View:
As filed with the Securities and Exchange Comission
on March 18, 1996
Registration No. 33-79688
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 1
to
FORM S-3
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 74-2099724
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification 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)
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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:
Jeffery A. Smisek, Esq. Michael L. Ryan, Esq.
Continental Airlines, Inc. Cleary, Gottlieb, Steen
2929 Allen Parkway, Suite 2010 & Hamilton
Houston, Texas 77019 One Liberty Plaza
New York, New York 10006
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Approximate date of commencement of
proposed sale to the public:
From time to time after the effective date of
this Registration Statement as determined
by market conditions.
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If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box: ( )
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. ( X )
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. ( )
If this Form is a post-effective amendment filed pursuant
to Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. ( )
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. ( )
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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.
EXPLANATORY NOTE
This Registration Statement includes two separate Prospectuses
covering securities to be registered, as follows:
(1) Pass Through Certificates; and
(2) Debt Securities.
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 MARCH 18, 1996
PROSPECTUS
Continental Airlines, Inc.
Pass Through Certificates
Up to $1,000,000,000 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 $1,000,000,000) 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
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.
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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.
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The date of this Prospectus is March 18, 1996.
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.
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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. Statements contained herein
concerning the provisions of any document are not necessarily
complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement
or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference. 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 Annual Report on Form 10-K for the year ended December
31, 1995, previously filed by Continental with the Commission
pursuant to the Exchange Act, and all other reports filed
pursuant to Section 13(a) or 15(d) of the Exchange Act since
December 31, 1995 are hereby incorporated into this Prospectus by
reference and made a part hereof.
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 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 1995 revenue passenger miles) 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 domestic route system primarily
through its hubs at Newark, Houston Intercontinental and
Cleveland, each of which is located in a large business and
population center, contributing to a high volume of "origin and
destination" traffic. Continental is the primary carrier at each
of these hubs, accounting for 50%, 77% and 53% of all daily jet
departures as of February 16, 1996. Continental, CMI and Express
together directly serve 127 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. Internationally, Continental flies
to 58 destinations and offers additional connecting service
through alliances with foreign carriers. Continental operates 49
weekly departures to five European cities and markets service to
three other cities through code-sharing agreements. Continental
is one of the leading airlines providing service to Mexico and
Central America, serving more destinations there than any other
United States airline. In addition, Continental flies to three
cities in South America, recently commenced service between
Newark and Lima, Peru and is scheduled to commence service
between Newark and Quito, Ecuador (via Bogota, Colombia) in June
1996. Through Guam and Saipan, CMI 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 and may enter into an
agreement for the purchase of other securities of the Company or
otherwise ("Other Securities"), as described in the 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
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 and, under certain
circumstances, to purchase Other Securities, 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 or Other Securities 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 and for the years ended December 31, 1994 and 1995 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 and for the year ended December 31,
1994, earnings were not sufficient to cover fixed charges.
Additional earnings of $316 million, $131 million, $979 million,
$60 million and $667 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. 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 and, if the
Certificates relate to Other Securities, the form of the related
purchase or subscription agreement, if any, 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.
The Certificates offered pursuant to this Prospectus will be
limited to $1,000,000,000 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
$1,000,000,000).
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 or Other Securities
(or both) 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 and Other Securities 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
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; (11)
if applicable, a description of the Other Securities, if any, to
be purchased by the related Trust, including payment or other
distribution dates with respect to such Other Securities and the
other terms and conditions of such Other Securities and any
related purchase or subscription agreements; and (12) 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
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
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
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 or Other Securities 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 or Other Securities 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
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
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").
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
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
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
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
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
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 or Other Securities
contemplated to be held in the related Trust, such Equipment
Notes or Other Securities 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 or Other Securities in an
escrow account pending the purchase of such Equipment Notes or
Other Securities 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
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 or Other Securities 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 or Other Securities 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
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.
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
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.
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.
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
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
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
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.
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
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
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
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
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
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.
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.
If so indicated in the applicable Prospectus Supplement, agents,
underwriters or dealers may be authorized to solicit offers by
certain institutions to purchase the Certificates at the public
offering prices set forth in the applicable Prospectus Supplement
pursuant to delayed delivery contracts ("Contracts") providing
for payment and delivery on a specified date or dates. A
commission indicated in the applicable Prospectus Supplement will
be paid to agents, underwriters and dealers, soliciting purchases
of the Certificates pursuant to Contracts accepted by
Continental.
