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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CONTINENTAL AIRLINES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4512 74-2099724
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) 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.
EXECUTIVE 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:
JOHN K. HOYNS, ESQ.
HUGHES HUBBARD & REED LLP
ONE BATTERY PARK PLAZA
NEW YORK, NEW YORK 10004-1482
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
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If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) CERTIFICATE(2) PRICE(2) REGISTRATION FEE
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Pass Through Certificates, Series
1997-2A................................ $74,862,000 100% $74,862,000
Pass Through Certificates, Series
1997-2B................................ $25,563,000 100% $25,563,000 $46,970
Pass Through Certificates, Series
1997-2C................................ $27,206,000 100% $27,206,000
Pass Through Certificates, Series
1997-2D................................ $27,369,000 100% $27,369,000
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(1) Equals the aggregate principal amount of the securities being registered.
(2) Pursuant to Rule 457(f)(2), the registration fee has been calculated using
the book value of the securities being registered.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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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 OCTOBER , 1997
PROSPECTUS
CONTINENTAL AIRLINES, INC.
OFFER TO EXCHANGE PASS THROUGH CERTIFICATES, SERIES 1997-2,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING PASS THROUGH CERTIFICATES, SERIES 1997-2
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ],
UNLESS EXTENDED.
Pass Through Certificates, Series 1997-2 (the "New Certificates"), which
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, are hereby offered, upon the terms and subject to the conditions set
forth in this Prospectus and the accompanying letter of transmittal (the "Letter
of Transmittal" and, together with this Prospectus, the "Exchange Offer"), in
exchange for an equal principal amount of outstanding Pass Through Certificates,
Series 1997-2 (the "Old Certificates"), of which $155,000,000 aggregate
principal amount is outstanding as of the date hereof. The New Certificates and
the Old Certificates are collectively referred to herein as the "Certificates".
Any and all Old Certificates that are validly tendered and not withdrawn on
or prior to 5:00 P.M., New York City time, on the date the Exchange Offer
expires, which will be [ ] (30 calendar days following the commencement of
the Exchange Offer) unless the Exchange Offer is extended (such date, including
as extended, the "Expiration Date") will be accepted for exchange. Tenders of
Old Certificates may be withdrawn at any time prior to 5:00 P.M., New York City
time, on the Expiration Date. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Certificates being tendered for exchange.
However, the Exchange Offer is subject to certain customary conditions which may
be waived by the Company and to the terms of the Registration Rights Agreement
(as defined herein). Old Certificates may be tendered only in integral multiples
of $1,000. See "The Exchange Offer".
The New Certificates will be entitled to the benefits of the same Pass
Through Trust Agreements (as defined herein) which govern the Old Certificates
and will govern the New Certificates. The New Certificates will have terms
identical in all material respects to the Old Certificates except that the New
Certificates will not contain terms with respect to transfer restrictions or
interest rate increases as described herein and the New Certificates will be
available only in book-entry form. See "The Exchange Offer" and "Description of
New Certificates".
Each Certificate represents a fractional undivided interest in one of the
four Continental Airlines 1997-2 Pass Through Trusts (the "Class A Trust", the
"Class B Trust", the "Class C Trust" and the "Class D Trust", and collectively,
the "Trusts") formed pursuant to four separate pass through trust agreements
(the "Pass Through Trust Agreements") between Continental Airlines, Inc.
("Continental" or the "Company") and Wilmington Trust Company (the "Trustee"),
as trustee under each Trust. Pursuant to an intercreditor agreement, (i) the
Certificates of the Class B Trust are subordinated in right of payment to the
Certificates of the Class A Trust, (ii) the Certificates of the Class C Trust
are subordinated in right of payment to the Certificates of the Class B Trust
and (iii) the Certificates of the Class D Trust are subordinated in right of
payment to the Certificates of the Class C Trust. Payments of interest on the
Certificates issued by each Trust (other than the Class D Trust) are supported
by a separate liquidity facility for the benefit of the holders of such
Certificates, each such facility provided initially by Kredietbank N.V., acting
through its New York branch, in an amount sufficient to pay interest thereon at
the applicable interest rate for such Certificates on up to three successive
semiannual distribution dates.
(Continued on the following page.)
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FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PARTICIPANTS IN THE EXCHANGE OFFER, SEE "RISK FACTORS" BEGINNING ON PAGE OF
THIS PROSPECTUS.
PASS THROUGH FINAL EXPECTED
CERTIFICATES PRINCIPAL AMOUNT INTEREST RATE DISTRIBUTION DATE
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1997-2A................................................... $ 74,862,000 7.148% June 30, 2007
1997-2B................................................... $ 25,563,000 7.149% June 30, 2005
1997-2C................................................... $ 27,206,000 7.206% June 30, 2004
1997-2D................................................... $ 27,369,000 7.522% June 30, 2001
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Total........................................... $155,000,000
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is , 1997
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(Continued from the cover page.)
The property of the Trusts includes, among other things, equipment notes
(the "Equipment Notes") issued on a recourse basis by Continental in connection
with its purchase of six Boeing 737-3T0 aircraft and four McDonnell Douglas
MD-82 aircraft (collectively, the "Aircraft") which were previously leased by
Continental. The Equipment Notes in respect of each Aircraft have been issued in
four series (the "Series A Equipment Notes", the "Series B Equipment Notes", the
"Series C Equipment Notes" and the "Series D Equipment Notes"). The Class A
Trust, the Class B Trust, the Class C Trust and the Class D Trust have purchased
the series of Equipment Notes issued with respect to each Aircraft that has 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 expected distribution date applicable to the
Certificates issued by such Trust. The Equipment Notes issued with respect to
each Aircraft are secured by a first priority security interest in such Aircraft
and by a second priority security interest in each of the other Aircraft. The
Equipment Notes issued with respect to the Aircraft are direct obligations of
Continental.
All of the Equipment Notes held in each Trust accrue interest at the
applicable rate per annum for the Certificates issued by such Trust, payable on
June 30 and December 30 of each year, commencing on December 30, 1997. Such
interest will be distributed to Certificateholders of such Trust on each such
date, subject to the Intercreditor Agreement (as defined herein). See
"Description of the New Certificates -- General" and "-- Payments and
Distributions". The New Certificates will accrue interest at the applicable per
annum rate for such Trust, from the date on which the Old Certificates were
originally issued. See "The Exchange Offer -- Interest on New Certificates".
Scheduled principal payments on the Equipment Notes held in each Trust will
be passed through to the Certificateholders of each such Trust on June 30 of
each year, commencing on June 30, 1998. Such payments will be made in accordance
with the principal repayment schedule set forth below under "Description of the
New Certificates -- Pool Factors", in each case subject to the Intercreditor
Agreement.
Each Class of New Certificates will be represented by one or more permanent
global Certificates in fully registered form, which will be deposited with the
Trustee as custodian for and registered in the name of a nominee of DTC.
Beneficial interests in the permanent global Certificates will be shown on, and
transfers thereof will be effected through, records maintained by DTC and its
participants.
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission"), as set forth in no-action letters issued to third
parties, including Exxon Capital Holdings Corporation, SEC No-Action Letter
(available April 13, 1989) (the "Exxon Capital Letter"), Morgan Stanley & Co.
Incorporated, SEC No-Action Letter (available June 5, 1991) (the "Morgan Stanley
Letter") and Shearman & Sterling, SEC No-Action Letter (available July 2, 1993)
(the "Shearman & Sterling Letter") (collectively, the "Exchange Offer No-Action
Letters"), the Company believes that the New Certificates issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders thereof (other than a broker-dealer who acquires such New Certificates
directly from the Trustee for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act or any holder that
is an "affiliate" of the Company as defined under Rule 405 of the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Certificates are
acquired in the ordinary course of such holders' business and such holders are
not engaged in, and do not intend to engage in, a distribution of such New
Certificates and have no arrangement with any person to participate in a
distribution of such New Certificates. By tendering the Old Certificates in
exchange for New Certificates, each holder, other than a broker-dealer, will
represent to the Company that: (i) it is not an affiliate of the Company (as
defined under Rule 405 of the Securities Act) nor a broker-dealer tendering Old
Certificates acquired directly from the Company for its own account; (ii) any
New Certificates to be received by it will be acquired in the ordinary course of
its business; and (iii) it is not engaged in, and does not intend to engage in,
a distribution of such New Certificates and has no arrangement or understanding
to participate in a distribution of the New Certificates. If a holder of Old
Certificates is engaged in or intends to engage in a distribution of the New
Certificates or has any arrangement or understanding with respect to the
distribution of the New Certificates to be acquired pursuant to the Exchange
Offer, such holder may not rely
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on the applicable interpretations of the staff of the Commission and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any secondary resale transaction. Each broker-dealer that
receives New Certificates for its own account pursuant to the Exchange Offer (a
"Participating Broker-Dealer") must acknowledge that it will deliver a
prospectus in connection with any resale of such New Certificates. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of New Certificates received in
exchange for Old Certificates where such Old Certificates were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. Pursuant to the Registration Rights Agreement, the Company
has agreed that starting on the Expiration Date it will make this Prospectus
available to any Participating Broker-Dealer for use in connection with any such
resale. See "Plan of Distribution."
The Company will not receive any proceeds from this offering. The Company
has agreed to pay the expenses of the Exchange Offer. No underwriter is being
utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD CERTIFICATES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES AND BLUE SKY LAWS OF SUCH JURISDICTION. THE COMPANY IS NOT
AWARE OF ANY JURISDICTION WITHIN THE UNITED STATES IN WHICH THE EXCHANGE OFFER
OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH SUCH LAWS.
Prior to the Exchange Offer, there has been no public market for the New
Certificates. If such market were to develop, the New Certificates could trade
at prices that may be higher or lower than their principal amount. Neither
Continental nor any Trust has applied or intends to apply for listing of the New
Certificates on any national securities exchange or otherwise. One or more of
Credit Suisse First Boston and Morgan Stanley & Co. Incorporated (the "Initial
Purchasers") have previously made a market in the Old Certificates and
Continental has been advised that both of the Initial Purchasers presently
intend to make a market in the New Certificates, as permitted by applicable laws
and regulations, after consummation of the Exchange Offer. None of the Initial
Purchasers is obligated, however, to make a market in the Certificates, and any
such market making activity by an Initial Purchaser may be discontinued at any
time without notice at the sole discretion of such Initial Purchaser. There an
be no assurance as to the liquidity of the public market for the Certificates or
that any active public market for the Certificates will develop or continue. If
an active public market does not develop or continue, the market prices and
liquidity of the Certificates may be adversely affected. See "Risk
Factors -- Risk Factors Relating to the Certificates and the Offering -- Absence
of an Established Market."
AVAILABLE INFORMATION
Continental is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549; Seven World Trade Center, 13th Floor, New York, New York 10007; and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material may also be obtained from the Public Reference Section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of prescribed rates. Such material may also
be accessed electronically by means of the Commission's home page on the
Internet at http://www.sec.gov. 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.
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Continental is the successor to Continental Airlines Holdings, Inc.
("Holdings"), which merged with and into Continental on April 27, 1993. Holdings
had also been subject to the informational requirements of the Exchange Act.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments and exhibits, the "Registration Statement") filed
by Continental with the Commission, through the Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR"), under the Securities Act, with respect
to the New Certificates offered hereby. This Prospectus omits certain of the
information contained in the Registration Statement, and reference is hereby
made to the Registration Statement for further information with respect to
Continental and the securities offered hereby. Although statements concerning
and summaries of certain documents are included herein, reference is made to the
copy of such document filed as an exhibit to the Registration Statement or
otherwise filed with the Commission. These documents may be inspected without
charge at the office of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies may be obtained at fees and charges
prescribed by the Commission.
REPORTS TO CERTIFICATEHOLDERS
Wilmington Trust Company, in its capacity as Pass Through Trustee under
each of the Trusts, will provide the Certificateholders of each Trust certain
periodic reports concerning the distributions made from such Trust. See
"Description of New Certificates -- Reports to Certificateholders".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File No. 0-9781) are
hereby incorporated by reference in this Prospectus: (i) Continental's Annual
Report on Form 10-K for the year ended December 31, 1996 (filed February 24,
1997), (ii) Continental's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1997 (filed April 28, 1997) and June 30, 1997 (filed
August 14, 1997) and (iii) Continental's Current Reports on Form 8-K filed on
January 6, March 21, April 18, May 28, June 10, June 25, 1997, October 6, 1997
and October 14 1997.
All reports and any definitive proxy or information statements filed by
Continental pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated herein by reference, or contained in this Prospectus, shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE TO
ANY PERSON TO WHOM A PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST OF
SUCH PERSON, FROM CONTINENTAL AIRLINES, INC., 2929 ALLEN PARKWAY, SUITE 2010,
HOUSTON, TEXAS 77019, ATTENTION: SECRETARY, TELEPHONE (713) 834-2950. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY [ ].
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PROSPECTUS SUMMARY
The following summary information does not purport to be complete and is
qualified in its entirety by the detailed information and financial statements
(including the notes thereto) appearing elsewhere in, or incorporated by
reference in, this Prospectus. Certain capitalized terms used herein are defined
elsewhere in this Prospectus on the pages indicated in the "Index of Terms".
THE COMPANY
Continental Airlines, Inc. is a major United States air carrier engaged in
the business of transporting passengers, cargo and mail. Continental is the
fifth largest United States airline (as measured by revenue passenger miles in
the first nine months of 1997) and, together with its wholly owned subsidiary,
Continental Express, Inc. ("Express"), and its wholly owned subsidiary,
Continental Micronesia, Inc. ("CMI"), each a Delaware corporation, serves 198
airports worldwide as of September 18, 1997.
The Company operates its route system primarily through domestic hubs at
Newark, George Bush Intercontinental in Houston and Cleveland Hopkins
("Cleveland"), and a hub on the Pacific island of Guam. Each of Continental's
three domestic hubs is located in a large business and population center,
contributing to a high volume of "origin and destination" traffic. The Guam hub
is strategically located to provide service from Japanese and other Asian cities
to popular resort destinations in the western Pacific. Continental is the
primary carrier at each of these hubs, accounting for 57%, 79%, 54% and 70% of
average daily jet departures, respectively.
Continental directly serves 133 U.S. cities, with additional cities
(principally in the western and southwestern United States) connected to
Continental's route system under agreements with America West Airlines, Inc.
("America West"). Internationally, Continental flies to 65 destinations and
offers additional connecting service through alliances with foreign carriers.
Continental operates 104 weekly departures to 10 European cities and markets
service to six other cities through code-sharing agreements. Continental
commenced service from Newark to Dusseldorf, Germany on March 19, 1997, to
Lisbon, Portugal on May 1, 1997, to Vancouver, British Columbia on June 12,
1997, to Birmingham, England on July 1, 1997, to Sao Paulo and Rio de Janeiro,
Brazil on July 10, 1997 and from Houston to Caracas, Venezuela on October 1,
1997. Continental has implemented international code-sharing agreements with
Alitalia Airlines ("Alitalia"), Air Canada, Transavia, CSA Czech Airlines,
Business Air and China Airlines (effective September 20, 1997). Upon receipt of
government approval, Continental will commence code-sharing arrangements with
Aerolineas Centrales de Colombia (ACES), Aeroflot Russian International Airline
("Aeroflot"), Air France, EVA Airways Corporation ("EVA"), an airline based in
Taiwan, and Virgin Atlantic Airways ("Virgin"). Continental's agreement with
Alitalia involves a block-space arrangement pursuant to which the Company and
Alitalia share capacity and bear economic risk for blocks of seats on the
code-shared trans-Atlantic flights.
In addition, the Company has also entered into joint marketing agreements
with other airlines, all of which (except for the agreement with Virgin) are
currently subject to government approval, which will involve block-space
arrangements which management believes are important to Continental's ability to
compete as an international airline. In October 1996, Continental announced a
block-space agreement with Air France which contemplates a future code-share
arrangement on certain flights between Newark and Charles de Gaulle Airport
("CDG") and Houston and CDG (expected to commence in the second quarter of
1998). In January 1997, the Company announced a similar agreement with Aeroflot
which management anticipates will commence in the second quarter of 1998.
Aeroflot will place its code on one daily Continental flight to Moscow and will
market the service throughout the Commonwealth of Independent States. The
Company's agreement with Virgin for a code-share arrangement containing block
space commitments recently received government approvals. The Company
anticipates commencing the code-share arrangement, which involves the carriers'
Newark/New York-London routes and eight other routes flown by Virgin between the
United Kingdom and the United States, in the first quarter of 1998. In August
1997, the Company entered into a code-sharing agreement with EVA that entitles
the Company to place its code on that carrier's flights between Taipei and five
cities in the United States.
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The Company anticipates entering into other code-sharing, joint marketing
and block-space agreements, which may include the Company undertaking the
financial commitment to purchase seats from other carriers.
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 four cities in South America. Through
its Guam hub, Continental provides extensive service in the western Pacific,
including service to more Japanese cities than any other United States carrier.
The Company is a Delaware corporation. Its executive offices are located at
2929 Allen Parkway, Suite 2010, Houston, Texas 77019, and its telephone number
is (713) 834-2950.
RECENT DEVELOPMENTS
Third Quarter 1997 Earnings
On October 16, 1997, the Company reported consolidated net income,
including special charges, of $110 million and $18 million for the three months
ended September 30, 1997 and 1996, respectively, and $312 million and $272
million for the nine months ended September 30, 1997 and 1996, respectively.
Special charges included a $128 million fleet disposition charge ($77 million
after taxes) in 1996 and after tax extraordinary losses of $4 million and $6
million in 1997 and 1996, respectively.
For the first nine months of 1997, Continental reported $5.4 billion in
revenue, $584 million in operating income and $518 million in pre-tax income.
This compares to $4.8 billion in revenue, $554 million in operating income and
$476 million in pre-tax income, excluding the $128 million fleet disposition
charge, for the comparable nine-month period in 1996.
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THE EXCHANGE OFFER
Registration Rights
Agreement.................. The Old Certificates were issued on June 25, 1997
(the "Issuance Date") to the Initial Purchasers.
The Initial Purchasers placed the Old Certificates
with institutional investors. In connection
therewith, the Company, the Trustee under each of
the Trusts, and the Initial Purchasers entered into
the Registration Rights Agreement providing, among
other things, for the Exchange Offer. See "The
Exchange Offer".
The Exchange Offer......... New Certificates are being offered in exchange for
an equal principal amount of Old Certificates. As
of the date hereof, $155,000,000 aggregate
principal amount of Old Certificates are
outstanding. Old Certificates may be tendered only
in integral multiples of $1,000.
Resale of New
Certificates............... Based on interpretations by the staff of the
Commission, as set forth in no-action letters
issued to third parties, including the Exchange
Offer No-Action Letters (as defined on page 2 of
this Prospectus), the Company believes that the New
Certificates issued pursuant to the Exchange Offer
may be offered for resale, resold or otherwise
transferred by holders thereof (other than a
broker-dealer who acquires such New Certificates
directly from the Trustee for resale pursuant to
Rule 144A under the Securities Act or any other
available exemption under the Securities Act or any
holder that is an "affiliate" of the Company as
defined under Rule 405 of the Securities Act),
without compliance with the registration and
prospectus delivery provisions of the Securities
Act, provided that such New Certificates are
acquired in the ordinary course of such holders'
business and such holders are not engaged in, and
do not intend to engage in, a distribution of such
New Certificates and have no arrangement with any
person to participate in a distribution of such New
Certificates. By tendering the Old Certificates in
exchange for New Certificates, each holder, other
than a broker-dealer, will represent to the Company
that: (i) it is not an affiliate of the Company (as
defined under Rule 405 of the Securities Act) nor a
broker-dealer tendering Old Certificates acquired
directly from the Trustee for its own account; (ii)
any New Certificates to be received by it were
acquired in the ordinary course of its business;
and (iii) it is not engaged in, and does not intend
to engage in, a distribution of such New
Certificates and has no arrangement or
understanding to participate in a distribution of
the New Certificates. If a holder of Old
Certificates is engaged in or intends to engage in
a distribution of the New Certificates or has any
arrangement or understanding with respect to the
distribution of the New Certificates to be acquired
pursuant to the Exchange Offer, such holder may not
rely on the applicable interpretations of the staff
of the Commission and must comply with the
registration and prospectus delivery requirements
of the Securities Act in connection with any
secondary resale transaction. Each Participating
Broker-Dealer that receives New Certificates for
its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such New
Certificates. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus,
a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to
time, may be used by a Participating Broker-Dealer
in connection with resales of New Certificates
received in exchange for Old
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Certificates where such Old Certificates were
acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading
activities. The Company has agreed that, starting
on the Expiration Date and ending on the close of
business 180 days after the Expiration Date, it
will make this Prospectus available to any
Participating Broker-Dealer for use in connection
with any such resale. See "Plan of Distribution."
To comply with the securities laws of certain
jurisdictions, it may be necessary to qualify for
sale or register the New Certificates prior to
offering or selling such New Certificates. The
Company has agreed, pursuant to the Registration
Rights Agreement and subject to certain specified
limitations therein, to register or qualify the New
Certificates for offer or sale under the securities
or "blue sky" laws of such jurisdictions as may be
necessary to permit the holders of New Certificates
to trade the New Certificates without any
restrictions or limitations under the securities
laws of the several states of the United States.
Consequences of Failure to
Exchange Old
Certificates............. Upon consummation of the Exchange Offer, subject to
certain exceptions, holders of Old Certificates who
do not exchange their Old Certificates for New
Certificates in the Exchange Offer will no longer
be entitled to registration rights and will not be
able to offer or sell their Old Certificates,
unless such Old Certificates are subsequently
registered under the Securities Act (which, subject
to certain limited exceptions, the Company will
have no obligation to do), except pursuant to an
exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities
laws. See "Risk Factors -- Risk Factors Relating to
the Certificates and the Offering Consequences of
Failure to Exchange" and "The Exchange
Offer -- Terms of the Exchange Offer".
Expiration Date............ 5:00 p.m., New York City time, on [ ] (30 calendar
days following the commencement of the Exchange
Offer), unless the Exchange Offer is extended, in
which case the term "Expiration Date" means the
latest date and time to which the Exchange Offer is
extended.
Interest on the New
Certificates............... The New Certificates will accrue interest at the
applicable per annum rate for such New Certificates
set forth on the cover page of this Prospectus,
from the date on which the Old Certificates were
originally issued.
Conditions to the Exchange
Offer...................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Certificates being
tendered for exchange. However, the Exchange Offer
is subject to certain customary conditions, which
may be waived by the Company. See "The Exchange
Offer -- Conditions". Except for the requirements
of applicable federal and state securities laws,
there are no federal or state regulatory
requirements to be complied with or obtained by the
Company in connection with the Exchange Offer.
Procedures for Tendering
Old Certificates........... Each holder of Old Certificates wishing to accept
the Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein,
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10
and mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with the
Old Certificates to be exchanged and any other
required documentation to the Exchange Agent at the
address set forth herein or effect a tender of Old
Certificates pursuant to the procedures for
book-entry transfer as provided for herein. See
"The Exchange Offer -- Procedures for Tendering"
and "-- Book Entry Transfer".
Guaranteed Delivery
Procedures................. Holders of Old Certificates who wish to tender
their Old Certificates and whose Old Certificates
are not immediately available or who cannot deliver
their Old Certificates and a properly completed
Letter of Transmittal or any other documents
required by the Letter of Transmittal to the
Exchange Agent prior to the Expiration Date may
tender their Old Certificates according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures".
Withdrawal Rights.......... Tenders of Old Certificates may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the
Expiration Date. To withdraw a tender of Old
Certificates, a written or facsimile transmission
notice of withdrawal must be received by the
Exchange Agent at its address set forth herein
under "The Exchange Offer -- Exchange Agent" prior
to 5:00 p.m., New York City time, on the Expiration
Date.
Acceptance of Old
Certificates and Delivery
of New Certificates...... Subject to certain conditions, any and all Old
Certificates which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date will be accepted for
exchange. The New Certificates issued pursuant to
the Exchange Offer will be delivered promptly
following the Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer".
Certain Tax
Considerations............. The exchange of New Certificates for Old
Certificates will not be a sale or exchange or
otherwise a taxable event for Federal income tax
purposes. See "Certain Federal Income Tax
Considerations".
Exchange Agent............. Wilmington Trust Company is serving as exchange
agent (the "Exchange Agent") in connection with the
Exchange Offer.
Fees and Expenses.......... All expenses incident to the Company's consummation
of the Exchange Offer and compliance with the
Registration Rights Agreement will be borne by the
Company. See "The Exchange Offer -- Fees and
Expenses".
Use of Proceeds............ There will be no cash proceeds payable to
Continental from the issuance of the New
Certificates pursuant to the Exchange Offer. The
proceeds from the sale of the Old Certificates
issued by each Trust were used to purchase
Equipment Notes issued by Continental to finance
the purchase of the Aircraft.
9
11
TERMS OF CERTIFICATES
The Exchange Offer relates to the exchange of up to $155,000,000 aggregate
principal amount of Old Certificates for up to an equal aggregate principal
amount of New Certificates. The New Certificates will be entitled to the
benefits of and will be governed by the same Pass Through Trust Agreements that
govern the Old Certificates. The form and terms of the New Certificates are the
same in all material respects as the form and terms of the Old Certificates,
except that the New Certificates do not provide for interest rate increases
relating to failure to implement the Exchange Offer and will not bear legends
restricting transfer. See "Description of New Certificates".
Trusts..................... Each of the Continental Airlines 1997-2A Pass
Through Trust, the Continental Airlines 1997-2B
Pass Through Trust, the Continental Airlines
1997-2C Pass Through Trust and the Continental
Airlines 1997-2D Pass Through Trust has been formed
pursuant to one of the four separate Pass Through
Trust Agreements that were entered into between the
Company and Wilmington Trust Company, as trustee
under each Trust. Each Trust is a separate entity.
Certificates Offered....... Pass Through Certificates issued by each Trust,
representing fractional undivided interests in such
Trust. The New Certificates issued by the Class A
Trust, the Class B Trust, the Class C Trust and the
Class D Trust are referred to herein as the "Class
A Certificates", the "Class B Certificates", the
"Class C Certificates", and the "Class D
Certificates", respectively.
Subordination Agent,
Trustee, Loan Trustee and
Second Mortgagee......... Wilmington Trust Company acts (i) as subordination
agent under the Intercreditor Agreement (the
"Subordination Agent"), (ii) as Trustee, paying
agent and registrar for the Certificates of each
Trust, (iii) as Loan Trustee, paying agent and
registrar for each series of Equipment Notes, and
(iv) as mortgagee (the "Second Mortgagee") under
the Second Indenture.
Liquidity Provider......... Kredietbank N.V., acting through its New York
branch, (the "Liquidity Provider") has provided a
separate liquidity facility for the benefit of the
holders of Class A Certificates, Class B
Certificates and Class C Certificates.
Trust Property............. The property of each Trust (the "Trust Property")
includes (i) subject to the Intercreditor
Agreement, Equipment Notes issued on a recourse
basis by Continental in connection with each
separate secured loan transaction with respect to
each Aircraft to finance the purchase of the
Aircraft by Continental, (ii) the rights of such
Trust under the Intercreditor Agreement (including
all monies receivable in respect of such rights),
(iii) except for the Class D Trust, all monies
receivable under the Liquidity Facility for such
Trust and (iv) funds from time to time deposited
with the Trustee in accounts relating to such
Trust. The Equipment Notes with respect to each
Aircraft have been issued in four series under an
Indenture (the "Indenture") between Continental and
the mortgagee thereunder (the "Loan Trustee"), and
are entitled to a first priority security interest
in such Aircraft pursuant to such Indenture and to
a second priority security interest in each of the
other Aircraft pursuant to the Second Indenture
(the "Second Indenture") between Continental and
the Second Mortgagee. The Class A Trust, the Class
B Trust, the Class C Trust and the Class D Trust
each have acquired,
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12
pursuant to a Participation Agreement with respect
to each Aircraft (the "Participation Agreement"),
the series of Equipment Notes issued with respect
to each of the Aircraft 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 expected Regular
Distribution Date applicable to the Certificates to
be issued by such Trust. The aggregate original
principal amount of the Equipment Notes held in
each Trust is the same as the aggregate original
face amount of the Certificates issued by such
Trust.
SUMMARY OF TERMS OF CERTIFICATES
CLASS A CLASS B CLASS C CLASS D
CERTIFICATES CERTIFICATES CERTIFICATES CERTIFICATES
------------------ ------------------ ------------------ ------------------
Aggregate Face Amount....... $74,862,000 $25,563,000 $27,206,000 $27,369,000
Loan to Aircraft Value
(cumulative)(1)........... 41.00% 55.00% 69.90% 84.89%
Expected Principal
Distribution Window (in
years).................... 1.00-10.00 1.00-8.00 1.00-7.00 1.00-4.00
Expected Initial Average
Life (in years)........... 8.01 6.70 5.07 2.60
Regular Distribution
Dates..................... June 30 & December June 30 & December June 30 & December June 30 & December
30 30 30 30
Final Expected Regular
Distribution Date......... June 30, 2007 June 30, 2005 June 30, 2004 June 30, 2001
Final Maturity Date......... December 30, 2008 December 30, 2006 December 30, 2005 June 30, 2001
Minimum Denomination........ $1,000 $1,000 $1,000 $1,000
Section 1110
Protection(2)............. Yes Yes Yes Yes
Liquidity Facility
Coverage(3)............... 3 semiannual 3 semiannual 3 semiannual None
interest payments interest payments interest payments
Liquidity Facility
Amount(3)................. $8,101,025 $2,766,630 $2,967,925 None
- ---------------
(1) Assumes an aggregate appraised Aircraft value of $182,590,000. The appraised
value is only an estimate and reflects certain assumptions. See "Description
of the Aircraft and the Appraisals -- The Appraisals".
(2) The Loan Trustee with respect to each Indenture has received a reasoned
opinion of Milbank, Tweed, Hadley & McCloy, counsel to the Initial
Purchasers, with respect to the application of Section 1110 of the U.S.
Bankruptcy Code to the lien of such Indenture. The benefit of Section 1110
would not be applicable to the lien on the other Aircraft created under the
Second Indenture. See "Description of Equipment Notes -- Remedies".
(3) For each Class of Certificates, other than the Class D Certificates, the
initial amount of the Liquidity Facility covers three consecutive semiannual
interest payments (without regard to any future payments of principal on
such Certificates). In aggregate for Class A, B and C Certificates, the
initial amount of the Liquidity Facilities is $13,835,580.
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13
EQUIPMENT NOTES AND THE AIRCRAFT
Set forth below is certain information about the Equipment Notes held in
the Trusts and the Aircraft that (under the related Indenture) secure such
Equipment Notes:
ORIGINAL
PRINCIPAL
AMOUNT OF
AIRCRAFT LATEST EQUIPMENT APPRAISED
REGISTRATION YEAR OF EQUIPMENT NOTE NOTES VALUE (IN
AIRCRAFT TYPE NUMBER MANUFACTURE MATURITY DATE (IN MILLIONS) MILLIONS)(1)
- ---------------------------------- ------------ ----------- -------------- ------------- -------------
Boeing 737-3T0.................... N12322 1986 June 30, 2007 $ 16.11 $ 18.98
Boeing 737-3T0.................... N10323 1986 June 30, 2007 16.11 18.98
Boeing 737-3T0.................... N14324 1986 June 30, 2007 16.11 18.98
Boeing 737-3T0.................... N69333 1986 June 30, 2007 16.13 19.00
Boeing 737-3T0.................... N14334 1986 June 30, 2007 16.13 19.00
Boeing 737-3T0.................... N14335 1986 June 30, 2007 16.13 19.00
McDonnell Douglas MD-82........... N12811 1985 June 30, 2007 13.20 15.55
McDonnell Douglas MD-82........... N15820 1986 June 30, 2007 14.43 17.00
McDonnell Douglas MD-82........... N18833 1987 June 30, 2007 15.32 18.05
McDonnell Douglas MD-82........... N10834 1987 June 30, 2007 15.32 18.05
- ---------------
(1) The appraised value of each Aircraft set forth above is based upon varying
assumptions and methodologies and reflects the lesser of the average and
median values of such Aircraft as appraised by three independent appraisal
and consulting firms: Aircraft Information Services, Inc. ("AISI"), BK
Associates, Inc. ("BK") and Morten Beyer and Agnew, Inc. ("MBA")
(collectively, the "Appraisers"), determined as of May 20, May 16 and June
6, 1997, respectively. An appraisal is only an estimate of value and should
not be relied upon as a measure of realizable value. See "Risk
Factors -- Appraisals and Realizable Value of Aircraft" and "Description of
the Aircraft and the Appraisals".
LOAN TO AIRCRAFT VALUE RATIOS
The following table sets forth loan to Aircraft value ratios ("LTVs") for
each Class of Certificates as of the Issuance Date and certain subsequent
Regular Distribution Dates. The LTVs for each Class of Certificates were
obtained for each such Regular Distribution Date by dividing (i) the expected
Pool Balance of such Class of Certificates together in each case with the
expected Pool Balance of all other Classes of Certificates senior in right of
payment to such Class of Certificates under the Intercreditor Agreement
determined immediately after giving effect to the distributions expected to be
made on such Regular Distribution Date, by (ii) the assumed value of all of the
Aircraft (the "Assumed Aggregate Aircraft Value") on such Regular Distribution
Date based on the assumptions set forth below.
The following table is based on the assumption that the value of each
Aircraft included in the Assumed Aggregate Aircraft Value opposite the initial
Regular Distribution Date included in the table depreciates by varying amounts
per year, depending on aircraft model and year of manufacture. See "Description
of the Equipment Notes -- Loan to Value Ratios of Equipment Notes". Other rates
or methods of depreciation would result in materially different LTVs and no
assurance can be given (i) that the depreciation rates and method assumed for
the purpose of the table are the ones most likely to occur or (ii) as to the
actual future value of any Aircraft. Thus, the table should not be considered a
forecast or prediction of expected or likely LTVs but simply a mathematical
calculation based on one set of assumptions. In addition, the initial appraised
value of each Aircraft was based upon the lesser of the average and the median
value of each Aircraft as appraised by the Appraisers, as of the respective date
of their appraisals. No assurance can be given that such value represents the
realizable value of any Aircraft. See "Risk Factors -- Risk Factors Relating to
the Certificates and the Offering -- Appraisal and Realizable Value of Aircraft"
and "Description of the Aircraft and the Appraisals -- The Appraisals".
12
14
The following table also assumes that no early redemption or default in
payment of principal of any Equipment Notes shall occur. The Equipment Notes
with respect to an Aircraft are subject to redemption if an Event of Loss occurs
with respect to such Aircraft or otherwise at Continental's election. See
"Description of the Equipment Notes -- Redemption".
The Equipment Notes issued with respect to each Aircraft are entitled to a
second priority security interest on each of the other Aircraft, and the
following table is compiled on an aggregate basis. However, it should be noted
that, since the second priority security interest would not be entitled to the
benefits of Section 1110 in a reorganization under the Bankruptcy Code of
Continental, the excess proceeds realized from the disposition of any particular
Aircraft might not immediately be available to offset shortfalls on the
Equipment Notes relating to any other Aircraft, but rather would be held as cash
collateral securing all of the Equipment Notes subject to the lien of the Second
Indenture. See "Description of the Equipment Notes -- Remedies". For the LTVs
for the Equipment Notes issued in respect of each individual Aircraft, see
"Description of the Equipment Notes -- Loan to Value Ratios of Equipment Notes".
ASSUMED CLASS A CLASS B CLASS C CLASS D
AGGREGATE CERTIFICATES CLASS A CERTIFICATES CLASS B CERTIFICATES CLASS C CERTIFICATES
AIRCRAFT POOL CERTIFICATES POOL CERTIFICATES POOL CERTIFICATES POOL
DATE VALUE BALANCE LTV BALANCE LTV BALANCE LTV BALANCE
- ----------------- ------------ ----------- ------------ ----------- ------------ ----------- ------------ -----------
June 25, 1997.... $182,590,000 $74,862,000 41.00% $25,563,000 55.00% $27,206,000 69.90% $27,369,000
June 30, 1998.... 177,535,510 72,789,660 41.00 24,855,370 55.00 26,005,070 69.65 21,100,424
June 30, 1999.... 172,481,020 70,717,320 41.00 24,147,744 55.00 23,680,240 68.73 14,716,780
June 30, 2000.... 167,426,530 68,644,877 41.00 23,439,713 55.00 20,504,611 67.25 7,569,162
June 30, 2001.... 162,029,940 66,432,273 41.00 22,684,190 55.00 16,879,034 65.42 0
June 30, 2002.... 153,444,850 62,890,431 40.99 20,610,168 54.42 15,368,504 64.43 0
June 30, 2003.... 144,137,760 58,376,498 40.50 18,475,201 53.32 7,889,264 58.79 0
June 30, 2004.... 134,830,670 52,689,000 39.08 11,076,977 47.29 0 NA 0
June 30, 2005.... 125,523,580 44,576,067 35.51 0 NA 0 NA 0
June 30, 2006.... 115,812,190 26,370,969 22.77 0 NA 0 NA 0
CLASS D
CERTIFICATES
DATE LTV
- ----------------- ------------
<
June 25, 1997.... 84.89%
June 30, 1998.... 81.53
June 30, 1999.... 77.26
June 30, 2000.... 71.77
June 30, 2001.... NA
June 30, 2002.... NA
June 30, 2003.... NA
June 30, 2004.... NA
June 30, 2005.... NA
June 30, 2006.... NA
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CASH FLOW STRUCTURE
Set forth below is a diagram illustrating the structure for the offering of
the Certificates and certain cash flows.
[Diagram omitted, which shows that Continental will pay the Payments on
Equipment Notes to the Loan Trustees. From such Payments on Equipment Notes, the
Loan Trustees will make Equipment Note Payments on the Series A Equipment Notes,
the Series B Equipment Notes, the Series C Equipment Notes and the Series D
Equipment Notes with respect to all Aircraft to the Subordination Agent. From
such Equipment Note Payments, the Subordination Agent will pay Principal,
Premium, if any, and Interest Distributions to the Pass Through Trustee for the
Class A Trust, the Pass Through Trustee for the Class B Trust, the Pass Through
Trustee for the Class C Trust and the Pass Through Trustee for the Class D
Trust, who will pay such Principal, Premium, if any, and Interest Distributions
to the Holders of Class A Certificates, the Holders of Class B Certificates, the
Holders of the Class C Certificates and the Holders of Class D Certificates,
respectively. The Subordination Agent may also receive Advances, if any, and pay
Reimbursements, if any, to the Liquidity Providers.]
- ---------------
(1) Each Aircraft is subject to a separate Indenture providing for a first
priority security interest in such Aircraft, and the Equipment Notes issued
with respect to each Aircraft are pursuant to the Second Indenture entitled
to a second priority security interest in each of the other Aircraft.
(2) For the Class A Certificates, the Class B Certificates and the Class C
Certificates, the initial amount of the Liquidity Facility for each such
Class covers three consecutive semiannual interest payments with respect to
such Class. There is no Liquidity Facility for the Class D Certificates.
14
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THE NEW CERTIFICATES
Certificates;
Denominations.............. The New Certificates of each Trust will be issued
in a minimum denomination of $1,000 and in integral
multiples thereof. See "Description of the New
Certificates -- General".
Regular Distribution
Dates...................... June 30 and December 30, commencing December 30,
1997.
Special Distribution
Dates...................... Any Business Day on which a Special Payment is to
be distributed.
Record Dates............... The fifteenth day preceding a Regular Distribution
Date or a Special Distribution Date.
Distributions.............. All payments of principal, premium (if any) and
interest received by the Trustee on the Equipment
Notes held in each Trust will be distributed by the
Trustee to the holders of the Certificates (the
"Certificateholders") of such Trust, subject to the
provisions of the Intercreditor Agreement. Such
payments of interest are scheduled to be received
by the Trustee of each Trust on June 30 and
December 30 of each year, commencing on December
30, 1997. Payments of principal of the Equipment
Notes are scheduled to be received on June 30 of
each year, commencing on June 30, 1998. Payments of
principal, premium (if any) and interest resulting
from the early redemption or purchase (if any) of
the Equipment Notes held in any Trust will be
distributed to the Certificateholders of such Trust
on a Special Distribution Date after not less than
20 days' notice to such Certificateholders of such
Trust, subject to the provisions of the
Intercreditor Agreement. For a discussion of
distributions by the Trusts upon an Indenture
Default, see "Description of the New
Certificates -- Indenture Defaults and Certain
Rights Upon an Indenture Default".
PTC Events of Default...... A "PTC Event of Default" under each Pass Through
Trust Agreement means the failure to pay within 10
Business Days of the due date thereof: (i) the
outstanding Pool Balance of the applicable Class of
Certificates on the Final Maturity Date for such
Class or (ii) interest due on such Certificates on
any distribution date (unless, in the case of the
Class A, B or C Certificates, the Subordination
Agent shall have made Interest Drawings with
respect thereto in an amount sufficient to pay such
interest and shall have distributed such amount to
the Trustee entitled thereto). The Final Maturity
Date for the Class A Certificates is December 30,
2008, for the Class B Certificates is December 30,
2006, for the Class C Certificates is December 30,
2005 and for the Class D Certificates is June 30,
2001. Any failure to make expected principal
distributions on any Class of Certificates on any
Regular Distribution Date (other than the Final
Maturity Date) will not constitute a PTC Event of
Default with respect to such Certificates.
Purchase Rights of
Certificateholders....... Upon the occurrence and during the continuation of
a Triggering Event, (i) the Class B
Certificateholders shall have the right to purchase
all, but not less than all, of the Class A
Certificates, (ii) the Class C Certificateholders
shall have the right to purchase all, but not less
than all, of the Class A Certificates and the Class
B Certificates and (iii) the Class D
Certificateholders shall have the right to purchase
all, but not less than all, of the Class A
Certificates, the Class B Certificates and the
Class C Certificates, in each case at a purchase
price equal to the Pool Balance of
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17
the relevant Class or Classes of Certificates plus
accrued and unpaid interest thereon to the date of
purchase without premium but including any other
amounts due to the Certificateholders of such Class
or Classes.
"Triggering Event" means (x) the occurrence of an
Indenture Default under all Indentures resulting in
a PTC Event of Default with respect to the most
senior Class of Certificates then outstanding, (y)
the acceleration of all of the outstanding
Equipment Notes or (z) certain bankruptcy or
insolvency events involving Continental.
Equipment Notes
(a) Interest............. The Equipment Notes held in each Trust will accrue
interest at the applicable rate per annum for the
Certificates issued by such Trust set forth on the
cover page of this Prospectus, payable on June 30
and December 30 of each year, commencing on
December 30, 1997, and such interest payments will
be passed through to Certificateholders of such
Trust on each such date until the final
distribution date for such Certificates, in each
case, subject to the Intercreditor Agreement.
Interest is calculated on the basis of a 360-day
year consisting of twelve 30-day months. See
"Description of the Equipment Notes -- Principal
and Interest Payments". The interest rates for the
Equipment Notes are subject to change under certain
circumstances described in "The Exchange
Offer -- Terms of the Exchange Offer -- General".
(b) Principal.............. Scheduled principal payments on the Equipment Notes
held in each Trust will be passed through to the
Certificateholders of each such Trust on June 30 of
each year, commencing on June 30, 1998, in each
case, subject to the Intercreditor Agreement. See
"Description of the New Certificates -- Pool
Factors" and "Description of the Equipment
Notes -- Principal and Interest Payments".
(c) Redemption and
Purchase................... (i) The Equipment Notes issued with respect to an
Aircraft will be redeemed in whole upon the
occurrence of an Event of Loss with respect to such
Aircraft if such Aircraft is not replaced by
Continental under the related Indenture and Second
Indenture, at a price equal to the aggregate unpaid
principal thereof, together with accrued interest
thereon to, but not including, the date of
redemption, but without any premium.
(ii) All of the Equipment Notes issued with respect
to any Aircraft may be redeemed prior to maturity
at a price equal to the aggregate unpaid principal
thereof, together with accrued interest thereon to,
but not including, the date of redemption, plus, if
such redemption is made prior to December 30, 2004
in the case of the Series A Equipment Notes,
December 30, 2003 in the case of the Series B
Equipment Notes, June 30, 2002 in the case of the
Series C Equipment Notes and June 30, 2000 in the
case of the Series D Equipment Notes (with respect
to any such Series, its "Premium Termination
Date"), a Make-Whole Premium. See "Description of
the Equipment Notes -- Redemption" for a
description of the manner of computing such
Make-Whole Premium and the circumstances under
which the Equipment Notes may be so redeemed.
(d) Security............... The Equipment Notes issued with respect to each
Aircraft are secured by a first priority security
interest in such Aircraft and by a second priority
security interest in each of the other Aircraft.
The Indentures include cross-default provisions,
and if an Indenture Default has oc-
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18
curred for the Equipment Notes issued with respect
to one or more Aircraft, then an Indenture Default
will have occurred for the Equipment Notes issued
with respect to the remaining Aircraft, and
remedies will be exercisable under the Indentures
and the Second Indenture with respect to all
Aircraft. If the Equipment Notes issued under an
Indenture and other obligations secured thereunder
and then due have been paid in full, the applicable
Aircraft will be released from the lien of such
Indenture and, so long as no Indenture Default or
certain other defaults exist under any other
Indenture at such time, will be released from the
lien of the Second Indenture. See "Description of
the Equipment Notes -- Security" and "-- Indenture
Defaults, Notice and Waiver".
The Equipment Notes are direct obligations of
Continental. See "Description of the Equipment
Notes -- General".
(e) Section 1110
Protection................. The Loan Trustee with respect to each Indenture has
received a reasoned opinion of Milbank, Tweed,
Hadley & McCloy, counsel to the Initial Purchasers,
that, subject to the assumptions and qualifications
contained therein, such Loan Trustee would be
entitled to the benefits of Section 1110 of the
U.S. Bankruptcy Code with respect to the airframe
and engines comprising the Aircraft that is subject
to the lien of such Indenture were Continental to
become a debtor in a case under Chapter 11 of the
Bankruptcy Code. See "Description of the Equipment
Notes -- Remedies" for a description of such
opinion and certain assumptions and qualifications
contained therein. The benefits of Section 1110
would not be applicable to the lien on the other
Aircraft created under the Second Indenture.
(f) Ranking................ Series B Equipment Notes issued in respect of any
Aircraft are subordinated in right of payment to
Series A Equipment Notes issued in respect of such
Aircraft; Series C Equipment Notes issued in
respect of such Aircraft are subordinated in right
of payment to such Series B Equipment Notes; and
Series D Equipment Notes issued in respect of such
Aircraft are subordinated in right of payment to
such Series C Equipment Notes. On each Distribution
Date, (i) payments of interest and principal due on
Series A Equipment Notes issued in respect of any
Aircraft will be made prior to payments of interest
and principal due on Series B Equipment Notes
issued in respect of such Aircraft, (ii) payments
of interest and principal due on such Series B
Equipment Notes will be made prior to payments of
interest and principal due on Series C Equipment
Notes issued in respect of such Aircraft and (iii)
payments of interest and principal due on such
Series C Equipment Notes will be made prior to
payments of interest and principal due on Series D
Equipment Notes issued in respect of such Aircraft.
Liquidity Facilities....... The Liquidity Provider and the Subordination Agent
have entered into a separate revolving credit
agreement (each, a "Liquidity Facility") with
respect to each of the Trusts (other than the Class
D Trust). Under the Liquidity Facility with respect
to any Trust (other than the Class D Trust), the
Liquidity Provider will, if necessary, make
advances ("Interest Drawings") in an aggregate
amount (the "Required Amount") sufficient to pay
interest on the Certificates of such Trust on up to
three successive semiannual Regular Distribution
Dates (without regard to any future payments of
principal on such Certificates) at the respective
interest rates shown on the cover page of this
Prospectus (plus an
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19
additional margin specified by the Registration
Rights Agreement, if applicable) for such
Certificates (the "Stated Interest Rates"). The
initial Required Amount under the Liquidity
Facilities for the Class A Certificates, the Class
B Certificates, and the Class C Certificates is
$8,101,025, $2,766,630, and $2,967,925,
respectively. Interest Drawings under the relevant
Liquidity Facility will be made promptly after any
Regular Distribution Date if, after giving effect
to the subordination provisions of the
Intercreditor Agreement, there are insufficient
funds available to the Subordination Agent to pay
interest on any Class A, B or C Certificates;
provided, however, that on any date the maximum
amount available under the Liquidity Facility with
respect to any Trust (other than the Class D Trust)
to fund any shortfall in interest due on the
Certificates of such Trust will not exceed the
Maximum Available Commitment under such Liquidity
Facility. The "Maximum Available Commitment" at any
time under each Liquidity Facility is an amount
equal to the then Required Amount of such Liquidity
Facility less the aggregate amount of each Interest
Drawing outstanding under such Liquidity Facility
at such time, provided that following a Downgrade
Drawing (defined below), a Final Drawing (defined
below) or (if applicable with respect to a
Replacement Facility (defined below)) a
Non-Extension Drawing (defined below) under a
Liquidity Facility, the Maximum Available
Commitment shall be zero. The Liquidity Facility
for any Class of Certificates does not provide for
drawings thereunder to pay for principal of or
premium on the Certificates of such Class, any
interest on the Certificates of such Class in
excess of the Stated Interest Rates, or principal
of or interest or premium on the Certificates of
any other Class.
Upon each Interest Drawing under any Liquidity
Facility, the Subordination Agent is obligated to
reimburse (to the extent that the Subordination
Agent has available funds therefor) the Liquidity
Provider for the amount of such drawing. Such
reimbursement obligation and any other amounts
owing to the Liquidity Provider under each
Liquidity Facility or certain other agreements (the
"Liquidity Obligations") ranks pari passu with the
Liquidity Obligations relating to all other
Liquidity Facilities and ranks senior to the
Certificates in right of payment. Upon
reimbursement in full of the Interest Drawings,
together with any accrued interest thereon, under
any Liquidity Facility, the Maximum Available
Commitment under such Liquidity Facility will be
reinstated to the Stated Portion of the then
Required Amount of such Liquidity Facility;
provided that the amount will not be so reinstated
if (i) a Liquidity Event of Default shall have
occurred and be continuing and (ii) less than 65%
of the aggregate outstanding principal amount of
all Equipment Notes are Performing Equipment Notes.
"Performing Equipment Note" means an Equipment Note
with respect to which no payment default has
occurred and is continuing; provided that in the
event of a bankruptcy proceeding involving
Continental under the U.S. Bankruptcy Code, (i) any
payment default existing during the 60-day period
under Section 1110(a)(1)(A) of the U.S. Bankruptcy
Code (or such longer period as may apply under
Section 1110(b) of the U.S. Bankruptcy Code) (the
"Section 1110 Period") shall not be taken into
consideration, unless during the Section 1110
Period the trustee in such proceeding or
Continental refuses to assume or agree to perform
its
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obligations under the Indenture related to such
Equipment Note and (ii) any payment default
occurring after the date of the order of relief in
such proceeding shall not be taken into
consideration if such payment default is cured
under Section 1110(a)(1)(B) of the U.S. Bankruptcy
Code before the later of 30 days after the date of
such default or the expiration of the Section 1110
Period.
If at any time the short-term unsecured debt rating
of the Liquidity Provider issued by either Rating
Agency is lower than the Threshold Rating, each
Liquidity Facility provided by such Liquidity
Provider will be required to be replaced by a
financial institution having such unsecured debt
ratings issued by both Rating Agencies that are
equal to or higher than the Threshold Rating. If
any such Liquidity Facility is not replaced within
30 days after notice of the downgrading, such
Liquidity Facility will be drawn in full up to the
then Maximum Available Commitment (the "Downgrade
Drawing") and the proceeds will be deposited into a
cash collateral account (the "Cash Collateral
Account") for the related Class of Certificates and
used for the same purposes and under the same
circumstances and subject to the same conditions as
cash payments of Interest Drawings under such
Liquidity Facility would be used.
Under certain circumstances described in
"Description of the Liquidity
Facilities -- Liquidity Events of Default", the
Liquidity Provider may cause a final drawing (the
"Final Drawing") to be made under a Liquidity
Facility in an amount equal to the then Maximum
Available Commitment thereunder. The Subordination
Agent shall hold the proceeds thereof in the Cash
Collateral Account for the related Trust to be used
for the same purposes and under the same
circumstances, and subject to the same conditions,
as cash payments of Interest Drawings under such
Liquidity Facility would be used. All amounts on
deposit in the Cash Collateral Account for any
Trust that are in excess of the Required Amount
will be paid to the Liquidity Provider.
Continental may, at its option subject to certain
limitations, arrange for a Replacement Facility to
replace the Liquidity Facility (or any prior
Replacement Facility) for any Trust, subject to
certain conditions. If such Replacement Facility is
provided at any time after a Downgrade Drawing or
Non-Extension Drawing (defined below) under such
Liquidity Facility (or prior Replacement Facility),
the funds on deposit with respect to such Liquidity
Facility (or prior Replacement Facility) in the
Cash Collateral Account for such Trust will be
returned to the Liquidity Provider being replaced.
The initial Liquidity Facility for each Class of
Certificates (other than the Class D Certificates)
is scheduled to expire on the fifteenth day after
the Final Maturity Date for such Class of
Certificates. A Replacement Facility may, however,
be scheduled to expire on an earlier date. If a
Replacement Facility for a Class of Certificates is
scheduled to expire prior to the date that is
fifteen days after the Final Maturity Date for such
Class, the Intercreditor Agreement provides for the
replacement or extension of such replacement
facility for 364 days. If such Replacement Facility
cannot be so replaced or extended by the date that
is 25 days prior to the then scheduled expiration
date of such Replacement Facility, such Replacement
Facility will be drawn in full up to the then
maximum
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available commitment thereunder (the "Non-Extension
Drawing") and the proceeds will be deposited in the
Cash Collateral Account for the related Class of
Certificates and used for the same purposes and
under the same circumstances and subject to the
same conditions as cash payments of interest
drawings under such Replacement Facility would be
used.
Notwithstanding the subordination provisions of the
Intercreditor Agreement, the holders of the
Certificates issued by each Trust (other than the
Class D Trust) will be entitled to receive and
retain the proceeds of drawings under the Liquidity
Facility (and any Replacement Facility) for such
Trust. See "Description of the Liquidity
Facilities".
Intercreditor Agreement
(a) Subordination........ The Trustees, the Liquidity Provider and the
Subordination Agent have entered into an agreement
(the "Intercreditor Agreement") which provides as
follows:
(i) All payments made in respect of the Equipment
Notes (whether under any Indenture or the Second
Indenture) and certain other payments will be made
to the Subordination Agent, which will distribute
such payments in accordance with the provisions of
paragraphs (ii) and (iii) below.
(ii) On any Regular Distribution Date or Special
Distribution Date (each, a "Distribution Date"), so
long as no Triggering Event shall have occurred
(whether or not continuing), all payments received
by the Subordination Agent in respect of the
Equipment Notes and certain other payments shall be
distributed in the following order: (1) payment of
certain Liquidity Obligations; (2) payment of
Expected Distributions to the holders of Class A
Certificates; (3) payment of Expected Distributions
to the holders of Class B Certificates; (4) payment
of Expected Distributions to the holders of Class C
Certificates; (5) payment of Expected Distributions
to the holders of Class D Certificates and (6)
payment of certain fees and expenses of the
Subordination Agent and the Trustees.
"Expected Distributions" means, with respect to the
Certificates of any Trust on any Distribution Date
(the "Current Distribution Date"), the sum of (x)
accrued and unpaid interest on such Certificates
and (y) the difference between (A) the Pool Balance
of such Certificates as of the immediately
preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date,
the original aggregate face amount of the
Certificates of such Trust), and (B) the Pool
Balance of such Certificates as of the Current
Distribution Date calculated on the basis that (i)
the principal of the Equipment Notes held in such
Trust has been paid when due (whether at stated
maturity, upon redemption, prepayment or
acceleration or otherwise) and such payments have
been distributed to the holders of such
Certificates and (ii) the principal of any
Equipment Notes formerly held in such Trust that
have been sold pursuant to the Intercreditor
Agreement has been paid in full and such payments
have been distributed to the holders of such
Certificates.
(iii) Upon the occurrence of a Triggering Event and
at all times thereafter, all payments received by
the Subordination Agent in respect of the Equipment
Notes and certain other payments shall be
distributed in the following order: (1) to the
Subordination Agent, the Trustees and
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certain other parties in payment of the
Administration Expenses and to the Liquidity
Provider in payment of the Liquidity Obligations;
(2) to the holders of Class A Certificates in
payment of Adjusted Expected Distributions; (3) to
the holders of Class B Certificates in payment of
Adjusted Expected Distributions; (4) to the holders
of Class C Certificates in payment of Adjusted
Expected Distributions; and (5) to the holders of
Class D Certificates in payment of Adjusted
Expected Distributions.
"Adjusted Expected Distributions" means, with
respect to the Certificates of any Trust on any
Distribution Date, the sum of (1) accrued and
unpaid interest on such Certificates and (2) the
greater of:
(A) the difference between (x) the Pool Balance of
such Certificates as of the immediately preceding
Distribution Date (or, if the Current Distribution
Date is the first Distribution Date, the original
aggregate face amount of the Certificates of such
Trust) and (y) the Pool Balance of such
Certificates as of the Current Distribution Date
calculated on the basis that (i) the principal of
the Equipment Notes other than Performing Equipment
Notes (the "Non-Performing Equipment Notes") held
in such Trust has been paid in full and such
payments have been distributed to the holders of
such Certificates, (ii) the principal of the
Performing Equipment Notes held in such Trust has
been paid when due (but without giving effect to
any unpaid acceleration of Performing Equipment
Notes) and such payments have been distributed to
the holders of such Certificates and (iii) the
principal of any Equipment Notes formerly held in
such Trust that have been sold pursuant to the
Intercreditor Agreement has been paid in full and
such payments have been distributed to the holders
of such Certificates, and
(B) the amount of the excess, if any, of (i) the
amount described in sub-clause (A)(x), over (ii)
the Aggregate LTV Collateral Amount for such Class
of Certificates for the Current Distribution Date;
provided that, until the date of the initial LTV
Appraisals, clause (B) shall not apply.
For purposes of calculating Expected Distributions
or Adjusted Expected Distributions with respect to
the Certificates of any Trust, any premium paid on
the Equipment Notes held in such Trust that has not
been distributed to the Certificateholders of such
Trust (other than such premium or a portion thereof
applied to the payment of interest on the
Certificates of such Trust or the reduction of the
Pool Balance of such Trust) shall be added to the
amount of Expected Distributions or Adjusted
Expected Distributions.
"Aggregate LTV Collateral Amount" for any Class of
Certificates for any Distribution Date means the
sum of the applicable LTV Collateral Amounts for
each Aircraft, minus the Pool Balance for each
Class of Certificates, if any, senior to such
Class, after giving effect to any distribution on
such Distribution Date of principal on such senior
Class or Classes.
"LTV Collateral Amount" of any Aircraft for any
Class of Certificates means, as of any Distribution
Date, the lesser of (i) the LTV Ratio for such
Class of Certificates multiplied by the Appraised
Current Market
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Value of such Aircraft (or with respect to any such
Aircraft which has suffered an Event of Loss under
and as defined in the relevant Indenture, the
amount of the insurance proceeds paid to the
related Loan Trustee and/or the Second Mortgagee in
respect thereof to the extent then held by such
Loan Trustee and/or the Second Mortgagee (and/or on
deposit in the Special Payments Account) or payable
to such Loan Trustee and/or the Second Mortgagee in
respect thereof) and (ii) the outstanding principal
amount of the Equipment Notes secured by such
Aircraft after giving effect to any principal
payments of such Equipment Notes on or before such
Distribution Date.
"LTV Ratio" means for the Class A Certificates
41.00%, for the Class B Certificates 55.00%, for
the Class C Certificates 69.90% and for the Class D
Certificates 84.89%.
"Appraised Current Market Value" of any Aircraft
means the lower of the average and the median of
the most recent three Appraisals of such Aircraft.
After a Triggering Event occurs and any Equipment
Note becomes a Non-Performing Equipment Note, the
Subordination Agent shall obtain Appraisals for the
Aircraft (the "LTV Appraisals") as soon as
practicable and additional LTV Appraisals on or
prior to each anniversary of the date of such
initial LTV Appraisals; provided that if the
Controlling Party reasonably objects to the
appraised value of the Aircraft shown in such LTV
Appraisals, the Controlling Party shall have the
right to obtain or cause to be obtained substitute
LTV Appraisals (including LTV Appraisals based upon
physical inspection of such Aircraft).
(b) Intercreditor Rights... Pursuant to the Intercreditor Agreement, the
Trustees and the Liquidity Provider have agreed
that, with respect to any Indenture and (in the
case of clause (b) below) the Second Indenture at
any given time, the Loan Trustee or the Second
Mortgagee, as the case may be, will be directed (a)
in taking, or refraining from taking, any action
thereunder or with respect to the Equipment Notes
issued thereunder, by the holders of at least a
majority of the outstanding principal amount of
such Equipment Notes as long as no Indenture
Default has occurred and is continuing thereunder
and (b) subject to certain conditions, in taking,
or refraining from taking, any action under such
Indenture (including exercising remedies
thereunder, such as acceleration of such Equipment
Notes or foreclosing the lien on the Aircraft
securing such Equipment Notes) or the Second
Indenture, by the Controlling Party insofar as an
Indenture Default under such Indenture has occurred
and is continuing.
"Controlling Party" with respect to any Indenture
and the Second Indenture means: (w) the Trustee for
the Class A Trust (the "Class A Trustee"); (x) upon
payment of Final Distributions to the holders of
Class A Certificates, the Trustee for the Class B
Trust (the "Class B Trustee"); (y) upon payment of
Final Distributions to the holders of Class B
Certificates, the Trustee for the Class C Trust
(the "Class C Trustee"); and (z) upon payment of
Final Distributions to the holders of Class C
Certificates, the Trustee for the Class D Trust
(the "Class D Trustee"). See "Description of the
New Certificates -- Indenture Defaults and Certain
Rights Upon an Indenture Default" for a description
of the rights of the Certificateholders of each
Trust to direct the respective Trustees.
Notwithstanding the foregoing, at any time after 18
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months from the earlier to occur of (x) the date on
which the entire available amount under any
Liquidity Facility shall have been drawn (for any
reason other than a Downgrade Drawing or (with
respect to any Replacement Facility) a
Non-Extension Drawing) and remain unreimbursed and
(y) the date on which all Equipment Notes shall
have been accelerated, the Liquidity Provider shall
have the right to become the Controlling Party with
respect to such Indenture. For purposes of giving
effect to the foregoing, the Trustees (other than
the Controlling Party) shall irrevocably agree (and
the Certificateholders (other than the
Certificateholders represented by the Controlling
Party) shall be deemed to agree by virtue of their
purchase of Certificates) to exercise their voting
rights as directed by the Controlling Party. For a
description of certain limitations on the
Controlling Party's rights to exercise remedies,
see "Description of the Equipment
Notes -- Remedies".
"Final Distributions" means, with respect to the
Certificates of any Trust on any Distribution Date,
the sum of (x) accrued and unpaid interest on such
Certificates and (y) the Pool Balance of such
Certificates as of the immediately preceding
Distribution Date.
(i) Upon the occurrence and during the continuation
of any Indenture Default under any Indenture, the
Controlling Party may accelerate and sell all (but
not less than all) of the Equipment Notes issued
under such Indenture to any person, subject to the
provisions of paragraph (ii) below. The proceeds of
such sale will be distributed pursuant to the
provisions of the Intercreditor Agreement.
(ii) So long as any Certificates are outstanding,
during nine months after the earlier of (x) the
acceleration of the Equipment Notes under any
Indenture or (y) the bankruptcy or insolvency of
Continental, without the consent of each Trustee,
no Aircraft subject to the lien of such Indenture
or such Equipment Notes may be sold, if the net
proceeds from such sale would be less than the
Minimum Sale Price for such Aircraft or such
Equipment Notes.
"Minimum Sale Price" means, with respect to any
Aircraft or the Equipment Notes issued in respect
of such Aircraft, at any time, the lesser of (1)
75% of the Appraised Current Market Value of such
Aircraft and (2) the aggregate outstanding
principal amount of such Equipment Notes, plus
accrued and unpaid interest thereon.
Certificates; Book-Entry
Registration............. The New Certificates of each Trust will be
represented by one or more permanent global
Certificates in definitive, fully registered form
and registered in the name of Cede & Co. ("Cede"),
as nominee of The Depository Trust Company ("DTC").
See "Description of the New Certificates -- Book
Entry; Delivery and Form".
Method of Distribution..... The persons in whose names the Certificates are
registered will be treated as the owners of such
Certificates for the purpose of receiving payments
of principal of and interest on such Certificates
and for all other purposes whatsoever. Therefore,
none of the Trustees, Continental, the Loan
Trustees, the Liquidity Provider or the
Subordination Agent has any direct responsibility
or liability for distributions or payments to
owners of beneficial interests in the Certificates
(the "Certificate Owners"). Distributions by the
Trustee in respect of Certificates registered in
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the name of Cede, as nominee of DTC, including the
final distribution of principal with respect to
such Certificates of any Trust, will be made in
same-day funds to DTC. DTC will in turn make
distributions in same-day funds to those
participants in DTC who are credited with ownership
of such Certificates ("DTC Participants") in
amounts proportionate to the amount of each such
DTC Participant's respective holdings of beneficial
interests in such Certificates. Corresponding
payments by the DTC Participants to beneficial
owners of such Certificates will be the
responsibility of such DTC Participants, and
Continental expects that they will be made in
accordance with customary industry practices. The
final distribution with respect to the Certificates
of any Trust will be made only upon surrender and
presentation thereof to the Trustee of such Trust.
See "Description of the New
Certificates -- Book-Entry; Delivery and Form".
Federal Income Tax
Consequences............. The exchange of New Certificates for Old
Certificates will not be a sale or exchange or
otherwise a taxable event for Federal income tax
purposes.
ERISA Considerations....... In general, employee benefit plans subject to Title
I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or Section 4975 of the
Internal Revenue Code of 1986, as amended (the
"Code") (or entities which may be deemed to hold
the assets of any such Plan) will be eligible to
purchase the Class A Certificates, subject to the
circumstances applicable to such Plans. Plans will
not be eligible to purchase Class B, Class C or
Class D Certificates, except that such Certificates
may be acquired with the assets of an insurance
company general account that may be deemed to
constitute Plan assets if the conditions of
Prohibited Transaction Class Exemption ("PTCE")
95-60 are satisfied. By its acceptance of a Class
B, Class C or Class D Certificate, each
Certificateholder will be deemed to have
represented and warranted that either (i) no Plan
assets have been used to purchase such Certificate
or (ii) the purchase and holding of such
Certificate is exempt from the prohibited
transaction restrictions of ERISA and Section 4975
of the Code pursuant to PTCE 95-60. See "ERISA
Considerations". Each Plan fiduciary (and each
fiduciary for a governmental or church plan subject
to rules similar to those imposed on Plans under
ERISA) should consult with its legal advisor
concerning an investment in any of the
Certificates.
STANDARD
MOODY'S & POOR'S
-------- ---------
Rating of the Liquidity Provider.... Short Term.......................... P-1 A-1+
Threshold Rating.................... Short Term.......................... P-1 A-1
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SELECTED FINANCIAL DATA
The following selected consolidated financial data for the years ended
December 31, 1996, 1995 and 1994 is derived from the audited consolidated
financial statements of the Company which is derived from the audited
consolidated financial statements incorporated by reference in the Prospectus.
The consolidated financial data of the Company for the three and six months
ended June 30, 1997 and 1996 is derived from its unaudited consolidated
financial statements incorporated by reference in the Prospectus, which include
all adjustments (consisting solely of normal recurring accruals) that the
Company considers necessary for the fair presentation of the financial position
and results of operations for these periods. Operating results for the three and
six months ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the year ending December 31, 1997. The Company's
selected consolidated financial data should be read in conjunction with, and are
qualified in their entirety by reference to, the consolidated financial
statements, including the notes thereto.
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ------------------ ---------------------------------
1997 1996 1997 1996 1996 1995 1994
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA AND RATIOS)
FINANCIAL DATA -- OPERATIONS:
Operating Revenue.............. $ 1,786 $ 1,639 $ 3,484 $ 3,128 $ 6,360 $ 5,825 $ 5,670
Operating Expenses............. 1,555 1,410 3,107 2,779 5,835(1) 5,440(2) 5,681
------- ------- ------- ------- ------- ------- -------
Operating Income (Loss)........ 231 229 377 349 525 385 (11)
Nonoperating Income Expense,
net.......................... (23) (23) (45) (48) (97) (75)(3) (640)(4)
------- ------- ------- ------- ------- ------- -------
Income (Loss) before Income
Taxes, Minority Interest and
Extraordinary Loss........... 208 206 332 301 428 310 (651)
Net Income (Loss).............. $ 128 $ 167 $ 202 $ 255 $ 319 $ 224 $ (613)
======= ======= ======= ======= ======= ======= =======
Earnings (Loss) per Common and
Common Equivalent Share(5)... $ 2.01 $ 2.53 $ 3.13 $ 3.90 $ 4.87 $ 3.60 $(11.88)
======= ======= ======= ======= ======= ======= =======
Earnings (Loss) per Common
Share Assuming Full
Dilution(5).................. $ 1.64 $ 2.04 $ 2.58 $ 3.25 $ 4.11 $ 3.15 $(11.88)
======= ======= ======= ======= ======= ======= =======
Ratio of Earnings to Fixed
Charges(6)................... 2.48 2.57 2.18 2.13 1.81 1.53 --
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ------------------ -------------------------------
1997 1996 1997 1996 1996 1995 1994
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS OF DOLLARS, EXCEPT PER SHARE DATA AND RATIOS)
OPERATING DATA (JET OPERATIONS
ONLY):(7)
Revenue passenger miles
(millions)(8).................. 11,922 10,527 22,813 20,279 41,914 40,023 41,588
Available seat miles
(millions)(9).................. 16,486 15,152 32,318 29,703 61,515 61,006 65,861
Passenger load factor(10)........ 72.3% 69.5% 70.6% 68.3% 68.1% 65.6% 63.1%
Breakeven passenger load
factor(11)..................... 62.4% 59.4% 62.3% 60.2% 60.7%(14) 60.8% 62.9%
Passenger revenue per available
seat mile (cents)(12).......... 9.31 9.35 9.30 9.13 8.93 8.20 7.22
Operating cost per available seat
mile (cents)(13)............... 8.90 8.81 9.08 8.86 8.77(14) 8.36 7.86
Average yield per revenue
passenger mile (cents)(15)..... 12.87 13.46 13.17 13.37 13.10 12.51 11.44
Average length of aircraft flight
(miles)........................ 944 888 935 882 896 836 727
(See footnotes on the following page.)
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JUNE 30, DECEMBER 31,
1997 1996
-------- ------------
(IN MILLIONS OF DOLLARS)
FINANCIAL DATA--BALANCE SHEET:
Assets:
Cash and Cash Equivalents, including restricted cash and
cash equivalents of $74 and $76, respectively(16).................... $ 994 $1,061
Other Current Assets................................................... 685 573
Total Property and Equipment, Net...................................... 1,885 1,596
Routes, Gates and Slots, Net........................................... 1,454 1,473
Other Assets, Net...................................................... 498 503
------ ------
Total Assets................................................. $5,516 $5,206
====== ======
Liabilities and Stockholders' Equity:
Current Liabilities.................................................... $2,324 $2,104
Long-term Debt and Capital Leases...................................... 1,581 1,624
Deferred Credits and Other Long-term Liabilities....................... 655 594
Minority Interest(17).................................................. 15 15
Continental-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust Holding Solely Convertible Subordinated
Debentures(18)....................................................... 242 242
Redeemable Preferred Stock(8).......................................... -- 46
Common Stockholders' Equity............................................ 699 581
------ ------
Total Liabilities and Stockholders' Equity................... $5,516 $5,206
====== ======
- ---------------
(1) The $128 million fleet disposition charge recorded in 1996 is associated
primarily with the Company's decision to accelerate the replacement of its
DC-9-30, DC-10-10, 727-200, 737-100, and 737-200 aircraft. In connection
with its decision to accelerate the replacement of such aircraft, the
Company wrote down its Stage 2 aircraft inventory that is not expected to
be consumed through operations to its estimated fair value and recorded a
provision for costs associated with the return of leased aircraft at the
end of their respective lease terms.
(2) Includes a $20 million cash payment in 1995 by the Company in connection
with a 24-month collective bargaining agreement entered into by the Company
and the Independent Association of Continental Pilots.
(3) Includes a pre-tax gain of $108 million ($30 million after tax) on the
series of transactions by which the Company and its subsidiary, Continental
CRS Interests, Inc., transferred certain assets and liabilities relating to
the computerized reservation business of such subsidiary to a newly-formed
limited liability company and the remaining assets and liabilities were
sold.
(4) Includes a provision of $447 million recorded in 1994 associated with the
planned early retirement of certain aircraft and closed or underutilized
airport and maintenance facilities and other assets.
(5) In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 -- "Earnings per Share" ("SFAS
128") which specifies the computation, presentation and disclosure
requirements for earnings per share ("EPS"). SFAS 128 replaces the
presentation of primary and fully diluted EPS pursuant to Accounting
Principles Board Opinion No. 15 -- "Earnings per Share" ("APB 15") with the
presentation of basic and diluted EPS. The Company is required to adopt
SFAS 128 with its December 31, 1997 financial statements and restate all
prior period EPS data. The Company will continue to account for EPS
pursuant to APB 15 until that time.
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UNDER SFAS 128, THE COMPANY'S BASIC AND DILUTED EPS WERE:
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30, FOR THE YEARS ENDED
-------------- -------------- -------------------------
1997 1996 1997 1996 1996 1995 1994
----- ----- ----- ----- ----- ----- -------
Basic EPS........................ $2.22 $3.05 $3.50 $4.65 $5.75 $4.07 $(11.88)
Diluted EPS...................... $1.63 $2.09 $2.58 $3.31 $4.17 $3.37 $(11.88)
(6) For purposes of calculating this ratio, earnings consist of earnings before
taxes, minority interest and extraordinary loss plus interest expense (net
of capitalized interest), the portion of rental expense representative of
interest expense and amortization on previously capitalized interest. Fixed
charges consist of interest expense and the portion of rental expense
representative of interest expense. For the year ended December 31, 1994,
earnings were inadequate to cover fixed charges and the coverage deficiency
was $667 million.
(7) Includes operating data for CMI, but does not include operating data for
Express' regional jet operations or turboprop operations.
(8) The number of scheduled miles flown by revenue passengers.
(9) The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
(10) Revenue passenger miles divided by available seat miles.
(11) The percentage of seats that must be occupied by revenue passengers in
order for the airline to break even on an income before income taxes basis,
excluding nonoperating items.
(12) Passenger revenue divided by available seat miles.
(13) Operating expenses divided by available seat miles.
(14) Excluded a $128 million fleet disposition charge. See Note (1) for
description of the fleet disposition charge.
(15) The average revenue received for each mile a revenue passenger is carried.
(16) Restricted cash and cash equivalents agreements relate primarily to
workers' compensation claims and the terms of certain other agreements.
(17) In July 1997, the Company purchased the minority interest holder's 9%
interest in Air Micronesia, Inc., the parent of CMI. See "Risk
Factors -- Risk Factors Relating to the Company".
(18) The sole assets of such Trust are convertible subordinated debentures, with
an aggregate principal amount of $250 million, which bear interest at the
rate of 8 1/2% per annum and mature on December 1, 2020. Upon repayment,
the Continental-Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trust will be mandatorily redeemed.
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RISK FACTORS
Holders of Old Certificates should carefully consider the following risk
factors, as well as other information set forth in this Prospectus, before
tendering their Old Certificates in the Exchange Offer. The risk factors set
forth below (other than "-- Risk Factors Relating to the Certificates and the
Offering -- Consequences of Failure to Exchange") are generally applicable to
the Old Certificates as well as the New Certificates.
RISK FACTORS RELATING TO THE COMPANY
Leverage and Liquidity
Continental is more leveraged and has significantly less liquidity than
certain of its competitors, several of whom have available lines of credit
and/or significant unencumbered assets. Accordingly, Continental may be less
able than certain of its competitors to withstand a prolonged recession in the
airline industry and may not have the flexibility to respond to changing
economic conditions or to exploit new business opportunities.
During the first and second quarters of 1995, in connection with
negotiations with various lenders and lessors, Continental ceased or reduced
contractually required payments under various agreements, which produced a
significant number of events of default under debt, capital lease and operating
lease agreements. Through agreements reached with the various lenders and
lessors, Continental cured all of these events of default. The last such
agreement was put in place during the fourth quarter of 1995.
As of June 30, 1997, Continental had approximately $1.9 billion (including
current maturities) of long-term debt and capital lease obligations and had
approximately $1.0 billion of minority interest, Continental-obligated
mandatorily redeemable preferred securities of subsidiary trust and common
stockholders' equity. Common stockholders' equity reflects the adjustment of the
Company's balance sheet and the recording of assets and liabilities at fair
market value as of April 27, 1993 in accordance with the American Institute of
Certified Public Accountants' Statement of Position 90-7 -- "Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code" ("SOP 90-7").
As of June 30, 1997, Continental had $920 million in cash and cash
equivalents (excluding restricted cash and cash equivalents of $74 million).
Continental has significant encumbered assets.
For 1997, Continental expects to incur cash expenditures under operating
leases relating to aircraft of approximately $631 million, compared to $568
million for 1996, and approximately $232 million relating to facilities and
other rentals, compared to $210 million in 1996. In addition, Continental has
capital requirements relating to compliance with regulations that are discussed
below. See "-- Risk Factors Relating to the Airline Industry -- Regulatory
Matters".
As of September 18, 1997, the Company had firm commitments with The Boeing
Company ("Boeing") to take delivery of a total of 122 principally narrowbody jet
aircraft during the years 1997 through 2003 with options for an additional 85
aircraft (exercisable subject to certain conditions). These aircraft will
replace older, less efficient Stage 2 aircraft and allow for growth of
operations. In addition, the Company has recently signed an agreement with
Boeing to purchase 35 new widebody jet aircraft. This new order consists of five
firm Boeing 777-200 aircraft and 30 firm Boeing 767-400ER aircraft, with options
for six additional 777 aircraft. The new widebody aircraft will replace
Continental's fleet of DC10-10 and DC10-30 aircraft, which will be retired as
the new Boeing aircraft are delivered, and will also be used to expand the
airline's international and transcontinental service. The ten firm delivery 777
aircraft (including five aircraft the Company already had on order, the
deliveries of which will be accelerated) will be delivered in September 1998
through May 1999, and the thirty firm delivery 767 aircraft will be delivered
starting in mid-2000 through the end of 2004. In connection with this new order,
the Company will obtain the flexibility to substitute certain aircraft on order
with Boeing and will obtain other benefits. The Company currently anticipates
substituting 777 aircraft for certain of the 767 aircraft. The Company's
agreement with Boeing provides that the Company will purchase from Boeing the
carrier's requirements for new jet aircraft (other than regional jets) over the
next twenty years, subject to certain conditions. However, Boeing has agreed
with the European Commission not to
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enforce such provision. The Company requested a business offer from Boeing which
would include the requirements commitment in order to obtain more favorable
terms and flexibility.
