REGISTRATION STATEMENT
REGISTRATION NO. 333-104689
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
-----------------
CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 4512 74-2099724
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification Number)
incorporation or Code Number)
organization)
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
(713) 324-2950
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
-----------------
Jennifer L. Vogel, Esq.
Vice President, General Counsel and Secretary
Continental Airlines, Inc.
1600 Smith Street, Dept. HQSLG
Houston, Texas 77002
(713) 324-2950
(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
(212) 837-6000
-----------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [__]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [__] ________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [__] _________
CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITES TO BE REGISTERED REGISTERED PER UNIT PRICE REGISTRATION FEE(1)
- -------------------------- ------------ ---------------- ------------------ -------------------
Floating Rate Secured Notes
Due 2007 $200,000,000 100% $200,000,000 $16,180 (2) (3)
- -----------------
(1) Pursuant to Rule 457(f)(2), the registration fee has been calculated using
the book value of the securities being registered.
(2) The Commission has informed Continental Airlines, Inc. that it may set off
an amount equal to $12,740.53 against the registration fee payable for this
registration statement due to a post-filing adjustment of the registration
fee for the Continental Airlines, Inc. registration statement on Form S-3
(File No. 333-71906), originally filed with the Commission on October 19,
2001.
(3) Paid on April 22, 2003.
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.
================================================================================
SUBJECT TO COMPLETION, DATED JUNE 3, 2003
PROSPECTUS
$200,000,000
CONTINENTAL AIRLINES, INC.
OFFER TO EXCHANGE
FLOATING RATE SECURED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING FLOATING RATE SECURED NOTES DUE 2007
We are offering to issue the new senior notes to satisfy our obligations
contained in the registration rights agreement entered into when the old senior
notes were sold in transactions exempt from, or not subject to, registration
under the Securities Act.
The terms of the new senior notes will be substantially identical to the
terms of the old senior notes, except that the new senior notes will be
registered under the Securities Act of 1933, the transfer restrictions,
registration rights and provisions for additional interest relating to the old
senior notes will not apply to the new senior notes, and the new senior notes
will be available only in book-entry form.
There is no existing market for the new senior notes. The new senior notes
will not be listed on any national securities exchange.
The exchange of old senior notes will not be a taxable event for U.S.
federal income tax purposes.
Old senior notes may be tendered only in integral multiples of $1,000. You
may withdraw a tender of old senior notes at any time prior to the expiration of
the exchange offer. All old senior notes that are validly tendered and not
validly withdrawn will be exchanged.
The exchange offer expires at 5:00 p.m., New York City time, on _______,
2003, unless the exchange offer is extended.
-----------------
THE SENIOR NOTES AND THE EXCHANGE OFFER INVOLVE RISKS. SEE "RISK FACTORS"
ON PAGE 22.
-----------------
PRINCIPAL INTEREST FINAL SCHEDULED
AMOUNT RATE(1) PAYMENT DATE
------------ ------------------------- ----------------
$200,000,000 USD 3-Month LIBOR + 0.90% December 6, 2007
- -----------------
(1) Subject to a maximum rate of 12% applicable only for periods as to which
Continental has failed to pay accrued interest when due and failed to cure
such nonpayment.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is _______, 2003
TABLE OF CONTENTS
PAGE PAGE
PRESENTATION OF INFORMATION..........................2 Redemption.......................................49
INCORPORATION OF CERTAIN DOCUMENTS BY Collateral.......................................50
REFERENCE.........................................4 Event of Default.................................55
PROSPECTUS SUMMARY...................................6 Remedies.........................................56
The Exchange Offer.................................6 Controlling Party................................58
Summary of Terms of Notes..........................9 Priority of Distributions........................59
Collateral........................................10 Modifications and Waiver of the Indenture
Cash Flow Structure...............................11 and Certain Other Agreements...................61
The Senior Notes..................................12 Merger, Consolidation and Transfer of Assets.....63
Summary Financial and Operating Data..............18 Indemnification..................................64
RISK FACTORS........................................22 Governing Law....................................64
Terrorist Attacks and International Hostilities...22 The Trustee......................................64
Risk Factors Relating to the Company..............22 Book Entry; Delivery and Form....................64
Risk Factors Relating to the Airline Industry.....25 DESCRIPTION OF THE SUBORDINATED NOTES..............67
Risk Factors Relating to the Senior Notes and General..........................................67
the Exchange Offer..............................26 Payments of Principal and Interest...............67
Risk Factors Relating to the Policy Provider......29 Redemption.......................................67
USE OF PROCEEDS.....................................30 Collateral.......................................68
RATIO OF EARNINGS TO FIXED CHARGES..................31 DESCRIPTION OF THE LIQUIDITY FACILITY..............69
THE COMPANY.........................................32 General..........................................69
Domestic Operations...............................32 Drawings.........................................69
International Operations..........................33 Reimbursement of Drawings........................71
Outlook...........................................34 Liquidity Events of Default and Termination......73
DESCRIPTION OF THE POLICY PROVIDER..................37 Liquidity Provider...............................73
General...........................................37 DESCRIPTION OF THE POLICY AND THE POLICY
MBIA Financial Information........................37 PROVIDER AGREEMENT..............................74
Financial Strength Rating of MBIA.................38 The Policy.......................................74
THE EXCHANGE OFFER..................................39 General..........................................76
Terms of the Exchange Offer.......................39 Definitions......................................76
Interest on the New Senior Notes..................41 The Policy Provider Agreement....................77
Procedures for Tendering..........................42 DESCRIPTION OF THE APPRAISAL.......................78
Acceptance of Old Senior Notes for MATERIAL U.S. FEDERAL INCOME TAX
Exchange; Delivery of New Senior Notes..........43 CONSEQUENCES....................................79
Book-Entry Transfer...............................44 Exchange of Old Senior Notes for New Senior
Guaranteed Delivery Procedures....................44 Notes..........................................79
Withdrawal of Tenders.............................44 PLAN OF DISTRIBUTION...............................79
Conditions........................................45 LEGAL MATTERS......................................80
Exchange Agent....................................45 EXPERTS............................................80
Fees and Expenses.................................46 FORWARD-LOOKING STATEMENTS.........................80
DESCRIPTION OF THE SENIOR NOTES.....................47 WHERE YOU CAN FIND MORE INFORMATION................81
General...........................................47 INDEX OF TERMS.............................APPENDIX I
Payments of Principal and Interest................47 APPRAISAL LETTER..........................APPENDIX II
Determination of LIBOR............................48
Break Amount......................................49
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY BE ACCURATE ONLY
ON THE DATE OF THIS DOCUMENT.
PRESENTATION OF INFORMATION
We have given certain capitalized terms specific meanings for purposes of
this Prospectus. The "Index of Terms" attached as Appendix I to this Prospectus
lists the page on which we have defined each such term.
At various places in this Prospectus, we refer you to other sections of
this document for additional information by indicating the caption heading of
such other sections. The page on which each principal caption included in this
Prospectus can be found is listed in the Table of Contents.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Securities and Exchange Commission (the "Commission") allows us to
incorporate by reference information into this prospectus. This means that we
can disclose important information to you by referring you to another document
filed separately with the Commission. The information incorporated by reference
is considered to be part of this Prospectus, except for any information that is
superseded by subsequent incorporated documents or by information that is
included directly in this Prospectus.
This Prospectus includes by reference the documents listed below that we
previously have filed with the Commission and that are not delivered with this
document. They contain important information about our company and its financial
condition.
FILING DATE FILED
Amended Annual Report on Form 10-K/A-1 for the year ended December 31, 2002............ April 22, 2003
Quarterly Report on Form 10-Q for the Quarter ended March 31, 2003..................... April 16, 2003
Current Report on Form 8-K............................................................. January 3, 2003
Current Report on Form 8-K............................................................. January 15, 2003
Current Report on Form 8-K............................................................. February 4, 2003
Current Report on Form 8-K............................................................. February 4, 2003
Current Report on Form 8-K............................................................. March 4, 2003
Amendment to Current Report on Form 8-K................................................ March 4, 2003
Current Report on Form 8-K............................................................. March 4, 2003
Current Report on Form 8-K............................................................. March 19, 2003
Current Report on Form 8-K............................................................. March 20, 2003
Current Report on Form 8-K............................................................. April 2, 2003
Current Report on Form 8-K............................................................. April 15, 2003
Current Report on Form 8-K............................................................. May 2, 2003
Current Report on Form 8-K............................................................. May 12, 2003
Current Report on Form 8-K............................................................. May 14, 2003
Current Report on Form 8-K............................................................. June 3, 2003
Our Commission file number is 1-10323.
We incorporate by reference additional documents that we may file with the
Commission between the date of this Prospectus and the termination of the
Exchange Offer. These documents include our periodic reports, such as Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K, as well as our proxy statements.
You may obtain any of these incorporated documents from us without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference in such document. You may obtain documents
incorporated by reference in this prospectus from our website
(WWW.CONTINENTAL.COM) or by requesting them from us in writing or by telephone
at the following address:
Continental Airlines, Inc.
1600 Smith Street, Dept. HQSEO
Houston, Texas 77002
Attention: Secretary
Telephone: (713) 324-2950
IN ORDER TO OBTAIN TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE
MADE BY [_________], 2003 (THE FIFTH BUSINESS DAY BEFORE THE SCHEDULED
EXPIRATION DATE OF THE EXCHANGE OFFER).
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROSPECTUS AND MAY
NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. FOR MORE COMPLETE
INFORMATION ABOUT THE NOTES AND CONTINENTAL AIRLINES, INC., YOU SHOULD READ THIS
ENTIRE PROSPECTUS, AS WELL AS THE MATERIALS FILED WITH THE COMMISSION THAT ARE
CONSIDERED TO BE PART OF THIS PROSPECTUS. SEE "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE".
THE EXCHANGE OFFER
The Notes..................... On December 6, 2002, Continental issued an
aggregate of $200,000,000 Floating Rate Secured
Notes due 2007 in transactions exempt from or
not subject to the registration requirements of
the Securities Act.
When we use the term "Old Senior Notes" in this
Prospectus, we mean the Floating Rate Secured
Notes due 2007 which were issued on December 6,
2002 and which were not registered with the
Commission.
When we use the term "New Senior Notes" in this
Prospectus, we mean the Floating Rate Secured
Notes due 2007 registered with the Commission
and offered hereby in exchange for the Old
Senior Notes.
When we use the term "Senior Notes" in this
Prospectus, the related discussion applies both
to the Old Senior Notes and the New Senior
Notes.
When we use the term "Subordinated Notes" in
this Prospectus, we mean the Floating Rate
Secured Subordinated Notes due 2007, which were
issued by Continental on May 9, 2003. The
Exchange Offer being made pursuant to this
Prospectus does not relate to the Subordinated
Notes.
When we use the term "Notes" in this Prospectus,
the related discussion applies both to the
Senior Notes and the Subordinated Notes.
Registration Rights
Agreement................... On December 6, 2002, Continental entered into a
Registration Rights Agreement with Morgan
Stanley & Co. Incorporated (the "Initial
Purchaser") providing, among other things, for
the Exchange Offer being made pursuant to this
Prospectus.
The Exchange Offer............ Continental is offering New Senior Notes in
exchange for an equal principal amount of Old
Senior Notes. The New Senior Notes will be
issued to satisfy Continental's obligations
under the Registration Rights Agreement. As of
the date of this Prospectus, $200,000,000
aggregate principal amount of Old Senior Notes
are outstanding. Old Senior Notes may be
tendered only in integral multiples of $1,000.
Resale of New Senior Notes.... We believe that you can offer for resale, resell
or otherwise transfer the New Senior Notes
without complying with the registration and
prospectus delivery requirements of the
Securities Act if:
o you acquire the New Senior Notes in the
ordinary course of your business;
o you have no arrangement or understanding with
any person to participate in the distribution
of the New Senior Notes; and
o you are not an "affiliate", as defined in the
Rule 405 under the Securities Act, of
Continental or a broker-dealer who acquired
Old Senior Notes directly from Continental
for your own account.
If any of these conditions is not satisfied and
you transfer any New Senior Note without
delivering a proper prospectus or without
qualifying for a registration exemption, you may
incur liability under the Securities Act.
Continental does not assume or indemnify you
against such liability.
Each broker-dealer that receives New Senior
Notes in exchange for Old Senior Notes held for
its own account as a result of market-making or
other trading activities must acknowledge that
it will deliver a prospectus in connection with
any resale of such New Senior Notes. A
broker-dealer may use this prospectus for an
offer to resell, resale or other transfer of
such New Senior Notes issued to it in the
Exchange Offer.
Conditions to the Exchange
Offer....................... The Exchange Offer is not conditioned upon any
minimum principal amount of Old Senior Notes
being tendered for exchange. However, the
Exchange Offer is subject to certain customary
conditions, which may be waived by Continental.
Expiration Date of the
Exchange Offer.............. [__________], 2003, subject to Continental's
right to extend the Expiration Date.
Procedures for Tendering Old
Senior Notes................ If you wish to accept the Exchange Offer, you
must deliver your Old Senior Notes to the
Exchange Agent for exchange no later than 5:00
p.m., New York City time, on the Expiration
Date.
You must also deliver a completed and signed
Letter of Transmittal together with the Old
Senior Notes. A Letter of Transmittal has been
sent to Senior Noteholders and a form is
attached as an exhibit to the Registration
Statement.
If you hold Old Senior Notes through DTC and
wish to accept the Exchange Offer, you may do so
through DTC's Automated Tender Offer Program. By
accepting the Exchange Offer through such
program, you will agree to be bound by the
Letter of Transmittal as though you had signed
the Letter of Transmittal and delivered it to
the Exchange Agent.
Guaranteed Delivery
Procedures.................. If you wish to tender your Old Senior Notes and
your Old Senior Notes are not immediately
available, you cannot deliver your Old Senior
Notes and a properly completed Letter of
Transmittal or any other document required by
the Letter of Transmittal to the Exchange Agent
prior to the Expiration Date or you cannot
complete the book-entry transfer procedures
prior to the Expiration Date, you may tender
your Old Senior Notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer--Guaranteed Delivery Procedures".
Withdrawal Rights............. You may withdraw a tender of Old Senior Notes at
any time prior to 5:00 p.m., New York City time,
on the Expiration Date. To withdraw a tender of
Old Senior Notes, the Exchange Agent must
receive a written or facsimile transmission
notice requesting such withdrawal at its address
set forth under "The Exchange Offer--Exchange
Agent" prior to 5:00 p.m., New York City time,
on the Expiration Date.
Acceptance of Old Senior Notes
and Delivery of
New Senior Notes............ Subject to certain conditions, any and all Old
Senior Notes 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 Senior Notes issued
pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date.
Registration, Clearance and
Settlement........ The New Senior Notes will be represented by one
or more permanent global notes, which will be
registered in the name of the nominee of DTC.
The global notes will be deposited with the
Trustee as custodian for DTC.
Consequences of Failure to
Exchange Old Senior Notes... Once the Exchange Offer has been completed, if
you do not exchange your Old Senior Notes for
New Senior Notes in the Exchange Offer, you will
no longer be entitled to registration rights and
will not be able to offer or sell your Old
Senior Notes, unless (i) such Old Senior Notes
are subsequently registered under the Securities
Act (which, subject to certain limited
exceptions, Continental will have no obligation
to do) or (ii) your transaction is exempt from,
or otherwise not subject to, the Securities Act
and applicable state securities laws.
Certain Federal Income Tax
Consequences................ The exchange of Old Senior Notes for New Senior
Notes will not be a sale or exchange or
otherwise a taxable event for federal income tax
purposes.
Exchange Agent................ Wilmington Trust Company is serving as Exchange
Agent in connection with the Exchange Offer.
Fees and Expenses............. All expenses incident to Continental's
consummation of the Exchange Offer and
compliance with the Registration Rights
Agreement will be borne by Continental.
Use of Proceeds............... Continental will not receive any cash proceeds
from the exchange of the Old Senior Notes for
the New Senior Notes.
SUMMARY OF TERMS OF NOTES
Senior Notes Subordinated Notes (1)
------------------------------ ----------------------------
Principal Amount........................... $200,000,000 $100,000,000
Loan to Collateral Value (2)............... 42.8% 65.7%
Maximum Loan to Collateral Value........... 45.0% 67.5%
Interest Rate.............................. USD 3-Month USD 3-Month
LIBOR + .90% (3) LIBOR + 7.50%
Interest Payment Dates..................... March 6, June 6, September 6 March 6, June 6, September 6
and December 6 and December 6
Final Scheduled Payment Date............... December 6, 2007 December 6, 2007
Final Legal Maturity Date.................. December 6, 2009 Not applicable
Minimum Denomination....................... $1,000 $100,000
Section 1110 Protection (4)................ Yes Yes
Liquidity Facility Coverage................ 8 quarterly interest None
payments (5)
Policy Provider Coverage................... Interest when due and principal None
no later than the Final Legal
Maturity Date (5)
- -----------------
(1) The Exchange Offer being made pursuant to this Prospectus does not relate
to the Subordinated Notes.
(2) These percentages have been determined by dividing the outstanding
principal amount of the Senior Notes plus, in the case of the percentage
applicable to the Subordinated Notes, the initial principal amount of the
Subordinated Notes (minus Cash Collateral) by the appraised value of the
Collateral determined as of December 25, 2002. Continental is required to
provide to the Policy Provider and the Trustee a semiannual appraisal of
the Collateral. If any such subsequent appraisal indicates that the loan to
Collateral value is greater than 45.0%, in the case of the Senior Notes, or
67.5%, in the case of the Subordinated Notes, Continental is required to
provide additional collateral or to reduce the principal amount of Senior
Notes or Subordinated Notes outstanding so that the loan to Collateral
value is not greater than the applicable maximum percentage. Continental
deposited $13,056,950 as Cash Collateral at the initial issuance of the Old
Senior Notes so that the initial loan to Collateral value would not exceed
45.0%, based on the appraisal determined as of August 25, 2002. The loan to
Collateral value, determined using the appraisal as of December 25, 2002,
would have been 45.8% for the Senior Notes and 68.7% for the Subordinated
Notes without giving effect to such deposit of Cash Collateral. Continental
expects to satisfy the applicable maximum loan to Collateral value
percentages at the time of the next appraisal due in August 2003, based
upon its projected purchases of spare parts, in which case Continental will
be entitled to withdraw such Cash Collateral. However, no assurance can be
given that such applicable maximum percentages will be satisfied. An
appraised value is only an estimate and reflects certain assumptions. See
"Description of the Appraisal".
(3) The interest rate applicable to the Senior Notes is subject to a maximum
rate of 12% per annum applicable only for periods as to which Continental
has failed to pay accrued interest when due and failed to cure such
nonpayment.
(4) Section 1110 of the U.S. Bankruptcy Code will be applicable to the spare
parts of the types initially subject to the lien securing the Notes, but
will not be applicable to Cash Collateral. In addition, in order to satisfy
the semiannual loan to collateral value requirement referred to in note (1)
above, Continental may add other collateral that may not be entitled to the
benefits of Section 1110, subject to certain limitations.
(5) The amounts available under the Liquidity Facility and the Policy for the
payment of accrued interest on the Senior Notes have been calculated
utilizing the Capped Interest Rate, which is the maximum interest rate on
the Senior Notes applicable only for periods as to which Continental has
failed to pay accrued interest when due and failed to cure such nonpayment.
COLLATERAL
The Senior Notes are secured by a lien on spare parts (including
appliances) first placed in service after October 22, 1994 and owned by
Continental that are appropriate for installation on or use in
o one or more of the following aircraft models: Boeing model 737-700,
737-800, 737-900, 757-200, 757-300, 767-200, 767-400 or 777-200
aircraft,
o any engine utilized on any such aircraft or
o any other spare part included in the Collateral,
and not appropriate for installation on or use in any other model of aircraft
currently operated by Continental or engine utilized on any such other model of
aircraft. The Subordinated Notes are also secured by a lien on such Collateral.
The lien will not apply for as long as a spare part is installed on or being
used in any aircraft, engine or other spare part so installed or being used. In
addition, the lien will not apply to a spare part not located at one of the
designated locations specified pursuant to the security agreement applicable to
the spare parts.
The spare parts included in the Collateral fall into two categories,
"rotables" and "expendables". Rotables are parts that wear over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which they relate. Expendables consist of parts
that can be restored to a serviceable condition but have a life less than the
related flight equipment and parts that generally are used once and thereby
consumed or thereafter discarded. Spare engines are not included in the
Collateral. Set forth below is certain information about the spare parts
included in the Collateral as of December 25, 2002:
SPARE PARTS QUANTITY(1)
-------------------------------------
AIRCRAFT MODEL EXPENDABLES ROTABLES TOTAL APPRAISED VALUE(2)
-------------- ----------- -------- ------- ------------------
737-700.................... 877 24 901
737-700/800................ 278,912 6,942 285,854
737-800.................... 3,777 191 3,968
737-900.................... 821 10 831
--------- --------- ---------
737-7/8/9 Subtotal......... 284,387 7,167 291,554 $185,972,600
757-200.................... 185,731 3,391 189,122 69,352,800
757-300.................... 10,946 96 11,042 3,116,700
767-200.................... 25,485 227 25,712 8,946,700
767-400.................... 51,147 1,586 52,733 55,741,200
777-200.................... 111,210 3,006 114,216 113,712,000
------- ------- ------- ------------
Total...................... 668,906 15,473 684,379 $436,841,900
- -----------------
(1) This quantity of spare parts used in preparing the appraised value was
determined as of December 25, 2002. Since spare parts are regularly used,
refurbished, purchased, transferred and discarded in the ordinary course of
Continental's business, the quantity of spare parts included in the
Collateral and their appraised value will change over time. Continental is
required to provide to the Policy Provider and the Trustee a semiannual
appraisal of the Collateral.
(2) The appraised value reflects the opinion of Simat, Helliesen & Eichner,
Inc., an independent aviation appraisal and consulting firm, of the fair
market value of the spare parts. A letter summarizing such appraisal is
annexed to this Prospectus as Appendix II. The appraisal is subject to
number of assumptions and limitations and was prepared based on certain
specified methodologies. An appraisal is only an estimate of value and
should not be relied upon as a measure of realizable value.
CASH FLOW STRUCTURE
Set forth below is a diagram illustrating the structure of certain cash
flows applicable to the Notes.
- -----------
(1) The Liquidity Facility is sufficient to cover eight consecutive quarterly
interest payments on the Senior Notes, but does not cover any other amounts
payable on the Senior Notes. There is no Liquidity Facility for the
Subordinated Notes.
(2) The Policy covers regular interest payments on the Senior Notes and
outstanding principal of the Senior Notes no later than the Final Legal
Maturity Date, but does not cover any other amounts payable on the Senior
Notes. There is no Policy for the Subordinated Notes.
THE SENIOR NOTES
Issuer........................ Continental Airlines, Inc.
Notes Offered................. Floating Rate Secured Notes due 2007.
Use of Proceeds............... The proceeds from the sale of the Old Senior
Notes were used for general corporate purposes.
Continental will not receive any proceeds from
the exchange of the New Senior Notes for the Old
Senior Notes.
Issuance of Subordinated
Notes....................... On May 9, 2003, Continental privately placed the
Subordinated Notes. The Subordinated Notes rank
junior to the Senior Notes (including amounts
owed to the Policy Provider and the Liquidity
Provider) with respect to payments received from
Continental, proceeds from liquidation of the
Collateral and otherwise. Unlike the Senior
Notes, the Subordinated Notes do not have the
benefit of a liquidity facility or an insurance
policy.
Trustee and Paying Agent...... Wilmington Trust Company.
Liquidity Provider............ Morgan Stanley Capital Services.
Policy Provider............... MBIA Insurance Corporation.
Final Scheduled Payment
Date........................ The entire principal amount of the Senior Notes
is scheduled for payment on December 6, 2007.
Final Legal Maturity Date..... December 6, 2009.
Interest...................... The Senior Notes will accrue interest at a
variable rate per annum set forth on the cover
page of this Prospectus. The interest rate on
the Senior Notes will be subject to a maximum
equal to the Capped Interest Rate of 12% per
annum applicable only for periods as to which
Continental has failed to pay accrued interest
when due and failed to cure such nonpayment. For
all other periods, the interest rate on the
Senior Notes will not be capped. Interest is
calculated on the basis of the actual number of
days elapsed over a 360-day year. LIBOR is
determined from time to time by the Reference
Agent as described in "Description of the Senior
Notes--Determination of LIBOR".
Interest Payment Dates........ March 6, June 6, September 6 and December 6,
commencing on March 6, 2003.
Record Dates.................. The fifteenth day preceding the related Interest
Payment Date.
Optional Redemption........... Continental may elect to redeem all or (so long
as no Payment Default has occurred and is
continuing) some of the Senior Notes at any time
prior to maturity. The redemption price in such
case will be the principal amount of the Senior
Notes, together with accrued and unpaid
interest, LIBOR break amount, if any, and, if
redeemed prior to the third anniversary of the
Issuance Date (except in connection with a
redemption to satisfy the maximum Senior
Collateral Ratio or minimum Senior Rotable Ratio
requirement), a Premium equal to the following
percentage of the principal amount prepaid:
IF REDEEMED DURING THE YEAR
PRIOR TO THE ANNIVERSARY OF THE
ISSUANCE DATE INDICATED BELOW PREMIUM
----------------------------- -------
1st 1.50%
2nd 1.00
3rd 0.50
If Continental gives notice of redemption but
fails to pay when due all amounts necessary to
effect such redemption, such redemption shall be
deemed revoked and no amount shall be due as a
result of notice of redemption having been
given.
Collateral.................... The Senior Notes are secured by a lien on spare
parts (including appliances) first placed in
service after October 22, 1994 and owned by
Continental that are appropriate for
installation on or use in
o one or more of the following aircraft models:
Boeing model 737-700, 737-800, 737-900,
757-200, 757-300, 767-200, 767-400 or 777-200
aircraft,
o any engine utilized on any such aircraft or
o any other spare part included in the
Collateral,
and not appropriate for installation on or use
in any other model of aircraft currently
operated by Continental or engine utilized on
any such other model of aircraft. The
Subordinated Notes are also secured by a lien on
such Collateral. The lien will not apply for as
long as a spare part is installed on or being
used in any aircraft, engine or other spare part
so installed or being used. In addition, the
lien will not apply to a spare part not located
at one of the designated locations specified
pursuant to the security agreement applicable to
the spare parts.
Maintenance of Collateral
Ratios...................... Continental is required to provide to the Policy
Provider and the Trustee a semiannual appraisal
of the Collateral. If any such appraisal
indicates that:
o the ratio of the outstanding principal amount
of the Senior Notes to the Collateral value
is greater than 45.0%;
o the ratio of the outstanding principal amount
of the Senior Notes and the Subordinated
Notes to Collateral value is greater than
67.5%;
o the ratio of the value of the Rotables
included in the Collateral to the outstanding
principal amount of the Senior Notes is less
than 150%; or
o the ratio of the value of the Rotables
included in the Collateral to the outstanding
principal amount of the Senior Notes and the
Subordinated Notes is less than 100%;
then Continental is required to provide
additional collateral or to reduce the principal
amount of Senior Notes or Subordinated Notes
outstanding so that such ratios comply with the
applicable maximum Collateral value percentages
and minimum Rotable value percentages.
Section 1110 Protection....... Continental's outside counsel has provided its
opinion to the Trustee and the Policy Provider
that the benefits of Section 1110 of the U.S.
Bankruptcy Code will be available with respect
to the lien on the spare parts collateral.
Liquidity Facility............ Under the Liquidity Facility, the Liquidity
Provider will, if necessary, make advances in an
aggregate amount sufficient to pay interest on
the Senior Notes on up to eight successive
quarterly Interest Payment Dates. Drawings under
the Liquidity Facility cannot be used to pay any
other amount in respect of the Senior Notes.
Upon each drawing under the Liquidity Facility
to pay interest on the Senior Notes, the Trustee
will reimburse the Liquidity Provider for the
amount of such drawing. Such reimbursement
obligation and all interest, fees and other
amounts owing to the Liquidity Provider under
the Liquidity Facility and certain other
agreements will rank senior to the Notes in
right of payment.
There is no Liquidity Facility for the
Subordinated Notes.
Policy Coverage............... Under the Policy, the Policy Provider is
required to honor drawings to cover:
o Any shortfall on any Distribution Date in
funds to be distributed as accrued interest
on the Senior Notes.
o Any shortfall on the Final Legal Maturity
Date in funds to be distributed as principal
of, and accrued interest on, the Senior
Notes.
o Any shortfall in the proceeds of the
disposition of the remaining Collateral from
the amount required to pay principal of, and
accrued interest on, the Senior Notes on the
Distribution Date established in connection
with such disposition.
o If certain payments with respect to the
Senior Notes are by court order determined to
be a "preferential transfer" under the U.S.
Bankruptcy Code or otherwise required to be
returned, the amount of such payments.
o After the continuance of a Payment Default
for eight consecutive Interest Periods, any
shortfall in funds required to pay principal
of, and accrued interest on, the Senior Notes
on the Distribution Date established in
connection with such Payment Default. If such
Distribution Date would occur prior to the
Final Scheduled Payment Date, instead of
paying such shortfall on such Distribution
Date, the Policy Provider may, so long as no
Policy Provider Default is continuing, elect
to pay:
o Any shortfall on such Distribution Date in
funds required to pay accrued interest on the
Senior Notes.
o Thereafter, on each Distribution Date, an
amount equal to the scheduled principal (on
the Final Scheduled Payment Date) and
interest (without regard to any acceleration
thereof) payable on the Senior Notes on such
Distribution Date.
Notwithstanding such election by the Policy
Provider, the Policy Provider may, on any
Business Day (which shall be a Distribution
Date) elected by the Policy Provider upon 20
days' notice, cause the Trustee to make a
drawing under the Policy for an amount equal to
the then outstanding principal balance of the
Senior Notes and accrued and unpaid interest
thereon. Further, notwithstanding such election
by the Policy Provider, upon the occurrence of a
Policy Provider Default, the Trustee shall, on
any Business Day elected by the Trustee upon 20
days' written notice to the Policy Provider,
make a drawing under the Policy for an amount
equal to the then outstanding principal balance
of the Senior Notes and accrued and unpaid
interest thereon.
Any shortfall for which a drawing under the
Policy may be made as described above will be
calculated after the application of funds
available through drawings under the Liquidity
Facility and withdrawals from the Cash
Collateral Account.
The Policy Provider is required to honor
drawings under the Policy by the Trustee on
behalf of the Liquidity Provider for all
outstanding drawings under the Liquidity
Facility, together with interest thereon, on or
after the Business Day which is 24 months from
the earliest to occur of (1) the date on which
an Interest Drawing shall have been made under
the Liquidity Facility and remain unreimbursed
from payments made by Continental at the end of
such 24-month period, (2) the date on which any
Downgrade Drawing, Non-Extension Drawing or
Final Drawing that was deposited into the Cash
Collateral Account shall have been applied to
pay any scheduled payment of interest on the
Senior Notes and remain unreimbursed from
payments made by Continental at the end of such
24-month period and (3) the date on which all of
the Senior Notes have been accelerated and
remain unpaid by Continental at the end of such
24-month period, in each case disregarding any
reimbursements from payments by the Policy
Provider and from proceeds from the sale of
Collateral distributed by the Trustee during
such 24-month period.
The reimbursement of drawings under the Policy
ranks junior to further distributions on the
Notes.
There is no Policy for the Subordinated Notes.
Control of Trustee............ Whether before or after the occurrence of an
Event of Default, the "Controlling Party" will
direct the Trustee in taking action under the
Indenture and other agreements relating to the
Notes, including in amending such agreements and
granting waivers thereunder. However, certain
limited provisions with respect to the
Collateral as they relate to the Subordinated
Notes cannot be amended or waived without the
consent of the holders of a majority of the
outstanding principal amount of the Subordinated
Notes and certain other limited provisions
cannot be amended or waived without the consent
of each Noteholder affected thereby. If an Event
of Default is continuing, the "Controlling
Party" will direct the Trustee in exercising
remedies, such as accelerating the Notes or
foreclosing the lien on the collateral securing
the Notes.
The Controlling Party will be:
o Except as provided below, the Policy
Provider.
o If a Policy Provider Default is continuing,
the holders of more than 50% in aggregate
unpaid principal amount of the Senior Notes
then outstanding or, if the Senior Notes have
been paid in full, of the Subordinated Notes
then outstanding.
o If the Senior Notes, the Policy Expenses and
the Policy Provider Obligations have been
paid in full, the holders of more than 50% in
aggregate unpaid principal amount of the
Subordinated Notes then outstanding.
o Under certain circumstances, the Liquidity
Provider.
The Subordinated Noteholders will have the right
to direct the Policy Provider in acting as the
Controlling Party during the continuance of an
Event of Default if the Subordinated Noteholders
shall have deposited with the Policy Provider
cash, U.S. government securities or other
investments acceptable to the Policy Provider as
collateral for amounts owed to, and for certain
amounts to become due and payable to, the Policy
Provider under the Operative Documents and
Support Documents. The amount deposited must be
sufficient without reinvestment to pay certain
amounts due and to become due on the Senior
Notes and to the Policy Provider. No
Subordinated Noteholder will be required to
contribute to a deposit. The Subordinated
Noteholders contributing their proportionate
share of such deposit will be entitled to direct
the Policy Provider in taking action as the
Controlling Party during the continuance of such
Event of Default by vote of a majority of the
principal amount of the Subordinated Notes held
by such contributing Subordinated Noteholders.
If the Policy Provider draws on such deposit,
after the Policy Provider shall have paid in
full all amounts due to it under the Operative
Documents and Support Documents, amounts
distributable to the Policy Provider under the
Indenture will be distributed to such
contributing Subordinated Noteholders in the
same proportion as their respective
contributions to the deposit until their
proportionate share of the deposit not returned
by the Policy Provider shall have been repaid in
full.
STANDARD &
MOODY'S POOR'S
Threshold Rating for the Short Term.......... P-1 A-1
Liquidity Provider..........
Liquidity Provider Rating..... Morgan Stanley, the parent company of Morgan
Stanley Capital Services, meets the Threshold
Rating requirement and has guaranteed Morgan
Stanley Capital Services' obligations under the
Liquidity Facility.
MOODY'S
Policy Provider Rating........ Financial Strength.................... Aaa
SUMMARY FINANCIAL AND OPERATING DATA
The following tables summarize certain consolidated financial data and
certain operating data with respect to Continental. The following selected
consolidated financial data for the years ended December 31, 2002, 2001 and 2000
are derived from the audited consolidated financial statements of Continental
(including certain reclassifications to conform to the current year
presentation) including the notes thereto incorporated by reference in this
Prospectus and should be read in conjunction with those financial statements.
The following selected consolidated financial data for the years ended December
31, 1999 and 1998 are derived from the selected financial data contained in
Continental's Annual Report on Form 10-K for the year ended December 31, 2002,
incorporated by reference in this Prospectus, and the audited consolidated
financial statements of Continental for the years ended December 31, 1999 and
1998 and should be read in conjunction therewith. The consolidated financial
data of Continental for the three months ended March 31, 2003 and 2002 are
derived from the unaudited consolidated financial statements of Continental
incorporated by reference in this Prospectus, which include all adjustments
(consisting solely of normal recurring accruals, except for fleet impairment
losses and other special charges) that Continental considers necessary for the
fair presentation of the financial position and results of operations for these
periods. Operating results for the three months ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003.
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- --------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
-------- ------- ---------- -------- -------- -------- ------
(IN MILLIONS OF DOLLARS, EXCEPT OPERATING DATA, PER SHARE DATA AND RATIOS)
FINANCIAL DATA--OPERATIONS:(1)
Operating Revenue.................... $ 2,042 $ 1,993 $ 8,402 $ 8,969 $ 9,899 $ 8,639 $ 7,927
Operating Expenses................... 2,266 2,180 8,714 8,825 9,170 8,024 7,226
-------- -------- -------- -------- -------- -------- --------
Operating Income (Loss).............. (224) (187) (312) 144 729 615 701
Non-operating Income (Expense), net.. (86) (67) (303) (258) (167) 183 (59)
-------- -------- -------- -------- -------- -------- --------
Income (Loss) before Income Taxes
and Cumulative Effect of Changes
in Accounting Principles.......... (310) (254) (615) (114) 562 798 642
Net Income (Loss).................... $ (221) $ (166) $ (451) $ (95) $ 342 $ 455 $ 383
======== ======== ======== ======== ======== ======== ========
Earnings (Loss) per Share:
Basic............................. $ (3.38) $ (2.61) $ (7.02) $ (1.72) $ 5.62 $ 6.54 $ 6.34
======== ======== ======== ======== ======== ======== ========
Diluted........................... $ (3.38) $ (2.61) $ (7.02) $ (1.72) $ 5.45 $ 6.20 $ 5.02
======== ======== ======== ======== ======== ======== ========
Shares used for Computation:
Basic............................. 65.3 63.5 64.2 55.5 60.7 69.5 60.3
Diluted........................... 65.3 63.5 64.2 55.5 62.8 73.9 80.3
Ratio of Earnings to Fixed Charges
(2).................................. -- -- -- -- 1.51x 1.80x 1.93x
======== ======== ======== ======== ======== ======== ========
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ---------------------------------------------------------
2003 2002 2002 2001 2000 1999 1998
-------- -------- --------- -------- -------- -------- --------
(IN MILLIONS OF DOLLARS, EXCEPT OPERATING DATA, PER SHARE DATA AND RATIOS)
OPERATING DATA:
MAINLINE JET STATISTICS:
Revenue passengers (thousands)........ 9,245 10,057 41,016 44,238 46,896 45,540 43,625
Revenue passenger miles
(millions) (3)...................... 13,274 14,032 59,349 61,140 64,161 60,022 53,910
Cargo ton miles (millions)............ 233 208 908 917 1,096 1,000 856
Available seat miles (millions) (4)... 19,076 18,951 80,122 84,485 86,100 81,946 74,727
Passenger load factor (5)............. 69.6% 74.0% 74.1% 72.4% 74.5% 73.2% 72.1%
Passenger revenue per available
seat mile (cents)................... 8.45 8.77 8.61 8.98 9.84 9.12 9.23
Total revenue per available seat mile
(cents)............................. 9.31 9.40 9.27 9.58 10.52 9.75 9.85
Operating cost per available seat mile
(cents) (6)......................... 10.25 10.09 9.53 9.22 9.68 9.07 9.03
Special items per available seat mile. 0.34 0.48 0.31 (0.36) N/A 0.09 0.14
Average yield per revenue passenger mile
(cents) (7)......................... 12.14 11.84 11.63 12.42 13.20 12.45 12.79
Average price per gallon of fuel,
excluding fuel taxes (cents)........ 98.50 60.17 69.97 78.24 84.21 46.56 46.83
Average price per gallon of fuel,
including fuel taxes (cents)........ 102.87 64.39 74.01 82.48 88.54 50.78 51.20
Fuel gallons consumed (millions)...... 305 308 1,296 1,426 1,533 1,536 1,487
Average fare per revenue passenger.... $174.27 $165.21 $168.25 $171.59 $180.66 $164.11 $158.02
Average length of aircraft flight (miles) 1,257 1,191 1,225 1,185 1,159 1,114 1,044
Average daily utilization of each
aircraft (hours) (8)................ 9:19 9:31 9:31 10:19 10:36 10:29 10:13
Actual aircraft in fleet at end of
period (9).......................... 362 364 366 352 371 363 363
REGIONAL JET AND TURBOPROP STATISTICS
(10):
Revenue passenger miles
(millions) (3)...................... 1,078 835 3,952 3,388 2,947 2,149 1,564
Available seat miles (millions) (4)... 1,767 1,424 6,219 5,437 4,735 3,431 2,641
Passenger load factor (5)............. 61.0% 58.6% 63.5% 62.3% 62.2% 62.6% 59.2%
CONSOLIDATED STATISTICS:
Consolidated passenger load factor.... 68.9% 73.0% 73.3% 71.8% 73.9% 72.8% 71.7%
Consolidated breakeven passenger load
factor (11)......................... 84.5% 87.4% 82.5% 73.5% 67.9% 64.0% 63.6%
MARCH 31, DECEMBER 31,
2003 2002
------------ ------------
(IN MILLIONS OF DOLLARS)
FINANCIAL DATA--BALANCE SHEET:
ASSETS:
Cash, Cash Equivalents and Short-Term Investments................ $ 1,181 $ 1,342
Other Current Assets............................................. 1,079 935
Total Property and Equipment, net................................ 6,824 6,968
Routes and Airport Operating Rights, net......................... 1,003 1,009
Other Assets..................................................... 503 486
------------ ------------
Total Assets............................................... $ 10,590 $ 10,740
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities.............................................. $ 3,137 $ 2,926
Long-Term Debt and Capital Leases................................ 5,096 5,222
Deferred Credits and Other Long-Term Liabilities................. 1,546 1,572
Minority Interest............................................ 19 7
Mandatorily Redeemable Preferred Securities of Subsidiary
Trust Holding Solely Convertible Subordinated Debentures
of Continental (12)....................................... 241 241
Redeemable Preferred Stock of Subsidiary (13).................... 5 5
Stockholders' Equity............................................. 546 767
------------ ------------
Total Liabilities and Stockholders' Equity................. $ 10,590 $ 10,740
============ ============
- -----------------
(1) Includes the following special expense (income) items (in millions):
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
---------------- --------------------------------------------
2003 2002 2002 2001 2000 1999 1998
------ ------ ------ ------ ------ ------ ------
Operating expense (income):
Fleet impairment and restructuring
charges............................... $ 65 $ 90 $242 $ 61 $ -- $ 81 $122
Air Transportation Safety and System
Stabilization Act grant............... -- -- 12 (417) -- -- --
Severance and other special charges..... -- -- -- 63 -- -- --
Nonoperating expense (income):
Gain on sale of assets.................. -- -- -- -- (9) (326) --
Impairment of investments............... -- -- -- 22 -- -- --
Cumulative effect of change in accounting,
net of taxes.......................... -- -- -- -- -- 33 --
(2) For purposes of calculating this ratio, earnings consist of income before
income taxes and cumulative effect of changes in accounting principles 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 expenses, the
portion of rental expense representative of interest expense, the amount
amortized for debt discount, premium and issuance expense and interest
previously capitalized. For the three months ended March 31, 2003 and 2002
and the years ended December 31, 2002 and 2001, earnings were inadequate to
cover fixed charges and the coverage deficiency was $307 million, $257
million, $616 million and $143 million, respectively.
(3) The number of scheduled miles flown by revenue passengers.
(4) The number of seats available for passengers multiplied by the number of
scheduled miles those seats are flown.
(5) Revenue passenger miles divided by available seat miles.
(6) Includes applicable special items noted in (1).
(7) The average revenue received for each mile a revenue passenger is carried.
(8) The average number of hours per day that an aircraft flown in revenue
service is operated (from gate departure to gate arrival).
(9) Excludes aircraft that are either temporarily or permanently removed from
service.
(10) These statistics reflect operations of Continental Express (as operated by
ExpressJet). In April 2002, ExpressJet's parent company Holdings completed
an initial public offering, and Continental's ownership in Holdings was
reduced to 53.1% of its outstanding common stock. Pursuant to a capacity
purchase agreement, Continental currently purchases all of ExpressJet's
available seat miles for a negotiated price.
(11) The percentage of seats that must be occupied by revenue passengers for us
to break even on a net income basis. The special items noted in (1)
included in the consolidated breakeven passenger load factor account for
3.0, 4.9, 3.3, (3.0), (0.1), (2.3) and 1.6 percentage points in each of the
periods, respectively.
(12) The sole assets of the Trust are convertible subordinated debentures issued
by Continental with an aggregate principal amount of $250 million, which
bear interest at the rate of 6% per annum and mature on November 15, 2030.
Upon repayment, the Mandatorily Redeemable Preferred Securities of
Subsidiary Trust will be mandatorily redeemed.
(13) In connection with an internal reorganization by Holdings, Continental's
53.1% majority owned subsidiary, a subsidiary of Holdings issued non-voting
preferred stock which has a liquidation preference of $5 million, is
mandatorily redeemable in 2012, and is callable beginning in 2005. The
preferred stock was sold to a non-affiliated third party for a note in the
original principal amount of $5 million and is included on our balance
sheet as redeemable preferred stock of subsidiary.
RISK FACTORS
TERRORIST ATTACKS AND INTERNATIONAL HOSTILITIES
THE 2001 TERRORIST ATTACKS AND THE RECENT WAR IN IRAQ HAVE ADVERSELY
AFFECTED, AND ANY ADDITIONAL TERRORIST ATTACKS OR HOSTILITIES MAY FURTHER
ADVERSELY AFFECT, CONTINENTAL'S FINANCIAL CONDITION, RESULTS OF OPERATIONS
AND PROSPECTS
As described in greater detail below under "The Company--Outlook" and in
Continental's filings with the Commission, the terrorist attacks of September
11, 2001 involving commercial aircraft adversely affected Continental's
financial condition, results of operations and prospects, and the airline
industry generally. Those effects continue, although they have been mitigated
somewhat by increased traffic, money received by Continental under the
Stabilization Act and a recent supplemental appropriations bill passed by both
houses of Congress and signed by the President in April 2003 and Continental's
cost-cutting measures. Moreover, additional terrorist attacks, even if not made
directly on the airline industry, or the fear of such attacks, could further
negatively affect Continental and the airline industry. The recent war in Iraq
further decreased demand for air travel, which could have a material adverse
impact on Continental's financial condition, liquidity and results of
operations.
Among the effects Continental experienced from the September 11, 2001
terrorist attacks were significant flight disruption costs caused by the Federal
Aviation Administration ("FAA") imposed grounding of the U.S. airline industry's
fleet, significantly increased security, insurance and other costs,
significantly higher ticket refunds, significantly reduced load factors (defined
as revenue passenger miles divided by available seat miles), and significantly
reduced yields. Further terrorist attacks against commercial aircraft could
result in another grounding of Continental's fleet, and would likely result in
significant reductions in load factor and yields, along with increased ticket
refunds and security, insurance and other costs. In addition, terrorist attacks
not involving commercial aircraft, post war unrest in Iraq or other world events
could result in decreased load factors and yields and could also result in
increased costs for Continental and the airline industry. For instance, fuel
costs rose significantly during 2002 and the first quarter of 2003 and until
recently have been at historically high levels. Premiums for aviation insurance
have increased substantially, and could escalate further, or certain aviation
insurance could become unavailable or available only for reduced amounts of
coverage that are insufficient to comply with the levels of insurance coverage
required by aircraft lenders and lessors or required by applicable government
regulations. Additionally, war-risk coverage or other insurance might cease to
be available to Continental's vendors, or might be available only at
significantly increased premiums or for reduced amounts of coverage, which could
adversely impact Continental's operations or costs.
Due in part to the lack of predictability of future traffic, business mix
and yields, Continental is currently unable to estimate the long-term impact on
it of the events of September 11, 2001 or the impact of any further terrorist
attacks or the war in Iraq. However, given the magnitude of the unprecedented
events of September 11, 2001 and their continuing aftermath, the adverse impact
to Continental's financial condition, results of operations, liquidity and
prospects may continue to be material, and Continental's financial resources
might not be sufficient to absorb it or that of any further terrorist attacks or
continued military action in Iraq.
RISK FACTORS RELATING TO THE COMPANY
CONTINENTAL CONTINUES TO EXPERIENCE SIGNIFICANT LOSSES
Since September 11, 2001, Continental has incurred significant losses.
Continental recorded losses of $451 million in 2002 and $221 million in the
first quarter of 2003, and expects to incur a significant loss for the full year
2003. Passenger revenue per available seat mile for Continental's mainline jet
operations has continued to decline since September 11, 2001, dropping 4.1% for
the year ended December 31, 2002 versus the same period in 2001 and 3.6% in the
first quarter of 2003 versus the first quarter of 2002. Overall passenger
revenue declined 7.0% during 2002 compared to 2001, and was flat in the first
quarter of 2003 compared to the same period in 2002. Business traffic in most
markets continues to be weak, and carriers continue to offer reduced fares to
attract passengers, which lowers Continental's passenger revenue and yields and
raises Continental's break-even load factor. Continental cannot predict when
business traffic or yields will increase. Further, the long-term impact of any
changes in fare structures, most importantly in relation to business fares,
booking patterns, low-cost competitor growth, increased usage of regional jets,
competitor bankruptcies and other changes in industry structure and conduct,
cannot be predicted at this time, but could have a material adverse effect on
Continental's financial condition, liquidity and results of operations. See "The
Company--Outlook".
In addition, Continental's capacity purchase agreement with ExpressJet
provides that Continental purchase, in advance, all of ExpressJet's available
seat miles for a negotiated price, and Continental is at risk for reselling the
available seat miles at market prices. Continental previously announced its
intention to sell or otherwise dispose of its remaining interests in ExpressJet.
If Continental does so, then Continental would report greater fixed costs, which
could result in lower or more volatile earnings or both. For example, for the
year ended December 31, 2002, Continental's net loss of $451 million included
net income for ExpressJet of $84 million. For the quarter ended March 31, 2003,
Continental's net loss of $221 million included net income for ExpressJet of $26
million.
CONTINENTAL'S HIGH LEVERAGE MAY AFFECT ITS ABILITY TO SATISFY ITS SIGNIFICANT
FINANCING NEEDS OR MEET ITS OBLIGATIONS
As is the case with its principal competitors, Continental has a high
proportion of debt compared to its equity capital. During 2002, the amount of
Continental's long-term debt increased 26%. Continental also has significant
operating leases and facility rental costs. In addition, Continental has fewer
cash resources than some of its principal competitors and substantially all of
Continental's property and equipment is subject to liens securing indebtedness.
Accordingly, Continental may be less able than some of its competitors to
withstand a prolonged recession in the airline industry or respond as well to
changing economic and competitive conditions. Moreover, competitors emerging
from bankruptcy will likely have lower cost structures and greater operating
flexibility after reorganizing their companies in bankruptcy.
As of March 31, 2003, Continental had approximately:
o $5.6 billion (including current maturities) of long-term debt and capital
lease obligations.
o $248 million liquidation amount of Continental-obligated mandatorily
redeemable preferred securities of trust ($241 million net of unamortized
discount).
o $546 million of stockholders' equity.
o $1.18 billion in cash, cash equivalents and short-term investments.
Continental has substantial commitments for capital expenditures, including
for the acquisition of new aircraft. As of March 31, 2003, Continental had firm
commitments for 67 aircraft from Boeing, with an estimated cost of approximately
$2.5 billion. The 67 aircraft are scheduled to be delivered between late 2003
and mid 2008, with four Boeing 737-800 aircraft scheduled for delivery in the
fourth quarter of 2003. Continental has been offered backstop financing for
approximately 12 firm aircraft and is currently in negotiations regarding the
offer. Continental does not have backstop financing or any other financing
currently in place for the remainder of the aircraft. In addition, at March 31,
2003, Continental had firm commitments to purchase 13 spare engines related to
the new Boeing aircraft for approximately $80 million. Continental does not have
any financing currently in place for five of these spare engines. These spare
engines are scheduled to be delivered through March 2005. Further financing will
be needed to satisfy Continental's capital commitments for its aircraft and
aircraft-related expenditures such as engines, spare parts and related items.
There can be no assurance that sufficient financing will be available for the
aircraft on order and other capital expenditures.
As of March 31, 2003, ExpressJet had firm commitments for an additional 74
regional jets from Empresa Brasileira de Aeronautica S.A. ("Embraer") delivering
through 2006, with an estimated aggregate cost of $1.5 billion. ExpressJet does
not have any obligation to take any of these firm aircraft that are not financed
by a third party and leased either to ExpressJet or Continental. Under the
capacity purchase agreement between Continental and ExpressJet, Continental has
agreed to lease as lessee and sublease to ExpressJet the regional jets that are
subject to ExpressJet's firm commitments to purchase. In addition, under the
capacity purchase agreement with ExpressJet, the Company generally is obligated
to purchase all of the capacity provided by these new aircraft as they deliver
to ExpressJet. Continental cannot predict whether passenger traffic levels will
enable it to utilize fully regional jets delivering to ExpressJet in the future.
Continental also has significant operating lease and facility rental
obligations. For the year ended December 31, 2002, annual aircraft and facility
rental expense under operating leases approximated $1.3 billion.
Additional financing will be needed to satisfy Continental's capital
commitments. Continental cannot predict whether sufficient financing will be
available. On several occasions subsequent to September 11, 2001, each of
Moody's, Standard & Poor's and Fitch, Inc. downgraded the credit ratings of a
number of major airlines, including Continental's credit ratings. Additional
downgrades were made in March and April 2003 and further downgrades are
possible. Reductions in Continental's credit ratings have increased the interest
Continental pays on new issuances of debt and may increase the cost and reduce
the availability of financing to Continental in the future.
Continental does not have debt obligations that would be accelerated as a
result of a credit rating downgrade, but under two letters of credit facilities
securing our worker's compensation program, Continental could be required to
substitute approximately $67 million of cash collateral for spare engines that
currently serve as collateral if the rating of its senior unsecured debt is
lowered below CCC- by Standard & Poor's or Caa3 by Moody's. Continental's senior
unsecured debt is currently rated "CCC+" on CreditWatch with negative
implications by Standard & Poor's and "Caa2" with negative outlook by Moody's.
SIGNIFICANT CHANGES OR EXTENDED PERIODS OF HIGH FUEL COSTS OR FUEL SUPPLY
DISRUPTIONS WOULD MATERIALLY AFFECT CONTINENTAL'S OPERATING RESULTS
Until recently, fuel costs have been at historically high levels and
constitute a significant portion of Continental's operating expense. Fuel costs
represented approximately 11.7% of Continental's operating expenses for the year
ended December 31, 2002 and 13.9% of Continental's operating expenses for the
year ended December 31, 2001. Fuel costs represented approximately 15.3% and
9.5% of Continental's operating expenses for the three months ended March 31,
2003 and 2002, respectively. Fuel prices and supplies are influenced
significantly by international political and economic circumstances, such as the
political crises in Venezuela and Nigeria and the war in Iraq. From time to time
Continental enters into petroleum swap contracts, petroleum call option
contracts and/or jet fuel purchase commitments to provide some short-term
protection (generally three to six months) against a sharp increase in jet fuel
prices. Depending upon the hedging method employed, Continental's strategy may
limit its ability to benefit from declines in fuel prices. Continental has
hedged approximately 80% of its fuel requirements for the second quarter of 2003
with petroleum call options. Continental has hedged approximately 25% of its
fuel requirements for the remainder of the year with petroleum call options. If
a future fuel supply shortage were to arise from OPEC production curtailments, a
disruption of oil imports, post war unrest in Iraq, other conflicts in the
Middle East, or otherwise, higher fuel prices or further reduction of scheduled
airline service could result. Significant changes in fuel costs would materially
affect Continental's operating results.
LABOR COSTS IMPACT CONTINENTAL'S RESULTS OF OPERATIONS
Labor costs constitute a significant percentage of Continental's total
operating costs. Continental's mechanics, represented by the International
Brotherhood of Teamsters, ratified a new four-year collective bargaining
agreement in December 2002. The mechanics agreement makes an adjustment to
current pay and recognizes current industry conditions with a provision to
re-open negotiations regarding wages, pension and health insurance provisions in
January 2004. Work rules and other contract items are established through 2006.
Collective bargaining agreements between Continental and its pilots and between
ExpressJet and its pilots (both of whom are represented by the Air Line Pilots
Association) became amendable in October 2002. After being deferred due to the
economic uncertainty following the September 11, 2001 terrorist attacks,
negotiations recommenced in September 2002 and are continuing. Although
Continental may incur increased labor costs in connection with the negotiation
of the pilot collective bargaining agreements, the labor cost uncertainty
associated with recent major hub-and-spoke carrier bankruptcies makes predicting
the outcome of negotiations more difficult. US Airways Group, Inc. ("US
Airways") and United Air Lines, Inc. ("United") have significantly decreased
their labor costs during their bankruptcy cases. Delta and Northwest Airlines
have each recently announced that they are seeking to decrease their labor costs
significantly. American Airlines, Inc. ("American Airlines") has recently agreed
with its major labor groups on significant labor cost reductions. Although
Continental enjoys generally good relations with its employees, there can be no
assurance that Continental will not experience labor disruptions in the future.
RISK FACTORS RELATING TO THE AIRLINE INDUSTRY
THE AIRLINE INDUSTRY IS HIGHLY COMPETITIVE
The airline industry is highly competitive and susceptible to price
discounting. Carriers use discount fares to stimulate traffic during periods of
slack demand, to generate cash flow and to increase market share. Some of
Continental's competitors have substantially greater financial resources or
lower cost structures than Continental, or both. In recent years, the market
share held by low cost carriers has increased significantly.
Airline profit levels are highly sensitive to changes in fuel costs, fare
levels and passenger demand. Passenger demand and fare levels are influenced by,
among other things, the state of the global economy, domestic and international
events, airline capacity and pricing actions taken by carriers. The weak U.S.
economy, turbulent international events and extensive price discounting by
carriers contributed to unprecedented losses for U.S. airlines from 1990 to
1993. Since September 11, 2001, these same factors, together with the effects of
the terrorist attacks and the war in Iraq, have resulted in dramatic losses for
Continental and the airline industry generally. Continental cannot predict when
conditions will improve. US Airways, United and several small competitors have
filed for bankruptcy protection, although US Airways emerged from bankruptcy on
March 31, 2003. Other carriers could follow. These carriers could operate under
bankruptcy protection in a manner that would be adverse to Continental, and
could emerge from bankruptcy as more vigorous competitors with substantially
lower costs.
In recent years, the major U.S. airlines have sought to form marketing
alliances with other U.S. and foreign air carriers. Such alliances generally
provide for codesharing, frequent flyer reciprocity, coordinated scheduling of
flights of each alliance member to permit convenient connections and other joint
marketing activities. Such arrangements permit an airline to market flights
operated by other alliance members as its own. This increases the destinations,
connections and frequencies offered by the airline, which provide an opportunity
to increase traffic on its segment of flights connecting with its alliance
partners. Continental's alliance with Northwest Airlines and its new alliance
with Delta and Northwest Airlines are examples of such arrangements, and
Continental has existing alliances with numerous other air carriers. (See "The
Company--Domestic Alliances".) Other major U.S. airlines have alliances or
planned alliances more extensive than Continental's, which would cause the route
systems of other carriers to provide relatively greater utility to customers
than Continental's more limited route system. Continental cannot predict the
extent to which it will be disadvantaged by competing alliances.
Since its deregulation in 1978, the U.S. airline industry has undergone
substantial consolidation, and it may in the future experience additional
consolidation. Continental routinely monitors changes in the competitive
landscape and engages in analysis and discussions regarding its strategic
position, including alliances and business combination transactions. Continental
has had, and expects to continue to have, discussions with third parties
regarding strategic alternatives. The impact of any consolidation within the
U.S. airline industry cannot be predicted at this time.
THE AVIATION SECURITY ACT WILL IMPOSE ADDITIONAL COSTS AND MAY CAUSE SEVERE
DISRUPTIONS
In November 2001, the President signed into law the Aviation and
Transportation Security Act (the "Aviation Security Act"). This law federalized
substantially all aspects of civil aviation security, creating a new
Transportation Security Administration under the Department of Transportation
(the "TSA"). Among other things, the law required that all checked baggage be
screened by explosive detection systems by December 31, 2002 (although during
the implementation phase, other permitted methods of screening are being
utilized and federal law permits individual airports to request extensions of
such deadline). At some airports, the TSA has provided for temporary security
measures which are less than optimal. Implementation of the requirements of the
Aviation Security Act has resulted in increased costs for the airline industry
and may result in additional costs, delays and disruptions in air travel,
although pursuant to a supplemental appropriations bill approved by both houses
of Congress and signed by the President in April 2003, some of these costs have
been or will be reimbursed by the U.S. government. See "The Company--Outlook".
CONTINENTAL'S BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENT REGULATION
As evidenced by the enactment of the Aviation Security Act, airlines are
subject to extensive regulatory and legal compliance requirements that result in
significant costs. The FAA from time to time issues directives and other
regulations relating to the maintenance and operation of aircraft that require
significant expenditures. Some FAA requirements cover, among other things,
retirement of older aircraft, security measures, collision avoidance systems,
airborne windshear avoidance systems, noise abatement and other environmental
concerns, commuter aircraft safety and increased inspections and maintenance
procedures to be conducted on older aircraft. Continental expects to continue
incurring expenses to comply with the FAA's regulations.
Additional laws, regulations, taxes and airport rates and charges have been
proposed from time to time that could significantly increase the cost of airline
operations or reduce revenue. Additionally, because of significantly higher
security and other costs incurred by airports since September 11, 2001, and
because reduced landing weights since September 11, 2001 have reduced the fees
airlines pay to airports, many airports are significantly increasing their rates
and charges to air carriers, including to Continental. Restrictions on the
ownership and transfer of airline routes and takeoff and landing slots have also
been proposed. The ability of U.S. carriers to operate international routes is
subject to change because the applicable arrangements between the United States
and foreign governments may be amended from time to time, or because appropriate
slots or facilities are not made available. Continental cannot provide assurance
that current laws and regulations, or laws or regulations enacted in the future,
will not adversely affect it.
CONTINENTAL'S OPERATIONS ARE AFFECTED BY THE SEASONALITY ASSOCIATED WITH THE
AIRLINE INDUSTRY
Due to greater demand for air travel during the summer months, revenue in
the airline industry in the second and third quarters of the year is generally
stronger than revenue in the first and fourth quarters of the year for most U.S.
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 actions, excise and similar taxes, security fees, changing levels
of operations, fuel prices, weather, air traffic control delays, foreign
currency exchange rates and general economic conditions.
RISK FACTORS RELATING TO THE SENIOR NOTES AND THE EXCHANGE OFFER
CONSEQUENCES OF FAILURE TO EXCHANGE
If you fail to deliver the proper documentation to the Exchange Agent in a
timely fashion, your tender of Old Senior Notes will be rejected. The New Senior
Notes will be issued in exchange for the Old Senior Notes only after timely
receipt by the Exchange Agent of the Old Senior Notes, a properly completed and
executed Letter of Transmittal (or an Agent's Message in lieu thereof) and all
other required documentation. If you wish to tender your Old Senior Notes in
exchange for New Senior Notes, you should allow sufficient time to ensure timely
delivery. None of the Exchange Agent, the Trustee or Continental is under any
duty to give holders of Old Senior Notes notification of defects or
irregularities with respect to tenders of Old Senior Notes for exchange.
If you do not exchange your Old Senior Notes for New Senior Notes pursuant
to the Exchange Offer, or if your tender of Old Senior Notes is not accepted,
your Old Senior Notes will continue to be subject to the restrictions on
transfer of such Old Senior Notes as set forth in the legend thereon. In
general, you may not offer or sell Old Senior Notes unless they are 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. Continental does not currently anticipate that it will register the Old
Senior Notes under the Securities Act. To the extent that Old Senior Notes are
tendered and accepted in the Exchange Offer, the trading market for untendered
and tendered but unaccepted Old Senior Notes could be adversely affected.
APPRAISAL AND REALIZABLE VALUE OF COLLATERAL
The Policy supports payment of interest on the Senior Notes when due and
payment of outstanding principal of the Senior Notes no later than the Final
Legal Maturity Date. However, if Continental does not make such payments and a
Policy Provider Default occurs, in order to obtain such payments, the holders of
the Senior Notes may have to rely on the proceeds from the sale of the
Collateral.
