will
be the responsibility of such participants. None of the Company,
the Trustee or any agent of the Company shall have any
142
responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests of
a Registered Global Security, or for maintaining, supervising or
reviewing any records relating to such beneficial ownership
interests. (Section 3.8)
Unless otherwise specified in the applicable Prospectus
Supplement, if the Depositary for any Debt Securities represented
by a Registered Global Security is at any time unwilling or unable
to continue as Depositary and a successor Depositary is not
appointed by the Company within ninety days, the Company will issue
such Debt Securities in definitive certificated form in exchange
for such Registered Global Security. In addition, the Company may
at any time and in its sole discretion determine not to have any of
the Debt Securities of a series represented by one or more
Registered Global Securities and, in such event, will issue Debt
Securities of such series in definitive certificated form in
exchange for all of the Registered Global Securities representing
such Debt Securities. (Section 3.5)
Conversion Rights
The terms on which Convertible Debt Securities of any series
are convertible into Class B common stock will be set forth in the
Prospectus Supplement relating thereto. Such terms shall include
provisions as to whether conversion is mandatory, at the option of
the holder, or at the option of the Company, and may include
provisions in which the number of shares of Class B common stock to
be received by the holders of Convertible Debt Securities would be
calculated according to the market price of Class B common stock as
of a time stated in the Prospectus Supplement.
Consolidation, Merger or Sale by the Company
The Indentures provide that the Company may merge or
consolidate with or into any other corporation or sell, convey,
transfer or otherwise dispose of all or substantially all of its
assets to any person, firm or corporation, if (i) (a) in the case
of a merger or consolidation, the Company is the surviving
corporation or (b) in the case of a merger or consolidation where
the Company is not the surviving corporation and in the case of
such a sale, conveyance or other disposition, the successor or
acquiring corporation is a corporation organized and existing under
the laws of the United States of America or a State thereof and
such corporation expressly assumes by supplemental indenture all
the obligations of the Company under the Debt Securities and any
coupons appertaining thereto and under the Indentures, (ii) no
Default or Event of Default shall arise as a result of such merger
or consolidation, or such sale, conveyance, transfer or other
disposition and (iii) the Company delivers to the Trustee an
Officer's Certificate and an Opinion of Counsel, in each case stating
that such consolidation, merger or transfer and such supplemental
indenture comply with the foregoing provisions. In the
event a successor corporation assumes the obligations of the
Company, such successor corporation shall succeed to and be
substituted for the Company under the Indentures and under the Debt
Securities and any coupons appertaining thereto and all obligations
of the Company shall terminate. (Section 7.1)
Events of Default, Notice and Certain Rights on Default
143
The Indentures provide that, if an Event of Default specified
therein occurs with respect to the Debt Securities of any series
issued thereunder and is continuing, the Trustee for such series or
the holders of 25% in aggregate principal amount of all of the
outstanding Debt Securities affected thereby (voting as a class),
by written notice to the Company (and to the Trustee for such
series, if notice is given by such holders of Debt Securities), may
declare the principal (or, if the Debt Securities of such series
are original issue discount Debt Securities or indexed Debt
Securities, such portion of the principal amount specified in the
Prospectus Supplement) of all the Debt Securities of such series to
be due and payable, provided that Debt Securities shall become
immediately due and payable without prior notice upon a bankruptcy
or insolvency of the Company. (Section 5.2)
Events of Default with respect to Debt Securities of any
series issued thereunder are defined in the Indentures as being:
default for thirty days in payment of any interest on any Debt
Security of that series or any additional amount payable with
respect to Debt Securities of such series as specified in the
applicable Prospectus Supplement when due; default in payment of
principal of or premium, if any, on any Debt Securities of that
series when due at maturity, upon acceleration, redemption or
otherwise; default for forty-five days after notice to the Company
by the Trustee for such series, or after notice by the holders of
25% in aggregate principal amount of the Debt Securities to which
such covenant or agreement is applicable (treated as a class), in
the performance of any other covenant or agreement in the Debt
Securities of that series, in the Indenture or in any supplemental
indenture or board resolution referred to therein under which the
Debt Securities of that series may have been issued; and certain
events of bankruptcy, insolvency or reorganization of the Company.
(Section 5.1)
Events of Default, voting, notice and other provisions with
respect to a specified series of Debt Securities may be added to
the Indenture under which the series is issued and, if so added,
will be described in the applicable Prospectus Supplement.
(Section 3.1)
The Indentures provide that the Trustee for any series of Debt
Securities shall, within ninety days after the occurrence of a
Default with respect to Debt Securities of that series, give to the
holder of the Debt Securities of that series notice of all uncured
Defaults known to it; provided that, except in the case of default
in payment on the Debt Securities of that series, the Trustee may
withhold the notice if and so long as a committee of its
Responsible Officers (as defined therein) in good faith first
determines that withholding such notice is in the interest of the
holders of the Debt Securities of that series. (Section 6.6)
"Default" means any event which is, or, after notice or passage of
time or both, would be, an Event of Default. (Section 1.l)
The Indentures provide that the holders of a majority in
aggregate principal amount of the Debt Securities of all series
affected (voting as a class) may direct the time, method and place
of conducting any proceeding for any remedy available to the
Trustee for such series, or exercising any trust or power conferred
on such Trustee. (Section 5.8)
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The Indentures include a covenant that the Company will file
annually with the Trustee a certificate as to the Company's
compliance with all conditions and covenants of the Indentures.
(Section 9.6)
The holders of a majority in aggregate principal amount of all
series of Debt Securities affected (voting as a class) by notice to
the Trustee for each such series may waive, on behalf of the
holders of all Debt Securities of all such series, any past Default
or Event of Default with respect to all such series and its
consequences except a Default or Event of Default in the payment of
the principal of, premium, if any, or interest, if any, on any of
such series of Debt Securities. (Section 5.2) In addition, the
holders of a majority in aggregate principal amount of any series
of Debt Securities by notice to the Trustee for such series may
waive, on behalf of the holders of all Debt Securities of such
series, any past Default or Event of Default with respect to that
series and its consequences except a Default or Event of Default in
the payment of the principal of, premium, if any, and interest, if
any, on any such Debt Securities and certain other Defaults.
(Section 5.7)
Modification of the Indentures
The Indentures contain provisions permitting the Company and
the Trustees to enter into one or more supplemental indentures
without the consent of the holders of any of the Debt Securities in
order (i) to evidence the succession of another corporation to the
Company and the assumption of the covenants of the Company by a
successor to the Company; (ii) to add to the covenants of the
Company or surrender any right or power of the Company; (iii) to
add additional Events of Default with respect to any series; (iv)
to add or change any provisions to such extent as necessary to
permit or facilitate the issuance of Debt Securities in bearer form
or in global form; (v) to add to, change or eliminate any provision
affecting Debt Securities not yet issued; (vi) to secure the Debt
Securities; (vii) to establish the form or terms of Debt
Securities; (viii) to evidence and provide for successor Trustees;
(ix) if allowed without penalty under applicable laws and
regulations, to permit payment in respect of Debt Securities in
bearer form in the United States; or (x) to cure any ambiguity or
correct any mistake and to correct or supplement any inconsistent
provisions or to make any other provisions as the Company may deem
necessary or desirable with respect to matters or questions arising
under the Indentures, provided that such action does not adversely
affect the interests of any holder of Debt Securities of any series
issued under the Indentures. (Section 8.1)
The Indentures also contain provisions permitting the Company
and the Trustees, with the consent of the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of
each series affected by such supplemental indenture, to execute
supplemental indentures adding any provisions to or changing or
eliminating any of the provisions of the Indentures or any
supplemental indenture or modifying the rights of the holders of
Debt Securities of such series, except that no such supplemental
indenture may, without the consent of the holder of each Debt
Security so affected, (i) change the time for payment of principal
or interest, if any, on any Debt Security; (ii) reduce the
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principal of, or any installment of principal of, or interest, if
any, on any Debt Security; (iii) reduce the amount of premium, if
any, payable upon the redemption of any Debt Security; (iv) reduce
the amount of principal payable upon acceleration of the maturity
of an Original Issue Discount Debt Security; (v) change the coin or
currency in which any Debt Security or any premium or interest
thereon is payable; (vi) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security;
(vii) reduce the percentage in principal amount of the outstanding
Debt Securities of any series the consent of whose holders is
required for modification or amendment of the Indentures or for
waiver of compliance with certain provisions of the Indentures or
for waiver of certain defaults; (viii) change the obligation of the
Company to maintain an office or agency in the places and for the
purposes specified in the Indentures; (ix) if applicable, modify
the subordination provisions in a manner adverse to the Holders of
Subordinated Debt Securities or make any change that adversely
affects the right to convert any Debt Security or (except as
provided in the Indentures) decrease the conversion rate or
increase the conversion price of any Debt Security; (x) modify the
provisions relating to waiver of certain defaults or any of the
foregoing provisions. (Section 8.2)
Defeasance and Covenant Defeasance
If indicated in the Prospectus Supplement, the Company may
elect either (i) to defease and be discharged from any and all
obligations with respect to the Debt Securities of or within any
series (except as described below) ("defeasance") or (ii) to be
released from its obligations with respect to certain covenants
applicable to the Debt Securities of or within any series
("covenant defeasance"), upon the deposit with the Trustee for such
series (or other qualifying trustee), in trust for such purpose, of
money and/or Government Obligations which through the payment of
principal and interest in accordance with their terms will provide
money in the amount sufficient to pay the principal of and any
premium or interest on such Debt Securities to Maturity or
redemption, as the case may be, and any mandatory sinking fund or
analogous payments thereon. Upon the occurrence of a defeasance,
the Company will be deemed to have paid and discharged the entire
indebtedness represented by such Debt Securities and any coupons
appertaining thereto and to have satisfied all of its other
obligations under such Debt Securities and any coupons appertaining
thereto (except for (i) the rights of holders of such Debt
Securities to receive, solely from the trust funds deposited to
defease such Debt Securities, payments in respect of the principal
of, premium, if any, and interest, if any, on such Debt Securities
or any coupons appertaining thereto when such payments are due and
(ii) certain other obligations as provided in the Indentures). Upon
the occurrence of a covenant defeasance, the Company will be
released only from its obligations to comply with certain covenants
contained in the Indenture relating to such Debt Securities, will
continue to be obligated in all other respects under such Debt
Securities and will continue to be contingently liable with respect
to the payment of principal, interest, if any, and premium, if any,
with respect to such Debt Securities.
Unless otherwise specified in the applicable Prospectus
Supplement and except as described below, the conditions to both
defeasance and covenant defeasance are as follows: (i) such
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defeasance or covenant defeasance must not result in a breach or
violation of, or constitute a Default or Event of Default under,
the applicable Indenture, or result in a breach or violation of, or
constitute a default under, any other material agreement or
instrument of the Company; (ii) certain bankruptcy-related Defaults
or Events of Default with respect to the Company must not have
occurred and be continuing during the period commencing on the date
of the deposit of the trust funds to defease such Debt Securities
and ending on the 91st day after such date; (iii) the Company must
deliver to the applicable Trustee an Opinion of Counsel to the
effect that the holders of such Debt Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of
such defeasance or covenant defeasance and will be subject to
Federal income tax on the same amounts and in the same manner and
at all the same times as would have been the case if such
defeasance or covenant defeasance had not occurred (such Opinion of
Counsel, in the case of defeasance, must refer to and be based upon
a ruling of the Internal Revenue Service or a change in applicable
Federal income tax law occurring after the date of the Indentures);
(iv) the Company must deliver to the applicable Trustee an
Officers' Certificate and an Opinion of Counsel with respect to
compliance with the conditions precedent to such defeasance or
covenant defeasance and with respect to certain registration
requirements under the Investment Company Act of 1940, as amended
and (v) any additional conditions to such defeasance or covenant
defeasance which may be imposed on the Company pursuant to the
applicable Indenture. (Article 4) The Indentures require that a
nationally recognized firm of independent public accountants
deliver to the applicable Trustee a written certification as to the
sufficiency of the trust funds deposited for the defeasance or
covenant defeasance of such Debt Securities. The Indentures do not
provide the holders of such Debt Securities with recourse against
such firm. If indicated in the applicable Prospectus Supplement,
in addition to obligations of the United States or an agency or
instrumentality thereof, Government Obligations may include
obligations of the government, an agency or instrumentality of the
government issuing the currency in which Debt Securities of such
series are payable. (Sections 1.1 and 3.1) In the event that
Government Obligations deposited with the applicable Trustee for
the defeasance of such Debt Securities decrease in value or default
subsequent to their being deposited, the Company will have no
further obligation, and the holders of such Debt Securities will
have no additional recourse against the Company, as a result of
such decrease in value or default. As described above, in the event
of a covenant defeasance, the Company will remain contingently
liable with respect to the payment of principal, interest, if any,
and premium, if any, with respect to the Debt Securities.
The Company may exercise its defeasance option with respect to
such Debt Securities notwithstanding its prior exercise of its
covenant defeasance option. If the Company exercises its
defeasance option, payment of such Debt Securities may not be
accelerated because of a Default or an Event of Default. If the
Company exercises its covenant defeasance option, payment of such
Debt Securities may not be accelerated by reason of a Default or an
Event of Default with respect to the covenants to which such
covenant defeasance is applicable. However, if such acceleration
were to occur, the realizable value at the acceleration date of the
money and Government Obligations in the defeasance trust could be
less than the principal and interest then due on such Debt
147
Securities, in that the required deposit in the defeasance trust is
based upon scheduled cash flow rather than market value, which will
vary depending upon interest rates and other factors.
INFORMATION TO BE PROVIDED BY PROSPECTUS SUPPLEMENT
The Prospectus Supplement which accompanies this Prospectus
provides (i) more detailed information on use of proceeds
(including the interest rate and maturity date of debt to be
repaid, if any, with the proceeds of Debt Securities offered by
such Prospectus Supplement), and (ii) the anticipated market for
the Debt Securities being offered by such Prospectus Supplement.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to one or more
underwriters for public offering and sale by them or may sell
Securities to investors or other persons directly or through
agents. Any such underwriter or agent involved in the offer and
sale of the Offered Securities will be named in an applicable
Prospectus Supplement. In addition, certain executive officers
of the Company may engage in solicitations of sales of the
Offered Securities.
Underwriters may offer and sell the Offered Securities at a
fixed price or prices, which may be changed, or from time to time
at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices. The
Company also may, from time to time, authorize underwriters acting
as the Company's agents to offer and sell the Offered Securities
upon the terms and conditions as shall be set forth in any
Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received
compensation from the Company in the form of underwriting discounts
or commissions and may also receive commissions from purchasers of
Offered Securities for whom they may act as agent. Underwriters
may sell Offered Securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions (which may be
changed from time to time) from the purchasers for whom they may
act as agent.
Any underwriting compensation paid by the Company to
underwriters or agents in connection with the offering of Offered
Securities, and any discounts, concessions or commissions allowed
by underwriters to participating dealers, will be set forth in an
applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions
received by them and any profit realized by them on resale of the
Offered Securities may be deemed to be underwriting discounts and
commissions under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements with the Company, to
indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act, and to
reimbursement by the Company for certain expenses.
Underwriters, dealers and agents may engage in transactions
with, or perform services for, the Company and its subsidiaries in
148
the ordinary course of business.
If so indicated in an applicable Prospectus Supplement, the
Company will authorize dealers acting as the Company's agents to
solicit offers by certain institutions to purchase Offered
Securities from the Company at the public offering price set forth
in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the
date or dates stated in such Prospectus Supplement. Each Contract
will be for an amount not less than, and the aggregate principal
amount of Offered Securities sold pursuant to Contracts shall not
be less nor more than, the respective amounts stated in such
Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks,
insurance companies, pension funds, investment companies,
educational and charitable institutions and other institutions, but
will in all cases be subject to the approval of the Company.
Contracts will not be subject to any conditions except (i) the
purchase by an institution of the Offered Securities covered by its
Contracts shall not at the time of delivery be prohibited under the
laws of any jurisdiction in the United States to which such
institution is subject, and (ii) if the Offered Securities are
being sold to underwriters, the Company shall have sold to such
underwriters the total principal amount of the Offered Securities
less the principal amount thereof covered by Contracts. Agents and
underwriters will have no responsibility in respect of the delivery
or performance of Contracts.
The Offered Securities may or may not be listed on a national
securities exchange or a foreign securities exchange. No
assurances can be given that there will be a market for the Offered
Securities.
The following information is included in this Prospectus
because Debt Securities may be offered and sold in the State of
Florida. The Company pays a small fee (approximately $83,000 in
1995) to Cubana Airlines, a company located in Cuba, in connection
with overflights of Cuba. This information is accurate as of the
date of this Prospectus. Current information concerning the
business dealings of the Company or its affiliates with the
government of Cuba or with any person or affiliate located in Cuba
may be obtained from the Florida Department of Banking and Finance,
Division of Securities and Investor Protection, The Capitol,
Tallahassee, Florida 32399-0350, telephone number (904) 488-9805.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus
Supplement, the validity of the Debt Securities offered hereby has
been passed upon for Continental by Mayor, Day, Caldwell & Keeton,
L.L.P., 700 Louisiana, Suite 1900, Houston, Texas 77002-2778.
EXPERTS
The consolidated financial statements (including schedules
incorporated by reference) of Continental Airlines, Inc. at
December 31, 1995 and 1994 and for each of the two years ended
December 31, 1995 and for the period April 28, 1993 through
December 31, 1993, and the consolidated statements of operations,
redeemable and non-redeemable preferred stock and common
149
stockholders' equity and cash flows of Continental Airlines
Holdings, Inc. for the period January 1, 1993 through April 27,
1993, incorporated by reference in this Prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon included therein
and incorporated herein by reference, in reliance upon such reports
given upon the authority of such firm as experts in accounting and
auditing.
150
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No person has been authorized to give any
information or to make any representations other
than those contained or incorporated by reference
in this Prospectus or in any accompanying
Prospectus Supplement in connection with the offer
contained in this Prospectus and in the
accompanying Prospectus Supplement, and, if given
or made, such information or representations must
not be relied upon as having been authorized by the
Company, any Selling Shareholder or any
underwriters, agents or dealers. Neither this
Prospectus nor any accompanying Prospectus
Supplement constitutes an offer to sell or the
solicitation of an offer to buy securities in any
jurisdiction to any person to whom it is unlawful
to make such offer or solicitation. Neither the
delivery of this Prospectus or any accompanying
Prospectus Supplement nor any sale made hereunder
and thereunder shall, under any circumstances,
create an implication that there has been no change
in the affairs of the Company since the date hereof
or thereof or that the information contained herein
or therein is correct at any time subsequent to the
date hereof or thereof.
_______________________
TABLE OF CONTENTS
Available Information
Incorporation of Certain Documents
by Reference
The Company
Ratios of Earnings to Fixed Charges
Use of Proceeds
Description of Debt Securities
Description of Capital Stock
Information to be Provided by Prospectus
Supplement
Plan of Distribution
Legal Opinions
Experts
==================================================
151
==================================================
Continental
Airlines, Inc.
Debt Securities
-------------------
PROSPECTUS
-------------------
==================================================
152
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation and bylaws provide that the
Company will indemnify each of its directors and officers to the full extent
permitted by the laws of the State of Delaware and may indemnify certain other
persons as authorized by the Delaware General Corporation Law (the "GCL").
Section 145 of the GCL provides as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (a) and (b). Such
determination shall be made (1) by a majority vote of the board of directors who
are not parties to such action, suit or proceeding, even though less than a
quorum, or (2) if there are no such directors, or if such directors so direct,
by independent legal counsel in a written opinion, or (3) by the stockholders.
II-1
(e) Expenses (including attorneys' fees) incurred by an officer or director
in defending any civil, criminal, administrative, or investigative action, suit
or proceeding may be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of 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
II-2
breach of the Director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the . . .
GCL, or (iv) for any transaction from which the Director derived any improper
personal benefit. If the GCL is amended to authorize corporate action further
eliminating or limiting the personal liability of Directors, then the liability
of Directors of the Corporation shall be eliminated or limited to the full
extent permitted by the GCL, as so amended."
The Company maintains directors' and officers' liability insurance.
Item 21. Exhibits.
Exhibit
Number Exhibit Description
- ------- -------------------
4.1* Form of New 6.94% Continental Airlines Pass Through Certificate Series
1996-A
4.2* Form of New 7.82% Continental Airlines Pass Through Certificate Series
1996-B
4.3* Form of New 9.50% Continental Airlines Pass Through Certificate Series
1996-C
4.4* Form of New 12.48% Continental Airlines Pass Through Certificate Series
1996-D
4.5* Pass Through Trust Agreement, dated as of January 31, 1996, between
Continental Airlines, Inc., and Wilmington Trust Company, as Trustee,
relating to the formation of Continental Airlines 1996-A Pass Through
Trust
4.6* Pass Through Trust Agreement, dated as of January 31, 1996, between
Continental Airlines, Inc., and Wilmington Trust Company, as Trustee,
relating to the formation of Continental Airlines 1996-B Pass Through
Trust
4.7* Pass Through Trust Agreement, dated as of January 31, 1996, between
Continental Airlines, Inc., and Wilmington Trust Company, as Trustee,
relating to the formation of Continental Airlines 1996-C Pass Through
Trust
4.8* Pass Through Trust Agreement, dated as of January 31, 1996, between
Continental Airlines, Inc., and Wilmington Trust Company, as Trustee,
relating to the formation of Continental Airlines 1996-D Pass Through
Trust
4.9** Participation Purchase Agreement, dated as of January 31, 1996, between
Credit Suisse, acting through its New York Branch, and Continental
Airlines, Inc.
4.10* Revolving Credit Agreement, dated January 31, 1996, between Wilmington
Trust Company, as Subordination Agent, as agent and trustee for the
Continental Airlines 1996-A Pass Through Trust, as Borrower and Credit
Suisse, acting through its New York Branch as Liquidity Provider
4.11* Revolving Credit Agreement, dated January 31, 1996, between Wilmington
Trust Company, as Subordination Agent, as agent and trustee for the
Continental Airlines 1996-B Pass Through Trust, as Borrower and Credit
Suisse, acting through its New York Branch as Liquidity Provider
4.12* Revolving Credit Agreement, dated January 31, 1996, between Wilmington
Trust Company, as Subordination Agent, as agent and trustee for the
Continental Airlines 1996-C Pass Through Trust, as Borrower and Credit
Suisse, acting through its New York Branch as Liquidity Provider
4.13* Intercreditor Agreement dated as of January 31, 1996, among Wilmington
Trust Company, not in its sole individual capacity but solely as Trustee
under the Continental Airlines Pass Through Trust 1996-A, Continental
Airlines Pass Through Trust 1996-B, Continental Airlines Pass Through
Trust 1996-C and Continental Pass Through Trust 1996-D, Credit Suisse,
acting through its New York Branch as Class A Liquidity Provider, Class
B Liquidity Provider, Class C
II-3
Liquidity Provider, and Wilmington Trust Company, not in its individual
capacity except as expressly set forth herein but solely as
Subordination Agent and Trustee
4.14* Registration Rights Agreement, dated as of January 31, 1996, among
Continental Airlines, Inc., Wilmington Trust Company, as Trustee under
Continental Airlines Pass Through Trust 1996-A, Continental Airlines
Pass Through Trust 1996-B, Continental Airlines Pass Through Trust 1996-
C, Continental Airlines Pass Through Trust 1996-D, and the Initial
Purchasers
4.15* Refunding Agreement, dated as of January 31, 1996, among Continental
Airlines, Inc., as Lessee, First Security Bank of Utah, National
Association, as Owner Trustee, Wilmington Trust Company, as Pass Through
Trustee under each of the Continental Airlines 1996 Pass Through Trust
Agreements, The Boeing Company, as Initial Loan Participant, General
Electric Company, as Owner Participant and Loan Participant, Wilmington
Trust Company, as Subordination Agent, and Wilmington Trust Company, as
Loan Trustee
4.16** Form of Participation Agreement dated as of September 15, 1994 among
Continental Airlines, Inc., General Electric Company, as Owner
Participant, Wilmington Trust Company, not in its individual capacity
but solely as Subordination Agent and Loan Participant, First Security
Bank of Utah, National Association, as Owner Trustee, and Wilmington
Trust Company as Loan Trustee
4.17** Form of Waiver dated as of December 22, 1995 among Continental Airlines,
Inc., General Electric Company, as Owner Participant, Wilmington Trust
Company, not in its individual capacity but solely as Subordination
Agent and Loan Participant, First Security Bank of Utah, National
Association, as Owner Trustee, and Wilmington Trust Company as Loan
Trustee
4.18** Form of Participation Agreement Amendment No. 2, dated as of January 31,
1996, among Continental Airlines, Inc., General Electric Company, as
Owner Participant, Wilmington Trust Company, not in its individual
capacity but solely as Subordination Agent and Loan Participant, First
Security Bank of Utah, National Association, as Owner Trustee, and
Wilmington Trust Company as Loan Trustee
4.19** Form of Lease Agreement dated as of April 1, 1995 between First Security
Bank of Utah, National Association, as Owner Trustee and Continental
Airlines, Inc.
4.20** Form of Lease Agreement Amendment No. 2, dated as of January 31, 1996,
between First Security Bank of Utah, National Association, as Owner
Trustee, and Continental Airlines, Inc.
4.21** Form of Amended and Restated Trust Indenture and Mortgage Amendment No.
1, dated as of January 31, 1996, between First Security Bank of Utah,
National Association, as Owner Trustee, and Wilmington Trust Company, as
Loan Trustee
4.22* Form of Series A Equipment Note, dated January 31, 1996, by First
Security Bank of Utah, National Association, as Owner trustee, payable
to Wilmington Trust Company, as Subordination Agent
4.23* Form of Series B Equipment Note, dated January 31, 1996, by First
Security Bank of Utah, National Association, as Owner trustee, payable
to Wilmington Trust Company, as Subordination Agent
4.24* Form of Series C Equipment Note, dated January 31, 1996, by First
Security Bank of Utah, National Association, as Owner trustee, payable
to Wilmington Trust Company, as Subordination Agent
4.25* Form of Series D Equipment Note, dated January 31, 1996, by First
Security Bank of Utah, National Association, as Owner trustee, payable
to Wilmington Trust Company, as Subordination Agent
4.26** Form of Trust Agreement, dated as of July 15, 1994, between Gaucho-2
Inc. and First Security Bank of Utah, National Association
4.27*** Form of Pass through Trust Agreement between Continental Airlines, Inc.
and Shawmut Bank Connecticut, National Association, as Trustee, relating
to certain Pass through Certificates
4.28*** Form of Pass Through Certificate (included in Exhibit 4.1)
4.29*** Form of Pass Through Trust Agreement between Continental Airlines, Inc.
and First Security Bank of Utah, National Association, as Trustee,
relating to certain Pass Through Certificates
4.30*** Form of Pass through Certificate (included in Exhibit 4.3)
4.31*** Form of Indenture between Continental Airlines, Inc. and Bank One,
Texas, National Association, as Trustee, relating to Senior Debt
Securities
4.32*** Form of Indenture between Continental Airlines, Inc. and Bank One,
Texas, National Association, as Trustee, relating to Subordinated Debt
Securities
5.1** Opinion of Cleary, Gottlieb, Steen & Hamilton relating to validity of
New Certificates
II-4
5.2** Opinion of Richards, Layton & Finger
5.3*** Opinion of Hughes Hubbard & Reed, counsel for Continental Airlines,
Inc., relating to Pass Through Certificates
5.4*** Opinion of Mayor, Day, Caldwell & Keeton, L.L.P., counsel for
Continental Airlines, Inc., relating to Debt Securities
5.5*** Opinion of Shipman & Goodwin, counsel for Shawmut Bank Connecticut,
National Association, relating to certain Pass Through Certificates
5.6*** Opinion of Ray, Quinney & Nebeker, counsel for First Security Bank of
Utah, National Association, relating to certain Pass Through
Certificates
8.1*** Tax Opinion of Hughes Hubbard & Reed, counsel for Continental Airlines,
Inc., relating to Pass Through Certificates (included in Exhibit 5.1)
8.2*** Tax Opinion of Shipman & Goodwin, counsel for Shawmut Bank Connecticut,
National Association, relating to certain Pass through Certificates
(included in Exhibit 5.3)
8.3*** Tax Opinion of Ray, Quinney & Nebeker, counsel for First Security Bank
of Utah, National Association, relating to certain Pass Through
Certificates (included in Exhibit 5.4)
12.1 Computation of Ratio of Earnings to Fixed Charges (incorporated by
reference to the Company's Registration Statement (File No. 333-03591))
23.1* Consent of Ernst & Young LLP
23.2** Consent of Cleary, Gottlieb, Steen, and Hamilton (included in its
opinion filed as exhibit 5.1)
23.3** Consent of Cleary, Gottlieb, Steen & Hamilton
23.4** Consent of Richards, Layton & Finger
23.5* Consent of Aircraft Information Services, Inc.
23.6* Consent of BK Associates, Inc.
23.7** Consent of Morten Beyer and Associates, Inc.
23.8*** Consent of Hughes Hubbard & Reed, counsel for Continental Airlines,
Inc. (included in Exhibit 5.1)
23.9*** Consent of Mayor, Day, Caldwell & Keeton, L.L.P., counsel for
Continental Airlines, Inc. (included in Exhibit 5.2)
23.10*** Consent of Shipman & Goodwin, counsel for Shawmut Bank Connecticut,
National Association (included in Exhibit 5.3)
23.11*** Consent of Ray, Quinney & Nebeker, counsel for First Security Bank of
Utah, National Association (included in Exhibit 5.4)
24.1* Powers of Attorney
25.1* Statement of Eligibility of Wilmington Trust Company for the 1996-A
Pass Through Certificates, on Form T-1
25.2* Statement of Eligibility of Wilmington Trust Company for the 1996-B
Pass Through Certificates, on Form T-1
25.3* Statement of Eligibility of Wilmington Trust Company for the 1996-C
Pass Through Certificates, on Form T-1
25.4* Statement of Eligibility of Wilmington Trust Company for the 1996-D
Pass Through Certificates, on Form T-1
25.5*** Statement of Eligibility of Shawmut Bank Connecticut, National
Association, on Form T-1
25.6*** Statement of Eligibility of First Security Bank of Utah, National
Association, on Form T-1
25.7*** Statement of Eligibility of Bank One, Texas, National Association, on
Form T-1
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
99.3* Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees
99.4* Form of Letter to Clients
- -----------------
* Filed herewith
** To be filed by amendment
*** Previously filed in connection with Registration Statement (File No.
33-79688)
Item 22. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from the low or high and of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
II-5
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by any such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether or not
such indemnification is against public policy as expressed in the Securities Act
of 1933 and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on May 30, 1996.
CONTINENTAL AIRLINES, INC.
By: /s/ Jeffrey A. Smisek
--------------------------
Jeffery A. Smisek
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated, on May 30, 1996.
Signature Title
--------- ------
*
- ----------------------------- President, Chief Executive Officer (Principal
Gordon M. Bethune Executive Officer) and Director
*
- ----------------------------- Senior Vice President and Chief Financial
Lawrence W. Kellner Officer (Principal Financial Officer)
*
- ----------------------------- Staff Vice President and Controller
Michael P. Bonds (Principal Accounting Officer)
*
- ----------------------------- Director
Thomas J. Barrack, Jr.
*
- ----------------------------- Director
David Bonderman
*
- ----------------------------- Director
Gregory D. Brenneman
*
- ----------------------------- Director
Joel H. Cowan
*
- ----------------------------- Director
Patrick Foley
*
- ----------------------------- Director
Rowland C. Frazee, C.C.
*
- ----------------------------- Director
Hollis L. Harris
*
- ----------------------------- Director
Dean C. Kehler
*
- ----------------------------- Director
Robert L. Lumpkins
*
- ----------------------------- Director
Douglas H. McCorkindale
*
- ----------------------------- Director
David E. Mitchell, O.C.
*
- ----------------------------- Director
Richard W. Pogue
*
- ----------------------------- Director
William S. Price III
*
- ----------------------------- Director
Donald L. Sturm
*
- ----------------------------- Director
Claude I. Taylor, O.C.
*
- ----------------------------- Director
Karen Hastie Williams
*
- ----------------------------- Director
Charles A. Yamarone
By: /s/ Scott R. Peterson
--------------------------
Scott R. Peterson, Attorney-in-fact
Exhibit 4.1
FORM OF CERTIFICATE
REGISTERED
No. __________
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN
EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS
3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO
HEREIN.
GLOBAL CERTIFICATE
CONTINENTAL AIRLINES 1996-A PASS THROUGH TRUST
6.94% Continental Airlines Exchange Pass Through Certificate
Series 1996-A
Final Distribution Date: October 15, 2013
evidencing a fractional undivided interest in a trust, the
property of which includes certain equipment notes each secured
by an Aircraft leased to Continental Airlines, Inc.
$________ Fractional Undivided Interest
representing ____% of the Trust per
$1,000 face amount
THIS CERTIFIES THAT __________, for value received, is
the registered owner of a $__________ (__________ dollars)
Fractional Undivided Interest in the Continental Airlines 1996-A
Pass Through Trust (the "Trust" created pursuant to a Pass
Through Trust Agreement, dated as of January 31, 1996 (the
"Agreement"), between Wilmington Trust Company (the "Trustee")
and Continental Airlines, Inc., a corporation incorporated under
Delaware law (the "Company"), a summary of certain of the
pertinent provisions of which is set forth below. To the extent
not otherwise defined herein, the capitalized terms used herein
have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated
as "6.94% Continental Airlines Exchange Pass Through Certificates
Series 1996-A" (herein called the "Certificates"). This
Certificate is issued under and is subject to the terms,
provisions, and conditions of the Agreement. By virtue of its
acceptance hereof the Certificateholder of this Certificate
assents to and agrees to be bound by the provisions of the
Agreement and the Intercreditor Agreement. The property of the
Trust includes certain Equipment Notes and all rights of the
Trust to receive payments under the Intercreditor Agreement and
the Liquidity Facilities (the "Trust Property"). Each issue of
the Equipment Notes is secured by, among other things, a security
interest in the Aircraft leased to or owned by the Company.
The Certificates represent fractional undivided
interests in the Trust and the Trust Property, and have no
rights, benefits or interest in respect of any assets or property
other than the Trust Property.
Subject to and in accordance with the terms of the
Agreement and the Intercreditor Agreement, from and to the extent
of funds then available to the Trustee, there will be distributed
on each January 15, April 15, July 15 and October 15 (a "Regular
Distribution Date"), commencing on April 15, 1996, to the Person
in whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date,
an amount in respect of the Scheduled Payments on the Equipment
Notes due on such Regular Distribution Date, the receipt of which
has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate
and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement and
the Intercreditor Agreement, in the event that Special Payments
on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the
applicable Special Distribution Date, to the Person in whose name
this Certificate is registered at the close of business on the
15th day preceding the Special Distribution Date, an amount in
respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the
product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special
Payments so received. If a Regular Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same
force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the
intervening period. The Trustee shall mail notice of each
Special Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate.
Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Trustee of
the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency of the
Trustee specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Reference is hereby made to the further provisions of
this Certificate set forth in the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been executed by the Trustee, by manual signature, this
Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.
Dated: CONTINENTAL AIRLINES
1996-A PASS THROUGH TRUST
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Trustee
Attest: By:________________________
Name:
Title:
______________________
Authorized Signature
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:___________________________
Authorized Officer
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation
of, or an obligation guaranteed by, or an interest in, the
Company or the Trustee or any of their affiliates. The
Certificates are limited in right or payment, all as more
specifically set forth on the face hereof and in the Agreement.
All payments or distributions made to Certificateholders under
the Agreement shall be made only from the Trust Property and only
to the extent that the Trustee shall have sufficient income or
proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof,
agrees that it will look solely to the income and proceeds from
the Trust Property to the extent available for distribution to
such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby. A copy of the Agreement may be examined
during normal business hours at the principal office of the
Trustee, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Certificateholders under the Agreement at any time by the Company
and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust.
Any such consent by the Certificateholder of this Certificate
shall be conclusive and binding on such Certificateholder and
upon all future Certificateholders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent is made
upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of
the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate
is registrable in the Register upon surrender of this Certificate
for registration of transfer at the offices or agencies
maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in the Borough of Manhattan, the City of New
York, duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided
Interest in the Trust will be issued to the designated transferee
or transferees.
The Certificates are issuable only as registered
Certificates without coupons in minimum denominations of $1,000
Fractional Undivided Interest and integral multiples of $1,000 in
excess thereof. As provided in the Agreement and subject to
certain limitations therein set forth, the Certificates are
exchangeable for new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in
the Trust, as requested by the Certificateholder surrendering the
same.
No service charge will be made for any such
registration of transfer or exchange, but the Trustee shall
require payment by the Holder of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the
Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes,
and neither the Trustee, the Registrar, nor any such agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the
Agreement and the Trust created thereby shall terminate upon the
distribution to Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement and the disposition
of all property held as part of the Trust Property.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
______________________
______________________
please print or typewrite name and address including zip code of
assignee
_____________________
the within Certificate and all rights thereunder, hereby
irrevocably constituting and appointing
_____________________
attorney to transfer said Certificate on the books of the Trustee
with full power of substitution in the premises.