The estimated aggregate cost of the Company's firm commitments for the 122
Boeing aircraft previously ordered and the 35 widebody aircraft included in the
recent Boeing agreement is approximately $7 billion. The Company has completed
or has third party commitments for a total of approximately $548 million in
financing for its future narrowbody Boeing deliveries, and has commitments or
letters of intent from various sources for backstop financing for approximately
one-fourth of the anticipated acquisition cost of its future narrowbody and
widebody Boeing deliveries. The Company currently plans on financing the new
Boeing aircraft with enhanced equipment trust certificates or similar financing
and lease equity, subject to availability and market conditions. However,
further financing will be needed to satisfy the Company's capital commitments
for other aircraft and aircraft-related expenditures such as engines, spare
parts, simulators and related items. There can be no assurance that sufficient
financing will be available for all aircraft and other capital expenditures not
covered by firm financing commitments. Deliveries of new Boeing aircraft are
expected to increase aircraft rental, depreciation and interest costs while
generating cost savings in the areas of maintenance, fuel and pilot training.
Continental has also entered into agreements or letters of intent with
several outside parties to lease three, and purchase one DC-10-30 aircraft and
will take delivery of such aircraft in 1997.
In September 1996, Express placed an order for 25 firm EMB-145ER regional
jets, with options for an additional 175 aircraft. In June 1997, Express
exercised its option to order 25 of such option aircraft. Express now has
options for an additional 150 regional jets exercisable at the election of the
Company over the next 12 years. Neither Express nor Continental will have any
obligation to take such aircraft that are not financed by a third party and
leased to the Company. Express has taken delivery of 12 of the firm aircraft
through September 18, 1997 and will take delivery of the remaining 38 firm
aircraft through the third quarter of 1999. The Company expects to account for
all of these aircraft as operating leases.
In July 1997, Continental entered into a $575 million credit facility (the
"Credit Facility"), including a $275 million five-year term loan. The proceeds
of the term loan were loaned by Continental to its wholly owned subsidiary, Air
Micronesia, Inc. ("AMI"), the parent of CMI, reloaned to CMI and used by CMI to
prepay its existing secured term loan. In connection with this prepayment,
Continental recorded a $4 million after-tax extraordinary charge to consolidated
earnings in the third quarter of 1997. The Credit Facility also includes a $225
million revolving credit facility and a $75 million seven-year term loan for
general corporate purposes.
The Credit Facility is secured by substantially all of CMI's assets (other
than aircraft subject to other financing arrangements) but does not contain any
financial covenants relating to CMI other than covenants restricting CMI's
incurrence of certain indebtedness and pledge or sale of assets. AMI's rights
with respect to its loan to CMI and Continental's rights with respect to its
loan to AMI (as well as Continental's stock in AMI and AMI's stock in CMI) are
pledged as collateral for loans to Continental under the Credit Facility. CMI
and AMI have guaranteed Continental's obligations under the Credit Facility. In
addition, the Credit Facility contains certain financial covenants applicable to
Continental comparable to those contained in the Facility discussed below and
prohibits Continental from granting a security interest on certain of its
international route authorities and domestic slots.
In July 1997, the Company purchased the rights of United Micronesia
Development Association, Inc. ("UMDA") to receive future payments under a
services agreement between UMDA and CMI (pursuant to which CMI was to pay UMDA
approximately 1% of the gross revenues of CMI, as defined, through January 1,
2012, which payment by CMI to UMDA totaled $6 million in 1996) and UMDA's 9%
interest in AMI, terminated the Company's obligations to UMDA under a settlement
agreement entered into in 1987, and terminated substantially all of the other
contractual arrangements between the Company, AMI and CMI, on the one hand, and
UMDA on the other hand, for an aggregate consideration of $73 million.
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In April 1997, Continental consummated a $160 million floating rate (LIBOR
plus 1.125% or prime) secured revolving credit facility (the "Facility"). The
revolving loans made under the Facility will be used for the purpose of making
certain predelivery payments to Boeing for new Boeing aircraft to be delivered
through December 1999. The Facility contains certain financial covenants,
including maintenance of a minimum fixed charge ratio, a minimum net worth and a
minimum unrestricted cash balance. Continental is also restricted from making
cash dividends and certain other payments.
In March 1997, Continental completed an offering of $707 million of pass
through certificates. The pass through certificates are not direct obligations
of, or guaranteed by, Continental and are therefore not included in the
consolidated financial statements, incorporated by reference herein. The cash
proceeds from the transaction were deposited with an escrow agent and will be
used to finance (through either leveraged leases or secured debt financings) the
debt portion of the acquisition cost of up to 30 new aircraft from Boeing
scheduled to be delivered to Continental through February 1998. In connection
therewith, owner participants have committed to approximately $184 million of
equity financing to be used in leveraged leases of 27 of such aircraft. If any
funds remain as deposits with the escrow agent for such pass through
certificates at the end of the delivery period (which may be extended to June
1998), such funds will be distributed back to the certificate holders. Such
distribution will include a make-whole premium payable by Continental.
Management believes that the likelihood that the Company would be required to
pay a material make-whole premium is remote.
In June 1997, the Company acquired 10 aircraft previously leased by it. The
debt financing for the acquisition of the six Boeing 737-300 aircraft and the
four McDonnell Douglas MD-82 aircraft was funded by the private placement of
$155 million of pass through certificates. The pass through certificates were
issued by separate pass through trusts that acquired equipment trust notes
issued on a recourse basis by Continental.
The Company has announced plans to expand its facilities at its Hopkins
International Airport hub in Cleveland, which expansion is expected to be
completed in the first quarter of 1999. The expansion, which will include a new
jet concourse for the new regional jet service offered by Express, as well as
other facility improvements, is expected to cost approximately $120 million,
which the Company expects will be funded principally by the issuance of a
combination of tax-exempt special facilities revenue bonds and general airport
revenue bonds by the City of Cleveland. In connection therewith, the Company
expects to enter into long-term leases with the City of Cleveland under which
rental payments will be sufficient to service the related bonds.
In April 1997, the City of Houston (the "City") completed the offering of
$190 million aggregate principal amount of tax-exempt special facilities revenue
bonds (the "IAH Bonds") payable solely from rentals paid by Continental under
long-term lease agreements with the City. The IAH Bonds are unconditionally
guaranteed by the Company. The proceeds from the IAH Bonds are being used to
finance the acquisition, construction and installation of certain terminal and
other airport facilities located at Continental's hub at George Bush
Intercontinental Airport in Houston, including a new automated people mover
system linking Terminals B and C and 20 aircraft gates in Terminal B into which
Continental intends to expand its operations. The expansion project is expected
to be completed by the summer of 1999.
Continental's History of Operating Losses
Although Continental recorded net income of $202 million for the six months
ended June 30, 1997, $319 million in 1996 and $224 million in 1995, it had
experienced significant operating losses in the previous eight years. In the
long term, Continental's viability depends on its ability to sustain profitable
results of operations.
Aircraft Fuel
Since fuel costs constitute a significant portion of Continental's
operating costs (approximately 14.1% for the six months ended June 30, 1997 and
13.3% for the year ended December 31, 1996), significant changes in fuel costs
would materially affect the Company's operating results. Fuel prices continue to
be susceptible to international events, and the Company cannot predict near or
longer-term fuel prices. The Company enters
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into petroleum option contracts to provide some short-term protection (generally
three to six months) against a sharp increase in jet fuel prices. In the event
of a fuel supply shortage resulting from a disruption of oil imports or
otherwise, higher fuel prices or curtailment of scheduled service could result.
Labor Matters
In April 1997, the Company began collective bargaining agreement
negotiations with its Continental Airlines pilots, whose contract became
amendable in July 1997, and Express pilots, whose contract became amendable in
October 1997. Negotiations are in progress to amend these contracts. The Company
believes that mutually acceptable agreements can be reached with such employees,
although the ultimate outcome of the negotiations is unknown at this time. The
Company's mechanics and related employees recently voted to be represented by
the International Brotherhood of Teamsters (the "Teamsters"). The Company does
not believe that the Teamsters' union representation will be material to the
Company. In September 1997, the Company announced that it intends to bring all
employees to industry standard wages (the average of the top ten air carriers as
ranked by the Department of Transportation excluding Continental) within the
next 36 months. The Company stated that it would phase in wage increases over
the 36-month period as its revenue, interest rates and rental rates reached
industry standards. The Company estimates that the increased wages will
aggregate approximately $500 million over the 36-month period.
Certain Tax Matters
At December 31, 1996 the Company had estimated net operating loss
carryforwards ("NOLs") of $2.3 billion for federal income tax purposes that will
expire through 2009 and federal investment tax credit carry forwards of $45
million that will expire through 2001.
The Company had, as of December 31, 1996, deferred tax assets aggregating
$1.3 billion, including $804 million of NOLs. The Company recorded a valuation
allowance of $694 million against such assets as of December 31, 1996. The
Company consummated several built-in-gain transactions, which resulted in the
realization of tax benefits related to NOLs and investment tax credit
carryforwards attributable to the Company's predecessor that were previously
recorded. To the extent the Company consummates additional built-in-gain
transactions, such benefits will reduce the valuation allowance and
reorganization value in excess of amounts allocable to identifiable assets. If
such reorganization value is exhausted, reductions in the valuation allowance
would decrease other intangibles.
As a result of NOLs, the Company will not pay United States federal income
taxes (other than alternative minimum tax) until it has recorded approximately
an additional $1.1 billion of taxable income following December 31, 1996.
Section 382 of the Internal Revenue Code ("Section 382") imposes limitations on
a corporation's ability to utilize NOLs if it experiences an "ownership change."
In general terms, an ownership change may result from transactions increasing
the ownership of certain stockholders in the stock of a corporation by more than
50 percentage points over a three-year period. In the event that an ownership
change should occur, utilization of Continental's NOLs would be subject to an
annual limitation under Section 382 determined by multiplying the value of the
Company's stock at the time of the ownership change by the applicable long-term
tax-exempt rate (which is 5.33% for October 1997). Unused annual limitation may
be carried over to later years, and the amount of the limitation may under
certain circumstances be increased by the built-in gains in assets held by the
Company at the time of the change that are recognized in the five-year period
after the change. Under current conditions, if an ownership change were to
occur, Continental's annual NOL utilization would be limited to approximately
$130 million per year.
Continental Micronesia
Because the majority of CMI's traffic originates in Japan, its results of
operations are substantially affected by the Japanese economy and changes in the
value of the yen as compared to the dollar. Appreciation of the yen against the
dollar during 1994 and 1995 increased CMI's profitability while a decline of the
yen against the dollar in 1996 and 1997 to date have reduced CMI's
profitability. As a result of the recent weakness of the yen against the dollar
and increased fuel costs, CMI's operating earnings declined during the
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past four quarters as compared to similar periods a year ago, and are not
expected to improve materially absent a stronger yen or reduced fuel costs.
To reduce the potential negative impact on CMI's dollar earnings, CMI, from
time to time, purchases average rate options as a hedge against a portion of its
expected net yen cash flow position. Such options historically have not had a
material effect on the Company's results of operations or financial condition.
Any significant and sustained decrease in traffic or yields (including due to
the value of the yen) to and from Japan could materially adversely affect
Continental's consolidated profitability.
Principal Stockholder
As of September 18, 1997, Air Partners, L.P., a Texas limited partnership
and major stockholder of the Company ("Air Partners"), held approximately 9.4%
of the common equity interest and 40.8% of the general voting power of the
Company. If all the remaining warrants held by Air Partners had been exercised
on September 18, 1997, approximately 13.8% of the common equity interest and
51.7% of the general voting power of the Company would have been held by Air
Partners. Various provisions in the Company's Certificate of Incorporation and
Bylaws currently provide Air Partners with the right to elect one-third of the
directors in certain circumstances; these provisions could have the effect of
delaying, deferring or preventing a change in the control of the Company.
RISK FACTORS RELATING TO THE AIRLINE INDUSTRY
Industry Conditions and Competition
The airline industry is highly competitive and susceptible to price
discounting. The Company has in the past both responded to discounting actions
taken by other carriers and initiated significant discounting actions itself.
Continental's competitors include carriers with substantially greater financial
resources (and in certain cases, lower cost structures), as well as smaller
carriers with low cost structures. Airline profit levels are highly sensitive
to, and during recent years have been severely impacted by, changes in fuel
costs, fare levels (or "average yield") and passenger demand. Passenger demand
and yields have been affected by, among other things, the general state of the
economy, international events and actions taken by carriers with respect to
fares. From 1990 to 1993, these factors contributed to the domestic airline
industry's incurring unprecedented losses. Although fare levels have increased
subsequently, fuel costs have also increased significantly. In addition,
significant industry-wide discounts could be reimplemented at any time, and the
introduction of broadly available, deeply discounted fares by a major United
States airline would likely result in lower yields for the entire industry and
could have a material adverse effect on the Company's operating results.
The airline industry has consolidated in past years as a result of mergers
and liquidations and may further consolidate in the future. Among other effects,
such consolidation has allowed certain of Continental's major competitors to
expand (in particular) their international operations and increase their market
strength. Furthermore, the emergence in recent years of several new carriers,
typically with low cost structures, has further increased the competitive
pressures on the major United States airlines. In many cases, the new entrants
have initiated or triggered price discounting. Aircraft, skilled labor and gates
at most airports continue to be readily available to start-up carriers.
Competition with new carriers or other low cost competitors on Continental's
routes could negatively impact Continental's operating results.
Regulatory Matters
In the last several years, the United States Federal Aviation
Administration (the "FAA") has issued a number of maintenance directives and
other regulations relating to, among other things, retirement of older aircraft,
security measures, collision avoidance systems, airborne windshear avoidance
systems, noise abatement, commuter aircraft safety and increased inspections and
maintenance procedures to be conducted on older aircraft. The Company expects to
continue incurring expenses for the purpose of complying with the FAA's noise
and aging aircraft regulations. In addition, several airports have recently
sought to increase substantially the rates charged to airlines, and the ability
of airlines to contest such increases has been restricted by federal
legislation, DOT regulations and judicial decisions.
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Management believes that the Company benefited significantly from the
expiration of the aviation trust fund tax (the "ticket tax") on December 31,
1995. The ticket tax was reinstated on August 27, 1996, expired on December 31,
1996 and was reinstated again on March 7, 1997. Congress recently passed tax
legislation reimposing and significantly modifying the ticket tax. The
legislation includes the imposition of new excise tax and segment fee tax
formulas to be phased in over a multi-year period, an increase in the
international departure tax and the imposition of a new arrivals tax, and the
extension of the ticket tax to cover items such as the sale of frequent flyer
miles. Management believes that the ticket tax has a negative impact on the
Company, although neither the amount of such negative impact directly resulting
from the reimposition of the ticket tax, nor the benefit realized by its
expiration, can be precisely determined.
Additional laws and regulations have been proposed from time to time that
could significantly increase the cost of airline operations by imposing
additional requirements or restrictions on operations. Laws and regulations have
also been considered that would prohibit or restrict the ownership and/or
transfer of airline routes or takeoff and landing slots. Also, the availability
of international routes to United States carriers is regulated by treaties and
related agreements between the United States and foreign governments that are
amendable. Continental cannot predict what laws and regulations may be adopted
or their impact, but there can be no assurance that laws or regulations
currently proposed or enacted in the future will not adversely affect the
Company.
Seasonal Nature of Airline Business
Due to the greater demand for air travel during the summer months, revenue
in the airline industry in the third quarter of the year is generally
significantly greater than revenue in the first quarter of the year and
moderately greater than revenue in the second and fourth quarters of the year
for the majority of air carriers. Continental's results of operations generally
reflect this seasonality, but have also been impacted by numerous other factors
that are not necessarily seasonal, including the extent and nature of
competition from other airlines, fare wars, excise and similar taxes, changing
levels of operations, fuel prices, foreign currency exchange rates and general
economic conditions.
RISK FACTORS RELATING TO THE CERTIFICATES AND THE OFFERING
Consequences of Failure to Exchange
Holders of Old Certificates who do not exchange their Old Certificates for
New Certificates pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Old Certificates as set forth in the legend
thereon as a consequence of the issuance of the Old Certificates pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Old Certificates may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Company does not currently anticipate that it will register the Old
Certificates under the Securities Act. To the extent that Old Certificates are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Old Certificates could be adversely affected.
Appraisals and Realizable Value of Aircraft
Appraisals in respect of the Aircraft (without physical inspection thereof)
have been prepared by AISI, BK and MBA, and such appraisals are based on varying
assumptions and methodologies which differ among the Appraisers. The Appraisers
have delivered letters summarizing their respective reports, copies of which are
annexed to this Prospectus as Appendix II. See "Description of the Aircraft and
the Appraisals -- The Appraisals". The appraised value of each Aircraft, and
accordingly the initial aggregate Aircraft value as referred to herein, is based
upon the lesser of the average and median value of such Aircraft as appraised by
the Appraisers. Appraisals that are based on different assumptions and
methodologies may result in valuations that are materially different from those
contained in the appraisals of the Appraisers. An appraisal is only an estimate
of value and should not in any event be relied upon as a measure of realizable
value; the proceeds
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realized upon a sale of any Aircraft may be less than the appraised value
thereof. The value of the Aircraft in the event of the exercise of remedies
under the applicable Indenture will depend on market and economic conditions,
the supply of aircraft, the availability of buyers, the condition of the
Aircraft and other factors. Accordingly, there can be no assurance that the
proceeds realized upon any such exercise with respect to the Equipment Notes and
the Aircraft pursuant to the applicable Pass Through Trust Agreement and the
applicable Indenture would be sufficient to satisfy in full payments due on the
Certificates.
Priority of Distributions; Subordination
Certain provisions of the Intercreditor Agreement, which provides for the
subordination of the Class B Certificates to the Class A Certificates, the
subordination of the Class C Certificates to the Class B Certificates and the
subordination of the Class D Certificates to the Class C Certificates, may
result in the holders of subordinated Classes of Certificates receiving less
than the full amount due to them after the occurrence of a Triggering Event even
if all of the Equipment Notes are paid in full.
Pursuant to the Intercreditor Agreement to which the Trustees, the
Subordination Agent and the Liquidity Provider are parties, on each Distribution
Date, so long as no Triggering Event shall have occurred, all payments in
respect of Equipment Notes received by the Subordination Agent will be
distributed in the following order: (1) payment of certain Liquidity Obligations
to the Liquidity Provider; (2) payment of Expected Distributions to the holders
of Class A Certificates; (3) payment of Expected Distributions to the holders of
Class B Certificates; (4) payment of Expected Distributions to the holders of
Class C Certificates; (5) payment of Expected Distributions to the holders of
Class D Certificates; and (6) payment of certain fees and expenses of the
Subordination Agent and the Trustees.
In addition, upon the occurrence of a Triggering Event and at all times
thereafter, all payments received by the Subordination Agent in respect of the
Equipment Notes and certain other payments will be distributed under the
Intercreditor Agreement in the following order: (1) to the Subordination Agent,
the Trustee and certain other parties in payment of the Administration Expenses
and to the Liquidity Provider in payment of the Liquidity Obligations; (2) to
the holders of Class A Certificates in payment of Adjusted Expected
Distributions; (3) to the holders of Class B Certificates in payment of Adjusted
Expected Distributions; (4) to the holders of Class C Certificates in payment of
Adjusted Expected Distributions; and (5) to the holders of Class D Certificates
in payment of Adjusted Expected Distributions.
Accordingly, the priority of distributions after a payment default under
any Equipment Note will have the effect in certain circumstances of requiring
the distribution to more senior Classes of Certificates of payments received in
respect of one or more junior series of Equipment Notes. If this should occur,
the interest accruing on the remaining Equipment Notes would in the aggregate be
less than the interest accruing on the remaining Certificates because such
Certificates include a relatively greater proportion of junior Classes with
relatively higher interest rates. As a result of this possible interest
shortfall, the holders of one or more junior Classes of Certificates may not
receive the full amount due them after a payment default under any Equipment
Note even if all Equipment Notes are eventually paid in full.
Control over Collateral; Sale of Collateral
Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity
Provider have agreed that, with respect to any Indenture or (in the case of
clause (b) below) the Second Indenture at any given time, the Loan Trustee will
be directed (a) in taking, or refraining from taking, any action thereunder by
the holders of at least a majority of the outstanding principal amount of the
Equipment Notes issued thereunder as long as no Indenture Default has occurred
and is continuing thereunder and (b) subject to certain conditions, in
exercising remedies under such Indenture (including acceleration of such
Equipment Notes or foreclosing the lien on the Aircraft securing such Equipment
Notes) and the Second Indenture insofar as an Indenture Default has occurred and
is continuing under such Indenture, by the Controlling Party. See "Description
of the New Certificates -- Indenture Defaults and Certain Rights Upon an
Indenture Default" for a description of the rights of the Certificateholders of
each Trust to direct the respective Trustees. Notwithstanding the foregoing, at
any time after 18 months from the earlier to occur of (x) the date on which the
entire available
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amount under any Liquidity Facility shall have been drawn (for any reason other
than a Downgrade Drawing or a Non-Extension Drawing) and remain unreimbursed and
(y) the date on which all Equipment Notes shall have been accelerated, the
Liquidity Provider will have the right to elect to become the Controlling Party
with respect to such Indenture. For purposes of giving effect to the foregoing,
the Trustees (other than the Controlling Party) shall irrevocably agree, and the
Certificateholders (other than the Certificateholders represented by the
Controlling Party) shall be deemed to agree by virtue of their purchase of
Certificates, to exercise their voting rights as directed by the Controlling
Party. For a description of certain limitations on the Controlling Party's
rights to exercise remedies, see "Description of the Equipment
Notes -- Remedies".
Upon the occurrence and during the continuation of any Indenture Default
under any Indenture, the Controlling Party may accelerate and, subject to the
provisions described in the last sentence of this paragraph, sell all (but not
less than all) of the Equipment Notes issued under such Indenture to any person.
The market for Equipment Notes at the time of the existence of any Indenture
Default may be very limited, and there can be no assurance as to the price at
which they could be sold. If the Controlling Party sells any such Equipment
Notes for less than their outstanding principal amount, certain
Certificateholders will receive a smaller amount of principal distributions than
anticipated and will not have any claim for the shortfall against Continental or
any Trustee. So long as any Certificates are outstanding, during nine months
after the earlier of (x) the acceleration of the Equipment Notes under any
Indenture and (y) the bankruptcy or insolvency of Continental, without the
consent of each Trustee, no Aircraft subject to the lien of such Indenture or
such Equipment Notes may be sold, if the net proceeds from such sale would be
less than the Minimum Sale Price for such Aircraft or such Equipment Notes.
The Equipment Notes issued with respect to each Aircraft are entitled to a
second priority security interest on each of the other Aircraft as to which
Equipment Notes have been issued. However, since the second priority security
interest would not be entitled to the benefits of Section 1110 in a
reorganization under the Bankruptcy Code of Continental, the excess proceeds
realized from the disposition of any particular Aircraft might not immediately
be available to offset shortfalls on the Equipment Notes relating to any other
Aircraft, but rather would be held as cash collateral securing all of the
Equipment Notes subject to the lien of the Second Indenture. See "Description of
the Equipment Notes -- Remedies".
Absence of an Established Market
Prior to the Exchange Offer, there has been no public market for the
Certificates and neither Continental nor any Trust intends to apply for listing
of the Certificates on any national securities exchange or otherwise. Certain of
the Initial Purchasers have previously made a market in the Old Certificates and
Continental has been advised by the Initial Purchasers that both of them
presently intend to make a market in the New Certificates, as permitted by
applicable laws and regulations, after consummation of the Exchange Offer. None
of the Initial Purchasers is obligated, however, to make a market in the Old
Certificates or the New Certificates, and any such market-making activity may be
discontinued at any time without notice at the sole discretion of each Initial
Purchaser. There can be no assurance as to the liquidity of the public market
for the Certificates or that any active public market for the Certificates will
develop or continue. If an active public market does not develop or continue,
the market price and liquidity of the Certificates may be adversely affected.
USE OF PROCEEDS
There will be no cash proceeds payable to Continental from the issuance of
the New Certificates pursuant to the Exchange Offer. The proceeds from the sale
of the Old Certificates issued by each Trust were used to purchase Equipment
Notes issued by Continental to finance the purchase of the Aircraft.
RATIOS OF EARNINGS TO FIXED CHARGES
The following information for the year ended December 31, 1992 and for the
period January 1, 1993 through April 27, 1993 relates to Continental's
predecessor, Holdings. Information for the period April 28,
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1993 through December 31, 1993, for the years ended December 31, 1994, 1995 and
1996 and for the six months ended June 30, 1996 and 1997 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" ("SOP 90-7").
For the year ended December 31, 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 $131 million, $979 million, $60 million and $667
million would have been required to achieve ratios of earnings to fixed charges
of 1.0. The ratio of earnings to fixed charges for the years ended December 31,
1995 and December 31, 1996 was 1.53 and 1.81, respectively. The ratio of
earnings to fixed charges for the three months ended June 30, 1996 and 1997 was
2.57 and 2.48, and for the six months ended June 30, 1996 and 1997 was 2.13 and
2.18, respectively. For purposes of calculating this ratio, earnings consist of
earnings before taxes, minority interest and extraordinary items plus interest
expense (net of capitalized interest), the portion of rental expense
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.
THE EXCHANGE OFFER
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and reference is made to the
provisions of the Registration Rights Agreement, which has been filed as an
exhibit to the Registration Statement and a copy of which is available as set
forth under the heading "Available Information".
TERMS OF THE EXCHANGE OFFER
General
In connection with the issuance of the Old Certificates pursuant to a
Purchase Agreement dated as of June 17, 1997, between the Company and the
Initial Purchasers, the Initial Purchasers and their respective assignees became
entitled to the benefits of the Registration Rights Agreement.
Under the Registration Rights Agreement, the Company is obligated to use
its best efforts to (i) file the Registration Statement of which this Prospectus
is a part for a registered exchange offer with respect to an issue of new
certificates identical in all material respects to the Old Certificates within
120 days after June 25, 1997, the Issuance Date, (ii) cause the Registration
Statement to become effective under the Securities Act within 180 days after the
Issuance Date, (iii) cause the Registration Statement to remain effective until
the closing of the Exchange Offer and (iv) consummate the Exchange Offer within
210 calendar days after the Issuance Date. The Company will keep the Exchange
Offer open for a period of not less than 30 days. The Exchange Offer being made
hereby, if commenced and consummated within the time periods described in this
paragraph, will satisfy those requirements under the Registration Rights
Agreement.
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal (which together constitute the Exchange Offer),
all Old Certificates validly tendered and not withdrawn prior to 5:00 p.m., New
York City time, on the Expiration Date will be accepted for exchange. New
Certificates of the same class will be issued in exchange for an equal face
amount of outstanding Old Certificates accepted in the Exchange Offer. Old
Certificates may be tendered only in integral multiples of $1,000. This
Prospectus, together with the Letter of Transmittal, is being sent to all
registered holders as of [ ]. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Certificates being tendered for exchange.
However, the obligation to accept Old Certificates for exchange pursuant to the
Exchange Offer is subject to certain conditions as set forth herein under
"-- Conditions".
Old Certificates shall be deemed to have been accepted as validly tendered
when, as and if the Trustee has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the
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tendering holders of Old Certificates for the purposes of receiving the New
Certificates and delivering New Certificates to such holders.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, including the Exchange Offer
No-Action Letters (as defined on page 2 of this prospectus), the Company
believes that the New Certificates issued pursuant to the Exchange Offer in
exchange for Old Certificates may be offered for resale, resold or otherwise
transferred by holders thereof (other than a broker-dealer who acquired such Old
Certificates directly from the Trustee for resale pursuant to Rule 144A under
the Securities Act or any other available exemption under the Securities Act or
any holder that is an "affiliate" of the Company as defined under Rule 405 of
the Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Certificates
are acquired in the ordinary course of such holders' business and such holders
are not engaged in, and do not intend to engage in, a distribution of such New
Certificates and have no arrangement with any person participate in a
distribution of such New Certificates. By tendering the Old Certificates in
exchange for New Certificates, each holder, other than a broker-dealer, will
represent to the Company that: (i) it is not an affiliate of the Company (as
defined under Rule 405 of the Securities Act) nor a broker-dealer tendering Old
Certificates acquired directly from the Company for its own account; (ii) any
New Certificates to be received by it will be acquired in the ordinary course of
its business; and (iii) it is not engaged in, and does not intend to engage in,
a distribution of such New Certificates and has no arrangement or understanding
to participate in a distribution of the New Certificates. If a holder of Old
Certificates is engaged in or intends to engage in a distribution of the New
Certificates or has any arrangement or understanding with respect to the
distribution of the New Certificates to be acquired pursuant to the Exchange
Offer, such holder may not rely on the applicable interpretations of the staff
of the Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Each Participating Broker-Dealer that receives New Certificates for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New Certificates. The
Letter of Transmittal states that by so acknowledging and by delivering a
prospectus, a Participating Broker-Dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer in connection with resales of New Certificates
received in exchange for Old Certificates where such Old Certificates were
acquired by such Participating Broker-Dealer as a result of market-making
activities or other trading activities. The Company has agreed that, starting on
the Expiration Date and ending on the close of business 180 days after the
Expiration Date, it will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
In the event that any changes in law or the applicable interpretations of
the staff of the Commission do not permit Continental to effect the Exchange
Offer, if the Registration Statement is not declared effective within 180
calendar days after the Issuance Date under certain circumstances or the
Exchange Offer is not consummated within 210 days after the Issuance Date under
certain other circumstances, at the request of a holder not eligible to
participate in the Exchange Offer or under certain other circumstances described
in the Registration Rights Agreement, Continental will, in lieu of effecting the
registration of the New Certificates pursuant to the Registration Statement and
at no cost to the holders of Old Certificates, (a) as promptly as practicable
file with the Commission a shelf registration statement (the "Shelf Registration
Statement") covering resales of the Old Certificates, (b) use its best efforts
to cause the Shelf Registration Statement to be declared effective under the
Securities Act by the 180th calendar day after the Issuance Date and (c) use its
best efforts to keep effective the Shelf Registration Statement for a period of
two years after its effective date (or for such shorter period as shall end when
all of the Old Certificates covered by the Shelf Registration Statement have
been sold pursuant thereto or may be freely sold pursuant to Rule 144 under the
Securities Act).
In the event that neither the consummation of the Exchange Offer nor the
declaration by the Commission of the Shelf Registration Statement to be
effective (each a "Registration Event") occurs on or prior to the 210th calendar
day following the Issuance Date, the interest rate per annum borne by the
Equipment Notes shall be increased by 0.50% from and including such 210th day to
but excluding the earlier
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of (i) the date on which a Registration Event occurs and (ii) the date on which
all of the Certificates otherwise become transferable by Certificateholders
(other than affiliates or former affiliates of Continental) without further
registration under the Securities Act. In the event that the Shelf Registration
Statement ceases to be effective at any time during the period specified by the
Registration Rights Agreement for more than 60 days, whether or not consecutive,
during any 12-month period, the interest rate per annum borne by the Equipment
Notes shall be increased by 0.50% from the 61st day of the applicable 12-month
period such Shelf Registration Statement ceases to be effective until such time
as the Shelf Registration Statement again becomes effective (or, if earlier, the
end of such period specified by the Registration Rights Agreement).
Upon consummation of the Exchange Offer, subject to certain exceptions,
holders of Old Certificates who do not exchange their Old Certificates for New
Certificates in the Exchange Offer will no longer be entitled to registration
rights and will not be able to offer or sell their Old Certificates, unless such
Old Certificates are subsequently registered under the Securities Act (which,
subject to certain limited exceptions, the Company will have no obligation to
do), except pursuant to an exemption from, or in a transaction not subject to,
the Securities Act and applicable state securities laws. See "Risk
Factors -- Risk Factors Relating to the Certificates -- Consequences of Failure
to Exchange".
Expiration Date; Extensions; Amendments; Termination
The term "Expiration Date" shall mean [ ] (30 calendar days following the
commencement of the Exchange Offer), unless the Company, in its sole discretion,
extends the Exchange Offer, in which case the term "Expiration Date" shall mean
the latest date to which the Exchange Offer is extended. Notwithstanding any
extension of the Exchange Offer, if the Exchange Offer is not consummated by
January 21, 1998, the interest rate borne by the Equipment Notes is subject to
increase. See "-- General".
In order to extend the Expiration Date, the Company will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Certificates an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old
Certificates, to extend the Exchange Offer or to terminate the Exchange Offer
and not permit acceptance of Old Certificates not previously accepted if any of
the conditions set forth herein under "-- Conditions" shall have occurred and
shall not have been waived by the Company, by giving oral or written notice of
such delay, extension or termination to the Exchange Agent, or (ii) to amend the
terms of the Exchange Offer in any manner deemed by it to be advantageous to the
holders of the Old Certificates. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the Exchange Agent. If the Exchange Offer is amended
in a manner determined by the Company to constitute a material change, the
Company will promptly disclose such amendment in a manner reasonably calculated
to inform the holders of the Old Certificates of such amendment.
Without limiting the manner in which the Company may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, the Company shall have no obligation to publish, advertise, or otherwise
communicate any such public announcement, other than by making a timely release
to an appropriate news agency.
INTEREST ON THE NEW CERTIFICATES
The New Certificates will accrue interest at the applicable per annum rate
for such Trust set forth on the cover page of this Prospectus, from the Issuance
Date. Interest on the New Certificates is payable on June 30 and December 30 of
each year commencing upon the consummation of the Exchange Offer, subject to the
terms of the Intercreditor Agreement.
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PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. In addition, either (i) certificates for such Old
Certificates must be received by the Exchange Agent along with the Letter of
Transmittal, (ii) a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Certificates, if such procedure is available, into
the Exchange Agent's account at The Depository Trust Company (the "Book-Entry
Transfer Facility") pursuant to the procedure for book-entry transfer described
below, must be received by the Exchange Agent prior to the Expiration Date or
(iii) the holder must comply with the guaranteed delivery procedures described
below. THE METHOD OF DELIVERY OF OLD CERTIFICATES, LETTERS OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD CERTIFICATES
SHOULD BE SENT TO THE COMPANY. Delivery of all documents must be made to the
Exchange Agent at its address set forth below. Holders may also request their
respective brokers, dealers, commercial banks, trust companies or nominees to
effect such tender for such holders.
The tender by a holder of Old Certificates will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Only a holder of Old Certificates may tender such Old Certificates in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Old Certificates are registered on the books of the Company
or any other person who has obtained a properly completed bond power from the
registered holder.
Any beneficial owner whose Old Certificates are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on his behalf. If such beneficial owner wishes to
tender on his own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering his Old Certificates, either
make appropriate arrangements to register ownership of the Old Certificates in
such owner's name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by any member firm of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
a commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor" institution within the meaning of Rule
17Ad-15 under the Exchange Act (each an "Eligible Institution") unless the Old
Certificates tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Issuance Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Old Certificates listed therein, such Old Certificates
must be endorsed or accompanied by bond powers and a proxy which authorizes such
person to tender the Old Certificates on behalf of the registered holder, in
each case as the name of the registered holder or holders appears on the Old
Certificates.
If the Letter of Transmittal or any Old Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
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All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Certificates will be determined by
the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old
Certificates not properly tendered or any Old Certificates the acceptance of
which would, in the opinion of counsel for the Company, be unlawful. The Company
also reserves the absolute right to waive any irregularities or conditions of
tender as to particular Old Certificates. The Company's interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless waived,
any defects or irregularities in connection with tenders of Old Certificates
must be cured within such time as the Company shall determine. Neither the
Company, the Exchange Agent nor any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of Old
Certificates, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Certificates will not be deemed to have been made
until such irregularities have been cured or waived. Any Old Certificates
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
without cost to such holder by the Exchange Agent to the tendering holders of
Old Certificates, unless otherwise provided in the Letter of Transmittal, as
soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion, subject
to the provisions of the Pass Through Trust Agreements, to (i) purchase or make
offers for any Old Certificates that remain outstanding subsequent to the
Expiration Date or, as set forth under "-- Conditions," to terminate the
Exchange Offer in accordance with the terms of the Registration Rights Agreement
and (ii) to the extent permitted by applicable law, purchase Old Certificates in
the open market, in privately negotiated transactions or otherwise. The terms of
any such purchases or offers could differ from the terms of the Exchange Offer.
ACCEPTANCE OF OLD CERTIFICATES FOR EXCHANGE; DELIVERY OF NEW CERTIFICATES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
all Old Certificates properly tendered will be accepted, promptly after the
Expiration Date, and the New Certificates will be issued promptly after
acceptance of the Old Certificates. See "-- Conditions" below. For purposes of
the Exchange Offer, Old Certificates shall be deemed to have been accepted for
exchange when, as and if the Company has given oral or written notice thereof to
the Exchange Agent.
In all cases, issuance of New Certificates for Old Certificates that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Old Certificates
or a timely Book-Entry Confirmation of such Old Certificates into the Exchange
Agent's account at the Book-Entry Transfer Facility, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Old Certificates are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer or if Old Certificates are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
nonexchanged Old Certificates will be returned without expense to the tendering
holder thereof (or, in the case of Old Certificates tendered by book-entry
transfer procedures described below, such nonexchanged Old Certificates will be
credited to an account maintained with such Book-Entry Transfer Facility) as
promptly as practicable after the expiration or termination of the Exchange
Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Certificates at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Certificates by causing
the Book-Entry Transfer Facility to transfer such Old Certificates into the
Exchange Agent's account at the Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Old Certificates may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof
with any required signature guarantees and any other required documents must, in
any case, be transmitted to and received by the Exchange Agent at one of the
addresses set forth below under
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"-- Exchange Agent" on or prior to the Expiration Date or the guaranteed
delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the Old Certificates desires to tender such Old
Certificates, and the Old Certificates are not immediately available, or time
will not permit such holder's Old Certificates or other required documents to
reach the Exchange Agent before the Expiration Date, or the procedures for book-
entry transfer cannot be completed on a timely basis, a tender may be effected
if (i) the tender is made through an Eligible Institution, (ii) prior to the
Expiration Date, the Exchange Agent receives from such Eligible Institution a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof) and Notice of Guaranteed Delivery, substantially in the form provided
by the Company (by facsimile transmission, mail or hand delivery), setting forth
the name and address of the holder of Old Certificates and the amount of Old
Certificates tendered, stating that the tender is being made thereby and
guaranteeing that within three New York Stock Exchange ("NYSE") trading days
after the date of execution of the Notice of Guaranteed Delivery, the
certificates for all physically tendered Old Certificates, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent and (iii) the certificates for all
physically tendered Old Certificates, in proper form for transfer, or a
Book-Entry Confirmation, as the case may be, and all other documents required by
the Letter of Transmittal are received by the Exchange Agent within three NYSE
trading days after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Certificates may be withdrawn at any time prior to 5:00
p.m., New York City time on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date at one of the addresses set forth below under "-- Exchange
Agent". Any such notice of withdrawal must specify the name of the person having
tendered the Old Certificates to be withdrawn, identify the Old Certificates to
be withdrawn (including the principal amount of such Old Certificates) and
(where certificates for Old Certificates have been transmitted) specify the name
in which such Old Certificates are registered, if different from that of the
withdrawing holder. If certificates for Old Certificates have been delivered or
otherwise identified to the Exchange Agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless such holder is an
Eligible Institution. If Old Certificates have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Old Certificates and otherwise comply with the
procedures of such facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company, whose determination shall be final and binding on all parties. Any
Old Certificates so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Certificates which have
been tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Certificates tendered by book-entry transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the book-entry transfer
procedures described above, such Old Certificates will be credited to an account
maintained with such Book-Entry Transfer Facility for the Old Certificates) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Certificates may be retendered by
following one of the procedures described under "-- Procedures for Tendering"
and "-- Book-Entry Transfer" above at any time on or prior to the Expiration
Date.
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CONDITIONS
Notwithstanding any other term of the Exchange Offer, Old Certificates will
not be required to be accepted for exchange, nor will New Certificates be issued
in exchange for, any Old Certificates, and the Company may terminate or amend
the Exchange Offer as provided herein before the acceptance of such Old
Certificates, if because of any change in law, or applicable interpretations
thereof by the Commission, the Company determines that it is not permitted to
effect the Exchange Offer, and the Company has no obligation to, and will not
knowingly, permit acceptance of tenders of Old Certificates from affiliates of
the Company (within the meaning of Rule 405 under the Securities Act) or from
any other holder or holders who are not eligible to participate in the Exchange
Offer under applicable law or interpretations thereof by the Commission, or if
the New Certificates to be received by such holder or holders of Old
Certificates in the Exchange Offer, upon receipt, will not be tradable by such
holder without restriction under the Securities Act and the Exchange Act and
without material restrictions under the "blue sky" or securities laws of
substantially all of the states of the United States.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent addressed as follows:
By Mail or Overnight Delivery: By Hand:
Wilmington Trust Company Wilmington Trust Company
1100 North Market Street 1105 North Market Street, 1st Floor
Wilmington, Delaware 19890-0001 Wilmington, Delaware 19890
Attention: Jill Rylee Attention: Corporate Trust Operations
Facsimile Transmission:
(302) 651-1079
Confirm by Telephone:
(302) 651-8869
Jill Rylee
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telegraph, telephone, telecopy, electronic mail or in person by officers
and regular employees of the Company.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
the Exchange Agent for its reasonable out-of-pocket expenses in connection
therewith. The Company may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of the Prospectus and related documents to the beneficial
owners of the Old Certificates, and in handling or forwarding tenders for
exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company, including fees and expenses of the Exchange Agent and
Trustee and accounting, legal, printing and related fees and expenses.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Certificates pursuant to the Exchange Offer. If, however, certificates
representing New Certificates or Old Certificates for principal amounts not
tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered holder
of the Old Certificates tendered, or if tendered Old
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Certificates are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of Old Certificates pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered holder or any other persons) will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
DESCRIPTION OF THE NEW CERTIFICATES
The New Certificates will be issued pursuant to four separate Pass Through
Trust Agreements. The following summary describes all material terms of the
Certificates and the Pass Through Trust Agreements. The summary does not purport
to be complete, and reference is made to all of the provisions of the New
Certificates, the Pass Through Trust Agreements and the Intercreditor Agreement,
which have been filed as exhibits to the Registration Statement and copies of
which are available as set forth under the heading "Available Information".
Except as otherwise indicated, the following summary relates to each of the
Trusts and the Certificates issued by each Trust. The terms and conditions
governing each of the Trusts are substantially the same, except as described
under "-- Subordination" below and except that the principal amount and
scheduled principal repayments of the Equipment Notes held by each Trust and the
interest rate and maturity date of the Equipment Notes held by each of the Class
A Trust, the Class B Trust, the Class C Trust and the Class D Trusts will
differ. The references to Sections in parentheses in the following summary are
to the relevant Sections of the Pass Through Trust Agreements unless otherwise
indicated.
GENERAL
The New Certificates of each Trust will be issued in fully registered form
only and will be subject to the provisions described below under "-- Book Entry;
Delivery and Form". (Section 3.01) Each New Certificate will represent a
fractional undivided interest in the Trust created by the Pass Through Trust
Agreement pursuant to which such Certificate is issued. (Section 3.01) The Trust
Property of each Trust consists of (i) subject to the Intercreditor Agreement,
Equipment Notes issued on a recourse basis by Continental in connection with
each separate secured loan transaction with respect to each Aircraft to finance
the purchase of such Aircraft by Continental, (ii) the rights of such Trust
under the Intercreditor Agreement (including all monies receivable in respect of
such rights), (iii) except for the Class D Trust, all monies receivable under
the Liquidity Facility for such Trust and (iv) funds from time to time deposited
with the Trustee in accounts relating to such Trust. The New Certificates
represent pro rata shares of the Equipment Notes and other property held in the
related Trust and will be issued only in minimum denominations of $1,000 and
integral multiples thereof. (Section 3.01).
The Certificates represent interests in the respective Trusts, and all
payments and distributions thereon will be made only from the Trust Property of
the related Trust. (Section 3.11) The Certificates do not represent an interest
in or obligation of Continental, the Trustees, any of the Loan Trustees or the
Second Mortgagee in their individual capacities, or any affiliate of any
thereof.
SUBORDINATION
Pursuant to the Intercreditor Agreement to which the Trustees, the
Subordination Agent and the Liquidity Provider are parties, on each Distribution
Date, so long as no Triggering Event shall have occurred (whether or not
continuing), all payments received by the Subordination Agent in respect of
Equipment Notes (whether under any Indenture or the Second Indenture) and
certain other payments will be distributed under the Intercreditor Agreement in
the following order: (1) payment of certain Liquidity Obligations to the
Liquidity Provider; (2) payment of Expected Distributions to the holders of
Class A Certificates; (3) payment of Expected Distributions to the holders of
Class B Certificates; (4) payment of Expected Distributions to the holders of
Class C Certificates; (5) payment of Expected Distributions to the holders of
Class D Certificates; and (6) payment of certain fees and expenses of the
Subordination Agent and the Trustees.
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In addition, upon the occurrence of a Triggering Event and at all times
thereafter, all payments received by the Subordination Agent in respect of the
Equipment Notes (whether under any Indenture or the Second Indenture) and
certain other payments will be distributed under the Intercreditor Agreement in
the following order: (1) to reimburse the Subordination Agent, the Trustees and
certain other parties for the payment of the Administration Expenses and to the
Liquidity Provider in payment of the Liquidity Obligations; (2) to the holders
of Class A Certificates in payment of Adjusted Expected Distributions; (3) to
the holders of Class B Certificates in payment of Adjusted Expected
Distributions; (4) to the holders of Class C Certificates in payment of Adjusted
Expected Distributions; and (5) to the holders of Class D Certificates in
payment of Adjusted Expected Distributions.
For purposes of calculating Expected Distributions or Adjusted Expected
Distributions with respect to the Certificates of any Trust, any premium paid on
the Equipment Notes held in such Trust that has not been distributed to the
Certificateholders of such Trust (other than such premium or a portion thereof
applied to the payment of interest on the Certificates of such Trust or the
reduction of the Pool Balance of such Trust) shall be added to the amount of
Expected Distributions or Adjusted Expected Distributions.
The priority of distributions after a Triggering Event will have the effect
in certain circumstances of requiring the distribution to more senior Classes of
Certificates of payments received in respect of one or more junior series of
Equipment Notes. If this should occur, the interest accruing on the remaining
Equipment Notes would in the aggregate be less than the interest accruing on the
remaining Certificates because such Certificates include a relatively greater
proportion of junior Classes with relatively higher interest rates. As a result
of such possible interest shortfalls, the holders of one or more junior Classes
of Certificates may not receive the full amount due them after a Triggering
Event even if all Equipment Notes are eventually paid in full.
PAYMENTS AND DISTRIBUTIONS
Payments of principal, premium (if any) and interest on the Equipment Notes
or with respect to other Trust Property held in each Trust will be distributed
by the Trustee to Certificateholders of such Trust on the date receipt of such
payment is confirmed, except in the case of certain types of Special Payments.
The Equipment Notes held in each Trust accrue interest at the applicable
rate per annum for Certificates to be issued by such Trust set forth on the
cover page of this Prospectus, payable on June 30 and December 30 of each year,
commencing on December 30, 1997. Such interest payments will be distributed to
Certificateholders of such Trust on each such date until the final Distribution
Date for such Trust, in each case, subject to the Intercreditor Agreement.
Interest is calculated on the basis of a 360-day year consisting of twelve
30-day months. The interest rates for the Equipment Notes are subject to change
under certain circumstances. See "The Exchange Offer -- Terms of the Exchange
Offer -- General". Payments of interest applicable to the Certificates issued by
each of the Trusts (other than the Class D Trust) are supported by a separate
Liquidity Facility provided by the Liquidity Provider for the benefit of the
holders of such Certificates in an aggregate amount sufficient to pay interest
thereon at the Stated Interest Rate for such Trust on up to three successive
Regular Distribution Dates (without regard to any future payments of principal
on such Certificates). The Liquidity Facility for any Class of Certificates does
not provide for drawings thereunder to pay for principal of or premium on the
Certificates of such Class, any interest on the Certificates of such Class in
excess of the Stated Interest Rates, or, notwithstanding the subordination
provisions of the Intercreditor Agreement, principal of or interest or premium
on the Certificates of any other Class. Therefore, only the holders of the
Certificates to be issued by a particular Trust (other than the Class D Trust)
will be entitled to receive and retain the proceeds of drawings under the
Liquidity Facility for such Trust. See "Description of the Liquidity
Facilities".
Payments of principal of the Equipment Notes held in each Trust are
scheduled to be received by the Trustee on June 30 of each year, commencing on
June 30, 1998. Scheduled payments of interest or principal on the Equipment
Notes are herein referred to as "Scheduled Payments", and June 30 and December
30 of each year are herein referred to as "Regular Distribution Dates". See
"Description of the Equipment Notes -- Principal and Interest Payments". The
"Final Maturity Date" for the Class A Certificates is December 30,
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2008, for the Class B Certificates is December 30, 2006, for the Class C
Certificates is December 30, 2005 and for the Class D Certificates is June 30,
2001.
The Trustee of each Trust will distribute, subject to the Intercreditor
Agreement, on each Regular Distribution Date to the Certificateholders of such
Trust all Scheduled Payments received in respect of Equipment Notes held on
behalf of such Trust, the receipt of which is confirmed by the Trustee on such
Regular Distribution Date. Each Certificateholder of each Trust will be entitled
to receive a pro rata share of any distribution in respect of Scheduled Payments
of principal of or interest on Equipment Notes held on behalf of such Trust,
subject to the Intercreditor Agreement. Each such distribution of Scheduled
Payments will be made by the applicable Trustee to the Certificateholders of
record of the relevant Trust on the Record Date applicable to such Scheduled
Payment subject to certain exceptions. (Sections 4.01 and 4.02) If a Scheduled
Payment is not received by the applicable Trustee on a Regular Distribution Date
but is received within five days thereafter, it will be distributed to such
holders of record on the date received. If it is received after such five-day
period, it will be treated as a Special Payment and distributed as described
below.
Any payment in respect of, or any proceeds of, any Equipment Note or the
Collateral under (and as defined in) each Indenture and the Second Indenture
other than a Scheduled Payment (each, a "Special Payment") will be scheduled to
be distributed on, in the case of an early redemption or a purchase of the
Equipment Notes relating to one or more Aircraft, the date of such early
redemption or purchase (which shall be a Business Day), and otherwise on the
Business Day specified for distribution of such Special Payment pursuant to a
notice delivered by each Trustee as soon as practicable after the Trustee has
received funds for such Special Payment (each a "Special Distribution Date"),
subject to the Intercreditor Agreement. Each Trustee will mail a notice to the
Certificateholders of the applicable Trust stating the scheduled Special
Distribution Date, the related Record Date, the amount of the Special Payment
and the reason for the Special Payment. In the case of a redemption or purchase
of the Equipment Notes held in the related Trust or the occurrence of a
Triggering Event, such notice will be mailed not less than 20 days prior to the
date such Special Payment is scheduled to be distributed, and in the case of any
other Special Payment, such notice will be mailed as soon as practicable after
the Trustee has confirmed that it has received funds for such Special Payment.
(Section 4.02(c)) Each distribution of a Special Payment, other than a final
distribution, on a Special Distribution Date for any Trust will be made by the
Trustee to the Certificateholders of record of such Trust on the Record Date
applicable to such Special Payment. (Section 4.02(b)) See "-- Indenture Defaults
and Certain Rights Upon an Indenture Default" and "Description of the Equipment
Notes -- Redemption".
Each Pass Through Trust Agreement requires that the Trustee establish and
maintain, for the related Trust and for the benefit of the Certificateholders of
such Trust, one or more accounts (the "Certificate Account") for the deposit of
payments representing Scheduled Payments received by such Trustee. Each Pass
Through Trust Agreement also requires that the Trustee establish and maintain,
for the related Trust and for the benefit of the Certificateholders of such
Trust, one or more accounts (the "Special Payments Account") for the deposit of
payments representing Special Payments received by such Trustee, which shall be
non-interest bearing except in certain circumstances where the Trustee may
invest amounts in such account in certain permitted investments. Pursuant to the
terms of each Pass Through Trust Agreement, the Trustee is required to deposit
any Scheduled Payments relating to the applicable Trust received by it in the
Certificate Account of such Trust and to deposit any Special Payments so
received by it in the Special Payments Account of such Trust. (Section 4.01) All
amounts so deposited will be distributed by the Trustee on a Regular
Distribution Date or a Special Distribution Date, as appropriate. (Section 4.02)
The final distribution for each Trust will be made only upon presentation
and surrender of the Certificates for such Trust at the office or agency of the
Trustee specified in the notice given by the Trustee of such final distribution.
The Trustee will mail such notice of the final distribution to the
Certificateholders of such Trust, specifying the date set for such final
distribution and the amount of such distribution. (Section 11.01) See
"-- Termination of the Trusts" below. Distributions in respect of Certificates
issued in global form will be made as described in "-- Book Entry; Delivery and
Form" below.
If any Regular Distribution Date or Special Distribution Date is a
Saturday, Sunday or other day on which commercial banks are authorized or
required to close in New York, New York, Houston, Texas, or
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Wilmington, Delaware (any other day being a "Business Day"), distributions
scheduled to be made on such Regular Distribution Date or Special Distribution
Date will be made on the next succeeding Business Day without additional
interest.
POOL FACTORS
The "Pool Balance" for each Trust or for the Certificates issued by any
Trust indicates, as of any date, the original aggregate face amount of the
Certificates of such Trust less the aggregate amount of all payments made in
respect of the Certificates of such Trust other than payments made in respect of
interest or premium or reimbursement of any costs and expenses in connection
therewith. The Pool Balance for each Trust or for the Certificates issued by any
Trust as of any Regular Distribution Date or Special Distribution Date shall be
computed after giving effect to any payment of principal of the Equipment Notes
or payment with respect to other Trust Property held in such Trust and the
distribution thereof to be made on that date. (Section 1.01)
The "Pool Factor" for each Trust as of any Regular Distribution Date or
Special Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance by (ii) the original aggregate face
amount of the Certificates of such Trust. The Pool Factor for each Trust or for
the Certificates issued by any Trust as of any Regular Distribution Date or
Special Distribution Date shall be computed after giving effect to any payment
of principal of the Equipment Notes or payment with respect to other Trust
Property held in such Trust and the distribution thereof to be made on that
date. (Section 1.01) The Pool Factor for each Trust was 1.0000000 on the
Issuance Date, and will decline as described herein to reflect reductions in the
Pool Balance of such Trust. The amount of a Certificateholder's pro rata share
of the Pool Balance of a Trust can be determined by multiplying the par value of
the holder's Certificate of such Trust by the Pool Factor for such Trust as of
the applicable Regular Distribution Date or Special Distribution Date. Notice of
the Pool Factor and the Pool Balance for each Trust will be mailed to
Certificateholders of such Trust on each Regular Distribution Date and Special
Distribution Date. (Section 4.03)
As of the Issuance Date, assuming that no early redemption or default in
the payment of principal of any Equipment Notes shall occur, the Scheduled
Payments of principal of the Equipment Notes held in each
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Trust, and the resulting Pool Factors for each Trust after taking into account
each such Scheduled Payment, will be as set forth below:
1997-2A 1997-2B 1997-2C 1997-2D
TRUST TRUST TRUST TRUST
EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT
NOTES 1997-2A NOTES 1997-2B NOTES 1997-2C NOTES 1997-2D
SCHEDULED TRUST SCHEDULED TRUST SCHEDULED TRUST SCHEDULED TRUST
PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED PAYMENTS OF EXPECTED
DATE PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR PRINCIPAL POOL FACTOR
- --------------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
June 25,
1997......... $ 0 1.0000000 $ 0 1.0000000 $ 0 1.0000000 $ 0 1.0000000
December 30,
1997......... 0 1.0000000 0 1.0000000 0 1.0000000 0 1.0000000
June 30,
1998......... 2,072,340 0.9723179 707,630 0.9723182 1,200,930 0.9558579 6,268,576 0.7709607
December 30,
1998......... 0 0.9723179 0 0.9723182 0 0.9558579 0 0.7709607
June 30,
1999......... 2,072,340 0.9446357 707,626 0.9446365 2,324,830 0.8704051 6,383,644 0.5377171
December 30,
1999......... 0 0.9446357 0 0.9446365 0 0.8704051 0 0.5377171
June 30,
2000......... 2,072,443 0.9169522 708,031 0.9169391 3,175,629 0.7536797 7,147,618 0.2765597
December 30,
2000......... 0 0.9169522 0 0.9169391 0 0.7536797 0 0.2765597
June 30,
2001......... 2,212,604 0.8873964 755,523 0.8873837 3,625,577 0.6204159 7,569,162 0.0000000
December 30,
2001......... 0 0.8873964 0 0.8873837 0 0.6204159 0 0.0000000
June 30,
2002......... 3,541,842 0.8400848 2,074,022 0.8062500 1,510,530 0.5648939 0 0.0000000
December 30,
2002......... 0 0.8400848 0 0.8062500 0 0.5648939 0 0.0000000
June 30,
2003......... 4,513,933 0.7797881 2,134,967 0.7227321 7,479,240 0.2899825 0 0.0000000
December 30,
2003......... 0 0.7797881 0 0.7227321 0 0.2899825 0 0.0000000
June 30,
2004......... 5,687,498 0.7038150 7,398,224 0.4333207 7,889,264 0.0000000 0 0.0000000
December 30,
2004......... 0 0.7038150 0 0.4333207 0 0.0000000 0 0.0000000
June 30,
2005......... 8,112,933 0.5954432 11,076,977 0.0000000 0 0.0000000 0 0.0000000
December 30,
2005......... 0 0.5954432 0 0.0000000 0 0.0000000 0 0.0000000
June 30,
2006......... 18,205,098 0.3522611 0 0.0000000 0 0.0000000 0 0.0000000
December 30,
2006......... 0 0.3522611 0 0.0000000 0 0.0000000 0 0.0000000
June 30,
2007......... 26,370,969 0.0000000 0 0.0000000 0 0.0000000 0 0.0000000
The Pool Factor and Pool Balance of each Trust will be recomputed if there
has been an early redemption, purchase, or a default in the payment of principal
or interest in respect of one or more issues of the Equipment Notes held in a
Trust, as described in "-- Indenture Defaults and Certain Rights Upon an
Indenture Default" and "Description of the Equipment Notes -- Redemption".
REPORTS TO CERTIFICATEHOLDERS
On each Distribution Date, the applicable Trustee will include with each
distribution by it of a Scheduled Payment or Special Payment to
Certificateholders of the related Trust a statement, giving effect to such
distribution to be made on such Distribution Date, setting forth the following
information (per $1,000 aggregate principal amount of Certificate for such
Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the
amount allocable to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Trust. (Section
4.03)
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With respect to the Certificates registered in the name of Cede, as nominee
for DTC, on the Record Date prior to each Distribution Date, the applicable
Trustee will request from DTC a securities position listing setting forth the
names of all DTC Participants reflected on DTC's books as holding interests in
the Certificates on such record date. On each Distribution Date, the applicable
Trustee will mail to each such DTC Participant the statement described above and
will make available additional copies as requested by such DTC Participant for
forwarding to holders of Certificates. (Section 4.03(a))
In addition, within a reasonable period of time after the end of each
calendar year, the applicable Trustee will furnish to each Certificateholder of
each Trust at any time during the preceding calendar year a report containing
the sum of the amounts determined pursuant to clauses (i) and (ii) above with
respect to the Trust for such calendar year or, in the event such person was a
Certificateholder during only a portion of such calendar year, for the
applicable portion of such calendar year, and such other items as are readily
available to such Trustee and which a Certificateholder shall reasonably request
as necessary for the purpose of such Certificateholder's preparation of its U.S.
federal income tax returns. (Section 4.03(b)) With respect to Certificates
registered in the name of Cede, as nominee for DTC, such report and such other
items shall be prepared on the basis of information supplied to the applicable
Trustee by the DTC Participants and shall be delivered by such Trustee to such
DTC Participants to be available for forwarding by such DTC Participants to
Certificate Owners in the manner described above. (Section 4.03(b))
With respect to the Certificates issued in definitive form, the applicable
Trustee will prepare and deliver the information described above to each
Certificateholder of record of each Trust as the name of such Certificateholder
appears on the records of the registrar of the Certificates.
INDENTURE DEFAULTS AND CERTAIN RIGHTS UPON AN INDENTURE DEFAULT
Upon the occurrence and continuation of an event of default under an
Indenture (an "Indenture Default"), the Controlling Party will direct the
Indenture Trustee under such Indenture in the exercise of remedies thereunder
and may accelerate and sell all (but not less than all) of the Equipment Notes
issued under such Indenture to any person, subject to certain limitations. See
"Description of Intercreditor Agreement -- Sale of Equipment Notes and
Aircraft". The proceeds of such sale will be distributed pursuant to the
provisions of the Intercreditor Agreement. Any such proceeds so distributed to
any Trustee upon any such sale shall be deposited in the applicable Special
Payments Account and shall be distributed to the Certificateholders of the
applicable Trust on a Special Distribution Date. (Sections 4.01 and 4.02) The
market for Equipment Notes at the time of the existence of any Indenture Default
may be very limited and there can be no assurance as to the price at which they
could be sold. If any such Equipment Notes are sold for less than their
outstanding principal amount, certain Certificateholders will receive a smaller
amount of principal distributions than anticipated and will not have any claim
for the shortfall against Continental, any Liquidity Provider or any Trustee.
The Equipment Notes issued with respect to each Aircraft are entitled to a
second priority security interest on each of the other Aircraft. However, since
the second priority security interest would not be entitled to the benefits of
Section 1110 in a reorganization under the Bankruptcy Code of Continental, the
excess proceeds realized from the disposition of any particular Aircraft might
not immediately be available to offset shortfalls on the Equipment Notes
relating to any other Aircraft, but rather would be held as cash collateral
securing all of the Equipment Notes subject to the lien of the Second Indenture.
See "Description of Equipment Notes -- Remedies". All payments made under the
Second Indenture in respect of the Equipment Notes will be made to the
Subordination Agent which will distribute such payments as provided in the
Intercreditor Agreement. See "Description of the New Certificates -- Payments
and Distributions".
Any amount, other than Scheduled Payments received on a Regular
Distribution Date, distributed to the Trustee of any Trust by the Subordination
Agent on account of any Equipment Note or Trust Indenture Estate (as defined in
each Indenture) held in such Trust following an Indenture Default under any
Indenture will be deposited in the Special Payments Account for such Trust and
will be distributed to the Certificateholders of such Trust on a Special
Distribution Date. (Sections 4.01 and 4.02)
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Any funds representing payments received with respect to any defaulted
Equipment Notes, or the proceeds from the sale of any Equipment Notes, held by
the Trustee in the Special Payments Account for such Trust will, to the extent
practicable, be invested and reinvested by such Trustee in certain permitted
investments pending the distribution of such funds on a Special Distribution
Date. (Section 4.04) Such permitted investments are defined as obligations of
the United States or agencies or instrumentalities thereof for the payment of
which the full faith and credit of the United States is pledged and which mature
in not more than 60 days or such lesser time as is required for the distribution
of any such funds on a Special Distribution Date. (Section 1.01)
Each Pass Through Trust Agreement provides that the Trustee of the related
Trust will, within 90 days after the occurrence of any default, give to the
Certificateholders of such Trust notice, transmitted by mail, of all uncured or
unwaived defaults with respect to such Trust known to it, provided that, except
in the case of default in a payment of principal, premium, if any, or interest
on any of the Equipment Notes held in such Trust, the applicable Trustee will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interests of such Certificateholders.
(Section 7.02) The term "default" as used in this paragraph only with respect to
any Trust means the occurrence of an Indenture Default under any Indenture
pursuant to which Equipment Notes held by such Trust were issued, as described
above, except that in determining whether any such Indenture Default has
occurred, any grace period or notice in connection therewith will be
disregarded.
In the event that the same institution acts as Trustee of multiple Trusts,
in the absence of instructions from the Certificateholders of any such Trust,
such Trustee could be faced with a potential conflict of interest upon an
Indenture Default. In such event, each Trustee has indicated that it would
resign as Trustee of one or all such Trusts, and a successor trustee would be
appointed in accordance with the terms of the applicable Pass Through Trust
Agreement. Wilmington Trust Company will be the initial Trustee under each
Trust.
Each Pass Through Trust Agreement contains a provision entitling the
Trustee of the related Trust, subject to the duty of such Trustee during a
default to act with the required standard of care, to be offered reasonable
security or indemnity by the holders of the Certificates of such Trust before
proceeding to exercise any right or power under such Pass Through Trust
Agreement at the request of such Certificateholders. (Section 7.03(e))
Subject to certain qualifications set forth in the Pass Through Trust
Agreements and to the Intercreditor Agreement, the Certificateholders of each
Trust holding Certificates evidencing fractional undivided interests aggregating
not less than a majority in interest in such Trust shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee with respect to such Trust or pursuant to the terms of
the Intercreditor Agreement, or exercising any trust or power conferred on such
Trustee under such Pass Through Trust Agreement or the Intercreditor Agreement,
including any right of such Trustee as Controlling Party under the Intercreditor
Agreement or as holder of the Equipment Notes. (Section 6.04)
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 "event of default" under such Trust (i.e., any Indenture Default
under any Indenture) and its consequences or, if the Trustee of such Trust is
the Controlling Party, may direct the Trustee to instruct the applicable Loan
Trustee to waive any past Indenture Default and its consequences and thereby
annul any direction given by such holders or Trustee to such Loan Trustee or the
Second Mortgagee with respect thereto, except (i) a default in the deposit of
any Scheduled Payment or Special Payment or in the distribution thereof, (ii) a
default in payment of the principal, premium, if any, or interest with respect
to any of the Equipment Notes and (iii) a default in respect of any covenant or
provision of the related Pass Through Trust Agreement that cannot be modified or
amended without the consent of each Certificateholder of such Trust affected
thereby. (Section 6.05) Each Indenture provides that, with certain exceptions,
the holders of the majority in aggregate unpaid principal amount of the
Equipment Notes issued thereunder may on behalf of all such holders waive any
past default or Indenture Default thereunder.
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Notwithstanding such provisions of the Indentures, pursuant to the Intercreditor
Agreement only the Controlling Party will be entitled to waive any such past
default or Indenture Default.
PURCHASE RIGHTS OF CERTIFICATEHOLDERS
Upon the occurrence and during the continuation of a Triggering Event, with
ten days' written notice to the Trustee and each Certificateholder of the same
Class, (i) the Class B Certificateholders will have the right to purchase all,
but not less than all, of the Class A Certificates, (ii) the Class C
Certificateholders will have the right to purchase all, but not less than all,
of the Class A Certificates and the Class B Certificates and (iii) the Class D
Certificateholders shall have the right to purchase all, but not less than all,
of the Class A Certificates, the Class B Certificates and the Class C
Certificates, in each case at a purchase price equal to the Pool Balance of the
relevant Class or Classes of Certificates plus accrued and unpaid interest
thereon to the date of purchase without premium but including any other amounts
due to the Certificateholders of such Class or Classes. In each case, if prior
to the end of the ten-day period, any other Certificateholder of the same Class
notifies the purchasing Certificateholder that the other Certificateholder wants
to participate in such purchase, then such other Certificateholder may join with
the purchasing Certificateholder to purchase the Certificates pro rata based on
the interest in the Trust held by each Certificateholder. (Section 6.01(b))
PTC EVENT OF DEFAULT
A PTC Event of Default is defined under each Pass Through Trust Agreement
as the failure to pay within 10 Business Days of the due date thereof: (i) the
outstanding Pool Balance of the applicable Class of Certificates on the Final
Maturity Date for such Class or (ii) interest due on such Class of Certificates
on any Distribution Date (unless, in the case of the Class A, B or C
Certificates, the Subordination Agent shall have made Interest Drawings, or
drawings on the Cash Collateral Account for such Class of Certificates, with
respect thereto in an aggregate amount sufficient to pay such interest and shall
have distributed such amount to the Trustee entitled thereto). Any failure to
make expected principal distributions on any Class of Certificates on any
Regular Distribution Date (other than the Final Maturity Date) will not
constitute a PTC Event of Default with respect to such Certificates. A PTC Event
of Default with respect to the most senior outstanding Class of Certificates
resulting from an Indenture Default under all Indentures will constitute a
Triggering Event.
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Continental is prohibited from consolidating with or merging into any other
corporation or transferring substantially all of its assets as an entirety to
any other corporation unless (i) the surviving successor or transferee
corporation shall (a) be a "citizen of the United States" as defined in Title 49
of the United States Code, as amended, relating to aviation (the "Transportation
Code"), (b) be a United States certificated air carrier and (c) expressly assume
all of the obligations of Continental contained in the Pass Through Trust
Agreements, the Participation Agreements, the Indentures and the Second
Indenture; and (ii) Continental shall have delivered a certificate and an
opinion or opinions of counsel indicating that such transaction complies with
such conditions. (Section 5.02) Additionally, after giving effect to such
transaction, no Indenture Event of Default shall have occurred and be
continuing. (Indenture, Section 4.09)
The Pass Through Trust Agreements, the Participation Agreements, the
Indentures and the Second Indenture do not contain any covenants or provisions
which may afford the applicable Trustee or Certificateholders protection in the
event of a highly leveraged transaction, including transactions effected by
management or affiliates, which may or may not result in a change in control of
Continental.
MODIFICATIONS OF THE PASS THROUGH TRUST AGREEMENTS AND CERTAIN OTHER AGREEMENTS
Each Pass Through Trust Agreement contains provisions permitting, at the
request of the Company, the execution of amendments or supplements to such Pass
Through Trust Agreement or, if applicable, to the Intercreditor Agreement, the
Registration Rights Agreement or the Liquidity Facility for such Trust, without
the consent of the holders of any of the Certificates of such Trust, (i) to
evidence the succession of another
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corporation to Continental and the assumption by such corporation of
Continental's obligations under such Pass Through Trust Agreement, the
Registration Rights Agreement or such Liquidity Facility, (ii) to add to the
covenants of Continental for the benefit of holders of such Certificates or to
surrender any right or power conferred upon Continental in such Pass Through
Trust Agreement, the Registration Rights Agreement or such Liquidity Facility,
(iii) to correct or supplement any provision of such Pass Through Trust
Agreement, the Intercreditor Agreement, the Registration Rights Agreement or
such Liquidity Facility which may be defective or inconsistent with any other
provision in such Pass Through Trust Agreement, the Intercreditor Agreement, the
Registration Rights Agreement or such Liquidity Facility, as applicable, or to
cure any ambiguity, correct any mistake or to modify any other provisions with
respect to matters or questions arising under such Pass Through Trust Agreement,
the Intercreditor Agreement, the Registration Rights Agreement or such Liquidity
Facility, provided such action shall not materially adversely affect the
interests of the holders of such Certificates, or (without limitation of the
foregoing) as provided in the Intercreditor Agreement to give effect to or
provide for Replacement Facilities, (iv) to comply with any requirement of the
Commission, any applicable law, rules or regulations of any exchange or
quotation system on which the Certificates are listed, any regulatory body or
the Registration Rights Agreement to effectuate the Exchange Offer, (v) to
modify, eliminate or add to such Pass Through Trust Agreement such other
provisions as may be expressly permitted by the Trust Indenture Act and (vi) to
evidence and provide for a successor Trustee or to add to or change any
provision of such Pass Through Trust Agreement as shall be necessary to
facilitate the administration of the Trust thereunder by more than one Trustee,
provided that in each case, such modification or supplement does not adversely
affect the status of the Trust as a grantor trust under Subpart E, Part I of
Subchapter J of Chapter 1 of Subtitle A of the Code for U.S. federal income tax
purposes. (Section 9.01)
Each Pass Through Trust Agreement also contains provisions permitting the
execution, with the consent of the holders of the Certificates of the related
Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust, of amendments or supplements for the
purposes of adding any provisions to or changing or eliminating any of the
provisions of such Pass Through Trust Agreement, the Intercreditor Agreement,
the Registration Rights Agreement or the Liquidity Facility with respect to such
Trust or of modifying the rights and obligations of the Certificateholders,
except that no such amendment or supplement 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 with
respect to the Equipment Notes or other Trust Property held in such Trust or
distributions in respect of any Certificate related to such Trust, or change the
date or place of any payment in respect of any Certificate, or make
distributions payable in coin or currency other than that provided for in such
Certificates, or impair the right of any Certificateholder of such Trust to
institute suit for the enforcement of any such payment when due, (b) permit the
disposition of any Equipment Note held in such Trust, except as provided in such
Pass Through Trust Agreement, or otherwise deprive any Certificateholder of the
benefit of the ownership of the applicable Equipment Notes, (c) alter the
priority of distributions specified in the Intercreditor Agreement in a manner
adverse to the Certificateholders, (d) reduce the percentage of the aggregate
fractional undivided interests of the Trust provided for in such Pass Through
Trust Agreement, the consent of the holders of which is required for any such
supplemental trust agreement or for any waiver provided for in such Pass Through
Trust Agreement, (e) modify any of the provisions relating to the rights of the
Certificateholders in respect of the waiver of events of default or receipt of
payment or (f) adversely affect the status of the Trust as a grantor trust under
Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the Code for
U.S. federal income tax purposes. (Section 9.02)
In the event that a Trustee, as holder (or beneficial owner through the
Subordination Agent) of any Equipment Note in trust for the benefit of the
Certificateholders of the relevant Trust or as Controlling Party under the
Intercreditor Agreement, receives (directly or indirectly through the
Subordination Agent) a request for a consent to any amendment, modification,
waiver or supplement under any Indenture, any Equipment Note, the Second
Indenture, any Participation Agreement or any other related document, the
Trustee shall forthwith send a notice of such proposed amendment, modification,
waiver or supplement to each Certificateholder of the relevant Trust as of the
date of such notice. The Trustee shall request from the Certificateholders a
direction as to (a) whether or not to take or refrain from taking (or direct the
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Subordination Agent to take or refrain from taking) any action which a holder of
such Equipment Note or the Controlling Party has the option to take, (b) whether
or not to give or execute (or direct the Subordination Agent to give or execute)
any waivers, consents, amendments, modifications or supplements as a holder of
such Equipment Note or as Controlling Party and (c) how to vote (or direct the
Subordination Agent to vote) any Equipment Note if a vote has been called for
with respect thereto. Provided such a request for Certificateholder direction
shall have been made, in directing any action or casting any vote or giving any
consent as the holder of any Equipment Note (or in directing the Subordination
Agent in any of the foregoing), (i) other than as Controlling Party, the Trustee
shall vote for or give consent to any such action with respect to such Equipment
Note in the same proportion as that of (x) the aggregate face amount of all
Certificates actually voted in favor of or for giving consent to such action by
such direction of certificateholders to (y) the aggregate face amount of all
outstanding Certificates of the relevant Trust and (ii) as the Controlling
Party, the Trustee shall vote as directed in such Certificateholder direction by
the Certificateholders evidencing fractional undivided interests aggregating not
less than a majority in interest in the relevant Trust. For purposes of the
immediately preceding sentence, a Certificate shall have been "actually voted"
if the Certificateholder has delivered to the Trustee an instrument evidencing
such Certificateholder's consent to such direction prior to two Business Days
before the Trustee directs such action or casts such vote or gives such consent.
Notwithstanding the foregoing, but subject to certain rights of the
Certificateholders under the relevant Pass Through Trust Agreement and subject
to the Intercreditor Agreement, the Trustee may, in its own discretion and at
its own direction, consent and notify the relevant Loan Trustee and/or the
Second Mortgagee, as the case may be, of such consent (or direct the
Subordination Agent to consent and notify the relevant Loan Trustee and/or the
Second Mortgagee, as the case may be, of such consent) to any amendment,
modification, waiver or supplement under the relevant Indenture, any relevant
Equipment Note, the Second Indenture, any Participation Agreement or any other
related document, if an Indenture Default under any Indenture shall have
occurred and be continuing, or if such amendment, modification, waiver or
supplement will not materially adversely affect the interests of the
Certificateholders. (Section 10.01)
TERMINATION OF THE TRUSTS
The obligations of Continental and the applicable Trustee with respect to a
Trust will terminate upon the distribution to Certificateholders of such Trust
of all amounts required to be distributed to them pursuant to the applicable
Pass Through Trust Agreement and the disposition of all property held in such
Trust. The applicable Trustee will send to each Certificateholder of such Trust
notice of the termination of such Trust, the amount of the proposed final
payment and the proposed date for the distribution of such final payment for
such Trust. The final distribution to any Certificateholder of such Trust will
be made only upon surrender of such Certificateholder's Certificates at the
office or agency of the applicable Trustee specified in such notice of
termination. (Section 11.01)
THE TRUSTEES
The Trustee for each Trust is Wilmington Trust Company.
With certain exceptions, the Trustees make no representations as to the
validity or sufficiency of the Pass Through Trust Agreements, the Certificates,
the Intercreditor Agreement, the Equipment Notes, the Indentures, the
Participation Agreements or other related documents. (Sections 7.04 and 7.15)
The Trustee of any Trust shall not be liable, with respect to the Certificates
of such Trust, for any action taken or omitted to be taken by it in good faith
in accordance with the direction of the holders of Certificates of such Trust
evidencing fractional undivided interests aggregating not less than a majority
in interest of such Trust. Subject to certain provisions, the Trustees shall be
under no obligation to exercise any of their rights or powers under any Pass
Through Trust Agreement at the request of any holders of Certificates issued
thereunder unless there shall have been offered to the Trustees reasonable
security and indemnity. (Section 7.03(e)) Each Pass Through Trust Agreement
provides that the Trustees in their individual or any other capacity may acquire
and hold Certificates issued thereunder and, subject to certain conditions, may
otherwise deal with Continental or with any Loan Trustee with the same rights
they would have if they were not the Trustees. (Section 7.05)
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Any Trustee may resign with respect to any or all of the Trusts of which it
is the Trustee at any time, in which event Continental will be obligated to
appoint a successor trustee. If any Trustee ceases to be eligible to continue as
Trustee with respect to a Trust or becomes incapable of acting as Trustee or
becomes insolvent, Continental may remove such Trustee, or any holder of the
Certificates of such Trust for at least six months may, on behalf of such holder
and all others similarly situated, petition any court of competent jurisdiction
for the removal of such Trustee and the appointment of a successor trustee. Any
resignation or removal of the Trustee with respect to a Trust and appointment of
a successor trustee for such Trust does not become effective until acceptance of
the appointment by the successor trustee. (Sections 7.09 and 7.10) 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 the 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 Pass Through Trust Agreement provides that Continental will pay or
cause to be paid the applicable Trustee's fees and expenses. (Section 7.07)
BOOK-ENTRY; DELIVERY AND FORM
The New Certificates of each Trust will be represented by one or more
permanent global Certificates, in definitive, fully registered form without
interest coupons (the "Global Certificates"), to be deposited with the Trustee
as custodian for DTC and registered in the name of Cede, as nominee for DTC.