Simat, Helliesen & Eichner, Inc., an independent aviation appraisal and
consulting firm ("SH&E"), has prepared an appraisal of the spare parts included
in the Collateral as of December 25, 2002. A letter, dated January 24, 2003,
summarizing such appraisal is annexed to this Prospectus as Appendix II. The
appraisal is subject to a number of assumptions and limitations and was prepared
based on certain specified methodologies. In preparing its appraisal, SH&E
conducted only a limited physical inspection of certain locations at which
Continental maintains the spare parts. An appraisal that is subject to other
assumptions and limitations and based on other methodologies may result in
valuations that are materially different from those contained in SH&E's
appraisal. See "Description of the Appraisal".
Continental is required to provide to the Policy Provider and the Trustee a
semiannual appraisal of the Collateral. If any such subsequent appraisal
indicates that the ratio of the outstanding principal amount of the Senior Notes
to the Collateral value is greater than 45.0%, or that the ratio of the
outstanding principal amount of the Senior Notes and the Subordinated Notes to
the Collateral value is greater than 67.5%, Continental is required to provide
additional collateral or to reduce the principal amount of Senior Notes or
Subordinated Notes outstanding so that the loan to Collateral values are not
greater than the applicable maximum percentage. Continental deposited
$13,056,950 as Cash Collateral at the initial issuance of the Old Senior Notes
so that the initial loan to Collateral value ratio would not exceed 45.0%, based
on the appraisal determined as of August 25, 2002. The ratio of the loan to
Collateral value, determined using the appraisal as of December 25, 2002, would
have been 45.8% for the Senior Notes and 68.7% for the Subordinated Notes
without giving effect to such deposit of Cash Collateral. Continental expects to
satisfy the applicable maximum loan to Collateral value percentages at the time
the next appraisal is required based upon its projected purchases of spare
parts, in which case Continental will be entitled to withdraw such Cash
Collateral. However, no assurance can be given that the applicable maximum
percentages will be satisfied. See "Description of the Senior
Notes--Collateral".
An appraisal is only an estimate of value. An appraisal should not be
relied upon as a measure of realizable value. The proceeds realized upon a sale
of any Collateral may be less than its appraised value. The value of the
Collateral if remedies are exercised under the Indenture will depend on market
and economic conditions, the supply of similar spare parts, the availability of
buyers, the condition of the Collateral and other factors. In addition, since
spare parts are regularly used, refurbished, purchased, transferred and
discarded in the ordinary course of business, the quantity of spare parts
included in the Collateral and their appraised value will change over time.
Accordingly, Continental cannot assure you that the proceeds realized upon any
such exercise of remedies would be sufficient to satisfy in full payments due on
the Senior Notes. If a Policy Provider Default occurs and such proceeds are not
sufficient to repay all such amounts due on the Senior Notes, then holders of
Senior Notes (to the extent not repaid from the proceeds of the sale of
Collateral) would have only unsecured claims against Continental and the Policy
Provider.
As discussed under "Risk Factors Relating to the Airline Industry--The
Airline Industry is Highly Competitive", since September 11, 2001, the airline
industry has suffered substantial losses. Two major air carriers, US Airways and
United, have filed for bankruptcy protection, although US Airways emerged from
bankruptcy on March 31, 2003. Northwest Airlines has publicly acknowledged that
it may file for bankruptcy unless it renegotiates its outstanding labor
agreements, and other airlines may file for bankruptcy protection as well.
Moreover, recent reports have suggested the possibility of liquidation by
United. In response to adverse market conditions, many air carriers have reduced
the number of aircraft in operation, and there may be further reductions,
particularly by air carriers in bankruptcy or liquidation. Any such reduction of
aircraft of the same models as the models of aircraft on which the spare parts
included in the Collateral may be installed or used could adversely affect the
value of the Collateral.
CONTROL OVER AMENDMENTS, WAIVERS AND SALE OF COLLATERAL
Whether before or after the occurrence of an Event of Default, the
"Controlling Party" will direct the Trustee in taking action under the Indenture
and other agreements relating to the Notes, including in amending such
agreements and granting waivers thereunder, except for certain limited
provisions with respect to the Collateral as it relates to the Subordinated
Notes that cannot be amended or waived without the consent of the holders of a
majority of the outstanding principal amount of the Subordinated Notes and
certain other limited provisions that cannot be amended or waived without the
consent of each Noteholder affected thereby. Except for those limited provisions
which are described in "Description of the Senior Notes--Modifications and
Waiver of the Indenture and Certain Other Agreements", the provisions of the
Indenture, the Security Agreement and the other Operative Documents may be
amended or waived by the Controlling Party (or, in the case of the Collateral
Maintenance Agreement, the Policy Provider) without the consent of the Senior
Noteholders. If an Event of Default is continuing, the "Controlling Party" will
direct the Trustee in exercising remedies under the Indenture and the Collateral
Agreements, including accelerating the Senior Notes or foreclosing the lien on
the Collateral securing the Senior Notes. See "Description of the Senior
Notes--Remedies".
The Controlling Party will be:
o The Policy Provider (except as provided below).
o If a Policy Provider Default is continuing, the holders of more than
50% in aggregate unpaid principal amount of the Senior Notes then
outstanding or, if the Senior Notes have been paid in full, of the
Subordinated Notes then outstanding.
o If the Senior Notes, the Policy Expenses and the Policy Provider
Obligations have been paid in full, the holders of more than 50% in
aggregate unpaid principal amount of Subordinated Notes then
outstanding.
o Under certain circumstances, the Liquidity Provider.
The Subordinated Noteholders will have the right to direct the Policy
Provider in acting as the Controlling Party during the continuance of an Event
of Default if the Subordinated Noteholders shall have deposited with the Policy
Provider cash, U.S. government securities or other investments acceptable to the
Policy Provider as collateral for amounts owed and to become due and payable to
the Policy Provider under the Operative Documents and Support Documents. The
Subordinated Noteholders contributing their proportionate share of such deposit
will be entitled to direct the Policy Provider in taking action as the
Controlling Party during the continuance of such Event of Default by vote of a
majority of the principal amount of the Subordinated Notes held by such
contributing Subordinated Noteholders. See "Description of the Senior
Notes--Controlling Party".
The rights of holders of Senior Notes may be adversely affected by the
actions of the Policy Provider as the Controlling Party described in the
preceding paragraphs, particularly if a Policy Provider Default occurs
subsequently thereto.
IF CONTINENTAL DEFAULTS, THE INTEREST RATE ON THE SENIOR NOTES WILL BE
SUBJECT TO A MAXIMUM EQUAL TO THE CAPPED INTEREST RATE
If Continental fails to pay accrued interest on the Senior Notes when due
on a Distribution Date and fails to cure such nonpayment, the interest rate on
the Senior Notes for the interest due on such Distribution Date will be subject
to a maximum equal to the Capped Interest Rate. If Continental cures such
nonpayment, such maximum rate will not apply. However, the amounts available
under the Liquidity Facility and the Policy for the payment of accrued interest
are limited by the same maximum rate. Accordingly, if Continental fails to make
a payment of interest when due and the interest rate on the Senior Notes then
applicable exceeds the Capped Interest Rate, the amount that the Trustee may
draw under the Liquidity Facility and Policy (or, if applicable, withdraw from
the Cash Collateral Account) to make such payment will be calculated at the
Capped Interest Rate. If Continental subsequently cures, Continental will be
obligated to pay the accrued interest calculated without regard to such maximum
rate. If Continental fails to cure, the Senior Noteholders will not have a claim
for interest due on such Distribution Date above the amount calculated at the
Capped Interest Rate.
CERTAIN LIMITATIONS WITH RESPECT TO THE COLLATERAL
The Policy supports the payment of interest on the Senior Notes when due
and payment of outstanding principal of the Senior Notes no later than the Final
Legal Maturity Date. However, if Continental does not make such payments and a
Policy Provider Default occurs, in order to obtain such payments, the holders of
Senior Notes may have to rely on the proceeds from the sale of the Collateral.
The Senior Notes are secured by a lien on the Pledged Spare Parts. The
Subordinated Notes are also secured by a lien on such collateral. See
"Description of the Senior Notes--Collateral". However, the lien will not apply
to a spare part for as long as it is installed on or being used in any aircraft,
engine or other spare part so installed or being used. In addition, since spare
parts are regularly used, refurbished, purchased, transferred and discarded in
the ordinary course of Continental's business, the quantity of spare parts
included in the Collateral and their appraised value will change over time.
Continental is required to keep the Pledged Spare Parts at certain
Designated Locations, subject to certain exceptions. See "Description of the
Senior Notes--Collateral--Designated Locations". The lien of the Senior Notes
will not apply to any spare part not located at a Designated Location.
Upon initial issuance of the Old Senior Notes, Continental made a cash
collateral deposit with the Security Agent of $13,056,950 so that the initial
ratio of the outstanding principal amount of the Senior Notes to the Collateral
value would not exceed 45.0%. Continental is required to provide to the Policy
Provider and the Trustee a semiannual appraisal of the Collateral. If any such
subsequent appraisal indicates that the ratio of the outstanding principal
amount of the Senior Notes to the Collateral value is greater than 45.0%, or
that the ratio of the outstanding principal amount of the Senior Notes and
Subordinated Notes to the Collateral value is greater than 67.5%, Continental is
required to provide additional collateral or to reduce the principal amount of
Senior Notes or Subordinated Notes outstanding so that the loan to Collateral
values are not greater than the applicable maximum percentage. In order to
satisfy this requirement, Continental may grant a lien on additional Qualified
Spare Parts, cash or certain investment securities. In addition, Continental may
grant a lien on other collateral, provided that the Policy Provider agrees and
each Rating Agency confirms that the use of such additional collateral will not
result in a reduction of the rating of the Senior Notes or Subordinated Notes
below the then current rating for such Notes (determined in the case of the
Senior Notes without regard to the Policy) or a withdrawal or suspension of the
rating of such Notes. See "Description of the Senior Notes--Collateral". Section
1110 of the U.S. Bankruptcy Code, which provides special rights to holders of
liens with respect to certain equipment (see "Description of the Senior
Notes--Remedies"), would apply to any such additional Qualified Spare Parts but
would not apply to any such cash or investment securities. In addition, Section
1110 may not apply to such other collateral, depending on the circumstances.
LIMITED ABILITY TO RESELL THE NOTES
Prior to the Exchange Offer, there has been no public market for the Senior
Notes. Continental does not intend to apply for listing of the Senior Notes on
any national securities exchange or otherwise. The Initial Purchaser has
previously made a market in the Old Senior Notes and Continental has been
advised by the Initial Purchaser that it presently intends to make a market in
the New Senior Notes, as permitted by applicable laws and regulations, after
consummation of the Exchange Offer. The Initial Purchaser is not obligated,
however, to make a market in the Old Senior Notes or the New Senior Notes, and
any such market-making activity may be discontinued at any time without notice
at the sole discretion of the Initial Purchaser. There can be no assurance as to
the liquidity of the public market for the Senior Notes or that any active
public market for the Senior Notes will develop or continue. If an active public
market does develop, it might not continue or it might not be sufficiently
liquid to allow you to resell any of your Senior Notes.
RISK FACTORS RELATING TO THE POLICY PROVIDER
IF THE FINANCIAL CONDITION OF THE POLICY PROVIDER DECLINES, THE RATING OF THE
NOTES MAY DECLINE
The Aaa rating by Moody's of the Senior Notes is based, primarily, on the
existence of the Policy that insures the complete and timely payment of interest
on the Senior Notes on each Interest Payment Date and the payment of outstanding
principal of the Senior Notes no later than the Final Legal Maturity Date. MBIA
Insurance Corporation, the Policy Provider, has issued the Policy. If the Policy
Provider's financial condition declines or if it becomes insolvent, the Trustee
may be unable to recover the full amount due under the Policy. In addition, such
a decline or insolvency could lead Moody's to downgrade the rating of the Senior
Notes because of a concern that the Policy Provider may be unable to make
payments to the holders of the Senior Notes under the Policy. For information on
the financial information generally available relating to the Policy Provider,
see "Description of the Policy Provider" and "Description of the Policy and the
Policy Provider Agreement--The Policy".
POLICY PROTECTION IS LIMITED
Although the Trustee may make drawings under the Policy for interest
payments on the Senior Notes on each Interest Payment Date, the Trustee may not
make drawings for principal payments on the Senior Notes until the Final Legal
Maturity Date except in certain limited circumstances. This limits the
protection afforded to holders of Senior Notes by the Policy.
USE OF PROCEEDS
There will be no cash proceeds payable to Continental from the issuance of
the New Senior Notes pursuant to the Exchange Offer. The proceeds from the sale
of the Old Senior Notes were used by Continental for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The ratios of our "earnings" to our "fixed charges" for each of the
years 1998 through 2002 and for the three months ended March 31, 2003 were:
THREE MONTHS ENDED
MARCH 31, 2003 YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------------
2002 2001 2000 1999 1998
------ ------ ------ ------ ------
--(1) --(1) --(1) 1.51 1.80 1.93
- -----------------
(1) For the three months ended March 31, 2003 and the years ended December 31,
2002 and 2001, earnings were inadequate to cover fixed charges and the coverage
deficiency was $307 million, $616 million and $143 million, respectively.
For purposes of the ratios, "earnings" means the sum of:
o our pre-tax income (loss); and
o our fixed charges, net of interest capitalized.
"Fixed charges" represent:
o the interest we pay on borrowed funds;
o the amount we amortize for debt discount, premium and issuance expense
and interest previously capitalized; and
o that portion of rentals considered to be representative of interest
expense.
THE COMPANY
Continental Airlines, Inc. ("Continental" or the "Company") 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 the number of scheduled miles flown by revenue passengers, known as
revenue passenger miles, in 2002) and, together with its indirect 53.1%-owned
subsidiary, ExpressJet Airlines, Inc. (operating as Continental Express and
referred to in this Prospectus as "ExpressJet"), and its wholly owned
subsidiary, Continental Micronesia, Inc. ("CMI"), served 218 airports worldwide
at April 30, 2003. As of April 30, 2003, Continental flew to 124 domestic and 94
international destinations and offered additional connecting service through
alliances with domestic and foreign carriers. Continental directly served 16
European cities, seven South American cities, Tel Aviv, Hong Kong and Tokyo as
of April 30, 2003, and is one of the leading airlines providing service to
Mexico and Central America, serving 28 cities, more destinations than any other
United States airline. Through its Guam hub, CMI provides extensive service in
the western Pacific, including service to more Japanese cities than any other
United States carrier. The Company's executive offices are located at 1600 Smith
Street, Houston, Texas 77002. The Company's telephone number is (713) 324-2950.
DOMESTIC OPERATIONS
Continental operates its domestic route system primarily through its hubs
in the New York metropolitan area at Newark Liberty International Airport
("Liberty International" or "Newark"), in Houston, Texas at George Bush
Intercontinental Airport ("Bush Intercontinental" or "Houston") and in
Cleveland, Ohio at Hopkins International Airport ("Hopkins International").
Continental's hub system allows it to transport passengers between a large
number of destinations with substantially more frequent service than if each
route were served directly. The hub system also allows Continental to add
service to a new destination from a large number of cities using only one or a
limited number of aircraft. As of April 30, 2003, Continental and ExpressJet
operated 66% of the average daily jet departures from Liberty International, 85%
of the average daily jet departures from Bush Intercontinental, and 67% of the
average daily jet departures from Hopkins International (in each case including
regional jets). Each of Continental's domestic hubs is located in a large
business and population center, contributing to a high volume of "origin and
destination" traffic.
EXPRESSJET
Continental's mainline jet service at each of its domestic hub cities is
coordinated with ExpressJet, which operates new-generation regional jets. In
April 2002, ExpressJet Holdings, Inc. ("Holdings"), Continental's then wholly
owned subsidiary and the sole stockholder of ExpressJet, sold 10 million shares
of its common stock in an initial public offering and used the net proceeds to
repay $147 million of ExpressJet's indebtedness to Continental. In addition,
Continental sold 20 million of its shares of Holdings common stock in the
offering for net proceeds of $300 million. In connection with the offering,
Continental's ownership of Holdings fell to 53.1%. Continental does not
currently intend to remain a stockholder of Holdings over the long term. Subject
to market conditions, Continental expects to sell or otherwise dispose of some
or all of its shares of Holdings common stock in the future. On May 1, 2003, at
Continental's request, Holdings filed a shelf registration statement with the
Commission relating to the 34 million shares of Holdings common stock held by
Continental to enable Continental to sell such common stock free of certain
restrictions under the Securities Act.
Effective January 1, 2001, Continental entered into a capacity purchase
agreement with ExpressJet pursuant to which Continental currently purchases all
of ExpressJet's available seat miles for a negotiated price. Under the
agreement, ExpressJet has the right through December 31, 2006 to be
Continental's sole provider of regional jet service from Continental's hubs.
Continental is responsible for all scheduling, pricing and seat inventories of
ExpressJet's flights and is entitled to all revenue associated with those
flights. Continental pays ExpressJet based on scheduled block hours (the hours
from departure gate to arrival gate) in accordance with a formula designed to
provide ExpressJet with an operating margin of approximately 10% before taking
into account variations in some costs and expenses that are generally
controllable by ExpressJet. ExpressJet's overall operating margin was 13.6% in
2002. Continental assumes the risk of revenue volatility associated with fares
and passenger traffic, price volatility for specified expense items such as fuel
and the cost of all distribution and revenue-related costs. The capacity
purchase agreement replaced Continental's prior revenue-sharing arrangement.
As of April 30, 2003, ExpressJet served 99 destinations in the U.S., 13
cities in Mexico, 5 cities in Canada and Nassau. Since December 2002,
ExpressJet's fleet has been comprised entirely of regional jets. Continental
believes ExpressJet's regional jet service complements Continental's operations
by carrying traffic that connects onto Continental's mainline jets and allowing
more frequent flights to smaller cities than could be provided economically with
larger jet aircraft. Continental believes that ExpressJet's regional jets
provide greater comfort and enjoy better customer acceptance than turboprop
aircraft. The regional jets also allow ExpressJet to serve certain routes that
cannot be served by turboprop aircraft. Additional commuter feed traffic is
currently provided to Continental by other codesharing partners.
DOMESTIC CARRIER ALLIANCES
Continental has entered into alliance agreements, which are also referred
to as codeshare agreements or cooperative marketing agreements, with other
carriers. These relationships may include (a) codesharing (one carrier placing
its name and flight number, or "code", on flights operated by the other carrier)
and (b) reciprocal frequent flyer program participation, reciprocal airport
lounge access and other joint activities (such as seamless check-in at
airports). Some relationships may include other cooperative undertakings such as
joint purchasing, joint corporate sale contracts, airport handling, facilities
sharing or joint technology development.
Continental has a long-term global alliance with Northwest Airlines, Inc.
("Northwest Airlines") through 2025, subject to earlier termination by either
carrier in the event of certain changes in control of either Northwest Airlines
or Continental. The alliance with Northwest provides for each carrier placing
its code on a large number of the flights of the other, reciprocity of frequent
flyer programs and airport lounge access, and other joint marketing activities.
Northwest Airlines and Continental also have joint contracts with major
corporations and travel agents designed to create access to a broader product
line encompassing the route systems of both carriers.
Continental also has domestic codesharing agreements with Gulfstream
International Airlines, Inc., Mesaba Aviation, Inc., Hawaiian Airlines, Inc.,
Alaska Airlines, Inc., Horizon Airlines, Inc., Champlain Enterprises, Inc.
(CommutAir), Hyannis Air Service, Inc. (Cape Air) and American Eagle Airlines,
Inc. In 2002, Continental introduced the first train-to-plane alliance in the
United States with Amtrak.
In response to the dramatic changes occurring in the airline industry,
including a marketing alliance between United and US Airways, Continental signed
a marketing agreement with Northwest Airlines and Delta Air Lines, Inc.
("Delta") in August 2002 to permit it to compete more effectively with other
carriers and alliance groups. As with the alliance with Northwest Airlines, this
alliance involves codesharing, reciprocal frequent flyer benefits and reciprocal
airport lounge privileges. Implementation of this marketing alliance is planned
for Summer 2003, subject to satisfaction of certain conditions.
INTERNATIONAL OPERATIONS
Continental directly serves destinations throughout Europe, Canada, Mexico,
Central and South America and the Caribbean as well as Tel Aviv, Hong Kong and
Tokyo. Continental also provides service to numerous other destinations through
codesharing arrangements with other carriers and has extensive operations in the
western Pacific conducted by CMI. As measured by 2002 available seat miles,
approximately 39% of Continental's mainline jet operations, including CMI, were
dedicated to international traffic.
Continental's New York/Newark hub is a significant international gateway.
From Liberty International, at April 30, 2003 Continental and ExpressJet served
16 European cities, five Canadian cities, six Mexican cities, six Central
American cities, four South American cities, 14 Caribbean destinations, Tel
Aviv, Hong Kong (though service between Hong Kong and Newark was suspended in
April 2003) and Tokyo.
Continental's Houston hub is the focus of its operations in Mexico and
Central America. As of April 30, 2003, Continental and ExpressJet flew from Bush
Intercontinental to 20 cities in Mexico, every country in Central America, six
cities in South America, three cities in Canada, three cities in Europe, two
Caribbean destinations and Tokyo.
From Continental's Cleveland hub, Continental and ExpressJet flew to
Montreal, Toronto, London, Cancun, Mexico, Nassau and San Juan, Puerto Rico as
of April 30, 2003.
CONTINENTAL MICRONESIA
From its hub operations based on the island of Guam, as of April 30, 2003,
CMI provided service to eight cities in Japan, more than any other United States
carrier, as well as other Pacific Rim destinations, including Taiwan (though
service has been suspended from May 21, 2003 through July 1, 2003), the
Philippines, Hong Kong (though service has been suspended from May 23, 2003
through June 2, 2003), Australia and Indonesia.
CMI is the principal air carrier in the Micronesian Islands, where it
pioneered scheduled air service in 1968. CMI's route system is linked to the
United States market through Hong Kong, Tokyo and Honolulu, each of which CMI
serves non-stop from Guam. CMI and Continental also maintain a codesharing
agreement and coordinate schedules on certain flights from the United States to
Honolulu, and from Honolulu to Guam, to facilitate travel from the United States
into CMI's route system.
FOREIGN CARRIER ALLIANCES
Continental seeks to develop international alliance relationships that
complement Continental's own route system and permit expanded service through
its hubs to major international destinations. International alliances assist
Continental in the development of its route structure by enabling Continental to
offer more frequencies in a market, provide passengers connecting service from
Continental's international flights to other destinations beyond an alliance
partner's hub, and expand the product line that Continental may offer in a
foreign destination.
In October 2001, Continental announced that it had signed a cooperative
marketing agreement with KLM Royal Dutch Airlines ("KLM") that includes
extensive codesharing and reciprocal frequent flyer program participation and
airport lounge access. In January 2002, Continental placed its code on selected
flights operated by KLM and KLM Cityhopper from Amsterdam to more than 40
destinations in Europe, Africa and the Middle East, and KLM placed its code on
selected flights to U.S. destinations operated by Continental beyond its New
York and Houston hubs. In addition, members of each carrier's frequent flyer
program are able to earn mileage anywhere on the other's global route network,
as well as the global network of Northwest Airlines. The current cooperative
agreement terminates in October 2003. Continental and KLM are currently in
negotiations to extend this alliance.
Continental also currently has international codesharing agreements with
Air Europa, Air China, EVA Airways Corporation (an airline based in Taiwan),
British European, Virgin Atlantic Airways and Compania Panamena de Aviacion,
S.A. ("Copa"). Continental owns 49% of the common equity of Copa. In February
2003, Continental launched an air/rail codeshare agreement with the French high
speed rail provider SNCF TGV. In May 2003, Continental announced a new
codesharing agreement with TAP Air Portugal, which will begin in September 2003,
subject to governmental approval.
OUTLOOK
The current U.S. domestic airline environment is the worst in Continental's
history. Prior to September 2001, Continental was profitable, although many U.S.
air carriers were losing money and Continental's profitability was declining.
The terrorist attacks of September 11, 2001 and the war in Iraq dramatically
worsened the difficult financial environment and presented new and greater
challenges for the airline industry. Since the terrorist attacks, several
airlines, including United and US Airways, have filed for bankruptcy, although
US Airways emerged from bankruptcy on March 31, 2003. American Airlines recently
threatened to file for bankruptcy, and other airlines may file for bankruptcy
protection as well. Although Continental has been able to raise capital,
downsize its operations and reduce its expenses significantly, Continental has
reported significant losses since the terrorist attacks, and current trends in
the airline industry make it likely that Continental will continue to post
significant losses for the foreseeable future. The revenue environment continues
to be weak in light of changing pricing models, excess capacity in the market,
reduced corporate travel spending and other issues. In addition, until recently
fuel prices had significantly escalated due to the war in Iraq and political
tensions in Venezuela and Nigeria. Absent adverse factors outside Continental's
control such as those described herein, Continental believes that its liquidity
and access to cash will be sufficient to fund its current operations through
2003 (and beyond if Continental is successful in implementing its previously
announced revenue-generating and cost cutting measures). However, Continental
believes that the economic environment must improve for Continental to continue
to operate at its current size and expense level beyond that time. Continental
may find it necessary to further downsize its operations, ground additional
aircraft and further reduce its expenses. Continental anticipates that its
previously announced capacity and cost reductions, together with the capacity
reductions announced by other carriers and capacity reductions that could come
from restructurings within the industry, should result in a better financial
environment by the end of 2003, absent adverse factors outside Continental's
control such as a further economic recession, additional terrorist attacks, post
war unrest in Iraq or conflicts elsewhere in the world, a significant spread of
Severe Acute Respiratory Syndrome, or "SARS", decreased consumer demand or
sustained high fuel prices. However, Continental expects to incur a significant
loss for the full year in 2003, regardless of such adverse factors.
Due in part to the lack of predictability of future traffic, business mix
and yields, Continental is currently unable to estimate the long-term effect on
it of the events of September 11, 2001, or the impact of any further terrorist
attacks or the recent war in Iraq. However, given the magnitude of the
unprecedented events of September 11, 2001 and their continuing aftermath, the
adverse impact to Continental's financial condition, results of operations,
liquidity and prospects may continue to be material, and Continental's financial
resources might not be sufficient to absorb it or that of any further terrorist
attacks or another military action elsewhere in the world.
Among the many factors that threaten Continental and the airline
industry generally are the following:
o A weak global and domestic economy has significantly decreased
Continental's revenue. Business traffic, Continental's most profitable
source of revenue, and yields are down significantly, as well as
leisure traffic and yields. Several of Continental's competitors are
significantly changing all or a portion of their pricing structures in
a manner that is revenue dilutive to Continental. Although Continental
has been successful in decreasing its unit cost as its unit revenue
has declined, Continental currently expects its net cash flows for the
second quarter of 2003, excluding amounts expected to be received from
the U.S. government discussed in the third bullet point below, to be
slightly negative at approximately $0.5 million per day, including
required debt payments and capital expenditures. In addition,
Continental expects to incur significant losses for the full year
2003.
o Continental believes that reduced demand persists not only because of
the weak economy, but also because of some customers' concerns about
further terrorist attacks and reprisals. The war in Iraq significantly
reduced Continental's bookings and lowered passenger traffic. In
addition, the spread of SARS in China and elsewhere has caused a
further decline in passenger traffic, particularly to Hong Kong and
certain other cities in Asia that Continental serves. Both of these
events have disproportionately affected Continental's international
passenger traffic. Continental has responded to the reduced actual and
anticipated demand by announcing temporary capacity reductions on
certain trans-Atlantic and trans-Pacific routes (including the
suspension of its flights between Hong Kong and Newark, Hong Kong and
Guam, and Taiwan and Guam) and by reducing its summer schedule.
Continental believes that demand is further weakened by customer
dissatisfaction with the hassles and delays of heightened airport
security and screening procedures.
o Fuel costs rose significantly at the end of 2002 and until recently
have been at historically high levels. Post war unrest in Iraq, other
conflicts in the Middle East, political events in Venezuela or
Nigeria, or significant events in other oil-producing nations could
cause fuel prices to increase further and may impact the availability
of fuel. Based on gallons consumed in 2002, for every one dollar
increase in the price of crude oil, Continental's annual fuel expense
would be approximately $40 million higher.
o The terrorist attacks of 2001 have caused security costs to increase
significantly, many of which have been passed on to airlines. Security
costs are likely to continue rising for the foreseeable future. In the
current environment of lower consumer demand and discounted pricing,
these costs cannot effectively be passed on to customers. Insurance
costs have also risen sharply, in part due to greater perceived risks
and in part due to the reduced availability of insurance coverage.
Continental must absorb these additional expenses in the current
pricing environment. Under a supplemental appropriations bill approved
by both houses of Congress and signed by the President in April 2003,
Continental and other U.S. carriers have been reimbursed for certain
security fees paid or collected by such carriers and will be
compensated for other security related costs. Consequently, in May
2003 Continental and ExpressJet received a reimbursement of $176.2
million for security fees paid or collected since February 2002.
o Although Continental reduced some of its costs during the last year
and continues to implement cost-cutting measures, its costs cannot be
decreased as quickly as its revenue has declined. In addition, as is
the case with many of its competitors, Continental is highly
leveraged, and has few assets that remain unpledged to support any new
debt. Combined with reduced access to the capital markets, themselves
already weakened by the state of the economy, there is the potential
for insufficient liquidity if current conditions continue unabated for
a sufficiently long period of time. Continental had approximately
$1.18 billion of cash, cash equivalents and short-term investments at
March 31, 2003. Continental continues to hold 53.1% of the outstanding
stock of Holdings, the publicly traded parent of its regional jet
subsidiary, and this stock is not pledged to creditors. Continental
intends to sell or otherwise dispose of some or all of its interest in
Holdings, subject to market conditions.
o The nature of the airline industry is changing dramatically as
business travelers change their spending patterns and low-cost
carriers continue to gain market share. Continental has announced and
is implementing plans to modify its product for the large segment of
its customers who are not willing to pay for a premium product, to
reduce costs and to generate additional revenue. Other carriers have
announced similar plans to create lower-cost products, or to offer
separate low cost products (such as a low cost "airline within an
airline"). In addition, carriers emerging from bankruptcy will have
significantly reduced cost structures and operational flexibility that
will allow them to compete more effectively.
o Current conditions may cause consolidation of the airline industry,
domestically and globally. The extremity of current conditions could
result in a reduction of some of the regulatory hurdles that
historically have limited consolidation. Depending on the nature of
the consolidation, Continental could benefit from it or be harmed by
it. Continental continues to monitor developments throughout the
industry and has entered into a marketing alliance (implementation of
which is subject to certain conditions) with Northwest Airlines and
Delta to permit Continental to compete more effectively with other
carriers and alliance groups.
o Continental has several noncontributory defined benefit plans covering
substantially all of Continental's employees. As of December 31, 2002,
these plans were underfunded by approximately $1.2 billion as measured
by SFAS 87, "Employers Accounting for Pensions". Continental's
contributions for the remainder of 2003 are expected to be $89 million
as of March 31, 2003. Absent any changes to the plans (which in most
cases are subject to collective bargaining agreements with our unions)
or a waiver of required payments from the Internal Revenue Service,
the minimum funding requirement in 2004 is expected to be
significantly greater than in 2003.
o Under the most restrictive provisions of a credit facility agreement
with an outstanding balance of $165 million at March 31, 2003,
Continental is required to maintain a minimum unrestricted cash
balance of $600 million. Also, a separate credit facility agreement
with an outstanding balance of $43 million at March 31, 2003 requires,
beginning in June 2003, Continental to maintain a 1 to 1 ratio of
EBITDAR (earnings before interest, income taxes, depreciation and
aircraft rentals) to fixed charges, which consist of interest expense,
aircraft rental expense, cash income taxes and cash dividends, for the
previous four quarters. Continental believes that it will be able to
meet both of these covenants for the remainder of 2003.
DESCRIPTION OF THE POLICY PROVIDER
GENERAL
The information set forth in this section, including any financial
statements incorporated by reference herein, has been provided by MBIA Insurance
Corporation ("MBIA" or the "Policy Provider") for inclusion in this Prospectus,
and such information has not been independently verified by Continental, the
Initial Purchaser, the Trustee or the Liquidity Provider. Accordingly,
notwithstanding anything to the contrary herein, none of Continental, the
Initial Purchaser, the Trustee or the Liquidity Provider assumes any
responsibility for the accuracy, completeness, or applicability of such
information.
MBIA is the principal operating subsidiary of MBIA Inc., a New York Stock
Exchange listed company (the "Parent Company"). The Parent Company is not
obligated to pay the debts of or claims against MBIA. MBIA is domiciled in the
State of New York and licensed to do business in and subject to regulation under
the laws of all 50 states, the District of Columbia, the Commonwealth of Puerto
Rico, the Commonwealth of the Northern Mariana Islands, the Virgin Islands of
the United States and the Territory of Guam. MBIA has three branches, one in the
Republic of France, one in the Republic of Singapore and one in the Kingdom of
Spain. New York has laws prescribing minimum capital requirements, limiting
classes and concentrations of investments, and requiring the approval of policy
rates and forms. State laws also regulate the amount of both the aggregate and
individual risks that may be insured, the payment of dividends by MBIA, changes
in control, and transactions among affiliates. Additionally, MBIA is required to
maintain contingency reserves on its liabilities in certain amounts and for
certain periods of time.
MBIA does not accept any responsibility for the accuracy or completeness of
this Prospectus or any information or disclosure contained herein, or omitted
herefrom, other than with respect to the accuracy of the information regarding
the Policy Provider set forth under the heading "Description of the Policy
Provider" or incorporated by reference herein. Additionally, MBIA makes no
representation regarding the Notes or the advisability of investing in the
Notes.
The Policy is not covered by the Property/Casualty Insurance Security Fund
specified in Article 76 of the New York Insurance Law.
MBIA FINANCIAL INFORMATION
The following documents filed by the Parent Company with the Commission are
incorporated herein by reference:
o the Parent Company's Annual Report on Form 10-K for the year ended
December 31, 2002; and
o the Parent Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 2003.
Any documents filed by the Parent Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
..Prospectus and prior to the termination of the offering of the New Senior Notes
shall be deemed to be incorporated by reference in this Prospectus and to be a
part hereof. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein, 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.
The consolidated financial statements of MBIA, a wholly owned subsidiary of
the Parent Company, and its subsidiaries as of December 31, 2002 and December
31, 2001 and for each of the three years in the period ended December 31, 2002,
prepared in accordance with generally accepted accounting principles, included
in the Annual Report on Form 10-K of the Parent Company for the year ended
December 31, 2002 and the consolidated financial statements of MBIA and its
subsidiaries as of March 31, 2003 and for the three month periods ended March
31, 2003 and March 31, 2002 included in the Quarterly Report on Form 10-Q for
the period ended March 31, 2003, are hereby incorporated by reference into this
Prospectus and shall be deemed to be a part hereof. All financial statements of
MBIA and its subsidiaries included in documents filed by the Parent Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934 subsequent to the date of this Prospectus and prior to the termination of
the offering of the New Senior Notes shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of filing such documents.
The Parent Company files annual, quarterly, and special reports,
information statements and other information with the Commission under File No.
1-9583. Copies of the Commission filings (including (1) the Parent Company's
Annual Report on Form 10-K for the year ended December 31, 2002 and (2) the
Parent Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2003) are available (i) over the Internet at the Commission web site at
HTTP://WWW.SEC.GOV; (ii) at the Commission's public reference room in Washington
D.C.; and (iii) at no cost, upon request to MBIA Insurance Corporation, 113 King
Street, Armonk, New York 10504. The telephone number of MBIA is (914) 273-4545.
The tables below present selected financial information of MBIA determined
in accordance with statutory accounting practices prescribed or permitted by
insurance regulatory authorities ("SAP") as well as generally accepted
accounting principles ("GAAP"):
SAP
------------------------------------------------
MARCH 31, DECEMBER 31,
2003 2002
----------------------- ------------------------
(UNAUDITED) (AUDITED)
(IN MILLIONS)
Admitted Assets $[____] $9,212
Liabilities [____] 6,054
Capital and Surplus [____] 3,158
GAAP
------------------------------------------------
MARCH 31, DECEMBER 31,
2003 2002
----------------------- ------------------------
(UNAUDITED) (AUDITED)
(IN MILLIONS)
Assets $[____] $10,588
Liabilities [____] 4,679
Shareholders' Equity [____] 5,909
FINANCIAL STRENGTH RATING OF MBIA
Moody's rates the financial strength of MBIA "Aaa".
The above rating reflects the current assessment by Moody's of the
creditworthiness of MBIA and its ability to pay claims on its policies of
insurance. Any further explanation as to the significance of the above rating
may be obtained only from Moody's. The above rating is not a recommendation to
buy, sell, or hold any Notes, and such rating may be subject to revision or
withdrawal at any time by Moody's. Any downward revision or withdrawal of the
above rating may have an adverse effect on the market price of the Notes. MBIA
does not guaranty the market price of the Notes nor does it guaranty that the
rating on the Notes will not be revised or withdrawn.
THE EXCHANGE OFFER
The following summary describes all material provisions of the Registration
Rights Agreement (the "Registration Rights Agreement") between Continental and
the Initial Purchaser with respect to the Senior Notes. The summary does not
purport to be complete. We urge you to read the Registration Rights Agreement
for additional detail and further information because it, and not this
description, defines your rights. The Registration Rights Agreement has been
filed as an exhibit to the Registration Statement and copies of the Registration
Rights Agreement are available as set forth under "Where You Can Find More
Information".
TERMS OF THE EXCHANGE OFFER
GENERAL
In connection with the issuance of the Old Senior Notes, the Initial
Purchaser and its assignees became entitled to the benefits of the Registration
Rights Agreement.
Under the Registration Rights Agreement, Continental is obligated to use
its best efforts to:
o file the Registration Statement of which this Prospectus is a part for
a registered exchange offer with respect to an issue of new notes
identical in all material respects to the Old Senior Notes within 120
days after December 6, 2002, which is the date on which the Old Senior
Notes were issued (the "Issuance Date");
o cause the Registration Statement to become effective under the
Securities Act within 180 days after the Issuance Date;
o cause the Registration Statement to remain effective until the closing
of the Exchange Offer; and
o consummate the Exchange Offer within 210 calendar days after the
Issuance Date.
Continental 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 Senior Notes 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 Senior
Notes will be issued in exchange for an equal face amount of outstanding Old
Senior Notes accepted in the Exchange Offer. Old Senior Notes 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 of Old Senior Notes as
of [_____], 2003. The Exchange Offer is not conditioned upon any minimum
principal amount of Old Senior Notes being tendered for exchange. However, the
obligation to accept Old Senior Notes for exchange pursuant to the Exchange
Offer is subject to certain conditions, as set forth herein under
"--Conditions".
Old Senior Notes shall be deemed to have been accepted as validly tendered
when, as and if Continental has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
of Old Senior Notes for the purposes of receiving the New Senior Notes and
delivering New Senior Notes to such holders.
Based on interpretations by the staff of the Commission, as set forth in
no-action letters issued to third parties, Continental believes that the New
Senior Notes issued pursuant to the Exchange Offer in exchange for Old Senior
Notes may be offered for resale, resold or otherwise transferred by holders
thereof (other than (i) a broker-dealer who acquired such Old Senior Notes
directly from Continental for resale pursuant to Rule 144A under the Securities
Act or any other available exemption under the Securities Act or (ii) any holder
that is an "affiliate" of Continental as defined in Rule 405 under the
Securities Act), without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New Senior Notes
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
Senior Notes and have no arrangement with any person to participate in a
distribution of such New Senior Notes.
By tendering the Old Senior Notes in exchange for New Senior Notes, each
holder, other than a broker-dealer, will represent to Continental that:
o it is not an affiliate of Continental (as defined in Rule 405 under
the Securities Act) nor a broker-dealer tendering Old Senior Notes
acquired directly from Continental for its own account;
o any New Senior Notes to be received by it will be acquired in the
ordinary course of its business; and
o it is not engaged in, and does not intend to engage in, a distribution
of such New Senior Notes and has no arrangement or understanding to
participate in a distribution of the New Senior Notes.
If a holder of Old Senior Notes is engaged in or intends to engage in a
distribution of the New Senior Notes or has any arrangement or understanding
with respect to the distribution of the New Senior Notes to be acquired pursuant
to the Exchange Offer, such holder may not rely on the applicable
interpretations of the staff of the Commission and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Each broker-dealer that
receives New Senior Notes 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 Senior Notes. 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 Senior Notes received in
exchange for Old Senior Notes where such Old Senior Notes were acquired by such
Participating Broker-Dealer as a result of market-making activities or other
trading activities. Continental 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 Senior Notes pursuant to the Registration Statement and
at no cost to the holders of Old Senior Notes:
o as promptly as practicable file with the Commission a shelf
registration statement (the "Shelf Registration Statement") covering
resales of the Old Senior Notes;
o 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
o 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 Senior Notes
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 the declaration of the effectiveness by the Commission of
the Registration Statement or the Shelf Registration Statement (each, a
"Registration Event") does not occur on or prior to the 210th calendar day
following the Issuance Date, the interest rate per annum borne by the Senior
Notes shall be increased by 0.50% from and including such 210th day to but
excluding the earlier of (i) the date on which a Registration Event occurs and
(ii) the date on which all of the Senior Notes otherwise become transferable by
Senior Noteholders (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 Senior 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 Senior Notes who do not exchange their Old Senior Notes for New
Senior Notes in the Exchange Offer will no longer be entitled to registration
rights and will not be able to offer or sell their Old Senior Notes, unless such
Old Senior Notes 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 Notes and the Exchange Offer--Consequences of Failure to
Exchange".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS; TERMINATION
The term "Expiration Date" shall mean [________], 2003 (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.
In order to extend the Expiration Date, Continental will notify the
Exchange Agent of any extension by oral or written notice and will mail to the
record holders of Old Senior Notes 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.
Continental reserves the right:
o to extend the Exchange Offer or to terminate the Exchange Offer and
not permit acceptance of Old Senior Notes 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; and
o to amend the terms of the Exchange Offer in any manner deemed by it to
be advantageous to the holders of the Old Senior Notes.
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
Continental to constitute a material change, Continental will promptly disclose
such amendment in a manner reasonably calculated to inform the holders of the
Old Senior Notes of such amendment.
Without limiting the manner in which Continental may choose to make public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, Continental 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 SENIOR NOTES
The New Senior Notes will bear interest at the Stated Interest Rate from
the most recent date to which interest has been paid on the Old Senior Notes.
Accordingly, registered holders of New Senior Notes on the relevant record date
for the first interest payment date following the completion of the Exchange
Offer will receive interest accruing from the most recent date to which interest
has been paid. Old Senior Notes accepted for exchange will cease to accrue
interest from and after the date of completion of the Exchange Offer. Holders of
Old Senior Notes whose Old Senior Notes are accepted for exchange will not
receive any payment for accrued interest on the Old Senior Notes otherwise
payable on any Interest Payment Date the record date for which occurs on or
after completion of the Exchange Offer and will be deemed to have waived their
rights to receive the accrued interest on the Old Senior Notes.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof (or, if the Old Senior Notes are
tendered in accordance with the procedure for book-entry transfer described
below, an Agent's Message in lieu of the Letter of Transmittal), have the
signatures thereon guaranteed if required by the Letter of Transmittal and mail
or otherwise deliver such Letter of Transmittal or such facsimile or have the
Agent's Message delivered, 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
o certificates for such Old Senior Notes must be received by the
Exchange Agent along with the Letter of Transmittal;
o a timely confirmation of a book-entry transfer (a "Book-Entry
Confirmation") of such Old Senior Notes, if such procedure is
available, into the Exchange Agent's account at The Depository Trust
Company ("DTC") pursuant to the procedure for book-entry transfer
described below, must be received by the Exchange Agent prior to the
Expiration Date; or
o the holder must comply with the guaranteed delivery procedures
described below.
The method of delivery of Old Senior Notes, 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 Senior Notes
should be sent to Continental. Delivery of all documents must be made to the
Exchange Agent at one of the addresses as 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 Senior Notes will constitute an agreement
between such holder and Continental in accordance with the terms and subject to
the conditions set forth in the Prospectus and in the Letter of Transmittal.
Only a holder of Old Senior Notes may tender such Old Senior Notes in the
Exchange Offer. The term "holder" with respect to the Exchange Offer means any
person in whose name Old Senior Notes are registered on the books of Continental
or any other person who has obtained a properly completed bond power from the
registered holder.
Any beneficial owner, whose Old Senior Notes 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 such owner's behalf. If such beneficial owner
wishes to tender on such owner's behalf, such beneficial owner must, prior to
completing and executing the Letter of Transmittal and delivering such owner's
Old Senior Notes, either make appropriate arrangements to register ownership of
the Old Senior Notes 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
Senior Notes 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 Senior Notes listed therein, such Old Senior Notes
must be endorsed or accompanied by bond powers and a proxy which authorizes such
person to tender the Old Senior Notes on behalf of the registered holder, in
each case as the name of the registered holder or holders appears on the Old
Senior Notes.
If the Letter of Transmittal or any Old Senior Notes 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
Continental, evidence satisfactory to Continental of their authority to so act
must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and withdrawal of the tendered Old Senior Notes 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
Senior Notes not properly tendered or any Old Senior Notes the acceptance of
which would, in the opinion of counsel for Continental, be unlawful. Continental
also reserves the absolute right to waive any irregularities or conditions of
tender as to particular Old Senior Notes. Continental'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 Senior Notes
must be cured within such time as Continental shall determine. Neither
Continental, 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
Senior Notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of Old Senior Notes will not be deemed to have been made
until such irregularities have been cured or waived. Any Old Senior Notes
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 Senior Notes (or, in the case of Old Senior Notes tendered by the book-entry
transfer procedures described below, such nonexchanged Old Senior Notes will be
credited to an account maintained with DTC), unless otherwise provided in the
Letter of Transmittal, promptly following the Expiration Date.
In addition, Continental reserves the right in its sole discretion, subject
to the provisions of the Indenture, to (i) purchase or make offers for any Old
Senior Notes 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 Senior Notes 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 SENIOR NOTES FOR EXCHANGE; DELIVERY OF NEW SENIOR NOTES
All Old Senior Notes properly tendered will be accepted, and the New Senior
Notes will be issued, promptly after the Expiration Date, subject to
satisfaction or waiver of all of the conditions to the Exchange Offer prior to
the Expiration Date. See "--Conditions" below. For purposes of the Exchange
Offer, Old Senior Notes shall be deemed to have been accepted for exchange when,
as and if Continental has given oral or written notice thereof to the Exchange
Agent.
In all cases, issuance of New Senior Notes for Old Senior Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of:
o certificates for such Old Senior Notes or a timely Book-Entry
Confirmation of such Old Senior Notes into the Exchange Agent's
account at DTC;
o a properly completed and duly executed Letter of Transmittal or an
Agent's Message in lieu thereof; and
o all other required documents.
If any tendered Old Senior Notes are not accepted for any reason set forth
in the terms and conditions of the Exchange Offer or if Old Senior Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or nonexchanged Old Senior Notes will be returned without
expense to the tendering holder thereof (or, in the case of Old Senior Notes
tendered by the book-entry transfer procedures described below, such
nonexchanged Old Senior Notes will be credited to an account maintained with
DTC), unless otherwise provided in the Letter of Transmittal, promptly following
the Expiration Date.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Senior Notes at DTC for purposes of the Exchange Offer within two
business days after the date of this Prospectus. The Exchange Agent has
confirmed that any financial institution that is a participant in DTC's systems
(a "DTC Participant") may use DTC's Automated Tender Offer program ("ATOP")
procedures to tender Old Senior Notes in the Exchange Offer. Any DTC Participant
may make book-entry delivery of Old Senior Notes by causing DTC to transfer such
Old Senior Notes into the Exchange Agent's account at DTC in accordance with
DTC's ATOP procedures for transfer. However, although delivery of Old Senior
Notes may be effected through book-entry transfer into the Exchange Agent's
account at DTC, the Letter of Transmittal (or facsimile thereof) with any
required signature guarantees, or an Agent's Message in lieu of the Letter of
Transmittal, and any other required documents must, in any case, be transmitted
to and received by the Exchange Agent at one of the addresses set forth below
under "--Exchange Agent" on or prior to 5:00 p.m., New York City time, on the
Expiration Date or the guaranteed delivery procedures described below must be
complied with. The term "Agent's Message" means a message, transmitted by DTC
and received by the Exchange Agent and forming part of a Book-Entry
Confirmation, that states that DTC has received an express acknowledgment from a
DTC Participant tendering Old Senior Notes that are the subject of such
Book-Entry Confirmation that such DTC Participant has received and agrees to be
bound by the terms of the Letter of Transmittal, and that Continental may
enforce the Letter of Transmittal against such DTC Participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of Old Senior Notes desires to tender such Old
Senior Notes, and (i) the Old Senior Notes are not immediately available, or
(ii) time will not permit such holder's Old Senior Notes, the Letter of
Transmittal or any other required documents to reach the Exchange Agent before
the Expiration Date, or (iii) the procedures for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
o the tender is made through an Eligible Institution;
o 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 or Agent's Message in lieu
thereof) and Notice of Guaranteed Delivery, substantially in the form
provided by Continental (by facsimile transmission, mail or hand
delivery), setting forth the name and address of the holder of Old
Senior Notes and the amount of Old Senior Notes tendered, stating that
the tender is being made thereby and guaranteeing that within three
New York Stock Exchange trading days after the date of execution of
the Notice of Guaranteed Delivery, the certificates for all physically
tendered Old Senior Notes in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof or Agent's
Message in lieu thereof) and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution
with the Exchange Agent; and
o the certificates for all physically tendered Old Senior Notes in
proper form for transfer, or a Book-Entry Confirmation, as the case
may be, a properly completed and duly executed Letter of Transmittal
(or a facsimile thereof or Agent's Message in lieu thereof) and all
other documents required by the Letter of Transmittal are received by
the Exchange Agent within three New York Stock Exchange trading days
after the date of execution of the Notice of Guaranteed Delivery.
WITHDRAWAL OF TENDERS
Tenders of Old Senior Notes 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 Senior Notes to be withdrawn, identify the Old Senior Notes to
be withdrawn (including the principal amount of such Old Senior Notes) and
(where certificates for Old Senior Notes have been transmitted) specify the name
in which such Old Senior Notes are registered, if different from that of the
withdrawing holder. If certificates for Old Senior Notes 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 Senior Notes 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 DTC to be credited with the
withdrawn Old Senior Notes 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 Continental, whose
determination shall be final and binding on all parties. Any Old Senior Notes so
withdrawn will be deemed not to have been validly tendered for exchange for
purposes of the Exchange Offer. Any Old Senior Notes 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 Senior Notes
tendered by book-entry transfer into the Exchange Agent's account at DTC
pursuant to the book-entry transfer procedures described above, such Old Senior
Notes will be credited to an account maintained with DTC for the Old Senior
Notes) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Senior Notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering" and "--Book-Entry Transfer" above at any time prior to 5:00 p.m., New
York City time, on the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, Old Senior Notes will
not be required to be accepted for exchange, nor will New Senior Notes be issued
in exchange for, any Old Senior Notes, and Continental may terminate or amend
the Exchange Offer as provided herein before the acceptance of such Old Senior
Notes, if because of any change in law, or applicable interpretations thereof by
the Commission, Continental determines that it is not permitted to effect the
Exchange Offer, and Continental has no obligation to, and will not, knowingly,
permit acceptance of tenders of Old Senior Notes 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
Senior Notes to be received by such holder or holders of Old Senior Notes 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 (the
"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: BY OVERNIGHT DELIVERY OR HAND:
Wilmington Trust Company Wilmington Trust Company
DC-1615 Reorg Services Corporate Trust Reorg Services
PO Box 8861 1100 North Market Street
Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615
FACSIMILE TRANSMISSION:
(302) 636-4145
CONFIRM BY TELEPHONE:
(302) 636-6472
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by Continental. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitations may be
made by telephone, telecopy, electronic mail or in person by officers and
regular employees of Continental.
Continental will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. Continental, 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. Continental 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 Senior Notes, and in handling or forwarding tenders for
exchange.
The expenses to be incurred in connection with the Exchange Offer will be
paid by Continental, including fees and expenses of the Exchange Agent and the
Trustee and accounting, legal, printing and related fees and expenses.
Continental will pay all transfer taxes, if any, applicable to the exchange
of Old Senior Notes pursuant to the Exchange Offer. If, however, certificates
representing New Senior Notes or Old Senior Notes 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 Senior Notes tendered, or if tendered Old Senior Notes 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 Senior Notes 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 SENIOR NOTES
The following summary describes the material terms of the Senior Notes. The
summary does not purport to be complete. We urge you to read the Senior Notes,
the Indenture, the Security Agreement, the Collateral Maintenance Agreement and
the Reference Agency Agreement (collectively, the "Operative Documents") for
additional detail and further information because they, and not this
description, define your rights. Each of the Operative Documents has been filed
as an exhibit to the Registration Statement and is available as set forth under
"Where You Can Find More Information". The references to Sections in parentheses
in the following summary are to the relevant Sections of the Indenture unless
otherwise indicated.
GENERAL
The Old Senior Notes were issued by Continental under an Indenture among
Continental, Wilmington Trust Company, as trustee (the "Trustee"), the Policy
Provider and the Liquidity Provider, which was amended and restated on the
Subordinated Notes Issuance Date (such Indenture, as so amended and restated,
the "Indenture"). The New Senior Notes will also be issued by Continental under
the Indenture.
The forms and terms of the New Senior Notes are the same in all material
respects as the form and terms of the Old Senior Notes, except that:
o the New Senior Notes will be registered under the Securities Act;
o the New Senior Notes will not contain restrictions on transfer or
provisions relating to registration rights or interest rate increases;
and
o the New Senior Notes will be available only in book-entry form.
The New Senior Notes will be issued only in fully registered form, without
coupons, and will be subject to the provisions described below under
"--Book-Entry; Delivery and Form". The New Senior Notes will be issued only in
minimum denominations of $1,000 or integral multiples thereof, except that one
Senior Note may be issued in a different denomination. (Section 2.1(b))
The Senior Notes are secured by a lien on the Collateral. The Senior Notes
rank equally in right of payment with all of Continental's other unsubordinated
obligations, except to the extent of the assets subject to such lien, as to
which the Senior Notes effectively rank senior. The Senior Notes rank senior to
the Subordinated Notes, which are also secured by a lien on the Collateral.
On the Issuance Date, the Trustee, for the benefit of the Noteholders,
entered into the Liquidity Facility, the fee letter with respect thereto, the
Policy and the Policy Provider Agreement (collectively, the "Support
Documents"). (Section 3.10)
PAYMENTS OF PRINCIPAL AND INTEREST
Continental has issued $200,000,000 in aggregate principal amount of Old
Senior Notes. The Senior Notes are limited to $200,000,000 of principal in the
aggregate. Subject to the provisions of the Indenture, the entire principal
amount of the Senior Notes is scheduled to be paid to the Senior Noteholders on
December 6, 2007 (the "Final Scheduled Payment Date"). The "Final Legal Maturity
Date" is December 6, 2009.
Interest accrues on the unpaid principal amount of each Senior Note at the
variable rate per annum set forth on the cover page of this Prospectus (plus, if
applicable, 0.50% during the periods specified in the Registration Rights
Agreement), subject to a maximum equal to the Capped Interest Rate applicable
only for periods as to which Continental has failed to pay accrued interest when
due and failed to cure such nonpayment (the "Stated Interest Rate"). For all
other periods, the interest rate on the Senior Notes will not be capped. Accrued
interest will be payable on March 6, June 6, September 6 and December 6 of each
year (each, a "Scheduled Interest Payment Date") or, if not a Business Day, the
next succeeding Business Day (each date on which interest is due, an "Interest
Payment Date" ), commencing on March 6, 2003. Such accrued interest will be paid
to holders of record on the 15th day preceding the applicable Scheduled Interest
Payment Date. Interest on the Senior Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from the
Issuance Date. Interest on the Senior Notes is calculated on the basis of the
actual number of days elapsed over a 360-day year and shall accrue with respect
to the first but not the last day of each Interest Period. If any date scheduled
for a payment of principal, interest, Premium, if any, or Break Amount, if any,
is not a Business Day, such payment will be made on the next succeeding Business
Day, and interest shall be added for such additional period. (Section 2.7)
Payments of interest on the Senior Notes are supported by a Liquidity
Facility provided by the Liquidity Provider for the benefit of the holders of
the Senior Notes. The Liquidity Facility will provide an amount sufficient to
pay interest on the Senior Notes at the Stated Interest Rate on up to eight
successive Interest Payment Dates. The Liquidity Facility does not provide for
drawings or payments thereunder to pay for principal of, or Premium, if any, or
Break Amount, if any, with respect to, the Senior Notes. See "Description of the
Liquidity Facility".
Except in specified circumstances, after use of any available funds under
the Liquidity Facility and the Cash Collateral Account, the payment of interest
on the Senior Notes at the Stated Interest Rate is supported by the Policy
provided by the Policy Provider. Payment of principal of the Senior Notes no
later than the Final Legal Maturity Date is also supported by the Policy. See
"Description of the Policy and the Policy Provider Agreement--The Policy".
Payments of interest and principal on the Notes will be distributed by the
Trustee on the date scheduled for such payment under the Indenture or, if the
money for purposes of such payment has not been deposited, in whole or in part,
with the Trustee by Continental, the Liquidity Provider or the Policy Provider
on such date, on the next Business Day on which some or all of the money has
been deposited with the Trustee (a "Distribution Date"). However, if some or all
of the money has not been deposited with the Trustee for purposes of making an
interest payment on the Senior Notes within five days after the Interest Payment
Date for such payment, Continental is required to fix a special payment date and
special record date for such payment and to give written notice to the Senior
Noteholders of such special dates and the amount of defaulted interest to be
paid.
DETERMINATION OF LIBOR
LIBOR ("LIBOR") for the period commencing on and including the Issuance
Date and ending on but excluding the first Interest Payment Date (the "Initial
Interest Period" and an "Interest Period") was determined on the second Business
Day preceding the Issuance Date as the rate for deposits in U.S. dollars for a
period of three months that appeared on the display designated as page "3750" on
the Telerate Monitor.
For the purpose of calculating LIBOR for the periods from and including an
Interest Payment Date to but excluding the next succeeding Interest Payment Date
(each, also an "Interest Period"), Continental and the Trustee have entered into
a Reference Agency Agreement (as amended, the "Reference Agency Agreement") with
Wilmington Trust Company, as reference agent (the "Reference Agent"). The
Reference Agent will determine LIBOR for each Interest Period following the
Initial Interest Period, on a date (the "Reference Date") that is two London
banking days (meaning days on which commercial banks are open for general
business in London, England) before the Interest Payment Date on which such
Interest Period commences.
On each Reference Date, the Reference Agent will determine LIBOR as the
rate for deposits in U.S. dollars for a period of three months that appears on
the display designated as page "3750" on the Telerate Monitor (or such other
page or service as may replace it) as of 11:00 a.m., London time.
If the rate determined as described in the foregoing paragraph does not
appear on the Telerate Page 3750, the Reference Agent will determine LIBOR on
the basis of the rates at which deposits in U.S. Dollars are offered by certain
reference banks as described in the Reference Agency Agreement at approximately
11:00 a.m., London time, on the Reference Date for such Interest Period to prime
banks in the London interbank market for a period of three months commencing on
the first day of such Interest Period and in an amount that is representative
for a single transaction in the London interbank market at the relevant time.
The Reference Agent will request the principal London office of each of the
reference banks to provide a quotation of its rate. If at least two such
quotations are provided, the rate for that Interest Period will be the
arithmetic mean of the quotations. If fewer than two quotations are provided,
the interest rate for the next Interest Period shall be the arithmetic mean of
the rates quoted by major banks in New York City, selected by the Reference
Agent in good faith and in a commercially reasonable manner, at approximately
11:00 a.m., New York City time, on the first day of such Interest Period for
loans in U.S. Dollars to leading European banks for a period of three months
commencing on the first day of such Interest Period and in an amount that is
representative for a single transaction in the New York market at the relevant
time, except that, if the banks so selected by the Reference Agent are not
quoting as mentioned above, LIBOR shall be the floating rate of interest in
effect for the last preceding Interest Period.
The Reference Agent's determination of LIBOR (in the absence of negligence,
willful default, bad faith or manifest error) will be conclusive and binding
upon all parties.
As promptly as is practicable after the determination thereof, the
Reference Agent will give notice of its determination of LIBOR for the relevant
Interest Period to Continental, the Trustee, the Liquidity Provider and the
Policy Provider. Holders of the Senior Notes (the "Senior Noteholders" and,
together with the Subordinated Noteholders, the "Noteholders") may obtain such
information from the Trustee.
Continental reserves the right to terminate the appointment of the
Reference Agent at any time on 30 days' notice and to appoint a replacement
reference agent in its place. Notice of any such termination will be given to
the Noteholders. The Reference Agent may not be removed or resign its duties
without a successor having been appointed.
BREAK AMOUNT
"Break Amount" means, as of any date of payment, redemption or acceleration
of any Note (the "Applicable Date"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the Applicable Date pursuant to
the formula set forth below.
The Break Amount with respect to any Note will be calculated as follows:
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum of (i) the
amount of the outstanding principal amount of such Note as of the
first day of the then applicable Interest Period plus (ii) interest
payable thereon during such entire Interest Period at then effective
LIBOR.
Y = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using then
effective LIBOR as the discount rate.
Z = X, discounted to present value from the last day of the then
applicable Interest Period to the Applicable Date, using a rate equal
to the applicable London interbank offered rate for a period
commencing on the Applicable Date and ending on the last day of the
then applicable Interest Period, determined by the Reference Agent as
of two Business Days prior to the Applicable Date as the discount
rate.
No Break Amount will be payable (x) if the Break Amount, as calculated
pursuant to the formula set forth above, is equal to or less than zero or (y) on
or in respect of any Applicable Date that is an Interest Payment Date.
REDEMPTION
The Senior Notes may be redeemed at any time in whole or (so long as no
Payment Default has occurred and is continuing) in part (in any integral
multiple of $1,000) by the Company at its sole option at a redemption price
equal to the sum of 100% of the principal amount of, accrued and unpaid interest
on, and Break Amount, if any, with respect to, the redeemed Senior Notes to and
including the date of redemption. In addition, if a Senior Note is redeemed
before the third anniversary of the Issuance Date (except in connection with a
redemption to satisfy the maximum Senior Collateral Ratio or minimum Senior
Rotable Ratio requirement discussed under "--Collateral--Appraisals and
Maintenance of Ratios"), such redemption price will include a premium (the
"Premium") equal to the following percentage of the principal amount of such
Senior Note: (i) if redeemed before the first anniversary of the Issuance Date,
1.5%; (ii) if redeemed on or after such first anniversary and before the second
anniversary of the Issuance Date, 1.0%; and (iii) if redeemed on or after such
second anniversary and before the third anniversary of the Issuance Date, 0.5%.
(Section 4.1)
At least 15 days but not more than 60 days before any redemption date, the
Trustee will send a notice of redemption to each Senior Noteholder whose Senior
Notes are to be redeemed, identifying the Senior Notes and the principal amount
thereof to be redeemed. If less than all of the Senior Notes are to be redeemed,
the Trustee will select the Senior Notes to be redeemed on either a pro rata
basis or by lot or by any other equitable manner determined by the Trustee in
its sole discretion. On the redemption date, interest will cease to accrue on
the Senior Notes or portions thereof called for redemption, unless Continental
fails to make the redemption payment for such Senior Notes. (Sections 4.3, 4.4
and 4.5)
If the Trustee gives notice of redemption but Continental fails to pay when
due all amounts necessary to effect such redemption, such redemption shall be
deemed revoked and no amount shall be due as a result of notice of redemption
having been given.