Date:_______________ [Name of Transferor]
NOTE: The signature must
correspond with the name as
written upon the face of the
within-mentioned instrument in
every particular, without
alteration or any change
whatsoever.
Signature Guarantee: ______________________
Exhibit 4.2
FORM OF CERTIFICATE
REGISTERED
No. __________________
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN
EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS
3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO
HEREIN.
GLOBAL CERTIFICATE
CONTINENTAL AIRLINES 1996-B PASS THROUGH TRUST
7.82% Continental Airlines Exchange Pass Through Certificate
Series 1996-B
Final Distribution Date: October 15, 2013
evidencing a fractional undivided interest in a trust, the
property of which includes certain equipment notes each secured
by an Aircraft leased to Continental Airlines, Inc.
$__________Fractional Undivided Interest
representing ______% of the Trust per $1,000 face
amount
THIS CERTIFIES THAT _______, for value received, is the
registered owner of a $________ (________dollars) Fractional
Undivided Interest in the Continental Airlines 1996-B Pass
Through Trust (the "Trust") created pursuant to a Pass Through
Trust Agreement, dated as of January 31, 1996 (the "Agreement"),
between Wilmington Trust Company (the "Trustee") and Continental
Airlines, Inc., a corporation incorporated under Delaware law
(the "Company"), a summary of certain of the pertinent provisions
of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings
assigned to them in the Agreement. This Certificate is one of
the duly authorized Certificates designated as "7.82% Continental
Airlines Exchange Pass Through Certificates Series 1996-B"
(herein called the "Certificates"). This Certificate is issued
under and is subject to the terms, provisions, and conditions of
the Agreement. By virtue of its acceptance hereof the
Cerificateholder of this Certificate assents to and agrees to be
bound by the provisions of the Agreement and the intercreditor
Agreement. The property of the Trust includes certain Equipment
Notes and all rights of the Trust to receive payments under the
Intercreditor Agreement and the Liquidity Facilities (the "Trust
Property"). Each issue of the Equipment Notes is secured by,
among other things, a security interest in the Aircraft leased to
or owned by the Company.
The Certificates represent fractional undivided
interests in the Trust and the Trust Property, and have no
rights, benefits or interest in respect of any assets or property
other than the Trust Property.
Subject to and in accordance with the terms of the
Agreement and the Intercreditor Agreement, from and to the extent
of funds then available to the Trustee, there will be distributed
on each January 15, April 15, July 15 and October 15 (a "Regular
Distribution Date"), commencing on April 15, 1996, to the Person
in whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date,
an amount in respect of the Scheduled Payments on the Equipment
Notes due on such regular Distribution Date, the receipt of which
has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate
and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement and
the Intercreditor Agreement, in the event that Special Payments
on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the
applicable Special Distribution Date, to the Person in whose name
this Certificate is registered at the close of business on the
15th day preceding the Special Distribution Date, an amount in
respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the
product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special
Payments so received. If a Regular Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same
force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the
intervening period. The Trustee shall mail notice of each
Special Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate.
Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Trustee of
the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency of the
Trustee specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Reference is hereby made to the further provisions of
this Certificate set forth in the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth in this place.
Unless the certificate of authentication hereon has
been executed by the Trustee, by manual signature, this
Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.
Dated: CONTINENTAL AIRLINES
1996-B PASS THROUGH TRUST
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Trustee
Attest:
By:----------------------
Name:
Title:
- --------------------
Authorized Signature
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Trustee
By: --------------------
Authorized Officer
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation
of, or an obligation guaranteed by, or an interest in, the
Company or the Trustee or any of their affiliates. The
Certificates are limited in right or payment, all as more
specifically set forth on the face hereof and in the Agreement.
All payments or distributions made to Certificateholders under
the Agreement shall be made only from the Trust Property and only
to the extent that the Trustee shall have sufficient income or
proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof,
agrees that it will look solely to the income and proceeds from
the Trust Property to the extent available for distribution to
such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby. A copy of the Agreement may be examined
during normal business hours at the principal office of the
Trustee, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Certificateholders under the Agreement at any time by the Company
and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust.
Any such Consent by the Certificateholder of this Certificate
shall be conclusive and binding on such Certificateholder and
upon all future Certificateholders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent is made
upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of
the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate
is registrable in the Register upon surrender of this Certificate
for registration of transfer at the offices or agencies
maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in the Borough of Manhattan, the City of New
York, duly endorsed or accompanied by written instrument of
transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided
Interest in the Trust will be issued to the designated transferee
or transferees.
The Certificates are issuable only as registered
Certificates without coupons in minimum denominations of $1,000
Fractional Undivided Interest and integral multiples of $1,000 in
excess thereof. As provided in the Agreement and subject to
certain limitations therein set forth, the Certificates are
exchangeable for new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in
the Trust, as requested by the Certificateholder surrendering the
same.
No service charge will be made for any such
registration of transfer or exchange, but the Trustee shall
require payment by the Holder of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and the agent of the
Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes,
and neither the Trustee, the Registrar, nor any agent shall be
affected by any notice to the contrary.
The obligations and responsibilities created by the
Agreement and the Trust created thereby shall terminate upon the
distribution to Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement and the disposition
of all property held as part of the Trust Property.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
_________________________________
_________________________________
please print or typewrite name and address including zip code of
assignee
________________________________
the within Certificate and all rights thereunder, hereby
irrevocably constituting and appointing
________________________________
attorney to transfer said Certificate on the books of the Trustee
with full power of substitution in the premises.
Date:___________________________ [Name of Transferor]
Note the signature must
correspond with the name
as written upon the face
of the within-mentioned
instrument in every
particular, without
alteration or any
change whatsoever.
Signature Guarantee: _____________________
Exhibit 4.3
FORM OF CERTIFICATE
REGISTERED
No. _________
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN
EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE NAME OF CEDE &
CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS
3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT REFERRED TO
HEREIN.
GLOBAL CERTIFICATE
CONTINENTAL AIRLINES 1996-C PASS THROUGH TRUST
9.50% Continental Airlines Exchange Pass Through Certificate
Series 1996-C
First Distribution Date: October 15, 2013
evidencing a fractional undivided interest in a trust, the
property of which includes certain equipment notes each secured
by an Aircraft leased to Continental Airlines, Inc.
$_____ Fractional Undivided Interest
representing ____% of the Trust per $1,000 face amount
THIS CERTIFIES THAT ________, for value received, is
the registered owner of a $______ (______ dollars) Fractional
Undivided Interest in the Continental Airlines 1996-C Pass
Through Trust (the "Trust") created pursuant to a Pass Through
Trust Agreement, dated as of January 31, 1996 (the "Agreement"),
between Wilmington Trust Company (the "Trustee") and Continental
Airlines, Inc., a corporation incorporated under Delaware law
(the "Company"), a summary of certain of the pertinent provisions
of which is set forth below. To the extent not otherwise defined
herein, the capitalized terms used herein have the meanings
assigned to them in the Agreement. This Certificate is one of
the duly authorized Certificates designated as "9.50% Continental
Airlines Exchange Pass Through Certificates Series 1996-C"
(herein called the "Certificates"). This Certificate is issued
under and is subject to the terms, provisions, and conditions of
the Agreement. By virtue of its acceptance hereof the
Certificateholder of this Certificate assents to and agrees to be
bound by the provisions of the Agreement and the Intercreditor
Agreement. The property of the Trust includes certain Equipment
Notes and all rights of the Trust to receive payments under the
Intercreditor Agreement and the Liquidity Facilities (the "Trust
Property"). Each issue of the Equipment Notes is secured by,
among other things, a security interest in the Aircraft leased to
or owned by the Company.
The Certificates represent fractional undivided
interests in the Trust and the Trust Property, and have no
rights, benefits or interest in respect of any assets or property
other than the Trust Property.
Subject to and in accordance with the terms of the
Agreement and the Inercreditor Agreement, from and to the extent
of funds then available to the Trustee, there will be distributed
on each January 15, April 15, July 15 and October 15 (a "Regular
Distribution Date"), commencing on April 15, 1996, to the Person
in whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date,
an amount in respect of the Scheduled Payments on the Equipment
Notes due on such Regular Distribution Date, the receipt of which
has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate
and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement and
the Intercreditor Agreement, in the event that Special Payments
on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the
applicable Special Distribution Date, to the Person in whose name
this Certificate is registered at the close of business on the
15th day preceding the Special Distribution Date, an amount in
respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the
product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special
Payments so received. If a Regular Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same
force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the
intervening period. The Trustee shall mail notice of each
Special Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate.
Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Trustee of
the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency of the
Trustee specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Reference is hereby made to the further provisions of
this Certificate set forth in the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been executed by the Trustee, by manual signature, this
Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.
Dated: CONTINENTAL AIRLINES
1996-C PASS THROUGH TRUST
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
Attest: By: ____________________________
Name:
Title:
____________________
Authorized Signature
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By: ________________________
Authorized Officer
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation
of, or an obligation guaranteed by, or an interest in, the
Company or the Trustee or any of their affiliates. The
Certificates are limited in right or payment, all as more
specifically set forth on the face hereof and in the Agreement.
All payments or distributions made to Certificateholders under
the Agreement shall be made only from the Trust Property and only
to the extent that the Trustee shall have sufficient income or
proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof,
agrees that it will look solely to the income and proceeds from
the Trust Property to the extent available for distribution to
such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby. A copy of the Agreement may be examined
during normal business hours at the principal office of the
Trustee, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Certificateholders under the Agreement at any time by the Company
and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust.
Any such consent by the Certificateholder of this Certificate
shall be conclusive and binding on such Certificateholder and
upon all future Certificateholders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent is made
upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of
the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate
is registrable in the Register upon surrender of this Certificate
for registration of transfer at the offices or agencies
maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in the Borough of Manhattan, the City of New
York, duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided
Interest in the Trust will be issued to the designated transferee
or transferees.
The Certificates are issuable only as registered
Certificates without coupons in minimum denominations of $1,000
Fractional Undivided Interest and integral multiples of $1,000 in
excess thereof. As provided in the Agreement and subject to
certain limitations therein set forth, the Certificates are
exchangeable for new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in
the Trust, as requested by the Certificateholder surrendering the
same.
No service charge will be made for any such
registration of transfer or exchange, but the Trustee shall
require payment by the Holder of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the
Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes,
and neither the Trustee, the Registrar, nor any such agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the
Agreement and the Trust created thereby shall terminate upon the
distribution to Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement and the disposition
of all property held as part of the Trust Property.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
________________________
________________________
please print or typewrite name and address including zip code of
assignee
_______________________
the within Certificate and all rights thereunder, hereby
irrevocably constituting and appointing
______________________
attorney to transfer said Certificate on the books of the Trustee
with full power of substitution in the premises.
Date: _______________ [Name of Transferor]
NOTE: The signature must
correspond with the name
as written upon the face of
the within-mentioned instrument
in every particular, without
alteration or any change
whatsoever.
Signature Guarantee: ________________
Exhibit 4.4
FORM OF CERTIFICATE
REGISTERED
No. ___________
CONTINENTAL AIRLINES 1996-d PASS THROUGH TRUST
12.48% Continental Airlines Exchange Pass Through Certificate
Series 1996-D
Final Distribution Date: October 15, 2013
evidencing a fractional undivided interest in a trust, the
property of which includes certain equipment notes each secured
by an Aircraft leased to Continental Airlines, Inc.
$________ Fractional Undivided Interest
representing _____% of the Trust per $1,000 face amount
THIS CERTIFIES THAT _______________, for value
received, is the registered owner of a $________ (__________
dollars) Fractional Undivided Interest in the Continental
Airlines 1996-D Pass Through Trust (the "Trust") created pursuant
to a Pass Through Trust Agreement, dated as of January 31, 1996
(the "Agreement"), between Wilmington Trust Company (the
"Trustee") and Continental Airlines, Inc. a corporation
incorporated under Delaware law (the "Company"), a summary of
certain of the pertinent provisions of which is set forth below.
To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement.
This Certificate is one of the duly authorized Certificates
designated as "12.48% Continental Airlines Exchange Pass Through
Certificates Series 1996-D" (herein called the "Certificates").
This Certificate is issued under and is subject to the terms,
provisions, and conditions of the Agreement. By virtue of its
acceptance hereof the Certificateholder of this Certificate
assents to and agrees to be bound by the provisions of the
Agreement and the Intercreditor Agreement. The property of the
Trust includes certain Equipment Notes and all rights of the
Trust to receive payments under the Intercreditor Agreement (the
"Trust Property"). Each issue of the Equipment Notes is secured
by, among other things, a security interest in the Aircraft
leased to or owned by the Company.
The Certificates represent fractional undivided
interests in the Trust and the Trust Property, and have no
rights, benefits or interest in respect of any as sets or
property other than the Trust Property.
Subject to and in accordance with the terms of the
Agreement and the Intercreditor Agreement, from and to the extent
of funds then available to the trustee, there will be distributed
on each January 15, April 15, July 15 and October 15 (a "Regular
Distribution Date"), commencing on April 15, 1996, to the Person
in whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date,
an amount in respect of the Scheduled Payments on the Equipment
Notes due on such Regular Distribution Date, the receipt of which
has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate
and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement and
the Intercreditor Agreement, in the event that Special Payments
on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the
applicable Special Distribution Date, to the Person in whose name
this Certificate is registered at the close of business on the
15th day preceding the Special Distribution Date, an amount in
respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the
product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special
Payments so received. If a Regular Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same
force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the
intervening period. The Trustee shall mail notice of each
Special Payment and the Special Distribution Date or special
Distribution Date and no interest shall accrue during the
intervening period. The Trustee shall mail notice of each
Special Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate.
Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Trustee of
the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency of the
Trustee specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Reference is hereby made to the further provisions of
this Certificate set forth in the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been executed by the Trustee, by manual signature, this
Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.
Dated: CONTINENTAL AIRLINES
1996-D PASS THROUGH TRUST
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Trustee
Attest: By: _______________________
Name:
Title:
______________________
Authorized Signature
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Trustee
By: __________________________
Authorized Officer
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation
of, or an obligation guaranteed by, or an interest in, the
Company or the Trustee or any of their affiliates. The
Certificates are limited in right or payment, all as more
specifically set forth on the fact hereof and in the Agreement
shall be made only from the Trust Property and only to the extent
that the Trustee shall have sufficient income or proceeds from
the Trust Property to make such payments in accordance with the
terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look
solely to the income and proceeds from the Trust Property to the
Extent available for distribution to such Certificateholder as
provided in the Agreement. This Certificate does not purport to
summarize the Agreement and reference is made to the Agreement
for information with respect to the interests, rights, benefits,
obligations, proceeds, and duties evidenced hereby. A copy of
the Agreement may be examined during normal business hours at the
principal office of the Trustee, and at such other places, if
any, designated by the Trustee, by any Certificateholder upon
request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Certificateholders under the Agreement at any time by the Company
and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
not less than a majority in interest in the Trust. Any such
consent by the Certificateholder of this Certificate shall be
conclusive and binding on such Certificateholder and upon all
future Certificateholders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent is made
upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of
the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate
is registrable in the Register upon surrender of this Certificate
for registration of transfer at the offices or agencies
maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in the Borough of Manhattan, the City of New
York, duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing, and
thereupon one or more new Certificateholder's attorney duly
authorized in writing, and thereupon one or more new Certificates
of authorized denominations evidencing the same aggregate
Fractional Undivided Interest in the Trust will be issued to the
designated transferee or transferees.
The certificates are issuable only as registered
Certificates without coupons in minimum denominations of $1,000
Fractional Undivided Interest and integral multiples of $1,000 in
excess thereof. As provided in the Agreement and subject to
certain limitations therein set forth, the Certificates are
exchangeable for new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in
the Trust, as requested by the Certificateholder surrendering the
same.
No service charge will be made for any such
registration of transfer or exchange, but the Trustee shall
require payment by the Holder of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the
Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes,
and neither the Trustee, the Registrar, nor any such agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the
Agreement and the Trust created thereby shall terminate upon the
distribution to Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement and the disposition
of all property held as part of the Trust Property.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
____________________________
____________________________
please print or typewrite name and address including zip code of
assignee
____________________________
the within Certificate and all rights thereunder, hereby
irrevocably constituting and appointing
____________________________
attorney to transfer said Certificate on the books of the Trustee
with full power of substitution in the premises.
Date:_______________________ [Name of Transferor]_____________
NOTE: The signature must
correspond with the name as
written upon the face of the
within-mentioned instrument in
every particular, without
alteration or any change
whatsoever.
Signature Guarantee: ________________
Exhibit 4.5
- -----------------------------------------------------------------
PASS THROUGH TRUST AGREEMENT
Dated as of January 31, 1996
among
CONTINENTAL AIRLINES, INC.
and
WILMINGTON TRUST COMPANY,
as Trustee
Continental Airlines 1996-A Pass Through Trust
6.94% 1996-A Initial Pass Through Certificates
6.94% 1996-A Exchange Pass Through Certificates
- -----------------------------------------------------------------
Reconciliation and tie between Continental Airlines 1996-A Pass
Through Trust Agreement, dated as of January 31, 1996, and the
Trust Indenture Act of 1939. This reconciliation does not
constitute part of the Pass Through Trust Agreement.
Trust Indenture Act Pass Through Trust
of 1939 Section Agreement Section
- ------------------- ------------------
310(a)(1) 7.08
(a)(2) 7.08
312(a) 3.05; 8.01; 8.02
313(a) 8.03
314(a) 8.04(a) - (c)
(a)(4) 8.04(d)
(c)(1) 1.02
(c)(2) 1.02
(d)(1) 7.13; 11.01
(d)(2) 7.13; 11.01
(d)(3) 2.01
(e) 1.02
315(b) 7.02
316(a)(last sentence) 1.04(c)
(a)(1)(A) 6.04
(a)(1)(B) 6.05
(b) 6.06
(c) 1.04(d)
317(a)(1) 6.03
(b) 7.13
318(a) 12.06
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01. Definitions. . . . . . . . . . . . . . . . . . 2
1.02. Compliance Certificates and Opinions . . . . . 12
1.03. Form of Documents Delivered to Trustee . . . . 13
1.04. Directions of Certificateholders . . . . . . . 13
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
2.01. Issuance of Certificates; Acquisition
of Equipment Notes . . . . . . . . . . . . . 15
2.02. Acceptance by Trustee. . . . . . . . . . . . . 17
2.03. Limitation of Powers . . . . . . . . . . . . . 17
ARTICLE III
THE CERTIFICATES
3.01. Title, Form, Denomination and Execution of
Certificates . . . . . . . . . . . . . . . . 18
3.02. Restrictive Legends. . . . . . . . . . . . . . 19
3.03. Authentication of Certificates . . . . . . . . 21
3.04. Transfer and Exchange. . . . . . . . . . . . . 21
3.05. Book-Entry Provisions for U.S. Global
Certificate and Offshore Global
Certificates . . . . . . . . . . . . . . . . 22
3.06. Special Transfer Provisions. . . . . . . . . . 23
3.07. Mutilated, Destroyed, Lost or Stolen
Certificates . . . . . . . . . . . . . . . . 26
3.08. Persons Deemed Owners. . . . . . . . . . . . . 27
3.09. Cancellation . . . . . . . . . . . . . . . . . 27
3.10. Temporary Certificates . . . . . . . . . . . . 27
3.11. Limitation of Liability for Payments . . . . . 27
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
4.01. Certificate Account and Special Payments
Account. . . . . . . . . . . . . . . . . . . 28
4.02. Distributions from Certificate Account and
Special Payments Account . . . . . . . . . . 28
4.03. Statements to Certificateholders . . . . . . . 30
4.04. Investment of Special Payment Moneys . . . . . 31
ARTICLE V
THE COMPANY
5.01. Maintenance of Corporate Existence . . . . . . 31
5.02. Consolidation, Merger, etc.. . . . . . . . . . 31
ARTICLE VI
DEFAULT
6.01. Events of Default. . . . . . . . . . . . . . . 32
6.02. [Intentionally omitted.] . . . . . . . . . . . 35
6.03. Judicial Proceedings Instituted by Trustee;
Trustee May Bring Suit . . . . . . . . . . . 35
6.04. Control by Certificateholders. . . . . . . . . 35
6.05. Waiver of Past Defaults. . . . . . . . . . . . 36
6.06. Right of Certificateholders to Receive
Payments Not to Be Impaired. . . . . . . . . 36
6.07. Certificateholders May Not Bring Suit Except
Under Certain Conditions . . . . . . . . . . 36
6.08. Remedies Cumulative. . . . . . . . . . . . . . 37
ARTICLE VII
THE TRUSTEE
7.01. Certain Duties and Responsibilities. . . . . . 37
7.02. Notice of Defaults . . . . . . . . . . . . . . 38
7.03. Certain Rights of Trustee. . . . . . . . . . . 38
7.04. Not Responsible for Recitals or Issuance of
Certificates . . . . . . . . . . . . . . . . 40
7.05. May Hold Certificates. . . . . . . . . . . . . 40
7.06. Money Held in Trust. . . . . . . . . . . . . . 40
7.07. Compensation and Reimbursement . . . . . . . . 40
7.08. Corporate Trustee Required; Eligibility. . . . 41
7.09. Resignation and Removal; Appointment of
Successor. . . . . . . . . . . . . . . . . . 41
7.10. Acceptance of Appointment by Successor . . . . 43
7.11. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . . 43
7.12. Maintenance of Agencies. . . . . . . . . . . . 44
7.13. Money for Certificate Payments to Be Held
in Trust . . . . . . . . . . . . . . . . . . 45
7.14. Registration of Equipment Notes in Name of
Subordination Agent. . . . . . . . . . . . . 45
7.15. Representations and Warranties of Trustee. . . 46
7.16. Withholding Taxes; Information Reporting . . . 47
7.17. Trustee's Liens. . . . . . . . . . . . . . . . 47
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
8.01. The Company to Furnish Trustee with Names
and Addresses of Certificateholders. . . . . 47
8.02. Preservation of Information; Communications
to Certificateholders. . . . . . . . . . . . 48
8.03. Reports by Trustee . . . . . . . . . . . . . . 48
8.04. Reports by the Company . . . . . . . . . . . . 48
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
9.01. Supplemental Agreements Without Consent of
Certificateholders . . . . . . . . . . . . . 49
9.02. Supplemental Agreements with Consent of
Certificateholders . . . . . . . . . . . . . 50
9.03. Documents Affecting Immunity or Indemnity. . . 51
9.04. Execution of Supplemental Agreements . . . . . 51
9.05. Effect of Supplemental Agreements. . . . . . . 51
9.06. Conformity with Trust Indenture Act. . . . . . 52
9.07. Reference in Certificates to Supplemental
Agreements . . . . . . . . . . . . . . . . . 52
ARTICLE X
AMENDMENTS TO INDENTURES AND REFUNDING DOCUMENTS
10.01. Amendments and Supplements to Indentures
and Other Refunding Documents. . . . . . . . 52
ARTICLE XI
TERMINATION OF TRUST
11.01. Termination of the Trust. . . . . . . . . . . 53
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Limitation on Rights of Certificateholders. . 54
12.02. Certificates Nonassessable and Fully Paid . . 54
12.03. Notices . . . . . . . . . . . . . . . . . . . 54
12.04. Governing Law . . . . . . . . . . . . . . . . 55
12.05. Severability of Provisions. . . . . . . . . . 55
12.06. Trust Indenture Act Controls. . . . . . . . . 56
12.07. Effect of Headings and Table of Contents. . . 56
12.08. Successors and Assigns. . . . . . . . . . . . 56
12.09. Benefits of Agreement . . . . . . . . . . . . 56
12.10. Legal Holidays. . . . . . . . . . . . . . . . 56
12.11. Counterparts. . . . . . . . . . . . . . . . . 56
12.12. Intention of Parties. . . . . . . . . . . . . 57
Schedule 1 - Indentures
Schedule 2 - Refunding Agreements
Exhibit A - Form of Certificate
Exhibit B - Form of Certificate for Unlegended Certificates
Exhibit C - Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S
PASS THROUGH TRUST AGREEMENT
This PASS THROUGH TRUST AGREEMENT, dated as of
January 31, 1996, between CONTINENTAL AIRLINES, INC., a Delaware
corporation, and WILMINGTON TRUST COMPANY, as Trustee, is made
with respect to the formation of Continental Airlines 1996-A Pass
Through Trust and the issuance of 6.94% Continental Airlines
1996-A Pass Through Certificates representing fractional
undivided interests in the Trust.
WITNESSETH:
WHEREAS, the Company, the Owner Trustees and the Owner
Participants (as such terms and certain other capitalized terms
used herein are defined below) have previously entered into
eighteen separate leveraged lease transactions in connection with
the purchase of nine Boeing 737-524 aircraft and nine
Boeing 757-224 aircraft (collectively, the "Aircraft") from the
manufacturer;
WHEREAS, each Owner Trustee, acting on behalf of the
corresponding Owner Participant, will issue pursuant to an
Indenture, on a non-recourse basis, four series of Equipment
Notes, among other things, to refinance the current indebtedness
of such Owner Trustee originally incurred to finance the purchase
price of the related Aircraft;
WHEREAS, the Trustee, upon execution and delivery of
this Agreement, hereby declares the creation of the Trust for the
benefit of the Certificateholders, and the initial
Certificateholders, as the grantors of the Trust, by their
respective acceptances of the Certificates, join in the creation
of this Trust with the Trustee;
WHEREAS, all Certificates to be issued by the Trust
will evidence fractional undivided interests in the Trust and
will convey no rights, benefits or interests in respect of any
property other than the Trust Property;
WHEREAS, pursuant to the terms and conditions of this
Agreement and each of the Refunding Agreements to be entered into
by the Trustee simultaneously with the execution and delivery of
this Agreement, the Trustee on behalf of the Trust shall purchase
one or more issues of Equipment Notes having the same interest
rate as, and final maturity dates not later than the final
Regular Distribution Date of, the Certificates issued hereunder
and shall hold such Equipment Notes in trust for the benefit of
the Certificateholders;
WHEREAS, to facilitate the sale of Equipment Notes to,
and the purchase of Equipment Notes by, the Trustee on behalf of
the Trust, the Company has duly authorized the execution and
delivery of this Agreement as the "issuer", as such term is
defined in and solely for purposes of the Securities Act of 1933,
as amended, of the Certificates to be issued pursuant hereto and
as the "obligor", as such term is defined in and solely for
purposes of the Trust Indenture Act of 1939, as amended, with
respect to all such Certificates and is undertaking to perform
certain administrative and ministerial duties hereunder and is
also undertaking to pay the ongoing fees and expenses of the
Trustee;
WHEREAS, all of the conditions and requirements
necessary to make this Agreement, when duly executed and
delivered, a valid, binding and legal instrument, enforceable in
accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof
have been in all respects duly authorized; and
WHEREAS, upon issuance of the Exchange Certificates, if
any, or the effectiveness of the Registration Statement, this
Agreement, as amended or supplemented from time to time, will be
subject to the provisions of the Trust Indenture Act of 1939, and
shall, to the extent applicable, be governed by such provisions;
NOW, THEREFORE, in consideration of the mutual
agreements herein contained, and of other good and valuable
consideration the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this
Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
(1) the terms used herein that are defined in
this Article have the meanings assigned to them in this
Article, and include the plural as well as the singular;
(2) all other terms used herein which are defined
in the Trust Indenture Act, either directly or by reference
therein, or by the rules promulgated under the Trust
Indenture Act, have the meanings assigned to them therein;
(3) all references in this Agreement to
designated "Articles", "Sections", "Subsections" and other
subdivisions are to the designated Articles, Sections,
Subsections and other subdivisions of this Agreement;
(4) the words "herein", "hereof" and "hereunder"
and other words of similar import refer to this Agreement as
a whole and not to any particular Article, Section,
Subsection or other subdivision; and
(5) unless the context otherwise requires,
whenever the words "including", "include" or "includes" are
used herein, it shall be deemed to be followed by the phrase
"without limitation".
Affiliate: Means, with respect to any Person, any
other Person directly or indirectly controlling or
controlled by or under common control with such Person,
provided, however, that neither America West Airlines, Inc.
nor any of its subsidiaries shall be deemed to be an
"Affiliate" of the Company for purposes of this Agreement.
For purposes of this definition, "control" means the power,
directly or indirectly, to direct the management and
policies of such Person, whether through the ownership of
voting securities or by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
Agent Members: Has the meaning specified in
Section 3.05.
Aircraft: Has the meaning specified in the first
recital to this Agreement.
Authorized Agent: Means any Paying Agent or
Registrar for the Certificates.
Avoidable Tax: Means a state or local tax
(i) upon (w) the Trust, (x) the Trust Property,
(y) Certificateholders or (z) the Trustee for which the
Trustee is entitled to seek reimbursement from the Trust
Property, and (ii) which would be avoided if the Trustee
were located in another state, or jurisdiction within a
state, within the United States. A tax shall not be an
Avoidable Tax if the Company or any Owner Trustee shall
agree to pay, and shall pay, such tax.
Business Day: Means any day other than a
Saturday, a Sunday or a day on which commercial banks are
required or authorized to close in Houston, Texas, New York,
New York, or, so long as any Certificate is outstanding, the
city and state in which the Trustee or any Loan Trustee
maintains its Corporate Trust Office or receives and
disburses funds.
Cedel: Means Cedel Bank societe anonyme.
Certificate: Means any one of the Initial
Certificates or Exchange Certificates and any such
Certificates issued in exchange therefor or replacement
thereof pursuant to this Agreement.
Certificate Account: Means the account or
accounts created and maintained pursuant to
Section 4.01(a).
Certificateholder or Holder: Means the Person in
whose name a Certificate is registered in the Register.
Company: Means Continental Airlines, Inc., a
Delaware corporation, or its successor in interest pursuant
to Section 5.02, or any other obligor (within the meaning of
the Trust Indenture Act) with respect to the Certificates.
Controlling Party: Has the meaning specified in
the Intercreditor Agreement.
Corporate Trust Office: With respect to the
Trustee or any Loan Trustee, means the office of such
trustee in the city at which at any particular time its
corporate trust business shall be principally administered.
Cut-off Date: Means March 31, 1996.
Depositary: Means the Depository Trust Company,
its nominees and their respective successors.
Direction: Has the meaning specified in
Section 1.04(a).
Distribution Date: Means any Regular Distribution
Date or Special Distribution Date.
Equipment Notes: Means the equipment notes issued
under the Indentures.
ERISA: Means the Employee Retirement Income
Security Act of 1974, as amended from time to time, or any
successor federal statute.
Escrow Account: Has the meaning specified in
Section 2.01(b).
Escrowed Funds: Has the meaning specified in
Section 2.01(b).
Euroclear: Means the Euroclear System.
Event of Default: Means an Indenture Default
under any Indenture pursuant to which Equipment Notes held
by the Trust were issued.
Exchange Certificates: Means the certificates
substantially in the form of Exhibit A hereto issued in
exchange for the Initial Certificates pursuant to the
Registration Rights Agreement and authenticated hereunder.
Exchange Offer Registration Statement: Means the
Exchange Offer Registration Statement defined in the
Registration Rights Agreement.
Fractional Undivided Interest: Means the
fractional undivided interest in the Trust that is evidenced
by a Certificate.
Global Certificates: Has the meaning assigned to
such term in Section 3.01.
Indentures: Means each of the eighteen separate
Amended and Restated Trust Indentures and Mortgages listed
on Schedule 1 hereto, as the same may be amended,
supplemented or otherwise modified from time to time in
accordance with its terms.
Indenture Default: With respect to any Indenture,
means any Event of Default (as such term is defined in such
Indenture).
Initial Certificates: Means the certificates
issued and authenticated hereunder substantially in the form
of Exhibit A hereto other than the Exchange Certificates.
Initial Purchasers: Means, collectively, CS First
Boston Corporation, Morgan Stanley & Co. Incorporated,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman
Brothers Inc. and Fieldstone FPCG Services, L.P.
Initial Regular Distribution Date: Means the
first Regular Distribution Date on which a Scheduled Payment
is to be made.
Institutional Accredited Investor: Means an
institutional investor that is an "accredited investor"
within the meaning set forth in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act.
Intercreditor Agreement: Means the Intercreditor
Agreement dated the date hereof among the Trustee, the Other
Trustees, the Liquidity Provider, the liquidity provider, if
any, relating to the Certificates issued under (and as
defined in) each of the Other Pass Through Trust Agreements,
and Wilmington Trust Company, as Subordination Agent
thereunder, as amended, supplemented or otherwise modified
from time to time in accordance with its terms.
Issuance Date: Means the date of the issuance of
the Initial Certificates.
Lease: Means the lease between an Owner Trustee,
as the lessor, and the Company, as the lessee, referred to
in the related Indenture, as each such lease may be amended,
supplemented or otherwise modified in accordance with its
terms.
Liquidity Facility: Means the Revolving Credit
Agreement dated the date hereof relating to the
Certificates, between the Liquidity Provider and the
Subordination Agent, as amended, replaced, supplemented or
otherwise modified from time to time in accordance with its
terms and the terms of the Intercreditor Agreement.
Liquidity Provider: Means, initially, Credit
Suisse, acting through its New York Branch, together with
any replacement or successor therefor appointed in
accordance with the Liquidity Facility and the Intercreditor
Agreement.
Loan Trustee: With respect to any Equipment Note
or the Indenture applicable thereto, means the bank or trust
company designated as indenture trustee under such
Indenture, together with any successor to such Loan Trustee
appointed pursuant thereto.
Non-U.S. Person: Means a Person that is not a
"U.S. person", as defined in Regulation S.
Officer's Certificate: Means a certificate
signed, (a) in the case of the Company, by (i) the Chairman
or Vice Chairman of the Board of Directors, the President,
any Executive Vice President, any Senior Vice President or
the Treasurer of the Company, signing alone or (ii) any Vice
President of the Company signing together with the
Secretary, the Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company or, (b) in the case of an
Owner Trustee or a Loan Trustee, a Responsible Officer of
such Owner Trustee or such Loan Trustee, as the case may be.
Offshore Certificates Exchange Date: Has the
meaning specified in Section 3.01.
Offshore Global Certificates: Has the meaning
assigned to such term in Section 3.01.
Offshore Physical Certificates: Has the meaning
assigned to such term in Section 3.01.
Opinion of Counsel: Means a written opinion of
legal counsel who (a) in the case of counsel for the Company
may be (i) a senior attorney of the Company one of whose
principal duties is furnishing advice as to legal matters,
(ii) Cleary, Gottlieb, Steen & Hamilton, (iii) Hughes
Hubbard & Reed, or (iv) such other counsel designated by the
Company and reasonably acceptable to the Trustee and (b) in
the case of counsel for any Owner Trustee or any Loan
Trustee may be such counsel as may be designated by any of
them whether or not such counsel is an employee of any of
them, and who shall be reasonably acceptable to the Trustee.
Other Pass Through Trust Agreements: Means each
of the three other Continental Airlines 1996 Pass Through
Trust Agreements relating to Continental Airlines 1996-B
Pass Through Trust, Continental Airlines 1996-C Pass Through
Trust and Continental Airlines 1996-D Pass Through Trust,
dated the date hereof.
Other Trustees: Means the trustee under the Other
Pass Through Trust Agreements, and any successor or other
trustee appointed as provided therein.
Outstanding: When used with respect to
Certificates, means, as of the date of determination, all
Certificates theretofore authenticated and delivered under
this Agreement, except:
(i) Certificates theretofore cancelled by
the Registrar or delivered to the Trustee or the
Registrar for cancellation;
(ii) Certificates for which money in the
full amount required to make the final distribution
with respect to such Certificates pursuant to
Section 11.01 hereof has been theretofore deposited
with the Trustee in trust for the Holders of such
Certificates as provided in Section 4.01 pending
distribution of such money to such Certificateholders
pursuant to payment of such final distribution; and
(iii) Certificates in exchange for or in
lieu of which other Certificates have been
authenticated and delivered pursuant to this Agreement.
Owner Participant: With respect to any Equipment Note,
means the "Owner Participant" as referred to in the
Indenture pursuant to which such Equipment Note is issued
and any permitted successor or assign of such Owner
Participant; and Owner Participants at any time of
determination means all of the Owner Participants thus
referred to in the Indentures.
Owner Trustee: With respect to any Equipment Note,
means the "Owner Trustee", as referred to in the Indenture
pursuant to which such Equipment Note is issued, not in its
individual capacity but solely as trustee; and Owner
Trustees means all of the Owner Trustees party to any of the
Indentures.
Participation Agreement: With respect to any Aircraft,
means the Participation Agreement referred to in the related
Indenture.
Paying Agent: Means the paying agent maintained and
appointed for the Certificates pursuant to Section 7.12.
Permanent Offshore Global Certificates: Has the
meaning specified in Section 3.01.