DTC has advised Continental as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provision of Section 17A of the Exchange Act. DTC was created to hold securities
for its participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ("indirect
participants").
Ownership of beneficial interests in Global Certificates is limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in the Global
Certificates is shown on, and the transfer of that ownership is effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants). The laws of some states require that certain
purchasers of securities take physical delivery of such securities. Such limits
and such laws may limit the market for beneficial interests in the Global
Certificates.
So long as DTC or its nominee is the registered owner or holder of the
Global Certificates, DTC or such nominee, as the case may be, will be considered
the sole record owner or holder of the Certificates represented by such Global
Certificates for all purposes under the related Pass Through Trust Agreements.
No beneficial owners of an interest in the Global Certificates will be able to
transfer that interest except in accordance with DTC's applicable procedures, in
addition to those provided for under the Pass Through Trust Agreements and, if
applicable, Euroclear or Cedel.
Payments of the principal of, premium, if any, and interest on the Global
Certificates will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. Neither Continental, the Trustee, nor any paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Certificates or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
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Continental expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, or interest in respect of the Global Certificates
will credit participants' accounts with payments in amounts proportionate to
their respective beneficial ownership interests in the principal amount of such
Global Certificates, as shown on the records of DTC or its nominee. Continental
also expects that payments by participants to owners of beneficial interests in
such Global Certificates held through such participants will be governed by
standing instructions and customary practices, as is now the case with
securities held for the accounts of customers registered in the names of
nominees for such customers. Such payments will be the responsibility of such
participants.
Neither Continental nor the Trustee has any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Certificates and a successor depositary is not appointed by within 90
days, the Trusts will issue certificates in definitive, fully registered form in
exchange for the Global Certificates.
DESCRIPTION OF THE LIQUIDITY FACILITIES
The following summary describes all material terms of the Liquidity
Facilities and certain provisions of the Intercreditor Agreement relating to the
Liquidity Facilities. The summary does not purport to be complete and reference
is made to all of the provisions of the Liquidity Facilities and certain
provisions of the Intercreditor Agreement, each of which has been filed as an
exhibit to the Registration Statement and copies of which are available as set
forth under the heading "Available Information". The provisions of the Liquidity
Facilities are substantially identical except as otherwise indicated.
GENERAL
The Liquidity Provider has entered into a separate Liquidity Facility with
the Subordination Agent with respect to the Certificates of each of the Trusts
(other than the Class D Trust) pursuant to which the Liquidity Provider will
make one or more advances to the Subordination Agent to pay interest on such
Certificates subject to certain limitations. The Liquidity Facility for each
Trust (other than the Class D Trust) is intended to enhance the likelihood of
timely receipt by the Certificateholders of such Trust of the interest payable
on the Certificates of such Trust at the Stated Interest Rate therefor on up to
three consecutive semiannual Regular Distribution Dates. If interest payment
defaults occur which exceed the amount covered by or available under the
Liquidity Facility for any Trust (other than the Class D Trust), the
Certificateholders of such Trust will bear their allocable share of the
deficiencies to the extent that there are no other sources of funds. Although
Kredietbank N.V., acting through its New York branch, is the initial liquidity
provider for each of the Trusts (other than the Class D Trust), it may be
replaced by one or more other entities with respect to the Trusts under certain
circumstances. Therefore, the liquidity provider for each Trust may differ.
DRAWINGS
The initial amount available under the Liquidity Facilities for the Class A
Trust, the Class B Trust and the Class C Trust is $8,101,025, $2,766,630 and
$2,967,925, respectively. Except as otherwise provided below, the Liquidity
Facility for each of the Class A, Class B and Class C Trusts will enable the
Subordination Agent to make Interest Drawings thereunder promptly after any
Regular Distribution Date to pay interest then due and payable on the
Certificates of such Trust at the Stated Interest Rate for such Trust to the
extent that the amount, if any, available to the Subordination Agent on such
Regular Distribution Date is not sufficient to pay such interest; provided,
however, that the maximum amount available to be drawn under the Liquidity
Facility with respect to any Trust on any Regular Distribution Date to fund any
shortfall of interest on Certificates of such Trust will not exceed the then
Maximum Available Commitment under such Liquidity Facility. The Liquidity
Facility for each applicable Trust does not provide for drawings thereunder to
pay for principal of or premium on the Certificates of such Trust or any
interest on the Certificates of such Trust in excess of the
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Stated Interest Rate for such Trust or more than three semiannual installments
of interest thereon or principal of or interest or premium on the Certificates
of any other Trust. (Liquidity Facilities, Section 2.02; Intercreditor
Agreement, Section 3.6)
Each payment by the Liquidity Provider under each Liquidity Facility
reduces pro tanto the Maximum Available Commitment under such Liquidity
Facility, subject to reinstatement as hereinafter described. With respect to any
Interest Drawings under the Liquidity Facility for any Trust, upon reimbursement
of the Liquidity Provider in full for the amount of such Interest Drawings plus
interest thereon, the Maximum Available Commitment under such Liquidity Facility
in respect of interest on the Certificates of such Trust will be reinstated to
an amount not to exceed the then Required Amount of such Liquidity Facility;
provided, however, that such Liquidity Facility will not be so reinstated at any
time after (i) a Liquidity Event of Default shall have occurred and be
continuing and (ii) less than 65% of the then aggregate outstanding principal
amount of all Equipment Notes are Performing Equipment Notes. With respect to
any other drawings under such Liquidity Facility, amounts available to be drawn
thereunder are not subject to reinstatement. The Required Amount of the
Liquidity Facility for any Trust will be automatically increased or reduced from
time to time to an amount equal to the next three successive interest payments
due on the Certificates of such Trust (without regard to expected future payment
of principal of such Certificates) at the Stated Interest Rate for such Trust.
(Liquidity Facilities, Section 2.04(a); Intercreditor Agreement, Section 3.6(j))
If at any time the short-term unsecured debt rating of the Liquidity
Provider then issued by either Rating Agency is lower than the Threshold Rating,
each Liquidity Facility provided by the Liquidity Provider will be required to
be replaced by a Replacement Facility. In the event that such Liquidity Facility
is not replaced with a Replacement Facility within 30 days after notice of the
downgrading and as otherwise provided in the Intercreditor Agreement, the
Subordination Agent will request the Downgrade Drawing in an amount equal to the
then Maximum Available Commitment thereunder and will hold the proceeds thereof
in the Cash Collateral Account for such Trust as cash collateral to be used for
the same purposes and under the same circumstances as cash payments of Interest
Drawings under such Liquidity Facility would be used. (Liquidity Facilities,
Section 2.02(c); Intercreditor Agreement, Section 3.6(c))
A "Replacement Facility" for any Liquidity Facility means an irrevocable
liquidity facility (or liquidity facilities) in substantially the form of the
replaced Liquidity Facility, including reinstatement provisions, or in such
other form (which may include a letter of credit) as shall permit the Rating
Agencies to confirm in writing their respective ratings then in effect for the
Certificates (before downgrading of such ratings, if any, as a result of the
downgrading of the Liquidity Provider), in a face amount (or in an aggregate
face amount) equal to the amount of interest payable on the Certificates of such
Trust (at the Stated Interest Rate for such Trust, and without regard to
expected future principal payments) on the three Regular Distribution Dates
following the date of replacement of such Liquidity Facility and issued by a
Person (or Persons) having unsecured short-term debt ratings issued by both
Rating Agencies which are equal to or higher than the Threshold Rating. Without
limitation of the form that a Replacement Facility otherwise may have pursuant
to the preceding sentence, a Replacement Facility for any Class of Certificates
may have a stated expiration date earlier than 15 days after the Final Maturity
Date of such Class of Certificates so long as such Replacement Facility provides
for the Non-Extension Drawing described below. (Intercreditor Agreement, Section
1.1) The provider of any Replacement Facility will have the same rights
(including, without limitation, priority distribution rights and rights as
"Controlling Party") under the Intercreditor Agreement as the initial Liquidity
Provider.
"Threshold Rating" means the short-term unsecured debt rating of P-1 by
Moody's and A-1 by Standard & Poor's.
The Liquidity Facility for each applicable Trust provides that the
Liquidity Provider's obligations thereunder will expire on the earliest of (i)
15 days later than the Final Maturity Date for the Certificates of such Trust;
(ii) the date on which the Subordination Agent delivers to such Liquidity
Provider a certification that all of the Certificates of such Trust have been
paid in full; (iii) the date on which the Subordination Agent delivers to such
Liquidity Provider a certification that a Replacement Facility has been
substituted for
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such Liquidity Facility; (iv) the date on which the Liquidity Provider makes a
Final Drawing thereunder (see "-- Liquidity Events of Default"); and (v) the
date on which no amount is or may (by reason of reinstatement) become available
for drawing under such Liquidity Facility.
The Intercreditor Agreement provides for the replacement of any Replacement
Facility for any applicable Trust (other than a Replacement Facility which
expires no earlier than 15 days later than the Final Maturity Date for the
Certificates of such Trust) in the event that such Replacement Facility is not
extended at least 25 days prior to its then scheduled expiration date. In the
event such Replacement Facility is not so extended or replaced by the 25th day
prior to its then scheduled expiration date, the Subordination Agent shall
request the Non-Extension Drawing in an amount equal to the then maximum
available commitment thereunder and hold the proceeds thereof in the Cash
Collateral Account for such Trust as cash collateral to be used for the same
purposes and under the same circumstances, and subject to the same conditions,
as cash payments of interest drawings under such Replacement Facility would be
used. (Intercreditor Agreement, Section 3.6(d))
Continental may, subject to certain limitations, arrange for a Replacement
Facility at any time to replace the Liquidity Facility for any applicable Trust
(including without limitation any Replacement Facility described in the
following sentence). If any Replacement Facility is provided at any time after
the Downgrade Drawing (or a Non-Extension Drawing in the case of a Replacement
Facility) under such Liquidity Facility, the funds with respect to the relevant
Liquidity Facility on deposit in the Cash Collateral Account for such Trust will
be returned to the Liquidity Provider being replaced. (Intercreditor Agreement,
Section 3.6(e))
The Subordination Agent will hold the proceeds of a Final Drawing made in
accordance with the provisions set forth under "-- Liquidity Events of Default"
below in the Cash Collateral Account for the related Trust as cash collateral to
be used for the same purposes and under the same circumstances, and subject to
the same conditions, as cash payments of Interest Drawings under such Liquidity
Facility would be used. (Liquidity Facilities, Section 2.02(d); Intercreditor
Agreement, Section 3.6(e))
Drawings under any Liquidity Facility (other than a Final Drawing) will be
made by delivery by the Subordination Agent of a certificate in the form
required by such Liquidity Facility. Upon receipt of such a certificate, the
relevant Liquidity Provider is obligated to make payment of the drawing
requested thereby in immediately available funds. Upon payment by any Liquidity
Provider of the amount specified in any drawing under any Liquidity Facility,
such Liquidity Provider will be fully discharged of its obligations under such
Liquidity Facility with respect to such drawing and will not thereafter be
obligated to make any further payments under such Liquidity Facility in respect
of such drawing to the Subordination Agent or any other person.
REIMBURSEMENT OF DRAWINGS
Amounts drawn under any Liquidity Facility by reason of an Interest Drawing
or the Final Drawing will be immediately due and payable, together with interest
on the amount of such drawing, with respect to the period from the date of its
borrowing to (but excluding) the third business day following the applicable
Liquidity Provider's receipt of the notice of such Interest Drawing, at the Base
Rate plus 1.75% per annum, and thereafter, at LIBOR for the applicable Interest
Period plus 1.75% per annum, provided that, in the case of the Final Drawing,
the Subordination Agent may convert the Final Drawing into a Drawing bearing
interest at the Base Rate plus 1.75% per annum on the last day of an Interest
Period for such Drawing; provided, further, that the Subordination Agent will be
obligated to reimburse such amounts only to the extent that the Subordination
Agent has funds available therefor.
The amount drawn under any Liquidity Facility or any Replacement Facility
for any Trust by reason of a Downgrade Drawing (or a Non-Extension Drawing in
the case of a Replacement Facility) will be treated as follows: (i) such amount
will be released on any Distribution Date to the relevant liquidity provider to
the extent that such amount exceeds the Required Amount; (ii) any portion of
such amount withdrawn from the Cash Collateral Account for such Certificates to
pay interest on such Certificates will be treated in the same way as Interest
Drawings; and (iii) the balance of such amount will be invested in Eligible
Investments. A Downgrade Drawing under any of the initial Liquidity Facilities
(other than any portion thereof applied to the payment of interest on the
Certificates) will bear interest (i) during the period from the date of its
borrowing
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to (but excluding) the third business day following the Liquidity Provider's
receipt of the notice of such Downgrade Drawing, at the Base Rate plus .45% per
annum on the amount of such Downgrade Drawing and (ii) thereafter, at a rate
equal to LIBOR for the applicable Interest Period plus .45% per annum, provided
that the Subordination Agent will be obligated to pay such amount only to the
extent that the Subordination Agent has funds available therefor. (Liquidity
Facilities, Section 2.06)
LIQUIDITY EVENTS OF DEFAULT
Events of Default under each Liquidity Facility (each, a "Liquidity Event
of Default") will consist of: (i) the acceleration of all the Equipment Notes
and (ii) certain bankruptcy or similar events involving Continental. (Liquidity
Facilities, Section 1.01)
If (i) any Liquidity Event of Default under any Liquidity Facility has
occurred and is continuing and (ii) less than 65% of the aggregate outstanding
principal amount of all Equipment Notes are Performing Equipment Notes, the
Liquidity Provider may, in its discretion, cause a Final Drawing thereunder in
an amount equal to the then Maximum Available Commitment thereunder. After such
Final Drawing, (i) the Liquidity Provider will have no further obligation to
make Drawings under the Liquidity Facility, (ii) any Drawing remaining
unreimbursed will automatically be converted into a Final Drawing under such
Liquidity Facility, and (iii) all amounts owing to the Liquidity Provider will
automatically be accelerated. Notwithstanding the foregoing, the Subordination
Agent will be obligated to pay amounts owing to the Liquidity Provider only to
the extent of funds available therefor after giving effect to the payments in
accordance with the provisions set forth under "Description of the Intercreditor
Agreement -- Priority of Distributions". (Liquidity Facilities, Section 6.01)
Upon the circumstances described below under "Description of the Intercreditor
Agreement -- Intercreditor Rights", a Liquidity Provider may become the
Controlling Party with respect to the exercise of remedies under the Indentures.
(Intercreditor Agreement, Section 2.6(c))
LIQUIDITY PROVIDER
The initial Liquidity Provider for each Trust (other than the Class D
Trust) will be Kredietbank N.V., a bank organized under the laws of Belgium,
acting through its New York branch. Kredietbank N.V. has short term debt ratings
of P-1 from Moody's and A-1+ from Standard & Poor's.
DESCRIPTION OF THE INTERCREDITOR AGREEMENT
The following summary describes all material provisions of the
Intercreditor Agreement. The summary does not purport to be complete and
reference is made to all of the provisions of the Intercreditor Agreement, which
has been filed as an exhibit to the Registration Statement and is available as
set forth under the heading "Available Information".
INTERCREDITOR RIGHTS
Controlling Party
Pursuant to the Intercreditor Agreement, the Trustees and the Liquidity
Provider have agreed that, with respect to any Indenture and (in the case of
clause (b) below) the Second Indenture at any given time, the Loan Trustee or
the Second Mortgagee, as the case may be, will be directed (a) in taking, or
refraining from taking, any action thereunder or with respect to the Equipment
Notes issued under such Indenture, by the holders of at least a majority of the
outstanding principal amount of the Equipment Notes issued under such Indenture
(provided that, for so long as the Subordination Agent is the registered holder
of the Equipment Notes, the Subordination Agent will act with respect to this
clause (a) in accordance with the directions of the Trustees (in the case of
each such Trustee, with respect to the Equipment Notes issued under such
Indenture and held as Trust Property of such Trust) constituting, in the
aggregate, directions with respect to such principal amount of Equipment Notes),
so long as no Indenture Default shall have occurred and be continuing
thereunder, and (b) after the occurrence and during the continuance of an
Indenture Default under such Indenture, in taking, or refraining from taking,
any action thereunder or with respect to the Equipment Notes
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issued under such Indenture, including exercising remedies thereunder or with
respect to such Equipment Notes (including acceleration of such Equipment Notes
or foreclosing the lien on the Aircraft securing such Equipment Notes), or under
the Second Indenture, by the Controlling Party, subject to the limitations
described below. See "Description of the New Certificates -- Indenture Defaults
and Certain Rights Upon an Indenture Default" for a description of the rights of
the Certificateholders of each Trust to direct the respective Trustees.
Notwithstanding the foregoing, at any time after 18 months from the earlier to
occur of (x) the date on which the entire available amount under any Liquidity
Facility shall have been drawn (for any reason other than a Downgrade Drawing or
a Non-Extension Drawing) and remain unreimbursed and (y) the date on which all
Equipment Notes shall have been accelerated, the Liquidity Provider will have
the right to elect to become the Controlling Party with respect to any
Indenture. For purposes of giving effect to the foregoing, the Trustees (other
than the Controlling Party) will irrevocably agree, and the Certificateholders
(other than the Certificateholders represented by the Controlling Party) will be
deemed to agree by virtue of their purchase of Certificates, that the
Subordination Agent, as record holder of the Equipment Notes, shall exercise its
voting rights in respect of the Equipment Notes as directed by the Controlling
Party. (Intercreditor Agreement, Section 2.6) For a description of certain
limitations on the Controlling Party's rights to exercise remedies, see
"Description of the Equipment Notes -- Remedies".
Sale of Equipment Notes or Aircraft
Upon the occurrence and during the continuation of any Indenture Default
under any Indenture, the Controlling Party may accelerate and, subject to the
provisions of the immediately following sentence, sell all (but not less than
all) of the Equipment Notes issued under such Indenture to any person. So long
as any Certificates are outstanding, during nine months after the earlier of (x)
the acceleration of the Equipment Notes under any Indenture and (y) the
bankruptcy or insolvency of Continental, without the consent of each Trustee, no
Aircraft subject to the lien of such Indenture or such Equipment Notes may be
sold, if the net proceeds from such sale would be less than the Minimum Sale
Price for such Aircraft or such Equipment Notes.
The Subordination Agent may from time to time during the continuance of an
Indenture Default (and before the occurrence of a Triggering Event) commission
Appraisals with respect to an Aircraft at the request of the Controlling Party.
(Intercreditor Agreement, Section 4.1(a)(iii))
PRIORITY OF DISTRIBUTIONS
So long as no Triggering Event shall have occurred, the payments in respect
of the Equipment Notes (whether under any Indenture or the Second Indenture) and
certain other payments received on any Distribution Date will be promptly
distributed by the Subordination Agent on such Distribution Date in the
following order of priority:
(i) to pay the Liquidity Obligations (other than any interest accrued
thereon or the principal amount of any Drawing) (the "Liquidity Expenses")
to the Liquidity Provider;
(ii) to pay interest accrued on the Liquidity Obligations to the
Liquidity Provider;
(iii) to pay or reimburse the Liquidity Provider for the Liquidity
Obligations (other than amounts payable pursuant to clauses (i) and (ii)
above) and/or, if applicable, to replenish each Cash Collateral Account up
to the Required Amount;
(iv) to pay Expected Distributions to the holders of Class A
Certificates;
(v) to pay Expected Distributions to the holders of Class B
Certificates;
(vi) to pay Expected Distributions to the holders of Class C
Certificates;
(vii) to pay Expected Distributions to the holders of Class D
Certificates; and
(viii) to pay certain fees and expenses of the Subordination Agent and
the Trustees.
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"Expected Distributions" means, with respect to the Certificates of any
Trust on any Current Distribution Date, the sum of (x) accrued and unpaid
interest on such Certificates and (y) the difference between (A) the Pool
Balance of such Certificates as of the immediately preceding Distribution Date
(or, if the Current Distribution Date is the first Distribution Date, the
original aggregate face amount of the Certificates of such Trust) and (B) the
Pool Balance of such Certificates as of the Current Distribution Date calculated
on the basis that (i) the principal of the Equipment Notes held in such Trust
has been paid when due (whether at stated maturity, upon redemption, prepayment
or acceleration or otherwise) and such payments have been distributed to the
holders of such Certificates and (ii) the principal of any Equipment Notes
formerly held in such Trust that have been sold pursuant to the Intercreditor
Agreement has been paid in full and such payments have been distributed to the
holders of such Certificates.
Subject to the terms of the Intercreditor Agreement, upon the occurrence of
a Triggering Event and at all times thereafter, all funds received by the
Subordination Agent in respect of the Equipment Notes whether under any
Indenture or the Second Indenture and certain other payments will be promptly
distributed by the Subordination Agent in the following order of priority:
(i) to pay certain out-of-pocket costs and expenses actually incurred
by the Subordination Agent or any Trustee or to reimburse any
Certificateholder or the Liquidity Provider in respect of payments made to
the Subordination Agent or any Trustee in connection with the protection or
realization of the value of the Equipment Notes or any Trust Indenture
Estate (the "Administration Expenses");
(ii) to the Liquidity Provider, to pay the Liquidity Expenses;
(iii) to the Liquidity Provider, to pay interest accrued on the
Liquidity Obligations;
(iv) to the Liquidity Provider, to pay the outstanding amount of all
Liquidity Obligations and/or, if applicable, with respect to any particular
Liquidity Facility, unless (x) less than 65% of the aggregate outstanding
principal amount of all Equipment Notes are Performing Equipment Notes and
a Liquidity Event of Default shall have occurred and be continuing under
such Liquidity Facility or (y) a Final Drawing shall have occurred under
such Liquidity Facility, to replenish the Cash Collateral Account with
respect to such Liquidity Facility up to the Required Amount for the
related Class of Certificates (less the amount of any repayments of
Interest Drawings under such Liquidity Facility while sub-clause (x) is
applicable);
(v) to pay certain fees, taxes, charges and other amounts payable to
the Subordination Agent, any Trustee or any Certificateholder;
(vi) to pay Adjusted Expected Distributions to the holders of Class A
Certificates;
(vii) to pay Adjusted Expected Distributions to the holders of Class B
Certificates;
(viii) to pay Adjusted Expected Distributions to the holders of Class C
Certificates; and
(ix) to pay Adjusted Expected Distributions to the holders of Class D
Certificates.
"Adjusted Expected Distributions" means, with respect to the Certificates
of any Trust on any Current Distribution Date, the sum of (1) accrued and unpaid
interest on such Certificates and (2) the greater of:
(A) the difference between (x) the Pool Balance of such Certificates
as of the immediately preceding Distribution Date (or, if the Current
Distribution Date is the first Distribution Date, the original aggregate
face amount of the Certificates of such Trust) and (y) the Pool Balance of
such Certificates as of the Current Distribution Date calculated on the
basis that (i) the principal of the Non-Performing Equipment Notes held in
such Trust has been paid in full and such payments have been distributed to
the holders of such Certificates, (ii) the principal of the Performing
Equipment Notes held in such Trust has been paid when due (but without
giving effect to any unpaid acceleration of Performing Equipment Notes) and
such payments have been distributed to the holders of such Certificates and
(iii) the principal of any Equipment Notes formerly held in such Trust that
have been sold pursuant to the Intercreditor Agreement has been paid in
full and such payments have been distributed to the holders of such
Certificates, and
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(B) the amount of the excess, if any, of (i) the amount described in
subclause (A)(x), over (ii) the Aggregate LTV Collateral Amount for such
Class of Certificates for the Current Distribution Date; provided that,
until the date of the initial LTV Appraisals, clause (B) shall not apply.
For purposes of calculating Expected Distributions or Adjusted Expected
Distributions with respect to the Certificates of any Trust, any premium paid on
the Equipment Notes held in such Trust that has not been distributed to the
Certificateholders of such Trust (other than such premium or a portion thereof
applied to the payment of interest on the Certificates of such Trust or the
reduction of the Pool Balance of such Trust) shall be added to the amount of
Expected Distributions or Adjusted Expected Distributions.
"Aggregate LTV Collateral Amount" for any Class of Certificates for any
Distribution Date means the sum of the applicable LTV Collateral Amounts for
each Aircraft, minus the Pool Balance for each Class of Certificates, if any,
senior to such Class, after giving effect to any distribution on such
Distribution Date of principal of the Equipment Notes held by the Trust or
Trusts of such senior Class or Classes.
"LTV Collateral Amount" of any Aircraft for any Class of Certificates
means, as of any Distribution Date, the lesser of (i) the LTV Ratio for such
Class of Certificates multiplied by the Appraised Current Market Value of such
Aircraft (or with respect to any such Aircraft which has suffered an Event or
Loss under and as defined in the relevant Indenture, the amount of the insurance
proceeds paid to the related Loan Trustee and/or the Second Mortgagee in respect
thereof to the extent then held by such Loan Trustee and/or the Second Mortgagee
(and/or on deposit in the Special Payments Account) or payable to such Loan
Trustee and/or the Second Mortgagee in respect thereof) and (ii) the outstanding
principal amount of the Equipment Notes secured by such Aircraft after giving
effect to any principal payments of such Equipment Notes on or before such
Distribution Date.
"LTV Ratio" means for the Class A Certificates 41.00%, for the Class B
Certificates 55.00%, for the Class C Certificates 69.90% and for the Class D
Certificates 84.89%.
"Appraised Current Market Value" of any Aircraft means the lower of the
average and the median of the most recent three Appraisals of such Aircraft.
After a Triggering Event occurs and any Equipment Note becomes a Non-Performing
Equipment Note, the Subordination Agent shall obtain LTV Appraisals for the
Aircraft as soon as practicable and additional LTV Appraisals on or prior to
each anniversary of the date of such initial LTV Appraisals; provided that if
the Controlling Party reasonably objects to the appraised value of the Aircraft
shown in such LTV Appraisals, the Controlling Party shall have the right to
obtain or cause to be obtained substitute LTV Appraisals (including LTV
Appraisals based upon physical inspection of such Aircraft).
"Appraisal" means a fair market value appraisal (which may be a "desktop"
appraisal) performed by any Appraiser or any other nationally recognized
appraiser on the basis of an arm's-length transaction between an informed and
willing purchaser under no compulsion to buy and an informed and willing seller
under no compulsion to sell and both having knowledge of all relevant facts.
Interest Drawings under the Liquidity Facility and withdrawals from the
Cash Collateral Account, in each case in respect of interest on the Certificates
of any Trust (other than the Class D Trust), will be distributed to the Trustee
for such Trust, notwithstanding the priority of distributions set forth in the
Intercreditor Agreement and otherwise described herein. All amounts on deposit
in the Cash Collateral Account for any Trust that are in excess of the Required
Amount will be paid to the applicable Liquidity Provider.
VOTING OF EQUIPMENT NOTES
In the event that the Subordination Agent, as the registered holder of any
Equipment Note, receives a request for its consent to any amendment,
modification, consent or waiver under such Equipment Note, the related Indenture
or the Second Indenture (or, if applicable, the related Participation Agreement
or other related document), (i) if no Indenture Default shall have occurred and
be continuing with respect to such Indenture (or, in the case of the Second
Indenture, any Indenture), the Subordination Agent shall request instructions
from the Trustees and shall vote or consent in accordance with the directions of
the Trustees (in
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the case of each such Trustee, with respect to the Equipment Notes held in such
Trust) constituting, in the aggregate, directions with respect to the requisite
principal amount of Equipment Notes under such Indenture (or, in the case of the
Second Indenture, with respect to the requisite aggregate principal amount of
Equipment Notes under all of the Indentures) and (ii) if any Indenture Default
shall have occurred and be continuing with respect to such Indenture (or, in the
case of the Second Indenture, any Indenture), the Subordination Agent will
exercise its voting rights as directed by the Controlling Party, subject to
certain limitations; provided that no such amendment, modification, consent or
waiver shall, without the consent of the Liquidity Provider, reduce the amount
of principal or interest payable by Continental under any Equipment Note issued
under any Indenture or have any other effect which would require the consent of
the holder of each Equipment Note as described in "Description of the Equipment
Notes -- Modification of Indentures". (Intercreditor Agreement, Section 9.1)
THE SUBORDINATION AGENT
Wilmington Trust Company is the Subordination Agent under the Intercreditor
Agreement. Continental and its affiliates may from time to time enter into
banking and trustee relationships with the Subordination Agent and its
affiliates. The Subordination Agent's address is Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
The Subordination Agent may resign at any time, in which event a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. The Controlling Party may remove the Subordination Agent for cause as
provided in the Intercreditor Agreement. In such circumstances, a successor
Subordination Agent will be appointed as provided in the Intercreditor
Agreement. Any resignation or removal of the Subordination Agent and appointment
of a successor Subordination Agent does not become effective until acceptance of
the appointment by the successor Subordination Agent. (Intercreditor Agreement,
Section 8.1)
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
THE AIRCRAFT
The Aircraft consist of six Boeing 737-3T0 aircraft manufactured in 1986
and four McDonnell Douglas MD-82 aircraft, one manufactured in 1985, one in 1986
and two in 1987. All of the Aircraft are currently leased by Continental. The
Aircraft have been designed to be in compliance with Stage 3 noise level
standards, which are the most restrictive regulatory standards currently in
effect in the United States for aircraft noise abatement.
Boeing 737-3T0 Aircraft
The Boeing 737-3T0 aircraft is a medium range aircraft with a seating
capacity of approximately 128 passengers (2-class). The Boeing 737-3T0 Aircraft
are powered by two CFM International CFM56-3B1 engines. Approximately 982 Boeing
737-300 series aircraft have been delivered as of April 30, 1997 (as provided by
Boeing).
McDonnell Douglas MD-82 Aircraft
The McDonnell Douglas MD-82 aircraft is a medium range aircraft with a
seating capacity of approximately 141 passengers (2-class). The McDonnell
Douglas MD-82 Aircraft are powered by two Pratt & Whitney JT8D-217A engines.
Approximately 990 MD-80 series (MD-81, MD-82 and MD-83) aircraft have been
manufactured (as provided by the AISI appraisal letter dated May 20, 1997,
attached in Appendix II hereto).
THE APPRAISALS
The table below sets forth the appraised values and certain additional
information regarding the Aircraft.
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AIRCRAFT APPRAISED VALUE
REGISTRATION ------------------------
AIRCRAFT TYPE ENGINE TYPE NUMBER AISI BK MBA
- ---------------------------------------------- ----------- ------------ ------ ------ ------
(IN MILLIONS OF DOLLARS)
Boeing 737-3T0................................ CFM56-3B1 N12322 $18.98 $18.25 $21.58
Boeing 737-3T0................................ CFM56-3B1 N10323 18.98 18.25 21.58
Boeing 737-3T0................................ CFM56-3B1 N14324 18.98 18.25 21.58
Boeing 737-3T0................................ CFM56-3B1 N69333 18.98 19.00 21.58
Boeing 737-3T0................................ CFM56-3B1 N14334 18.98 19.00 21.58
Boeing 737-3T0................................ CFM56-3B1 N14335 18.98 19.00 21.58
McDonnell Douglas MD-82....................... JT8D-217A N12811 15.30 15.55 19.71
McDonnell Douglas MD-82....................... JT8D-217A N15820 16.10 17.00 20.67
McDonnell Douglas MD-82....................... JT8D-217A N18833 16.90 18.05 21.62
McDonnell Douglas MD-82....................... JT8D-217A N10834 16.90 18.05 21.62
The appraised values set forth in the foregoing chart were determined by
three independent aircraft appraisal and consulting firms, AISI, BK and MBA, as
of May 20, May 16 and June 6, 1997, respectively. As part of this process, all
three Appraisers performed "desk-top" appraisals without any physical inspection
of the Aircraft. The appraisals are based on various assumptions and
methodologies, which vary among the appraisals. The Appraisers have delivered
letters summarizing their respective appraisals, copies of which are annexed to
this Prospectus as Appendix II. For a discussion of the assumptions and
methodologies used in each of the appraisals, reference is hereby made to such
summaries.
An appraisal is only an estimate of value and should not be relied upon as
a measure of realizable value; the proceeds realized upon a sale of any Aircraft
may be less than the appraised value thereof. The value of the Aircraft in the
event of the exercise of remedies under the applicable Indenture will depend on
market and economic conditions, the availability of buyers, the condition of the
Aircraft and other similar factors. Accordingly, there can be no assurance that
the proceeds realized upon any such exercise with respect to the Equipment Notes
and the Aircraft pursuant to the applicable Indenture would be as appraised or
sufficient to satisfy in full payments due on the Equipment Notes issued
thereunder or the Certificates.
DESCRIPTION OF THE EQUIPMENT NOTES
The statements under this caption are summaries and do not purport to be
complete. The summaries make use of terms defined in and reference is made to
all of the provisions of the Equipment Notes, the Indentures, the Second
Indenture and the Participation Agreements. Except as otherwise indicated, the
following summaries relate to the Equipment Notes, the Indenture, the Second
Indenture and the Participation Agreement that may be applicable to each
Aircraft, forms of which are filed as exhibits to the Registration Statement and
are available as set forth under the heading "Available Information".
GENERAL
The Equipment Notes have been issued in four series with respect to each
Aircraft under a separate Indenture between Continental and Wilmington Trust
Company, as Loan Trustee. Continental's obligations under the Equipment Notes
issued with respect to each Aircraft are general obligations of Continental.
SUBORDINATION
Series B Equipment Notes issued in respect of any Aircraft are subordinated
in right of payment to Series A Equipment Notes issued in respect of such
Aircraft, Series C Equipment Notes issued in respect of such Aircraft are
subordinated in right of payment to such Series B Equipment Notes and Series D
Equipment Notes issued in respect of such Aircraft are subordinated in right of
payment to such Series C Equipment Notes. On each Equipment Note payment date,
(i) payments of interest and principal due on Series A Equipment Notes issued in
respect of any Aircraft will be made prior to payments of interest and
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principal due on Series B Equipment Notes issued in respect of such Aircraft,
(ii) payments of interest and principal due on Series B Equipment Notes issued
in respect of any Aircraft will be made prior to payments of interest and
principal due on Series C Equipment Notes issued in respect of such Aircraft and
(iii) payments of interest and principal due on Series C Equipment Notes issued
in respect of any Aircraft will be made prior to payments of interest and
principal due on Series D Equipment Notes issued in respect of such Aircraft.
PRINCIPAL AND INTEREST PAYMENTS
Subject to the provisions of the Intercreditor Agreement, interest paid on
the Equipment Notes held in each Trust will be passed through to the
Certificateholders of such Trust on the dates and at the rate per annum set
forth on the cover page of this Prospectus with respect to Certificates issued
by such Trust (subject to change as provided in the Registration Rights
Agreement) until the final expected Regular Distribution Date for such Trust.
Subject to the provisions of the Intercreditor Agreement, principal paid on the
Equipment Notes held in each Trust will be passed through to the
Certificateholders of such Trust in scheduled amounts on the dates set forth
herein until the final expected Regular Distribution Date for such Trust.
The aggregate original principal amounts of the Equipment Notes issued with
respect to each Aircraft, as such Equipment Notes are held in each of the
Trusts, are as follows:
AIRCRAFT TRUST 1997-2A TRUST 1997-2B TRUST 1997-2C TRUST 1997-2D
REGISTRATION EQUIPMENT EQUIPMENT EQUIPMENT EQUIPMENT
NUMBER NOTES NOTES NOTES NOTES TOTAL
- ------------------------------ ------------- ------------- ------------- ------------- ------------
N12322........................ $ 7,781,810 $ 2,657,242 $ 2,828,029 $ 2,844,973 $ 16,112,054
N10323........................ 7,781,810 2,657,242 2,828,029 2,844,973 16,112,054
N14324........................ 7,781,810 2,657,242 2,828,029 2,844,973 16,112,054
N69333........................ 7,790,010 2,660,042 2,831,009 2,847,971 16,129,032
N14334........................ 7,790,010 2,660,042 2,831,009 2,847,971 16,129,032
N14335........................ 7,790,010 2,660,042 2,831,009 2,847,971 16,129,032
N12811........................ 6,375,511 2,177,034 2,316,960 2,330,840 13,200,345
N15820........................ 6,970,009 2,380,034 2,533,008 2,548,184 14,431,235
N18833........................ 7,400,510 2,527,040 2,689,459 2,705,572 15,322,581
N10834........................ 7,400,510 2,527,040 2,689,459 2,705,572 15,322,581
----------- ----------- ----------- ----------- ------------
Total.................... $ 74,862,000 $ 25,563,000 $27,206,000 $27,369,000 $155,000,000
Interest will be payable on the unpaid principal amount of each Equipment
Note at the rate applicable to such Equipment Note on June 30 and December 30 of
each year, commencing on December 30, 1997. Such interest will be computed on
the basis of a 360-day year of twelve 30-day months. Under certain circumstances
described in "Exchange Offer; Registration Rights", the interest rates for the
Equipment Notes will be increased to the extent described therein.
The principal of the Equipment Notes purchased by each Trust will be
payable as set forth in Appendix IV.
If any date scheduled for any payment of principal, premium (if any) or
interest with respect to the Equipment Notes is not a Business Day, such payment
will be made on the next succeeding Business Day without any additional
interest.
REDEMPTION
If an Event of Loss occurs with respect to any Aircraft and such Aircraft
is not replaced by Continental under the related Indenture and Second Indenture,
the Equipment Notes issued with respect to such Aircraft will be redeemed, in
whole, in each case at a price equal to the aggregate unpaid principal amount
thereof, together with accrued interest thereon to, but not including, the date
of redemption, but without premium, on a Special Distribution Date. (Indentures,
Section 2.09)
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All of the Equipment Notes issued with respect to the Aircraft may be
redeemed prior to maturity at any time at the option of Continental, in each
case at a price equal to the aggregate unpaid principal thereof, together with
accrued interest thereon to, but not including, the date of redemption, plus, in
the case of any series of Equipment Notes, if such redemption is made prior to
the Premium Termination Date applicable to such series, a Make-Whole Premium.
(Indentures, Section 2.10)
"Make-Whole Premium" means, with respect to any Equipment Note, an amount
(as determined by an independent investment banker of national standing) equal
to the excess, if any, of (a) the present value of the remaining scheduled
payments of principal and interest to maturity of such Equipment Note computed
by discounting such payments on a semiannual basis on each Payment Date
(assuming a 360-day year of twelve 30-day months) using a discount rate equal to
the Treasury Yield over (b) the outstanding principal amount of such Equipment
Note plus accrued interest to the date of determination.
For purposes of determining the Make-Whole Premium, "Treasury Yield" means,
at the date of determination with respect to any Equipment Note, the interest
rate (expressed as a semiannual decimal and, in the case of United States
Treasury bills, converted to a bond equivalent yield) determined to be the per
annum rate equal to the semiannual yield to maturity for United States Treasury
securities maturing on the Average Life Date of such Equipment Note and trading
in the public securities markets either as determined by interpolation between
the most recent weekly average yield to maturity for two series of United States
Treasury securities trading in the public securities markets, (A) one maturing
as close as possible to, but earlier than, the Average Life Date of such
Equipment Note and (B) the other maturing as close as possible to, but later
than, the Average Life Date of such Equipment Note, in each case as published in
the most recent H.15(519) or, if a weekly average yield to maturity for United
States Treasury securities maturing on the Average Life Date of such Equipment
Note is reported in the most recent H.15(519), such weekly average yield to
maturity as published in such H.15(519). "H.15(519)" means the weekly
statistical release designated as such, or any successor publication, published
by the Board of Governors of the Federal Reserve System. The date of
determination of a Make-Whole Premium shall be the third Business Day prior to
the applicable payment or redemption date and the "most recent H.15(519)" means
the H.15(519) published prior to the close of business on the third Business Day
prior to the applicable payment or redemption date.
"Average Life Date" for any Equipment Note shall be the date which follows
the time of determination by a period equal to the Remaining Weighted Average
Life of such Equipment Note. "Remaining Weighted Average Life" on a given date
with respect to any Equipment Note shall be the number of days equal to the
quotient obtained by dividing (a) the sum of each of the products obtained by
multiplying (i) the amount of each then remaining scheduled payment of principal
of such Equipment Note by (ii) the number of days from and including such
determination date to but excluding the date on which such payment of principal
is scheduled to be made, by (b) the then outstanding principal amount of such
Equipment Note.
SECURITY
The Equipment Notes issued with respect to each Aircraft are secured by a
first priority security interest in such Aircraft and by a second priority
security interest in each of the other Aircraft. If the Equipment Notes issued
under an Indenture and other obligations secured thereunder and then due have
been paid in full, the applicable Aircraft will be released from the lien of
such Indenture and, so long as no Indenture Default or certain other defaults
exist under any other Indenture at such time, will be released from the lien of
the Second Indenture.
Funds, if any, held from time to time by the Loan Trustee with respect to
any Aircraft, including funds held as the result of an Event of Loss to such
Aircraft, if any, relating thereto, will be invested and reinvested by such Loan
Trustee, at the direction of Continental, in investments described in the
related Indenture. (Indentures, Section 6.06)
LOAN TO VALUE RATIOS OF EQUIPMENT NOTES
The following tables titled "Loan to Value Ratios" set forth loan to
Aircraft value ratios for the Equipment Notes issued in respect of each Aircraft
as of the specified Regular Distribution Dates obtained by
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dividing (i) the outstanding balance (assuming no payment default) of such
Equipment Notes determined immediately after giving effect to the payments
scheduled to be made on each such Regular Distribution Date by (ii) the assumed
value (the "Assumed Aircraft Value") of the Aircraft securing such Equipment
Notes. Differences may occur due to rounding.
The Loan to Value Ratio tables are based on the assumption that the value
of each Aircraft set forth opposite the Issuance Date included in each table
depreciates by the respective percentages indicated in the table titled
"Depreciation Assumptions" below for the Boeing 737-300 Aircraft which were each
manufactured in 1986 (aircraft registration numbers N12322, N10323, N14324,
N69333, N14334 and N14335), and for the McDonnell Douglas MD-82 Aircraft
manufactured in 1985 (aircraft registration number N12811), manufactured in 1986
(aircraft registration number N15820) and manufactured in 1987 (aircraft
registration numbers N18833 and N10834).
Depreciation Assumptions
VALUE DEPRECIATION PERCENTAGES
---------------------------------------
MANUFACTURE YEAR: 1986 1985 1986 1987
AIRCRAFT: B737-300 MD-82 MD-82 MD-82
----------------------------------------------- -------- ------ ----- -----
YEAR BEGINNING
-----------------------------------------------
1997........................................... 2.6% 3.1% 3.1% 3.0%
1998........................................... 2.6 3.1 3.1 3.0
1999........................................... 2.6 3.1 3.1 3.0
2000........................................... 2.6 5.3 3.1 3.0
2001........................................... 5.1 5.3 5.1 3.0
2002........................................... 5.1 5.3 5.1 5.0
2003........................................... 5.1 5.3 5.1 5.0
2004........................................... 5.1 5.3 5.1 5.0
2005........................................... 5.1 7.9 5.1 5.0
2006........................................... 7.7 7.9 7.7 5.0
Other rates or methods of depreciation would result in materially different
loan to Aircraft value ratios, and no assurance can be given (i) that the
depreciation rates and method assumed for the purposes of the tables are the
ones most likely to occur or (ii) as to the actual future value of any Aircraft.
Thus the tables should not be considered a forecast or prediction of expected or
likely loan to Aircraft value ratios, but simply a mathematical calculation
based on one set of assumptions.
Loan to Value Ratios
AIRCRAFT REGISTRATION NUMBER AIRCRAFT REGISTRATION NUMBER AIRCRAFT REGISTRATION NUMBER
N12322 N10323 N14324
---------------------------------- ---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT EQUIPMENT
NOTE ASSUMED LOAN TO NOTE ASSUMED LOAN TO NOTE ASSUMED LOAN TO
OUTSTANDING AIRCRAFT VALUE OUTSTANDING AIRCRAFT VALUE OUTSTANDING AIRCRAFT VALUE
DATE BALANCE VALUE RATIO BALANCE VALUE RATIO BALANCE VALUE RATIO
- -------------------- ----------- ---------- ------- ----------- ---------- ------- ----------- ---------- -------
(MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS)
June 25, 1997....... $ 16.11 $18.98 84.89% $ 16.11 $18.98 84.89% $ 16.11 $18.98 84.89%
June 30, 1998....... 15.07 18.49 81.53 15.07 18.49 81.53 15.07 18.49 81.53
June 30, 1999....... 13.90 17.99 77.26 13.90 17.99 77.26 13.90 17.99 77.26
June 30, 2000....... 12.56 17.50 71.77 12.56 17.50 71.77 12.56 17.50 71.77
June 30, 2001....... 11.12 17.01 65.42 11.12 17.01 65.42 11.12 17.01 65.42
June 30, 2002....... 10.33 16.04 64.43 10.33 16.04 64.43 10.33 16.04 64.43
June 30, 2003....... 8.86 15.07 58.79 8.86 15.07 58.79 8.86 15.07 58.79
June 30, 2004....... 6.67 14.10 47.29 6.67 14.10 47.29 6.67 14.10 47.29
June 30, 2005....... 4.66 13.13 35.51 4.66 13.13 35.51 4.66 13.13 35.51
June 30, 2006....... 2.77 12.17 22.77 2.77 12.17 22.77 2.77 12.17 22.77
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AIRCRAFT REGISTRATION NUMBER AIRCRAFT REGISTRATION NUMBER AIRCRAFT REGISTRATION NUMBER
N69333 N14334 N14335
---------------------------------- ---------------------------------- ----------------------------------
EQUIPMENT EQUIPMENT EQUIPMENT
NOTE ASSUMED LOAN TO NOTE ASSUMED LOAN TO NOTE ASSUMED LOAN TO
OUTSTANDING AIRCRAFT VALUE OUTSTANDING AIRCRAFT VALUE OUTSTANDING AIRCRAFT VALUE
DATE BALANCE VALUE RATIO BALANCE VALUE RATIO BALANCE VALUE RATIO
- -------------------- ----------- ---------- ------- ----------- ---------- ------- ----------- ---------- -------
(MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS)
June 25, 1997....... $ 16.13 $19.00 84.89% $ 16.13 $19.00 84.89% $ 16.13 $19.00 84.89%
June 30, 1998....... 15.09 18.51 81.53 15.09 18.51 81.53 15.09 18.51 81.53
June 30, 1999....... 13.92 18.01 77.26 13.92 18.01 77.26 13.92 18.01 77.26
June 30, 2000....... 12.57 17.52 71.77 12.57 17.52 71.77 12.57 17.52 71.77
June 30, 2001....... 11.14 17.02 65.42 11.14 17.02 65.42 11.14 17.02 65.42
June 30, 2002....... 10.34 16.06 64.43 10.34 16.06 64.43 10.34 16.06 64.43
June 30, 2003....... 8.87 15.09 58.79 8.87 15.09 58.79 8.87 15.09 58.79
June 30, 2004....... 6.68 14.12 47.29 6.68 14.12 47.29 6.68 14.12 47.29
June 30, 2005....... 4.67 13.15 35.51 4.67 13.15 35.51 4.67 13.15 35.51
June 30, 2006....... 2.77 12.18 22.77 2.77 12.18 22.77 2.77 12.18 22.77
AIRCRAFT REGISTRATION NUMBER N12811 AIRCRAFT REGISTRATION NUMBER N15820
--------------------------------------------- ---------------------------------------------
EQUIPMENT NOTE EQUIPMENT NOTE
OUTSTANDING ASSUMED LOAN TO OUTSTANDING ASSUMED LOAN TO
DATE BALANCE AIRCRAFT VALUE VALUE RATIO BALANCE AIRCRAFT VALUE VALUE RATIO
- ---------------------------------- -------------- -------------- ----------- -------------- -------------- -----------
(MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS)
June 25, 1997..................... $13.20 $15.55 84.89% $14.43 $17.00 84.89%
June 30, 1998..................... 12.29 15.07 81.53 13.43 16.47 81.53
June 30, 1999..................... 11.27 14.59 77.26 12.32 15.95 77.26
June 30, 2000..................... 10.12 14.10 71.77 11.07 15.42 71.77
June 30, 2001..................... 8.69 13.28 65.42 9.74 14.89 65.42
June 30, 2002..................... 8.03 12.46 64.43 9.04 14.03 64.43
June 30, 2003..................... 6.84 11.63 58.79 7.74 13.16 58.79
June 30, 2004..................... 5.11 10.81 47.29 5.81 12.29 47.29
June 30, 2005..................... 3.55 9.98 35.51 4.06 11.42 35.51
June 30, 2006..................... 1.99 8.75 22.77 2.40 10.56 22.77
AIRCRAFT REGISTRATION NUMBER N18833 AIRCRAFT REGISTRATION NUMBER N10834
--------------------------------------------- ---------------------------------------------
EQUIPMENT NOTE EQUIPMENT NOTE
OUTSTANDING ASSUMED LOAN TO OUTSTANDING ASSUMED LOAN TO
DATE BALANCE AIRCRAFT VALUE VALUE RATIO BALANCE AIRCRAFT VALUE VALUE RATIO
- ---------------------------------- -------------- -------------- ----------- -------------- -------------- -----------
(MILLIONS) (MILLIONS) (MILLIONS) (MILLIONS)
June 25, 1997..................... $15.32 $18.05 84.89% $15.32 $18.05 84.89%
June 30, 1998..................... 14.28 17.51 81.53 14.28 17.51 81.53
June 30, 1999..................... 13.11 16.97 77.26 13.11 16.97 77.26
June 30, 2000..................... 11.79 16.43 71.77 11.79 16.43 71.77
June 30, 2001..................... 10.39 15.88 65.42 10.39 15.88 65.42
June 30, 2002..................... 9.89 15.34 64.43 9.89 15.34 64.43
June 30, 2003..................... 8.49 14.44 58.79 8.49 14.44 58.79
June 30, 2004..................... 6.40 13.54 47.29 6.40 13.54 47.29
June 30, 2005..................... 4.49 12.64 35.51 4.49 12.64 35.51
June 30, 2006..................... 2.67 11.73 22.77 2.67 11.73 22.77
INDENTURE DEFAULTS, NOTICE AND WAIVER
Indenture Defaults under each Indenture will include: (a) the failure by
Continental to pay any interest or principal or premium, if any, when due, under
any Equipment Note issued thereunder that continues for 10 Business Days or
more, or the failure to pay any other amount payable by it thereunder or under
the related Participation Agreement when due, which failure shall continue for
more than 10 Business Days after Continental has received written notice from
the Loan Trustee of the failure to make such payment when due,
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(b) the failure by Continental to maintain certain required insurance, (c) the
failure by Continental to perform or observe in any material respect any other
covenant or obligation under such Indenture or certain related documents that
continues after notice and specified cure periods, (d) the untruth or inaccuracy
in any material respect of any representation or warranty made by Continental in
such Indenture, in the related Participation Agreement or in certain related
documents which is material at the time in question, after notice and a
specified cure period, (e) the occurrence and continuation of an Indenture
Default under any of the other Indentures or (f) the occurrence of certain
events of bankruptcy, reorganization or insolvency of Continental. (Indenture,
Section 5.01)
The holders of a majority in principal amount of the outstanding Equipment
Notes issued with respect to any Aircraft, by notice to the Loan Trustee, may on
behalf of all the holders waive any existing default and its consequences under
the Indenture with respect to such Aircraft, except a default in the payment of
the principal of, or premium or interest on any such Equipment Notes or a
default in respect of any covenant or provision of such Indenture that cannot be
modified or amended without the consent of each holder of Equipment Notes.
(Indenture, Section 5.06)
REMEDIES
If an Indenture Default occurs and is continuing under an Indenture, the
related Loan Trustee or the holders of a majority in principal amount of the
Equipment Notes outstanding under such Indenture may declare the principal of
all such Equipment Notes issued thereunder immediately due and payable, together
with all accrued but unpaid interest thereon. Since the occurrence and
continuation of an Indenture Default under an Indenture constitutes an Indenture
Default under each other Indenture, remedies will be exercisable under the
Indentures and the Second Indenture with respect to all Aircraft if an Indenture
Default exists under any Indenture. The holders of a majority in principal
amount of Equipment Notes outstanding under an Indenture may rescind any
declaration of acceleration of such Equipment Notes at any time before the
judgment or decree for the payment of the money so due shall be entered if (i)
there has been paid to the related Loan Trustee an amount sufficient to pay all
principal, interest, and premium, if any, on any such Equipment Notes, to the
extent such amounts have become due otherwise than by such declaration of
acceleration and (ii) all other Indenture Defaults and incipient Indenture
Defaults with respect to any covenant or provision of such Indenture have been
cured. (Indenture, Section 5.02(b))
Each Indenture provides that if an Indenture Default under such Indenture
has occurred and is continuing, the related Loan Trustee may exercise certain
rights or remedies available to it under such Indenture or under applicable law,
including one or more of the remedies under such Indenture. The Loan Trustee
will not be entitled to exercise any rights under the Second Indenture in
respect of any Aircraft without the prior written consent of the Loan Trustee
under the related Indenture so long as the lien of such Indenture has not been
discharged and the Loan Trustee has not commenced to foreclose such lien in
respect of such Aircraft thereunder (Second Indenture, Section 5.02(d)). With
respect to each Aircraft, the Second Indenture will be discharged at the time of
discharge of the Indenture relating to such Aircraft so long as no Indenture
Default or certain other defaults exist under any other Indenture at such time
(Second Indenture, Section 11.01).
Section 1110 of the U.S. Bankruptcy Code provides in relevant part that the
right of lessors, conditional vendors and holders of purchase-money equipment
security interests with respect to "equipment" (as defined in Section 1110 of
the U.S. Bankruptcy Code) to take possession of such equipment in compliance
with the provisions of a lease, conditional sale contract or security agreement,
as the case may be, is not affected by (a) the automatic stay provision of the
U.S. Bankruptcy Code, which provision enjoins repossessions by creditors for the
duration of the reorganization period, (b) the provision of the U.S. Bankruptcy
Code allowing the trustee in reorganization to use property of the debtor during
the reorganization period, (c) Section 1129 of the U.S. Bankruptcy Code (which
governs the confirmation of plans of reorganization in Chapter 11 cases) and (d)
any power of the bankruptcy court to enjoin a repossession. Section 1110
provides, however, in relevant part 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
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bankruptcy court) and may not be exercised at all if, within such 60-day period
(or such longer period consented to by the lessor, conditional vendor or holder
of a purchase-money equipment security interest), the trustee in reorganization
agrees to perform the debtor's obligations that become due on or after such date
and cures all existing defaults (other than defaults resulting solely from the
financial condition, bankruptcy, insolvency or reorganization of the debtor).
"Equipment" is defined in Section 1110 of the U.S. Bankruptcy Code, in part, as
an aircraft, aircraft engine, propeller, appliance, or spare part (as defined in
Section 40102 of Title 49 of the U.S. Code) that is subject to a purchase-money
equipment security interest granted by, leased to, or conditionally sold to a
debtor that is a citizen of the United States (as defined in Section 40102 of
Title 49 of the U.S. Code) holding an air carrier operating certificate issued
by the Secretary of Transportation pursuant to chapter 447 of Title 49 of the
U.S. Code for aircraft capable of carrying 10 or more individuals or 6,000
pounds or more of cargo.
On the Issuance Date, the relevant Loan Trustee has received a reasoned
opinion of Milbank, Tweed, Hadley & McCloy, counsel to the Initial Purchasers,
that, subject to the assumptions and qualifications contained therein, such Loan
Trustee's right to take possession of the Aircraft under the applicable
Indenture would be entitled to the benefits of Section 1110 with respect to the
airframe and engines comprising such Aircraft, in each case so long as
Continental continues to be a "citizen of the United States" as defined in
Section 40102 of Title 49 of the U.S. Code holding an air carrier operating
certificate issued by the Secretary of Transportation pursuant to chapter 447 of
title 49 of the U.S. Code for aircraft capable of carrying 10 or more
individuals or 6,000 pounds or more of cargo. In rendering such opinion,
Milbank, Tweed, Hadley & McCloy has relied, among other things, on (i) an
officer's certificate of Continental to the effect that (a) Continental has
never held title to nor claimed to be the owner of the Aircraft, (b) immediately
prior to its purchase of the relevant Aircraft, it was the lessee of such
Aircraft under a lease agreement (the "Existing Lease") designated as such and
(c) the Existing Lease was entered into as part of a settlement of liability
under Title IV of ERISA with the PBGC at a time when Continental was a debtor
under Title 11 of the U.S. Bankruptcy Code, and (ii) the provisions of the
Aircraft Equipment Settlement Leases Act of 1993 (the "Settlement Act"), which
provides in relevant part that if the PBGC as part of a settlement of liability
under ERISA enters into an agreement with a debtor under Title 11 of the U.S.
Bankruptcy Code which agreement provides that it is to be treated as a lease,
then such agreement will be treated as a lease for purposes of Section 1110. The
opinion of Milbank, Tweed, Hadley & McCloy states that, while the residual value
sharing arrangement provided by Continental to the PBGC with respect to the
Aircraft may give rise to questions as to whether each Existing Lease is a "true
lease" for tax purposes and hence for Section 1110 purposes, the plain language
of the Settlement Act effectively eliminates such uncertainty. In the opinion of
Milbank, Tweed, Hadley & McCloy, on the basis that the Existing Lease is a lease
for purposes of Section 1110, and for the reasons noted therein, the purchase of
the relevant Aircraft by Continental would be an acquisition of rights by
Continental in the Aircraft sufficient to support the existence of a purchase
money security interest for purposes of Section 1110, notwithstanding
Continental's prior interest in the Aircraft as lessee under the Existing Lease.
See First National Bank of Geneva v. United States, 13 Cl. Ct. 385 (1987) (lease
of equipment, followed by purchase of equipment, supports existence of purchase
money security interest).
The opinion of Milbank, Tweed, Hadley & McCloy does not address the
possible replacement of an Aircraft after an Event of Loss in the future, the
consummation of which is conditioned upon the contemporaneous delivery of an
opinion of counsel to the effect that the related Loan Trustee will be entitled
to Section 1110 benefits with respect to such replacement unless there is a
change in law or court interpretation that results in Section 1110 not being
available. See "-- Agreements Relating to the Aircraft -- Events of Loss". The
opinion of Milbank, Tweed, Hadley & McCloy does also not address the
availability of Section 1110 with respect to any possible lessee of an Aircraft
if it is leased by Continental.
The Second Indenture creates, with respect to the Equipment Notes issued
with respect to each Aircraft, a valid security interest in each of the other
Aircraft, which security interest ranks behind the security interest created by
the applicable Indenture with respect to each such Aircraft. In connection with
a reorganization under the Bankruptcy Code of Continental, the effect of such
additional, second-ranking security interest under the Second Indenture, in
conjunction with Section 1110, would be as follows: if the relevant Loan Trustee
were to repossess and sell an Aircraft in the exercise of its special
repossessory rights under
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Section 1110 with respect to the Aircraft, (a) proceeds up to the amount owing
on the Equipment Notes issued under the Indenture with respect to such Aircraft
would be distributable outside the bankruptcy estate in respect of such
Equipment Notes, and (b) any proceeds in excess of such amount would become part
of the bankruptcy estate subject to a valid security interest that secures all
other Equipment Notes. All payments made under the Second Indenture in respect
of the Equipment Notes will be made to the Subordination Agent which will
distribute such payments as provided in the Intercreditor Agreement. See
"Description of the New Certificates -- Payments and Distribution".
If an Indenture Default under any Indenture occurs and is continuing, any
sums held or received by the related Loan Trustee or the Second Mortgagee may be
applied to reimburse such Loan Trustee or the Second Mortgagee for any tax,
expense or other loss incurred by it and to pay any other amounts due to such
Loan Trustee or the Second Mortgagee prior to any payments to holders of the
Equipment Notes issued under such Indenture or payments under the Second
Indenture. (Indentures, Section 3.03; Second Mortgage, Section 3.01; Second
Mortgage, Section 3.01)
MODIFICATION OF INDENTURES
Without the consent of holders of a majority in principal amount of the
Equipment Notes outstanding under any Indenture, the provisions of such
Indenture and the related Participation Agreement may not be amended or
modified, except to the extent indicated below.
Any Indenture may be amended without the consent of the holders of
Equipment Notes to, among other things, cure any defect or inconsistency in such
Indenture or, the Equipment Notes issued thereunder, provided that such change
does not adversely affect the interests of any such holder. (Indenture, Section
10.01(b))
Without the consent of the holder of each Equipment Note outstanding under
any Indenture affected thereby, no amendment or modification of such Indenture
may among other things (a) reduce the principal amount of, or premium, if any,
or interest payable on, any Equipment Notes issued under such Indenture or
change the date on which any principal or premium, if any, or interest is due
and payable, (b) permit the creation of any security interest with respect to
the property subject to the lien of such Indenture, except as provided in such
Indenture, or deprive any holder of an Equipment Note issued under such
Indenture of the benefit of the lien of such Indenture upon the property subject
thereto or (c) reduce the percentage in principal amount of outstanding
Equipment Notes issued under such Indenture necessary to modify or amend any
provision of such Indenture or to waive compliance therewith. (Indenture,
Section 10.01(a))
INDEMNIFICATION
Continental will be required to indemnify each Loan Trustee, the Second
Mortgagee, the Liquidity Provider, the Subordination Agent and each Trustee, but
not the holders of Certificates, for certain losses, claims and other matters.
AGREEMENTS RELATING TO THE AIRCRAFT
Possession, Sublease and Transfer
Each Aircraft may be operated by Continental or, subject to certain
restrictions, by certain other persons. Normal interchange and pooling
agreements customary in the commercial airline industry with respect to any
Engine are permitted. Leases are also permitted to U.S. air carriers and foreign
air carriers that have their principal executive office in certain specified
countries. In addition, a lessee may not be subject to insolvency or similar
proceedings at the commencement of such lease. (Indenture, Section 4.02)
Permitted foreign air carriers are not limited to those based in a country that
is a party to the Convention on the International Recognition of Rights in
Aircraft (Geneva 1948) (the "Convention"). It is uncertain to what extent the
relevant Loan Trustee's, and the Second Mortgagee's, security interest would be
recognized if an Aircraft is registered or located in a jurisdiction not a party
to the Convention. Moreover, in the case of an Indenture Default, the ability of
the related Loan Trustee, and the Second Mortgagee, to realize upon its security
interest
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in an Aircraft could be adversely affected as a legal or practical matter if
such Aircraft were registered or located outside the United States.
Registration
Continental is required to keep each Aircraft duly registered under the
Transportation Code with the FAA and to record each Indenture under the
Transportation Code. (Indenture, Section 4.02(e)) Such recordation of the
Indenture and certain other documents with respect to each Aircraft will give
the relevant Loan Trustee a first-priority, perfected security interest in such
Aircraft whenever it is located in the United States or any of its territories
and possessions. The Convention provides that such security interest will also
be recognized, with certain limited exceptions, in those jurisdictions that have
ratified or adhere to the Convention.
Liens
Continental is required to maintain each Aircraft free of any liens, other
than the rights of the holders of the related Equipment Notes arising under the
applicable Indenture, or the other operative documents related thereto, and
other than certain limited liens permitted under such documents, including but
not limited to (i) liens for taxes either not yet due or being contested in good
faith by appropriate proceedings; (ii) materialmen's, mechanics' and other
similar liens arising in the ordinary course of business and securing
obligations that either are not yet delinquent for more than 60 days or are
being contested in good faith by appropriate proceedings; and (iii) judgment
liens so long as such judgment is discharged or vacated within 60 days or the
execution of such judgment is stayed pending appeal or discharged, vacated or
reversed within 60 days after expiration of such stay; and (iv) any other lien
as to which Continental has provided a bond or other security adequate in the
reasonable opinion of the Loan Trustee provided that in the case of each of the
liens described in the foregoing clauses (i), (ii) and (iii), such liens and
proceedings do not involve any material risk of the sale, forfeiture or loss of
such Aircraft or the interest of holders of Equipment Notes therein or impair
the lien of the relevant Indenture or Second Indenture. (Indenture, Section 4.01
and Annex A)
Maintenance; Replacement of Parts; Alterations
Continental is required to maintain, service, repair and overhaul the
Aircraft so as to keep them in as good operating condition as on the Issuance
Date, ordinary wear and tear excepted. Continental is obligated to replace all
parts at its expense that may from time to time be incorporated or installed in
or attached to any Aircraft and that may become lost, damaged beyond repair,
worn out, stolen, seized, confiscated or rendered permanently unfit for use.
Continental or any permitted lessee has the right, at its own expense, to make
such alterations, modifications and additions with respect to each Aircraft as
it deems desirable in the proper conduct of its business and to remove parts
which it deems to be obsolete or no longer suitable or appropriate for use, so
long as such alteration, modification, addition or removal does not materially
diminish the value, utility, or remaining useful life of the related Aircraft,
Airframe or Engine or invalidate the Aircraft's airworthiness certificate.
(Indenture, Section 4.04(d))
Insurance
Continental is required to maintain, at its expense (or at the expense of a
permitted lessee), all-risk aircraft hull insurance covering each Aircraft, at
all times in an amount not less than the aggregate outstanding principal amount
of the Equipment Notes related to such Aircraft, together with six months of
accrued interest thereon (the "Debt Balance"). However, after giving effect to
self-insurance permitted as described below, the amount payable under such
insurance may be less than such amounts payable with respect to the Equipment
Notes. In the event of a loss involving insurance proceeds in excess of
$3,500,000 per occurrence, such proceeds up to the Debt Balance of the relevant
Aircraft will be payable to the applicable Loan Trustee, for so long as the
relevant Indenture shall be in effect. In the event of a loss involving
insurance proceeds of up to $3,500,000 per occurrence, such proceeds will be
payable directly to Continental so long as an Indenture Default or certain other
defaults do not exist with respect to the Indenture. So long as the loss does
not
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constitute an Event of Loss, insurance proceeds will be applied to repair or
replace the property. (Indenture, Section 4.06 and Annex B)
In addition, Continental is obligated to maintain comprehensive airline
liability insurance at its expense (or at the expense of a permitted lessee),
including, without limitation, passenger liability, baggage liability, cargo and
mail liability, hangarkeeper's liability and contractual liability insurance
with respect to each Aircraft. Such liability insurance must be underwritten by
insurers of nationally or internationally recognized responsibility. The amount
of such liability insurance coverage per occurrence may not be less than the
amount of comprehensive airline liability insurance from time to time applicable
to aircraft owned or leased and operated by Continental of the same type and
operating on similar routes as such Aircraft. (Indenture, Section 4.06 and Annex
B)
Continental is also required to maintain war-risk, hijacking or allied
perils insurance if it (or any permitted lessee) operates any Aircraft, Airframe
or Engine in any area of recognized hostilities or if Continental (or any
permitted lessee) maintains such insurance with respect to other aircraft
operated on the same international routes or areas on or in which the Aircraft
is operated. (Indenture, Section 4.06 and Annex B)
Continental may self-insure under a program applicable to all aircraft in
its fleet, but the amount of such self-insurance in the aggregate may not exceed
50% of the largest replacement value of any single aircraft in Continental's
fleet or 1 1/2% of the average aggregate insurable value (during the preceding
policy year) of all aircraft on which Continental carries insurance, whichever
is less, unless an insurance broker of national standing shall certify that the
standard among all other major U.S. airlines is a higher level of
self-insurance, in which case Continental may self-insure the Aircraft to such
higher level. In addition, Continental may self-insure to the extent of any
applicable deductible per Aircraft that does not exceed industry standards for
major U.S. airlines. (Indenture, Section 4.06 and Annex B)
In respect of each Aircraft, Continental is required to name as additional
insured parties the relevant Loan Trustee, the Second Mortgagee and holders of
the Equipment Notes and certain other parties under all liability, hull and
property and war risk, hijacking and allied perils insurance policies required
with respect to such Aircraft. In addition, the insurance policies maintained
under the Indenture will be required to provide that, in respect of the
interests of such additional insured persons, the insurance shall not be
invalidated or impaired by any act or omission of Continental or any other
person and to insure the respective interests of such additional insured
persons, regardless of any breach or violation of any representation, warranty,
declaration, term or condition contained in such policies by Continental or any
permitted lessee. (Indenture, Section 4.06 and Annex B)
Events of Loss
If an Event of Loss occurs with respect to the Airframe or the Airframe and
Engines of an Aircraft, Continental must elect within 45 days after such
occurrence either to make payment with respect to such Event of Loss or to
replace such Airframe and any such Engines. If Continental elects to make such
payment, not later than the first Business Day following the earlier of (i) the
120th day following the date of occurrence of such Event of Loss, and (ii) the
fourth Business Day following the receipt of the insurance proceeds in respect
of such Event of Loss, Continental must pay to the Loan Trustee the aggregate
unpaid principal of the related Equipment Notes and accrued interest thereon up
to, but not including, the date of such payment, together with certain
additional amounts, but, in any case, without any Make-Whole Premium.
(Indenture, Sections 2.09 and 4.05(a))
If Continental elects to replace an Airframe (or Airframe and one or more
Engines, as the case may be) that suffered such Event of Loss, it will do so
within 120 days after the occurrence of such Event of Loss and will provide to
the relevant Loan Trustee and the Second Mortgagee reasonably acceptable
opinions of counsel to the effect, among other things, that (i) certain
specified documents have been duly filed under the Transportation Code and (ii)
such Loan Trustee will be entitled to receive the benefits of Section 1110 of
the U.S. Bankruptcy Code with respect to any such replacement airframe (unless,
as a result of a change in law or court interpretation, such benefits are not
then available). (Indenture, Section 4.05(c))
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If Continental elects not to replace such Airframe, or Airframe and
Engine(s), then upon payment of the outstanding principal amount of the
Equipment Notes issued with respect to such Aircraft, together with all
additional amounts then due and unpaid with respect to such Aircraft, which must
be at least sufficient to pay in full as of the date of payment thereof the
aggregate unpaid principal amount under such Equipment Notes together with
accrued but unpaid interest thereon and all other amounts due and owing in
respect of such Equipment Notes and the related Indenture, the lien of the
Indenture and the obligation of Continental thereafter to make the scheduled
interest and principal payments with respect thereto shall cease. (Indenture,
Sections 2.09 and 4.05(a)(ii)) The Debt Balance and other payments made under
the Indenture by Continental shall be deposited with the applicable Loan
Trustee.
If an Event of Loss occurs with respect to an Engine alone, Continental
will be required to replace such Engine within 60 days after the occurrence of
such Event of Loss with another engine, free and clear of all liens (other than
certain permitted liens). Such replacement engine shall be the same make and
model as the Engine to be replaced, or an improved model, suitable for
installation and use on the Airframe, and having a value, utility and remaining
useful life (without regard to hours or cycles remaining until overhaul) at
least equal to the Engine to be replaced, assuming that such Engine had been
maintained in accordance with the relevant Indenture. (Indenture, Section
4.04(e))
An "Event of Loss" with respect to an Aircraft, Airframe or any Engine
means any of the following events with respect to such property: (i) the
destruction of such property, damage to such property beyond economic repair or
rendition of such property permanently unfit for normal use; (ii) the actual or
constructive total loss of such property or any damage to such property or
requisition of title or use of such property which results in an insurance
settlement with respect to such property on the basis of a total loss or a
constructive or compromised total loss; (iii) any theft, hijacking or
disappearance of such property for a period of 180 consecutive days or more;
(iv) any seizure, condemnation, confiscation, taking or requisition of title to
such property by any non-U.S. governmental entity or purported non-U.S.
governmental entity (other than the country of registration of the relevant
Aircraft) for a period exceeding 180 consecutive days (exceeding 90 consecutive
days in the case of a requisition of title); (v) as a result of any law, rule,
regulation, order or other action by the FAA or any governmental entity, the use
of such property in the normal course of Continental's business of passenger air
transportation is prohibited for 180 consecutive days, unless Continental, prior
to the expiration of such 180-day period, shall have undertaken and shall be
diligently carrying forward steps which are necessary or desirable to permit the
normal use of such property by Continental, but in any event if such use shall
have been prohibited for a period of two consecutive years, provided that no
Event of Loss shall be deemed to have occurred if such prohibition has been
applicable to Continental's entire U.S. registered fleet of similar property and
Continental, prior to the expiration of such two-year period, shall have
conformed at least one unit of such property in its fleet to the requirements of
any such law, rule, regulation, order or other action and commenced regular
commercial use of the same and shall be diligently carrying forward, in a manner
which does not discriminate against applicable property in so conforming such
property, steps which are necessary or desirable to permit the normal use of
such property by Continental, but in any event if such use shall have been
prohibited for a period of three years; or (vi) with respect to any Engine, any
divestiture of title to such Engine shall be treated as an Event of Loss.
(Indenture, Annex A)
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
EXCHANGE OF OLD CERTIFICATES FOR NEW CERTIFICATES
The following summary describes all material generally applicable U.S.
federal income tax consequences to Certificateholders of the exchange of the Old
Certificates for New Certificates. This summary is intended to address the
beneficial owners of Certificates that are citizens or residents of the United
States, corporations, partnerships or other entities created or organized in or
under the laws of the United States or any State, or estates or trusts the
income of which is subject to U.S. federal income taxation regardless of its
source that will hold the Certificates as capital assets.
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The exchange of Old Certificates for New Certificates (the "Exchange")
pursuant to the Exchange Offer will not be a taxable event for U.S. federal
income tax purposes. As a result, a holder of an Old Certificate whose Old
Certificate is accepted in an Exchange Offer will not recognize gain or loss on
the Exchange. A tendering holder's tax basis in the New Certificates will be the
same as such holder's tax basis in its Old Certificates. A tendering holder's
holding period for the New Certificates received pursuant to the Exchange Offer
will include its holding period for the Old Certificates surrendered therefor.
ALL HOLDERS OF OLD CERTIFICATES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES
OF THE EXCHANGE OF OLD CERTIFICATES FOR NEW CERTIFICATES AND OF THE OWNERSHIP
AND DISPOSITION OF NEW CERTIFICATES RECEIVED IN THE EXCHANGE OFFER IN LIGHT OF
THEIR OWN PARTICULAR CIRCUMSTANCES.
ERISA CONSIDERATIONS
IN GENERAL
ERISA imposes certain requirements on employee benefit plans subject to
ERISA ("ERISA Plans"), and on those persons who are fiduciaries with respect to
ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary
requirements, including, but not limited to, the requirement of investment
prudence and diversification and the requirement that an ERISA Plan's
investments be made in accordance with the documents governing the Plan.
Section 406 of ERISA and Section 4975 of the Code prohibit certain
transactions involving the assets of an ERISA Plan (as well as those plans that
are not subject to ERISA but which are subject to Section 4975 of the Code, such
as individual retirement accounts (together with ERISA Plans, "Plans")) and
certain persons (referred to as "parties in interest" or "disqualified persons")
having certain relationships to such Plans, unless a statutory or administrative
exemption is applicable to the transaction. A party in interest or disqualified
person who engages in a prohibited transaction may be subject to excise taxes
and other penalties and liabilities under ERISA and the Code.
The Department of Labor has promulgated a regulation, 29 CFR Section
2510.3-101 (the "Plan Asset Regulation"), describing what constitutes the assets
of a Plan with respect to the Plan's investment in an entity for purposes of
ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, if a Plan
invests (directly or indirectly) in a Certificate, the Plan's assets will
include both the Certificate and an undivided interest in each of the underlying
assets of the corresponding Trust, including the Equipment Notes held by such
Trust, unless it is established that equity participation in the Trust by
benefit plan investors (including but not limited to Plans and entities whose
underlying assets include Plan assets by reason of an employee benefit plan's
investment in the entity) is not "significant" within the meaning of the Plan
Asset Regulation. In this regard, the extent to which there is equity
participation in a particular Trust by, or on behalf of, employee benefit plans
will not be monitored. If the assets of a Trust are deemed to constitute the
assets of a Plan, transactions involving the assets of such Trust could be
subject to the prohibited transaction provisions of ERISA and Section 4975 of
the Code unless a statutory or administrative exemption is applicable to the
transaction.
The fiduciary of a Plan that proposes to purchase and hold any Certificates
should consider, among other things, whether such purchase and holding may
involve (i) the direct or indirect extension of credit to a party in interest or
a disqualified person, (ii) the sale or exchange of any property between a Plan
and a party in interest or a disqualified person, and (iii) the transfer to, or
use by or for the benefit of, a party in interest or a disqualified person, of
any Plan assets. Such parties in interest or disqualified persons could include,
without limitation, Continental and its affiliates, the Initial Purchasers, the
Trustees, and the Liquidity Provider. In addition, whether or not the assets of
a Trust are deemed to be Plan assets under the Plan Asset Regulation, if
Certificates are purchased by a Plan and Certificates of a subordinate Class are
held by a party in interest or a disqualified person with respect to such Plan,
the exercise by the holder of the subordinate Class of Certificates of its right
to purchase the senior Classes of Certificates upon the occurrence and during
the
73
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continuation of a Triggering Event could be considered to constitute a
prohibited transaction unless a statutory or administrative exemption were
applicable.
Depending on the identity of the Plan fiduciary making the decision to
acquire or hold Certificates on behalf of a Plan, PTCE 91-38 (relating to
investments by bank collective investment funds), PTCE 84-14 (relating to
transactions effected by a "qualified professional asset manager"), PTCE 95-60
(relating to investments by an insurance company general account), PTCE 96-23
(relating to transactions directed by an in-house professional asset manager) or
PTCE 90-1 (relating to investments by insurance company pooled separate
accounts) (collectively, the "Class Exemptions") could provide an exemption from
the prohibited transaction provisions of ERISA and Section 4975 of the Code.
However, there can be no assurance that any of these Class Exemptions or any
other exemption will be available with respect to any particular transaction
involving the Certificates.
Governmental plans and certain church plans, while not subject to the
fiduciary responsibility provisions of ERISA or the prohibited transaction
provisions of ERISA and Section 4975 of the Code, may nevertheless be subject to
state or other federal laws that are substantially similar to the foregoing
provisions of ERISA and the Code. Fiduciaries of any such plans should consult
with their counsel before purchasing any Certificates.
Any Plan fiduciary which proposes to cause a Plan to purchase any
Certificates should consult with its counsel regarding the applicability of the
fiduciary responsibility and prohibited transaction provisions of ERISA and
Section 4975 of the Code to such an investment, and to confirm that such
purchase and holding will not constitute or result in a non-exempt prohibited
transaction or any other violation of an applicable requirement of ERISA.
CLASS A CERTIFICATES
In addition to the Class Exemptions referred to above, an individual
exemption may apply to the purchase, holding and secondary market sale of Class
A Certificates by Plans, provided that certain specified conditions are met. In
particular, the Department of Labor has issued individual administrative
exemptions to the Initial Purchasers which are substantially the same as the
administrative exemption issued to The First Boston Corporation, Prohibited
Transaction Exemption 89-90 (54 Fed. Reg. 42,597 (1989)), as amended (the
"Underwriter Exemption"). The Underwriter Exemption generally exempts from the
application of certain, but not all, of the prohibited transaction provisions of
Section 406 of ERISA and Section 4975 of the Code certain transactions relating
to the initial purchase, holding and subsequent secondary market sale of
pass-through certificates which represent an interest in a trust that holds
equipment notes secured by leases and certain other assets, provided that
certain conditions set forth in the Underwriter Exemption are satisfied.