COLLATERAL
The Senior Notes are secured by a lien on spare parts (including
appliances) first placed in service after October 22, 1994, and owned by
Continental that are appropriate for installation on or use in
o one or more of the following aircraft models: Boeing model 737-700,
737-800, 737-900, 757-200, 757-300, 767-200, 767-400 or 777-200
aircraft,
o any engine utilized on any such aircraft or
o any other Qualified Spare Part,
and not appropriate for installation on or use in any other model of aircraft
currently operated by Continental or engine utilized on any such other model of
aircraft ("Qualified Spare Parts"), together with certain records relating to
such spare parts, certain rights of Continental with respect to such spare parts
and certain proceeds of the foregoing (collectively, the "Collateral"). The
Subordinated Notes are also secured by a lien on the Collateral. The lien will
not apply for as long as a spare part is installed on or being used in any
aircraft, engine or other spare part so installed or being used. In addition,
the lien will not apply if a spare part is not located at a Designated Location.
(Security Agreement, Section 2.01) Spare engines are not included in the
Collateral.
On the Issuance Date, Continental entered into a Security Agreement (as
amended, the "Security Agreement" and, together with any other agreement under
which Continental may grant a lien for the benefit of the Noteholders, the
"Collateral Agreements") with the Trustee, acting as security agent (the
"Security Agent" and, together with any collateral agent under any other
Collateral Agreement, the "Collateral Agents"), providing for the grant of the
lien on the Collateral. In addition, on the Issuance Date, Continental entered
into a Collateral Maintenance Agreement (as amended, the "Collateral Maintenance
Agreement") with the Policy Provider, providing for appraisal reports and
certain other requirements with respect to the Collateral. The following
summarizes certain provisions of the Security Agreement and Collateral
Maintenance Agreement, as such agreements were amended on the Subordinated Notes
Issuance Date in connection with the issuance of the Subordinated Notes,
relating to the spare parts included in the Collateral (the "Pledged Spare
Parts").
APPRAISALS AND MAINTENANCE OF RATIOS
Continental is required to furnish to the Policy Provider and the Trustee
by the fifth Business Day of February and the fifth Business Day of August in
each year, commencing in August 2003, so long as the Notes of any series are
outstanding, a certificate of an independent appraiser. Such certificates are
required to state such appraiser's opinion of the fair market value of the
Collateral and of the Rotables included in the Collateral, determined on the
basis of a hypothetical sale negotiated in an arm's length free market
transaction between a willing and able seller and a willing and able buyer,
neither of whom is under undue pressure to complete the transaction, under then
current market conditions (the "Fair Market Value"). This appraisal will not
apply to any cash or permitted investment securities (the "Cash Collateral")
then held as collateral for the Notes, and such securities will be valued by the
Trustee in accordance with customary financial market practices. Such valuations
will then be used to calculate the following:
o the "Senior Collateral Ratio" applicable to the Senior Notes, which
shall mean a percentage determined by dividing (i) the aggregate
principal amount of the outstanding Senior Notes minus the sum of the
Cash Collateral held by the Collateral Agent by (ii) the Fair Market
Value of all Collateral (excluding any Cash Collateral) as set forth
in such independent appraiser's certificate;
o the "Subordinated Collateral Ratio" applicable to the Subordinated
Notes, which shall mean a percentage determined by dividing (i) the
aggregate principal amount of the outstanding Senior Notes and
Subordinated Notes minus the sum of the Cash Collateral held by the
Collateral Agent by (ii) the Fair Market Value of all Collateral
(excluding any Cash Collateral) as set forth in such independent
appraiser's certificate;
o the "Senior Rotable Ratio" applicable to the Senior Notes, which shall
mean a percentage determined by dividing (i) the Fair Market Value of
the Rotables as set forth in such independent appraiser's certificate
by (ii) the aggregate principal amount of all outstanding Senior Notes
minus the sum of the Cash Collateral held by the Collateral Agent; and
o the "Subordinated Rotable Ratio" applicable to the Subordinated Notes,
which shall mean a percentage determined by dividing (i) the Fair
Market Value of the Rotables as set forth in such independent
appraiser's certificate by (ii) the aggregate principal amount of all
outstanding Senior Notes and Subordinated Notes minus the sum of the
Cash Collateral held by the Collateral Agent.
The calculation of the Senior Collateral Ratio, the Subordinated Collateral
Ratio (together, the "Collateral Ratios"), the Senior Rotable Ratio and the
Subordinated Rotable Ratio (together, the "Rotable Ratios") will be set forth in
a certificate of Continental. (Collateral Maintenance Agreement, Article 2)
If the Senior Collateral Ratio as so determined is greater than 45.0% or
the Subordinated Collateral Ratio as so determined is greater than 67.5%,
Continental will be required, within 90 days after the date of Continental's
certificate calculating such Collateral Ratios, to:
o subject additional Qualified Spare Parts to the lien of the Security
Agreement;
o grant a security interest in other property to secure the Notes for
the benefit of the Noteholders (which thereafter will be included as
"Collateral" for purposes of the Notes), but only if the Policy
Provider agrees and Continental shall have received written
confirmation from each nationally recognized rating agency then rating
the Senior Notes or the Subordinated Notes at Continental's request (a
"Rating Agency") that the use of such additional collateral and the
related agreements to reduce the Collateral Ratios will not result in
a reduction of the rating for the Senior Notes or the Subordinated
Notes below the then current rating for such Notes (such rating in the
case of the Senior Notes determined without regard to the Policy) or a
withdrawal or suspension of the rating of such Notes;
o provide additional Cash Collateral to the Security Agent under the
Security Agreement (provided that if Continental's cash, cash
equivalents and certain other marketable securities as of the
applicable determination date was less than $600,000,000, then the
total amount of Cash Collateral may not exceed $20,000,000);
o deliver Notes to the Trustee for cancellation;
o redeem some or all of the Notes; or
o any combination of the foregoing;
such that the Senior Collateral Ratio and the Subordinated Collateral Ratio, as
recalculated giving effect to such action (but otherwise using the information
most recently used to determine such Collateral Ratios), would not be greater
than 45.0% and 67.5%, respectively. (Collateral Maintenance Agreement, Section
3.1(a))
If the Senior Rotable Ratio as so determined is less than 150% or the
Subordinated Rotable Ratio as so determined is less than 100%, Continental will
be required, within 90 days after the date of Continental's certificate
calculating such Rotable Ratios, to:
o subject additional Rotables to the lien of the Security Agreement;
o provide additional Cash Collateral to the Security Agent under the
Security Agreement (provided that if Continental's cash, cash
equivalents and certain other marketable securities as of the
applicable determination date was less than $600,000,000, then the
total amount of Cash Collateral may not exceed $20,000,000);
o deliver Notes to the Trustee for cancellation;
o redeem some or all of the Notes; or
o any combination of the foregoing;
such that the Senior Rotable Ratio and the Subordinated Rotable Ratio, as
recalculated giving effect to such action (but otherwise using the information
most recently used to determine such Rotable Ratios), would not be less than
150% and 100%, respectively. (Collateral Maintenance Agreement, Section 3.1(b))
If Continental provides additional Cash Collateral to comply with any such
maximum Collateral Ratio or minimum Rotable Ratio requirement, it must, within
90 days after providing such Cash Collateral, take additional action (other than
providing Cash Collateral) to cause the Collateral Ratios and the Rotable Ratios
(in each case calculated to exclude such Cash Collateral) to comply with the
applicable maximum or minimum percentage. (Collateral Maintenance Agreement,
Section 3.1(e)) If the Senior Collateral Ratio and Subordinated Collateral Ratio
are less than the applicable maximum percentage and the Senior Rotable Ratio and
the Subordinated Rotable Ratio are greater than the applicable minimum
percentage, in each case as most recently determined as described above, and the
Security Agent held Cash Collateral as of the relevant determination date,
Continental may withdraw Cash Collateral in excess of the amount necessary to
comply with such ratios. (Security Agreement, Section 7.03(b))
Continental deposited Cash Collateral of $13,056,950 with the Security
Agent upon initial issuance of the Old Senior Notes, so that the initial Senior
Collateral Ratio was 45.0% based on the initial appraisal as of August 25, 2002,
prepared by SH&E. See "Description of the Appraisal". Without giving effect to
such deposit, the initial Senior Collateral Ratio would have been 48.1%. Using
the appraisal of the Collateral determined as of December 25, 2002, and without
giving effect to such deposit, the Senior Collateral Ratio would have been 45.8%
and the Subordinated Collateral Ratio would have been 68.7%. See "Description of
the Appraisal". The calculation of the Collateral Ratios at the time of the next
semiannual appraisal due in August 2003 will be made without giving effect to
such Cash Collateral deposit. Continental expects to satisfy the maximum
Collateral Ratio requirements at that time based on its projected purchases of
spare parts, in which case Continental will be entitled to withdraw such Cash
Collateral. However, no assurance can be given that the maximum Collateral Ratio
requirements will be satisfied based on such purchases. If it is not,
Continental will be required to take one or more of the other actions described
above (other than providing Cash Collateral) to satisfy such requirement.
Continental is required to furnish to the Policy Provider and the Trustee,
within ten Business Days after each May 1 and November 1, commencing with May 1,
2003, a report providing certain information regarding the quantity of Pledged
Spare Parts included in the Collateral and compliance with certain requirements
of the Collateral Maintenance Agreement.
FLEET REDUCTION
The Collateral Maintenance Agreement requires that the outstanding
principal amount of Senior Notes and Subordinated Notes be reduced if the total
number of aircraft of any of the four aircraft model groups listed below in
Continental's in-service fleet during any period of 60 consecutive days is less
than the minimum specified below for such group (other than due to restrictions
on operating such aircraft imposed by the FAA or any other U.S. Government
agency):
AIRCRAFT MODEL MINIMUM
-------------- -------
o Boeing 737-700, Boeing 737-800 and Boeing 737-900 Aircraft.... 63 Aircraft
o Boeing 757-200 and Boeing 757-300 Aircraft.................... 23 Aircraft
o Boeing 767-200 and Boeing 767-400 Aircraft.................... 13 Aircraft
o Boeing 777-200 Aircraft....................................... 9 Aircraft
If any of the foregoing specified minimums is not so satisfied with respect to
any aircraft model group, then within 90 days after such occurrence, Continental
must redeem Senior Notes or deliver Senior Notes to the Trustee for cancellation
(or a combination thereof) in a percentage of the outstanding principal amount
of Senior Notes determined by dividing the appraised value of the Pledged Spare
Parts that are appropriate for installation on, or use in, only the aircraft of
such model group, or the engines utilized only on such aircraft, by the
appraised value of the Collateral. In addition, Continental must redeem
Subordinated Notes or deliver Subordinated Notes to the Trustee for cancellation
(or a combination thereof) in the same percentage of the outstanding principal
amount of Subordinated Notes. (Collateral Maintenance Agreement, Section 3.3)
LIENS
Continental is required to maintain the Pledged Spare Parts free of any
liens, other than the rights of the Trustee, the Noteholders and Continental
arising under the 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 that either are not yet
delinquent for more than 60 days or are being contested in good faith by
appropriate proceedings; (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
Security Agent; 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 the Pledged Spare Parts or
the interest of the Security Agent therein or impair the lien of the Security
Agreement. (Collateral Maintenance Agreement, Section 3.4)
MAINTENANCE
Continental is required to maintain the Pledged Spare Parts in good working
order and condition, excluding (i) Pledged Spare Parts that have become worn out
or unfit for use and not reasonably repairable or obsolete, (ii) Pledged Spare
Parts that are not required for Continental's normal operations and (iii)
expendable parts that have been consumed or used in Continental's operations. In
addition, Continental must maintain all records, logs and other materials
required by the FAA or under the Federal Aviation Act to be maintained in
respect of the Pledged Spare Parts. (Collateral Maintenance Agreement, Section
3.5)
USE AND POSSESSION
Continental has the right to deal with the Pledged Spare Parts in any
manner consistent with its ordinary course of business. This includes the right
to install on, or use in, any aircraft, engine or Qualified Spare Part leased to
or owned by Continental any Pledged Spare Part, free from the lien of the
Security Agreement. (Security Agreement Section 4.02(a))
Continental may not sell, lease, transfer or relinquish possession of any
Pledged Spare Part without the prior written consent of the Policy Provider,
except as permitted by the Security Agreement or the Collateral Maintenance
Agreement. So long as no Event of Default has occurred and is continuing,
Continental may sell, transfer or dispose of Pledged Spare Parts free from the
Lien of the Security Agreement. (Security Agreement, Section 4.03(a)) However,
as of any date during the period between the dates of independent appraiser's
certificates delivered pursuant to the Collateral Maintenance Agreement, the
aggregate appraised value of all Pledged Spare Parts (x) previously during such
period sold, transferred or disposed of (with certain exceptions) may not exceed
2% of the appraised value of the Collateral, (y) then subject to leases or loans
may not exceed 2% of the appraised value of the Collateral or (z) previously
during such period moved from a Designated Location to a location that is not a
Designated Location (with certain exceptions) may not exceed 2% of the appraised
value of the Collateral. Such restrictions may be waived by the Policy Provider,
so long as after giving effect to a transaction permitted as a result of such
waiver the Subordinated Collateral Ratio (using the information most recently
used to determine such ratio) would not be greater than 67.5%. (Collateral
Maintenance Agreement, Section 3.2)
Continental may, in the ordinary course of business, transfer possession of
any Pledged Spare Part to the manufacturer thereof or any other organization for
testing, overhaul, repairs, maintenance, alterations or modifications or to any
person for the purpose of transport to any of the foregoing. In addition,
Continental may dismantle any Pledged Spare Part that has become worn out or
obsolete or unfit for use and may sell or dispose of any such Pledged Spare Part
or any salvage resulting from such dismantling, free from the lien of the
Security Agreement. Continental also may subject any Pledged Spare Part to a
pooling, exchange, borrowing or maintenance servicing agreement arrangement
customary in the airline industry and entered into in the ordinary course of
business; provided, however, that if Continental's title to any such Pledged
Spare Part shall be divested under any such agreement or arrangement, such
divestiture shall be deemed to be a sale with respect to such Pledged Spare
Part. (Collateral Maintenance Agreement, Section 3.6(a))
So long as no Event of Default shall have occurred and be continuing,
Continental may enter into a lease with respect to any Pledged Spare Part to any
U.S. air carrier that is not then subject to any bankruptcy, insolvency,
liquidation, reorganization, dissolution or similar proceeding and shall not
have substantially all of its property in the possession of any liquidator,
trustee, receiver or similar person. In the case of any such lease, Continental
will include in such lease appropriate provisions which (i) make such lease
expressly subject and subordinate to all of the terms of the Security Agreement,
including the rights of the Security Agent to avoid such lease in the exercise
of its rights to repossession of the Pledged Spare Parts thereunder; (ii)
require the lessee to comply with the insurance requirements of the Collateral
Maintenance Agreement; and (iii) require that the Pledged Spare Parts subject
thereto be used in accordance with the limitations applicable to Continental's
use, possession and location of such Pledged Spare Parts provided in the
Collateral Maintenance Agreement and the Security Agreement (including, without
limitation, that such Pledged Spare Parts be kept at one or more Designated
Locations). (Collateral Maintenance Agreement, Section 3.6(b))
DESIGNATED LOCATIONS
Continental is required to keep the Pledged Spare Parts at one or more of
the designated locations specified in the Security Agreement or added from time
to time by Continental in accordance with the Security Agreement (the
"Designated Locations"), except as otherwise permitted under the Security
Agreement and Collateral Maintenance Agreement. (Security Agreement, Section
4.02(b)) Continental is entitled to hold Qualified Spare Parts at locations
other than Designated Locations. The lien of the Security Agreement does not
apply to any spare part not located at a Designated Location.
INSURANCE
Continental is required to maintain insurance covering physical damage to
the Pledged Spare Parts. Such insurance must provide for the reimbursement of
Continental's expenditure in repairing or replacing any damaged or destroyed
Pledged Spare Part. If any such Pledged Spare Part is not repaired or replaced,
such insurance must provide for the payment of the amount it would cost to
repair or replace such Pledged Spare Part, on the date of loss, with proper
deduction for obsolescence and physical depreciation. However, after giving
effect to self-insurance permitted as described below, the amounts payable under
such insurance may be less.
All insurance proceeds paid under such policies as a result of the
occurrence of an "Event of Loss" with respect to any Pledged Spare Parts
involving proceeds in excess of $2 million, up to 110% of the outstanding
principal amount of the Notes (the "Debt Balance"), will be paid to the Security
Agent. The entire amount of any insurance proceeds not involving an "Event of
Loss" with respect to any Pledged Spare Parts or involving proceeds of $2
million or less, and the amount of insurance proceeds in excess of the Debt
Balance, will be paid to Continental so long as no Payment Default, Event of
Default or Continental Bankruptcy Event shall be continuing. For these purposes,
"Event of Loss" means, with respect to any Pledge Spare Part, its destruction,
damage beyond repair, damage that results in the receipt of insurance proceeds
on the same basis as destruction or loss of possession by Continental for 90
consecutive days as a result of theft or disappearance. Any such proceeds held
by the Security Agent will be disbursed to Continental to reimburse it for the
purchase of additional Qualified Spare Parts after the occurrence of such Event
of Loss. In addition, such proceeds will be disbursed to Continental to the
extent it would not cause the Collateral Ratios, as subsequently determined, to
exceed the applicable maximum percentages.
Continental is also required to maintain third party liability insurance
with respect to the Pledged Spare Parts, in an amount and scope as it
customarily maintains for equipment similar to the Pledged Spare Parts.
Continental may self-insure the risks required to be insured against as
described above in such amounts as shall be consistent with normal industry
practice.
EVENT OF DEFAULT
Each of the following constitutes an "Event of Default" with respect to the
Notes:
o Failure by Continental to pay (i) principal of, interest on, or
Premium, if any, or Break Amount, if any, with respect to, any Note
when due, and such failure shall remain unremedied for more than ten
Business Days (it being understood that any amount distributed to the
Senior Noteholders in respect of the foregoing from funds provided by
the Policy Provider, the Liquidity Provider or the Cash Collateral
Account shall not be deemed to cure such Default) or (ii) any other
amount payable by it to the Noteholders under the Indenture or any
other Operative Document when due, and such failure shall continue for
more than ten Business Days after Continental has received written
notice from the Trustee of the failure to make such payment when due
(without giving effect to any such notice or grace period, a "Payment
Default").
o Failure by Continental to observe or perform (or cause to be observed
and performed) in any material respect any other covenant, agreement
or obligation set forth in the Indenture or in any other Operative
Document, and such failure shall continue after notice and specified
cure periods.
o Any representation or warranty made by Continental in the Indenture or
any Operative Document (a) shall prove to have been untrue or
inaccurate in any material respect as of the date made, (b) such
untrue or inaccurate representation or warranty is material at the
time in question and (c) the same shall remain uncured (to the extent
of the adverse impact of such incorrectness on the Trustee) for more
than 30 days after the date of written notice from the Trustee to
Continental.
o The occurrence of certain events of bankruptcy, reorganization or
insolvency of Continental (each, a "Continental Bankruptcy Event").
(Section 7.1)
If an event occurs and is continuing which is, or after notice or passage
of time, or both, would be an Event of Default (a "Default") and if such Default
is known to the Trustee, the Trustee shall mail to each Noteholder, the
Liquidity Provider and the Policy Provider a notice of the Default within 90
days after the occurrence thereof except as otherwise permitted by the Trust
Indenture Act of 1939, as amended (the "TIA"). Except in the case of a Default
in payment of principal of, or interest on, or Premium, if any, or Break Amount,
if any, with respect to, any Note, the Trustee may withhold the notice if and so
long as it, in good faith, determines that withholding the notice is in the
interests of the Noteholders. (Section 8.5)
REMEDIES
If an Event of Default (other than a Continental Bankruptcy Event) occurs
and is continuing, the Controlling Party may, by notice to Continental and the
Trustee, and the Trustee shall, upon the request of the Controlling Party,
declare all unpaid principal of, accrued but unpaid interest on, and Premium, if
any, and Break Amount, if any, with respect to, the outstanding Notes and other
amounts otherwise payable under the Indenture, if any, to be due and payable
immediately. If a Continental Bankruptcy Event occurs, such amounts shall be due
and payable without any declaration or other act on the part of the Trustee, the
Controlling Party or any Noteholder. (Section 7.2)
The Controlling Party by notice to the Trustee may rescind an acceleration
and its consequences if (a) all existing Events of Default, other than the
non-payment as to the Notes of the principal, interest, Premium, if any, and
Break Amount, if any, with respect thereto and other amounts otherwise payable
under the Indenture, if any, which have become due solely by such declaration of
acceleration, have been cured or waived, (b) to the extent the payment of such
interest is permitted by law, interest on overdue installments of interest and
on overdue principal which has become due otherwise than by such declaration of
acceleration, has been paid, (c) the rescission would not conflict with any
judgment or decree of a court of competent jurisdiction, and (d) all payments
due to the Trustee and any predecessor Trustee have been made. No such
rescission shall affect any subsequent default or impair any right arising from
any subsequent default. (Section 7.2)
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, interest on, or Premium, if any, or Break Amount, if any, with
respect to, the Notes or other amounts otherwise payable under the Indenture, if
any, or to enforce the performance of any provision of the Notes or the
Indenture, including instituting proceedings and exercising and enforcing, or
directing exercise and enforcement of, all rights and remedies of the Trustee
and the Collateral Agent under the Operative Documents and directing the
Collateral Agent to deposit with the Trustee all cash or investment securities
held by the Collateral Agent. The Trustee may maintain a proceeding even if it
does not possess any of the Notes or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Noteholder in exercising
any right or remedy accruing upon an Event of Default shall not impair the right
or remedy or constitute a waiver of or acquiescence in the Event of Default. No
remedy is exclusive of any other remedy. All available remedies are cumulative.
(Section 7.3)
The Controlling Party by notice to the Trustee may authorize the Trustee to
waive an existing Default or Event of Default and its consequences, except a
Default or Event of Default (i) in the payment of principal of, interest on, or
Premium, if any, or Break Amount, if any, with respect to, any Note that has not
been paid to the Noteholder from funds provided by the Policy Provider, the
Liquidity Provider or the Cash Collateral Account or (ii) in respect of a
covenant or provision of the Indenture which cannot be modified or amended
without the consent of the Liquidity Provider, the Policy Provider and the
holder of each Note affected. When a Default or Event of Default is waived, it
is cured and ceases, and the Company, the Liquidity Provider, the Policy
Provider, the Noteholders and the Trustee shall be restored to their former
positions and rights hereunder respectively; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereon. (Section 7.4)
No holder of a Note may institute any remedy with respect to the Indenture
or the Notes unless such holder has previously given to the Trustee written
notice of a continuing Event of Default, the holders of 25% or more of the
principal amount of a series of Notes then outstanding have requested that the
Trustee pursue the remedy, such holder has offered the Trustee indemnity against
loss, liability and expense satisfactory to the Trustee, the Trustee has failed
so to act for 60 days after receipt of the same, during such 60-day period the
Controlling Party has not given the Trustee a direction inconsistent with the
request and, in the case of a Subordinated Noteholder, the principal of,
interest on, and Premium, if any, Break Amount, if any, and all other amounts
payable under the Indenture with respect to the Senior Notes have been paid in
full. (Section 7.6) Notwithstanding the foregoing, the right of any Noteholder
to receive payment when due of principal, interest, Premium, if any, and Break
Amount, if any, or to bring suit for the enforcement of any such payment, shall
not be impaired or affected without the consent of such holder. (Section 7.7)
The Controlling Party may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee (as Trustee or Collateral
Agent, subject, in the case of any actions based on the status of the Trustee as
Collateral Agent, to any limitations otherwise expressly provided for in the
Operative Documents) or exercising any trust or power conferred on it; provided
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction. The Trustee may refuse to follow any
direction or authorization that conflicts with law or the Indenture or that the
Trustee determines may subject the Trustee to personal liability. In addition,
at any time after a Policy Provider Default or after the Senior Notes, the
Policy Expenses and the Policy Provider Obligations have been paid in full, the
Trustee may refuse to follow any direction or authorization that the Trustee
determines may be unduly prejudicial to the rights of another Noteholder.
However, the Trustee shall have no liability for any actions or omissions to act
which are in accordance with any such direction or authorization. (Section 7.5)
The Controlling Party shall not direct the Trustee or any Collateral Agent
to sell or otherwise dispose of any Collateral unless all unpaid principal of,
accrued but unpaid interest on, and Premium, if any, and Break Amount, if any,
with respect to, the outstanding Notes and other amounts otherwise payable under
the Indenture, if any, shall be declared or otherwise become due and payable
immediately. (Section 7.5)
In the case of Chapter 11 bankruptcy proceedings, Section 1110 of the U.S.
Bankruptcy Code ("Section 1110") provides special rights to holders of security
interests with respect to "equipment" (defined as described below). Under
Section 1110, the right of such holders to take possession of such equipment in
compliance with the provisions of a security agreement is not affected by any
provision of the U.S. Bankruptcy Code or any power of the bankruptcy court. Such
right to take possession may not be exercised for 60 days following the date of
commencement of the reorganization proceedings. Thereafter, such right to take
possession may be exercised during such proceedings unless, within the 60-day
period or any longer period consented to by the relevant parties (the "Section
1110 Period"), the debtor agrees to perform its future obligations and cures all
existing and future defaults on a timely basis. Defaults resulting solely from
the financial condition, bankruptcy, insolvency or reorganization of the debtor
need not be cured.
"Equipment" is defined in Section 1110, 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 security interest granted by, leased
to, or conditionally sold to a debtor that, at the time such transaction is
entered into, holds an air carrier operating certificate issued pursuant to
chapter 447 of Title 49 of the U.S. Code for aircraft capable of carrying ten or
more individuals or 6,000 pounds or more of cargo.
On the Issuance Date, Hughes Hubbard & Reed LLP, outside counsel to
Continental, provided its opinion to the Trustee and the Policy Provider that
the Security Agent will be entitled to the benefits of Section 1110 with respect
to the Pledged Spare Parts, assuming that, at the time of the issuance,
Continental held an air carrier operating certificate issued pursuant to chapter
447 of Title 49 of the U.S. Code for aircraft capable of carrying ten or more
individuals or 6,000 pounds or more of cargo.
If Continental is the debtor in a Chapter 11 bankruptcy proceeding and:
o the Section 1110 Period shall expire without Continental having
entered into an agreement to perform its obligations under the
Indenture and the other Operative Documents in accordance with Section
1110(a),
o Continental shall have entered into such an agreement in accordance
with Section 1110(a) but thereafter Continental defaults such that the
Security Agent is entitled to take possession of the Pledged Spare
Parts pursuant to the Security Agreement or
o Continental shall not reinstate its obligations under the Operative
Documents in its confirmed plan of reorganization,
then the Policy Provider, if then the Controlling Party, will not permit (and
will not permit the Trustee or any Collateral Agent to permit) the sale or lease
of any Collateral to Continental or any of its affiliates for any amount less
than the then current fair market value for such transaction. The Policy
Provider, if then the Controlling Party, will give the holders of the
Subordinated Notes (the "Subordinated Noteholders") at least 30 days' prior
written notice of its intention to sell or lease any of the Collateral. These
restrictions are not applicable to any Controlling Party other than the Policy
Provider.
CONTROLLING PARTY
Whether before or after the occurrence of an Event of Default, the Trustee
and the Security Agent will be directed by the Controlling Party in taking
action under the Indenture and other agreements relating to the Notes, including
in amending such agreements and granting waivers thereunder. However, certain
limited provisions with respect to the Collateral as they relate to the
Subordinated Notes cannot be amended or waived without the consent of the
holders of a majority of the outstanding principal amount of the Subordinated
Notes and certain other limited provisions cannot be amended or waived without
the consent of each Noteholder affected thereby. Except for those limited
provisions which are described in "--Modifications and Waiver of the Indenture
and Certain Other Agreements", the provisions of the Indenture, the Security
Agreement and the other Operative Documents may be amended or waived by the
Controlling Party (or, in the case of the Collateral Maintenance Agreement, the
Policy Provider) without the consent of the Noteholders. If an Event of Default
has occurred and is continuing, the Controlling Party will direct the Trustee
and the Security Agent in exercising remedies under the Indenture and under the
Security Agreement, subject to the limitations described below. (Section 3.8(a))
The "Controlling Party" will be:
o The Policy Provider (except as provided below).
o If a Policy Provider Default is continuing, the holders of more than
50% in aggregate unpaid principal amount of the Senior Notes then
outstanding or, if the Senior Notes have been paid in full, of the
Subordinated Notes then outstanding.
o If the Senior Notes, the Policy Expenses and the Policy Provider
Obligations have been paid in full, the holders of more than 50% in
aggregate unpaid principal amount of the Subordinated Notes then
outstanding.
o Under the circumstances described in the next paragraph, the Liquidity
Provider.
At any time after the Liquidity Provider Reimbursement Date, if a Policy
Provider Default attributable to a failure to make a drawing to pay the
Liquidity Provider, as described under "Description of the Policy and the Policy
Provider Agreement--The Policy--Liquidity Provider Drawing", is continuing, the
Liquidity Provider (so long as the Liquidity Provider has not defaulted in its
obligation to make any advance under the Liquidity Facility) shall have the
right to become the Controlling Party, provided that if the Policy Provider
subsequently pays to the Liquidity Provider all outstanding drawings, together
with accrued interest thereon owing under the Liquidity Facility, and no other
Policy Provider Default has occurred and is continuing, then the Policy Provider
shall be the Controlling Party so long as no Policy Provider Default occurs
after the date of such payment. (Section 3.8(c))
The Subordinated Noteholders will have the right to direct the Policy
Provider in acting as the Controlling Party during the continuance of an Event
of Default if the Subordinated Noteholders shall have deposited with the Policy
Provider cash, U.S. government securities or other investments acceptable to the
Policy Provider as collateral for amounts owed to and to become due and payable
to the Policy Provider under the Operative Documents and Support Documents. The
payments of principal and interest when due and without reinvestment on any such
deposited U.S. government securities or other investments plus any deposited
money without investment must, in the opinion of a nationally recognized firm of
independent certified public accountants acceptable to the Policy Provider,
provide cash sufficient to pay: (i) all accrued and unpaid Policy Expenses and
Policy Provider Obligations, (ii) the then outstanding principal amount of the
Senior Notes, (iii) interest accruing and payable on the Senior Notes to the
Final Legal Maturity Date (or, alternatively, the interest calculated at the
rate of interest of 12% per annum for a period of 24 months (or, if shorter, the
period from the date of such deposit to the Final Legal Maturity Date)) and (iv)
the Policy premium payable for a period of 24 months (or, if shorter, the period
from the date of such deposit to the Final Legal Maturity Date). In order to
participate in such deposit, a Subordinated Noteholder must contribute its
proportionate share of the deposit, which will be the proportion that the
principal amount of its Subordinated Notes bears to the principal amount of the
Subordinated Notes of all Subordinated Noteholders participating in such
deposit. A Subordinated Noteholder will not be required to contribute to a
deposit. The Subordinated Noteholders contributing their proportionate shares of
such deposit will be entitled to direct the Policy Provider in taking action as
the Controlling Party during the continuance of such Event of Default by vote of
a majority of the principal amount of the Subordinated Notes held by such
contributing Subordinated Noteholders. If the Policy Provider draws on such
deposit, after the Policy Provider shall have been paid in full all amounts due
to it under the Operative Documents and Support Documents, amounts otherwise
distributable to the Policy Provider under the Indenture will be distributed to
such contributing Subordinated Noteholders in the same proportion as their
respective contributions to the deposit until their proportionate share of the
deposit not returned by the Policy Provider shall have been repaid in full. If
Continental or any of its affiliates is a Subordinated Noteholder, it will not
be entitled to participate in making the foregoing deposit or directing the
Controlling Party. (Section 3.11)
"Policy Provider Default" means the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of written notice of such failure to the
Policy Provider or (b) the Policy Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is
final and nonappealable, or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Policy Provider (or taking of possession of
all or any material portion of the Policy Provider's property).
PRIORITY OF DISTRIBUTIONS
On each Distribution Date, all payments received by the Trustee in respect
of the Notes will be promptly distributed in the following order:
o If an Event of Default shall have occurred and be continuing on such
Distribution Date, to the Trustee, the Policy Provider, the Liquidity
Provider and any Senior Noteholder to the extent required to pay
certain out-of-pocket costs and expenses actually incurred by the
Trustee or the Policy Provider or to reimburse the Policy Provider,
the Liquidity Provider or any Senior Noteholder in respect of payments
made to the Trustee in connection with the protection or realization
of the value of the Collateral.
o To the Liquidity Provider to the extent required to pay the Liquidity
Expenses and to the Policy Provider to pay the Policy Expenses.
o To the Liquidity Provider to the extent required to pay interest
accrued on the Liquidity Obligations (as determined after giving
effect to certain payments by the Policy Provider to the Liquidity
Provider), to the Policy Provider to the extent required to pay
interest accrued on certain Policy Provider Obligations and, if the
Policy Provider has paid to the Liquidity Provider all outstanding
drawings and interest thereon owing to the Liquidity Provider, to the
Policy Provider to the extent required to reimburse the Policy
Provider for the amount of such payment made to the Liquidity Provider
attributable to interest accrued on such drawings.
o To (i) the Liquidity Provider to the extent required to pay the
outstanding amount of all Liquidity Obligations (as determined after
giving effect to certain payments by the Policy Provider to the
Liquidity Provider), (ii) if applicable, unless (x) on such
Distribution Date the Senior Notes are Non-Performing and a Liquidity
Event of Default shall have occurred and be continuing or (y) the
Final Drawing shall have occurred, to replenish the Cash Collateral
Account up to the Required Amount (less the amount of any repayments
of Interest Drawings under the Liquidity Facility while sub-clause (x)
of this clause is applicable) and (iii) if the Policy Provider has
paid to the Liquidity Provider all outstanding drawings and interest
thereon owing to the Liquidity Provider, to the Policy Provider to the
extent required to reimburse the Policy Provider for the amount of
such payment made to the Liquidity Provider in respect of principal of
drawings under the Liquidity Facility.
o If an Event of Default shall have occurred and be continuing on such
Distribution Date and at all times thereafter, to the Trustee or any
Senior Noteholder, to the extent required to pay certain fees, taxes,
charges and other amounts payable.
o To the Senior Noteholders to the extent required to pay in full
amounts due on such Distribution Date.
o To the Policy Provider to the extent required to pay Policy Provider
Obligations (other than amounts payable pursuant to the first four
clauses above).
o To the Subordinated Noteholders to the extent required to pay in full
amounts due on such Distribution Date.
o To the Trustee for the payment of certain fees and expenses (other
than amounts payable pursuant to the first and fifth clauses above).
o To the Company (unless on such Distribution Date (i) an Event of
Default has occurred and is continuing or (ii) any amount due to the
Liquidity Provider or the Policy Provider from the Company has not
been paid). (Section 3.2)
"Liquidity Obligations" means the obligations to reimburse or to pay the
Liquidity Provider all principal, interest, fees and other amounts owing to it
under the Liquidity Facility or certain other agreements.
"Liquidity Expenses" means the Liquidity Obligations other than any
interest accrued thereon or the principal amount of any drawing under the
Liquidity Facility.
"Non-Performing" means, with respect to any Senior Note, a Payment Default
existing thereunder (without giving effect to any acceleration); provided, that,
in the event of a bankruptcy proceeding under the U.S. Bankruptcy Code in which
the Company is a debtor, any Payment Default existing at the commencement of
such bankruptcy proceeding or during the 60-day period under Section 1110(a) (2)
(A) of the U.S. Bankruptcy Code (or such longer period as may apply under
Section 1110(b) of the U.S. Bankruptcy Code or as may apply for the cure of such
Payment Default under Section 1110(a)(2)(B) of the U.S. Bankruptcy Code) shall
not be taken into consideration until the expiration of the applicable period.
"Policy Provider Obligations" means all reimbursement and other amounts,
including fees and indemnities (to the extent not included in Policy Expenses)
due to the Policy Provider under the Policy Provider Agreement and, if the
Liquidity Provider has failed to honor any Interest Drawing, interest on any
Policy Drawing made to cover the shortfall attributable to such failure by the
Liquidity Provider in an amount equal to the amount of interest that would have
accrued on such Interest Drawing if such Interest Drawing had been made at the
interest rate applicable to such Interest Drawing until such Policy Drawing has
been repaid in full. Except as provided in the definition of Policy Provider
Obligations, no interest will accrue on any Policy Drawing.
"Policy Expenses" means all amounts (including amounts in respect of
premiums, fees, expenses or indemnities) owing to the Policy Provider under the
Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest
accrued on any Policy Provider Obligation and (iii) reimbursement of and
interest on the Liquidity Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider, provided that if, at the time
of determination, a Policy Provider Default exists, Policy Expenses will not
include any indemnity payments owed to the Policy Provider.
"Policy Drawing" means any payment of a claim under the Policy.
Interest Drawings under the Liquidity Facility, withdrawals from the Cash
Collateral Account and drawings under the Policy will be distributed to the
Trustee for distribution to the Senior Noteholders, notwithstanding the priority
of distributions set forth in the Indenture and otherwise described herein. All
amounts on deposit in the Cash Collateral Account that are in excess of the
Required Amount will be paid to the Liquidity Provider.
If any 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 Wilmington, Delaware, or, which is not a day for trading by
and between banks in the London interbank Eurodollar market (any other day being
a "Business Day"), distributions scheduled to be made on such Distribution Date
will be made on the next succeeding Business Day, and interest shall be added
for such additional period.
MODIFICATIONS AND WAIVER OF THE INDENTURE AND CERTAIN OTHER AGREEMENTS
The Company, the Trustee and the Collateral Agent may amend or
supplement the Indenture, the Notes, the other Operative Documents and, upon
request of Continental, the Trustee shall amend or supplement the Support
Documents, in each case without the consent of the Noteholders:
o To provide for uncertificated Notes of any series in addition to or in
place of certificated Notes of such series.
o To provide for the assumption of the Company's obligations under the
Operative Documents and the Notes in the case of a merger,
consolidation or conveyance, transfer or lease of all or substantially
all of the assets of the Company.
o To comply with any requirements of the Commission in connection with
the qualification of the Indenture under the TIA. o To provide for a
replacement Liquidity Provider.
o To provide for the effectiveness of any additional Collateral
Agreement.
o To comply with the requirements of DTC, Euroclear Bank or Clearstream
Banking or the Trustee with respect to the provisions of the Indenture
or the Notes of any series relating to transfers and exchanges of the
Notes of any series or beneficial interests therein.
o To provide for any successor Trustee or Collateral Agent with respect
to the Notes of one or more series and to add to or change any of the
provisions of the Indenture as shall be necessary or advisable to
provide for or facilitate the administration of the trusts under the
Indenture by more than one Trustee.
o To cure any ambiguity, defect or inconsistency.
o To make any other change not inconsistent with the Indenture provided
that such action does not materially adversely affect the interests of
any Noteholder. (Section 10.1)
The Company, the Trustee and the Collateral Agent may otherwise amend or
supplement the Indenture, the Notes and the other Operative Documents (other
than the Collateral Maintenance Agreement), and, upon consent of the Company,
the Trustee shall amend or supplement the Support Documents, in each case only
with the written consent of the Controlling Party, subject to certain limited
exceptions. Except for those limited provisions described in this section under
the caption "--Modifications and Waiver of the Indenture and Certain Other
Agreements", the provisions of the Indenture, the Security Agreement and the
Operative Documents may be amended or waived by the Controlling Party (or, in
the case of the Collateral Maintenance Agreement, the Policy Provider) without
the consent of the Noteholders. Whether before or after the occurrence of an
Event of Default, the Controlling Party may authorize the Trustee to, and the
Trustee upon such authorization shall, waive compliance by the Company with any
provision of the Indenture, the Notes or the other Operative Documents (other
than the Collateral Maintenance Agreement). However, no such amendment,
supplement or waiver may, without the consent of the Liquidity Provider, the
Policy Provider and each Senior Noteholder affected:
o Reduce the amount of Senior Notes whose holders must consent to an
amendment, supplement or waiver.
o Reduce the rate or extend the time for payment of interest on any
Senior Note.
o Reduce the amount or extend the time for payment of principal of, or
Premium, if any, or Break Amount, if any, with respect to (in each
case, whether on redemption or otherwise), any Senior Note.
o Change the place of payment where, or the coin or currency in which,
any Senior Note (or the redemption price thereof), interest thereon,
or Premium, if any, or Break Amount, if any, with respect thereto, is
payable.
o Change the priority of distributions and application of payments
specified in the Indenture.
o Waive a default in the payment of the principal of, interest on, or
Premium, if any, or Break Amount, if any, with respect to, any Senior
Note.
o Make any changes to provisions in the Indenture that involve the
waiver of defaults, the right of Senior Noteholders to receive payment
of principal of, interest on, and Premium, if any, and Break Amount,
if any, with respect to, any Senior Note on or after the respective
due dates.
o Impair the right of any Senior Noteholder to institute suit for the
enforcement of any amount payable on any Senior Note when due.
(Section 10.2)
In addition, no such amendment, supplement or waiver may, without the
consent of each Subordinated Noteholder affected:
o Reduce the amount of Subordinated Notes whose holders must consent to
an amendment, supplement or waiver.
o Reduce the rate or extend the time for payment of interest on any
Subordinated Note.
o Reduce the amount or extend the time for payment of principal of, or
Premium, if any, or Break Amount, if any, with respect to (in each
case, whether on redemption or otherwise), any Subordinated Note.
o Change the definitions of "Maximum Subordinated Collateral Ratio" or
"Subordinated Collateral Ratio".
o Increase the principal amount of, or the rate of interest on, the
Senior Notes.
o Change the place of payment where, or the coin or currency in which,
any Senior Note or Subordinated Note (or the redemption price
thereof), interest thereon, or Premium, if any, or Break Amount, if
any, with respect thereto, is payable.
o Change the priority of distributions and application of payments
specified in the Indenture.
o Waive a default in the payment of the principal of, interest on, or
Premium, if any, or Break Amount, if any, with respect to, any
Subordinated Note.
o Make any changes to provisions in the Indenture that involve the
waiver of defaults, the right of Noteholders to receive payment of
principal of, interest on, and Premium, if any, and Break Amount, if
any, with respect to, any Subordinated Note on or after the respective
due dates.
o Impair the right of any Subordinated Noteholder to institute suit for
the enforcement of any amount payable on any Subordinated Note when
due. (Section 10.2)
The provisions of the Indenture for determining who will be the Controlling
Party, the definition of "Event of Default" and the covenant described in the
last paragraph under "--Remedies" cannot be amended without the consent of the
holders of a majority in principal amount of the Subordinated Notes. In
addition, an amendment of any defined term used in the definitions of "Maximum
Subordinated Collateral Ratio" or "Subordinated Collateral Ratio" or in any such
defined term will not be effective for purposes of such definitions unless
consented to by the holders of a majority in principal amount of the
Subordinated Notes. The requirement that the Subordinated Noteholders consent to
an amendment to the definition of "Event of Default" does not affect the right
of the Controlling Party to waive an Event of Default. See "--Remedies".
The Company and the Policy Provider can amend, modify or waive compliance
with any provision of the Collateral Maintenance Agreement (including the
provisions described under "--Appraisals and Maintenance of Ratios", "--Fleet
Reduction", "--Liens", "--Maintenance", "--Insurance" and "--Use and
Possession") without the consent of the Trustee, the Collateral Agent or any
Noteholders, except for certain limited provisions. However, the Company and the
Trustee, with the consent of the holders of a majority in principal amount of
the Subordinated Notes and without the consent of the Policy Provider, can
amend, modify or waive compliance with the following requirements of the
Collateral Maintenance Agreement:
o that appraisals of the Collateral be obtained for purposes of
determining the maximum Subordinated Collateral Ratio by the fifth
Business Day of February and the fifth Business Day of August in each
year, commencing in August 2003 (see "--Collateral --Appraisals and
Maintenance of Ratios");
o that the maximum Subordinated Collateral Ratio be complied with in
connection with such appraisals (see "--Collateral --Appraisals and
Maintenance of Ratios");
o that the outstanding principal amount of the Subordinated Notes be
reduced if there is a fleet reduction (see "--Collateral --Fleet
Reduction"); or
o that the maximum Subordinated Collateral Ratio be complied with upon
effecting a transaction permitted as a result of the waiver by the
Policy Provider of certain restrictions on selling, leasing and moving
Pledged Spare Parts (see "--Collateral --Use and Possession").
However, the methods for determining the Fair Market Value of the Collateral,
the qualifications of the appraiser, the limitations on Cash Collateral and
other provisions of the Collateral Maintenance Agreement applicable to both the
Senior Notes and the Subordinated Notes may be amended or modified by agreement
of the Company and the Policy Provider without the consent of Subordinated
Noteholders.
In determining whether the holders of the required principal amount of
Senior Notes or Subordinated Notes have consented to an amendment, modification
or waiver, any such Senior Notes or Subordinated Notes owned by Continental or
any of its affiliates will be disregarded and deemed not outstanding. (Section
2.13)
MERGER, CONSOLIDATION AND TRANSFER OF ASSETS
Continental is prohibited from consolidating with, merging into, or
conveying, transferring or leasing substantially all of its assets to any Person
unless:
o The resulting, surviving, transferee or lessee Person shall be
organized under the laws of the United States, any state thereof or
the District of Columbia and shall be a U.S. air carrier.
o The resulting, surviving, transferee or lessee Person shall expressly
assume all of the obligations of Continental contained in the
Indenture, the Notes and any other Operative Documents.
o Continental shall have delivered a certificate and an opinion of
counsel stating that (i) such transaction, in effect, complies with
such conditions and (ii) the Indenture, the Notes and the other
Operative Documents constitute the valid and legally binding
obligations of the resulting, surviving, transferee or lessee Person.
o Immediately after giving effect to such transaction, no Event of
Default shall have occurred and be continuing. (Section 5.4)
The Indenture, the Notes and the other Operative Documents do not contain
any covenants or provisions which may afford the Trustee or Noteholders
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.
INDEMNIFICATION
Continental is required to indemnify the Liquidity Provider, the Policy
Provider, the Trustee and the Collateral Agent, but not the Noteholders, for
certain losses, claims and other matters. (Section 6.1)
GOVERNING LAW
The Indenture and the Notes are governed by the laws of the State of New
York. (Section 12.8)
THE TRUSTEE
The Trustee is Wilmington Trust Company. Except as otherwise provided in
the Indenture, the Trustee, in its individual capacity, will not be answerable
or accountable under the Indenture or under the Notes under any circumstances
except, among other things, for its own willful misconduct or gross negligence.
Continental and its affiliates may from time to time enter into banking and
trustee relationships with the Trustee and its affiliates. The Trustee's address
is Wilmington Trust Company, Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration.
BOOK ENTRY; DELIVERY AND FORM
GENERAL
The New Senior Notes will be represented by one or more global Notes, in
definitive, fully registered form without interest coupons (the "Global Notes").
Each Global Note will be deposited with the Trustee, as custodian for DTC, and
registered in the name of Cede & Co. ("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
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for DTC Participants and facilitate the clearance and settlement of
securities transactions between DTC Participants through electronic book-entry
changes in accounts of DTC Participants, thereby eliminating the need for
physical movement of certificates. DTC Participants include securities brokers
and dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of DTC Participants and by the New York
Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. 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 DTC Participant,
either directly or indirectly ("Indirect Participants").
Ownership of beneficial interests in Global Notes is limited to persons who
have accounts with DTC Participants or persons who hold interests through DTC
Participants. Ownership of beneficial interests in the Global Notes 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 DTC Participants) and the
records of DTC Participants (with respect to interests of persons other than DTC
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 Notes.
So long as DTC or its nominee is the registered owner or holder of the
Global Notes, DTC or such nominee, as the case may be, will be considered the
sole record owner or holder of the Senior Notes represented by such Global Notes
for all purposes under the Indenture. No beneficial owners of an interest in the
Global Notes will be able to transfer that interest except in accordance with
DTC's applicable procedures, in addition to those provided for under the
Indenture.
Beneficial interests in the Global Notes will be exchangeable or
transferable, as the case may be, for Senior Notes in definitive, fully
registered form ("Definitive Notes") only if (i) DTC notifies the Trustee that
DTC is unwilling or unable to continue as depositary for such Senior Notes and
successor depositary is not appointed by the Trustee within 90 days of such
notice or (ii) after the occurrence and during the continuance of an Event of
Default, owners of beneficial interests in the Global Notes (the "Note Owners")
with a principal amount aggregating not less than a majority of the outstanding
principal amount of the Global Notes advise the Trustee, Continental and DTC
through Direct Participants in writing that the continuation of a book-entry
system through DTC (or a successor thereto) is no longer in their best
interests. (Section 2.5(b)) Upon the occurrence of any event described in
clauses (i) or (ii) of the immediately preceding sentence, the Trustee will be
required to notify all Direct Participants having a beneficial interest in the
Global Notes of the availability of Definitive Notes. Upon surrender by DTC of
the Global Notes and receipt of instructions for re-registration, the Trustee
will reissue the Senior Notes as Definitive Notes to Note Owners. (Section
2.5(d))
Payments of the principal of, interest on, Premium, if any, and Break
Amount, if any, with respect to, the Global Notes 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 Notes or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
Continental expects that DTC or its nominee, upon receipt of any payment of
principal of, interest on, Premium, if any, and Break Amount, if any, with
respect to, a Global Note, will credit the accounts of DTC Participants with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Note, as shown on the records of DTC or its
nominee. Continental also expects that payments by DTC Participants to owners of
beneficial interests in such Global Note held through such DTC 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
DTC Participants.
Distributions of principal of, interest on, and Premium, if any, and Break
Amount, if any, with respect to, Definitive Notes will be made by the Trustee
directly in accordance with the procedures set forth in the Indenture, to
holders in whose names the Definitive Notes were registered at the close of
business on the applicable record date. Such distributions will be made by check
mailed to the address of such holder as it appears on the register maintained by
the Trustee. The final payment on any Senior Note, however, will be made only
upon presentation and surrender of such Senior Note at the office or agency
specified in the notice of final distribution to Senior Noteholders.
Neither Continental nor the Trustee has any responsibility for the
performance by DTC, DTC Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
SAME-DAY SETTLEMENT AND PAYMENT
As long as the Senior Notes are registered in the name of DTC or its
nominee, Continental will make all payments to the Trustee under the Indenture
in immediately available funds. The Trustee will pass through to DTC in
immediately available funds all payments received from Continental, including
the final distribution of principal with respect to the Senior Notes.
Any Senior Notes registered in the name of DTC or its nominee will trade in
DTC's Same-Day Funds Settlement System until maturity. DTC will require
secondary market trading activity in the Senior Notes to settle in immediately
available funds. Continental cannot give any assurance as to the effect, if any,
of settlement in same-day funds on trading activity in the Senior Notes.
DESCRIPTION OF THE SUBORDINATED NOTES
The following summary describes terms of the Subordinated Notes that are
material to a holder of Senior Notes. The summary does not purport to be
complete. We urge you to read the Subordinated Notes and the Operative Documents
for additional detail and further information because they, and not this
description, define your rights. Each of the Operative Documents has been filed
as an exhibit to the Registration Statement and is available as set forth under
"Where You Can Find More Information". The references to Sections in parentheses
in the following summary are to the relevant Sections of the Indenture.
GENERAL
On May 9, 2003 (the "Subordinated Notes Issuance Date"), Continental issued
the Subordinated Notes under the Indenture. The Subordinated Notes are secured
by a lien on the Collateral. The Subordinated Notes rank junior to the Senior
Notes (including amounts owed to the Policy Provider and the Liquidity Provider)
with respect to payments received from Continental, proceeds from liquidation of
the Collateral and otherwise.
PAYMENTS OF PRINCIPAL AND INTEREST
The Subordinated Notes are limited to $100,000,000 of principal in the
aggregate. Subject to the provisions of the Indenture, the entire principal
amount of the Subordinated Notes is scheduled to be paid to the Subordinated
Noteholders on the Final Scheduled Payment Date.
Interest accrues on the unpaid principal amount of each Subordinated Note
at LIBOR plus 7.50% (plus, if applicable, 0.50% during the periods specified in
the registration rights agreement applicable to the Subordinated Notes). Accrued
interest on the Subordinated Notes is payable on March 6, June 6, September 6
and December 6 of each year or, if not a Business Day, the next succeeding
Business Day, commencing on June 6, 2003. Such accrued interest will be paid to
holders of record on the 15th day preceding the applicable Scheduled Interest
Payment Date. Interest on the Subordinated Notes accrues from the most recent
date to which interest has been paid or, if no interest has been paid, from the
Subordinated Notes Issuance Date. Interest on the Subordinated Notes is
calculated on the basis of the actual number of days elapsed over a 360-day year
and shall accrue with respect to the first but not the last day of each Interest
Period. If any date scheduled for a payment of principal, interest, Subordinated
Notes Premium, if any, or Break Amount, if any, is not a Business Day, such
payment will be made on the next succeeding Business Day, and interest shall be
added for such additional period. (Section 2A.7)
The Subordinated Notes do not have the benefit of a Liquidity Facility or a
Policy.
REDEMPTION
The Subordinated Notes may not be redeemed by Continental prior to May 9,
2004. The Subordinated Notes may be redeemed at any time on or after May 9,
2004, in whole or (so long as no Payment Default has occurred and is continuing)
in part (in any integral multiple of $1,000) by Continental at its sole option
at a redemption price equal to the sum of 100% of the principal amount of,
accrued and unpaid interest on, and Break Amount, if any, with respect to, the
redeemed Subordinated Notes to and including the date of redemption. In
addition, if a Subordinated Note is redeemed before the fourth anniversary of
the Subordinated Notes Issuance Date (except in connection with a redemption to
satisfy the maximum Collateral Ratio or minimum Rotable Ratio requirements
discussed under "Description of the Senior Notes--Collateral--Appraisals and
Maintenance of Ratios"), such redemption price will include a premium (the
"Subordinated Notes Premium") equal to the following percentage of the principal
amount of such Subordinated Note: (i) if redeemed before the second anniversary
of the Subordinated Notes Issuance Date, 3.0%; (ii) if redeemed on or after such
second anniversary and before the third anniversary of the Subordinated Notes
Issuance Date, 2.0%; and (iii) if redeemed on or after such third anniversary
and before the fourth anniversary of the Subordinated Notes Issuance Date, 1.0%.
Notwithstanding the foregoing, so long as the Policy Provider is the Controlling
Party, no such redemption may be made if an Event of Default has occurred and is
continuing or if the Senior Collateral Ratio or Senior Rotable Ratio is not then
satisfied (after giving effect to any concurrent redemption of the Senior
Notes), unless the Policy Provider shall otherwise agree. (Section 4.1)
If Continental gives notice of redemption but fails to pay when due all
amounts necessary to effect such redemption, such redemption shall be deemed
revoked and no amount shall be due as a result of notice of redemption having
been given.
COLLATERAL
The Subordinated Notes are secured by a lien on the Collateral. See
"Description of the Senior Notes--Collateral".
DESCRIPTION OF THE LIQUIDITY FACILITY
The following summary describes the material terms of the Liquidity
Facility and certain provisions of the Indenture relating to the Liquidity
Facility. The summary does not purport to be complete. We urge you to read the
Liquidity Facility and the Indenture for additional detail and further
information because they, and not this description, define your rights. Each of
the Liquidity Facility and the Indenture has been filed as an exhibit to the
Registration Statement and is available as set forth under "Where You Can Find
More Information".
GENERAL
Morgan Stanley Capital Services Inc. (the "Liquidity Provider") has entered
into a revolving credit agreement (the "Liquidity Facility") with the Trustee
with respect to the Senior Notes. The Subordinated Notes do not have the benefit
of a Liquidity Facility.
On any Distribution Date, if, after giving effect to the subordination
provisions of the Indenture, the Trustee does not have sufficient funds for the
payment of interest on the Senior Notes, the Liquidity Provider is required to
make an advance (an "Interest Drawing") in the amount needed to fund the
interest shortfall (calculated assuming that Continental will not cure the
nonpayment of interest) up to the Maximum Available Commitment.
The maximum amount of Interest Drawings available under the Liquidity
Facility will be sufficient to pay interest on the Senior Notes on up to eight
consecutive quarterly Interest Payment Dates at the Stated Interest Rate
(calculated assuming that Continental will not cure any nonpayment of interest).
If interest payment defaults occur which exceed the amount covered by and
available under the Liquidity Facility, the Senior Noteholders will bear their
allocable share of the deficiencies to the extent that there are no other
sources of funds. The initial Liquidity Provider may be replaced by one or more
other entities under certain circumstances.
DRAWINGS
The aggregate amount available under the Liquidity Facility at March 6,
2003, the first Interest Payment Date after the Issuance Date, was
$48,733,333.33.
Except as otherwise provided below, the Liquidity Facility enables the
Trustee to make Interest Drawings thereunder promptly on or after any
Distribution Date if, after giving effect to the subordination provisions of the
Indenture, there are insufficient funds available to the Trustee to pay interest
then due and payable on the Senior Notes at the Stated Interest Rate (calculated
assuming that Continental will not cure any nonpayment of interest); provided,
however, that the maximum amount available to be drawn under the Liquidity
Facility on any Distribution Date to fund any shortfall of interest on the
Senior Notes will not exceed the then Maximum Available Commitment.
The "Maximum Available Commitment" at any time is an amount equal to the
then Required Amount of the Liquidity Facility less the aggregate amount of each
Interest Drawing outstanding thereunder at such time, provided that, following a
Non-Extension Drawing, a Downgrade Drawing or a Final Drawing, the Maximum
Available Commitment shall be zero.
The "Required Amount" will be equal, on any day, to the sum of the
aggregate amount of interest, calculated at the Capped Interest Rate, that would
be payable on the Senior Notes on each of the eight consecutive quarterly
Interest Payment Dates immediately following such day or, if such day is an
Interest Payment Date, on such day and the succeeding seven quarterly Interest
Payment Dates, in each case calculated on the outstanding aggregate principal
amount of the Senior Notes on such day and without regard to expected future
payments of principal.
"Capped Interest Rate" is 12% per annum.
The Liquidity Facility does not provide for drawings thereunder to pay for
principal of, or Premium, if any, or Break Amount, if any, with respect to, the
Senior Notes, any interest thereon in excess of an amount equal to eight full
quarterly installments of interest calculated at the Capped Interest Rate
thereon or any amount with respect to the Subordinated Notes. (Liquidity
Facility, Section 2.02; Indenture, Section 3.5)
Each payment by the Liquidity Provider reduces by the same amount the
Maximum Available Commitment, subject to reinstatement as hereinafter described.
With respect to any Interest Drawings, upon reimbursement of the Liquidity
Provider in full or in part for the amount of such Interest Drawings plus
interest thereon, the Maximum Available Commitment will be reinstated to an
amount not to exceed the then Required Amount. However, the Liquidity Facility
will not be so reinstated at any time if (i) the Senior Notes are Non-Performing
and a Liquidity Event of Default shall have occurred and be continuing or (ii)
the Liquidity Provider Reimbursement Date has occurred. Any amounts paid by the
Policy Provider to the Liquidity Provider as described in "Description of the
Senior Notes--Controlling Party" or "Description of the Policy and the Policy
Provider Agreement--Liquidity Provider Drawing" will not reinstate the Liquidity
Facility but any reimbursement of such amounts received by the Policy Provider
under the distribution provisions of the Indenture will reinstate the Liquidity
Facility to the extent of such reimbursement unless (i) the Senior Notes are
Non-Performing and a Liquidity Event of Default shall have occurred and be
continuing or (ii) the Liquidity Provider Reimbursement Date has occurred. With
respect to any other drawings under the Liquidity Facility, amounts available to
be drawn thereunder are not subject to reinstatement. The Required Amount will
be automatically reduced from time to time to an amount equal to the next eight
successive quarterly interest payments due on the Senior Notes (without regard
to expected future payments of principal) at the Capped Interest Rate.
(Liquidity Facility, Section 2.04(a); Indenture, Section 3.5(j)) Upon the
occurrence of the Liquidity Provider Reimbursement Date, no further drawings
under the Liquidity Facility will be permitted.
If at any time the short-term unsecured debt rating of the Liquidity
Provider Guarantor then issued by either Moody's or Standard & Poor's is lower
than the Threshold Rating or the Liquidity Provider Guarantor's guarantee ceases
to be in full force and effect or becomes invalid or unenforceable or the
Liquidity Provider Guarantor denies its liability thereunder, and the Liquidity
Facility is not replaced with a Replacement Facility within ten days after
notice of such downgrading or such event and as otherwise provided in the
Indenture, the Liquidity Facility will be drawn in full up to the then Maximum
Available Commitment (the "Downgrade Drawing"). The proceeds of a Downgrade
Drawing will be deposited into a cash collateral account (the "Cash Collateral
Account") and used for the same purposes and under the same circumstances and
subject to the same conditions as cash payments of Interest Drawings under the
Liquidity Facility would be used. (Liquidity Facility, Section 2.02(c);
Indenture, Section 3.5(c)) If a qualified Replacement Facility is subsequently
provided, the balance of the Cash Collateral Account will be repaid to the
replaced Liquidity Provider.
A "Replacement 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 with respect to
the Senior Notes to confirm in writing its ratings then in effect for the Senior
Notes (before downgrading of such ratings, if any, as a result of the
downgrading of the Liquidity Provider but without regard to the Policy), which
shall have been consented to by the Policy Provider, which consent shall not be
unreasonably withheld or delayed, in a face amount (or in an aggregate face
amount) equal to the amount of interest payable on the Senior Notes (at the
Capped Interest Rate and without regard to expected future payments of
principal) on the eight Interest Payment Dates following the date of replacement
of the Liquidity Facility and issued by a person (or persons) having unsecured
short-term debt rating or issuer credit rating, as the case may be, issued by
each of Moody's and Standard & Poor's which are equal to or higher than the
Threshold Rating. (Indenture, Appendix I) The provider of any Replacement
Facility will have the same rights (including, without limitation, priority
distribution rights and rights as "Controlling Party") under the Indenture as
the initial Liquidity Provider.
"Threshold Rating" means the short-term unsecured debt rating of P-1 by
Moody's Investors Service, Inc. ("Moody's") and A-1 by Standard & Poor's Ratings
Services, a division of The McGraw Hill Companies, Inc. ("Standard & Poor's").
The Liquidity Facility provides that the Liquidity Provider's
obligations thereunder will expire on the earliest of:
o 364 days after the Issuance Date (counting from, and including, the
Issuance Date).
o The date on which the Trustee delivers to the Liquidity Provider a
certification that all of the Senior Notes have been paid in full.
o The date on which the Trustee delivers to the Liquidity Provider a
certification that a Replacement Facility has been substituted for
such Liquidity Facility.
o The fifth Business Day following receipt by the Trustee of a
Termination Notice from the Liquidity Provider (see "--Liquidity
Events of Default and Termination").
o The date on which no amount is or may (by reason of reinstatement)
become available for drawing under the Liquidity Facility.
o The occurrence of the Liquidity Provider Reimbursement Date.
The Liquidity Facility provides that it will be automatically extended for
additional 364-day periods unless the Liquidity Provider notifies the Trustee
that it does not agree to such extension.