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.
==================================================
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
==================================================
==================================================
Continental
Airlines, Inc.
Pass Through Certificates
-------------------
PROSPECTUS
-------------------
==================================================
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 MARCH 18, 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
$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 $1,000,000,000). 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 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 March 18, 1996.
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.
Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the
Commission. Each such statement is qualified in its entirety by
such reference. 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 Annual Report on Form 10-K for the year ended December 31,
1995, previously filed by Continental with the Commission pursuant
to the Exchange Act, and all other reports filed pursuant to
Section 13(a) or 15(d) of the Exchange Act since December 31, 1995
are hereby incorporated into this Prospectus by reference and made
a part hereof.
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 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 1995 revenue passenger miles) 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 domestic route system primarily
through its hubs at Newark, Houston Intercontinental and Cleveland,
each of which is located in a large business and population center,
contributing to a high volume of "origin and destination" traffic.
Continental is the primary carrier at each of these hubs,
accounting for 50%, 77% and 53% of all daily jet departures as of
February 16, 1996. Continental, CMI and Express together directly
serve 127 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.
Internationally, Continental flies to 58 destinations and offers
additional connecting service through alliances with foreign
carriers. Continental operates 49 weekly departures to five
European cities and markets service to three other cities through
code-sharing agreements. Continental is one of the leading
airlines providing service to Mexico and Central America, serving
more destinations there than any other United States airline. In
addition, Continental flies to three cities in South America,
recently commenced service between Newark and Lima, Peru and is
scheduled to commence service between Newark and Quito, Ecuador
(via Bogota, Colombia) in June 1996. Through Guam and Saipan, CMI
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 and for the
years ended December 31, 1994 and 1995 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 and for the year ended December 31, 1994,
earnings were not sufficient to cover fixed charges. Additional
earnings of $316 million, $131 million, $979 million, $60 million
and $667 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.
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
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, subject to
and qualified in their entirety by reference 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 $1,000,000,000). 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. If this Prospectus is being delivered
in connection with a series of Subordinated Debt Securities, the
accompanying Prospectus Supplement or the information incorporated
herein by reference will set forth the amount of Senior Debt
outstanding.
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
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
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
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
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
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) certain other conditions are met. 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
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)
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
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
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
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.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of
50,000,000 shares of Class A common stock. $.01 par value (the
"Class A common stock"), 100,000,000 shares of Class B common
stock, $.01 par value (the "Class B common stock"), 50,000,000
shares of Class C common stock, $.01 par value (the "Class C common
stock"), 50,000,000 shares of Class D common stock, $.01 par value
(the "Class D common stock"), (such classes of common stock
referred to collectively as the "common stock") and 10,000,000
shares of preferred stock, $.01 par value (the "Preferred Stock").
As of December 31, 1995, there were 6,301,056 outstanding shares of
Class A common stock, 21,428,274 outstanding shares of Class B
common stock and 397,948 outstanding shares of Series A 12%
Cumulative Preferred Stock. No shares of Class C common stock or
Class D common stock have been issued.
Pursuant to the Company's reorganization (the
"Reorganization") under Chapter 11 of the federal bankruptcy code,
on April 27, 1993 the Company issued 1,900,000 shares of Class A
common stock and 5,042,368 shares of Class B common stock to
itself, as distribution agent for the benefit of the Company's
prepetition creditors. Between August 30 and September 10, 1993,
1,404,533 of these Class A shares and 3,720,856 of these Class B
shares were distributed to prepetition creditors. An additional
7,332 shares of Class A common stock and 19,924 shares of Class B
common stock were sold for the benefit of prepetition creditors
expected to receive less than ten shares each. As of December 31,
1995, there remained 306,743 shares of Class A common stock,
804,390 shares of Class B common stock, and approximately $1
million of cash available for distribution. Pending resolution of
certain disputed claims, the Company, as distribution agent, will
continue to hold undistributed Class A and Class B shares and will
vote such shares of each class pro rata in accordance with the vote
of all other shares of such class on any matter submitted to a vote
of stockholders. Also pursuant to the Reorganization, the Company
issued 493,621 shares of Class B common stock to its retirement
plan. On December 14, 1993, the Company sold 8,086,579 shares of
Class B common stock in an underwritten public offering. In
January 1994, Air Canada converted 287,840 shares of Class B common
stock into an equal number of shares of Class A common stock (see
"--Class B Common Stock and Class A Common Stock").