Permanent Offshore Physical Certificates: Has the
meaning specified in Section 3.01.
Permitted Investments: Means obligations of the United
States of America or agencies or instrumentalities thereof
the payment of which is backed by the full faith and credit
of the United States of America and which mature in not more
than 60 days after the date of acquisition thereof or such
lesser time as is required for the distribution of any
Special Payments on a Special Distribution Date.
Person: Means any person, including any individual,
corporation, partnership, joint venture, association, joint-
stock company, trust, trustee, unincorporated organization,
or government or any agency or political subdivision
thereof.
Physical Certificates: Has the meaning specified in
Section 3.01.
Pool Balance: Means, as of any date, (i) the original
aggregate face amount of the Certificates less (ii) the
aggregate amount of all payments made in respect of such
Certificates other than payments made in respect of interest
or premium thereon or reimbursement of any costs or expenses
incurred in connection therewith. The Pool Balance as of
any Distribution Date shall be computed after giving effect
to the payment of principal, if any, on the Equipment Notes
or other Trust Property held in such Trust and the
distribution thereof to be made on such Distribution Date.
Pool Factor: Means, as of any date, the quotient
(rounded to the seventh decimal place) computed by dividing (i)
the Pool Balance as at such date by (ii) the original aggregate
face amount of the Certificates. The Pool Factor as of any
Distribution Date shall be computed after giving effect to the
payment of principal, if any, on the Equipment Notes or other
Trust Property and the distribution thereof to be made on such
Distribution Date.
Postponed Notes: Means the Equipment Notes to be held
in the Trust as to which a Postponement Notice shall have
been delivered pursuant to Section 2.01(b).
Postponement Notice: Means an Officer's Certificate of
the Company (1) requesting that the Trustee temporarily
postpone the purchase pursuant to one or more of the
Refunding Agreements of certain of the Equipment Notes to a
date which is later than the Issuance Date, (2) identifying
the amount of the purchase price of each such Equipment Note
and the aggregate purchase price for all such Equipment
Notes, (3) setting forth the reasons for such postponement
and (4) with respect to each such Equipment Note, either
(a) setting or resetting a new Transfer Date (which shall be
on or prior to the applicable Cut-off Date) for payment by
the Trustee of such purchase price and issuance of the
related Equipment Note, or (b) indicating that such new
Transfer Date (which shall be on or prior to the applicable
Cut-off Date) will be set by subsequent written notice not
less than one Business Day prior to such new Transfer Date.
Private Placement Legend: Has the meaning specified in
Section 3.02.
PTC Event of Default: Means any failure to pay within
10 Business Days of the due date thereof: (i) the
outstanding Pool Balance on April 15, 2015 or (ii) interest
due on the Certificates on any Distribution Date (unless the
Subordination Agent shall have made an Interest Drawing (as
defined in the Intercreditor Agreement) with respect thereto
in an amount sufficient to pay such interest and shall have
distributed such amount to the Certificateholders).
QIB: Means a qualified institutional buyer as defined
in Rule 144A.
Record Date: Means (i) for Scheduled Payments to be
distributed on any Regular Distribution Date, other than the
final distribution, the 15th day (whether or not a Business
Day) preceding such Regular Distribution Date, and (ii) for
Special Payments to be distributed on any Special
Distribution Date, other than the final distribution, the
15th day (whether or not a Business Day) preceding such
Special Distribution Date.
Refunding Agreements: Means each of the eighteen
separate Refunding Agreements dated the date hereof, listed
on Schedule 2 hereto, providing for, among other things, the
purchase of Equipment Notes by the Trustee on behalf of the
Trust, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
Refunding Documents: With respect to any Equipment
Note, means the related Indenture, Refunding Agreement,
Lease and Participation Agreement.
Register and Registrar: Mean the register maintained
and the registrar appointed pursuant to Sections 3.04
and 7.12.
Registration Rights Agreement: Means the Registration
Rights Agreement dated January 31, 1996, among the Initial
Purchasers, the Trustee, the Other Trustees and the Company,
as amended, supplemented or otherwise modified from time to
time in accordance with its terms.
Registration Statement: Means the Registration
Statement defined in the Registration Rights Agreement.
Regular Distribution Date: With respect to
distributions of Scheduled Payments in respect of the
Certificates, means each date designated as a Regular
Distribution Date in this Agreement, until payment of all
the Scheduled Payments to be made under the Equipment Notes
held in the Trust have been made; provided, however, that,
if any such day shall not be a Business Day, the related
distribution shall be made on the next succeeding Business
Day without additional interest.
Regulation S: Means Regulation S under the Securities
Act or any successor regulation thereto.
Responsible Officer: With respect to the Trustee, any
Loan Trustee and any Owner Trustee, means any officer in the
Corporate Trust Office of the Trustee, Loan Trustee or Owner
Trustee or any other officer customarily performing
functions similar to those performed by the persons who at
the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of his
knowledge of and familiarity with a particular subject.
Rule 144A: Means Rule 144A under the Securities Act
and any successor rule thereto.
Scheduled Payment: With respect to any Equipment Note,
means (i) any payment of principal and interest on such
Equipment Note (other than any such payment which is not in
fact received by the Subordination Agent within five days of
the date on which such payment is scheduled to be made) due
from the obligor thereon or (ii) any payment of interest on
the Certificates with funds drawn under the Liquidity
Facility, which payment represents the installment of
principal at the stated maturity of such installment of
principal on such Equipment Note, the payment of regularly
scheduled interest accrued on the unpaid principal amount of
such Equipment Note, or both; provided that any payment of
principal, premium, if any, or interest resulting from the
redemption or purchase of any Equipment Note shall not
constitute a Scheduled Payment.
SEC: Means the Securities and Exchange Commission, as
from time to time constituted or created under the
Securities Exchange Act of 1934, as amended, or, if at any
time after the execution of this instrument such Commission
is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such
duties on such date.
Securities Act: Means the United States Securities Act
of 1933, as amended from time to time, or any successor
thereto.
Special Distribution Date: Means each date on which a
Special Payment is to be distributed as specified in this
Agreement; provided, however, that, if any such day shall
not be a Business Day, the related distribution shall be
made on the next succeeding Business Day without additional
interest.
Special Payment: Means (i) any payment (other than a
Scheduled Payment) in respect of, or any proceeds of, any
Equipment Note or Trust Indenture Estate (as defined in each
Indenture), (ii) the amounts required to be distributed
pursuant to the last paragraph of Section 2.01(b) or
(iii) the amounts required to be distributed pursuant to the
penultimate paragraph of Section 2.01(b).
Special Payments Account: Means the account or
accounts created and maintained pursuant to Section 4.01(b).
Specified Investments: Means (i) obligations of, or
guaranteed by, the United States Government or agencies
thereof, (ii) open market commercial paper of any
corporation incorporated under the laws of the United States
of America or any State thereof rated at least P-2 or its
equivalent by Moody's Investors Service, Inc. or at least
A-2 or its equivalent by Standard & Poor's Ratings Group,
(iii) certificates of deposit issued by commercial banks
organized under the laws of the United States or of any
political subdivision thereof having a combined capital and
surplus in excess of $100,000,000, which banks or their
holding companies have a short-term deposit rating of P1 by
Moody's Investors Service, Inc. or its equivalent by
Standard & Poor's Ratings Group; provided, however, that the
aggregate amount at any one time so invested in certificates
of deposit issued by any one bank shall not exceed 5% of
such bank's capital and surplus, (iv) U.S. dollar
denominated offshore certificates of deposit issued by, or
offshore time deposits with, any commercial bank described
in clause (iii) above or any subsidiary thereof and
(v) repurchase agreements with any financial institution
having combined capital and surplus of at least $100,000,000
with respect to any of the obligations described in
clauses (i) through (iv) above as collateral; provided
further that if all of the above investments are
unavailable, all amounts to be invested may be used to
purchase Federal Funds from an entity described in
clause (iii) above.
Subordination Agent: Has the meaning specified in the
Intercreditor Agreement.
Temporary Offshore Global Certificates: Has the
meaning specified in Section 3.01.
Transfer Date: Has the meaning assigned to the term
"Refunding Date" in each Refunding Agreement.
Triggering Event: Has the meaning assigned to such
term in the Intercreditor Agreement.
Trust: Means the trust created by this Agreement, the
estate of which consists of the Trust Property.
Trust Indenture Act: Except as otherwise provided in
Section 9.06, means the United States Trust Indenture Act of
1939 as in force at the date hereof.
Trust Property: Means (i) the Equipment Notes held as
the property of the Trust and all monies at any time paid
thereon and all monies due and to become due thereunder,
(ii) funds from time to time deposited in the Escrow
Account, the Certificate Account and the Special Payments
Account, and (iii) all rights of the Trust and the Trustee,
on behalf of the Trust, under the Intercreditor Agreement
and the Liquidity Facility, including, without limitation,
all rights to receive certain payments thereunder, and all
monies paid to the Trustee on behalf of the Trust pursuant
to the Intercreditor Agreement or the Liquidity Facility.
Trustee: Means Wilmington Trust Company, or its
successor in interest, and any successor or other trustee
appointed as provided herein.
Trustee's Lien: Has the meaning specified in Section
7.17.
U.S. Global Certificate: Has the meaning specified in
Section 3.01.
U.S. Physical Certificates: Has the meaning specified
in Section 3.01.
Section 1.02. Compliance Certificates and Opinions.
Upon any application or request by the Company, any Owner Trustee
or any Loan Trustee to the Trustee to take any action under any
provision of this Agreement, the Company, such Owner Trustee or
such Loan Trustee, as the case may be, shall furnish to the
Trustee (i) an Officer's Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in
this Agreement relating to the proposed action have been complied
with and (ii) an Opinion of Counsel stating that in the opinion
of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or
request as to which the furnishing of such documents is
specifically required by any provision of this Agreement relating
to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Agreement
(other than a certificate provided pursuant to Section 8.04(d))
shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition
and the definitions in this Agreement relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been
complied with.
Section 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by
the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Agreement
or, in respect of the Certificates, this Agreement, they may, but
need not, be consolidated and form one instrument.
Section 1.04. Directions of Certificateholders. (a)
Any direction, consent, request, demand, authorization, notice,
waiver or other action provided by this Agreement to be given or
taken by Certificateholders (a "Direction") may be embodied in
and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent
or proxy duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective
when such instrument or instruments are delivered to the Trustee
and, where it is hereby expressly required pursuant to this
Agreement, to the Company or any Loan Trustee. Proof of
execution of any such instrument or of a writing appointing any
such agent or proxy shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee, the Company and
any Loan Trustee, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the
certificate of any notary public or other officer of any
jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument
acknowledged to him the execution thereof, or by an affidavit of
a witness to such execution sworn to before any such notary or
such other officer and where such execution is by an officer of a
corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such
certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing
the same, may also be proved in any other reasonable manner which
the Trustee deems sufficient.
(c) In determining whether the Certificateholders of
the requisite Fractional Undivided Interests of Certificates
Outstanding have given any Direction under this Agreement,
Certificates owned by the Company or any Affiliate thereof shall
be disregarded and deemed not to be Outstanding for purposes of
any such determination. In determining whether the Trustee shall
be protected in relying upon any such Direction, only
Certificates which the Trustee knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, (i) if any such
Person owns 100% of the Certificates Outstanding, such
Certificates shall not be so disregarded, and (ii) if any amount
of Certificates so owned by any such Person have been pledged in
good faith, such Certificates shall not be disregarded if the
pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates and
that the pledgee is not the Company or any Affiliate thereof.
(d) The Company may at its option, by delivery of an
Officer's Certificate to the Trustee, set a record date to
determine the Certificateholders entitled to give any Direction.
Notwithstanding Section 316(c) of the Trust Indenture Act, such
record date shall be the record date specified in such Officer's
Certificate, which shall be a date not more than 30 days prior to
the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such Direction may be
given before or after such record date, but only the
Certificateholders of record at the close of business on such
record date shall be deemed to be Certificateholders for the
purposes of determining whether Certificateholders of the
requisite proportion of Outstanding Certificates have authorized
or agreed or consented to such Direction, and for that purpose
the Outstanding Certificates shall be computed as of such record
date; provided that no such Direction by the Certificateholders
on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Agreement not
later than one year after such record date.
(e) Any Direction by the Holder of any Certificate
shall bind the Holder of every Certificate issued upon the
transfer thereof or in exchange therefor or in lieu thereof,
whether or not notation of such Direction is made upon such
Certificate.
(f) Except as otherwise provided in Section 1.04(c),
Certificates owned by or pledged to any Person shall have an
equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among
all of the Certificates.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Issuance of Certificates; Acquisition of
Equipment Notes. (a) The Trustee is hereby directed to execute
and deliver the Intercreditor Agreement, the Registration Rights
Agreement and each of the Refunding Agreements on or prior to the
Issuance Date, each in the form delivered to the Trustee by the
Company. Upon request of the Company and the satisfaction of the
closing conditions specified in each of the Refunding Agreements,
the Trustee shall execute, deliver and authenticate Certificates
equalling in the aggregate the aggregate principal amount of the
Equipment Notes to be purchased by the Trustee pursuant to each
of the Refunding Agreements on the Transfer Date, and evidencing
the entire ownership interest in the Trust. The Trustee shall
issue and sell such Certificates, in authorized denominations and
in such Fractional Undivided Interests, so as to result in the
receipt by the Trustee of consideration in an amount equal to the
aggregate principal amount of such Equipment Notes and,
concurrently therewith, the Trustee shall purchase, pursuant to
the terms and conditions of the Refunding Agreements, the
Equipment Notes at a purchase price equal to the amount of such
consideration so received. Except as provided in Sections 3.04
and 3.07 hereof, the Trustee shall not execute, authenticate or
deliver Certificates in excess of the aggregate amount specified
in this paragraph. The provisions of this Subsection (a) are
subject to the provisions of Subsection (b) below.
(b) If on or prior to the Issuance Date, the Company
shall deliver to the Trustee a Postponement Notice relating to
one or more Postponed Notes (which Postponement Notice may be
given by the Company only if one or more conditions to the
purchase of such Postponed Notes by the Trustee shall not have
been satisfied or waived pursuant to the related Refunding
Agreement), the Trustee shall postpone the purchase of such
Postponed Notes from the consideration received from the sale of
Certificates and shall promptly deposit funds in an amount equal
to the purchase price of such Postponed Notes (the "Escrowed
Funds") into an escrow account (the "Escrow Account") with the
Trustee to be maintained as a part of the Trust. The Escrowed
Funds so deposited shall be invested by the Trustee at the
direction and risk of, and for the benefit of, the Company in
Specified Investments (i) maturing no later than any scheduled
Transfer Date relating to the Certificates or (ii) if no such
Transfer Date has been scheduled, maturing on the next Business
Day, or (iii) if the Company has given notice to the Trustee that
any Postponed Notes will not be issued, with respect to the
portion of the Escrowed Funds relating to such Postponed Notes,
maturing on the next applicable Special Distribution Date, if
such investments are reasonably available for purchase. The
Trustee shall make withdrawals from the Escrow Account only as
provided in this Agreement. Upon request of the Company on one
or more occasions and the satisfaction of the closing conditions
specified in the applicable Refunding Agreements on or prior to
the related Cut-off Date, the Trustee shall purchase the
applicable Postponed Notes with the Escrowed Funds withdrawn from
the Escrow Account. The purchase price shall equal the principal
amount of such Postponed Notes.
The Trustee shall hold all Specified Investments until
the maturity thereof and will not sell or otherwise transfer
Specified Investments. If Specified Investments held in an
Escrow Account mature prior to any applicable Transfer Date, any
proceeds received on the maturity of such Specified Investments
(other than any earnings thereon) shall be reinvested by the
Trustee at the direction and risk of, and for the benefit of, the
Company in Specified Investments maturing as provided in the
preceding paragraph.
Any earnings on Specified Investments received from
time to time by the Trustee shall be promptly distributed to the
Company. The Company shall pay to the Trustee for deposit to the
Escrow Account an amount equal to any losses on such Specified
Investments as incurred. On the Initial Regular Distribution
Date, the Company will pay (in immediately available funds) to
the Trustee an amount equal to the interest that would have
accrued on any Postponed Notes purchased after the Issuance Date
if such Postponed Notes had been purchased on the Issuance Date,
from the Issuance Date to, but not including, the date of the
purchase of such Postponed Notes by the Trustee.
If the Company notifies the Trustee prior to the Cut-
off Date that any Postponed Notes will not be issued on or prior
to the Cut-off Date for any reason, on the next Special
Distribution Date occurring more than 20 days following the date
of such notice (i) the Company shall pay to the Trustee for
deposit in the Special Payments Account, in immediately available
funds, an amount equal to the interest that would have accrued on
the Postponed Notes designated in such notice at a rate equal to
the interest rate applicable to the Certificates from the
Issuance Date to, but not including, such Special Distribution
Date and (ii) the Trustee shall transfer an amount equal to that
amount of Escrowed Funds that would have been used to purchase
the Postponed Notes designated in such notice plus the amount
paid by the Company pursuant to the immediately preceding
clause (i) to the Special Payments Account for distribution as a
Special Payment in accordance with the provisions hereof.
If, on the Cut-off Date, an amount equal to less than
all of the Escrowed Funds (other than Escrowed Funds referred to
in the immediately preceding paragraph) has been used to purchase
Postponed Notes, on the next Special Distribution Date occurring
more than 20 days following the Cut-off Date (i) the Company
shall pay to the Trustee for deposit in the Special Payments
Account, in immediately available funds, an amount equal to the
interest that would have accrued on Postponed Notes originally
contemplated to be purchased with such unused Escrowed Funds
(other than Escrowed Funds referred to in the immediately
preceding paragraph) but not so purchased at a rate equal to the
interest rate applicable to the Certificates from the Issuance
Date to, but not including, such Special Distribution Date and
(ii) the Trustee shall transfer such unused Escrowed Funds and
the amount paid by the Company pursuant to the immediately
preceding clause (i) to the Special Payments Account for
distribution as a Special Payment in accordance with the
provisions hereof.
Section 2.02. Acceptance by Trustee. The Trustee,
upon the execution and delivery of this Agreement, acknowledges
its acceptance of all right, title and interest in and to the
Equipment Notes acquired pursuant to Section 2.01 hereof and the
Refunding Agreements and declares that the Trustee holds and will
hold such right, title and interest, together with all other
property constituting the Trust Property, for the benefit of all
then present and future Certificateholders, upon the trusts
herein set forth. Subject to Section 7.14, the Trustee shall
take all actions reasonably necessary to effect the registration
of all such Equipment Notes in the name of the Subordination
Agent. By its payment for and acceptance of each Certificate
issued to it under this Agreement, each initial Certificateholder
as grantor of the Trust thereby joins in the creation and
declaration of the Trust.
Section 2.03. Limitation of Powers. The Trust is
constituted solely for the purpose of making the investment in
the Equipment Notes, and, except as set forth herein, the Trustee
shall not be authorized or empowered to acquire any other
investments or engage in any other activities and, in particular,
the Trustee shall not be authorized or empowered to do anything
that would cause such Trust to fail to qualify as a "grantor
trust" for federal income tax purposes (including as subject to
this restriction, acquiring any Aircraft (as defined in the
respective Indentures) by bidding such Equipment Notes or
otherwise, or taking any action with respect to any such Aircraft
once acquired).
ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and Execution
of Certificates. (a) The Initial Certificates shall be known as
the "6.94% 1996-A Initial Pass Through Certificates" and the
Exchange Certificates shall be known as the "6.94% 1996-A
Exchange Pass Through Certificates", in each case, of the Trust.
Each Certificate will represent a fractional undivided interest
in the Trust and shall be substantially in the form set forth as
Exhibit A hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted
by this Agreement and may have such letters, numbers or other
marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be
determined by the officers executing such Certificates, as
evidenced by their execution of the Certificates. Any portion of
the text of any Certificate may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the
Certificate.
(b) The Initial Certificates shall be issued only in
fully registered form without coupons and only in denominations
of $100,000 or integral multiples of $1,000 in excess thereof,
except that one Certificate may be issued in a denomination of
less than $100,000. The Exchange Certificates will be issued in
denominations of $1,000 or integral multiples thereof. Each
Certificate shall be dated the date of its authentication. The
aggregate Fractional Undivided Interest of Certificates shall not
at any time exceed $269,518,000.
(c) Initial Certificates offered and sold in reliance
on Rule 144A shall be issued initially in the form of a single
permanent global Certificate in registered form, substantially in
the form set forth as Exhibit A hereto (the "U.S. Global
Certificate"), duly executed and authenticated by the Trustee as
hereinafter provided. The U.S. Global Certificate will be
registered in the name of a nominee for the Depositary and
deposited with the Trustee, as custodian for the Depositary. The
aggregate principal amount of the U.S. Global Certificate may
from time to time be increased or decreased by adjustments made
on the records of the Depositary or its nominee, or of the
Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
(d) Initial Certificates offered and sold in offshore
transactions in reliance on Regulation S shall be issued
initially in the form of a single temporary global Certificate in
registered form, substantially in the form set forth as Exhibit A
hereto (the "Temporary Offshore Global Certificate") duly
executed and authenticated by the Trustee as hereinafter
provided. The Temporary Offshore Global Certificates will be
registered in the name of a nominee of the Depositary for credit
to the account of the Agent Members acting as depositaries for
Euroclear and Cedel and deposited with the Trustee as custodian
for the Depositary. At any time following March 11, 1996 (the
"Offshore Certificates Exchange Date"), upon receipt by the
Trustee of a certificate substantially in the form of Exhibit B
hereto, a single permanent global Certificate in registered form
substantially in the form set forth in Exhibit A (the "Permanent
Offshore Global Certificate"; and together with the Temporary
Offshore Global Certificate, the "Offshore Global Certificates"),
duly executed and authenticated by the Trustee as hereinafter
provided, shall be registered in the name of a nominee for the
Depositary and deposited with the Trustee, as custodian for the
Depositary, and the Registrar shall reflect on its books and
records the date of such transfer and a decrease in the principal
amount of any Temporary Offshore Global Certificate in an amount
equal to the principal amount of the beneficial interest in such
Temporary Offshore Global Certificate transferred. The U.S.
Global Certificate and the Offshore Global Certificates are
sometimes referred to as the "Global Certificates".
(e) Initial Certificates offered and sold to
Institutional Accredited Investors shall be issued in the form of
permanent certificated Certificates in registered form in
substantially the form set forth as Exhibit A hereto (the "U.S.
Physical Certificates"). Certificates issued pursuant to Section
3.05(b) in exchange for interests in any Offshore Global
Certificate shall be in the form of permanent certificated
Certificates in registered form substantially in the form set
forth in Exhibit A (the "Offshore Physical Certificates"). The
Offshore Physical Certificates and U.S. Physical Certificates are
sometimes collectively herein referred to as the "Physical
Certificates".
(f) The definitive Certificates shall be in registered
form and shall be typed, printed, lithographed or engraved or
produced by any combination of these methods or may be produced
in any other manner, all as determined by the officers executing
such Certificates, as evidenced by their execution of such
Certificates.
Section 3.02. Restrictive Legends. (a) Subject to
Section 3.06, unless and until (i) an Initial Certificate is sold
under an effective Registration Statement or (ii) an Initial
Certificate is exchanged for an Exchange Certificate pursuant to
an effective Exchange Offer Registration Statement, in each case
as provided for in the Registration Rights Agreement, each Global
Certificate (other than the Permanent Offshore Global
Certificate) and each U.S. Physical Certificate shall bear the
following legend (the "Private Placement Legend") on the face
thereof:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS
CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS
HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE
TRANSFER THIS CERTIFICATE EXCEPT (A) TO CONTINENTAL
AIRLINES, INC., (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS CERTIFICATE WITHIN THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE
LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY CONTINENTAL
AIRLINES, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH
PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH
TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
(b) Each Global Certificate shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS
THROUGH TRUST AGREEMENT REFERRED TO HEREIN.
Section 3.03. Authentication of Certificates. (a)
The Trustee shall duly execute, authenticate and deliver
Certificates in authorized denominations equalling in the
aggregate the aggregate principal amount of the Equipment Notes
to be purchased by the Trustee pursuant to the Refunding
Agreements and evidencing the entire ownership of the Trust.
(b) No Certificate shall be entitled to any benefit
under this Agreement or be valid or obligatory for any purpose,
unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Certificate
shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder.
Section 3.04. Transfer and Exchange. (a) The Trustee
shall cause to be kept at the office or agency to be maintained
by it in accordance with the provisions of Section 7.12 of this
Agreement a register (the "Register") for the Certificates in
which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of the
Certificates and of transfers and exchanges of the Certificates
as herein provided. The Trustee shall initially be the registrar
(the "Registrar") for the purpose of registering the Certificates
and transfers and exchanges of the Certificates as herein
provided. A Certificateholder may transfer a Certificate by
written application to the Registrar stating the name of the
proposed transferee and otherwise complying with the terms of
this Agreement, including providing a written certificate or
other evidence of compliance with any restrictions on transfer.
No such transfer shall be effected until, and such transferee
shall succeed to the rights of a Certificateholder only upon,
final acceptance and registration of the transfer by the
Registrar in the Register. Prior to the registration of any
transfer by a Certificateholder as provided herein, the Trustee
shall treat the person in whose name the Certificate is
registered as the owner thereof for all purposes, and the Trustee
shall not be affected by notice to the contrary. Furthermore,
the Depositary shall, by acceptance of a Global Certificate,
agree that transfers of beneficial interests in such Global
Certificate may be effected only through a book-entry system
maintained by the Depositary (or its agent), and that ownership
of a beneficial interest in the Certificate shall be required to
be reflected in a book entry. When Certificates are presented to
the Registrar with a request to register the transfer or to
exchange them for an equal face amount of Certificates of other
authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its requirements
for such transactions are met. To permit registrations of
transfers and exchanges in accordance with the terms, conditions
and restrictions hereof, the Trustee shall execute and
authenticate Certificates at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange
of the Certificates, but the Trustee may require payment by the
transferor of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental
charges payable upon exchanges pursuant to Section 3.10 or 9.07).
Section 3.05. Book-Entry Provisions for U.S. Global
Certificate and Offshore Global Certificates. (a) Members of,
or participants in, the Depositary ("Agent Members") shall have
no rights under this Agreement with respect to any Global
Certificate held on their behalf by the Depositary, or the
Trustee as its custodian, and the Depositary may be treated by
the Trustee and any agent of the Trustee as the absolute owner of
such Global Certificate for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the
Trustee or any agent of the Trustee from giving effect to any
written certification, proxy or other authorization furnished by
the Depositary or shall impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Certificate. Upon the
issuance of any Global Certificate, the Registrar or its duly
appointed agent shall record a nominee of the Depositary as the
registered holder of such Global Certificate.
(b) Transfers of any Global Certificate shall be
limited to transfers of such Global Certificate or Offshore
Global Certificate in whole, but not in part, to nominees of the
Depositary, its successor or such successor's nominees.
Beneficial interests in the U.S. Global Certificate and any
Offshore Global Certificate may be transferred in accordance with
the rules and procedures of the Depositary and the provisions of
Section 3.06. Beneficial interests in the U.S. Global
Certificate or an Offshore Global Certificate shall be delivered
to all beneficial owners in the form of U.S. Physical
Certificates or Offshore Physical Certificates, as the case may
be, if (i) the Depositary notifies the Trustee that it is
unwilling or unable to continue as Depositary for the U.S. Global
Certificate or such Offshore Global Certificate, as the case may
be, and a successor depositary is not appointed by the Trustee
within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a
request from the Depositary to issue Physical Certificates.
(c) Any beneficial interest in one of the Global
Certificates that is transferred to a Person who takes delivery
in the form of an interest in the other Global Certificate will,
upon such transfer, cease to be an interest in such Global
Certificate and become an interest in the other Global
Certificate and, accordingly, will thereafter be subject to all
transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Certificate for as long
as it remains such an interest.
(d) [Intentionally omitted.]
(e) In connection with the transfer of the entire U.S.
Global Certificate or an entire Offshore Global Certificate to
the beneficial owners thereof pursuant to paragraph (b) of this
Section 3.05, such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, shall be deemed to be
surrendered to the Trustee for cancellation, and the Trustee
shall execute, authenticate and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial
interest in such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, an equal aggregate principal
amount of U.S. Physical Certificates or Offshore Physical
Certificates, as the case may be, of authorized denominations.
(f) Any U.S. Physical Certificate delivered in
exchange for an interest in the U.S. Global Certificate pursuant
to paragraph (b) of this Section 3.05 shall, except as otherwise
provided by paragraph (f) of Section 3.06, bear the Private
Placement Legend.
(g) Any Offshore Physical Certificate delivered in
exchange for an interest in an Offshore Global Certificate
pursuant to paragraph (b) of this Section shall, except as
otherwise provided by paragraph (f) of Section 3.06, bear the
applicable legend regarding transfer restrictions set forth in
Section 3.02(a).
(h) The registered holder of the U.S. Global
Certificate or any Offshore Global Certificate may grant proxies
and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this
Agreement or the Certificates.
Section 3.06. Special Transfer Provisions. Unless and
until (i) an Initial Certificate is sold under an effective
Registration Statement, or (ii) an Initial Certificate is
exchanged for an Exchange Certificate pursuant to an effective
Exchange Offer Registration Statement, in each case pursuant to
the Registration Rights Agreement, the following provisions shall
apply to such Initial Certificates:
(a) [intentionally omitted.]
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer
of an Initial Certificate to a QIB (excluding Non-U.S. Persons):
(i) If the Certificate to be transferred consists of
U.S. Physical Certificates or an interest in any Temporary
Offshore Global Certificate, the Registrar shall register
the transfer if such transfer is being made by a proposed
transferor who has checked the box provided for on the form
of Initial Certificate stating, or has otherwise advised the
Trustee and the Registrar in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided for on
the form of Initial Certificate stating, or has otherwise
advised the Trustee and the Registrar in writing, that it is
purchasing the Initial Certificate for its own account or an
account with respect to which it exercises sole investment
discretion and that it, or the Person on whose behalf it is
acting with respect to any such account, is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Trust and/or the
Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) Upon receipt by the Registrar of the documents
referred to in clause (i) above and instructions given in
accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its
books and records the date of such transfer and an increase
in the principal amount of the U.S. Global Certificate in an
amount equal to the principal amount of the U.S. Physical
Certificates or interests in the Temporary Offshore Global
Certificate, as the case may be, being transferred, and the
Trustee shall cancel such Physical Certificates or decrease
the amount of such Temporary Offshore Global Certificate so
transferred.
(c) [intentionally omitted.]
(d) Transfers of Interests in the Permanent Offshore
Global Certificate or Offshore Physical Certificates. The
Registrar shall register any transfer of interests in the
Permanent Offshore Global Certificate or Offshore Physical
Certificates without requiring any additional certification.
(e) Transfers to Non-U.S. Persons at Any Time. The
following provisions shall apply with respect to any registration
of any transfer of an Initial Certificate to a Non-U.S. Person:
(i) Prior to the Offshore Certificates Exchange Date,
the Registrar shall register any proposed transfer of an
Initial Certificate to a Non-U.S. Person upon receipt of a
certificate substantially in the form set forth as Exhibit C
hereto from the proposed transferor.
(ii) On and after the Offshore Certificates Exchange
Date, the Registrar shall register any proposed transfer to
any Non-U.S. Person if the Certificate to be transferred is
a U.S. Physical Certificate or an interest in the U.S.
Global Certificate, upon receipt of a certificate
substantially in the form of Exhibit C from the proposed
transferor. The Registrar shall promptly send a copy of
such certificate to the Company.
(iii) Upon receipt by the Registrar of (x) the
documents, if any, required by paragraph (ii) and (y)
instructions in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its
books and records the date of such transfer and a decrease
in the principal amount of such U.S. Global Certificate in
an amount equal to the principal amount of the beneficial
interest in such U.S. Global Certificate to be transferred,
and (B) upon receipt by the Registrar of instructions given
in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of
the Offshore Global Certificate in an amount equal to the
principal amount of the U.S. Physical Certificate or the
U.S. Global Certificate, as the case may be, to be
transferred, and the Trustee shall cancel the Physical
Certificate, if any, so transferred or decrease the amount
of such U.S. Global Certificate.
(f) Private Placement Legend. Upon the transfer,
exchange or replacement of Certificates not bearing the Private
Placement Legend, the Registrar shall deliver Certificates that
do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Certificates bearing the Private
Placement Legend, the Registrar shall deliver only Certificates
that bear the Private Placement Legend unless either (i) the
circumstances contemplated by paragraph (a)(i)(x) or (e)(ii) of
this Section 3.06 exist or (ii) there is delivered to the
Registrar an Opinion of Counsel to the effect that neither such
legend nor the related restrictions on transfer are required in
order to maintain compliance with the provisions of the
Securities Act.
(g) General. By its acceptance of any Certificate
bearing the Private Placement Legend, each Holder of such a
Certificate acknowledges the restrictions on transfer of such
Certificate set forth in this Agreement and agrees that it will
transfer such Certificate only as provided in this Agreement.
The Registrar shall not register a transfer of any Certificate
unless such transfer complies with the restrictions on transfer
of such Certificate set forth in this Agreement. In connection
with any transfer of Certificates, each Certificateholder agrees
by its acceptance of the Certificates to furnish the Registrar or
the Trustee such certifications, legal opinions or other
information as either of them may reasonably require to confirm
that such transfer is being made pursuant to an exemption from,
or a transaction not subject to, the registration requirements of
the Securities Act; provided that the Registrar shall not be
required to determine the sufficiency of any such certifications,
legal opinions or other information.
Until such time as no Certificates remain Outstanding,
the Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.05 or
this Section 3.06. The Trustee, if not the Registrar at such
time, shall have the right to inspect and make copies of all such
letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to
the Registrar.
Section 3.07. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to
the Registrar or the Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate
and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save
each of them harmless, then, in the absence of notice to the
Registrar or the Trustee that such destroyed, lost or stolen
Certificate has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the Uniform
Commercial Code in effect in any applicable jurisdiction are met,
the Trustee shall execute, authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate or Certificates, in authorized
denominations and of like Fractional Undivided Interest and
bearing a number not contemporaneously outstanding.
In connection with the issuance of any new Certificate
under this Section 3.07, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee and the
Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this
Section 3.07 shall constitute conclusive evidence of the
appropriate Fractional Undivided Interest in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Certificates.
Section 3.08. Persons Deemed Owners. Prior to due
presentment of a Certificate for registration of transfer, the
Trustee, the Registrar and any Paying Agent may treat the Person
in whose name any Certificate is registered (as of the day of
determination) as the owner of such Certificate for the purpose
of receiving distributions pursuant to Article IV and for all
other purposes whatsoever, and none of the Trustee, the Registrar
or any Paying Agent shall be affected by any notice to the
contrary.
Section 3.09. Cancellation. All Certificates
surrendered for payment or transfer or exchange shall, if
surrendered to the Trustee or any agent of the Trustee other than
the Registrar, be delivered to the Registrar for cancellation and
shall promptly be cancelled by it. No Certificates shall be
authenticated in lieu of or in exchange for any Certificates
cancelled as provided in this Section, except as expressly
permitted by this Agreement. All cancelled Certificates held by
the Registrar shall be destroyed and a certification of their
destruction delivered to the Trustee.
Section 3.10. Temporary Certificates. Until
definitive Certificates are ready for delivery, the Trustee shall
authenticate temporary Certificates. Temporary Certificates
shall be substantially in the form of definitive Certificates but
may have insertions, substitutions, omissions and other
variations determined to be appropriate by the officers executing
the temporary Certificates, as evidenced by their execution of
such temporary Certificates. If temporary Certificates are
issued, the Trustee will cause definitive Certificates to be
prepared without unreasonable delay. After the preparation of
definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the
temporary Certificates at the office or agency of the Trustee
designated for such purpose pursuant to Section 7.12, without
charge to the Certificateholder. Upon surrender for cancellation
of any one or more temporary Certificates, the Trustee shall
execute, authenticate and deliver in exchange therefor a like
face amount of definitive Certificates of authorized
denominations. Until so exchanged, the temporary Certificates
shall be entitled to the same benefits under this Agreement as
definitive Certificates.
Section 3.11. Limitation of Liability for Payments.
All payments and distributions made to Certificateholders shall
be made only from the Trust Property and only to the extent that
the Trustee shall have sufficient income or proceeds from the
Trust Property to make such payments in accordance with the terms
of Article IV of this Agreement. Each Certificateholder, by its
acceptance of a Certificate, agrees that it will look solely to
the income and proceeds from the Trust Property for any payment
or distribution due to such Certificateholder pursuant to the
terms of this Agreement and that it will not have any recourse to
the Company, the Trustee, the Loan Trustees, the Owner Trustees
or the Owner Participants, except as otherwise expressly provided
herein.
The Company is a party to this Agreement solely for
purposes of meeting the requirements of the Trust Indenture Act,
and therefore shall not have any right, obligation or liability
hereunder (except as otherwise expressly provided herein).