The Indenture provides for the replacement of the Liquidity Facility if
such Liquidity Facility is scheduled to expire earlier than 15 days after the
Final Legal Maturity Date and the Liquidity Facility is not extended at least 25
days prior to its then scheduled expiration date. If the Liquidity Facility is
not so extended or replaced by the 25th day prior to its then scheduled
expiration date, the Liquidity Facility will be drawn in full up to the then
Maximum Available Commitment (the "Non-Extension Drawing"). The proceeds of the
Non-Extension Drawing will be deposited in the Cash Collateral Account 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
the Liquidity Facility would be used. (Liquidity Facility, Section 2.02(b);
Indenture, Section 3.5(d))
Subject to certain limitations, Continental may, at its option, arrange for
a Replacement Facility at any time to replace the Liquidity Facility (including,
without limitation, any Replacement Facility described in the following
sentence). In addition, if the Liquidity Provider shall determine not to extend
the Liquidity Facility, then the Liquidity Provider may, at its option, arrange
for a Replacement Facility to replace the Liquidity Facility (i) during the
period no earlier than 40 days and no later than 25 days prior to the then
scheduled expiration date of the Liquidity Facility and (ii) at any time after
such scheduled expiration date. The Liquidity Provider may also arrange for a
Replacement Facility to replace the Liquidity Facility at any time after a
Downgrade Drawing thereunder. If any Replacement Facility is provided at any
time after a Downgrade Drawing or a Non-Extension Drawing, the funds on deposit
in the Cash Collateral Account will be returned to the Liquidity Provider being
replaced. (Indenture, Section 3.5(e))
Upon receipt by the Trustee of a Termination Notice from the Liquidity
Provider, the Trustee shall request a final drawing (a "Final Drawing") under
the Liquidity Facility in an amount equal to the then Maximum Available
Commitment thereunder. The Trustee will hold the proceeds of the Final Drawing
in the Cash Collateral Account 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 the Liquidity Facility would be
used. (Liquidity Facility, Section 2.02(d); Indenture, Section 3.5(i))
Drawings under the Liquidity Facility will be made by delivery by the
Trustee of a certificate in the form required by the Liquidity Facility. Upon
receipt of such a certificate, the Liquidity Provider is obligated to make
payment of the drawing requested thereby in immediately available funds. Upon
payment by the Liquidity Provider of the amount specified in any drawing under
the Liquidity Facility, the Liquidity Provider will be fully discharged of its
obligations under the Liquidity Facility with respect to such drawing and will
not thereafter be obligated to make any further payments under the Liquidity
Facility in respect of such drawing to the Trustee or any other person.
REIMBURSEMENT OF DRAWINGS
The Trustee must reimburse amounts drawn under the Liquidity Facility by
reason of an Interest Drawing, Final Drawing, Downgrade Drawing or Non-Extension
Drawing and interest thereon, but only to the extent that the Trustee has funds
available therefor.
INTEREST DRAWINGS AND FINAL DRAWINGS
Amounts drawn by reason of an Interest Drawing or Final Drawing under the
Liquidity Facility will be immediately due and payable, together with interest
on the amount of such drawing. From the date of the drawing to (but excluding)
the third business day following the Liquidity Provider's receipt of the notice
of such Interest Drawing, interest will accrue at the Base Rate plus 2.00% per
annum. Thereafter, interest will accrue at Liquidity Facility LIBOR for the
applicable interest period plus 2.00% per annum. In the case of the Final
Drawing, however, the Trustee may convert the Final Drawing into a drawing
bearing interest at the Base Rate plus 2.00% per annum on the last day of an
interest period for such Drawing.
"Base Rate" means a fluctuating interest rate per annum in effect from time
to time, which rate per annum shall at all times be equal to (a) the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a business day, for the next preceding business day)
by the Federal Reserve Bank of New York, or if such rate is not so published for
any day that is a business day, the average of the quotations for such day for
such transactions received by the Liquidity Provider from three Federal funds
brokers of recognized standing selected by it, plus (b) one-quarter of one
percent (1/4 of 1%).
"Liquidity Facility LIBOR" means, with respect to any interest period, (i)
the rate per annum appearing on display page 3750 (British Bankers
Association--LIBOR) of the Dow Jones Markets Service (or any successor or
substitute therefor) at approximately 11:00 a.m. (London time) two business days
before the first day of such interest period, as the rate for dollar deposits
with a maturity comparable to such interest period, or (ii) if the rate
calculated pursuant to clause (i) above is not available, the average (rounded
upwards, if necessary, to the next 1/16 of 1%) of the rates per annum at which
deposits in dollars are offered for the relevant interest period by three banks
of recognized standing selected by the Liquidity Provider in the London
interbank market at approximately 11:00 a.m. (London time) two business days
before the first day of such interest period in an amount approximately equal to
the principal amount of the LIBOR Advance to which such interest period is to
apply and for a period comparable to such interest period.
DOWNGRADE DRAWINGS AND NON-EXTENSION DRAWINGS
The amount drawn under the Liquidity Facility by reason of a Downgrade
Drawing or a Non-Extension Drawing will be treated as follows:
o Such amount will be released on any Distribution Date to the Liquidity
Provider to the extent that such amount exceeds the Required Amount.
o Any portion of such amount withdrawn from the Cash Collateral Account
to pay interest on the Senior Notes will be treated in the same way as
Interest Drawings.
o The balance of such amount will be invested in certain specified
eligible investments.
Any Downgrade Drawing, other than any portion thereof applied to the
payment of interest on the Senior Notes, will bear interest (x) subject to
clause (y) below, at a rate equal to Liquidity Facility LIBOR for the applicable
interest period plus a specified margin on the outstanding amount from time to
time of such Downgrade Drawing and (y) from and after the date, if any, on which
it is converted into a Final Drawing as described below under "--Liquidity
Events of Default and Termination", at a rate equal to Liquidity Facility LIBOR
for the applicable interest period (or, as described in the first paragraph
under "--Interest Drawings and Final Drawings", the Base Rate) plus 2.00% per
annum.
Any Non-Extension Drawing, other than any portion thereof applied to the
payment of interest on the Senior Notes, will bear interest (x) subject to
clause (y) below, in an amount equal to the investment earnings on amounts
deposited in the Cash Collateral Account plus a specified margin on the
outstanding amount from time to time of such Non-Extension Drawing and (y) from
and after the date, if any, on which it is converted into a Final Drawing as
described below under "--Liquidity Events of Default and Termination", at a rate
equal to Liquidity Facility LIBOR for the applicable interest period (or, as
described in the first paragraph under "--Interest Drawings and Final Drawings",
the Base Rate) plus 2.00% per annum.
LIQUIDITY EVENTS OF DEFAULT AND TERMINATION
Events of default under the Liquidity Facility (each, a "Liquidity Event of
Default") consist of:
o The acceleration of the Senior Notes.
o Certain bankruptcy or similar events involving Continental. (Liquidity
Facility, Section 1.01)
If any Liquidity Event of Default has occurred and is continuing and the
Senior Notes are Non-Performing, the Liquidity Provider may, in its discretion,
give a notice of termination of the Liquidity Facility (a "Termination Notice").
The Termination Notice will have the following consequences:
o The Liquidity Facility will expire on the fifth Business Day after the
date on which such Termination Notice is received by the Trustee.
o The Trustee will promptly request, and the Liquidity Provider will
make, a Final Drawing in an amount equal to the then Maximum Available
Commitment.
o Any drawing remaining unreimbursed as of the date of termination will
be automatically converted into a Final Drawing.
o All amounts owing to the Liquidity Provider automatically will be
accelerated.
Notwithstanding the foregoing, the Trustee 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 Senior Notes--Priority of Distributions". (Liquidity
Facility, Section 6.01) Upon the circumstances described above under
"Description of the Senior Notes--Remedies", the Liquidity Provider may become
the Controlling Party with respect to the exercise of remedies under the
Indenture. (Indenture, Section 3.8(c))
Upon the occurrence of the Liquidity Provider Reimbursement Date, the
Liquidity Facility will automatically expire, any drawing remaining unreimbursed
as of such date will be automatically converted into a Final Drawing and all
amounts owing to the Liquidity Provider automatically will be accelerated. On
and after such date, no drawings under the Liquidity Facility will be permitted.
LIQUIDITY PROVIDER
The initial Liquidity Provider for the Senior Notes is Morgan Stanley
Capital Services Inc. The obligations of Morgan Stanley Capital Services Inc.
have been guaranteed by Morgan Stanley, its parent company (the "Liquidity
Provider Guarantor"). Morgan Stanley has short-term unsecured debt ratings of
P-1 from Moody's and A-1 from Standard & Poor's.
DESCRIPTION OF THE POLICY AND THE POLICY PROVIDER AGREEMENT
The following summary describes the material terms of the Policy and
certain provisions of the Policy Provider Agreement. The summary does not
purport to be complete. We urge you to read the Policy for additional detail and
further information because it, and not this description, defines your rights.
The Policy has been filed as an exhibit to the Registration Statement and is
available as set forth under "Where You Can Find More Information".
THE POLICY
The Policy Provider has issued a certificate guarantee insurance policy
(the "Policy") in favor of the Trustee for the benefit of the Senior Noteholders
and the Liquidity Provider. The Subordinated Notes do not have the benefit of a
Policy.
Drawings under the Policy may be made under the following six
circumstances:
INTEREST DRAWINGS
If on any Distribution Date (other than the date on which a Policy Drawing
is made as described in "--Proceeds Deficiency Drawing", "--Non-Performance
Drawing" or "--Final Policy Drawing") after giving effect to the subordination
provisions of the Indenture and to the application of any drawing paid under the
Liquidity Facility in respect of interest due on the Senior Notes on such
Distribution Date and any withdrawal of funds from the Cash Collateral Account
in respect of such interest (collectively, "Prior Funds"), the Trustee does not
then have sufficient funds available for the payment of all amounts due and
owing in respect of accrued interest on the Senior Notes at the Stated Interest
Rate (without giving effect to any acceleration and calculated assuming that
Continental will not cure the nonpayment of interest), the Trustee is to request
a Policy Drawing under the Policy in an amount sufficient to enable the Trustee
to pay such accrued interest.
PROCEEDS DEFICIENCY DRAWING
If on any Distribution Date (other than the date on which a Policy Drawing
is made as described in "--Non-Performance Drawing" or "--Final Policy Drawing")
established by the Trustee by reason of its receipt of a payment constituting
the proceeds from the sale of Pledged Spare Parts comprising all of the Pledged
Spare Parts subject to the lien of the Security Agreement at the time of such
sale, after giving effect to the subordination provisions of the Indenture and
to the application of Prior Funds, the Trustee does not then have sufficient
funds available for the payment in full of the then outstanding principal amount
of the Senior Notes together with accrued and unpaid interest thereon at the
Stated Interest Rate (calculated assuming that Continental will not cure the
nonpayment of interest and excluding any accrued and unpaid Premium or Break
Amount) (collectively, the "Outstanding Amount"), the Trustee is to request a
Policy Drawing under the Policy in an amount sufficient to enable the Trustee to
pay the Outstanding Amount.
NON-PERFORMANCE DRAWING
If a Payment Default exists under the Senior Notes (without giving effect
to any acceleration or any payments by the Liquidity Provider or the Policy
Provider) for eight consecutive Interest Periods (such period, the
"Non-Performing Period") (regardless of whether any proceeds from the sale of
any Collateral are distributed by the Trustee during such period) and continues
to exist on the Interest Payment Date on which such eighth Interest Period ends
(or, if such Interest Payment Date falls within the applicable period specified
in the proviso to the definition of "Non-Performing", continues to exist on the
Business Day immediately following such period (the "Relevant Date")), and on
the 25th day following such Interest Payment Date or, if applicable, the
Relevant Date (or, if such 25th day is not a Business Day, the next Business
Day) (the "Non-Performance Payment Date") after giving effect to the
subordination provisions of the Indenture and to the application of Prior Funds,
the Trustee does not then have sufficient funds available for the payment in
full of the Outstanding Amount as of the Non-Performance Payment Date, unless
the Policy Provider shall have paid on any day prior thereto the Outstanding
Amount as of such day pursuant to a Policy Drawing as described in "--Proceeds
Deficiency Drawing" or "--Final Policy Drawing", the Trustee is to request a
Policy Drawing under the Policy in an amount sufficient to enable the Trustee to
pay such Outstanding Amount. If the Non-Performance Payment Date is established,
the Trustee shall send to the Senior Noteholders written notice thereof
promptly, but no later than three Business Days, after the occurrence of the
Interest Payment Date on which the Non-Performing Period ends or, if applicable,
the Relevant Date.
Notwithstanding the foregoing, if the Non-Performance Payment Date is
scheduled to occur prior to the Final Scheduled Payment Date, instead of paying
such amount on the Non-Performance Payment Date, the Policy Provider may, so
long as no Policy Provider Default is continuing, elect (the "Policy Provider
Election"), by giving notice to the Trustee at least 10 days prior to the
Non-Performance Payment Date, to pay:
o Any shortfall on the Non-Performance Payment Date in funds required to
pay accrued interest on the Senior Notes.
o Thereafter, on each Distribution Date, an amount equal to the
scheduled principal (on the Final Scheduled Payment Date) and interest
(without regard to any acceleration thereof) payable on the Senior
Notes on such Distribution Date.
Notwithstanding the Policy Provider Election, the Policy Provider may, on
any Business Day (which shall be a Distribution Date) elected by the Policy
Provider upon 20 days' notice, cause the Trustee to make a drawing under the
Policy for an amount equal to the Outstanding Amount as of such day. Further,
notwithstanding the Policy Provider Election, upon the occurrence of a Policy
Provider Default, the Trustee shall, on any Business Day elected by the Trustee
upon 20 days' notice to the Policy Provider, make a drawing under the Policy for
an amount equal to the Outstanding Amount as of such day.
FINAL POLICY DRAWING
If on the Final Legal Maturity Date, after giving effect to the
subordination provisions of the Indenture and to the application of any Prior
Funds, unless the Policy Provider shall have paid on any day prior thereto the
Outstanding Amount as of such day as described in "--Proceeds Deficiency
Drawing" or "--Non-Performance Drawing", the Trustee does not then have
sufficient funds available for the payment in full of the Outstanding Amount as
of such date, the Trustee is to request a Policy Drawing under the Policy in an
amount sufficient to enable the Trustee to pay such Outstanding Amount.
AVOIDANCE DRAWING
If, at any time, the Trustee has actual knowledge of the issuance of any
Final Order, the Trustee is to give prompt notice to the Liquidity Provider and
the Policy Provider of such Final Order and, prior to the expiration of the
Policy, to request a Policy Drawing for the relevant Avoided Payment and to
deliver to the Policy Provider a copy of the documentation required by the
Policy with respect to such Final Order. To the extent that any portion of such
Avoided Payment is to be paid to the Trustee (and not to any receiver,
conservator, debtor-in-possession or trustee in bankruptcy as provided in the
Policy), the Trustee shall establish as a Distribution Date the date that is the
earlier of three Business Days after the date of the expiration of the Policy
and the Business Day that immediately follows the 25th day after that notice for
distribution of such portion of the proceeds of such Policy Drawing.
LIQUIDITY PROVIDER DRAWING
On or after the Business Day which is 24 months from the earliest to occur
of (1) the date on which an Interest Drawing shall have been made under the
Liquidity Facility and remains unreimbursed from payments made by Continental at
the end of such 24-month period, (2) the date on which any Downgrade Drawing,
Non-Extension Drawing or Final Drawing that was deposited into the Cash
Collateral Account shall have been applied to pay any scheduled payment of
interest on the Senior Notes and remains unreimbursed from payments made by
Continental at the end of such 24-month period and (3) the date on which all of
the Senior Notes have been accelerated and remain unpaid by Continental at the
end of such 24-month period (in each case, disregarding any reimbursements from
payments by the Policy Provider and from proceeds from the sale of Collateral
distributed by the Trustee during such 24-month period) (such Business Day, the
"Liquidity Provider Reimbursement Date"), the Policy Provider (upon 20 days'
prior notice from the Trustee on behalf of the Liquidity Provider) will be
required to honor drawings under the Policy by the Trustee on behalf of the
Liquidity Provider for all outstanding drawings under the Liquidity Facility,
together with interest thereon.
GENERAL
All requests by the Trustee for a Policy Drawing under the Policy (other
than a Policy Drawing as described in "--Liquidity Provider Drawing") are to be
made by it no later than 1:00 p.m. (New York City time) on (or, in the case of
any Avoided Payment, at least three Business Days prior to) the applicable
Distribution Date and in the form required by the Policy and delivered to the
Policy Provider in accordance with the Policy. All proceeds of any Policy
Drawing under the Policy (other than a Policy Drawing as described in
"--Liquidity Provider Drawing") by the Trustee are to be deposited by the
Trustee in a separate policy account and from there distributed to the Senior
Noteholders without regard to the subordination provisions of the Indenture. In
the case of any Avoided Payments, however, all or part of the Policy Drawing
will be paid directly to the bankruptcy receiver, conservator,
debtor-in-possession or trustee to the extent such amounts have not been paid by
the Senior Noteholders. If any request for a Policy Drawing is rejected as not
meeting the requirements of the Policy, the Trustee is to resubmit such request
so as to meet such requirements.
The Policy provides that if such a request for a Policy Drawing is properly
submitted or resubmitted it will pay to the Trustee for deposit in a separate
policy account the applicable payment under the Policy no later than 3:00 p.m.
on the later of the relevant Distribution Date and the date the request is
received by the Policy Provider (if the request is received by 1:00 p.m. on such
date) or the next Business Day (if the request is received after that time).
Once any payment under the Policy is paid to the Trustee, the Policy
Provider will have no further obligation in respect of such payment. THE POLICY
PROVIDER SHALL NOT BE REQUIRED TO MAKE ANY PAYMENT EXCEPT AT THE TIMES AND IN
THE AMOUNTS AND UNDER THE CIRCUMSTANCES EXPRESSLY SET FORTH IN THE POLICY.
The Policy does not cover (i) shortfalls, if any, attributable to the
liability of the Trustee for withholding taxes, if any (including interest and
penalties in respect of that liability), (ii) any interest on the Senior Notes
in excess of the Capped Interest Rate, (iii) any Premium or other acceleration
payment payable in respect of the Senior Notes, (iv) any Break Amount, (v) any
failure of the Trustee to make any payment due to the Senior Noteholders from
funds received or (vi) any amount with respect to the Subordinated Notes.
The Policy Provider's obligation under the Policy will be discharged to the
extent that funds are received by the Trustee for distribution to the Senior
Noteholders, whether or not the funds are properly distributed by the Trustee.
The Policy is noncancellable. The Policy expires and terminates without any
action on the part of the Policy Provider or any other person on the date (the
"Termination Date") that is one year and one day following the date on which the
Outstanding Amount is paid on the Senior Notes, unless an Insolvency Proceeding
has commenced and has not been concluded or dismissed on the Termination Date,
in which case on the later of (i) the date of the conclusion or dismissal of
such Insolvency Proceeding without continuing jurisdiction by the court in such
Insolvency Proceeding and (ii) the date on which the Policy Provider has made
all payments required to be made under the terms of such Policy in respect of
Avoided Payments. No portion of the premium under the Policy is refundable for
any reason including payment or provision being made for payment.
The Policy is issued under and pursuant to, and shall be construed under,
the laws of the State of New York.
DEFINITIONS
"Avoided Payment" means with respect to the Policy any amount paid or
required to be paid thereunder that is voided under any applicable bankruptcy,
insolvency, receivership or similar law in an Insolvency Proceeding, and, as a
result of which, the Trustee, the Liquidity Provider or any Senior Noteholder is
required to return all or any portion of such voided payment (including any
disgorgement from the Senior Noteholders or the Liquidity Provider resulting
from an Insolvency Proceeding whether such disgorgement is determined on a
theory of preferential conveyance or otherwise) in accordance with a final,
non-appealable order of a court of competent jurisdiction.
"Final Order" means the order referred to in the definition of the term
"Avoided Payment".
"Insolvency Proceeding" means the commencement, after the Issuance Date, of
any bankruptcy, insolvency, readjustment of debt, reorganization, marshalling of
assets and liabilities or similar proceedings by or against Continental or the
Liquidity Provider and the commencement, after the Issuance Date, of any
proceedings by Continental or the Liquidity Provider for the winding up or
liquidation of its affairs or the consent, after the Issuance Date, to the
appointment of a trustee, conservator, receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, reorganization, marshalling of assets and
liabilities or similar proceedings of or relating to Continental or the
Liquidity Provider.
THE POLICY PROVIDER AGREEMENT
The Trustee, Continental and the Policy Provider have entered into an
insurance and indemnity agreement (the "Policy Provider Agreement") pursuant to
which Continental has agreed to reimburse the Policy Provider for amounts paid
pursuant to claims made under the Policy. Pursuant to the Policy Provider
Agreement, Continental has agreed to pay the Policy Provider a premium based on
the outstanding principal of the Senior Notes and a fee in connection with any
prepayment of the Senior Notes and to reimburse the Policy Provider for certain
expenses.
DESCRIPTION OF THE APPRAISAL
SH&E, an independent aviation appraisal and consulting firm, has prepared
an appraisal of the spare parts included in the Collateral as of December 25,
2002. A letter, dated January 24, 2003, summarizing such appraisal is annexed to
this Prospectus as Appendix II. The appraisal is subject to a number of
assumptions and limitations and was prepared based on certain specified
methodologies. In preparing its appraisal, SH&E conducted only a limited
physical inspection of certain locations at which Continental maintains the
spare parts. An appraisal that is subject to other assumptions and limitations
and based on other methodologies may result in valuations that are materially
different from those contained in SH&E's appraisal.
The spare parts included in the Collateral fall into two categories,
"rotables" and "expendables". Rotables are parts that wear over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which they relate ("Rotables"). For example,
thrust reversers, auxiliary power units and landing gear are Rotables.
Expendables consist of parts that can be restored to a serviceable condition but
have a life less than the related flight equipment and parts that generally are
used once and thereby consumed or thereafter discarded. For example, engine
cowlings, engine blades and duct assemblies are repairable expendable parts and
bolts, screws, tubes and hoses are consumable expendable parts. Spare engines
are not included in the Collateral. Set forth below is certain information about
the spare parts of the types included in the Collateral and the appraised value
of such spare parts set forth in SH&E's appraisal referred to above:
SPARE PARTS QUANTITY(1)
--------------------------------------
AIRCRAFT MODEL EXPENDABLES ROTABLES TOTAL APPRAISED VALUE
-------------- ----------- -------- ---------- ---------------
737-700.................... 877 24 901
737-700/800................ 278,912 6,942 285,854
737-800.................... 3,777 191 3,968
737-900.................... 821 10 831
---------- ---------- ----------
737-7/8/9 Subtotal......... 284,387 7,167 291,554 $185,972,600
757-200.................... 185,731 3,391 189,122 69,352,800
757-300.................... 10,946 96 11,042 3,116,700
767-200.................... 25,485 227 25,712 8,946,700
767-400.................... 51,147 1,586 52,733 55,741,200
777-200.................... 111,210 3,006 114,216 113,712,000
---------- ---------- ----------
Total...................... 668,906 15,473 684,379 $436,841,900
- -----------------
(1) This quantity of spare parts used in preparing the appraised value was
determined as of December 25, 2002. Since spare parts are regularly used,
refurbished, purchased, transferred and discarded in the ordinary course of
Continental's business, the quantity of spare parts included in the
Collateral and their appraised value will change over time. Continental is
required to provide to the Policy Provider and the Trustee a semiannual
appraisal of the Collateral. See "Description of the Senior
Notes--Collateral".
In connection with the issuance of the Old Senior Notes, SH&E prepared an
appraisal, dated as of October 31, 2002, of the spare parts of the types
included in the Collateral owned by Continental as of August 25, 2002, prepared
on substantially the same basis as the appraisal described above. The total
appraised value of the spare parts according to such appraisal was $415,429,000.
An appraisal is only an estimate of value. An appraisal should not be
relied upon as a measure of realizable value. The proceeds realized upon a sale
of any Collateral may be less than its appraised value. The value of the
Collateral if remedies are exercised under the Indenture will depend on market
and economic conditions, the supply of similar spare parts, the availability of
buyers, the condition of the Collateral and other factors. In addition, since
spare parts are regularly used, refurbished, purchased, transferred and
discarded in the ordinary course of business, the quantity of spare parts
included in the Collateral and their appraised value will change over time.
Accordingly, Continental cannot assure you that the proceeds realized upon any
such exercise of remedies would be sufficient to satisfy in full payments due on
the Senior Notes. If a Policy Provider Default occurs and such proceeds are not
sufficient to repay all such amounts due on the Senior Notes, then holders (to
the extent not repaid from the proceeds of the sale of Collateral) would have
only unsecured claims against Continental and the Policy Provider.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
EXCHANGE OF OLD SENIOR NOTES FOR NEW SENIOR NOTES
The following summary describes the material U.S. federal income tax
consequences to Senior Noteholders of the exchange of the Old Senior Notes for
New Senior Notes. This summary is intended to address the beneficial owners of
Senior Notes 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
Senior Notes as capital assets. The summary does not address all of the federal
income tax consequences that may be relevant to all Senior Noteholders in light
of their particular circumstances (including, for example, any special rules
applicable to tax-exempt organizations, broker-dealers, insurance companies,
foreign entities and persons who are not citizens or residents of the United
States) and does not address any tax consequences other than federal income tax
consequences.
The exchange of Old Senior Notes for New Senior Notes (the "Exchange")
pursuant to the Exchange Offer will be treated as a continuation of the holder's
investment in the Old Senior Notes and will not be a taxable event for U.S.
federal income tax purposes. As a result, a holder of an Old Senior Note whose
Old Senior Note is accepted in an Exchange Offer will not recognize gain or loss
on the Exchange. Similarly, there would be no federal income tax consequences to
a Senior Noteholder that does not participate in the Exchange Offer. A tendering
holder's tax basis in the New Senior Notes will be the same as such holder's tax
basis in its Old Senior Notes. A tendering holder's holding period for the New
Senior Notes received pursuant to the Exchange Offer will include its holding
period for the Old Senior Notes surrendered therefor.
ALL HOLDERS OF OLD SENIOR NOTES ARE ADVISED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE EXCHANGE OF OLD SENIOR NOTES FOR NEW SENIOR NOTES AND OF THE
OWNERSHIP AND DISPOSITION OF NEW SENIOR NOTES RECEIVED IN THE EXCHANGE OFFER IN
LIGHT OF THEIR OWN PARTICULAR CIRCUMSTANCES.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Senior Notes 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 Senior Notes. 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 Senior Notes received in
exchange for Old Senior Notes where such Old Senior Notes were acquired as a
result of market-making activities or other trading activities. Continental 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 Senior Notes may be required to deliver a prospectus.
Continental will not receive any proceeds from any sale of New Senior Notes
by broker-dealers. New Senior Notes 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 Senior Notes 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 Senior Notes. Any
broker-dealer that resells New Senior Notes 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 Senior Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit of any
such resale of New Senior Notes 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, Continental 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.
Continental has agreed to pay all expenses incident to the Exchange Offer other
than commissions or concessions of any brokers or dealers, fees of counsel to
the Senior Noteholders and certain transfer taxes, and will indemnify the
Holders of the New Senior Notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the New Senior Notes is being passed upon for Continental
by Hughes Hubbard & Reed LLP, New York, New York.
EXPERTS
The consolidated financial statements (including the financial statement
schedule) of Continental Airlines, Inc. appearing in Continental Airlines,
Inc.'s Annual Report (Form 10-K), as amended, for the year ended December 31,
2002 have been audited by Ernst & Young LLP, independent auditors, as set forth
in their reports thereon included therein and incorporated herein by reference.
Such consolidated financial statements (including the financial statement
schedule) are, and audited consolidated financial statements to be included in
subsequently filed documents will be, incorporated herein by reference in
reliance upon such reports of Ernst & Young LLP pertaining to such consolidated
financial statements (to the extent covered by consents filed with the
Commission) given on the authority of such firm as experts in accounting and
auditing.
The consolidated balance sheets of MBIA Inc. and subsidiaries and MBIA
Insurance Corporation and subsidiaries as of December 31, 2002 and December 31,
2001 and the related consolidated statements of income, changes in shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 2002, incorporated herein by reference, have been incorporated herein in
reliance on the reports of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing. Any
other audited financial statements of such companies that are incorporated or
that are deemed to be incorporated herein by reference that are the subject of a
report by PricewaterhouseCoopers LLP, independent accountants, will be so
incorporated by reference in reliance upon such reports and upon the authority
of such firms as experts in accounting and auditing to the extent covered by
consents of PricewaterhouseCoopers LLP filed with the SEC.
The references to SH&E, and to its appraisal reports, dated as of October
31, 2002 and January 24, 2003, are included herein in reliance upon the
authority of such firm as an expert with respect to the matters contained in its
appraisal reports.
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents we incorporate by reference may contain
"forward-looking statements". Forward-looking statements include any statements
that predict, forecast, indicate or imply future results, performance or
achievements, and may contain the words "believe", "anticipate", "expect",
"estimate", "project", "will be", "will continue", "will result", or words or
phrases of similar meaning.
Any such forward-looking statements are not assurances of future
performance and involve risks and uncertainties. Actual results may vary
materially from anticipated results for a number of reasons, including those
stated in our Commission reports incorporated in this Prospectus by reference or
as stated in "Risk Factors".
All forward-looking statements attributable to us are expressly qualified
in their entirety by the cautionary statements above.
WHERE YOU CAN FIND MORE INFORMATION
Continental files annual, quarterly and special reports, proxy statements
and other information with the Commission under the Securities Exchange Act of
1934. You may read and copy this information at the Public Reference Room of the
Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the Commission at (800) SEC-0330.
The Commission also maintains an internet web site that contains reports,
proxy statements and other information about issuers, like Continental, who file
reports electronically with the Commission. The address of that site is
HTTP://WWW.SEC.GOV.
You may also inspect reports, proxy statements and other information about
Continental at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
Continental's annual report on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8-K, as well as any amendments and exhibits to those
reports, are available free of charge through Continental's website at
HTTP://WWW.CONTINENTAL.COM/COMPANY/INVESTOR as soon as reasonably practicable
after it files them with, or furnishes them to, the Commission.
This Prospectus constitutes a part of a registration statement on Form S-4
(together with all amendments, exhibits and appendices, the "Registration
Statement") filed by Continental with the Securities and Exchange Commission
under the Securities Act. This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement for further information with respect to Continental and
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.
APPENDIX I--INDEX OF TERMS
PAGE PAGE
Agent's Message..................................44 Final Order......................................77
American Airlines................................24 Final Scheduled Payment Date.....................47
Applicable Date..................................49 Fixed charges....................................31
ATOP.............................................44 GAAP.............................................38
Aviation Security Act............................25 Global Notes.....................................64
Avoided Payment..................................76 holder...........................................42
Base Rate........................................72 Holdings.........................................32
Book-Entry Confirmation..........................42 Hopkins International............................32
Break Amount.....................................49 Houston..........................................32
Bush Intercontinental............................32 Indenture........................................47
Business Day.....................................61 Indirect Participants............................64
Capped Interest Rate.............................69 Initial Interest Period..........................48
Cash Collateral..................................51 Initial Purchaser.................................6
Cash Collateral Account..........................70 Insolvency Proceeding............................77
Cede.............................................64 Interest Drawing.................................69
CMI..............................................32 Interest Payment Date............................47
Collateral.......................................50 Interest Period..................................48
Collateral Agents................................50 Issuance Date....................................39
Collateral Agreements............................50 KLM..............................................34
Collateral Maintenance Agreement.................50 Liberty International............................32
Collateral Ratios................................51 LIBOR............................................48
Commission........................................4 Liquidity Event of Default.......................73
Company..........................................32 Liquidity Expenses...............................60
Continental......................................32 Liquidity Facility...............................69
Continental Bankruptcy Event.....................55 Liquidity Facility LIBOR.........................72
Controlling Party................................27 Liquidity Obligations............................60
Copa.............................................34 Liquidity Provider...............................69
Debt Balance.....................................55 Liquidity Provider Guarantor.....................73
Default..........................................55 Liquidity Provider Reimbursement Date............75
Definitive Notes.................................65 Maximum Available Commitment.....................69
Delta............................................33 MBIA.............................................37
Designated Locations.............................54 Moody's..........................................70
Distribution Date................................48 New Senior Notes..................................6
Downgrade Drawing................................70 Newark...........................................32
DTC..............................................42 Non-Extension Drawing............................71
DTC Participant..................................44 Non-Performance Payment Date.....................74
earnings.........................................31 Non-Performing...................................60
Eligible Institution.............................42 Non-Performing Period............................74
Embraer..........................................23 Northwest Airlines...............................33
Equipment........................................57 Note Owners......................................65
Event of Default.................................55 Noteholders......................................49
Event of Loss....................................55 Notes.............................................6
Exchange.........................................79 Old Senior Notes..................................6
Exchange Agent...................................45 Operative Documents..............................47
Exchange Offer....................................6 Outstanding Amount...............................74
Expiration Date..................................41 Parent Company...................................37
ExpressJet.......................................32 Participating Broker-Dealer......................40
FAA..............................................22 Payment Default..................................55
Fair Market Value................................51 Pledged Spare Parts..............................50
Final Drawing....................................71 Policy...........................................74
Final Legal Maturity Date........................47 Policy Drawing...................................60
Policy Expenses..................................60 Security Agreement...............................50
Policy Provider..................................37 Senior Collateral Ratio..........................51
Policy Provider Agreement........................77 Senior Noteholders...............................49
Policy Provider Default..........................59 Senior Notes......................................6
Policy Provider Election.........................75 Senior Rotable Ratio.............................51
Policy Provider Obligations......................60 SH&E.............................................27
Premium..........................................50 Shelf Registration Statement.....................40
Prior Funds......................................74 Standard & Poor's................................70
Qualified Spare Parts............................50 Stated Interest Rate.............................47
Rating Agency....................................51 Subordinated Collateral Ratio....................51
Reference Agency Agreement.......................48 Subordinated Noteholders.........................57
Reference Agent..................................48 Subordinated Notes................................6
Reference Date...................................48 Subordinated Notes Issuance Date.................67
Registration Event...............................40 Subordinated Notes Premium.......................67
Registration Rights Agreement....................39 Subordinated Rotable Ratio.......................51
Registration Statement...........................81 Support Documents................................47
Relevant Date....................................74 Termination Date.................................76
Replacement Facility.............................70 Termination Notice...............................73
Required Amount..................................69 Threshold Rating.................................70
Rotable Ratios...................................51 TIA..............................................55
Rotables.........................................78 Trustee..........................................47
SAP..............................................38 TSA..............................................25
SARS.............................................35 United...........................................24
Scheduled Interest Payment Date..................47 US Airways.......................................24
Section 1110.....................................57
Section 1110 Period..............................57
Security Agent...................................50
APPENDIX II--APPRAISAL LETTER
SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY
A FULL APPRAISAL OF SELECTED SPARE PARTS
Prepared for:
CONTINENTAL AIRLINES
Prepared by:
SH&E
JANUARY 24, 2003
TABLE OF CONTENTS
1 1.0 INTRODUCTION, DETERMINATION &
ASSUMPTIONS....................................................................1
1.1 Introduction.......................................................1
1.2 Determination......................................................1
1.3 Assumptions........................................................3
2 2.0 DESCRIPTION OF ASSETS................................................4
2.1 Spare Parts Nomenclature...........................................4
2.2 Summary of the Continental Inventory...............................7
2.3 Comparison of the Two Appraisals...................................8
2.3.1 Inventory Size Comparison....................................9
2.3.2 Significant Changes in the Inventory........................10
2.3.3 Other Observations..........................................11
3 3.0 METHODOLOGY.........................................................12
3.1 Definition of Terms...............................................12
3.1.1 Base Value..................................................12
3.1.2 Current Market Value........................................12
3.2 Spare Parts Appraisal Methodology.................................13
3.2.1 Sampling Process............................................13
3.2.2 Sample Valuation............................................14
3.2.3 Current Market Value Determination..........................14
3.2.4 Condition and Quantity Adjustment...........................15
4 4.0 THE MARKET FOR THE SUBJECT ASSETS...................................16
5 5.0 QUALIFICATIONS......................................................17
6 6.0 LIMITATIONS.........................................................18
Appendix A - Value by Aircraft Type by Material Class
Appendix B - Summary of Inventory Adjustments
Appendix C - Proportion of Serviceable & Unserviceable Parts
1.0 INTRODUCTION, DETERMINATION
& ASSUMPTIONS
1.1 INTRODUCTION
Continental Airlines, Inc. ("Continental" the "Client") has retained Simat,
Helliesen & Eichner, Inc. ("SH&E") to prepare an update to its opinion of the
Current (or Fair) Market Value ("CMV") of an inventory of selected spare parts
owned by Continental (collectively the "Subject Assets"). This report is an
update to SH&E's previous report dated October 31, 2002.
As part of the appraisal, SH&E conducted limited physical inspections of
Continental's warehouse facilities at Newark (3 locations), Cleveland, Los
Angeles (2 locations), Houston - George Bush Intercontinental (4 locations),
Houston - Hobby, Honolulu (2 locations) and Orlando. Together, these locations
account for 80% of the subject asset value.
1.2 DETERMINATION
SH&E has determined the aggregate Adjusted1 Current Market Value of the Subject
Assets to be:
$ 436.8 MILLION
As a point of reference, this updated appraisal represents an increase of $21.4
million from the valuation provided in the previous report dated October 31,
2002 that was based on an inventory listing as of August 25, 2002.
- -----------------
1. Adjustments were made to the CMV to reflect serviceability levels and
inventory accuracy
- --------------------------------------------------------------------------------
TABLE 1-1: CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000)
- --------------------------------------------------------------------------------
UNADJUSTED CURRENT MARKET VALUE
Serviceable Unserviceable Total
- --------------------------------------------------------------------------------
737-7/8/9 $157,991.7 $56,175.8 $214,167.6
757-200 $62,373.7 $17,599.7 $79,973.4
757-300 $2,944.5 $434.0 $3,378.4
767-200 $6,340.1 $7,193.2 $13,533.3
767-400 $51,935.1 $9,576.8 $61,511.8
777-200 $97,444.4 $32,665.2 $130,109.6
--------- --------- ----------
Total $379,029.5 $123,644.7 $502,674.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 1-2: CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000)
- --------------------------------------------------------------------------------
ADJUSTED CURRENT MARKET VALUE
SH&E Value
Group Serviceable Unserviceable Total
- --------------------------------------------------------------------------------
737-7/8/9 $157,991.7 $27,980.8 $185,972.6
757-200 $62,373.7 $6,979.1 $69,352.8
757-300 $2,944.5 $172.2 $3,116.7
767-200 $6,340.1 $2,606.6 $8,946.7
767-400 $51,935.1 $3,806.1 $55,741.2
777-200 $97,444.4 $16,267.6 $113,712.0
--------- --------- ----------
Total $379,029.5 $57,812.4 $436,841.9
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1.3 ASSUMPTIONS
SH&E relied on the following assumptions while performing this valuation:
o The global commercial aviation industry and, more specifically, the
aviation spare parts aftermarket will continue to recover from the
financial distress experienced since early 2001.
o The SH&E values assume the Subject Assets meet all relevant
specifications and performance capabilities.
o SH&E relied upon Continental's determination as to the serviceability
or unserviceability of the Subject Assets. Any variation in their
status would affect the values referenced herein.
o SH&E has not addressed any ownership rights and has assumed that the
Subject Assets are owned by the Client.
o The Subject Asset's records are in compliance with International Civil
Aviation Organization (ICAO) standards and furthermore, all Life
Limited Parts ("LLP's") records are traceable "back to birth"2.
o All normally required maintenance has been performed including
compliance with all mandatory Airworthiness Directives.
o All of the data and information provided by Continental is an accurate
representation of the actual conditions or circumstances of the
Subject Assets.
o The Subject Assets have not been involved in any major incident or
accident that resulted in significant damage to the asset.
- -----------------
2. "Back-to-birth" records are those that provide operating history
information for each LLP from the date of its first delivery by the
Original Equipment Manufacturer (OEM) to its first operator and for each
subsequent installation.
2.0 DESCRIPTION OF ASSETS
2.1 SPARE PARTS NOMENCLATURE
Aircraft and engine spare parts are generally categorized as follows:
ROTABLES
Rotable parts are those components that can be repeatedly and economically
restored to a serviceable condition over a period approximating the life of the
flight equipment to which they are related. When in need of overhaul, rotable
components are generally worth 30-50% of new and, after overhaul, they are
typically worth 70-85% of new depending on the age of the aircraft type.
Examples of rotable parts include thrust reversers, auxiliary power units,
landing gears, generators, valves and actuators. Rotable parts normally have an
unique serial number.
REPAIRABLES
Repairables are those components or parts that can be economically restored to a
serviceable or overhauled condition, but that have a life that is considerably
less than the life of the flight equipment to which they are related. In
addition, they can only be overhauled or repaired a limited number of times.
When in need of overhaul or repair, repairable parts are typically worth 30-50%
of new and, after overhaul 60-80 % of new.
In the Continental system, these parts are classified as Expendables (because
they are ultimately consumed) with a notation in the part record that the part
is to be "recovered" and inspected to determine if repair is cost effective
prior to being scrapped.
Examples of repairable or Recoverable Expendable parts include engine cowlings,
fairings, and engine blades, flap track assemblies, certain bearings, duct
assemblies and fittings.
EXPENDABLES
Expendables are parts or material that, once used, cannot be re-used and, if not
serviceable, they generally cannot be overhauled or repaired.
LIFE LIMITED PARTS
Life limited parts (LLP) have a finite operating life that is defined by hours,
cycles or calendar limit and are usually found in engines and landing gear
assemblies. When a LLP reaches its life limit, it cannot be overhauled or
repaired and must be destroyed.
The condition of aircraft and engine parts is classified as follows:
NEW
New parts are parts that have never been used and are normally in the
manufacturer's original packaging.
OVERHAULED
Overhauled parts are rotable or repairable parts that have been repaired and
tested to defined overhaul standards that can be specified by the manufacturer,
an airline or the repair vendor. The overhaul process restores the part to near
new service standard.
SERVICEABLE
Serviceable parts are parts that have been inspected and tested and found to be
within prescribed service limits.
AS REMOVED
An 'As Removed' part is in the condition that it was when it was removed from an
operator's aircraft or engine. Such a part can be installed, if operating
normally prior to removal, without prior testing on an aircraft or engine in the
same operator's fleet. In all other cases, an As Removed part must be inspected
and tested in an approved manner before it can be declared serviceable.
UNSERVICEABLE
Unserviceable (sometimes referred to as Repairable) components or parts have
been either removed from service for not working correctly or, upon inspection
and testing, were found not to meet certain prescribed standards. Such parts can
be sent to suitably qualified facilities for repair or overhaul as required.
BEYOND ECONOMIC REPAIR
An unserviceable part that, when inspected and tested, is found to require
repairs that are estimated to cost more than the part is worth is declared
'Beyond Economic Repair' (BER) and is usually scrapped.
AIRWORTHINESS OF PARTS
All parts, regardless of whether or not they are classified as 'New',
'Overhauled' or 'Serviceable' only remain airworthy as long as the part
continues to comply with all manufacturer's storage, maintenance and FAA
Airworthiness Directives requirements.
2.2 SUMMARY OF THE CONTINENTAL INVENTORY
The Subject Assets are selected airframe, avionic and engine spare parts for
Continental's in-service fleet of Boeing 737-700, 737-800 and 737-900 together
with Boeing 757-200, 757-300, 767-200, 767-400 and 777-200 aircraft. The
aircraft inventories include the total inventory population for all of those
aircraft except for the 757-200. The 757 parts include only those acquired after
October 1994.
SH&E was provided with an electronic inventory listing from CO's 'SCEPTRE/ICS'
inventory management system dated as of December 25, 2002. The inventory listed
each Continental part number ("MEPN") and information for each MEPN by fleet,
category (expendable or rotable), historic average cost (also last purchase
price and catalogue price if available), and the percentage serviceable. The
inventory consisted of 25,465 line items with a total of 789,737 individual
parts. A total of 2,110 line items containing 105,358 parts (see Appendix B)
were excluded from this appraisal for the following reasons:
1. The parts are for an aircraft modification program that will be
completed by the next appraisal (cockpit doors).
2. The parts are assets supplied and owned by vendors but tracked in the
Continental maintenance system (brake and tire sets).
3. Or, are branded parts specific to Continental and can only be used by
the airline (seat covers, carpet and cushion, and fabric).
These parts except for the cockpit doors, which are new items, were also removed
from the previous appraisal.
The majority of the Subject Assets were assessed to be in a new or overhauled
maintenance condition. Continental claimed that the accuracy of the inventory
management systems found by SH&E at the inspected facilities was representative
of other stations in the system and SH&E found no indications to the contrary.
It should be noted that SH&E did not compare or reconcile the part cost basis
provided to SH&E with values reported on Continental's Balance Sheet.
- --------------------------------------------------------------------------------
TABLE 2-1: SELECTED SPARE PARTS DISTRIBUTION
- --------------------------------------------------------------------------------
Value Group Fleet Expendable Rotable Total
- --------------------------------------------------------------------------------
737-700/800 278,912 6,942 285,854
737-800 3,777 191 3,968
737-900 821 10 831
--- -- ---
737-7/8/900 Total 284,387 7,167 291,554
757-200 757-200 185,731 3,391 189,122
757-300 757-300 10,946 96 11,042
767-200 767-200 25,485 227 25,712
767-400 767-400 51,147 1,586 52,733
777-200 777-200 111,210 3,006 114,216
------- ----- -------
Grand Total 668,906 15,473 684,379
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*These summary tables reflect the current part count after all inventory
adjustments. See Appendix B for a detailed summary of inventory adjustments.
2.3 COMPARISON OF THE TWO APPRAISALS
For this appraisal SH&E used data as of December 25, 2002; in the prior
appraisal, the inventory was dated as of August 25, 2002
2.3.1 INVENTORY SIZE COMPARISON
The inventory as of December 25, 2002 contained 742 more Continental part
numbers and contained 59,454 more individual parts. The following table
summarizes the differences.
- --------------------------------------------------------------------------------
TABLE 2-2: INVENTORY AS OF DECEMBER 2002
- --------------------------------------------------------------------------------
Aircraft Lines Parts
- --------------------------------------------------------------------------------
737-7/8/9 6,036 335,753
757-200 7,568 212,363
757-300 674 12,662
767-200 1,298 26,574
767-400 3,970 67,597
777-200 5,919 134,788
----- -------
Grand Total 25,465 789,737
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 2-3: INVENTORY AS OF AUGUST 2002
- --------------------------------------------------------------------------------
Aircraft Lines Parts
- --------------------------------------------------------------------------------
737-7/8/9 5,756 279,537
757-200 7,386 212,424
757-300 659 12,080
767-200 1,260 26,418
767-400 3,867 67,304
777-200 5,795 132,520
----- -------
Grand Total 24,723 730,283
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TABLE 2-4: INVENTORY - DIFFERENCES
- --------------------------------------------------------------------------------
Aircraft Lines Parts
- --------------------------------------------------------------------------------
737-7/8/9 280 56,216
757-200 182 (61)
757-300 15 582
767-200 38 156
767-400 103 293
777-200 124 2,268
--- -----
Grand Total 742 59,454
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*THE COUNT OF PARTS AS OF JANUARY 2003 IS BEFORE ALL INVENTORY ADJUSTMENTS. SEE
APPENDIX B FOR A DETAILED SUMMARY OF INVENTORY ADJUSTMENTS.
The change in inventory represents an increase in unadjusted current market
value of approximately $47.9 Million.
2.3.2 SIGNIFICANT CHANGES IN THE INVENTORY
SH&E noted that the proportion of unserviceable parts has increased by
approximately $50 million (before maintenance adjustment) since the previous
inventory. This change was expected as it was noted during the prior appraisal
that the proportion of unserviceable parts was relatively low compared with U.S.
industry average.
SH&E also noted that Continental acquired 4 new APUs3 with an approximate
current market value of $2.5 million.
- -----------------
3. An APU is an Auxiliary Power Unit. It is a small jet engine used to provide
electrical and pneumatic power to aircraft system when on the ground and
power for starting the main engines. Certain of the engines can be used to
provide emergency in-flight electrical power.
2.3.3 OTHER OBSERVATIONS
o At Newark Liberty International Airport, Continental is building a new
spare parts facility which is due for completion in April 2003. Once
complete, parts from the current hanger location and off-airport
warehouse will be consolidated into the single facility.
o The Guam station holds inventory representing approximately $25
million in value and was recently damaged by a typhoon. Accordingly,
SH&E was unable to inspect this facility. Continental reports that the
facility is being repaired. Continental further informs us that the
associated damage, to the spare parts was minimal, and affected parts
are being repaired. SH&E will inspect the facility at the next
appraisal update.
o SH&E observed different packaging standards between different stations
although all were acceptable by industry standards. SH&E recommended
that all parts in excess of $2,500 be individually packaged even when
stored within a bin.
o Previously at the Houston - Morales (MOR) location, SH&E discovered
several rotable parts were reported as being present at the facility
inventory when they were actually installed on an aircraft.
Continental was aware of the problem and advised it was being
corrected. SH&E retested samples of this inventory and the problem
appears to have been corrected.
3.0 METHODOLOGY
3.1 DEFINITION OF TERMS
3.1.1 BASE VALUE
The Base Value ("BV") is the appraiser's opinion of the underlying economic
value of an asset in an open, unrestricted and stable market environment with a
reasonable balance of supply and demand, and also assumes full considerations of
its "highest and best use". An asset's BV is founded in the historical trend of
values and in the projection of 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.
Since BV pertains to a somewhat idealized asset and market combination it may
not necessarily reflect the actual value of the asset in question, but is a
nominal starting value to which adjustments may be applied to determine an
actual value. Since BV is related to long-term market trends, the BV definition
is normally applied to analyses of historical values and projections of residual
values and lease rates.
3.1.2 CURRENT MARKET VALUE
The Current (or Fair) Market Value ("CMV" or "FMV") is the appraiser's opinion
of the most likely trading price that may be generated for an individual asset
under the market circumstances that are perceived to exist at the time in
question. CMV assumes that the asset is valued for its highest, best use, that
the parties to the hypothetical sale transaction are willing, able, prudent and
knowledgeable. Neither are under any 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. Unless
stated otherwise, the total CMV of multiple assets represents the aggregate of
the individual asset's Current Market Values were they to be sold on an
asset-by-asset basis and not the value of the assets if sold in bulk.
3.2 SPARE PARTS APPRAISAL METHODOLOGY
SH&E's standard parts appraisal can be summarized as a calculation of an
adjustment to the owner's internal inventory value. The statistically based
adjustment is achieved by the development of a representative, dollar-weighted,
stratified sample of the parts, the valuation of that sample and then, the
application of a derived adjustment factor to the sample and then to the entire
population of parts. That process is more fully described below.
3.2.1 SAMPLING PROCESS
SH&E obtained an itemized database of the parts to be valued from Continental.
The data identified each part by aircraft type, rotable or expendable category,
description, manufacturer's part number, quantity, and percent serviceable. The
data also provided an average acquisition cost for each part. Some parts were
listed with zero cost and those were handled separately.
SH&E compiled a single database of the selected Continental inventory that
contained 25,465 line items. The inventory was then grouped by aircraft type
with common trading characteristics and subsequently, by category. For this
valuation, SH&E initially grouped all 737 aircraft together but kept the 757 and
767 parts separate. It should be noted that the later model 767-400 has
significant systems and parts commonality with the 777 aircraft.
Each of the groupings was then sorted by descending unit cost value and then
divided into four to six separate strata of approximately equal total value
based on Continental's reported cost or value for each line item. A further
stratum was created in some cases to provide consideration for parts with a
reported zero average acquisition value. Approximately 1,500 line items were
selected for the initial sampling and these served as the basis of the pricing
and physical sampling process. The pricing sample was further increased to
include all matching parts in SH&E's internal parts database.
3.2.2 SAMPLE VALUATION
The CMV of the individual parts that make up each sample was determined by
investigating the current sale price for new or overhauled parts, based on
information from independent third parties, manufacturers' parts lists and SH&E
files.
SH&E performed a detailed pricing survey for the prior appraisal and, for this
update, spot checked values from each pool of parts and found no significant
change in the individual part's values. New pricing was performed on a small
group of parts with higher values to validate their pricing consistency with
similar parts from the prior appraisal. A small sample of new parts was sent to
several major parts vendors who provided current trading values. As before, most
of these parts are associated with new production aircraft with a limited
secondary market and many of the returned vendor-provided values were new prices
or catalogue values.
3.2.3 CURRENT MARKET VALUE DETERMINATION
SH&E applied the results of the sample pricing to each appropriate strata and,
in addition, applied price matches from other sources. Over 30 different sources
including price catalogs from the major manufacturers, US government procurement
data, airline parts pooling price lists and inventory and purchase records from
seven major U.S. and European airlines files were reviewed in order to determine
additional current market values. More than three million parts pricing records
were examined in order to match a part number and reference price for each part
in the Continental inventory.
SH&E obtained a market price for the small sample of parts based on an
assumption that each part would be purchased independently, as a single unit,
and in a new or overhauled condition for rotables and new condition for
expendables. In cases where more than one quote was obtained, SH&E attempted to
determine the most reasonable value.
This file matching procedure, using both the initial sample and SH&E's internal
resources, was successful in determining market price for approximately 17,500
line items representing approximately 71% of the line items and 74% of the
historic cost.
3.2.4 CONDITION AND QUANTITY ADJUSTMENT
The CMV of unserviceable parts was calculated using ratios of serviceable to
unserviceable values obtained from prior SH&E parts appraisals and applied to
SH&E's findings made during the physical inspection and audit.
Continental provided SH&E with a percentage unserviceable by part number. This
statistic was tested against internal records but, during this appraisal, no
supplier audits or surveys' were made to validate the unserviceable percentages
provided by the airline. Selected vendor audit will be performed during the next
full appraisal.
For this update, SH&E revisited Continental's parts facilities in Newark,
Cleveland, Los Angeles and Houston (George Bush) and performed first time visits
to Honolulu, Houston Hobby and Orlando to physically inspect the assets and to
verify the accuracy of the inventory reporting system. As before the accuracy of
Continental's inventory was above industry standard and Honolulu and Cleveland
both had no discrepancies. SH&E's review of the associated records also revealed
no discrepancies.
The physical sample audit indicated accuracy above U.S. industry norms, however,
SH&E did note that the airline creates a large number of "kits." A kit is a
package of parts, either multiple units of the same part or a collection of
necessary parts needed to complete a certain maintenance task. Sometimes the kit
contains a rotable item along with the necessary expendable material to perform
installation. Almost all the material was new. It should be noted that the
"kitting" process makes the kit unique to Continental but the parts can be made
generic simply by disassembling the kit. For this valuation the kit parts were
treated as independent parts.
4.0 THE MARKET FOR THE SUBJECT
ASSETS
The potential market for Continental Airlines' spare parts remains positive. In
the main, the parts are associated with aircraft that have enjoyed extensive
production runs and also have a wide operator base. The two exceptions are the
757-300 and the 767-400; these aircraft have both limited production runs and
small operator bases. There have been a total of 63 757-300 aircraft ordered for
7 operators and 37 767-400 aircraft ordered for two operators, Continental and
Delta. That said, there is very significant commonality between the 757-200 and
757-300 aircraft and also between the 767-400 and the 777.
The parts aftermarket, generally estimated to exceed $1.3 billion in annual
revenues, has obtained the majority of its product from either airline surplus
sales or from dismantled aircraft. There have been no significant sales of
surplus parts for the late generation aircraft represented by this parts
inventory or for their associated engines. Nor have any of these aircraft types
been dismantled for parts other than incident-related aircraft. Consequently,
there is very little of this type of airframe material available on the parts
aftermarket. The same is true for the engine market where the Original Equipment
Manufacturers ("OEM") have maintained a tight control of any aftermarket
relating to newer generation engines. SH&E is of the opinion that the Subject
Assets, if offered for sale, would include some of the most marketable material
in the commercial aviation parts aftermarket.
5.0 QUALIFICATIONS
Founded in 1963 and with offices in New York, Boston, Washington, London and
Amsterdam, SH&E is the world's largest consulting firm specializing in
commercial aviation. Its staff of over 90 personnel encompasses expertise in all
disciplines of the industry and the firm has provided appraisal, consulting,
strategic planning and technical services to airlines, leasing companies,
government agencies, airframe and engine manufacturers, and financial
institutions.
SH&E's appraisal staff are all members of the International Society of Transport
Aircraft Trading (ISTAT), the internationally recognized body for the
certification of aircraft appraisers. SH&E performs all appraisals in accordance
with the definitions, guidelines and standards set forth by ISTAT. SH&E's
officer responsible for all appraisals is an ISTAT Senior Appraiser.
SH&E annually values approximately $20 billion of aviation assets including
commercial and military equipment, airline fleets and lease portfolios. The
appraisals range from full appraisals involving detailed aircraft and record
inspections conducted by SH&E's technical staff to the valuation of tax-based
leases. SH&E's proprietary aircraft residual value model is widely accepted by
the rating agencies as a reliable forecasting tool. In addition to the above
aircraft valuations, SH&E annually values in excess of $3 billion worth of
aircraft spare parts and spare engines. SH&E routinely values flight simulators,
hangar tooling, ground equipment, gates, slots, maintenance facilities and Fixed
Base Operations.
A related service that SH&E offers its Clients is Asset Management. Over the
last few years, SH&E has been the principal asset manager responsible for the
recovery and subsequent remarketing of a number of individual aircraft and some
significant portfolios.
This active participation in the market place provides SH&E with practical and
first hand knowledge of the values and lease rates of aircraft, engines and
parts.
6.0 LIMITATIONS
SH&E used information supplied by the Client together with in-house data
accumulated through other recent studies of aircraft parts transactions.
SH&E's opinions are based upon historical relationships and expectations that it
believes are reasonable.
Some of the underlying assumptions, including those described above are detailed
explicitly or implicitly elsewhere in this report, may not materialize because
of unanticipated events and circumstances. SH&E's opinions could, and would,
vary materially, should any of the above assumptions prove to be inaccurate.
The opinions expressed herein are not given for, or as an inducement or
endorsement for, any financial transaction. They are prepared for the exclusive
use of the addressee. SH&E accepts no responsibility for damages, if any, that
result from decisions made or actions taken based on this report.
This report does not address the validity of title or ownership of the items
discussed herein.
This report reflects SH&E's expert opinion and best judgment based upon the
information available to it at the time of its preparation. SH&E does not have,
and does not expect to have, any financial interest in the appraised property.
For SH&E:
/s/ CLIVE G. MEDLAND
Clive G. Medland, FRAeS
Senior Vice President
Senior Appraiser
International Society of
Transport Aircraft Trading
January 24, 2003
SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY
APPENDIX A
VALUE BY AIRCRAFT TYPE BY MATERIAL CLASS
SELECTED SPARE PARTS VALUATION SUMMARY BY MATERIAL
CLASS
Dollars in (000)
- --------------------------------------------------------------------------------
VALUE GROUP ROTABLE EXPENDABLE GRAND TOTAL
- --------------------------------------------------------------------------------
737-7/8/9 $153,526.8 $32,445.7 $185,972.6
- --------------------------------------------------------------------------------
757-200 $49,898.8 $19,454.1 $69,352.8
- --------------------------------------------------------------------------------
757-300 $2,267.0 $849.7 $3,116.7
- --------------------------------------------------------------------------------
767-200 $6,611.4 $2,335.3 $8,946.7
- --------------------------------------------------------------------------------
767-400 $46,714.4 $9,026.8 $55,741.2
- --------------------------------------------------------------------------------
777-200 $88,442.0 $25,270.0 $113,712.0
- --------------------------------------------------------------------------------
TOTAL $347,460.4 $89,381.5 $436,841.9
- --------------------------------------------------------------------------------
SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY
APPENDIX B
SUMMARY OF INVENTORY ADJUSTMENTS
SELECTED SPARE PARTS: SUMMARY OF INVENTORY
ADJUSTMENTS
- ------------------------ ------------------------------- ---------------------- --------------------- -----------------------
Starting CO Inventory Less brakes, tires, cockpit Less CO specific Total Adjustments Inventory After
doors parts to Inventory Adjustments
- ------------------------ ------------------------------- ---------------------- --------------------- -----------------------
Group Lines Qty Group Lines Qty Reason Group Lines Qty Group Lines Qty Group Lines Qty
- ------------------------ ------------------------------- ---------------------- --------------------- -----------------------
737-7/8/9 6,036 335,753 737-7/8/9 1 50 DOOR 737-7/8/9 470 44,149 737-7/8/9 471 44,199 737-7/8/9 5,565 291,554
757-200 7,568 212,363 757-200 3 99 BRAKE/TIRE 757-200 395 23,142 757-200 398 23,241 757-200 7,170 189,122
757-300 674 12,662 757-300 2 14 BRAKE/TIRE 757-300 46 1,606 757-300 48 1,620 757-300 626 11,042
767-200 1,298 26,574 767-200 2 9 BRAKE/TIRE 767-200 38 853 767-200 40 862 767-200 1,258 25,712
767-400 3,970 67,597 767-400 1 35 BRAKE/TIRE 767-400 282 14,829 767-400 283 14,864 767-400 3,687 52,733
777-200 5,919 134,788 777-200 3 294 BRAKE/TIRE 777-200 867 20,278 777-200 870 20,572 777-200 5,049 114,216
- ------------------------ ------------------------------- ---------------------- --------------------- -----------------------
Total 25,465 789,737 Total 12 501 Total 2,098 104,857 Total 2,110105,358 Total 23,355 684,379
- ------------------------ ------------------------------- ---------------------- --------------------- -----------------------
*CO specific parts include: seat covers, carpet, cushions, curtains, fabric, cloth, placards
SH&E INTERNATIONAL AIR TRANSPORT CONSULTANCY
APPENDIX C
PROPORTION OF SERVICEABLE AND
UNSERVICEABLE PARTS
COMPARISON OF THE SELECTED PARTS INVENTORY VALUATIONS
DOLLARS IN (000)
- -----------------------------------------------------------------------------------------------------------------------
CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000) DECEMBER 2002
- -----------------------------------------------------------------------------------------------------------------------
UNADJUSTED CURRENT MARKET VALUE ADJUSTED CURRENT MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------------
Value Group Serviceable Unserviceable Total Serviceable Unserviceable Total % Unserviceable
-----------------------------------------------------------------------------------------------------------
737-7/8/9 $157,991.7 $56,175.8 $214,167.6 $157,991.7 $27,980.8 $185,972.6 15%
757-200 $62,373.7 $17,599.7 $79,973.4 $62,373.7 $6,979.1 $69,352.8 10%
757-300 $2,944.5 $434.0 $3,378.4 $2,944.5 $172.2 $3,116.7 6%
767-200 $6,340.1 $7,193.2 $13,533.3 $6,340.1 $2,606.6 $8,946.7 29%
767-400 $51,935.1 $9,576.8 $61,511.8 $51,935.1 $3,806.1 $55,741.2 7%
777-200 $97,444.4 $32,665.2 $130,109.6 $97,444.4 $16,267.6 $113,712.0 14%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $379,029.5 $123,644.7 $502,674.2 $379,029.5 $57,812.4 $436,841.9 13%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
CONTINENTAL AIRLINES SELECTED SPARE PARTS VALUATION SUMMARY ($000) AUGUST 2002
- -----------------------------------------------------------------------------------------------------------------------
UNADJUSTED CURRENT MARKET VALUE ADJUSTED CURRENT MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------------
Value Group Serviceable Unserviceable Total Serviceable Unserviceable Total % Unserviceable
-----------------------------------------------------------------------------------------------------------
737-7/8/9 $158,726.5 $33,816.2 $192,542.7 $158,726.5 $16,811.8 $175,538.3 10%
757-200 $62,627.8 $15,171.1 $77,799.0 $62,627.8 $6,009.3 $68,637.2 9%
757-300 $2,927.8 $372.3 $3,300.1 $2,927.8 $147.6 $3,075.4 5%
767-200 $6,948.4 $4,070.4 $11,018.7 $6,948.4 $1,407.8 $8,356.1 17%
767-400 $50,651.2 $5,196.2 $55,847.3 $50,651.2 $2,056.1 $52,707.3 4%
777-200 $100,107.0 $14,129.3 $114,236.3 $100,107.0 $7,007.5 $107,114.6 7%
- -----------------------------------------------------------------------------------------------------------------------
TOTAL $381,988.8 $72,755.4 $454,744.2 $381,988.8 $33,440.2 $415,429.0 8%
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
DIFFERENCES (DECEMBER 2002 - AUGUST 2002) ($000)
- -----------------------------------------------------------------------------------------------------------------------
UNADJUSTED CURRENT MARKET VALUE ADJUSTED CURRENT MARKET VALUE
- -----------------------------------------------------------------------------------------------------------------------
Value Group Serviceable Unserviceable Total Serviceable Unserviceable Total
- -----------------------------------------------------------------------------------------------------------------------
737-7/8/9 ($734.8) $22,359.6 $21,624.9 ($734.8) $11,169.0 $10,434.2
757-200 ($254.1) $2,428.6 $2,174.5 ($254.1) $969.8 $715.7
757-300 $16.6 $61.6 $78.3 $16.6 $24.6 $41.3
767-200 ($608.3) $3,122.8 $2,514.5 ($608.3) $1,198.8 $590.6
767-400 $1,283.9 $4,380.6 $5,664.5 $1,283.9 $1,750.0 $3,033.9
777-200 ($2,662.6) $18,535.9 $15,873.3 ($2,662.6) $9,260.0 $6,597.4
-----------------------------------------------------------------------------------------------------------
TOTAL ($2,959.3) $50,889.3 $47,930.0 ($2,959.3) $24,372.3 $21,413.0
- -----------------------------------------------------------------------------------------------------------------------
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 the person 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 the
person in connection with such action, suit or proceeding if the person
acted in good faith and in a manner the person 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
the person's 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
the person 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 the person's 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 the person 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 the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person 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 present or former director or officer 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, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person 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 present or former director, officer, employee or agent is proper in
the circumstances because the person has met the applicable standard of
conduct set forth in subsections (a) and (b) of this section. Such
determination shall be made, with respect to a person who is a director or
officer at the time of such determination, (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) by a committee of such directors
designated by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (4) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this
section. Such expenses (including attorneys' fees) incurred by former
directors and officers or other employees and agents may be so paid upon
such terms and conditions, if any, as the corporation 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 such person's 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 such person and incurred by such person in
any such capacity, or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify such person
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 of 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 such
person 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 any 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 such person reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees)."