The Underwriter Exemption sets forth a number of general and specific
conditions which must be satisfied for a transaction involving the initial
purchase, holding or secondary market sale of certificates representing a
beneficial ownership interest in a trust to be eligible for exemptive relief
thereunder. In particular, the Underwriter Exemption requires that the
acquisition of certificates by a Plan be on terms that are at least as favorable
to the Plan as they would be in an arm's-length transaction with an unrelated
party; the rights and interests evidenced by the certificates not be
subordinated to the rights and interests evidenced by other certificates of the
same trust estate; the certificates at the time of acquisition by the Plan be
rated in one of the three highest generic rating categories by Moody's, Standard
& Poor's, Duff & Phelps Inc. or Fitch Investors Service, Inc.; and the investing
Plan be an accredited investor as defined in Rule 501(a)(1) of Regulation D of
the Commission under the Securities Act.
In addition, the trust corpus generally must be invested in qualifying
receivables, such as the Equipment Notes, and generally may not include cash
held for the purpose of acquiring additional receivables after the closing date.
However, the Department of Labor has indicated that in its view this requirement
would be satisfied where the receivables, although specifically identified as of
the closing date, are not all transferred to the trust on the closing date for
administrative or other reasons but will be transferred to the trust shortly
after the closing date. In addition, the Department of Labor has proposed
amendments to the Underwriter Exemption, effective as of January 1, 1992, which
would allow up to 25 percent of the principal amount of the certificates being
offered to be held in a pre-funding account for a period of up to three months
following the
74
76
closing date for the acquisition of additional qualifying receivables, if
certain conditions are satisfied. The proposed amendments were published in the
Federal Register dated May 23, 1997.
The Underwriter Exemption does not apply to the Class B, Class C or Class D
Certificates. Even if all of the conditions of the Underwriter Exemption are
satisfied with respect to the Class A Certificates, no assurance can be given
that the Exemption would apply with respect to all transactions involving the
Class A Certificates or the assets of the Class A Trust. In particular, it
appears that the Underwriter Exemption would not apply to the purchase by Class
B Certificateholders or Class C Certificateholders of Class A Certificates in
connection with the exercise of their rights upon the occurrence and during the
continuance of a Triggering Event. Therefore, the fiduciary of a Plan
considering the purchase of a Class A Certificate should consider the
availability of the exemptive relief provided by the Underwriter Exemption, as
well as the availability of any other exemptions with respect to transactions to
which the Underwriter Exemption may not apply.
CLASS B, CLASS C AND CLASS D CERTIFICATES
The Underwriter Exemption does not apply to the Class B, Class C or Class D
Certificates. The Class B, Class C and Class D Certificates may not be acquired
with the assets of a Plan, except that such Certificates may be acquired with
the assets of an insurance company general account that may be deemed to
constitute Plan assets, provided that the conditions of PTCE 95-60 are satisfied
at the time of the acquisition (and during the holding) of such Certificates.
Holders of Class B Certificates, Class C Certificates or Class D Certificates
that tender Old Certificates in exchange for New Certificates will be deemed to
have represented and warranted that either (i) no Plan assets have been used to
acquire and hold such Certificate or (ii) the acquisition and holding of such
Certificate is exempt from the prohibited transaction restrictions of ERISA and
the Code pursuant to PTCE 95-60.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Certificates for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Certificates. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Certificates received in
exchange for Old Certificates where such Old Certificates were acquired as a
result of market-making activities or other trading activities. The Company has
agreed that, starting on the Expiration Date and ending on the close of business
180 days after the Expiration Date, it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any such
resale. In addition, until such date all broker-dealers effecting transactions
in the New Certificates may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Certificates
by broker-dealers. New Certificates received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Certificates or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Certificates. Any
broker-dealer that resells New Certificates that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such New Certificates may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of New Certificates and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
Starting on the Expiration Date, the Company will promptly send additional
copies of this Prospectus and any amendment or supplement to this Prospectus to
any broker-dealer that requests such documents in the Letter of Transmittal. The
Company has agreed to pay all expenses incident to the Exchange Offer other than
75
77
commissions or concessions of any brokers or dealers, fees of counsel to the
Holders and certain transfer taxes, and will indemnify the Holders of the New
Certificates (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Certificates will be passed upon for Continental by
Hughes Hubbard & Reed LLP, New York, New York.
EXPERTS
The consolidated financial statements (including financial statement
schedules) of Continental Airlines, Inc. appearing in Continental Airlines,
Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1996 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are, and audited consolidated financial statements to be
included in subsequently filed documents will be, incorporated herein by
reference in reliance upon reports of Ernst & Young LLP pertaining to such
consolidated financial statements (to the extent covered by consents filed with
the Commission) given upon the authority of such firm as experts in accounting
and auditing.
The references to AISI, BK and MBA, and to their respective appraisal
reports, dated as May 20, May 16 and June 6, 1997, respectively, are included
herein in reliance upon the authority of each such firm as an expert with
respect to the matters contained in its appraisal report.
76
78
APPENDIX I -- INDEX OF TERMS
PAGE
-------
Adjusted Expected Distributions,
21................................ 59
Administration Expenses............. 58
Aeroflot............................ 5
Aggregate LTV Collateral Amount,
22................................ 59
Air Partners........................ 33
Aircraft............................ 2
AISI................................ 12
Alitalia............................ 5
America West........................ 5
AMI................................. 30
Appraisal........................... 60
Appraised Current Market Value,
22................................ 60
Appraisers.......................... 12
Assumed Aggregate Aircraft Value.... 12
Assumed Aircraft Value.............. 64
Average Life Date................... 64
BK.................................. 12
Boeing.............................. 29
Book-Entry Confirmation............. 39
Book-Entry Transfer Facility........ 39
Business Day........................ 46
Cash Collateral Account............. 19
CDG................................. 5
Cede................................ 24
Certificate Account................. 46
Certificate Owners.................. 24
Certificateholders.................. 15
Certificates........................ 1
City................................ 31
Class Exemptions.................... 74
Class A Certificates................ 10
Class A Trust....................... 1
Class A Trustee..................... 23
Class B Certificates................ 10
Class B Trust....................... 1
Class B Trustee..................... 23
Class C Certificates................ 10
Class C Trust....................... 1
Class C Trustee..................... 23
Class D Trust....................... 1
Class D Trustee..................... 23
Class D Certificates................ 10
Cleveland........................... 5
CMI................................. 5
Code................................ 25
Commission.......................... 2
Company............................. 1
Continental......................... 1
Controlling Party................... 23
PAGE
-------
Convention.......................... 69
Credit Facility..................... 30
Current Distribution Date........... 21
Debt Balance........................ 70
disqualified persons................ 73
Distribution Date................... 20
Downgrade Drawing................... 19
DTC................................. 24
DTC Participants.................... 24
EDGAR............................... 3
Eligible Institution................ 40
Equipment Notes..................... 2
ERISA............................... 25
ERISA Plans......................... 73
EVA................................. 5
Event of Loss....................... 71
Exchange............................ 73
Exchange Act........................ 3
Exchange Agent...................... 9
Exchange Offer...................... 1
Exchange Offer No-Action Letters.... 2
Existing Lease...................... 68
Expected Distributions.............. 21, 58
Expiration Date..................... 1
Express............................. 5
Exxon Capital Letter................ 2
FAA................................. 33
Facility............................ 30
Final Distributions................. 23
Final Drawing....................... 19
Final Maturity Date................. 45
Global Certificates................. 52
H.15(519)........................... 64
holder.............................. 40
Holdings............................ 3
IAH Bonds........................... 31
Indenture........................... 10
Indenture Default................... 48
indirect participants............... 53
Initial Purchasers.................. 3
Intercreditor Agreement............. 20
Interest Drawings................... 18
Issuance Date....................... 7
Letter of Transmittal............... 1
Liquidity Event of Default.......... 56
Liquidity Expenses.................. 58
Liquidity Facility.................. 18
Liquidity Obligations............... 18
Liquidity Provider.................. 10
I-1
79
PAGE
-------
Loan Trustee........................ 11
LTV Appraisals...................... 22
LTV Collateral Amount............... 22, 59
LTV Ratio........................... 22, 60
LTVs................................ 12
Make-Whole Premium.................. 63
Maximum Available Commitment........ 18
MBA................................. 12
Minimum Sale Price.................. 24
Morgan Stanley Letter............... 2
most recent H.15(519)............... 64
New Certificates.................... 1
NOLs................................ 32
Non-Extension Drawing............... 20
Non-Performing Equipment Notes...... 21
NYSE................................ 41
Old Certificates.................... 1
participants........................ 53
Participating Broker-Dealer......... 2
Participation Agreement............. 11
parties in interest................. 73
Pass Through Trust Agreements....... 1
Performing Equipment Note........... 19
Plan Asset Regulation............... 73
Plans............................... 73
Pool Balance........................ 46
Pool Factor......................... 46
Premium Termination Date............ 17
PTC Event of Default................ 15
PTCE................................ 25
Registration Event.................. 38
Registration Statement.............. 3
Regular Distribution Dates.......... 45
Remaining Weighted Average Life..... 64
PAGE
-------
Replacement Facility................ 55
Required Amount..................... 18
Scheduled Payments.................. 45
Second Indenture.................... 11
Second Mortgagee.................... 10
Section 1110 Period................. 19
Section 382......................... 32
Securities Act...................... 1
Series A Equipment Notes............ 2
Series B Equipment Notes............ 2
Series C Equipment Notes............ 2
Series D Equipment Notes............ 2
Settlement Act...................... 68
Shearman & Sterling Letter.......... 2
Shelf Registration Statement........ 38
SOP 90-7............................ 29, 36
Special Distribution Date........... 45
Special Payment..................... 45
Special Payments Account............ 46
Stated Interest Rates............... 18
Subordination Agent................. 10
Teamsters........................... 32
Threshold Rating.................... 55
ticket tax.......................... 33
Transportation Code................. 50
Treasury Yield...................... 63
Triggering Event.................... 16
Trust Property...................... 10
Trustee............................. 1
Trusts.............................. 1
UMDA................................ 30
Underwriter Exemption............... 74
Virgin.............................. 5
I-2
80
APPENDIX II -- APPRAISAL LETTERS
[AIRCRAFT INFORMATION SERVICES, INC. LETTERHEAD]
20 May 1997
Continental Airlines
2929 Allen Parkway, Suite 1588
Houston, TX 77019
Subject: AISI Report No.: A7D055BVO
AISI Sight Unseen Current Market Half-Life Value Appraisal,
Six B737-300 and Four MD-82 Aircraft.
Dear Gentlemen:
In response to your request, Aircraft Information Services, Inc. (AISI) is
pleased to offer Continental Airlines our opinion of the sight unseen current
market half-life value of six B737-300 and four MD-82 aircraft as listed and
defined in Table I.
1. METHODOLOGY AND DEFINITIONS
This method used by AISI in its valuation of the Aircraft was based both on a
review of information and Aircraft specifications supplied by Continental
Airlines and also on a review of present and past market conditions, various
expert opinions (such as aircraft brokers and financiers) and information
contained in AISI's databases that help determine aircraft availability and
price data and thus arrive at the appraised values.
The historical standard term of reference for commercial aircraft value has
been 'half-life fair market value' of an 'average' aircraft. However, 'fair
market value' could mean a fair value in the given market or a value in a
hypothetical 'fair' or balanced market, and the two definitions are not
equivalent. Recently, the term 'base value' has been created to describe the
theoretical balanced market condition and to avoid the potentially misleading
term 'fair market value' which has now become synonymous with the term 'current
market value' or a 'fair' value in the actual current market. AISI value
definitions are consistent with those of the International Society of Transport
Aircraft Trading (ISTAT) of 01 January 1994; AISI is a member of that
organization and employs an ISTAT Certified Senior Aircraft Appraiser.
AISI defines a 'base value' as that of a transaction between equally willing
and informed buyer and seller, neither under compulsion to buy or sell, for a
single unit cash transaction with no hidden value or liability, and with supply
and demand of the sale item roughly in balance. AISI defines a 'current market
value' or 'fair market value' as that value which reflects the real market
conditions, whether at, above or below the base value conditions. Definitions
of aircraft condition, buyer/seller qualifications and type of transaction
remain unchanged from
81
[AIRCRAFT INFORMATION SERVICES, INC. LOGO]
20 May 1997
AISI File No. A7D055BVO
Page - 2 -
that of base value. Current market value takes into consideration the status of
the economy in which the aircraft is used, the status of supply and demand for
the particular aircraft type, the value of recent transactions and the opinions
of informed buyers and sellers. Current market value assumes that there is no
short term time constraint to buy or sell.
2. MARKET ANALYSIS B737-300 AND MD-80
B737-300
The B737-300 is a twin engine, narrowbody, stage 3, two man crew aircraft
typically seating 128 passengers in mixed class configuration. Typical range
with full passengers at low MTOW is approximately 1,600 nautical miles, while
at high MTOW the range increases to approximately 2,600 nautical miles,
sufficient for short range domestic operations.
The B737-300 has a large fleet of 909 active aircraft, with 63 on firm order,
and a very strong customer base of 83 airlines with good representation in
every major geographic area. A significant number of the B737-300 fleet, 521
aircraft, are operated via either a finance lease or operating lease.
The major competitors to the B737-300 are the MD-80/MD-90 and the Airbus A320
even though these aircraft types are larger than the B737-300. The B737-300
also must compete with its larger variant the B737-400 and in some markets with
the older B737-200A. It will also shortly have to compete with the new B737-700
family.
We expect B737-300 production to cease by 1999. The aircraft was first
delivered in 1986, and AISI analysis of the market for the B737-300 indicates
that the present strong demand has stabilized and will continue at least until
the next major economic downturn, and that near term current market purchase
prices are decreasing slightly, while current market lease rates are still
increasing. Over the longer term, the B737-300 faces significant competition
from more advanced aircraft such as the B737-700 and A320 on the high end, and
from still viable B737-200 and MD-80 aircraft on the low end. B737-300 values
will probably decline to meet this challenge. B737-700 orders now equal
B737-300 backlog; we expect B737-300 deliveries to overtake the B737-300
shortly, however there are expected to be some B737-300 users who put
insufficient value in the advantages of the B737-700 over the B737-300 to
support any significant price differential between the two. Due to small size
and limited range, we expect the future potential for freighter conversion to
be confined to the domestic small package carrier market, and then only after
the aircraft has approached the end of its economic useful life as a passenger
aircraft.
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20 May 1997 [LOGO]
AISI File No. A7D055BVO
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Boeing in recent head-to-head B737-300 competition with Airbus A319 and A320
aircraft has shown a willingness to offer B737-300 aircraft at drastically
reduced prices; over 40% less than the so called "list" prices; Airbus has
generally matched or exceeded Boeing's discounts. This willingness to discount,
combined with significant increases in production rates, produces an artificial
softening of market prices of all new and newer 100 to 160 seat stage III
narrowbody domestic aircraft.
MD-80
The McDonnell Douglas MD-80 series aircraft family is a twin JT8D-200 turbofan
engined, narrowbody, stage 3, two man crew aircraft derived from the DC-9
family, intended for short to medium range domestic passenger transport.
The MD-81, -82 and -83 all feature the same typical 135 passenger dual class
configuration, but vary in maximum gross takeoff weights to achieve different
ranges of approximately 1,550, 2,050 and 2,500 nautical miles respectively. The
MD-88 is an MD-82 with a modern 'glass' EFIS cockpit. The MD-87 features a
shorter cabin accommodating 114 passengers in dual class configuration, with
2,350 nautical mile range. Production of the MD-80 began in 1980 and we
forecast termination of production by 1998. In all 114 MD-81's were built,
operating with 10 airlines, with 64 on lease, and none on order. 562 MD-82's
were built, operating with 27 airlines, with 281 on lease and 7 on order. 221
MD-83 were built, operating with 32 airlines, with 162 on lease and 19 on
order. 72 MD-87's were built, operating with 11 airlines, with 21 on lease and
none on order. 152 MD-88's were built, operating with 6 airlines, with 71 on
lease and 5 on order. The operators are reasonably well geographically
distributed.
The MD-80 is a marginal stage 3 noise compliant aircraft, and its JT8D-200
engines are older technology, less fuel efficient than many of its newer
competitors, which include the B737-300/400/500 and soon the B737-600/700/800,
the A319/A320, the Fokker 100, the new MD-90/95 and the Avro RJ family as well
as less expensive older aircraft, including the B737-200, DC-9 family, Fokker
F-28, and Bae 146 family. Prior to the December 1996 announcement of the
acquisition of McDonnell Douglas, we had forecast termination of MD-80
production by 1998. Now, further production of the successor to the MD-80, the
MD-90/95, is also in doubt.
While MD-80 values have been steady in the current high demand market
conditions for narrowbody stage 3 aircraft, the combination of older
technology, minimal noise compliance margin, higher fuel consumption and now,
probability of termination of production of the variant and its high
commonality successor, make the MD-80 family quite vulnerable to reductions in
value with any economic downturn or lessening of demand. However, so long as
stiffer noice regulations are not effected, the aircraft should find a ready
home in startup airline
83
20 May 1997 [LOGO]
AISI File No. A7D055BVO
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fleets as it declines in value and drops out of major airline fleets. The MD-87
and MD-81 should be most vulnerable, with the MD-82/88 and MD-83 less
vulnerable to reductions in value. The aircraft should enjoy a long useful life,
with its durable airframe and reliable systems, just as demonstrated by its
predecessor, the DC-9 family.
3. VALUATION
Following in Table I is AISI's opinion of the current market value for the
subject aircraft based on the assumptions, definitions and disclaimers herein.
TABLE I
Aircraft 1997 Current Market
Date of Registration Manufacturer's Half Life Value
Manufacturer Number Serial Number USdollars
- ------------ ------------ -------------- -------------------
B737-300, CFM56-3B1 ENGINES, 135,000LB MTOW
1986 N12322 23373 18,980,000
1986 N10383 23374 18,980,000
1986 N14324 23375 18,980,000
1986 N69333 23571 18,980,000
1986 N14334 23572 18,980,000
1986 N14335 23573 18,980,000
MD-82, JT8D-217A ENGINES, 149,500LB MTOW
1985 N12811 49265 15,300,000
1986 N15820 49480 16,100,000
1987 N18833 49493 16,900,000
1987 N10834 49494 16,900,000
84
[AISI LOGO]
20 May 1997
AISI File No. A7D055KBVO
Page - 5 -
Unless otherwise agreed by Aircraft Information Services, Inc. (AISI) in
writing, this report shall be for the sole use of the client/addressee. This
report is offered as a fair and unbiased assessment of the subject aircraft.
AISI has no past, present, or anticipated future interest in the subject
aircraft. The conclusions and opinions expressed in this report are based on
published information, information provided by others, reasonable
interpretations and calculations thereof and are given in good faith. Such
conclusions and opinions are judgments that reflect conditions and values which
are current at the time of this report. The values and conditions reported upon
are subject to any subsequent change. AISI shall not be liable to any party for
damages arising out of reliance or alleged reliance on this report, or for any
parties action or failure to act as a result of reliance or alleged reliance on
this report.
Sincerely,
AIRCRAFT INFORMATION SERVICES, INC.
/S/ [NEED SIGNATURE]
For: Fred E. Bearden
President
FBI/DMfjm
85
[BK ASSOCIATES, INC. LETTERHEAD]
June 6, 1997
CONTINENTAL AIRLINES
2929 Allen Parkway
Houston, TX 77019
Gentlemen:
In response to your request, BK Associates, Inc. is pleased to provide this
opinion on the fair market value (FMV) as of June 1997 on each of six Boeing
737-3TO and four McDonnell Douglas DC9-82 (MD82) aircraft (Aircraft). Each of
the B737-3TO aircraft is powered by two CFM International CFM56-3B1 engines with
20,000 pounds thrust, a 135,000 pound maximum takeoff weight and a non-EFIS
(Electronic Flight Instrumentation System) flight deck. Each of the MD82s is
powered by two Pratt & Whitney JT8D-217A engines with 21,000 pounds thrust, has
a 149,500 pound maximum takeoff weight and is also non-EFIS. The Aircraft are
further identified in the conclusion to this letter.
Set forth below is a summary of the methodology, considerations and assumptions
utilized in this appraisal.
CURRENT FAIR MARKET VALUE
According to the International Society of Transport Aircraft Trading's (ISTAT)
definition of FMV, to which BK Associates subscribes, the quoted FMV is the
Appraiser's opinion of the most likely trading price that may be generated for
an aircraft under the market circumstances that are perceived to exist at the
time in question. The FMV assumes that the aircraft is valued for its highest
and best use, that the parties to the hypothetical sale transaction are
willing, able, prudent and knowledgeable, and under no unusual pressure for a
prompt sale, and that the transaction would be negotiated in an open and
unrestricted market on an arm's length basis, for cash or equivalent
consideration, and given an adequate amount of time for effective exposure to
prospective buyers, which BK Associates considers to be 12 to 18 months.
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Continental Airlines, Inc.
June 6, 1997
Page 2
BASE VALUE
Base value is the Appraiser's opinion of the underlying economic value of an
aircraft in an open, unrestricted, stable market environment with a reasonable
balance of supply and demand, and assumes full consideration of its "highest
and best use". An aircraft's base value is founded in the historical trend of
values and in the projection of future value trends and presumes an arm's
length, cash transaction between willing, able and knowledgeable parties,
acting prudently, with an absence of duress and with a reasonable period of
time available for marketing.
VALUE METHODOLOGY
Fair market valuations are determined based upon one of three methods:
comparable recent sales, replacement cost or rate of return to investor. In
this appraisal, BK used the comparable sales method, which is the most common
method, in determining the base values of the Aircraft. This method uses
industry data to ascertain the prices realized in recent sales of comparable
models. The fair market value of the base Aircraft is based on BK's familiarity
with the aircraft type, its earnings potential in commercial service, its
knowledge of its capabilities and the uses to which it will be put worldwide,
its knowledge of the marketing of used aircraft, and the factors affecting the
fair market value of such aircraft, and on its knowledge of the asking, offered
and transaction prices for similar competitive, and alternative equipment, as
well as transactions and negotiations involving basically identical aircraft.
These realizations, however, which reflect the market supply and demand at the
time of sale, are subject to minor adjustments for other conditions existing at
the time of the appraisal. In this respect, we consider the market for B737 and
MD82 aircraft to be in reasonable balance at this time but tending to be strong
with demand slightly exceeding supply, and thus, the FMV is equal to or
slightly higher than the base value. In addition, values were adjusted for
engine type, maximum gross takeoff weights (MGTOW), and the absence of EFIS. In
arriving at the current fair market value, BK considered the impact of many
factors affecting the market for used aircraft, including: the current demand
for and availability of aircraft, the projected demand for lift, the
suitability and operating economies of the aircraft, regulatory factors, and
recent sales experience.
LIMITING CONDITIONS AND ASSUMPTIONS
BK has neither inspected the Aircraft nor their maintenance records but relied
upon information supplied by you and from BK's own database. In determining the
fair market value of a used aircraft, the following assumptions apply to the
base aircraft:
87
[BK Associates, Inc. Logo]
Continental Airlines, Inc.
June 6, 1997
Page 3
1. Unless it is new, the aircraft has half-time remaining to its next major
overhauls or scheduled shop visit on its airframe, engines, landing gear
and auxiliary power unit.
2. The aircraft is in compliance under a Federal Aviation Administration
approved airline maintenance program, with all airworthiness directives,
mandatory modifications and applicable service bulletins currently up to
industry standard.
3. The interior of the aircraft is in a standard configuration for its
specific type, with the buyer furnished equipment and options of the
types and models generally accepted and utilized in the industry.
4. The aircraft is in current flight operations.
5. The aircraft is sold for cash without seller financing.
6. The Aircraft is in average or better condition.
7. There is no accident damage.
CONCLUSIONS
Based on the above methodology, considerations and assumptions, it is our
opinion that the current fair market value of each aircraft are as follows:
Date of Serial Registration
Model Delivery Number Number CFMV (Each)
----- -------- ------ ------------ -----------
B737-3TO 02/1986 23373 N12322 18,250,000
B737-3TO 03/1986 23374 N10323 18,250,000
B737-3TO 03/1986 23375 N14324 18,250,000
B737-3TO 10/1986 23571 N69333 19,000,000
B737-3TO 10/1986 23572 N14334 19,000,000
B737-3TO 11/1986 23573 N14335 19,000,000
MD82 03/1985 49265 N12811 15,550,000
MD82 08/1986 49480 N15820 17,000,000
MD82 05/1987 49493 N18833 18,050,000
MD82 05/1987 49494 N10834 18,050,000
88
[BK ASSOCIATES, INC. LOGO]
Continental Airlines, Inc.
June 6, 1997
Page 4
BK Associates, Inc. has no present or contemplated future interest in the
Aircraft, nor any interest that would preclude our making a fair and unbiased
estimate. This appraisal represents the opinion of BK Associates, Inc. and
reflects our best judgment based on the information available to us at the time
of preparation and the time and budget constraints imposed by the client. It is
not given as a recommendation, or as an inducement, for any financial
transaction and further, BK Associates, Inc. assumes no responsibility or legal
liability for any action taken or not taken by the addressee, or any other
party, with regard to the appraised equipment. By accepting this appraisal, the
addressee agrees that BK Associates, Inc. shall bear no such responsibility or
legal liability. This appraisal is prepared for the use of the addressee and
shall not be provided to other parties without the express consent of the
addressee.
Sincerely yours,
BK ASSOCIATES, INC.
/s/ John F. Keitz
John F. Keitz
President
ISTAT Senior Certified Appraiser
89
[MORTEN BEYER AND AGNEW, INC. LETTERHEAD]
May 16, 1997
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Gentlemen:
Pursuant to your request, Morten Beyer and Agnew (MBA) has set forth
its opinion regarding the value of six B-737-300 and four MD-82 aircraft (as
described in Schedule I herein) being operated by Continental Airlines.
There are several terms used to describe the "value" of an aircraft. MBA
uses the definitions of various value terms as promulgated by the International
Society of Transport Aircraft Traders (ISTAT), a not-for-profit organization of
some 500 members who have an interest in the commercial aviation industry. The
membership consists of management level personnel from banks, leasing
companies, airlines, appraisers, brokers, manufacturers, etc. ISTAT has also
established standards for appraisal practice and a code of ethics for those
members who want to be certified by the Society as appraisers. To attain
certification members must meet rigid educational and experience requirements
and must successfully complete written examinations. Both Morten Beyer and
Robert Minnich of MBA are ISTAT Certified Senior Appraisers.
ISTAT defines Current Market Value (CMV) as the most likely trading
price that may be generated for an aircraft under the market conditions that
are perceived to exist at the time in question. Market Value (MV) assumes that
the aircraft is valued for its highest, best use, that the parties to the
hypothetical sales transaction are willing, able, prudent and knowledgeable,
and under no unusual pressure for a prompt sale, and that the transaction would
be negotiated in an open and unrestricted market on an arm's length basis, for
case or equivalent consideration and given an adequate amount of time for
effective exposure to prospective buyers. Fair Market Value (FMV) is synonymous
to MV and Current Fair Market Value is synonymous with CMV because the criteria
90
typically used in those documents that use the term "fair" reflect the same
criteria set forth in the above definition of Market Value.
BV contains the same elements as MV, but the market conditions are
always assumed to be in a reasonable state of equilibrium. Thus, BV pertains to
an idealized aircraft and market combination, but will not necessarily reflect
the actual CMV of the aircraft in question. BV is founded in the historical
trend of values and is generally used to analyze historic values or to project
future values.
The values set forth herein are Current Market Values. CMVs are
provided for each aircraft, identified by assigned manufacturer's serial
numbers and FAA registration numbers.
In preparing this report, MBA did not inspect the aircraft or their
historical maintenance documentation. Therefore, we used certain assumptions
that are generally accepted industry practice to determine the BV of an
aircraft. The principal assumptions are as follows:
1. The aircraft are in good overall condition.
2. The overhaul status of the airframe, engines, landing gear and other
major components are the equivalent of mid-time/mid-life unless
otherwise specified.
3. The historical maintenance documentation has been maintained to
acceptable international standards.
4. The specifications of the aircraft are those most common for
aircraft of their type and vintage.
5. The aircraft are in standard airline configuration.
6. The aircraft are current as to all Airworthiness Directives and
Service Bulletins.
7. Their modification status is comparable to that most common for
aircraft of their type and vintage.
8. Their utilization is comparable to industry averages.
9. There is no history of accident or incident damage.
[MBA LOGO] 2
91
The aircraft are not encumbered by any attached lease, tax benefit
recapture or any other extraneous factor.
Based on the information set forth in this report the Current Market
Valuations of the subject aircraft, as of the date of this report, are as
follows:
AIRCRAFT REGISTRATION SERIAL MANUFACTURE CURRENT
TYPE NUMBER NUMBER DATE MARKET VALUE
-------- ------------ ------ ----------- ------------
B737-300 N12322 23373 1986 $21.58
B737-300 N10323 23374 1986 21.58
B737-300 N14324 23375 1986 21.58
B737-300 N69333 23571 1986 21.58
B737-300 N14334 23572 1986 21.58
B737-300 N14335 23573 1986 21.58
MD-82 N12811 49265 1985 19.71
MD-82 N15820 49480 1986 20.67
MD-82 N18833 49493 1987 21.62
MD-82 N10834 49494 1987 21.62
The Boeing 737-300 series aircraft is the Stage III upgraded successor to
the Boeing 737-200 series aircraft and has already has a 14-year production run,
with 948 produced to date and 76 more on order. Production is being phased out
over the next three years as the Boeing 737-700 series takes its place.
Nonetheless, we expect the -300 series will retain its value well into the next
century because of its strong market base and good economics. A few of these
aircraft are always in the float simply because there are so many of them, with
some being leased or operated by marginal carriers. Prices for these aircraft
have returned to near original acquisition costs after a dip in the early 1990s.
BACK Information Services currently lists three aircraft available for sale or
lease. MBA is of the opinion that the CMV is 110 percent of the Base Value.
[MBA LOGO] 3
92
The MD-80 series aircraft was the first newly manufactured twin to meet
Stage III noise standards, and featured higher gross weights and greater range.
Almost 1,200 of all models have been built. American Airlines, with orders
totaling 260, literally saved the design in a crucial period when initial
orders declined. There have been surprisingly few new orders in the last four
years although there are almost no aircraft on the market. BACK lists one
MD-82 available for sale or lease. Any aircraft that come on the market are
immediately spoken for. MBA is of the opinion that the CMV of this aircraft is
110 percent of Base Value.
This report has been prepared for the exclusive use of Continental
Airlines, and shall not be provided to other parties by MBA without the express
consent of Continental.
MBA certifies that this report has been prepared independently and that
it fully and accurately represents MBA's opinion, as of the date of this
report, of the Current Market Value of the subject aircraft. MBA further
certifies that it does not have, and does not expect to have, any financial or
other interest in the subject of similar aircraft.
This report represents the opinion of MBA and is intended to be
advisory only in nature. Therefore, MBA assumes no responsibility or legal
liability for any actions taken or not taken by Continental or any other party
with regard to the subject aircraft. By accepting this report, all parties
agree that MBA shall bear no such responsibility or legal liability.
Sincerely,
/s/ Morten S. Beyer
---------------------------------------
Morten S. Beyer
Chairman & CEO
ISTAT Certified Senior Appraiser
[MBA LOGO] 4
93
APPENDIX III -- EQUIPMENT NOTES PRINCIPAL PAYMENT SCHEDULE
SERIES A
AIRCRAFT REGISTRATION NUMBER
REGULAR
DISTRIBUTION DATES N12322 N10323 N14324 N69333 N14334 N14335 N12811
- -------------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
June 25, 1997....... $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00
December 30, 1997... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 1998....... 215,417.00 215,417.00 215,417.00 215,644.00 215,644.00 215,644.00 176,488.00
December 30, 1998... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 1999....... 215,417.00 215,417.00 215,417.00 215,644.00 215,644.00 215,644.00 176,488.00
December 30, 1999... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2000....... 215,428,00 215,428.00 215,428.00 215,655.00 215,655.00 215,655.00 176,496.00
December 30, 2000... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2001....... 229,997.00 229,997.00 229,997.00 230,240.00 230,240.00 230,240.00 188,433.00
December 30, 2001... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2002....... 368,170.00 368,170.00 368,170.00 368,558.00 368,558.00 368,558.00 301,636.00
December 30, 2002... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2003....... 469,218.00 469,218.00 469,218.00 459,712.00 469,712.00 469,712.00 384,422.00
December 30, 2003... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2004....... 591,208.00 591,208,00 591,208.00 591,831.00 591,831.00 591,831.00 484,368.00
December 30, 2004... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2005....... 843,329.00 843,329.00 843,329.00 844,218.00 844,218.00 844,218.00 690,925.00
December 30, 2005... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2006....... 1,892,397.00 1,892,397.00 1,892,397.00 1,894,391.00 1,894,391.00 1,894,391.00 1,550,411.00
December 30, 2006... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2007....... 2,741,229.00 2,741,229.00 2,741,229.00 2,744,117.00 2,744,117.00 2,744,117.00 2,245,844.00
REGULAR
DISTRIBUTION DATES N15820 N18833 N10834
- -------------------- ------------- ------------- -------------
June 25, 1997....... $ 0.00 $ 0.00 $ 0.00
December 30, 1997... 0.00 0.00 0.00
June 30, 1998....... 192,945.00 204,862.00 204,862.00
December 30, 1998... 0.00 0.00 0.00
June 30, 1999....... 192,945.00 204,862.00 204,862.00
December 30, 1999... 0.00 0.00 0.00
June 30, 2000....... 192,954.00 204,872.00 204,872.00
December 30, 2000... 0.00 0.00 0.00
June 30, 2001....... 206,004.00 218,728.00 218,728.00
December 30, 2001... 0.00 0.00 0.00
June 30, 2002....... 329,762.00 350,130.00 350,130.00
December 30, 2002... 0.00 0.00 0.00
June 30, 2003....... 420,269.00 446,226.00 446,226.00
December 30, 2003... 0.00 0.00 0.00
June 30, 2004....... 529,533.00 562,240.00 562,240.00
December 30, 2004... 0.00 0.00 0.00
June 30, 2005....... 755,353.00 802,007.00 802,007.00
December 30, 2005... 0.00 0.00 0.00
June 30, 2006....... 1,694,981.00 1,799,671.00 1,799,671.00
December 30, 2006... 0.00 0.00 0.00
June 30, 2007....... 2,455,263.00 2,606,912.00 2,606,912.00
SERIES B
AIRCRAFT REGISTRATION NUMBER
REGULAR
DISTRIBUTION DATES N12322 N10323 N14324 N69333 N14334 N14335 N12811
- -------------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
June 25, 1997....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 1997... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 1998....... 73,557.00 73,557.00 73,557.00 73,635.00 73,635.00 73,635.00 60,264.00
December 30, 1998... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 1999....... 73,557.00 73,557.00 73,557.00 73,634.00 73,634.00 73,634.00 60,264.00
December 30, 1999... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2000....... 73,599.00 73,599.00 73,599.00 73,677.00 73,677.00 73,677.00 60,298.00
December 30, 2000... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2001....... 78,536.00 78,536.00 78,536.00 78,618.00 78,618.00 78,618.00 64,343.00
December 30, 2001... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2002....... 215,592.00 215,592.00 215,592.00 215,819.00 215,819.00 215,819.00 176,631.00
December 30, 2002... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2003....... 221,927.00 221,927.00 221,927.00 222,161.00 222,161.00 222,161.00 181,822.00
December 30, 2003... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2004....... 769,036.00 769,036.00 769,036.00 769,847.00 769,847.00 769,847.00 630,058.00
December 30, 2004... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2005....... 1,151,438.00 1,151,438.00 1,151,438.00 1,152,651.00 1,152,651.00 1,152,651.00 943,354.00
December 30, 2005... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2006....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 2006... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2007....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
REGULAR
DISTRIBUTION DATES N15820 N18833 N10834
- -------------------- ------------- ------------- -------------
June 25, 1997....... 0.00 0.00 0.00
December 30, 1997... 0.00 0.00 0.00
June 30, 1998....... 65,884.00 69,953.00 69,953.00
December 30, 1998... 0.00 0.00 0.00
June 30, 1999....... 65,883.00 69,953.00 69,953.00
December 30, 1999... 0.00 0.00 0.00
June 30, 2000....... 65,921.00 69,992.00 69,992.00
December 30, 2000... 0.00 0.00 0.00
June 30, 2001....... 70,342.00 74,688.00 74,688.00
December 30, 2001... 0.00 0.00 0.00
June 30, 2002....... 193,102.00 205,028.00 205,028.00
December 30, 2002... 0.00 0.00 0.00
June 30, 2003....... 198,775.00 211,053.00 211,053.00
December 30, 2003... 0.00 0.00 0.00
June 30, 2004....... 688,809.00 731,354.00 731,354.00
December 30, 2004... 0.00 0.00 0.00
June 30, 2005....... 1,031,318.00 1,095,019.00 1,095,019.00
December 30, 2005... 0.00 0.00 0.00
June 30, 2006....... 0.00 0.00 0.00
December 30, 2006... 0.00 0.00 0.00
June 30, 2007....... 0.00 0.00 0.00
III-1
94
APPENDIX III -- EQUIPMENT NOTES PRINCIPAL PAYMENT SCHEDULE -- (CONTINUED)
SERIES C
AIRCRAFT REGISTRATION NUMBER
REGULAR
DISTRIBUTION DATES N12322 N10323 N14324 N69333 N14334 N14335 N12811
- -------------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
June 25, 1997....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 1997... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 1998 ...... 124,835.00 124,835.00 124,835.00 124,967.00 124,967.00 124,967.00 102,276.00
December 30, 1998... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 1999....... 241,663.00 241,663.00 241,663.00 241,918.00 241,918.00 241,918.00 197,990.00
December 30, 1999... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2000....... 330,103.00 330,103.00 330,103.00 330,450.00 330,450.00 330,450.00 270,448.00
December 30, 2000... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2001....... 376,874.00 376,874.00 376,874.00 377,271.00 377,271.00 377,271.00 308,767.00
December 30, 2001... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2002....... 157,018.00 157,018.00 157,018.00 157,183.00 157,183.00 157,183.00 128,642.00
December 30, 2002... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2003....... 777,457.00 777,457.00 777,457.00 778,277.00 778,277.00 778,277.00 636,959.00
December 30, 2003... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2004....... 820,079.00 820,079.00 820,079.00 820,943.00 820,943.00 820,943.00 671,878.00
December 30, 2004... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2005....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 2005... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2006....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 2006... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2007....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
REGULAR
DISTRIBUTION DATES N15820 N18833 N10834
- -------------------- ------------- ------------- -------------
June 25, 1997....... 0.00 0.00 0.00
December 30, 1997... 0.00 0.00 0.00
June 30, 1998 ...... 111,812.00 118,718.00 118,718.00
December 30, 1998... 0.00 0.00 0.00
June 30, 1999....... 216,453.00 229,822.00 229,822.00
December 30, 1999... 0.00 0.00 0.00
June 30, 2000....... 295,666.00 313,928.00 313,928.00
December 30, 2000... 0.00 0.00 0.00
June 30, 2001....... 337,559.00 358,408.00 358,408.00
December 30, 2001... 0.00 0.00 0.00
June 30, 2002....... 140,637.00 149,324.00 149,324.00
December 30, 2002... 0.00 0.00 0.00
June 30, 2003....... 696,353.00 739,363.00 739,363.00
December 30, 2003... 0.00 0.00 0.00
June 30, 2004....... 734,528.00 779,896.00 779,896.00
December 30, 2004... 0.00 0.00 0.00
June 30, 2005....... 0.00 0.00 0.00
December 30, 2005... 0.00 0.00 0.00
June 30, 2006....... 0.00 0.00 0.00
December 30, 2006... 0.00 0.00 0.00
June 30, 2007....... 0.00 0.00 0.00
SERIES D
AIRCRAFT REGISTRATION NUMBER
REGULAR
DISTRIBUTION DATES N12322 N10323 N14324 N69333 N14334 N14335 N12811
- -------------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
June 25, 1997....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 1997... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 1998....... 651,611.00 651,611.00 651,611.00 652,297.00 652,297.00 652,297.00 533,854.00
December 30, 1998... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 1999....... 663,571.00 663,571.00 663,571.00 664,271.00 664,271.00 664,271.00 543,654.00
December 30, 1999... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2000....... 742,986.00 742,986.00 742,986.00 743,769.00 743,769.00 743,769.00 608,716.00
December 30, 2000... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2001....... 786,805.00 786,805.00 786,805.00 787,634.00 787,634.00 787,634.00 644,616.00
December 30, 2001... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2002....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 2002... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2003....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 2003... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2004....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 2004... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2005....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 2005... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2006 0.00 0.00 0.00 0.00 0.00 0.00 0.00
December 30, 2006... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
June 30, 2007....... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
REGULAR
DISTRIBUTION DATES N15820 N18833 N10834
- -------------------- ------------- ------------- -------------
June 25, 1997....... 0.00 0.00 0.00
December 30, 1997... 0.00 0.00 0.00
June 30, 1998....... 583,634.00 619,682.00 619,682.00
December 30, 1998... 0.00 0.00 0.00
June 30, 1999....... 594,348.00 631,058.00 631,058.00
December 30, 1999... 0.00 0.00 0.00
June 30, 2000....... 665,477.00 706,580.00 706,580.00
December 30, 2000... 0.00 0.00 0.00
June 30, 2001....... 704,725.00 748,252.00 748,252.00
December 30, 2001... 0.00 0.00 0.00
June 30, 2002....... 0.00 0.00 0.00
December 30, 2002... 0.00 0.00 0.00
June 30, 2003....... 0.00 0.00 0.00
December 30, 2003... 0.00 0.00 0.00
June 30, 2004....... 0.00 0.00 0.00
December 30, 2004... 0.00 0.00 0.00
June 30, 2005....... 0.00 0.00 0.00
December 30, 2005... 0.00 0.00 0.00
June 30, 2006 0.00 0.00 0.00
December 30, 2006... 0.00 0.00 0.00
June 30, 2007....... 0.00 0.00 0.00
III-2
95
======================================================
NO OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND THE ACCOMPANYING LETTER OF
TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS, NOR THE
ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE
HEREOF OR THEREOF.
------------------------
TABLE OF CONTENTS
PAGE
-----
Available Information................ 3
Reports to Certificateholders........ 4
Incorporation of Certain Documents By
Reference.......................... 4
Prospectus Summary................... 5
Risk Factors......................... 28
Use of Proceeds...................... 35
Ratios of Earnings to Fixed
Charges............................ 35
The Exchange Offer................... 36
Description of the New
Certificates....................... 43
Description of the Liquidity
Facilities......................... 54
Description of the Intercreditor
Agreement.......................... 57
Description of the Aircraft and the
Appraisals......................... 61
Description of the Equipment Notes... 62
Certain U.S. Federal Income Tax
Consequences....................... 72
ERISA Considerations................. 73
Plan of Distribution................. 75
Legal Matters........................ 76
Experts.............................. 76
Index of Terms....................... I-1
Appraisal Letters.................... II-1
Equipment Notes Principal Payment
Schedule........................... III-1
======================================================
======================================================
CONTINENTAL AIRLINES, INC.
OFFER TO EXCHANGE
PASS THROUGH CERTIFICATES, SERIES 1997-2,
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
FOR ANY AND ALL OUTSTANDING
PASS THROUGH CERTIFICATES, SERIES 1997-2
PROSPECTUS
, 1997
======================================================
96
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Certificate of Incorporation and Bylaws provide that the
Company will indemnify each of its directors and officers to the full extent
permitted by the laws of the State of Delaware and may indemnify certain other
persons as authorized by the Delaware General Corporation Law (the "GCL").
Section 145 of the GCL provides as follows:
"(a) A corporation shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that 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 shall have power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending
or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that 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
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97
advance of the final disposition of such action, suit or proceeding upon
receipt of 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
II-2
98
(iv) for any transaction from which the Director derived any improper personal
benefit. If the GCL is amended to authorize corporate action further eliminating
or limiting the personal liability of Directors, then the liability of Directors
of the Corporation shall be eliminated or limited to the full extent permitted
by the GCL, as so amended".
The Company maintains directors' and officers' liability insurance.
ITEM 21. EXHIBITS.
The Index to Exhibits to this Registration Statement is incorporated herein
by reference.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement; provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
shall not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such posteffective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plans annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
II-3
99
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by any such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question of whether
or not such indemnification is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
100
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of Texas,
on October 21, 1997.
CONTINENTAL AIRLINES, INC.
By: /s/ JEFFERY A. SMISEK
------------------------------------
Jeffery A. Smisek
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated, on October 21, 1997.
SIGNATURE TITLE
- -------------------------------------------- --------------------------------------------
* Chairman of the Board, Chief Executive
- -------------------------------------------- Officer (Principal Executive Officer) and
Gordon M. Bethune Director
* Executive Vice President and Chief Financial
- -------------------------------------------- Officer (Principal Financial Officer)
Lawrence W. Kellner
* Vice President and Controller (Principal
- -------------------------------------------- Accounting Officer)
Michael P. Bonds
* Director
- --------------------------------------------
Thomas J. Barrack, Jr.
* Director
- --------------------------------------------
Lloyd M. Bentsen, Jr.
* Director
- --------------------------------------------
David Bonderman
* Director
- --------------------------------------------
Gregory D. Brenneman
* Director
- --------------------------------------------
Patrick Foley
* Director
- --------------------------------------------
Douglas H. McCorkindale
* Director
- --------------------------------------------
George G.C. Parker
II-5
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SIGNATURE TITLE
- -------------------------------------------- --------------------------------------------
* Director
- --------------------------------------------
Richard W. Pogue
* Director
- --------------------------------------------
William S. Price III
* Director
- --------------------------------------------
Donald L. Sturm
* Director
- --------------------------------------------
Karen Hastie Williams
* Director
- --------------------------------------------
Charles A. Yamarone
*By: /s/ SCOTT R. PETERSON
- --------------------------------------------
Scott R. Peterson
Attorney-in-fact
II-6
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EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -----------------------------------------------------------------------------------
4.1 Form of New 7.148% Exchange Pass Through Certificate Series 1997-2A (included in
Exhibit 4.5)
4.2 Form of New 7.149% Exchange Pass Through Certificate Series 1997-2B (included in
Exhibit 4.6)
4.3 Form of New 7.206% Exchange Pass Through Certificate Series 1997-2C (included in
Exhibit 4.7)
4.4 Form of New 7.522% Exchange Pass Through Certificate Series 1997-2D (included in
Exhibit 4.8)
4.5 Pass Through Trust Agreement, dated as of June 25, 1997, between Continental
Airlines, Inc. and Wilmington Trust Company, as Trustee, made with respect to the
formation of Continental Airlines Pass Through Trust, Series 1997-2A and the
issuance of 7.148% Continental Airlines Pass Through Trust, Series 1997-2A Pass
Through Certificates representing fractional undivided interests in the Trust
4.6 Pass Through Trust Agreement, dated as of June 25, 1997, between Continental
Airlines, Inc. and Wilmington Trust Company, as Trustee, made with respect to the
formation of Continental Airlines Pass Through Trust, Series 1997-2B and the
issuance of 7.149% Continental Airlines Pass Through Trust, Series 1997-2B Pass
Through Certificates representing fractional undivided interests in the Trust
4.7 Pass Through Trust Agreement, dated as of June 25, 1997, between Continental
Airlines, Inc. and Wilmington Trust Company, as Trustee, made with respect to the
formation of Continental Airlines Pass Through Trust, Series 1997-2C and the
issuance of 7.206% Continental Airlines Pass Through Trust, Series 1997-2C Pass
Through Certificates representing fractional undivided interests in the Trust
4.8 Pass Through Trust Agreement, dated as of June 25, 1997, between Continental
Airlines, Inc., and Wilmington Trust Company, as Trustee, made with respect to the
formation of Continental Airlines Pass Through Trust, Series 1997-2D and the
issuance of 7.522% Continental Airlines Pass Through Trust, Series 1997-2D Pass
Through Certificates representing fractional undivided interests in the Trust
4.9 Revolving Credit Agreement, dated June 25, 1997, between Wilmington Trust Company,
as Subordination Agent, as agent and trustee for the Continental Airlines Pass
Through Trust 1997-2A, as Borrower and Kredietbank N.V., New York Branch, as
Liquidity Provider
4.10 Revolving Credit Agreement, dated June 25, 1997, between Wilmington Trust Company,
as Subordination Agent, as agent and trustee for the Continental Airlines Pass
Through Trust 1997-2B, as Borrower and Kredietbank N.V., New York Branch, as
Liquidity Provider
4.11 Revolving Credit Agreement, dated June 25, 1997, between Wilmington Trust Company,
as Subordination Agent, as agent and trustee for the Continental Airlines Pass
Through Trust 1997-2C, as Borrower and Kredietbank N.V., New York Branch, as
Liquidity Provider
4.12 Intercreditor Agreement, dated as of June 25, 1997, among Wilmington Trust Company,
as Trustee under the Continental Airlines Pass Through Trust 1997-2A, Continental
Airlines Pass Through Trust 1997-2B, Continental Airlines Pass Through Trust
1997-2C and Continental Pass Through Trust 1997-2D, Kredietbank N.V., New York
Branch, as Class A Liquidity Provider, Class B Liquidity Provider, Class C
Liquidity Provider, and Wilmington Trust Company, as Subordination Agent and
Trustee
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EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -----------------------------------------------------------------------------------
4.13 Exchange and Registration Rights Agreement, dated as of June 25, 1997, among
Continental Airlines, Inc., Wilmington Trust Company, as Trustee under Continental
Airlines Pass Through Trust, Series 1997-2A, Continental Airlines Pass Through
Trust, Series 1997-2B, Continental Airlines Pass Through Trust, Series 1997-2C, and
Credit Suisse First Boston Corporation, and Morgan Stanley & Co. Incorporated,
Chase Securities Inc. and Goldman, Sachs & Co.
4.14 Purchase Agreement, dated as of June 17, 1997, among Continental Airlines, Inc.,
Wilmington Trust Company as Trustee under each of the Trusts, Credit Suisse First
Boston Corporation and Morgan Stanley & Co., Incorporated as Purchasers
4.15 Participation Agreement 322, dated as of June 25, 1997, among Continental Airlines,
Inc., and Wilmington Trust Company, not in its individual capacity, but solely as
Mortgagee, Second Mortgagee, Subordination Agent under the Intercreditor Agreement
and Pass Through Trustee under each of the Pass Through Agreements (this instrument
is substantially the same for each Aircraft)
4.16 Trust Indenture and Mortgage 322, dated as of June 25, 1997, between Continental
Airlines, Inc., and Wilmington Trust Company, solely as Mortgagee (this instrument
is substantially the same for each Aircraft)
4.17 Second Trust Indenture and Mortgage, dated as of June 25, 1997, between Continental
Airlines, Inc., Owner and Wilmington Trust Company, not in its individual capacity,
but solely as Mortgagee, Second Mortgagee
5.1 Opinion of Hughes Hubbard & Reed LLP relating to validity of the New Certificates
12.1 Computation of Ratio of Earnings to Fixed Charges*
23.1 Consent of Ernst & Young LLP
23.2 Consent of Hughes Hubbard & Reed LLP (included in its opinion filed as exhibit 5.1)
23.3 Consent of Aircraft Information Services, Inc.
23.4 Consent of BK Associates, Inc.
23.5 Consent of Morten Beyer and Agnew, Inc.
24.1 Powers of Attorney
25.1 Statement of Eligibility of Wilmington Trust Company for the 1997-2A Pass Through
Certificates, on Form T-1
25.2 Statement of Eligibility of Wilmington Trust Company for the 1997-2B Pass Through
Certificates, on Form T-1
25.3 Statement of Eligibility of Wilmington Trust Company for the 1997-2C Pass Through
Certificates, on Form T-1
25.4 Statement of Eligibility of Wilmington Trust Company for the 1997-2D Pass Through
Certificates, on Form T-1
99.1 Form of Letter of Transmittal
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees
99.4 Form of Letter to Clients
- ---------------
* To be filed by amendment
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Exhibit 4.5
[EXECUTION COPY]
================================================================================
PASS THROUGH TRUST AGREEMENT
Dated as of June 25, 1997
between
CONTINENTAL AIRLINES, INC.
and
WILMINGTON TRUST COMPANY,
as Trustee
Continental Airlines Pass Through Trust, Series 1997-2A
7.148% Initial Pass Through Certificates, Series 1997-2A
7.148% Exchange Pass Through Certificates, Series 1997-2A
================================================================================
2
Reconciliation and tie between Continental Airlines Pass Through Trust
Agreement, Series 1997-2A dated as of June 25, 1997, and the Trust Indenture Act
of 1939. This reconciliation does not constitute part of the Pass Through Trust
Agreement.
Trust Indenture Act Pass Through Trust
of 1939 Section Agreement Section
--------------- -----------------
310(a)(1) 7.08
(a)(2) 7.08
312(a) 3.05; 8.01; 8.02
313(a) 7.06; 8.03
314(a) 8.04(a), (c) & (d)
(a)(4) 8.04(e)
(c)(1) 1.02
(c)(2) 1.02
(d)(1) 7.13; 11.01
(d)(2) 7.13; 11.01
(d)(3) 2.01
(e) 1.02
315(b) 7.02
316(a)(last sentence) 1.04(c)
(a)(1)(A) 6.04
(a)(1)(B) 6.05
(b) 6.06
(c) 1.04(e)
317(a)(1) 6.03
(b) 7.13
318(a) 12.06
3
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions........................................... 2
Section 1.02. Compliance Certificates and Opinions.................. 15
Section 1.03. Form of Documents Delivered to
Trustee............................................... 16
Section 1.04. Directions of Certificateholders...................... 16
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES; ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Issuance of Certificates;
Acquisition of Equipment Notes........................ 18
Section 2.02. Acceptance by Trustee................................. 22
Section 2.03. Limitation of Powers.................................. 22
ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and
Execution of Certificates............................. 23
Section 3.02. Restrictive Legends................................... 25
Section 3.03. Authentication of Certificates........................ 27
Section 3.04. Transfer and Exchange................................. 28
Section 3.05. Book-Entry Provisions for
Restricted Global Certificates and
Regulation S Global Certificates...................... 29
Section 3.06. Special Transfer Provisions........................... 31
Section 3.07. Mutilated, Destroyed, Lost or
Stolen Certificates................................... 36
Section 3.08. Persons Deemed Owners................................. 36
Section 3.09. Cancellation.......................................... 37
Section 3.10. Temporary Certificates................................ 37
Section 3.11. Limitation of Liability for Payments.................. 38
4
Section Page
- ------- ----
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special
Payments Account...................................... 38
Section 4.02. Distributions from Certificate
Account and Special Payments Account.................. 39
Section 4.03. Statements to Certificateholders...................... 41
Section 4.04. Investment of Special Payment Moneys.................. 42
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence.................... 42
Section 5.02. Consolidation, Merger, etc............................ 43
ARTICLE VI
DEFAULT
Section 6.01. Events of Default. (a) Exercise of
Remedies.............................................. 44
Section 6.02. Incidents of Sale of Equipment Notes.................. 48
Section 6.03. Judicial Proceedings Instituted by
Trustee; Trustee May Bring Suit....................... 48
Section 6.04. Control by Certificateholders......................... 49
Section 6.05. Waiver of Past Defaults............................... 49
Section 6.06. Right of Certificateholders to
Receive Payments Not to Be Impaired................... 50
Section 6.07. Certificateholders May Not Bring
Suit Except Under Certain Conditions.................. 50
Section 6.08. Remedies Cumulative................................... 51
5
Section Page
- ------- ----
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities................... 52
Section 7.02. Notice of Defaults.................................... 52
Section 7.03. Certain Rights of Trustee............................. 53
Section 7.04. Not Responsible for Recitals or
Issuance of Certificates.............................. 54
Section 7.05. May Hold Certificates................................. 55
Section 7.06. Money Held in Trust................................... 55
Section 7.07. Compensation and Reimbursement........................ 55
Section 7.08. Corporate Trustee Required;
Eligibility........................................... 56
Section 7.09. Resignation and Removal;
Appointment of Successor.............................. 56
Section 7.10. Acceptance of Appointment by
Successor............................................. 58
Section 7.11. Merger, Conversion, Consolidation
or Succession to Business............................. 59
Section 7.12. Maintenance of Agencies............................... 60
Section 7.13. Money for Certificate Payments to
Be Held in Trust...................................... 61
Section 7.14. Registration of Equipment Notes in
Name of Subordination Agent........................... 62
Section 7.15. Representations and Warranties of
Trustee............................................... 62
Section 7.16. Withholding Taxes, Information
Reporting............................................. 63
Section 7.17. Trustee's Liens....................................... 64
Section 7.18. Preferential Collection of Claims..................... 64
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with
Names and Addresses of
Certificateholders.................................... 65
6
Section Page
- ------- ----
Section 8.02. Preservation of Information;
Communications to Certificateholders.................. 65
Section 8.03. Reports by Trustee.................................... 65
Section 8.04. Reports by the Company................................ 66
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without
Consent of Certificateholders......................... 67
Section 9.02. Supplemental Agreements with
Consent of Certificateholders......................... 69
Section 9.03. Documents Affecting Immunity or
Indemnity............................................. 70
Section 9.04. Execution of Supplemental Agreements.................. 70
Section 9.05. Effect of Supplemental Agreements..................... 71
Section 9.06. Conformity with Trust Indenture Act................... 71
Section 9.07. Reference in Certificates to
Supplemental Agreements............................... 71
ARTICLE X
AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS
Section 10.01. Amendments and Supplements to
Indentures and Financing Documents.................... 71
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust.............................. 73
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of
Certificateholders.................................... 74
7
Section Page
- ------- ----
Section 12.02. Certificates Nonassessable and
Fully Paid............................................ 74
Section 12.03. Notices............................................... 75
Section 12.04. Governing Law......................................... 76
Section 12.05. Severability of Provisions............................ 76
Section 12.06. Trust Indenture Act Controls.......................... 76
Section 12.07. Effect of Headings and Table of
Contents.............................................. 77
Section 12.08. Successors and Assigns................................ 77
Section 12.09. Benefits of Agreement................................. 77
Section 12.10. Legal Holidays........................................ 77
Section 12.11. Counterparts.......................................... 77
Section 12.12. Intention of Parties.................................. 77
Exhibit A- Form of Certificate
Exhibit B- Form of Certificate to Request Removal of Restricted Legend
Exhibit C- Form of Certificate to be Delivered by an Insitutional
Accredited Investor
Schedule I- Aircraft
8
PASS THROUGH TRUST AGREEMENT
This PASS THROUGH TRUST AGREEMENT, dated as of June 25, 1997 (the
"Agreement"), between CONTINENTAL AIRLINES, INC., a Delaware corporation, and
WILMINGTON TRUST COMPANY, as Trustee, is made with respect to the formation of
Continental Airlines Pass Through Trust, Series 1997-2A and the issuance of
7.148% Continental Airlines Pass Through Trust, Series 1997-2A Pass Through
Certificates representing fractional undivided interests in the Trust.
WITNESSETH:
WHEREAS, the Company wishes to purchase the six Boeing 737-3TO
aircraft and four McDonnell Douglas DC-9-82 aircraft listed in Schedule I hereto
(the "Aircraft") and to finance the purchase price of each such Aircraft through
the issuance pursuant to an Indenture, on a recourse basis, of four series of
Equipment Notes relating to such Aircraft;
WHEREAS, the Trustee, upon execution and delivery of this Agreement,
hereby declares the creation of the Trust for the benefit of the
Certificateholders, and the initial Certificateholders, as the grantors of the
Trust, by their respective acceptances of the Certificates, join in the creation
of this Trust with the Trustee;
WHEREAS, all Certificates to be issued by the Trust will evidence
fractional undivided interests in the Trust and will convey no rights, benefits
or interests in respect of any property other than the Trust Property;
WHEREAS, pursuant to the terms and conditions of this Agreement and
each of the Financing Agreements to be entered into by the Trustee
simultaneously with the execution and delivery of this Agreement, the Trustee on
behalf of the Trust shall purchase one or more issues of Equipment Notes having
the same interest rate as, and final maturity dates not later than the final
Regular Distribution Date of, the Certificates issued hereunder and, subject to
the Intercreditor Agreement, shall hold such Equipment Notes in trust for the
benefit of the Certificateholders;
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WHEREAS, to facilitate the sale of Equipment Notes to, and the
purchase of Equipment Notes by, the Trustee on behalf of the Trust, the Company
has duly authorized the execution and delivery of this Agreement as the
"issuer", as such term is defined in and solely for purposes of the Securities
Act, of the Certificates to be issued pursuant hereto and as the "obligor", as
such term is defined in and solely for purposes of the Trust Indenture Act of
1939, as amended, with respect to all such Certificates and is undertaking to
perform certain administrative and ministerial duties hereunder and is also
undertaking to pay the ongoing fees and expenses of the Trustee;
WHEREAS, all of the conditions and requirements necessary to make
this Agreement, when duly executed and delivered, a valid, binding and legal
instrument, enforceable in accordance with its terms and for the purposes herein
expressed, have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof have been in
all respects duly authorized; and
WHEREAS, upon issuance of the Exchange Certificates, if any, or the
effectiveness of the Shelf Registration Statement, this Agreement, as amended or
supplemented from time to time, will be subject to the provisions of the Trust
Indenture Act of 1939, and shall, to the extent applicable, be governed by such
provisions;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of other good and valuable consideration the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms used in this Agreement, including in the recitals to
this Agreement, that are defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
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(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, or by the rules
promulgated under the Trust Indenture Act, have the meanings assigned to
them therein;
(3) all references in this Agreement to designated "Articles",
"Sections", "Subsections" and other subdivisions are to the designated
Articles, Sections, Subsections and other subdivisions of this Agreement;
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, Section, Subsection or other subdivision; and
(5) unless the context otherwise requires, whenever the words
"including", "include" or "includes" are used herein, it shall be deemed
to be followed by the phrase "without limitation".
Affiliate: Means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such Person, provided, however, that
neither America West Airlines, Inc. nor any of its subsidiaries shall be
deemed to be an "Affiliate" of the Company for purposes of this Agreement.
For the purposes of this definition, "control" means the power, directly
or indirectly, to direct the management and policies of such Person,
whether through the ownership of voting securities or by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
Agent Members: Has the meaning specified in Section 3.05.
Agreement: Has the meaning specified in the initial paragraph
hereto.
Aircraft: Has the meaning specified in the first recital to this
Agreement.
Authorized Agent: Means any Paying Agent or Registrar for the
Certificates.
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Avoidable Tax: Means a state or local tax (i) upon (w) the Trust,
(x) the Trust Property, (y) Certificateholders or (z) the Trustee for
which the Trustee is entitled to seek reimbursement from the Trust
Property, and (ii) which would be avoided if the Trustee were located in
another state, or jurisdiction within a state, within the United States. A
tax shall not be an Avoidable Tax if the Company shall agree to pay, and
shall pay, such tax.
Boeing: Means The Boeing Company.
Business Day: Means any day other than a Saturday, a Sunday or a day
on which commercial banks are required or authorized to close in Houston,
Texas, New York, New York, Salt Lake City, Utah or, so long as any
Certificate is outstanding, the city and state in which the Trustee or any
Loan Trustee maintains its Corporate Trust Office or receives and
disburses funds.
Cedel: Means Cedel Bank societe anonyme.
Certificate: Means any one of the Initial Certificates or Exchange
Certificates and any such Certificates issued in exchange therefor or
replacement thereof pursuant to this Agreement.
Certificate Account: Means the account or accounts created and
maintained pursuant to Section 4.01(a).
Certificateholder or Holder: Means the Person in whose name a
Certificate is registered in the Register.
Company: Means Continental Airlines, Inc., a Delaware corporation,
or its successor in interest pursuant to Section 5.02, or (only in the
context of provisions hereof, if any, where such reference is required for
purposes of compliance with the Trust Indenture Act) any other "obligor"
(within the meaning of the Trust Indenture Act) with respect to the
Certificates.
Controlling Party: Has the meaning specified in the Intercreditor
Agreement.
Corporate Trust Office: With respect to the Trustee, the Second
Mortgagee or any Loan Trustee, means the office of such trustee in the
city at which at any particular time
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its corporate trust business shall be principally administered.
Cut-off Date: Means August 31, 1997.
Definitive Certificates: Has the meaning specified in Section
3.01(e).
Direction: Has the meaning specified in Section 1.04(a).
Distribution Date: Means any Regular Distribution Date or Special
Distribution Date as the context requires.
DTC: Means The Depository Trust Company, its nominees and their
respective successors.
Equipment Notes: Means the equipment notes issued under the
Indentures.
Escrow Account: Has the meaning specified in Section 2.01(b).
Escrowed Funds: Has the meaning specified in Section 2.01(b).
Euroclear: Means the Euroclear System.
Event of Default: Means an Indenture Default under any Indenture
pursuant to which Equipment Notes held by the Trust were issued.
Exchange Certificates: Means the pass through certificates
substantially in the form of Exhibit A hereto issued in exchange for the
Initial Certificates pursuant to the Registration Rights Agreement and
authenticated hereunder.
Exchange Offer: Means the exchange offer which may be made pursuant
to the Registration Rights Agreement to exchange Initial Certificates for
Exchange Certificates.
Exchange Offer Registration Statement: Means the registration
statement that, pursuant to the Registration Rights Agreement, is filed by
the Company with the SEC with respect to the exchange of Initial
Certificates for Exchange Certificates.
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Final Maturity Date: Means December 30, 2008.
Financing Agreements: Means each of the ten separate Participation
Agreements relating to the Aircraft each dated the date hereof, among the
Company, the Pass Through Trustee, the Other Trustees, the relevant Loan
Trustee, the Second Mortgagee and the Subordination Agent providing for,
among other things, the purchase of Equipment Notes by the Trustee on
behalf of the Trust, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
Financing Documents: With respect to any Equipment Note, means the
related Indenture, the Second Mortgage and the related Financing
Agreement.
Fractional Undivided Interest: Means the fractional undivided
interest in the Trust that is evidenced by a Certificate.
Global Certificates: Has the meaning specified in Section 3.01(d).
Global Exchange Certificate: Has the meaning specified in Section
3.01(f).
Indenture: Means each of the ten separate trust indentures and
mortgages relating to the Aircraft, in each case as the same may be
amended, supplemented or otherwise modified from time to time in
accordance with its terms.
Indenture Default: With respect to any Indenture, means any Event of
Default (as such term is defined in such Indenture).
Initial Certificates: Means the certificates issued and
authenticated hereunder substantially in the form of Exhibit A hereto
other than the Exchange Certificates.
Initial Purchasers: Means, collectively, Credit Suisse First Boston
Corporation and Morgan Stanley & Co. Incorporated.
Institutional Accredited Investor: Means an institutional investor
that is an "accredited investor"
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within the meaning set forth in Rule 501(a)(1), (2), (3) or (7) of
Regulation D under the Securities Act.
Intercreditor Agreement: Means the Intercreditor Agreement dated as
of June 25, 1997 among the Trustee, the Other Trustees, the Liquidity
Provider, the liquidity providers relating to the Certificates issued
under (and as defined in) each of the Other Pass Through Trust Agreements,
and Wilmington Trust Company, as Subordination Agent and as trustee
thereunder, as amended, supplemented or otherwise modified from time to
time in accordance with its terms.
Issuance Date: Means the date of the issuance of the Initial
Certificates.
Liquidity Facility: Means, initially, the Revolving Credit Agreement
dated as of June 25, 1997 relating to the Certificates, between the
Liquidity Provider and the Subordination Agent, as agent and trustee for
the Trustee, and, from and after the replacement of such Agreement
pursuant to the Intercreditor Agreement, the replacement liquidity
facility (or facilities) therefor, in each case as amended, supplemented
or otherwise modified from time to time in accordance with its terms.
Liquidity Provider: Means, initially, Kredietbank N.V., acting
through its New York Branch, and any replacement or successor therefor
appointed in accordance with the Intercreditor Agreement.
Loan Trustee: With respect to any Equipment Note or the Indenture
applicable thereto, means the bank or trust company designated as
mortgagee under such Indenture, together with any successor to such
mortgagee appointed pursuant thereto.
McDonnell Douglas: Means the McDonnell Douglas Corporation.
Non-U.S. Person: Means a Person that is not a "U.S. person", as
defined in Regulation S.
Officer's Certificate: Means a certificate signed, (a) in the case
of the Company, by (i) the Chairman or Vice Chairman of the Board of
Directors, the President, any Executive Vice President, any Senior Vice
President or the
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Treasurer of the Company, signing alone, or (ii) any Vice President of the
Company signing together with the Secretary, the Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, (b) in the case of a
Loan Trustee, a Responsible Officer of such Loan Trustee or (c) in the
case of a Second Mortgagee, a Responsible Officer of such Second
Mortgagee.
Opinion of Counsel: Means a written opinion of legal counsel who (a)
in the case of counsel for the Company may be (i) a senior attorney of the
Company one of whose principal duties is furnishing advice as to legal
matters, (ii) Hughes Hubbard & Reed LLP, or (iii) such other counsel
designated by the Company and reasonably acceptable to the Trustee and (b)
in the case of counsel for any Loan Trustee or Second Mortgagee may be
such counsel as may be designated by any of them whether or not such
counsel is an employee of any of them, and who shall be reasonably
acceptable to the Trustee.
Other Pass Through Trust Agreements: Means each of the three other
Continental Airlines 1997-2 Pass Through Trust Agreements relating to
Continental Airlines Pass Through Trust, Series 1997-2B, Continental
Airlines Pass Through Trust, Series 1997-2C and Continental Airlines Pass
Through Trust, Series 1997-2D, dated the date hereof.
Other Trustees: Means the trustees under the Other Pass Through
Trust Agreements, and any successor or other trustee appointed as provided
therein.
Outstanding: When used with respect to Certificates, means, as of
the date of determination, all Certificates theretofore authenticated and
delivered under this Agreement, except:
(i) Certificates theretofore canceled by the Registrar or
delivered to the Trustee or the Registrar for cancellation;
(ii) Certificates for which money in the full amount required
to make the final distribution with respect to such Certificates
pursuant to Section 11.01 hereof has been theretofore deposited with
the Trustee in trust for the Holders of such Certificates as
provided in Section 4.01 pending distribution of such
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money to such Certificateholders pursuant to payment of such final
distribution; and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been authenticated and delivered pursuant to this
Agreement.
Paying Agent: Means the paying agent maintained and appointed for
the Certificates pursuant to Section 7.12.
Permitted Investments: Means obligations of the United States of
America or agencies or instrumentalities thereof for the payment of which
the full faith and credit of the United States of America is pledged,
maturing in not more than 60 days after the date of acquisition thereof or
such lesser time as is required for the distribution of any Special
Payments on a Special Distribution Date.
Person: Means any person, including any individual, corporation,
limited liability company, partnership, joint venture, association,
joint-stock company, trust, trustee, unincorporated organization, or
government or any agency or political subdivision thereof.
Pool Balance: Means, as of any date, (i) the original aggregate face
amount of the Certificates less (ii) the aggregate amount of all payments
made in respect of such Certificates other than payments made in respect
of interest or premium thereon or reimbursement of any costs or expenses
incurred in connection therewith. The Pool Balance as of any Distribution
Date shall be computed after giving effect to the payment of principal, if
any, on the Equipment Notes or other Trust Property held in the Trust and
the distribution thereof to be made on such Distribution Date.
Pool Factor: Means, as of any date, the quotient (rounded to the
seventh decimal place) computed by dividing (i) the Pool Balance as at
such date by (ii) the original aggregate face amount of the Certificates.
The Pool Factor as of any Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes or
other Trust Property held in the Trust and the distribution thereof to be
made on such Distribution Date.
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Postponed Notes: Means any Equipment Notes to be held in the Trust
as to which a Postponement Notice shall have been delivered pursuant to
Section 2.01(b).
Postponement Notice: Means an Officer's Certificate of the Company
(1) requesting that the Trustee temporarily postpone the purchase pursuant
to one or more of the Financing Agreements of certain of the Equipment
Notes to a date which is later than the Issuance Date, (2) identifying the
amount of the purchase price of each such Equipment Note and the aggregate
purchase price for all such Equipment Notes and (3) with respect to each
such Equipment Note, either (a) setting or resetting a new Transfer Date
for payment by the Trustee of such purchase price and issuance of the
related Equipment Note (subject to subsequent change from time to time in
accordance with the relevant Financing Agreement), or (b) indicating that
such new Transfer Date (which shall be on or prior to the Cut-off Date)
will be set by subsequent written notice not less than one Business Day
prior to such new Transfer Date (subject to subsequent change from time to
time in accordance with the relevant Financing Agreement).
PTC Event of Default: Means any failure to pay within 10 Business
Days of the due date thereof: (i) the outstanding Pool Balance on the
Final Maturity Date or (ii) interest due on the Certificates on any
Distribution Date (unless the Subordination Agent shall have made an
Interest Drawing or Drawings (as defined in the Intercreditor Agreement),
or a withdrawal or withdrawals pursuant to section 3.6(f) of the
Intercreditor Agreement, with respect thereto in an aggregate amount
sufficient to pay such interest and shall have distributed such amount to
the Trustee).
Purchase Agreement: Means the Purchase Agreement dated June 17, 1997
among the Initial Purchasers and the Company, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
its terms.
QIB: Means a qualified institutional buyer as defined in Rule 144A.
Record Date: Means (i) for Scheduled Payments to be distributed on
any Regular Distribution Date, other than the
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final distribution, the 15th day (whether or not a Business Day) preceding
such Regular Distribution Date, and (ii) for Special Payments to be
distributed on any Special Distribution Date, other than the final
distribution, the 15th day (whether or not a Business Day) preceding such
Special Distribution Date.
Register and Registrar: Mean the register maintained and the
registrar appointed pursuant to Sections 3.04 and 7.12.
Registration Event: Means the declaration of the effectiveness by
the SEC of the Exchange Offer Registration Statement or the Shelf
Registration Statement.
Registration Rights Agreement: Means the Exchange and Registration
Rights Agreement dated as of June 25, 1997, among the Initial Purchasers,
the Trustee, the Other Trustees and the Company, as amended, supplemented
or otherwise modified from time to time in accordance with its terms.
Regular Distribution Date: With respect to distributions of
Scheduled Payments in respect of the Certificates, means each date
designated as a Regular Distribution Date in the Certificates issued
pursuant to this Agreement, until payment of all the Scheduled Payments to
be made under the Equipment Notes held in the Trust have been made;
provided, however, that, if any such day shall not be a Business Day, the
related distribution shall be made on the next succeeding Business Day
without additional interest.
Regulation S: Means Regulation S under the Securities Act or any
successor regulation thereto.
Regulation S Definitive Certificates: Has the meaning specified in
Section 3.01(e).
Regulation S Global Certificates: Has the meaning specified in
Section 3.01(d).
Responsible Officer: With respect to the Trustee, the Second
Mortgagee and any Loan Trustee, means any officer in the Corporate Trust
Office of the Trustee, Second Mortgagee or Loan Trustee or any other
officer customarily performing
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functions similar to those performed by the persons who at the time shall
be such officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with a particular
subject.
Restricted Definitive Certificates: Has the meaning specified in
Section 3.01(e).
Restricted Global Certificate: Has the meaning specified in Section
3.01(c).
Restricted Legend: Has the meaning specified in Section 3.02.
Restricted Period: Has the meaning specified in Section 3.01(d).
Rule 144A: Means Rule 144A under the Securities Act and any
successor rule thereto.
Scheduled Payment: With respect to any Equipment Note, means (i) any
payment of principal or interest on such Equipment Note (other than any
such payment which is not in fact received by the Subordination Agent
within five days of the date on which such payment is scheduled to be
made) due from the obligor thereon or (ii) any payment of interest on the
Certificates with funds drawn under the Liquidity Facility, which payment
represents the installment of principal at the stated maturity of such
installment of principal on such Equipment Note, the payment of regularly
scheduled interest accrued on the unpaid principal amount of such
Equipment Note, or both; provided that any payment of principal, premium,
if any, or interest resulting from the redemption or purchase of any
Equipment Note shall not constitute a Scheduled Payment.
SEC: Means the Securities and Exchange Commission, as from time to
time constituted or created under the United States Securities Exchange
Act of 1934, as amended, or, if at any time after the execution of this
instrument such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing
such duties on such date.
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Second Mortgage: Means the Second Trust Indenture and Mortgage dated
as of the date hereof between the Company and the Loan Trustees.
Second Mortgagee: Means the bank or trust company designated as
second mortgagee under the Second Mortgage together with any successor to
such second mortgagee appointed pursuant thereto.
Securities Act: Means the United States Securities Act of 1933, as
amended from time to time, or any successor thereto.
Shelf Registration Statement: Means the shelf registration statement
which may be required to be filed by the Company with the SEC pursuant to
any Registration Rights Agreement, other than an Exchange Offer
Registration Statement.
Special Distribution Date: Means each date on which a Special
Payment is to be distributed as specified in this Agreement; provided,
however, that, if any such day shall not be a Business Day, the related
distribution shall be made on the next succeeding Business Day without
additional interest.
Special Payment: Means (i) any payment (other than a Scheduled
Payment) in respect of, or any proceeds of, any Equipment Note, the
Collateral (as defined in each Indenture) or the Collateral (as defined in
the Second Mortgage), (ii) the amounts required to be distributed pursuant
to the last paragraph of Section 2.01(b) or (iii) the amounts required to
be distributed pursuant to the penultimate paragraph of Section 2.01(b).
Special Payments Account: Means the account or accounts created and
maintained pursuant to Section 4.01(b).
Specified Investments: Means, with respect to investments to be made
with Escrowed Funds pursuant to Section 2.01(b) hereof, (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
21
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Standard & Poor's Ratings Group, (iii) certificates of deposit issued by
commercial banks organized under the laws of the United States or of any
political subdivision thereof having a combined capital and surplus in
excess of $100,000,000, which banks or their holding companies have a
short-term deposit rating of Pl by Moody's Investors Service, Inc. or its
equivalent by Standard & Poor's Ratings Group; provided, however, that the
aggregate amount at any one time so invested in certificates of deposit
issued by any one bank shall not exceed 5% of such bank's capital and
surplus, (iv) U.S. dollar denominated offshore certificates of deposit
issued by, or offshore time deposits with, any commercial bank described
in clause (iii) above or any subsidiary thereof and (v) repurchase
agreements with any financial institution having combined capital and
surplus of at least $100,000,000 with respect to any of the obligations
described in clauses (i) through (iv) above as collateral; provided
further that if all of the above investments are unavailable, all amounts
to be invested may be used to purchase Federal Funds from an entity
described in clause (iii) above.
Subordination Agent: Has the meaning specified in the Intercreditor
Agreement.