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments
Account. (a) The Trustee shall establish and maintain on behalf
of the Certificateholders a Certificate Account as one or more
non-interest-bearing accounts. The Trustee shall hold the
Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals
therefrom only as provided in this Agreement. On each day when a
Scheduled Payment is made to the Trustee under the Intercreditor
Agreement, the Trustee upon receipt thereof shall immediately
deposit the aggregate amount of such Scheduled Payment in the
Certificate Account.
(b) The Trustee shall establish and maintain on
behalf of the Certificateholders a Special Payments Account as
one or more accounts, which shall be non-interest bearing except
as provided in Section 4.04. The Trustee shall hold the Special
Payments Account in trust for the benefit of the
Certificateholders and shall make or permit withdrawals therefrom
only as provided in this Agreement. On each day when one or more
Special Payments are made to the Trustee, the Trustee, upon
receipt thereof, shall immediately deposit the aggregate amount
of such Special Payments in the Special Payments Account.
(c) The Trustee shall present to the related Loan
Trustee of each Equipment Note such Equipment Note on the date of
its stated final maturity or, in the case of any Equipment Note
which is to be redeemed in whole pursuant to the related
Indenture, on the applicable redemption date under such
Indenture.
Section 4.02. Distributions from Certificate Account
and Special Payments Account. (a) On each Regular Distribution
Date or as soon thereafter as the Trustee has confirmed receipt
of the payment of all or any part of the Scheduled Payments due
on such date, the Trustee shall distribute out of the Certificate
Account the entire amount deposited therein pursuant to
Section 4.01(a). There shall be so distributed to each
Certificateholder of record on the Record Date with respect to
such Regular Distribution Date (other than as provided in
Section 11.01 concerning the final distribution) by check mailed
to such Certificateholder, at the address appearing in the
Register, such Certificateholder's pro rata share (based on the
Fractional Undivided Interest in the Trust held by such
Certificateholder) of the total amount in the Certificate
Account, except that, with respect to Certificates registered on
the Record Date in the name of the nominee of the Depositary
(initially, such nominee to be Cede & Co.), such distribution
shall be made by wire transfer in immediately available funds to
the account designated by such nominee.
(b) On each Special Distribution Date with respect to
any Special Payment or as soon thereafter as the Trustee has
confirmed receipt of any Special Payments, the Trustee shall
distribute out of the Special Payments Account the entire amount
of such Special Payment deposited therein pursuant to
Section 4.01(b). There shall be so distributed to each
Certificateholder of record on the Record Date with respect to
such Special Distribution Date (other than as provided in
Section 11.01 concerning the final distribution) by check mailed
to such Certificateholder, at the address appearing in the
Register, such Certificateholder's pro rata share (based on the
Fractional Undivided Interest in the Trust held by such
Certificateholder) of the total amount in the Special Payments
Account on account of such Special Payment, except that, with
respect to Certificates registered on the Record Date in the name
of the nominee of the Depositary (initially, such nominee to be
Cede & Co.), such distribution shall be made by wire transfer in
immediately available funds to the account designated by such
nominee.
(c) The Trustee shall, at the expense of the Company,
cause notice of each Special Payment to be mailed to each
Certificateholder at his address as it appears in the Register.
In the event of redemption or purchase of Equipment Notes held in
the Trust, such notice shall be mailed not less than 20 days
prior to the Special Distribution Date for the Special Payment
resulting from such redemption or purchase, which Special
Distribution Date shall be the date of such redemption or
purchase. In the case of any other Special Payments, such notice
shall be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment,
stating the Special Distribution Date for such Special Payment
which shall occur not less than 20 days after the date of such
notice and as soon as practicable thereafter. Notices mailed by
the Trustee shall set forth:
(i) the Special Distribution Date and the Record Date
therefor (except as otherwise provided in Section 11.01),
(ii) the amount of the Special Payment for each $1,000
face amount Certificate (taking into account any payment to
be made by the Company pursuant to Section 2.01(b)) and the
amount thereof constituting principal, premium, if any, and
interest,
(iii) the reason for the Special Payment, and
(iv) if the Special Distribution Date is the same date
as a Regular Distribution Date, the total amount to be
received on such date for each $1,000 face amount
Certificate.
If the amount of premium, if any, payable upon the redemption or
purchase of an Equipment Note has not been calculated at the time
that the Trustee mails notice of a Special Payment, it shall be
sufficient if the notice sets forth the other amounts to be
distributed and states that any premium received will also be
distributed.
If any redemption of the Equipment Notes held in the
Trust is cancelled, the Trustee, as soon as possible after
learning thereof, shall cause notice thereof to be mailed to each
Certificateholder at its address as it appears on the Register.
Section 4.03. Statements to Certificateholders. (a)
On each Distribution Date, the Trustee will include with each
distribution to Certificateholders of a Scheduled Payment or
Special Payment, as the case may be, a statement setting forth
the following information (per $1,000 face amount Certificate as
to (i) and (ii) below):
(i) the amount of such distribution allocable to
principal and the amount allocable to premium, if any;
(ii) the amount of such distribution allocable to
interest; and
(iii) the Pool Balance and the Pool Factor.
With respect to the Certificates registered in the name
of Cede & Co., as nominee for the Depositary, on the Record Date
prior to each Distribution Date, the Trustee will request from
the Depositary a Securities Position Listing setting forth the
names of all Agent Members reflected on the Depositary's books as
holding interests in the Certificates on such Record Date. On
each Distribution Date, the Trustee will mail to each such Agent
Member the statement described above and will make available
additional copies as requested by such Agent Member for
forwarding to holders of interests in the Certificates.
(b) Within a reasonable period of time after the end
of each calendar year but not later than the latest date
permitted by law, the Trustee shall furnish to each Person who at
any time during such calendar year was a Certificateholder of
record a statement containing the sum of the amounts determined
pursuant to clauses (a)(i) and (a)(ii) above with respect to the
Trust for such calendar year or, in the event such Person was a
Certificateholder of record during a portion of such calendar
year, for such portion of such year, and such other items as are
readily available to the Trustee and which a Certificateholder
shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax
returns. Such statement and such other items shall be prepared
on the basis of information supplied to the Trustee by the Agent
Members and shall be delivered by the Trustee to such Agent
Members to be available for forwarding by such Agent Members to
the holders of interests in the Certificates in the manner
described in Section 4.03(a).
Section 4.04. Investment of Special Payment Moneys.
Any money received by the Trustee pursuant to Section 4.01(b)
representing a Special Payment which is not to be promptly
distributed shall, to the extent practicable, be invested in
Permitted Investments by the Trustee pending distribution of such
Special Payment pursuant to Section 4.02. Any investment made
pursuant to this Section 4.04 shall be in such Permitted
Investments having maturities not later than the date that such
moneys are required to be used to make the payment required under
Section 4.02 on the applicable Special Distribution Date and the
Trustee shall hold any such Permitted Investments until maturity.
The Trustee shall have no liability with respect to any
investment made pursuant to this Section 4.04, other than by
reason of the willful misconduct or negligence of the Trustee.
All income and earnings from such investments shall be
distributed on such Special Distribution Date as part of such
Special Payment.
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence. The
Company, at its own cost and expense, will do or cause to be done
all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises, except as
otherwise specifically permitted in Section 5.02; provided,
however, that the Company shall not be required to preserve any
right or franchise if the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company.
Section 5.02. Consolidation, Merger, etc. The Company
shall not consolidate with or merge into any other corporation or
convey, transfer or lease substantially all of its assets as an
entirety to any Person unless:
(a) the corporation formed by such consolidation or
into which the Company is merged or the Person that acquires
by conveyance, transfer or lease substantially all of the
assets of the Company as an entirety shall be (i) organized
and validly existing under the laws of the United States of
America or any state thereof or the District of Columbia,
(ii) a "citizen of the United States" as defined in 49
U.S.C. 40102(a)(15), as amended, and (iii) a United States
certificated air carrier, if and so long as such status is a
condition of entitlement to the benefits of Section 1110 of
the Bankruptcy Reform Act of 1978, as amended (11 U.S.C.
Section 1110), with respect to the Leases;
(b) the corporation formed by such consolidation or
into which the Company is merged or the Person which
acquires by conveyance, transfer or lease substantially all
of the assets of the Company as an entirety shall execute
and deliver to the Trustee a duly authorized, valid, binding
and enforceable agreement in form and substance reasonably
satisfactory to the Trustee containing an assumption by such
successor corporation or Person of the due and punctual
performance and observance of each covenant and condition of
this Agreement, the Other Pass Through Trust Agreements, the
Refunding Agreements, and each other Refunding Document to
be performed or observed by the Company; and
(c) the Company shall have delivered to the Trustee
an Officer's Certificate of the Company and an Opinion of
Counsel of the Company reasonably satisfactory to the
Trustee, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement
mentioned in clause (b) above comply with this Section 5.02
and that all conditions precedent herein provided for
relating to such transaction have been complied with.
Upon any consolidation or merger, or any conveyance,
transfer or lease of substantially all of the assets of the
Company as an entirety in accordance with this Section 5.02, the
successor corporation or Person formed by such consolidation or
into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if such successor
corporation or Person had been named as the Company herein. No
such conveyance, transfer or lease of substantially all of the
assets of the Company as an entirety shall have the effect of
releasing any successor corporation or Person which shall have
become such in the manner prescribed in this Section 5.02 from
its liability in respect of this Agreement and any Refunding
Document to which it is a party.
ARTICLE VI
DEFAULT
Section 6.01. Events of Default. (a) Exercise of
Remedies. Upon the occurrence and during the continuation of any
Indenture Default under any Indenture, the Trustee may, to the
extent it is the Controlling Party at such time (as determined
pursuant to the Intercreditor Agreement), direct the exercise of
remedies as provided in the Intercreditor Agreement.
(b) Purchase Rights of Certificateholders. By
acceptance of its Certificate, each Certificateholder agrees that
at any time after the occurrence and during the continuation of a
Triggering Event,
(i) each Class B Certificateholder shall have the
right to purchase all, but not less than all, of the
Certificates upon ten days' written notice to the Trustee
and each other Class B Certificateholder, provided that (A)
if prior to the end of such ten-day period any other Class B
Certificateholder notifies such purchasing Class B
Certificateholder that such other Class B Certificateholder
wants to participate in such purchase, then such other Class
B Certificateholder may join with the purchasing Class B
Certificateholder to purchase all, but not less than all, of
the Certificates pro rata based on the Fractional Undivided
Interest in the Class B Trust held by each such Class B
Certificateholder and (B) if prior to the end of such ten-
day period any other Class B Certificateholder fails to
notify the purchasing Class B Certificateholder of such
other Class B Certificateholder's desire to participate in
such a purchase, then such other Class B Certificateholder
shall lose its right to purchase the Certificates pursuant
to this Section 6.01(b);
(ii) each Class C Certificateholder shall have the
right (which shall not expire upon any purchase of the
Certificates pursuant to clause (i) above) to purchase all,
but not less than all, of the Certificates and the Class B
Certificates upon ten days' written notice to the Trustee,
the Class B Trustee and each other Class C
Certificateholder, provided that (A) if prior to the end of
such ten-day period any other Class C Certificateholder
notifies such purchasing Class C Certificateholder that such
other Class C Certificateholder wants to participate in such
purchase, then such other Class C Certificateholder may join
with the purchasing Class C Certificateholder to purchase
all, but not less than all, of the Certificates and the
Class B Certificates pro rata based on the Fractional
Undivided Interest in the Class C Trust held by each such
Class C Certificateholder and (B) if prior to the end of
such ten day period any other Class C Certificateholder
fails to notify the purchasing Class C Certificateholder of
such other Class C Certificateholder's desire to participate
in such a purchase, then such other Class C
Certificateholder shall lose its right to purchase the
Certificates pursuant to this Section 6.01(b); and
(iii) each Class D Certificateholder shall have the
right (which shall not expire upon any purchase of the
Certificates pursuant to clause (i) above or the purchase of
the Certificates and the Class B Certificates pursuant to
clause (ii) above) to purchase all, but not less than all,
of the Certificates, the Class B Certificates and the Class
C Certificates upon ten days' written notice to the Trustee,
the Class B Trustee, the Class C Trustee and each other
Class D Certificateholder, provided that (A) if prior to the
end of such ten-day period any other Class D
Certificateholder notifies such purchasing Class D
Certificateholder that such other Class D Certificateholder
wants to participate in such purchase, then such other Class
D Certificateholder may join with the purchasing
Certificateholder to purchase all, but not less than all, of
the Certificates, the Class B Certificates and the Class C
Certificates pro rata based on the Fractional Undivided
Interest in the Class D Trust held by each such Class D
Certificateholder and (B) if prior to the end of such ten
day period any other Class D Certificateholder fails to
notify the purchasing Class D Certificateholder of such
other Class D Certificateholder's desire to participate in
such a purchase, then such other Class D Certificateholder
shall lose its right to purchase the Certificates, the Class
B Certificates and the Class C Certificates pursuant to this
Section 6.01(b).
The purchase price with respect to the Certificates
shall be equal to the Pool Balance of the Certificates, together
with accrued and unpaid interest thereon to the date of such
purchase, without premium, but including any other amounts then
due and payable to the Certificateholders under this Agreement,
the Intercreditor Agreement or any other Refunding Document or on
or in respect of the Certificates; provided, however, that no
such purchase of Certificates shall be effective unless the
purchaser shall certify to the Trustee that contemporaneously
with such purchase, such purchaser is purchasing, pursuant to the
terms of this Agreement and the Other Pass Through Trust
Agreements, the Certificates, the Class B Certificates and the
Class C Certificates which are senior to the securities held by
such purchaser. Each payment of the purchase price of the
Certificates referred to in the first sentence hereof shall be
made to an account or accounts designated by the Trustee and each
such purchase shall be subject to the terms of this Section
6.01(b). Each Certificateholder agrees by its acceptance of its
Certificate that it will, subject to Section 3.04 hereof, upon
payment from such Class B Certificateholder(s), Class C
Certificateholder(s) or Class D Certificateholder(s), as the case
may be, of the purchase price set forth in the first sentence of
this paragraph, forthwith sell, assign, transfer and convey to
the purchaser thereof (without recourse, representation or
warranty of any kind except for its own acts), all of the right,
title, interest and obligation of such Certificateholder in, this
Agreement, the Intercreditor Agreement, the Liquidity Facility,
the Refunding Documents and all Certificates held by such
Certificateholder (excluding all right, title and interest under
any of the foregoing to the extent such right, title or interest
is with respect to an obligation not then due and payable as
respects any action or inaction or state of affairs occurring
prior to such sale) and the purchaser shall assume all of such
Certificateholder's obligations under this Agreement, the
Intercreditor Agreement, the Liquidity Facility and the Refunding
Documents. The Certificates will be deemed to be purchased on
the date payment of the purchase price is made notwithstanding
the failure of the Certificateholders to deliver any Certificates
(whether in the form of Physical Certificates or beneficial
interests in Global Certificates) and, upon such a purchase, (i)
the only rights of the Certificateholders will be to deliver the
Certificates to the purchaser and receive the purchase price for
such Certificates and (ii) if the purchaser shall so request,
such Certificateholder will comply with all the provisions of
Section 3.04 hereof to enable new Certificates to be issued to
the purchaser in such denominations as it shall request. All
charges and expenses in connection with the issuance of any such
new Certificates shall be borne by the purchaser thereof.
As used in this Section 6.01(b), the terms
"Certificateholder", "Class", "Class B Certificate", "Class B
Certificateholder", "Class B Trust", "Class B Trustee", "Class C
Certificate", "Class C Certificateholder", "Class C Trust",
"Class C Trustee", "Class D Certificate", "Class D
Certificateholder", "Class D Trust" and "Class D Trustee", shall
have the respective meanings assigned to such terms in the
Intercreditor Agreement.
Section 6.02. [Intentionally omitted.].
Section 6.03. Judicial Proceedings Instituted by
Trustee; Trustee May Bring Suit. If there shall be a failure to
make payment of the principal of, premium, if any, or interest on
any Equipment Note, or if there shall be any failure to pay Rent
(as defined in the relevant Lease) under any Lease when due and
payable, then the Trustee, in its own name and as trustee of an
express trust, as holder of such Equipment Notes, to the extent
permitted by and in accordance with the terms of the
Intercreditor Agreement and the Refunding Documents (subject to
the rights of the applicable Owner Trustee or Owner Participant
to cure any such failure in accordance with Section 4.03 of the
applicable Indenture), shall be entitled and empowered to
institute any suits, actions or proceedings at law, in equity or
otherwise, for the collection of the sums so due and unpaid on
such Equipment Notes or under such Lease and may prosecute any
such claim or proceeding to judgment or final decree with respect
to the whole amount of any such sums so due and unpaid.
Section 6.04. Control by Certificateholders. Subject
to Section 6.03 and the Intercreditor Agreement, the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee with respect to the Trust or pursuant to
the terms of the Intercreditor Agreement, or exercising any trust
or power conferred on the Trustee under this Agreement or the
Intercreditor Agreement, including any right of the Trustee as
Controlling Party under the Intercreditor Agreement or as holder
of the Equipment Notes, provided that
(1) such Direction shall not be in conflict with any
rule of law or with this Agreement and would not involve the
Trustee in personal liability or expense,
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the
Certificateholders not taking part in such Direction, and
(3) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
Direction.
Section 6.05. Waiver of Past Defaults. Subject to the
Intercreditor Agreement, the Certificateholders holding
Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust (i)
may on behalf of all of the Certificateholders waive any past
Event of Default hereunder and its consequences or (ii) if the
Trustee is the Controlling Party, may direct the Trustee to
instruct the applicable Loan Trustee to waive, any past Indenture
Default under any Indenture and its consequences, and thereby
annul any Direction given by such Certificateholders or the
Trustee to such Loan Trustee with respect thereto, except a
default:
(1) in the deposit of any Scheduled Payment or Special
Payment under Section 4.01 or in the distribution of any
payment under Section 4.02 on the Certificates, or
(2) in the payment of the principal of (premium, if
any) or interest on the Equipment Notes, or
(3) in respect of a covenant or provision hereof
which under Article X cannot be modified or amended without
the consent of each Certificateholder holding an Outstanding
Certificate affected thereby.
Upon any such waiver, such default shall cease to exist
with respect to the Certificates and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose
and any direction given by the Trustee on behalf of the
Certificateholders to the relevant Loan Trustee shall be annulled
with respect thereto; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any
right consequent thereon. Upon any such waiver, the Trustee
shall vote the Equipment Notes issued under the relevant
Indenture to waive the corresponding Indenture Default.
Section 6.06. Right of Certificateholders to Receive
Payments Not to Be Impaired. Anything in this Agreement to the
contrary notwithstanding, including, without limitation,
Section 6.07 hereof, but subject to the Intercreditor Agreement,
the right of any Certificateholder to receive distributions of
payments required pursuant to Section 4.02 hereof on the
Certificates when due, or to institute suit for the enforcement
of any such payment on or after the applicable Regular
Distribution Date or Special Distribution Date, shall not be
impaired or affected without the consent of such
Certificateholder.
Section 6.07. Certificateholders May Not Bring Suit
Except Under Certain Conditions. A Certificateholder shall not
have the right to institute any suit, action or proceeding at law
or in equity or otherwise with respect to this Agreement, for the
appointment of a receiver or for the enforcement of any other
remedy under this Agreement, unless:
(1) such Certificateholder previously shall have given
written notice to the Trustee of a continuing Event of
Default;
(2) Certificateholders holding Certificates evidencing
Fractional Undivided Interests aggregating not less than 25%
of the Trust shall have requested the Trustee in writing to
institute such action, suit or proceeding and shall have
offered to the Trustee indemnity as provided in
Section 7.03(e);
(3) the Trustee shall have refused or neglected to
institute such an action, suit or proceeding for 60 days
after receipt of such notice, request and offer of
indemnity; and
(4) no direction inconsistent with such written
request shall have been given to the Trustee during such 60-
day period by Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust.
It is understood and intended that no one or more of
the Certificateholders shall have any right in any manner
whatsoever hereunder or under the Certificates to (i) surrender,
impair, waive, affect, disturb or prejudice any property in the
Trust Property or the lien of any Indenture on any property
subject thereto, or the rights of the Certificateholders or the
holders of the Equipment Notes, (ii) obtain or seek to obtain
priority over or preference with respect to any other such
Certificateholder or (iii) enforce any right under this
Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all the Certificateholders
subject to the provisions of this Agreement.
Section 6.08. Remedies Cumulative. Every remedy given
hereunder to the Trustee or to any of the Certificateholders
shall not be exclusive of any other remedy or remedies, and every
such remedy shall be cumulative and in addition to every other
remedy given hereunder or now or hereafter given by statute, law,
equity or otherwise.
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default, the
Trustee undertakes to perform such duties as are specifically set
forth in this Agreement, and no implied covenants or obligations
shall be read into this Agreement against the Trustee.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of
care and skill in their exercise, as a prudent man would exercise
or use under the circumstances in the conduct of its own affairs.
(c) No provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful
misconduct, except that
(1) this Subsection shall not be construed to limit
the effect of Subsection (a) of this Section; and
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the
Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts.
(d) Whether or not herein expressly so provided, every
provision of this Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.
Section 7.02. Notice of Defaults. As promptly as
practicable after, and in any event within 90 days after, the
occurrence of any default (as such term is defined below)
hereunder, the Trustee shall transmit by mail to the Company, the
Owner Trustees, the Owner Participants, the Loan Trustees and the
Certificateholders in accordance with Section 313(c) of the Trust
Indenture Act, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default on the
payment of the principal, premium, if any, or interest on any
Equipment Note, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that
the withholding of such notice is in the interests of the
Certificateholders. For the purpose of this Section, the term
"default" means any event that is, or after notice or lapse of
time or both would become, an Event of Default.
Section 7.03. Certain Rights of Trustee. Subject to
the provisions of Section 315 of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting in reliance upon any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a written
description of the subject matter thereof accompanied by an
Officer's Certificate and an Opinion of Counsel as provided
in Section 1.02 of this Agreement;
(c) whenever in the administration of this Agreement
the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate of the
Company, any Owner Trustee or any Loan Trustee;
(d) the Trustee may consult with counsel and the
advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Agreement at the Direction of any of the Certificateholders
pursuant to this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable security or
indemnity against the cost, expenses and liabilities which
might be incurred by it in compliance with such Direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture or other paper or document;
(g) the Trustee may execute any of the trusts or
powers under this Agreement or perform any duties under this
Agreement either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or
attorney appointed with due care by it under this Agreement;
(h) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the Direction of the Certificateholders
holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest
in the Trust relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement; and
(i) the Trustee shall not be required to expend or
risk its own funds in the performance of any of its duties
under this Agreement, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity
against such risk is not reasonably assured to it.
Section 7.04. Not Responsible for Recitals or Issuance
of Certificates. The recitals contained herein and in the
Certificates, except the certificates of authentication, shall
not be taken as the statements of the Trustee, and the Trustee
assumes no responsibility for their correctness. Subject to
Section 7.15, the Trustee makes no representations as to the
validity or sufficiency of this Agreement, any Refunding
Agreement, any Equipment Notes, the Certificates or any other
Refunding Document, except that the Trustee hereby represents and
warrants that this Agreement has been, and the Intercreditor
Agreement, the Registration Rights Agreement, each Refunding
Agreement and each Certificate will be, executed, authenticated
and delivered by one of its officers who is duly authorized to
execute, authenticate and deliver such document on its behalf.
Section 7.05. May Hold Certificates. The Trustee, any
Paying Agent, Registrar or any of their Affiliates or any other
agent in their respective individual or any other capacity may
become the owner or pledgee of Certificates and, subject to
Sections 310(b) and 311 of the Trust Indenture Act, if
applicable, may otherwise deal with the Company, the Owner
Trustees or the Loan Trustees with the same rights it would have
if it were not Trustee, Paying Agent, Registrar or such other
agent.
Section 7.06. Money Held in Trust. Money held by the
Trustee or the Paying Agent in trust hereunder need not be
segregated from other funds except to the extent required herein
or by law and neither the Trustee nor the Paying Agent shall have
any liability for interest upon any such moneys except as
provided for herein.
Section 7.07. Compensation and Reimbursement. The
Company agrees:
(1) to pay, or cause to be paid, to the Trustee from
time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse, or cause to be reimbursed, the Trustee upon its
request for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Trustee
in accordance with any provision of this Agreement
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to
its negligence, willful misconduct or bad faith or as may be
incurred due to the Trustee's breach of its representations
and warranties set forth in Section 7.15; and
(3) to indemnify the Trustee pursuant to Section 10.1
of the Participation Agreements (as amended by the
Amendments No. 2 thereto dated as of the date hereof) (as
defined in the Intercreditor Agreement).
The Trustee shall be entitled to reimbursement from,
and shall have a lien prior to the Certificates upon, the Trust
Property for any tax incurred without negligence, bad faith or
willful misconduct, on its part, arising out of or in connection
with the acceptance or administration of such Trust (other than
any tax attributable to the Trustee's compensation for serving as
such), including any costs and expenses incurred in contesting
the imposition of any such tax. If the Trustee reimburses itself
from the Trust Property of such Trust for any such tax, it will
mail a brief report within 30 days setting forth the
circumstances thereof to all Certificateholders as their names
and addresses appear in the Register.
Section 7.08. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as a trustee under Section 310(a) of the Trust
Indenture Act and shall have a combined capital and surplus of at
least $75,000,000 (or a combined capital and surplus in excess of
$5,000,000 and the obligations of which, whether now in existence
or hereafter incurred, are fully and unconditionally guaranteed
by a corporation organized and doing business under the laws of
the United States, any state or territory thereof or of the
District of Columbia and having a combined capital and surplus of
at least $75,000,000). If such corporation publishes reports of
conditions at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of
Columbia supervising or examining authority, then for the
purposes of this Section 7.08, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of conditions
so published.
In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.08
to act as Trustee, the Trustee shall resign immediately as
Trustee in the manner and with the effect specified in
Section 7.09.
Section 7.09. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 7.10.
(b) The Trustee may resign at any time as trustee by
giving prior written notice thereof to the Company, the
Authorized Agents, the Owner Trustees and the Loan Trustees. If
an instrument of acceptance by a successor Trustee shall not have
been delivered to the Company, the Authorized Agents, the Owner
Trustees, the Loan Trustees and the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by
Direction of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less
than a majority in interest in the Trust delivered to the Trustee
and to the Company, the Owner Trustees and the Loan Trustees.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 310
of the Trust Indenture Act, if applicable, after written
request therefor by the Company or by any Certificateholder
who has been a bona fide Certificateholder for at least six
months; or
(2) the Trustee shall cease to be eligible under
Section 7.08 and shall fail to resign after written request
therefor by the Company or by any such Certificateholder; or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any case, (i) the Company may, with the consent of the
Owner Participants, which consent may not be unreasonably
withheld, remove the Trustee or (ii) any Certificateholder who
has been a bona fide Certificateholder for at least six months
may, on behalf of itself and all others similarly situated,
petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
(e) If a Responsible Officer of the Trustee shall
obtain actual knowledge of an Avoidable Tax which has been or is
likely to be asserted, the Trustee shall promptly notify the
Company and shall, within 30 days of such notification, resign
hereunder unless within such 30-day period the Trustee shall have
received notice that the Company has agreed to pay such tax. The
Company shall promptly appoint a successor Trustee in a
jurisdiction where there are no Avoidable Taxes.
(f) If the Trustee shall resign, be removed or become
incapable of acting or if a vacancy shall occur in the office of
the Trustee for any cause, the Company shall promptly appoint a
successor Trustee. If, within one year after such resignation,
removal or incapability, or other occurrence of such vacancy, a
successor Trustee shall be appointed by Direction of the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust delivered to the Company, the Owner
Trustees, the Loan Trustees and the retiring Trustee, and the
Company approves such appointment, which approval shall not be
unreasonably withheld, then the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become
the successor Trustee and supersede the successor Trustee
appointed as provided above. If no successor Trustee shall have
been so appointed as provided above and accepted appointment in
the manner hereinafter provided, any Certificateholder who has
been a bona fide Certificateholder for at least six months may,
on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a
successor Trustee.
(g) The successor Trustee shall give notice of the
resignation and removal of the Trustee and appointment of the
successor Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Certificateholders as
their names and addresses appear in the Register. Each notice
shall include the name of such successor Trustee and the address
of its Corporate Trust Office.
Section 7.10. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute and
deliver to the Company, the Authorized Agents, the Owner Trustees
and the Loan Trustees and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall execute and
deliver an instrument transferring to such successor Trustee all
such rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all
Trust Property held by such retiring Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 7.07.
Upon request of any such successor Trustee, the Company, the
retiring Trustee and such successor Trustee shall execute and
deliver any and all instruments containing such provisions as
shall be necessary or desirable to transfer and confirm to, and
for more fully and certainly vesting in, such successor Trustee
all such rights, powers and trusts.
No institution shall accept its appointment as a
Trustee hereunder unless at the time of such acceptance such
institution shall be qualified and eligible under this Article
VII.
Section 7.11. Merger, Conversion, Consolidation or
Succession to Business. Any corporation into which the Trustee
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article VII, without
the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Certificates
shall have been executed or authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Trustee may adopt such
execution or authentication and deliver the Certificates so
executed or authenticated with the same effect as if such
successor Trustee had itself executed or authenticated such
Certificates.
Section 7.12. Maintenance of Agencies. (a) There
shall at all times be maintained an office or agency in the
location set forth in Section 12.03 where Certificates may be
presented or surrendered for registration of transfer or for
exchange, and for payment thereof and where notices and demands
to or upon the Trustee in respect of such certificates or this
Agreement may be served; provided, however, that, if it shall be
necessary that the Trustee maintain an office or agency in
another location (e.g., the Certificates shall be represented by
Physical Certificates and shall be listed on a national
securities exchange), the Trustee will make all reasonable
efforts to establish such an office or agency. Written notice of
the location of each such other office or agency and of any
change of location thereof shall be given by the Trustee to the
Company, the Owner Trustees, the Loan Trustees (in the case of
any Owner Trustee or Loan Trustee, at its address specified in
the Refunding Agreements or such other address as may be notified
to the Trustee) and the Certificateholders. In the event that no
such office or agency shall be maintained or no such notice of
location or of change of location shall be given, presentations
and demands may be made and notices may be served at the
Corporate Trust Office of the Trustee.
(b) There shall at all times be a Registrar and a
Paying Agent hereunder with respect to the Certificates. Each
such Authorized Agent shall be a bank or trust company, shall be
a corporation organized and doing business under the laws of the
United States or any state, with a combined capital and surplus
of at least $75,000,000, or, if the Trustee shall be acting as
the Registrar or Paying Agent hereunder, a corporation having a
combined capital and surplus in excess of $5,000,000, the
obligations of which are guaranteed by a corporation organized
and doing business under the laws of the United States or any
state, with a combined capital and surplus of at least
$75,000,000, and shall be authorized under such laws to exercise
corporate trust powers, subject to supervision by Federal or
state authorities. The Trustee shall initially be the Paying
Agent and, as provided in Section 3.04, Registrar hereunder with
respect to the Certificates. Each Registrar shall furnish to the
Trustee, at stated intervals of not more than six months, and at
such other times as the Trustee may request in writing, a copy of
the Register maintained by such Registrar.
(c) Any corporation into which any Authorized Agent
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, consolidation or
conversion to which any Authorized Agent shall be a party, or any
corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent
hereunder, if such successor corporation is otherwise eligible
under this Section, without the execution or filing of any paper
or any further act on the part of the parties hereto or such
Authorized Agent or such successor corporation.
(d) Any Authorized Agent may at any time resign by
giving written notice of resignation to the Trustee, the Company,
the Owner Trustees and the Loan Trustees. The Company may, and
at the request of the Trustee shall, at any time terminate the
agency of any Authorized Agent by giving written notice of
termination to such Authorized Agent and to the Trustee. Upon
the resignation or termination of an Authorized Agent or in case
at any time any such Authorized Agent shall cease to be eligible
under this Section (when, in either case, no other Authorized
Agent performing the functions of such Authorized Agent shall
have been appointed), the Company shall promptly appoint one or
more qualified successor Authorized Agents, reasonably
satisfactory to the Trustee, to perform the functions of the
Authorized Agent which has resigned or whose agency has been
terminated or who shall have ceased to be eligible under this
Section. The Company shall give written notice of any such
appointment made by it to the Trustee, the Owner Trustees and the
Loan Trustees; and in each case the Trustee shall mail notice of
such appointment to all Certificateholders as their names and
addresses appear on the Register.
(e) The Company agrees to pay, or cause to be paid,
from time to time to each Authorized Agent reasonable
compensation for its services and to reimburse it for its
reasonable expenses.
Section 7.13. Money for Certificate Payments to Be
Held in Trust. All moneys deposited with any Paying Agent for
the purpose of any payment on Certificates shall be deposited and
held in trust for the benefit of the Certificateholders entitled
to such payment, subject to the provisions of this Section.
Moneys so deposited and held in trust shall constitute a separate
trust fund for the benefit of the Certificateholders with respect
to which such money was deposited.
The Trustee may at any time, for the purpose of
obtaining the satisfaction and discharge of this Agreement or for
any other purpose, direct any Paying Agent to pay to the Trustee
all sums held in trust by such Paying Agent, such sums to be held
by the Trustee upon the same trusts as those upon which such sums
were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
Section 7.14. Registration of Equipment Notes in Name
of Subordination Agent. The Trustee agrees that all Equipment
Notes to be purchased by the Trust shall be issued in the name of
the Subordination Agent or its nominee and held by the
Subordination Agent in trust for the benefit of the
Certificateholders, or, if not so held, the Subordination Agent
or its nominee shall be reflected as the owner of such Equipment
Notes in the register of the issuer of such Equipment Notes.
Section 7.15. Representations and Warranties of
Trustee. The Trustee hereby represents and warrants that:
(a) the Trustee is a Delaware banking corporation
organized and validly existing in good standing under the
laws of the State of Delaware;
(b) the Trustee has full power, authority and legal
right to execute, deliver, and perform this Agreement, the
Intercreditor Agreement, the Registration Rights Agreement
and the Refunding Agreements and has taken all necessary
action to authorize the execution, delivery, and performance
by it of this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Refunding Agreements;
(c) the execution, delivery and performance by the
Trustee of this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Refunding Agreements
(i) will not violate any provision of United States federal
law or the law of the state of the United States where it is
located governing the banking and trust powers of the
Trustee or any order, writ, judgment, or decree of any
court, arbitrator or governmental authority applicable to
the Trustee or any of its assets, (ii) will not violate any
provision of the articles of association or by-laws of the
Trustee, or (iii) will not violate any provision of, or
constitute, with or without notice or lapse of time, a
default under, or result in the creation or imposition of
any lien on any properties included in the Trust Property
pursuant to the provisions of any mortgage, indenture,
contract, agreement or other undertaking to which it is a
party, which violation, default or lien could reasonably be
expected to have an adverse effect on the Trustee's
performance or ability to perform its duties hereunder or
thereunder or on the transactions contemplated herein or
therein;
(d) the execution, delivery and performance by the
Trustee of this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Refunding Agreements
will not require the authorization, consent, or approval of,
the giving of notice to, the filing or registration with, or
the taking of any other action in respect of, any
governmental authority or agency of the United States or the
State of the United States where it is located regulating
the banking and corporate trust activities of the Trustee;
and
(e) this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Refunding Agreements
have been duly executed and delivered by the Trustee and
constitute the legal, valid, and binding agreements of the
Trustee, enforceable against it in accordance with their
respective terms, provided that enforceability may be
limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
rights of creditors generally and (ii) general principles of
equity.
Section 7.16. Withholding Taxes; Information
Reporting. The Trustee, as trustee of the grantor trust created
by this Agreement, shall exclude and withhold from each
distribution of principal, premium, if any, and interest and
other amounts due under this Agreement or under the Certificates
any and all withholding taxes applicable thereto as required by
law. The Trustee agrees to act as such withholding agent and, in
connection therewith, whenever any present or future taxes or
similar charges are required to be withheld with respect to any
amounts payable in respect of the Certificates, to withhold such
amounts and timely pay the same to the appropriate authority in
the name of and on behalf of the Certificateholders, that it will
file any necessary withholding tax returns or statements when
due, and that, as promptly as possible after the payment thereof,
it will deliver to each such Certificateholder appropriate
documentation showing the payment thereof, together with such
additional documentary evidence as such Certificateholders may
reasonably request from time to time. The Trustee agrees to file
any other information reports as it may be required to file under
United States law.