The Certificate of Incorporation and Bylaws also limit the personal
liability of directors to the Company and its stockholders for monetary damages
resulting from certain breaches of the directors' fiduciary duties. The bylaws
of the Company provide as follows:
"No Director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the GCL, or (iv) for any
transaction from which the Director derived any improper personal benefit. If
the GCL is amended ... to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a Director
of the Corporation shall be eliminated or limited to the fullest 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 statement (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 end 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
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(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 (1)(i) and (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
with or furnished to the Commission by the registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
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 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by 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.
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on June 2, 2003.
CONTINENTAL AIRLINES, INC.
By:/s/ JENNIFER L. VOGEL
------------------------------
Jennifer L. Vogel
Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities indicated, on June 2, 2003.
SIGNATURE TITLE
- --------------------------------------- ----------------------------------------------
GORDON M. BETHUNE* Chairman of the Board, Chief Executive Officer
- --------------------------------------- (Principal Executive Officer) and Director
Gordon M. Bethune
LAWRENCE W. KELLNER*
- --------------------------------------- President, Chief Operating Officer and Director
Lawrence W. Kellner
JEFFREY J. MISNER* Senior Vice President and Chief Financial Officer
- --------------------------------------- (Principal Financial Officer)
Jeffrey J. Misner
/S/ CHRIS KENNY Vice President and Controller (Principal Accounting
- --------------------------------------- Officer)
Chris Kenny
THOMAS J. BARRACK, JR.*
- --------------------------------------- Director
Thomas J. Barrack, Jr.
DAVID BONDERMAN*
- --------------------------------------- Director
David Bonderman
KIRBYJON CALDWELL*
- --------------------------------------- Director
Kirbyjon Caldwell
PATRICK FOLEY*
- --------------------------------------- Director
Patrick Foley
DOUGLAS H. MCCORKINDALE*
- --------------------------------------- Director
Douglas H. McCorkindale
GEORGE G.C. PARKER*
- --------------------------------------- Director
George G.C. Parker
RICHARD W. POGUE*
- --------------------------------------- Director
Richard W. Pogue
SIGNATURE TITLE
- --------------------------------------- ----------------------------------------------
WILLIAM S. PRICE III*
- --------------------------------------- Director
William S. Price III
- --------------------------------------- Director
Donald L. Sturm
KAREN HASTIE WILLIAMS*
- --------------------------------------- Director
Karen Hastie Williams
CHARLES A. YAMARONE*
- --------------------------------------- Director
Charles A. Yamarone
*BY: /s/ JENNIFER L. VOGEL
- ---------------------------------------
Jennifer L. Vogel
Attorney-in-Fact
EXHIBIT INDEX
EXHIBIT EXHIBIT DESCRIPTION
NUMBER
4.1 Amended and Restated Indenture, dated as of May 9, 2003,
among Continental Airlines, Inc., Wilmington Trust Company,
as Trustee, Morgan Stanley Capital Services Inc., as
Liquidity Provider, and MBIA Insurance Corporation, as Policy
Provider, made with respect to the issuance of Floating Rate
Secured Notes due 2007 and the Floating Rate Secured
Subordinated Notes due 2007
4.2 Form of Exchange Floating Rate Secured Note Due 2007
(included in Exhibit 4.1)
4.3 Collateral Maintenance Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. and MBIA Insurance
Corporation*
4.4 Spare Parts Security Agreement, dated as of December 6, 2002,
between Continental Airlines, Inc. and Wilmington Trust
Company, as Security Agent*
4.5 Reference Agency Agreement, dated as of December 6, 2002,
among Continental Airlines, Inc., Wilmington Trust Company,
as Trustee, and Wilmington Trust Company, as Reference Agent*
4.6 Revolving Credit Agreement, dated as of December 6, 2002,
between Wilmington Trust Company, as Trustee, and Morgan
Stanley Capital Services Inc., as Liquidity Provider*
4.7 Guarantee Agreement, dated as of December 6, 2002, by Morgan
Stanley, relating to the Revolving Credit Agreement*
4.8 Financial Guarantee Insurance Policy #39753 of MBIA Insurance
Corporation*
4.9 Exchange and Registration Rights Agreement, dated as of
December 6, 2002, between Continental Airlines, Inc. and
Morgan Stanley & Co. Incorporated*
4.10 Purchase Agreement, dated as of December 2, 2002, between
Continental Airlines, Inc. and Morgan Stanley & Co.
Incorporated, as Initial Purchaser*
4.11 Amendment No. 1 to Collateral Maintenance Agreement, dated as
of May 9, 2003, between Continental Airlines, Inc. and MBIA
Insurance Corporation
4.12 Amendment No. 1 to Spare Parts Security Agreement, dated as
of May 9, 2003, between Continental Airlines, Inc. and
Wilmington Trust Company, as Security Agent
4.13 Amendment No. 1 to Reference Agency Agreement, dated as of
May 9, 2003, between Continental Airlines, Inc., Wilmington
Trust Company, as Trustee, and Wilmington Trust Company, as
Reference Agent
5.1 Opinion of Hughes Hubbard & Reed LLP relating to validity of
the New Senior Notes*
12.1 Computation of Ratio of Earnings to Fixed Charges*
23.1 Consent of Ernst & Young LLP
23.2 Consent of PricewaterhouseCoopers LLP*
EXHIBIT EXHIBIT DESCRIPTION
NUMBER
23.3 Consent of Hughes Hubbard & Reed LLP (included in its opinion
filed as exhibit 5.1)
23.4 Consent of Simat, Helliesen & Eichner, Inc.*
24.1 Powers of Attorney*
25.1 Statement of Eligibility of Wilmington Trust Company for the
Floating Rate Secured Notes Due 2007, 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*
- --------------
*Previously filed
================================================================================
AMENDED AND RESTATED
INDENTURE
Dated as of May 9, 2003
Among
CONTINENTAL AIRLINES, INC.
WILMINGTON TRUST COMPANY,
as Trustee
MORGAN STANLEY CAPITAL SERVICES INC.,
as Liquidity Provider
and
MBIA INSURANCE CORPORATION,
as Policy Provider
$300,000,000
Floating Rate Secured Notes due 2007
and
Floating Rate Secured Subordinated Notes due 2007
================================================================================
TABLE OF CONTENTS
PAGE
----
ARTICLE 1.
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 Definitions......................................................1
Section 1.2 Rules of Construction............................................1
ARTICLE 2.
THE SECURITIES
Section 2.1 Title, Form, Denomination and Execution of Securities............1
Section 2.2 Restrictive Legends..............................................4
Section 2.3 Authentication of Securities.....................................5
Section 2.4 Transfer and Exchange............................................6
Section 2.5 Book-Entry Provisions for Restricted Global Securities and
Regulation S Global Securities...................................7
Section 2.6 Special Transfer Provisions......................................8
Section 2.7 Terms of Securities.............................................11
Section 2.8 Registrar and Paying Agent......................................12
Section 2.9 Paying Agent to Hold Payments In Trust..........................12
Section 2.10 Record Dates....................................................13
Section 2.11 Noteholder Lists................................................14
Section 2.12 Mutilated, Defaced, Destroyed, Lost and Stolen Notes............14
Section 2.13 Treasury Notes..................................................15
Section 2.14 Temporary Notes.................................................15
Section 2.15 Cancellation....................................................16
Section 2.16 Defaulted Interest..............................................16
Section 2.17 CUSIP Numbers...................................................16
ARTICLE 2A.
THE SUBORDINATED SECURITIES
Section 2A.1 Title, Form, Denomination and Execution of Subordinated
Securities......................................................17
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 2A.2 Restrictive Legends.............................................19
Section 2A.3 Authentication of Subordinated Securities.......................20
Section 2A.4 Transfer and Exchange...........................................20
Section 2A.5 Book-Entry Provisions for Restricted Global Subordinated
Securities and Regulation S Global Subordinated Securities......21
Section 2A.6 Special Transfer Provisions.....................................23
Section 2A.7 Terms of Subordinated Securities................................26
ARTICLE 3.
LIQUIDITY PROVIDER AND POLICY PROVIDER; PRIORITY OF DISTRIBUTIONS
Section 3.1 Written Notice of Distribution..................................27
Section 3.2 Priority of Distributions; Subordination........................28
Section 3.3 Other Payments..................................................30
Section 3.4 Payments to Liquidity Provider and Policy Provider..............31
Section 3.5 Liquidity Facility..............................................31
Section 3.6 The Policy......................................................38
Section 3.7 Designated Representatives......................................42
Section 3.8 Controlling Party...............................................43
Section 3.9 Company's Payment Obligations...................................44
Section 3.10 Execution of Support Documents..................................44
Section 3.11 Right of Subordinated Securityholders to Direct Policy
Provider........................................................44
ARTICLE 4.
REDEMPTIONS
Section 4.1 Optional Redemption.............................................46
Section 4.2 Redemption Notice to Trustee....................................46
Section 4.3 Selection of Notes to be Redeemed...............................47
Section 4.4 Notice of Redemption............................................47
Section 4.5 Effect of Notice of Redemption..................................48
Section 4.6 Deposit of Redemption Price.....................................48
Section 4.7 Notes Redeemed in Part..........................................48
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE 5.
COVENANTS
Section 5.1 Payment of Notes................................................48
Section 5.2 Maintenance of Office or Agency.................................49
Section 5.3 Corporate Existence.............................................49
Section 5.4 Company Not to Consolidate, Merge, Convey or Transfer Except
Under Certain Conditions........................................50
Section 5.5 Reports by the Company..........................................51
ARTICLE 6.
INDEMNIFICATION
Section 6.1 General Indemnity...............................................51
Section 6.2 Separate Agreement..............................................54
Section 6.3 Notice..........................................................54
Section 6.4 Notice of Proceedings; Defense of Claims; Limitations...........54
Section 6.5 Information.....................................................55
Section 6.6 Subrogation; Further Assurances.................................55
Section 6.7 Refunds.........................................................56
ARTICLE 7.
DEFAULT AND REMEDIES
Section 7.1 Events of Default...............................................56
Section 7.2 Acceleration....................................................57
Section 7.3 Other Remedies..................................................58
Section 7.4 Waiver of Past Defaults.........................................58
Section 7.5 Control of Remedies.............................................59
Section 7.6 Limitation on Suits.............................................59
Section 7.7 Rights of Holders to Receive Payment............................60
Section 7.8 Collection Suit by Trustee......................................60
Section 7.9 Trustee May File Proofs of Claim................................60
Section 7.10 Application of Proceeds.........................................61
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 7.11 Undertaking for Costs...........................................61
Section 7.12 Restoration of Rights on Abandonment of Proceedings.............61
Section 7.13 Powers and Remedies Cumulative; Delay or Omission Not Waiver
of Default......................................................62
Section 7.14 Certain Limits on Remedies by Policy Provider...................62
ARTICLE 8.
TRUSTEE
Section 8.1 Duties of Trustee...............................................63
Section 8.2 Rights of Trustee...............................................64
Section 8.3 Individual Rights of Trustee....................................64
Section 8.4 Trustee's Disclaimer............................................64
Section 8.5 Notice of Defaults..............................................65
Section 8.6 Reports by Trustee to Holders...................................65
Section 8.7 Compensation and Indemnity......................................65
Section 8.8 Replacement of Trustee..........................................66
Section 8.9 Successor Trustee by Merger, etc................................67
Section 8.10 Eligibility; Disqualification...................................67
Section 8.11 Preferential Collection of Claims Against Company...............67
Section 8.12 Other Capacities................................................67
Section 8.13 Trust Accounts..................................................68
Section 8.14 Deposits to the Collection Account..............................69
Section 8.15 Certain Payments................................................69
ARTICLE 9.
DISCHARGE OF INDENTURE
Section 9.1 Discharge of Liability on Notes.................................69
Section 9.2 Application of Trust Money......................................70
Section 9.3 Repayment to Company............................................70
Section 9.4 Reinstatement...................................................70
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
ARTICLE 10.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 10.1 Without Consent of the Controlling Party or Holders.............71
Section 10.2 With Consent of the Controlling Party, Liquidity Provider
and Holders.....................................................72
Section 10.3 Compliance with Trust Indenture Act.............................74
Section 10.4 Revocation and Effect of Consents...............................74
Section 10.5 Notation on or Exchange of Notes................................75
Section 10.6 Trustee to Sign Amendments, etc.................................75
Section 10.7 Effect of Supplement and/or Amendment...........................75
ARTICLE 11.
SECURITY
Section 11.1 Other Operative Documents.......................................75
Section 11.2 Opinions, Certificates and Appraisals...........................76
Section 11.3 Authorization of Actions to be Taken by the Trustee Under
the Operative Documents.........................................77
Section 11.4 Authorization of Receipt of Funds by the Trustee Under the
Operative Documents and the Support Documents...................77
Section 11.5 Agreement as to Fair Market Value...............................77
ARTICLE 12.
MISCELLANEOUS
Section 12.1 Conflict with Trust Indenture Act of 1939.......................78
Section 12.2 Notices; Waivers................................................78
Section 12.3 Communications By Holders With Other Holders....................80
Section 12.4 Certificate and Opinion as to Conditions Precedent..............80
Section 12.5 Statements Required In Certificate or Opinion...................80
Section 12.6 Rules By Trustee, Paying Agent, Registrar.......................81
Section 12.7 Effect of Headings..............................................81
Section 12.8 Governing Law...................................................81
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 12.9 Quiet Enjoyment.................................................82
Section 12.10 No Recourse Against Others......................................82
Section 12.11 Benefits of Indenture and the Securities Restricted.............82
Section 12.12 Successors and Assigns..........................................82
Section 12.13 Counterpart Originals...........................................82
Section 12.14 Severability....................................................82
APPENDIX I Definitions
EXHIBIT A Form of Security
EXHIBIT B Form of Certificate to Request Removal of Restricted Legend
EXHIBIT C Form of Certificate to be Delivered by an Institutional
Accredited Investor
EXHIBIT D Form of Subordinated Security
AMENDED AND RESTATED INDENTURE dated as of May 9, 2003, among CONTINENTAL
AIRLINES, INC., a Delaware corporation (the "COMPANY"), WILMINGTON TRUST
COMPANY, a Delaware banking corporation ("WTC"), not in its individual capacity
but solely as Trustee (the "TRUSTEE"), MORGAN STANLEY CAPITAL SERVICES INC., a
Delaware corporation ("MSCS"), as Liquidity Provider, and MBIA INSURANCE
CORPORATION, a New York insurance company, as Policy Provider, which amends and
restates the Indenture, dated as of December 6, 2002 (the "ORIGINAL INDENTURE"),
among the Company, the Trustee, the Liquidity Provider and the Policy Provider.
Pursuant to the Original Indenture, the Company issued, authenticated and
delivered the Initial Securities. Now, the Company has elected to issue,
authenticate and deliver a series of Subordinated Securities as permitted by the
Original Indenture, and in connection with such issuance, the parties hereto
wish to amend and restate the Original Indenture as set forth herein. The
Company has obtained Ratings Confirmation with respect to such issuance and
amendment.
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Notes (except as otherwise
provided herein).
ARTICLE 1.
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1 DEFINITIONS.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed to such terms in Section 1 of the Definitions Appendix
attached hereto as Appendix I, which shall be a part of this Indenture as if
fully set forth in this place.
Section 1.2 RULES OF CONSTRUCTION.
The rules of construction for this Indenture are set forth in Section 2 of
the Definitions Appendix.
ARTICLE 2.
THE SECURITIES
Section 2.1 TITLE, FORM, DENOMINATION AND EXECUTION OF SECURITIES.
(a) The Initial Securities shall be known as the "INITIAL FLOATING RATE
SECURED NOTES DUE 2007" and the Exchange Securities shall be known as the
"EXCHANGE FLOATING RATE SECURED NOTES DUE 2007", in each case, of the Company.
Each Security 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 Indenture 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 Company or the Officers
executing the Securities, as evidenced by the Company's or the Officers'
execution of the Securities.
(b) The Initial Securities 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 Security may be issued in a different
denomination. The Exchange Securities will be issued in denominations of $1,000
or integral multiples thereof, except that one Security may be issued in a
different denomination. Each Security shall be dated the date of its
authentication. The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to $200,000,000
except for Securities authenticated and delivered upon registration of transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Sections
2.4, 2.6, 2.12, 2.14 or 10.5. The issuance of the Securities hereunder shall be
collectively considered a single extension of credit to the Company.
(c) The Initial Securities offered and sold in reliance on Rule 144A shall
be issued, and will only be available, in the form of one or more global
Securities substantially in the form of Exhibit A hereto with such applicable
legends as are provided for in Section 2.2 (each, a "RESTRICTED GLOBAL
SECURITY") duly executed by the Company and duly authenticated by the Trustee as
herein provided. The Restricted Global Securities shall be in definitive, fully
registered form without interest coupons 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 Security 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 Security, as provided
in Section 2.6 hereof, which adjustments shall be conclusive as to the aggregate
principal amount of any such Global Security.
(d) The Initial Securities offered and sold outside the United States in
reliance on Regulation S shall be issued, and will only be available, in the
form of one or more global Securities substantially in the form of Exhibit A
hereto (each, a "REGULATION S GLOBAL SECURITY") duly executed by the Company and
duly authenticated by the Trustee as herein provided. The Regulation S Global
Securities shall be in definitive, fully registered form without interest
coupons 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 to the respective accounts of beneficial owners of
such Securities (or to such other accounts as they may direct) at Morgan
Guaranty Trust Company of New York, Brussels office, as operator of Euroclear or
Clearstream. As used herein, the term "RESTRICTED PERIOD", with respect to the
Regulation S Global Securities 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 Securities are first offered to persons other than
distributors (as defined in Regulation S) in reliance on Regulation S and (ii)
the Closing Date. The aggregate principal amount of any Regulation S Global
Security 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 Security, as
provided in Section 2.6 hereof, which adjustments shall be conclusive as to the
aggregate principal amount of any such Global Security. The Restricted Global
Security and Regulation S Global Security are sometimes collectively referred to
herein as the "GLOBAL SECURITIES".
(e) Initial Securities offered and sold to any Institutional Accredited
Investor that is not a QIB in a transaction exempt from registration under the
Securities Act (and other than as described in Section 2.1(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 2.2 (the "RESTRICTED DEFINITIVE SECURITIES") duly executed by the
Company and duly authenticated by the Trustee as herein provided. Securities
issued pursuant to Section 2.5(b) in exchange for interests in a Regulation S
Global Security shall be issued in definitive, fully registered form without
interest coupons (the "REGULATION S DEFINITIVE SECURITIES"). The Restricted
Definitive Securities and the Regulation S Definitive Securities are sometimes
collectively referred to herein as the "DEFINITIVE SECURITIES".
(f) The Exchange Securities shall be issued in the form of one or more
global Securities substantially in the form of Exhibit A hereto (each, a "GLOBAL
EXCHANGE SECURITY"), except that (i) the Restricted Legend shall be omitted and
(ii) the Exchange Securities 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 Securities as the Officers of
the Company executing such Exchange Securities on behalf of the Company may
determine, as evidenced by such Officers' execution on behalf of the Company of
such Exchange Securities. The Global Exchange Securities 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 Security 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 Security, which adjustments shall be conclusive as to the
aggregate principal amount of any such Global Exchange Security. Subject to
clauses (i) and (ii) of the first sentence of this Section 2.1(f), the terms
hereof applicable to the Global Securities shall apply to the Global Exchange
Securities, MUTATIS MUTANDIS, unless the context otherwise requires.
(g) The definitive Securities 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 Securities, as evidenced by their execution of such
Securities.
(h) The Securities shall be signed for the Company by the manual or
facsimile signatures of two Officers. If an Officer whose signature is on a
Security no longer holds that office at the time the Trustee authenticates the
Security, the Security shall be valid nevertheless.
Section 2.2 RESTRICTIVE LEGENDS.
All Initial Securities issued pursuant to this Indenture shall be
"RESTRICTED SECURITIES" and shall bear a legend to the following effect (the
"RESTRICTED LEGEND") except as provided in Section 2.6 or unless the Company and
the Trustee determine otherwise consistent with applicable law:
"THIS SECURITY 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 SECURITY 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
SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL
AIRLINES, INC. OR ANY AFFILIATE OF CONTINENTAL AIRLINES, INC. RESELL OR
OTHERWISE TRANSFER THIS SECURITY 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 SECURITY IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS SECURITY OR THE LAST DATE
ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL AIRLINES, INC. OR ANY
AFFILIATE OF CONTINENTAL AIRLINES, INC., THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS SECURITY TO CONTINENTAL AIRLINES, INC. OR ITS
AGENT. 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 INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE
FOREGOING RESTRICTIONS."
Each Global Security and Global Exchange Security shall bear the following
legend on the face thereof:
"UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
CONTINENTAL AIRLINES, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY
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 SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 2.5 AND 2.6 OF THE INDENTURE REFERRED TO HEREIN."
Section 2.3 AUTHENTICATION OF SECURITIES.
(a) Subject to the limits set forth herein, the Trustee shall authenticate
Securities for original issue upon written order of the Company signed by two
Officers. The order shall specify the amount of Securities to be authenticated
and the date on which the original issue of Securities is to be authenticated,
shall provide instructions with respect to the delivery thereof and shall be
accompanied by the documents specified in Section 12.4.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. An authenticating agent may authenticate Securities
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with the Company or
any Affiliate of the Company.
(b) No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose, unless there appears on such Security a
certificate of authentication 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 Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder.
Section 2.4 TRANSFER AND EXCHANGE.
All Securities issued upon any registration of transfer or exchange of
Securities shall be valid obligations of the Company, evidencing the same
interest therein, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
A Securityholder may transfer a Security, or request that a Security be
exchanged for Securities (including, without limitation, subject to the proviso
to this sentence, Exchange Securities) in authorized denominations and in an
aggregate principal amount equal to the principal amount of such Security
surrendered for exchange of other authorized denominations, by surrender of such
Security to the Trustee with the form of transfer notice thereon duly completed
and executed, and otherwise complying with the terms of this Indenture,
including providing evidence of compliance with any restrictions on transfer, in
form satisfactory to the Company, the Trustee and the Registrar; PROVIDED that
exchanges of Initial Securities for Exchange Securities 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 Securityholder only upon, final acceptance and registration of the
transfer by the Registrar in the Register. Prior to the registration of any
transfer of a Security by a Securityholder as provided herein, the Company, the
Registrar, the Paying Agent and the Trustee shall deem and treat the person in
whose name the Security is registered on the Register as the absolute owner and
holder thereof for the purpose of receiving payment of all amounts payable with
respect to such Security and for all other purposes, and none of the Company,
the Registrar, the Paying Agent or the Trustee shall be affected by any notice
to the contrary. Furthermore, DTC shall, by acceptance of a Global Security,
agree that transfers of beneficial interests in such Global Security may be
effected only through a book-entry system maintained by DTC (or its agent) and
that ownership of a beneficial interest in the Security shall be required to be
reflected in a book-entry. When Securities are presented to the Registrar with a
request to register the transfer thereof or to exchange them for other
authorized denominations of a Security in a principal amount equal to the
aggregate principal amount of Securities 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 Company shall execute, and the
Trustee shall authenticate, Securities at the Registrar's request. No service
charge shall be made to a Securityholder for any registration of transfer or
exchange of Securities, but the Company may 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 Securities. All Securities surrendered for
registration of transfer or exchange shall be canceled and subsequently
destroyed by the Trustee.
Section 2.5 BOOK-ENTRY PROVISIONS FOR RESTRICTED GLOBAL SECURITIES AND
REGULATION S GLOBAL SECURITIES.
(a) Members of, or participants in, DTC ("AGENT MEMBERS") shall have no
rights under this Indenture with respect to any Global Security held on their
behalf by DTC, or the Trustee as its custodian, and DTC may be treated by the
Company, the Trustee and any agent of the Trustee as the absolute owner of such
Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, 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 Security. Upon the issuance of any Global Security,
the Registrar or its duly appointed agent shall record DTC as the registered
holder of such Global Security.
(b) Transfers of any Global Security shall be limited to transfers of such
Restricted Global Security or Regulation S Global Security in whole, but not in
part, to DTC. Beneficial interests in the Restricted Global Security and any
Regulation S Global Security may be transferred in accordance with the rules and
procedures of DTC and the provisions of Section 2.6. Beneficial interests in a
Restricted Global Security or a Regulation S Global Security shall be delivered
to all beneficial owners thereof in the form of Restricted Definitive Securities
or Regulation S Definitive Securities, 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 Security or Regulation S Global Security, 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 Security with a
principal amount aggregating not less than a majority of the outstanding
principal amount of the Global Security 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 Securities that is
transferred to a Person who takes delivery in the form of an interest in another
Global Security will, upon such transfer, cease to be an interest in such Global
Security and become an interest in the other Global Security and, accordingly,
will thereafter be subject to all transfer restrictions, if any, and other
procedures applicable to beneficial interests in such other Global Security for
as long as it remains such an interest.
(d) In connection with the transfer of an entire Restricted Global Security
or an entire Regulation S Global Security to the beneficial owners thereof
pursuant to paragraph (b) of this Section 2.5, such Restricted Global Security
or Regulation S Global Security, as the case may be, shall be deemed to be
surrendered to the Trustee for cancellation, and the Company shall execute, and
the Trustee shall authenticate, to each beneficial owner identified by DTC in
exchange for its beneficial interest in such Restricted Global Security or
Regulation S Global Security, as the case may be, an equal aggregate principal
amount of Restricted Definitive Securities or Regulation S Definitive
Securities, as the case may be, of authorized denominations. None of the
Company, the Registrar, the Paying Agent or 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 Securities, the Company and the Trustee shall recognize the Person in
whose name the Definitive Securities are registered in the Register as
Securityholders hereunder.
(e) Any Definitive Security delivered in exchange for an interest in the
Restricted Global Security pursuant to paragraph (b) of this Section 2.5 shall,
except as otherwise provided by paragraph (e) of Section 2.6, bear the
Restricted Legend.
(f) Prior to the expiration of the Restricted Period, any Regulation S
Definitive Security delivered in exchange for an interest in a Regulation S
Global Security pursuant to paragraph (b) of this Section 2.5 shall bear the
Restricted Legend.
(g) The registered holder of any Restricted Global Security or Regulation S
Global Security 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 Indenture or the
Securities.
(h) Neither the Company nor the Trustee shall be liable if the Trustee or
the Company is unable to locate a qualified successor clearing agency.
Section 2.6 SPECIAL TRANSFER PROVISIONS.
Unless and until (i) an Initial Security is sold under an effective Shelf
Registration Statement, or (ii) an Initial Security is exchanged for an Exchange
Security 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 Securities:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The following
provisions shall apply with respect to the registration of any proposed transfer
of a Security to any Institutional Accredited Investor that is neither a QIB nor
a Non-U.S. Person:
(i) The Registrar shall register the transfer of any Security, whether
or not bearing the Restricted Legend, only if (x) the requested transfer is
at least two years after the later of the (A) Closing Date and (B) the last
date on which such Security was held by the Company or any affiliate of the
Company or (y) the proposed transferor is an Initial Purchaser who is
transferring Securities 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
Securities being transferred is at least $100,000. Except as provided in
the foregoing sentence, the Registrar shall not register the transfer of
any Security to any Institutional Accredited Investor that 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 Security, 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
Security in an amount equal to the principal amount of the beneficial
interest in such Restricted Global Security to be transferred, and the
Company shall execute and the Trustee shall authenticate and deliver to the
transferor or at its direction, one or more Restricted Definitive
Securities 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 Security to a QIB
(excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of a Restricted
Definitive Security, or of an interest in any Regulation S Global Security
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 Security stating, or has otherwise
advised the Company, 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 Security stating, or has otherwise advised the Company, the Trustee
and the Registrar in writing, that it is purchasing the Initial Security
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 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 Security in an amount equal to the principal
amount of the Restricted Definitive Securities or interests in such
Regulation S Global Security, as the case may be, being transferred, and
the Trustee shall cancel such Definitive Securities or decrease the amount
of such Regulation S Global Security so transferred.
(c) TRANSFERS OF INTERESTS IN THE REGULATION S GLOBAL SECURITY OR
REGULATION S DEFINITIVE SECURITIES. After the expiration of the Restricted
Period, the Registrar shall register any transfer of interests in any Regulation
S Global Security or Regulation S Definitive Security without requiring any
additional certification. Until the expiration of the Restricted Period,
interests in the Regulation S Global Security may only be held through Agent
Members acting for and on behalf of Euroclear and Clearstream.
(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
Security 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 Security 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 Security
to be transferred is a Restricted Definitive Security or an interest in a
Restricted Global Security, 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 Security in an amount equal to the principal amount
of the beneficial interest in such Restricted Global Security 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 Security in an amount equal to the
principal amount of the Restricted Definitive Security or the Restricted
Global Security, as the case may be, to be transferred, and the Trustee
shall cancel the Definitive Security, if any, so transferred or decrease
the amount of such Restricted Global Security.
(e) RESTRICTED LEGEND. Upon the transfer, exchange or replacement of
Securities not bearing the Restricted Legend, the Registrar shall deliver
Securities that do not bear the Restricted Legend. Upon the transfer, exchange
or replacement of Securities bearing the Restricted Legend, the Registrar shall
deliver only Securities that bear the Restricted Legend unless either (i) the
circumstances contemplated by paragraph (d)(ii) of this Section 2.6 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 Security bearing the Restricted Legend,
each Holder of such Security acknowledges the restrictions on transfer of such
Security set forth in such Restricted Legend and otherwise in this Indenture and
agrees that it will transfer such Security only as provided in such Restricted
Legend and otherwise in this Indenture. The Registrar shall not register a
transfer of any Security unless such transfer complies with the restrictions on
transfer, if any, of such Security set forth in such Restricted Legend and
otherwise in this Indenture. In connection with any transfer of Securities, each
Securityholder agrees by its acceptance of the Securities 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 2; 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 Securities remain Outstanding, the Registrar shall
retain copies of all letters, notices and other written communications received
pursuant to Section 2.5 or this Section 2.6. 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 2.7 TERMS OF SECURITIES.
The outstanding principal amount of the Securities shall be due on December
6, 2007. The Securities shall bear interest on the unpaid principal amount
thereof from time to time outstanding from the most recent Interest Payment Date
to which interest has been paid (or, if no interest has been paid, from the
Closing Date) at the rate per annum for each Interest Period equal to the Debt
Rate for such Interest Period (calculated on the basis of a year of 360 days and
actual days elapsed during the period for which such amount accrues). Accrued
interest on the Securities shall be payable in arrears on each Interest Payment
Date, until the principal amount of the Securities has been paid in full,
PROVIDED that if such payment in full is not made on an Interest Payment Date,
accrued interest shall be paid on the date of such payment in full rather than
the next Interest Payment Date. Interest on the Securities shall accrue with
respect to the first but not the last day of each Interest Period. The
Securities shall bear interest, payable on demand, at the Payment Due Rate
(calculated on the basis of a year of 360 days and actual days elapsed during
the period for which such amount accrues) on any part of the principal amount,
and, to the extent permitted by applicable Law, interest and any other amounts
payable thereunder not paid when due, in each case for the period the same is
overdue. Amounts under any Security shall be overdue if not paid when due
(whether at stated maturity, by acceleration or otherwise). Notwithstanding
anything to the contrary contained herein, if any date on which a payment under
any Security becomes due and payable is not a Business Day then such payment
shall not be made on such scheduled date but shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest payable thereunder.
Section 2.8 REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes eligible for
transfer or exchange may be presented for registration of transfer or for
exchange ("REGISTRAR") and an office or agency where Notes may be presented for
payment ("PAYING AGENT"). The Registrar shall keep a register of the Notes and
of their transfer and exchange ("REGISTER"). Such Register shall be in written
form in the English language. At all reasonable times such Register shall be
open for inspection by the Trustee. The Company may have one or more
co-Registrars and one or more additional paying agents. The term "Paying Agent"
includes any additional paying agent.
The Company may enter into an appropriate agency agreement with any Agent
not a party to this Indenture. The agreement shall implement the provisions of
this Indenture that relate to such Agent. The Company shall notify the Trustee
of the name and address of any such Agent. If the Company fails to maintain a
Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints WTC as Registrar and Paying Agent.
Section 2.9 PAYING AGENT TO HOLD PAYMENTS IN TRUST.
Each Paying Agent shall hold in trust for the benefit of Noteholders all
Payments held by the Paying Agent for the payment of principal of, interest on,
and Premium, if any, and Break Amount, if any, with respect to, the Notes and
shall notify the Trustee of any default by the Company in making any such
payment. The Company at any time may require a Paying Agent to pay all Payments
held by it to the Trustee and account for any funds disbursed and the Trustee
may at any time during the continuance of any Payment Default, upon written
request to a Paying Agent, require such Paying Agent to pay all Payments held by
it to the Trustee and to account for any Payments distributed. Upon receipt of
such Payment, the Trustee shall immediately deposit all such amounts in the
Collection Account. Upon doing so the Paying Agent shall have no further
liability for the Payments.
The Paying Agent, as agent for the Company, shall exclude and withhold at
the appropriate rate from each payment of principal of, interest on, Premium, if
any, Break Amount, if any, and other amounts due hereunder or under each Note
(and such exclusion and withholding shall constitute payment in respect of such
Note) any and all United States withholding taxes applicable thereto as required
by Law. The Paying Agent agrees to act as such withholding agent and, in
connection therewith, whenever any present or future United States taxes or
similar charges are required to be withheld with respect to any amounts payable
hereunder or in respect of the Notes, to withhold such amounts and timely pay
the same to the appropriate authority in the name of and on behalf of the
Noteholders, that it will file any necessary United States withholding tax
returns or statements when due, and that as promptly as possible after the
payment thereof it will deliver to each Noteholder (with a copy to the Company)
appropriate receipts showing the payment thereof, together with such additional
documentary evidence as any such Noteholder may reasonably request from time to
time.
The Company will cause each Paying Agent other than the Trustee to execute
and deliver to the Trustee an instrument in which such Paying Agent shall agree
with the Trustee, subject to the provisions of this Section, that such Paying
Agent will:
(a) hold all Payments received by it as such agent for the payment of the
principal of, interest on, Premium, if any, or Break Amount, if any, with
respect to the Notes in trust for the benefit of the Persons entitled thereto
until such Payments shall be paid to such Persons or otherwise disposed of as
herein provided;
(b) promptly give the Trustee notice of any failure by the Company to make
any payment of the principal of, interest on, Premium, if any, or Break Amount,
if any, with respect to, the Notes when the same shall be due and payable; and
(c) at any time during the continuance of any such failure, upon the
written request of the Trustee, forthwith pay to the Trustee all Payments so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, direct any Paying
Agent to pay to the Trustee all Payments held in trust by such Paying Agent,
such Payments to be held by the Trustee upon the same trusts as those upon which
such Payments 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 Payments held by it as Paying Agent.
Any Payments deposited with the Trustee or any Paying Agent in trust for
the payment of the principal of, interest on, or Premium, if any, or Break
Amount, if any, with respect to, any Note and unclaimed for two (2) years after
such principal, interest, Premium, if any, or Break Amount, if any, has become
due and payable shall be paid to the Company on its request, unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, and the Holder of such Note shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof and all liability
of the Trustee or such Paying Agent with regard to such Payments shall thereupon
cease.
Section 2.10 RECORD DATES.
The Person in whose name any Note is registered at the close of business on
any Record Date with respect to any Interest Payment Date shall be entitled to
receive the interest payable on such Interest Payment Date to the extent
provided by such Note, except if and to the extent the Company shall default in
the payment of the interest due on such Interest Payment Date, in which case
defaulted interest shall be paid to the Person in whose name the Outstanding
Note is registered at the close of business on the subsequent record date (which
shall be not less than five (5) Business Days prior to the date of payment of
such defaulted interest) established by notice given by mail by or on behalf of
the Company to the Holders of Notes of the Series suffering such default not
less than fifteen (15) days preceding such subsequent record date (a "SPECIAL
RECORD DATE") pursuant to Section 2.16.
Section 2.11 NOTEHOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Noteholders of each Series. If the Trustee is not the Registrar, the Company
shall furnish to the Trustee on or before each Distribution Date and at such
other times as the Trustee may request in writing a list in such form and as of
such date as the Trustee may reasonably require of the names and addresses of
Noteholders of each Series.
Section 2.12 MUTILATED, DEFACED, DESTROYED, LOST AND STOLEN NOTES.
In case any temporary or definitive Note shall become mutilated, defaced or
be apparently destroyed, lost or stolen, subject to compliance with the
following sentence and in the absence of notice to the Company or the Trustee
that such Note has been acquired by a bona fide purchaser, the Company shall
execute, and the Trustee shall authenticate and deliver, a new Note of the same
Series, bearing a number not contemporaneously outstanding, in exchange and
substitution for the mutilated or defaced Note, or in lieu of and substitution
for the Note so apparently destroyed, lost or stolen. In every case the
applicant for a substitute Note shall furnish to the Company and to the Trustee
and any agent of the Company or the Trustee such security or indemnity as may be
required by them to indemnify and defend and to save each of them harmless and,
in every case of destruction, loss or theft, evidence to their satisfaction of
the apparent destruction, loss or theft of such Note and of the ownership
thereof.
Upon the issuance of any substitute Note pursuant to the preceding
paragraph, the Company may require the payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Trustee) connected
therewith. In case any Note which has matured or is about to mature, shall
become mutilated or defaced or be apparently destroyed, lost or stolen, the
Company may, instead of issuing a substitute Note, pay or authorize the payment
of such Note (without surrender of such Note except in the case of a mutilated
or defaced Note), as applicable, if the applicant for such payment shall furnish
to the Company and to the Trustee and any agent of the Company or the Trustee
such security or indemnity as any of them may require to save each of them
harmless from all risks, however remote, and, in every case of apparent
destruction, loss or theft, the applicant shall also furnish to the Company and
the Trustee and any agent of the Company or the Trustee evidence to their
satisfaction of the apparent destruction, loss or theft of such Note and of the
ownership thereof.
Every substitute Note issued pursuant to the provisions of this Section by
virtue of the fact that any Note is apparently destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the apparently destroyed, lost or stolen Note shall be at any time enforceable
by anyone and shall be entitled to all the benefits of (but shall also be
subject to all the limitations of rights set forth in) this Indenture equally
and proportionately with any and all other Notes of the same Series duly
authenticated and delivered hereunder. Every substitute Note issued pursuant to
the provisions of this Section 2.12 by virtue of the fact that any Note is
mutilated or defaced shall constitute an additional contractual obligation of
the Company and shall be entitled to all the benefits of (but shall also be
subject to all the limitations of rights set forth in) this Indenture equally
and proportionately with any and all other Notes of the same Series duly
authenticated and delivered hereunder. All Securities shall be held and owned
upon the express condition that, to the extent permitted by law, the foregoing
provisions are exclusive with respect to the replacement or payment of mutilated
or defaced or apparently destroyed, lost or stolen Securities and shall preclude
any and all other rights or remedies notwithstanding any law or statute existing
or hereafter enacted to the contrary with respect to the replacement or payment
of negotiable instruments or other securities without their surrender.
Section 2.13 TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes or Series of Notes have given or concurred in any amendment, request,
demand, authorization, direction, notice, consent or waiver under this Indenture
or any other Operative Document, Notes owned by the Company or any of its
Affiliates shall be disregarded and deemed not to be Outstanding for the purpose
of any such determination, except that, for the purposes of determining whether
the Trustee shall be protected in relying on any such amendment, request,
demand, authorization, direction, notice, consent or waiver, only Notes which
the Trustee knows are so owned shall be so disregarded. Notes so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee that neither the Company nor any
of its Affiliates is affiliated with the pledgee or any Affiliate of the pledgee
and that the pledgee has the present right (subject to no contrary obligation or
understanding) so to act with respect to the Notes as a Holder independently of
any direction by or interest of the Company or any of its Affiliates. In case of
a dispute as to such right, the Trustee in good faith shall be entitled to rely
upon the advice of counsel, including counsel for the Company. Upon request of
the Trustee, the Company shall promptly furnish to the Trustee a certificate of
an Officer listing and identifying all Notes, if any, known by the Company to be
owned or held by or for the account of the Company or any of its Affiliates; and
subject to Sections 8.1 and 8.2 herein, the Trustee shall be entitled to accept
such certificate as conclusive evidence of the facts therein set forth and of
the fact that all Notes not listed therein are Outstanding for the purpose of
any such determination.
Section 2.14 TEMPORARY NOTES.
Until definitive Notes of any Series are ready for delivery, the Company
may prepare, and, upon written order of the Company, the Trustee shall
authenticate, temporary Notes of such Series, in any authorized denominations.
Temporary Notes of any Series shall be substantially of the tenor of the
definitive Notes of such Series in lieu of which they are issued but may have
variations that the Company considers appropriate for temporary Notes. Without
unreasonable delay, the Company shall prepare and the Trustee shall authenticate
and deliver definitive Notes in exchange for temporary Notes. Until so
exchanged, the temporary Notes shall be entitled to the same benefits under this
Indenture as definitive Notes of the same Series.
Section 2.15 CANCELLATION.
The Company may at any time deliver Notes to the Trustee for cancellation.
The Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for transfer, exchange or payment. The Trustee and no one
else shall cancel all Notes surrendered for transfer, exchange, payment or
cancellation. The Company may not issue new Notes to replace Notes it has paid
or which have been delivered to the Trustee for cancellation. The Trustee shall
destroy all canceled Notes and, if requested, deliver a certificate of such
destruction to the Company. If the Company shall acquire any of the Notes, such
acquisition shall not operate as a satisfaction of the indebtedness represented
by such Notes unless and until the same are delivered to the Trustee for
cancellation.
Section 2.16 DEFAULTED INTEREST.
If any payment of interest on the Notes due on any Interest Payment Date
becomes an Overdue Scheduled Payment, the Company shall pay such defaulted
interest, plus interest on the defaulted interest, at the Payment Due Rate (in
the case of the Securities) or the Subordinated Payment Due Rate (in the case of
the Subordinated Securities) to the extent permitted by law and the terms
thereof, to the persons who are Noteholders of the Series suffering such default
on a subsequent Special Record Date. The Company shall fix the Special Record
Date and payment date. If there is an Overdue Scheduled Payment with respect to
both Series of Notes attributable to interest originally due on the same
Interest Payment Date, the Special Record Date and payment date applicable to
each Series shall be the same. At least fifteen (15) days before the Special
Record Date, the Company shall mail to each Noteholder of the Series suffering
such default a notice that states the Special Record Date, the payment date and
the amount of defaulted interest to be paid.
Section 2.17 CUSIP NUMBERS.
The Company in issuing the Notes may use "CUSIP" numbers (if then generally
in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of
redemption as a convenience to Holders; PROVIDED, HOWEVER, that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers.
ARTICLE 2A.
THE SUBORDINATED SECURITIES
Section 2A.1 TITLE, FORM, DENOMINATION AND EXECUTION OF SUBORDINATED
SECURITIES.
(a) The Initial Subordinated Securities shall be known as the "INITIAL
FLOATING RATE SECURED SUBORDINATED NOTES DUE 2007" and the Exchange Subordinated
Securities shall be known as the "EXCHANGE FLOATING RATE SECURED SUBORDINATED
NOTES DUE 2007", in each case, of the Company. Each Subordinated Security shall
be substantially in the form set forth as Exhibit D hereto, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture 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 Company or the Officers executing
the Subordinated Securities, as evidenced by the Company's or the Officers'
execution of the Subordinated Securities.
(b) The Initial Subordinated Securities 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 Subordinated
Security may be issued in a different denomination. The Exchange Subordinated
Securities will be issued in denominations of $1,000 or integral multiples
thereof, except that one Subordinated Security may be issued in a different
denomination. Each Subordinated Security shall be dated the date of its
authentication. The aggregate principal amount of Subordinated Securities which
may be authenticated and delivered under this Indenture is limited to
$100,000,000 except for Subordinated Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Subordinated Securities pursuant to Sections 2.12, 2.14, 2A.4, 2A.6 or 10.5. The
issuance of the Subordinated Securities hereunder shall be collectively
considered a single extension of credit to the Company.
(c) The Initial Subordinated Securities offered and sold in reliance on
Rule 144A shall be issued, and will only be available, in the form of one or
more global Subordinated Securities substantially in the form of Exhibit D
hereto with such applicable legends as are provided for in Section 2A.2 (each, a
"RESTRICTED GLOBAL SUBORDINATED SECURITY") duly executed by the Company and duly
authenticated by the Trustee as herein provided. The Restricted Global
Subordinated Securities shall be in definitive, fully registered form without
interest coupons 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 Subordinated Security 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 Subordinated Security,
as provided in Section 2A.6 hereof, which adjustments shall be conclusive as to
the aggregate principal amount of any such Global Subordinated Security.
(d) The Initial Subordinated Securities offered and sold outside the United
States in reliance on Regulation S shall be issued, and will only be available,
in the form of one or more global Subordinated Securities substantially in the
form of Exhibit D hereto (each, a "REGULATION S GLOBAL SUBORDINATED SECURITY")
duly executed by the Company and duly authenticated by the Trustee as herein
provided. The Regulation S Global Subordinated Securities shall be in
definitive, fully registered form without interest coupons 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 to
the respective accounts of beneficial owners of such Subordinated Securities (or
to such other accounts as they may direct) at Morgan Guaranty Trust Company of
New York, Brussels office, as operator of Euroclear or Clearstream. As used
herein, the term "RESTRICTED PERIOD", with respect to the Regulation S Global
Subordinated Securities 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 Subordinated Securities are first offered to persons other than
distributors (as defined in Regulation S) in reliance on Regulation S and (ii)
the Subordinated Closing Date. The aggregate principal amount of any Regulation
S Global Subordinated Security 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 Subordinated Security, as provided in Section 2A.6 hereof, which
adjustments shall be conclusive as to the aggregate principal amount of any such
Global Subordinated Security. The Restricted Global Subordinated Security and
Regulation S Global Subordinated Security are sometimes collectively referred to
herein as the "GLOBAL SUBORDINATED SECURITIES".
(e) Initial Subordinated Securities offered and sold to any Institutional
Accredited Investor that is not a QIB in a transaction exempt from registration
under the Securities Act (and other than as described in Section 2A.1(d)) shall
be issued substantially in the form of Exhibit D hereto in definitive, fully
registered form without interest coupons with such applicable legends as are
provided for in Section 2A.2 (the "RESTRICTED DEFINITIVE SUBORDINATED
SECURITIES") duly executed by the Company and duly authenticated by the Trustee
as herein provided. Subordinated Securities issued pursuant to Section 2A.5(b)
in exchange for interests in a Regulation S Global Subordinated Security shall
be issued in definitive, fully registered form without interest coupons (the
"REGULATION S DEFINITIVE SUBORDINATED SECURITIES"). The Restricted Definitive
Subordinated Securities and the Regulation S Definitive Subordinated Securities
are sometimes collectively referred to herein as the "DEFINITIVE SUBORDINATED
SECURITIES".
(f) The Exchange Subordinated Securities shall be issued in the form of one
or more global Subordinated Securities substantially in the form of Exhibit D
hereto (each, a "GLOBAL EXCHANGE SUBORDINATED SECURITY"), except that (i) the
Restricted Legend shall be omitted and (ii) the Exchange Subordinated Securities
shall contain such appropriate insertions, omissions, substitutions and other
variations from the form set forth in Exhibit D hereto relating to the nature of
the Exchange Subordinated Securities as the Officers of the Company executing
such Exchange Subordinated Securities on behalf of the Company may determine, as
evidenced by such Officers' execution on behalf of the Company of such Exchange
Subordinated Securities. The Global Exchange Subordinated Securities 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 Subordinated Security 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 Subordinated Security,
which adjustments shall be conclusive as to the aggregate principal amount of
any such Global Exchange Subordinated Security. Subject to clauses (i) and (ii)
of the first sentence of this Section 2A.1(f), the terms hereof applicable to
the Global Subordinated Securities shall apply to the Global Exchange
Subordinated Securities, MUTATIS MUTANDIS, unless the context otherwise
requires.
(g) The definitive Subordinated Securities 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 Subordinated Securities, as evidenced by their
execution of such Subordinated Securities.
(h) The Subordinated Securities shall be signed for the Company by the
manual or facsimile signatures of two Officers. If an Officer whose signature is
on a Subordinated Security no longer holds that office at the time the Trustee
authenticates the Subordinated Security, the Subordinated Security shall be
valid nevertheless.
Section 2A.2 RESTRICTIVE LEGENDS.
All Initial Subordinated Securities issued pursuant to this Indenture shall
be "RESTRICTED SUBORDINATED SECURITIES" and shall bear the Restricted Legend.
Each Global Subordinated Security and Global Exchange Subordinated Security
shall bear the following legend on the face thereof:
"UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO
CONTINENTAL AIRLINES, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY
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 SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 2A.5 AND 2A.6 OF THE INDENTURE REFERRED TO HEREIN."
Section 2A.3 AUTHENTICATION OF SUBORDINATED SECURITIES.
(a) Subject to the limits set forth herein, the Trustee shall authenticate
Subordinated Securities for original issue upon written order of the Company
signed by two Officers. The order shall specify the amount of Subordinated
Securities to be authenticated and the date on which the original issue of
Subordinated Securities is to be authenticated, shall provide instructions with
respect to the delivery thereof and shall be accompanied by the documents
specified in Section 12.4.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Subordinated Securities. An authenticating agent may
authenticate Subordinated Securities whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with the Company or any Affiliate of the Company.
(b) No Subordinated Security shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there appears on
such Subordinated Security 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 Subordinated
Security shall be conclusive evidence, and the only evidence, that such
Subordinated Security has been duly authenticated and delivered hereunder
Section 2A.4 TRANSFER AND EXCHANGE.
All Subordinated Securities issued upon any registration of transfer or
exchange of Subordinated Securities shall be valid obligations of the Company,
evidencing the same interest therein, and entitled to the same benefits under
this Indenture, as the Subordinated Securities surrendered upon such
registration of transfer or exchange.
A Subordinated Securityholder may transfer a Subordinated Security, or
request that a Subordinated Security be exchanged for Subordinated Securities
(including, without limitation, subject to the proviso to this sentence,
Exchange Subordinated Securities) in authorized denominations and in an
aggregate principal amount equal to the principal amount of such Subordinated
Security surrendered for exchange of other authorized denominations, by
surrender of such Subordinated Security to the Trustee with the form of transfer
notice thereon duly completed and executed, and otherwise complying with the
terms of this Indenture, including providing evidence of compliance with any
restrictions on transfer, in form satisfactory to the Company, the Trustee and
the Registrar; PROVIDED that exchanges of Initial Subordinated Securities for
Exchange Subordinated Securities 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
Subordinated Securityholder only upon, final acceptance and registration of the
transfer by the Registrar in the Register. Prior to the registration of any
transfer of a Subordinated Security by a Subordinated Securityholder as provided
herein, the Company, the Registrar, the Paying Agent and the Trustee shall deem
and treat the person in whose name the Subordinated Security is registered on
the Register as the absolute owner and holder thereof for the purpose of
receiving payment of all amounts payable with respect to such Subordinated
Security and for all other purposes, and none of the Company, the Registrar, the
Paying Agent or the Trustee shall be affected by any notice to the contrary.
Furthermore, DTC shall, by acceptance of a Global Subordinated Security, agree
that transfers of beneficial interests in such Global Subordinated Security may
be effected only through a book-entry system maintained by DTC (or its agent)
and that ownership of a beneficial interest in the Subordinated Security shall
be required to be reflected in a book-entry. When Subordinated Securities are
presented to the Registrar with a request to register the transfer thereof or to
exchange them for other authorized denominations of a Subordinated Security in a
principal amount equal to the aggregate principal amount of Subordinated
Securities 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 Company shall execute, and the
Trustee shall authenticate, Subordinated Securities at the Registrar's request.
No service charge shall be made to a Subordinated Securityholder for any
registration of transfer or exchange of Subordinated Securities, but the Company
may 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 Subordinated
Securities. All Subordinated Securities surrendered for registration of transfer
or exchange shall be canceled and subsequently destroyed by the Trustee.
Section 2A.5 BOOK-ENTRY PROVISIONS FOR RESTRICTED GLOBAL SUBORDINATED
SECURITIES AND REGULATION S GLOBAL SUBORDINATED SECURITIES.
(a) Agent Members shall have no rights under this Indenture with respect to
any Global Subordinated Security held on their behalf by DTC, or the Trustee as
its custodian, and DTC may be treated by the Company, the Trustee and any agent
of the Trustee as the absolute owner of such Global Subordinated Security for
all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, 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 Subordinated
Security. Upon the issuance of any Global Subordinated Security, the Registrar
or its duly appointed agent shall record DTC as the registered holder of such
Global Subordinated Security.
(b) Transfers of any Global Subordinated Security shall be limited to
transfers of such Restricted Global Subordinated Security or Regulation S Global
Subordinated Security in whole, but not in part, to DTC. Beneficial interests in
the Restricted Global Subordinated Security and any Regulation S Global
Subordinated Security may be transferred in accordance with the rules and
procedures of DTC and the provisions of Section 2A.6. Beneficial interests in a
Restricted Global Subordinated Security or a Regulation S Global Subordinated
Security shall be delivered to all beneficial owners thereof in the form of
Restricted Definitive Subordinated Securities or Regulation S Definitive
Subordinated Securities, 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 Subordinated Security or Regulation S Global Subordinated Security, 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
Subordinated Security with a principal amount aggregating not less than a
majority of the outstanding principal amount of the Global Subordinated Security
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 Subordinated Securities
that is transferred to a Person who takes delivery in the form of an interest in
another Global Subordinated Security will, upon such transfer, cease to be an
interest in such Global Subordinated Security and become an interest in the
other Global Subordinated Security and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Subordinated Security for as long as
it remains such an interest.
(d) In connection with the transfer of an entire Restricted Global
Subordinated Security or an entire Regulation S Global Subordinated Security to
the beneficial owners thereof pursuant to paragraph (b) of this Section 2A.5,
such Restricted Global Subordinated Security or Regulation S Global Subordinated
Security, as the case may be, shall be deemed to be surrendered to the Trustee
for cancellation, and the Company shall execute, and the Trustee shall
authenticate, to each beneficial owner identified by DTC in exchange for its
beneficial interest in such Restricted Global Subordinated Security or
Regulation S Global Subordinated Security, as the case may be, an equal
aggregate principal amount of Restricted Definitive Subordinated Securities or
Regulation S Definitive Subordinated Securities, as the case may be, of
authorized denominations. None of the Company, the Registrar, the Paying Agent
or 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 Subordinated
Securities, the Company and the Trustee shall recognize the Person in whose name
the Definitive Subordinated Securities are registered in the Register as
Subordinated Securityholders hereunder.
(e) Any Definitive Subordinated Security delivered in exchange for an
interest in the Restricted Global Subordinated Security pursuant to paragraph
(b) of this Section 2A.5 shall, except as otherwise provided by paragraph (e) of
Section 2A.6, bear the Restricted Legend.
(f) Prior to the expiration of the Restricted Period, any Regulation S
Definitive Subordinated Security delivered in exchange for an interest in a
Regulation S Global Subordinated Security pursuant to paragraph (b) of this
Section 2A.5 shall bear the Restricted Legend.
(g) The registered holder of any Restricted Global Subordinated Security or
Regulation S Global Subordinated Security 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 Indenture or the Subordinated Securities.
(h) Neither the Company nor the Trustee shall be liable if the Trustee or
the Company is unable to locate a qualified successor clearing agency.
Section 2A.6 SPECIAL TRANSFER PROVISIONS.
Unless and until (i) an Initial Subordinated Security is sold under an
effective Shelf Registration Statement, or (ii) an Initial Subordinated Security
is exchanged for an Exchange Subordinated Security pursuant to an effective
Exchange Offer Registration Statement, in each case pursuant to the terms of the
Subordinated Security Registration Rights Agreement, the following provisions
shall apply to such Initial Subordinated Securities:
(a) TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS. The following
provisions shall apply with respect to the registration of any proposed transfer
of a Subordinated Security to any Institutional Accredited Investor that is
neither a QIB nor a Non-U.S. Person:
(i) The Registrar shall register the transfer of any Subordinated
Security, whether or not bearing the Restricted Legend, only if (x) the
requested transfer is at least two years after the later of the (A)
Subordinated Closing Date and (B) the last date on which such Subordinated
Security was held by the Company or any affiliate of the Company or (y) the
proposed transferor is an Initial Purchaser who is transferring
Subordinated Securities purchased under the Subordinated Security 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 Subordinated Securities being transferred is at
least $100,000. Except as provided in the foregoing sentence, the Registrar
shall not register the transfer of any Subordinated Security to any
Institutional Accredited Investor that 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 Subordinated Security, 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 Subordinated Security in an amount equal to the
principal amount of the beneficial interest in such Restricted Global
Subordinated Security to be transferred, and the Company shall execute and
the Trustee shall authenticate and deliver to the transferor or at its
direction, one or more Restricted Definitive Subordinated Securities 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 Subordinated Security to
a QIB (excluding Non-U.S. Persons):
(i) If the Subordinated Security to be transferred consists of a
Restricted Definitive Subordinated Security, or of an interest in any
Regulation S Global Subordinated Security 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 Subordinated Security stating, or has otherwise advised the
Company, 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 Subordinated
Security stating, or has otherwise advised the Company, the Trustee and the
Registrar in writing, that it is purchasing the Initial Subordinated
Security 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 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 Subordinated Security in an amount equal to
the principal amount of the Restricted Definitive Subordinated Securities
or interests in such Regulation S Global Subordinated Security, as the case
may be, being transferred, and the Trustee shall cancel such Definitive
Subordinated Securities or decrease the amount of such Regulation S Global
Subordinated Security so transferred.
(c) TRANSFERS OF INTERESTS IN THE REGULATION S GLOBAL SUBORDINATED SECURITY
OR REGULATION S DEFINITIVE SUBORDINATED SECURITIES. After the expiration of the
Restricted Period, the Registrar shall register any transfer of interests in any
Regulation S Global Subordinated Security or Regulation S Definitive
Subordinated Security without requiring any additional certification. Until the
expiration of the Restricted Period, interests in the Regulation S Global
Subordinated Security may only be held through Agent Members acting for and on
behalf of Euroclear and Clearstream.
(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
Subordinated Security 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 Subordinated Security 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
Subordinated Security to be transferred is a Restricted Definitive
Subordinated Security or an interest in a Restricted Global Subordinated
Security, 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 Subordinated Security in an amount equal to the
principal amount of the beneficial interest in such Restricted Global
Subordinated Security 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
Subordinated Security in an amount equal to the principal amount of the
Restricted Definitive Subordinated Security or the Restricted Global
Subordinated Security, as the case may be, to be transferred, and the
Trustee shall cancel the Definitive Subordinated Security, if any, so
transferred or decrease the amount of such Restricted Global Subordinated
Security.
(e) RESTRICTED LEGEND. Upon the transfer, exchange or replacement of
Subordinated Securities not bearing the Restricted Legend, the Registrar shall
deliver Subordinated Securities that do not bear the Restricted Legend. Upon the
transfer, exchange or replacement of Subordinated Securities bearing the
Restricted Legend, the Registrar shall deliver only Subordinated Securities that
bear the Restricted Legend unless either (i) the circumstances contemplated by
paragraph (d)(ii) of this Section 2A.6 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 Subordinated Security bearing the
Restricted Legend, each Holder of such Subordinated Security acknowledges the
restrictions on transfer of such Subordinated Security set forth in such
Restricted Legend and otherwise in this Indenture and agrees that it will
transfer such Subordinated Security only as provided in such Restricted Legend
and otherwise in this Indenture. The Registrar shall not register a transfer of
any Subordinated Security unless such transfer complies with the restrictions on
transfer, if any, of such Subordinated Security set forth in such Restricted
Legend and otherwise in this Indenture. In connection with any transfer of
Subordinated Securities, each Subordinated Securityholder agrees by its
acceptance of the Subordinated Securities to furnish the Company, the Registrar
or the Trustee such certifications, legal opinions or other information as any
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 2A; 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 Subordinated Securities remain Outstanding, the
Registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2A.5 or this Section 2A.6. 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 2A.7 TERMS OF SUBORDINATED SECURITIES.