Transfer Date: Has the meaning assigned to the term "Closing Date"
in each Financing Agreement (as such "Closing Date" may be changed from
time to time in accordance with the terms of such Financing Agreement).
Triggering Event: Has the meaning assigned to such term in the
Intercreditor Agreement.
Trust: Means the trust created by this Agreement, the estate of
which consists of the Trust Property.
Trust Indenture Act: Means the United States Trust Indenture Act of
1939, as amended from time to time, or any successor thereto.
Trust Property: Means (i) subject to the Intercreditor Agreement,
the Equipment Notes held as the property of the Trust and all monies at
any time paid thereon and all monies due and to become due thereunder,
(ii) funds from time to time deposited in the Escrow Account, the
Certificate Account and the Special Payments Account and, subject to the
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Intercreditor Agreement, any proceeds from the sale by the Trustee
pursuant to Article VI hereof of any such Equipment Note and (iii) all
rights of the Trust and the Trustee, on behalf of the Trust, under the
Intercreditor Agreement and the Liquidity Facility, including, without
limitation, all rights to receive certain payments thereunder, and all
monies paid to the Trustee on behalf of the Trust pursuant to the
Intercreditor Agreement or the Liquidity Facility.
Trustee: Means Wilmington Trust Company, or its successor in
interest, and any successor or other trustee appointed as provided herein.
Trustee's Lien: Has the meaning specified in Section 7.17.
Section 1.02. Compliance Certificates and Opinions. Upon any
application or request (except with respect to matters set forth in Article II)
by the Company, any Loan Trustee or the Second Mortgagee to the Trustee to take
any action under any provision of this Agreement, the Company, such Loan Trustee
or such Second Mortgagee, as the case may be, shall furnish to the Trustee (i)
an Officer's Certificate stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Agreement relating to the
proposed action have been complied with and (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Agreement relating to such particular application or request,
no additional certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement (other than a certificate
provided pursuant to Section 8.04(e)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Agreement relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements
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or opinions contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters and any such Person may certify or give an opinion as to
such matters in one or several documents.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement or, in respect of the Certificates, this
Agreement, they may, but need not, be consolidated and form one instrument.
Section 1.04. Directions of Certificateholders. (a) Any direction,
consent, request, demand, authorization, notice, waiver or other action provided
by this Agreement to be given or taken by Certificateholders (a "Direction") may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent or proxy duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required pursuant to this
Agreement, to the Company, any Loan Trustee or the Second Mortgagee. Proof of
execution of any such instrument or of a writing appointing any such agent or
proxy shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Trustee, the Company, any Loan Trustee
24
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and the Second Mortgagee, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or such other officer and where such execution is by
an officer of a corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other reasonable manner
which the Trustee deems sufficient.
(c) In determining whether the Certificateholders of the requisite
Fractional Undivided Interests of Certificates Outstanding have given any
Direction under this Agreement, Certificates owned by the Company or any
Affiliate thereof shall be disregarded and deemed not to be Outstanding for
purposes of any such determination. In determining whether the Trustee shall be
protected in relying upon any such Direction, only Certificates which the
Trustee knows to be so owned shall be so disregarded. Notwithstanding the
foregoing, (i) if any such Person owns 100% of the Certificates Outstanding,
such Certificates shall not be so disregarded, and (ii) if any amount of
Certificates so owned by any such Person have been pledged in good faith, such
Certificates shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Certificates and that the pledgee is not the Company or any Affiliate thereof.
(d) For all purposes of this Agreement, all Initial Certificates and
all Exchange Certificates shall vote and take all other actions of
Certificateholders together as one series of Certificates.
(e) The Company may at its option, by delivery of an Officer's
Certificate to the Trustee, set a record date to determine the
Certificateholders entitled to give any Direction. Notwithstanding Section
316(c) of the Trust Indenture Act, such
25
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record date shall be the record date specified in such Officer's Certificate,
which shall be a date not more than 30 days prior to the first solicitation of
Certificateholders in connection therewith. If such a record date is fixed, such
Direction may be given before or after such record date, but only the
Certificateholders of record at the close of business on such record date shall
be deemed to be Certificateholders for the purposes of determining whether
Certificateholders of the requisite proportion of Outstanding Certificates have
authorized or agreed or consented to such Direction, and for that purpose the
Outstanding Certificates shall be computed as of such record date; provided that
no such Direction by the Certificateholders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Agreement not later than one year after such record date.
(f) Any Direction by the Holder of any Certificate shall bind the
Holder of every Certificate issued upon the transfer thereof or in exchange
therefor or in lieu thereof, whether or not notation of such Direction is made
upon such Certificate.
(g) Except as otherwise provided in Section 1.04(c), Certificates
owned by or pledged to any Person shall have an equal and proportionate benefit
under the provisions of this Agreement, without preference, priority, or
distinction as among all of the Certificates.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Issuance of Certificates; Acquisition of Equipment
Notes. (a) The Trustee is hereby directed (i) to execute and deliver the
Intercreditor Agreement, the Registration Rights Agreement and each of the
Financing Agreements on or prior to the Issuance Date, each in the form
delivered to the Trustee by the Company, and (ii) subject to the respective
terms thereof, to perform its obligations thereunder. Upon request of the
Company and the satisfaction or waiver of the closing conditions specified in
the Purchase Agreement, the Trustee shall execute, deliver, authenticate, issue
and sell Initial Certificates in authorized denominations equalling in the
aggregate the amount set forth, with respect to the Certificates, in Schedule II
to
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the Purchase Agreement evidencing the entire ownership interest in the Trust,
which amount equals the maximum aggregate principal amount of Equipment Notes
which may be purchased by the Trustee pursuant to the Financing Agreements. On
the Issuance Date, the Trustee shall purchase, pursuant to the terms and
conditions of the Financing Agreements, the Equipment Notes (other than the
Postponed Notes) contemplated to be purchased by the Trustee under the Financing
Agreements at a purchase price equal to the consideration so received for the
Certificates (less the aggregate amount of any Escrowed Funds). Except as
provided in Sections 3.04, 3.05, 3.06, 3.07 and 3.10 hereof, the Trustee shall
not execute, authenticate or deliver Certificates in excess of the aggregate
amount specified in this paragraph.
(b) On or prior to the Issuance Date, the Company may deliver to the
Trustee a Postponement Notice relating to one or more Postponed Notes. The
Trustee shall postpone the purchase of the Postponed Notes from the
consideration received from the sale of Certificates and shall promptly deposit
funds in an amount equal to the purchase price of such Postponed Notes (the
"Escrowed Funds") into an escrow account (the "Escrow Account") with the Trustee
to be maintained as a part of the Trust. The portion of Escrowed Funds so
deposited with respect to any particular Postponed Notes shall be invested by
the Trustee at the direction and risk of the Company in Specified Investments
(i) maturing no later than any scheduled Transfer Date relating to such
Postponed Notes or (ii) if no such Transfer Date has been scheduled, maturing on
the next Business Day, or (iii) if the Company has given notice to the Trustee
that such Postponed Notes will not be issued, maturing on the next applicable
Special Distribution Date, if such investments are reasonably available for
purchase. The Trustee shall make withdrawals from the Escrow Account only as
provided in this Agreement. Upon request of the Company on one or more occasions
and the satisfaction or waiver of the closing conditions specified in the
applicable Financing Agreement on or prior to the Cut-off Date, the Trustee
shall purchase the applicable Postponed Notes with Escrowed Funds withdrawn from
the Escrow Account. The purchase price shall equal the principal amount of such
Postponed Notes.
The Trustee shall hold all Specified Investments until the maturity
thereof and will not sell or otherwise transfer Specified Investments. If
Specified Investments held in an Escrow Account mature prior to any applicable
Transfer Date, any proceeds received on the maturity of such Specified
Investments
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(including any earnings thereon) shall be reinvested by the Trustee at the
direction and risk of the Company in Specified Investments maturing as provided
in the preceding paragraph. The Company shall pay to the Trustee for deposit to
the Escrow Account an amount equal to any losses on such Specified Investments
as incurred.
On the initial Regular Distribution Date, the Company will pay (in
immediately available funds) to the Trustee an amount equal to (i) the sum of
(A) the interest that would have accrued, at a rate equal to the interest rate
applicable to the Certificates, on any Postponed Notes purchased on or prior to
the Cut-Off Date if such Postponed Notes had been issued on the Issuance Date,
from and including the Issuance Date to but excluding the date of such purchase,
and (B) the interest that would have accrued, at a rate equal to the interest
rate applicable to the Certificates, on any Postponed Notes not purchased on or
prior to the Cut-Off Date (other than any Postponed Notes for which a Special
Distribution Date specified in either of the two immediately succeeding
paragraphs has occurred on or prior to the initial Regular Distribution Date) if
such Postponed Notes had been issued on the Issuance Date, from and including
the Issuance Date to but excluding the initial Regular Distribution Date, minus
(ii) the earnings on Specified Investments received (with respect to the portion
of the Escrow Funds deposited with respect to the Postponed Notes described in
sub-clauses (A) and (B) of clause (i) of this paragraph) by the Trustee from and
including the Issuance Date to but excluding the initial Regular Distribution
Date.
If the Company notifies the Trustee prior to the Cut-off Date that
any Postponed Notes will not be issued on or prior to the Cut-off Date for any
reason, on the next Special Distribution Date established pursuant to Section
4.02(c) for the distribution to the Certificateholders of Escrowed Funds with
respect to the Postponed Notes designated in such notice (i) the Company shall
pay to the Trustee for deposit in the Special Payments Account, in immediately
available funds, an amount equal to (A) the interest that would have accrued, on
the Postponed Notes designated in such notice, at a rate equal to the interest
rate applicable to the Certificates from and including the Issuance Date (if
such Special Distribution Date shall occur on or prior to the initial Regular
Distribution Date) or the initial Regular Distribution Date (if such Special
Distribution Date
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occurs after the initial Regular Distribution Date) to but excluding such
Special Distribution Date, minus (B) the earnings on Specified Investments
received (with respect to the portion of the Escrowed Funds deposited with
respect to the Postponed Notes designated in such notice) by the Trustee from
and including the Issuance Date (if such Special Distribution Date shall occur
on or prior to the initial Regular Distribution Date) or the initial Regular
Distribution Date (if such Special Distribution Date occurs after the initial
Regular Distribution Date) to but excluding such Special Distribution Date and
(ii) the Trustee shall transfer an amount equal to that amount of Escrowed Funds
that would have been used to purchase the Postponed Notes designated in such
notice (together with the earnings described in clause (i)(B) of this paragraph
above) plus the amount paid by the Company pursuant to clause (i) of this
paragraph to the Special Payments Account for distribution as a Special Payment
in accordance with the provisions hereof.
If, on the Cut-off Date, an amount equal to less than all of the
initial Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) has been used to purchase Postponed Notes, on the Special
Distribution Date established pursuant to Section 4.02(c) for the distribution
to the Certificateholders of Escrowed Funds with respect to all of the Postponed
Notes that have not been purchased on or prior to the Cut-off Date (other than
any Postponed Notes referred to in the immediately preceding paragraph) (i) the
Company shall pay to the Trustee for deposit in the Special Payments Account, in
immediately available funds, an amount equal to (A) the interest that would have
accrued on Postponed Notes originally contemplated to be purchased with such
unused Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) but not so purchased at a rate equal to the interest rate
applicable to the Certificates from and including the Issuance Date (if such
Special Distribution Date shall occur on or prior to the initial Regular
Distribution Date) or the initial Regular Distribution Date (if such Special
Distribution Date occurs after the initial Regular Distribution Date) to but
excluding such Special Distribution Date, minus (B) the earnings on Specified
Investments received (with respect to the portion of the Escrowed Funds
deposited with respect to the Postponed Notes described in this paragraph) by
the Trustee from and including the Issuance Date (if such Special Distribution
Date shall occur on or prior to the initial Regular Distribution Date) or the
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initial Regular Distribution Date (if such Special Distribution Date occurs
after the initial Regular Distribution Date) to but excluding such Special
Distribution Date and (ii) the Trustee shall transfer such unused Escrowed Funds
(together with the earnings described in clause (i)(B) of this paragraph above)
and the amount paid by the Company pursuant to the clause (i) of this paragraph
to the Special Payments Account for distribution as a Special Payment in
accordance with the provisions hereof.
Section 2.02. Acceptance by Trustee. The Trustee, upon the execution
and delivery of this Agreement, acknowledges its acceptance of all right, title
and interest in and to the Trust Property and declares that the Trustee holds
and will hold such right, title and interest for the benefit of all then present
and future Certificateholders, upon the trusts herein set forth. Subject to
Section 7.14, the Trustee shall take all actions reasonably necessary to effect
the registration of all of the Equipment Notes acquired by the Trust in the name
of the Subordination Agent. By its payment for and acceptance of each
Certificate issued to it under this Agreement, each initial Certificateholder as
grantor of the Trust thereby joins in the creation and declaration of the Trust.
Section 2.03. Limitation of Powers. The Trust is constituted solely
for the purpose of making the investment in the Equipment Notes to be held in
the Trust, and, except as set forth herein, the Trustee shall not be authorized
or empowered to acquire any other investments or engage in any other activities
and, in particular, the Trustee shall not be authorized or empowered to do
anything that would cause such Trust to fail to qualify as a "grantor trust" for
federal income tax purposes (including as subject to this restriction, acquiring
any Aircraft (as defined in the respective Indentures) by bidding such Equipment
Notes or otherwise, or taking any action with respect to any such Aircraft once
acquired).
ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and Execution of
Certificates. (a) The Initial Certificates shall be known as the "7.148% Initial
Pass Through Certificates, Series 1997-2A" and the Exchange Certificates shall
be known as the "7.148% Exchange Pass Through Certificates, Series 1997-2A", in
each
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case, of the Trust. Each Certificate will represent a fractional undivided
interest in the Trust and shall be substantially in the form set forth as
Exhibit A hereto, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Agreement and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
Trustee or the officers executing such Certificates, as evidenced by the
Trustee's or officer's execution of the Certificates.
(b) The Initial Certificates shall be issued only in fully
registered form without coupons and only in denominations of $100,000 or
integral multiples of $1,000 in excess thereof, except that one Certificate may
be issued in a different denomination. The Exchange Certificates will be issued
in denominations of $1,000 or integral multiples thereof, except that one
Certificate may be issued in a different denomination. Each Certificate shall be
dated the date of its authentication. The aggregate Fractional Undivided
Interest of Certificates shall not at any time exceed $74,862,000.
(c) The Initial Certificates offered and sold in reliance on Rule
144A shall be issued in the form of one or more global Certificates
substantially in the form of Exhibit A hereto with such applicable legends as
are provided for in Section 3.02 (each a "Restricted Global Certificate") duly
executed and authenticated by the Trustee as hereinafter provided. Such
Restricted Global Certificates shall be in registered form and be registered in
the name of DTC and deposited with the Trustee, at its Corporate Trust Office,
as custodian for DTC. The aggregate principal amount of any Restricted Global
Certificate may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for DTC for such Restricted Global
Certificate, as provided in Section 3.06 hereof, which adjustments shall be
conclusive as to the aggregate principal amount of any such Global Certificate.
(d) The Initial Certificates offered and sold outside the United
States in reliance on Regulation S shall be issued in the form of one or more
global Certificates substantially in the form of Exhibit A hereto (each a
"Regulation S Global Certificate") duly executed and authenticated by the
Trustee as hereinafter provided. Such Regulation S Global Certificates
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shall be in registered form and be registered in the name of DTC and deposited
with the Trustee, at its Corporate Trust Office, as custodian for DTC, for
credit initially and during the Restricted Period (hereinafter defined) to the
respective accounts of beneficial owners of such Certificates (or to such other
accounts as they may direct) at Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear or Cedel. As used herein, the term
"Restricted Period", with respect to the Regulation S Global Certificates
offered and sold in reliance on Regulation S, means the period of 40 consecutive
days beginning on and including the later of (i) the day on which the
Certificates are first offered to persons other than distributors (as defined in
Regulation S) in reliance on Regulation S and (ii) the date of the closing of
the offering under the Purchase Agreement. The aggregate principal amount of any
Regulation S Global Certificate may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for DTC for such
Global Certificate, as provided in Section 3.06 hereof, which adjustments shall
be conclusive as to the aggregate principal amount of any such Global
Certificate. The Restricted Global Certificate and Regulation S Global
Certificate are sometimes collectively referred to herein as the "Global
Certificates".
(e) Initial Certificates offered and sold to any Institutional
Accredited Investor which is not a QIB in a transaction exempt from registration
under the Securities Act (and other than as described in Section 3.01(d)) shall
be issued substantially in the form of Exhibit A hereto in definitive, fully
registered form without interest coupons with such applicable legends as are
provided for in Section 3.02 (the "Restricted Definitive Certificates") duly
executed and authenticated by the Trustee as hereinafter provided. Certificates
issued pursuant to Section 3.05(b) in exchange for interests in a Regulation S
Global Certificate shall be issued in definitive, fully registered form without
interest coupons (the "Regulation S Definitive Certificates"). The Restricted
Definitive Certificates and the Regulation S Definitive Certificates are
sometimes collectively referred to herein as the "Definitive Certificates".
(f) The Exchange Certificates shall be issued in the form of one or
more global Certificates substantially in the form of Exhibit A hereto (each, a
"Global Exchange Certificate"), except that (i) the Restricted Legend
(hereinafter defined) shall
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be omitted and (ii) such Exchange Certificates shall contain such appropriate
insertions, omissions, substitutions and other variations from the form set
forth in Exhibit A hereto relating to the nature of the Exchange Certificates as
the Responsible Officer of the Trustee executing such Exchange Certificates on
behalf of the Trust may determine, as evidenced by such officer's execution on
behalf of the Trust of such Exchange Certificates. Such Global Exchange
Certificates shall be in registered form and be registered in the name of DTC
and deposited with the Trustee, at its Corporate Trust Office, as custodian for
DTC. The aggregate principal amount of any Global Exchange Certificate may from
time to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for DTC for such Global Exchange Certificate, which
adjustments shall be conclusive as to the aggregate principal amount of any such
Global Exchange Certificate. Subject to clauses (i) and (ii) of the first
sentence of this Section 3.01(f), the terms hereof applicable to Restricted
Global Certificates and/or Global Certificates shall apply to the Global
Exchange Certificates, mutatis mutandis.
(g) The definitive Certificates shall be in registered form and
shall be typed, printed, lithographed or engraved or produced by any combination
of these methods or may be produced in any other manner, all as determined by
the officers executing such Certificates, as evidenced by their execution of
such Certificates.
Section 3.02. Restrictive Legends. All Initial Certificates issued
pursuant to this Agreement for resale pursuant to Rule 144A or offered and sold
to any Institutional Accredited Investor which is not a QIB (including any
Global Certificate issued upon registration of transfer, in exchange for or in
lieu of such Certificates) shall be "Restricted Certificates" and shall bear a
legend to the following effect (the "Restricted Legend") unless the Company and
the Trustee determine otherwise consistent with applicable law:
"THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
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RULE 144A UNDER THE SECURITIES ACT), (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS
CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST
DATE ON WHICH THIS CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE
TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR OTHERWISE
TRANSFER THIS CERTIFICATE EXCEPT (A) TO CONTINENTAL AIRLINES, INC., (B) TO
A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT; AND (3) AGREES THAT IF IT SHOULD RESELL OR
OTHERWISE TRANSFER THIS CERTIFICATE IT WILL DELIVER TO EACH PERSON TO WHOM
THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS CERTIFICATE WITHIN
TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR
THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES,
INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE
MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS."
Each Global Certificate shall bear the following legend on the face
thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY
34
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CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO
SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST
AGREEMENT REFERRED TO HEREIN."
Section 3.03. Authentication of Certificates. (a) On the Issuance
Date, the Trustee shall duly execute, authenticate and deliver Initial
Certificates in authorized denominations equalling in the aggregate the amount
set forth, with respect to the Trust, in Schedule II to the Purchase Agreement,
evidencing the entire ownership of the Trust, which amount equals the aggregate
principal amount of Equipment Notes which have been or may be purchased by the
Trustee pursuant to each Financing Agreement. Thereafter, the Trustee shall duly
execute, authenticate and deliver Certificates as herein provided.
(b) No Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose, unless there appears on
such Certificate a certificate of authentication substantially in the form
provided for herein executed by the Trustee by the manual signature of one of
its authorized signatories, and such certificate upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder.
Section 3.04. Transfer and Exchange. The Trustee shall cause to be
kept at the office or agency to be maintained by it in accordance with the
provisions of Section 7.12 a register (the "Register") of the Certificates in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of such Certificates and of transfers and
exchanges of such Certificates as herein provided. The Trustee shall initially
be the registrar (the "Registrar")
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for the purpose of registering such Certificates and transfers and exchanges of
such Certificates as herein provided.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid obligations of the Trust, evidencing the
same interest therein, and entitled to the same benefits under this Agreement,
as the Certificates surrendered upon such registration of transfer or exchange.
A Certificateholder may transfer a Certificate, or request that a
Certificate be exchanged for Certificates (including, without limitation,
subject to the proviso to this sentence, Exchange Certificates) in authorized
denominations and in an aggregate Fractional Undivided Interest equal to the
Fractional Undivided Interest of such Certificate surrendered for exchange of
other authorized denominations, by surrender of such Certificate to the Trustee
with the form of transfer notice thereon duly completed and executed, and
otherwise complying with the terms of this Agreement, including providing
evidence of compliance with any restrictions on transfer, in form satisfactory
to the Trustee and the Registrar; provided that exchanges of Initial
Certificates for Exchange Certificates shall occur only after an Exchange Offer
Registration Statement shall have been declared effective by the SEC (notice of
which shall be provided to the Trustee by the Company) and otherwise only in
accordance with the terms of the Exchange Offer. No such transfer shall be
effected until, and such transferee shall succeed to the rights of a
Certificateholder only upon, final acceptance and registration of the transfer
by the Registrar in the Register. Prior to the registration of any transfer by a
Certificateholder as provided herein, the Trustee shall treat the person in
whose name the Certificate is registered as the owner thereof for all purposes,
and the Trustee shall not be affected by notice to the contrary. Furthermore,
DTC shall, by acceptance of a Global Certificate, agree that transfers of
beneficial interests in such Global Certificate may be effected only through a
book-entry system maintained by DTC (or its agent) and that ownership of a
beneficial interest in the Certificate shall be required to be reflected in a
book-entry. When Certificates are presented to the Registrar with a request to
register the transfer thereof or to exchange them for other authorized
denominations of a Certificate in a Fractional Undivided Interest equal to the
aggregate Fractional Undivided Interest of Certificates surrendered for
exchange, the Registrar shall
36
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register the transfer or make the exchange as requested if its requirements for
such transactions are met.
To permit registrations of transfers and exchanges in accordance
with the terms, conditions and restrictions hereof, the Trustee shall execute,
authenticate and deliver Certificates at the Registrar's request. No service
charge shall be made to a Certificateholder for any registration of transfer or
exchange of Certificates, but the Trustee shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates. All Certificates
surrendered for registration of transfer or exchange shall be canceled and
subsequently destroyed by the Trustee.
Section 3.05. Book-Entry Provisions for Restricted Global
Certificates and Regulation S Global Certificates. (a) Members of, or
participants in, DTC ("Agent Members") shall have no rights under this Agreement
with respect to any Global Certificate held on their behalf by DTC, or the
Trustee as its custodian, and DTC may be treated by the Trustee and any agent of
the Trustee as the absolute owner of such Global Certificate for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Trustee or any agent of the Trustee from giving effect to any written
certification, proxy or other authorization furnished by DTC or shall impair, as
between DTC and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Certificate. Upon the
issuance of any Global Certificate, the Registrar or its duly appointed agent
shall record DTC as the registered holder of such Global Certificate.
(b) Transfers of any Global Certificate shall be limited to
transfers of such Restricted Global Certificate or Regulation S Global
Certificate in whole, but not in part, to DTC. Beneficial interests in the
Restricted Global Certificate and any Regulation S Global Certificate may be
transferred in accordance with the rules and procedures of DTC and the
provisions of Section 3.06. Beneficial interests in a Restricted Global
Certificate or a Regulation S Global Certificate shall be delivered to all
beneficial owners thereof in the form of Restricted Definitive Certificates or
Regulation S Definitive Certificates, as the case may be, if (i) DTC notifies
the Trustee that it is unwilling or unable to continue as depositary for such
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Restricted Global Certificate or Regulation S Global Certificate, as the case
may be, and a successor depositary is not appointed by the Trustee within 90
days of such notice, and (ii) after the occurrence and during the continuance of
an Event of Default, owners of beneficial interests in a Global Certificate with
Fractional Undivided Interests aggregating not less than a majority in interest
in the Trust advise the Trustee, the Company and DTC through Agent Members in
writing that the continuation of a book-entry system through DTC or its
successor is no longer in their best interests.
(c) Any beneficial interest in one of the Global Certificates that
is transferred to a Person who takes delivery in the form of an interest in
another Global Certificate will, upon such transfer, cease to be an interest in
such Global Certificate and become an interest in the other Global Certificate
and, accordingly, will thereafter be subject to all transfer restrictions, if
any, and other procedures applicable to beneficial interests in such other
Global Certificate for as long as it remains such an interest.
(d) In connection with the transfer of an entire Restricted Global
Certificate or an entire Regulation S Global Certificate to the beneficial
owners thereof pursuant to paragraph (b) of this Section 3.05, such Restricted
Global Certificate or Regulation S Global Certificate, as the case may be, shall
be deemed to be surrendered to the Trustee for cancellation, and the Trustee
shall execute, authenticate and deliver, to each beneficial owner identified by
DTC in exchange for its beneficial interest in such Restricted Global
Certificate or Regulation S Global Certificate, as the case may be, an equal
aggregate principal amount of Restricted Definitive Certificates or Regulation S
Definitive Certificates, as the case may be, of authorized denominations. None
of the Company, the Registrar, the Paying Agent nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such registration instructions. Upon the
issuance of Definitive Certificates, the Trustee shall recognize the Person in
whose name the Definitive Certificates are registered in the Register as
Certificateholders hereunder. Neither the Company nor the Trustee shall be
liable if the Trustee or the Company is unable to locate a qualified successor
clearing agency.
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(e) Any Definitive Certificate delivered in exchange for an interest
in the Restricted Global Certificate pursuant to paragraph (b) of this Section
3.05 shall, except as otherwise provided by paragraph (e) of Section 3.06, bear
the Restricted Legend.
(f) Prior to the expiration of the Restricted Period, any Regulation
S Definitive Certificate delivered in exchange for an interest in a Regulation S
Global Certificate pursuant to paragraph (b) of this Section shall bear the
Restricted Legend.
(g) The registered holder of any Restricted Global Certificate or
Regulation S Global Certificate may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Agreement or the Certificates.
Section 3.06. Special Transfer Provisions. Unless and until (i) an
Initial Certificate is sold under an effective Shelf Registration Statement, or
(ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to
an effective Exchange Offer Registration Statement, in each case pursuant to the
terms of the Registration Rights Agreement, the following provisions shall apply
to such Initial Certificates:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Certificate to any Institutional Accredited
Investor which is neither a QIB nor a Non-U.S. Person:
(i) The Registrar shall register the transfer of any
Certificate, whether or not bearing the Restricted Legend, only if
(x) the requested transfer is at least two years after the later of
the original issue date of the Certificates and the last date on
which such Certificate was held by the Company, the Trustee or any
affiliate of any of such Persons or (y) the proposed transferor is
an Initial Purchaser who is transferring Certificates purchased
under the Purchase Agreement and the proposed transferee has
delivered to the Registrar a letter substantially in the form of
Exhibit C hereto and the aggregate principal amount of the
Certificates being transferred is at least $100,000. Except as
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provided in the foregoing sentence, the Registrar shall not register
the transfer of any Certificate to any Institutional Accredited
Investor which is neither a QIB nor a Non-U.S. Person.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in a Restricted Global Certificate, upon receipt
by the Registrar of (x) the documents, if any, required by paragraph
(i) and (y) instructions given in accordance with DTC's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date of the transfer and a decrease in the principal
amount of such Restricted Global Certificate in an amount equal to
the principal amount of the beneficial interest in such Restricted
Global Certificate to be transferred, and the Trustee shall execute,
authenticate and deliver to the transferor or at its direction, one
or more Restricted Definitive Certificates of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial
Certificate to a QIB (excluding Non-U.S. Persons):
(i) If the Certificate to be transferred consists of
Restricted Definitive Certificates, or of an interest in any
Regulation S Global Certificate during the Restricted Period, the
Registrar shall register the transfer if such transfer is being made
by a proposed transferor who has checked the box provided for on the
form of Initial Certificate stating, or has otherwise advised the
Trustee and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Initial
Certificate stating, or has otherwise advised the Trustee and the
Registrar in writing, that it is purchasing the Initial Certificate
for its own account or an account with respect to which it exercises
sole investment discretion and that it, or the Person on whose
behalf it is acting with respect to any such account, is a QIB
within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such
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information regarding the Trust and/or the Company as it has
requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying
upon its foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
(ii) Upon receipt by the Registrar of the documents required
by clause (i) above and instructions given in accordance with DTC's
and the Registrar's procedures therefor, the Registrar shall reflect
on its books and records the date of such transfer and an increase
in the principal amount of a Restricted Global Certificate in an
amount equal to the principal amount of the Restricted Definitive
Certificates or interests in such Regulation S Global Certificate,
as the case may be, being transferred, and the Trustee shall cancel
such Definitive Certificates or decrease the amount of such
Regulation S Global Certificate so transferred.
(c) Transfers of Interests in the Regulation S Global Certificate or
Regulation S Definitive Certificates. After the expiration of the
Restricted Period, the Registrar shall register any transfer of interests
in any Regulation S Global Certificate or Regulation S Definitive
Certificates without requiring any additional certification. Until the
expiration of the Restricted Period, interests in the Regulation S Global
Certificate may only be held through Agent Members acting for and on
behalf of Euroclear and Cedel.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any registration of any transfer of
an Initial Certificate to a Non-U.S. Person:
(i) Prior to the expiration of the Restricted Period, the
Registrar shall register any proposed transfer of an Initial
Certificate to a Non-U.S.Person upon receipt of a certificate
substantially in the form set forth as Exhibit B hereto from the
proposed transferor.
(ii) After the expiration of the Restricted Period, the
Registrar shall register any proposed
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transfer to any Non-U.S. Person if the Certificate to be transferred
is a Restricted Definitive Certificate or an interest in a
Restricted Global Certificate, upon receipt of a certificate
substantially in the form of Exhibit B from the proposed transferor.
The Registrar shall promptly send a copy of such certificate to the
Company.
(iii) Upon receipt by the Registrar of (x) the documents, if
any, required by clause (ii) and (y) instructions in accordance with
DTC's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date of such transfer and a decrease in
the principal amount of such Restricted Global Certificate in an
amount equal to the principal amount of the beneficial interest in
such Restricted Global Certificate to be transferred, and, upon
receipt by the Registrar of instructions given in accordance with
DTC's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal
amount of the Regulation S Global Certificate in an amount equal to
the principal amount of the Restricted Definitive Certificate or the
Restricted Global Certificate, as the case may be, to be
transferred, and the Trustee shall cancel the Definitive
Certificate, if any, so transferred or decrease the amount of such
Restricted Global Certificate.
(e) Restricted Legend. Upon the transfer, exchange or replacement of
Certificates not bearing the Restricted Legend, the Registrar shall
deliver Certificates that do not bear the Restricted Legend. Upon the
transfer, exchange or replacement of Certificates bearing the Restricted
Legend, the Registrar shall deliver only Certificates that bear the
Restricted Legend unless either (i) the circumstances contemplated by
paragraph (d)(ii) of this Section 3.06 exist or (ii) there is delivered to
the Registrar an Opinion of Counsel to the effect that neither such legend
nor the related restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act.
(f) General. By acceptance of any Certificate bearing the Restricted
Legend, each Holder of such a Certificate
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acknowledges the restrictions on transfer of such Certificate set forth in
such Restricted Legend and otherwise in this Agreement and agrees that it
will transfer such Certificate only as provided in such Restricted Legend
and otherwise in this Agreement. The Registrar shall not register a
transfer of any Certificate unless such transfer complies with the
restrictions on transfer, if any, of such Certificate set forth in such
Restricted Legend and otherwise in this Agreement. In connection with any
transfer of Certificates, each Certificateholder agrees by its acceptance
of the Certificates to furnish the Registrar or the Trustee such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to
an exemption from, or a transaction not subject to, the registration
requirements of the Securities Act and in accordance with the terms and
provisions of this Article III; provided that the Registrar shall not be
required to determine the sufficiency of any such certifications, legal
opinions or other information.
Until such time as no Certificates remain Outstanding, the Registrar
shall retain copies of all letters, notices and other written communications
received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the
Registrar at such time, shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate is surrendered to the Registrar or the Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save each of them
harmless, then, in the absence of notice to the Registrar or the Trustee that
such destroyed, lost or stolen Certificate has been acquired by a bona fide
purchaser, and provided that the requirements of Section 8-405 of the Uniform
Commercial Code in effect in any applicable jurisdiction are met, the Trustee
shall execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate or
Certificates, in authorized
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denominations and of like Fractional Undivided Interest and bearing a number not
contemporaneously outstanding.
In connection with the issuance of any new Certificate under this
Section 3.07, the Trustee shall require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 3.07 shall
constitute conclusive evidence of the appropriate Fractional Undivided Interest
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Certificates.
Section 3.08. Persons Deemed Owners. Prior to due presentment of a
Certificate for registration of transfer, the Trustee, the Registrar and any
Paying Agent may treat the Person in whose name any Certificate is registered
(as of the day of determination) as the owner of such Certificate for the
purpose of receiving distributions pursuant to Article IV and for all other
purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent
shall be affected by any notice to the contrary.
Section 3.09. Cancellation. All Certificates surrendered for payment
or transfer or exchange shall, if surrendered to the Trustee or any agent of the
Trustee other than the Registrar, be delivered to the Registrar for cancellation
and shall promptly be canceled by it. No Certificates shall be authenticated in
lieu of or in exchange for any Certificates canceled as provided in this
Section, except as expressly permitted by this Agreement. All canceled
Certificates held by the Registrar shall be destroyed and a certification of
their destruction delivered to the Trustee.
Section 3.10. Temporary Certificates. Until definitive Certificates
are ready for delivery, the Trustee shall
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authenticate temporary Certificates. Temporary Certificates shall be
substantially in the form of definitive Certificates but may have insertions,
substitutions, omissions and other variations determined to be appropriate by
the officers executing the temporary Certificates, as evidenced by their
execution of such temporary Certificates. If temporary Certificates are issued,
the Trustee will cause definitive Certificates to be prepared without
unreasonable delay. After the preparation of definitive Certificates, the
temporary Certificates shall be exchangeable for definitive Certificates upon
surrender of the temporary Certificates at the office or agency of the Trustee
designated for such purpose pursuant to Section 7.12, without charge to the
Certificateholder. Upon surrender for cancellation of any one or more temporary
Certificates, the Trustee shall execute, authenticate and deliver in exchange
therefor a like face amount of definitive Certificates of authorized
denominations. Until so exchanged, the temporary Certificates shall be entitled
to the same benefits under this Agreement as definitive Certificates.
Section 3.11. Limitation of Liability for Payments. All payments and
distributions made to Certificateholders in respect of the Certificates shall be
made only from the Trust Property and only to the extent that the Trustee shall
have sufficient income or proceeds from the Trust Property to make such payments
in accordance with the terms of Article IV of this Agreement. Each
Certificateholder, by its acceptance of a Certificate, agrees that it will look
solely to the income and proceeds from the Trust Property for any payment or
distribution due to such Certificateholder pursuant to the terms of this
Agreement and that it will not have any recourse to the Company, the Trustee,
the Loan Trustees, the Second Mortgagee or the Liquidity Provider, except as
otherwise expressly provided herein or in the Intercreditor Agreement.
The Company is a party to this Agreement solely for purposes of
meeting the requirements of the Trust Indenture Act, and therefore shall not
have any right, obligation or liability hereunder (except as otherwise expressly
provided herein).
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ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments Account. (a)
The Trustee shall establish and maintain on behalf of the Certificateholders a
Certificate Account as one or more non-interest-bearing accounts. The Trustee
shall hold the Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals therefrom only as
provided in this Agreement. On each day when a Scheduled Payment is made to the
Trustee under the Intercreditor Agreement, the Trustee upon receipt thereof
shall immediately deposit the aggregate amount of such Scheduled Payment in the
Certificate Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders a Special Payments Account as one or more accounts, which
shall be non-interest bearing except as provided in Section 4.04. The Trustee
shall hold the Special Payments Account in trust for the benefit of the
Certificateholders and shall make or permit withdrawals therefrom only as
provided in this Agreement. On each day when one or more Special Payments are
made to the Trustee under the Intercreditor Agreement, the Trustee, upon receipt
thereof, shall immediately deposit the aggregate amount of such Special Payments
in the Special Payments Account.
(c) The Trustee shall cause the Subordination Agent to present to
the related Loan Trustee of each Equipment Note such Equipment Note on the date
of its stated final maturity or, in the case of any Equipment Note which is to
be redeemed in whole pursuant to the related Indenture, on the applicable
redemption date under such Indenture.
Section 4.02. Distributions from Certificate Account and Special
Payments Account. (a) On each Regular Distribution Date or as soon thereafter as
the Trustee has confirmed receipt of the payment of all or any part of the
Scheduled Payments due on such date, the Trustee shall distribute out of the
Certificate Account the entire amount deposited therein pursuant to Section
4.01(a). There shall be so distributed to each Certificateholder of record on
the Record Date with respect to such Regular Distribution Date (other than as
provided in Section 11.01
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concerning the final distribution) by check mailed to such Certificateholder, at
the address appearing in the Register, such Certificateholder's pro rata share
(based on the Fractional Undivided Interest in the Trust held by such
Certificateholder) of the total amount in the Certificate Account, except that,
with respect to Certificates registered on the Record Date in the name of DTC,
such distribution shall be made by wire transfer in immediately available funds
to the account designated by DTC.
(b) On each Special Distribution Date with respect to any Special
Payment or as soon thereafter as the Trustee has confirmed receipt of such
Special Payment, the Trustee shall distribute out of the Special Payments
Account the entire amount of such Special Payment deposited therein pursuant to
Section 4.01(b). There shall be so distributed to each Certificateholder of
record on the Record Date with respect to such Special Distribution Date (other
than as provided in Section 11.01 concerning the final distribution) by check
mailed to such Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional Undivided Interest
in the Trust held by such Certificateholder) of the total amount in the Special
Payments Account on account of such Special Payment, except that, with respect
to Certificates registered on the Record Date in the name of DTC, such
distribution shall be made by wire transfer in immediately available funds to
the account designated by DTC.
(c) The Trustee shall, at the expense of the Company, cause notice
of each Special Payment to be mailed to each Certificateholder at his address as
it appears in the Register. In the event of redemption or purchase of Equipment
Notes held in the Trust, such notice shall be mailed not less than 20 days prior
to the Special Distribution Date for the Special Payment resulting from such
redemption or purchase, which Special Distribution Date shall be the date of
such redemption or purchase. In the event that the Trustee receives a notice
from the Company that Postponed Notes will not be purchased pursuant to Section
2.01, such notice of Special Payment shall be mailed as soon as practicable
after receipt of such notice from the Company and shall state the Special
Distribution Date for such Special Payment, which shall occur 20 days after the
date of such notice of Special Payment or (if such 20th day is not practicable)
as soon as practicable thereafter. In the event that any Special Payment is to
be made pursuant to the last paragraph of Section 2.01(b) hereof, on the Cut-Off
Date (or, if
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such Cut-Off Date is not practicable, as soon as practicable after the Cut-Off
Date), notice of such Special Payment shall be mailed stating the Special
Distribution Date for such Special Payment, which shall occur 20 days after the
date of such notice of such Special Payment (or, if such 20th day is not
practicable, as soon as practicable thereafter). In the case of any other
Special Payments, such notice shall be mailed as soon as practicable after the
Trustee has confirmed that it has received funds for such Special Payment,
stating the Special Distribution Date for such Special Payment which shall occur
not less than 20 days after the date of such notice and as soon as practicable
thereafter. Notices mailed by the Trustee shall set forth:
(i) the Special Distribution Date and the Record Date therefor
(except as otherwise provided in Section 11.01),
(ii) the amount of the Special Payment for each $1,000 face
amount Certificate and the amount thereof constituting principal,
premium, if any, and interest,
(iii) the reason for the Special Payment, and
(iv) if the Special Distribution Date is the same date as a
Regular Distribution Date, the total amount to be received on such
date for each $1,000 face amount Certificate.
If the amount of premium, if any, payable upon the redemption or purchase of an
Equipment Note has not been calculated at the time that the Trustee mails notice
of a Special Payment, it shall be sufficient if the notice sets forth the other
amounts to be distributed and states that any premium received will also be
distributed.
If any redemption of the Equipment Notes held in the Trust is
canceled, the Trustee, as soon as possible after learning thereof, shall cause
notice thereof to be mailed to each Certificateholder at its address as it
appears on the Register.
Section 4.03. Statements to Certificateholders. (a) On each
Distribution Date, the Trustee will include with each distribution to
Certificateholders of a Scheduled Payment or Special Payment, as the case may
be, a statement setting forth
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the following information (per $1,000 face amount Certificate as to (i) and (ii)
below):
(i) the amount of such distribution allocable to principal and
the amount allocable to premium, if any;
(ii) the amount of such distribution allocable to interest;
and
(iii) the Pool Balance and the Pool Factor.
With respect to the Certificates registered in the name of DTC, on
the Record Date prior to each Distribution Date, the Trustee will request from
DTC a securities position listing setting forth the names of all Agent Members
reflected on DTC's books as holding interests in the Certificates on such Record
Date. On each Distribution Date, the Trustee will mail to each such Agent Member
the statement described above and will make available additional copies as
requested by such Agent Member for forwarding to holders of interests in the
Certificates.
(b) Within a reasonable period of time after the end of each
calendar year but not later than the latest date permitted by law, the Trustee
shall furnish to each Person who at any time during such calendar year was a
Certificateholder of record a statement containing the sum of the amounts
determined pursuant to clauses (a)(i) and (a)(ii) above for such calendar year
or, in the event such Person was a Certificateholder of record during a portion
of such calendar year, for such portion of such year, and such other items as
are readily available to the Trustee and which a Certificateholder shall
reasonably request as necessary for the purpose of such Certificateholder's
preparation of its federal income tax returns. Such statement and such other
items shall be prepared on the basis of information supplied to the Trustee by
the Agent Members and shall be delivered by the Trustee to such Agent Members to
be available for forwarding by such Agent Members to the holders of interests in
the Certificates in the manner described in Section 4.03(a).
Section 4.04. Investment of Special Payment Moneys. Any money
received by the Trustee pursuant to Section 4.01(b) representing a Special
Payment which is not distributed on the date received shall, to the extent
practicable, be invested in Permitted Investments by the Trustee pending
distribution of such
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Special Payment pursuant to Section 4.02. Any investment made pursuant to this
Section 4.04 shall be in such Permitted Investments having maturities not later
than the date that such moneys are required to be used to make the payment
required under Section 4.02 on the applicable Special Distribution Date and the
Trustee shall hold any such Permitted Investments until maturity. The Trustee
shall have no liability with respect to any investment made pursuant to this
Section 4.04, other than by reason of the willful misconduct or negligence of
the Trustee. All income and earnings from such investments shall be distributed
on such Special Distribution Date as part of such Special Payment.
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence. The Company, at
its own cost and expense, will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises, except as otherwise specifically permitted in Section 5.02;
provided, however, that the Company shall not be required to preserve any right
or franchise if the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company.
Section 5.02. Consolidation, Merger, etc. The Company shall not
consolidate with or merge into any other corporation or convey, transfer or
lease substantially all of its assets as an entirety to any Person unless:
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person that acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety shall
be (i) organized and validly existing under the laws of the United States
of America or any state thereof or the District of Columbia, (ii) a
"citizen of the United States" as defined in 49 U.S.C. 40102(a)(15), as
amended, and (iii) a United States certificated air carrier, if and so
long as such status is a condition of entitlement to the benefits of
Section 1110 of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C.
ss. 1110), with respect to the Leases;
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(b) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety shall
execute and deliver to the Trustee a duly authorized, valid, binding and
enforceable agreement in form and substance reasonably satisfactory to the
Trustee containing an assumption by such successor corporation or Person
of the due and punctual performance and observance of each covenant and
condition of this Agreement, the Other Pass Through Trust Agreements and
each Financing Document to be performed or observed by the Company; and
(c) the Company shall have delivered to the Trustee an Officer's
Certificate of the Company and an Opinion of Counsel of the Company
reasonably satisfactory to the Trustee, each stating that such
consolidation, merger, conveyance, transfer or lease and the assumption
agreement mentioned in clause (b) above comply with this Section 5.02 and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
Upon any consolidation or merger, or any conveyance, transfer or
lease of substantially all of the assets of the Company as an entirety in
accordance with this Section 5.02, the successor corporation or Person formed by
such consolidation or into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Agreement with
the same effect as if such successor corporation or Person had been named as the
Company herein. No such conveyance, transfer or lease of substantially all of
the assets of the Company as an entirety shall have the effect of releasing any
successor corporation or Person which shall have become such in the manner
prescribed in this Section 5.02 from its liability in respect of this Agreement
and any Financing Document to which it is a party.
ARTICLE VI
DEFAULT
Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the
occurrence and during the continuation of any Indenture Default under any
Indenture, the Trustee may, to the
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extent it is the Controlling Party at such time (as determined pursuant to the
Intercreditor Agreement), direct the exercise of remedies as provided in the
Intercreditor Agreement.
(b) Purchase Rights of Certificateholders. By acceptance of its
Certificate, each Certificateholder agrees that at any time after the occurrence
and during the continuation of a Triggering Event,
(i) each Class B Certificateholder shall have the right to
purchase all, but not less than all, of the Certificates upon ten
days' written notice to the Trustee and each other Class B
Certificateholder, provided that (A) if prior to the end of such
ten-day period any other Class B Certificateholder notifies such
purchasing Class B Certificateholder that such other Class B
Certificateholder wants to participate in such purchase, then such
other Class B Certificateholder may join with the purchasing Class B
Certificateholder to purchase all, but not less than all, of the
Certificates pro rata based on the Fractional Undivided Interest in
the Class B Trust held by each such Class B Certificateholder and
(B) if prior to the end of such ten-day period any other Class B
Certificateholder fails to notify the purchasing Class B
Certificateholder of such other Class B Certificateholder's desire
to participate in such a purchase, then such other Class B
Certificateholder shall lose its right to purchase the Certificates
pursuant to this Section 6.01(b);
(ii) each Class C Certificateholder shall have the right
(which shall not expire upon any purchase of the Certificates
pursuant to clause (i) above) to purchase all, but not less than
all, of the Certificates and the Class B Certificates upon ten days'
written notice to the Trustee, the Class B Trustee and each other
Class C Certificateholder, provided that (A) if prior to the end of
such ten-day period any other Class C Certificateholder notifies
such purchasing Class C Certificateholder that such other Class C
Certificateholder wants to participate in such purchase, then such
other Class C Certificateholder may join with the purchasing Class C
Certificateholder to purchase all, but not less than all, of the
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Certificates and the Class B Certificates pro rata based on
the Fractional Undivided Interest in the Class C Trust held by each
such Class C Certificateholder and (B) if prior to the end of such
ten day period any other Class C Certificateholder fails to notify
the purchasing Class C Certificateholder of such other Class C
Certificateholder's desire to participate in such a purchase, then
such other Class C Certificateholder shall lose its right to
purchase the Certificates pursuant to this Section 6.01(b); and
(iii) each Class D Certificateholder shall have the right
(which shall not expire upon any purchase of the Certificates
pursuant to clause (i) above or the purchase of the Certificates and
the Class B Certificates pursuant to clause (ii) above) to purchase
all, but not less than all, of the Certificates, the Class B
Certificates and the Class C Certificates upon ten days' written
notice to the Trustee, the Class B Trustee, the Class C Trustee and
each other Class D Certificateholder, provided that (A) if prior to
the end of such ten-day period any other Class D Certificateholder
notifies such purchasing Class D Certificateholder that such other
Class D Certificateholder wants to participate in such purchase,
then such other Class D Certificateholder may join with the
purchasing Certificateholder to purchase all, but not less than all,
of the Certificates, the Class B Certificates and the Class C
Certificates pro rata based on the Fractional Undivided Interest in
the Class D Trust held by each such Class D Certificateholder and
(B) if prior to the end of such ten day period any other Class D
Certificateholder fails to notify the purchasing Class D
Certificateholder of such other Class D Certificateholder's desire
to participate in such a purchase, then such other Class D
Certificateholder shall lose its right to purchase the Certificates,
the Class B Certificates and the Class C Certificates pursuant to
this Section 6.01(b).
The purchase price with respect to the Certificates shall be equal
to the Pool Balance of the Certificates, together with accrued and unpaid
interest thereon to the date of such purchase, without premium, but including
any other amounts then
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due and payable to the Certificateholders under this Agreement, the
Intercreditor Agreement or any other Financing Document or on or in respect of
the Certificates; provided, however, if such purchase occurs after a Record
Date, such purchase price shall be reduced by the amount to be distributed
hereunder on the Distribution Date following such Record Date (which deducted
amounts shall remain distributable to, and may be retained by, the
Certificateholders as of such Record Date); provided, further, that no such
purchase of Certificates shall be effective unless the purchaser(s) shall
certify to the Trustee that contemporaneously with such purchase, such
purchaser(s) is purchasing, pursuant to the terms of this Agreement and the
Other Pass Through Trust Agreements, the Certificates, the Class B Certificates
and the Class C Certificates which are senior to the securities held by such
purchaser(s). Each payment of the purchase price of the Certificates referred to
in the first sentence hereof shall be made to an account or accounts designated
by the Trustee and each such purchase shall be subject to the terms of this
Section 6.01(b). Each Certificateholder agrees by its acceptance of its
Certificate that it will, subject to Section 3.04 hereof, upon payment from such
Class B Certificateholder(s), Class C Certificateholder(s) or Class D
Certificateholder(s), as the case may be, of the purchase price set forth in the
first sentence of this paragraph, forthwith sell, assign, transfer and convey to
the purchaser(s) thereof (without recourse, representation or warranty of any
kind except for its own acts), all of the right, title, interest and obligation
of such Certificateholder in this Agreement, the Intercreditor Agreement, the
Liquidity Facility, the Financing Documents and all Certificates held by such
Certificateholder (excluding all right, title and interest under any of the
foregoing to the extent such right, title or interest is with respect to an
obligation not then due and payable as respects any action or inaction or state
of affairs occurring prior to such sale) and the purchaser shall assume all of
such Certificateholder's obligations under this Agreement, the Intercreditor
Agreement, the Liquidity Facility, the Financing Documents and all such
Certificates. The Certificates will be deemed to be purchased on the date
payment of the purchase price is made notwithstanding the failure of the
Certificateholders to deliver any Certificates (whether in the form of
Definitive Certificates or beneficial interests in Global Certificates) and,
upon such a purchase, (i) the only rights of the Certificateholders will be to
deliver the Certificates to the purchaser(s) and receive the purchase price for
such Certificates
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and (ii) if the purchaser(s) shall so request, such Certificateholders will
comply with all the provisions of Section 3.04 hereof to enable new Certificates
to be issued to the purchaser in such denominations as it shall request. All
charges and expenses in connection with the issuance of any such new
Certificates shall be borne by the purchaser thereof.
As used in this Section 6.01(b), the terms "Certificateholder",
"Class", "Class B Certificate", "Class B Certificateholder", "Class B Trust",
"Class B Trustee", "Class C Certificate", "Class C Certificateholder", "Class C
Trust", "Class C Trustee", "Class D Certificate", "Class D Certificateholder",
"Class D Trust" and "Class D Trustee" shall have the respective meanings
assigned to such terms in the Intercreditor Agreement.
Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of
all or any part of the Equipment Notes held in the Trust made either under the
power of sale given under this Agreement or otherwise for the enforcement of
this Agreement, the following shall be applicable:
(1) Certificateholders and Trustee May Purchase Equipment Notes. Any
Certificateholder, the Trustee in its individual or any other capacity or
any other Person may bid for and purchase any of the Equipment Notes held
in the Trust, and upon compliance with the terms of sale, may hold,
retain, possess and dispose of such Equipment Notes in their own absolute
right without further accountability.
(2) Receipt of Trustee Shall Discharge Purchaser. The receipt of the
Trustee making such sale shall be a sufficient discharge to any purchaser
for his purchase money, and, after paying such purchase money and
receiving such receipt, such purchaser or its personal representative or
assigns shall not be obliged to see to the application of such purchase
money, or be in any way answerable for any loss, misapplication or
non-application thereof.
(3) Application of Moneys Received upon Sale. Any moneys collected
by the Trustee upon any sale made either under the power of sale given by
this Agreement or otherwise for the enforcement of this Agreement shall be
applied as provided in Section 4.02.
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Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee
May Bring Suit. If there shall be a failure to make payment of the principal of,
premium, if any, or interest on any Equipment Note held in the Trust, or if
there shall be any failure to pay Rent (as defined in the relevant Lease) under
any Lease when due and payable, then the Trustee, in its own name and as trustee
of an express trust, as holder of such Equipment Notes, to the extent permitted
by and in accordance with the terms of the Intercreditor Agreement and the
Financing Documents, shall be entitled and empowered to institute any suits,
actions or proceedings at law, in equity or otherwise, for the collection of the
sums so due and unpaid on such Equipment Notes or under such Lease and may
prosecute any such claim or proceeding to judgment or final decree with respect
to the whole amount of any such sums so due and unpaid.
Section 6.04. Control by Certificateholders. Subject to Section 6.03
and the Intercreditor Agreement, the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee with
respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or
exercising any trust or power conferred on the Trustee under this Agreement or
the Intercreditor Agreement, including any right of the Trustee as Controlling
Party under the Intercreditor Agreement or as holder of the Equipment Notes held
in the Trust, provided that
(1) such Direction shall not be in conflict with any rule of law or
with this Agreement and would not involve the Trustee in personal
liability or expense,
(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Certificateholders not taking part in
such Direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such Direction.
Section 6.05. Waiver of Past Defaults. Subject to the Intercreditor
Agreement, the Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in interest in the
Trust
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(i) may on behalf of all of the Certificateholders waive any past Event of
Default hereunder and its consequences or (ii) if the Trustee is the Controlling
Party, may direct the Trustee to instruct the applicable Loan Trustee to waive
any past Indenture Default under any Indenture and its consequences, and thereby
annul any Direction given by such Certificateholders or the Trustee to such Loan
Trustee and/or the Second Mortgagee with respect thereto, except a default:
(1) in the deposit of any Scheduled Payment or Special Payment under
Section 4.01 or in the distribution of any payment under Section 4.02 on
the Certificates, or
(2) in the payment of the principal of (premium, if any) or interest
on the Equipment Notes held in the Trust, or
(3) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of each
Certificateholder holding an Outstanding Certificate affected thereby.
Upon any such waiver, such default shall cease to exist with respect
to the Certificates and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose and any direction given by the Trustee on
behalf of the Certificateholders to the relevant Loan Trustee and/or the Second
Mortgagee shall be annulled with respect thereto; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon. Upon any such waiver, the Trustee shall vote the
Equipment Notes issued under the relevant Indenture to waive the corresponding
Indenture Default.
Section 6.06. Right of Certificateholders to Receive Payments Not to
Be Impaired. Anything in this Agreement to the contrary notwithstanding,
including, without limitation, Section 6.07 hereof, but subject to the
Intercreditor Agreement, the right of any Certificateholder to receive
distributions of payments required pursuant to Section 4.02 hereof on the
Certificates when due, or to institute suit for the enforcement of any such
payment on or after the applicable Regular Distribution Date or Special
Distribution Date, shall not be impaired or affected without the consent of such
Certificateholder.
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Section 6.07. Certificateholders May Not Bring Suit Except Under
Certain Conditions. A Certificateholder shall not have the right to institute
any suit, action or proceeding at law or in equity or otherwise with respect to
this Agreement, for the appointment of a receiver or for the enforcement of any
other remedy under this Agreement, unless:
(1) such Certificateholder previously shall have given written
notice to the Trustee of a continuing Event of Default;
(2) Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than 25% of the Trust shall have
requested the Trustee in writing to institute such action, suit or
proceeding and shall have offered to the Trustee indemnity as provided in
Section 7.03(e);
(3) the Trustee shall have refused or neglected to institute such an
action, suit or proceeding for 60 days after receipt of such notice,
request and offer of indemnity; and
(4) no direction inconsistent with such written request shall have
been given to the Trustee during such 60-day period by Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating
not less than a majority in interest in the Trust.
It is understood and intended that no one or more of the
Certificateholders shall have any right in any manner whatsoever hereunder or
under the Certificates to (i) surrender, impair, waive, affect, disturb or
prejudice any property in the Trust Property or the lien of any Indenture on any
property subject thereto, or the rights of the Certificateholders or the holders
of the Equipment Notes, (ii) obtain or seek to obtain priority over or
preference with respect to any other such Certificateholder or (iii) enforce any
right under this Agreement, except in the manner herein provided and for the
equal, ratable and common benefit of all the Certificateholders subject to the
provisions of this Agreement.
Section 6.08. Remedies Cumulative. Every remedy given hereunder to
the Trustee or to any of the Certificateholders shall not be exclusive of any
other remedy or remedies, and every
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such remedy shall be cumulative and in addition to every other remedy given
hereunder or now or hereafter given by statute, law, equity or otherwise.
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities. (a) Except during
the continuance of an Event of Default, the Trustee undertakes to perform such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Trustee.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of its
own affairs.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section; and
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts.
(d) Whether or not herein expressly so provided, every provision of
this Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
Section 7.02. Notice of Defaults. As promptly as practicable after,
and in any event within 90 days after, the occurrence of any default (as such
term is defined below) hereunder known to the Trustee, the Trustee shall
transmit by mail to the Company, the Loan Trustees, the Second Mortgagee and the
Certificateholders in accordance with Section 313(c) of the Trust Indenture Act,
notice of such default hereunder known to the Trustee, unless such default shall
have been cured or waived;
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provided, however, that, except in the case of a default in the payment of the
principal, premium, if any, or interest on any Equipment Note held in the Trust,
the Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee or a trust committee of directors
and/or Responsible Officers of the Trustee in good faith determine that the
withholding of such notice is in the interests of the Certificateholders. For
the purpose of this Section, the term "default" means any event that is, or
after notice or lapse of time or both would become, an Event of Default.
Section 7.03. Certain Rights of Trustee. Subject to the provisions
of Section 315 of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a written description of the subject matter
thereof accompanied by an Officer's Certificate and an Opinion of Counsel
as provided in Section 1.02 of this Agreement;
(c) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officer's Certificate of the Company,
any Loan Trustee or the Second Mortgagee;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the Direction of any of
the Certificateholders
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pursuant to this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the cost,
expenses and liabilities which might be incurred by it in compliance with
such Direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document;
(g) the Trustee may execute any of the trusts or powers under this
Agreement or perform any duties under this Agreement either directly or by
or through agents or attorneys, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it under this Agreement;
(h) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the
Direction of the Certificateholders holding Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in
interest in the Trust relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Agreement; and
(i) the Trustee shall not be required to expend or risk its own
funds in the performance of any of its duties under this Agreement, or in
the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk is not reasonably assured to it.
Section 7.04. Not Responsible for Recitals or Issuance of
Certificates. The recitals contained herein and in the Certificates, except the
certificates of authentication, shall not be taken as the statements of the
Trustee, and the Trustee assumes no responsibility for their correctness.
Subject to Section 7.15, the Trustee makes no representations as to the validity
or sufficiency of this Agreement, any Equipment Notes, the Intercreditor
Agreement, the Certificates or any other Financing Document, except that the
Trustee hereby represents and warrants that this Agreement has been, and the
Intercreditor
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Agreement, the Registration Rights Agreement and each Certificate will be,
executed, authenticated and delivered by one of its officers who is duly
authorized to execute, authenticate and deliver such document on its behalf.
Section 7.05. May Hold Certificates. The Trustee, any Paying Agent,
Registrar or any of their Affiliates or any other agent in their respective
individual or any other capacity may become the owner or pledgee of Certificates
and, subject to Sections 310(b) and 311 of the Trust Indenture Act, if
applicable, may otherwise deal with the Company, the Loan Trustees or the Second
Mortgagee with the same rights it would have if it were not Trustee, Paying
Agent, Registrar or such other agent.
Section 7.06. Money Held in Trust. Money held by the Trustee or the
Paying Agent in trust hereunder need not be segregated from other funds except
to the extent required herein or by law and neither the Trustee nor the Paying
Agent shall have any liability for interest upon any such moneys except as
provided for herein.
Section 7.07. Compensation and Reimbursement. The Company agrees:
(1) to pay, or cause to be paid, to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse, or
cause to be reimbursed, the Trustee upon its request for all reasonable
out-of-pocket expenses, disbursements and advances incurred or made by the
Trustee in accordance with any provision of this Agreement (including the
reasonable compensation and the expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence, willful misconduct or bad faith or as may
be incurred due to the Trustee's breach of its representations and
warranties set forth in Section 7.15; and
(3) to indemnify the Trustee pursuant to Sections 8.1 and 8.3 of
each Financing Agreement.
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The Trustee shall be entitled to reimbursement from, and shall have
a lien prior to the Certificates upon, the Trust Property for any tax incurred
without negligence, bad faith or willful misconduct, on its part, arising out of
or in connection with the acceptance or administration of such Trust (other than
any tax attributable to the Trustee's compensation for serving as such),
including any costs and expenses incurred in contesting the imposition of any
such tax. If the Trustee reimburses itself from the Trust Property of such Trust
for any such tax, it will mail a brief report within 30 days setting forth the
circumstances thereof to all Certificateholders as their names and addresses
appear in the Register.
Section 7.08. Corporate Trustee Required; Eligibility. There shall
at all times be a Trustee hereunder which shall be eligible to act as a trustee
under Section 310(a) of the Trust Indenture Act and shall have a combined
capital and surplus of at least $75,000,000 (or a combined capital and surplus
in excess of $5,000,000 and the obligations of which, whether now in existence
or hereafter incurred, are fully and unconditionally guaranteed by a corporation
organized and doing business under the laws of the United States, any state or
territory thereof or of the District of Columbia and having a combined capital
and surplus of at least $75,000,000). If such corporation publishes reports of
conditions at least annually, pursuant to law or to the requirements of federal,
state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section 7.08, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of conditions so published.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.08 to act as Trustee, the
Trustee shall resign immediately as Trustee in the manner and with the effect
specified in Section 7.09.
Section 7.09. Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 7.10.
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(b) The Trustee may resign at any time as trustee by giving prior
written notice thereof to the Company, the Authorized Agents, the Loan Trustees
and the Second Mortgagee. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Company, the Authorized Agents, the Loan
Trustees, the Trustee and the Second Mortgagee within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Direction of the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust
delivered to the Trustee and to the Company, the Loan Trustees and the Second
Mortgagee.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 310 of the Trust
Indenture Act, if applicable, after written request therefor by the
Company or by any Certificateholder who has been a bona fide
Certificateholder for at least six months; or
(2) the Trustee shall cease to be eligible under Section 7.08 and
shall fail to resign after written request therefor by the Company or by
any such Certificateholder; or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
then, in any case, (i) the Company may remove the Trustee or (ii) any
Certificateholder who has been a bona fide Certificateholder for at least six
months may, on behalf of itself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If a Responsible Officer of the Trustee shall obtain actual
knowledge of an Avoidable Tax which has been or is likely to be asserted, the
Trustee shall promptly notify the Company and shall, within 30 days of such
notification, resign
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hereunder unless within such 30-day period the Trustee shall have received
notice that the Company has agreed to pay such tax. The Company shall promptly
appoint a successor Trustee in a jurisdiction where there are no Avoidable
Taxes.
(f) If the Trustee shall resign, be removed or become incapable of
acting or if a vacancy shall occur in the office of the Trustee for any cause,
the Company shall promptly appoint a successor Trustee. If, within one year
after such resignation, removal or incapability, or other occurrence of such
vacancy, a successor Trustee shall be appointed by Direction of the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust
delivered to the Company, the Loan Trustees, the Second Mortgagee and the
retiring Trustee, and the Company approves such appointment, which approval
shall not be unreasonably withheld, then the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the successor
Trustee and supersede the successor Trustee appointed as provided above. If no
successor Trustee shall have been so appointed as provided above and accepted
appointment in the manner hereinafter provided, any Certificateholder who has
been a bona fide Certificateholder for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(g) The successor Trustee shall give notice of the resignation and
removal of the Trustee and appointment of the successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Certificateholders as their names and addresses appear in the Register. Each
notice shall include the name of such successor Trustee and the address of its
Corporate Trust Office.
Section 7.10. Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute and deliver to the Company,
the Authorized Agents, the Loan Trustees and the Second Mortgagee and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Company or the successor Trustee, such retiring
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Trustee shall execute and deliver an instrument transferring to such successor
Trustee all such rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee all Trust Property
held by such retiring Trustee hereunder, subject nevertheless to its lien, if
any, provided for in Section 7.07. Upon request of any such successor Trustee,
the Company, the retiring Trustee and such successor Trustee shall execute and
deliver any and all instruments containing such provisions as shall be necessary
or desirable to transfer and confirm to, and for more fully and certainly
vesting in, such successor Trustee all such rights, powers and trusts.
No institution shall accept its appointment as a Trustee hereunder
unless at the time of such acceptance such institution shall be qualified and
eligible under this Article VII.
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VII, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Certificates shall have been
executed or authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such execution or authentication and deliver the Certificates so
executed or authenticated with the same effect as if such successor Trustee had
itself executed or authenticated such Certificates.
Section 7.12. Maintenance of Agencies. (a) There shall at all times
be maintained an office or agency in the location set forth in Section 12.03
where Certificates may be presented or surrendered for registration of transfer
or for exchange, and for payment thereof and where notices and demands to or
upon the Trustee in respect of such certificates or this Agreement may be
served; provided, however, that, if it shall be necessary that the Trustee
maintain an office or agency in another location (e.g., the Certificates shall
be represented by Definitive
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Certificates and shall be listed on a national securities exchange), the Trustee
will make all reasonable efforts to establish such an office or agency. Written
notice of the location of each such other office or agency and of any change of
location thereof shall be given by the Trustee to the Company, the Loan Trustees
and the Second Mortgagee (at their respective addresses specified in the
Financing Documents or such other address as may be notified to the Trustee) and
the Certificateholders. In the event that no such office or agency shall be
maintained or no such notice of location or of change of location shall be
given, presentations and demands may be made and notices may be served at the
Corporate Trust Office of the Trustee.
(b) There shall at all times be a Registrar and a Paying Agent
hereunder with respect to the Certificates. Each such Authorized Agent shall be
a bank or trust company, shall be a corporation organized and doing business
under the laws of the United States or any state, with a combined capital and
surplus of at least $75,000,000, or, if the Trustee shall be acting as the
Registrar or Paying Agent hereunder, a corporation having a combined capital and
surplus in excess of $5,000,000, the obligations of which are guaranteed by a
corporation organized and doing business under the laws of the United States or
any state, with a combined capital and surplus of at least $75,000,000, and
shall be authorized under such laws to exercise corporate trust powers, subject
to supervision by Federal or state authorities. The Trustee shall initially be
the Paying Agent and, as provided in Section 3.04, Registrar hereunder with
respect to the Certificates. Each Registrar shall furnish to the Trustee, at
stated intervals of not more than six months, and at such other times as the
Trustee may request in writing, a copy of the Register maintained by such
Registrar.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, consolidation or conversion to which any Authorized Agent shall
be a party, or any corporation succeeding to the corporate trust business of any
Authorized Agent, shall be the successor of such Authorized Agent hereunder, if
such successor corporation is otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part of the parties
hereto or such Authorized Agent or such successor corporation.
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(d) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Trustee, the Company, the Loan Trustees and the
Second Mortgagee. The Company may, and at the request of the Trustee shall, at
any time terminate the agency of any Authorized Agent by giving written notice
of termination to such Authorized Agent and to the Trustee. Upon the resignation
or termination of an Authorized Agent or in case at any time any such Authorized
Agent shall cease to be eligible under this Section (when, in either case, no
other Authorized Agent performing the functions of such Authorized Agent shall
have been appointed), the Company shall promptly appoint one or more qualified
successor Authorized Agents, reasonably satisfactory to the Trustee, to perform
the functions of the Authorized Agent which has resigned or whose agency has
been terminated or who shall have ceased to be eligible under this Section. The
Company shall give written notice of any such appointment made by it to the
Trustee, the Loan Trustees and the Second Mortgagee; and in each case the
Trustee shall mail notice of such appointment to all Certificateholders as their
names and addresses appear on the Register.
(e) The Company agrees to pay, or cause to be paid, from time to
time to each Authorized Agent reasonable compensation for its services and to
reimburse it for its reasonable expenses.
Section 7.13. Money for Certificate Payments to Be Held in Trust.
All moneys deposited with any Paying Agent for the purpose of any payment on
Certificates shall be deposited and held in trust for the benefit of the
Certificateholders entitled to such payment, subject to the provisions of this
Section. Moneys so deposited and held in trust shall constitute a separate trust
fund for the benefit of the Certificateholders with respect to which such money
was deposited.
The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Agreement or for any other purpose, direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
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Section 7.14. Registration of Equipment Notes in Name of
Subordination Agent. The Trustee agrees that all Equipment Notes to be purchased
by the Trust shall be issued in the name of the Subordination Agent or its
nominee and held by the Subordination Agent in trust for the benefit of the
Certificateholders, or, if not so held, the Subordination Agent or its nominee
shall be reflected as the owner of such Equipment Notes in the register of the
issuer of such Equipment Notes.
Section 7.15. Representations and Warranties of Trustee. The Trustee
hereby represents and warrants that:
(a) the Trustee is a Delaware banking corporation organized and
validly existing in good standing under the laws of the State of Delaware;
(b) the Trustee has full power, authority and legal right to
execute, deliver, and perform this Agreement, the Intercreditor Agreement,
the Registration Rights Agreement and the Financing Agreements and has
taken all necessary action to authorize the execution, delivery, and
performance by it of this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Financing Agreements;
(c) the execution, delivery and performance by the Trustee of this
Agreement, the Intercreditor Agreement, the Registration Rights Agreement
and the Financing Agreements (i) will not violate any provision of United
States federal law or the law of the state of the United States where it
is located governing the banking and trust powers of the Trustee or any
order, writ, judgment, or decree of any court, arbitrator or governmental
authority applicable to the Trustee or any of its assets, (ii) will not
violate any provision of the articles of association or by-laws of the
Trustee, or (iii) will not violate any provision of, or constitute, with
or without notice or lapse of time, a default under, or result in the
creation or imposition of any lien on any properties included in the Trust
Property pursuant to the provisions of any mortgage, indenture, contract,
agreement or other undertaking to which it is a party, which violation,
default or lien could reasonably be expected to have an adverse effect on
the Trustee's performance or ability to perform its duties hereunder or
thereunder or on the transactions contemplated herein or therein;
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(d) the execution, delivery and performance by the Trustee of this
Agreement, the Intercreditor Agreement, the Registration Rights Agreement
and the Financing Agreements will not require the authorization, consent,
or approval of, the giving of notice to, the filing or registration with,
or the taking of any other action in respect of, any governmental
authority or agency of the United States or the state of the United States
where it is located regulating the banking and corporate trust activities
of the Trustee; and
(e) this Agreement, the Intercreditor Agreement, the Registration
Rights Agreement and the Financing Agreements have been duly executed and
delivered by the Trustee and constitute the legal, valid, and binding
agreements of the Trustee, enforceable against it in accordance with their
respective terms, provided that enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and (ii) general
principles of equity.
Section 7.16. Withholding Taxes, Information Reporting. The Trustee,
as trustee of the grantor trust created by this Agreement, shall exclude and
withhold from each distribution of principal, premium, if any, and interest and
other amounts due under this Agreement or under the Certificates any and all
withholding taxes applicable thereto as required by law. The Trustee agrees to
act as such withholding agent and, in connection therewith, whenever any present
or future taxes or similar charges are required to be withheld with respect to
any amounts payable in respect of the Certificates, to withhold such amounts and
timely pay the same to the appropriate authority in the name of and on behalf of
the Certificateholders, that it will file any necessary withholding tax returns
or statements when due, and that, as promptly as possible after the payment
thereof, it will deliver to each such Certificateholder appropriate
documentation showing the payment thereof, together with such additional
documentary evidence as such Certificateholders may reasonably request from time
to time. The Trustee agrees to file any other information reports as it may be
required to file under United States law.
Section 7.17. Trustee's Liens. The Trustee in its individual
capacity agrees that it will at its own cost and
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expense promptly take any action as may be necessary to duly discharge and
satisfy in full any mortgage, pledge, lien, charge, encumbrance, security
interest or claim ("Trustee's Liens") on or with respect to the Trust Property
which is attributable to the Trustee either (i) in its individual capacity and
which is unrelated to the transactions contemplated by this Agreement, the
Intercreditor Agreement, the Financing Agreements or the Financing Documents, or
(ii) as Trustee hereunder or in its individual capacity and which arises out of
acts or omissions which are not contemplated by this Agreement.
Section 7.18. Preferential Collection of Claims. The Trustee shall
comply with Section 311(a) of the Trust Indenture Act, excluding any creditor
relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee
shall resign or be removed as Trustee, it shall be subject to Section 311(a) of
the Trust Indenture Act to the extent provided therein.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with Names and
Addresses of Certificateholders. The Company will furnish to the Trustee within
15 days after each Record Date with respect to a Scheduled Payment, and at such
other times as the Trustee may request in writing within 30 days after receipt
by the Company of any such request, a list, in such form as the Trustee may
reasonably require, of all information in the possession or control of the
Company as to the names and addresses of the Certificateholders, in each case as
of a date not more than 15 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the sole Registrar, no such
list need be furnished; and provided further, however, that no such list need be
furnished for so long as a copy of the Register is being furnished to the
Trustee pursuant to Section 7.12.
Section 8.02. Preservation of Information; Communications to
Certificateholders. The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Certificateholders contained
in the most recent list furnished to the Trustee as provided in Section 7.12 or
Section 8.01, as the case may be, and the names and addresses of
Certificateholders received by the Trustee in its capacity as
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Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 7.12 or Section 8.01, as the case may be, upon receipt of a
new list so furnished.
Section 8.03. Reports by Trustee. Within 60 days after May 15 of
each year commencing with the first full year following the issuance of the
Certificates, the Trustee shall transmit to the Certificateholders, as provided
in Section 313(c) of the Trust Indenture Act, a brief report dated as of such
May 15, if required by Section 313(a) of the Trust Indenture Act.
Section 8.04. Reports by the Company. The Company shall:
(a) file with the Trustee, within 30 days after the Company is
required to file the same with the SEC, copies of the annual reports and
of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may from time to time by rules
and regulations prescribe) which the Company is required to file with the
SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act
of 1934, as amended; or, if the Company is not required to file
information, documents or reports pursuant to either of such sections,
then to file with the Trustee and the SEC, in accordance with rules and
regulations prescribed by the SEC, such of the supplementary and periodic
information, documents and reports which may be required pursuant to
section 13 of the Securities Exchange Act of 1934, as amended, in respect
of a security listed and registered on a national securities exchange as
may be prescribed in such rules and regulations;
(b) during any period, prior to the consummation of the Exchange
Offer and during which the Shelf Registration Statement is not in effect,
in which the Company is not subject to Section 13(a), 13(c) or 15(d) under
the Securities Exchange Act of 1934, make available to any Holder of the
Certificates in connection with any sale thereof and any prospective
purchaser of the Certificates from such Holder, in each case upon request,
the information specified in, and meeting the requirements of, Rule
144A(d)(4) under the Securities Act but only for so long as any of the
Certificates remain outstanding and are "restricted securities" within the
meaning of Rule 144(a)(3)
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under the Securities Act and, in any event, only until the second
anniversary of the Issuance Date;
(c) file with the Trustee and the SEC, in accordance with the rules
and regulations prescribed by the SEC, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Agreement, as may be
required by such rules and regulations, including, in the case of annual
reports, if required by such rules and regulations, certificates or
opinions of independent public accountants, conforming to the requirements
of Section 1.02;
(d) transmit to all Certificateholders, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act such
summaries of any information, documents and reports required to be filed
by the Company pursuant to subsections (a) and (c) of this Section 8.04 as
may be required by rules and regulations prescribed by the SEC; and
(e) furnish to the Trustee, not less often than annually, a brief
certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this
Agreement (it being understood that for purposes of this paragraph (e),
such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Agreement).
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without Consent of
Certificateholders. Without the consent of the Certificateholders, the Company
may (but will not be required to), and the Trustee (subject to Section 9.03)
shall, at the Company's request, at any time and from time to time, enter into
one or more agreements supplemental hereto or, if applicable, to the
Intercreditor Agreement, the Registration Rights Agreement or the Liquidity
Facility in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of
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the covenants of the Company herein contained or of the Company's
obligations under the Registration Rights Agreement or the Liquidity
Facility; or
(2) to add to the covenants of the Company for the benefit of the
Certificateholders, or to surrender any right or power conferred upon the
Company in this Agreement, the Registration Rights Agreement or the
Liquidity Facility; or
(3) to correct or supplement any provision in this Agreement, the
Intercreditor Agreement, the Registration Rights Agreement or the
Liquidity Facility which may be defective or inconsistent with any other
provision herein or therein or to cure any ambiguity or correct any
mistake or to modify any other provision with respect to matters or
questions arising under this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement or the Liquidity Facility, provided that any
such action shall not materially adversely affect the interests of the
Certificateholders; or, as provided in the Intercreditor Agreement, to
give effect to or provide for a Replacement Liquidity Facility (as defined
in the Intercreditor Agreement); or
(4) to comply with any requirement of the SEC, any applicable law,
rules or regulations of any exchange or quotation system on which the
Certificates are listed, any regulatory body or the Registration Rights
Agreement to effectuate the Exchange Offer; or
(5) to modify, eliminate or add to the provisions of this Agreement
to such extent as shall be necessary to continue the qualification of this
Agreement (including any supplemental agreement) under the Trust Indenture
Act or under any similar Federal statute hereafter enacted, and to add to
this Agreement such other provisions as may be expressly permitted by the
Trust Indenture Act, excluding, however, the provisions referred to in
Section 316(a)(2) of the Trust Indenture Act as in effect at the date as
of which this instrument was executed or any corresponding provision in
any similar Federal statute hereafter enacted; or
(6) to evidence and provide for the acceptance of appointment under
this Agreement by the Trustee of a successor Trustee and to add to or
change any of the
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provisions of this Agreement as shall be necessary to provide for or
facilitate the administration of the Trust, pursuant to the requirements
of Section 7.10; or
(7) to provide the information required under Section 7.12 and
Section 12.03 as to the Trustee; or
(8) to modify or eliminate provisions relating to the transfer or
exchange of Exchange Certificates or the Initial Certificates upon
consummation of the Exchange Offer (as defined in the Registration Rights
Agreement) or effectiveness of the Shelf Registration Statement or the
Exchange Offer Registration Statement;
provided, however, that no such supplemental agreement shall adversely affect
the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter
J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended,
for U.S. federal income tax purposes.