The following summary description of capital stock is not
intended to be complete and is qualified by reference to the
provisions of the Company's Restated Certificate of Incorporation
(the "Certificate of Incorporation") and bylaws and the agreements
referred to in this summary description, copies of each of which
have been filed or incorporated by reference as exhibits to the
1995 Form 10-K incorporated herein. As used in this section,
except as otherwise stated or required by context, each reference
to Air Canada or Air Partners, L.P. ("Air Partners") includes any
successor by merger, consolidation or similar transaction and any
wholly-owned subsidiary of such entity or such successor.
Common Stock -- All Classes
Holders of common stock of all classes participate ratably as
to any dividends or distributions on the common stock, except that
dividends payable in shares of common stock, or securities to
acquire common stock, are paid in common stock, or securities to
acquire common stock, of the same class as that held by the
recipient of the dividend. Upon any liquidation, dissolution or
winding up of the Company, holders of common stock of all
outstanding classes are entitled to receive pro rata all of the
assets of the Company available for distribution to the
stockholders, subject to the prior rights of holders of any
outstanding Preferred Stock. Holders of common stock have no
preemptive, subscription, conversion or redemption rights (other
than preemptive, subscription and conversion rights of Air Partners
and Air Canada described below), and are not subject to further
calls or assessments. Holders of common stock have no right to
cumulate their votes in the election of directors. The common
stock votes together as a single class, subject to the right to a
separate class vote in certain instances required by law and to the
rights of holders of Class C common stock and Class D common stock
to vote separately as a class to elect directors as described under
"--Special Classes of Common Stock".
Class B Common Stock and Class A Common Stock
The holders of Class B common stock are entitled to one vote
per share, and the holders of Class A common stock are entitled to
ten votes per share, on all matters submitted to a vote of common
stockholders, except that voting rights of non-U.S. citizens are
limited as set forth below under "--Limitation on Voting by Foreign
Owners" and no holder of Class C common stock or Class D common
stock can vote any of its Class B common stock for the election of
directors (see "Special Classes of Common Stock").
Air Canada and Air Partners (together, the "AP/AC Investors")
own as of December 31, 1995 in the aggregate approximately 37.8% of
the outstanding Class A common stock and Class B common stock
combined, representing approximately 59.3% of total voting power
(excluding the exercise of warrants held by Air Partners and the
exchange of Class B common stock for Class A common stock by Air
Canada) and Air Partners has warrants to acquire an additional
4,902,366 shares in the aggregate (which increases Air Partners' voting
power by 11.6%, assuming exercise of such warrants). See "-Corporate
Governance and Control" below for a discussion of arrangements
regarding the composition of the Board of Directors of the Company.
Air Canada may at any time convert shares of Class A common
stock into an equal number of shares of Class B common stock and,
so long as such exchange would comply with the Foreign Ownership
Restrictions (as defined below under the caption "-Limitation on
Voting by Foreign Owners") may exchange up to 1,078,944 of its
shares of Class B common stock for an equal number of shares of
Class A common stock. Except for these special conversion and
exchange rights of Air Canada, Class B common stock is not
convertible into or exchangeable for Class A common stock and Class
A common stock is not convertible into or exchangeable for Class B
common stock.