The outstanding principal amount of the Subordinated Securities shall be
due on December 6, 2007. The Subordinated Securities shall bear interest on the
unpaid principal amount thereof from time to time outstanding from the most
recent Interest Payment Date to which interest has been paid (or, if no interest
has been paid, from the Subordinated Closing Date) at the rate per annum for
each Interest Period equal to the Subordinated Debt Rate for such Interest
Period (calculated on the basis of a year of 360 days and actual days elapsed
during the period for which such amount accrues). Accrued interest on the
Subordinated Securities shall be payable in arrears on each Interest Payment
Date, until the principal amount of the Subordinated Securities has been paid in
full, PROVIDED that if such payment in full is not made on an Interest Payment
Date, accrued interest shall be paid on the date of such payment in full rather
than the next Interest Payment Date. Interest on the Subordinated Securities
shall accrue with respect to the first but not the last day of each Interest
Period. The Subordinated Securities shall bear interest, payable on demand, at
the Subordinated Payment Due Rate (calculated on the basis of a year of 360 days
and actual days elapsed during the period for which such amount accrues) on any
part of the principal amount, and, to the extent permitted by applicable Law,
interest and any other amounts payable thereunder not paid when due, in each
case for the period the same is overdue. Amounts under any Subordinated Security
shall be overdue if not paid when due (whether at stated maturity, by
acceleration or otherwise). Notwithstanding anything to the contrary contained
herein, if any date on which a payment under any Subordinated Security becomes
due and payable is not a Business Day then such payment shall not be made on
such scheduled date but shall be made on the next succeeding Business Day, and
such extension of time shall be included in the computation of interest payable
thereunder.
ARTICLE 3.
LIQUIDITY PROVIDER AND POLICY PROVIDER; PRIORITY OF DISTRIBUTIONS
Section 3.1 WRITTEN NOTICE OF DISTRIBUTION.
(a) No later than 3:00 p.m. (New York City time) on the Business Day
immediately preceding each Distribution Date, each of the following Persons
shall deliver to the Trustee a Written Notice setting forth the following
information as at the close of business on such Business Day:
(i) The Liquidity Provider shall set forth the amounts to be paid to
it in accordance with clauses "first", "second", "third", "fourth" and
"fifth" of Section 3.2; and
(ii) The Policy Provider shall set forth the amounts to be paid to it
in accordance with clauses "first", "second", "third", "fourth" and
"eighth" of Section 3.2.
The notices required under this Section 3.1(a) may be in the form of a
schedule or similar document provided to the Trustee by the Persons referenced
therein or by any one of them, which schedule or similar document may state
that, unless there has been a prepayment of the Securities, such schedule or
similar document is to remain in effect until any substitute notice or amendment
shall be given to the Trustee by the Person providing such notice. Any amounts
requested and received under the Policy Fee Letter or the Policy Provider
Agreement or any amounts for which the Policy Provider is not entitled to be
reimbursed pursuant to the provisions of the Policy Provider Agreement may not
be requested by the Policy Provider under this Section 3.1(a) nor distributed to
the Policy Provider under Section 3.2.
(b) At such time as the Liquidity Provider or the Policy Provider shall
have received all amounts owing to it pursuant to Section 3.2 hereof and its
commitment or obligations under the Liquidity Facility or the Policy, as the
case may be, shall have terminated or expired, such Person shall, by a Written
Notice, so inform the Trustee.
(c) The Trustee shall be fully protected in relying on any of the
information set forth in a Written Notice provided by the Liquidity Provider or
the Policy Provider pursuant to paragraphs (a) or (b) above and shall have no
independent obligation to verify, calculate or recalculate any amount set forth
in any Written Notice delivered in accordance with such paragraphs.
(d) In the event the Trustee shall not receive from any Person any
information set forth in paragraph (a) above which is required to enable the
Trustee to make a distribution to such Person pursuant to Section 3.2, the
Trustee shall request such information and, failing to receive any such
information, the Trustee shall not make such distribution(s) to such Person. In
such event, the Trustee shall make distributions pursuant to clauses "FIRST"
through "ELEVENTH" of Section 3.2 to the extent it shall have sufficient
information to enable it to make such distributions, and shall continue to hold
any funds remaining, after making such distributions, until the Trustee shall
receive all necessary information to enable it to distribute any funds so
withheld.
(e) On such dates (but not more frequently than monthly) as the Liquidity
Provider or the Policy Provider shall request, but in any event automatically at
the end of each calendar quarter, the Trustee shall send to such Person a
written statement reflecting all amounts on deposit with the Trustee pursuant to
Section 3.1(d) hereof.
Section 3.2 PRIORITY OF DISTRIBUTIONS; SUBORDINATION.
Except as otherwise provided in Sections 3.1(d), 3.3, 3.5(b), 3.5(k) and
3.6, amounts on deposit in the Collection Account on any Distribution Date shall
be promptly distributed in the following order of priority and in accordance
with the information provided to the Trustee pursuant to Section 3.1(a) hereof:
FIRST, if an Event of Default shall have occurred and be continuing on
such Distribution Date, such amount as shall be required to reimburse (i)
the Trustee for any reasonable out-of-pocket costs and expenses actually
incurred by it (to the extent not previously reimbursed) in the protection
of, or the realization of the value of, the Collateral, shall be applied by
the Trustee in reimbursement of such costs and expenses, (ii) the Policy
Provider for any amounts of the nature described in clause (i) above
actually incurred by it under the Policy Provider Agreement (to the extent
not previously reimbursed), shall be distributed to the Policy Provider,
and (iii) the Liquidity Provider, the Policy Provider or any Securityholder
for payments, if any, made by it to the Trustee in respect of amounts
described in clause (i) above, shall be distributed to the Liquidity
Provider, the Policy Provider or to the Trustee for the account of such
Securityholder, in each such case, pro rata on the basis of all amounts
described in clauses (i) through (iii) above.
SECOND, such amount as shall be required to pay (i) all accrued and
unpaid Liquidity Expenses owed to the Liquidity Provider and (ii) all
accrued and unpaid Policy Expenses owed to the Policy Provider, shall be
distributed to the Liquidity Provider and the Policy Provider pro rata on
the basis of the amount of Liquidity Expenses and Policy Expenses owed to
the Liquidity Provider and the Policy Provider;
THIRD, such amount as shall be required to pay (i) the aggregate
amount of accrued and unpaid interest on all Liquidity Obligations (at the
rate, or in the amount, provided in the Liquidity Facility and determined
after application of the proceeds of any Policy Drawing pursuant to Section
3.6(d) or other payment by the Policy Provider to the Liquidity Provider in
respect of any interest on Drawings in accordance with the provisions of
Section 3.8(c)), (ii) the aggregate amount of accrued and unpaid Policy
Provider Interest Obligations and (iii) if the Policy Provider has paid
pursuant to Section 3.6(d) or the proviso to Section 3.8(c) to the
Liquidity Provider all outstanding Drawings and interest thereon owing to
the Liquidity Provider under the Liquidity Facility, the amount of such
payments made to the Liquidity Provider attributable to interest accrued on
Drawings under the Liquidity Facility, shall be distributed to the
Liquidity Provider and the Policy Provider, as the case may be, pro rata on
the basis of the amounts owed to the Liquidity Provider and the Policy
Provider under subclauses (i), (ii) and (iii) of this clause "third";
FOURTH, such amount as shall be required (i)(A) if the Cash Collateral
Account had been previously funded as provided in Section 3.5(f), unless
(1) on such Distribution Date the Securities are Non-Performing and a
Liquidity Event of Default shall have occurred and be continuing or (2) the
Final Drawing shall have occurred, to fund the Cash Collateral Account up
to the Required Amount (less the amount of any repayments of Interest
Drawings under the Liquidity Facility while subclause (i)(A)(1) above is
applicable) shall be deposited in the Cash Collateral Account, (B) if the
Liquidity Facility shall become a Downgraded Facility or a Non-Extended
Facility at a time when unreimbursed Interest Drawings under the Liquidity
Facility have reduced the Available Amount to zero, unless (1) on such
Distribution Date the Securities are Non-Performing and a Liquidity Event
of Default shall have occurred and be continuing or (2) the Final Drawing
shall have occurred, to deposit into the Cash Collateral Account an amount
equal to the Required Amount (less the amount of any repayments of Interest
Drawings under the Liquidity Facility while subclause (i)(B)(1) above is
applicable) shall be deposited in the Cash Collateral Account, and (C) if
neither subclause (i)(A) nor subclause (i)(B) of this clause "fourth" is
applicable, to pay or reimburse the Liquidity Provider in an amount equal
to the amount of all Liquidity Obligations then due under the Liquidity
Facility (other than amounts payable pursuant to Section 3.6(d) or clause
"second" or "third" of this Section 3.2), net of any and all payments made
by the Policy Provider to the Liquidity Provider with respect to the
principal of any Interest Drawing, and (ii) if the Policy Provider has paid
pursuant to the proviso to Section 3.8(c) to the Liquidity Provider all
outstanding Drawings and interest thereon owing to the Liquidity Provider
under the Liquidity Facility, the amount of such payments made to the
Liquidity Provider in respect of principal of Drawings under the Liquidity
Facility, shall be paid to the Policy Provider, pro rata on the basis of
the amounts of all such deficiencies and/or unreimbursed Liquidity
Obligations payable to the Liquidity Provider and the amount of such
unreimbursed Policy Provider Obligations payable to the Policy Provider, in
each instance, under this clause "fourth";
FIFTH, if any amounts are to be distributed pursuant to either
subclause (i)(A) or (i)(B) of clause "fourth" above, then the Liquidity
Provider shall be paid the excess of (x) the aggregate outstanding amount
of unreimbursed Advances (whether or not then due) under the Liquidity
Facility over (y) the Required Amount (less the amount of any repayments of
Interest Drawings under the Liquidity Facility while subclause (i)(A)(1) or
(i)(B)(1), as the case may be, of clause "fourth" above is applicable);
SIXTH, if an Event of Default shall have occurred and be continuing on
such Distribution Date and at all times thereafter, such amount as shall be
required to reimburse or pay (i) the Trustee for any Tax (other than Taxes
imposed on compensation paid hereunder), expense, fee, charge or other loss
incurred by or any other amount payable to the Trustee in connection with
the transactions contemplated hereby (to the extent not previously
reimbursed), shall be applied by the Trustee in reimbursement of such
amount, and (ii) each Securityholder for payments, if any, made by it
pursuant to an indemnity provided pursuant to Section 7.6(c) hereof in
respect of amounts described in subclause (i) above, shall be distributed
to the Trustee for the account of such Securityholder, in each such case,
pro rata on the basis of all amounts described in subclauses (i) and (ii)
of this clause "sixth";
SEVENTH, such amount as shall be required to pay in full amounts due
to the Securityholders on such Distribution Date;
EIGHTH, such amount as shall be required to pay the Policy Provider
all Policy Provider Obligations then due and unpaid (other than amounts
payable pursuant to clauses "first", "second", "third" and "fourth" of this
Section 3.2) shall be paid to the Policy Provider;
NINTH, such amount as shall be required to pay in full amounts due to
the Subordinated Securityholders on such Distribution Date;
TENTH, such amount as shall be required to pay in full the aggregate
unpaid amount of fees and expenses payable as of such Distribution Date to
the Trustee pursuant to the terms of this Indenture (other than amounts
payable pursuant to clauses "first" and "sixth" of this Section 3.2), shall
be distributed to the Trustee; and
ELEVENTH, the balance, if any, of any such amount remaining thereafter
shall be paid to the Company unless on such Distribution Date (i) an Event
of Default has occurred and is continuing or (ii) any amount due to the
Liquidity Provider or the Policy Provider from the Company has not been
paid, in which case such amount shall be held in the Collection Account for
later distribution in accordance with this Article 3 or paid to the Company
upon discharge of the Indenture pursuant to Article 9.
Section 3.3 OTHER PAYMENTS.
(a) Any payments received by the Trustee for which no provision as to the
application thereof is made in this Indenture shall be distributed by the
Trustee in the order of priority specified in Section 3.2 hereof.
(b) Notwithstanding the priority of payments specified in Section 3.2, in
the event any Investment Earnings on amounts on deposit in the Cash Collateral
Account resulting from an Unapplied Provider Advance are deposited in the
Collection Account, such Investment Earnings shall be used to pay interest
payable in respect of such Unapplied Provider Advance to the extent of such
Investment Earnings.
(c) If the Trustee receives any Payment after the Scheduled Payment Date
relating thereto, then the Trustee shall deposit such Payment in the Collection
Account and distribute such Payment on the next Distribution Date in accordance
with the priority of distributions set forth in Section 3.2 hereof.
Section 3.4 PAYMENTS TO LIQUIDITY PROVIDER AND POLICY PROVIDER.
Any amounts distributed hereunder to the Liquidity Provider or Policy
Provider shall be paid to the Liquidity Provider or Policy Provider by wire
transfer of funds to the address the Liquidity Provider or Policy Provider shall
provide to the Trustee. The Trustee shall provide a Written Notice of any such
transfer to the Liquidity Provider or Policy Provider, as the case may be, at
the time of such transfer.
Section 3.5 LIQUIDITY FACILITY.
(a) INTEREST DRAWINGS. If on any Distribution Date, after giving effect to
the subordination provisions of Section 3.2, the Trustee shall not have
sufficient funds for the payment of any amounts due and owing in respect of
accrued interest on the Securities (at the Debt Rate), then, prior to 12:30 p.m.
(New York City time) on such Distribution Date, the Trustee shall request a
drawing (each such drawing, an "INTEREST DRAWING") under the Liquidity Facility
(and concurrently with the making of such request, the Trustee will give notice
to the Policy Provider of such insufficiency of funds) in an amount equal to the
lesser of (x) an amount sufficient to pay the amount of such accrued interest
(at the Debt Rate) and (y) the Available Amount, and shall pay such amount to
the Securityholders in accordance with the provisions of this Indenture in
payment of such accrued interest.
(b) APPLICATION OF INTEREST DRAWINGS. Notwithstanding anything to the
contrary contained in this Indenture, all payments received by the Trustee in
respect of an Interest Drawing under the Liquidity Facility and all amounts
withdrawn by the Trustee from the Cash Collateral Account, and payable in each
case to the Securityholders, shall be promptly distributed to the
Securityholders in accordance with the provisions of this Indenture, PROVIDED
that if (x) the Trustee shall receive any amount in respect of an Interest
Drawing under the Liquidity Facility or a withdrawal from the Cash Collateral
Account to pay Accrued Interest after such Accrued Interest has been fully paid
to the Securityholders by a Policy Drawing under the Policy pursuant to Section
3.6(a) hereof or (y) the Trustee shall receive any amount in respect of a Policy
Drawing under the Policy pursuant to Section 3.6(a) hereof to fully pay Accrued
Interest after such Accrued Interest has been paid (in full or in part) to the
Securityholders by an Interest Drawing under the Liquidity Facility or a
withdrawal from the Cash Collateral Account, the Trustee, in the case of either
clause (x) or (y), shall pay an amount equal to the amount of such Interest
Drawing or withdrawal directly to the Policy Provider as reimbursement of such
Policy Drawing rather than to the Securityholders.
(c) DOWNGRADE DRAWINGS. (i) A Downgrade Drawing under the Liquidity
Facility shall be requested by the Trustee as provided in Section 3.5(c)(iii),
if at any time, (x) so long as MSCS is the Liquidity Provider, the short-term
unsecured debt rating of the Liquidity Guarantor is lower than the applicable
Threshold Rating issued by either Moody's or Standard & Poor's or the related
Liquidity Guarantee ceases to be in full force and effect or becomes invalid or
unenforceable or the Liquidity Guarantor denies its liability thereunder, or (y)
if MSCS is not the Liquidity Provider, the short-term unsecured debt rating of
the Liquidity Provider is lower than the applicable Threshold Rating issued by
either Moody's or Standard & Poor's (in each case, a "DOWNGRADE EVENT", and the
Liquidity Facility, a "DOWNGRADED FACILITY"), unless an event described in
Section 3.5(c)(ii) occurs.
(ii) If at any time the Liquidity Facility becomes a Downgraded
Facility, the Trustee shall not request a Downgrade Drawing thereunder in
accordance with Section 3.5(c)(iii), if the Liquidity Provider or the
Company has arranged for a Replacement Liquidity Provider to issue and
deliver a Replacement Liquidity Facility to the Trustee within 10 days
after receiving notice of a Downgrade Event (but not later than the
expiration date of such Downgraded Facility).
(iii) If the Trustee is required to request a Downgrade Drawing under
Section 3.5(c)(i), the Trustee shall, on the 10th day referred to in
Section 3.5(c)(ii) (or if such 10th day is not a Business Day, on the next
succeeding Business Day) (or, if earlier, the expiration date of such
Downgraded Facility), request a drawing in accordance with and to the
extent permitted by such Downgraded Facility (such drawing, a "DOWNGRADE
DRAWING") of the Available Amount. Amounts drawn pursuant to a Downgrade
Drawing shall be maintained and invested as provided in Section 3.5(f)
hereof. The Liquidity Provider may also arrange for a Replacement Liquidity
Provider to issue and deliver a Replacement Liquidity Facility at any time
after such Downgrade Drawing so long as such Downgrade Drawing has not been
reimbursed in full to the Liquidity Provider.
(d) NON-EXTENSION DRAWINGS. If the Liquidity Facility is scheduled to
expire on a date (the "STATED EXPIRATION DATE") prior to the date that is 15
days after the Final Legal Maturity Date, then, no earlier than the 60th day and
no later than the 40th day prior to the then Stated Expiration Date, the Trustee
shall request that the Liquidity Provider extend the Stated Expiration Date
until the earlier of (i) the date which is 15 days after the Final Legal
Maturity Date and (ii) the date that is the day immediately preceding the 364th
day occurring after the last day of the applicable Consent Period (unless the
obligations of the Liquidity Provider under the Liquidity Facility are earlier
terminated in accordance with the Liquidity Facility). Whether or not the
Liquidity Provider has received a request from the Trustee, the Liquidity
Provider shall advise the Trustee, no earlier than the 40th day (or, if earlier,
the date of the Liquidity Provider's receipt of such request, if any, from the
Trustee) and no later than the 25th day prior to the Stated Expiration Date then
in effect (such period, the "CONSENT PERIOD"), whether, in its sole discretion,
it agrees to extend such Stated Expiration Date. If (A) on or before the date on
which such Consent Period ends, the Liquidity Facility shall not have been
replaced in accordance with Section 3.5(e) and (B) the Liquidity Provider fails
irrevocably and unconditionally to advise the Trustee on or before the date on
which such Consent Period ends that such Stated Expiration Date then in effect
shall be so extended, the Trustee shall, on the date on which such Consent
Period ends (or as soon as possible thereafter), in accordance with the terms of
the expiring Liquidity Facility (a "NON-EXTENDED FACILITY"), request a drawing
under such expiring Liquidity Facility (such drawing, a "NON-EXTENSION DRAWING")
of all available and undrawn amounts thereunder. Notwithstanding the immediately
preceding three sentences, so long as MSCS is the Liquidity Provider, the Stated
Expiration Date shall be automatically extended, effective on the 25th day prior
to such Stated Expiration Date (unless such Stated Expiration Date is on or
after the date that is 15 days after the Final Legal Maturity Date), for a
period of 364 days after the Stated Expiration Date (unless the obligations of
the Liquidity Provider are earlier terminated in accordance with the Liquidity
Facility) without the necessity of any act by the Trustee or the Liquidity
Provider, unless the Liquidity Provider shall advise the Trustee, prior to such
25th day, that it does not agree to such extension of the Stated Expiration
Date, in which event, the Trustee shall, on such 25th day (or as soon as
possible thereafter), in accordance with and to the extent permitted by the
terms of the Non-Extended Facility, request a Non-Extension Drawing under the
Non-Extended Facility of all available and undrawn amounts thereunder. Amounts
drawn pursuant to a Non-Extension Drawing shall be maintained and invested in
accordance with Section 3.5(f) hereof.
(e) ISSUANCE OF REPLACEMENT LIQUIDITY FACILITY. (i) At any time, the
Company may, at its option, with cause or without cause, arrange for a
Replacement Liquidity Facility to replace any Liquidity Facility (including any
Replacement Liquidity Facility provided pursuant to Section 3.5(e)(ii) hereof);
PROVIDED, HOWEVER, that the initial Liquidity Provider shall not be replaced by
the Company as a Liquidity Provider without the consent of such initial
Liquidity Provider unless (A) there shall have become due to such initial
Liquidity Provider, or such initial Liquidity Provider shall have demanded,
amounts pursuant to Section 3.01, 3.02 or 3.03 of the Liquidity Facility and the
replacement of such initial Liquidity Provider would reduce or eliminate the
obligation to pay such amounts or the Company determines in good faith that
there is a substantial likelihood that such initial Liquidity Provider will have
the right to claim any such amounts (unless such initial Liquidity Provider
waives, in writing, any right it may have to claim such amounts), which
determination shall be set forth in a certificate delivered by the Company to
such initial Liquidity Provider setting forth the basis for such determination
and accompanied by an opinion of outside counsel selected by the Company and
reasonably acceptable to such initial Liquidity Provider verifying the legal
conclusions, if any, of such certificate relating to such basis, PROVIDED that,
in the case of any likely claim for such amounts based upon any proposed, or
proposed change in, law, rule, regulation, interpretation, directive,
requirement, request or administrative practice, such opinion may assume the
adoption or promulgation of such proposed matter, (B) it shall become unlawful
or impossible for such initial Liquidity Provider (or its Facility Office) to
maintain or fund its LIBOR Advances as described in Section 3.10 of the
Liquidity Facility, (C) the Liquidity Facility of the initial Liquidity Provider
shall become a Downgraded Facility or a Non-Extended Facility or a Downgrade
Drawing or a Non-Extension Drawing shall have occurred under the Liquidity
Facility of the initial Liquidity Provider or (D) the initial Liquidity Provider
shall have breached any of its payment (including, without limitation, funding)
obligations under the Liquidity Facility. If such Replacement Liquidity Facility
is provided at any time after a Downgrade Drawing or Non-Extension Drawing has
been made, all funds on deposit in the Cash Collateral Account will be returned
to the Liquidity Provider being replaced.
(ii) If the Liquidity Provider shall determine not to extend the
Liquidity Facility in accordance with Section 3.5(d), then the Liquidity
Provider may, at its option, arrange for a Replacement Liquidity Facility
to replace the Liquidity Facility during the period no earlier than 40 days
and no later than 25 days prior to the then effective Stated Expiration
Date. In addition, so long as the initial Liquidity Provider is the
Liquidity Provider, at any time after a Non-Extension Drawing has been made
under the Liquidity Facility, the Liquidity Provider may, at its option,
arrange for a Replacement Liquidity Facility to replace the Liquidity
Facility.
(iii) No Replacement Liquidity Facility arranged by the Company or a
Liquidity Provider in accordance with clause (i) or (ii) above or pursuant
to Section 3.5(c), respectively, shall become effective and no such
Replacement Liquidity Facility shall be deemed a "Liquidity Facility" under
the Operative Documents and the Support Documents, unless and until (A)
each of the conditions referred to in sub-clauses (iv)(x) and (z) below
shall have been satisfied, (B) if such Replacement Liquidity Facility shall
materially adversely affect the rights, remedies, interests or obligations
of the Securityholders under any of the Operative Documents or the Support
Documents, the Trustee shall have consented, in writing, to the execution
and issuance of such Replacement Liquidity Facility and (C) in the case of
a Replacement Liquidity Facility arranged by a Liquidity Provider under
Section 3.5(e)(ii) or pursuant to Section 3.5(c), such Replacement
Liquidity Facility is acceptable to the Company.
(iv) In connection with the issuance of each Replacement Liquidity
Facility, the Trustee shall (x) prior to the issuance of such Replacement
Liquidity Facility, obtain written confirmation from each Rating Agency
with respect to the Securities that such Replacement Liquidity Facility
will not cause a reduction of any rating then in effect for the Securities
by such Rating Agency (without regard to any downgrading of any rating of
any Liquidity Provider being replaced pursuant to Section 3.5(c) hereof and
without regard to the Policy) or a withdrawal or suspension of the rating
of the Securities by such Rating Agency and the written consent of the
Policy Provider (which consent will not be unreasonably withheld or
delayed), (y) pay all Liquidity Obligations then owing to the replaced
Liquidity Provider (which payment shall be made first from available funds
in the Cash Collateral Account as described in clause (iii) of Section
3.5(f) hereof, and thereafter from any other available source, including,
without limitation, a drawing under the Replacement Liquidity Facility) and
(z) cause the issuer of the Replacement Liquidity Facility to deliver the
Replacement Liquidity Facility to the Trustee, together with a legal
opinion opining that such Replacement Liquidity Facility is an enforceable
obligation of such Replacement Liquidity Provider.
(v) Upon satisfaction of the conditions set forth in clauses (iii) and
(iv) of this Section 3.5(e) with respect to a Replacement Liquidity
Facility, (w) the replaced Liquidity Facility shall terminate, (x) the
Trustee shall, if and to the extent so requested by the Company or the
Liquidity Provider being replaced, execute and deliver any certificate or
other instrument required in order to terminate the replaced Liquidity
Facility, shall surrender the replaced Liquidity Facility to the Liquidity
Provider being replaced and shall execute and deliver the Replacement
Liquidity Facility and any associated Fee Letter, (y) each of the parties
hereto shall enter into any amendments to this Indenture necessary to give
effect to (1) the replacement of the applicable Liquidity Provider with the
applicable Replacement Liquidity Provider and (2) the replacement of the
applicable Liquidity Facility with the applicable Replacement Liquidity
Facility and (z) the applicable Replacement Liquidity Provider shall be
deemed to be a Liquidity Provider with the rights and obligations of a
Liquidity Provider hereunder and under the other Operative Documents and
the Support Documents and such Replacement Liquidity Facility shall be
deemed to be a Liquidity Facility hereunder and under the other Operative
Documents and the Support Documents.
(f) CASH COLLATERAL ACCOUNT; WITHDRAWALS; INVESTMENTS. In the event the
Trustee shall draw all available amounts under the Liquidity Facility pursuant
to Section 3.5(c), 3.5(d) or 3.5(i) hereof, or in the event amounts are to be
deposited in the Cash Collateral Account pursuant to subclause (i)(A) or (i)(B)
of clause "fourth" of Section 3.2, amounts so drawn or to be deposited, as the
case may be, shall be deposited by the Trustee in the Cash Collateral Account.
All amounts on deposit in the Cash Collateral Account shall be invested and
reinvested in Eligible Investments in accordance with Section 8.13(b) hereof.
On each Interest Payment Date, Investment Earnings on amounts on deposit in
the Cash Collateral Account shall be deposited in the Collection Account and
applied on such Interest Payment Date in accordance with Section 3.2 or 3.3 (as
applicable). The Trustee shall deliver a written statement to the Company, the
Liquidity Provider and the Policy Provider one day prior to each Interest
Payment Date setting forth the amount of Investment Earnings held in the Cash
Collateral Account as of such date. In addition, from and after the date funds
are so deposited, the Trustee shall make withdrawals from such accounts as
follows:
(i) on each Distribution Date, the Trustee shall, to the extent it
shall not have received funds to pay accrued and unpaid interest due and
owing on the Securities (at the Debt Rate) after giving effect to the
subordination provisions of Section 3.2, withdraw from the Cash Collateral
Account, and pay to the Securityholders, an amount equal to the lesser of
(x) an amount necessary to pay accrued and unpaid interest (at the Debt
Rate) on such Securities and (y) the amount on deposit in the Cash
Collateral Account (so long as the aggregate amount of unreplenished
withdrawals, including such withdrawal, does not exceed the Required Amount
for such Distribution Date);
(ii) on each date on which principal of the Securities shall have been
paid to the Securityholders pursuant to Section 3.2 hereof, the Trustee
shall withdraw from the Cash Collateral Account such amount as is necessary
so that, after giving effect to such payment of principal on such date (and
any reduction in the amounts on deposit in the Cash Collateral Account
resulting from a prior withdrawal of amounts on deposit in the Cash
Collateral Account on such date) and any transfer of Investment Earnings
from such Cash Collateral Account to the Collection Account on such date,
an amount equal to the sum of the Required Amount (calculated for purposes
of this clause (ii) on the basis of the Capped Interest Rate) plus (if on a
Distribution Date not coinciding with an Interest Payment Date) Investment
Earnings on deposit in the Cash Collateral Account (after giving effect to
any such transfer of Investment Earnings) will be on deposit in the Cash
Collateral Account and shall first, pay such withdrawn amount to the
Liquidity Provider until the Liquidity Obligations owing to such the
Liquidity Provider shall have been paid in full, and second, deposit any
remaining withdrawn amount in the Collection Account;
(iii) if a Replacement Liquidity Facility shall be delivered to the
Trustee following the date on which funds have been deposited into the Cash
Collateral Account, the Trustee shall withdraw all amounts on deposit in
the Cash Collateral Account and shall pay such amounts to the replaced
Liquidity Provider until all Liquidity Obligations owed to such Person
shall have been paid in full, and shall deposit any remaining amount in the
Collection Account; and
(iv) following the payment of all sums payable with respect to the
Securities, on the date on which the Trustee shall have been notified by
the Liquidity Provider that the Liquidity Obligations owed to the Liquidity
Provider have been paid in full, the Trustee shall withdraw all amounts on
deposit in the Cash Collateral Account and shall distribute such amounts in
accordance with the order of priority set forth in Section 3.2.
(g) REINSTATEMENT. With respect to any Interest Drawing under the Liquidity
Facility, upon the reimbursement of the Liquidity Provider for all or any part
of the amount of such Interest Drawing, together with any accrued interest
thereon, the Available Amount of the Liquidity Facility shall be reinstated by
an amount equal to the amount of such Interest Drawing so reimbursed to the
Liquidity Provider but not to exceed the Stated Amount; PROVIDED, HOWEVER, that
the Liquidity Facility shall not be so reinstated in part or in full at any time
if (x) the Securities are Non-Performing and a Liquidity Event of Default shall
have occurred and be continuing or (y) the Final Drawing shall have occurred;
PROVIDED FURTHER, that any payment by the Policy Provider to the Liquidity
Provider of any amounts pursuant to the second proviso to Section 3.8(c) shall
not reinstate the Liquidity Facility, but the Liquidity Facility (so long as the
Liquidity Facility is in effect) shall be reinstated, PRO TANTO, to the extent
the Policy Provider receives any reimbursement in respect of such payment under
clause "FOURTH" of Section 3.2, unless (x) the Securities are Non-Performing and
a Liquidity Event of Default shall have occurred and be continuing or (y) the
Final Drawing shall have occurred. In the event that (i) funds are withdrawn
from the Cash Collateral Account pursuant to clause (i) of Section 3.5(f) hereof
or (ii) the Liquidity Facility shall become a Downgraded Facility or a
Non-Extended Facility at a time when unreimbursed Interest Drawings have reduced
the Available Amount to zero, then funds received by the Trustee at any time
other than (x) any time when the Securities are Non-Performing and Liquidity
Event of Default shall have occurred and be continuing or (y) any time after the
Final Drawing shall have occurred, shall be deposited in the Cash Collateral
Account as and to the extent provided in clause "FOURTH" of Section 3.2, and
applied in accordance with Section 3.5(f) hereof.
(h) REIMBURSEMENT. The amount of each drawing under the Liquidity Facility
shall be due and payable, together with interest thereon, on the dates and at
the rate, respectively, provided in the Liquidity Facility.
(i) FINAL DRAWING. Upon receipt from the Liquidity Provider of a
Termination Notice, the Trustee shall, not later than the date specified in such
Termination Notice, in accordance with the terms of the Liquidity Facility,
request a drawing under the Liquidity Facility of all available and undrawn
amounts thereunder (a "FINAL DRAWING"). Amounts drawn pursuant to a Final
Drawing shall be maintained and invested in accordance with Section 3.5(f)
hereof.
(j) ADJUSTMENTS OF STATED AMOUNT. Promptly following each date on which the
Required Amount is reduced as a result of a payment of the principal amount of
the Securities, the Stated Amount shall automatically be adjusted to an amount
equal to the Required Amount (as calculated by the Trustee after giving effect
to such payment).
(k) RELATION TO SUBORDINATION PROVISIONS. Subject to the proviso contained
in Section 3.5(b), Interest Drawings under the Liquidity Facility and
withdrawals from the Cash Collateral Account will be distributed to the Trustee,
and the Trustee will distribute such Interest Drawings and withdrawals promptly
to the Securityholders in accordance with the provisions of this Indenture, in
each case, notwithstanding Section 3.2 hereof.
(l) ASSIGNMENT OF LIQUIDITY FACILITY. The Trustee agrees not to consent to
the assignment by the Liquidity Provider of any of its rights or obligations
under the Liquidity Facility or any interest therein, unless (i) the Company
shall have consented to such assignment and (ii) each Rating Agency with respect
to the Securities shall have provided a Ratings Confirmation in respect of such
assignment and (iii) the Policy Provider shall have consented to such assignment
(which consent shall not be unreasonably withheld or delayed); PROVIDED, that
the Trustee shall consent to such assignment if the conditions in the foregoing
clauses (i), (ii) and (iii) are satisfied, and the foregoing is not intended to
and shall not be construed to limit the rights of the initial Liquidity Provider
under Section 3.5(e)(ii).
(m) NO DISCHARGE OF THE COMPANY'S OBLIGATIONS. The payment of interest on
the Securities with funds drawn under the Liquidity Facility or from the Cash
Collateral Account shall not be deemed to discharge the Company's obligation to
make such payment, which obligation shall continue in full force and effect.
(n) INTEREST COVERAGE. The interest payable by the Liquidity Provider under
the Liquidity Facility shall include interest accruing during the pendency of
any bankruptcy, insolvency, receivership or other similar proceeding, regardless
of whether allowed or allowable in such proceeding.
(o) CONSENT TO ISSUANCE OF SUBORDINATED SECURITIES. The Liquidity Provider,
by its execution and delivery of this Indenture, (i) consents to the issuance of
the Subordinated Securities hereunder and the amendments to the Operative
Documents in connection therewith, and (ii) confirms that all of its obligations
under the Liquidity Facility remain unchanged and in full force and effect.
Section 3.6 THE POLICY.
(a) INTEREST DRAWINGS. If on any Distribution Date (other than the Final
Legal Maturity Date, the Election Distribution Date, the Policy Election
Distribution Date, the Non-Performance Payment Date or a date on which a Policy
Drawing is to be made pursuant to Section 3.6(b) of this Indenture), after
giving effect to the subordination provisions of Section 3.2 and to the
application of Prior Funds, the Trustee does not then have sufficient funds
available for the payment of all amounts due and owing in respect of accrued and
unpaid interest on the Securities at the Debt Rate (without giving effect to any
Acceleration and calculated assuming that the Company will not cure the
nonpayment of interest) ("ACCRUED INTEREST"), then the Trustee (i) prior to 1:00
p.m. (New York City time) on such Distribution Date shall deliver a Notice for
Payment, as provided in the Policy, to the Policy Provider or its fiscal agent,
requesting a Policy Drawing under the Policy (for payment into the Policy
Account) in an amount sufficient to enable the Trustee to pay such Accrued
Interest and (ii) upon receipt shall pay such amount from the Policy Account to
the Securityholders in payment of such Accrued Interest.
(b) PROCEEDS DEFICIENCY DRAWING. If on any Distribution Date (other than
the Final Legal Maturity Date, the Election Distribution Date, the Policy
Election Distribution Date or the Non-Performance Payment Date) established by
the Trustee by reason of its receipt of a payment constituting the proceeds from
the sale of Pledged Spare Parts comprising all of the Pledged Spare Parts
subject to the Lien of the Security Agreement at the time of such sale, after
giving effect to the subordination provisions of Section 3.2 and, if such
payment is received prior to a Policy Provider Election, to the application of
Prior Funds, the Trustee does not then have sufficient funds available for the
payment in full of the then outstanding principal amount of the Securities
together with accrued and unpaid interest thereon at the Debt Rate (excluding
any accrued and unpaid Premium or Break Amount and calculated assuming that the
Company will not cure the nonpayment of interest) (collectively, the
"OUTSTANDING AMOUNT"), then the Trustee (i) prior to 1:00 p.m. (New York City
time) on such Distribution Date shall deliver a Notice for Payment, as provided
in the Policy, to the Policy Provider or its fiscal agent, requesting a Policy
Drawing (the "PROCEEDS DEFICIENCY DRAWING") under the Policy (for payment into
the Policy Account) in an amount sufficient to enable the Trustee to pay the
Outstanding Amount and (ii) upon receipt shall pay such amount from the Policy
Account to the Securityholders in payment of the Outstanding Amount.
(c) NON-PERFORMANCE DRAWING. If a Payment Default exists under the
Securities (without giving effect to any Acceleration or any payments by the
Liquidity Provider or the Policy Provider) for a period of eight consecutive
Interest Periods (such period, the "NON-PERFORMING PERIOD") (regardless of
whether any proceeds from the sale of any Collateral are distributed by the
Trustee during such period) and continues to exist on the Interest Payment Date
on which such eighth Interest Period ends (or, if such Interest Payment Date
falls within the applicable period specified in the proviso to the definition of
"Non-Performing", continues to exist on the Business Day immediately following
such period (the "RELEVANT DATE")), and on the 25th day following such Interest
Payment Date or, if applicable, the Relevant Date (or, if such 25th day is not a
Business Day, the next Business Day) (the "NON-PERFORMANCE PAYMENT DATE") after
giving effect to the subordination provisions of Section 3.2 and to the
application of Prior Funds, the Trustee does not then have sufficient funds
available for the payment in full of the Outstanding Amount as of the
Non-Performance Payment Date, then unless the Policy Provider shall have paid on
any day prior thereto the Outstanding Amount as of such day pursuant to Section
3.6(b) or 3.6(e) of this Indenture, the Trustee (i) prior to the 1:00 p.m. (New
York City time) on the Non-Performance Payment Date shall deliver a Notice for
Payment, as provided in the Policy, to the Policy Provider or its fiscal agent,
requesting a Policy Drawing (the "NON-PERFORMANCE DRAWING") under the Policy
(for payment into the Policy Account) in an amount sufficient to enable the
Trustee to pay such Outstanding Amount, and (ii) upon receipt shall pay such
amount from the Policy Account to the Securityholders in payment of such
Outstanding Amount. If the Non-Performance Payment Date is established, the
Trustee shall send to the Securityholders Written Notice thereof promptly, but
no later than three Business Days, after the occurrence of the Interest Payment
Date on which the Non-Performing Period ends or, if applicable, the Relevant
Date.
Notwithstanding the foregoing, if, and only if, the Non-Performance Payment
Date is scheduled to occur prior to the Final Scheduled Payment Date, the Policy
Provider has the right, by Written Notice to the Trustee given at least 10 days
prior to the Non-Performance Payment Date, so long as no Policy Provider Default
shall have occurred and be continuing, to elect (the "POLICY PROVIDER ELECTION")
not to pay the deficiency necessary to pay the Outstanding Amount on the
Non-Performance Payment Date pursuant to the preceding paragraph, in which case
the Policy Provider shall (i) pay on the Non-Performance Payment Date any
shortfall in funds required to pay accrued interest on the Securities (without
regard to Acceleration and after giving effect to the subordination provisions
of Section 3.2 and to the application of Prior Funds), (ii) thereafter, on each
Distribution Date until the establishment of an Election Distribution Date or a
Policy Election Distribution Date, pay an amount equal to the scheduled
principal on the Final Scheduled Payment Date and interest (without regard to
any Acceleration) payable on the Securities on such Distribution Date, and (iii)
(A) on any Business Day elected by the Policy Provider upon at least 20 days'
Written Notice to the Trustee, direct the Trustee (such Business Day a "POLICY
ELECTION DISTRIBUTION DATE") or (B) following the occurrence of a Policy
Provider Default, on any Business Day specified by the Trustee upon at least 20
days' Written Notice to the Policy Provider (such Business Day an "ELECTION
DISTRIBUTION DATE") permit the Trustee, in each case, to make a Policy Drawing
under the Policy for an amount equal to the Outstanding Amount as of such Policy
Election Distribution Date or Election Distribution Date, as applicable. The
Trustee shall (i) prior to 1:00 p.m. (New York City time) on each such
Distribution Date referred to in the preceding sentence deliver a Notice of
Payment, as provided in the Policy, to the Policy Provider or its fiscal agent
requesting a Policy Drawing under the Policy for payment into the Policy Account
to pay the amount then due under this paragraph and (ii) upon receipt of the
proceeds thereof pay the amount thereof from the Policy Account to the
Securityholders in payment of such amount.
(d) LIQUIDITY PROVIDER DRAWING. On or after the Business Day which is 24
months from the earliest to occur of (i) the date on which an Interest Drawing
shall have been made under the Liquidity Facility and remains unreimbursed from
payments made by the Company at the end of such 24-month period, (ii) the date
on which any Downgrade Drawing, Non-Extension Drawing or Final Drawing that was
deposited into the Cash Collateral Account shall have been applied to pay any
scheduled payment of interest on the Securities and remains unreimbursed from
payments made by the Company at the end of such 24-month period and (iii) the
date on which all of the Securities have been accelerated and such Securities
remain unpaid by the Company at the end of such 24-month period (in each case,
disregarding any reimbursements from payments by the Policy Provider and from
proceeds from the sale of Collateral distributed by the Trustee during such
24-month period) (such Business Day, the "LIQUIDITY PROVIDER REIMBURSEMENT
DATE"), the Policy Provider (upon at least 20 days' prior notice from the
Trustee on behalf of the Liquidity Provider, which notice can be given in
advance of the expiry of such twenty-four month period) will be required to
honor drawings under the Policy by the Trustee on behalf of the Liquidity
Provider in an amount sufficient to repay all outstanding drawings under the
Liquidity Facility, together with interest accrued thereon in accordance with
the Liquidity Facility. The Liquidity Provider hereby appoints the Trustee as
its agent for purposes of making the drawing pursuant to this clause (d) and
clause (vii) of the definition of "Deficiency Amount" in the Policy and the
Trustee hereby accepts such appointment and agrees to make such drawing at the
direction of the Liquidity Provider and to promptly distribute all amounts
received in respect of such drawing to the Liquidity Provider.
(e) FINAL POLICY DRAWING. If on the Final Legal Maturity Date, after giving
effect to the subordination provisions of Section 3.2 and to the application of
Prior Funds, unless the Policy Provider shall have paid on any day prior thereto
the Outstanding Amount as of such day pursuant to Section 3.6(b) or 3.6(c) of
this Indenture, the Trustee does not then have sufficient funds available on
such date for the payment in full of the Outstanding Amount as of such date,
then the Trustee shall (i) prior to 1:00 p.m. (New York City time) on such date
deliver a Notice for Payment, as provided in the Policy, to the Policy Provider
or its fiscal agent, requesting a Policy Drawing under the Policy (for payment
into the Policy Account) in an amount sufficient to enable the Trustee to pay
such Outstanding Amount, and (ii) upon receipt pay such amount from the Policy
Account to Securityholders in payment of such amount.
(f) AVOIDANCE DRAWINGS. If at any time the Trustee shall have actual
knowledge of the issuance of any Final Order, the Trustee shall promptly give
notice thereof to the Liquidity Provider and the Policy Provider. The Trustee
shall thereupon calculate the relevant Avoided Payments resulting therefrom and
shall promptly: (a) send to the Securityholders a Written Notice of such amounts
and (b) prior to the expiration of the Policy, deliver to the Policy Provider or
its fiscal agent a Notice of Avoided Payment under the Policy, together with a
copy of the documentation required by the Policy with respect thereto,
requesting a Policy Drawing thereunder (for payment to the receiver,
conservator, debtor-in-possession, trustee in bankruptcy or the Trustee (for
deposit into the Policy Account), as applicable) in an amount equal to the
amount of relevant Avoided Payment. To the extent that any portion of such
Avoided Payment is to be paid to the Trustee, such Written Notice shall also set
the date for the distribution of such portion of the proceeds of such Policy
Drawing which date shall constitute a Distribution Date and shall be the earlier
of three Business Days after the date of the expiration of the Policy and the
Business Day that immediately follows the 25th day after the date of such
Written Notice. Upon receipt, the Trustee shall pay the proceeds of the
specified Policy Drawing under the Policy to the Securityholders or the
Liquidity Provider, as applicable on such Distribution Date.
(g) APPLICATION OF POLICY DRAWINGS. Notwithstanding anything to the
contrary contained in this Indenture (including, without limitation, Section 3.2
hereof), except as provided in Section 3.6(d) hereof, all payments received by
the Trustee in respect of a Policy Drawing (including, without limitation, that
portion, if any, of the proceeds of a Policy Drawing for any Avoided Payment
that is to be paid to the Trustee and not to any receiver, conservator,
debtor-in-possession or trustee in bankruptcy as provided in the Policy) shall
be promptly paid from the Policy Account to the Securityholders.
(h) LIMITATION TO OUTSTANDING PRINCIPAL AMOUNT; INTEREST ON POLICY
DRAWINGS. Notwithstanding anything to the contrary in this Section 3.6, except
as provided in Section 3.6(f), at no time shall the Trustee make any Policy
Drawing under the Policy under clause (b), (c) or (e) of this Section 3.6 in
excess of the then outstanding principal amount of the Securities, and accrued
and unpaid interest at the Debt Rate. Nothing contained in this Indenture shall
alter or amend the liabilities, obligations, requirements or procedures of the
Policy Provider under the Policy, and the Policy Provider shall not be obligated
to make payment except at the times and in the amounts and under the
circumstances expressly set forth in the Policy. Except for Policy Provider
Interest Obligations, no interest shall accrue on any Policy Drawing or any
other payment made by the Policy Provider.
(i) RESUBMISSION OF NOTICE FOR PAYMENT. If the Policy Provider at any time
informs the Trustee in accordance with the Policy that a Notice for Payment or
Notice of Avoided Payment submitted by the Trustee does not meet the
requirements of the Policy, the Trustee shall, as promptly as possible after
being so informed, submit to the Policy Provider an amended and revised Notice
for Payment or Notice of Avoided Payment, as the case may be, and shall pay to
Securityholders out of the Policy Account the amount received pursuant to such
amended or revised Notice for Payment or Notice of Avoided Payment, as the case
may be, when received.
(j) NO DISCHARGE OF THE COMPANY'S OBLIGATIONS. The payment of principal of
or interest on the Securities with funds drawn under the Policy shall not be
deemed to discharge the Company's obligation to make such payment, which
obligation shall continue in full force and effect.
(k) INTEREST COVERAGE. The interest payable by the Policy Provider under
the Policy shall include interest accruing during the pendency of any
bankruptcy, insolvency, receivership or other similar proceeding, regardless of
whether allowed or allowable in such proceeding.
(l) CONSENT TO ISSUANCE OF SUBORDINATED SECURITIES. The Policy Provider, by
its execution and delivery of this Indenture, (i) consents, as Controlling
Party, to the issuance of the Subordinated Securities hereunder and the
amendments to the Operative Documents in connection therewith, and (ii) confirms
that all of its obligations under the Policy remain unchanged and in full force
and effect.
Section 3.7 DESIGNATED REPRESENTATIVES.
(a) With the delivery of the Original Indenture, the Trustee furnished to
the Liquidity Provider and the Policy Provider, and from time to time thereafter
may furnish to the Liquidity Provider and the Policy Provider, at the Trustee's
discretion, or upon the Liquidity Provider's or the Policy Provider's request
(which request shall not be made more than one time in any 12-month period), a
certificate (a "TRUSTEE INCUMBENCY CERTIFICATE") of a Responsible Officer of the
Trustee certifying as to the incumbency and specimen signatures of the officers
of the Trustee and the attorney-in-fact and agents of the Trustee (the "TRUSTEE
REPRESENTATIVES") authorized to give Written Notices on behalf of the Trustee
hereunder. Until the Liquidity Provider and the Policy Provider receives a
subsequent Trustee Incumbency Certificate, it shall be entitled to rely on the
last Trustee Incumbency Certificate delivered to it hereunder.
(b) With the delivery of the Original Indenture, the Liquidity Provider and
the Policy Provider furnished to the Trustee, and from time to time thereafter
may furnish to the Trustee, at the Liquidity Provider's or Policy Provider's
discretion, or upon the Trustee's request (which request shall not be made more
than one time in any 12-month period), a certificate (each, a "PROVIDER
INCUMBENCY CERTIFICATE") of any Responsible Officer of such Liquidity Provider
or Policy Provider certifying as to the incumbency and specimen signatures of
any officer, attorney-in-fact, agent or other designated representative of such
Liquidity Provider or Policy Provider (in each case, the "PROVIDER
REPRESENTATIVES" and, together with the Trustee Representatives, the "DESIGNATED
REPRESENTATIVES") authorized to give Written Notices on behalf of the Liquidity
Provider or Policy Provider hereunder. Until the Trustee receives a subsequent
Provider Incumbency Certificate, it shall be entitled to rely on the last
Provider Incumbency Certificate delivered to it hereunder by the Liquidity
Provider or the Policy Provider.
Section 3.8 CONTROLLING PARTY.
(a) Subject to the rights of the Holders hereunder (including, without
limitation, Sections 7.4, 7.6, 7.7 and 10.2) and the requirements of the TIA, in
taking, or refraining from taking, any action under this Indenture, whether
before or after the occurrence of an Event of Default, the Trustee will be
directed by the Controlling Party. In particular, in taking, or refraining from
taking, any action under this Indenture pursuant to the exercise of remedies
hereunder as provided in Article 7 and under the Security Agreement pursuant to
the exercise of remedies thereunder as provided in Article 6 thereof (including
foreclosing the Lien on the Collateral), the Trustee and the Collateral Agents
will be directed by the Controlling Party. The provisions of Section 316(a)(1)
of the TIA and, except during any period that the Required Holders or the
Required Subordinated Holders are the Controlling Party, the provisions of
Section 315(d)(3) of the TIA are expressly excluded from this Indenture.
(b) The Person who shall be the "CONTROLLING PARTY" shall be (x) the Policy
Provider (or, if any Policy Provider Default shall have occurred and be
continuing, (i) the Required Holders or (ii) if the Securities have been paid in
full, the Required Subordinated Holders) and (y) upon payment in full of the
Securities, the Policy Expenses and the Policy Provider Obligations, the
Required Subordinated Holders.
The Trustee shall give Written Notice to the Policy Provider and the
Liquidity Provider promptly upon a change in the identity of the Controlling
Party. Each of the Securityholders, by their acceptance of the Securities, each
of the Subordinated Securityholders, by their acceptance of the Subordinated
Securities, the Policy Provider, by entering into the Policy Provider Agreement,
and the Liquidity Provider, by entering into the Liquidity Facility, has agreed
that it shall not exercise any of the rights of the Controlling Party at such
time as it is not the Controlling Party hereunder; PROVIDED, HOWEVER, that
nothing herein contained shall prevent or prohibit any Non-Controlling Party
from exercising such rights as shall be specifically granted to such
Non-Controlling Party hereunder and under the other Operative Documents or the
Support Documents.
(c) Notwithstanding the foregoing, if at any time after the Liquidity
Provider Reimbursement Date a Policy Provider Default attributable to a failure
to make a payment referred to in Section 3.6(d) shall have occurred and be
continuing, the Liquidity Provider (so long as the Liquidity Provider has not
defaulted in its obligation to make any Drawing under the Liquidity Facility)
shall have the right to elect, by Written Notice to the Trustee and the Policy
Provider, to become the Controlling Party hereunder at any time from and
including the Liquidity Provider Reimbursement Date; PROVIDED, HOWEVER, that if
the Policy Provider subsequently pays to the Liquidity Provider all outstanding
Drawings, together with accrued interest thereon, under the Liquidity Facility,
and no other Policy Provider Default has occurred and is continuing, then, the
Policy Provider rather than the Liquidity Provider shall be the Controlling
Party, subject to Section 3.8(b).
(d) The Controlling Party shall not be entitled to require or obligate any
Non-Controlling Party to provide funds necessary to exercise any right or remedy
hereunder.
Section 3.9 COMPANY'S PAYMENT OBLIGATIONS.
The Company agrees to pay to the Trustee for distribution in accordance
with Section 3.2 hereof: (a)(i) an amount equal to the fees payable to the
Liquidity Provider under Section 2.03 of the Liquidity Facility and the related
Fee Letter; (ii) the amount equal to interest on any Downgrade Advance (other
than any Applied Downgrade Advance) payable under Section 3.07 of the Liquidity
Facility minus Investment Earnings from such Downgrade Advance; (iii) the amount
equal to interest on any Non-Extension Advance (other than any Applied
Non-Extension Advance) payable under Section 3.07 of the Liquidity Facility
minus Investment Earnings from such Non-Extension Advance; (iv) if any payment
default shall have occurred and be continuing with respect to interest on any
Securities, the excess, if any, of (1) an amount equal to interest on any Unpaid
Advance, Applied Downgrade Advance or Applied Non-Extension Advance payable
under Section 3.07 of the Liquidity Facility (or, if the Policy Provider has
made a payment equivalent to such an Advance, as would have been payable under
Section 3.07 of the Liquidity Facility had such Advance been made) over (2) the
sum of Investment Earnings from any Final Advance plus any amount of interest at
the Payment Due Rate actually payable (whether or not in fact paid) by the
Company on the overdue scheduled interest on the Securities in respect of which
such Unpaid Advance, Applied Downgrade Advance or Applied Non-Extension Advance
was made by the Liquidity Provider (or an equivalent payment made by the Policy
Provider); (v) any other amounts owed to the Liquidity Provider by the Trustee
as borrower under the Liquidity Facility other than amounts due as repayment of
advances thereunder or as interest on such advances, except to the extent
payable pursuant to clause (ii), (iii) or (iv) above, and (vi) an amount equal
to the fees payable to the Policy Provider under Section 3.02(d) of the Policy
Provider Agreement and all other compensation and reimbursement of expenses and
disbursements (but excluding reimbursement of advances) payable to the Policy
Provider under the Policy Provider Agreement (but excluding all such amounts
actually paid by the Company to the Policy Provider under the Policy Provider
Agreement or the Policy Fee Letter). The Trustee shall immediately deposit in
the Collection Account all payments from the Company received pursuant to this
Section.
Section 3.10. EXECUTION OF SUPPORT DOCUMENTS.
The Trustee was authorized and directed, for the benefit of the
Securityholders, to enter into the Support Documents on the Original Closing
Date. The Trustee shall not amend or supplement, or grant any waiver with
respect to, any Support Document, except pursuant to the provisions of Article
10.
Section 3.11 RIGHT OF SUBORDINATED SECURITYHOLDERS TO DIRECT POLICY
PROVIDER.
(a) Subject to the provisions of Section 3.11 (b) below and Section 3.8
hereof, the Subordinated Securityholders shall have the right to direct the
Policy Provider in taking (or refraining from taking) any action as Controlling
Party during the continuance of an Event of Default if the Subordinated
Securityholders:
(i) deposit with the Policy Provider cash in United States tender,
U.S. Government Obligations or other investments acceptable to the Policy
Provider (or any combination thereof) in the amount specified in clause
(ii) below as collateral security for amounts owed to and to become due and
payable to the Policy Provider under the Operative Documents and the
Support Documents; and
(ii) deliver to the Policy Provider a certificate from a nationally
recognized firm of independent certified public accountants acceptable to
the Policy Provider expressing their opinion that the payments of principal
and interest when due and without reinvestment on the deposited U.S.
Government Obligations or other investments plus any deposited money
without investment will provide cash sufficient to pay: (i) all accrued and
unpaid Policy Expenses and Policy Provider Obligations as of the date of
such deposit, (ii) the then outstanding principal amount of the Securities,
(iii) interest accruing and payable on the Securities from the date of such
deposit to the Final Legal Maturity Date (or, alternatively, the interest
calculated at the rate of interest of 12% per annum for a period of 24
months (or, if shorter, the period from the date of such deposit to the
Final Legal Maturity Date)) and (iv) the premium payable with respect to
the Policy for a period of 24 months from the date of such deposit (or, if
shorter, the period from the date of such deposit to the Final Legal
Maturity Date).
(b) In order to participate in such deposit, a Subordinated Securityholder
must contribute its proportionate share of such deposit which will be the
proportion that the principal amount of its Subordinated Securities bears to the
principal amount of the Subordinated Securities of all Subordinated
Securityholders participating in such deposit. A Subordinated Securityholder
shall not be obligated to contribute to such deposit. The Subordinated
Securityholders contributing their proportionate share of such deposit shall be
entitled, subject to the provisions of Section 3.8 hereof, to direct the Policy
Provider in taking action (or refraining from taking action) as the Controlling
Party during the continuance of an Event of Default by consent of the
contributing Subordinated Securityholders holding more than 50% of the aggregate
unpaid principal amount of the Subordinated Securities held by all such
contributing Subordinated Securityholders. If the Company or any of its
Affiliates is a Subordinated Securityholder, such Person shall not be entitled
to participate in making such deposit or directing the Controlling Party.
(c) The Policy Provider may apply the deposited cash and the cash from the
U.S. Government Obligations and other investments to the reimbursement of Policy
Expenses and Policy Provider Obligations outstanding from time to time. From and
after such application and after the Policy Provider shall have been paid in
full all amounts then due and payable to it under the Operative Documents and
the Support Documents, amounts otherwise distributable to the Policy Provider
under Section 3.2 hereof shall be distributed to such contributing Subordinated
Securityholders in the same proportion as their respective contributions to such
deposit until their proportionate share of such deposit not otherwise returned
by the Policy Provider hereunder shall have been repaid in full.
(d) The Policy Provider shall promptly turn over to the contributing
Subordinated Securityholders in the same proportion as their respective
contributions to such deposit, upon the request accompanied by a certificate
from a nationally recognized firm of independent accountants acceptable to the
Policy Provider expressing their opinion that any money or U.S. Government
Obligations or other investments then held by the Policy Provider are in excess
of the amounts sufficient to pay the amounts referred to in Section 3.11 (a)(ii)
above, any such excess money or investments held by it.
(e) Upon a Policy Provider Default (in which case, the Controlling Party
shall be determined in accordance with Section 3.8 hereof), such deposit shall
be immediately released to the contributing Subordinated Securityholders and the
Policy Provider hereby indemnifies and holds harmless each contributing
Subordinated Securityholders for any and all costs and expenses incurred in
connection with such deposit and release.
ARTICLE 4.
REDEMPTIONS
Section 4.1 OPTIONAL REDEMPTION.
The Notes may be redeemed at any time in whole or (so long as no Payment
Default has occurred and is continuing) in part (in any integral multiple of
$1,000) by the Company at its sole option at a redemption price equal to the sum
of 100% of the principal amount of, accrued and unpaid interest on, and Premium,
if any, and Break Amount, if any, with respect to, the redeemed Notes to and
including the Redemption Date, PROVIDED that the Subordinated Securities may not
be redeemed at the option of the Company prior to May 9, 2004. Notwithstanding
the foregoing, so long as the Policy Provider is the Controlling Party, the
Company shall not redeem any Subordinated Securities (i) if an Event of Default
has occurred and is continuing as of the Redemption Date or (ii) unless the
Company shall have furnished to the Policy Provider within 60 days prior to the
Redemption Date a certificate of an Officer certifying that, based upon the
Pledged Spare Parts included in the Collateral determined as of a date within 10
days prior to the date of such certificate valued using the Appraised Value of
such Pledged Spare Parts (but without requiring a new Independent Appraiser's
Certificate), the Maximum Collateral Ratio and Minimum Rotable Ratio are
satisfied (after giving effect to any scheduled redemption of Securities on such
Redemption Date), PROVIDED that the Policy Provider may, in its sole discretion,
waive compliance with the requirements of this sentence.
Section 4.2 REDEMPTION NOTICE TO TRUSTEE.
If the Company elects to redeem Notes as provided in Section 4.1, it shall
notify the Trustee of the Redemption Date, the principal amount of Notes of each
Series to be redeemed and all other information needed for the notice to be
given by the Trustee pursuant to Section 4.4.
The Company shall give the notice provided for in this Section at least ten
(10) days (unless a shorter notice shall be satisfactory to the Trustee) prior
to the date the Trustee must give notice pursuant to Section 4.4.
Section 4.3 SELECTION OF NOTES TO BE REDEEMED.
If less than all the Notes of a Series are to be redeemed, the Trustee
shall select the Notes of such Series to be redeemed on either a PRO RATA basis
or by lot or by any other equitable manner determined by the Trustee in its sole
discretion. The Trustee shall make the selection from Notes of such Series
outstanding not previously called for redemption. The Trustee may select for
redemption portions of the principal of Notes that have denominations larger
than $1,000. Notes and portions of them it selects shall be in amounts of $1,000
or whole multiples of $1,000. Provisions of this Indenture that apply to Notes
called for redemption also apply to portions of Notes called for redemption, and
references to such Notes shall also refer to such portions of such Notes.
Section 4.4 NOTICE OF REDEMPTION.
At least 15 days but not more than 60 days before a Redemption Date, the
Trustee shall mail by first-class mail a notice of redemption to each Holder
whose Notes are to be redeemed.
The notice shall identify the Notes and the principal amount thereof to be
redeemed and shall state:
(1) the Redemption Date;
(2) the redemption price (including the amount of accrued and unpaid
interest, and Premium, if any, to be paid on the Notes called for
redemption);
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption
Date, upon surrender of such Note, a new Note or Notes in principal amount
equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price; and
(6) that, unless the Company fails to make the redemption payment,
interest on the Notes to be redeemed ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of such Notes
is to receive payment of the redemption price (including the amount of
accrued and unpaid interest, and Premium, if any, to be paid on the Notes
called for redemption) upon surrender to the Paying Agent of the Notes.
At the Company's request, the Trustee shall give the notice of redemption
in the Company's name and at the Company's expense.
Section 4.5 EFFECT OF NOTICE OF REDEMPTION.
Once a notice of redemption is mailed, Notes called for redemption become
due and payable on the Redemption Date at the redemption price and, on and after
such date (unless the Company shall fail to make the payment of the redemption
price), such Notes shall cease to bear interest. Upon surrender to the Paying
Agent, such Notes shall be paid at the redemption price. Notwithstanding the
foregoing, if the Trustee gives notice of redemption, but the Company fails to
pay when due all amounts necessary to effect such redemption, such redemption
shall be deemed revoked and no amount shall be due as a result of notice of
redemption having been given.
Section 4.6 DEPOSIT OF REDEMPTION PRICE.
On or before 12:30 p.m., Eastern Time, on the Redemption Date, the Company
shall deposit with the Paying Agent money in funds immediately available on the
Redemption Date sufficient to pay the principal amount of and accrued interest
on and Premium, if any, and Break Amount, if any, with respect to, all Notes to
be redeemed on that date, PROVIDED that the Company's failure to make such
deposit shall result in the revocation of such redemption in accordance with
Section 4.5.
Section 4.7 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for the Holder a new Note of the same Series equal in principal
amount of the unredeemed portion of the Note surrendered.
ARTICLE 5.
COVENANTS
Section 5.1 PAYMENT OF NOTES.
The Company shall pay the principal of, interest on and Premium, if any,
and Break Amount, if any, with respect to, the Notes on the dates and in the
manner provided in this Indenture and in the Notes. The Company will, on or
before each due date for the payment of the principal of, interest on, Premium,
if any, or Break Amount, if any, due under any of the Notes, deposit with the
Trustee payments sufficient to pay the principal, interest, Premium, if any, or
Break Amount, if any, so becoming due, and the Trustee shall immediately deposit
all such payments in the Collection Account.
The principal of, interest on, Premium, if any, Break Amount, if any, and
other amounts due under any of the Notes or hereunder will be payable in Dollars
by wire transfer of immediately available funds not later than 12:30 p.m., New
York time, on the due date of payment to the Trustee at the Corporate Trust
Office for distribution in the manner provided herein. The Trustee will make
funds deposited in the Collection Account on a Distribution Date and required to
be distributed to Noteholders pursuant to Section 3.2 available to the Paying
Agent for such distribution. The Paying Agent shall distribute amounts payable
to each Noteholder by check mailed to such Noteholder at its address appearing
in the Register, except that with respect to Notes registered on the applicable
Record Date in the name of a Clearing Agency (or its nominee), such distribution
shall be made by wire transfer in immediately available funds to the account
designated by such Clearing Agency (or such nominee). The Company shall not have
any responsibility for the distribution of such payments to any Noteholder. Any
payment made hereunder shall be made without any presentment or surrender of any
Notes, except that, in the case of the final payment in respect of any Note,
such Note shall be surrendered to the Paying Agent for cancellation against
receipt of such payment.