Section 9.02. Supplemental Agreements with Consent of
Certificateholders. With the consent of the Certificateholders holding
Certificates (including consents obtained in connection with a tender offer or
exchange offer for the Certificates) evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust, by Direction of
said Certificateholders delivered to the Company and the Trustee, the Company
may (but shall not be obligated to), and the Trustee (subject to Section 9.03)
shall enter into an agreement or agreements for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, the Intercreditor Agreement, the Liquidity Facility, the
Registration Rights Agreement or any Financing Agreement to the extent
applicable to such Certificateholders or of modifying in any manner the rights
and obligations of such Certificateholders under this Agreement, the
Intercreditor Agreement, the Liquidity Facility or the Registration Rights
Agreement; provided, however, that no such agreement shall, without the consent
of the Certificateholder of each Outstanding Certificate affected thereby:
(1) reduce in any manner the amount of, or delay the timing of, any
receipt by the Trustee of payments on the Equipment Notes held in the
Trust or distributions that are required to be made herein on any
Certificate, or change any
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date of payment on any Certificate, or change the place of payment where,
or the coin or currency in which, any Certificate is payable, or impair
the right to institute suit for the enforcement of any such payment or
distribution on or after the Regular Distribution Date or Special
Distribution Date applicable thereto; or
(2) permit the disposition of any Equipment Note included in the
Trust Property except as permitted by this Agreement, or otherwise deprive
such Certificateholder of the benefit of the ownership of the Equipment
Notes in the Trust; or
(3) reduce the specified percentage of the aggregate Fractional
Undivided Interests of the Trust which is required for any such
supplemental agreement, or reduce such specified percentage required for
any waiver of compliance with certain provisions of this Agreement or
certain defaults hereunder and their consequences provided for in this
Agreement; or
(4) waive, amend or modify Section 2.4, 3.2 or 3.3 of the
Intercreditor Agreement in a manner adverse to the Certificateholders; or
(5) modify any of the provisions of this Section 9.02 or Section
6.05, except to increase any such percentage or to provide that certain
other provisions of this Agreement cannot be modified or waived without
the consent of the Certificateholder of each Certificate affected thereby;
or
(6) adversely affect the status of any Trust as a grantor trust
under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended, for U.S. federal income tax
purposes.
It shall not be necessary for any Direction of Certificateholders
under this Section to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such Direction shall approve the
substance thereof.
Section 9.03. Documents Affecting Immunity or Indemnity. If in the
opinion of the Trustee any document required to be executed by it pursuant to
the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or
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indemnity in favor of the Trustee under this Agreement, the Trustee may in its
discretion decline to execute such document.
Section 9.04. Execution of Supplemental Agreements. In executing, or
accepting the additional trusts created by, any agreement permitted by this
Article or the modifications thereby of the trusts created by this Agreement,
the Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this Agreement.
Section 9.05. Effect of Supplemental Agreements. Upon the execution
of any agreement supplemental to this Agreement under this Article, this
Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Agreement for all purposes; and every Holder
of a Certificate theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 9.06. Conformity with Trust Indenture Act. Every
supplemental agreement executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
Section 9.07. Reference in Certificates to Supplemental Agreements.
Certificates authenticated and delivered after the execution of any supplemental
agreement pursuant to this Article may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental agreement; and, in
such case, suitable notation may be made upon Outstanding Certificates after
proper presentation and demand.
ARTICLE X
AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS
Section 10.01. Amendments and Supplements to Indentures and
Financing Documents. In the event that the Trustee, as holder (or beneficial
owner through the Subordination Agent) of any Equipment Note (or as prospective
purchaser of any Postponed Notes) in trust for the benefit of the
Certificateholders or as Controlling Party under the Intercreditor Agreement,
receives (directly or indirectly through the Subordination Agent) a request for
a consent to any amendment, modification, waiver or supplement under any
Equipment Note, any Financing Document
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related thereto or any other related document, the Trustee shall forthwith send
a notice of such proposed amendment, modification, waiver or supplement to each
Certificateholder registered on the Register as of the date of such notice. The
Trustee shall request from the Certificateholders a Direction as to (a) whether
or not to take or refrain from taking (or direct the Subordination Agent to take
or refrain from taking) any action which a holder of (or, with respect to
Postponed Notes, a prospective purchaser of) such Equipment Note has the option
to direct, (b) whether or not to give or execute (or direct the Subordination
Agent to give or execute) any waivers, consents, amendments, modifications or
supplements as a holder of (or, with respect to Postponed Notes, a prospective
purchaser of) such Equipment Note or a Controlling Party and (c) how to vote (or
direct the Subordination Agent to vote) any Equipment Note (or, with respect to
Postponed Note, its commitment to acquire such Postponed Note) if a vote has
been called for with respect thereto. Provided such a request for
Certificateholder Direction shall have been made, in directing any action or
casting any vote or giving any consent as the holder of any Equipment Note (or
in directing the Subordination Agent in any of the foregoing), (i) other than as
Controlling Party, the Trustee shall vote for or give consent to any such action
with respect to such Equipment Note (or Postponed Note) in the same proportion
as that of (A) the aggregate face amounts of all Certificates actually voted in
favor of or for giving consent to such action by such Direction of
Certificateholders to (B) the aggregate face amount of all Outstanding
Certificates and (ii) as Controlling Party, the Trustee shall vote as directed
in such Certificateholder Direction by the Certificateholders evidencing a
Fractional Undivided Interest aggregating not less than a majority in interest
in the Trust. For purposes of the immediately preceding sentence, a Certificate
shall have been "actually voted" if the Holder of such Certificate has delivered
to the Trustee an instrument evidencing such Holder's consent to such Direction
prior to two Business Days before the Trustee directs such action or casts such
vote or gives such consent. Notwithstanding the foregoing, but subject to
Section 6.04 and the Intercreditor Agreement, the Trustee may, in its own
discretion and at its own direction, consent and notify the relevant Loan
Trustee and/or the Second Mortgagee, as the case may be, of such consent (or
direct the Subordination Agent to consent and notify the relevant Loan Trustee
and/or the Second Mortgagee, as the case may be, of such consent) to any
amendment, modification, waiver or supplement under any Equipment Note (or
Postponed Note), any
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Financing Document related thereto or any other related document, if an Event of
Default hereunder shall have occurred and be continuing, or if such amendment,
modification, waiver or supplement will not materially adversely affect the
interests of the Certificateholders.
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust. The respective obligations
and responsibilities of the Company and the Trustee with respect to the Trust
shall terminate upon the distribution to all Holders of Certificates and the
Trustee of all amounts required to be distributed to them pursuant to this
Agreement and the disposition of all property held as part of the Trust
Property; provided, however, that in no event shall the Trust continue beyond
one hundred ten (110) years following the date of the execution of this Trust
Agreement.
Notice of such termination, specifying the Distribution Date upon
which the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be mailed promptly by
the Trustee to Certificateholders not earlier than the 60th day and not later
than the 20th day next preceding such final Distribution Date specifying (A) the
Distribution Date upon which the proposed final payment of the Certificates will
be made upon presentation and surrender of Certificates at the office or agency
of the Trustee therein specified, (B) the amount of any such proposed final
payment, and (C) that the Record Date otherwise applicable to such Distribution
Date is not applicable, payments being made only upon presentation and surrender
of the Certificates at the office or agency of the Trustee therein specified.
The Trustee shall give such notice to the Registrar at the time such notice is
given to Certificateholders. Upon presentation and surrender of the Certificates
in accordance with such notice, the Trustee shall cause to be distributed to
Certificateholders such final payments.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
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cancellation and receive the final distribution with respect thereto. No
additional interest shall accrue on the Certificates after the Distribution Date
specified in the first written notice. In the event that any money held by the
Trustee for the payment of distributions on the Certificates shall remain
unclaimed for two years (or such lesser time as the Trustee shall be satisfied,
after sixty days' notice from the Company, is one month prior to the escheat
period provided under applicable law) after the final distribution date with
respect thereto, the Trustee shall pay to each Loan Trustee the appropriate
amount of money relating to such Loan Trustee and shall give written notice
thereof to the Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders. The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations, and liabilities of the parties
hereto or any of them.
Section 12.02. Certificates Nonassessable and Fully Paid. Except as
set forth in the last sentence of this Section 12.02, Certificateholders shall
not be personally liable for obligations of the Trust, the Fractional Undivided
Interests represented by the Certificates shall be nonassessable for any losses
or expenses of the Trust or for any reason whatsoever, and Certificates, upon
authentication thereof by the Trustee pursuant to Section 3.03, are and shall be
deemed fully paid. No Certificateholder shall have any right (except as
expressly provided herein) to vote or in any manner otherwise control the
operation and management of the Trust Property, the Trust, or the obligations of
the parties hereto, nor shall anything set forth herein, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association.
Neither the existence of the Trust nor any provision herein is intended to or
shall limit the liability the Certificateholders would otherwise incur if the
Certificateholders owned Trust Property as co-
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owners, or incurred any obligations of the Trust, directly rather than through
the Trust.
Section 12.03. Notices. (a) Unless otherwise specifically provided
herein, all notices required under the terms and provisions of this Agreement
shall be in English and in writing, and any such notice may be given by United
States mail, courier service or telecopy, and any such notice shall be effective
when delivered or received or, if mailed, three days after deposit in the United
States mail with proper postage for ordinary mail prepaid,
if to the Company, to:
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Attention: Chief Financial Officer and
General Counsel
Facsimile: (713) 523-2831
if to the Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Department
Facsimile: (302) 651-8882
Telephone: (302) 651-8584
(b) The Company or the Trustee, by notice to the other, may
designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to Certificateholders shall be
mailed by first-class mail to the addresses for Certificateholders shown on the
Register kept by the Registrar. Failure so to mail a notice or communication or
any defect in such notice or communication shall not affect its sufficiency with
respect to other Certificateholders.
(d) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is conclusively presumed to have been duly
given, whether or not the addressee receives it.
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(e) If the Company mails a notice or communication to the
Certificateholders, it shall mail a copy to the Trustee and to the Paying Agent
at the same time.
(f) Notwithstanding the foregoing, all communications or notices to
the Trustee shall be deemed to be given only when received by a Responsible
Officer of the Trustee.
(g) The Trustee shall promptly furnish the Company with a copy of
any demand, notice or written communication received by the Trustee hereunder
from any Certificateholder, any Loan Trustee or the Second Mortgagee.
Section 12.04. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN
THE STATE OF NEW YORK AND THIS AGREEMENT AND THE CERTIFICATES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 12.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or the Trust, or of the
Certificates or the rights of the Certificateholders thereof.
Section 12.06. Trust Indenture Act Controls. Upon the occurrence of
any Registration Event, this Agreement shall become subject to the provisions of
the Trust Indenture Act and shall, to the extent applicable, be governed by such
provisions. From and after any Registration Event, if any provision of this
Agreement limits, qualifies or conflicts with another provision which is
required to be included in this Agreement by the Trust Indenture Act, the
required provision shall control.
Section 12.07. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 12.08. Successors and Assigns. All covenants, agreements,
representations and warranties in this Agreement by
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the Trustee and the Company shall bind and, to the extent permitted hereby,
shall inure to the benefit of and be enforceable by their respective successors
and assigns, whether so expressed or not.
Section 12.09. Benefits of Agreement. Nothing in this Agreement or
in the Certificates, express or implied, shall give to any Person, other than
the parties hereto and their successors hereunder, and the Certificateholders,
any benefit or any legal or equitable right, remedy or claim under this
Agreement.
Section 12.10. Legal Holidays. In any case where any Regular
Distribution Date or Special Distribution Date relating to any Certificate shall
not be a Business Day, then (notwithstanding any other provision of this
Agreement) payment need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on such
Regular Distribution Date or Special Distribution Date, and no interest shall
accrue during the intervening period.
Section 12.11. Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 12.12. Intention of Parties. The parties hereto intend that
the Trust be classified for U.S. federal income tax purposes as a grantor trust
under Subpart E, Part I of Subchapter J of the Internal Revenue Code of 1986, as
amended, and not as a trust or association taxable as a corporation or as a
partnership. The powers granted and obligations undertaken pursuant to this
Agreement shall be so construed so as to further such intent.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first written above.
CONTINENTAL AIRLINES,INC.
By: /s/
-------------------------------
Name: Gerald Laderman
Title:Vice President
WILMINGTON TRUST COMPANY,
as Trustee
By: _______________________________
Name:
Title:
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first written above.
CONTINENTAL AIRLINES,INC.
By: _________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Trustee
By: _______________________________
Name:
Title:
85
EXHIBIT A
FORM OF CERTIFICATE
REGISTERED
No._________
[THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED OR
SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, ANY
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT),
(B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT IT WILL NOT WITHIN
TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS CERTIFICATE OR
THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES,
INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH PERSONS RESELL OR
OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO CONTINENTAL AIRLINES,
INC., (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES THAT IF IT SHOULD
RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE IT WILL DELIVER TO EACH
PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS
CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY
CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH
PERSONS, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED
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STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A
PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.]*
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST
AGREEMENT REFERRED TO HEREIN.]**
- ----------
* Not to be included on the face of the Regulation S Global Certificate.
** To be included on the face of each Global Certificate.
87
A-3
[[REGULATION S] GLOBAL CERTIFICATE]*
CONTINENTAL AIRLINES PASS THROUGH TRUST, SERIES 1997-2A
7.148% Continental Airlines [Initial] [Exchange]
Pass Through Certificate,
Series 1997-2A
Final Maturity Date: December 30, 2008
CUSIP/Common Code No. ____________
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft owned by
Continental Airlines, Inc.
$74,862,000 Fractional Undivided Interest representing
.001335791% of the Trust per $1,000 face amount
THIS CERTIFIES THAT _______________, for value received, is the
registered owner of a $________ (__________dollars) Fractional Undivided
Interest in the Continental Airlines Pass Through Trust, Series 1997-2A (the
"Trust") created pursuant to a Pass Through Trust Agreement, dated as of June
25, 1997 (the "Agreement"), between Wilmington Trust Company (the "Trustee") and
Continental Airlines, Inc., a corporation incorporated under Delaware law (the
"Company"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "7.148%
Continental Airlines [Initial] [Exchange] Pass Through Certificates, Series
1997-2A" (herein called the "Certificates"). This Certificate is issued under
and is subject to the terms, provisions, and conditions of the Agreement. By
virtue of its acceptance hereof the Certificateholder of this Certificate
assents to and agrees to be bound by the provisions of the Agreement and the
Intercreditor Agreement. The property of the Trust includes an interest in
certain Equipment Notes and all rights of the Trust to receive payments under
the Intercreditor Agreement and the Liquidity Facility (the "Trust Property").
Each issue of the Equipment
- ----------
* To be included on the face of each Global Certificate.
88
A-4
Notes is secured by, among other things, a security interest in the Aircraft
owned by the Company.
The Certificates represent fractional undivided interests in the
Trust and the Trust Property, and have no rights, benefits or interest in
respect of any assets or property other than the Trust Property.
Subject to and in accordance with the terms of the Agreement and the
Intercreditor Agreement, from and to the extent of funds then available to the
Trustee, there will be distributed on each June 30 and December 30 (a "Regular
Distribution Date"), commencing on December 30, 1997, to the Person in whose
name this Certificate is registered at the close of business on the 15th day
preceding the Regular Distribution Date, an amount in respect of the Scheduled
Payments due on such Regular Distribution Date on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate and an amount
equal to the sum of such Scheduled Payments. Subject to and in accordance with
the terms of the Agreement and the Intercreditor Agreement, in the event that
Special Payments on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the applicable
Special Distribution Date, to the Person in whose name this Certificate is
registered at the close of business on the 15th day preceding the Special
Distribution Date, an amount in respect of such Special Payments on the
Equipment Notes, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special Payments so received.
If a Regular Distribution Date or Special Distribution Date is not a Business
Day, distribution shall be made on the immediately following Business Day with
the same force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the intervening
period. The Trustee shall mail notice of each Special Payment and the Special
Distribution Date therefor to the Certificateholder of this Certificate.
The Certificates do not represent a direct obligation of, or an
obligation guaranteed by, or an interest in, the Company or the Trustee or any
of their affiliates. The Certificates are limited in right or payment, all as
more
89
A-5
specifically set forth on the face hereof and in the Agreement. All payments or
distributions made to Certificateholders under the Agreement shall be made only
from the Trust Property and only to the extent that the Trustee shall have
sufficient income or proceeds from the Trust Property to make such payments in
accordance with the terms of the Agreement. Each Certificateholder of this
Certificate, by its acceptance hereof, agrees that it will look solely to the
income and proceeds from the Trust Property to the extent available for
distribution to such Certificateholder as provided in the Agreement. This
Certificate does not purport to summarize the Agreement and reference is made to
the Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds, and duties evidenced hereby. A copy of the Agreement may
be examined during normal business hours at the principal office of the Trustee,
and at such other places, if any, designated by the Trustee, by any
Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust. Any such consent by the
Certificateholder of this Certificate shall be conclusive and binding on such
Certificateholder and upon all future Certificateholders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Certificateholders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee in its capacity as Registrar, or
by any successor Registrar, in the Borough of Manhattan, the City of New York,
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized in
writing, and
90
A-6
thereupon one or more new Certificates of authorized denominations evidencing
the same aggregate Fractional Undivided Interest in the Trust will be issued to
the designated transferee or transferees.
[The Holder of this Certificate is entitled to the benefits of the
Exchange and Registration Rights Agreement, dated as of June 25, 1997, among the
Company, the Trustee and the Initial Purchasers named therein (the "Registration
Rights Agreement"). In the event that no Registration Event has occurred on or
prior to the 210th day after the date of the issuance of the Certificates, the
interest rate per annum payable in respect of the Equipment Notes shall be
increased by 0.50%, from and including the 210th day after the Issuance Date to
but excluding the earlier of (i) the date on which a Registration Event occurs
and (ii) the date on which there cease to be any Registrable Certificates (as
defined in the Registration Rights Agreement). In the event that the Shelf
Registration Statement (if it is filed), after being declared effective by the
SEC, ceases to be effective at any time during the period specified by Section
2(b)(B) of the Registration Rights Agreement for more than 60 days, whether or
not consecutive, during any 12-month period, the interest rate per annum payable
in respect of the Equipment Notes shall be increased by 0.50% from the 61st day
of the applicable 12-month period such Shelf Registration Statement ceases to be
effective until such time as the Shelf Registration Statement again becomes
effective (or, if earlier, the end of the period specified by Section 2(b)(B) of
the Registration Rights Agreement).]*
Except as otherwise provided in the Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after notice
mailed by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency of the
Trustee specified in such notice.
- ----------
* To be included only on each Initial Certificate.
91
A-7
The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of [$100,000]* [$1,000]** Fractional
Undivided Interest and integral multiples of $1,000 in excess thereof except
that one Certificate may be in a different denomination. As provided in the
Agreement and subject to certain limitations therein set forth, the Certificates
are exchangeable for new Certificates of authorized denominations evidencing the
same aggregate Fractional Undivided Interest in the Trust, as requested by the
Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee shall require payment by the Holder of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Registrar, and any agent of the Trustee or the
Registrar may treat the person in whose name this Certificate is registered as
the owner hereof for all purposes, and neither the Trustee, the Registrar, nor
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and
the Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
- ----------
* To be included only on each Initial Certificate.
** To be included only on each Initial Certificate.
92
A-8
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated: _______________, 1997 CONTINENTAL AIRLINES
PASS THROUGH TRUST, SERIES
1997-2A
By: WILMINGTON TRUST COMPANY,
not in its individual
capacity but solely as
Trustee
By: ____________________________
Name:
Title:
93
A-9
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred to in the
within-mentioned Agreement.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By: ____________________________
Authorized Officer
94
A-10
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned
registered holder hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
__________________________________
__________________________________
please print or typewrite name and address including zip code of assignee
__________________________________
the within Certificate and all rights thereunder, hereby irrevocably
constituting and appointing
__________________________________
attorney to transfer said Certificate on the books of the Trustee with full
power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT REGULATION S GLOBAL AND
REGULATION S DEFINITIVE CERTIFICATES]
In connection with any transfer of
this Certificate occurring prior to the date that is the earlier of the date of
an effective Registration Statement or the date two years after the later of the
original issuance of this Certificate or the last date on which this Certificate
was held by Continental Airlines, Inc., the Trustee or any affiliate of such
Persons, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided by Rule
144A thereunder.
or
95
A-11
[ ] (b) this Certificate is being transferred other than in accordance with (a)
above and documents are being furnished that comply with the conditions of
transfer set forth in this Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Certificate in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 3.06 of the Agreement
shall have been satisfied.
Date:__________________ [Name of Transferor]____________________
NOTE: The signature must correspond with
the name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee: ______________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Certificate for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:__________________ ________________________________
NOTE: To be executed by an
executive officer.
96
EXHIBIT B
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS OF CERTIFICATES PURSUANT TO REGULATION S
[date]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Trustee Administration
Re: Continental Airlines Pass Through Trust (the "Trust"), Series
1997-2A, Continental Airlines Pass Through Certificates, Series
1997-2A (the "Certificates")
Sirs:
In connection with our proposed sale of $_____ Fractional Undivided
Interest of the Certificates, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Certificates was not made to a person in the
United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale
97
B-2
has been made in accordance with the applicable provisions of Rule 903(c)(3) or
Rule 904(c)(1), as the case may be.
You and Continental Airlines, Inc. are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
98
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS OF CERTIFICATES TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
--------------------, ----
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Trustee Administration
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
CONTINENTAL AIRLINES
PASS THROUGH TRUST, SERIES 1997-2A (the "Trust")
Pass Through Certificates, Series 1997-2A
(the "Certificates")
---------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of U.S. $[_____________]
Fractional Undivided Interest of Certificates, we confirm that:
1. We understand that any subsequent transfer of the Certificates is
subject to certain restrictions and conditions set forth in the Trust Agreement,
dated as of June 25, 1997, between Continental Airlines, Inc. (the "Company")
and Wilmington Trust Company (the "Trustee") relating to the Certificates, and
we agree to be bound by, and not to resell, pledge or otherwise transfer the
Certificates except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
2. We are purchasing Certificates having an aggregate principal amount of
not less than $100,000 and each account (if any) for which we are purchasing
Certificates is purchasing Certificates having an aggregate principal amount of
not less than $100,000.
99
C-2
3. We understand that the Certificates have not been registered under the
Securities Act, that the Certificates are being sold to us in a transaction that
is exempt from the registration requirements of the Securities Act and that the
Certificates may not be offered or resold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that, if we should sell any Certificates
within two years after the later of the original issuance of such Certificate
and the last date on which such Certificate is owned by the Company, the Trustee
or any affiliate of any of such persons, we will do so only (A) to the Company,
(B) in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined therein), (C) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (D) pursuant
to the exemption from registration provided by Rule 144 under the Securities Act
or (E) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing any of the Certificates
from us a notice advising such purchaser that resales of the Certificates are
restricted as stated herein.
4. We understand that, on any proposed resale of any Certificates, we will
be required to furnish to the Company and the Trustee such certifications, legal
opinions and other information as the Company and the Trustee may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Certificates purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Certificates, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investments.
6. We are acquiring the Certificates purchased by us for our own account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion and not
with a view to any distribution of the Certificates, subject, nevertheless to
the understanding that the disposition of our property shall at all times be and
remain within our control.
100
C-3
You are entitled to rely upon this letter and are irrevocably authorized
to produce this letter or a copy thereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By: _____________________________
Name:
Title:
101
SCHEDULE I
Aircraft
Aircraft Type Registration Number
------------- -------------------
Boeing 737-3T0 N12322
Boeing 737-3T0 N10323
Boeing 737-3T0 N14324
Boeing 737-3T0 N69333
Boeing 737-3T0 N14334
Boeing 737-3T0 N14335
McDonnell Douglas MD-82 N12811
McDonnell Douglas MD-82 N15820
McDonnell Douglas MD-82 N18833
McDonnell Douglas MD-82 N10834
1
Exhibit 4.6
[EXECUTION COPY]
- --------------------------------------------------------------------------------
PASS THROUGH TRUST AGREEMENT
Dated as of June 25, 1997
between
CONTINENTAL AIRLINES, INC.
and
WILMINGTON TRUST COMPANY,
as Trustee
Continental Airlines Pass Through Trust, Series 1997-2B
7.149% Initial Pass Through Certificates, Series 1997-2B
7.149% Exchange Pass Through Certificates, Series 1997-2B
- --------------------------------------------------------------------------------
2
Reconciliation and tie between Continental Airlines Pass Through Trust
Agreement, Series 1997-2B dated as of June 25, 1997, and the Trust Indenture Act
of 1939. This reconciliation does not constitute part of the Pass Through Trust
Agreement.
Trust Indenture Act Pass Through Trust
of 1939 Section Agreement Section
------------------- ------------------
310(a)(1) 7.08
(a)(2) 7.08
312(a) 3.05; 8.01; 8.02
313(a) 7.06; 8.03
314(a) 8.04(a), (c)
& (d)
(a)(4) 8.04(e)
(c)(1) 1.02
(c)(2) 1.02
(d)(1) 7.13; 11.01
(d)(2) 7.13; 11.01
(d)(3) 2.01
(e) 1.02
315(b) 7.02
316(a)(last sentence) 1.04(c)
(a)(1)(A) 6.04
(a)(1)(B) 6.05
(b) 6.06
(c) 1.04(e)
317(a)(1) 6.03
(b) 7.13
318(a) 12.06
3
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions........................................... 2
Section 1.02. Compliance Certificates and Opinions.................. 15
Section 1.03. Form of Documents Delivered to Trustee................ 16
Section 1.04. Directions of Certificateholders...................... 17
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Issuance of Certificates; Acquisition of
Equipment Notes....................................... 19
Section 2.02. Acceptance by Trustee................................. 22
Section 2.03. Limitation of Powers.................................. 22
ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and Execution of
Certificates.......................................... 23
Section 3.02. Restrictive Legends................................... 26
Section 3.03. Authentication of Certificates........................ 27
Section 3.04. Transfer and Exchange................................. 28
Section 3.05. Book-Entry Provisions for Restricted Global
Certificates and Regulation S Global
Certificates.......................................... 29
Section 3.06. Special Transfer Provisions........................... 31
Section 3.07. Mutilated, Destroyed, Lost or Stolen
Certificates.......................................... 36
Section 3.08. Persons Deemed Owners................................. 37
Section 3.09. Cancellation.......................................... 37
Section 3.10. Temporary Certificates................................ 37
Section 3.11. Limitation of Liability for Payments.................. 38
Section 3.12. ERISA Restrictive Legend.............................. 38
i
4
Section Page
- ------- ----
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments Account...... 39
Section 4.02. Distributions from Certificate Account and
Special Payments Account.............................. 39
Section 4.03. Statements to Certificateholders...................... 41
Section 4.04. Investment of Special Payment Moneys.................. 42
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence.................... 43
Section 5.02. Consolidation, Merger, etc............................ 43
ARTICLE VI
DEFAULT
Section 6.01. Events of Default..................................... 45
Section 6.02. Incidents of Sale of Equipment Notes.................. 48
Section 6.03. Judicial Proceedings Instituted by Trustee;
Trustee May Bring Suit................................ 49
Section 6.04. Control by Certificateholders......................... 49
Section 6.05. Waiver of Past Defaults............................... 50
Section 6.06. Right of Certificateholders to Receive Payments
Not to Be Impaired.................................... 50
Section 6.07. Certificateholders May Not Bring Suit Except
Under Certain Conditions.............................. 51
Section 6.08. Remedies Cumulative................................... 52
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities................... 52
Section 7.02. Notice of Defaults.................................... 53
Section 7.03. Certain Rights of Trustee............................. 53
Section 7.04. Not Responsible for Recitals or Issuance of
Certificates.......................................... 55
Section 7.05. May Hold Certificates................................. 55
Section 7.06. Money Held in Trust................................... 55
ii
5
Section Page
- ------- ----
Section 7.07. Compensation and Reimbursement........................ 55
Section 7.08. Corporate Trustee Required; Eligibility............... 56
Section 7.09. Resignation and Removal; Appointment of
Successor............................................. 57
Section 7.10. Acceptance of Appointment by Successor................ 59
Section 7.11. Merger, Conversion, Consolidation or Succession
to Business........................................... 59
Section 7.12. Maintenance of Agencies............................... 60
Section 7.13. Money for Certificate Payments to Be Held in
Trust................................................. 62
Section 7.14. Registration of Equipment Notes in Name of
Subordination Agent................................... 62
Section 7.15. Representations and Warranties of Trustee............. 62
Section 7.16. Withholding Taxes, Information Reporting.............. 64
Section 7.17. Trustee's Liens....................................... 64
Section 7.18. Preferential Collection of Claims..................... 64
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with Names and
Addresses of Certificateholders....................... 65
Section 8.02. Preservation of Information; Communications to
Certificateholders.................................... 65
Section 8.03. Reports by Trustee.................................... 65
Section 8.04. Reports by the Company................................ 66
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without Consent of
Certificateholders.................................... 67
Section 9.02. Supplemental Agreements with Consent of
Certificateholders.................................... 69
Section 9.03. Documents Affecting Immunity or Indemnity............. 70
Section 9.04. Execution of Supplemental Agreements.................. 71
Section 9.05. Effect of Supplemental Agreements..................... 71
Section 9.06. Conformity with Trust Indenture Act................... 71
Section 9.07. Reference in Certificates to Supplemental
Agreements............................................ 71
iii
6
Section Page
- ------- ----
ARTICLE X
AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS
Section 10.01. Amendments and Supplements to Indentures and
Financing Documents................................... 71
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust.............................. 73
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders............ 74
Section 12.02. Certificates Nonassessable and Fully Paid............. 74
Section 12.03. Notices............................................... 75
Section 12.04. Governing Law......................................... 76
Section 12.05. Severability of Provisions............................ 76
Section 12.06. Trust Indenture Act Controls.......................... 76
Section 12.07. Effect of Headings and Table of Contents.............. 77
Section 12.08. Successors and Assigns................................ 77
Section 12.09. Benefits of Agreement................................. 77
Section 12.10. Legal Holidays........................................ 77
Section 12.11. Counterparts.......................................... 77
Section 12.12. Intention of Parties.................................. 78
Exhibit A- Form of Certificate
Exhibit B- Form of Certificate to Request Removal of
Restricted Legend
Exhibit C- Form of Certificate to be Delivered by an
Institutional Accredited Investor
Schedule I- Aircraft
iv
7
PASS THROUGH TRUST AGREEMENT
This PASS THROUGH TRUST AGREEMENT, dated as of June 25, 1997 (the
"Agreement"), between CONTINENTAL AIRLINES, INC., a Delaware corporation, and
WILMINGTON TRUST COMPANY, as Trustee, is made with respect to the formation of
Continental Airlines Pass Through Trust, Series 1997-2B and the issuance of
7.149% Continental Airlines Pass Through Trust, Series 1997-2B Pass Through
Certificates representing fractional undivided interests in the Trust.
WITNESSETH:
WHEREAS, the Company wishes to purchase the six Boeing 737-3TO
aircraft and four McDonnell Douglas DC-9-82 aircraft listed in Schedule I hereto
(the "Aircraft") and to finance the purchase price of each such Aircraft through
the issuance pursuant to an Indenture, on a recourse basis, of four series of
Equipment Notes relating to such Aircraft;
WHEREAS, the Trustee, upon execution and delivery of this Agreement,
hereby declares the creation of the Trust for the benefit of the
Certificateholders, and the initial Certificateholders, as the grantors of the
Trust, by their respective acceptances of the Certificates, join in the creation
of this Trust with the Trustee;
WHEREAS, all Certificates to be issued by the Trust will evidence
fractional undivided interests in the Trust and will convey no rights, benefits
or interests in respect of any property other than the Trust Property;
WHEREAS, pursuant to the terms and conditions of this Agreement and
each of the Financing Agreements to be entered into by the Trustee
simultaneously with the execution and delivery of this Agreement, the Trustee on
behalf of the Trust shall purchase one or more issues of Equipment Notes having
the same interest rate as, and final maturity dates not later than the final
Regular Distribution Date of, the Certificates issued hereunder and, subject to
the Intercreditor Agreement, shall hold such Equipment Notes in trust for the
benefit of the Certificateholders;
WHEREAS, to facilitate the sale of Equipment Notes to, and the
purchase of Equipment Notes by, the Trustee on behalf of
8
-2-
the Trust, the Company has duly authorized the execution and delivery of this
Agreement as the "issuer", as such term is defined in and solely for purposes of
the Securities Act, of the Certificates to be issued pursuant hereto and as the
"obligor", as such term is defined in and solely for purposes of the Trust
Indenture Act of 1939, as amended, with respect to all such Certificates and is
undertaking to perform certain administrative and ministerial duties hereunder
and is also undertaking to pay the ongoing fees and expenses of the Trustee;
WHEREAS, all of the conditions and requirements necessary to make
this Agreement, when duly executed and delivered, a valid, binding and legal
instrument, enforceable in accordance with its terms and for the purposes herein
expressed, have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof have been in
all respects duly authorized; and
WHEREAS, upon issuance of the Exchange Certificates, if any, or the
effectiveness of the Shelf Registration Statement, this Agreement, as amended or
supplemented from time to time, will be subject to the provisions of the Trust
Indenture Act of 1939, and shall, to the extent applicable, be governed by such
provisions;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of other good and valuable consideration the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms used in this Agreement, including in the recitals to
this Agreement, that are defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference
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therein, or by the rules promulgated under the Trust Indenture Act, have
the meanings assigned to them therein;
(3) all references in this Agreement to designated "Articles",
"Sections", "Subsections" and other subdivisions are to the designated
Articles, Sections, Subsections and other subdivisions of this Agreement;
(4) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any
particular Article, Section, Subsection or other subdivision; and
(5) unless the context otherwise requires, whenever the words
"including", "include" or "includes" are used herein, it shall be deemed
to be followed by the phrase "without limitation".
Affiliate: Means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such Person, provided, however, that
neither America West Airlines, Inc. nor any of its subsidiaries shall be
deemed to be an "Affiliate" of the Company for purposes of this Agreement.
For the purposes of this definition, "control" means the power, directly
or indirectly, to direct the management and policies of such Person,
whether through the ownership of voting securities or by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
Agent Members: Has the meaning specified in Section 3.05.
Agreement: Has the meaning specified in the initial paragraph
hereto.
Aircraft: Has the meaning specified in the first recital to this
Agreement.
Authorized Agent: Means any Paying Agent or Registrar for the
Certificates.
Avoidable Tax: Means a state or local tax (i) upon (w) the Trust,
(x) the Trust Property, (y) Certificateholders or (z) the Trustee for
which the Trustee is entitled to seek
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reimbursement from the Trust Property, and (ii) which would be avoided if
the Trustee were located in another state, or jurisdiction within a state,
within the United States. A tax shall not be an Avoidable Tax if the
Company shall agree to pay, and shall pay, such tax.
Boeing: Means The Boeing Company.
Business Day: Means any day other than a Saturday, a Sunday or a day
on which commercial banks are required or authorized to close in Houston,
Texas, New York, New York, Salt Lake City, Utah or, so long as any
Certificate is outstanding, the city and state in which the Trustee or any
Loan Trustee maintains its Corporate Trust Office or receives and
disburses funds.
Cedel: Means Cedel Bank societe anonyme.
Certificate: Means any one of the Initial Certificates or Exchange
Certificates and any such Certificates issued in exchange therefor or
replacement thereof pursuant to this Agreement.
Certificate Account: Means the account or accounts created and
maintained pursuant to Section 4.01(a).
Certificateholder or Holder: Means the Person in whose name a
Certificate is registered in the Register.
Company: Means Continental Airlines, Inc., a Delaware corporation,
or its successor in interest pursuant to Section 5.02, or (only in the
context of provisions hereof, if any, where such reference is required for
purposes of compliance with the Trust Indenture Act) any other "obligor"
(within the meaning of the Trust Indenture Act) with respect to the
Certificates.
Controlling Party: Has the meaning specified in the Intercreditor
Agreement.
Corporate Trust Office: With respect to the Trustee, the Second
Mortgagee or any Loan Trustee, means the office of such trustee in the
city at which at any particular time its corporate trust business shall be
principally administered.
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Cut-off Date: Means August 31, 1997.
Definitive Certificates: Has the meaning specified in Section
3.01(e).
Direction: Has the meaning specified in Section 1.04(a).
Distribution Date: Means any Regular Distribution Date or Special
Distribution Date as the context requires.
DTC: Means The Depository Trust Company, its nominees and their
respective successors.
Equipment Notes: Means the equipment notes issued under the
Indentures.
ERISA: Means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor federal statute.
ERISA Legend: Has the meaning specified in Section 3.12.
Escrow Account: Has the meaning specified in Section 2.01(b).
Escrowed Funds: Has the meaning specified in Section 2.01(b).
Euroclear: Means the Euroclear System.
Event of Default: Means an Indenture Default under any Indenture
pursuant to which Equipment Notes held by the Trust were issued.
Exchange Certificates: Means the pass through certificates
substantially in the form of Exhibit A hereto issued in exchange for the
Initial Certificates pursuant to the Registration Rights Agreement and
authenticated hereunder.
Exchange Offer: Means the exchange offer which may be made pursuant
to the Registration Rights Agreement to exchange Initial Certificates for
Exchange Certificates.
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Exchange Offer Registration Statement: Means the registration
statement that, pursuant to the Registration Rights Agreement, is filed by
the Company with the SEC with respect to the exchange of Initial
Certificates for Exchange Certificates.
Final Maturity Date: Means December 30, 2006.
Financing Agreements: Means each of the ten separate Participation
Agreements relating to the Aircraft each dated the date hereof, among the
Company, the Pass Through Trustee, the Other Trustees, the relevant Loan
Trustee, the Second Mortgagee and the Subordination Agent providing for,
among other things, the purchase of Equipment Notes by the Trustee on
behalf of the Trust, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
Financing Documents: With respect to any Equipment Note, means the
related Indenture, the Second Mortgage and the related Financing
Agreement.
Fractional Undivided Interest: Means the fractional undivided
interest in the Trust that is evidenced by a Certificate.
Global Certificates: Has the meaning specified in Section 3.01(d).
Global Exchange Certificate: Has the meaning specified in Section
3.01(f).
Indenture: Means each of the ten separate trust indentures and
mortgages relating to the Aircraft, in each case as the same may be
amended, supplemented or otherwise modified from time to time in
accordance with its terms.
Indenture Default: With respect to any Indenture, means any Event of
Default (as such term is defined in such Indenture).
Initial Certificates: Means the certificates issued and
authenticated hereunder substantially in the form of Exhibit A hereto
other than the Exchange Certificates.
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Initial Purchasers: Means, collectively, Credit Suisse First Boston
Corporation and Morgan Stanley & Co. Incorporated.
Institutional Accredited Investor: Means an institutional investor
that is an "accredited investor" within the meaning set forth in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act.
Intercreditor Agreement: Means the Intercreditor Agreement dated as
of June 25, 1997 among the Trustee, the Other Trustees, the Liquidity
Provider, the liquidity providers relating to the Certificates issued
under (and as defined in) each of the Other Pass Through Trust Agreements,
and Wilmington Trust Company, as Subordination Agent and as trustee
thereunder, as amended, supplemented or otherwise modified from time to
time in accordance with its terms.
Issuance Date: Means the date of the issuance of the Initial
Certificates.
Liquidity Facility: Means, initially, the Revolving Credit Agreement
dated as of June 25, 1997 relating to the Certificates, between the
Liquidity Provider and the Subordination Agent, as agent and trustee for
the Trustee, and, from and after the replacement of such Agreement
pursuant to the Intercreditor Agreement, the replacement liquidity
facility (or facilities) therefor, in each case as amended, supplemented
or otherwise modified from time to time in accordance with its terms.
Liquidity Provider: Means, initially, Kredietbank N.V., acting
through its New York Branch, and any replacement or successor therefor
appointed in accordance with the Intercreditor Agreement.
Loan Trustee: With respect to any Equipment Note or the Indenture
applicable thereto, means the bank or trust company designated as
mortgagee under such Indenture, together with any successor to such
mortgagee appointed pursuant thereto.
McDonnell Douglas: Means the McDonnell Douglas Corporation.
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Non-U.S. Person: Means a Person that is not a "U.S. person", as
defined in Regulation S.
Officer's Certificate: Means a certificate signed, (a) in the case
of the Company, by (i) the Chairman or Vice Chairman of the Board of
Directors, the President, any Executive Vice President, any Senior Vice
President or the Treasurer of the Company, signing alone, or (ii) any Vice
President of the Company signing together with the Secretary, the
Assistant Secretary, the Treasurer or any Assistant Treasurer of the
Company, (b) in the case of a Loan Trustee, a Responsible Officer of such
Loan Trustee or (c) in the case of a Second Mortgagee, a Responsible
Officer of such Second Mortgagee.
Opinion of Counsel: Means a written opinion of legal counsel who (a)
in the case of counsel for the Company may be (i) a senior attorney of the
Company one of whose principal duties is furnishing advice as to legal
matters, (ii) Hughes Hubbard & Reed LLP, or (iii) such other counsel
designated by the Company and reasonably acceptable to the Trustee and (b)
in the case of counsel for any Loan Trustee or Second Mortgagee may be
such counsel as may be designated by any of them whether or not such
counsel is an employee of any of them, and who shall be reasonably
acceptable to the Trustee.
Other Pass Through Trust Agreements: Means each of the three other
Continental Airlines 1997-2 Pass Through Trust Agreements relating to
Continental Airlines Pass Through Trust, Series 1997-2A, Continental
Airlines Pass Through Trust, Series 1997-2C and Continental Airlines Pass
Through Trust, Series 1997-2D, dated the date hereof.
Other Trustees: Means the trustees under the Other Pass Through
Trust Agreements, and any successor or other trustee appointed as provided
therein.
Outstanding: When used with respect to Certificates, means, as of
the date of determination, all Certificates theretofore authenticated and
delivered under this Agreement, except:
(i) Certificates theretofore canceled by the Registrar or
delivered to the Trustee or the Registrar for cancellation;
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(ii) Certificates for which money in the full amount required
to make the final distribution with respect to such Certificates
pursuant to Section 11.01 hereof has been theretofore deposited with
the Trustee in trust for the Holders of such Certificates as
provided in Section 4.01 pending distribution of such money to such
Certificateholders pursuant to payment of such final distribution;
and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been authenticated and delivered pursuant to this
Agreement.
Paying Agent: Means the paying agent maintained and appointed for
the Certificates pursuant to Section 7.12.
Permitted Investments: Means obligations of the United States of
America or agencies or instrumentalities thereof for the payment of which
the full faith and credit of the United States of America is pledged,
maturing in not more than 60 days after the date of acquisition thereof or
such lesser time as is required for the distribution of any Special
Payments on a Special Distribution Date.
Person: Means any person, including any individual, corporation,
limited liability company, partnership, joint venture, association,
joint-stock company, trust, trustee, unincorporated organization, or
government or any agency or political subdivision thereof.
Plan Transferee: Means any Plan or any entity that is using the
assets of any Plan to purchase or hold its interest in a Certificate. For
purposes of this definition, a "Plan" means any employee benefit plan
subject to ERISA as well as any plan that is not subject to ERISA but
which is subject to Section 4975 of the Internal Revenue Code of 1986, as
amended.
Pool Balance: Means, as of any date, (i) the original aggregate face
amount of the Certificates less (ii) the aggregate amount of all payments
made in respect of such Certificates other than payments made in respect
of interest or premium thereon or reimbursement of any costs or expenses
incurred in connection therewith. The Pool Balance as of any Distribution
Date shall be computed after giving effect to the payment of principal, if
any, on the Equipment Notes
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or other Trust Property held in the Trust and the distribution thereof to
be made on such Distribution Date.
Pool Factor: Means, as of any date, the quotient (rounded to the
seventh decimal place) computed by dividing (i) the Pool Balance as at
such date by (ii) the original aggregate face amount of the Certificates.
The Pool Factor as of any Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes or
other Trust Property held in the Trust and the distribution thereof to be
made on such Distribution Date.
Postponed Notes: Means any Equipment Notes to be held in the Trust
as to which a Postponement Notice shall have been delivered pursuant to
Section 2.01(b).
Postponement Notice: Means an Officer's Certificate of the Company
(1) requesting that the Trustee temporarily postpone the purchase pursuant
to one or more of the Financing Agreements of certain of the Equipment
Notes to a date which is later than the Issuance Date, (2) identifying the
amount of the purchase price of each such Equipment Note and the aggregate
purchase price for all such Equipment Notes and (3) with respect to each
such Equipment Note, either (a) setting or resetting a new Transfer Date
for payment by the Trustee of such purchase price and issuance of the
related Equipment Note (subject to subsequent change from time to time in
accordance with the relevant Financing Agreement), or (b) indicating that
such new Transfer Date (which shall be on or prior to the Cut-off Date)
will be set by subsequent written notice not less than one Business Day
prior to such new Transfer Date (subject to subsequent change from time to
time in accordance with the relevant Financing Agreement).
PTC Event of Default: Means any failure to pay within 10 Business
Days of the due date thereof: (i) the outstanding Pool Balance on the
Final Maturity Date or (ii) interest due on the Certificates on any
Distribution Date (unless the Subordination Agent shall have made an
Interest Drawing or Drawings (as defined in the Intercreditor Agreement),
or a withdrawal or withdrawals pursuant to section 3.6(f) of the
Intercreditor Agreement, with respect thereto in an aggregate amount
sufficient to pay such
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interest and shall have distributed such amount to the Trustee).
Purchase Agreement: Means the Purchase Agreement dated June 17, 1997
among the Initial Purchasers and the Company, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
its terms.
QIB: Means a qualified institutional buyer as defined in Rule 144A.
Record Date: Means (i) for Scheduled Payments to be distributed on
any Regular Distribution Date, other than the final distribution, the 15th
day (whether or not a Business Day) preceding such Regular Distribution
Date, and (ii) for Special Payments to be distributed on any Special
Distribution Date, other than the final distribution, the 15th day
(whether or not a Business Day) preceding such Special Distribution Date.
Register and Registrar: Mean the register maintained and the
registrar appointed pursuant to Sections 3.04 and 7.12.
Registration Event: Means the declaration of the effectiveness by
the SEC of the Exchange Offer Registration Statement or the Shelf
Registration Statement.
Registration Rights Agreement: Means the Exchange and Registration
Rights Agreement dated as of June 25, 1997, among the Initial Purchasers,
the Trustee, the Other Trustees and the Company, as amended, supplemented
or otherwise modified from time to time in accordance with its terms.
Regular Distribution Date: With respect to distributions of
Scheduled Payments in respect of the Certificates, means each date
designated as a Regular Distribution Date in the Certificates issued
pursuant to this Agreement, until payment of all the Scheduled Payments to
be made under the Equipment Notes held in the Trust have been made;
provided, however, that, if any such day shall not be a Business Day, the
related distribution shall be made on the next succeeding Business Day
without additional interest.
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Regulation S: Means Regulation S under the Securities Act or any
successor regulation thereto.
Regulation S Definitive Certificates: Has the meaning specified in
Section 3.01(e).
Regulation S Global Certificates: Has the meaning specified in
Section 3.01(d).
Responsible Officer: With respect to the Trustee, the Second
Mortgagee and any Loan Trustee, means any officer in the Corporate Trust
Office of the Trustee, Second Mortgagee or Loan Trustee or any other
officer customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of his knowledge of and
familiarity with a particular subject.
Restricted Definitive Certificates: Has the meaning specified in
Section 3.01(e).
Restricted Global Certificate: Has the meaning specified in Section
3.01(c).
Restricted Legend: Has the meaning specified in Section 3.02.
Restricted Period: Has the meaning specified in Section 3.01(d).
Rule 144A: Means Rule 144A under the Securities Act and any
successor rule thereto.
Scheduled Payment: With respect to any Equipment Note, means (i) any
payment of principal or interest on such Equipment Note (other than any
such payment which is not in fact received by the Subordination Agent
within five days of the date on which such payment is scheduled to be
made) due from the obligor thereon or (ii) any payment of interest on the
Certificates with funds drawn under the Liquidity Facility, which payment
represents the installment of principal at the stated maturity of such
installment of principal on such Equipment Note, the payment of regularly
scheduled interest accrued on the unpaid principal amount of such
Equipment Note, or both; provided that any payment of principal, premium,
if any, or interest resulting from the
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redemption or purchase of any Equipment Note shall not constitute a
Scheduled Payment.
SEC: Means the Securities and Exchange Commission, as from time to
time constituted or created under the United States Securities Exchange
Act of 1934, as amended, or, if at any time after the execution of this
instrument such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing
such duties on such date.
Second Mortgage: Means the Second Trust Indenture and Mortgage dated
as of the date hereof between the Company and the Loan Trustees.
Second Mortgagee: Means the bank or trust company designated as
second mortgagee under the Second Mortgage together with any successor to
such second mortgagee appointed pursuant thereto.
Securities Act: Means the United States Securities Act of 1933, as
amended from time to time, or any successor thereto.
Shelf Registration Statement: Means the shelf registration statement
which may be required to be filed by the Company with the SEC pursuant to
any Registration Rights Agreement, other than an Exchange Offer
Registration Statement.
Special Distribution Date: Means each date on which a Special
Payment is to be distributed as specified in this Agreement; provided,
however, that, if any such day shall not be a Business Day, the related
distribution shall be made on the next succeeding Business Day without
additional interest.
Special Payment: Means (i) any payment (other than a Scheduled
Payment) in respect of, or any proceeds of, any Equipment Note, the
Collateral (as defined in each Indenture) or the Collateral (as defined in
the Second Mortgage), (ii) the amounts required to be distributed pursuant
to the last paragraph of Section 2.01(b) or (iii) the amounts required to
be distributed pursuant to the penultimate paragraph of Section 2.01(b).
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Special Payments Account: Means the account or accounts created and
maintained pursuant to Section 4.01(b).
Specified Investments: Means, with respect to investments to be made
with Escrowed Funds pursuant to Section 2.01(b) hereof, (i) obligations
of, or guaranteed by, the United States Government or agencies thereof,
(ii) open market commercial paper of any corporation incorporated under
the laws of the United States of America or any State thereof rated at
least P-2 or its equivalent by Moody's Investors Service, Inc. or at least
A-2 or its equivalent by Standard & Poor's Ratings Group, (iii)
certificates of deposit issued by commercial banks organized under the
laws of the United States or of any political subdivision thereof having a
combined capital and surplus in excess of $100,000,000, which banks or
their holding companies have a short-term deposit rating of Pl by Moody's
Investors Service, Inc. or its equivalent by Standard & Poor's Ratings
Group; provided, however, that the aggregate amount at any one time so
invested in certificates of deposit issued by any one bank shall not
exceed 5% of such bank's capital and surplus, (iv) U.S. dollar denominated
offshore certificates of deposit issued by, or offshore time deposits
with, any commercial bank described in clause (iii) above or any
subsidiary thereof and (v) repurchase agreements with any financial
institution having combined capital and surplus of at least $100,000,000
with respect to any of the obligations described in clauses (i) through
(iv) above as collateral; provided further that if all of the above
investments are unavailable, all amounts to be invested may be used to
purchase Federal Funds from an entity described in clause (iii) above.
Subordination Agent: Has the meaning specified in the Intercreditor
Agreement.
Transfer Date: Has the meaning assigned to the term "Closing Date"
in each Financing Agreement (as such "Closing Date" may be changed from
time to time in accordance with the terms of such Financing Agreement).
Triggering Event: Has the meaning assigned to such term in the
Intercreditor Agreement.
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Trust: Means the trust created by this Agreement, the estate of
which consists of the Trust Property.
Trust Indenture Act: Means the United States Trust Indenture Act of
1939, as amended from time to time, or any successor thereto.
Trust Property: Means (i) subject to the Intercreditor Agreement,
the Equipment Notes held as the property of the Trust and all monies at
any time paid thereon and all monies due and to become due thereunder,
(ii) funds from time to time deposited in the Escrow Account, the
Certificate Account and the Special Payments Account and, subject to the
Intercreditor Agreement, any proceeds from the sale by the Trustee
pursuant to Article VI hereof of any such Equipment Note and (iii) all
rights of the Trust and the Trustee, on behalf of the Trust, under the
Intercreditor Agreement and the Liquidity Facility, including, without
limitation, all rights to receive certain payments thereunder, and all
monies paid to the Trustee on behalf of the Trust pursuant to the
Intercreditor Agreement or the Liquidity Facility.
Trustee: Means Wilmington Trust Company, or its successor in
interest, and any successor or other trustee appointed as provided herein.
Trustee's Lien: Has the meaning specified in Section 7.17.
Section 1.02. Compliance Certificates and Opinions. Upon any
application or request (except with respect to matters set forth in Article II)
by the Company, any Loan Trustee or the Second Mortgagee to the Trustee to take
any action under any provision of this Agreement, the Company, such Loan Trustee
or such Second Mortgagee, as the case may be, shall furnish to the Trustee (i)
an Officer's Certificate stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Agreement relating to the
proposed action have been complied with and (ii) an Opinion of Counsel stating
that in the opinion of such counsel all such conditions precedent, if any, have
been complied with, except that in the case of any such application or request
as to which the furnishing of such documents is specifically required by any
provision of this Agreement relating to such particular application or request,
no additional certificate or opinion need be furnished.
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Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement (other than a certificate
provided pursuant to Section 8.04(e)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Agreement relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters and any such Person may certify or give an opinion as to
such matters in one or several documents.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement or, in respect of the Certificates, this
Agreement, they may, but need not, be consolidated and form one instrument.
Section 1.04. Directions of Certificateholders. (a) Any direction,
consent, request, demand, authorization, notice, waiver or other action provided
by this Agreement to be given or taken by Certificateholders (a "Direction") may
be embodied in and evidenced by one or more instruments of
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substantially similar tenor signed by such Certificateholders in person or by an
agent or proxy duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee and, where it is hereby expressly
required pursuant to this Agreement, to the Company, any Loan Trustee or the
Second Mortgagee. Proof of execution of any such instrument or of a writing
appointing any such agent or proxy shall be sufficient for any purpose of this
Agreement and conclusive in favor of the Trustee, the Company, any Loan Trustee
and the Second Mortgagee, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or such other officer and where such execution is by
an officer of a corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other reasonable manner
which the Trustee deems sufficient.
(c) In determining whether the Certificateholders of the requisite
Fractional Undivided Interests of Certificates Outstanding have given any
Direction under this Agreement, Certificates owned by the Company or any
Affiliate thereof shall be disregarded and deemed not to be Outstanding for
purposes of any such determination. In determining whether the Trustee shall be
protected in relying upon any such Direction, only Certificates which the
Trustee knows to be so owned shall be so disregarded. Notwithstanding the
foregoing, (i) if any such Person owns 100% of the Certificates Outstanding,
such Certificates shall not be so disregarded, and (ii) if any amount of
Certificates so owned by any such Person have been pledged in good faith, such
Certificates shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to such
Certificates and that the pledgee is not the Company or any Affiliate thereof.
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(d) For all purposes of this Agreement, all Initial Certificates and
all Exchange Certificates shall vote and take all other actions of
Certificateholders together as one series of Certificates.
(e) The Company may at its option, by delivery of an Officer's
Certificate to the Trustee, set a record date to determine the
Certificateholders entitled to give any Direction. Notwithstanding Section
316(c) of the Trust Indenture Act, such record date shall be the record date
specified in such Officer's Certificate, which shall be a date not more than 30
days prior to the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such Direction may be given before or
after such record date, but only the Certificateholders of record at the close
of business on such record date shall be deemed to be Certificateholders for the
purposes of determining whether Certificateholders of the requisite proportion
of Outstanding Certificates have authorized or agreed or consented to such
Direction, and for that purpose the Outstanding Certificates shall be computed
as of such record date; provided that no such Direction by the
Certificateholders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Agreement not later than one
year after such record date.
(f) Any Direction by the Holder of any Certificate shall bind the
Holder of every Certificate issued upon the transfer thereof or in exchange
therefor or in lieu thereof, whether or not notation of such Direction is made
upon such Certificate.
(g) Except as otherwise provided in Section 1.04(c), Certificates
owned by or pledged to any Person shall have an equal and proportionate benefit
under the provisions of this Agreement, without preference, priority, or
distinction as among all of the Certificates.
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Issuance of Certificates; Acquisition of Equipment
Notes. (a) The Trustee is hereby directed (i) to execute and deliver the
Intercreditor Agreement, the Registration Rights Agreement and each of the
Financing Agreements on or prior
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to the Issuance Date, each in the form delivered to the Trustee by the Company,
and (ii) subject to the respective terms thereof, to perform its obligations
thereunder. Upon request of the Company and the satisfaction or waiver of the
closing conditions specified in the Purchase Agreement, the Trustee shall
execute, deliver, authenticate, issue and sell Initial Certificates in
authorized denominations equaling in the aggregate the amount set forth, with
respect to the Certificates, in Schedule II to the Purchase Agreement evidencing
the entire ownership interest in the Trust, which amount equals the maximum
aggregate principal amount of Equipment Notes which may be purchased by the
Trustee pursuant to the Financing Agreements. On the Issuance Date, the Trustee
shall purchase, pursuant to the terms and conditions of the Financing
Agreements, the Equipment Notes (other than the Postponed Notes) contemplated to
be purchased by the Trustee under the Financing Agreements at a purchase price
equal to the consideration so received for the Certificates (less the aggregate
amount of any Escrowed Funds). Except as provided in Sections 3.04, 3.05, 3.06,
3.07 and 3.10 hereof, the Trustee shall not execute, authenticate or deliver
Certificates in excess of the aggregate amount specified in this paragraph.
(b) On or prior to the Issuance Date, the Company may deliver to the
Trustee a Postponement Notice relating to one or more Postponed Notes. The
Trustee shall postpone the purchase of the Postponed Notes from the
consideration received from the sale of Certificates and shall promptly deposit
funds in an amount equal to the purchase price of such Postponed Notes (the
"Escrowed Funds") into an escrow account (the "Escrow Account") with the Trustee
to be maintained as a part of the Trust. The portion of Escrowed Funds so
deposited with respect to any particular Postponed Notes shall be invested by
the Trustee at the direction and risk of the Company in Specified Investments
(i) maturing no later than any scheduled Transfer Date relating to such
Postponed Notes or (ii) if no such Transfer Date has been scheduled, maturing on
the next Business Day, or (iii) if the Company has given notice to the Trustee
that such Postponed Notes will not be issued, maturing on the next applicable
Special Distribution Date, if such investments are reasonably available for
purchase. The Trustee shall make withdrawals from the Escrow Account only as
provided in this Agreement. Upon request of the Company on one or more occasions
and the satisfaction or waiver of the closing conditions specified in the
applicable Financing Agreement on or prior to the Cut-off Date, the Trustee
shall purchase the applicable Postponed Notes with Escrowed Funds
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withdrawn from the Escrow Account. The purchase price shall equal the principal
amount of such Postponed Notes.
The Trustee shall hold all Specified Investments until the maturity
thereof and will not sell or otherwise transfer Specified Investments. If
Specified Investments held in an Escrow Account mature prior to any applicable
Transfer Date, any proceeds received on the maturity of such Specified
Investments (including any earnings thereon) shall be reinvested by the Trustee
at the direction and risk of the Company in Specified Investments maturing as
provided in the preceding paragraph. The Company shall pay to the Trustee for
deposit to the Escrow Account an amount equal to any losses on such Specified
Investments as incurred.
On the initial Regular Distribution Date, the Company will pay (in
immediately available funds) to the Trustee an amount equal to (i) the sum of
(A) the interest that would have accrued, at a rate equal to the interest rate
applicable to the Certificates, on any Postponed Notes purchased on or prior to
the Cut-Off Date if such Postponed Notes had been issued on the Issuance Date,
from and including the Issuance Date to but excluding the date of such purchase,
and (B) the interest that would have accrued, at a rate equal to the interest
rate applicable to the Certificates, on any Postponed Notes not purchased on or
prior to the Cut-Off Date (other than any Postponed Notes for which a Special
Distribution Date specified in either of the two immediately succeeding
paragraphs has occurred on or prior to the initial Regular Distribution Date) if
such Postponed Notes had been issued on the Issuance Date, from and including
the Issuance Date to but excluding the initial Regular Distribution Date, minus
(ii) the earnings on Specified Investments received (with respect to the portion
of the Escrow Funds deposited with respect to the Postponed Notes described in
sub-clauses (A) and (B) of clause (i) of this paragraph) by the Trustee from and
including the Issuance Date to but excluding the initial Regular Distribution
Date.
If the Company notifies the Trustee prior to the Cut-off Date that
any Postponed Notes will not be issued on or prior to the Cut-off Date for any
reason, on the next Special Distribution Date established pursuant to Section
4.02(c) for the distribution to the Certificateholders of Escrowed Funds with
respect to the Postponed Notes designated in such notice (i) the Company shall
pay to the Trustee for deposit in the Special
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Payments Account, in immediately available funds, an amount equal to (A) the
interest that would have accrued, on the Postponed Notes designated in such
notice, at a rate equal to the interest rate applicable to the Certificates from
and including the Issuance Date (if such Special Distribution Date shall occur
on or prior to the initial Regular Distribution Date) or the initial Regular
Distribution Date (if such Special Distribution Date occurs after the initial
Regular Distribution Date) to but excluding such Special Distribution Date,
minus (B) the earnings on Specified Investments received (with respect to the
portion of the Escrowed Funds deposited with respect to the Postponed Notes
designated in such notice) by the Trustee from and including the Issuance Date
(if such Special Distribution Date shall occur on or prior to the initial
Regular Distribution Date) or the initial Regular Distribution Date (if such
Special Distribution Date occurs after the initial Regular Distribution Date) to
but excluding such Special Distribution Date and (ii) the Trustee shall transfer
an amount equal to that amount of Escrowed Funds that would have been used to
purchase the Postponed Notes designated in such notice (together with the
earnings described in clause (i)(B) of this paragraph above) plus the amount
paid by the Company pursuant to clause (i) of this paragraph to the Special
Payments Account for distribution as a Special Payment in accordance with the
provisions hereof.
If, on the Cut-off Date, an amount equal to less than all of the
initial Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) has been used to purchase Postponed Notes, on the Special
Distribution Date established pursuant to Section 4.02(c) for the distribution
to the Certificateholders of Escrowed Funds with respect to all of the Postponed
Notes that have not been purchased on or prior to the Cut-off Date (other than
any Postponed Notes referred to in the immediately preceding paragraph) (i) the
Company shall pay to the Trustee for deposit in the Special Payments Account, in
immediately available funds, an amount equal to (A) the interest that would have
accrued on Postponed Notes originally contemplated to be purchased with such
unused Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) but not so purchased at a rate equal to the interest rate
applicable to the Certificates from and including the Issuance Date (if such
Special Distribution Date shall occur on or prior to the initial Regular
Distribution Date) or the initial Regular Distribution Date (if such Special
Distribution Date occurs after the initial Regular Distribution Date) to but
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excluding such Special Distribution Date, minus (B) the earnings on Specified
Investments received (with respect to the portion of the Escrowed Funds
deposited with respect to the Postponed Notes described in this paragraph) by
the Trustee from and including the Issuance Date (if such Special Distribution
Date shall occur on or prior to the initial Regular Distribution Date) or the
initial Regular Distribution Date (if such Special Distribution Date occurs
after the initial Regular Distribution Date) to but excluding such Special
Distribution Date and (ii) the Trustee shall transfer such unused Escrowed Funds
(together with the earnings described in clause (i)(B) of this paragraph above)
and the amount paid by the Company pursuant to the clause (i) of this paragraph
to the Special Payments Account for distribution as a Special Payment in
accordance with the provisions hereof.
Section 2.02. Acceptance by Trustee. The Trustee, upon the execution
and delivery of this Agreement, acknowledges its acceptance of all right, title
and interest in and to the Trust Property and declares that the Trustee holds
and will hold such right, title and interest for the benefit of all then present
and future Certificateholders, upon the trusts herein set forth. Subject to
Section 7.14, the Trustee shall take all actions reasonably necessary to effect
the registration of all of the Equipment Notes acquired by the Trust in the name
of the Subordination Agent. By its payment for and acceptance of each
Certificate issued to it under this Agreement, each initial Certificateholder as
grantor of the Trust thereby joins in the creation and declaration of the Trust.
Section 2.03. Limitation of Powers. The Trust is constituted solely
for the purpose of making the investment in the Equipment Notes to be held in
the Trust, and, except as set forth herein, the Trustee shall not be authorized
or empowered to acquire any other investments or engage in any other activities
and, in particular, the Trustee shall not be authorized or empowered to do
anything that would cause such Trust to fail to qualify as a "grantor trust" for
federal income tax purposes (including as subject to this restriction, acquiring
any Aircraft (as defined in the respective Indentures) by bidding such Equipment
Notes or otherwise, or taking any action with respect to any such Aircraft once
acquired).
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ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and Execution of
Certificates. (a) The Initial Certificates shall be known as the "7.149% Initial
Pass Through Certificates, Series 1997-2B" and the Exchange Certificates shall
be known as the "7.149% Exchange Pass Through Certificates, Series 1997-2B", in
each case, of the Trust. Each Certificate will represent a fractional undivided
interest in the Trust and shall be substantially in the form set forth as
Exhibit A hereto, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Agreement and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
Trustee or the officers executing such Certificates, as evidenced by the
Trustee's or officer's execution of the Certificates.
(b) The Initial Certificates shall be issued only in fully
registered form without coupons and only in denominations of $100,000 or
integral multiples of $1,000 in excess thereof, except that one Certificate may
be issued in a different denomination. The Exchange Certificates will be issued
in denominations of $1,000 or integral multiples thereof, except that one
Certificate may be issued in a different denomination. Each Certificate shall be
dated the date of its authentication. The aggregate Fractional Undivided
Interest of Certificates shall not at any time exceed $25,563,000.
(c) The Initial Certificates offered and sold in reliance on Rule
144A shall be issued in the form of one or more global Certificates
substantially in the form of Exhibit A hereto with such applicable legends as
are provided for in Section 3.02 (each a "Restricted Global Certificate") duly
executed and authenticated by the Trustee as hereinafter provided. Such
Restricted Global Certificates shall be in registered form and be registered in
the name of DTC and deposited with the Trustee, at its Corporate Trust Office,
as custodian for DTC. The aggregate principal amount of any Restricted Global
Certificate may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for DTC for such Restricted Global
Certificate, as provided in Section 3.06 hereof, which
30
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adjustments shall be conclusive as to the aggregate principal amount of any such
Global Certificate.
(d) The Initial Certificates offered and sold outside the United
States in reliance on Regulation S shall be issued in the form of one or more
global Certificates substantially in the form of Exhibit A hereto (each a
"Regulation S Global Certificate") duly executed and authenticated by the
Trustee as hereinafter provided. Such Regulation S Global Certificates shall be
in registered form and be registered in the name of DTC and deposited with the
Trustee, at its Corporate Trust Office, as custodian for DTC, for credit
initially and during the Restricted Period (hereinafter defined) to the
respective accounts of beneficial owners of such Certificates (or to such other
accounts as they may direct) at Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear or Cedel. As used herein, the term
"Restricted Period", with respect to the Regulation S Global Certificates
offered and sold in reliance on Regulation S, means the period of 40 consecutive
days beginning on and including the later of (i) the day on which the
Certificates are first offered to persons other than distributors (as defined in
Regulation S) in reliance on Regulation S and (ii) the date of the closing of
the offering under the Purchase Agreement. The aggregate principal amount of any
Regulation S Global Certificate may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for DTC for such
Global Certificate, as provided in Section 3.06 hereof, which adjustments shall
be conclusive as to the aggregate principal amount of any such Global
Certificate. The Restricted Global Certificate and Regulation S Global
Certificate are sometimes collectively referred to herein as the "Global
Certificates".
(e) Initial Certificates offered and sold to any Institutional
Accredited Investor which is not a QIB in a transaction exempt from registration
under the Securities Act (and other than as described in Section 3.01(d)) shall
be issued substantially in the form of Exhibit A hereto in definitive, fully
registered form without interest coupons with such applicable legends as are
provided for in Section 3.02 (the "Restricted Definitive Certificates") duly
executed and authenticated by the Trustee as hereinafter provided. Certificates
issued pursuant to Section 3.05(b) in exchange for interests in a Regulation S
Global Certificate shall be issued in definitive, fully registered form without
interest coupons (the
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"Regulation S Definitive Certificates"). The Restricted Definitive Certificates
and the Regulation S Definitive Certificates are sometimes collectively referred
to herein as the "Definitive Certificates".
(f) The Exchange Certificates shall be issued in the form of one or
more global Certificates substantially in the form of Exhibit A hereto (each, a
"Global Exchange Certificate"), except that (i) the Restricted Legend
(hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall
contain such appropriate insertions, omissions, substitutions and other
variations from the form set forth in Exhibit A hereto relating to the nature of
the Exchange Certificates as the Responsible Officer of the Trustee executing
such Exchange Certificates on behalf of the Trust may determine, as evidenced by
such officer's execution on behalf of the Trust of such Exchange Certificates.
Such Global Exchange Certificates shall be in registered form and be registered
in the name of DTC and deposited with the Trustee, at its Corporate Trust
Office, as custodian for DTC. The aggregate principal amount of any Global
Exchange Certificate may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for DTC for such
Global Exchange Certificate, which adjustments shall be conclusive as to the
aggregate principal amount of any such Global Exchange Certificate. Subject to
clauses (i) and (ii) of the first sentence of this Section 3.01(f), the terms
hereof applicable to Restricted Global Certificates and/or Global Certificates
shall apply to the Global Exchange Certificates, mutatis mutandis.
(g) The definitive Certificates shall be in registered form and
shall be typed, printed, lithographed or engraved or produced by any combination
of these methods or may be produced in any other manner, all as determined by
the officers executing such Certificates, as evidenced by their execution of
such Certificates.
Section 3.02. Restrictive Legends. All Initial Certificates issued
pursuant to this Agreement for resale pursuant to Rule 144A or offered and sold
to any Institutional Accredited Investor which is not a QIB (including any
Global Certificate issued upon registration of transfer, in exchange for or in
lieu of such Certificates) shall be "Restricted Certificates" and shall bear a
legend to the following effect
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(the "Restricted Legend") unless the Company and the Trustee determine otherwise
consistent with applicable law:
"THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT
IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY
CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH
PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO
CONTINENTAL AIRLINES, INC., (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES
THAT IF IT SHOULD RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE IT WILL
DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
AFFILIATE OF ANY OF SUCH PERSONS, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS
THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE
33
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TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE
FOREGOING RESTRICTIONS."
Each Global Certificate shall bear the following legend on the face
thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS
CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST
AGREEMENT REFERRED TO HEREIN."
Section 3.03. Authentication of Certificates. (a) On the Issuance
Date, the Trustee shall duly execute, authenticate and deliver Initial
Certificates in authorized denominations equaling in the aggregate the amount
set forth, with respect to the Trust, in Schedule II to the Purchase Agreement,
evidencing the entire ownership of the Trust, which amount equals the aggregate
principal amount of Equipment Notes which have been or may be purchased by the
Trustee pursuant to each Financing Agreement. Thereafter, the Trustee shall duly
execute, authenticate and deliver Certificates as herein provided.
(b) No Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose, unless there appears on
such Certificate a certificate of authentication substantially in the form
provided for herein executed by the Trustee by the manual signature of one of
its authorized signatories, and such certificate upon any Certificate
34
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shall be conclusive evidence, and the only evidence, that such Certificate has
been duly authenticated and delivered hereunder.
Section 3.04. Transfer and Exchange. The Trustee shall cause to be
kept at the office or agency to be maintained by it in accordance with the
provisions of Section 7.12 a register (the "Register") of the Certificates in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of such Certificates and of transfers and
exchanges of such Certificates as herein provided. The Trustee shall initially
be the registrar (the "Registrar") for the purpose of registering such
Certificates and transfers and exchanges of such Certificates as herein
provided.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid obligations of the Trust, evidencing the
same interest therein, and entitled to the same benefits under this Agreement,
as the Certificates surrendered upon such registration of transfer or exchange.
A Certificateholder may transfer a Certificate, or request that a
Certificate be exchanged for Certificates (including, without limitation,
subject to the proviso to this sentence, Exchange Certificates) in authorized
denominations and in an aggregate Fractional Undivided Interest equal to the
Fractional Undivided Interest of such Certificate surrendered for exchange of
other authorized denominations, by surrender of such Certificate to the Trustee
with the form of transfer notice thereon duly completed and executed, and
otherwise complying with the terms of this Agreement, including providing
evidence of compliance with any restrictions on transfer, in form satisfactory
to the Trustee and the Registrar; provided that exchanges of Initial
Certificates for Exchange Certificates shall occur only after an Exchange Offer
Registration Statement shall have been declared effective by the SEC (notice of
which shall be provided to the Trustee by the Company) and otherwise only in
accordance with the terms of the Exchange Offer. No such transfer shall be
effected until, and such transferee shall succeed to the rights of a
Certificateholder only upon, final acceptance and registration of the transfer
by the Registrar in the Register. Prior to the registration of any transfer by a
Certificateholder as provided herein, the Trustee shall treat the person in
whose name the Certificate is registered as the owner thereof for all purposes,
and the Trustee shall not be affected by notice to the contrary. Furthermore,
DTC shall, by acceptance
35
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of a Global Certificate, agree that transfers of beneficial interests in such
Global Certificate may be effected only through a book-entry system maintained
by DTC (or its agent) and that ownership of a beneficial interest in the
Certificate shall be required to be reflected in a book-entry. When Certificates
are presented to the Registrar with a request to register the transfer thereof
or to exchange them for other authorized denominations of a Certificate in a
Fractional Undivided Interest equal to the aggregate Fractional Undivided
Interest of Certificates surrendered for exchange, the Registrar shall register
the transfer or make the exchange as requested if its requirements for such
transactions are met.
To permit registrations of transfers and exchanges in accordance
with the terms, conditions and restrictions hereof, the Trustee shall execute,
authenticate and deliver Certificates at the Registrar's request. No service
charge shall be made to a Certificateholder for any registration of transfer or
exchange of Certificates, but the Trustee shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates. All Certificates
surrendered for registration of transfer or exchange shall be canceled and
subsequently destroyed by the Trustee.
Section 3.05. Book-Entry Provisions for Restricted Global
Certificates and Regulation S Global Certificates. (a) Members of, or
participants in, DTC ("Agent Members") shall have no rights under this Agreement
with respect to any Global Certificate held on their behalf by DTC, or the
Trustee as its custodian, and DTC may be treated by the Trustee and any agent of
the Trustee as the absolute owner of such Global Certificate for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Trustee or any agent of the Trustee from giving effect to any written
certification, proxy or other authorization furnished by DTC or shall impair, as
between DTC and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Certificate. Upon the
issuance of any Global Certificate, the Registrar or its duly appointed agent
shall record DTC as the registered holder of such Global Certificate.
(b) Transfers of any Global Certificate shall be limited to
transfers of such Restricted Global Certificate or Regulation S Global
Certificate in whole, but not in part, to
36
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DTC. Beneficial interests in the Restricted Global Certificate and any
Regulation S Global Certificate may be transferred in accordance with the rules
and procedures of DTC and the provisions of Section 3.06. Beneficial interests
in a Restricted Global Certificate or a Regulation S Global Certificate shall be
delivered to all beneficial owners thereof in the form of Restricted Definitive
Certificates or Regulation S Definitive Certificates, as the case may be, if (i)
DTC notifies the Trustee that it is unwilling or unable to continue as
depository for such Restricted Global Certificate or Regulation S Global
Certificate, as the case may be, and a successor depository is not appointed by
the Trustee within 90 days of such notice, and (ii) after the occurrence and
during the continuance of an Event of Default, owners of beneficial interests in
a Global Certificate with Fractional Undivided Interests aggregating not less
than a majority in interest in the Trust advise the Trustee, the Company and DTC
through Agent Members in writing that the continuation of a book-entry system
through DTC or its successor is no longer in their best interests.
(c) Any beneficial interest in one of the Global Certificates that
is transferred to a Person who takes delivery in the form of an interest in
another Global Certificate will, upon such transfer, cease to be an interest in
such Global Certificate and become an interest in the other Global Certificate
and, accordingly, will thereafter be subject to all transfer restrictions, if
any, and other procedures applicable to beneficial interests in such other
Global Certificate for as long as it remains such an interest.
(d) In connection with the transfer of an entire Restricted Global
Certificate or an entire Regulation S Global Certificate to the beneficial
owners thereof pursuant to paragraph (b) of this Section 3.05, such Restricted
Global Certificate or Regulation S Global Certificate, as the case may be, shall
be deemed to be surrendered to the Trustee for cancellation, and the Trustee
shall execute, authenticate and deliver, to each beneficial owner identified by
DTC in exchange for its beneficial interest in such Restricted Global
Certificate or Regulation S Global Certificate, as the case may be, an equal
aggregate principal amount of Restricted Definitive Certificates or Regulation S
Definitive Certificates, as the case may be, of authorized denominations. None
of the Company, the Registrar, the Paying Agent nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
37
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shall be protected in relying on, such registration instructions. Upon the
issuance of Definitive Certificates, the Trustee shall recognize the Person in
whose name the Definitive Certificates are registered in the Register as
Certificateholders hereunder. Neither the Company nor the Trustee shall be
liable if the Trustee or the Company is unable to locate a qualified successor
clearing agency.
(e) Any Definitive Certificate delivered in exchange for an interest
in the Restricted Global Certificate pursuant to paragraph (b) of this Section
3.05 shall, except as otherwise provided by paragraph (e) of Section 3.06, bear
the Restricted Legend.
(f) Prior to the expiration of the Restricted Period, any Regulation
S Definitive Certificate delivered in exchange for an interest in a Regulation S
Global Certificate pursuant to paragraph (b) of this Section shall bear the
Restricted Legend.
(g) The registered holder of any Restricted Global Certificate or
Regulation S Global Certificate may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Agreement or the Certificates.