Section 7.17. Trustee's Liens. The Trustee in its
individual capacity agrees that it will at its own cost and
expense promptly take any action as may be necessary to duly
discharge and satisfy in full any mortgage, pledge, lien, charge,
encumbrance, security interest or claim ("Trustee's Liens") on or
with respect to the Trust Property which is attributable to the
Trustee either (i) in its individual capacity and which is
unrelated to the transactions contemplated by this Agreement, the
Intercreditor Agreement, the Refunding Agreements or the
Refunding Documents, or (ii) as Trustee hereunder or in its
individual capacity and which arises out of acts or omissions
which are not contemplated by this Agreement.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with
Names and Addresses of Certificateholders. The Company will
furnish to the Trustee within 15 days after each Record Date with
respect to a Scheduled Payment, and at such other times as the
Trustee may request in writing within 30 days after receipt by
the Company of any such request, a list, in such form as the
Trustee may reasonably require, of all information in the
possession or control of the Company as to the names and
addresses of the Certificateholders, in each case as of a date
not more than 15 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the sole
Registrar, no such list need be furnished; and provided further,
however, that no such list need be furnished for so long as a
copy of the Register is being furnished to the Trustee pursuant
to Section 7.12.
Section 8.02. Preservation of Information;
Communications to Certificateholders. The Trustee shall
preserve, in as current a form as is reasonably practicable, the
names and addresses of Certificateholders contained in the most
recent list furnished to the Trustee as provided in Section 7.12
or Section 8.01, as the case may be, and the names and addresses
of Certificateholders received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list
furnished to it as provided in Section 7.12 or Section 8.01, as
the case may be, upon receipt of a new list so furnished.
Section 8.03. Reports by Trustee. Within 60 days
after May 15 of each year commencing with the first full year
following the issuance of the Certificates, the Trustee shall
transmit to the Certificateholders, as provided in Section 313(c)
of the Trust Indenture Act, a brief report dated as of such
May 15, if required by Section 313(a) of the Trust Indenture Act.
Section 8.04. Reports by the Company. The Company
shall:
(a) file with the Trustee, within 30 days after the
Company is required to file the same with the SEC, copies of
the annual reports and of the information, documents and
other reports (or copies of such portions of any of the
foregoing as the SEC may from time to time by rules and
regulations prescribe) which the Company is required to file
with the SEC pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934, as amended; or, if the
Company is not required to file information, documents or
reports pursuant to either of such sections, then to file
with the Trustee and the SEC, in accordance with rules and
regulations prescribed by the SEC, such of the supplementary
and periodic information, documents and reports which may be
required pursuant to section 13 of the Securities Exchange
Act of 1934, as amended, in respect of a security listed and
registered on a national securities exchange as may be
prescribed in such rules and regulations;
(b) file with the Trustee and the SEC, in accordance
with the rules and regulations prescribed by the SEC, such
additional information, documents and reports with respect
to compliance by the Company with the conditions and
covenants provided for in this Agreement, as may be required
by such rules and regulations, including, in the case of
annual reports, if required by such rules and regulations,
certificates or opinions of independent public accountants;
(c) transmit to all Certificateholders, in the manner
and to the extent provided in Section 313(c) of the Trust
Indenture Act such summaries of any information, documents
and reports required to be filed by the Company pursuant to
subsections (a) and (b) of this Section 8.04 as may be
required by rules and regulations prescribed by the SEC; and
(d) furnish to the Trustee, not less often than
annually, a brief certificate from the principal executive
officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's
compliance with all conditions and covenants under this
Agreement (it being understood that for purposes of this
paragraph (d), such compliance shall be determined without
regard to any period of grace or requirement of notice
provided under this Agreement).
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without Consent
of Certificateholders. Without the consent of the
Certificateholders, the Company may (but will not be required
to), and the Trustee (subject to Section 9.03) shall, at any time
and from time to time, enter into one or more agreements
supplemental hereto or, if applicable, to the Intercreditor
Agreement or the Liquidity Facility in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation
to the Company and the assumption by any such successor of
the covenants of the Company herein contained; or
(2) to add to the covenants of the Company for the
benefit of the Certificateholders, or to surrender any right
or power in this Agreement conferred upon the Company; or
(3) to correct or supplement any provision in this
Agreement, the Intercreditor Agreement or the Liquidity
Facility which may be defective or inconsistent with any
other provision herein or to cure any ambiguity or correct
any mistake or to modify any other provision with respect to
matters or questions arising under this Agreement, the
Intercreditor Agreement or the Liquidity Facility, provided
that any such action shall not materially adversely affect
the interests of the Certificateholders; or
(4) to modify, eliminate or add to the provisions of
this Agreement to such extent as shall be necessary to
continue the qualification of this Agreement (including any
supplemental agreement) under the Trust Indenture Act or
under any similar Federal statute hereafter enacted, and to
add to this Agreement such other provisions as may be
expressly permitted by the Trust Indenture Act, excluding,
however, the provisions referred to in Section 316(a)(2) of
the Trust Indenture Act as in effect at the date as of which
this instrument was executed or any corresponding provision
in any similar Federal statute hereafter enacted; or
(5) to evidence and provide for the acceptance of
appointment under this Agreement by the Trustee of a
successor Trustee and to add to or change any of the
provisions of this Agreement as shall be necessary to
provide for or facilitate the administration of the Trust,
pursuant to the requirements of Section 7.10; or
(6) to provide the information required under
Section 7.12 and Section 12.03 as to the Trustee; or
(7) to modify or eliminate provisions relating to the
transfer or exchange of Exchange Certificates or the Initial
Certificates upon consummation of the Exchange Offer (as
defined in the Registration Rights Agreement) or
effectiveness of the Registration Statement.
Section 9.02. Supplemental Agreements with Consent of
Certificateholders. With the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust, by
Direction of said Certificateholders delivered to the Company and
the Trustee, the Company may (with the consent of the Owner
Trustees, if any, which consent shall not be unreasonably
withheld), and the Trustee (subject to Section 9.03) shall, enter
into an agreement or agreements for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, the Intercreditor Agreement, the
Liquidity Facility, the Registration Rights Agreement or any
Refunding Agreement to the extent applicable to such
Certificateholders or of modifying in any manner the rights and
obligations of such Certificateholders under this Agreement, the
Intercreditor Agreement, the Liquidity Facility, the Registration
Rights Agreement or any Refunding Agreement; provided, however,
that no such agreement shall, without the consent of the
Certificateholder of each Outstanding Certificate affected
thereby:
(1) reduce in any manner the amount of, or delay the
timing of, any receipt by the Trustee of payments on the
Equipment Notes held in the Trust or distributions that are
required to be made herein on any Certificate, or change any
date of payment on any Certificate, or change the place of
payment where, or the coin or currency in which, any
Certificate is payable, or impair the right to institute
suit for the enforcement of any such payment or distribution
on or after the Regular Distribution Date or Special
Distribution Date applicable thereto; or
(2) permit the disposition of any Equipment Note
included in the Trust Property except as permitted by this
Agreement, or otherwise deprive such Certificateholder of
the benefit of the ownership of the Equipment Notes in the
Trust; or
(3) reduce the percentage of the aggregate Fractional
Undivided Interests of the Trust which is required for any
such supplemental agreement, or reduce such percentage
required for any waiver of compliance with certain
provisions of this Agreement or certain defaults hereunder
and their consequences provided for in this Agreement; or
(4) waive, amend or modify Section 2.4, 3.2 or 3.3 of
the Intercreditor Agreement in a manner adverse to the
Certificateholders; or
(5) modify any of the provisions of this Section 9.02
or Section 6.05, except to increase any such percentage or
to provide that certain other provisions of this Agreement
cannot be modified or waived without the consent of the
Certificateholder of each Certificate affected thereby.
It shall not be necessary for any Direction of
Certificateholders under this Section to approve the particular
form of any proposed supplemental agreement, but it shall be
sufficient if such Direction shall approve the substance thereof.
Section 9.03. Documents Affecting Immunity or
Indemnity. If in the opinion of the Trustee any document
required to be executed by it pursuant to the terms of
Section 9.01 or 9.02 affects any interest, right, duty, immunity
or indemnity in favor of the Trustee under this Agreement, the
Trustee may in its discretion decline to execute such document.
Section 9.04. Execution of Supplemental Agreements.
In executing, or accepting the additional trusts created by, any
agreement permitted by this Article or the modifications thereby
of the trusts created by this Agreement, the Trustee shall be
entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this
Agreement.
Section 9.05. Effect of Supplemental Agreements. Upon
the execution of any agreement supplemental to this Agreement
under this Article, this Agreement shall be modified in
accordance therewith, and such supplemental agreement shall form
a part of this Agreement for all purposes; and every Holder of a
Certificate theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 9.06. Conformity with Trust Indenture Act.
Every supplemental agreement executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act as
then in effect.
Section 9.07. Reference in Certificates to
Supplemental Agreements. Certificates authenticated and
delivered after the execution of any supplemental agreement
pursuant to this Article may bear a notation in form approved by
the Trustee as to any matter provided for in such supplemental
agreement; and, in such case, suitable notation may be made upon
Outstanding Certificates after proper presentation and demand.
ARTICLE X
AMENDMENTS TO INDENTURES AND REFUNDING DOCUMENTS
Section 10.01. Amendments and Supplements to
Indentures and Other Refunding Documents. In the event that the
Trustee, as holder of any Equipment Note in trust for the benefit
of the Certificateholders or as Controlling Party under the
Intercreditor Agreement, receives a request for a consent to any
amendment, modification, waiver or supplement under any Indenture
or other Refunding Document, the Trustee shall forthwith send a
notice of such proposed amendment, modification, waiver or
supplement to each Certificateholder registered on the Register
as of the date of such notice. The Trustee shall request from
the Certificateholders a Direction as to (a) whether or not to
take or refrain from taking any action which a holder of such
Equipment Note has the option to direct, (b) whether or not to
give or execute any waivers, consents, amendments, modifications
or supplements as a holder of such Equipment Note and (c) how to
vote any Equipment Note if a vote has been called for with
respect thereto. Provided such a request for Certificateholder
Direction shall have been made, in directing any action or
casting any vote or giving any consent as the holder of any
Equipment Note, the Trustee shall vote for or give consent to any
such action with respect to such Equipment Note in the same
proportion as that of (i) the aggregate face amounts of all
Certificates actually voted in favor of or for giving consent to
such action by such Direction of Certificateholders to (ii) the
aggregate face amount of all Outstanding Certificates. For
purposes of the immediately preceding sentence, a Certificate
shall have been "actually voted" if the Holder of such
Certificate has delivered to the Trustee an instrument evidencing
such Holder's consent to such Direction prior to two Business
Days before the Trustee directs such action or casts such vote or
gives such consent. Notwithstanding the foregoing, but subject
to Section 6.04 and the Intercreditor Agreement, the Trustee may,
in its own discretion and at its own direction, consent and
notify the relevant Loan Trustee of such consent to any
amendment, modification, waiver or supplement under the relevant
Indenture or any other Refunding Document, if an Event of Default
hereunder shall have occurred and be continuing, or if such
amendment, modification or waiver will not adversely affect the
interests of the Certificateholders.
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust. The
respective obligations and responsibilities of the Company and
the Trustee with respect to the Trust shall terminate upon the
distribution to all Holders of Certificates and the Trustee of
all amounts required to be distributed to them pursuant to this
Agreement and the disposition of all property held as part of the
Trust Property; provided, however, that in no event shall the
Trust continue beyond one hundred ten (110) years following the
date of the earliest execution of this Trust Agreement.
Notice of any termination, specifying the Regular
Distribution Date (or Special Distribution Date, as the case may
be) upon which the Certificateholders may surrender their
Certificates to the Trustee for payment of the final Distribution
Date and cancellation, shall be mailed promptly by the Trustee to
Certificateholders not earlier than the 60th day and not later
than the 20th day next preceding such final Distribution Date
specifying (A) the Regular Distribution Date (or Special
Distribution Date, as the case may be) upon which the proposed
final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office or agency of the
Trustee therein specified, (B) the amount of any such proposed
final payment, and (C) that the Record Date otherwise applicable
to such Regular Distribution Date (or Special Distribution Date,
as the case may be) is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office
or agency of the Trustee therein specified. The Trustee shall
give such notice to the Registrar at the time such notice is
given to Certificateholders. Upon presentation and surrender of
the Certificates in accordance with such notice, the Trustee
shall cause to be distributed to Certificateholders such final
payments.
In the event that all of the Certificateholders shall
not surrender their Certificates for cancellation within six
months after the date specified in the above-mentioned written
notice, the Trustee shall give a second written notice to the
remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect
thereto. No additional interest shall accrue on the Certificates
after the Regular Distribution Date (or Special Distribution
Date, as the case may be) specified in the first written notice.
In the event that any money held by the Trustee for the payment
of distributions on the Certificates shall remain unclaimed for
two years (or such lesser time as the Trustee shall be satisfied,
after sixty days' notice from the Company, is one month prior to
the escheat period provided under applicable law) after the final
distribution date with respect thereto, the Trustee shall pay to
each Loan Trustee the appropriate amount of money relating to
such Loan Trustee and shall give written notice thereof to the
related Owner Trustees, the Owner Participants and the Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of
Certificateholders. The death or incapacity of any
Certificateholder shall not operate to terminate this Agreement
or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any
action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights,
obligations, and liabilities of the parties hereto or any of
them.
Section 12.02. Certificates Nonassessable and Fully
Paid. Except as set forth in the last sentence of this Section
12.02, Certificateholders shall not be personally liable for
obligations of the Trust, the Fractional Undivided Interests
represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and
Certificates, upon authentication thereof by the Trustee pursuant
to Section 3.03, are and shall be deemed fully paid. No
Certificateholder shall have any right (except as expressly
provided herein) to vote or in any manner otherwise control the
operation and management of the Trust Property, the Trust, or the
obligations of the parties hereto, nor shall anything set forth
herein, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to
time as partners or members of an association. Neither the
existence of the Trust nor any provision herein is intended to or
shall limit the liability the Certificateholders would otherwise
incur if the Certificateholders owned Trust Property as co-
owners, or incurred any obligations of the Trust, directly rather
than through the Trust.
Section 12.03. Notices. (a) Unless otherwise
specifically provided herein, all notices required under the
terms and provisions of this Agreement shall be in English and in
writing, and any such notice may be given by United States mail,
courier service or telecopy, and any such notice shall be
effective when delivered or received or, if mailed, three days
after deposit in the United States mail with proper postage for
ordinary mail prepaid,
if to the Company, to:
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Attention: Chief Financial Officer and
General Counsel
Facsimile: (713) 523-2831
if to the Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Department
Facsimile: (302) 651-8882
Telephone: (302) 651-8584
(b) The Company or the Trustee, by notice to the
other, may designate additional or different addresses for
subsequent notices or communications.
(c) Any notice or communication to Certificateholders
shall be mailed by first-class mail to the addresses for
Certificateholders shown on the Register kept by the Registrar.
Failure so to mail a notice or communication or any defect in
such notice or communication shall not affect its sufficiency
with respect to other Certificateholders.
(d) If a notice or communication is mailed in the
manner provided above within the time prescribed, it is
conclusively presumed to have been duly given, whether or not the
addressee receives it.
(e) If the Company mails a notice or communication to
the Certificateholders, it shall mail a copy to the Trustee and
to the Paying Agent at the same time.
(f) Notwithstanding the foregoing, all communications
or notices to the Trustee shall be deemed to be given only when
received by a Responsible Officer of the Trustee.
(g) The Trustee shall promptly furnish the Company
with a copy of any demand, notice or written communication
received by the Trustee hereunder from any Certificateholder,
Owner Trustee or Loan Trustee.
Section 12.04. Governing Law. THIS AGREEMENT HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS-OF-LAW PRINCIPLES.
Section 12.05. Severability of Provisions. If any one
or more of the covenants, agreements, provisions or terms of this
Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions, or terms shall be deemed
severable from the remaining covenants, agreements, provisions or
terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or
the Trust, or of the Certificates or the rights of the
Certificateholders thereof.
Section 12.06. Trust Indenture Act Controls. This
Agreement is subject to the provisions of the Trust Indenture Act
and shall, to the extent applicable, be governed by such
provisions.
Section 12.07. Effect of Headings and Table of
Contents. The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.
Section 12.08. Successors and Assigns. All covenants,
agreements, representations and warranties in this Agreement by
the Trustee and the Company shall bind and, to the extent
permitted hereby, shall inure to the benefit of and be
enforceable by their respective successors and assigns, whether
so expressed or not.
Section 12.09. Benefits of Agreement. Nothing in this
Agreement or in the Certificates, express or implied, shall give
to any Person, other than the parties hereto and their successors
hereunder, and the Certificateholders, any benefit or any legal
or equitable right, remedy or claim under this Agreement.
Section 12.10. Legal Holidays. In any case where any
Regular Distribution Date or Special Distribution Date relating
to any Certificate shall not be a Business Day, then
(notwithstanding any other provision of this Agreement) payment
need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made
on such Regular Distribution Date or Special Distribution Date,
and no interest shall accrue during the intervening period.
Section 12.11. Counterparts. For the purpose of
facilitating the execution of this Agreement and for other
purposes, this Agreement may be executed simultaneously in any
number of counterparts, each of which counterparts shall be
deemed to be an original, and all of which counterparts shall
constitute but one and the same instrument.
Section 12.12. Intention of Parties. The parties
hereto intend that the Trust be classified for U.S. federal
income tax purposes as a grantor trust under Subpart E, Part I of
Subchapter J of the Internal Revenue Code of 1986, as amended,
and not as a trust or association taxable as a corporation or as
a partnership. The powers granted and obligations undertaken
pursuant to this Agreement shall be so construed so as to further
such intent.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed by their respective officers
thereunto duly authorized as of the day and year first written
above.
CONTINENTAL AIRLINES, INC.
By __________________________
Name:
Title:
WILMINGTON TRUST COMPANY, as
Trustee
By __________________________
Name:
Title:
EXHIBIT A
FORM OF CERTIFICATE
REGISTERED
No. ______________
[THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF,
THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH
THIS CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES,
INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH
PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE
EXCEPT (A) TO CONTINENTAL AIRLINES, INC., (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN
THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE
TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER
AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT. THE
PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE
FOREGOING RESTRICTIONS.]*
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR
TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED
TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS
3.05 AND 3.06 OF THE PASS THROUGH TRUST AGREEMENT
REFERRED TO HEREIN.]**
[GLOBAL CERTIFICATE]***
CONTINENTAL AIRLINES 1996-A PASS THROUGH TRUST
6.94% Continental Airlines [Initial] [Exchange]
Pass Through Certificate
Series 1996-A
Final Distribution Date: October 15, 2013
evidencing a fractional undivided interest in a trust, the
property of which includes certain equipment notes each secured
by an Aircraft leased to Continental Airlines, Inc.
$__________ Fractional Undivided Interest
representing .________% of the Trust per
$1,000 face amount
THIS CERTIFIES THAT _______________________, for value
received, is the registered owner of a $__________ (__________
dollars) Fractional Undivided Interest in the Continental
Airlines 1996-A Pass Through Trust (the "Trust") created pursuant
to a Pass Through Trust Agreement, dated as of January 31, 1996
(the "Agreement"), between Wilmington Trust Company (the
"Trustee") and Continental Airlines, Inc., a corporation
incorporated under Delaware law (the "Company"), a summary
of certain of the pertinent provisions of which is set forth
below. To the extent not otherwise defined herein, the
capitalized terms used herein have the meanings assigned to them
in the Agreement. This Certificate is one of the duly authorized
Certificates designated as "6.94% Continental Airlines [Initial]
[Exchange] Pass Through Certificates Series 1996-A" (herein
called the "Certificates"). This Certificate is issued under and
is subject to the terms, provisions, and conditions of the
Agreement. By virtue of its acceptance hereof the
Certificateholder of this Certificate assents to and agrees to be
bound by the provisions of the Agreement and the Intercreditor
Agreement. The property of the Trust includes certain Equipment
Notes and all rights of the Trust to receive payments under the
Intercreditor Agreement and the Liquidity Facilities (the "Trust
Property"). Each issue of the Equipment Notes is secured by,
among other things, a security interest in the Aircraft leased to
or owned by the Company.
The Certificates represent fractional undivided
interests in the Trust and the Trust Property, and have no
rights, benefits or interest in respect of any assets or property
other than the Trust Property.
Subject to and in accordance with the terms of the
Agreement and the Intercreditor Agreement, from and to the extent
of funds then available to the Trustee, there will be distributed
on each January 15, April 15, July 15 and October 15 (a "Regular
Distribution Date"), commencing on April 15, 1996, to the Person
in whose name this Certificate is registered at the close of
business on the 15th day preceding the Regular Distribution Date,
an amount in respect of the Scheduled Payments on the Equipment
Notes due on such Regular Distribution Date, the receipt of which
has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate
and an amount equal to the sum of such Scheduled Payments.
Subject to and in accordance with the terms of the Agreement and
the Intercreditor Agreement, in the event that Special Payments
on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the
applicable Special Distribution Date, to the Person in whose name
this Certificate is registered at the close of business on the
15th day preceding the Special Distribution Date, an amount in
respect of such Special Payments on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the
product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special
Payments so received. If a Regular Distribution Date or Special
Distribution Date is not a Business Day, distribution shall be
made on the immediately following Business Day with the same
force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the
intervening period. The Trustee shall mail notice of each
Special Payment and the Special Distribution Date therefor to the
Certificateholder of this Certificate.
[The Holder of this Certificate is entitled to the
benefits of the Registration Rights Agreement, dated as of
January 31, 1996, among the Company, the Trustee and the Initial
Purchasers named therein (the "Registration Rights Agreement").
In the event that either (a) (x) the Exchange Offer Registration
Statement (as defined in the Registration Rights Agreement) is
not filed with the SEC on or prior to the 120th calendar day
following the date of the Agreement, or (y) the Exchange Offer
Registration Statement has not been declared effective on or
prior to the 60th calendar day following the filing thereof with
the SEC or (z) the Exchange Offer (as defined in the Registration
Rights Agreement) is not consummated on or prior to the 30th
calendar day following the effectiveness of the Exchange Offer
Registration Statement (in each case other than under certain
circumstances described in the Registration Rights Agreement) or
(b) a Shelf Registration Statement (as defined in the
Registration Rights Agreement) is required to be filed with the
SEC pursuant to the Registration Rights Agreement, and such Shelf
Registration Statement is not declared effective on or prior to
the 210th calendar day following the date of the Agreement (each,
a "Registration Default"), the interest rate per annum borne by
the Equipment Notes shall be increased by (1) 0.25% from and
including the day following such Registration Default to but
excluding the 90th day following such Registration Default and
(2) 0.50% thereafter; provided, however, that such increase shall
cease to be in effect from and including the date on which such
Registration Default has been cured. In the event that the Shelf
Registration Statement ceases to be effective at any time during
the period specified by the Registration Rights Agreement for
more than 60 days, whether or not consecutive, during any 12-
month period, the interest rate per annum borne by the Equipment
Notes shall be increased by 0.50% from the 61st day of the
applicable 12-month period such Shelf Registration Statement
ceases to be effective until such time as the Shelf Registration
Statement again becomes effective.]****
Except as otherwise provided in the Agreement and
notwithstanding the above, the final distribution on this
Certificate will be made after notice mailed by the Trustee of
the pendency of such distribution and only upon presentation and
surrender of this Certificate at the office or agency of the
Trustee specified in such notice.
THE AGREEMENT AND THIS CERTIFICATE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
Reference is hereby made to the further provisions of
this Certificate set forth in the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been executed by the Trustee, by manual signature, this
Certificate shall not be entitled to any benefit under the
Agreement or be valid for any purpose.
IN WITNESS WHEREOF, the Trustee has caused this
Certificate to be duly executed.
Dated: CONTINENTAL AIRLINES
1996-A PASS THROUGH TRUST
By: WILMINGTON TRUST
COMPANY,
not in its individual
capacity but solely as
Trustee
Attest: By: ______________________
Name:
Title:
____________________
Authorized Signature
__________________
* Not to be included on the face of the Permanent Offshore
Global Certificate.
** To be included on the face of each Global Certificate.
*** To be included on the face of each Global Certificate.
**** To be included only on each Initial Certificate.
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred
to in the within-mentioned Agreement.
WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Trustee
By: ______________________
Authorized Officer
[REVERSE OF CERTIFICATE]
The Certificates do not represent a direct obligation
of, or an obligation guaranteed by, or an interest in, the
Company or the Trustee or any of their affiliates. The
Certificates are limited in right or payment, all as more
specifically set forth on the face hereof and in the Agreement.
All payments or distributions made to Certificateholders under
the Agreement shall be made only from the Trust Property and only
to the extent that the Trustee shall have sufficient income or
proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof,
agrees that it will look solely to the income and proceeds from
the Trust Property to the extent available for distribution to
such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect
to the interests, rights, benefits, obligations, proceeds, and
duties evidenced hereby. A copy of the Agreement may be examined
during normal business hours at the principal office of the
Trustee, and at such other places, if any, designated by the
Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Certificateholders under the Agreement at any time by the Company
and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust.
Any such consent by the Certificateholder of this Certificate
shall be conclusive and binding on such Certificateholder and
upon all future Certificateholders of this Certificate and of any
Certificate issued upon the transfer hereof or in exchange hereof
or in lieu hereof whether or not notation of such consent is made
upon this Certificate. The Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of
the Certificateholders of any of the Certificates.
As provided in the Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate
is registrable in the Register upon surrender of this Certificate
for registration of transfer at the offices or agencies
maintained by the Trustee in its capacity as Registrar, or by any
successor Registrar, in the Borough of Manhattan, the City of New
York, duly endorsed or accompanied by a written instrument of
transfer in form satisfactory to the Trustee and the Registrar
duly executed by the Certificateholder hereof or such
Certificateholder's attorney duly authorized in writing, and
thereupon one or more new Certificates of authorized
denominations evidencing the same aggregate Fractional Undivided
Interest in the Trust will be issued to the designated transferee
or transferees.
The Certificates are issuable only as registered
Certificates without coupons in minimum denominations of
[$100,000]* [$1,000]** Fractional Undivided Interest and integral
multiples of $1,000 in excess thereof [except that one
Certificate may be in a denomination of less than $100,000]*. As
provided in the Agreement and subject to certain limitations
therein set forth, the Certificates are exchangeable for new
Certificates of authorized denominations evidencing the same
aggregate Fractional Undivided Interest in the Trust, as
requested by the Certificateholder surrendering the same.
No service charge will be made for any such
registration of transfer or exchange, but the Trustee shall
require payment by the Holder of a sum sufficient to cover any
tax or governmental charge payable in connection therewith.
The Trustee, the Registrar, and any agent of the
Trustee or the Registrar may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes,
and neither the Trustee, the Registrar, nor any such agent shall
be affected by any notice to the contrary.
The obligations and responsibilities created by the
Agreement and the Trust created thereby shall terminate upon the
distribution to Certificateholders of all amounts required to be
distributed to them pursuant to the Agreement and the disposition
of all property held as part of the Trust Property.
____________________
* To be included only on each Initial Certificate.
** To be included only on each Exchange Certificate.
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
__________________________________
__________________________________
please print or typewrite name and address including zip code of
assignee
__________________________________
the within Certificate and all rights thereunder, hereby
irrevocably constituting and appointing
__________________________________
attorney to transfer said Certificate on the books of the Trustee
with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT PERMANENT OFFSHORE GLOBAL AND
OFFSHORE PHYSICAL CERTIFICATES]
In connection with any transfer of this Certificate
occurring prior to the date that is the earlier of the date of an
effective Registration Statement or __________, 1999, the
undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in
compliance with the exemption from registration under
the Securities Act of 1933, as amended, provided by
Rule 144A thereunder.
or
[ ] (b) this Certificate is being transferred other than
in accordance with (a) above and documents are being
furnished that comply with the conditions of transfer
set forth in this Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or
other Registrar shall not be obligated to register this
Certificate in the name of any Person other than the Holder
hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 3.06 of the
Agreement shall have been satisfied.
Date:_____________ [Name of Transferor]
----------------------------
NOTE: The signature must
correspond with the name as
written upon the face of the
within-mentioned instrument in
every particular, without
alteration or any change
whatsoever.
Signature Guarantee: __________________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is
purchasing this Certificate for its own account or an account
with respect to which it exercises sole investment discretion and
that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933,
as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: ____________________ ___________________________
NOTE: To be executed by an
executive officer.
EXHIBIT B
FORM OF CERTIFICATE FOR UNLEGENDED CERTIFICATES
[Date]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Trustee Administration
Re: Continental Airlines 1996 Pass Through Trust,
Class A Pass Through Trust Certificates (the
"Certificates")
Dear Sirs:
This letter relates to U.S. $__________ Fractional
Undivided Interest of Certificates represented by a Certificate
(the "Legended Certificate") which bears a legend outlining
restrictions upon transfer of such Legended Certificate.
Pursuant to Section 3.01 of the Pass Through Trust Agreement
relating to the Certificates dated as of January 31, 1996 (the
"Trust Agreement"), between Continental Airlines, Inc.
("Continental") and you, we hereby certify that we are (or we
will hold such securities on behalf of) a person outside the
United States to whom the Certificates could be transferred in
accordance with Rule 904 of Regulation S promulgated under the
U.S. Securities Act of 1933, as amended. Accordingly, you are
hereby requested to exchange the legended certificate for an
unlegended certificate representing an identical principal amount
of Certificates, all in the manner provided for in the Trust
Agreement.
You and Continental are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.
Very truly yours,
[Name of Certificateholder]
By:____________________________
Authorized Signature
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS PURSUANT TO REGULATION S
[date]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Trustee Administration
Re: Continental Airlines 1996-A Pass Through
Trust (the "Trust"), 6.94% Continental
Airlines Pass Through Certificates Series
1996-A (the "Certificates")
Sirs:
In connection with our proposed sale of $_______
Fractional Undivided Interest of the Certificates, we confirm
that such sale has been effected pursuant to and in accordance
with Regulation S under the Securities Act of 1933, as amended,
and, accordingly, we represent that:
(1) the offer of the Certificates was not made to a
person in the United States;
(2) either (a) at the time the buy order was
originated, the transferee was outside the United States or
we and any person acting on our behalf reasonably believed
that the transferee was outside the United States or (b) the
transaction was executed in, on or through the facilities of
a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction
has been pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the
United States in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S, as applicable;
and
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the Securities Act.
In addition, if the sale is made during a restricted
period and the provisions of Rule 903(c)(3) or Rule 904(c)(1) of
Regulation S are applicable thereto, we confirm that such sale
has been made in accordance with the applicable provisions of
Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You and Continental Airlines, Inc. are entitled to rely
upon this letter and are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_______________________
Authorized Signature
Exhibit 4.6
- -----------------------------------------------------------------
PASS THROUGH TRUST AGREEMENT
Dated as of January 31, 1996
among
CONTINENTAL AIRLINES, INC.
and
WILMINGTON TRUST COMPANY,
as Trustee
Continental Airlines 1996-B Pass Through Trust
7.82% 1996-B Initial Pass Through Certificates
7.82% 1996-B Exchange Pass Through Certificates
- -----------------------------------------------------------------
Reconciliation and tie between Continental Airlines 1996-B Pass
Through Trust Agreement, dated as of January 31, 1996, and the
Trust Indenture Act of 1939. This reconciliation does not
constitute part of the Pass Through Trust Agreement.
Trust Indenture Act Pass Through Trust
of 1939 Section Agreement Section
- ------------------- ------------------
310(a)(1) 7.08
(a)(2) 7.08
312(a) 3.05; 8.01; 8.02
313(a) 8.03
314(a) 8.04(a) - (c)
(a)(4) 8.04(d)
(c)(1) 1.02
(c)(2) 1.02
(d)(1) 7.13; 11.01
(d)(2) 7.13; 11.01
(d)(3) 2.01
(e) 1.02
315(b) 7.02
316(a)(last sentence) 1.04(c)
(a)(1)(A) 6.04
(a)(1)(B) 6.05
(b) 6.06
(c) 1.04(d)
317(a)(1) 6.03
(b) 7.13
318(a) 12.06
TABLE OF CONTENTS
Section Page
ARTICLE I
DEFINITIONS
1.01. Definitions. . . . . . . . . . . . . . . . . . . . 2
1.02. Compliance Certificates and Opinions . . . . . . . 12
1.03. Form of Documents Delivered to Trustee . . . . . . 13
1.04. Directions of Certificateholders . . . . . . . . . 14
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
2.01. Issuance of Certificates; Acquisition of
Equipment Notes. . . . . . . . . . . . . . . . . . 15
2.02. Acceptance by Trustee. . . . . . . . . . . . . . . 17
2.03. Limitation of Powers . . . . . . . . . . . . . . . 17
ARTICLE III
THE CERTIFICATES
3.01. Title, Form, Denomination and Execution of
Certificates . . . . . . . . . . . . . . . . . . . 18
3.02. Restrictive Legends. . . . . . . . . . . . . . . . 19
3.03. Authentication of Certificates . . . . . . . . . . 21
3.04. Transfer and Exchange. . . . . . . . . . . . . . . 22
3.05. Book-Entry Provisions for U.S. Global
Certificate and Offshore Global Certificates . . . 22
3.06. Special Transfer Provisions. . . . . . . . . . . . 24
3.07. Mutilated, Destroyed, Lost or Stolen
Certificates . . . . . . . . . . . . . . . . . . . 26
3.08. Persons Deemed Owners. . . . . . . . . . . . . . . 27
3.09. Cancellation . . . . . . . . . . . . . . . . . . . 27
3.10. Temporary Certificates . . . . . . . . . . . . . . 27
3.11. Limitation of Liability for Payments . . . . . . . 28
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
4.01. Certificate Account and Special Payments
Account. . . . . . . . . . . . . . . . . . . . . . 28
4.02. Distributions from Certificate Account and
Special Payments Account . . . . . . . . . . . . . 29
4.03. Statements to Certificateholders . . . . . . . . . 30
4.04. Investment of Special Payment Moneys . . . . . . . 31
ARTICLE V
THE COMPANY
5.01. Maintenance of Corporate Existence . . . . . . . . 32
5.02. Consolidation, Merger, etc.. . . . . . . . . . . . 32
ARTICLE VI
DEFAULT
6.01. Events of Default. . . . . . . . . . . . . . . . . 33
6.02. [Intentionally omitted.] . . . . . . . . . . . . . 35
6.03. Judicial Proceedings Instituted by Trustee;
Trustee May Bring Suit . . . . . . . . . . . . . . 35
6.04. Control by Certificateholders. . . . . . . . . . . 36
6.05. Waiver of Past Defaults. . . . . . . . . . . . . . 36
6.06. Right of Certificateholders to Receive Payments
Not to Be Impaired . . . . . . . . . . . . . . . . 37
6.07. Certificateholders May Not Bring Suit Except
Under Certain Conditions . . . . . . . . . . . . . 37
6.08. Remedies Cumulative. . . . . . . . . . . . . . . . 38
ARTICLE VII
THE TRUSTEE
7.01. Certain Duties and Responsibilities. . . . . . . . 38
7.02. Notice of Defaults . . . . . . . . . . . . . . . . 39
7.03. Certain Rights of Trustee. . . . . . . . . . . . . 39
7.04. Not Responsible for Recitals or Issuance of
Certificates . . . . . . . . . . . . . . . . . . . 40
7.05. May Hold Certificates. . . . . . . . . . . . . . . 40
7.06. Money Held in Trust. . . . . . . . . . . . . . . . 41
7.07. Compensation and Reimbursement . . . . . . . . . . 41
7.08. Corporate Trustee Required; Eligibility. . . . . . 41
7.09. Resignation and Removal; Appointment of
Successor. . . . . . . . . . . . . . . . . . . . . 42
7.10. Acceptance of Appointment by Successor . . . . . . 43
7.11. Merger, Conversion, Consolidation or Succession
to Business. . . . . . . . . . . . . . . . . . . . 44
7.12. Maintenance of Agencies. . . . . . . . . . . . . . 44
7.13. Money for Certificate Payments to Be Held
in Trust . . . . . . . . . . . . . . . . . . . . . 46
7.14. Registration of Equipment Notes in Name of
Subordination Agent. . . . . . . . . . . . . . . . 46
7.15. Representations and Warranties of Trustee. . . . . 46
7.16. Withholding Taxes; Information Reporting . . . . . 47
7.17. Trustee's Liens. . . . . . . . . . . . . . . . . . 47
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
8.01. The Company to Furnish Trustee with Names and
Addresses of Certificateholders. . . . . . . . . . 48
8.02. Preservation of Information; Communications to
Certificateholders . . . . . . . . . . . . . . . . 48
8.03. Reports by Trustee . . . . . . . . . . . . . . . . 48
8.04. Reports by the Company . . . . . . . . . . . . . . 48
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
9.01. Supplemental Agreements Without Consent of
Certificateholders . . . . . . . . . . . . . . . . 49
9.02. Supplemental Agreements with Consent of
Certificateholders . . . . . . . . . . . . . . . . 50
9.03. Documents Affecting Immunity or Indemnity. . . . . 52
9.04. Execution of Supplemental Agreements . . . . . . . 52
9.05. Effect of Supplemental Agreements. . . . . . . . . 52
9.06. Conformity with Trust Indenture Act. . . . . . . . 52
9.07. Reference in Certificates to Supplemental
Agreements . . . . . . . . . . . . . . . . . . . . 52
ARTICLE X
AMENDMENTS TO INDENTURES AND REFUNDING DOCUMENTS
10.01. Amendments and Supplements to Indentures and
Other Refunding Documents . . . . . . . . . . . . 52
ARTICLE XI
TERMINATION OF TRUST
11.01. Termination of the Trust. . . . . . . . . . . . . 53
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.01. Limitation on Rights of Certificateholders. . . . 54
12.02. Certificates Nonassessable and Fully Paid . . . . 54
12.03. Notices . . . . . . . . . . . . . . . . . . . . . 55
12.04. Governing Law . . . . . . . . . . . . . . . . . . 56
12.05. Severability of Provisions. . . . . . . . . . . . 56
12.06. Trust Indenture Act Controls. . . . . . . . . . . 56
12.07. Effect of Headings and Table of Contents. . . . . 56
12.08. Successors and Assigns. . . . . . . . . . . . . . 56
12.09. Benefits of Agreement . . . . . . . . . . . . . . 56
12.10. Legal Holidays. . . . . . . . . . . . . . . . . . 57
12.11. Counterparts. . . . . . . . . . . . . . . . . . . 57
12.12. Intention of Parties. . . . . . . . . . . . . . . 57
Schedule 1 - Indentures
Schedule 2 - Refunding Agreements
Exhibit A - Form of Certificate
Exhibit B - Form of Certificate for Unlegended Certificates
Exhibit C - Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S
PASS THROUGH TRUST AGREEMENT
This PASS THROUGH TRUST AGREEMENT, dated as of
January 31, 1996, between CONTINENTAL AIRLINES, INC., a Delaware
corporation, and WILMINGTON TRUST COMPANY, as Trustee, is made
with respect to the formation of Continental Airlines 1996-B Pass
Through Trust and the issuance of 7.82% Continental Airlines
1996-B Pass Through Certificates representing fractional
undivided interests in the Trust.