Section 5.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, The City of New
York, an office or agency where Notes may be surrendered for registration of
transfer or exchange or for presentation for payment and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. At the request of the Company, said office or agency may be an office of
the Trustee or an agent appointed by the Trustee for such purpose. The Company
shall give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency not designated or appointed by the
Trustee. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office.
The Company may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; PROVIDED, HOWEVER,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency. The Company hereby designates
the Corporate Trust Office as one such office or agency of the Company in
accordance with Section 2.8.
Section 5.3 CORPORATE EXISTENCE.
Except as otherwise provided in Section 5.4, the Company shall do or cause
to be done all things necessary to preserve and keep in full force and effect
its corporate existence and shall at all times remain a U.S. Air Carrier.
Section 5.4 COMPANY NOT TO CONSOLIDATE, MERGE, CONVEY OR TRANSFER EXCEPT
UNDER CERTAIN CONDITIONS.
(a) The Company shall not consolidate with, or merge into, or convey,
transfer or lease all or substantially all of its assets to any Person unless:
(i) the resulting, surviving, transferee or lessee Person (the
"SUCCESSOR COMPANY") shall be a Person organized and existing under the
laws of the U.S., any state thereof or the District of Columbia and a U.S.
Air Carrier, and the Successor Company shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under
the Notes, the Indenture, the other Operative Documents and the Support
Documents to which the Company is a party;
(ii) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that (i) such
consolidation, merger, conveyance, transfer or lease and such supplemental
indenture comply with the terms of this Indenture and (ii) this Indenture,
each other Operative Document and the Notes constitute the valid and
legally binding obligations of the Successor Company;
(iii) the Company or the Successor Company complies with the
requirements of Section 4.04(c) of the Security Agreement; and
(iv) immediately after giving effect to such transaction, no Event of
Default shall have occurred and be continuing.
(b) The Successor Company shall be the successor to the Company and shall
succeed to, and be substituted for, and be bound by and obligated to pay the
obligations of, and may exercise every right and power of, the Company under the
Indenture, each other Operative Document, the Notes and the Support Documents to
which the Company is a party, but the predecessor Company in the case of a
conveyance, transfer or lease shall not be released from the obligation to pay
the principal of, interest on, and Premium, if any, and Break Amount, if any,
with respect to, the Notes and any other amounts payable by the Company
hereunder.
(c) The Successor Company may cause to be signed, and may issue either in
its own name or in the name of the Company prior to such succession any or all
of the Notes issuable hereunder which theretofore shall not have been signed by
the Company and delivered to the Trustee; and upon the order of the Successor
Company, instead of the Company, and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
shall deliver any Notes which previously shall have been signed and delivered by
the officers of the Company to the Trustee for authentication, and any Notes
which such Successor Company thereafter shall cause to be signed and delivered
to the Trustee for that purpose. All of the Notes so issued shall in all
respects have the same legal rank and benefit under this Indenture as though all
of such Notes had been issued at the date of the execution hereof.
(d) In case of any such consolidation, merger, sale, conveyance, transfer
or lease such changes in phraseology and form (but not in substance) may be made
in the Notes thereafter to be issued as may be appropriate.
Section 5.5 REPORTS BY THE COMPANY.
(a) The Company shall file with the Trustee, within 15 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) that the Company may be required to file with the SEC
pursuant to Section 13 or Section 15(d) of the Exchange Act; or, if the Company
is not required to file information, documents, or reports pursuant to either of
said sections, then to file with the Trustee and the SEC, in accordance with
rules and regulations prescribed from time to time by the SEC, such of the
supplementary and periodic information, documents, and reports that may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.
(b) So long as required by the TIA, the Company shall deliver to the
Trustee, within 120 days after the end of each calendar year, a certificate
signed by the Company's principal executive officer, principal financial officer
or principal accounting officer (which certificate need not comply with Section
12.4 or 12.5) stating that to his or her knowledge during such preceding
calendar year no Default or Event of Default has occurred (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge).
ARTICLE 6.
INDEMNIFICATION
Section 6.1 GENERAL INDEMNITY.
(a) The Company shall indemnify, protect, defend and hold harmless each
Indemnitee from, against and in respect of, and shall pay on a net after-tax
basis, any and all Expenses of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against any Indemnitee, relating to, resulting from,
or arising out of or in connection with, any one or more of the following:
(i) The Operative Documents or the Support Documents, or the
enforcement of any of the terms of any of the Operative Documents or the
Support Documents;
(ii) The Spare Parts Collateral, including, without limitation, with
respect thereto, (A) the manufacture, design, purchase, acceptance,
nonacceptance or rejection, ownership, delivery, nondelivery, lease,
sublease, assignment, possession, use or non-use, operation, maintenance,
testing, repair, overhaul, condition, alteration, modification, addition,
improvement, storage, airworthiness, replacement, repair, sale,
substitution, return, abandonment, redelivery or other disposition of any
Spare Parts Collateral, (B) any claim or penalty arising out of violations
of applicable Laws by the Company (or any Permitted Lessee), (C) tort
liability, whether or not arising out of the negligence of any Indemnitee
(whether active, passive or imputed), (D) death or property damage of
passengers, shippers or others, (E) environmental control, noise or
pollution and (F) any Liens in respect of the Spare Parts Collateral;
(iii) The offer, sale, or delivery of any Notes or any interest
therein or represented thereby; and
(iv) Any breach of or failure to perform or observe, or any other
noncompliance with, any covenant or agreement or other obligation to be
performed by the Company under any Operative Document or Support Document
to which it is party or the falsity of any representation or warranty of
the Company in any Operative Document or Support Document to which it is
party.
(b) Notwithstanding anything contained in Section 6.1(a), the Company shall
not be required to indemnify, protect, defend and hold harmless any Indemnitee
pursuant to Section 6.1(a) in respect of any Expense of such Indemnitee:
(i) For any Taxes or a loss of Tax benefit;
(ii) Except to the extent attributable to acts or events occurring
prior thereto, acts or events (other than acts or events related to the
performance by the Company of its obligations pursuant to the terms of the
Operative Documents or the Support Documents to which it is a party) that
occur after the Indenture is required to be terminated in accordance with
Section 9.1 of this Indenture; PROVIDED, that nothing in this clause (ii)
shall be deemed to exclude or limit any claim that any Indemnitee may have
under applicable Law by reason of an Event of Default or for damages from
the Company for breach of the Company's covenants contained in the
Operative Documents or the Support Documents to which it is a party or to
release the Company from any of its obligations under the Operative
Documents or the Support Documents to which it is a party that expressly
provide for performance after termination of the Indenture;
(iii) To the extent attributable to any transfer (voluntary or
involuntary) by or on behalf of such Indemnitee or any related Indemnitee
of any Note or interest therein;
(iv) To the extent attributable to the gross negligence or willful
misconduct of such Indemnitee or any related Indemnitee (as defined below)
(other than gross negligence or willful misconduct imputed to such person
by reason of its interest in the Spare Parts Collateral or any Operative
Document);
(v) To the extent attributable to the incorrectness or breach of any
representation or warranty of such Indemnitee or any related Indemnitee
contained in or made pursuant to any Operative Document or any Support
Document;
(vi) To the extent attributable to the failure by such Indemnitee or
any related Indemnitee to perform or observe any agreement, covenant or
condition on its part to be performed or observed in any Operative Document
or any Support Document;
(vii) To the extent attributable to the offer or sale by such
Indemnitee or any related Indemnitee of any interest in the Spare Parts
Collateral, any Note, or any similar interest, in violation of the
Securities Act or other applicable federal, state or foreign securities
Laws (other than any thereof caused by acts or omissions of the Company);
(viii) (x) With respect to any Indemnitee (other than the Trustee, any
Agent or any Collateral Agent), to the extent attributable to the failure
of the Trustee, any Agent or any Collateral Agent to distribute funds
received and distributable by it in accordance with the Indenture or a
Collateral Agreement, as the case may be, or (y) with respect to the
Trustee, any Agent or any Collateral Agent, to the extent attributable to
the negligence or willful misconduct of the Trustee, any Agent or any
Collateral Agent in the distribution of funds received and distributable by
it in accordance with the Indenture or a Collateral Agreement, as the case
may be;
(ix) Other than during the continuation of an Event of Default, to the
extent attributable to the authorization or giving or withholding of any
future amendments, supplements, waivers or consents with respect to any
Operative Document or Support Document other than such as have been
requested by the Company or as are required by or made pursuant to the
terms of the Operative Documents or Support Documents (unless such
requirement results from the actions of an Indemnitee not required by or
made pursuant to the Operative Documents or the Support Documents);
(x) To the extent attributable to any amount which any Indemnitee
expressly agrees to pay or such Indemnitee expressly agrees shall not be
paid by or be reimbursed by the Company;
(xi) To the extent that it is an ordinary and usual operating or
overhead expense;
(xii) For any Lien attributable to such Indemnitee or any related
Indemnitee;
(xiii) If another provision of an Operative Document or a Support
Document specifies the extent of the Company's responsibility or obligation
with respect to such Expense, to the extent arising from other than failure
of the Company to comply with such specified responsibility or obligation;
or
(xiv) To the extent incurred by or asserted against an Indemnitee as a
result of any "prohibited transaction", within the meaning of Section 406
of ERISA or Section 4975(c)(1) of the Code.
For purposes of this Section 6.1, a Person shall be considered a "related"
Indemnitee with respect to an Indemnitee if such Person is an Affiliate or
employer of such Indemnitee, a director, officer, employee, agent, or servant of
such Indemnitee or any such Affiliate or a successor or permitted assignee of
any of the foregoing.
Section 6.2 SEPARATE AGREEMENT.
This Article 6 constitutes a separate agreement with respect to each
Indemnitee and is enforceable directly by each such Indemnitee.
Section 6.3 NOTICE.
If a claim for any Expense that an Indemnitee shall be indemnified against
under this Article 6 is made, such Indemnitee shall give prompt written notice
thereof to the Company. Notwithstanding the foregoing, the failure of any
Indemnitee to notify the Company as provided in this Section 6.3, or in Section
6.4, shall not release the Company from any of its obligations to indemnify such
Indemnitee hereunder, except to the extent that such failure results in an
additional Expense to the Company (in which event the Company shall not be
responsible for such additional expense) or materially impairs the Company's
ability to contest such claim.
Section 6.4 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS.
(a) In case any action, suit or proceeding shall be brought against any
Indemnitee for which the Company is responsible under this Article 6, such
Indemnitee shall notify the Company of the commencement thereof and the Company
may, at its expense, participate in and to the extent that it shall wish
(subject to the provisions of the following paragraph), assume and control the
defense thereof and, subject to Section 6.4(c), settle or compromise the same.
(b) The Company or its insurer(s) shall have the right, at its or their
expense, to investigate or, if the Company or its insurer(s) shall agree not to
dispute liability to the Indemnitee giving notice of such action, suit or
proceeding under this Section 6.4 for indemnification hereunder or under any
insurance policies pursuant to which coverage is sought, control the defense of,
any action, suit or proceeding, relating to any Expense for which
indemnification is sought pursuant to this Article 6, and each Indemnitee shall
cooperate with the Company or its insurer(s) with respect thereto; PROVIDED,
that the Company shall not be entitled to control the defense of any such
action, suit, proceeding or compromise any such Expense during the continuance
of any Event of Default. In connection with any such action, suit or proceeding
being controlled by the Company, such Indemnitee shall have the right to
participate therein, at its sole cost and expense, with counsel reasonably
satisfactory to the Company; PROVIDED, that such Indemnitee's participation does
not, in the reasonable opinion of the independent counsel appointed by the
Company or its insurers to conduct such proceedings, interfere with the defense
of such case.
(c) In no event shall any Indemnitee enter into a settlement or other
compromise with respect to any Expense without the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed, unless
such Indemnitee waives its right to be indemnified with respect to such Expense
under this Article 6.
(d) In the case of any Expense indemnified by the Company hereunder which
is covered by a policy of insurance maintained by the Company pursuant to a
Collateral Agreement, at the Company's expense, each Indemnitee agrees to
cooperate with the insurers in the exercise of their rights to investigate,
defend or compromise such Expense as may be required to retain the benefits of
such insurance with respect to such Expense.
(e) If an Indemnitee is not a party to this Indenture, the Company may
require such Indemnitee to agree in writing to the terms of this Article 6 prior
to making any payment to such Indemnitee under this Article 6.
(f) Nothing contained in this Section 6.4 shall be deemed to require an
Indemnitee to contest any Expense or to assume responsibility for or control of
any judicial proceeding with respect thereto.
Section 6.5 INFORMATION.
The Company will provide the relevant Indemnitee with such information not
within the control of such Indemnitee, as is in the Company's control or is
reasonably available to the Company, which such Indemnitee may reasonably
request and will otherwise cooperate with such Indemnitee so as to enable such
Indemnitee to fulfill its obligations under Section 6.4. The Indemnitee shall
supply the Company with such information not within the control of the Company,
as is in such Indemnitee's control or is reasonably available to such
Indemnitee, which the Company may reasonably request to control or participate
in any proceeding to the extent permitted by Section 6.4.
Section 6.6 SUBROGATION; FURTHER ASSURANCES.
Upon the payment in full by the Company of any indemnity provided for under
this Article 6, the Company, without any further action and to the full extent
permitted by Law, will be subrogated to all rights and remedies of the person
indemnified (other than with respect to any of such Indemnitee's insurance
policies) in respect of the matter as to which such indemnity was paid. Each
Indemnitee will give such further assurances or agreements and cooperate with
the Company to permit the Company to pursue such claims, if any, to the extent
reasonably requested by the Company and at the Company's expense.
Section 6.7 REFUNDS.
If an Indemnitee receives any refund, in whole or in part, with respect to
any Expense paid by the Company hereunder, it will promptly pay the amount
refunded (but not an amount in excess of the amount the Company or any of its
insurers has paid in respect of such Expense) over to the Company unless an
Event of Default shall have occurred and be continuing, in which case such
amounts shall be paid over to the Security Agent to hold as security for the
Company's obligations under the Operative Documents and the Support Documents to
which the Company is a party or, if requested by the Company, applied to satisfy
such obligations.
ARTICLE 7.
DEFAULT AND REMEDIES
Section 7.1 EVENTS OF DEFAULT.
The term "EVENT OF DEFAULT" shall mean any of the following events
(whatever the reason for such Event of Default and whether such event shall be
voluntary or involuntary or come about or be effected by operation of law or
pursuant to or in compliance with any judgment, decree or order of any court or
any order, rule or regulation of any administration or governmental body):
(a) the Company shall fail to pay (i) principal of, interest on, or
Premium, if any, or Break Amount, if any, with respect to any Note when due, and
such failure shall continue unremedied for a period of 10 Business Days
thereafter (it being understood that any amount distributed to Securityholders
in respect of the foregoing from funds provided by the Policy Provider, the
Liquidity Provider or the Cash Collateral Account shall not be deemed to cure
such Default), or (ii) any other amount payable by it to the Noteholders under
this Indenture or any Operative Document when due, and such failure shall
continue for a period in excess of 10 Business Days after the Company has
received written notice from the Trustee of the failure to make such payment
when due;
(b) the Company shall fail to observe or perform (or caused to be observed
and performed) in any material respect any other covenant, agreement or
obligation set forth herein or in any other Operative Document to which the
Company is a party and such failure shall continue unremedied for a period of 30
days from and after the date of written notice thereof to the Company from the
Trustee, unless such failure is capable of being corrected and the Company shall
be diligently proceeding to correct such failure, in which case there shall be
no Event of Default unless and until such failure shall continue unremedied for
a period of 270 days after receipt of such notice;
(c) any representation or warranty made by the Company herein or in any
other Operative Document to which the Company is a party (a) shall prove to have
been untrue or inaccurate in any material respect as of the date made, (b) such
untrue or inaccurate representation or warranty is material at the time in
question, and (c) the same shall remain uncured (to the extent of the adverse
impact of such incorrectness on the interest of the Trustee) for a period in
excess of 30 days from and after the date of written notice thereof from Trustee
to the Company;
(d) the Company shall consent to the appointment of or taking possession by
a receiver, trustee or liquidator of itself or of a substantial part of its
property, or the Company shall admit in writing its inability to pay its debts
generally as they come due or shall make a general assignment for the benefit of
its creditors, or the Company shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization, liquidation or other
relief under any bankruptcy laws or insolvency laws (as in effect at such time),
or an answer admitting the material allegations of a petition filed against it
in any such case, or the Company shall seek relief by voluntary petition, answer
or consent, under the provisions of any other bankruptcy or similar law
providing for the reorganization or winding-up of corporations (as in effect at
such time), or the Company shall seek an agreement, composition, extension or
adjustment with its creditors under such laws or the Company's board of
directors shall adopt a resolution authorizing corporate action in furtherance
of any of the foregoing;
(e) an order, judgment or decree shall be entered by any court of competent
jurisdiction appointing, without the consent of the Company, a receiver, trustee
or liquidator of the Company or of any substantial part of its property, or any
substantial part of the property of the Company shall be sequestered, or
granting any other relief in respect of the Company as a debtor under any
bankruptcy laws or other insolvency laws (as in effect at such time), and any
such order, judgment, decree, or decree of appointment or sequestration shall
remain in force undismissed, unstayed or unvacated for a period of 90 days after
the date of entry thereof; or
(f) a petition against the Company in a proceeding under any bankruptcy
laws or other insolvency laws (as in effect at such time) is filed and not
withdrawn or dismissed within 90 days thereafter, or if, under the provisions of
any law providing for reorganization or winding-up of corporations which may
apply to the Company, any court of competent jurisdiction shall assume
jurisdiction, custody or control of the Company of any substantial part of its
property and such jurisdiction, custody or control shall remain in force
unrelinquished, unstayed or unterminated for a period of 90 days.
Section 7.2 ACCELERATION.
If an Event of Default (other than an Event of Default specified in Section
7.1(d), (e) or (f) with respect to the Company) occurs, and is continuing, the
Controlling Party may, by notice to the Company and the Trustee, and the Trustee
shall, upon the request of such Controlling Party, declare all unpaid principal
of, accrued but unpaid interest on, and Premium, if any, Break Amount, if any,
with respect to the Notes Outstanding and other amounts otherwise payable
hereunder, if any, to the date of acceleration to be due and payable and upon
any such declaration, the same shall become and be immediately due and payable.
If an Event of Default specified in Section 7.1(d), (e) or (f) occurs with
respect to the Company, all unpaid principal of, accrued but unpaid interest on,
and Premium, if any, Break Amount, if any, with respect to, the Notes
Outstanding and other amounts otherwise payable hereunder, if any, shall
automatically become and be immediately due and payable without any declaration
or other act on the part of the Trustee, the Controlling Party or any
Noteholder. Upon payment of such principal amount, interest, Premium, if any,
Break Amount, if any, and other amounts, all of the Company's obligations under
the Notes and this Indenture, other than obligations under Article 6 and Section
8.7, shall terminate. The Controlling Party by notice to the Trustee may rescind
an acceleration and its consequences if (a) all existing Events of Default,
other than the non-payment as to the Notes of the principal, interest, Premium,
if any, and Break Amount, if any, with respect thereto and other amounts
otherwise payable hereunder, if any, which has become due solely by such
declaration of acceleration, have been cured or waived, (b) to the extent the
payment of such interest is permitted by law, interest on overdue installments
of interest and on overdue principal which has become due otherwise than by such
declaration of acceleration, has been paid, (c) the rescission would not
conflict with any judgment or decree of a court of competent jurisdiction, and
(d) all payments due to the Trustee and any predecessor Trustee under Section
8.7 have been made. No such rescission shall affect any subsequent default or
impair any right arising from any subsequent default.
Section 7.3 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, interest on, or Premium, if any, or Break Amount, if any, with
respect to the Notes or other amounts otherwise payable hereunder, if any, or to
enforce the performance of any provision of the Notes or this Indenture
including, without limitation, instituting proceedings and exercising and
enforcing, or directing exercise and enforcement of, all rights and remedies of
the Trustee and the Collateral Agent under the other Operative Documents and
directing the Collateral Agent to deposit with the Trustee all cash and/or
Investment Securities held by the Collateral Agent.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Noteholder in exercising any right or remedy accruing upon
an Event of Default shall not impair the right or remedy or constitute a waiver
of or acquiescence in the Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.
Section 7.4 WAIVER OF PAST DEFAULTS.
Subject to Sections 7.7, 10.2 and 10.6, the Controlling Party by notice to
the Trustee may authorize the Trustee to waive an existing Default or Event of
Default and its consequences, except a Default or Event of Default (i) in the
payment of principal of, interest on, or Premium, if any, or Break Amount, if
any, with respect to, any Note as specified in Section 7.1(a) that has not been
paid from funds provided by the Policy Provider, the Liquidity Provider or the
Cash Collateral Account or (ii) in respect of a covenant or provision hereof
which cannot be modified or amended without the consent of the Liquidity
Provider, the Policy Provider and the Holder of each Security affected or
without the consent of the Holder of each Subordinated Security affected. When a
Default or Event of Default is so waived, it is cured and ceases, and the
Company, the Liquidity Provider, the Policy Provider, the Holders and the
Trustee shall be restored to their former positions and rights hereunder
respectively; but no such waiver shall extend to any subsequent or other Default
or Event of Default or impair any right consequent thereon.
Section 7.5 CONTROL OF REMEDIES.
The Controlling Party may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee (as Trustee or Collateral
Agent, subject, in the case of any actions based on the status of the Trustee as
Collateral Agent, to any limitations otherwise expressly provided for in the
other Operative Documents) or exercising any trust or power conferred on it;
provided that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction. The Trustee may refuse to follow
any direction hereunder or authorization under Section 7.4 that conflicts with
law or this Indenture, that the Trustee determines may subject the Trustee to
personal liability or, after a Policy Provider Default or after the Securities,
the Policy Expenses and the Policy Provider Obligations have been paid in full,
that the Trustee determines may be unduly prejudicial to the rights of another
Noteholder. However, the Trustee shall have no liability for any actions or
omissions to act which are in accordance with any such direction or
authorization. The Controlling Party shall not direct the Trustee or any
Collateral Agent to sell or otherwise dispose of any Collateral unless all
unpaid principal of, accrued but unpaid interest on, and Premium, if any, and
Break Amount, if any, with respect to, the Outstanding Notes and other amounts
otherwise payable under this Indenture, if any, shall be declared or otherwise
become due and payable immediately.
Section 7.6 LIMITATION ON SUITS.
A Noteholder may not pursue any remedy with respect to this Indenture or
the Notes unless:
(a) the Holder gives to the Trustee written notice of a continuing Event of
Default;
(b) the Holders of at least twenty-five percent (25%) in principal amount
of a Series of Notes Outstanding make a written request to the Trustee to pursue
the remedy;
(c) such Holder or Holders offer to the Trustee indemnity satisfactory to
the Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within sixty (60) days
after receipt of the request and the offer of indemnity;
(e) during such 60-day period the Controlling Party does not give the
Trustee a direction which, in the opinion of the Trustee, is inconsistent with
such request; and
(f) in the case of a Subordinated Securityholder, the principal of,
interest on, and Premium, if any, Break Amount, if any, and all other amounts
payable under this Indenture with respect to the Securities have been paid in
full.
A Noteholder may not use this Indenture to prejudice the rights of another
Noteholder or to obtain a preference or priority over such other Noteholder
(except for the preferences and priorities of the Securities over the
Subordinated Securities provided for in this Indenture).
Section 7.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal of, interest on, and Premium,
if any, and Break Amount, if any, with respect to, the Note in cash, on or after
the respective due dates expressed in the Note, or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of the Holder.
It is hereby expressly understood, intended and agreed that any and all
actions which a Holder of the Notes may take to enforce the provisions of this
Indenture and/or collect Payments due hereunder or under the Notes, except to
the extent that such action is determined to be on behalf of all Holders of the
Notes, shall be in addition to and shall not in any way change, adversely affect
or impair the rights and remedies of the Trustee, the Controlling Party or any
other Holder of the Notes thereunder or under this Indenture, the other
Operative Documents and the Support Documents, including the right to foreclose
upon and sell the Collateral or any part thereof and to apply any proceeds
realized in accordance with the provisions of this Indenture.
Section 7.8 COLLECTION SUIT BY TRUSTEE.
If an Event of Default in payment of principal, interest, Premium or Break
Amount specified in Section 7.1(a) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company or any other obligor on the Notes for the whole amount of principal,
accrued interest, Premium, if any, or Break Amount, if any, remaining unpaid,
together with interest on overdue principal and on overdue interest, Premium or
Break Amount to the extent that payment of such interest is permitted by law, in
each case at the rate per annum provided for by the Notes, and such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
Section 7.9 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents as
may be necessary or advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel) and the Noteholders allowed
in any judicial proceedings relative to the Company (or any other obligor upon
the Notes), its creditors or its property and shall be entitled and empowered to
collect and receive any moneys or other property payable or deliverable on any
such claims and to distribute the same, and any Custodian in any such judicial
proceedings is hereby authorized by each Noteholder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Noteholders, to pay to the Trustee any amount due to it
for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel, and any other amounts due the Trustee under
Section 8.7, and unless prohibited by law or applicable regulations to vote on
behalf of the Holders of Notes for the election of a trustee in bankruptcy or
other person performing similar functions. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Noteholder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Noteholder in any
such proceeding except, as aforesaid, for the election of a trustee in
bankruptcy or person performing similar functions.
Section 7.10 APPLICATION OF PROCEEDS.
Any moneys collected by the Trustee pursuant to this Article 7 or by the
Security Agent under Section 6.02 of the Security Agreement shall be distributed
in the order provided in Section 3.2 at the date or dates fixed by the Trustee
and, in case of the distribution of such moneys on account of principal,
interest, Premium, if any, or Break Amount, if any, upon presentation of the
several Notes and stamping (or otherwise noting) thereon the payment, or issuing
Notes in reduced principal amounts in exchange for the presented Notes if only
partially paid, or upon surrender thereof if fully paid.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 7.10, and the Trustee shall give the
Company and the Noteholders written notice thereof no less than 15 days prior to
any such record date.
Section 7.11 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any Note by his
acceptance thereof shall be deemed to have agreed, that any court in its
discretion may require in any suit for the enforcement of any right or remedy
under this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit, having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 7.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 7.7, or a suit
by Holders of more than ten percent (10%) in principal amount of the Notes of a
Series Outstanding.
Section 7.12 RESTORATION OF RIGHTS ON ABANDONMENT OF PROCEEDINGS.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned for any
reason, or shall have been determined adversely to the Trustee, then and in
every such case the Company, the Trustee and the Noteholders shall be restored
respectively to their former positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the Noteholders shall
continue as though no such proceedings had been taken.
Section 7.13 POWERS AND REMEDIES CUMULATIVE; DELAY OR OMISSION NOT WAIVER
OF DEFAULT.
No right or remedy herein conferred upon or reserved to the Trustee or to
any Noteholder is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder of any of the Notes to
exercise any right or power accruing upon any Event of Default occurring and
continuing as aforesaid shall impair any such right or power or shall be
construed to be a waiver of any such Event of Default or an acquiescence
therein; and, subject to the other applicable provisions of this Indenture,
every power and remedy given by this Indenture or by law to the Trustee, a
Liquidity Provider, the Policy Provider or to any Noteholder may be exercised
from time to time, and as often as shall be deemed expedient, by the Trustee or
by such Noteholder.
Any right or remedy herein conferred upon or reserved to the Trustee may be
exercised by it in its capacity as Trustee and/or as Collateral Agent, as it may
deem most efficacious, if it is then acting in such capacity.
Section 7.14 CERTAIN LIMITS ON REMEDIES BY POLICY PROVIDER.
The Policy Provider agrees, for the benefit of the Subordinated
Securityholders, that, so long as the Policy Provider is the Controlling Party,
if the Company is a debtor in a proceeding under Chapter 11 of the Bankruptcy
Code and (i) the 60-day period under Section 1110(a)(2)(A) of the Bankruptcy
Code (or such longer period as may apply under Section 1110(b) of the Bankruptcy
Code) shall expire without the Company having entered into an agreement of the
kind described in Section 1110(a)(2)(A) of the Bankruptcy Code (a "SECTION
1110(A) AGREEMENT") with respect to the Indenture and the other Operative
Documents, (ii) the Company shall have entered into a Section 1110(a) Agreement
and thereafter shall have failed to perform its obligations thereunder such that
the Security Agent is entitled to take possession of the Pledged Spare Parts
pursuant to the Security Agreement, or (iii) a plan of reorganization shall have
been confirmed in such proceeding that does not provide for the continuation of
the terms and conditions of the Operative Documents in full force and effect in
accordance with their original stated terms without modification or impairment,
the Policy Provider shall not permit (and will not permit the Trustee or any
Collateral Agent to permit) the sale or lease of all or any portion of the
Collateral to the Company or any of its Affiliates for an amount less than the
then current fair market value thereof (as determined by a nationally recognized
appraiser selected by the Trustee and acceptable to the Policy Provider). The
Policy Provider further agrees to give the Subordinated Securityholders at least
30 days' prior written notice of its intention to sell or lease all or any
portion of the Collateral.
ARTICLE 8.
TRUSTEE
Section 8.1 DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture and
use the same degree of care and skill in their exercise as a prudent person
would exercise or use under the circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee need perform only those duties as are specifically set
forth in this Indenture, the other Operative Documents and the Support
Documents and no others.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) This paragraph (c) does not limit the effect of paragraph (b) of
this Section 8.1 or of Section 8.2.
(ii) The Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 7.5.
(d) The Trustee may refuse to perform any duty or exercise any right or
power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 8.1.
(f) Funds held in trust for the benefit of the Holders of the Notes by the
Trustee or any Paying Agent on deposit with itself or elsewhere, and Investment
Securities held in trust for the benefit of the Holders of the Notes by the
Trustee, shall be held in distinct, identifiable accounts, and other funds or
investments of any nature or from any source whatsoever may be held in such
accounts, except, in each case, to the extent required by law. The Trustee shall
not be liable for interest on any money received by it except as the Trustee may
agree with the Company.
Section 8.2 RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel, which shall conform to Section
12.5. The Trustee shall not be liable for any action it takes or omits to take
in good faith in reliance on such certificate or opinion.
(c) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through its attorneys and
agents and the Trustee shall not be responsible for the misconduct or negligence
of any agent or attorney appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within its
rights or powers.
Section 8.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner or
pledgee of Notes and may otherwise deal with and collect obligations owed to it
by the Company or Affiliates of the Company with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However, the
Trustee is subject to Sections 8.10 and 8.11.
Section 8.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Notes, it shall not be accountable for the Company's use of the
proceeds from the Notes, and it shall not be responsible for any statement in
the Notes or in this Indenture other than its certificate of authentication.
Section 8.5 NOTICE OF DEFAULTS.
If a Default occurs and is continuing and if it is known to the Trustee,
the Trustee shall mail to each Noteholder, the Liquidity Provider and the Policy
Provider a notice of the Default within ninety (90) days after the occurrence
thereof except as otherwise permitted by the TIA. Except in the case of a
Default in payment of principal of, or interest on, or Premium, if any, or Break
Amount, if any, with respect to, any Note, the Trustee may withhold the notice
if and so long as it, in good faith, determines that withholding the notice is
in the interests of the Noteholders.
Section 8.6 REPORTS BY TRUSTEE TO HOLDERS.
If circumstances require any report to Holders under TIA ss. 313(a), it
shall be mailed to Noteholders within sixty (60) days after each May 15
(beginning with the May 15 following the date of this Indenture) as of which
such circumstances exist. The Trustee also shall comply with the remainder of
TIA ss. 313.
The Company shall notify the Trustee if the Notes become listed on or
delisted from any stock exchange or other recognized trading market.
The Trustee shall, upon the written request of any Holder of Notes but
subject to applicable laws and contractual limitations, provide to such Holder
copies of any reports, certificates, opinions or other materials of any kind or
nature required to be delivered to the Trustee (including in its capacity as
Collateral Agent if it is acting as such) under this Indenture, any of the other
Operative Documents or the Support Documents or otherwise delivered by or on
behalf of the Company to the Trustee (including in its capacity as Collateral
Agent if it is acting as such).
Section 8.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation, as agreed upon from time to time, for its services, including as
Collateral Agent if its acting as such. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Company
shall reimburse the Trustee upon request for all reasonable disbursements,
expenses and advances incurred or made by it in any such capacities. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Trustee's agents and counsel and all agents and other persons not
regularly in its employ.
The Company shall indemnify the Trustee (in its capacities as Trustee and,
if it is acting as such, Collateral Agent) and each predecessor Trustee for, and
hold each of them harmless against, any loss or liability incurred by each of
them in connection with the administration of this trust and its duties
hereunder. In connection with any defense of such a claim, the Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not reimburse any expense or indemnify against
any loss or liability incurred by the Trustee or any predecessor Trustee through
the negligence or bad faith of such Trustee or each such predecessor Trustee.
To secure the Company's payment obligations in this Section 8.7, the
Trustee shall have a Lien (legal and equitable) prior to the Notes on all money
or property held or collected by the Trustee, in its capacity as Trustee, or
otherwise distributable to Noteholders, except money, securities or property
held in trust to pay principal of, interest on or Premium, if any, or Break
Amount, if any, with respect to the particular Notes.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 7.1(d), (e) or (f) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under the Bankruptcy Code or any similar law of any jurisdiction
other than the U.S.
Section 8.8 REPLACEMENT OF TRUSTEE.
The Trustee for any Series may resign by so notifying the Company, the
Liquidity Provider and the Policy Provider in writing. The Controlling Party may
remove the Trustee for any Series by so notifying the Trustee in writing and may
appoint a successor Trustee with the Company's consent, which consent shall not
be unreasonably refused or delayed. The Company may remove the Trustee for any
Series if:
(a) such Trustee fails to comply with Section 8.10;
(b) such Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of such Trustee or its
property;
(d) such Trustee becomes incapable of acting; or
(e) no Default or Event of Default has occurred and is continuing and the
Company determines in good faith to remove such Trustee.
If the Trustee for any Series resigns or is removed or if a vacancy exists
in the office of Trustee for any Series for any reason, the Company shall
promptly appoint a successor Trustee for such Series. Within one year after the
successor Trustee for any Series takes office, the Controlling Party may appoint
a successor Trustee for such Series to replace the successor Trustee for such
Series appointed by the Company.
A successor Trustee for any Series shall deliver a written acceptance of
its appointment to the retiring Trustee for such Series and to the Company.
Immediately after that, the retiring Trustee for such Series shall transfer all
property held by it as Trustee for such Series to the successor Trustee for such
Series, subject to the Lien provided in Section 8.7, the resignation or removal
of the retiring Trustee for such Series shall become effective, and the
successor Trustee for such Series shall have all the rights, powers and duties
of the Trustee for such Series under this Indenture. A successor Trustee for any
Series shall mail notice of its succession to each Noteholder of such Series. If
there is a successor Security Agent under the Security Agreement, the Trustee
shall mail notice of such succession to each Noteholder.
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 this Section 8.8. If a successor
Trustee for any Series does not take office within sixty (60) days after the
retiring Trustee for such Series resigns or is removed, the retiring Trustee,
the Company, the Liquidity Provider, the Policy Provider or the Holders of at
least ten percent (10%) in principal amount of the Notes of such Series
Outstanding may petition any court of competent jurisdiction for the appointment
of a successor Trustee for such Series.
If the Trustee for any Series fails to comply with Section 8.10, any Holder
of Notes of such Series may petition any court of competent jurisdiction for the
removal of the Trustee for such Series and the appointment of a successor
Trustee for such Series.
Notwithstanding replacement of the Trustee pursuant to this Section 8.8,
the Company's obligations under Section 8.7 shall continue for the benefit of
the retiring Trustee (whether in its capacity as Trustee or Collateral Agent)
which shall retain its claim pursuant to Section 8.7.
The resignation, removal and replacement of each Collateral Agent shall be
governed by the applicable Collateral Agreement.
Section 8.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or transfers all
or substantially all of its corporate trust business to, another corporation,
the resulting, surviving or transferee corporation without any further act shall
be the successor Trustee.
Section 8.10 ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss. 310(a)(1) and ss. 310(a)(5). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent,
published annual report of condition. The Trustee shall comply with TIA ss.
310(b); PROVIDED, HOWEVER, that there shall be excluded from the operation of
TIA ss. 310(b)(1) any indenture or indentures under which other securities, or
certificates of interest or participation in other securities, of the Company
are outstanding, if the requirements for such exclusion set forth in TIA ss.
310(b)(1) are met.
Section 8.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
Section 8.12 OTHER CAPACITIES.
If the Trustee shall serve as the Collateral Agent, the Person serving in
such capacities shall have and may effectively exercise all the rights, remedies
and powers, and be entitled to all protections and indemnifications, provided to
such Person in whatever capacities such Person then serves under any and all of
the Indenture, the other Operative Documents and the Support Documents,
regardless of the capacity or capacities in which such Person may purport to
take or omit any action. The Trustee agrees to and shall have the benefit of all
provisions of the Operative Documents stated therein to be applicable to the
Trustee.
Section 8.13 TRUST ACCOUNTS.
(a) Upon the execution of this Indenture, the Trustee shall establish and
maintain in its name (i) the Collection Account as an Eligible Deposit Account,
bearing a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Noteholders, the Liquidity Provider and the
Policy Provider, and (ii) a Policy Account as an Eligible Deposit Account
bearing a designation clearly indicating that the funds deposited therein are
held in trust for the benefit of the Securityholders and, with respect to
amounts paid by the Policy Provider under Section 3.6(d) and clause (vii) of the
definition of "Deficiency Amount" in the Policy, the Liquidity Provider. The
Trustee shall establish and maintain the Cash Collateral Account pursuant to and
under the circumstances set forth in Section 3.5(f) hereof. Upon such
establishment and maintenance under Section 3.5(f) hereof, the Cash Collateral
Account shall, together with the Collection Account and the Policy Account,
constitute the "TRUST ACCOUNTS" hereunder.
(b) Funds on deposit in the Trust Accounts shall be invested and reinvested
by the Trustee in Eligible Investments selected by the Trustee if such
investments are reasonably available and have maturities no later than the
earlier of (i) 90 days following the date of such investment and (ii) the
Business Day immediately preceding the Interest Payment Date next following the
date of such investment; PROVIDED, HOWEVER, that following the making of a
Downgrade Drawing or a Non-Extension Drawing under the Liquidity Facility, the
Trustee shall invest and reinvest such amounts in Eligible Investments at the
direction of the Company (or, if and to the extent so specified to the Trustee
by the Company, the Liquidity Provider); PROVIDED FURTHER, HOWEVER, that,
notwithstanding the foregoing proviso, following the making of a Non-Extension
Drawing under the initial Liquidity Facility, the Trustee shall invest and
reinvest the amounts in the Cash Collateral Account with respect to such
Liquidity Facility in Eligible Investments pursuant to the written instructions
of the Liquidity Provider; PROVIDED FURTHER, HOWEVER, that upon the occurrence
and during the continuation of an Event of Default, the Trustee shall invest and
reinvest such amounts in accordance with the written instructions of the
Controlling Party. Unless otherwise expressly provided in this Indenture
(including, without limitation, with respect to Investment Earnings on amounts
on deposit in the Cash Collateral Account pursuant to Section 3.5(f) hereof),
any Investment Earnings shall be deposited in the Collection Account when
received by the Trustee and shall be applied by the Trustee in the same manner
as the other amounts on deposit in the Collection Account are to be applied and
any losses shall be charged against the principal amount invested, in each case
net of the Trustee's reasonable fees and expenses in making such investments.
The Trustee shall not be liable for any loss resulting from any investment,
reinvestment or liquidation required to be made under this Indenture other than
by reason of its willful misconduct or gross negligence. Eligible Investments
and any other investment required to be made hereunder shall be held to their
maturities except that any such investment may be sold (without regard to its
maturity) by the Trustee without instructions whenever such sale is necessary to
make a distribution required under the Indenture. Uninvested funds held
hereunder shall not earn or accrue interest.
(c) The Trustee shall possess all right, title and interest in all funds on
deposit from time to time in the Trust Accounts and in all proceeds thereof
(including all income thereon, except as otherwise expressly provided in Section
3.3(b) with respect to Investment Earnings). The Trust Accounts shall be held in
trust by the Trustee under the sole dominion and control of the Trustee for the
benefit of the Noteholders, the Liquidity Provider and the Policy Provider, as
the case may be. If, at any time, any of the Trust Accounts ceases to be an
Eligible Deposit Account, the Trustee shall within 10 Business Days (or such
longer period, not to exceed 30 calendar days, for which a Ratings Confirmation
for the Notes of each Series and the consent of the Policy Provider (which
consent shall not be unreasonably withheld or delayed) shall have been obtained)
establish a new Collection Account, Policy Account or Cash Collateral Account,
as the case may be, as an Eligible Deposit Account and shall transfer any cash
and/or any investments to such new Collection Account, Policy Account or Cash
Collateral Account, as the case may be. So long as WTC is an Eligible
Institution, the Trust Accounts shall be maintained with it as Eligible Deposit
Accounts.
Section 8.14 DEPOSITS TO THE COLLECTION ACCOUNT.
The Trustee shall, upon receipt thereof, deposit in the Collection Account
all Payments received by it (other than any Payment which by the express terms
hereof is to be deposited in the Policy Account or the Cash Collateral Account).
Section 8.15 CERTAIN PAYMENTS.
Except for amounts constituting Liquidity Obligations, Policy Expenses or
Policy Provider Obligations which shall be deposited in the Collection Account
and distributed as provided in Section 3.2, the Trustee will distribute promptly
upon receipt thereof to the Person entitled thereto any indemnity payment or
expense reimbursement received by it from the Company in respect of the
Liquidity Provider or the Policy Provider.
ARTICLE 9.
DISCHARGE OF INDENTURE
Section 9.1 DISCHARGE OF LIABILITY ON NOTES.
(a) When (i) the Company delivers to the Trustee all Outstanding Notes
(other than Notes replaced pursuant to Section 2.12) for cancellation or (ii)
all Outstanding Notes have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 4 hereof and
the Company irrevocably deposits with the Trustee funds sufficient to pay at
maturity or upon redemption all Outstanding Notes, including interest thereon to
maturity or such redemption date (other than Notes replaced pursuant to Section
2.12), Premium, if any, and Break Amount, if any, and if in either case the
Company pays all other sums payable hereunder by the Company and due on or prior
to such maturity or redemption date, then this Indenture shall, subject to
Section 9.1(b), cease to be of further effect. The Trustee shall acknowledge
satisfaction and discharge of this Indenture by executing and delivering to the
Company on demand of the Company accompanied by an Officers' Certificate and an
Opinion of Counsel, a written instrument to such effect prepared by the Company
at its sole cost and expense.
(b) Notwithstanding clause (a) above, the provisions of Sections 2.1
through 2.17, inclusive, 2A.1 through 2A.7, inclusive, 6.1, 8.7 and 8.8 and in
this Article 9 shall survive until the Outstanding Notes have been paid in full.
Thereafter, the Company's obligations in Sections 6.1, 8.7, 9.3 and 9.4 shall
survive.
Section 9.2 APPLICATION OF TRUST MONEY.
The Trustee shall hold in trust cash deposited with it pursuant to this
Article 9. It shall apply the deposited cash through the Paying Agent and in
accordance with this Indenture to the payment of principal of, interest on,
Premium, if any, and Break Amount, if any, on the Notes.
Section 9.3 REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly turn over to the Company,
upon request accompanied by a certificate from a nationally recognized firm of
independent accountants expressing their opinion that any cash then held by the
Trustee is in excess of the amounts sufficient to pay when due all of the
principal of, interest on, and Premium, if any, and Break Amount, if any, with
respect to the Notes to redemption or maturity, as the case may be, any such
excess cash held by them.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any cash held by them for the
payment of principal, interest, Premium or Break Amount that remains unclaimed
for two years, and, thereafter, Noteholders entitled to the cash must look to
the Company for payment as general creditors.
Section 9.4 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any cash in accordance
with this Article 9 by reason of any legal proceeding or by reason of any order
or judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture, the other Operative Documents, the Support Documents and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
this Article 9 until such time as the Trustee or Paying Agent is permitted to
apply all such cash in accordance with this Article 9; PROVIDED, HOWEVER, that,
if the Company has made any payment of principal of, interest on, or Premium, if
any, or Break Amount, if any, with respect to any Notes because of the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the cash held by the
Trustee or Paying Agent.
ARTICLE 10.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 10.1 WITHOUT CONSENT OF THE CONTROLLING PARTY OR HOLDERS.
The Company and the Trustee or the Collateral Agent, as the case may be,
may amend or supplement this Indenture, the Notes and the other Operative
Documents and, upon request of the Company, the Trustee shall amend or
supplement the Support Documents, in each case without notice to or consent of
any Noteholder and, except as otherwise provided in the Support Documents,
without notice to or consent of the Liquidity Provider or the Policy Provider:
(i) to provide for uncertificated Notes of any Series in addition to
or in place of certificated Notes of such Series;
(ii) to provide for the assumption of the Company's obligations under
the Operative Documents and the Notes in the case of a merger or
consolidation or conveyance, transfer or lease of all or substantially all
of the assets of the Company or otherwise to comply with Section 5.4;
(iii) to comply with any requirements of the SEC in connection with
the qualification of this Indenture under the TIA;
(iv) to effect the amendments contemplated by Section 3.5(e)(v)(y);
(v) to provide for the effectiveness of a Collateral Agreement
pursuant to Section 3.1 of the Collateral Maintenance Agreement;
(vi) to comply with the requirements of DTC, Euroclear or Clearstream
or the Trustee with respect to the provisions of the Indenture or the Notes
of any Series relating to transfers and exchanges of the Notes of any
Series or beneficial interests therein;
(vii) to provide for any successor Collateral Agent or Trustee with
respect to the Notes of one or more Series and to add to or change any of
the provisions of the Indenture as shall be necessary or advisable to
provide for or facilitate the administration of the trusts hereunder by
more than one Trustee;
(viii) to cure any ambiguity, defect or inconsistency; or
(ix) to make any other change not inconsistent with the provisions
hereof, PROVIDED that such action does not materially adversely affect the
interests of any Noteholder.
Section 10.2 WITH CONSENT OF THE CONTROLLING PARTY, LIQUIDITY PROVIDER AND
HOLDERS.
(a) The Company and the Trustee or the Collateral Agent, as the case may
be, may amend or supplement this Indenture, the Notes and the other Operative
Documents and, upon request of the Company, the Trustee shall amend or
supplement the Support Documents, in each case without notice to or consent of
the Liquidity Provider or the Policy Provider and without notice to any
Noteholder but with the written consent of the Controlling Party, PROVIDED that
(i) Sections 3.5, 3.6, 3.8 and 3.9 of this Indenture may not be modified without
the consent of the Liquidity Provider and the Policy Provider, (ii) the
Collateral Maintenance Agreement and the Support Documents may not be modified
other than in accordance with the provisions thereof, (iii) Sections 3.8(b),
3.8(c) and 7.14 of this Indenture, this clause (iii), the following clause (iv)
and the definition of "Event of Default" may not be modified without the consent
of the Required Subordinated Holders (it being understood that the foregoing
does not affect the right of the Controlling Party to waive an Event of Default)
and (iv) an amendment of any defined term used in the definition of "Maximum
Subordinated Collateral Ratio" or "Subordinated Collateral Ratio" or in any such
defined term will not be effective for purposes of the definitions of "Maximum
Subordinated Collateral Ratio" or "Subordinated Collateral Ratio" unless
consented to by the Required Subordinated Holders. Subject to Sections 7.4, 7.5
and 7.7, unless any Event of Default has occurred and is continuing, the
Controlling Party may authorize the Trustee to, and the Trustee, subject to
Section 10.6, upon such authorization shall, waive compliance by the Company
with any provision of this Indenture, the Notes or the other Operative
Documents, PROVIDED that compliance by the Company with the provisions of the
Collateral Maintenance Agreement may not be waived other than in accordance with
the provisions thereof. However, an amendment, supplement or waiver, including a
waiver pursuant to any provision of Section 7.4, may not without the consent of
the Liquidity Provider, the Policy Provider and each Securityholder affected:
(i) reduce the amount of Securities whose Holders must consent to an
amendment, supplement or waiver;
(ii) reduce the rate or extend the time for payment of interest on any
Security;
(iii) reduce the amount or extend the time for payment of principal of
or Premium, if any or Break Amount, if any, with respect to (in each case,
whether on redemption or otherwise) any Security;
(iv) change the place of payment where, or the coin or currency in
which, any Security (or the redemption price thereof), interest thereon, or
Premium, if any, or Break Amount, if any, with respect thereto is payable;
(v) change the distribution and application of payments as described
in Section 3.2 of this Indenture;
(vi) waive a default in the payment of the principal of, interest on,
or Premium, if any, or Break Amount, if any, with respect to any Security;
(vii) make any changes in Sections 7.4, 7.7 or 7.10 or the third
sentence of this Section 10.2(a); or
(viii) impair the right of any Holder to institute suit for the
enforcement of any amount payable on any Security when due.
In addition, an amendment, supplement or waiver, including a waiver pursuant to
any provision of Section 7.4, may not without the consent of each Subordinated
Securityholder affected:
(i) reduce the amount of Subordinated Securities whose Holders must
consent to an amendment, supplement or waiver;
(ii) reduce the rate or extend the time for payment of interest on any
Subordinated Security;
(iii) reduce the amount or extend the time for payment of principal of
or Premium, if any or Break Amount, if any, with respect to (in each case,
whether on redemption or otherwise) any Subordinated Security;
(iv) change the definitions of "Maximum Subordinated Collateral Ratio"
or "Subordinated Collateral Ratio";
(v) increase the principal amount of, or the rate of interest on, the
Securities;
(vi) change the place of payment where, or the coin or currency in
which, any Security or Subordinated Security (or the redemption price
thereof), interest thereon, or Premium, if any, or Break Amount, if any,
with respect thereto is payable;
(vii) change the distribution and application of payments as described
in Section 3.2 of this Indenture;
(viii) waive a default in the payment of the principal of, interest
on, or Premium, if any, or Break Amount, if any, with respect to any
Subordinated Security;
(ix) make any changes in Sections 7.4, 7.7 or 7.10 or the fourth
sentence of this Section 10.2(a); or
(x) impair the right of any Holder to institute suit for the
enforcement of any amount payable on any Subordinated Security when due;
PROVIDED that an amendment, supplement or waiver with respect to the foregoing
clauses (i), (ii), (iii), (iv), (vi), (viii) or (x) shall not require the
consent of the Controlling Party or of the Liquidity Provider or Policy Provider
(if not then the Controlling Party).
(b) It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
(c) After an amendment, supplement or waiver under this Section 10.2
becomes effective, the Company shall mail to the Holders affected thereby a
brief notice describing such amendment, supplement or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however in any
way impair or affect the validity of any such amendment, supplement or waiver.
Section 10.3 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to or supplement of this Indenture, any other Operative
Document or the Notes shall comply with the TIA as then in effect.
Section 10.4 REVOCATION AND EFFECT OF CONSENTS.
(a) Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of a
Note or portion of a Note that evidences the same debt as the consenting
Holder's Note, even if notation of the consent is not made on any Note. However,
any such Holder or subsequent Holder may revoke the consent as to his Note or
portion of a Note. Such revocation shall be effective only if the Trustee
receives the notice of revocation before the date the amendment, supplement or
waiver becomes effective.
(b) After an amendment, supplement or waiver becomes effective, it shall
bind every Noteholder, unless it makes a change described in any of clauses (i)
through (viii) of the third sentence of Section 10.2(a) or any of clauses (i)
through (viii) of the fourth sentence of Section 10.2(a). In that case the
amendment, supplement or waiver shall bind (x) each Holder of a Note whose
consent was required under Section 10.2(a) and who has consented to it and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note and (y) each other Holder whose consent was not
required under Section 10.2(a); PROVIDED, HOWEVER, that no amendment, supplement
or waiver relating to any impairment of the right to receive principal,
interest, Premium, if any, or Break Amount, if any, when due and payable
consented to by a Holder shall be binding upon any subsequent Holder of a Note
or a portion of a Note that evidences the same debt as the consenting Holder's
Note unless notation with regard thereto is made upon such Note or the Note
representing such portion.
Section 10.5 NOTATION ON OR EXCHANGE OF NOTES.
If an amendment, supplement or waiver changes the terms of a Note, the
Trustee may require the Holder of the Note to deliver it to the Trustee. The
Trustee may place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Company or the Trustee so
determines, the Company in exchange for the Note shall issue and the Trustee
shall authenticate a new Note of the same Series that reflects the changed
terms.
Section 10.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
Upon the Request of the Company, the Trustee shall execute any amendment,
supplement or waiver authorized pursuant to this Article 10; PROVIDED that the
Trustee shall not be obligated to execute any such amendment, supplement or
waiver which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Section 10.7 EFFECT OF SUPPLEMENT AND/OR AMENDMENT.
Upon the execution of any supplemental indenture and/or any such amendment
or supplement to the Operative Documents or the Support Documents pursuant to
the provisions of this Article 10, this Indenture, such Operative Documents and
such Support Documents shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitations of rights,
obligations, duties and immunities under this Indenture, the other Operative
Documents and the Support Documents of the Trustee, the Collateral Agent, the
Liquidity Provider, the Policy Provider, the Company and the Holders of Notes
shall thereafter be determined, exercised and enforced hereunder and thereunder
subject in all respects to such modifications and amendments, and all terms and
conditions of any such supplemental indenture and/or any such amendment or
supplement to the other Operative Documents or the Support Documents shall be
and be deemed to be part of the terms and conditions of this Indenture, the
other Operative Documents and the Support Documents for any and all purposes.
ARTICLE 11.
SECURITY
Section 11.1 OTHER OPERATIVE DOCUMENTS.
(a) To secure the due and punctual payment, performance and observance of
the Obligations, the Company simultaneously with the execution of the Original
Indenture entered into the Security Agreement and has granted a security
interest on the Spare Parts Collateral to the Security Agent in the manner and
to the extent therein provided and, simultaneously with the execution of this
Indenture, the Company has entered into Amendment No. 1 to Security Agreement to
secure, among other things, the Company's obligations with respect to the
Subordinated Securities. WTC was appointed as Security Agent and authorized and
directed to enter into the Security Agreement on the Original Closing Date. Each
Noteholder, by accepting a Note, agrees to all of the terms and provisions of
each Operative Document (including, without limitation, the provisions providing
for the release of Collateral), as the same may be in effect or may be amended
from time to time pursuant to its terms and the terms hereof. The Company will
execute, acknowledge and deliver to the Trustee or the Collateral Agent such
further assignments, transfers, assurances or other instruments as the Trustee
may require or request, and will do or cause to be done all such acts and things
as may be necessary or proper, or as may be reasonably required by the Trustee
or the Collateral Agent to assure and confirm to the Trustee or the Collateral
Agent the security interest in the Collateral contemplated hereby and by the
other Operative Documents, as from time to time constituted, so as to render the
same available for the security and benefit of this Indenture and of the
Securities secured hereby, according to the intent and purposes herein
expressed.
(b) The Trustee acknowledges that it is a third-party beneficiary of the
Trustee Provisions and agrees to perform its obligations expressly set forth in
the Collateral Maintenance Agreement.
Section 11.2 OPINIONS, CERTIFICATES AND APPRAISALS.
(a) The Company shall furnish to the Trustee promptly after the execution
and delivery of the Original Indenture an Opinion of Counsel stating that in the
opinion of such counsel the Original Indenture or Security Agreement has been
properly recorded and filed so as to make effective the Lien intended to be
created thereby and reciting the details of such actions, or stating that, in
the opinion of such counsel, no such action is necessary to make such Lien
effective. The Company shall furnish to the Trustee promptly after the execution
and delivery of this Indenture an Opinion of Counsel stating that in the opinion
of such counsel Amendment No. 1 to Security Agreement has been properly filed
and recorded with the FAA and reciting the details of such actions.
(b) The Company shall furnish to the Trustee not later than one hundred and
twenty (120) days after January 1 in each year beginning with January 1, 2003,
an Opinion of Counsel, dated as of such date, either (a) stating that, in the
opinion of such counsel, such action has been taken with respect to the
recording, filing, rerecording, and refiling of the Indenture, any Collateral
Agreement, any amendment or supplement thereto, and all financing statements,
continuation statements or other instruments of further assurance as is
necessary to maintain the Lien created by the Collateral Agreements (if not then
terminated pursuant to its terms) and reciting the details of such action, or
(b) stating that, in the opinion of such counsel, no such action is necessary to
maintain such Lien.
(c) The release of any Collateral from the terms of any Collateral
Agreement, will not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Collateral is
released pursuant to the applicable Collateral Agreement. To the extent
applicable, the Company shall cause TIA ss. 314(d) relating to the release of
property or securities from the Lien of any Collateral Agreement, and relating
to the substitution therefor of any property or securities to be subjected to
the Lien of such Collateral Agreement, to be complied with. With respect to any
such substitution, the Company shall furnish to the Trustee an Independent
Appraiser's Certificate if required by TIA ss. 314(d). Any certificate or
opinion required by TIA ss. 314(d) may be made by an Officer of the Company,
except in cases where TIA ss. 314(d) requires that such certificate or opinion
be made by an independent person, which person shall meet the requirements set
forth in clause (ii) of the definition of the term "Independent Appraiser."
Section 11.3 AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER THE
OPERATIVE DOCUMENTS.
The Trustee (in its capacities as such or, if it is acting as such, as a
Collateral Agent) may, in its sole discretion and without the consent of the
Noteholders, take all actions it deems necessary or appropriate to (a) enforce
any of the terms of the Operative Documents and the Support Documents and (b)
collect and receive any and all amounts payable in respect of the obligations of
the Company hereunder. Subject to the provisions of this Indenture, the other
Operative Documents and the Support Documents, the Trustee (in such capacities)
shall have power to institute and to maintain such suits and proceedings as it
may deem expedient to prevent any impairment of the Collateral by any acts which
may be unlawful or in violation of the other Operative Documents or this
Indenture, and such suits and proceedings as it may deem expedient to preserve
or protect its interest and the interests of the Noteholders in the Collateral
(including power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the security interest hereunder or be prejudicial to the interests of the
Noteholders or of the Trustee in any such capacity).
Section 11.4 AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
OPERATIVE DOCUMENTS AND THE SUPPORT DOCUMENTS.
The Trustee is authorized to receive any funds for the benefit of
Noteholders distributed under the Collateral Agreements and for the benefit of
the Securityholders distributed under the Support Documents, and to make further
distributions of such funds to the Holders according to the provisions of this
Indenture.
Section 11.5 AGREEMENT AS TO FAIR MARKET VALUE.
The Company and the Trustee acknowledge that the use of Fair Market Value
herein or in the other Operative Documents is strictly and solely for
convenience in establishing the amount of Collateral and any substitutions
therefor under the Operative Documents. Accordingly, the Fair Market Value of
any Collateral subjected to the Lien of a Collateral Agreement is not an
indication of and shall not be deemed an agreement by the parties as the basis
for valuation of such Collateral for purposes of determining the value of the
Trustee's secured claim against the Company, adequate protection of the
Trustee's interest in the Collateral or for any other purpose in any bankruptcy,
receivership or insolvency proceeding involving the Company or any remedial
action brought by the Trustee or Collateral Agent, except to the extent such
valuations are mandated by applicable law, or any court with jurisdiction over
such proceedings, in either case without regard to the use of the concept of
Fair Market Value by the parties hereto.
ARTICLE 12.
MISCELLANEOUS
Section 12.1 CONFLICT WITH TRUST INDENTURE ACT OF 1939.
If and to the extent that any provision of this Indenture limits,
qualifies, or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the TIA, such imposed duties shall control.
Section 12.2 NOTICES; WAIVERS.
Any request, demand, authorization, direction, notice, consent, waiver or
other document provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with
(a) the Company shall be sufficient for every purpose hereunder if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier, postage or courier charges,
as the case may be, prepaid, to the Company at:
Continental Airlines, Inc.
1600 Smith Street
Dept. HQS-FN
Houston, TX 77002
Attention: Treasurer
Telecopier No.: (713) 324-2447
(b) the Trustee shall be sufficient for every purpose hereunder if in
writing and sent by personal delivery, by telecopier, by registered or certified
mail or by nationally recognized overnight courier, postage or courier charges,
as the case may be, prepaid, to the Trustee at:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
Attention: Corporate Trust Administration
Telecopier No.: (302) 651-8882
(c) the Liquidity Provider shall be sufficient for every purpose hereunder
if in writing and sent by personal delivery, by telecopier, by registered or
certified mail or by nationally recognized overnight courier, postage or courier
charges, as the case may be, prepaid, to the Liquidity Provider at:
Morgan Stanley Capital Services Inc.
1585 Broadway
New York, New York 10036
Attention: David Rogers
Telecopier No.: (212) 761-0350
(d) the Policy Provider shall be sufficient for every purpose hereunder if
in writing and sent by personal delivery, by telecopier, by registered or
certified mail or by nationally recognized overnight courier, postage or courier
charges, as the case may be, prepaid, to the Policy Provider at:
MBIA Insurance Corporation
113 King Street
Armonk, New York 10504
Attention: Insured Portfolio Management,
Structured Finance
Telecopier No.: (914) 765-3163
or to any of the above parties at any other address or telecopier number
subsequently furnished in writing by it to each of the other parties listed
above. An affidavit by any person representing or acting on behalf of the
Company, the Trustee, Liquidity Provider or Policy Provider as to such mailing,
having any registry receipt required by this Section attached, shall be
conclusive evidence of the giving of such demand, notice or communication.
Any notice or communication mailed to a Holder shall be sent to such Holder
by first-class mail or by nationally recognized overnight courier, postage or
courier charges, as the case may be, prepaid, at such Holder's address as it
appears on the Register and shall be sufficiently given to such Holder if so
sent within the time prescribed. Any notice or communication shall comply with
TIA ss. 313(c) to the extent required by the TIA.
Failure to mail a notice or send a communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. Notices
under this Indenture to the Trustee, to the Policy Provider, to the Liquidity
Provider or to the Company are deemed given only when received. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by the Holders shall be filed with the Trustee, but such filing shall not
be a condition precedent to the validity of any action taken in reliance upon
such waiver.
Section 12.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Noteholders may communicate pursuant to TIA ss. 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and any other person shall have the
protection of TIA ss. 312(c).
Section 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any Request or application by the Company to the Trustee to take any
action under this Indenture or another Operative Document, the Company shall
furnish to the Trustee: (a) an Officers' Certificate and (b) an Opinion of
Counsel, each stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture or such Operative Document, as
the case may be, relating to the proposed action have been complied with,
provided, that in the case of any such application or Request as to which the
furnishing of an Officers' Certificate or Opinion of Counsel is specifically
required by any provision of this Indenture or another Operative Document
relating to such particular application or Request, no additional certificate or
opinion, as the case may be, need be furnished.
Section 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion provided for and delivered to the Trustee or
the Collateral Agent with respect to compliance with a condition or covenant
provided for in this Indenture or another Operative Document shall include: (a)
a statement that the Person signing such certificate or opinion has read such
condition or covenant and the definitions herein or therein relating thereto;
(b) 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; (c) a statement that, in the opinion of such
Person, he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such condition or
covenant has been complied with; and (d) a statement as to whether or not in the
opinion of such Person, such condition or covenant has been complied with.