Section 3.06. Special Transfer Provisions. Unless and until (i) an
Initial Certificate is sold under an effective Shelf Registration Statement, or
(ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to
an effective Exchange Offer Registration Statement, in each case pursuant to the
terms of the Registration Rights Agreement, the following provisions shall apply
to such Initial Certificates:
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration
of any proposed transfer of a Certificate to any Institutional
Accredited Investor which is neither a QIB nor a Non-U.S. Person:
(i) The Registrar shall register the transfer of any
Certificate, whether or not bearing the Restricted Legend, only if
(x) the requested transfer is at least two years after the later of
the original issue date of the Certificates and the last date on
which such Certificate was held by the Company, the Trustee or any
38
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affiliate of any of such Persons or (y) the proposed transferor is
an Initial Purchaser who is transferring Certificates purchased
under the Purchase Agreement and the proposed transferee has
delivered to the Registrar a letter substantially in the form of
Exhibit C hereto and the aggregate principal amount of the
Certificates being transferred is at least $100,000. Except as
provided in the foregoing sentence, the Registrar shall not register
the transfer of any Certificate to any Institutional Accredited
Investor which is neither a QIB nor a Non-U.S. Person.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in a Restricted Global Certificate, upon receipt
by the Registrar of (x) the documents, if any, required by paragraph
(i) and (y) instructions given in accordance with DTC's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date of the transfer and a decrease in the principal
amount of such Restricted Global Certificate in an amount equal to
the principal amount of the beneficial interest in such Restricted
Global Certificate to be transferred, and the Trustee shall execute,
authenticate and deliver to the transferor or at its direction, one
or more Restricted Definitive Certificates of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of an Initial
Certificate to a QIB (excluding Non-U.S. Persons):
(i) If the Certificate to be transferred consists of
Restricted Definitive Certificates, or of an interest in any
Regulation S Global Certificate during the Restricted Period, the
Registrar shall register the transfer if such transfer is being made
by a proposed transferor who has checked the box provided for on the
form of Initial Certificate stating, or has otherwise advised the
Trustee and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Initial
Certificate stating, or has otherwise advised the Trustee and the
Registrar in writing, that it is
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purchasing the Initial Certificate for its own account or an account
with respect to which it exercises sole investment discretion and
that it, or the Person on whose behalf it is acting with respect to
any such account, is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Trust and/or the Company as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) Upon receipt by the Registrar of the documents required
by clause (i) above and instructions given in accordance with DTC's
and the Registrar's procedures therefor, the Registrar shall reflect
on its books and records the date of such transfer and an increase
in the principal amount of a Restricted Global Certificate in an
amount equal to the principal amount of the Restricted Definitive
Certificates or interests in such Regulation S Global Certificate,
as the case may be, being transferred, and the Trustee shall cancel
such Definitive Certificates or decrease the amount of such
Regulation S Global Certificate so transferred.
(c) Transfers of Interests in the Regulation S Global Certificate or
Regulation S Definitive Certificates. After the expiration of the
Restricted Period, the Registrar shall register any transfer of interests
in any Regulation S Global Certificate or Regulation S Definitive
Certificates without requiring any additional certification. Until the
expiration of the Restricted Period, interests in the Regulation S Global
Certificate may only be held through Agent Members acting for and on
behalf of Euroclear and Cedel.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any registration of any transfer of
an Initial Certificate to a Non-U.S. Person:
(i) Prior to the expiration of the Restricted Period, the
Registrar shall register any proposed
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transfer of an Initial Certificate to a Non-U.S. Person upon receipt
of a certificate substantially in the form set forth as Exhibit B
hereto from the proposed transferor.
(ii) After the expiration of the Restricted Period, the
Registrar shall register any proposed transfer to any Non-U.S.
Person if the Certificate to be transferred is a Restricted
Definitive Certificate or an interest in a Restricted Global
Certificate, upon receipt of a certificate substantially in the form
of Exhibit B from the proposed transferor. The Registrar shall
promptly send a copy of such certificate to the Company.
(iii) Upon receipt by the Registrar of (x) the documents, if
any, required by clause (ii) and (y) instructions in accordance with
DTC's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date of such transfer and a decrease in
the principal amount of such Restricted Global Certificate in an
amount equal to the principal amount of the beneficial interest in
such Restricted Global Certificate to be transferred, and, upon
receipt by the Registrar of instructions given in accordance with
DTC's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal
amount of the Regulation S Global Certificate in an amount equal to
the principal amount of the Restricted Definitive Certificate or the
Restricted Global Certificate, as the case may be, to be
transferred, and the Trustee shall cancel the Definitive
Certificate, if any, so transferred or decrease the amount of such
Restricted Global Certificate.
(e) Restricted Legend. Upon the transfer, exchange or replacement of
Certificates not bearing the Restricted Legend, the Registrar shall
deliver Certificates that do not bear the Restricted Legend. Upon the
transfer, exchange or replacement of Certificates bearing the Restricted
Legend, the Registrar shall deliver only Certificates that bear the
Restricted Legend unless either (i) the circumstances contemplated by
paragraph (d)(ii) of this Section 3.06 exist or (ii) there is delivered to
the Registrar an Opinion of
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Counsel to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with
the provisions of the Securities Act.
(f) General. By acceptance of any Certificate bearing the Restricted
Legend, each Holder of such a Certificate acknowledges the restrictions on
transfer of such Certificate set forth in such Restricted Legend and
otherwise in this Agreement and agrees that it will transfer such
Certificate only as provided in such Restricted Legend and otherwise in
this Agreement. The Registrar shall not register a transfer of any
Certificate unless such transfer complies with the restrictions on
transfer, if any, of such Certificate set forth in such Restricted Legend
and otherwise in this Agreement. In connection with any transfer of
Certificates, each Certificateholder agrees by its acceptance of the
Certificates to furnish the Registrar or the Trustee such certifications,
legal opinions or other information as either of them may reasonably
require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration
requirements of the Securities Act and in accordance with the terms and
provisions of this Article III; provided that the Registrar shall not be
required to determine the sufficiency of any such certifications, legal
opinions or other information.
Until such time as no Certificates remain Outstanding, the Registrar
shall retain copies of all letters, notices and other written communications
received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the
Registrar at such time, shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate is surrendered to the Registrar or the Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save each of them
harmless, then, in the absence of notice to the Registrar or the Trustee that
such destroyed, lost or stolen
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Certificate has been acquired by a bona fide purchaser, and provided that the
requirements of Section 8-405 of the Uniform Commercial Code in effect in any
applicable jurisdiction are met, the Trustee shall execute, authenticate and
deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or
stolen Certificate, a new Certificate or Certificates, in authorized
denominations and of like Fractional Undivided Interest and bearing a number not
contemporaneously outstanding.
In connection with the issuance of any new Certificate under this
Section 3.07, the Trustee shall require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 3.07 shall
constitute conclusive evidence of the appropriate Fractional Undivided Interest
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Certificates.
Section 3.08. Persons Deemed Owners. Prior to due presentment of a
Certificate for registration of transfer, the Trustee, the Registrar and any
Paying Agent may treat the Person in whose name any Certificate is registered
(as of the day of determination) as the owner of such Certificate for the
purpose of receiving distributions pursuant to Article IV and for all other
purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent
shall be affected by any notice to the contrary.
Section 3.09. Cancellation. All Certificates surrendered for payment
or transfer or exchange shall, if surrendered to the Trustee or any agent of the
Trustee other than the Registrar, be delivered to the Registrar for cancellation
and shall promptly be canceled by it. No Certificates shall be authenticated in
lieu of or in exchange for any Certificates canceled as provided in this
Section, except as expressly permitted by this Agreement. All canceled
Certificates held by
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the Registrar shall be destroyed and a certification of their destruction
delivered to the Trustee.
Section 3.10. Temporary Certificates. Until definitive Certificates
are ready for delivery, the Trustee shall authenticate temporary Certificates.
Temporary Certificates shall be substantially in the form of definitive
Certificates but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the officers executing the temporary
Certificates, as evidenced by their execution of such temporary Certificates. If
temporary Certificates are issued, the Trustee will cause definitive
Certificates to be prepared without unreasonable delay. After the preparation of
definitive Certificates, the temporary Certificates shall be exchangeable for
definitive Certificates upon surrender of the temporary Certificates at the
office or agency of the Trustee designated for such purpose pursuant to Section
7.12, without charge to the Certificateholder. Upon surrender for cancellation
of any one or more temporary Certificates, the Trustee shall execute,
authenticate and deliver in exchange therefor a like face amount of definitive
Certificates of authorized denominations. Until so exchanged, the temporary
Certificates shall be entitled to the same benefits under this Agreement as
definitive Certificates.
Section 3.11. Limitation of Liability for Payments. All payments and
distributions made to Certificateholders in respect of the Certificates shall be
made only from the Trust Property and only to the extent that the Trustee shall
have sufficient income or proceeds from the Trust Property to make such payments
in accordance with the terms of Article IV of this Agreement. Each
Certificateholder, by its acceptance of a Certificate, agrees that it will look
solely to the income and proceeds from the Trust Property for any payment or
distribution due to such Certificateholder pursuant to the terms of this
Agreement and that it will not have any recourse to the Company, the Trustee,
the Loan Trustees, the Second Mortgagee or the Liquidity Provider, except as
otherwise expressly provided herein or in the Intercreditor Agreement.
The Company is a party to this Agreement solely for purposes of
meeting the requirements of the Trust Indenture Act, and therefore shall not
have any right, obligation or liability hereunder (except as otherwise expressly
provided herein).
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Section 3.12. ERISA Restrictive Legend. All Certificates issued
pursuant to this Agreement shall bear a legend to the following effect (the
"ERISA Legend") unless the Company and the Trustee determine otherwise
consistent with applicable law:
"BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS NOT
A PLAN TRANSFEREE (AS DEFINED IN THE PASS THROUGH TRUST AGREEMENT) OR (B) IT IS
AN INSURANCE COMPANY USING THE ASSETS OF ITS GENERAL ACCOUNT TO ACQUIRE THIS
CERTIFICATE, AND THE CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60
ISSUED BY THE U.S. DEPARTMENT OF LABOR HAVE BEEN AND WILL CONTINUE TO BE
SATISFIED IN CONNECTION WITH ITS PURCHASE AND HOLDING OF THIS CERTIFICATE. THE
PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE
FOREGOING RESTRICTIONS."
Without limitation of Section 3.06(f), by acceptance of any
Certificate bearing the ERISA Legend, each Holder of such a Certificate
acknowledges the restrictions set forth in such ERISA Legend. The Registrar
shall refuse to register any transfer of any Certificate in violation of the
restrictions set forth in such ERISA Legend.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments Account. (a)
The Trustee shall establish and maintain on behalf of the Certificateholders a
Certificate Account as one or more non-interest-bearing accounts. The Trustee
shall hold the Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals therefrom only as
provided in this Agreement. On each day when a Scheduled Payment is made to the
Trustee under the Intercreditor Agreement, the Trustee upon receipt thereof
shall immediately deposit the aggregate amount of such Scheduled Payment in the
Certificate Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders a Special Payments Account as one or more accounts, which
shall be non-interest bearing except as provided in Section 4.04. The Trustee
shall hold the Special
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Payments Account in trust for the benefit of the Certificateholders and shall
make or permit withdrawals therefrom only as provided in this Agreement. On each
day when one or more Special Payments are made to the Trustee under the
Intercreditor Agreement, the Trustee, upon receipt thereof, shall immediately
deposit the aggregate amount of such Special Payments in the Special Payments
Account.
(c) The Trustee shall cause the Subordination Agent to present to
the related Loan Trustee of each Equipment Note such Equipment Note on the date
of its stated final maturity or, in the case of any Equipment Note which is to
be redeemed in whole pursuant to the related Indenture, on the applicable
redemption date under such Indenture.
Section 4.02. Distributions from Certificate Account and Special
Payments Account. (a) On each Regular Distribution Date or as soon thereafter as
the Trustee has confirmed receipt of the payment of all or any part of the
Scheduled Payments due on such date, the Trustee shall distribute out of the
Certificate Account the entire amount deposited therein pursuant to Section
4.01(a). There shall be so distributed to each Certificateholder of record on
the Record Date with respect to such Regular Distribution Date (other than as
provided in Section 11.01 concerning the final distribution) by check mailed to
such Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional Undivided Interest
in the Trust held by such Certificateholder) of the total amount in the
Certificate Account, except that, with respect to Certificates registered on the
Record Date in the name of DTC, such distribution shall be made by wire transfer
in immediately available funds to the account designated by DTC.
(b) On each Special Distribution Date with respect to any Special
Payment or as soon thereafter as the Trustee has confirmed receipt of such
Special Payment, the Trustee shall distribute out of the Special Payments
Account the entire amount of such Special Payment deposited therein pursuant to
Section 4.01(b). There shall be so distributed to each Certificateholder of
record on the Record Date with respect to such Special Distribution Date (other
than as provided in Section 11.01 concerning the final distribution) by check
mailed to such Certificateholder, at the address appearing in the Register, such
Certificateholder's pro rata share (based on the Fractional Undivided Interest
in the Trust held by such Certificateholder)
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of the total amount in the Special Payments Account on account of such Special
Payment, except that, with respect to Certificates registered on the Record Date
in the name of DTC, such distribution shall be made by wire transfer in
immediately available funds to the account designated by DTC.
(c) The Trustee shall, at the expense of the Company, cause notice
of each Special Payment to be mailed to each Certificateholder at his address as
it appears in the Register. In the event of redemption or purchase of Equipment
Notes held in the Trust, such notice shall be mailed not less than 20 days prior
to the Special Distribution Date for the Special Payment resulting from such
redemption or purchase, which Special Distribution Date shall be the date of
such redemption or purchase. In the event that the Trustee receives a notice
from the Company that Postponed Notes will not be purchased pursuant to Section
2.01, such notice of Special Payment shall be mailed as soon as practicable
after receipt of such notice from the Company and shall state the Special
Distribution Date for such Special Payment, which shall occur 20 days after the
date of such notice of Special Payment or (if such 20th day is not practicable)
as soon as practicable thereafter. In the event that any Special Payment is to
be made pursuant to the last paragraph of Section 2.01(b) hereof, on the Cut-Off
Date (or, if such Cut-Off Date is not practicable, as soon as practicable after
the Cut-Off Date), notice of such Special Payment shall be mailed stating the
Special Distribution Date for such Special Payment, which shall occur 20 days
after the date of such notice of such Special Payment (or, if such 20th day is
not practicable, as soon as practicable thereafter). In the case of any other
Special Payments, such notice shall be mailed as soon as practicable after the
Trustee has confirmed that it has received funds for such Special Payment,
stating the Special Distribution Date for such Special Payment which shall occur
not less than 20 days after the date of such notice and as soon as practicable
thereafter. Notices mailed by the Trustee shall set forth:
(i) the Special Distribution Date and the Record Date therefor
(except as otherwise provided in Section 11.01),
(ii) the amount of the Special Payment for each $1,000 face amount
Certificate and the amount thereof constituting principal, premium, if
any, and interest,
(iii) the reason for the Special Payment, and
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(iv) if the Special Distribution Date is the same date as a Regular
Distribution Date, the total amount to be received on such date for each
$1,000 face amount Certificate.
If the amount of premium, if any, payable upon the redemption or purchase of an
Equipment Note has not been calculated at the time that the Trustee mails notice
of a Special Payment, it shall be sufficient if the notice sets forth the other
amounts to be distributed and states that any premium received will also be
distributed.
If any redemption of the Equipment Notes held in the Trust is
canceled, the Trustee, as soon as possible after learning thereof, shall cause
notice thereof to be mailed to each Certificateholder at its address as it
appears on the Register.
Section 4.03. Statements to Certificateholders. (a) On each
Distribution Date, the Trustee will include with each distribution to
Certificateholders of a Scheduled Payment or Special Payment, as the case may
be, a statement setting forth the following information (per $1,000 face amount
Certificate as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and the
amount allocable to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor.
With respect to the Certificates registered in the name of DTC, on
the Record Date prior to each Distribution Date, the Trustee will request from
DTC a securities position listing setting forth the names of all Agent Members
reflected on DTC's books as holding interests in the Certificates on such Record
Date. On each Distribution Date, the Trustee will mail to each such Agent Member
the statement described above and will make available additional copies as
requested by such Agent Member for forwarding to holders of interests in the
Certificates.
(b) Within a reasonable period of time after the end of each
calendar year but not later than the latest date permitted by law, the Trustee
shall furnish to each Person who at any time during such calendar year was a
Certificateholder of
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record a statement containing the sum of the amounts determined pursuant to
clauses (a)(i) and (a)(ii) above for such calendar year or, in the event such
Person was a Certificateholder of record during a portion of such calendar year,
for such portion of such year, and such other items as are readily available to
the Trustee and which a Certificateholder shall reasonably request as necessary
for the purpose of such Certificateholder's preparation of its federal income
tax returns. Such statement and such other items shall be prepared on the basis
of information supplied to the Trustee by the Agent Members and shall be
delivered by the Trustee to such Agent Members to be available for forwarding by
such Agent Members to the holders of interests in the Certificates in the manner
described in Section 4.03(a).
Section 4.04. Investment of Special Payment Moneys. Any money
received by the Trustee pursuant to Section 4.01(b) representing a Special
Payment which is not distributed on the date received shall, to the extent
practicable, be invested in Permitted Investments by the Trustee pending
distribution of such Special Payment pursuant to Section 4.02. Any investment
made pursuant to this Section 4.04 shall be in such Permitted Investments having
maturities not later than the date that such moneys are required to be used to
make the payment required under Section 4.02 on the applicable Special
Distribution Date and the Trustee shall hold any such Permitted Investments
until maturity. The Trustee shall have no liability with respect to any
investment made pursuant to this Section 4.04, other than by reason of the
willful misconduct or negligence of the Trustee. All income and earnings from
such investments shall be distributed on such Special Distribution Date as part
of such Special Payment.
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence. The Company, at
its own cost and expense, will do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights and
franchises, except as otherwise specifically permitted in Section 5.02;
provided, however, that the Company shall not be required to preserve any right
or franchise if the Company shall determine that the
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preservation thereof is no longer desirable in the conduct of the business of
the Company.
Section 5.02. Consolidation, Merger, etc. The Company shall not
consolidate with or merge into any other corporation or convey, transfer or
lease substantially all of its assets as an entirety to any Person unless:
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person that acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety shall
be (i) organized and validly existing under the laws of the United States
of America or any state thereof or the District of Columbia, (ii) a
"citizen of the United States" as defined in 49 U.S.C. 40102(a)(15), as
amended, and (iii) a United States certificated air carrier, if and so
long as such status is a condition of entitlement to the benefits of
Section 1110 of the Bankruptcy Reform Act of 1978, as amended (11 U.S.C.
ss. 1110), with respect to the Leases;
(b) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance, transfer or
lease substantially all of the assets of the Company as an entirety shall
execute and deliver to the Trustee a duly authorized, valid, binding and
enforceable agreement in form and substance reasonably satisfactory to the
Trustee containing an assumption by such successor corporation or Person
of the due and punctual performance and observance of each covenant and
condition of this Agreement, the Other Pass Through Trust Agreements and
each Financing Document to be performed or observed by the Company; and
(c) the Company shall have delivered to the Trustee an Officer's
Certificate of the Company and an Opinion of Counsel of the Company
reasonably satisfactory to the Trustee, each stating that such
consolidation, merger, conveyance, transfer or lease and the assumption
agreement mentioned in clause (b) above comply with this Section 5.02 and
that all conditions precedent herein provided for relating to such
transaction have been complied with.
Upon any consolidation or merger, or any conveyance, transfer or
lease of substantially all of the assets of the
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Company as an entirety in accordance with this Section 5.02, the successor
corporation or Person formed by such consolidation or into which the Company is
merged or to which such conveyance, transfer or lease is made shall succeed to,
and be substituted for, and may exercise every right and power of, the Company
under this Agreement with the same effect as if such successor corporation or
Person had been named as the Company herein. No such conveyance, transfer or
lease of substantially all of the assets of the Company as an entirety shall
have the effect of releasing any successor corporation or Person which shall
have become such in the manner prescribed in this Section 5.02 from its
liability in respect of this Agreement and any Financing Document to which it is
a party.
ARTICLE VI
DEFAULT
Section 6.01. Events of Default. (a) Exercise of Remedies. Upon the
occurrence and during the continuation of any Indenture Default under any
Indenture, the Trustee may, to the extent it is the Controlling Party at such
time (as determined pursuant to the Intercreditor Agreement), direct the
exercise of remedies as provided in the Intercreditor Agreement.
(b) Purchase Rights of Certificateholders. (i) At any time after the
occurrence and during the continuation of a Triggering Event, each
Certificateholder shall have the right to purchase all, but not less than
all, of the Class A Certificates upon ten days' written notice to the
Class A Trustee and each other Certificateholder, provided that (A) if
prior to the end of such ten-day period any other Certificateholder
notifies such purchasing Certificateholder that such other
Certificateholder wants to participate in such purchase, then such other
Certificateholder may join with the purchasing Certificateholder to
purchase all, but not less than all, of the Class A Certificates pro rata
based on the outstanding principal amount of the Certificates held by each
such Certificateholder and (B) if prior to the end of such ten-day period
any other Certificateholder fails to notify the purchasing
Certificateholder of such other Certificateholder's desire to participate
in such a purchase, then such other Certificateholder shall lose its right
to purchase the Class A Certificates pursuant to this Section 6.01(b)(i).
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(ii) By acceptance of its Certificate, each Certificateholder
agrees that at any time after the occurrence and during the continuation
of a Triggering Event, each Class C Certificateholder shall have the right
(which shall not expire upon any purchase of the Class A Certificates
pursuant to paragraph (i) above) to purchase all, but not less than all,
of the Class A Certificates and the Certificates upon ten days' written
notice to the Class A Trustee, the Trustee and each other Class C
Certificateholder, provided that (A) if prior to the end of such ten-day
period any other Class C Certificateholder notifies such purchasing Class
C Certificateholder that such other Class C Certificateholder wants to
participate in such purchase, then such other Class C Certificateholder
may join with the purchasing Class C Certificateholder to purchase all,
but not less than all, of the Class A Certificates and the Certificates
pro rata based on the Fractional Undivided Interest in the Class C Trust
held by each such Class C Certificateholder and (B) if prior to the end of
such ten-day period any other Class C Certificateholder fails to notify
the purchasing Class C Certificateholder of such other Class C
Certificateholder's desire to participate in such a purchase, then such
other Class C Certificateholder shall lose its right to purchase the Class
A Certificates and the Certificates pursuant to this Section 6.01(b).
(iii) By acceptance of its Certificate, each Certificateholder
agrees that at any time after the occurrence and during the continuation
of a Triggering Event, each Class D Certificateholder shall have the right
(which shall not expire upon any purchase of the Class A Certificates
pursuant to clause (i) above or the purchase of the Class A Certificates
and the Certificates pursuant to clause (ii) above) to purchase all, but
not less than all, of the Class A Certificates, the Certificates and the
Class C Certificates upon ten days' written notice to the Trustee, the
Class B Trustee, the Class C Trustee and each other Class D
Certificateholder, provided that (A) if prior to the end of such ten-day
period any other Class D Certificateholder notifies such purchasing Class
D Certificateholder that such other Class D Certificateholder wants to
participate in such purchase, then such other Class D Certificateholder
may join with the purchasing Certificateholder to purchase all, but not
less than all, of the Class A Certificates, the Certificates and the Class
C
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Certificates pro rata based on the Fractional Undivided Interest in the
Class D Trust held by each such Class D Certificateholder and (B) if prior
to the end of such ten day period any other Class D Certificateholder
fails to notify the purchasing Class D Certificateholder of such other
Class D Certificateholder's desire to participate in such a purchase, then
such other Class D Certificateholder shall lose its right to purchase the
Certificates, the Class B Certificates and the Class C Certificates
pursuant to this Section 6.01(b).
The purchase price with respect to the Certificates shall be equal
to the Pool Balance of the Certificates, together with accrued and unpaid
interest thereon to the date of such purchase, without premium, but including
any other amounts then due and payable to the Certificateholders under this
Agreement, the Intercreditor Agreement or any other Financing Document or on or
in respect of the Certificates; provided, however, if such purchase occurs after
a Record Date, such purchase price shall be reduced by the amount to be
distributed hereunder on the Distribution Date following such Record Date (which
deducted amounts shall remain distributable to, and may be retained by, the
Certificateholders as of such Record Date); provided, further, that no such
purchase of Certificates shall be effective unless the purchaser(s) shall
certify to the Trustee that contemporaneously with such purchase, such
purchaser(s) is purchasing, pursuant to the terms of this Agreement and the
Other Pass Through Trust Agreements, the Class A Certificates, the Certificates
and the Class C Certificates which are senior to the securities held by such
purchaser(s). Each payment of the purchase price of the Certificates referred to
in the first sentence hereof shall be made to an account or accounts designated
by the Trustee and each such purchase shall be subject to the terms of this
Section 6.01(b). Each Certificateholder agrees by its acceptance of its
Certificate that it will, subject to Section 3.04 hereof, upon payment from such
Class C Certificateholder(s) or Class D Certificateholder(s), as the case may
be, of the purchase price set forth in the first sentence of this paragraph,
forthwith sell, assign, transfer and convey to the purchaser(s) thereof (without
recourse, representation or warranty of any kind except for its own acts), all
of the right, title, interest and obligation of such Certificateholder in this
Agreement, the Intercreditor Agreement, the Liquidity Facility, the Financing
Documents and all Certificates held by such Certificateholder (excluding all
right, title and interest under
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any of the foregoing to the extent such right, title or interest is with respect
to an obligation not then due and payable as respects any action or inaction or
state of affairs occurring prior to such sale) and the purchaser shall assume
all of such Certificateholder's obligations under this Agreement, the
Intercreditor Agreement, the Liquidity Facility, the Financing Documents and all
such Certificates. The Certificates will be deemed to be purchased on the date
payment of the purchase price is made notwithstanding the failure of the
Certificateholders to deliver any Certificates (whether in the form of
Definitive Certificates or beneficial interests in Global Certificates) and,
upon such a purchase, (i) the only rights of the Certificateholders will be to
deliver the Certificates to the purchaser(s) and receive the purchase price for
such Certificates and (ii) if the purchaser(s) shall so request, such
Certificateholders will comply with all the provisions of Section 3.04 hereof to
enable new Certificates to be issued to the purchaser in such denominations as
it shall request. All charges and expenses in connection with the issuance of
any such new Certificates shall be borne by the purchaser thereof.
As used in this Section 6.01(b), the terms "Class", "Class A
Certificate", "Class A Trustee", "Class C Certificate", "Class C
Certificateholder", "Class C Trust", "Class C Trustee", "Class D Certificate",
"Class D Certificateholder", "Class D Trust" and "Class D Trustee" shall have
the respective meanings assigned to such terms in the Intercreditor Agreement.
Section 6.02. Incidents of Sale of Equipment Notes. Upon any sale of
all or any part of the Equipment Notes held in the Trust made either under the
power of sale given under this Agreement or otherwise for the enforcement of
this Agreement, the following shall be applicable:
(1) Certificateholders and Trustee May Purchase Equipment Notes. Any
Certificateholder, the Trustee in its individual or any other capacity or
any other Person may bid for and purchase any of the Equipment Notes held
in the Trust, and upon compliance with the terms of sale, may hold,
retain, possess and dispose of such Equipment Notes in their own absolute
right without further accountability.
(2) Receipt of Trustee Shall Discharge Purchaser. The receipt of the
Trustee making such sale shall be a sufficient discharge to any purchaser
for his purchase
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money, and, after paying such purchase money and receiving such receipt,
such purchaser or its personal representative or assigns shall not be
obliged to see to the application of such purchase money, or be in any way
answerable for any loss, misapplication or non-application thereof.
(3) Application of Moneys Received upon Sale. Any moneys collected
by the Trustee upon any sale made either under the power of sale given by
this Agreement or otherwise for the enforcement of this Agreement shall be
applied as provided in Section 4.02.
Section 6.03. Judicial Proceedings Instituted by Trustee; Trustee
May Bring Suit. If there shall be a failure to make payment of the principal of,
premium, if any, or interest on any Equipment Note held in the Trust, or if
there shall be any failure to pay Rent (as defined in the relevant Lease) under
any Lease when due and payable, then the Trustee, in its own name and as trustee
of an express trust, as holder of such Equipment Notes, to the extent permitted
by and in accordance with the terms of the Intercreditor Agreement and the
Financing Documents, shall be entitled and empowered to institute any suits,
actions or proceedings at law, in equity or otherwise, for the collection of the
sums so due and unpaid on such Equipment Notes or under such Lease and may
prosecute any such claim or proceeding to judgment or final decree with respect
to the whole amount of any such sums so due and unpaid.
Section 6.04. Control by Certificateholders. Subject to Section 6.03
and the Intercreditor Agreement, the Certificateholders holding Certificates
evidencing Fractional Undivided Interests aggregating not less than a majority
in interest in the Trust shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee with
respect to the Trust or pursuant to the terms of the Intercreditor Agreement, or
exercising any trust or power conferred on the Trustee under this Agreement or
the Intercreditor Agreement, including any right of the Trustee as Controlling
Party under the Intercreditor Agreement or as holder of the Equipment Notes held
in the Trust, provided that
(1) such Direction shall not be in conflict with any rule of law or
with this Agreement and would not involve the Trustee in personal
liability or expense,
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(2) the Trustee shall not determine that the action so directed
would be unjustly prejudicial to the Certificateholders not taking part in
such Direction, and
(3) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such Direction.
Section 6.05. Waiver of Past Defaults. Subject to the Intercreditor
Agreement, the Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than a majority in interest in the
Trust (i) may on behalf of all of the Certificateholders waive any past Event of
Default hereunder and its consequences or (ii) if the Trustee is the Controlling
Party, may direct the Trustee to instruct the applicable Loan Trustee to waive
any past Indenture Default under any Indenture and its consequences, and thereby
annul any Direction given by such Certificateholders or the Trustee to such Loan
Trustee and/or the Second Mortgagee with respect thereto, except a default:
(1) in the deposit of any Scheduled Payment or Special Payment under
Section 4.01 or in the distribution of any payment under Section 4.02 on
the Certificates, or
(2) in the payment of the principal of (premium, if any) or interest
on the Equipment Notes held in the Trust, or
(3) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of each
Certificateholder holding an Outstanding Certificate affected thereby.
Upon any such waiver, such default shall cease to exist with respect
to the Certificates and any Event of Default arising therefrom shall be deemed
to have been cured for every purpose and any direction given by the Trustee on
behalf of the Certificateholders to the relevant Loan Trustee and/or the Second
Mortgagee shall be annulled with respect thereto; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon. Upon any such waiver, the Trustee shall vote the
Equipment Notes issued under the relevant Indenture to waive the corresponding
Indenture Default.
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Section 6.06. Right of Certificateholders to Receive Payments Not to
Be Impaired. Anything in this Agreement to the contrary notwithstanding,
including, without limitation, Section 6.07 hereof, but subject to the
Intercreditor Agreement, the right of any Certificateholder to receive
distributions of payments required pursuant to Section 4.02 hereof on the
Certificates when due, or to institute suit for the enforcement of any such
payment on or after the applicable Regular Distribution Date or Special
Distribution Date, shall not be impaired or affected without the consent of such
Certificateholder.
Section 6.07. Certificateholders May Not Bring Suit Except Under
Certain Conditions. A Certificateholder shall not have the right to institute
any suit, action or proceeding at law or in equity or otherwise with respect to
this Agreement, for the appointment of a receiver or for the enforcement of any
other remedy under this Agreement, unless:
(1) such Certificateholder previously shall have given written
notice to the Trustee of a continuing Event of Default;
(2) Certificateholders holding Certificates evidencing Fractional
Undivided Interests aggregating not less than 25% of the Trust shall have
requested the Trustee in writing to institute such action, suit or
proceeding and shall have offered to the Trustee indemnity as provided in
Section 7.03(e);
(3) the Trustee shall have refused or neglected to institute such an
action, suit or proceeding for 60 days after receipt of such notice,
request and offer of indemnity; and
(4) no direction inconsistent with such written request shall have
been given to the Trustee during such 60-day period by Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating
not less than a majority in interest in the Trust.
It is understood and intended that no one or more of the
Certificateholders shall have any right in any manner whatsoever hereunder or
under the Certificates to (i) surrender, impair, waive, affect, disturb or
prejudice any property in the Trust Property or the lien of any Indenture on any
property
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subject thereto, or the rights of the Certificateholders or the holders of the
Equipment Notes, (ii) obtain or seek to obtain priority over or preference with
respect to any other such Certificateholder or (iii) enforce any right under
this Agreement, except in the manner herein provided and for the equal, ratable
and common benefit of all the Certificateholders subject to the provisions of
this Agreement.
Section 6.08. Remedies Cumulative. Every remedy given hereunder to
the Trustee or to any of the Certificateholders shall not be exclusive of any
other remedy or remedies, and every such remedy shall be cumulative and in
addition to every other remedy given hereunder or now or hereafter given by
statute, law, equity or otherwise.
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities. (a) Except during
the continuance of an Event of Default, the Trustee undertakes to perform such
duties as are specifically set forth in this Agreement, and no implied covenants
or obligations shall be read into this Agreement against the Trustee.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Agreement, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of its
own affairs.
(c) No provision of this Agreement shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that
(1) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section; and
(2) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts.
(d) Whether or not herein expressly so provided, every provision of
this Trust Agreement relating to the conduct or
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affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
Section 7.02. Notice of Defaults. As promptly as practicable after,
and in any event within 90 days after, the occurrence of any default (as such
term is defined below) hereunder known to the Trustee, the Trustee shall
transmit by mail to the Company, the Loan Trustees, the Second Mortgagee and the
Certificateholders in accordance with Section 313(c) of the Trust Indenture Act,
notice of such default hereunder known to the Trustee, unless such default shall
have been cured or waived; provided, however, that, except in the case of a
default in the payment of the principal, premium, if any, or interest on any
Equipment Note held in the Trust, the Trustee shall be protected in withholding
such notice if and so long as the board of directors, the executive committee or
a trust committee of directors and/or Responsible Officers of the Trustee in
good faith determine that the withholding of such notice is in the interests of
the Certificateholders. For the purpose of this Section, the term "default"
means any event that is, or after notice or lapse of time or both would become,
an Event of Default.
Section 7.03. Certain Rights of Trustee. Subject to the provisions
of Section 315 of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in reliance upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a written description of the subject matter
thereof accompanied by an Officer's Certificate and an Opinion of Counsel
as provided in Section 1.02 of this Agreement;
(c) whenever in the administration of this Agreement the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad
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faith on its part, rely upon an Officer's Certificate of the Company, any
Loan Trustee or the Second Mortgagee;
(d) the Trustee may consult with counsel and the advice of such
counsel or any Opinion of Counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Agreement at the Direction of any of
the Certificateholders pursuant to this Agreement, unless such
Certificateholders shall have offered to the Trustee reasonable security
or indemnity against the cost, expenses and liabilities which might be
incurred by it in compliance with such Direction;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document;
(g) the Trustee may execute any of the trusts or powers under this
Agreement or perform any duties under this Agreement either directly or by
or through agents or attorneys, and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it under this Agreement;
(h) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the
Direction of the Certificateholders holding Certificates evidencing
Fractional Undivided Interests aggregating not less than a majority in
interest in the Trust relating to the time, method and place of conducting
any proceeding for any remedy available to the Trustee, or exercising any
trust or power conferred upon the Trustee, under this Agreement; and
(i) the Trustee shall not be required to expend or risk its own
funds in the performance of any of its duties under this Agreement, or in
the exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk is not reasonably assured to it.
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Section 7.04. Not Responsible for Recitals or Issuance of
Certificates. The recitals contained herein and in the Certificates, except the
certificates of authentication, shall not be taken as the statements of the
Trustee, and the Trustee assumes no responsibility for their correctness.
Subject to Section 7.15, the Trustee makes no representations as to the validity
or sufficiency of this Agreement, any Equipment Notes, the Intercreditor
Agreement, the Certificates or any other Financing Document, except that the
Trustee hereby represents and warrants that this Agreement has been, and the
Intercreditor Agreement, the Registration Rights Agreement and each Certificate
will be, executed, authenticated and delivered by one of its officers who is
duly authorized to execute, authenticate and deliver such document on its
behalf.
Section 7.05. May Hold Certificates. The Trustee, any Paying Agent,
Registrar or any of their Affiliates or any other agent in their respective
individual or any other capacity may become the owner or pledgee of Certificates
and, subject to Sections 310(b) and 311 of the Trust Indenture Act, if
applicable, may otherwise deal with the Company, the Loan Trustees or the Second
Mortgagee with the same rights it would have if it were not Trustee, Paying
Agent, Registrar or such other agent.
Section 7.06. Money Held in Trust. Money held by the Trustee or the
Paying Agent in trust hereunder need not be segregated from other funds except
to the extent required herein or by law and neither the Trustee nor the Paying
Agent shall have any liability for interest upon any such moneys except as
provided for herein.
Section 7.07. Compensation and Reimbursement. The Company agrees:
(1) to pay, or cause to be paid, to the Trustee from time to time
reasonable compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to reimburse, or
cause to be reimbursed, the Trustee upon its request for all reasonable
out-of-pocket expenses, disbursements and advances incurred or made by the
Trustee
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in accordance with any provision of this Agreement (including the
reasonable compensation and the expenses and disbursements of its agents
and counsel), except any such expense, disbursement or advance as may be
attributable to its negligence, willful misconduct or bad faith or as may
be incurred due to the Trustee's breach of its representations and
warranties set forth in Section 7.15; and
(3) to indemnify the Trustee pursuant to Sections 8.1 and 8.3 of
each Financing Agreement.
The Trustee shall be entitled to reimbursement from, and shall have
a lien prior to the Certificates upon, the Trust Property for any tax incurred
without negligence, bad faith or willful misconduct, on its part, arising out of
or in connection with the acceptance or administration of such Trust (other than
any tax attributable to the Trustee's compensation for serving as such),
including any costs and expenses incurred in contesting the imposition of any
such tax. If the Trustee reimburses itself from the Trust Property of such Trust
for any such tax, it will mail a brief report within 30 days setting forth the
circumstances thereof to all Certificateholders as their names and addresses
appear in the Register.
Section 7.08. Corporate Trustee Required; Eligibility. There shall
at all times be a Trustee hereunder which shall be eligible to act as a trustee
under Section 310(a) of the Trust Indenture Act and shall have a combined
capital and surplus of at least $75,000,000 (or a combined capital and surplus
in excess of $5,000,000 and the obligations of which, whether now in existence
or hereafter incurred, are fully and unconditionally guaranteed by a corporation
organized and doing business under the laws of the United States, any state or
territory thereof or of the District of Columbia and having a combined capital
and surplus of at least $75,000,000). If such corporation publishes reports of
conditions at least annually, pursuant to law or to the requirements of federal,
state, territorial or District of Columbia supervising or examining authority,
then for the purposes of this Section 7.08, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of conditions so published.
In case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 7.08
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to act as Trustee, the Trustee shall resign immediately as Trustee in the manner
and with the effect specified in Section 7.09.
Section 7.09. Resignation and Removal; Appointment of Successor. (a)
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 7.10.
(b) The Trustee may resign at any time as trustee by giving prior
written notice thereof to the Company, the Authorized Agents, the Loan Trustees
and the Second Mortgagee. If an instrument of acceptance by a successor Trustee
shall not have been delivered to the Company, the Authorized Agents, the Loan
Trustees, the Trustee and the Second Mortgagee within 30 days after the giving
of such notice of resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Direction of the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust
delivered to the Trustee and to the Company, the Loan Trustees and the Second
Mortgagee.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 310 of the Trust
Indenture Act, if applicable, after written request therefor by the
Company or by any Certificateholder who has been a bona fide
Certificateholder for at least six months; or
(2) the Trustee shall cease to be eligible under Section 7.08 and
shall fail to resign after written request therefor by the Company or by
any such Certificateholder; or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation;
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then, in any case, (i) the Company may remove the Trustee or (ii) any
Certificateholder who has been a bona fide Certificateholder for at least six
months may, on behalf of itself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(e) If a Responsible Officer of the Trustee shall obtain actual
knowledge of an Avoidable Tax which has been or is likely to be asserted, the
Trustee shall promptly notify the Company and shall, within 30 days of such
notification, resign hereunder unless within such 30-day period the Trustee
shall have received notice that the Company has agreed to pay such tax. The
Company shall promptly appoint a successor Trustee in a jurisdiction where there
are no Avoidable Taxes.
(f) If the Trustee shall resign, be removed or become incapable of
acting or if a vacancy shall occur in the office of the Trustee for any cause,
the Company shall promptly appoint a successor Trustee. If, within one year
after such resignation, removal or incapability, or other occurrence of such
vacancy, a successor Trustee shall be appointed by Direction of the
Certificateholders holding Certificates evidencing Fractional Undivided
Interests aggregating not less than a majority in interest in the Trust
delivered to the Company, the Loan Trustees, the Second Mortgagee and the
retiring Trustee, and the Company approves such appointment, which approval
shall not be unreasonably withheld, then the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment, become the successor
Trustee and supersede the successor Trustee appointed as provided above. If no
successor Trustee shall have been so appointed as provided above and accepted
appointment in the manner hereinafter provided, any Certificateholder who has
been a bona fide Certificateholder for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(g) The successor Trustee shall give notice of the resignation and
removal of the Trustee and appointment of the successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Certificateholders as their names and addresses appear in the Register. Each
notice shall include the name of such successor Trustee and the address of its
Corporate Trust Office.
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Section 7.10. Acceptance of Appointment by Successor. Every
successor Trustee appointed hereunder shall execute and deliver to the Company,
the Authorized Agents, the Loan Trustees and the Second Mortgagee and to the
retiring Trustee an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become effective and such
successor Trustee, without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the retiring Trustee;
but, on request of the Company or the successor Trustee, such retiring Trustee
shall execute and deliver an instrument transferring to such successor Trustee
all such rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all Trust Property held
by such retiring Trustee hereunder, subject nevertheless to its lien, if any,
provided for in Section 7.07. Upon request of any such successor Trustee, the
Company, the retiring Trustee and such successor Trustee shall execute and
deliver any and all instruments containing such provisions as shall be necessary
or desirable to transfer and confirm to, and for more fully and certainly
vesting in, such successor Trustee all such rights, powers and trusts.
No institution shall accept its appointment as a Trustee hereunder
unless at the time of such acceptance such institution shall be qualified and
eligible under this Article VII.
Section 7.11. Merger, Conversion, Consolidation or Succession to
Business. Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article VII, without the execution or filing of any paper or any further act on
the part of any of the parties hereto. In case any Certificates shall have been
executed or authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating Trustee
may adopt such execution or authentication and deliver the Certificates so
executed or authenticated with the same effect as if such successor Trustee had
itself executed or authenticated such Certificates.
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Section 7.12. Maintenance of Agencies. (a) There shall at all times
be maintained an office or agency in the location set forth in Section 12.03
where Certificates may be presented or surrendered for registration of transfer
or for exchange, and for payment thereof and where notices and demands to or
upon the Trustee in respect of such certificates or this Agreement may be
served; provided, however, that, if it shall be necessary that the Trustee
maintain an office or agency in another location (e.g., the Certificates shall
be represented by Definitive Certificates and shall be listed on a national
securities exchange), the Trustee will make all reasonable efforts to establish
such an office or agency. Written notice of the location of each such other
office or agency and of any change of location thereof shall be given by the
Trustee to the Company, the Loan Trustees and the Second Mortgagee (at their
respective addresses specified in the Financing Documents or such other address
as may be notified to the Trustee) and the Certificateholders. In the event that
no such office or agency shall be maintained or no such notice of location or of
change of location shall be given, presentations and demands may be made and
notices may be served at the Corporate Trust Office of the Trustee.
(b) There shall at all times be a Registrar and a Paying Agent
hereunder with respect to the Certificates. Each such Authorized Agent shall be
a bank or trust company, shall be a corporation organized and doing business
under the laws of the United States or any state, with a combined capital and
surplus of at least $75,000,000, or, if the Trustee shall be acting as the
Registrar or Paying Agent hereunder, a corporation having a combined capital and
surplus in excess of $5,000,000, the obligations of which are guaranteed by a
corporation organized and doing business under the laws of the United States or
any state, with a combined capital and surplus of at least $75,000,000, and
shall be authorized under such laws to exercise corporate trust powers, subject
to supervision by Federal or state authorities. The Trustee shall initially be
the Paying Agent and, as provided in Section 3.04, Registrar hereunder with
respect to the Certificates. Each Registrar shall furnish to the Trustee, at
stated intervals of not more than six months, and at such other times as the
Trustee may request in writing, a copy of the Register maintained by such
Registrar.
(c) Any corporation into which any Authorized Agent may be merged or
converted or with which it may be consolidated,
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or any corporation resulting from any merger, consolidation or conversion to
which any Authorized Agent shall be a party, or any corporation succeeding to
the corporate trust business of any Authorized Agent, shall be the successor of
such Authorized Agent hereunder, if such successor corporation is otherwise
eligible under this Section, without the execution or filing of any paper or any
further act on the part of the parties hereto or such Authorized Agent or such
successor corporation.
(d) Any Authorized Agent may at any time resign by giving written
notice of resignation to the Trustee, the Company, the Loan Trustees and the
Second Mortgagee. The Company may, and at the request of the Trustee shall, at
any time terminate the agency of any Authorized Agent by giving written notice
of termination to such Authorized Agent and to the Trustee. Upon the resignation
or termination of an Authorized Agent or in case at any time any such Authorized
Agent shall cease to be eligible under this Section (when, in either case, no
other Authorized Agent performing the functions of such Authorized Agent shall
have been appointed), the Company shall promptly appoint one or more qualified
successor Authorized Agents, reasonably satisfactory to the Trustee, to perform
the functions of the Authorized Agent which has resigned or whose agency has
been terminated or who shall have ceased to be eligible under this Section. The
Company shall give written notice of any such appointment made by it to the
Trustee, the Loan Trustees and the Second Mortgagee; and in each case the
Trustee shall mail notice of such appointment to all Certificateholders as their
names and addresses appear on the Register.
(e) The Company agrees to pay, or cause to be paid, from time to
time to each Authorized Agent reasonable compensation for its services and to
reimburse it for its reasonable expenses.
Section 7.13. Money for Certificate Payments to Be Held in Trust.
All moneys deposited with any Paying Agent for the purpose of any payment on
Certificates shall be deposited and held in trust for the benefit of the
Certificateholders entitled to such payment, subject to the provisions of this
Section. Moneys so deposited and held in trust shall constitute a separate trust
fund for the benefit of the Certificateholders with respect to which such money
was deposited.
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The Trustee may at any time, for the purpose of obtaining the
satisfaction and discharge of this Agreement or for any other purpose, direct
any Paying Agent to pay to the Trustee all sums held in trust by such Paying
Agent, such sums to be held by the Trustee upon the same trusts as those upon
which such sums were held by such Paying Agent; and, upon such payment by any
Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Section 7.14. Registration of Equipment Notes in Name of
Subordination Agent. The Trustee agrees that all Equipment Notes to be purchased
by the Trust shall be issued in the name of the Subordination Agent or its
nominee and held by the Subordination Agent in trust for the benefit of the
Certificateholders, or, if not so held, the Subordination Agent or its nominee
shall be reflected as the owner of such Equipment Notes in the register of the
issuer of such Equipment Notes.
Section 7.15. Representations and Warranties of Trustee. The Trustee
hereby represents and warrants that:
(a) the Trustee is a Delaware banking corporation organized and
validly existing in good standing under the laws of the State of Delaware;
(b) the Trustee has full power, authority and legal right to
execute, deliver, and perform this Agreement, the Intercreditor Agreement,
the Registration Rights Agreement and the Financing Agreements and has
taken all necessary action to authorize the execution, delivery, and
performance by it of this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement and the Financing Agreements;
(c) the execution, delivery and performance by the Trustee of this
Agreement, the Intercreditor Agreement, the Registration Rights Agreement
and the Financing Agreements (i) will not violate any provision of United
States federal law or the law of the state of the United States where it
is located governing the banking and trust powers of the Trustee or any
order, writ, judgment, or decree of any court, arbitrator or governmental
authority applicable to the Trustee or any of its assets, (ii) will not
violate any provision of the articles of association or by-laws of the
Trustee, or (iii) will not violate any provision of, or constitute, with
or without notice or lapse of time, a
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default under, or result in the creation or imposition of any lien on any
properties included in the Trust Property pursuant to the provisions of
any mortgage, indenture, contract, agreement or other undertaking to which
it is a party, which violation, default or lien could reasonably be
expected to have an adverse effect on the Trustee's performance or ability
to perform its duties hereunder or thereunder or on the transactions
contemplated herein or therein;
(d) the execution, delivery and performance by the Trustee of this
Agreement, the Intercreditor Agreement, the Registration Rights Agreement
and the Financing Agreements will not require the authorization, consent,
or approval of, the giving of notice to, the filing or registration with,
or the taking of any other action in respect of, any governmental
authority or agency of the United States or the state of the United States
where it is located regulating the banking and corporate trust activities
of the Trustee; and
(e) this Agreement, the Intercreditor Agreement, the Registration
Rights Agreement and the Financing Agreements have been duly executed and
delivered by the Trustee and constitute the legal, valid, and binding
agreements of the Trustee, enforceable against it in accordance with their
respective terms, provided that enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the rights of creditors generally and (ii) general
principles of equity.
Section 7.16. Withholding Taxes, Information Reporting. The Trustee,
as trustee of the grantor trust created by this Agreement, shall exclude and
withhold from each distribution of principal, premium, if any, and interest and
other amounts due under this Agreement or under the Certificates any and all
withholding taxes applicable thereto as required by law. The Trustee agrees to
act as such withholding agent and, in connection therewith, whenever any present
or future taxes or similar charges are required to be withheld with respect to
any amounts payable in respect of the Certificates, to withhold such amounts and
timely pay the same to the appropriate authority in the name of and on behalf of
the Certificateholders, that it will file any necessary withholding tax returns
or statements when
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due, and that, as promptly as possible after the payment thereof, it will
deliver to each such Certificateholder appropriate documentation showing the
payment thereof, together with such additional documentary evidence as such
Certificateholders may reasonably request from time to time. The Trustee agrees
to file any other information reports as it may be required to file under United
States law.
Section 7.17. Trustee's Liens. The Trustee in its individual
capacity agrees that it will at its own cost and expense promptly take any
action as may be necessary to duly discharge and satisfy in full any mortgage,
pledge, lien, charge, encumbrance, security interest or claim ("Trustee's
Liens") on or with respect to the Trust Property which is attributable to the
Trustee either (i) in its individual capacity and which is unrelated to the
transactions contemplated by this Agreement, the Intercreditor Agreement, the
Financing Agreements or the Financing Documents, or (ii) as Trustee hereunder or
in its individual capacity and which arises out of acts or omissions which are
not contemplated by this Agreement.
Section 7.18. Preferential Collection of Claims. The Trustee shall
comply with Section 311(a) of the Trust Indenture Act, excluding any creditor
relationship listed in Section 311(b) of the Trust Indenture Act. If the Trustee
shall resign or be removed as Trustee, it shall be subject to Section 311(a) of
the Trust Indenture Act to the extent provided therein.
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with Names and
Addresses of Certificateholders. The Company will furnish to the Trustee within
15 days after each Record Date with respect to a Scheduled Payment, and at such
other times as the Trustee may request in writing within 30 days after receipt
by the Company of any such request, a list, in such form as the Trustee may
reasonably require, of all information in the possession or control of the
Company as to the names and addresses of the Certificateholders, in each case as
of a date not more than 15 days prior to the time such list is furnished;
provided, however, that so long as the Trustee is the sole Registrar, no such
list need be furnished; and provided further, however, that no such list need be
furnished for so long as a
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copy of the Register is being furnished to the Trustee pursuant to Section 7.12.
Section 8.02. Preservation of Information; Communications to
Certificateholders. The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Certificateholders contained
in the most recent list furnished to the Trustee as provided in Section 7.12 or
Section 8.01, as the case may be, and the names and addresses of
Certificateholders received by the Trustee in its capacity as Registrar, if so
acting. The Trustee may destroy any list furnished to it as provided in Section
7.12 or Section 8.01, as the case may be, upon receipt of a new list so
furnished.
Section 8.03. Reports by Trustee. Within 60 days after May 15 of
each year commencing with the first full year following the issuance of the
Certificates, the Trustee shall transmit to the Certificateholders, as provided
in Section 313(c) of the Trust Indenture Act, a brief report dated as of such
May 15, if required by Section 313(a) of the Trust Indenture Act.
Section 8.04. Reports by the Company. The Company shall:
(a) file with the Trustee, within 30 days after the Company is
required to file the same with the SEC, copies of the annual reports and
of the information, documents and other reports (or copies of such
portions of any of the foregoing as the SEC may from time to time by rules
and regulations prescribe) which the Company is required to file with the
SEC pursuant to section 13 or section 15(d) of the Securities Exchange Act
of 1934, as amended; or, if the Company is not required to file
information, documents or reports pursuant to either of such sections,
then to file with the Trustee and the SEC, in accordance with rules and
regulations prescribed by the SEC, such of the supplementary and periodic
information, documents and reports which may be required pursuant to
section 13 of the Securities Exchange Act of 1934, as amended, in respect
of a security listed and registered on a national securities exchange as
may be prescribed in such rules and regulations;
(b) during any period, prior to the consummation of the Exchange
Offer and during which the Shelf Registration Statement is not in effect,
in which the Company is not
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subject to Section 13(a), 13(c) or 15(d) under the Securities Exchange Act
of 1934, make available to any Holder of the Certificates in connection
with any sale thereof and any prospective purchaser of the Certificates
from such Holder, in each case upon request, the information specified in,
and meeting the requirements of, Rule 144A(d)(4) under the Securities Act
but only for so long as any of the Certificates remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act and, in any event, only until the second anniversary of the
Issuance Date;
(c) file with the Trustee and the SEC, in accordance with the rules
and regulations prescribed by the SEC, such additional information,
documents and reports with respect to compliance by the Company with the
conditions and covenants provided for in this Agreement, as may be
required by such rules and regulations, including, in the case of annual
reports, if required by such rules and regulations, certificates or
opinions of independent public accountants, conforming to the requirements
of Section 1.02;
(d) transmit to all Certificateholders, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act such
summaries of any information, documents and reports required to be filed
by the Company pursuant to subsections (a) and (c) of this Section 8.04 as
may be required by rules and regulations prescribed by the SEC; and
(e) furnish to the Trustee, not less often than annually, a brief
certificate from the principal executive officer, principal financial
officer or principal accounting officer as to his or her knowledge of the
Company's compliance with all conditions and covenants under this
Agreement (it being understood that for purposes of this paragraph (e),
such compliance shall be determined without regard to any period of grace
or requirement of notice provided under this Agreement).
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without Consent of
Certificateholders. Without the consent of the Certificateholders, the
Company may (but will not be required
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to), and the Trustee (subject to Section 9.03) shall, at the Company's request,
at any time and from time to time, enter into one or more agreements
supplemental hereto or, if applicable, to the Intercreditor Agreement, the
Registration Rights Agreement or the Liquidity Facility in form satisfactory to
the Trustee, for any of the following purposes:
(1) to evidence the succession of another corporation to the Company
and the assumption by any such successor of the covenants of the Company
herein contained or of the Company's obligations under the Registration
Rights Agreement or the Liquidity Facility; or
(2) to add to the covenants of the Company for the benefit of the
Certificateholders, or to surrender any right or power conferred upon the
Company in this Agreement, the Registration Rights Agreement or the
Liquidity Facility; or
(3) to correct or supplement any provision in this Agreement, the
Intercreditor Agreement, the Registration Rights Agreement or the
Liquidity Facility which may be defective or inconsistent with any other
provision herein or therein or to cure any ambiguity or correct any
mistake or to modify any other provision with respect to matters or
questions arising under this Agreement, the Intercreditor Agreement, the
Registration Rights Agreement or the Liquidity Facility, provided that any
such action shall not materially adversely affect the interests of the
Certificateholders; or, as provided in the Intercreditor Agreement, to
give effect to or provide for a Replacement Liquidity Facility (as defined
in the Intercreditor Agreement); or
(4) to comply with any requirement of the SEC, any applicable law,
rules or regulations of any exchange or quotation system on which the
Certificates are listed, any regulatory body or the Registration Rights
Agreement to effectuate the Exchange Offer; or
(5) to modify, eliminate or add to the provisions of this Agreement
to such extent as shall be necessary to continue the qualification of this
Agreement (including any supplemental agreement) under the Trust Indenture
Act or under any similar Federal statute hereafter enacted, and to add to
this Agreement such other provisions as may be
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expressly permitted by the Trust Indenture Act, excluding, however, the
provisions referred to in Section 316(a)(2) of the Trust Indenture Act as
in effect at the date as of which this instrument was executed or any
corresponding provision in any similar Federal statute hereafter enacted;
or
(6) to evidence and provide for the acceptance of appointment under
this Agreement by the Trustee of a successor Trustee and to add to or
change any of the provisions of this Agreement as shall be necessary to
provide for or facilitate the administration of the Trust, pursuant to the
requirements of Section 7.10; or
(7) to provide the information required under Section 7.12 and
Section 12.03 as to the Trustee; or
(8) to modify or eliminate provisions relating to the transfer or
exchange of Exchange Certificates or the Initial Certificates upon
consummation of the Exchange Offer (as defined in the Registration Rights
Agreement) or effectiveness of the Shelf Registration Statement or the
Exchange Offer Registration Statement;
provided, however, that no such supplemental agreement shall adversely affect
the status of any Trust as a grantor trust under Subpart E, Part I of Subchapter
J of Chapter 1 of Subtitle A of the Internal Revenue Code of 1986, as amended,
for U.S. federal income tax purposes.
Section 9.02. Supplemental Agreements with Consent of
Certificateholders. With the consent of the Certificateholders holding
Certificates (including consents obtained in connection with a tender offer or
exchange offer for the Certificates) evidencing Fractional Undivided Interests
aggregating not less than a majority in interest in the Trust, by Direction of
said Certificateholders delivered to the Company and the Trustee, the Company
may (but shall not be obligated to), and the Trustee (subject to Section 9.03)
shall enter into an agreement or agreements for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Agreement, the Intercreditor Agreement, the Liquidity Facility, the
Registration Rights Agreement or any Financing Agreement to the extent
applicable to such Certificateholders or of modifying in any manner the rights
and obligations of such Certificateholders under this Agreement, the
Intercreditor
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Agreement, the Liquidity Facility or the Registration Rights Agreement;
provided, however, that no such agreement shall, without the consent of the
Certificateholder of each Outstanding Certificate affected thereby:
(1) reduce in any manner the amount of, or delay the timing of, any
receipt by the Trustee of payments on the Equipment Notes held in the
Trust or distributions that are required to be made herein on any
Certificate, or change any date of payment on any Certificate, or change
the place of payment where, or the coin or currency in which, any
Certificate is payable, or impair the right to institute suit for the
enforcement of any such payment or distribution on or after the Regular
Distribution Date or Special Distribution Date applicable thereto; or
(2) permit the disposition of any Equipment Note included in the
Trust Property except as permitted by this Agreement, or otherwise deprive
such Certificateholder of the benefit of the ownership of the Equipment
Notes in the Trust; or
(3) reduce the specified percentage of the aggregate Fractional
Undivided Interests of the Trust which is required for any such
supplemental agreement, or reduce such specified percentage required for
any waiver of compliance with certain provisions of this Agreement or
certain defaults hereunder and their consequences provided for in this
Agreement; or
(4) waive, amend or modify Section 2.4, 3.2 or 3.3 of the
Intercreditor Agreement in a manner adverse to the Certificateholders; or
(5) modify any of the provisions of this Section 9.02 or Section
6.05, except to increase any such percentage or to provide that certain
other provisions of this Agreement cannot be modified or waived without
the consent of the Certificateholder of each Certificate affected thereby;
or
(6) adversely affect the status of any Trust as a grantor trust
under Subpart E, Part I of Subchapter J of Chapter 1 of Subtitle A of the
Internal Revenue Code of 1986, as amended, for U.S. federal income tax
purposes.
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It shall not be necessary for any Direction of Certificateholders
under this Section to approve the particular form of any proposed supplemental
agreement, but it shall be sufficient if such Direction shall approve the
substance thereof.
Section 9.03. Documents Affecting Immunity or Indemnity. If in the
opinion of the Trustee any document required to be executed by it pursuant to
the terms of Section 9.01 or 9.02 affects any interest, right, duty, immunity or
indemnity in favor of the Trustee under this Agreement, the Trustee may in its
discretion decline to execute such document.
Section 9.04. Execution of Supplemental Agreements. In executing, or
accepting the additional trusts created by, any agreement permitted by this
Article or the modifications thereby of the trusts created by this Agreement,
the Trustee shall be entitled to receive, and shall be fully protected in
relying upon, an Opinion of Counsel stating that the execution of such
supplemental agreement is authorized or permitted by this Agreement.
Section 9.05. Effect of Supplemental Agreements. Upon the execution
of any agreement supplemental to this Agreement under this Article, this
Agreement shall be modified in accordance therewith, and such supplemental
agreement shall form a part of this Agreement for all purposes; and every Holder
of a Certificate theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
Section 9.06. Conformity with Trust Indenture Act. Every
supplemental agreement executed pursuant to this Article shall conform to the
requirements of the Trust Indenture Act as then in effect.
Section 9.07. Reference in Certificates to Supplemental Agreements.
Certificates authenticated and delivered after the execution of any supplemental
agreement pursuant to this Article may bear a notation in form approved by the
Trustee as to any matter provided for in such supplemental agreement; and, in
such case, suitable notation may be made upon Outstanding Certificates after
proper presentation and demand.
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ARTICLE X
AMENDMENTS TO INDENTURES AND FINANCING DOCUMENTS
Section 10.01. Amendments and Supplements to Indentures and
Financing Documents. In the event that the Trustee, as holder (or beneficial
owner through the Subordination Agent) of any Equipment Note (or as prospective
purchaser of any Postponed Notes) in trust for the benefit of the
Certificateholders or as Controlling Party under the Intercreditor Agreement,
receives (directly or indirectly through the Subordination Agent) a request for
a consent to any amendment, modification, waiver or supplement under any
Equipment Note, any Financing Document related thereto or any other related
document, the Trustee shall forthwith send a notice of such proposed amendment,
modification, waiver or supplement to each Certificateholder registered on the
Register as of the date of such notice. The Trustee shall request from the
Certificateholders a Direction as to (a) whether or not to take or refrain from
taking (or direct the Subordination Agent to take or refrain from taking) any
action which a holder of (or, with respect to Postponed Notes, a prospective
purchaser of) such Equipment Note has the option to direct, (b) whether or not
to give or execute (or direct the Subordination Agent to give or execute) any
waivers, consents, amendments, modifications or supplements as a holder of (or,
with respect to Postponed Notes, a prospective purchaser of) such Equipment Note
or a Controlling Party and (c) how to vote (or direct the Subordination Agent to
vote) any Equipment Note (or, with respect to Postponed Note, its commitment to
acquire such Postponed Note) if a vote has been called for with respect thereto.
Provided such a request for Certificateholder Direction shall have been made, in
directing any action or casting any vote or giving any consent as the holder of
any Equipment Note (or in directing the Subordination Agent in any of the
foregoing), (i) other than as Controlling Party, the Trustee shall vote for or
give consent to any such action with respect to such Equipment Note (or
Postponed Note) in the same proportion as that of (A) the aggregate face amounts
of all Certificates actually voted in favor of or for giving consent to such
action by such Direction of Certificateholders to (B) the aggregate face amount
of all Outstanding Certificates and (ii) as Controlling Party, the Trustee shall
vote as directed in such Certificateholder Direction by the Certificateholders
evidencing a Fractional Undivided Interest aggregating not less than a majority
in interest in the Trust. For purposes of the
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immediately preceding sentence, a Certificate shall have been "actually voted"
if the Holder of such Certificate has delivered to the Trustee an instrument
evidencing such Holder's consent to such Direction prior to two Business Days
before the Trustee directs such action or casts such vote or gives such consent.
Notwithstanding the foregoing, but subject to Section 6.04 and the Intercreditor
Agreement, the Trustee may, in its own discretion and at its own direction,
consent and notify the relevant Loan Trustee and/or the Second Mortgagee, as the
case may be, of such consent (or direct the Subordination Agent to consent and
notify the relevant Loan Trustee and/or the Second Mortgagee, as the case may
be, of such consent) to any amendment, modification, waiver or supplement under
any Equipment Note (or Postponed Note), any Financing Document related thereto
or any other related document, if an Event of Default hereunder shall have
occurred and be continuing, or if such amendment, modification, waiver or
supplement will not materially adversely affect the interests of the
Certificateholders.
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust. The respective obligations
and responsibilities of the Company and the Trustee with respect to the Trust
shall terminate upon the distribution to all Holders of Certificates and the
Trustee of all amounts required to be distributed to them pursuant to this
Agreement and the disposition of all property held as part of the Trust
Property; provided, however, that in no event shall the Trust continue beyond
one hundred ten (110) years following the date of the execution of this Trust
Agreement.
Notice of such termination, specifying the Distribution Date upon
which the Certificateholders may surrender their Certificates to the Trustee for
payment of the final distribution and cancellation, shall be mailed promptly by
the Trustee to Certificateholders not earlier than the 60th day and not later
than the 20th day next preceding such final Distribution Date specifying (A) the
Distribution Date upon which the proposed final payment of the Certificates will
be made upon presentation and surrender of Certificates at the office or agency
of the Trustee therein specified, (B) the amount of any such proposed final
payment, and (C) that the Record Date otherwise applicable to such Distribution
Date is not applicable, payments being made
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only upon presentation and surrender of the Certificates at the office or agency
of the Trustee therein specified. The Trustee shall give such notice to the
Registrar at the time such notice is given to Certificateholders. Upon
presentation and surrender of the Certificates in accordance with such notice,
the Trustee shall cause to be distributed to Certificateholders such final
payments.
In the event that all of the Certificateholders shall not surrender
their Certificates for cancellation within six months after the date specified
in the above-mentioned written notice, the Trustee shall give a second written
notice to the remaining Certificateholders to surrender their Certificates for
cancellation and receive the final distribution with respect thereto. No
additional interest shall accrue on the Certificates after the Distribution Date
specified in the first written notice. In the event that any money held by the
Trustee for the payment of distributions on the Certificates shall remain
unclaimed for two years (or such lesser time as the Trustee shall be satisfied,
after sixty days' notice from the Company, is one month prior to the escheat
period provided under applicable law) after the final distribution date with
respect thereto, the Trustee shall pay to each Loan Trustee the appropriate
amount of money relating to such Loan Trustee and shall give written notice
thereof to the Company.
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders. The death
or incapacity of any Certificateholder shall not operate to terminate this
Agreement or the Trust, nor entitle such Certificateholder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the Trust,
nor otherwise affect the rights, obligations, and liabilities of the parties
hereto or any of them.
Section 12.02. Certificates Nonassessable and Fully Paid. Except as
set forth in the last sentence of this Section 12.02, Certificateholders shall
not be personally liable for obligations of the Trust, the Fractional Undivided
Interests represented by the Certificates shall be nonassessable for any
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losses or expenses of the Trust or for any reason whatsoever, and Certificates,
upon authentication thereof by the Trustee pursuant to Section 3.03, are and
shall be deemed fully paid. No Certificateholder shall have any right (except as
expressly provided herein) to vote or in any manner otherwise control the
operation and management of the Trust Property, the Trust, or the obligations of
the parties hereto, nor shall anything set forth herein, or contained in the
terms of the Certificates, be construed so as to constitute the
Certificateholders from time to time as partners or members of an association.
Neither the existence of the Trust nor any provision herein is intended to or
shall limit the liability the Certificateholders would otherwise incur if the
Certificateholders owned Trust Property as co-owners, or incurred any
obligations of the Trust, directly rather than through the Trust.
Section 12.03. Notices. (a) Unless otherwise specifically provided
herein, all notices required under the terms and provisions of this Agreement
shall be in English and in writing, and any such notice may be given by United
States mail, courier service or telecopy, and any such notice shall be effective
when delivered or received or, if mailed, three days after deposit in the United
States mail with proper postage for ordinary mail prepaid,
if to the Company, to:
Continental Airlines, Inc.
2929 Allen Parkway
Houston, TX 77019
Attention: Chief Financial Officer and
General Counsel
Facsimile: (713) 523-2831
if to the Trustee, to:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Department
Facsimile: (302) 651-8882
Telephone: (302) 651-8584
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(b) The Company or the Trustee, by notice to the other, may
designate additional or different addresses for subsequent notices or
communications.
(c) Any notice or communication to Certificateholders shall be
mailed by first-class mail to the addresses for Certificateholders shown on the
Register kept by the Registrar. Failure so to mail a notice or communication or
any defect in such notice or communication shall not affect its sufficiency with
respect to other Certificateholders.
(d) If a notice or communication is mailed in the manner provided
above within the time prescribed, it is conclusively presumed to have been duly
given, whether or not the addressee receives it.
(e) If the Company mails a notice or communication to the
Certificateholders, it shall mail a copy to the Trustee and to the Paying Agent
at the same time.
(f) Notwithstanding the foregoing, all communications or notices to
the Trustee shall be deemed to be given only when received by a Responsible
Officer of the Trustee.
(g) The Trustee shall promptly furnish the Company with a copy of
any demand, notice or written communication received by the Trustee hereunder
from any Certificateholder, any Loan Trustee or the Second Mortgagee.
Section 12.04. Governing Law. THIS AGREEMENT HAS BEEN DELIVERED IN
THE STATE OF NEW YORK AND THIS AGREEMENT AND THE CERTIFICATES SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
Section 12.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall be for any
reason whatsoever held invalid, then such covenants, agreements, provisions, or
terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement or the Trust, or of the
Certificates or the rights of the Certificateholders thereof.
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Section 12.06. Trust Indenture Act Controls. Upon the occurrence of
any Registration Event, this Agreement shall become subject to the provisions of
the Trust Indenture Act and shall, to the extent applicable, be governed by such
provisions. From and after any Registration Event, if any provision of this
Agreement limits, qualifies or conflicts with another provision which is
required to be included in this Agreement by the Trust Indenture Act, the
required provision shall control.
Section 12.07. Effect of Headings and Table of Contents. The Article
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
Section 12.08. Successors and Assigns. All covenants, agreements,
representations and warranties in this Agreement by the Trustee and the Company
shall bind and, to the extent permitted hereby, shall inure to the benefit of
and be enforceable by their respective successors and assigns, whether so
expressed or not.
Section 12.09. Benefits of Agreement. Nothing in this Agreement or
in the Certificates, express or implied, shall give to any Person, other than
the parties hereto and their successors hereunder, and the Certificateholders,
any benefit or any legal or equitable right, remedy or claim under this
Agreement.
Section 12.10. Legal Holidays. In any case where any Regular
Distribution Date or Special Distribution Date relating to any Certificate shall
not be a Business Day, then (notwithstanding any other provision of this
Agreement) payment need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on such
Regular Distribution Date or Special Distribution Date, and no interest shall
accrue during the intervening period.
Section 12.11. Counterparts. For the purpose of facilitating the
execution of this Agreement and for other purposes, this Agreement may be
executed simultaneously in any number of counterparts, each of which
counterparts shall be deemed to be an original, and all of which counterparts
shall constitute but one and the same instrument.
Section 12.12. Intention of Parties. The parties hereto intend that
the Trust be classified for U.S. federal income tax purposes as a grantor trust
under Subpart E, Part I of
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Subchapter J of the Internal Revenue Code of 1986, as amended, and
not as a trust or association taxable as a corporation or as a partnership. The
powers granted and obligations undertaken pursuant to this Agreement shall be so
construed so as to further such intent.
83
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first written above.
CONTINENTAL AIRLINES, INC.
By:___________________________
Name: Gerald Laderman
Title: Vice President
WILMINGTON TRUST COMPANY,
as Trustee
By:___________________________
Name:
Title:
84
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first written above.
CONTINENTAL AIRLINES, INC.
By:___________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Trustee
By:___________________________
Name:
Title:
85
EXHIBIT A
FORM OF CERTIFICATE
REGISTERED
No._________
[THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT
IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY
CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH
PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO
CONTINENTAL AIRLINES, INC., (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES
THAT IF IT SHOULD RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE IT WILL
DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
AFFILIATE OF ANY OF SUCH PERSONS, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
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A-2
ACT. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE
TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.]*
BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS NOT A PLAN
TRANSFEREE (AS DEFINED IN THE PASS THROUGH TRUST AGREEMENT) OR (B) IT IS
AN INSURANCE COMPANY USING THE ASSETS OF ITS GENERAL ACCOUNT TO ACQUIRE
THIS CERTIFICATE, AND THE CONDITIONS OF PROHIBITED TRANSACTION CLASS
EXEMPTION 95-60 ISSUED BY THE U.S. DEPARTMENT OF LABOR HAVE BEEN AND WILL
CONTINUE TO BE SATISFIED IN CONNECTION WITH ITS PURCHASE AND HOLDING OF
THIS CERTIFICATE. THE PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS CERTIFICATE IS REGISTERED
IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST
AGREEMENT REFERRED TO HEREIN.]**
- ----------
* Not to be included on the face of the Regulation S Global
Certificate.
** To be included on the face of each Global Certificate.
87
A-3
[[REGULATION S] GLOBAL CERTIFICATE]*
CONTINENTAL AIRLINES PASS THROUGH TRUST, SERIES 1997-2B
7.149% Continental Airlines [Initial] [Exchange]
Pass Through Certificate,
Series 1997-2B
Final Maturity Date: December 30, 2006
CUSIP/Common Code No. ____________
evidencing a fractional undivided interest in a trust, the property of which
includes certain equipment notes each secured by an Aircraft owned by
Continental Airlines, Inc.
$25,563,000 Fractional Undivided Interest representing
.003911904% of the Trust per $1,000 face amount
THIS CERTIFIES THAT _______________, for value received, is the
registered owner of a $________ (__________dollars) Fractional Undivided
Interest in the Continental Airlines Pass Through Trust, Series 1997-2B (the
"Trust") created pursuant to a Pass Through Trust Agreement, dated as of June
25, 1997 (the "Agreement"), between Wilmington Trust Company (the "Trustee") and
Continental Airlines, Inc., a corporation incorporated under Delaware law (the
"Company"), a summary of certain of the pertinent provisions of which is set
forth below. To the extent not otherwise defined herein, the capitalized terms
used herein have the meanings assigned to them in the Agreement. This
Certificate is one of the duly authorized Certificates designated as "7.149%
Continental Airlines [Initial] [Exchange] Pass Through Certificates, Series
1997-2B" (herein called the "Certificates"). This Certificate is issued under
and is subject to the terms, provisions, and conditions of the Agreement. By
virtue of its acceptance hereof the Certificateholder of this Certificate
assents to and agrees to be bound by the provisions of the Agreement and the
Intercreditor Agreement. The property of the Trust includes an interest in
certain Equipment Notes and all rights of the Trust to receive payments under
the Intercreditor Agreement and the Liquidity Facility (the "Trust Property").
Each issue of the Equipment
- ----------
* To be included on the face of each Global Certificate.
88
A-4
Notes is secured by, among other things, a security interest in the Aircraft
owned by the Company.
The Certificates represent fractional undivided interests in the
Trust and the Trust Property, and have no rights, benefits or interest in
respect of any assets or property other than the Trust Property.
Subject to and in accordance with the terms of the Agreement and the
Intercreditor Agreement, from and to the extent of funds then available to the
Trustee, there will be distributed on each June 30 and December 30 (a "Regular
Distribution Date"), commencing on December 30, 1997, to the Person in whose
name this Certificate is registered at the close of business on the 15th day
preceding the Regular Distribution Date, an amount in respect of the Scheduled
Payments due on such Regular Distribution Date on the Equipment Notes, the
receipt of which has been confirmed by the Trustee, equal to the product of the
percentage interest in the Trust evidenced by this Certificate and an amount
equal to the sum of such Scheduled Payments. Subject to and in accordance with
the terms of the Agreement and the Intercreditor Agreement, in the event that
Special Payments on the Equipment Notes are received by the Trustee, from funds
then available to the Trustee, there shall be distributed on the applicable
Special Distribution Date, to the Person in whose name this Certificate is
registered at the close of business on the 15th day preceding the Special
Distribution Date, an amount in respect of such Special Payments on the
Equipment Notes, the receipt of which has been confirmed by the Trustee, equal
to the product of the percentage interest in the Trust evidenced by this
Certificate and an amount equal to the sum of such Special Payments so received.
If a Regular Distribution Date or Special Distribution Date is not a Business
Day, distribution shall be made on the immediately following Business Day with
the same force and effect as if made on such Regular Distribution Date or
Special Distribution Date and no interest shall accrue during the intervening
period. The Trustee shall mail notice of each Special Payment and the Special
Distribution Date therefor to the Certificateholder of this Certificate.
The Certificates do not represent a direct obligation of, or an
obligation guaranteed by, or an interest in, the Company or the Trustee or any
of their affiliates. The Certificates are limited in right or payment, all as
more specifically set forth on the face hereof and in the Agreement.
89
A-5
All payments or distributions made to Certificateholders under the Agreement
shall be made only from the Trust Property and only to the extent that the
Trustee shall have sufficient income or proceeds from the Trust Property to make
such payments in accordance with the terms of the Agreement. Each
Certificateholder of this Certificate, by its acceptance hereof, agrees that it
will look solely to the income and proceeds from the Trust Property to the
extent available for distribution to such Certificateholder as provided in the
Agreement. This Certificate does not purport to summarize the Agreement and
reference is made to the Agreement for information with respect to the
interests, rights, benefits, obligations, proceeds, and duties evidenced hereby.
A copy of the Agreement may be examined during normal business hours at the
principal office of the Trustee, and at such other places, if any, designated by
the Trustee, by any Certificateholder upon request.
The Agreement permits, with certain exceptions therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Certificateholders under the Agreement at any time
by the Company and the Trustee with the consent of the Certificateholders
holding Certificates evidencing Fractional Undivided Interests aggregating not
less than a majority in interest in the Trust. Any such consent by the
Certificateholder of this Certificate shall be conclusive and binding on such
Certificateholder and upon all future Certificateholders of this Certificate and
of any Certificate issued upon the transfer hereof or in exchange hereof or in
lieu hereof whether or not notation of such consent is made upon this
Certificate. The Agreement also permits the amendment thereof, in certain
limited circumstances, without the consent of the Certificateholders of any of
the Certificates.
As provided in the Agreement and subject to certain limitations
therein set forth, the transfer of this Certificate is registrable in the
Register upon surrender of this Certificate for registration of transfer at the
offices or agencies maintained by the Trustee in its capacity as Registrar, or
by any successor Registrar, in the Borough of Manhattan, the City of New York,
duly endorsed or accompanied by a written instrument of transfer in form
satisfactory to the Trustee and the Registrar duly executed by the
Certificateholder hereof or such Certificateholder's attorney duly authorized in
writing, and thereupon one or more new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided
90
A-6
Interest in the Trust will be issued to the designated transferee or
transferees.