Limitation on Voting by Foreign Owners
The Company's Certificate of Incorporation defines "Foreign
Ownership Restrictions" as "applicable statutory, regulatory and
interpretive restrictions regarding foreign ownership or control of
U.S. air carriers (as amended or modified from time to time)." Such
restrictions currently require that no more than 25% of the voting
stock of the Company be owned or controlled, directly or
indirectly, by persons who are not U.S. Citizens ("Foreigners") for
purposes of the Foreign Ownership Restrictions, and that the
Company's president and at least two-thirds of its other managing
officers and directors be U.S. Citizens. For purposes of the
Certificate of Incorporation, "U.S. Citizen" means (i) an
individual who is a citizen of the United States; (ii) a
partnership each of whose partners is an individual who is a
citizen of the United States; or (iii) a corporation or association
organized under the laws of the United States or a State, the
District of Columbia, or a territory or possession of the United
States, of which the president and at least two-thirds of the board
of directors and other managing officers are citizens of the United
States, and in which at least 75 percent of the voting interest is
owned or controlled by persons that are citizens of the United
States. The Certificate of Incorporation provides that no shares
of capital stock may be voted by or at the direction of Foreigners,
unless such shares are registered on a separate stock record (the
"Foreign Stock Record") maintained by the Company for the
registration of ownership of voting stock by Foreigners. The
Company's Bylaws further provide that no shares will be registered
on the Foreign Stock Record if the amount so registered would
exceed the Foreign Ownership Restrictions or adversely affect the
Company's operating certificates or authorities. Registration on
the Foreign Stock Record is made in chronological order based on
the date the Company receives a written request for registration,
except that certain shares held by Air Canada, and, after such
shares, certain shares acquired by Air Partners in connection with
its original investment in the Company that are subsequently
transferred to any Foreigner are entitled to be registered prior
to, and to the exclusion of, other shares. Shares currently owned
by Air Canada and registered on the Foreign Stock Record constitute
a substantial portion of the shares that may be voted by Foreigners
under the Foreign Ownership Restrictions. Accordingly, at this
time only a very limited number of shares of Class B common stock
or Class A common stock of the Company may be registered on the
Foreign Stock Record and voted by any Foreigner other than Air
Canada.
==================================================
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
==================================================
==================================================
Continental
Airlines, Inc.
Debt Securities
-------------------
PROSPECTUS
-------------------
==================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this offering, other
than underwriting discounts and commissions, are:
Securities and Exchange Commission
registration filing fee . . . . . . . . . . .$ 344,827.59*
Blue Sky qualification fees and
expenses, including legal fee . . . . . . . .30,000.00
Printing and engraving expenses . . . . . . .100,000.00
Trustee fees and expenses . . . . . . . . . .15,000.00
Accounting fees and expenses. . . . . . . . .100,000.00
Legal fees and expenses . . . . . . . . . . .100,000.00
Miscellaneous . . . . . . . . . . . . . . . .8,422.41
Total. . . . . . . . . . . . . . . . . .$ 700,000.00
* Previously paid (on June 3, 1994).
Item 15. 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.
(e) Expenses (including attorneys' fees) incurred by an
officer or director in defending any civil, criminal,
administrative, or investigative action, suit or proceeding may be
paid by the corporation in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified
by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents
may be so paid upon such terms and conditions, if any, as the board
of directors deems appropriate.
(f) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this section
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director,
officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status
as such, whether or not the corporation would have the power to
indemnify him against such liability under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or
agents, so that any person who is or was a director, officer,
employee or agent for such constituent corporation, or is or was
serving at the request of such constituent corporation as a
director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand
in the same position under this section with respect to the
resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer,
employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided
by, or granted pursuant to, this section shall, unless otherwise
provided when authorized or ratified, continue as to a person who
has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of
such a person.
(k) The Court of Chancery is hereby vested with exclusive
jurisdiction to hear and determine all actions for advancement of
expenses or indemnification brought under this section or under any
bylaw, agreement, vote of stockholders or disinterested directors,
or otherwise. The Court of Chancery may summarily determine a
corporation's obligation to advance expenses (including attorneys'
fees).
The Certificate of Incorporation and bylaws also limit the
personal liability of directors to the Company and its stockholders
for monetary damages resulting from certain breaches of the
directors' fiduciary duties. The bylaws of the Company provide as
follows:
"No Director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach
of fiduciary duty as a Director, except for liability (i) for any
breach of the Director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the GCL, or (iv) for any transaction from
which the Director derived any improper personal benefit. If the
GCL is amended to authorize corporate action further eliminating or
limiting the personal liability of Directors, then the liability of
Directors of the Corporation shall be eliminated or limited to the
full extent permitted by the GCL, as so amended."
The Company maintains directors' and officers' liability
insurance. Air Partners and Air Canada have also entered into
indemnification agreements with directors and officers of the
Company covering certain liabilities, excluded from such insurance,
that might arise from claims by or on behalf of Air Partners or Air
Canada.