WITNESSETH:
WHEREAS, the Company, the Owner Trustees and the Owner
Participants (as such terms and certain other capitalized terms
used herein are defined below) have previously entered into
eighteen separate leveraged lease transactions in connection with
the purchase of nine Boeing 737-524 aircraft and nine
Boeing 757-224 aircraft (collectively, the "Aircraft") from the
manufacturer;
WHEREAS, each Owner Trustee, acting on behalf of the
corresponding Owner Participant, will issue pursuant to an
Indenture, on a non-recourse basis, four series of Equipment
Notes, among other things, to refinance the current indebtedness
of such Owner Trustee originally incurred to finance the purchase
price of the related Aircraft;
WHEREAS, the Trustee, upon execution and delivery of
this Agreement, hereby declares the creation of the Trust for the
benefit of the Certificateholders, and the initial
Certificateholders, as the grantors of the Trust, by their
respective acceptances of the Certificates, join in the creation
of this Trust with the Trustee;
WHEREAS, all Certificates to be issued by the Trust
will evidence fractional undivided interests in the Trust and
will convey no rights, benefits or interests in respect of any
property other than the Trust Property;
WHEREAS, pursuant to the terms and conditions of this
Agreement and each of the Refunding Agreements to be entered into
by the Trustee simultaneously with the execution and delivery of
this Agreement, the Trustee on behalf of the Trust shall purchase
one or more issues of Equipment Notes having the same interest
rate as, and final maturity dates not later than the final
Regular Distribution Date of, the Certificates issued hereunder
and shall hold such Equipment Notes in trust for the benefit of
the Certificateholders;
WHEREAS, to facilitate the sale of Equipment Notes to,
and the purchase of Equipment Notes by, the Trustee on behalf of
the Trust, the Company has duly authorized the execution and
delivery of this Agreement as the "issuer", as such term is
defined in and solely for purposes of the Securities Act of 1933,
as amended, of the Certificates to be issued pursuant hereto and
as the "obligor", as such term is defined in and solely for
purposes of the Trust Indenture Act of 1939, as amended, with
respect to all such Certificates and is undertaking to perform
certain administrative and ministerial duties hereunder and is
also undertaking to pay the ongoing fees and expenses of the
Trustee;
WHEREAS, all of the conditions and requirements
necessary to make this Agreement, when duly executed and
delivered, a valid, binding and legal instrument, enforceable in
accordance with its terms and for the purposes herein expressed,
have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof
have been in all respects duly authorized; and
WHEREAS, upon issuance of the Exchange Certificates, if
any, or the effectiveness of the Registration Statement, this
Agreement, as amended or supplemented from time to time, will be
subject to the provisions of the Trust Indenture Act of 1939, and
shall, to the extent applicable, be governed by such provisions;
NOW, THEREFORE, in consideration of the mutual
agreements herein contained, and of other good and valuable
consideration the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this
Agreement, except as otherwise expressly provided or unless the
context otherwise requires:
(1) the terms used herein that are defined in this
Article have the meanings assigned to them in this Article,
and include the plural as well as the singular;
(2) all other terms used herein which are defined in
the Trust Indenture Act, either directly or by reference
therein, or by the rules promulgated under the Trust
Indenture Act, have the meanings assigned to them therein;
(3) all references in this Agreement to designated
"Articles", "Sections", "Subsections" and other subdivisions
are to the designated Articles, Sections, Subsections and
other subdivisions of this Agreement;
(4) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a
whole and not to any particular Article, Section,
Subsection or other subdivision; and
(5) unless the context otherwise requires, whenever
the words "including", "include" or "includes" are used
herein, it shall be deemed to be followed by the phrase
"without limitation".
Affiliate: Means, with respect to any Person, any
other Person directly or indirectly controlling or
controlled by or under common control with such Person,
provided, however, that neither America West Airlines, Inc.
nor any of its subsidiaries shall be deemed to be an
"Affiliate" of the Company for purposes of this Agreement.
For purposes of this definition, "control" means the power,
directly or indirectly, to direct the management and
policies of such Person, whether through the ownership of
voting securities or by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
Agent Members: Has the meaning specified in Section
3.05.
Aircraft: Has the meaning specified in the first
recital to this Agreement.
Authorized Agent: Means any Paying Agent or Registrar
for the Certificates.
Avoidable Tax: Means a state or local tax (i) upon
(w) the Trust, (x) the Trust Property,
(y) Certificateholders or (z) the Trustee for which the
Trustee is entitled to seek reimbursement from the Trust
Property, and (ii) which would be avoided if the Trustee
were located in another state, or jurisdiction within a
state, within the United States. A tax shall not be an
Avoidable Tax if the Company or any Owner Trustee shall
agree to pay, and shall pay, such tax.
Business Day: Means any day other than a Saturday, a
Sunday or a day on which commercial banks are required or
authorized to close in Houston, Texas, New York, New York,
or, so long as any Certificate is outstanding, the city and
state in which the Trustee or any Loan Trustee maintains its
Corporate Trust Office or receives and disburses funds.
Cedel: Means Cedel Bank societe anonyme.
Certificate: Means any one of the Initial Certificates
or Exchange Certificates and any such Certificates issued in
exchange therefor or replacement thereof pursuant to this
Agreement.
Certificate Account: Means the account or accounts
created and maintained pursuant to Section 4.01(a).
Certificateholder or Holder: Means the Person in whose
name a Certificate is registered in the Register.
Company: Means Continental Airlines, Inc., a Delaware
corporation, or its successor in interest pursuant to
Section 5.02, or any other obligor (within the meaning of
the Trust Indenture Act) with respect to the Certificates.
Controlling Party: Has the meaning specified in the
Intercreditor Agreement.
Corporate Trust Office: With respect to the Trustee or
any Loan Trustee, means the office of such trustee in the
city at which at any particular time its corporate trust
business shall be principally administered.
Cut-off Date: Means March 31, 1996.
Depositary: Means the Depository Trust Company, its
nominees and their respective successors.
Direction: Has the meaning specified in
Section 1.04(a).
Distribution Date: Means any Regular Distribution Date
or Special Distribution Date.
Equipment Notes: Means the equipment notes issued
under the Indentures.
ERISA: Means the Employee Retirement Income Security
Act of 1974, as amended from time to time, or any successor
federal statute.
Escrow Account: Has the meaning specified in
Section 2.01(b).
Escrowed Funds: Has the meaning specified in
Section 2.01(b).
Euroclear: Means the Euroclear System.
Event of Default: Means an Indenture Default under any
Indenture pursuant to which Equipment Notes held by the
Trust were issued.
Exchange Certificates: Means the certificates
substantially in the form of Exhibit A hereto issued in
exchange for the Initial Certificates pursuant to the
Registration Rights Agreement and authenticated hereunder.
Exchange Offer Registration Statement: Means the
Exchange Offer Registration Statement defined in the
Registration Rights Agreement.
Fractional Undivided Interest: Means the fractional
undivided interest in the Trust that is evidenced by a
Certificate.
Global Certificates: Has the meaning assigned to such
term in Section 3.01.
Indentures: Means each of the eighteen separate
Amended and Restated Trust Indentures and Mortgages listed
on Schedule 1 hereto, as the same may be amended,
supplemented or otherwise modified from time to time in
accordance with its terms.
Indenture Default: With respect to any Indenture,
means any Event of Default (as such term is defined in such
Indenture).
Initial Certificates: Means the certificates issued
and authenticated hereunder substantially in the form of
Exhibit A hereto other than the Exchange Certificates.
Initial Purchasers: Means, collectively, CS First
Boston Corporation, Morgan Stanley & Co. Incorporated,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Lehman
Brothers Inc. and Fieldstone FPCG Services, L.P.
Initial Regular Distribution Date: Means the first
Regular Distribution Date on which a Scheduled Payment is to
be made.
Institutional Accredited Investor: Means an
institutional investor that is an "accredited investor"
within the meaning set forth in Rule 501(a)(1), (2), (3)
or (7) of Regulation D under the Securities Act.
Intercreditor Agreement: Means the Intercreditor
Agreement dated the date hereof among the Trustee, the Other
Trustees, the Liquidity Provider, the liquidity provider, if
any, relating to the Certificates issued under (and as
defined in) each of the Other Pass Through Trust Agreements,
and Wilmington Trust Company, as Subordination Agent
thereunder, as amended, supplemented or otherwise modified
from time to time in accordance with its terms.
Issuance Date: Means the date of the issuance of the
Initial Certificates.
Lease: Means the lease between an Owner Trustee, as
the lessor, and the Company, as the lessee, referred to in
the related Indenture, as each such lease may be amended,
supplemented or otherwise modified in accordance with its
terms.
Liquidity Facility: Means the Revolving Credit
Agreement dated the date hereof relating to the
Certificates, between the Liquidity Provider and the
Subordination Agent, as amended, replaced, supplemented or
otherwise modified from time to time in accordance with its
terms and the terms of the Intercreditor Agreement.
Liquidity Provider: Means, initially, Credit Suisse,
acting through its New York Branch, together with any
replacement or successor therefor appointed in accordance
with the Liquidity Facility and the Intercreditor Agreement.
Loan Trustee: With respect to any Equipment Note or
the Indenture applicable thereto, means the bank or trust
company designated as indenture trustee under such
Indenture, together with any successor to such Loan Trustee
appointed pursuant thereto.
Non-U.S. Person: Means a Person that is not a "U.S.
person", as defined in Regulation S.
Officer's Certificate: Means a certificate signed,
(a) in the case of the Company, by (i) the Chairman or Vice
Chairman of the Board of Directors, the President, any
Executive Vice President, any Senior Vice President or the
Treasurer of the Company, signing alone or (ii) any Vice
President of the Company signing together with the
Secretary, the Assistant Secretary, the Treasurer or any
Assistant Treasurer of the Company or, (b) in the case of an
Owner Trustee or a Loan Trustee, a Responsible Officer of
such Owner Trustee or such Loan Trustee, as the case may be.
Offshore Certificates Exchange Date: Has the meaning
specified in Section 3.01.
Offshore Global Certificates: Has the meaning assigned
to such term in Section 3.01.
Offshore Physical Certificates: Has the meaning
assigned to such term in Section 3.01.
Opinion of Counsel: Means a written opinion of legal
counsel who (a) in the case of counsel for the Company may
be (i) a senior attorney of the Company one of whose
principal duties is furnishing advice as to legal matters,
(ii) Cleary, Gottlieb, Steen & Hamilton, (iii) Hughes
Hubbard & Reed, or (iv) such other counsel designated by the
Company and reasonably acceptable to the Trustee and (b) in
the case of counsel for any Owner Trustee or any Loan
Trustee may be such counsel as may be designated by any of
them whether or not such counsel is an employee of any of
them, and who shall be reasonably acceptable to the Trustee.
Other Pass Through Trust Agreements: Means each of the
three other Continental Airlines 1996 Pass Through Trust
Agreements relating to Continental Airlines 1996-A Pass
Through Trust, Continental Airlines 1996-C Pass Through
Trust and Continental Airlines 1996-D Pass Through Trust,
dated the date hereof.
Other Trustees: Means the trustee under the Other Pass
Through Trust Agreements, and any successor or other trustee
appointed as provided therein.
Outstanding: When used with respect to Certificates,
means, as of the date of determination, all Certificates
theretofore authenticated and delivered under this
Agreement, except:
(i) Certificates theretofore cancelled by the
Registrar or delivered to the Trustee or the Registrar
for cancellation;
(ii) Certificates for which money in the full
amount required to make the final distribution with
respect to such Certificates pursuant to Section 11.01
hereof has been theretofore deposited with the Trustee
in trust for the Holders of such Certificates as
provided in Section 4.01 pending distribution of such
money to such Certificateholders pursuant to payment of
such final distribution; and
(iii) Certificates in exchange for or in lieu of
which other Certificates have been authenticated and
delivered pursuant to this Agreement.
Owner Participant: With respect to any Equipment Note,
means the "Owner Participant" as referred to in the
Indenture pursuant to which such Equipment Note is issued
and any permitted successor or assign of such Owner
Participant; and Owner Participants at any time of
determination means all of the Owner Participants thus
referred to in the Indentures.
Owner Trustee: With respect to any Equipment Note,
means the "Owner Trustee", as referred to in the Indenture
pursuant to which such Equipment Note is issued, not in its
individual capacity but solely as trustee; and Owner
Trustees means all of the Owner Trustees party to any of the
Indentures.
Participation Agreement: With respect to any Aircraft,
means the Participation Agreement referred to in the related
Indenture.
Paying Agent: Means the paying agent maintained and
appointed for the Certificates pursuant to Section 7.12.
Permanent Offshore Global Certificates: Has the
meaning specified in Section 3.01.
Permanent Offshore Physical Certificates: Has the
meaning specified in Section 3.01.
Permitted Investments: Means obligations of the United
States of America or agencies or instrumentalities thereof
the payment of which is backed by the full faith and credit
of the United States of America and which mature in not more
than 60 days after the date of acquisition thereof or such
lesser time as is required for the distribution of any
Special Payments on a Special Distribution Date.
Person: Means any person, including any individual,
corporation, partnership, joint venture, association, joint-
stock company, trust, trustee, unincorporated organization,
or government or any agency or political subdivision
thereof.
Physical Certificates: Has the meaning specified in
Section 3.01.
Plan Transferee: Means any Plan or any entity that is
using the assets of any Plan to purchase or hold its
interest in a Certificate. For purposes of this definition,
a "Plan" means any employee benefit plan subject to ERISA as
well as any plan that is not subject to ERISA but which is
subject to Section 4975 of the Internal Revenue Code of
1986, as amended.
Pool Balance: Means, as of any date, (i) the original
aggregate face amount of the Certificates less (ii) the
aggregate amount of all payments made in respect of such
Certificates other than payments made in respect of interest
or premium thereon or reimbursement of any costs or expenses
incurred in connection therewith. The Pool Balance as of
any Distribution Date shall be computed after giving effect
to the payment of principal, if any, on the Equipment Notes
or other Trust Property held in such Trust and the
distribution thereof to be made on such Distribution Date.
Pool Factor: Means, as of any date, the quotient
(rounded to the seventh decimal place) computed by dividing
(i) the Pool Balance as at such date by (ii) the original
aggregate face amount of the Certificates. The Pool Factor
as of any Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment
Notes or other Trust Property and the distribution thereof
to be made on such Distribution Date.
Postponed Notes: Means the Equipment Notes to be held
in the Trust as to which a Postponement Notice shall have
been delivered pursuant to Section 2.01(b).
Postponement Notice: Means an Officer's Certificate of
the Company (1) requesting that the Trustee temporarily
postpone the purchase pursuant to one or more of the
Refunding Agreements of certain of the Equipment Notes to a
date which is later than the Issuance Date, (2) identifying
the amount of the purchase price of each such Equipment Note
and the aggregate purchase price for all such Equipment
Notes, (3) setting forth the reasons for such postponement
and (4) with respect to each such Equipment Note, either
(a) setting or resetting a new Transfer Date (which shall be
on or prior to the applicable Cut-off Date) for payment by
the Trustee of such purchase price and issuance of the
related Equipment Note, or (b) indicating that such new
Transfer Date (which shall be on or prior to the applicable
Cut-off Date) will be set by subsequent written notice not
less than one Business Day prior to such new Transfer Date.
Private Placement Legend: Has the meaning specified in
Section 3.02.
PTC Event of Default: Means any failure to pay within
10 Business Days of the due date thereof: (i) the
outstanding Pool Balance on April 15, 2015 or (ii) interest
due on the Certificates on any Distribution Date (unless the
Subordination Agent shall have made an Interest Drawing (as
defined in the Intercreditor Agreement) with respect thereto
in an amount sufficient to pay such interest and shall have
distributed such amount to the Certificateholders).
QIB: Means a qualified institutional buyer as defined
in Rule 144A.
Record Date: Means (i) for Scheduled Payments to be
distributed on any Regular Distribution Date, other than the
final distribution, the 15th day (whether or not a Business
Day) preceding such Regular Distribution Date, and (ii) for
Special Payments to be distributed on any Special
Distribution Date, other than the final distribution, the
15th day (whether or not a Business Day) preceding such
Special Distribution Date.
Refunding Agreements: Means each of the eighteen
separate Refunding Agreements dated the date hereof, listed
on Schedule 2 hereto, providing for, among other things, the
purchase of Equipment Notes by the Trustee on behalf of the
Trust, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
Refunding Documents: With respect to any Equipment
Note, means the related Indenture, Refunding Agreement,
Lease and Participation Agreement.
Register and Registrar: Mean the register maintained
and the registrar appointed pursuant to Sections 3.04
and 7.12.
Registration Rights Agreement: Means the Registration
Rights Agreement dated January 31, 1996, among the Initial
Purchasers, the Trustee, the Other Trustees and the Company,
as amended, supplemented or otherwise modified from time to
time in accordance with its terms.
Registration Statement: Means the Registration
Statement defined in the Registration Rights Agreement.
Regular Distribution Date: With respect to
distributions of Scheduled Payments in respect of the
Certificates, means each date designated as a Regular
Distribution Date in this Agreement, until payment of all
the Scheduled Payments to be made under the Equipment Notes
held in the Trust have been made; provided, however, that,
if any such day shall not be a Business Day, the related
distribution shall be made on the next succeeding Business
Day without additional interest.
Regulation S: Means Regulation S under the Securities
Act or any successor regulation thereto.
Responsible Officer: With respect to the Trustee, any
Loan Trustee and any Owner Trustee, means any officer in the
Corporate Trust Office of the Trustee, Loan Trustee or Owner
Trustee or any other officer customarily performing
functions similar to those performed by the persons who at
the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of his
knowledge of and familiarity with a particular subject.
Rule 144A: Means Rule 144A under the Securities Act
and any successor rule thereto.
Scheduled Payment: With respect to any Equipment Note,
means (i) any payment of principal and interest on such
Equipment Note (other than any such payment which is not in
fact received by the Subordination Agent within five days of
the date on which such payment is scheduled to be made) due
from the obligor thereon or (ii) any payment of interest on
the Certificates with funds drawn under the Liquidity
Facility, which payment represents the installment of
principal at the stated maturity of such installment of
principal on such Equipment Note, the payment of regularly
scheduled interest accrued on the unpaid principal amount of
such Equipment Note, or both; provided that any payment of
principal, premium, if any, or interest resulting from the
redemption or purchase of any Equipment Note shall not
constitute a Scheduled Payment.
SEC: Means the Securities and Exchange Commission, as
from time to time constituted or created under the
Securities Exchange Act of 1934, as amended, or, if at any
time after the execution of this instrument such Commission
is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such
duties on such date.
Securities Act: Means the United States Securities Act
of 1933, as amended from time to time, or any successor
thereto.
Special Distribution Date: Means each date on which a
Special Payment is to be distributed as specified in this
Agreement; provided, however, that, if any such day shall
not be a Business Day, the related distribution shall be
made on the next succeeding Business Day without additional
interest.
Special Payment: Means (i) any payment (other than a
Scheduled Payment) in respect of, or any proceeds of, any
Equipment Note or Trust Indenture Estate (as defined in each
Indenture), (ii) the amounts required to be distributed
pursuant to the last paragraph of Section 2.01(b) or
(iii) the amounts required to be distributed pursuant to the
penultimate paragraph of Section 2.01(b).
Special Payments Account: Means the account or
accounts created and maintained pursuant to Section 4.01(b).
Specified Investments: Means (i) obligations of, or
guaranteed by, the United States Government or agencies
thereof, (ii) open market commercial paper of any
corporation incorporated under the laws of the United States
of America or any State thereof rated at least P-2 or its
equivalent by Moody's Investors Service, Inc. or at least
A-2 or its equivalent by Standard & Poor's Ratings Group,
(iii) certificates of deposit issued by commercial banks
organized under the laws of the United States or of any
political subdivision thereof having a combined capital and
surplus in excess of $100,000,000, which banks or their
holding companies have a short-term deposit rating of P1 by
Moody's Investors Service, Inc. or its equivalent by
Standard & Poor's Ratings Group; provided, however, that the
aggregate amount at any one time so invested in certificates
of deposit issued by any one bank shall not exceed 5% of
such bank's capital and surplus, (iv) U.S. dollar
denominated offshore certificates of deposit issued by, or
offshore time deposits with, any commercial bank described
in clause (iii) above or any subsidiary thereof and
(v) repurchase agreements with any financial institution
having combined capital and surplus of at least $100,000,000
with respect to any of the obligations described in
clauses (i) through (iv) above as collateral; provided
further that if all of the above investments are
unavailable, all amounts to be invested may be used to
purchase Federal Funds from an entity described in
clause (iii) above.
Subordination Agent: Has the meaning specified in the
Intercreditor Agreement.
Temporary Offshore Global Certificates: Has the
meaning specified in Section 3.01.
Transfer Date: Has the meaning assigned to the term
"Refunding Date" in each Refunding Agreement.
Triggering Event: Has the meaning assigned to such
term in the Intercreditor Agreement.
Trust: Means the trust created by this Agreement, the
estate of which consists of the Trust Property.
Trust Indenture Act: Except as otherwise provided in
Section 9.06, means the United States Trust Indenture Act of
1939 as in force at the date hereof.
Trust Property: Means (i) the Equipment Notes held as
the property of the Trust and all monies at any time paid
thereon and all monies due and to become due thereunder,
(ii) funds from time to time deposited in the Escrow
Account, the Certificate Account and the Special Payments
Account, and (iii) all rights of the Trust and the Trustee,
on behalf of the Trust, under the Intercreditor Agreement
and the Liquidity Facility, including, without limitation,
all rights to receive certain payments thereunder, and all
monies paid to the Trustee on behalf of the Trust pursuant
to the Intercreditor Agreement or the Liquidity Facility.
Trustee: Means Wilmington Trust Company, or its
successor in interest, and any successor or other trustee
appointed as provided herein.
Trustee's Lien: Has the meaning specified in Section
7.17.
U.S. Global Certificate: Has the meaning specified in
Section 3.01.
U.S. Physical Certificates: Has the meaning specified
in Section 3.01.
Section 1.02. Compliance Certificates and Opinions.
Upon any application or request by the Company, any Owner Trustee
or any Loan Trustee to the Trustee to take any action under any
provision of this Agreement, the Company, such Owner Trustee or
such Loan Trustee, as the case may be, shall furnish to the
Trustee (i) an Officer's Certificate stating that, in the opinion
of the signers, all conditions precedent, if any, provided for in
this Agreement relating to the proposed action have been complied
with and (ii) an Opinion of Counsel stating that in the opinion
of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or
request as to which the furnishing of such documents is
specifically required by any provision of this Agreement relating
to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance
with a condition or covenant provided for in this Agreement
(other than a certificate provided pursuant to Section 8.04(d))
shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition
and the definitions in this Agreement relating thereto;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of each such
individual, he has made such examination or investigation as
is necessary to enable him to express an informed opinion as
to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether, in the opinion of each
such individual, such condition or covenant has been
complied with.
Section 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not
necessary that all such matters be certified by, or covered by
the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Where any Person is required to make, give or execute
two or more applications, requests, consents, certificates,
statements, opinions or other instruments under this Agreement
or, in respect of the Certificates, this Agreement, they may, but
need not, be consolidated and form one instrument.
Section 1.04. Directions of Certificateholders. (a)
Any direction, consent, request, demand, authorization, notice,
waiver or other action provided by this Agreement to be given or
taken by Certificateholders (a "Direction") may be embodied in
and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent
or proxy duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective
when such instrument or instruments are delivered to the Trustee
and, where it is hereby expressly required pursuant to this
Agreement, to the Company or any Loan Trustee. Proof of
execution of any such instrument or of a writing appointing any
such agent or proxy shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee, the Company and
any Loan Trustee, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person
of any such instrument or writing may be proved by the
certificate of any notary public or other officer of any
jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument
acknowledged to him the execution thereof, or by an affidavit of
a witness to such execution sworn to before any such notary or
such other officer and where such execution is by an officer of a
corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such
certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such
instrument or writing, or the authority of the Person executing
the same, may also be proved in any other reasonable manner which
the Trustee deems sufficient.
(c) In determining whether the Certificateholders of
the requisite Fractional Undivided Interests of Certificates
Outstanding have given any Direction under this Agreement,
Certificates owned by the Company or any Affiliate thereof shall
be disregarded and deemed not to be Outstanding for purposes of
any such determination. In determining whether the Trustee shall
be protected in relying upon any such Direction, only
Certificates which the Trustee knows to be so owned shall be so
disregarded. Notwithstanding the foregoing, (i) if any such
Person owns 100% of the Certificates Outstanding, such
Certificates shall not be so disregarded, and (ii) if any amount
of Certificates so owned by any such Person have been pledged in
good faith, such Certificates shall not be disregarded if the
pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Certificates and
that the pledgee is not the Company or any Affiliate thereof.
(d) The Company may at its option, by delivery of an
Officer's Certificate to the Trustee, set a record date to
determine the Certificateholders entitled to give any Direction.
Notwithstanding Section 316(c) of the Trust Indenture Act, such
record date shall be the record date specified in such Officer's
Certificate, which shall be a date not more than 30 days prior to
the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such Direction may be
given before or after such record date, but only the
Certificateholders of record at the close of business on such
record date shall be deemed to be Certificateholders for the
purposes of determining whether Certificateholders of the
requisite proportion of Outstanding Certificates have authorized
or agreed or consented to such Direction, and for that purpose
the Outstanding Certificates shall be computed as of such record
date; provided that no such Direction by the Certificateholders
on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Agreement not
later than one year after such record date.
(e) Any Direction by the Holder of any Certificate
shall bind the Holder of every Certificate issued upon the
transfer thereof or in exchange therefor or in lieu thereof,
whether or not notation of such Direction is made upon such
Certificate.
(f) Except as otherwise provided in Section 1.04(c),
Certificates owned by or pledged to any Person shall have an
equal and proportionate benefit under the provisions of this
Agreement, without preference, priority, or distinction as among
all of the Certificates.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Issuance of Certificates; Acquisition of
Equipment Notes. (a) The Trustee is hereby directed to execute
and deliver the Intercreditor Agreement, the Registration Rights
Agreement and each of the Refunding Agreements on or prior to the
Issuance Date, each in the form delivered to the Trustee by the
Company. Upon request of the Company and the satisfaction of the
closing conditions specified in each of the Refunding Agreements,
the Trustee shall execute, deliver and authenticate Certificates
equalling in the aggregate the aggregate principal amount of the
Equipment Notes to be purchased by the Trustee pursuant to each
of the Refunding Agreements on the Transfer Date, and evidencing
the entire ownership interest in the Trust. The Trustee shall
issue and sell such Certificates, in authorized denominations and
in such Fractional Undivided Interests, so as to result in the
receipt by the Trustee of consideration in an amount equal to the
aggregate principal amount of such Equipment Notes and,
concurrently therewith, the Trustee shall purchase, pursuant to
the terms and conditions of the Refunding Agreements, the
Equipment Notes at a purchase price equal to the amount of such
consideration so received. Except as provided in Sections 3.04
and 3.07 hereof, the Trustee shall not execute, authenticate or
deliver Certificates in excess of the aggregate amount specified
in this paragraph. The provisions of this Subsection (a) are
subject to the provisions of Subsection (b) below.
(b) If on or prior to the Issuance Date, the Company
shall deliver to the Trustee a Postponement Notice relating to
one or more Postponed Notes (which Postponement Notice may be
given by the Company only if one or more conditions to the
purchase of such Postponed Notes by the Trustee shall not have
been satisfied or waived pursuant to the related Refunding
Agreement), the Trustee shall postpone the purchase of such
Postponed Notes from the consideration received from the sale of
Certificates and shall promptly deposit funds in an amount equal
to the purchase price of such Postponed Notes (the "Escrowed
Funds") into an escrow account (the "Escrow Account") with the
Trustee to be maintained as a part of the Trust. The Escrowed
Funds so deposited shall be invested by the Trustee at the
direction and risk of, and for the benefit of, the Company in
Specified Investments (i) maturing no later than any scheduled
Transfer Date relating to the Certificates or (ii) if no such
Transfer Date has been scheduled, maturing on the next Business
Day, or (iii) if the Company has given notice to the Trustee that
any Postponed Notes will not be issued, with respect to the
portion of the Escrowed Funds relating to such Postponed Notes,
maturing on the next applicable Special Distribution Date, if
such investments are reasonably available for purchase. The
Trustee shall make withdrawals from the Escrow Account only as
provided in this Agreement. Upon request of the Company on one
or more occasions and the satisfaction of the closing conditions
specified in the applicable Refunding Agreements on or prior to
the related Cut-off Date, the Trustee shall purchase the
applicable Postponed Notes with the Escrowed Funds withdrawn from
the Escrow Account. The purchase price shall equal the principal
amount of such Postponed Notes.
The Trustee shall hold all Specified Investments until
the maturity thereof and will not sell or otherwise transfer
Specified Investments. If Specified Investments held in an
Escrow Account mature prior to any applicable Transfer Date, any
proceeds received on the maturity of such Specified Investments
(other than any earnings thereon) shall be reinvested by the
Trustee at the direction and risk of, and for the benefit of, the
Company in Specified Investments maturing as provided in the
preceding paragraph.
Any earnings on Specified Investments received from
time to time by the Trustee shall be promptly distributed to the
Company. The Company shall pay to the Trustee for deposit to the
Escrow Account an amount equal to any losses on such Specified
Investments as incurred. On the Initial Regular Distribution
Date, the Company will pay (in immediately available funds) to
the Trustee an amount equal to the interest that would have
accrued on any Postponed Notes purchased after the Issuance Date
if such Postponed Notes had been purchased on the Issuance Date,
from the Issuance Date to, but not including, the date of the
purchase of such Postponed Notes by the Trustee.
If the Company notifies the Trustee prior to the Cut-
off Date that any Postponed Notes will not be issued on or prior
to the Cut-off Date for any reason, on the next Special
Distribution Date occurring more than 20 days following the date
of such notice (i) the Company shall pay to the Trustee for
deposit in the Special Payments Account, in immediately available
funds, an amount equal to the interest that would have accrued on
the Postponed Notes designated in such notice at a rate equal to
the interest rate applicable to the Certificates from the
Issuance Date to, but not including, such Special Distribution
Date and (ii) the Trustee shall transfer an amount equal to that
amount of Escrowed Funds that would have been used to purchase
the Postponed Notes designated in such notice plus the amount
paid by the Company pursuant to the immediately preceding
clause (i) to the Special Payments Account for distribution as a
Special Payment in accordance with the provisions hereof.
If, on the Cut-off Date, an amount equal to less than
all of the Escrowed Funds (other than Escrowed Funds referred to
in the immediately preceding paragraph) has been used to purchase
Postponed Notes, on the next Special Distribution Date occurring
more than 20 days following the Cut-off Date (i) the Company
shall pay to the Trustee for deposit in the Special Payments
Account, in immediately available funds, an amount equal to the
interest that would have accrued on Postponed Notes originally
contemplated to be purchased with such unused Escrowed Funds
(other than Escrowed Funds referred to in the immediately
preceding paragraph) but not so purchased at a rate equal to the
interest rate applicable to the Certificates from the Issuance
Date to, but not including, such Special Distribution Date and
(ii) the Trustee shall transfer such unused Escrowed Funds and
the amount paid by the Company pursuant to the immediately
preceding clause (i) to the Special Payments Account for
distribution as a Special Payment in accordance with the
provisions hereof.
Section 2.02. Acceptance by Trustee. The Trustee,
upon the execution and delivery of this Agreement, acknowledges
its acceptance of all right, title and interest in and to the
Equipment Notes acquired pursuant to Section 2.01 hereof and the
Refunding Agreements and declares that the Trustee holds and will
hold such right, title and interest, together with all other
property constituting the Trust Property, for the benefit of all
then present and future Certificateholders, upon the trusts
herein set forth. Subject to Section 7.14, the Trustee shall
take all actions reasonably necessary to effect the registration
of all such Equipment Notes in the name of the Subordination
Agent. By its payment for and acceptance of each Certificate
issued to it under this Agreement, each initial Certificateholder
as grantor of the Trust thereby joins in the creation and
declaration of the Trust.
Section 2.03. Limitation of Powers. The Trust is
constituted solely for the purpose of making the investment in
the Equipment Notes, and, except as set forth herein, the Trustee
shall not be authorized or empowered to acquire any other
investments or engage in any other activities and, in particular,
the Trustee shall not be authorized or empowered to do anything
that would cause such Trust to fail to qualify as a "grantor
trust" for federal income tax purposes (including as subject to
this restriction, acquiring any Aircraft (as defined in the
respective Indentures) by bidding such Equipment Notes or
otherwise, or taking any action with respect to any such Aircraft
once acquired).
ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and Execution
of Certificates. (a) The Initial Certificates shall be known as
the "7.82% 1996-B Initial Pass Through Certificates" and the
Exchange Certificates shall be known as the "7.82% 1996-B
Exchange Pass Through Certificates", in each case, of the Trust.
Each Certificate will represent a fractional undivided interest
in the Trust and shall be substantially in the form set forth as
Exhibit A hereto, with such appropriate insertions, omissions,
substitutions and other variations as are required or permitted
by this Agreement and may have such letters, numbers or other
marks of identification and such legends or endorsements placed
thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be
determined by the officers executing such Certificates, as
evidenced by their execution of the Certificates. Any portion of
the text of any Certificate may be set forth on the reverse
thereof, with an appropriate reference thereto on the face of the
Certificate.
(b) The Initial Certificates shall be issued only in
fully registered form without coupons and only in denominations
of $100,000 or integral multiples of $1,000 in excess thereof,
except that one Certificate may be issued in a denomination of
less than $100,000. The Exchange Certificates will be issued in
denominations of $1,000 or integral multiples thereof. Each
Certificate shall be dated the date of its authentication. The
aggregate Fractional Undivided Interest of Certificates shall not
at any time exceed $94,332,000.
(c) Initial Certificates offered and sold in reliance
on Rule 144A shall be issued initially in the form of a single
permanent global Certificate in registered form, substantially in
the form set forth as Exhibit A hereto (the "U.S. Global
Certificate"), duly executed and authenticated by the Trustee as
hereinafter provided. The U.S. Global Certificate will be
registered in the name of a nominee for the Depositary and
deposited with the Trustee, as custodian for the Depositary. The
aggregate principal amount of the U.S. Global Certificate may
from time to time be increased or decreased by adjustments made
on the records of the Depositary or its nominee, or of the
Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
(d) Initial Certificates offered and sold in offshore
transactions in reliance on Regulation S shall be issued
initially in the form of a single temporary global Certificate in
registered form, substantially in the form set forth as Exhibit A
hereto (the "Temporary Offshore Global Certificate") duly
executed and authenticated by the Trustee as hereinafter
provided. The Temporary Offshore Global Certificates will be
registered in the name of a nominee of the Depositary for credit
to the account of the Agent Members acting as depositaries for
Euroclear and Cedel and deposited with the Trustee as custodian
for the Depositary. At any time following March 11, 1996 (the
"Offshore Certificates Exchange Date"), upon receipt by the
Trustee of a certificate substantially in the form of Exhibit B
hereto, a single permanent global Certificate in registered form
substantially in the form set forth in Exhibit A (the "Permanent
Offshore Global Certificate"; and together with the Temporary
Offshore Global Certificate, the "Offshore Global Certificates"),
duly executed and authenticated by the Trustee as hereinafter
provided, shall be registered in the name of a nominee for the
Depositary and deposited with the Trustee, as custodian for the
Depositary, and the Registrar shall reflect on its books and
records the date of such transfer and a decrease in the principal
amount of any Temporary Offshore Global Certificate in an amount
equal to the principal amount of the beneficial interest in such
Temporary Offshore Global Certificate transferred. The U.S.