[The Holder of this Certificate is entitled to the benefits of the
Exchange and Registration Rights Agreement, dated as of June 25, 1997, among the
Company, the Trustee and the Initial Purchasers named therein (the "Registration
Rights Agreement"). In the event that no Registration Event has occurred on or
prior to the 210th day after the date of the issuance of the Certificates, the
interest rate per annum payable in respect of the Equipment Notes shall be
increased by 0.50%, from and including the 210th day after the Issuance Date to
but excluding the earlier of (i) the date on which a Registration Event occurs
and (ii) the date on which there cease to be any Registrable Certificates (as
defined in the Registration Rights Agreement). In the event that the Shelf
Registration Statement (if it is filed), after being declared effective by the
SEC, ceases to be effective at any time during the period specified by Section
2(b)(B) of the Registration Rights Agreement for more than 60 days, whether or
not consecutive, during any 12-month period, the interest rate per annum payable
in respect of the Equipment Notes shall be increased by 0.50% from the 61st day
of the applicable 12-month period such Shelf Registration Statement ceases to be
effective until such time as the Shelf Registration Statement again becomes
effective ( or, if earlier, the end of the period specified by Section 2(b)(B)
of the Registration Rights Agreement).]*
Except as otherwise provided in the Agreement and notwithstanding
the above, the final distribution on this Certificate will be made after notice
mailed by the Trustee of the pendency of such distribution and only upon
presentation and surrender of this Certificate at the office or agency of the
Trustee specified in such notice.
The Certificates are issuable only as registered Certificates
without coupons in minimum denominations of [$100,000]** [$1,000]*** Fractional
Undivided Interest and integral multiples of $1,000 in excess thereof except
that one Certificate may be in a different denomination. As provided in the
Agreement and subject to certain limitations therein set forth, the
- ----------
* To be included only on each Initial Certificate.
** To be included only on each Initial Certificate.
*** To be included only on each Exchange Certificate.
91
A-7
Certificates are exchangeable for new Certificates of authorized denominations
evidencing the same aggregate Fractional Undivided Interest in the Trust, as
requested by the Certificateholder surrendering the same.
No service charge will be made for any such registration of transfer
or exchange, but the Trustee shall require payment by the Holder of a sum
sufficient to cover any tax or governmental charge payable in connection
therewith.
The Trustee, the Registrar, and any agent of the Trustee or the
Registrar may treat the person in whose name this Certificate is registered as
the owner hereof for all purposes, and neither the Trustee, the Registrar, nor
any such agent shall be affected by any notice to the contrary.
The obligations and responsibilities created by the Agreement and
the Trust created thereby shall terminate upon the distribution to
Certificateholders of all amounts required to be distributed to them pursuant to
the Agreement and the disposition of all property held as part of the Trust
Property.
THIS CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK AND THE OBLIGATIONS, RIGHTS AND REMEDIES
OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Unless the certificate of authentication hereon has been executed by
the Trustee, by manual signature, this Certificate shall not be entitled to any
benefit under the Agreement or be valid for any purpose.
92
A-8
IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed.
Dated: _______________, 1997 CONTINENTAL AIRLINES
PASS THROUGH TRUST, SERIES
1997-2B
By: WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By: ____________________________
Name:
Title:
93
A-9
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Certificates referred to in the
within-mentioned Agreement.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By: ____________________________
Authorized Officer
94
A-10
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned
registered holder hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
_________________________________________
_________________________________________
please print or typewrite name and address including zip code of assignee
_________________________________________
the within Certificate and all rights thereunder, hereby irrevocably
constituting and appointing
_________________________________________
attorney to transfer said Certificate on the books of the Trustee with full
power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL CERTIFICATES
EXCEPT REGULATION S GLOBAL AND
REGULATION S DEFINITIVE CERTIFICATES]
In connection with any transfer of this
Certificate occurring prior to the date that is the earlier of the date of an
effective Registration Statement or the date two years after the later of the
original issuance of this Certificate or the last date on which this Certificate
was held by Continental Airlines, Inc., the Trustee or any affiliate of such
Persons, the undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
[ ] (a) this Certificate is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided by Rule
144A thereunder.
95
A-11
or
[ ] (b) this Certificate is being transferred other than in accordance with (a)
above and documents are being furnished that comply with the conditions of
transfer set forth in this Certificate and the Agreement.
If neither of the foregoing boxes is checked, the Trustee or other Registrar
shall not be obligated to register this Certificate in the name of any Person
other than the Holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in Section 3.06 of the Agreement
shall have been satisfied.
Date:__________________ [Name of Transferor]
NOTE: The signature must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any change
whatsoever.
Signature Guarantee: ______________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Certificate for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:__________________ ________________________________
NOTE: To be executed by an
executive officer.
96
EXHIBIT B
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS OF CERTIFICATES PURSUANT TO REGULATION S
[date]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Trustee Administration
Re: Continental Airlines Pass Through Trust (the "Trust"), Series
1997-2B, Continental Airlines Pass Through Certificates, Series
1997-2B (the "Certificates")
Sirs:
In connection with our proposed sale of $_____ Fractional Undivided
Interest of the Certificates, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Certificates was not made to a person in the
United States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(3) or Rule 904(c)(1) of
97
B-2
Regulation S are applicable thereto, we confirm that such sale has
been made in accordance with the applicable provisions of Rule 903(c)(3) or Rule
904(c)(1), as the case may be.
You and Continental Airlines, Inc. are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
98
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS OF CERTIFICATES TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
______________, ____
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Trustee Administration
Continental Airlines, Inc.
2929 Allen Parkway
Houston, Texas 77019
CONTINENTAL AIRLINES
PASS THROUGH TRUST, SERIES 1997-2B (the "Trust")
Pass Through Certificates, Series 1997-2B
(the "Certificates")
---------------------------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of U.S. $[_____________]
Fractional Undivided Interest of Certificates, we confirm that:
1. We understand that any subsequent transfer of the Certificates is
subject to certain restrictions and conditions set forth in the Trust Agreement,
dated as of June 25, 1997, between Continental Airlines, Inc. (the "Company")
and Wilmington Trust Company (the "Trustee") relating to the Certificates, and
we agree to be bound by, and not to resell, pledge or otherwise transfer the
Certificates except in compliance with, such restrictions and conditions and the
Securities Act of 1933, as amended (the "Securities Act").
2. We are purchasing Certificates having an aggregate principal amount of
not less than $100,000 and each account (if any) for which we are purchasing
Certificates is purchasing Certificates having an aggregate principal amount of
not less than $100,000.
99
C-2
3. We understand that the Certificates have not been registered under the
Securities Act, that the Certificates are being sold to us in a transaction that
is exempt from the registration requirements of the Securities Act and that the
Certificates may not be offered or resold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that, if we should sell any Certificates
within two years after the later of the original issuance of such Certificate
and the last date on which such Certificate is owned by the Company, the Trustee
or any affiliate of any of such persons, we will do so only (A) to the Company,
(B) in accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined therein), (C) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (D) pursuant
to the exemption from registration provided by Rule 144 under the Securities Act
or (E) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing any of the Certificates
from us a notice advising such purchaser that resales of the Certificates are
restricted as stated herein.
4. We understand that, on any proposed resale of any Certificates, we will
be required to furnish to the Company and the Trustee such certifications, legal
opinions and other information as the Company and the Trustee may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Certificates purchased by us will
bear a legend to the foregoing effect.
5. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Certificates, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investments.
6. We are acquiring the Certificates purchased by us for our own account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion and not
with a view to any distribution of the Certificates, subject, nevertheless to
the understanding that the disposition of our property shall at all times be and
remain within our control.
100
C-3
You are entitled to rely upon this letter and are irrevocably authorized
to produce this letter or a copy thereof to any interested party in any
administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
By: _____________________________
Name:
Title:
101
SCHEDULE I
Aircraft
Aircraft Type Registration Number
------------- -------------------
Boeing 737-3T0 N12322
Boeing 737-3T0 N10323
Boeing 737-3T0 N14324
Boeing 737-3T0 N69333
Boeing 737-3T0 N14334
Boeing 737-3T0 N14335
McDonnell Douglas MD-82 N12811
McDonnell Douglas MD-82 N15820
McDonnell Douglas MD-82 N18833
McDonnell Douglas MD-82 N10834
1
Exhibit 4.7
[EXECUTION COPY]
- --------------------------------------------------------------------------------
PASS THROUGH TRUST AGREEMENT
Dated as of June 25, 1997
between
CONTINENTAL AIRLINES, INC.
and
WILMINGTON TRUST COMPANY,
as Trustee
Continental Airlines Pass Through Trust, Series 1997-2C
7.206% Initial Pass Through Certificates, Series 1997-2C
7.206% Exchange Pass Through Certificates, Series 1997-2C
- --------------------------------------------------------------------------------
2
Reconciliation and tie between Continental Airlines Pass Through Trust
Agreement, Series 1997-2C dated as of June 25, 1997, and the Trust Indenture Act
of 1939. This reconciliation does not constitute part of the Pass Through Trust
Agreement.
Trust Indenture Act Pass Through Trust
of 1939 Section Agreement Section
-------------------- --------------------
310(a)(1) 7.08
(a)(2) 7.08
312(a) 3.05; 8.01; 8.02
313(a) 7.06; 8.03
314(a) 8.04(a), (c)
& (d)
(a)(4) 8.04(e)
(c)(1) 1.02
(c)(2) 1.02
(d)(1) 7.13; 11.01
(d)(2) 7.13; 11.01
(d)(3) 2.01
(e) 1.02
315(b) 7.02
316(a)(last sentence) 1.04(c)
(a)(1)(A) 6.04
(a)(1)(B) 6.05
(b) 6.06
(c) 1.04(e)
317(a)(1) 6.03
(b) 7.13
318(a) 12.06
3
TABLE OF CONTENTS
Section Page
- ------- ----
ARTICLE I
DEFINITIONS
Section 1.01. Definitions......................................... 2
Section 1.02. Compliance Certificates and Opinions................ 15
Section 1.03. Form of Documents Delivered to Trustee.............. 16
Section 1.04. Directions of Certificateholders.................... 17
ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Issuance of Certificates; Acquisition of
Equipment Notes..................................... 19
Section 2.02. Acceptance by Trustee............................... 22
Section 2.03. Limitation of Powers................................ 22
ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and Execution of
Certificates........................................ 23
Section 3.02. Restrictive Legends................................. 26
Section 3.03. Authentication of Certificates...................... 27
Section 3.04. Transfer and Exchange............................... 28
Section 3.05. Book-Entry Provisions for Restricted Global
Certificates and Regulation S Global
Certificates........................................ 29
Section 3.06. Special Transfer Provisions......................... 31
Section 3.07. Mutilated, Destroyed, Lost or Stolen
Certificates........................................ 36
Section 3.08. Persons Deemed Owners............................... 36
Section 3.09. Cancellation........................................ 37
Section 3.10. Temporary Certificates.............................. 37
Section 3.11. Limitation of Liability for Payments................ 37
Section 3.12. ERISA Restrictive Legend............................ 38
i
4
Section Page
- ------- ----
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments Account.... 38
Section 4.02. Distributions from Certificate Account and
Special Payments Account............................ 39
Section 4.03. Statements to Certificateholders.................... 41
Section 4.04. Investment of Special Payment Moneys................ 42
ARTICLE V
THE COMPANY
Section 5.01. Maintenance of Corporate Existence.................. 43
Section 5.02. Consolidation, Merger, etc.......................... 43
ARTICLE VI
DEFAULT
Section 6.01. Events of Default................................... 44
Section 6.02. Incidents of Sale of Equipment Notes................ 47
Section 6.03. Judicial Proceedings Instituted by Trustee;
Trustee May Bring Suit.............................. 48
Section 6.04. Control by Certificateholders....................... 48
Section 6.05. Waiver of Past Defaults............................. 48
Section 6.06. Right of Certificateholders to Receive Payments
Not to Be Impaired.................................. 49
Section 6.07. Certificateholders May Not Bring Suit Except
Under Certain Conditions............................ 50
Section 6.08. Remedies Cumulative................................. 50
ARTICLE VII
THE TRUSTEE
Section 7.01. Certain Duties and Responsibilities................. 51
Section 7.02. Notice of Defaults.................................. 51
Section 7.03. Certain Rights of Trustee........................... 52
Section 7.04. Not Responsible for Recitals or Issuance of
Certificates........................................ 53
Section 7.05. May Hold Certificates............................... 54
Section 7.06. Money Held in Trust................................. 54
ii
5
Section Page
- ------- ----
Section 7.07. Compensation and Reimbursement...................... 54
Section 7.08. Corporate Trustee Required; Eligibility............. 55
Section 7.09. Resignation and Removal; Appointment of
Successor........................................... 55
Section 7.10. Acceptance of Appointment by Successor.............. 57
Section 7.11. Merger, Conversion, Consolidation or Succession
to Business......................................... 58
Section 7.12. Maintenance of Agencies............................. 58
Section 7.13. Money for Certificate Payments to Be Held in
Trust............................................... 60
Section 7.14. Registration of Equipment Notes in Name of
Subordination Agent................................. 61
Section 7.15. Representations and Warranties of Trustee........... 61
Section 7.16. Withholding Taxes, Information Reporting............ 62
Section 7.17. Trustee's Liens..................................... 63
Section 7.18. Preferential Collection of Claims................... 63
ARTICLE VIII
CERTIFICATEHOLDERS' LISTS AND
REPORTS BY TRUSTEE
Section 8.01. The Company to Furnish Trustee with Names and
Addresses of Certificateholders..................... 63
Section 8.02. Preservation of Information; Communications to
Certificateholders.................................. 63
Section 8.03. Reports by Trustee.................................. 64
Section 8.04. Reports by the Company.............................. 64
ARTICLE IX
SUPPLEMENTAL AGREEMENTS
Section 9.01. Supplemental Agreements Without Consent of
Certificateholders.................................. 65
Section 9.02. Supplemental Agreements with Consent of
Certificateholders.................................. 67
Section 9.03. Documents Affecting Immunity or Indemnity........... 69
Section 9.04. Execution of Supplemental Agreements................ 69
Section 9.05. Effect of Supplemental Agreements................... 69
Section 9.06. Conformity with Trust Indenture Act................. 69
iii
6
Section Page
- ------- ----
Section 9.07. Reference in Certificates to Supplemental
Agreements.......................................... 69
ARTICLE X
AMENDMENTS TO INDENTURES AND
FINANCING DOCUMENTS
Section 10.01. Amendments and Supplements to Indentures and
Financing Documents................................. 69
ARTICLE XI
TERMINATION OF TRUST
Section 11.01. Termination of the Trust............................ 71
ARTICLE XII
MISCELLANEOUS PROVISIONS
Section 12.01. Limitation on Rights of Certificateholders.......... 72
Section 12.02. Certificates Nonassessable and Fully Paid........... 72
Section 12.03. Notices............................................. 73
Section 12.04. Governing Law....................................... 74
Section 12.05. Severability of Provisions.......................... 74
Section 12.06. Trust Indenture Act Controls........................ 74
Section 12.07. Effect of Headings and Table of Contents............ 75
Section 12.08. Successors and Assigns.............................. 75
Section 12.09. Benefits of Agreement............................... 75
Section 12.10. Legal Holidays...................................... 75
Section 12.11. Counterparts........................................ 75
Section 12.12. Intention of Parties................................ 75
Exhibit A- Form of Certificate
Exhibit B- Form of Certificate to Request Removal of
Restricted Legend
Exhibit C- Form of Certificate to be Delivered by an
Institutional Accredited Investor
Schedule I- Aircraft
iv
7
PASS THROUGH TRUST AGREEMENT
This PASS THROUGH TRUST AGREEMENT, dated as of June 25, 1997 (the
"Agreement"), between CONTINENTAL AIRLINES, INC., a Delaware corporation, and
WILMINGTON TRUST COMPANY, as Trustee, is made with respect to the formation of
Continental Airlines Pass Through Trust, Series 1997-2C and the issuance of
7.206% Continental Airlines Pass Through Trust, Series 1997-2C Pass Through
Certificates representing fractional undivided interests in the Trust.
WITNESSETH:
WHEREAS, the Company wishes to purchase the six Boeing 737-3TO
aircraft and four McDonnell Douglas DC-9-82 aircraft listed in Schedule I hereto
(the "Aircraft") and to finance the purchase price of each such Aircraft through
the issuance pursuant to an Indenture, on a recourse basis, of four series of
Equipment Notes relating to such Aircraft;
WHEREAS, the Trustee, upon execution and delivery of this Agreement,
hereby declares the creation of the Trust for the benefit of the
Certificateholders, and the initial Certificateholders, as the grantors of the
Trust, by their respective acceptances of the Certificates, join in the creation
of this Trust with the Trustee;
WHEREAS, all Certificates to be issued by the Trust will evidence
fractional undivided interests in the Trust and will convey no rights, benefits
or interests in respect of any property other than the Trust Property;
WHEREAS, pursuant to the terms and conditions of this Agreement and
each of the Financing Agreements to be entered into by the Trustee
simultaneously with the execution and delivery of this Agreement, the Trustee on
behalf of the Trust shall purchase one or more issues of Equipment Notes having
the same interest rate as, and final maturity dates not later than the final
Regular Distribution Date of, the Certificates issued hereunder and, subject to
the Intercreditor Agreement, shall hold such Equipment Notes in trust for the
benefit of the Certificateholders;
WHEREAS, to facilitate the sale of Equipment Notes to, and the
purchase of Equipment Notes by, the Trustee on behalf of
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the Trust, the Company has duly authorized the execution and delivery of this
Agreement as the "issuer", as such term is defined in and solely for purposes of
the Securities Act, of the Certificates to be issued pursuant hereto and as the
"obligor", as such term is defined in and solely for purposes of the Trust
Indenture Act of 1939, as amended, with respect to all such Certificates and is
undertaking to perform certain administrative and ministerial duties hereunder
and is also undertaking to pay the ongoing fees and expenses of the Trustee;
WHEREAS, all of the conditions and requirements necessary to make
this Agreement, when duly executed and delivered, a valid, binding and legal
instrument, enforceable in accordance with its terms and for the purposes herein
expressed, have been done, performed and fulfilled, and the execution and
delivery of this Agreement in the form and with the terms hereof have been in
all respects duly authorized; and
WHEREAS, upon issuance of the Exchange Certificates, if any, or the
effectiveness of the Shelf Registration Statement, this Agreement, as amended or
supplemented from time to time, will be subject to the provisions of the Trust
Indenture Act of 1939, and shall, to the extent applicable, be governed by such
provisions;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, and of other good and valuable consideration the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. For all purposes of this Agreement,
except as otherwise expressly provided or unless the context otherwise requires:
(1) the terms used in this Agreement, including in the recitals to
this Agreement, that are defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference
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therein, or by the rules promulgated under the Trust Indenture Act, have
the meanings assigned to them therein;
(3) all references in this Agreement to designated "Articles",
"Sections", "Subsections" and other subdivisions are to the designated
Articles, Sections, Subsections and other subdivisions of this Agreement;
(4) the words "herein", "hereof" and "hereunder" and other words of
similar (import refer to this Agreement as a whole and not to any
particular Article, Section, Subsection or other subdivision; and
(5) unless the context otherwise requires, whenever the words
"including", "include" or "includes" are used herein, it shall be deemed
to be followed by the phrase "without limitation".
Affiliate: Means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such Person, provided, however, that
neither America West Airlines, Inc. nor any of its subsidiaries shall be
deemed to be an "Affiliate" of the Company for purposes of this Agreement.
For the purposes of this definition, "control" means the power, directly
or indirectly, to direct the management and policies of such Person,
whether through the ownership of voting securities or by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
Agent Members: Has the meaning specified in Section 3.05.
Agreement: Has the meaning specified in the initial paragraph
hereto.
Aircraft: Has the meaning specified in the first recital to this
Agreement.
Authorized Agent: Means any Paying Agent or Registrar for the
Certificates.
Avoidable Tax: Means a state or local tax (i) upon (w) the Trust,
(x) the Trust Property, (y) Certificateholders or (z) the Trustee for
which the Trustee is entitled to seek
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reimbursement from the Trust Property, and (ii) which would be avoided if
the Trustee were located in another state, or jurisdiction within a state,
within the United States. A tax shall not be an Avoidable Tax if the
Company shall agree to pay, and shall pay, such tax.
Boeing: Means The Boeing Company.
Business Day: Means any day other than a Saturday, a Sunday or a day
on which commercial banks are required or authorized to close in Houston,
Texas, New York, New York, Salt Lake City, Utah or, so long as any
Certificate is outstanding, the city and state in which the Trustee or any
Loan Trustee maintains its Corporate Trust Office or receives and
disburses funds.
Cedel: Means Cedel Bank societe anonyme.
Certificate: Means any one of the Initial Certificates or
Exchange Certificates and any such Certificates issued in exchange
therefor or replacement thereof pursuant to this Agreement.
Certificate Account: Means the account or accounts created and
maintained pursuant to Section 4.01(a).
Certificateholder or Holder: Means the Person in whose name a
Certificate is registered in the Register.
Company: Means Continental Airlines, Inc., a Delaware corporation,
or its successor in interest pursuant to Section 5.02, or (only in the
context of provisions hereof, if any, where such reference is required for
purposes of compliance with the Trust Indenture Act) any other "obligor"
(within the meaning of the Trust Indenture Act) with respect to the
Certificates.
Controlling Party: Has the meaning specified in the
Intercreditor Agreement.
Corporate Trust Office: With respect to the Trustee, the Second
Mortgagee or any Loan Trustee, means the office of such trustee in the
city at which at any particular time its corporate trust business shall be
principally administered.
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Cut-off Date: Means August 31, 1997.
Definitive Certificates: Has the meaning specified in Section
3.01(e).
Direction: Has the meaning specified in Section 1.04(a).
Distribution Date: Means any Regular Distribution Date or
Special Distribution Date as the context requires.
DTC: Means The Depository Trust Company, its nominees and their
respective successors.
Equipment Notes: Means the equipment notes issued under the
Indentures.
ERISA: Means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor federal statute.
ERISA Legend: Has the meaning specified in Section 3.12.
Escrow Account: Has the meaning specified in Section 2.01(b).
Escrowed Funds: Has the meaning specified in Section 2.01(b).
Euroclear: Means the Euroclear System.
Event of Default: Means an Indenture Default under any Indenture
pursuant to which Equipment Notes held by the Trust were issued.
Exchange Certificates: Means the pass through certificates
substantially in the form of Exhibit A hereto issued in exchange for the
Initial Certificates pursuant to the Registration Rights Agreement and
authenticated hereunder.
Exchange Offer: Means the exchange offer which may be made
pursuant to the Registration Rights Agreement to exchange Initial
Certificates for Exchange Certificates.
Exchange Offer Registration Statement: Means the registration
statement that, pursuant to the Registration Rights Agreement, is filed by
the Company with the SEC with respect to the exchange of Initial
Certificates for Exchange Certificates.
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Final Maturity Date: Means December 30, 2005.
Financing Agreements: Means each of the ten separate Participation
Agreements relating to the Aircraft each dated the date hereof, among the
Company, the Pass Through Trustee, the Other Trustees, the relevant Loan
Trustee, the Second Mortgagee and the Subordination Agent providing for,
among other things, the purchase of Equipment Notes by the Trustee on
behalf of the Trust, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with its terms.
Financing Documents: With respect to any Equipment Note, means
the related Indenture, the Second Mortgage and the related Financing
Agreement.
Fractional Undivided Interest: Means the fractional undivided
interest in the Trust that is evidenced by a Certificate.
Global Certificates: Has the meaning specified in Section
3.01(d).
Global Exchange Certificate: Has the meaning specified in
Section 3.01(f).
Indenture: Means each of the ten separate trust indentures and
mortgages relating to the Aircraft, in each case as the same may be
amended, supplemented or otherwise modified from time to time in
accordance with its terms.
Indenture Default: With respect to any Indenture, means any
Event of Default (as such term is defined in such Indenture).
Initial Certificates: Means the certificates issued and
authenticated hereunder substantially in the form of Exhibit A hereto
other than the Exchange Certificates.
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Initial Purchasers: Means, collectively, Credit Suisse First
Boston Corporation and Morgan Stanley & Co. Incorporated.
Institutional Accredited Investor: Means an institutional investor
that is an "accredited investor" within the meaning set forth in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act.
Intercreditor Agreement: Means the Intercreditor Agreement dated as
of June 25, 1997 among the Trustee, the Other Trustees, the Liquidity
Provider, the liquidity providers relating to the Certificates issued
under (and as defined in) each of the Other Pass Through Trust Agreements,
and Wilmington Trust Company, as Subordination Agent and as trustee
thereunder, as amended, supplemented or otherwise modified from time to
time in accordance with its terms.
Issuance Date: Means the date of the issuance of the Initial
Certificates.
Liquidity Facility: Means, initially, the Revolving Credit Agreement
dated as of June 25, 1997 relating to the Certificates, between the
Liquidity Provider and the Subordination Agent, as agent and trustee for
the Trustee, and, from and after the replacement of such Agreement
pursuant to the Intercreditor Agreement, the replacement liquidity
facility (or facilities) therefor, in each case as amended, supplemented
or otherwise modified from time to time in accordance with its terms.
Liquidity Provider: Means, initially, Kredietbank N.V., acting
through its New York Branch, and any replacement or successor therefor
appointed in accordance with the Intercreditor Agreement.
Loan Trustee: With respect to any Equipment Note or the Indenture
applicable thereto, means the bank or trust company designated as
mortgagee under such Indenture, together with any successor to such
mortgagee appointed pursuant thereto.
McDonnell Douglas: Means the McDonnell Douglas Corporation.
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Non-U.S. Person: Means a Person that is not a "U.S. person", as
defined in Regulation S.
Officer's Certificate: Means a certificate signed, (a) in the case
of the Company, by (i) the Chairman or Vice Chairman of the Board of
Directors, the President, any Executive Vice President, any Senior Vice
President or the Treasurer of the Company, signing alone, or (ii) any Vice
President of the Company signing together with the Secretary, the
Assistant Secretary, the Treasurer or any Assistant Treasurer of the
Company, (b) in the case of a Loan Trustee, a Responsible Officer of such
Loan Trustee or (c) in the case of a Second Mortgagee, a Responsible
Officer of such Second Mortgagee.
Opinion of Counsel: Means a written opinion of legal counsel who (a)
in the case of counsel for the Company may be (i) a senior attorney of the
Company one of whose principal duties is furnishing advice as to legal
matters, (ii) Hughes Hubbard & Reed LLP, or (iii) such other counsel
designated by the Company and reasonably acceptable to the Trustee and (b)
in the case of counsel for any Loan Trustee or Second Mortgagee may be
such counsel as may be designated by any of them whether or not such
counsel is an employee of any of them, and who shall be reasonably
acceptable to the Trustee.
Other Pass Through Trust Agreements: Means each of the three other
Continental Airlines 1997-2 Pass Through Trust Agreements relating to
Continental Airlines Pass Through Trust, Series 1997-2A, Continental
Airlines Pass Through Trust, Series 1997-2B and Continental Airlines Pass
Through Trust, Series 1997-2D, dated the date hereof.
Other Trustees: Means the trustees under the Other Pass Through
Trust Agreements, and any successor or other trustee appointed as
provided therein.
Outstanding: When used with respect to Certificates, means, as
of the date of determination, all Certificates theretofore
authenticated and delivered under this Agreement, except:
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(i) Certificates theretofore canceled by the Registrar or
delivered to the Trustee or the Registrar for cancellation;
(ii) Certificates for which money in the full amount required
to make the final distribution with respect to such Certificates
pursuant to Section 11.01 hereof has been theretofore deposited with
the Trustee in trust for the Holders of such Certificates as
provided in Section 4.01 pending distribution of such money to such
Certificateholders pursuant to payment of such final distribution;
and
(iii) Certificates in exchange for or in lieu of which other
Certificates have been authenticated and delivered pursuant to this
Agreement.
Paying Agent: Means the paying agent maintained and appointed
for the Certificates pursuant to Section 7.12.
Permitted Investments: Means obligations of the United States of
America or agencies or instrumentalities thereof for the payment of which
the full faith and credit of the United States of America is pledged,
maturing in not more than 60 days after the date of acquisition thereof or
such lesser time as is required for the distribution of any Special
Payments on a Special Distribution Date.
Person: Means any person, including any individual, corporation,
limited liability company, partnership, joint venture, association,
joint-stock company, trust, trustee, unincorporated organization, or
government or any agency or political subdivision thereof.
Plan Transferee: Means any Plan or any entity that is using the
assets of any Plan to purchase or hold its interest in a Certificate. For
purposes of this definition, a "Plan" means any employee benefit plan
subject to ERISA as well as any plan that is not subject to ERISA but
which is subject to Section 4975 of the Internal Revenue Code of 1986, as
amended.
Pool Balance: Means, as of any date, (i) the original aggregate face
amount of the Certificates less (ii) the aggregate amount of all payments
made in respect of such
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Certificates other than payments made in respect of interest or premium
thereon or reimbursement of any costs or expenses incurred in connection
therewith. The Pool Balance as of any Distribution Date shall be computed
after giving effect to the payment of principal, if any, on the Equipment
Notes or other Trust Property held in the Trust and the distribution
thereof to be made on such Distribution Date.
Pool Factor: Means, as of any date, the quotient (rounded to the
seventh decimal place) computed by dividing (i) the Pool Balance as at
such date by (ii) the original aggregate face amount of the Certificates.
The Pool Factor as of any Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes or
other Trust Property held in the Trust and the distribution thereof to be
made on such Distribution Date.
Postponed Notes: Means any Equipment Notes to be held in the
Trust as to which a Postponement Notice shall have been delivered
pursuant to Section 2.01(b).
Postponement Notice: Means an Officer's Certificate of the Company
(1) requesting that the Trustee temporarily postpone the purchase pursuant
to one or more of the Financing Agreements of certain of the Equipment
Notes to a date which is later than the Issuance Date, (2) identifying the
amount of the purchase price of each such Equipment Note and the aggregate
purchase price for all such Equipment Notes and (3) with respect to each
such Equipment Note, either (a) setting or resetting a new Transfer Date
for payment by the Trustee of such purchase price and issuance of the
related Equipment Note (subject to subsequent change from time to time in
accordance with the relevant Financing Agreement), or (b) indicating that
such new Transfer Date (which shall be on or prior to the Cut-off Date)
will be set by subsequent written notice not less than one Business Day
prior to such new Transfer Date (subject to subsequent change from time to
time in accordance with the relevant Financing Agreement).
PTC Event of Default: Means any failure to pay within 10 Business
Days of the due date thereof: (i) the outstanding Pool Balance on the
Final Maturity Date or (ii) interest due on the Certificates on any
Distribution Date (unless the Subordination Agent shall have made an
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Interest Drawing or Drawings (as defined in the Intercreditor Agreement),
or a withdrawal or withdrawals pursuant to section 3.6(f) of the
Intercreditor Agreement, with respect thereto in an aggregate amount
sufficient to pay such interest and shall have distributed such amount to
the Trustee).
Purchase Agreement: Means the Purchase Agreement dated June 17, 1997
among the Initial Purchasers and the Company, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with
its terms.
QIB: Means a qualified institutional buyer as defined in Rule
144A.
Record Date: Means (i) for Scheduled Payments to be distributed on
any Regular Distribution Date, other than the final distribution, the 15th
day (whether or not a Business Day) preceding such Regular Distribution
Date, and (ii) for Special Payments to be distributed on any Special
Distribution Date, other than the final distribution, the 15th day
(whether or not a Business Day) preceding such Special Distribution Date.
Register and Registrar: Mean the register maintained and the
registrar appointed pursuant to Sections 3.04 and 7.12.
Registration Event: Means the declaration of the effectiveness
by the SEC of the Exchange Offer Registration Statement or the Shelf
Registration Statement.
Registration Rights Agreement: Means the Exchange and Registration
Rights Agreement dated as of June 25, 1997, among the Initial Purchasers,
the Trustee, the Other Trustees and the Company, as amended, supplemented
or otherwise modified from time to time in accordance with its terms.
Regular Distribution Date: With respect to distributions of
Scheduled Payments in respect of the Certificates, means each date
designated as a Regular Distribution Date in the Certificates issued
pursuant to this Agreement, until payment of all the Scheduled Payments to
be made under the Equipment Notes held in the Trust have been made;
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provided, however, that, if any such day shall not be a Business Day, the
related distribution shall be made on the next succeeding Business Day
without additional interest.
Regulation S: Means Regulation S under the Securities Act or any
successor regulation thereto.
Regulation S Definitive Certificates: Has the meaning specified
in Section 3.01(e).
Regulation S Global Certificates: Has the meaning specified in
Section 3.01(d).
Responsible Officer: With respect to the Trustee, the Second
Mortgagee and any Loan Trustee, means any officer in the Corporate Trust
Office of the Trustee, Second Mortgagee or Loan Trustee or any other
officer customarily performing functions similar to those performed by the
persons who at the time shall be such officers, respectively, or to whom
any corporate trust matter is referred because of his knowledge of and
familiarity with a particular subject.
Restricted Definitive Certificates: Has the meaning specified in
Section 3.01(e).
Restricted Global Certificate: Has the meaning specified in
Section 3.01(c).
Restricted Legend: Has the meaning specified in Section 3.02.
Restricted Period: Has the meaning specified in Section 3.01(d).
Rule 144A: Means Rule 144A under the Securities Act and any
successor rule thereto.
Scheduled Payment: With respect to any Equipment Note, means (i) any
payment of principal or interest on such Equipment Note (other than any
such payment which is not in fact received by the Subordination Agent
within five days of the date on which such payment is scheduled to be
made) due from the obligor thereon or (ii) any payment of interest on the
Certificates with funds drawn under the Liquidity Facility, which payment
represents the installment of
19
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principal at the stated maturity of such installment of principal on such
Equipment Note, the payment of regularly scheduled interest accrued on the
unpaid principal amount of such Equipment Note, or both; provided that any
payment of principal, premium, if any, or interest resulting from the
redemption or purchase of any Equipment Note shall not constitute a
Scheduled Payment.
SEC: Means the Securities and Exchange Commission, as from time to
time constituted or created under the United States Securities Exchange
Act of 1934, as amended, or, if at any time after the execution of this
instrument such Commission is not existing and performing the duties now
assigned to it under the Trust Indenture Act, then the body performing
such duties on such date.
Second Mortgage: Means the Second Trust Indenture and Mortgage
dated as of the date hereof between the Company and the Loan Trustees.
Second Mortgagee: Means the bank or trust company designated as
second mortgagee under the Second Mortgage together with any successor to
such second mortgagee appointed pursuant thereto.
Securities Act: Means the United States Securities Act of 1933,
as amended from time to time, or any successor thereto.
Shelf Registration Statement: Means the shelf registration statement
which may be required to be filed by the Company with the SEC pursuant to
any Registration Rights Agreement, other than an Exchange Offer
Registration Statement.
Special Distribution Date: Means each date on which a Special
Payment is to be distributed as specified in this Agreement; provided,
however, that, if any such day shall not be a Business Day, the related
distribution shall be made on the next succeeding Business Day without
additional interest.
Special Payment: Means (i) any payment (other than a Scheduled
Payment) in respect of, or any proceeds of, any Equipment Note, the
Collateral (as defined in each
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Indenture) or the Collateral (as defined in the Second Mortgage), (ii) the
amounts required to be distributed pursuant to the last paragraph of
Section 2.01(b) or (iii) the amounts required to be distributed pursuant
to the penultimate paragraph of Section 2.01(b).
Special Payments Account: Means the account or accounts created
and maintained pursuant to Section 4.01(b).
Specified Investments: Means, with respect to investments to be made
with Escrowed Funds pursuant to Section 2.01(b) hereof, (i) obligations
of, or guaranteed by, the United States Government or agencies thereof,
(ii) open market commercial paper of any corporation incorporated under
the laws of the United States of America or any State thereof rated at
least P-2 or its equivalent by Moody's Investors Service, Inc. or at least
A-2 or its equivalent by Standard & Poor's Ratings Group, (iii)
certificates of deposit issued by commercial banks organized under the
laws of the United States or of any political subdivision thereof having a
combined capital and surplus in excess of $100,000,000, which banks or
their holding companies have a short-term deposit rating of Pl by Moody's
Investors Service, Inc. or its equivalent by Standard & Poor's Ratings
Group; provided, however, that the aggregate amount at any one time so
invested in certificates of deposit issued by any one bank shall not
exceed 5% of such bank's capital and surplus, (iv) U.S. dollar denominated
offshore certificates of deposit issued by, or offshore time deposits
with, any commercial bank described in clause (iii) above or any
subsidiary thereof and (v) repurchase agreements with any financial
institution having combined capital and surplus of at least $100,000,000
with respect to any of the obligations described in clauses (i) through
(iv) above as collateral; provided further that if all of the above
investments are unavailable, all amounts to be invested may be used to
purchase Federal Funds from an entity described in clause (iii) above.
Subordination Agent: Has the meaning specified in the
Intercreditor Agreement.
Transfer Date: Has the meaning assigned to the term "Closing
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Date" in each Financing Agreement (as such "Closing Date" may be changed
from time to time in accordance with the terms of such Financing
Agreement).
Triggering Event: Has the meaning assigned to such term in the
Intercreditor Agreement.
Trust: Means the trust created by this Agreement, the estate of
which consists of the Trust Property.
Trust Indenture Act: Means the United States Trust Indenture Act
of 1939, as amended from time to time, or any successor thereto.
Trust Property: Means (i) subject to the Intercreditor Agreement,
the Equipment Notes held as the property of the Trust and all monies at
any time paid thereon and all monies due and to become due thereunder,
(ii) funds from time to time deposited in the Escrow Account, the
Certificate Account and the Special Payments Account and, subject to the
Intercreditor Agreement, any proceeds from the sale by the Trustee
pursuant to Article VI hereof of any such Equipment Note and (iii) all
rights of the Trust and the Trustee, on behalf of the Trust, under the
Intercreditor Agreement and the Liquidity Facility, including, without
limitation, all rights to receive certain payments thereunder, and all
monies paid to the Trustee on behalf of the Trust pursuant to the
Intercreditor Agreement or the Liquidity Facility.
Trustee: Means Wilmington Trust Company, or its successor in
interest, and any successor or other trustee appointed as provided
herein.
Trustee's Lien: Has the meaning specified in Section 7.17.
Section 1.02. Compliance Certificates and Opinions. Upon any
application or request (except with respect to matters set forth in Article II)
by the Company, any Loan Trustee or the Second Mortgagee to the Trustee to take
any action under any provision of this Agreement, the Company, such Loan Trustee
or such Second Mortgagee, as the case may be, shall furnish to the Trustee (i)
an Officer's Certificate stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Agreement relating to the
proposed action have been complied with and (ii) an Opinion of Counsel stating
that in the opinion
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of such counsel all such conditions precedent, if any, have been complied with,
except that in the case of any such application or request as to which the
furnishing of such documents is specifically required by any provision of this
Agreement relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement (other than a certificate
provided pursuant to Section 8.04(e)) shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions in this
Agreement relating thereto;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
Section 1.03. Form of Documents Delivered to Trustee. In any case
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
as to other matters and any such Person may certify or give an opinion as to
such matters in one or several documents.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Agreement
23
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or, in respect of the Certificates, this Agreement, they may, but need not, be
consolidated and form one instrument.
Section 1.04. Directions of Certificateholders. (a) Any direction,
consent, request, demand, authorization, notice, waiver or other action provided
by this Agreement to be given or taken by Certificateholders (a "Direction") may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Certificateholders in person or by an agent or proxy duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required pursuant to this
Agreement, to the Company, any Loan Trustee or the Second Mortgagee. Proof of
execution of any such instrument or of a writing appointing any such agent or
proxy shall be sufficient for any purpose of this Agreement and conclusive in
favor of the Trustee, the Company, any Loan Trustee and the Second Mortgagee, if
made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the certificate of any notary public or
other officer of any jurisdiction authorized to take acknowledgments of deeds or
administer oaths that the Person executing such instrument acknowledged to him
the execution thereof, or by an affidavit of a witness to such execution sworn
to before any such notary or such other officer and where such execution is by
an officer of a corporation or association or a member of a partnership, on
behalf of such corporation, association or partnership, such certificate or
affidavit shall also constitute sufficient proof of his authority. The fact and
date of the execution of any such instrument or writing, or the authority of the
Person executing the same, may also be proved in any other reasonable manner
which the Trustee deems sufficient.
(c) In determining whether the Certificateholders of the requisite
Fractional Undivided Interests of Certificates Outstanding have given any
Direction under this Agreement, Certificates owned by the Company or any
Affiliate thereof shall be disregarded and deemed not to be Outstanding for
purposes of any such determination. In determining whether the Trustee shall be
protected in relying upon any such Direction, only Certificates which the
Trustee knows to be so owned shall be so
24
-18-
disregarded. Notwithstanding the foregoing, (i) if any such Person owns 100% of
the Certificates Outstanding, such Certificates shall not be so disregarded, and
(ii) if any amount of Certificates so owned by any such Person have been pledged
in good faith, such Certificates shall not be disregarded if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Certificates and that the pledgee is not the Company or any
Affiliate thereof.
(d) For all purposes of this Agreement, all Initial Certificates and
all Exchange Certificates shall vote and take all other actions of
Certificateholders together as one series of Certificates.
(e) The Company may at its option, by delivery of an Officer's
Certificate to the Trustee, set a record date to determine the
Certificateholders entitled to give any Direction. Notwithstanding Section
316(c) of the Trust Indenture Act, such record date shall be the record date
specified in such Officer's Certificate, which shall be a date not more than 30
days prior to the first solicitation of Certificateholders in connection
therewith. If such a record date is fixed, such Direction may be given before or
after such record date, but only the Certificateholders of record at the close
of business on such record date shall be deemed to be Certificateholders for the
purposes of determining whether Certificateholders of the requisite proportion
of Outstanding Certificates have authorized or agreed or consented to such
Direction, and for that purpose the Outstanding Certificates shall be computed
as of such record date; provided that no such Direction by the
Certificateholders on such record date shall be deemed effective unless it shall
become effective pursuant to the provisions of this Agreement not later than one
year after such record date.
(f) Any Direction by the Holder of any Certificate shall bind the
Holder of every Certificate issued upon the transfer thereof or in exchange
therefor or in lieu thereof, whether or not notation of such Direction is made
upon such Certificate.
(g) Except as otherwise provided in Section 1.04(c), Certificates
owned by or pledged to any Person shall have an equal and proportionate benefit
under the provisions of this Agreement, without preference, priority, or
distinction as among all of the Certificates.
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ARTICLE II
ORIGINAL ISSUANCE OF CERTIFICATES;
ACQUISITION OF EQUIPMENT NOTES
Section 2.01. Issuance of Certificates; Acquisition of Equipment
Notes. (a) The Trustee is hereby directed (i) to execute and deliver the
Intercreditor Agreement, the Registration Rights Agreement and each of the
Financing Agreements on or prior to the Issuance Date, each in the form
delivered to the Trustee by the Company, and (ii) subject to the respective
terms thereof, to perform its obligations thereunder. Upon request of the
Company and the satisfaction or waiver of the closing conditions specified in
the Purchase Agreement, the Trustee shall execute, deliver, authenticate, issue
and sell Initial Certificates in authorized denominations equaling in the
aggregate the amount set forth, with respect to the Certificates, in Schedule II
to the Purchase Agreement evidencing the entire ownership interest in the Trust,
which amount equals the maximum aggregate principal amount of Equipment Notes
which may be purchased by the Trustee pursuant to the Financing Agreements. On
the Issuance Date, the Trustee shall purchase, pursuant to the terms and
conditions of the Financing Agreements, the Equipment Notes (other than the
Postponed Notes) contemplated to be purchased by the Trustee under the Financing
Agreements at a purchase price equal to the consideration so received for the
Certificates (less the aggregate amount of any Escrowed Funds). Except as
provided in Sections 3.04, 3.05, 3.06, 3.07 and 3.10 hereof, the Trustee shall
not execute, authenticate or deliver Certificates in excess of the aggregate
amount specified in this paragraph.
(b) On or prior to the Issuance Date, the Company may deliver to the
Trustee a Postponement Notice relating to one or more Postponed Notes. The
Trustee shall postpone the purchase of the Postponed Notes from the
consideration received from the sale of Certificates and shall promptly deposit
funds in an amount equal to the purchase price of such Postponed Notes (the
"Escrowed Funds") into an escrow account (the "Escrow Account") with the Trustee
to be maintained as a part of the Trust. The portion of Escrowed Funds so
deposited with respect to any particular Postponed Notes shall be invested by
the Trustee at the direction and risk of the Company in Specified Investments
(i) maturing no later than any scheduled Transfer Date relating to such
Postponed Notes or (ii) if no such Transfer Date has been scheduled, maturing on
the next Business Day, or (iii) if the
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Company has given notice to the Trustee that such Postponed Notes will not be
issued, maturing on the next applicable Special Distribution Date, if such
investments are reasonably available for purchase. The Trustee shall make
withdrawals from the Escrow Account only as provided in this Agreement. Upon
request of the Company on one or more occasions and the satisfaction or waiver
of the closing conditions specified in the applicable Financing Agreement on or
prior to the Cut-off Date, the Trustee shall purchase the applicable Postponed
Notes with Escrowed Funds withdrawn from the Escrow Account. The purchase price
shall equal the principal amount of such Postponed Notes.
The Trustee shall hold all Specified Investments until the maturity
thereof and will not sell or otherwise transfer Specified Investments. If
Specified Investments held in an Escrow Account mature prior to any applicable
Transfer Date, any proceeds received on the maturity of such Specified
Investments (including any earnings thereon) shall be reinvested by the Trustee
at the direction and risk of the Company in Specified Investments maturing as
provided in the preceding paragraph. The Company shall pay to the Trustee for
deposit to the Escrow Account an amount equal to any losses on such Specified
Investments as incurred.
On the initial Regular Distribution Date, the Company will pay (in
immediately available funds) to the Trustee an amount equal to (i) the sum of
(A) the interest that would have accrued, at a rate equal to the interest rate
applicable to the Certificates, on any Postponed Notes purchased on or prior to
the Cut-Off Date if such Postponed Notes had been issued on the Issuance Date,
from and including the Issuance Date to but excluding the date of such purchase,
and (B) the interest that would have accrued, at a rate equal to the interest
rate applicable to the Certificates, on any Postponed Notes not purchased on or
prior to the Cut-Off Date (other than any Postponed Notes for which a Special
Distribution Date specified in either of the two immediately succeeding
paragraphs has occurred on or prior to the initial Regular Distribution Date) if
such Postponed Notes had been issued on the Issuance Date, from and including
the Issuance Date to but excluding the initial Regular Distribution Date, minus
(ii) the earnings on Specified Investments received (with respect to the portion
of the Escrow Funds deposited with respect to the Postponed Notes described in
sub-clauses (A) and (B) of clause (i) of this paragraph) by the
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Trustee from and including the Issuance Date to but excluding the initial
Regular Distribution Date.
If the Company notifies the Trustee prior to the Cut-off Date that
any Postponed Notes will not be issued on or prior to the Cut-off Date for any
reason, on the next Special Distribution Date established pursuant to Section
4.02(c) for the distribution to the Certificateholders of Escrowed Funds with
respect to the Postponed Notes designated in such notice (i) the Company shall
pay to the Trustee for deposit in the Special Payments Account, in
immediately available funds, an amount equal to (A) the interest that would have
accrued, on the Postponed Notes designated in such notice, at a rate equal to
the interest rate applicable to the Certificates from and including the Issuance
Date (if such Special Distribution Date shall occur on or prior to the initial
Regular Distribution Date) or the initial Regular Distribution Date (if such
Special Distribution Date occurs after the initial Regular Distribution Date) to
but excluding such Special Distribution Date, minus (B) the earnings on
Specified Investments received (with respect to the portion of the Escrowed
Funds deposited with respect to the Postponed Notes designated in such notice)
by the Trustee from and including the Issuance Date (if such Special
Distribution Date shall occur on or prior to the initial Regular Distribution
Date) or the initial Regular Distribution Date (if such Special Distribution
Date occurs after the initial Regular Distribution Date) to but excluding such
Special Distribution Date and (ii) the Trustee shall transfer an amount equal to
that amount of Escrowed Funds that would have been used to purchase the
Postponed Notes designated in such notice (together with the earnings described
in clause (i)(B) of this paragraph above) plus the amount paid by the Company
pursuant to clause (i) of this paragraph to the Special Payments Account for
distribution as a Special Payment in accordance with the provisions hereof.
If, on the Cut-off Date, an amount equal to less than all of the
initial Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) has been used to purchase Postponed Notes, on the Special
Distribution Date established pursuant to Section 4.02(c) for the distribution
to the Certificateholders of Escrowed Funds with respect to all of the Postponed
Notes that have not been purchased on or prior to the Cut-off Date (other than
any Postponed Notes referred to in the immediately preceding paragraph) (i) the
Company shall pay to the Trustee for deposit in the Special Payments Account, in
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immediately available funds, an amount equal to (A) the interest that would have
accrued on Postponed Notes originally contemplated to be purchased with such
unused Escrowed Funds (other than Escrowed Funds referred to in the immediately
preceding paragraph) but not so purchased at a rate equal to the interest rate
applicable to the Certificates from and including the Issuance Date (if such
Special Distribution Date shall occur on or prior to the initial Regular
Distribution Date) or the initial Regular Distribution Date (if such Special
Distribution Date occurs after the initial Regular Distribution Date) to but
excluding such Special Distribution Date, minus (B) the earnings on Specified
Investments received (with respect to the portion of the Escrowed Funds
deposited with respect to the Postponed Notes described in this paragraph) by
the Trustee from and including the Issuance Date (if such Special Distribution
Date shall occur on or prior to the initial Regular Distribution Date) or the
initial Regular Distribution Date (if such Special Distribution Date occurs
after the initial Regular Distribution Date) to but excluding such Special
Distribution Date and (ii) the Trustee shall transfer such unused Escrowed Funds
(together with the earnings described in clause (i)(B) of this paragraph above)
and the amount paid by the Company pursuant to the clause (i) of this paragraph
to the Special Payments Account for distribution as a Special Payment in
accordance with the provisions hereof.
Section 2.02. Acceptance by Trustee. The Trustee, upon the execution
and delivery of this Agreement, acknowledges its acceptance of all right, title
and interest in and to the Trust Property and declares that the Trustee holds
and will hold such right, title and interest for the benefit of all then present
and future Certificateholders, upon the trusts herein set forth. Subject to
Section 7.14, the Trustee shall take all actions reasonably necessary to effect
the registration of all of the Equipment Notes acquired by the Trust in the name
of the Subordination Agent. By its payment for and acceptance of each
Certificate issued to it under this Agreement, each initial Certificateholder as
grantor of the Trust thereby joins in the creation and declaration of the Trust.
Section 2.03. Limitation of Powers. The Trust is constituted solely
for the purpose of making the investment in the Equipment Notes to be held in
the Trust, and, except as set forth herein, the Trustee shall not be authorized
or empowered to acquire any other investments or engage in any other activities
and, in particular, the Trustee shall not be authorized or
29
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empowered to do anything that would cause such Trust to fail to qualify as a
"grantor trust" for federal income tax purposes (including as subject to this
restriction, acquiring any Aircraft (as defined in the respective Indentures) by
bidding such Equipment Notes or otherwise, or taking any action with respect to
any such Aircraft once acquired).
ARTICLE III
THE CERTIFICATES
Section 3.01. Title, Form, Denomination and Execution of
Certificates. (a) The Initial Certificates shall be known as the "7.206% Initial
Pass Through Certificates, Series 1997-2C" and the Exchange Certificates shall
be known as the "7.206% Exchange Pass Through Certificates, Series 1997-2C", in
each case, of the Trust. Each Certificate will represent a fractional undivided
interest in the Trust and shall be substantially in the form set forth as
Exhibit A hereto, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Agreement and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
Trustee or the officers executing such Certificates, as evidenced by the
Trustee's or officer's execution of the Certificates.
(b) The Initial Certificates shall be issued only in fully
registered form without coupons and only in denominations of $100,000 or
integral multiples of $1,000 in excess thereof, except that one Certificate may
be issued in a different denomination. The Exchange Certificates will be issued
in denominations of $1,000 or integral multiples thereof, except that one
Certificate may be issued in a different denomination. Each Certificate shall be
dated the date of its authentication. The aggregate Fractional Undivided
Interest of Certificates shall not at any time exceed $27,206,000.
(c) The Initial Certificates offered and sold in reliance on Rule
144A shall be issued in the form of one or more global Certificates
substantially in the form of Exhibit A hereto with such applicable legends as
are provided for in Section 3.02 (each a "Restricted Global Certificate") duly
executed and authenticated by the Trustee as hereinafter provided. Such
30
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Restricted Global Certificates shall be in registered form and be registered in
the name of DTC and deposited with the Trustee, at its Corporate Trust Office,
as custodian for DTC. The aggregate principal amount of any Restricted Global
Certificate may from time to time be increased or decreased by adjustments made
on the records of the Trustee, as custodian for DTC for such Restricted Global
Certificate, as provided in Section 3.06 hereof, which adjustments shall be
conclusive as to the aggregate principal amount of any such Global Certificate.
(d) The Initial Certificates offered and sold outside the United
States in reliance on Regulation S shall be issued in the form of one or more
global Certificates substantially in the form of Exhibit A hereto (each a
"Regulation S Global Certificate") duly executed and authenticated by the
Trustee as hereinafter provided. Such Regulation S Global Certificates shall be
in registered form and be registered in the name of DTC and deposited with the
Trustee, at its Corporate Trust Office, as custodian for DTC, for credit
initially and during the Restricted Period (hereinafter defined) to the
respective accounts of beneficial owners of such Certificates (or to such other
accounts as they may direct) at Morgan Guaranty Trust Company of New York,
Brussels office, as operator of Euroclear or Cedel. As used herein, the term
"Restricted Period", with respect to the Regulation S Global Certificates
offered and sold in reliance on Regulation S, means the period of 40 consecutive
days beginning on and including the later of (i) the day on which the
Certificates are first offered to persons other than distributors (as defined in
Regulation S) in reliance on Regulation S and (ii) the date of the closing of
the offering under the Purchase Agreement. The aggregate principal amount of any
Regulation S Global Certificate may from time to time be increased or decreased
by adjustments made on the records of the Trustee, as custodian for DTC for such
Global Certificate, as provided in Section 3.06 hereof, which adjustments shall
be conclusive as to the aggregate principal amount of any such Global
Certificate. The Restricted Global Certificate and Regulation S Global
Certificate are sometimes collectively referred to herein as the "Global
Certificates".
(e) Initial Certificates offered and sold to any Institutional
Accredited Investor which is not a QIB in a transaction exempt from registration
under the Securities Act (and other than as described in Section 3.01(d)) shall
be issued substantially in the form of Exhibit A hereto in definitive,
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fully registered form without interest coupons with such applicable legends as
are provided for in Section 3.02 (the "Restricted Definitive Certificates") duly
executed and authenticated by the Trustee as hereinafter provided. Certificates
issued pursuant to Section 3.05(b) in exchange for interests in a Regulation S
Global Certificate shall be issued in definitive, fully registered form without
interest coupons (the "Regulation S Definitive Certificates"). The Restricted
Definitive Certificates and the Regulation S Definitive Certificates are
sometimes collectively referred to herein as the "Definitive Certificates".
(f) The Exchange Certificates shall be issued in the form of one or
more global Certificates substantially in the form of Exhibit A hereto (each, a
"Global Exchange Certificate"), except that (i) the Restricted Legend
(hereinafter defined) shall be omitted and (ii) such Exchange Certificates shall
contain such appropriate insertions, omissions, substitutions and other
variations from the form set forth in Exhibit A hereto relating to the nature of
the Exchange Certificates as the Responsible Officer of the Trustee executing
such Exchange Certificates on behalf of the Trust may determine, as evidenced by
such officer's execution on behalf of the Trust of such Exchange Certificates.
Such Global Exchange Certificates shall be in registered form and be registered
in the name of DTC and deposited with the Trustee, at its Corporate Trust
Office, as custodian for DTC. The aggregate principal amount of any Global
Exchange Certificate may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for DTC for such
Global Exchange Certificate, which adjustments shall be conclusive as to the
aggregate principal amount of any such Global Exchange Certificate. Subject to
clauses (i) and (ii) of the first sentence of this Section 3.01(f), the terms
hereof applicable to Restricted Global Certificates and/or Global Certificates
shall apply to the Global Exchange Certificates, mutatis mutandis.
(g) The definitive Certificates shall be in registered form and
shall be typed, printed, lithographed or engraved or produced by any combination
of these methods or may be produced in any other manner, all as determined by
the officers executing such Certificates, as evidenced by their execution of
such Certificates.
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Section 3.02. Restrictive Legends. All Initial Certificates issued
pursuant to this Agreement for resale pursuant to Rule 144A or offered and sold
to any Institutional Accredited Investor which is not a QIB (including any
Global Certificate issued upon registration of transfer, in exchange for or in
lieu of such Certificates) shall be "Restricted Certificates" and shall bear a
legend to the following effect (the "Restricted Legend") unless the Company and
the Trustee determine otherwise consistent with applicable law:
"THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, ANY PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT
A U.S. PERSON AND IS ACQUIRING THIS CERTIFICATE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT; (2) AGREES THAT
IT WILL NOT WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS CERTIFICATE WAS HELD BY
CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY AFFILIATE OF ANY OF SUCH
PERSONS RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE EXCEPT (A) TO
CONTINENTAL AIRLINES, INC., (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; AND (3) AGREES
THAT IF IT SHOULD RESELL OR OTHERWISE TRANSFER THIS CERTIFICATE IT WILL
DELIVER TO EACH PERSON TO WHOM THIS CERTIFICATE IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THIS CERTIFICATE WITHIN TWO YEARS AFTER THE LATER OF THE
ORIGINAL ISSUANCE OF THIS CERTIFICATE OR THE LAST DATE ON WHICH THIS
CERTIFICATE WAS HELD BY CONTINENTAL AIRLINES, INC., THE TRUSTEE OR ANY
AFFILIATE OF
33
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ANY OF SUCH PERSONS, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH
ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT
THIS CERTIFICATE TO THE TRUSTEE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT. THE PASS THROUGH TRUST
AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
RESTRICTIONS."
Each Global Certificate shall bear the following legend on the face
thereof:
"UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE TRUSTEE OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN EXCHANGE FOR THIS
CERTIFICATE IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL CERTIFICATE SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
CERTIFICATE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS SET FORTH IN SECTIONS 3.05 AND 3.06 OF THE PASS THROUGH TRUST
AGREEMENT REFERRED TO HEREIN."
Section 3.03. Authentication of Certificates. (a) On the Issuance
Date, the Trustee shall duly execute, authenticate and deliver Initial
Certificates in authorized denominations equaling in the aggregate the amount
set forth, with respect to the Trust, in Schedule II to the Purchase Agreement,
evidencing the entire ownership of the Trust, which amount equals the aggregate
principal amount of Equipment Notes which have been or may be purchased by the
Trustee pursuant to each Financing Agreement. Thereafter, the Trustee shall duly
execute, authenticate and deliver Certificates as herein provided.
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(b) No Certificate shall be entitled to any benefit under this
Agreement or be valid or obligatory for any purpose, unless there appears on
such Certificate a certificate of authentication substantially in the form
provided for herein executed by the Trustee by the manual signature of one of
its authorized signatories, and such certificate upon any Certificate shall be
conclusive evidence, and the only evidence, that such Certificate has been duly
authenticated and delivered hereunder.
Section 3.04. Transfer and Exchange. The Trustee shall cause to be
kept at the office or agency to be maintained by it in accordance with the
provisions of Section 7.12 a register (the "Register") of the Certificates in
which, subject to such reasonable regulations as it may prescribe, the Trustee
shall provide for the registration of such Certificates and of transfers and
exchanges of such Certificates as herein provided. The Trustee shall initially
be the registrar (the "Registrar") for the purpose of registering such
Certificates and transfers and exchanges of such Certificates as herein
provided.
All Certificates issued upon any registration of transfer or
exchange of Certificates shall be valid obligations of the Trust, evidencing the
same interest therein, and entitled to the same benefits under this Agreement,
as the Certificates surrendered upon such registration of transfer or exchange.
A Certificateholder may transfer a Certificate, or request that a
Certificate be exchanged for Certificates (including, without limitation,
subject to the proviso to this sentence, Exchange Certificates) in authorized
denominations and in an aggregate Fractional Undivided Interest equal to the
Fractional Undivided Interest of such Certificate surrendered for exchange of
other authorized denominations, by surrender of such Certificate to the Trustee
with the form of transfer notice thereon duly completed and executed, and
otherwise complying with the terms of this Agreement, including providing
evidence of compliance with any restrictions on transfer, in form satisfactory
to the Trustee and the Registrar; provided that exchanges of Initial
Certificates for Exchange Certificates shall occur only after an Exchange Offer
Registration Statement shall have been declared effective by the SEC (notice of
which shall be provided to the Trustee by the Company) and otherwise only in
accordance with the terms of the Exchange Offer. No such transfer shall be
effected until, and such transferee shall succeed to the rights of a
Certificateholder only upon, final
35
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acceptance and registration of the transfer by the Registrar in the Register.
Prior to the registration of any transfer by a Certificateholder as provided
herein, the Trustee shall treat the person in whose name the Certificate is
registered as the owner thereof for all purposes, and the Trustee shall not be
affected by notice to the contrary. Furthermore, DTC shall, by acceptance of a
Global Certificate, agree that transfers of beneficial interests in such Global
Certificate may be effected only through a book-entry system maintained by DTC
(or its agent) and that ownership of a beneficial interest in the Certificate
shall be required to be reflected in a book-entry. When Certificates are
presented to the Registrar with a request to register the transfer thereof or to
exchange them for other authorized denominations of a Certificate in a
Fractional Undivided Interest equal to the aggregate Fractional Undivided
Interest of Certificates surrendered for exchange, the Registrar shall register
the transfer or make the exchange as requested if its requirements for such
transactions are met.
To permit registrations of transfers and exchanges in accordance
with the terms, conditions and restrictions hereof, the Trustee shall execute,
authenticate and deliver Certificates at the Registrar's request. No service
charge shall be made to a Certificateholder for any registration of transfer or
exchange of Certificates, but the Trustee shall require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any transfer or exchange of Certificates. All Certificates
surrendered for registration of transfer or exchange shall be canceled and
subsequently destroyed by the Trustee.
Section 3.05. Book-Entry Provisions for Restricted Global
Certificates and Regulation S Global Certificates. (a) Members of, or
participants in, DTC ("Agent Members") shall have no rights under this Agreement
with respect to any Global Certificate held on their behalf by DTC, or the
Trustee as its custodian, and DTC may be treated by the Trustee and any agent of
the Trustee as the absolute owner of such Global Certificate for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Trustee or any agent of the Trustee from giving effect to any written
certification, proxy or other authorization furnished by DTC or shall impair, as
between DTC and its Agent Members, the operation of customary practices
governing the exercise of the rights of a holder of any Certificate. Upon the
issuance of any Global Certificate, the
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Registrar or its duly appointed agent shall record DTC as the registered holder
of such Global Certificate.
(b) Transfers of any Global Certificate shall be limited to
transfers of such Restricted Global Certificate or Regulation S Global
Certificate in whole, but not in part, to DTC. Beneficial interests in the
Restricted Global Certificate and any Regulation S Global Certificate may be
transferred in accordance with the rules and procedures of DTC and the
provisions of Section 3.06. Beneficial interests in a Restricted Global
Certificate or a Regulation S Global Certificate shall be delivered to all
beneficial owners thereof in the form of Restricted Definitive Certificates or
Regulation S Definitive Certificates, as the case may be, if (i) DTC notifies
the Trustee that it is unwilling or unable to continue as depositary for such
Restricted Global Certificate or Regulation S Global Certificate, as the case
may be, and a successor depositary is not appointed by the Trustee within 90
days of such notice, and (ii) after the occurrence and during the continuance of
an Event of Default, owners of beneficial interests in a Global Certificate with
Fractional Undivided Interests aggregating not less than a majority in interest
in the Trust advise the Trustee, the Company and DTC through Agent Members in
writing that the continuation of a book-entry system through DTC or its
successor is no longer in their best interests.
(c) Any beneficial interest in one of the Global Certificates that
is transferred to a Person who takes delivery in the form of an interest in
another Global Certificate will, upon such transfer, cease to be an interest in
such Global Certificate and become an interest in the other Global Certificate
and, accordingly, will thereafter be subject to all transfer restrictions, if
any, and other procedures applicable to beneficial interests in such other
Global Certificate for as long as it remains such an interest.
(d) In connection with the transfer of an entire Restricted Global
Certificate or an entire Regulation S Global Certificate to the beneficial
owners thereof pursuant to paragraph (b) of this Section 3.05, such Restricted
Global Certificate or Regulation S Global Certificate, as the case may be, shall
be deemed to be surrendered to the Trustee for cancellation, and the Trustee
shall execute, authenticate and deliver, to each beneficial owner identified by
DTC in exchange for its beneficial interest in such Restricted Global
Certificate
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or Regulation S Global Certificate, as the case may be, an equal aggregate
principal amount of Restricted Definitive Certificates or Regulation S
Definitive Certificates, as the case may be, of authorized denominations. None
of the Company, the Registrar, the Paying Agent nor the Trustee shall be liable
for any delay in delivery of such instructions and may conclusively rely on, and
shall be protected in relying on, such registration instructions. Upon the
issuance of Definitive Certificates, the Trustee shall recognize the Person in
whose name the Definitive Certificates are registered in the Register as
Certificateholders hereunder. Neither the Company nor the Trustee shall be
liable if the Trustee or the Company is unable to locate a qualified successor
clearing agency.
(e) Any Definitive Certificate delivered in exchange for an interest
in the Restricted Global Certificate pursuant to paragraph (b) of this Section
3.05 shall, except as otherwise provided by paragraph (e) of Section 3.06, bear
the Restricted Legend.
(f) Prior to the expiration of the Restricted Period, any Regulation
S Definitive Certificate delivered in exchange for an interest in a Regulation S
Global Certificate pursuant to paragraph (b) of this Section shall bear the
Restricted Legend.
(g) The registered holder of any Restricted Global Certificate or
Regulation S Global Certificate may grant proxies and otherwise authorize any
Person, including Agent Members and Persons that may hold interests through
Agent Members, to take any action which a Holder is entitled to take under this
Agreement or the Certificates.
Section 3.06. Special Transfer Provisions. Unless and until (i) an
Initial Certificate is sold under an effective Shelf Registration Statement, or
(ii) an Initial Certificate is exchanged for an Exchange Certificate pursuant to
an effective Exchange Offer Registration Statement, in each case pursuant to the
terms of the Registration Rights Agreement, the following provisions shall apply
to such Initial Certificates:
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration
of any proposed transfer of a Certificate to any Institutional
Accredited Investor which is neither a QIB nor a Non-U.S. Person:
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(i) The Registrar shall register the transfer of any
Certificate, whether or not bearing the Restricted Legend, only if
(x) the requested transfer is at least two years after the later of
the original issue date of the Certificates and the last date on
which such Certificate was held by the Company, the Trustee or any
affiliate of any of such Persons or (y) the proposed transferor is
an Initial Purchaser who is transferring Certificates purchased
under the Purchase Agreement and the proposed transferee has
delivered to the Registrar a letter substantially in the form of
Exhibit C hereto and the aggregate principal amount of the
Certificates being transferred is at least $100,000. Except as
provided in the foregoing sentence, the Registrar shall not register
the transfer of any Certificate to any Institutional Accredited
Investor which is neither a QIB nor a Non-U.S. Person.
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in a Restricted Global Certificate,
upon receipt by the Registrar of (x) the documents, if any, required
by paragraph (i) and (y) instructions given in accordance with DTC's
and the Registrar's procedures, the Registrar shall reflect on its
books and records the date of the transfer and a decrease in the
principal amount of such Restricted Global Certificate in an amount
equal to the principal amount of the beneficial interest in such
Restricted Global Certificate to be transferred, and the Trustee
shall execute, authenticate and deliver to the transferor or at its
direction, one or more Restricted Definitive Certificates of like
tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply
with respect to the registration of any proposed transfer of an Initial
Certificate to a QIB (excluding Non-U.S. Persons):
(i) If the Certificate to be transferred consists of
Restricted Definitive Certificates, or of an interest in any
Regulation S Global Certificate during the Restricted Period, the
Registrar shall register the transfer if such transfer is being made
by
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a proposed transferor who has checked the box provided for on the
form of Initial Certificate stating, or has otherwise advised the
Trustee and the Registrar in writing, that the sale has been made in
compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Initial
Certificate stating, or has otherwise advised the Trustee and the
Registrar in writing, that it is purchasing the Initial Certificate
for its own account or an account with respect to which it exercises
sole investment discretion and that it, or the Person on whose
behalf it is acting with respect to any such account, is a QIB
within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Trust and/or the Company as
it has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
(ii) Upon receipt by the Registrar of the documents
required by clause (i) above and instructions given in accordance
with DTC's and the Registrar's procedures therefor, the Registrar
shall reflect on its books and records the date of such transfer and
an increase in the principal amount of a Restricted Global
Certificate in an amount equal to the principal amount of the
Restricted Definitive Certificates or interests in such Regulation S
Global Certificate, as the case may be, being transferred, and the
Trustee shall cancel such Definitive Certificates or decrease the
amount of such Regulation S Global Certificate so transferred.
(c) Transfers of Interests in the Regulation S Global Certificate or
Regulation S Definitive Certificates. After the expiration of the
Restricted Period, the Registrar shall register any transfer of interests
in any Regulation S Global Certificate or Regulation S Definitive
Certificates without requiring any additional certification. Until the
expiration of the Restricted Period, interests in the Regulation S Global
Certificate may only be held through Agent Members acting for and on
behalf of Euroclear and Cedel.
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(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any registration of any transfer of
an Initial Certificate to a Non-U.S. Person:
(i) Prior to the expiration of the Restricted Period,
the Registrar shall register any proposed transfer of an Initial
Certificate to a Non-U.S. Person upon receipt of a certificate
substantially in the form set forth as Exhibit B hereto from the
proposed transferor.
(ii) After the expiration of the Restricted Period, the
Registrar shall register any proposed transfer to any Non-U.S.
Person if the Certificate to be transferred is a Restricted
Definitive Certificate or an interest in a Restricted Global
Certificate, upon receipt of a certificate substantially in the form
of Exhibit B from the proposed transferor. The Registrar shall
promptly send a copy of such certificate to the Company.
(iii) Upon receipt by the Registrar of (x) the
documents, if any, required by clause (ii) and (y) instructions in
accordance with DTC's and the Registrar's procedures, the Registrar
shall reflect on its books and records the date of such transfer and
a decrease in the principal amount of such Restricted Global
Certificate in an amount equal to the principal amount of the
beneficial interest in such Restricted Global Certificate to be
transferred, and, upon receipt by the Registrar of instructions
given in accordance with DTC's and the Registrar's procedures, the
Registrar shall reflect on its books and records the date and an
increase in the principal amount of the Regulation S Global
Certificate in an amount equal to the principal amount of the
Restricted Definitive Certificate or the Restricted Global
Certificate, as the case may be, to be transferred, and the Trustee
shall cancel the Definitive Certificate, if any, so transferred or
decrease the amount of such Restricted Global Certificate.
(e) Restricted Legend. Upon the transfer, exchange or replacement of
Certificates not bearing the Restricted
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Legend, the Registrar shall deliver Certificates that do not bear the
Restricted Legend. Upon the transfer, exchange or replacement of
Certificates bearing the Restricted Legend, the Registrar shall deliver
only Certificates that bear the Restricted Legend unless either (i) the
circumstances contemplated by paragraph (d)(ii) of this Section 3.06 exist
or (ii) there is delivered to the Registrar an Opinion of Counsel to the
effect that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions of the
Securities Act.
(f) General. By acceptance of any Certificate bearing the Restricted
Legend, each Holder of such a Certificate acknowledges the restrictions on
transfer of such Certificate set forth in such Restricted Legend and
otherwise in this Agreement and agrees that it will transfer such
Certificate only as provided in such Restricted Legend and otherwise in
this Agreement. The Registrar shall not register a transfer of any
Certificate unless such transfer complies with the restrictions on
transfer, if any, of such Certificate set forth in such Restricted Legend
and otherwise in this Agreement. In connection with any transfer of
Certificates, each Certificateholder agrees by its acceptance of the
Certificates to furnish the Registrar or the Trustee such certifications,
legal opinions or other information as either of them may reasonably
require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration
requirements of the Securities Act and in accordance with the terms and
provisions of this Article III; provided that the Registrar shall not be
required to determine the sufficiency of any such certifications, legal
opinions or other information.
Until such time as no Certificates remain Outstanding, the Registrar
shall retain copies of all letters, notices and other written communications
received pursuant to Section 3.05 or this Section 3.06. The Trustee, if not the
Registrar at such time, shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
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Section 3.07. Mutilated, Destroyed, Lost or Stolen Certificates. If
(a) any mutilated Certificate is surrendered to the Registrar or the Registrar
receives evidence to its satisfaction of the destruction, loss or theft of any
Certificate and (b) there is delivered to the Registrar and the Trustee such
security, indemnity or bond, as may be required by them to save each of them
harmless, then, in the absence of notice to the Registrar or the Trustee that
such destroyed, lost or stolen Certificate has been acquired by a bona fide
purchaser, and provided that the requirements of Section 8-405 of the Uniform
Commercial Code in effect in any applicable jurisdiction are met, the Trustee
shall execute, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate or
Certificates, in authorized denominations and of like Fractional Undivided
Interest and bearing a number not contemporaneously outstanding.
In connection with the issuance of any new Certificate under this
Section 3.07, the Trustee shall require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Trustee and the
Registrar) connected therewith.
Any duplicate Certificate issued pursuant to this Section 3.07 shall
constitute conclusive evidence of the appropriate Fractional Undivided Interest
in the Trust, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Certificates.
Section 3.08. Persons Deemed Owners. Prior to due presentment of a
Certificate for registration of transfer, the Trustee, the Registrar and any
Paying Agent may treat the Person in whose name any Certificate is registered
(as of the day of determination) as the owner of such Certificate for the
purpose of receiving distributions pursuant to Article IV and for all other
purposes whatsoever, and none of the Trustee, the Registrar or any Paying Agent
shall be affected by any notice to the contrary.
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Section 3.09. Cancellation. All Certificates surrendered for payment
or transfer or exchange shall, if surrendered to the Trustee or any agent of the
Trustee other than the Registrar, be delivered to the Registrar for cancellation
and shall promptly be canceled by it. No Certificates shall be authenticated in
lieu of or in exchange for any Certificates canceled as provided in this
Section, except as expressly permitted by this Agreement. All canceled
Certificates held by the Registrar shall be destroyed and a certification of
their destruction delivered to the Trustee.
Section 3.10. Temporary Certificates. Until definitive Certificates
are ready for delivery, the Trustee shall authenticate temporary Certificates.
Temporary Certificates shall be substantially in the form of definitive
Certificates but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the officers executing the temporary
Certificates, as evidenced by their execution of such temporary Certificates. If
temporary Certificates are issued, the Trustee will cause definitive
Certificates to be prepared without unreasonable delay. After the preparation of
definitive Certificates, the temporary Certificates shall be exchangeable for
definitive Certificates upon surrender of the temporary Certificates at the
office or agency of the Trustee designated for such purpose pursuant to Section
7.12, without charge to the Certificateholder. Upon surrender for cancellation
of any one or more temporary Certificates, the Trustee shall execute,
authenticate and deliver in exchange therefor a like face amount of definitive
Certificates of authorized denominations. Until so exchanged, the temporary
Certificates shall be entitled to the same benefits under this Agreement as
definitive Certificates.
Section 3.11. Limitation of Liability for Payments. All payments and
distributions made to Certificateholders in respect of the Certificates shall be
made only from the Trust Property and only to the extent that the Trustee shall
have sufficient income or proceeds from the Trust Property to make such payments
in accordance with the terms of Article IV of this Agreement. Each
Certificateholder, by its acceptance of a Certificate, agrees that it will look
solely to the income and proceeds from the Trust Property for any payment or
distribution due to such Certificateholder pursuant to the terms of this
Agreement and that it will not have any recourse to the Company, the Trustee,
the Loan Trustees, the Second Mortgagee or the
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Liquidity Provider, except as otherwise expressly provided herein or in the
Intercreditor Agreement.
The Company is a party to this Agreement solely for purposes of
meeting the requirements of the Trust Indenture Act, and therefore shall not
have any right, obligation or liability hereunder (except as otherwise expressly
provided herein).
Section 3.12. ERISA Restrictive Legend. All Certificates issued
pursuant to this Agreement shall bear a legend to the following effect (the
"ERISA Legend") unless the Company and the Trustee determine otherwise
consistent with applicable law:
"BY ITS ACQUISITION HEREOF, THE HOLDER REPRESENTS THAT (A) IT IS NOT
A PLAN TRANSFEREE (AS DEFINED IN THE PASS THROUGH TRUST AGREEMENT) OR (B) IT IS
AN INSURANCE COMPANY USING THE ASSETS OF ITS GENERAL ACCOUNT TO ACQUIRE THIS
CERTIFICATE, AND THE CONDITIONS OF PROHIBITED TRANSACTION CLASS EXEMPTION 95-60
ISSUED BY THE U.S. DEPARTMENT OF LABOR HAVE BEEN AND WILL CONTINUE TO BE
SATISFIED IN CONNECTION WITH ITS PURCHASE AND HOLDING OF THIS CERTIFICATE. THE
PASS THROUGH TRUST AGREEMENT CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS CERTIFICATE IN VIOLATION OF THE
FOREGOING RESTRICTIONS."
Without limitation of Section 3.06(f), by acceptance of any
Certificate bearing the ERISA Legend, each Holder of such a Certificate
acknowledges the restrictions set forth in such ERISA Legend. The Registrar
shall refuse to register any transfer of any Certificate in violation of the
restrictions set forth in such ERISA Legend.
ARTICLE IV
DISTRIBUTIONS; STATEMENTS TO
CERTIFICATEHOLDERS
Section 4.01. Certificate Account and Special Payments Account. (a)
The Trustee shall establish and maintain on behalf of the Certificateholders a
Certificate Account as one or more non-interest-bearing accounts. The Trustee
shall hold the Certificate Account in trust for the benefit of the
Certificateholders, and shall make or permit withdrawals therefrom only as
provided in this Agreement. On each day when a
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Scheduled Payment is made to the Trustee under the Intercreditor Agreement, the
Trustee upon receipt thereof shall immediately deposit the aggregate amount of
such Scheduled Payment in the Certificate Account.
(b) The Trustee shall establish and maintain on behalf of the
Certificateholders a Special Payments Account as one or more accounts, which
shall be non-interest bearing except as provided in Section 4.04. The Trustee
shall hold the Special Payments Account in trust for the benefit of the
Certificateholders and shall make or permit withdrawals therefrom only as
provided in this Agreement. On each day when one or more Special Payments are
made to the Trustee under the Intercreditor Agreement, the Trustee, upon receipt
thereof, shall immediately deposit the aggregate amount of such Special Payments
in the Special Payments Account.
(c) The Trustee shall cause the Subordination Agent to present to
the related Loan Trustee of each Equipment Note such Equipment Note on the date
of its stated final maturity or, in the case of any Eq