Item 16. Exhibits.
Exhibit
Number Exhibit Description
- - ------- -------------------
Exhibit 1.1 Underwriting Agreement for Pass Through
Certificates of Continental Airlines, Inc. (to be
filed as an exhibit to a report on Form 8-K that
is incorporated by reference into the
Registration Statement subsequent to the
effectiveness of this post-effective amendment)
Exhibit 1.2 Underwriting Agreement for Debt Securities of
Continental Airlines, Inc. (to be filed as an
exhibit to a report on Form 8-K that is
incorporated by reference into the Registration
Statement subsequent to the effectiveness of this
post-effective amendment)
Exhibit 4.1* Form of Pass Through Trust Agreement between
Continental Airlines, Inc. and Shawmut Bank
Connecticut, National Association, as Trustee,
relating to certain Pass Through Certificates
Exhibit 4.2* Form of Pass Through Certificate (included in
Exhibit 4.1)
Exhibit 4.3* 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
Exhibit 4.4* Form of Pass Through Certificate (included in
Exhibit 4.3)
Exhibit 4.5* Form of Indenture between Continental Airlines,
Inc. and Bank One, Texas, National Association,
as Trustee, relating to Senior Debt Securities
Exhibit 4.6* Form of Indenture between Continental Airlines,
Inc. and Bank One, Texas, National Association,
as Trustee, relating to Subordinated Debt
Securities
Exhibit 5.1* Opinion of Hughes Hubbard & Reed, counsel for
Continental Airlines, Inc., relating to Pass
Through Certificates
Exhibit 5.2* Opinion of Mayor, Day, Caldwell & Keeton, L.L.P.,
counsel for Continental Airlines, Inc., relating
to Debt Securities
Exhibit 5.3* Opinion of Shipman & Goodwin, counsel for Shawmut
Bank Connecticut, National Association, relating
to certain Pass Through Certificates
Exhibit 5.4* Opinion of Ray, Quinney & Nebeker, counsel for
First Security Bank of Utah, National
Association, relating to certain Pass Through
Certificates
Exhibit 8.1* Tax Opinion of Hughes Hubbard & Reed, counsel for
Continental Airlines, Inc., relating to Pass
Through Certificates (included in Exhibit 5.1)
Exhibit 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)
Exhibit 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)
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges
Exhibit 23.1 Consent of Ernst & Young
Exhibit 23.2* Consent of Hughes Hubbard & Reed, counsel for
Continental Airlines, Inc. (included in Exhibit
5.1)
Exhibit 23.3* Consent of Mayor, Day, Caldwell & Keeton, L.L.P.,
counsel for Continental Airlines, Inc. (included
in Exhibit 5.2)
Exhibit 23.4* Consent of Shipman & Goodwin, counsel for Shawmut
Bank Connecticut, National Association (included
in Exhibit 5.3)
Exhibit 23.5* Consent of Ray, Quinney & Nebeker, counsel for
First Security Bank of Utah, National Association
(included in Exhibit 5.4)
Exhibit 24.1** Powers of Attorney
Exhibit 25.1* Statement of Eligibility of Shawmut Bank
Connecticut, National Association, on Form T-1
Exhibit 25.2* Statement of Eligibility of First Security Bank
of Utah, National Association, on Form T-1
Exhibit 25.3* Statement of Eligibility of Bank One, Texas,
National Association, on Form T-1
___________________
* Filed on July 1, 1994 in connection with the filing of (pre-
effective) Amendment Number 1 to this Registration Statement.
** Filed on June 3, 1994 in connection with the initial filing
of this Registration Statement.
Item 17. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
Registration Statement:
(i) To include any prospectus required by
section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
registration (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the registration statement or any material
change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall
not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are incorporated
by reference in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes if
securities are to be offered pursuant to competitive bidding (1) to
use its best efforts to distribute prior to the opening of bids, to
prospective bidders, underwriters and dealers, a reasonable number
of copies of a prospectus which at that time meets the requirements
of section 10(a) of the Act, and relating to the securities offered
at competitive bidding, as contained in this registration
statement, together with any supplements thereto, and (2) to file
an amendment to this registration statement reflecting the results
of bidding, the terms of the reoffering and related matters to the
extent required by the applicable form, not later than the first
use, authorized by the issuer after the opening of bids, of a
prospectus relating to the securities offered at competitive
bidding, unless no further public offering of such securities by
the issuer and no reoffering of such securities by purchasers is
proposed to be made.