Global Certificate and the Offshore Global Certificates are
sometimes referred to as the "Global Certificates".
(e) Initial Certificates offered and sold to
Institutional Accredited Investors shall be issued in the form of
permanent certificated Certificates in registered form in
substantially the form set forth as Exhibit A hereto (the "U.S.
Physical Certificates"). Certificates issued pursuant to Section
3.05(b) in exchange for interests in any Offshore Global
Certificate shall be in the form of permanent certificated
Certificates in registered form substantially in the form set
forth in Exhibit A (the "Offshore Physical Certificates"). The
Offshore Physical Certificates and U.S. Physical Certificates are
sometimes collectively herein referred to as the "Physical
Certificates".
(f) The definitive Certificates shall be in registered
form and shall be typed, printed, lithographed or engraved or
produced by any combination of these methods or may be produced
in any other manner, all as determined by the officers executing
such Certificates, as evidenced by their execution of such
Certificates.
Section 3.02. Restrictive Legends. (a) Subject to
Section 3.06, unless and until (i) an Initial Certificate is sold
under an effective Registration Statement or (ii) an Initial
Certificate is exchanged for an Exchange Certificate pursuant to
an effective Exchange Offer Registration Statement, in each case
as provided for in the Registration Rights Agreement, each Global
Certificate (other than the Permanent Offshore Global
Certificate) and each U.S. Physical Certificate shall bear the
following legend (the "Private Placement Legend") on the face
thereof:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN THREE
YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS
CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS
HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE
TRANSFER THIS CERTIFICATE EXCEPT (A) TO CONTINENTAL
AIRLINES, INC., (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS CERTIFICATE WITHIN THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE
LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY CONTINENTAL
AIRLINES, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH
PERSONS THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH
TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE
TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT
(A) IT IS NOT A PLAN TRANSFEREE (AS DEFINED IN THE PASS
THROUGH TRUST AGREEMENT) OR (B) IT IS AN INSURANCE COMPANY
USING THE ASSETS OF ITS GENERAL ACCOUNT TO ACQUIRE THIS
CERTIFICATE, AND THE CONDITIONS OF PROHIBITED TRANSACTION
CLASS EXEMPTION 95-60 ISSUED BY THE U.S. DEPARTMENT OF LABOR
HAVE BEEN AND WILL CONTINUE TO BE SATISFIED IN CONNECTION
WITH ITS PURCHASE AND HOLDING OF THIS CERTIFICATE. THE PASS
THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
(b) Each Global Certificate shall also bear the
following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE TRUSTEE OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL CERTIFICATE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS
THROUGH TRUST AGREEMENT REFERRED TO HEREIN.
Section 3.03. Authentication of Certificates. (a)
The Trustee shall duly execute, authenticate and deliver
Certificates in authorized denominations equalling in the
aggregate the aggregate principal amount of the Equipment Notes
to be purchased by the Trustee pursuant to the Refunding
Agreements and evidencing the entire ownership of the Trust.
(b) No Certificate shall be entitled to any benefit
under this Agreement or be valid or obligatory for any purpose,
unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein
executed by the Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Certificate
shall be conclusive evidence, and the only evidence, that such
Certificate has been duly authenticated and delivered hereunder.
Section 3.04. Transfer and Exchange. The Trustee
shall cause to be kept at the office or agency to be maintained
by it in accordance with the provisions of Section 7.12 of this
Agreement a register (the "Register") for the Certificates in
which, subject to such reasonable regulations as it may
prescribe, the Trustee shall provide for the registration of the
Certificates and of transfers and exchanges of the Certificates
as herein provided. The Trustee shall initially be the registrar
(the "Registrar") for the purpose of registering the Certificates
and transfers and exchanges of the Certificates as herein
provided. A Certificateholder may transfer a Certificate by
written application to the Registrar stating the name of the
proposed transferee and otherwise complying with the terms of
this Agreement, including providing a written certificate or
other evidence of compliance with any restrictions on transfer.
No such transfer shall be effected until, and such transferee
shall succeed to the rights of a Certificateholder only upon,
final acceptance and registration of the transfer by the
Registrar in the Register. Prior to the registration of any
transfer by a Certificateholder as provided herein, the Trustee
shall treat the person in whose name the Certificate is
registered as the owner thereof for all purposes, and the Trustee
shall not be affected by notice to the contrary. Furthermore,
the Depositary shall, by acceptance of a Global Certificate,
agree that transfers of beneficial interests in such Global
Certificate may be effected only through a book-entry system
maintained by the Depositary (or its agent), and that ownership
of a beneficial interest in the Certificate shall be required to
be reflected in a book entry. When Certificates are presented to
the Registrar with a request to register the transfer or to
exchange them for an equal face amount of Certificates of other
authorized denominations, the Registrar shall register the
transfer or make the exchange as requested if its requirements
for such transactions are met. To permit registrations of
transfers and exchanges in accordance with the terms, conditions
and restrictions hereof, the Trustee shall execute and
authenticate Certificates at the Registrar's request. No service
charge shall be made for any registration of transfer or exchange
of the Certificates, but the Trustee may require payment by the
transferor of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith
(other than any such transfer taxes or other similar governmental
charges payable upon exchanges pursuant to Section 3.10 or 9.07).
Section 3.05. Book-Entry Provisions for U.S. Global
Certificate and Offshore Global Certificates. (a) Members of,
or participants in, the Depositary ("Agent Members") shall have
no rights under this Agreement with respect to any Global
Certificate held on their behalf by the Depositary, or the
Trustee as its custodian, and the Depositary may be treated by
the Trustee and any agent of the Trustee as the absolute owner of
such Global Certificate for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the
Trustee or any agent of the Trustee from giving effect to any
written certification, proxy or other authorization furnished by
the Depositary or shall impair, as between the Depositary and its
Agent Members, the operation of customary practices governing the
exercise of the rights of a holder of any Certificate. Upon the
issuance of any Global Certificate, the Registrar or its duly
appointed agent shall record a nominee of the Depositary as the
registered holder of such Global Certificate.
(b) Transfers of any Global Certificate shall be
limited to transfers of such Global Certificate or Offshore
Global Certificate in whole, but not in part, to nominees of the
Depositary, its successor or such successor's nominees.
Beneficial interests in the U.S. Global Certificate and any
Offshore Global Certificate may be transferred in accordance with
the rules and procedures of the Depositary and the provisions of
Section 3.06. Beneficial interests in the U.S. Global
Certificate or an Offshore Global Certificate shall be delivered
to all beneficial owners in the form of U.S. Physical
Certificates or Offshore Physical Certificates, as the case may
be, if (i) the Depositary notifies the Trustee that it is
unwilling or unable to continue as Depositary for the U.S. Global
Certificate or such Offshore Global Certificate, as the case may
be, and a successor depositary is not appointed by the Trustee
within 90 days of such notice or (ii) an Event of Default has
occurred and is continuing and the Registrar has received a
request from the Depositary to issue Physical Certificates.
(c) Any beneficial interest in one of the Global
Certificates that is transferred to a Person who takes delivery
in the form of an interest in the other Global Certificate will,
upon such transfer, cease to be an interest in such Global
Certificate and become an interest in the other Global
Certificate and, accordingly, will thereafter be subject to all
transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Certificate for as long
as it remains such an interest.
(d) [Intentionally omitted.]
(e) In connection with the transfer of the entire U.S.
Global Certificate or an entire Offshore Global Certificate to
the beneficial owners thereof pursuant to paragraph (b) of this
Section 3.05, such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, shall be deemed to be
surrendered to the Trustee for cancellation, and the Trustee
shall execute, authenticate and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial
interest in such U.S. Global Certificate or Offshore Global
Certificate, as the case may be, an equal aggregate principal
amount of U.S. Physical Certificates or Offshore Physical
Certificates, as the case may be, of authorized denominations.
(f) Any U.S. Physical Certificate delivered in
exchange for an interest in the U.S. Global Certificate pursuant
to paragraph (b) of this Section 3.05 shall, except as otherwise
provided by paragraph (f) of Section 3.06, bear the Private
Placement Legend.
(g) Any Offshore Physical Certificate delivered in
exchange for an interest in an Offshore Global Certificate
pursuant to paragraph (b) of this Section shall, except as
otherwise provided by paragraph (f) of Section 3.06, bear the
applicable legend regarding transfer restrictions set forth in
Section 3.02(a).
(h) The registered holder of the U.S. Global
Certificate or any Offshore Global Certificate may grant proxies
and otherwise authorize any Person, including Agent Members and
Persons that may hold interests through Agent Members, to take
any action which a Holder is entitled to take under this
Agreement or the Certificates.
Section 3.06. Special Transfer Provisions. Unless and
until (i) an Initial Certificate is sold under an effective
Registration Statement, or (ii) an Initial Certificate is
exchanged for an Exchange Certificate pursuant to an effective
Exchange Offer Registration Statement, in each case pursuant to
the Registration Rights Agreement, the following provisions shall
apply to such Initial Certificates:
(a) [intentionally omitted.]
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed
transfer of an Initial Certificate to a QIB (excluding
Non-U.S. Persons):
(i) If the Certificate to be transferred consists
of U.S. Physical Certificates or an interest in any
Temporary Offshore Global Certificate, the Registrar
shall register the transfer if such transfer is being
made by a proposed transferor who has checked the box
provided for on the form of Initial Certificate
stating, or has otherwise advised the Trustee and the
Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a
transferee who has signed the certification provided
for on the form of Initial Certificate stating, or has
otherwise advised the Trustee and the Registrar in
writing, that it is purchasing the Initial Certificate
for its own account or an account with respect to which
it exercises sole investment discretion and that it, or
the Person on whose behalf it is acting with respect to
any such account, is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Trust
and/or the Company as it has requested pursuant to
Rule 144A or has determined not to request such
information and that it is aware that the transferor is
relying upon its foregoing representations in order to
claim the exemption from registration provided by
Rule 144A.
(ii) Upon receipt by the Registrar of the
documents referred to in clause (i) above and
instructions given in accordance with the Depositary's
and the Registrar's procedures therefor, the Registrar
shall reflect on its books and records the date of such
transfer and an increase in the principal amount of the
U.S. Global Certificate in an amount equal to the
principal amount of the U.S. Physical Certificates or
interests in the Temporary Offshore Global Certificate,
as the case may be, being transferred, and the Trustee
shall cancel such Physical Certificates or decrease the
amount of such Temporary Offshore Global Certificate so
transferred.
(c) [intentionally omitted.]
(d) Transfers of Interests in the Permanent Offshore
Global Certificate or Offshore Physical Certificates. The
Registrar shall register any transfer of interests in the
Permanent Offshore Global Certificate or Offshore Physical
Certificates without requiring any additional certification.
(e) Transfers to Non-U.S. Persons at Any Time. The
following provisions shall apply with respect to any
registration of any transfer of an Initial Certificate to a
Non-U.S. Person:
(i) Prior to the Offshore Certificates Exchange
Date, the Registrar shall register any proposed
transfer of an Initial Certificate to a Non-U.S. Person
upon receipt of a certificate substantially in the form
set forth as Exhibit C hereto from the proposed
transferor.
(ii) On and after the Offshore Certificates
Exchange Date, the Registrar shall register any
proposed transfer to any Non-U.S. Person if the
Certificate to be transferred is a U.S. Physical
Certificate or an interest in the U.S. Global
Certificate, upon receipt of a certificate
substantially in the form of Exhibit C from the
proposed transferor. The Registrar shall promptly send
a copy of such certificate to the Company.
(iii) Upon receipt by the Registrar of (x) the
documents, if any, required by paragraph (ii) and (y)
instructions in accordance with the Depositary's and
the Registrar's procedures, the Registrar shall reflect
on its books and records the date of such transfer and
a decrease in the principal amount of such U.S. Global
Certificate in an amount equal to the principal amount
of the beneficial interest in such U.S. Global
Certificate to be transferred, and (B) upon receipt by
the Registrar of instructions given in accordance with
the Depositary's and the Registrar's procedures, the
Registrar shall reflect on its books and records the
date and an increase in the principal amount of the
Offshore Global Certificate in an amount equal to the
principal amount of the U.S. Physical Certificate or
the U.S. Global Certificate, as the case may be, to be
transferred, and the Trustee shall cancel the Physical
Certificate, if any, so transferred or decrease the
amount of such U.S. Global Certificate.
(f) Private Placement Legend. Upon the transfer,
exchange or replacement of Certificates not bearing the
Private Placement Legend, the Registrar shall deliver
Certificates that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Certificates
bearing the Private Placement Legend, the Registrar shall
deliver only Certificates that bear the Private Placement
Legend unless either (i) the circumstances contemplated by
paragraph (a)(i)(x) or (e)(ii) of this Section 3.06 exist or
(ii) there is delivered to the Registrar an Opinion of
Counsel to the effect that neither such legend nor the
related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities
Act.
(g) General. By its acceptance of any Certificate
bearing the Private Placement Legend, each Holder of such a
Certificate acknowledges the restrictions on transfer of
such Certificate set forth in this Agreement and agrees that
it will transfer such Certificate only as provided in this
Agreement. The Registrar shall not register a transfer of
any Certificate unless such transfer complies with the
restrictions on transfer of such Certificate set forth in
this Agreement. In connection with any transfer of
Certificates, each Certificateholder agrees by its
acceptance of the Certificates to furnish the Registrar or
the Trustee such certifications, legal opinions or other
information as either of them may reasonably require to
confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided
that the Registrar shall not be required to determine the
sufficiency of any such certifications, legal opinions or
other information.
Until such time as no Certificates remain Outstanding,
the Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 3.05 or
this Section 3.06. The Trustee, if not the Registrar at such
time, shall have the right to inspect and make copies of all such
letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to
the Registrar.
Section 3.07. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to
the Registrar or the Registrar receives evidence to its
satisfaction of the destruction, loss or theft of any Certificate
and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save
each of them harmless, then, in the absence of notice to the
Registrar or the Trustee that such destroyed, lost or stolen
Certificate has been acquired by a bona fide purchaser, and
provided that the requirements of Section 8-405 of the Uniform
Commercial Code in effect in any applicable jurisdiction are met,
the Trustee shall execute, authenticate and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen
Certificate, a new Certificate or Certificates, in authorized
denominations and of like Fractional Undivided Interest and
bearing a number not contemporaneously outstanding.
In connection with the issuance of any new Certificate
under this Section 3.07, the Trustee may require the payment of a
sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee and the
Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this
Section 3.07 shall constitute conclusive evidence of the
appropriate Fractional Undivided Interest in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Certificates.
Section 3.08. Persons Deemed Owners. Prior to due
presentment of a Certificate for registration of transfer, the
Trustee, the Registrar and any Paying Agent may treat the Person
in whose name any Certificate is registered (as of the day of
determination) as the owner of such Certificate for the purpose
of receiving distributions pursuant to Article IV and for all
other purposes whatsoever, and none of the Trustee, the Registrar
or any Paying Agent shall be affected by any notice to the
contrary.
Section 3.09. Cancellation. All Certificates
surrendered for payment or transfer or exchange shall, if
surrendered to the Trustee or any agent of the Trustee other than
the Registrar, be delivered to the Registrar for cancellation and
shall promptly be cancelled by it. No Certificates shall be
authenticated in lieu of or in exchange for any Certificates
cancelled as provided in this Section, except as expressly
permitted by this Agreement. All cancelled Certificates held by
the Registrar shall be destroyed and a certification of their
destruction delivered to the Trustee.
Section 3.10. Temporary Certificates. Until
definitive Certificates are ready for delivery, the Trustee shall
authenticate temporary Certificates. Temporary Certificates
shall be substantially in the form of definitive Certificates but
may have insertions, substitutions, omissions and other
variations determined to be appropriate by the officers executing
the temporary Certificates, as evidenced by their execution of
such temporary Certificates. If temporary Certificates are
issued, the Trustee will cause definitive Certificates to be
prepared without unreasonable delay. After the preparation of
definitive Certificates, the temporary Certificates shall be
exchangeable for definitive Certificates upon surrender of the
temporary Certificates at the office or agency of the Trustee
designated for such purpose pursuant to Section 7.12, without
charge to the Certificateholder. Upon surrender for cancellation
of any one or more temporary Certificates, the Trustee shall
execute, authenticate and deliver in exchange therefor a like
face amount of definitive Certificates of authorized
denominations. Until so exchanged, the temporary Certificates
shall be entitled to the same benefits under this Agreement as
definitive Certificates.
Section 3.11. Limitation of Liability for Payments.
All payments and distributions made to Certificateholders shall
be made only from the Trust Property and only to the extent that
the Trustee shall have sufficient income or proceeds from the
Trust Property to make such payments in accordance with the terms
of Article IV of this Agreement. Each Certificateholder, by its
acceptance of a Certificate, agrees that it will look solely to
the income and proceeds from the Trust Property for any payment
or distribution due to such Certificateholder pursuant to the
terms of this Agreement and that it will not have any recourse to
the Company, the Trustee, the Loan Trustees, the Owner Trustees
or the Owner Participants, except as otherwise expressly provided
herein.
The Company is a party to this Agreement solely for
purposes of meeting the requirements of the Trust Indenture Act,
and therefore shall not have any right, obligation or liability
hereunder (except as otherwise expressly provided herein).
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments
Account. (a) The Trustee shall establish and maintain on behalf
of the Certificateholders a Certificate Account as one or more
non-interest-bearing accounts. The Trustee shall hold the
Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals
therefrom only as provided in this Agreement. On each day when a
Scheduled Payment is made to the Trustee under the Intercreditor
Agreement, the Trustee upon receipt thereof shall immediately
deposit the aggregate amount of such Scheduled Payment in the
Certificate Account.
(b) The Trustee shall establish and maintain on behalf
of the Certificateholders a Special Payments Account as one or
more accounts, which shall be non-interest bearing except as
provided in Section 4.04. The Trustee shall hold the Special
Payments Account in trust for the benefit of the
Certificateholders and shall make or permit withdrawals therefrom
only as provided in this Agreement. On each day when one or more
Special Payments are made to the Trustee, the Trustee, upon
receipt thereof, shall immediately deposit the aggregate amount
of such Special Payments in the Special Payments Account.
(c) The Trustee shall present to the related Loan
Trustee of each Equipment Note such Equipment Note on the date of
its stated final maturity or, in the case of any Equipment Note
which is to be redeemed in whole pursuant to the related
Indenture, on the applicable redemption date under such
Indenture.
Section 4.02. Distributions from Certificate Account
and Special Payments Account. (a) On each Regular Distribution
Date or as soon thereafter as the Trustee has confirmed receipt
of the payment of all or any part of the Scheduled Payments due
on such date, the Trustee shall distribute out of the Certificate
Account the entire amount deposited therein pursuant to
Section 4.01(a). There shall be so distributed to each
Certificateholder of record on the Record Date with respect to
such Regular Distribution Date (other than as provided in
Section 11.01 concerning the final distribution) by check mailed
to such Certificateholder, at the address appearing in the
Register, such Certificateholder's pro rata share (based on the
Fractional Undivided Interest in the Trust held by such
Certificateholder) of the total amount in the Certificate
Account, except that, with respect to Certificates registered on
the Record Date in the name of the nominee of the Depositary
(initially, such nominee to be Cede & Co.), such distribution
shall be made by wire transfer in immediately available funds to
the account designated by such nominee.
(b) On each Special Distribution Date with respect to
any Special Payment or as soon thereafter as the Trustee has
confirmed receipt of any Special Payments, the Trustee shall
distribute out of the Special Payments Account the entire amount
of such Special Payment deposited therein pursuant to
Section 4.01(b). There shall be so distributed to each
Certificateholder of record on the Record Date with respect to
such Special Distribution Date (other than as provided in
Section 11.01 concerning the final distribution) by check mailed
to such Certificateholder, at the address appearing in the
Register, such Certificateholder's pro rata share (based on the
Fractional Undivided Interest in the Trust held by such
Certificateholder) of the total amount in the Special Payments
Account on account of such Special Payment, except that, with
respect to Certificates registered on the Record Date in the name
of the nominee of the Depositary (initially, such nominee to be
Cede & Co.), such distribution shall be made by wire transfer in
immediately available funds to the account designated by such
nominee.
(c) The Trustee shall, at the expense of the Company,
cause notice of each Special Payment to be mailed to each
Certificateholder at his address as it appears in the Register.
In the event of redemption or purchase of Equipment Notes held in
the Trust, such notice shall be mailed not less than 20 days
prior to the Special Distribution Date for the Special Payment
resulting from such redemption or purchase, which Special
Distribution Date shall be the date of such redemption or
purchase. In the case of any other Special Payments, such notice
shall be mailed as soon as practicable after the Trustee has
confirmed that it has received funds for such Special Payment,
stating the Special Distribution Date for such Special Payment
which shall occur not less than 20 days after the date of such
notice and as soon as practicable thereafter. Notices mailed by
the Trustee shall set forth:
(i) the Special Distribution Date and the Record Date
therefor (except as otherwise provided in Section 11.01),
(ii) the amount of the Special Payment for each $1,000
face amount Certificate (taking into account any payment to
be made by the Company pursuant to Section 2.01(b)) and the
amount thereof constituting principal, premium, if any, and
interest,
(iii) the reason for the Special Payment, and
(iv) if the Special Distribution Date is the same date
as a Regular Distribution Date, the total amount to be
received on such date for each $1,000 face amount
Certificate.
If the amount of premium, if any, payable upon the redemption or
purchase of an Equipment Note has not been calculated at the time
that the Trustee mails notice of a Special Payment, it shall be
sufficient if the notice sets forth the other amounts to be
distributed and states that any premium received will also be
distributed.
If any redemption of the Equipment Notes held in the
Trust is cancelled, the Trustee, as soon as possible after
learning thereof, shall cause notice thereof to be mailed to each
Certificateholder at its address as it appears on the Register.
Section 4.03. Statements to Certificateholders. (a)
On each Distribution Date, the Trustee will include with each
distribution to Certificateholders of a Scheduled Payment or
Special Payment, as the case may be, a statement setting forth
the following information (per $1,000 face amount Certificate as
to (i) and (ii) below):
(i) the amount of such distribution allocable to
principal and the amount allocable to premium, if any;
(ii) the amount of such distribution allocable to
interest; and
(iii) the Pool Balance and the Pool Factor.
With respect to the Certificates registered in the name
of Cede & Co., as nominee for the Depositary, on the Record Date
prior to each Distribution Date, the Trustee will request from
the Depositary a Securities Position Listing setting forth the
names of all Agent Members reflected on the Depositary's books as
holding interests in the Certificates on such Record Date. On
each Distribution Date, the Trustee will mail to each such Agent
Member the statement described above and will make available
additional copies as requested by such Agent Member for
forwarding to holders of interests in the Certificates.
(b) Within a reasonable period of time after the end
of each calendar year but not later than the latest date
permitted by law, the Trustee shall furnish to each Person who at
any time during such calendar year was a Certificateholder of
record a statement containing the sum of the amounts determined
pursuant to clauses (a)(i) and (a)(ii) above with respect to the
Trust for such calendar year or, in the event such Person was a
Certificateholder of record during a portion of such calendar
year, for such portion of such year, and such other items as are
readily available to the Trustee and which a Certificateholder
shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax
returns. Such statement and such other items shall be prepared
on the basis of information supplied to the Trustee by the Agent
Members and shall be delivered by the Trustee to such Agent
Members to be available for forwarding by such Agent Members to
the holders of interests in the Certificates in the manner
described in Section 4.03(a).
Section 4.04. Investment of Special Payment Moneys.
Any money received by the Trustee pursuant to Section 4.01(b)
representing a Special Payment which is not to be promptly
distributed shall, to the extent practicable, be invested in
Permitted Investments by the Trustee pending distribution of such
Special Payment pursuant to Section 4.02. Any investment made
pursuant to this Section 4.04 shall be in such Permitted
Investments having maturities not later than the date that such
moneys are required to be used to make the payment required under
Section 4.02 on the applicable Special Distribution Date and the
Trustee shall hold any such Permitted Investments until maturity.
The Trustee shall have no liability with respect to any
investment made pursuant to this Section 4.04, other than by
reason of the willful misconduct or negligence of the Trustee.
All income and earnings from such investments shall be
distributed on such Special Distribution Date as part of such
Special Payment.
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence. The
Company, at its own cost and expense, will do or cause to be done
all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises, except as
otherwise specifically permitted in Section 5.02; provided,
however, that the Company shall not be required to preserve any
right or franchise if the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the
business of the Company.
Section 5.02. Consolidation, Merger, etc. The Company
shall not consolidate with or merge into any other corporation or
convey, transfer or lease substantially all of its assets as an
entirety to any Person unless:
(a) the corporation formed by such consolidation or
into which the Company is merged or the Person that acquires
by conveyance, transfer or lease substantially all of the
assets of the Company as an entirety shall be (i) organized
and validly existing under the laws of the United States of
America or any state thereof or the District of Columbia,
(ii) a "citizen of the United States" as defined in 49
U.S.C. 40102(a)(15), as amended, and (iii) a United States
certificated air carrier, if and so long as such status is a
condition of entitlement to the benefits of Section 1110 of
the Bankruptcy Reform Act of 1978, as amended (11 U.S.C.
Section 1110), with respect to the Leases;
(b) the corporation formed by such consolidation or
into which the Company is merged or the Person which
acquires by conveyance, transfer or lease substantially all
of the assets of the Company as an entirety shall execute
and deliver to the Trustee a duly authorized, valid, binding
and enforceable agreement in form and substance reasonably
satisfactory to the Trustee containing an assumption by such
successor corporation or Person of the due and punctual
performance and observance of each covenant and condition of
this Agreement, the Other Pass Through Trust Agreements, the
Refunding Agreements, and each other Refunding Document to
be performed or observed by the Company; and
(c) the Company shall have delivered to the Trustee an
Officer's Certificate of the Company and an Opinion of
Counsel of the Company reasonably satisfactory to the
Trustee, each stating that such consolidation, merger,
conveyance, transfer or lease and the assumption agreement
mentioned in clause (b) above comply with this Section 5.02
and that all conditions precedent herein provided for
relating to such transaction have been complied with.
Upon any consolidation or merger, or any conveyance,
transfer or lease of substantially all of the assets of the
Company as an entirety in accordance with this Section 5.02, the
successor corporation or Person formed by such consolidation or
into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under
this Agreement with the same effect as if such successor
corporation or Person had been named as the Company herein. No
such conveyance, transfer or lease of substantially all of the
assets of the Company as an entirety shall have the effect of
releasing any successor corporation or Person which shall have
become such in the manner prescribed in this Section 5.02 from
its liability in respect of this Agreement and any Refunding
Document to which it is a party.
ARTICLE VI
DEFAULT
Section 6.01. Events of Default. (a) Exercise of
Remedies. Upon the occurrence and during the continuation of any
Indenture Default under any Indenture, the Trustee may, to the
extent it is the Controlling Party at such time (as determined
pursuant to the Intercreditor Agreement), direct the exercise of
remedies as provided in the Intercreditor Agreement.
(b) Purchase Rights of Certificateholders. (i) At
any time after the occurrence and during the continuation of a
Triggering Event, each Certificateholder shall have the right to
purchase all, but not less than all, of the Class A Certificates
upon ten days' written notice to the Class A Trustee and each
other Certificateholder, provided that (A) if prior to the end of
such ten-day period any other Certificateholder notifies such
purchasing Certificateholder that such other Certificateholder
wants to participate in such purchase, then such other
Certificateholder may join with the purchasing Certificateholder
to purchase all, but not less than all, of the Class A
Certificates pro rata based on the outstanding principal amount
of the Certificates held by each such Certificateholder and
(B) if prior to the end of such ten-day period any other
Certificateholder fails to notify the purchasing
Certificateholder of such other Certificateholder's desire to
participate in such a purchase, then such other Certificateholder
shall lose its right to purchase the Class A Certificates
pursuant to this Section 6.01(b)(i).
(ii) By acceptance of its Certificate, each
Certificateholder agrees that at any time after the occurrence
and during the continuation of a Triggering Event,
(1) each Class C Certificateholder shall have the
right (which shall not expire upon any purchase of the Class
A Certificates pursuant to paragraph (i) above) to purchase
all, but not less than all, of the Class A Certificates and
the Certificates upon ten days' written notice to the Class
A Trustee, the Trustee and each other Class C
Certificateholder, provided that (A) if prior to the end of
such ten-day period any other Class C Certificateholder
notifies such purchasing Class C Certificateholder that such
other Class C Certificateholder wants to participate in such
purchase, then such other Class C Certificateholder may join
with the purchasing Class C Certificateholder to purchase
all, but not less than all, of the Class A Certificates and
the Certificates pro rata based on the Fractional Undivided
Interest in the Class C Trust held by each such Class C
Certificateholder and (B) if prior to the end of such ten
day period any other Class C Certificateholder fails to
notify the purchasing Class C Certificateholder of such
other Class C Certificateholder's desire to participate in
such a purchase, then such other Class C Certificateholder
shall lose its right to purchase the Certificates pursuant
to this Section 6.01(b); and
(2) each Class D Certificateholder shall have the
right (which shall not expire upon any purchase of the Class
A Certificates pursuant to paragraph (i) above or the
purchase of the Class A Certificates and the Certificates
pursuant to clause (ii)(1) above) to purchase all, but not
less than all, of the Class A Certificates, the Certificates
and the Class C Certificates upon ten days' written notice
to the Class A Trustee, the Trustee, the Class C Trustee and
each other Class D Certificateholder, provided that (A) if
prior to the end of such ten-day period any other Class D
Certificateholder notifies such purchasing Class D
Certificateholder that such other Class D Certificateholder
wants to participate in such purchase, then such other Class
D Certificateholder may join with the purchasing
Certificateholder to purchase all, but not less than all, of
the Class A Certificates, the Certificates and the Class C
Certificates pro rata based on the Fractional Undivided
Interest in the Class D Trust held by each such Class D
Certificateholder and (B) if prior to the end of such ten
day period any other Class D Certificateholder fails to
notify the purchasing Class D Certificateholder of such
other Class D Certificateholder's desire to participate in
such a purchase, then such other Class D Certificateholder
shall lose its right to purchase the Class A Certificates,
the Certificates and the Class C Certificates pursuant to
this Section 6.01(b).
The purchase price with respect to the Certificates
shall be equal to the Pool Balance of the Certificates, together
with accrued and unpaid interest thereon to the date of such
purchase, without premium, but including any other amounts then
due and payable to the Certificateholders under this Agreement,
the Intercreditor Agreement or any other Refunding Document or on
or in respect of the Certificates; provided, however, that no
such purchase of Certificates shall be effective unless the
purchaser shall certify to the Trustee that contemporaneously
with such purchase, such purchaser is purchasing, pursuant to the
terms of this Agreement and the Other Pass Through Trust
Agreements, the Class A Certificates, the Certificates and the
Class C Certificates which are senior to the securities held by
such purchaser. Each payment of the purchase price of the
Certificates referred to in the first sentence hereof shall be
made to an account or accounts designated by the Trustee and each
such purchase shall be subject to the terms of this Section
6.01(b). Each Certificateholder agrees by its acceptance of its
Certificate that it will, subject to Section 3.04 hereof, upon
payment from such Class C Certificateholder(s) or Class D
Certificateholder(s), as the case may be, of the purchase price
set forth in the first sentence of this paragraph, forthwith
sell, assign, transfer and convey to the purchaser thereof
(without recourse, representation or warranty of any kind except
for its own acts), all of the right, title, interest and
obligation of such Certificateholder in, this Agreement, the
Intercreditor Agreement, the Liquidity Facility, the Refunding
Documents and all Certificates held by such Certificateholder
(excluding all right, title and interest under any of the
foregoing to the extent such right, title or interest is with
respect to an obligation not then due and payable as respects any
action or inaction or state of affairs occurring prior to such
sale) and the purchaser shall assume all of such
Certificateholder's obligations under this Agreement, the
Intercreditor Agreement, the Liquidity Facility and the Refunding
Documents. The Certificates will be deemed to be purchased on
the date payment of the purchase price is made notwithstanding
the failure of the Certificateholders to deliver any Certificates
(whether in the form of Physical Certificates or beneficial
interests in Global Certificates) and, upon such a purchase, (i)
the only rights of the Certificateholders will be to deliver the
Certificates to the purchaser and receive the purchase price for
such Certificates and (ii) if the purchaser shall so request,
such Certificateholder will comply with all the provisions of
Section 3.04 hereof to enable new Certificates to be issued to
the purchaser in such denominations as it shall request. All
charges and expenses in connection with the issuance of any such
new Certificates shall be borne by the purchaser thereof.
As used in this Section 6.01(b), the terms
"Certificateholder", "Class", "Class A Certificate", "Class A
Trustee", "Class C Certificate", "Class C Certificateholder",
"Class C Trust", "Class C Trustee", "Class D Certificate", "Class
D Certificateholder", "Class D Trust" and "Class D Trustee",
shall have the respective meanings assigned to such terms in the
Intercreditor Agreement.
Section 6.02. [Intentionally omitted.].
Section 6.03. Judicial Proceedings Instituted by
Trustee; Trustee May Bring Suit. If there shall be a failure to
make payment of the principal of, premium, if any, or interest on
any Equipment Note, or if there shall be any failure to pay Rent
(as defined in the relevant Lease) under any Lease when due and
payable, then the Trustee, in its own name and as trustee of an
express trust, as holder of such Equipment Notes, to the extent
permitted by and in accordance with the terms of the
Intercreditor Agreement and the Refunding Documents (subject to
the rights of the applicable Owner Trustee or Owner Participant
to cure any such failure in accordance with Section 4.03 of the
applicable Indenture), shall be entitled and empowered to
institute any suits, actions or proceedings at law, in equity or
otherwise, for the collection of the sums so due and unpaid on
such Equipment Notes or under such Lease and may prosecute any
such claim or proceeding to judgment or final decree with respect
to the whole amount of any such sums so due and unpaid.
Section 6.04. Control by Certificateholders. Subject
to Section 6.03 and the Intercreditor Agreement, the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust shall have the right to direct the time,
method and place of conducting any proceeding for any remedy
available to the Trustee with respect to the Trust or pursuant to
the terms of the Intercreditor Agreement, or exercising any trust
or power conferred on the Trustee under this Agreement or the
Intercreditor Agreement, including any right of the Trustee as
Controlling Party under the Intercreditor Agreement or as holder
of the Equipment Notes, provided that
(1) such Direction shall not be in conflict with any
rule of law or with this Agreement and would not involve the
Trustee in personal liability or expense,
(2) the Trustee shall not determine that the action so
directed would be unjustly prejudicial to the
Certificateholders not taking part in such Direction, and
(3) the Trustee may take any other action deemed
proper by the Trustee which is not inconsistent with such
Direction.
Section 6.05. Waiver of Past Defaults. Subject to the
Intercreditor Agreement, the Certificateholders holding
Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust (i)
may on behalf of all of the Certificateholders waive any past
Event of Default hereunder and its consequences or (ii) if the
Trustee is the Controlling Party, may direct the Trustee to
instruct the applicable Loan Trustee to waive, any past Indenture
Default under any Indenture and its consequences, and thereby
annul any Direction given by such Certificateholders or the
Trustee to such Loan Trustee with respect thereto, except a
default:
(1) in the deposit of any Scheduled Payment or Special
Payment under Section 4.01 or in the distribution of any
payment under Section 4.02 on the Certificates, or
(2) in the payment of the principal of (premium, if
any) or interest on the Equipment Notes, or
(3) in respect of a covenant or provision hereof
which under Article X cannot be modified or amended without
the consent of each Certificateholder holding an Outstanding
Certificate affected thereby.
Upon any such waiver, such default shall cease to exist
with respect to the Certificates and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose
and any direction given by the Trustee on behalf of the
Certificateholders to the relevant Loan Trustee shall be annulled
with respect thereto; but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any
right consequent thereon. Upon any such waiver, the Trustee
shall vote the Equipment Notes issued under the relevant
Indenture to waive the corresponding Indenture Default.
Section 6.06. Right of Certificateholders to Receive
Payments Not to Be Impaired. Anything in this Agreement to the
contrary notwithstanding, including, without limitation,
Section 6.07 hereof, but subject to the Intercreditor Agreement,
the right of any Certificateholder to receive distributions of
payments required pursuant to Section 4.02 hereof on the
Certificates when due, or to institute suit for the enforcement
of any such payment on or after the applicable Regular
Distribution Date or Special Distribution Date, shall not be
impaired or affected without the consent of such
Certificateholder.
Section 6.07. Certificateholders May Not Bring Suit
Except Under Certain Conditions. A Certificateholder shall not
have the right to institute any suit, action or proceeding at law
or in equity or otherwise with respect to this Agreement, for the
appointment of a receiver or for the enforcement of any other
remedy under this Agreement, unless:
(1) such Certificateholder previously shall have given
written notice to the Trustee of a continuing Event of
Default;
(2) Certificateholders holding Certificates evidencing
Fractional Undivided Interests aggregating not less than 25%
of the Trust shall have requested the Trustee in writing to
institute such action, suit or proceeding and shall have
offered to the Trustee indemnity as provided in
Section 7.03(e);
(3) the Trustee shall have refused or neglected to
institute such an action, suit or proceeding for 60 days
after receipt of such notice, request and offer of
indemnity; and
(4) no direction inconsistent with such written
request shall have been given to the Trustee during such 60-
day period by Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust.
It is understood and intended that no one or more of
the Certificateholders shall have any right in any manner
whatsoever hereunder or under the Certificates to (i) surrender,
impair, waive, affect, disturb or prejudice any property in the
Trust Property or the lien of any Indenture on any property
subject thereto, or the rights of the Certificateholders or the
holders of the Equipment Notes, (ii) obtain or seek to obtain
priority over or preference with respect to any other such
Certificateholder or (iii) enforce any right under this
Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all the Certificateholders
subject to the provisions of this Agreement.
Section 6.08. Remedies Cumulative. Every remedy given
hereunder to the Trustee or to any of the Certificateholders
shall not be exclusive of any other remedy or remedies, and every
such remedy shall be cumulative and in addition to every other
remedy given hereunder or now or hereafter given by statute, law,
equity or otherwise.
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default, the
Trustee undertakes to perform such duties as are specifically set
forth in this Agreement, and no implied covenants or obligations
shall be read into this Agreement against the Trustee.
(b) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and
powers vested in it by this Agreement, and use the same degree of
care and skill in their exercise, as a prudent man would exercise
or use under the circumstances in the conduct of its own affairs.
(c) No provision of this Agreement shall be construed
to relieve the Trustee from liability for its own negligent
action, its own negligent failure to act, or its own wilful
misconduct, except that
(1) this Subsection shall not be construed to limit
the effect of Subsection (a) of this Section; and
(2) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the
Trustee, unless it shall be proved that the Trustee was
negligent in ascertaining the pertinent facts.
(d) Whether or not herein expressly so provided, every
provision of this Trust Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustee
shall be subject to the provisions of this Section.
Section 7.02. Notice of Defaults. As promptly as
practicable after, and in any event within 90 days after, the
occurrence of any default (as such term is defined below)
hereunder, the Trustee shall transmit by mail to the Company, the
Owner Trustees, the Owner Participants, the Loan Trustees and the
Certificateholders in accordance with Section 313(c) of the Trust
Indenture Act, notice of such default hereunder known to the
Trustee, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default on the
payment of the principal, premium, if any, or interest on any
Equipment Note, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the
executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that
the withholding of such notice is in the interests of the
Certificateholders. For the purpose of this Section, the term
"default" means any event that is, or after notice or lapse of
time or both would become, an Event of Default.
Section 7.03. Certain Rights of Trustee. Subject to
the provisions of Section 315 of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in
acting or refraining from acting in reliance upon any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture or other paper or document believed by it to be
genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a written
description of the subject matter thereof accompanied by an
Officer's Certificate and an Opinion of Counsel as provided
in Section 1.02 of this Agreement;
(c) whenever in the administration of this Agreement
the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate of the
Company, any Owner Trustee or any Loan Trustee;
(d) the Trustee may consult with counsel and the
advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Agreement at the Direction of any of the Certificateholders
pursuant to this Agreement, unless such Certificateholders
shall have offered to the Trustee reasonable security or
indemnity against the cost, expenses and liabilities which
might be incurred by it in compliance with such Direction;
(f) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture or other paper or document;
(g) the Trustee may execute any of the trusts or
powers under this Agreement or perform any duties under this
Agreement either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or
attorney appointed with due care by it under this Agreement;
(h) the Trustee shall not be liable with respect to
any action taken or omitted to be taken by it in good faith
in accordance with the Direction of the Certificateholders
holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest
in the Trust relating to the time, method and place of
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under this Agreement; and
(i) the Trustee shall not be required to expend or
risk its own funds in the performance of any of its duties
under this Agreement, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity
against such risk is not reasonably assured to it.
Section 7.04. Not Responsible for Recitals or Issuance
of Certificates. The recitals contained herein and in the
Certificates, except the certificates of authentication, shall
not be taken as the statements of the Trustee, and the Trustee
assumes no responsibility for their correctness. Subject to
Section 7.15, the Trustee makes no representations as to the
validity or sufficiency of this Agreement, any Refunding
Agreement, any Equipment Notes, the Certificates or any other
Refunding Document, except that the Trustee hereby represents and
warrants that this Agreement has been, and the Intercreditor
Agreement, the Registration Rights Agreement, each Refunding
Agreement and each Certificate will be, executed, authenticated
and delivered by one of its officers who is duly authorized to
execute, authenticate and deliver such document on its behalf.
Section 7.05. May Hold Certificates. The Trustee, any
Paying Agent, Registrar or any of their Affiliates or any other
agent in their respective individual or any other capacity may
become the owner or pledgee of Certificates and, subject to
Sections 310(b) and 311 of the Trust Indenture Act, if
applicable, may otherwise deal with the Company, the Owner
Trustees or the Loan Trustees with the same rights it would have
if it were not Trustee, Paying Agent, Registrar or such other
agent.
Section 7.06. Money Held in Trust. Money held by the
Trustee or the Paying Agent in trust hereunder need not be
segregated from other funds except to the extent required herein
or by law and neither the Trustee nor the Paying Agent shall have
any liability for interest upon any such moneys except as
provided for herein.
Section 7.07. Compensation and Reimbursement. The
Company agrees:
(1) to pay, or cause to be paid, to the Trustee from
time to time reasonable compensation for all services
rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse, or cause to be reimbursed, the Trustee upon its
request for all reasonable out-of-pocket expenses,
disbursements and advances incurred or made by the Trustee
in accordance with any provision of this Agreement
(including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such
expense, disbursement or advance as may be attributable to
its negligence, willful misconduct or bad faith or as may be
incurred due to the Trustee's breach of its representations
and warranties set forth in Section 7.15; and
(3) to indemnify the Trustee pursuant to Section 10.1
of the Participation Agreements (as amended by the
Amendments No. 2 thereto dated as of the date hereof) (as
defined in the Intercreditor Agreement).
The Trustee shall be entitled to reimbursement from,
and shall have a lien prior to the Certificates upon, the Trust
Property for any tax incurred without negligence, bad faith or
willful misconduct, on its part, arising out of or in connection
with the acceptance or administration of such Trust (other than
any tax attributable to the Trustee's compensation for serving as
such), including any costs and expenses incurred in contesting
the imposition of any such tax. If the Trustee reimburses itself
from the Trust Property of such Trust for any such tax, it will
mail a brief report within 30 days setting forth the
circumstances thereof to all Certificateholders as their names
and addresses appear in the Register.
Section 7.08. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as a trustee under Section 310(a) of the Trust
Indenture Act and shall have a combined capital and surplus of at
least $75,000,000 (or a combined capital and surplus in excess of
$5,000,000 and the obligations of which, whether now in existence
or hereafter incurred, are fully and unconditionally guaranteed
by a corporation organized and doing business under the laws of
the United States, any state or territory thereof or of the
District of Columbia and having a combined capital and surplus of
at least $75,000,000). If such corporation publishes reports of
conditions at least annually, pursuant to law or to the
requirements of federal, state, territorial or District of
Columbia supervising or examining authority, then for the
purposes of this Section 7.08, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of conditions
so published.
In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 7.08
to act as Trustee, the Trustee shall resign immediately as
Trustee in the manner and with the effect specified in
Section 7.09.
Section 7.09. Resignation and Removal; Appointment of
Successor. (a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the
successor Trustee under Section 7.10.
(b) The Trustee may resign at any time as trustee by
giving prior written notice thereof to the Company, the
Authorized Agents, the Owner Trustees and the Loan Trustees. If
an instrument of acceptance by a successor Trustee shall not have
been delivered to the Company, the Authorized Agents, the Owner
Trustees, the Loan Trustees and the Trustee within 30 days after
the giving of such notice of resignation, the resigning Trustee
may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed at any time by
Direction of the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less
than a majority in interest in the Trust delivered to the Trustee
and to the Company, the Owner Trustees and the Loan Trustees.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 310
of the Trust Indenture Act, if applicable, after written
request therefor by the Company or by any Certificateholder
who has been a bona fide Certificateholder for at least six
months; or
(2) the Trustee shall cease to be eligible under
Section 7.08 and shall fail to resign after written request
therefor by the Company or by any such Certificateholder; or
(3) the Trustee shall become incapable of acting or
shall be adjudged a bankrupt or insolvent or a receiver of
the Trustee or of its property shall be appointed or any
public officer shall take charge or control of the Trustee
or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any case, (i) the Company may, with the consent of the
Owner Participants, which consent may not be unreasonably
withheld, remove the Trustee or (ii) any Certificateholder who
has been a bona fide Certificateholder for at least six months
may, on behalf of itself and all others similarly situated,
petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
(e) If a Responsible Officer of the Trustee shall
obtain actual knowledge of an Avoidable Tax which has been or is
likely to be asserted, the Trustee shall promptly notify the
Company and shall, within 30 days of such notification, resign
hereunder unless within such 30-day period the Trustee shall have
received notice that the Company has agreed to pay such tax. The
Company shall promptly appoint a successor Trustee in a
jurisdiction where there are no Avoidable Taxes.
(f) If the Trustee shall resign, be removed or become
incapable of acting or if a vacancy shall occur in the office of
the Trustee for any cause, the Company shall promptly appoint a
successor Trustee. If, within one year after such resignation,
removal or incapability, or other occurrence of such vacancy, a
successor Trustee shall be appointed by Direction of the
Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in
interest in the Trust delivered to the Company, the Owner
Trustees, the Loan Trustees and the retiring Trustee, and the
Company approves such appointment, which approval shall not be
unreasonably withheld, then the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become
the successor Trustee and supersede the successor Trustee
appointed as provided above. If no successor Trustee shall have
been so appointed as provided above and accepted appointment in
the manner hereinafter provided, any Certificateholder who has
been a bona fide Certificateholder for at least six months may,
on behalf of himself and all others similarly situated, petition
any court of competent jurisdiction for the appointment of a
successor Trustee.
(g) The successor Trustee shall give notice of the
resignation and removal of the Trustee and appointment of the
successor Trustee by mailing written notice of such event by
first-class mail, postage prepaid, to the Certificateholders as
their names and addresses appear in the Register. Each notice
shall include the name of such successor Trustee and the address
of its Corporate Trust Office.
Section 7.10. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute and
deliver to the Company, the Authorized Agents, the Owner Trustees
and the Loan Trustees and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, trusts and
duties of the retiring Trustee; but, on request of the Company or
the successor Trustee, such retiring Trustee shall execute and
deliver an instrument transferring to such successor Trustee all
such rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all
Trust Property held by such retiring Trustee hereunder, subject
nevertheless to its lien, if any, provided for in Section 7.07.
Upon request of any such successor Trustee, the Company, the
retiring Trustee and such successor Trustee shall execute and
deliver any and all instruments containing such provisions as
shall be necessary or desirable to transfer and confirm to, and
for more fully and certainly vesting in, such successor Trustee
all such rights, powers and trusts.
No institution shall accept its appointment as a
Trustee hereunder unless at the time of such acceptance such
institution shall be qualified and eligible under this Article
VII.
Section 7.11. Merger, Conversion, Consolidation or
Succession to Business. Any corporation into which the Trustee
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the
corporate trust business of the Trustee, shall be the successor
of the Trustee hereunder, provided such corporation shall be
otherwise qualified and eligible under this Article VII, without
the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Certificates
shall have been executed or authenticated, but not delivered, by
the Trustee then in office, any successor by merger, conversion
or consolidation to such authenticating Trustee may adopt such
execution or authentication and deliver the Certificates so
executed or authenticated with the same effect as if such
successor Trustee had itself executed or authenticated such
Certificates.
Section 7.12. Maintenance of Agencies. (a) There
shall at all times be maintained an office or agency in the
location set forth in Section 12.03 where Certificates may be
presented or surrendered for registration of transfer or for
exchange, and for payment thereof and where notices and demands
to or upon the Trustee in respect of such certificates or this
Agreement may be served; provided, however, that, if it shall be
necessary that the Trustee maintain an office or agency in
another location (e.g., the Certificates shall be represented by
Physical Certificates and shall be listed on a national
securities exchange), the Trustee will make all reasonable
efforts to establish such an office or agency. Written notice of
the location of each such other office or agency and of any
change of location thereof shall be given by the Trustee to the
Company, the Owner Trustees, the Loan Trustees (in the case of
any Owner Trustee or Loan Trustee, at its address specified in
the Refunding Agreements or such other address as may be notified
to the Trustee) and the Certificateholders. In the event that no
such office or agency shall be maintained or no such notice of
location or of change of location shall be given, presentations
and demands may be made and notices may be served at the
Corporate Trust Office of the Trustee.
(b) There shall at all times be a Registrar and a
Paying Agent hereunder with respect to the Certificates. Each
such Authorized Agent shall be a bank or trust company, shall be
a corporation organized and doing business under the laws of the
United States or any state, with a combined capital and surplus
of at least $75,000,000, or, if the Trustee shall be acting as
the Registrar or Paying Agent hereunder, a corporation having a
combined capital and surplus in excess of $5,000,000, the
obligations of which are guaranteed by a corporation organized
and doing business under the laws of the United States or any
state, with a combined capital and surplus of at least
$75,000,000, and shall be authorized under such laws to exercise
corporate trust powers, subject to supervision by Federal or
state authorities. The Trustee shall initially be the Paying
Agent and, as provided in Section 3.04, Registrar hereunder with
respect to the Certificates. Each Registrar shall furnish to the
Trustee, at stated intervals of not more than six months, and at
such other times as the Trustee may request in writing, a copy of
the Register maintained by such Registrar.
(c) Any corporation into which any Authorized Agent
may be merged or converted or with which it may be consolidated,
or any corporation resulting from any merger, consolidation or
conversion to which any Authorized Agent shall be a party, or any
corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent
hereunder, if such successor corporation is otherwise eligible
under this Section, without the execution or filing of any paper
or any further act on the part of the parties hereto or such
Authorized Agent or such successor corporation.
(d) Any Authorized Agent may at any time resign by
giving written notice of resignation to the Trustee, the Company,
the Owner Trustees and the Loan Trustees. The Company may, and
at the request of the Trustee shall, at any time terminate the
agency of any Authorized Agent by giving written notice of
termination to such Authorized Agent and to the Trustee. Upon
the resignation or termination of an Authorized Agent or in case
at any time any such Authorized Agent shall cease to be eligible
under this Section (when, in either case, no other Authorized
Agent performing the functions of such Authorized Agent shall
have been appointed), the Company shall promptly appoint one or
more qualified successor Authorized Agents, reasonably
satisfactory to the Trustee, to perform the functions of the
Authorized Agent which has resigned or whose agency has been
terminated or who shall have ceased to be eligible under this
Section. The Company shall give written notice of any such
appointment made by it to the Trustee, the Owner Trustees and the
Loan Trustees; and in each case the Trustee shall mail notice of
such appointment to all Certificateholders as their names and
addresses appear on the Register.
(e) The Company agrees to pay, or cause to be paid,
from time to time to each Authorized Agent reasonable
compensation for its services and to reimburse it for its
reasonable expenses.
Section 7.13. Money for Certificate Payments to Be
Held in Trust. All moneys deposited with any Paying Agent for
the purpose of any payment on Certificates shall be deposited and
held in trust for the benefit of the Certificateholders entitled
to such payment, subject to the provisions of this Section.
Moneys so deposited and held in trust shall constitute a separate
trust fund for the benefit of the Certificateholders with respect
to which such money was deposited.
The Trustee may at any time, for the purpose of
obtaining the satisfaction and discharge of this Agreement or for
any other purpose, direct any Paying Agent to pay to the Trustee
all sums held in trust by such Paying Agent, such sums to be held
by the Trustee upon the same trusts as those upon which such sums
were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released
from all further liability with respect to such money.
Section 7.14. Registration of Equipment Notes in Name
of Subordination Agent. The Trustee agrees that all Equipment
Notes to be purchased by the Trust shall be issued in the name of
the Subordination Agent or its nominee and held by the
Subordination Agent in trust for the benefit of the
Certificateholders, or, if not so held, the Subordination Agent
or its nominee shall be reflected as the owner of such Equipment
Notes in the register of the issuer of such Equipment Notes.
Section 7.15. Representations and Warranties of
Trustee. The Trustee hereby represents and warrants that:
(a) the Trustee is a Delaware banking corporation
organized and validly existing in good standing under the
laws of the State of Delaware;
(b) the Trustee has full power, authority and legal
right to execute, deliver, and perform this Agreement, the
Intercreditor Agreement, the Registration Rights Agreement
and the Refunding Agreements and has taken all necessary
action to authorize the execution, delivery, and performance
by it of this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Refunding Agreements;
(c) the execution, delivery and performance by the
Trustee of this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Refunding Agreements
(i) will not violate any provision of United States federal
law or the law of the state of the United States where it is
located governing the banking and trust powers of the
Trustee or any order, writ, judgment, or decree of any
court, arbitrator or governmental authority applicable to
the Trustee or any of its assets, (ii) will not violate any
provision of the articles of association or by-laws of the
Trustee, or (iii) will not violate any provision of, or
constitute, with or without notice or lapse of time, a
default under, or result in the creation or imposition of
any lien on any properties included in the Trust Property
pursuant to the provisions of any mortgage, indenture,
contract, agreement or other undertaking to which it is a
party, which violation, default or lien could reasonably be
expected to have an adverse effect on the Trustee's
performance or ability to perform its duties hereunder or
thereunder or on the transactions contemplated herein or
therein;
(d) the execution, delivery and performance by the
Trustee of this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Refunding Agreements
will not require the authorization, consent, or approval of,
the giving of notice to, the filing or registration with, or
the taking of any other action in respect of, any
governmental authority or agency of the United States or the
State of the United States where it is located regulating
the banking and corporate trust activities of the Trustee;
and
(e) this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Refunding Agreements
have been duly executed and delivered by the Trustee and
constitute the legal, valid, and binding agreements of the
Trustee, enforceable against it in accordance with their
respective terms, provided that enforceability may be
limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
rights of creditors generally and (ii) general principles of
equity.
Section 7.16. Withholding Taxes; Information
Reporting. The Trustee, as trustee of the grantor trust created
by this Agreement, shall exclude and withhold from each
distribution of principal, premium, if any, and interest and
other amounts due under this Agreement or under the Certificates
any and all withholding taxes applicable thereto as required by
law. The Trustee agrees to act as such withholding agent and, in
connection therewith, whenever any present or future taxes or
similar charges are required to be withheld with respect to any
amounts payable in respect of the Certificates, to withhold such
amounts and timely pay the same to the appropriate authority in
the name of and on behalf of the Certificateholders, that it will
file any necessary withholding tax returns or statements when
due, and that, as promptly as possible after the payment thereof,
it will deliver to each such Certificateholder appropriate
documentation showing the payment thereof, together with such
additional documentary evidence as such Certificateholders may
reasonably request from time to time. The Trustee agrees to file
any other information reports as it may be required to file under
United States law.
Section 7.17. Trustee's Liens. The Trustee in its
individual capacity agrees that it will at its own cost and
expense promptly take any action as may be necessary to duly
discharge and satisfy in full any mortgage, pledge, lien, charge,
encumbrance, security interest or claim ("Trustee's Liens") on or
with respect to the Trust Property which is attributable to the
Trustee either (i) in its individual capacity and which is
unrelated to the transactions contemplated by this Agreement, the
Intercreditor Agreement, the Refunding Agreements or the
Refunding Documents, or (ii) as Trustee hereunder or in its
individual capacity and which arises out of acts or omissions
which are not contemplated by this Agreement.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with
Names and Addresses of Certificateholders. The Company will
furnish to the Trustee within 15 days after each Record Date with
respect to a Scheduled Payment, and at such other times as the
Trustee may request in writing within 30 days after receipt by
the Company of any such request, a list, in such form as the
Trustee may reasonably require, of all information in the
possession or control of the Company as to the names and
addresses of the Certificateholders, in each case as of a date
not more than 15 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the sole
Registrar, no such list need be furnished; and provided further,
however, that no such list need be furnished for so long as a
copy of the Register is being furnished to the Trustee pursuant
to Section 7.12.
Section 8.02. Preservation of Information;
Communications to Certificateholders. The Trustee shall
preserve, in as current a form as is reasonably practicable, the
names and addresses of Certificateholders contained in the most
recent list furnished to the Trustee as provided in Section 7.12
or Section 8.01, as the case may be, and the names and addresses
of Certificateholders received by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list
furnished to it as provided in Section 7.12 or Section 8.01, as
the case may be, upon receipt of a new list so furnished.
Section 8.03. Reports by Trustee. Within 60 days
after May 15 of each year commencing with the first full year
following the issuance of the Certificates, the Trustee shall
transmit to the Certificateholders, as provided in Section 313(c)
of the Trust Indenture Act, a brief report dated as of such
May 15, if required by Section 313(a) of the Trust Indenture Act.
Section 8.04. Reports by the Company. The Company
shall:
(a) file with the Trustee, within 30 days after the
Company is required to file the same with the SEC, copies of
the annual reports and of the information, documents and
other reports (or copies of such portions of any of the
foregoing as the SEC may from time to time by rules and
regulations prescribe) which the Company is required to file
with the SEC pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934, as amended; or, if the
Company is not required to file information, documents or
reports pursuant to either of such sections, then to file
with the Trustee and the SEC, in accordance with rules and
regulations prescribed by the SEC, such of the supplementary
and periodic information, documents and reports which may be
required pursuant to section 13 of the Securities Exchange
Act of 1934, as amended, in respect of a security listed and
registered on a national securities exchange as may be
prescribed in such rules and regulations;
(b) file with the Trustee and the SEC, in accordance
with the rules and regulations prescribed by the SEC, such
additional information, documents and reports with respect
to compliance by the Company with the conditions and
covenants provided for in this Agreement, as may be required
by such rules and regulations, including, in the case of
annual reports, if required by such rules and regulations,
certificates or opinions of independent public accountants;
(c) transmit to all Certificateholders, in the manner
and to the extent provided in Section 313(c) of the Trust
Indenture Act such summaries of any information, documents
and reports required to be filed by the Company pursuant to
subsections (a) and (b) of this Section 8.04 as may be
required by rules and regulations prescribed by the SEC; and
(d) furnish to the Trustee, not less often than
annually, a brief certificate from the principal executive
officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's
compliance with all conditions and covenants under this
Agreement (it being understood that for purposes of this
paragraph (d), such compliance shall be determined without
regard to any period of grace or requirement of notice
provided under this Agreement).
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without Consent
of Certificateholders. Without the consent of the
Certificateholders, the Company may (but will not be required
to), and the Trustee (subject to Section 9.03) shall, at any time
and from time to time, enter into one or more agreements
supplemental hereto or, if applicable, to the Intercreditor
Agreement or the Liquidity Facility, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation
to the Company and the assumption by any such successor of
the covenants of the Company herein contained; or
(2) to add to the covenants of the Company for the
benefit of the Certificateholders, or to surrender any right
or power in this Agreement conferred upon the Company; or
(3) to correct or supplement any provision in this
Agreement, the Intercreditor Agreement or the Liquidity
Facility which may be defective or inconsistent with any
other provision herein or to cure any ambiguity or correct
any mistake or to modify any other provision with respect to
matters or questions arising under this Agreement, the
Intercreditor Agreement or the Liquidity Facility, provided
that any such action shall not materially adversely affect
the interests of the Certificateholders; or
(4) to modify, eliminate or add to the provisions of
this Agreement to such extent as shall be necessary to
continue the qualification of this Agreement (including any
supplemental agreement) under the Trust Indenture Act or
under any similar Federal statute hereafter enacted, and to
add to this Agreement such other provisions as may be
expressly permitted by the Trust Indenture Act, excluding,
however, the provisions referred to in Section 316(a)(2) of
the Trust Indenture Act as in effect at the date as of which
this instrument was executed or any corresponding provision
in any similar Federal statute hereafter enacted; or
(5) to evidence and provide for the acceptance of
appointment under this Agreement by the Trustee of a
successor Trustee and to add to or change any of the
provisions of this Agreement as shall be necessary to
provide for or facilitate the administration of the Trust,
pursuant to the requirements of Section 7.10; or
(6) to provide the information required under
Section 7.12 and Section 12.03 as to the Trustee; or
(7) to modify or eliminate provisions relating to the
transfer or exchange of Exchange Certificates or the Initial
Certificates upon consummation of the Exchange Offer (as
defined in the Registration Rights Agreement) or
effectiveness of the Registration Statement.
Section 9.02. Supplemental Agreements with Consent of
Certificateholders. With the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust, by
Direction of said Certificateholders delivered to the Company and
the Trustee, the Company may (with the consent of the Owner
Trustees, if any, which consent shall not be unreasonably
withheld), and the Trustee (subject to Section 9.03) shall, enter
into an agreement or agreements for the purpose of adding any
provisions to or changing in any manner or eliminating any of the
provisions of this Agreement, the Intercreditor Agreement, the
Liquidity Facility, the Registration Rights Agreement or any
Refunding Agreement to the extent applicable to such
Certificateholders or of modifying in any manner the rights and
obligations of such Certificateholders under this Agreement, the
Intercreditor Agreement, the Liquidity Facility, the Registration
Rights Agreement or any Refunding Agreement; provided, however,
that no such agreement shall, without the consent of the
Certificateholder of each Outstanding Certificate affected
thereby:
(1) reduce in any manner the amount of, or delay the
timing of, any receipt by the Trustee of payments on the
Equipment Notes held in the Trust or distributions that are
required to be made herein on any Certificate, or change any
date of payment on any Certificate, or change the place of
payment where, or the coin or currency in which, any
Certificate is payable, or impair the right to institute
suit for the enforcement of any such payment or distribution
on or after the Regular Distribution Date or Special
Distribution Date applicable thereto; or
(2) permit the disposition of any Equipment Note
included in the Trust Property except as permitted by this
Agreement, or otherwise deprive such Certificateholder of
the benefit of the ownership of the Equipment Notes in the
Trust; or
(3) reduce the percentage of the aggregate Fractional
Undivided Interests of the Trust which is required for any
such supplemental agreement, or reduce such percentage
required for any waiver of compliance with certain
provisions of this Agreement or certain defaults hereunder
and their consequences provided for in this Agreement; or
(4) waive, amend or modify Section 2.4, 3.2 or 3.3 of
the Intercreditor Agreement in a manner adverse to the
Certificateholders; or
(5) modify any of the provisions of this Section 9.02
or Section 6.05, except to increase any such percentage or
to provide that certain other provisions of this Agreement
cannot be modified or waived without the consent of the
Certificateholder of each Certificate affected thereby.
It shall not be necessary for any Direction of
Certificateholders under this Section to approve the particular
form of any proposed supplemental agreement, but it shall be
sufficient if such Direction shall approve the substance thereof.
Section 9.03. Documents Affecting Immunity or
Indemnity. If in the opinion of the Trustee any document
required to be executed by it pursuant to the terms of
Section 9.01 or 9.02 affects any interest, right, duty, immunity
or indemnity in favor of the Trustee under this Agreement, the
Trustee may in its discretion decline to execute such document.
Section 9.04. Execution of Supplemental Agreements.
In executing, or accepting the additional trusts created by, any
agreement permitted by this Article or the modifications thereby
of the trusts created by this Agreement, the Trustee shall be
entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this
Agreement.
Section 9.05. Effect of Supplemental Agreements. Upon
the execution of any agreement supplemental to this Agreement
under this Article, this Agreement shall be modified in
accordance therewith, and such supplemental agreement shall form
a part of this Agreement for all purposes; and every Holder of a
Certificate theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 9.06. Conformity with Trust Indenture Act.
Every supplemental agreement executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act as
then in effect.
Section 9.07. Reference in Certificates to
Supplemental Agreements. Certificates authenticated and
delivered after the execution of any supplemental agreement
pursuant to this Article may bear a notation in form approved by
the Trustee as to any matter provided for in such supplemental
agreement; and, in such case, suitable notation may be made upon
Outstanding Certificates after proper presentation and demand.
ARTICLE X
AMENDMENTS TO INDENTURES AND REFUNDING DOCUMENTS
Section 10.01. Amendments and Supplements to
Indentures and Other Refunding Documents. In the event that the
Trustee, as holder of any Equipment Note in trust for the benefit
of the Certificateholders or as Controlling Party under the
Intercreditor Agreement, receives a request for a consent to any
amendment, modification, waiver or supplement under any Indenture
or other Refunding Document, the Trustee shall forthwith send a
notice of such proposed amendment, modification, waiver or
supplement to each Certificateholder registered on the Register
as of the date of such notice. The Trustee shall request from
the Certificateholders a Direction as to (a) whether or not to
take or refrain from taking any action which a holder of such
Equipment Note has the option to direct, (b) whether or not to
give or execute any waivers, consents, amendments, modifications
or supplements as a holder of such Equipment Note and (c) how to
vote any Equipment Note if a vote has been called for with
respect thereto. Provided such a request for Certificateholder
Direction shall have been made, in directing any action or
casting any vote or giving any consent as the holder of any
Equipment Note, the Trustee shall vote for or give consent to any
such action with respect to such Equipment Note in the same
proportion as that of (i) the aggregate face amounts of all
Certificates actually voted in favor of or for giving consent to
such action by such Direction of Certificateholders to (ii) the
aggregate face amount of all Outstanding Certificates. For
purposes of the immediately preceding sentence, a Certificate
shall have been "actually voted" if the Holder of such
Certificate has delivered to the Trustee an instrument evidencing
such Holder's consent to such Direction prior to two Business
Days before the Trustee directs such action or casts such vote or
gives such consent. Notwithstanding the foregoing, but subject
to Section 6.04 and the Intercreditor Agreement, the Trustee may,
in its own discretion and at its own direction, consent and
notify the relevant Loan Trustee of such consent to any
amendment, modification, waiver or supplement under the relevant
Indenture or any other Refunding Document, if an Event of Default
hereunder shall have occurred and be continuing, or if such
amendment, modification or waiver will not adversely affect the
interests of the Certificateholders.
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust. The
respective obligations and responsibilities of the Company and
the Trustee with respect to the Trust shall terminate upon the
distribution to all Holders of Certificates and the Trustee of
all amounts required to be distributed to them pursuant to this
Agreement and the disposition of all property held as part of the
Trust Property; provided, however, that in no event shall the
Trust continue beyond one hundred ten (110) years following the
date of the earliest execution of this Trust Agreement.
Notice of any termination, specifying the Regular
Distribution Date (or Special Distribution Date, as the case may
be) upon which the Certificateholders may surrender their
Certificates to the Trustee for payment of the final Distribution
Date and cancellation, shall be mailed promptly by the Trustee to
Certificateholders not earlier than the 60th day and not later
than the 20th day next preceding such final Distribution Date
specifying (A) the Regular Distribution Date (or Special
Distribution Date, as the case may be) upon which the proposed
final payment of the Certificates will be made upon presentation
and surrender of Certificates at the office or agency of the
Trustee therein specified, (B) the amount of any such proposed
final payment, and (C) that the Record Date otherwise applicable
to such Regular Distribution Date (or Special Distribution Date,
as the case may be) is not applicable, payments being made only
upon presentation and surrender of the Certificates at the office
or agency of the Trustee therein specified. The Trustee shall
give such notice to the Registrar at the time such notice is
given to Certificateholders. Upon presentation and surrender of
the Certificates in accordance with such notice, the Trustee
shall cause to be distributed to Certificateholders such final
payments.
In the event that all of the Certificateholders shall
not surrender their Certificates for cancellation within six
months after the date specified in the above-mentioned written
notice, the Trustee shall give a second written notice to the
remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect
thereto. No additional interest shall accrue on the Certificates
after the Regular Distribution Date (or Special Distribution
Date, as the case may be) specified in the first written notice.
In the event that any money held by the Trustee for the payment
of distributions on the Certificates shall remain unclaimed for
two years (or such lesser time as the Trustee shall be satisfied,
after sixty days' notice from the Company, is one month prior to
the escheat period provided under applicable law) after the final
distribution date with respect thereto, the Trustee shall pay to
each Loan Trustee the appropriate amount of money relating to
such Loan Trustee and shall give written notice thereof to the
related Owner Trustees, the Owner Participants and the Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of
Certificateholders. The death or incapacity of any
Certificateholder shall not operate to terminate this Agreement
or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any
action or commence any proceeding in any court for a partition or
winding up of the Trust, nor otherwise affect the rights,
obligations, and liabilities of the parties hereto or any of
them.
Section 12.02. Certificates Nonassessable and Fully
Paid. Except as set forth in the last sentence of this Section
12.02, Certificateholders shall not be personally liable for
obligations of the Trust, the Fractional Undivided Interests
represented by the Certificates shall be nonassessable for any
losses or expenses of the Trust or for any reason whatsoever, and
Certificates, upon authentication thereof by the Trustee pursuant
to Section 3.03, are and shall be deemed fully paid. No
Certificateholder shall have any right (except as expressly
provided herein) to vote or in any manner otherwise control the
operation and management of the Trust Property, the Trust, or the
obligations of the parties hereto, nor shall anything set forth
herein, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to
time as partners or members of an association. Neither the
existence of the Trust nor any provision herein is intended to or
shall limit the liability the Certificateholders would otherwise
incur if the Certificateholders owned Trust Property as co-
owners, or incurred any obligations of the Trust, directly rather
than through the Trust.
Section 12.03. Notices. (a) Unless otherwise
specifically provided herein, all notices required under the
terms and provisions of this Agreement shall be in English and in
writing, and any such notice may be given by United States mail,
courier service or telecopy, and any such notice shall be
effective when delivered or received or, if mailed, three days
after deposit in the United States mail with proper postage for
ordinary mail prepaid,
if to the Company, to:
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Attention: Chief Financial Officer and
General Counsel
Facsimile: (713) 523-2831
if to the Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Department
Facsimile: (302) 651-8882
Telephone: (302) 651-8584
(b) The Company or the Trustee, by notice to the
other, may designate additional or different addresses for
subsequent notices or communications.
(c) Any notice or communication to Certificateholders
shall be mailed by first-class mail to the addresses for
Certificateholders shown on the Register kept by the Registrar.
Failure so to mail a notice or communication or any defect in
such notice or communication shall not affect its sufficiency
with respect to other Certificateholders.
(d) If a notice or communication is mailed in the
manner provided above within the time prescribed, it is
conclusively presumed to have been duly given, whether or not the
addressee receives it.
(e) If the Company mails a notice or communication to
the Certificateholders, it shall mail a copy to the Trustee and
to the Paying Agent at the same time.
(f) Notwithstanding the foregoing, all communications
or notices to the Trustee shall be deemed to be given only when
received by a Responsible Officer of the Trustee.
(g) The Trustee shall promptly furnish the Company
with a copy of any demand, notice or written communication
received by the Trustee hereunder from any Certificateholder,
Owner Trustee or Loan Trustee.
Section 12.04. Governing Law. THIS AGREEMENT HAS BEEN
DELIVERED IN THE STATE OF NEW YORK AND THIS AGREEMENT AND THE
CERTIFICATES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
CONFLICTS-OF-LAW PRINCIPLES.
Section 12.05. Severability of Provisions. If any one
or more of the covenants, agreements, provisions or terms of this
Agreement shall be for any reason whatsoever held invalid, then
such covenants, agreements, provisions, or terms shall be deemed
severable from the remaining covenants, agreements, provisions or
terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement or
the Trust, or of the Certificates or the rights of the
Certificateholders thereof.
Section 12.06. Trust Indenture Act Controls. This
Agreement is subject to the provisions of the Trust Indenture Act
and shall, to the extent applicable, be governed by such
provisions.
Section 12.07. Effect of Headings and Table of
Contents. The Article and Section headings herein and the Table
of Contents are for convenience only and shall not affect the
construction hereof.
Section 12.08. Successors and Assigns. All covenants,
agreements, representations and warranties in this Agreement by
the Trustee and the Company shall bind and, to the extent
permitted hereby, shall inure to the benefit of and be
enforceable by their respective successors and assigns, whether
so expressed or not.
Section 12.09. Benefits of Agreement. Nothing in this
Agreement or in the Certificates, express or implied, shall give
to any Person, other than the parties hereto and their successors
hereunder, and the Certificateholders, any benefit or any legal
or equitable right, remedy or claim under this Agreement.
Section 12.10. Legal Holidays. In any case where any
Regular Distribution Date or Special Distribution Date relating
to any Certificate shall not be a Business Day, then
(notwithstanding any other provision of this Agreement) payment
need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made
on such Regular Distribut 