(d) Insofar as the indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
(e) 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 the form of
prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed 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.
(f) To the extent the registrant intends to rely on section
305(b)(2) of the Trust Indenture Act of 1939 for determining the
eligibility of the trustee under indentures for securities to be
used, offered or sold on a delayed basis by or on behalf of the
registrant, the undersigned registrant hereby undertakes to file an
application for the purpose of determining the liability of the
trustee to act under subsection (a) of section 310 of such Act in
accordance with the rules and regulations prescribed by the
Commission under section 305(b)(2) of such Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this amendment to the Registration
Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Houston, State of
Texas, on March 18, 1996.
CONTINENTAL AIRLINES, INC.
By: /s/ JEFFERY A. SMISEK
---------------------------
Jeffery A. Smisek
Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933,
this amendment to the Registration Statement has been signed by
the following persons in the capacities and on the dates
indicated, on March 18, 1996.
Signature Title
/s/ GORDON M. BETHUNE
- - ----------------------------
Gordon M. Bethune President, Chief Executive
Officer (Principal Executive
Officer) and Director
/s/ LAWRENCE W. KELLNER
- - ----------------------------
Lawrence W. Kellner Senior Vice President and Chief
Financial Officer (Principal
Financial Officer)
/s/ MICHAEL P. BONDS
- - ----------------------------
Michael P. Bonds Staff Vice President and
Controller (Principal Accounting
Officer)
- - ----------------------------
Thomas J. Barrack, Jr. Director
*
- - ----------------------------
David Bonderman Director
- - ----------------------------
Gregory D. Brenneman Director
*
- - ----------------------------
Joel H. Cowan Director
*
- - ----------------------------
Patrick Foley Director
*
- - ----------------------------
Rowland C. Frazee Director
*
- - ----------------------------
Hollis L. Harris Director
- - ----------------------------
Dean C. Kehler Director
*
- - ----------------------------
Robert L. Lumpkins Director
*
- - ----------------------------
Douglas McCorkindale Director
*
- - ----------------------------
David E. Mitchell, O.C. Director
*
- - ----------------------------
Richard W. Pogue Director
*
- - ----------------------------
William S. Price III Director
*
- - ----------------------------
Donald L. Sturm Director
*
- - ----------------------------
Claude I. Taylor, O.C. Director
*
- - ----------------------------
Karen Hastie Williams Director
- - ----------------------------
Charles A. Yamarone Director
* By: /s/ BARRY P. SIMON
----------------------------
Barry P. Simon
Senior Vice President--Europe
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- - ------- -------------------
Exhibit 1.1 Underwriting Agreement for Pass Through
Certificates of Continental Airlines, Inc. (to
be filed as an exhibit to a report on Form 8-K
that is incorporated by reference into the
Registration Statement subsequent to the
effectiveness of this post-effective amendment)
Exhibit 1.2 Underwriting Agreement for Debt Securities of
Continental Airlines, Inc. (to be filed as an
exhibit to a report on Form 8-K that is
incorporated by reference into the Registration
Statement subsequent to the effectiveness of
this post-effective amendment)
Exhibit 4.1* Form of Pass Through Trust Agreement between
Continental Airlines, Inc. and Shawmut Bank
Connecticut, National Association, as Trustee,
relating to certain Pass Through Certificates
Exhibit 4.2* Form of Pass Through Certificate (included in
Exhibit 4.1)
Exhibit 4.3* 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
Exhibit 4.4* Form of Pass Through Certificate (included in
Exhibit 4.3)
Exhibit 4.5* Form of Indenture between Continental Airlines,
Inc. and Bank One, Texas, National Association,
as Trustee, relating to Senior Debt Securities
Exhibit 4.6* Form of Indenture between Continental Airlines,
Inc. and Bank One, Texas, National Association,
as Trustee, relating to Subordinated Debt
Securities
Exhibit 5.1* Opinion of Hughes Hubbard & Reed, counsel for
Continental Airlines, Inc., relating to Pass
Through Certificates
Exhibit 5.2* Opinion of Mayor, Day, Caldwell & Keeton,
L.L.P., counsel for Continental Airlines, Inc.,
relating to Debt Securities
Exhibit 5.3* Opinion of Shipman & Goodwin, counsel for
Shawmut Bank Connecticut, National Association,
relating to certain Pass Through Certificates
Exhibit 5.4* Opinion of Ray, Quinney & Nebeker, counsel for
First Security Bank of Utah, National
Association, relating to certain Pass Through
Certificates
Exhibit 8.1* Tax Opinion of Hughes Hubbard & Reed, counsel
for Continental Airlines, Inc., relating to Pass
Through Certificates (included in Exhibit 5.1)
Exhibit 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)
Exhibit 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)
Exhibit 12 Computation of Ratio of Earnings to Fixed
Charges
Exhibit 23.1 Consent of Ernst & Young
Exhibit 23.2* Consent of Hughes Hubbard & Reed, counsel for
Continental Airlines, Inc. (included in Exhibit
5.1)
Exhibit 23.3* Consent of Mayor, Day, Caldwell & Keeton,
L.L.P., counsel for Continental Airlines, Inc.
(included in Exhibit 5.2)
Exhibit 23.4* Consent of Shipman & Goodwin, counsel for
Shawmut Bank Connecticut, National Association
(included in Exhibit 5.3)
Exhibit 23.5* Consent of Ray, Quinney & Nebeker, counsel for
First Security Bank of Utah, National
Association (included in Exhibit 5.4)
Exhibit 24.1** Powers of Attorney
Exhibit 25.1* Statement of Eligibility of Shawmut Bank
Connecticut, National Association, on Form T-1
Exhibit 25.2* Statement of Eligibility of First Security Bank
of Utah, National Association, on Form T-1
Exhibit 25.3* Statement of Eligibility of Bank One, Texas,
National Association, on Form T-1
___________________
* Filed on July 1, 1994 in connection with the filing of (pre-
effective) Amendment Number 1 to this Registration Statement.
** Filed on June 3, 1994 in connection with the initial filing of
this Registration Statement.
EXHIBIT 12
CONTINENTAL AIRLINES, INC.
COMPUTATION OF RATIO OF EARNINGS
TO FIXED CHARGES
(IN MILLIONS)
4/28/93 1/1/93
THROUGH THROUGH
1995 1994 12/31/93 4/27/93 1992 1991
---- ---- -------- ------- ---- ----
Earnings:
Earnings (Loss)
Before Income
Taxes, Minority
Interest and
Extraordinary
Items $ 310 $ (651) $ (52) $ (977) $ (125) $ (304)
Plus:
Interest
Expense (a) 213 241 165 52 153 174
Capitalized
Interest (6) (17) (8) (2) (6) (12)
Amort of
Capitalized
Interest 2 1 0 0 0 0
Portion of
Rent Expense
Representative
of Interest
Expense (a) 360 337 216 117 324 333
Adjusted Earnings
(Loss) 879 (89) 321 (810) 346 191
Fixed Charges:
Interest
Expense (a) 213 241 165 52 153 174
Portion of
Rent Expense
Representative
of Interest
Expense (a) 360 337 216 117 324 333
Total Fixed Charges 573 578 381 169 477 507
Coverage Adequacy
(Deficiency) $ 306 $ (667) $ (60) $ (979) $ (131) $ (316)
Coverage Ratio 1.53 n/a n/a n/a n/a n/a
(a) Includes Fair Market Value Adjustments resulting from the Company's
emergence from bankruptcy.
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference of our firm under the caption
"Experts" in the Registration Statement (Post-Effective Amendment
No. 1 to Form S-3 No. 33-79688) and related Prospectuses of
Continental Airlines, Inc. for the registration of up to $1 billion
of aggregate principal amount of pass through certificates and debt
securities and to the incorporation by reference therein of our
reports dated February 12, 1996, with respect to the consolidated
financial statements and schedules of Continental Airlines, Inc. 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 of January 1, 1993 through April 27,
1993, included in Continental Airlines, Inc.'s annual report (Form
10-K) filed with the Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
- - -------------------------
Houston, Texas
March 15, 1996