Any certificate or opinion of an Officer or an engineer, insurance broker,
accountant or other expert may be based, insofar as it relates to legal matters,
upon a certificate or opinion of or upon representations by counsel, unless such
officer, engineer, insurance broker, accountant or other expert knows that the
certificate or opinion or representations with respect to the matters upon which
his opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should have known that the same were erroneous.
Any certificate or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon the certificate or opinion of or representations by an
officer or officers of the Company stating that the information with respect to
such factual matters is in possession of the Company, unless such counsel knows
that the certificate or opinion or representations with respect to the matters
upon which his opinion may be based as aforesaid are erroneous and insofar as it
relates to legal matters in a jurisdiction or area of law beyond the expertise
of such counsel, such counsel may rely upon the opinion of counsel qualified in
such other jurisdiction or area of law.
Wherever in this Indenture or another Operative Document in connection with
any application, certificate or report to the Trustee or the Collateral Agent it
is provided that the Company shall deliver any document as a condition of the
granting of such application or as evidence of the Company's compliance with any
term hereof, it is intended that the truth and accuracy at the time of the
granting of such application or at the effective date of such certificate or
report, as the case may be, of the facts and opinions stated in such document
shall in each such case be a condition precedent to the right of the Company to
have such application granted or to the sufficiency of such certificate or
report. Nevertheless, in the case of any such application, certificate or
report, any document required by any provision of this Indenture or another
Operative Document to be delivered to the Trustee or the Collateral Agent as a
condition of the granting of such application or as evidence of such compliance
may be received by the Trustee or the Collateral Agent as conclusive evidence of
any statement therein contained and shall be full warrant, authority and
protection to the Trustee or the Collateral Agent acting on the faith thereof.
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.
Whenever any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements or opinions or other
instruments under this Indenture or another Operative Document he may, but need
not, consolidate such instruments into one.
Section 12.6 RULES BY TRUSTEE, PAYING AGENT, REGISTRAR.
The Trustee may make reasonable rules for action by or at a meeting of
Noteholders. The Registrar or Paying Agent may make reasonable rules for their
respective functions.
Section 12.7 EFFECT OF HEADINGS.
The Article and Section headings and the Table of Contents contained in
this Indenture have been inserted for convenience of reference only, and are and
shall be without substantive meaning or content of any kind whatsoever and are
not a part of this Indenture.
Section 12.8 GOVERNING LAW.
THIS INDENTURE IS BEING DELIVERED IN THE STATE OF NEW YORK. THIS INDENTURE
AND THE NOTES ISSUED HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
Section 12.9 QUIET ENJOYMENT.
The Trustee, the Policy Provider and the Liquidity Provider each agrees as
to itself with the Company that, so long as no Event of Default shall have
occurred and be continuing, such Person shall not (and shall not permit any of
its Affiliates or other Person claiming by, through or under it to) interfere
with the Company's rights in accordance with the Indenture and the other
Operative Documents to the quiet enjoyment, possession and use of the
Collateral.
Section 12.10 NO RECOURSE AGAINST OTHERS.
A director, officer, employee or stockholder, as such, of the Company shall
not have any personal liability for any obligations of the Company under the
Notes, the Indenture or the other Operative Documents by reason of his or her
status as such director, officer, employee or stockholder. Each Noteholder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for the issue of the Notes.
Section 12.11 BENEFITS OF INDENTURE AND THE SECURITIES RESTRICTED.
Subject to the provisions of Section 12.12 hereof, nothing in this
Indenture or the Notes, express or implied, shall give or be construed to give
to any Person, firm or corporation, other than the parties hereto and the
Holders, any legal or equitable right, remedy or claim under or in respect of
this Indenture or under any covenant, condition, or provision herein contained,
all such covenants, conditions and provisions, subject to Section 12.12 hereof,
being for the sole benefit of the parties hereto and of the Holders.
Section 12.12 SUCCESSORS AND ASSIGNS.
This Indenture and all obligations of the Company hereunder shall be
binding upon the successors and permitted assigns of the Company, and shall,
together with the rights and remedies of the Trustee hereunder, inure to the
benefit of the Trustee, the Holders, and their respective successors and
assigns. Any assignment in violation of this Indenture shall be null and void ab
initio.
Section 12.13 COUNTERPART ORIGINALS.
This Indenture may be signed in two or more counterparts, each of which
shall be deemed an original, but all of which shall together constitute one and
the same agreement.
Section 12.14 SEVERABILITY.
The provisions of this Indenture are severable, and if any clause or
provision shall be held invalid, illegal or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect in that
jurisdiction only such clause or provision, or part thereof, and shall not in
any manner affect such clause or provision in any other jurisdiction or any
other clause or provision of this Indenture in any jurisdiction, and a Holder
shall have no claim therefor against any party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed and delivered all as of the date first written above.
CONTINENTAL AIRLINES, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
WILMINGTON TRUST COMPANY,
as Trustee
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
MORGAN STANLEY CAPITAL SERVICES INC.,
as Liquidity Provider
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
MBIA INSURANCE CORPORATION,
as Policy Provider
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Appendix I
DEFINITIONS APPENDIX
SECTION 1. DEFINED TERMS.
"ACCELERATION" means, with respect to the amounts payable in respect of the
Notes issued under the Indenture, such amounts becoming immediately due and
payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.
"ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.
"ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral
Maintenance Agreement.
"ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral
Maintenance Agreement.
"ADVANCE" means any Advance as defined in the Liquidity Facility.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying
Agent.
"AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.
"AIRCRAFT" means any contrivance invented, used, or designed to navigate,
or fly in, the air.
"AMENDMENT NO. 1 TO COLLATERAL MAINTENANCE AGREEMENT" means Amendment No.
1, dated as of the Subordinated Issuance Date, to the Collateral Maintenance
Agreement.
"AMENDMENT NO. 1 TO REFERENCE AGENCY AGREEMENT" means Amendment No. 1,
dated as of the Subordinated Issuance Date, to the Reference Agency Agreement.
"AMENDMENT NO. 1 TO SECURITY AGREEMENT" means Amendment No. 1, dated as of
the Subordinated Issuance Date, to the Security Agreement.
"ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral, taking at least the following actions: (i)
reviewing the Parts Inventory Report
prepared as of the applicable Valuation Date; (ii) reviewing the Independent
Appraiser's internal value database for values applicable to Qualified Spare
Parts included in the Spare Parts Collateral; (iii) developing a representative
sampling of a reasonable number of the different Qualified Spare Parts included
in Spare Parts Collateral for which a market check will be conducted; (iv)
checking other sources, such as manufacturers, other airlines, U.S. government
procurement data and airline parts pooling price lists, for current market
prices of the sample parts referred to in clause (iii); (v) establishing an
assumed ratio of Serviceable Parts to Unserviceable Parts as of the applicable
Valuation Date based upon information provided by the Company and the
Independent Appraiser's limited physical review of the Spare Parts Collateral
referred to in the following clause (vi); (vi) visiting at least two locations
selected by the Independent Appraiser where the Pledged Spare Parts are kept by
the Company (neither of which was visited for purposes of the last appraisal
under Section 2.1 or 2.2 of the Collateral Maintenance Agreement, whichever was
most recent), PROVIDED that at least one such location shall be one of the top
three locations at which the Company keeps the largest number of Pledged Spare
Parts, to conduct a limited physical inspection of the Spare Parts Collateral;
(vii) conducting a limited review of the inventory reporting system applicable
to the Pledged Spare Parts, including checking information reported in such
system against information determined through physical inspection pursuant to
the preceding clause (vi) and (viii) reviewing a sampling of the Spare Parts
Documents (including tear-down reports).
"ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral
Maintenance Agreement.
"APPLIANCE" means an instrument, equipment, apparatus, a part, an
appurtenance, or an accessory used, capable of being used, or intended to be
used, in operating or controlling Aircraft in flight, including a parachute,
communication equipment, and another mechanism installed in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.
"APPLICABLE MARGIN" means 0.90%.
"APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.
"APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing
information relating to the calculation of the Collateral Ratio, the
Subordinated Collateral Ratio, Rotable Ratio and Subordinated Rotable Ratio,
which shall be substantially in the form of Appendix II to the Collateral
Maintenance Agreement.
"APPRAISED VALUE" means, with respect to any Collateral, the Fair Market
Value of such Collateral as most recently determined pursuant to (i) the report
attached as Appendix II to the Offering Memo or (ii) Article 2 and, if
applicable, Section 3.1 of the Collateral Maintenance Agreement.
"AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment
(as defined in the Liquidity Facility) on such date.
"AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
Section 101 ET SEQ.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of such board duly authorized to act in respect of any particular
matter.
"BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the Applicable Date pursuant to
the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below, is equal to or less than zero or (y) on or in respect of any Applicable
Date that is an Interest Payment Date (or, if such an Interest Payment Date is
not a Business Day, the next succeeding Business Day)
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum of (i) the
amount of the outstanding principal amount of such Note as of the first
day of the then applicable Interest Period plus (ii) interest payable
thereon during such entire Interest Period at then effective LIBOR.
Y = X, discounted to present value from the last day of the then applicable
Interest Period to the Applicable Date, using then effective LIBOR as
the discount rate.
Z = X, discounted to present value from the last day of the then applicable
Interest Period to the Applicable Date, using a rate equal to the
applicable London interbank offered rate for a period commencing on the
Applicable Date and ending on the last day of the then applicable
Interest Period, determined by the Reference Agent as of two Business
Days prior to the Applicable Date as the discount rate.
"BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank Eurodollar market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston, Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with respect to draws under any Policy, the city and state in which the
office of the Policy Provider at which notices, presentations, transmissions,
deliveries and communications are to be made under the Policy is located, and
that, solely with respect to draws under the Liquidity Facility, also is a
"Business Day" as defined in the Liquidity Facility.
"CAPPED INTEREST RATE" means a rate per annum equal to 12%.
"CASH COLLATERAL" means cash and/or Investment Securities deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.
"CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if
it shall so qualify, into which all amounts drawn under the Liquidity Facility
pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be
deposited.
"CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15).
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.
"CLOSING DATE" means the Issuance Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the Spare Parts Collateral and all other collateral in
which the Collateral Agent has a security interest pursuant to the Collateral
Agreements.
"COLLATERAL AGENT" means the Security Agent and each other Person acting as
agent on behalf of the Holders under any other Collateral Agreement.
"COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.
"COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance
Agreement, dated as of the Issuance Date, between the Company and the Policy
Provider.
"COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the
aggregate principal amount of all Securities Outstanding minus the sum of the
Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral), as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.
"COLLECTION ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.
"COMPANY" means the party named as such in the Indenture or any obligor on
the Notes until a successor replaces it pursuant to the Indenture and thereafter
means the successor.
"CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.
"CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.
"CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents that would have been shown on the balance sheet of Continental and
its consolidated subsidiaries prepared in accordance with GAAP as of any
Valuation Date, plus (b) the amount of marketable securities that would have
been reflected on such balance sheet which had, as of such Valuation Date, a
maturity of less than one year and which, but for their maturity, would have
qualified to be reflected on such balance sheet as cash equivalents.
"CONTROLLING PARTY" means the Person entitled to act as such pursuant to
the terms of Section 3.8 of the Indenture.
"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the
office of the Trustee at which at any particular time its corporate trust
business is administered and which, at the Closing Date, is located at
Wilmington Trust Company, as Trustee, Rodney Square North 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
"DEBT BALANCE" means 110% of the principal amount of the Outstanding Notes.
"DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period for the Securities, to 2.32% and, in the case of any subsequent Interest
Period, LIBOR for such Interest Period, as determined pursuant to the Reference
Agency Agreement, plus the Applicable Margin, PROVIDED that, solely in the event
no Registration Event (as defined in the Registration Rights Agreement) occurs
on or prior to the 210th day after the Closing Date, the Debt Rate shall be
increased by an additional margin equal to 0.50% per annum, from and including
such 210th day to and excluding the earlier of (i) the date on which such
Registration Event occurs and (ii) the date on which there ceases to be any
Registrable Securities (as defined in the Registration Rights Agreement)); or if
the Shelf Registration Statement (as defined in the Registration Rights
Agreement) (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 Debt Rate shall be increased by an
additional margin equal to 0.50% per annum from and including the 61st day of
the applicable 12-month period such Shelf Registration Statement ceases to be
effective to and excluding the date on which 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), PROVIDED that the
additional margin added to the Debt Rate pursuant to the preceding proviso shall
never exceed 0.50% at any time, PROVIDED FURTHER that, if a default in the
payment of interest on the Securities occurs and is continuing on any Interest
Payment Date, then the Debt Rate applicable to the Interest Period ending on
such Interest Payment Date shall not exceed the Capped Interest Rate, except
that for purposes of any payment made by the Company intended to cure such
default, this proviso shall not apply.
"DEFAULT" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.
"DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.
"DEFINITIVE SUBORDINATED SECURITIES" is defined in Section 2A.1(e) of the
Indenture.
"DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged Spare Parts may be maintained by or
on behalf of the Company, which initially shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.
"DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a
Payment required to be paid to the Trustee for distribution on such Scheduled
Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time, except for a
defaulted payment of interest that is not paid within five days after the
Scheduled Payment Date therefor), (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv)
the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the
Policy Election Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the
Indenture and not for purposes of any other payment or distribution under the
Indenture, the date established for such payment in accordance with the Policy.
"DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.
"DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c)
of the Indenture.
"DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.
"DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension
Drawing or a Downgrade Drawing, as the case may be.
"DTC" means The Depository Trust Company, its nominees and their respective
successors.
"ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.
"ELIGIBLE ACCOUNT" means an account established by and with an Eligible
Institution at the request of the Security Agent, which institution agrees, for
all purposes of the New York UCC including Article 8 thereof, that (a) such
account shall be a "securities account" (as defined in Section 8-501 of the New
York UCC), (b) such institution is a "securities intermediary" (as defined in
Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash)
credited to such account shall be treated as a "financial asset" (as defined in
Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the
"entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in
respect of such account, (e) it will comply with all entitlement orders issued
by the Security Agent to the exclusion of the Company, (f) it will waive or
subordinate in favor of the Security Agent all claims (including without
limitation, claims by way of security interest, lien or right of set-off or
right of recoupment), and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository institution has a long-term unsecured debt rating or issuer
credit rating, as the case may be, from Moody's of at least A-3 or its
equivalent. An Eligible Deposit Account may be maintained with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution; provided
that such Liquidity Provider shall have waived all rights of set-off and
counterclaim with respect to such account.
"ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any U.S. branch of a
foreign bank), which has a long-term unsecured debt rating or issuer credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.
"ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or
guaranteed by, the U.S. Government having maturities no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any state thereof with a short-term unsecured debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having maturities no later than 90 days following the
date of such investment or (c) investments in negotiable certificates of
deposit, time deposits, banker's acceptances, commercial paper or other direct
obligations of, or obligations guaranteed by, commercial banks organized under
the laws of the United States or of any political subdivision thereof (or any
U.S. branch of a foreign bank) with a short-term unsecured debt rating by
Moody's of at least P-1 and a short-term issuer credit rating by Standard &
Poor's of at least A-1, having maturities no later than 90 days following the
date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments
that are bank obligations shall be denominated in U.S. dollars; and (y) the
aggregate amount of Eligible Investments at any one time that are bank
obligations issued by any one bank shall not be in excess of 5% of such bank's
capital surplus; PROVIDED FURTHER that any investment of the types described in
clauses (a), (b) and (c) above may be made through a repurchase agreement in
commercially reasonable form with a bank or other financial institution
qualifying as an Eligible Institution so long as such investment is held by a
third party custodian also qualifying as an Eligible Institution; PROVIDED
FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code. Notwithstanding the
foregoing, no investment of the types described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates, and no investment
in the obligations of any one bank in excess of $10,000,000, shall be an
Eligible Investment unless written approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.
"ENGINE" means an engine used, or intended to be used, to propel an
Aircraft, including a part, appurtenance, and accessory of the Engine, except a
Propeller.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time
"EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear
System.
"EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.
"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of
the use thereof due to destruction, damage beyond repair or rendition of any of
the Pledged Spare Parts permanently unfit for normal use for any reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged Spare Parts which results in the receipt of
insurance proceeds with respect to such Pledged Spare Parts on the basis of an
actual or constructive loss; or (iii) the loss of possession of any of the
Pledged Spare Parts by the Company for ninety (90) consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section
2.1(a) of the Indenture.
"EXCHANGE FLOATING RATE SECURED SUBORDINATED NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.
"EXCHANGE OFFER" means (i) with respect to the Securities, the exchange
offer which may be made pursuant to the Registration Rights Agreement to
exchange Initial Securities for Exchange Securities and (ii) with respect to the
Subordinated Securities, the exchange offer which may be made pursuant to the
Subordinated Security Registration Rights Agreement to exchange Initial
Subordinated Securities for Exchange Subordinated Securities.
"EXCHANGE OFFER REGISTRATION STATEMENT" means (i) with respect to the
Securities, 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 Securities for Exchange Securities and (ii) with respect to Subordinated
Securities, the registration statement that, pursuant to the Subordinated
Security Registration Rights Agreement, is filed by the Company with the SEC
with respect to the exchange of Initial Subordinated Securities for Exchange
Subordinated Securities.
"EXCHANGE SECURITIES" means the securities substantially in the form of
Exhibit A to the Indenture issued in exchange for the Initial Securities
pursuant to the Registration Rights Agreement and authenticated pursuant to the
Indenture.
"EXCHANGE SUBORDINATED SECURITIES" means the securities substantially in
the form of Exhibit D to the Indenture issued in exchange for the Initial
Subordinated Securities pursuant to the
Subordinated Security Registration Rights Agreement and authenticated pursuant
to the Indenture.
"EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.
"EXPENDABLES" means Qualified Spare Parts other than Rotables.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration or similar regulatory
authority established to replace it.
"FAA FILED DOCUMENTS" means the Security Agreement and Amendment No. 1 to
Security Agreement.
"FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider thereunder, presently located at 1585 Broadway, New
York, New York 10036, or such other office as such Liquidity Provider from time
to time shall notify the Trustee as its "Facility Office" under any such
Liquidity Facility; provided that such Liquidity Provider shall not change its
Facility Office to another Facility Office outside the United States of America
except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity
Facility.
"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market
value determined on the basis of a hypothetical sale negotiated in an arm's
length free market transaction between a willing and able seller and a willing
and able buyer, neither of whom is under undue pressure to complete the
transaction, under then current market conditions, provided that cash shall be
valued at its Dollar amount.
"FEDERAL AVIATION ACT" means Title 49 of the United States Code,
"Transportation", as amended from time to time, or any similar legislation of
the United States enacted in substitution or replacement thereof.
"FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial Liquidity Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.
"FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.
"FINAL LEGAL MATURITY DATE" means December 6, 2009.
"FINAL ORDER" has the meaning assigned to such term in the Policy.
"FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.
"FINANCING STATEMENTS" means, collectively, UCC-1 financing statements
covering the Spare Parts Collateral, by the Company, as debtor, showing the
Security Agent as secured party, for filing in Delaware, Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.
"GLOBAL EXCHANGE SUBORDINATED SECURITY" is defined in Section 2A.1(f) of
the Indenture.
"GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.
"GLOBAL SUBORDINATED SECURITIES" is defined in Section 2A.1(d) of the
Indenture.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Documents or relating
to the observance or performance of the obligations of any of the parties to the
Operative Documents.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Registrar's books.
"INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or additional trustee or security agent appointed pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.
"INDENTURE" means the Amended and Restated Indenture dated as of May 9,
2003, among the Company, the Trustee, the Liquidity Provider and the Policy
Provider under which the Notes are issued.
"INDENTURE DISCHARGE DATE" means the date of the termination of the
effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without
giving effect to Section 9.1(b) thereof).
"INDENTURE TRUSTEE" means the Trustee.
"INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other
Person (i) engaged in a business which includes appraising Aircraft and assets
related to the operation and maintenance of Aircraft from time to time and (ii)
who does not have any material financial interest in the Company and is not
connected with the Company or any of its Affiliates as an officer, director,
employee, promoter, underwriter, partner or person performing similar functions.
"INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an
Independent Appraiser and attached as Appendix II to the Offering Memo or
delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral
Maintenance Agreement.
"INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.
"INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.
"INITIAL FLOATING RATE SECURED SUBORDINATED NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.
"INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.
"INITIAL SECURITIES" mean the securities issued and authenticated pursuant
to the Indenture and substantially in the form of Exhibit A thereto, other than
the Exchange Securities.
"INITIAL SUBORDINATED SECURITIES" means the securities issued and
authenticated pursuant to the Indenture and substantially in the form of Exhibit
D thereto, other than the Exchange Subordinated Securities.
"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.
"INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.
"INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6
of each year so long as any Note is Outstanding (commencing March 6, 2003 in the
case of the Securities and June 6, 2003 in the case of the Subordinated
Securities), PROVIDED that if any such day is not a Business Day, then the
relevant Interest Payment Date shall be the next succeeding Business Day.
"INTEREST PERIOD" means (i) in the case of the first Interest Period, the
period commencing on (and including) the Closing Date (in the case of the
Securities) or the Subordinated Closing Date (in the case of the Subordinated
Securities) and ending on (but excluding) the first Interest Payment Date
following such date and (ii) in the case of each subsequent Interest Period, the
period commencing on (and including) the last day of the immediately preceding
Interest Period, and ending on (but excluding) the next Interest Payment Date.
"INVESTMENT EARNINGS" means investment earnings on funds on deposit in the
Trust Accounts net of losses and investment expenses of the Trustee in making
such investments.
"INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any
obligation which is a direct obligation of or guaranteed by any state of the
U.S. or any subdivision thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's; (c)
any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment instrument relying
upon the credit and backing of any bank or trust company which is a member of
the Federal Reserve System and which has a combined capital (including capital
reserves to the extent not included in capital) and surplus and undivided
profits of not less than $250,000,000 (including the Collateral Agent and its
Affiliates if such requirements as to Federal Reserve System membership and
combined capital and surplus and undivided profits are satisfied), including,
without limitation, certificates of deposit, time and other interest-bearing
deposits, bankers' acceptances, commercial paper, loan and mortgage
participation certificates and documented discount notes accompanied by
irrevocable letters of credit and money market fund investing solely in
securities backed by the full faith and credit of the United States; or (e)
repurchase agreements collateralized by any of the foregoing.
"ISSUANCE DATE" means the date of initial issuance of the Initial
Securities.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"LIBOR" has the meaning specified in the Reference Agency Agreement.
"LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.
"LIEN" means any mortgage, pledge, lease, security interest, encumbrance,
lien or charge of any kind affecting title to or any interest in property.
"LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the
Liquidity Facility.
"LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the
principal amount of any Drawings under the Liquidity Facility and (ii) any
interest accrued on any Liquidity Obligations.
"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
"LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date
of the Original Indenture, providing for the guarantee by the Liquidity
Guarantor of the obligations of the Liquidity Provider under the Liquidity
Facility.
"LIQUIDITY GUARANTOR" means Morgan Stanley.
"LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other
amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee
Letter.
"LIQUIDITY PROVIDER" means Morgan Stanley Capital Services Inc., together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the
Indenture.
"LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.
"LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Documents.
"MAXIMUM COLLATERAL RATIO" means 45%.
"MAXIMUM SUBORDINATED COLLATERAL RATIO" means 67.5%.
"MINIMUM ROTABLE RATIO" means 150%.
"MINIMUM SUBORDINATED ROTABLE RATIO" means 100%.
"MOODY'S" means Moody's Investors Service, Inc.
"MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MSCS" has the meaning specified in the first paragraph of the Indenture.
"NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.
"NONAPPRAISAL COMPLIANCE REPORT" means a report providing information
relating to compliance by the Company with Section 3.2 of the Collateral
Maintenance Agreement, which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.
"NON-CONTROLLING PARTY" means, at any time, the Securityholders, the
Subordinated Securityholders, the Liquidity Provider and the Policy Provider,
excluding whichever is the Controlling Party at such time.
"NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.
"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.
"NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.
"NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the
Indenture.
"NON-PERFORMING" means, with respect to any Security, a Payment Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy proceeding under the Bankruptcy Code in which the
Company is a debtor, any Payment Default existing at the commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy Code or as may apply for the cure of such Payment Default under
Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into
consideration until the expiration of the applicable period.
"NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.
"NON-U.S. PERSON" means any Person other than a U.S. person, as defined in
Regulation S.
"NOTES" means the Securities and the Subordinated Securities.
"NOTEHOLDER" means any holder of one or more Notes.
"NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the
Policy.
"NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined
in the Policy.
"OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.
"OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of
the Company relating to the offering of the Securities.
"OFFICER" means the Chairman of the Board, the President, any Vice
President of any grade, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.
"OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the
Collateral Maintenance Agreement and the Reference Agency Agreement.
"OPINION OF COUNSEL" means a written opinion from the General Counsel of
the Company, legal counsel to the Company or another legal counsel who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days following receipt) of, or its action on,
an opinion of counsel not specifically referred to above shall be sufficient
evidence that such counsel is acceptable to the Trustee.
"OUTSTANDING" or "OUTSTANDING" when used with respect to Notes or a Note,
means all Notes theretofore authenticated and delivered under the Indenture,
except:
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee in trust
for the Holders of such Notes, PROVIDED that, if such Notes are to be redeemed,
notice of such redemption has been duly given pursuant to the Indenture or
provision therefor satisfactory to the Trustee has been made;
(c) Notes for which payment has been deposited with the Trustee or any
Paying Agent in trust pursuant to Article 9 of the Indenture (except to the
extent provided therein); and
(d) Notes which have been paid, or for which other Notes shall have
been authenticated and delivered in lieu thereof or in substitution therefor
pursuant to the terms of Section 2.12 of the Indenture, unless proof
satisfactory to the Trustee is presented that any such Notes are held by bona
fide purchasers in whose hands the Notes are valid obligations of the Company.
A Note does not cease to be Outstanding because the Company or one of its
Affiliates holds the Note; PROVIDED, HOWEVER, that in determining whether the
Holders of the requisite aggregate principal amount of Notes Outstanding have
given any request, demand, authorization, direction, notice, consent or waiver
under the Indenture or any other Operative Document, Section 2.13 of the
Indenture shall be applicable.
"ORIGINAL INDENTURE" has the meaning set forth in the introductory
paragraph of the Indenture.
"OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.
"OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on any
Notes which is not in fact received by the Trustee (whether from the Company,
the Liquidity Provider, the Policy Provider or otherwise) on or within five days
after the Scheduled Payment Date relating thereto and which is not subsequently
paid in connection with the redemption or final maturity of a Note.
"PARTS INVENTORY REPORT" means, as of any date, a list identifying the
Pledged Spare Parts by manufacturer's part number and brief description and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.
"PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.
"PAYMENT" means (i) any payment of principal of, interest on, or Premium,
if any, or Break Amount, if any, with respect to the Notes from the Company,
(ii) any payment of interest on the Securities with funds drawn under the
Liquidity Facility or from a Cash Collateral Account or (iii) any payment of
interest on or principal of Securities with funds drawn under the Policy, or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.
"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the
Indenture.
"PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the
maximum rate permitted by applicable law.
"PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance
Agreement.
"PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the
Collateral Maintenance Agreement.
"PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents; (b) Liens attributable to Security Agent (both in its capacity as
Security Agent and in its individual capacity); (c) the rights of others under
agreements or arrangements to the extent expressly permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being contested in good faith by appropriate proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged Spare Parts or the interest of Security Agent therein or
impair the Lien of the Security Agreement; (e) materialmen's, mechanics',
workers', repairers', employees' or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for more than 60 days or is being contested in good faith by appropriate
proceedings, so long as such Liens and such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award against the Company, so long as
such judgment shall, within 60 days after the entry thereof, have been
discharged or vacated, or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result, or
any such judgment or award does not involve, any material risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent
therein or any impairment of the Lien of the Security Agreement; (g) any other
Lien with respect to which the Company shall have provided a bond, cash
collateral or other security adequate in the reasonable opinion of Security
Agent.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, trustee,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.
"POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance
Policy No. 39753, issued as of the Closing Date, as amended, supplemented or
otherwise modified from time to time in accordance with its respective terms.
"POLICY ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.
"POLICY DRAWING" means any payment of a claim under the Policy.
"POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the
Indenture.
"POLICY EXPENSES" means all amounts (including amounts in respect of
premiums, fees, expenses or indemnities) due to the Policy Provider under the
Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest
accrued on any Policy Provider Obligations, and (iii) reimbursement of and
interest on the Liquidity Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider; provided that if, at the time
of determination, a Policy Provider Default exists, Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.
"POLICY FEE LETTER" means the fee letter, dated as of the Closing Date,
from the Policy Provider to the Company and acknowledged by the Trustee, setting
forth the fees and premiums payable with respect to the Policy.
"POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance
company, and its successors and permitted assigns.
"POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement
dated as of the Closing Date, among the Trustee, the Company and the Policy
Provider, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of Written Notice of such failure to the
Policy Provider or (b) the Policy Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is
final and nonappealable, or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Policy Provider (or taking of possession of
all or any material portion of the Policy Provider's property).
"POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.
"POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity Facility in an amount equal to the amount of interest that would have
accrued on such Interest Drawing if such Interest Drawing had been made in
accordance with Section 2.02(e) of the Liquidity Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.
"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts,
including, without limitation, fees and indemnities (to the extent not included
in Policy Expenses), due to the Policy Provider under the Policy Provider
Agreement but shall not include any interest on Policy Drawings other than
Policy Provider Interest Obligations.
"PREMIUM" means, with respect to any Note redeemed pursuant to Article 4 of
the Indenture, the following percentage of the principal amount of such Note:
(a) with respect to a Security, (i) if redeemed before the first anniversary of
the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and
before the second anniversary of the Issuance Date, 1.0%; and (iii) if redeemed
on or after such second anniversary and before the third anniversary of the
Issuance Date, 0.5%; and (b) with respect to a Subordinated Security, (i) if
redeemed before the second anniversary of the Subordinated Issuance Date, 3.0%;
(ii) if redeemed on or after such second anniversary and before the third
anniversary of the Subordinated Issuance Date, 2.0%; and (iii) if redeemed on or
after such third anniversary and before the fourth anniversary of the
Subordinated Issuance Date, 1.0%; PROVIDED that no Premium shall be payable in
connection with a redemption made by the Company to satisfy the Maximum
Collateral Ratio, Maximum Subordinated Collateral Ratio, Minimum Rotable Ratio
or Minimum Subordinated Rotable Ratio requirement pursuant to Section 3.1 of the
Collateral Maintenance Agreement.
"PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the
Liquidity Facility on such Distribution Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.
"PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the
Indenture.
"PROPELLER" includes a part, appurtenance, and accessory of a propeller.
"PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the
Indenture.
"PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.
"QIB" means a qualified institutional buyer as defined in Rule 144A.
"QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.
"RATING AGENCIES" means, collectively, at any time, and with respect to a
Series of Notes, each nationally recognized rating agency which shall have been
requested by the Company to rate such Series of Notes and which shall then be
rating such Series of Notes. The initial Rating Agency will be Moody's, in the
case of the Securities, and Moody's and Standard & Poor's, in the case of the
Subordinated Securities.
"RATINGS CONFIRMATION" means, with respect to any action proposed to be
taken, a written confirmation from each of the Rating Agencies with respect to
the applicable Series of Notes that such action would not result in (i) a
reduction of the rating for such Series of Notes below the then current rating
for such Series of Notes (such rating, in the case of the Securities, as
determined without regard to the Policy) or (ii) a withdrawal or suspension of
the rating of such Series of Notes.
"RECORD DATE" means the fifteenth (15th) day preceding any Scheduled
Interest Payment Date, whether or not a Business Day.
"REDEMPTION DATE", when used with respect to any Note to be redeemed, means
the date fixed for such redemption by or pursuant to the Indenture and such
Note.
"REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.
"REGISTER" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of December 6, 2002, by and between the Company and the Initial
Purchaser.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"REGULATION S DEFINITIVE SUBORDINATED SECURITIES" is defined in Section
2A.1(e) of the Indenture.
"REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the
Indenture.
"REGULATION S GLOBAL SUBORDINATED SECURITY" is defined in Section 2A.1(d)
of the Indenture.
"RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.
"REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit
agreement (or agreements) 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 with respect to
the Securities to confirm in writing their respective ratings then in effect for
the Securities (before downgrading of such ratings, if any, as a result of the
downgrading of the Liquidity Provider), and be consented to by the Policy
Provider, which consent shall not be unreasonably withheld or delayed, in a face
amount (or in an aggregate face amount) equal to the amount of interest payable
on the Securities (at the Capped Interest Rate, and without regard to expected
future principal payments) on the eight Interest Payment Dates following the
date of replacement of such Liquidity Facility (or if such date is an Interest
Payment Date, on such day and the seven Interest Payment Dates following the
date of replacement of such Liquidity Facility) and issued by a Person (or
Persons) having unsecured short-term debt rating or issuer credit rating, as the
case may be, issued by Moody's and Standard & Poor's which are equal to or
higher than the Threshold Rating. Without limitation of the form that a
Replacement Liquidity Facility otherwise may have pursuant to the preceding
sentence, a Replacement Liquidity Facility for the Securities may have a stated
expiration date earlier than 15 days after the Final Legal Maturity Date so long
as such Replacement Liquidity Facility provides for a Non-Extension Drawing as
contemplated by Section 3.5(d) of the Indenture.
"REQUEST" means a written request for the action therein specified signed
on behalf of the Company by any Officer and delivered to the Trustee. Each
Request shall be accompanied by an Officers' Certificate if and to the extent
required by Section 12.4 of the Indenture.
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of
interest, calculated at the Capped Interest Rate, that would be payable on the
Securities on each of the eight successive Interest Payment Dates immediately
following such day or, if such day is an Interest Payment Date, on such day and
the succeeding seven Interest Payment Dates, in each case calculated on the
basis of the outstanding principal amount of the Securities on such date and
without regard to expected future payments of principal on the Securities.
"REQUIRED HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.
"REQUIRED SUBORDINATED HOLDERS" means from time to time the holders of more
than 50% in aggregate unpaid principal amount of the Subordinated Securities
then Outstanding.
"RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the corporate trust administration department of the Trustee or any other
officer customarily performing functions similar to those performed by the
Persons who at the time shall be such officers or to whom any corporate trust
matter is referred because of his or her knowledge of and familiarity with a
particular subject, (ii) with respect to the Liquidity Provider, any authorized
officer of the Liquidity Provider, and (iii) with respect to the Policy
Provider, any authorized officer of the Policy Provider.
"RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"RESTRICTED DEFINITIVE SUBORDINATED SECURITIES" is defined in Section
2A.1(e) of the Indenture.
"RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.
"RESTRICTED GLOBAL SUBORDINATED SECURITY" is defined in Section 2A.1(c) of
the Indenture.
"RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.
"RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture for
purposes of the Securities and in Section 2A.1(d) for purposes of the
Subordinated Securities.
"RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.
"RESTRICTED SUBORDINATED SECURITIES" are defined in Section 2A.2 of the
Indenture.
"ROTABLE" means a Qualified Spare Part that wears over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which it relates.
"ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market Value of the Rotables, as set forth in the most recent Independent
Appraiser's Certificate delivered by the Company pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities Outstanding minus the sum of the Cash Collateral held
by the Collateral Agent.
"RULE 144A" means Rule 144A under the Securities Act.
"SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.
"SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable thereto, (ii) with respect to any payment
of defaulted interest, the payment date established pursuant to Section 2.16,
(iii) with respect to amounts due on the redemption of any Note, the Redemption
Date applicable thereto, and (iv) with respect to the final maturity of the
Notes, December 6, 2007.
"SEC" means the Securities and Exchange Commission and any government
agency succeeding to its functions.
"SECTION 1110" means Section 1110 of the Bankruptcy Code.
"SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified
in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period, if any, commencing with the trustee or debtor-in-possession in such
proceeding agreeing, with court approval, to perform its obligations under the
Operative Documents within such 60 days (or longer period as agreed) and
continuing until such time as such trustee or debtor-in-possession ceases to
fully perform its obligations thereunder with the result that the period during
which the Collateral Agent is prohibited from repossessing the collateral under
any Collateral Agreement comes to an end.
"SECURITIES" means the Initial Securities and the Exchange Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement until a successor replaces
it in accordance with the provisions of the Security Agreement and thereafter
means the successor.
"SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of
the Issuance Date between the Company and the Security Agent.
"SECURITYHOLDER" means any holder of one or more Securities.
"SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.
"SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral
Maintenance Agreement.
"SERIES" means each of the Securities and the Subordinated Securities,
considered as a separate class.
"SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation in, installation on, attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.
"SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be required to be filed by the Company with the SEC pursuant to (i) with
respect to Securities, the Registration Rights Agreement, other than an Exchange
Offer Registration Statement, and (ii) with respect to Subordinated Securities,
the Subordinated Securities Registration Rights Agreement, other than an
Exchange Offer Registration Statement.
"SPARE PART" means an accessory, appurtenance, or part of an Aircraft
(except an Engine or Propeller), Engine (except a Propeller), Propeller, or
Appliance, that is to be installed at a later time in an Aircraft, Engine,
Propeller or Appliance.
"SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the
Security Agreement.
"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.
"SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy
Event.
"SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the
Indenture.
"SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral
Maintenance Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.
"STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity
Facility).
"STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.
"SUBORDINATED APPLICABLE MARGIN" means 7.50%.
"SUBORDINATED CLOSING DATE" means the Subordinated Issuance Date.
"SUBORDINATED COLLATERAL RATIO" shall mean a percentage determined by
dividing (i) the aggregate principal amount of all Notes Outstanding minus the
sum of the Cash Collateral held by the Collateral Agent by (ii) the Fair Market
Value of all Collateral (excluding any Cash Collateral), as set forth in the
most recent Independent Appraiser's Certificate delivered by the Company
pursuant to Article 2 of the Collateral Maintenance Agreement, as supplemented
pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable.
"SUBORDINATED DEBT RATE" means a rate per annum equal, in the case of the
first Interest Period for the Subordinated Securities, to 8.78% and, in the case
of any subsequent Interest Period, LIBOR for such Interest Period, as determined
pursuant to the Reference Agency Agreement, plus the Subordinated Applicable
Margin, PROVIDED that, solely in the event no Registration Event (as defined in
the Subordinated Security Registration Rights Agreement) occurs on or prior to
the 210th day after the Subordinated Closing Date, the Subordinated Debt Rate
shall be increased by an additional margin equal to 0.50% per annum, from and
including such 210th day to and excluding the earlier of (i) the date on which
such Registration Event occurs and (ii) the date on which there ceases to be any
Registrable Securities (as defined in the Subordinated Security Registration
Rights Agreement)); or if the Shelf Registration Statement (as defined in the
Subordinated Security Registration Rights Agreement) (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 Subordinated Security
Registration Rights Agreement for more than 60 days, whether or not consecutive,
during any 12-month period, the Subordinated Debt Rate shall be increased by an
additional margin equal to 0.50% per annum from and including the 61st day of
the applicable 12-month period such Shelf Registration Statement ceases to be
effective to and excluding the date on which the Shelf Registration Statement
again becomes effective (or, if earlier, the end of the period specified by
Section 2(b)(B) of the Subordinated Security Registration Rights Agreement),
PROVIDED that the additional margin added to the Subordinated Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time.
"SUBORDINATED DOCUMENTS" means the Indenture, Amendment No. 1 to Collateral
Maintenance Agreement, Amendment No. 1 to Reference Agency Agreement and
Amendment No. 1 to Security Agreement.
"SUBORDINATED ISSUANCE DATE" means the date of initial issuance of the
Initial Subordinated Securities.
"SUBORDINATED PAYMENT DUE RATE" means (a) the Subordinated Debt Rate plus
2% or, if less, (b) the maximum rate permitted by applicable law.
"SUBORDINATED ROTABLE RATIO" shall mean a percentage determined by dividing
(i) the Fair Market Value of the Rotables, as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable, by (ii) the
aggregate principal amount of all Notes Outstanding minus the sum of the Cash
Collateral held by the Collateral Agent.
"SUBORDINATED SECURITIES" means the Initial Subordinated Securities and the
Exchange Subordinated Securities.
"SUBORDINATED SECURITY OFFERING MEMO" means the Offering Memorandum, dated
May 2, 2003 of the Company relating to the offering of the Subordinated
Securities.
"SUBORDINATED SECURITY PROVISIONS" is defined in Section 4.1 of the
Collateral Maintenance Agreement.
"SUBORDINATED SECURITY PURCHASE AGREEMENT" means the Purchase Agreement,
dated as of May 2, 2003, by and between the Initial Purchaser and the Company.
"SUBORDINATED SECURITY REGISTRATION RIGHTS AGREEMENT" means the
Registration Rights Agreement dated as of the Subordinated Issuance Date, by and
between the Company and the Initial Purchaser.
"SUBORDINATED SECURITYHOLDER" means any holder of one or more Subordinated
Securities.
"SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.
"SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security
Agreement substantially in the form of Exhibit A to the Security Agreement.
"SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy
Provider Agreement and the Fee Letters.
"TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs incurred or imposed with respect thereto) imposed or otherwise
assessed by the United States of America or by any state, local or foreign
government (or any subdivision or agency thereof) or other taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth and similar charges; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, taxes on goods and services, gains taxes, license, registration and
documentation fees, customs duties, tariffs, and similar charges.
"TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.
"THRESHOLD AMOUNT" means $2,000,000.
"THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by
Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial
Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply
to the Liquidity Guarantor.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is amended after such date, "TIA" means, to the extent
required by any such amendment, the TIA as so amended.
"TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.
"TRUST OFFICER" means any officer in the corporate trust department of the
Trustee, or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"TRUSTEE" means the party named as such in the Indenture until a successor
replaces it in accordance with the provisions of the Indenture and thereafter
means the successor Trustee and if, at any time, there is more than one Trustee,
"Trustee" as used with respect to the Notes of any Series shall mean the Trustee
with respect to the Notes of that Series.
"TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the
Indenture.
"TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral
Maintenance Agreement.
"TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility.
"UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable
Parts.
"U.S." or "UNITED STATES" means the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating certificate issued pursuant
to chapter 447 of title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the option of the issuer thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance
Agreement.
"WARRANTIES" is defined in clause (2) of Section 2.01 of the Security
Agreement.
"WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the
Policy Provider, a written instrument executed by the Designated Representative
of such Person. An invoice delivered by the Liquidity Provider pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing procedures
shall constitute Written Notice under such Section.
"WTC" has the meaning specified in the first paragraph of the Indenture.
SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the
following rules of construction shall apply for all purposes of the Operative
Documents (including this appendix) and of such agreements as may incorporate
this appendix by reference.
(a) In each Operative Document, unless otherwise expressly provided, a
reference to:
(i) each of the Company, the Trustee, the Collateral Agent, the Security
Agent or any other person includes, without prejudice to the
provisions of any Operative Document, any successor in interest to it
and any permitted transferee, permitted purchaser or permitted
assignee of it;
(ii) words importing the plural include the singular and words importing
the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule or
exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Document, that
agreement, instrument or document, or annex, schedule or exhibit, or
part, respectively, as amended, modified or supplemented from time to
time in accordance with its terms and in accordance with the
Operative Documents, and any agreement, instrument or document
entered into in substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as amended,
modified, supplemented, substituted, reissued or reenacted prior to
the Closing Date, and thereafter from time to time;
(v) the words "Agreement", "this Agreement", "hereby", "herein",
"hereto", "hereof" and "hereunder" and words of similar import when
used in any Operative Document refer to such Operative Document as a
whole and not to any particular provision of such Operative Document;
(vi) the words "including", "including, without limitation", "including,
but not limited to", and terms or phrases of similar import when used
in any Operative Document, with respect to any matter or thing, mean
including, without limitation, such matter or thing; and
(vii) a"Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule"
in any Operative Document, or in any annex thereto, is a reference to
a section of, or an exhibit, an annex, an appendix or a schedule to,
such Operative Document or such annex, respectively.
(b) Each exhibit, annex, appendix and schedule to each Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.
(c) Unless otherwise defined or specified in any Operative Document,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Document are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Document.
(e) For purposes of each Operative Document, the occurrence and
continuance of a Default or Event of Default referred to in Section 7.1(d), (e)
or (f) of the Indenture shall not be deemed to prohibit the Company from taking
any action or exercising any right that is conditioned on no Special Default,
Default or Event of Default having occurred and be continuing if such Special
Default, Default or Event of Default consists of the institution of
reorganization proceedings with respect to the Company under Chapter 11 of the
Bankruptcy Code and the trustee or debtor-in-possession in such proceedings
shall have agreed to perform its obligations under the Operative Documents with
the approval of the applicable court and thereafter shall have continued to
perform such obligations in accordance with Section 1110.
EXHIBIT A
[FORM OF SECURITY]
[THIS SECURITY 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 SECURITY 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 SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL
AIRLINES, INC. OR ANY AFFILIATE OF CONTINENTAL AIRLINES, INC. RESELL OR
OTHERWISE TRANSFER THIS SECURITY 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 SECURITY IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS
SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL
AIRLINES, INC. OR ANY AFFILIATE OF CONTINENTAL AIRLINES, INC., THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO CONTINENTAL AIRLINES, INC. OR ITS
AGENT. 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 INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTIONS.]*
[UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO CONTINENTAL
AIRLINES, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY 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 SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2.5 AND
2.6 OF THE INDENTURE REFERRED TO HEREIN.]**
- -------------------------
* To be included on the face of each Restricted Security.
** To be included on the face of each Global Security.
No. [__] CUSIP/Common Code No. [___]
$ [____]
[[REGULATION S] GLOBAL SECURITY]*
[INITIAL] [EXCHANGE] FLOATING RATE SECURED NOTE DUE 2007
CONTINENTAL AIRLINES, INC., a Delaware corporation (the "Company"),
promises to pay to [__________], or the registered assignee thereof, the
principal sum of $[_______] Dollars (the "Principal Amount") on December 6,
2007, subject to earlier payment as provided in the Indenture referred to
herein. This Security shall bear interest on the unpaid Principal Amount from
time to time outstanding from the most recent Interest Payment Date to which
interest has been paid (or, if no interest has been paid under the Indenture,
from December 6, 2002) at a rate per annum for each Interest Period equal to the
Debt Rate for such Interest Period (calculated on the basis of a year of 360
days and actual days elapsed during the period for which such amount accrues).
The Company shall pay accrued interest in arrears on each March 6, June 6,
September 6 and December 6 of each year, commencing March 6, 2003 (or, if not a
Business Day, the next succeeding Business Day) (an "Interest Payment Date")
until the Principal Amount has been paid in full, PROVIDED that if such payment
in full is not made on an Interest Payment Date, accrued interest shall be paid
on the date of such payment in full rather than the next Interest Payment Date.
Interest shall accrue with respect to the first but not the last day of each
Interest Period. This Security shall bear interest, payable on demand, at the
Payment Due Rate (calculated on the basis of a year of 360 days and actual days
elapsed during the period for which such amount accrues) on any part of the
Principal Amount and, to the extent permitted by applicable Law, interest and
any other amounts payable hereunder not paid when due, in each case for the
period the same is overdue. Amounts shall be overdue if not paid when due
(whether at stated maturity, by acceleration or otherwise). Notwithstanding
anything to the contrary contained herein, if any date on which a payment under
this Security becomes due and payable is not a Business Day, then such payment
shall not be made on such scheduled date but shall be made on the next
succeeding Business Day, and such extension of time shall be included in the
computation of interest payable.
1. GENERAL. This Security is one of a duly authorized issue of securities
of the Company designated as "[Initial] [Exchange] Floating Rate Secured Notes
due 2007" (herein, called the "Securities"), limited in aggregate principal
amount to $200,000,000, issued, authenticated and delivered pursuant to the
Indenture, dated as of December 6, 2002 (the "Indenture"), among the Company,
Wilmington Trust Company, as Trustee (the "Trustee"), Morgan Stanley Capital
Services Inc., as Liquidity Provider, and MBIA Insurance Corporation, as Policy
Provider. To the extent not otherwise defined herein, the capitalized terms used
herein have the meanings assigned to them in the Indenture. This Security is
subject to the terms, provisions and conditions of the Indenture and those made
- -------------------------
* To be included on the face of each Global Security.
applicable to the Indenture by the TIA. To the extent any provision of this
Security conflicts with the express provisions of the Indenture, the provisions
of the Indenture shall govern and be controlling. Reference is hereby made to
the Indenture, the TIA, the Security Agreement, the other Operative Documents
and the Support Documents for a complete statement of the rights and obligations
of the holders of, and the nature and extent of the security for, this Security.
By virtue of its acceptance hereof the Securityholder of this Security assents
to and agrees to be bound by the provisions of the Indenture.
2. RECORD DATES. The Person in whose name any Security is registered at the
close of business on the fifteenth day preceding a Scheduled Interest Payment
Date shall be entitled to receive the interest payable on the applicable
Interest Payment Date to the extent provided by such Security, except if and to
the extent the Company shall default in the payment of the interest due on such
Interest Payment Date, in which case defaulted interest shall be paid to the
Person in whose name the Security is registered at the close of business on the
subsequent record date established by notice given by mail by or on behalf of
the Company to the Holders of Securities pursuant to the Indenture.
3. OPTIONAL REDEMPTION. The Company may redeem the Securities at any time
in whole or (so long as no Payment Default has occurred and is continuing) in
part (in any integral multiple of $1,000) at its sole option at a redemption
price equal to the sum of 100% of the principal amount of, accrued and unpaid
interest on, and Premium, if any, and Break Amount, if any, with respect to, the
redeemed Securities to and including the Redemption Date. "Premium" means, with
respect to any Security redeemed pursuant to the Indenture, the following
percentage of the principal amount of such Security: (i) if redeemed before the
first anniversary of the Issuance Date, 1.5%; (ii) if redeemed on or after such
first anniversary and before the second anniversary of the Issuance Date, 1.0%;
and (iii) if redeemed on or after such second anniversary and before the third
anniversary of the Issuance Date, 0.5%; PROVIDED that no Premium shall be
payable in connection with a redemption made by the Company to satisfy the
Maximum Collateral Ratio or Minimum Rotable Ratio requirement pursuant to
Section 3.1 of the Collateral Maintenance Agreement. The Trustee shall mail a
notice of any redemption at least 15 days but not more than 60 days before the
Redemption Date to each Holder whose Securities are to be redeemed at his
registered address. If the Trustee gives notice of redemption but the Company
fails to pay when due all amounts necessary to effect such redemption, such
redemption shall be deemed revoked and no amount shall be due as a result of
notice of redemption having been given. Securities called for redemption shall
cease to bear interest on and after the Redemption Date (unless the Company
shall fail to pay the redemption price). Upon surrender to the Paying Agent,
such Securities shall be paid the redemption price.
4. METHOD OF PAYMENT. The Paying Agent shall distribute amounts payable to
each Securityholder by check mailed to such Securityholder at its address
appearing in the Register, except that with respect to Securities registered on
the applicable Record Date in the name of a Clearing Agency (or its nominee),
such distribution shall be made by wire transfer in immediately available funds
to the account designated by such Clearing Agency (or such nominee). The Company
shall not have any responsibility for the distribution of such payments to any
Securityholder. Any payment made hereunder shall be made without any presentment
or surrender of this Security, except that, in the case of the final payment in
respect of this Security, this Security shall be surrendered to the Paying Agent
for cancellation against receipt of such payment.
5. CREDIT SUPPORT. The Company's obligations with respect to the Securities
are secured by a lien on the Pledged Spare Parts and certain other property of
the Company. In addition, the Trustee has entered into a Liquidity Facility
under which the Liquidity Provider is obligated to make advances to the Trustee
in an aggregate amount sufficient to pay interest on the Securities up to eight
successive quarterly Interest Payment Dates. The Trustee is also the beneficiary
of the Policy under which the Policy Provider is obligated to honor drawings to
cover interest on the Securities when due and principal of the Securities no
later than 24 months after the Final Scheduled Payment Date of the Securities.
6. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or
agency where Securities eligible for transfer or exchange may be presented for
registration of transfer or for exchange, and an office or agency where
Securities may be presented for payment. Initially, the Trustee will act as
Registrar and Paying Agent. If the Company fails to maintain a Registrar or
Paying Agent, the Trustee shall act as such.
7. DENOMINATIONS, TRANSFER AND EXCHANGE. The Securities 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,]* [in denominations
of $1,000 or integral multiples thereof,]** except that one Security may be
issued in a different denomination. The transfer of Securities may be registered
and Securities may be exchanged as provided in the Indenture. No transfer shall
be effected until, and such transferee shall succeed to the rights of a
Securityholder only upon, final acceptance and registration of the transfer by
the Registrar in the Register. No service charge shall be made to a
Securityholder for any registration of transfer or exchange of Securities, but
the Company may 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 Securities.
8. PERSONS DEEMED OWNERS. Prior to the registration of any transfer of a
Security by a Securityholder as provided in the Indenture, the Company, the
Registrar, the Paying Agent and the Trustee shall deem and treat the person in
whose name the Security is registered on the Register as the absolute owner and
holder thereof for the purpose of receiving payment of all amounts payable with
respect to such Security and for all other purposes, and none of the Company,
the Registrar, the Paying Agent or the Trustee shall be affected by any notice
to the contrary.
9. AMENDMENTS AND WAIVERS. The Company and the Trustee or the Collateral
Agent, as the case may be, may amend or supplement the Indenture, the
- -------------------------
* To be used for Initial Securities.
** To be used for Exchange Securities.
Securities, or any of the other Operative Documents and, upon request of the
Company, the Trustee shall amend or supplement the Support Documents, in each
case only with the written consent of the Controlling Party, PROVIDED that
certain amendments, supplements and waivers may not be made without the consent
of each Securityholder affected thereby. Any consent by the Securityholder of
this Security shall be conclusive and binding on such Securityholder and upon
all future Securityholders of this Security and of any Security issued upon the
transfer hereof or in exchange hereof or in lieu hereof whether or not notation
of such consent is made upon such Security. Without the consent of the
Controlling Party or any Holder, the Indenture, the Securities, any of the
Operative Documents and any of the Support Documents may be amended to, among
other things, cure any ambiguity, defect or inconsistency or to make any other
change not inconsistent with the provisions of the Indenture, provided that such
action does not materially adversely affect the interests of any Securityholder.
10. DEFAULTS AND REMEDIES. Events of Default under the Indenture include
the following: (a) failure by the Company to pay (1) principal of, interest on,
Premium, if any, or Break Amount, if any, with respect to any Security when due,
and such failure shall continue unremedied for a period of 10 Business Days
thereafter (it being understood that any amount distributed to Securityholders
in respect of the foregoing from funds provided by the Policy Provider, the
Liquidity Provider or a Cash Collateral Account shall not be deemed to cure such
Default) or (2) any other amount payable by it to the Holders under the
Indenture or any Operative Document when due, and such failure shall continue
for a period in excess of 10 Business Days after the Company has received
written notice from the Trustee of the failure to make such payment when due;
(b) failure by the Company to observe and perform in any material respect any
other covenant, agreement or obligation set forth in the Indenture or in any
other Operative Documents, with such failure continuing after notice and
specified cure periods; (c) any representation or warranty made by the Company
in the Indenture or any other Operative Document (1) shall prove to have been
untrue or inaccurate in any material respect as of the date made, (2) such
untrue or inaccurate representation or warranty is material at the time in
question and (3) the same shall remain uncured following notice; and (d) the
occurrence of certain events of bankruptcy, reorganization or insolvency of the
Company. Subject to certain limitations in the Indenture, if an Event of Default
occurs and is continuing, the Controlling Party may, by notice to Company and
the Trustee, and the Trustee shall, upon the request of the Controlling Party,
declare all unpaid principal of, accrued interest on, Premium, if any, and Break
Amount, if any, with respect to the Securities Outstanding and other amounts
otherwise payable under the Indenture, if any, to be due and payable
immediately. In the case of an Event of Default arising from certain events of
bankruptcy, reorganization or insolvency, such amounts shall automatically
become and be immediately due and payable without further action or notice.
Under certain circumstance, the Controlling Party by notice to the Trustee may
rescind an acceleration and its consequences.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, interest on, or Premium, if any, or Break Amount, if any, with
respect to, the Securities or other amounts otherwise payable under the
Indenture, if any. Subject to the Indenture, so long as an Event of Default has
occurred and is continuing, the Controlling Party by notice to the Trustee may
authorize the Trustee to waive an existing Default or Event of Default and its
consequences. The Controlling Party may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee (as Trustee or
Collateral Agent, subject, in the case of any actions based on the status of the
Trustee as Collateral Agent, to any limitations otherwise expressly provided for
in the Operative Documents) or exercising any trust or power conferred on it;
provided that the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction. Securityholders may not enforce
the Indenture or the Securities except as provided in the Indenture. The Trustee
may require indemnity satisfactory to it before it enforces the Indenture or the
Securities. The Trustee may withhold from Securityholders notice of any
continuing default (except a default in payment of principal, interest, Premium
or Break Amount) if it determines in good faith that withholding notice is in
their interests. The above description of Events of Default and remedies is
qualified by reference, and subject in its entirety to the more complete
description thereof contained in the Indenture.
11. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any personal liability for
any obligations of the Company under the Securities, the Indenture or the other
Operative Documents by reason of his or her status as such director, officer,
employee or stockholder. Each Securityholder by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Securities.
12. AUTHENTICATION. This Security shall not be entitled to any benefit
under the Indenture or be valid or obligatory for any purpose until the
certificate of authentication attached hereto has been executed by the manual
signature of an authorized signatory of the Trustee or an authenticating agent
appointed by the Trustee.
13. UNCLAIMED MONEY. If money deposited with the Trustee or any Paying
Agent in trust for the payment of the principal of, interest on, or Premium, if
any, or Break Amount, if any, with respect to, any Security and unclaimed for
two (2) years after such principal, interest, Premium, if any, or Break Amount,
if any, has become due and payable shall be paid to the Company on its request,
subject to any applicable abandoned property law, and the Holder of such
Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof.
14. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
15. CUSIP NUMBERS. The Company in issuing this Security may use a "CUSIP"
number (if then generally in use) and, if so, the Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to Holders; PROVIDED, HOWEVER,
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
[16. REGISTRATION. The Holder of this Security is entitled to the benefits
of the Registration Rights Agreement. In the event that no Registration Event
(as defined in the Registration Rights Agreement) occurs on or prior to the
210th day after the Issuance Date, the Debt Rate shall be increased by an
additional margin equal to 0.50%, from and including such 210th day to and
excluding the earlier of (i) the date on which a Registration Event occurs and
(ii) the date on which there ceases to be any Registrable Securities (as defined
in the Registration Rights Agreement); or if the Shelf Registration Statement
(as defined in the Registration Rights Agreement) (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
Debt Rate shall be increased by an additional margin equal to 0.50% from and
including the 61st day of the applicable 12-month period such Shelf Registration
Statement ceases to be effective to and excluding the date on which 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);
PROVIDED that the additional margin added to the Debt Rate pursuant to this
section shall never exceed 0.50% at any time.]*
[17. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT. Each Holder of
a Security, by acceptance hereof, acknowledges and agrees to the provisions of
the Registration Rights Agreement, including, without limitation, the
obligations of the Holders with respect to a registration and the
indemnification of the Company to the extent provided therein.]*
18. GOVERNING LAW. THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
The Company will furnish to any Holder of this Security, upon written
request and without charge, a copy of the Indenture. Request may be made to:
Continental Airlines, Inc., 1600 Smith Street, Houston, Texas 77002, Attention:
Corporate Secretary.
- -------------------------
* To be included only on each Initial Security.
* To be included only on each Initial Security.
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed in its corporate name by its officer thereunto duly authorized on the
date hereof.
Dated:
CONTINENTAL AIRLINES, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities referred
to in the Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:
--------------------------------------
Authorized Officer
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 Security and all rights thereunder, hereby irrevocably constituting
and appointing
- ---------------------------------
attorney to transfer said Security on the books of the Registrar with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL SECURITIES,
EXCEPT REGULATION S GLOBAL,
REGULATION S DEFINITIVE SECURITIES AND EXCHANGE SECURITIES]
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 Security
or the last date on which this Security was held by Continental Airlines, Inc.
or any affiliate of Continental Airlines, Inc., the undersigned confirms that
without utilizing any general solicitation or general advertising that:
[CHECK ONE]
[__] (a) this Security is being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended, provided by Rule
144A thereunder.
OR
[__] (b) this Security 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 Security and the Indenture.
If neither of the foregoing boxes is checked, the Registrar shall not be
obligated to register this Security 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 2.6 of the Indenture 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 Security
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:[___________, ___]
--------------------------
NOTE: To be executed by an executive officer.
EXHIBIT B
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS OF NOTES PURSUANT TO REGULATION S
[___________, ___]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Re: FLOATING RATE SECURED [SUBORDINATED] NOTES DUE 2007
(THE "SECURITIES")
Ladies and Gentlemen:
In connection with our proposed sale of US $[__] of the Securities, 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 Securities 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(a) or Rule 904(a) 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(b)(2) or Rule 904(b)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(b)(2) or Rule 904(b)(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]
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION
WITH TRANSFERS OF NOTES TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
[___________, ___]
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention: Corporate Trust Administration
Continental Airlines, Inc.
1600 Smith Street
Houston, Texas 77002
CONTINENTAL AIRLINES
Floating Rate Secured [Subordinated] Notes due 2007 (the "Securities")
------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of U.S. $[_____________] of
Securities (the "Purchased Securities"), we confirm that:
1. We understand that any subsequent transfer of the Purchased
Securities is subject to certain restrictions and conditions set forth in
the Amended and Restated Indenture, dated as of [___________], 2003, among
Continental Airlines, Inc. (the "Company"), Wilmington Trust Company (the
"Trustee"), Morgan Stanley Capital Services Inc., as Liquidity Provider,
and MBIA Insurance Corporation, as Policy Provider, relating to the
Securities, and we agree to be bound by, and not to resell, pledge or
otherwise transfer the Purchased Securities except in compliance with, such
restrictions and conditions and the Securities Act of 1933, as amended (the
"Securities Act").
2. We are purchasing Securities having an aggregate principal amount
of not less than $100,000 and each account (if any) for which we are
purchasing Securities is purchasing Securities having an aggregate
principal amount of not less than $100,000.
3. We understand that the Purchased Securities have not been
registered under the Securities Act, that the Purchased Securities are
being sold to us in a transaction that is exempt from the registration
requirements of the Securities Act and that the Purchased Securities 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 Purchased
Securities within two years after the later of the original issuance of
such Purchased Securities and the last date on which such Purchased
Securities are owned by the Company or any affiliate of the Company, 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 Purchased
Securities from us a notice advising such purchaser that resales of the
Purchased Securities are restricted as stated herein.
4. We understand that, on any proposed resale of any Purchased
Securities, 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
Purchased Securities 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
Purchased Securities, 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 Purchased Securities 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 Purchased Securities, subject,
nevertheless to the understanding that the disposition of our property
shall at all times be and remain within our control.
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:
EXHIBIT D
[FORM OF SUBORDINATED SECURITY]
[THIS SECURITY 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 SECURITY 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 SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL
AIRLINES, INC. OR ANY AFFILIATE OF CONTINENTAL AIRLINES, INC. RESELL OR
OTHERWISE TRANSFER THIS SECURITY 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 SECURITY IT
WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS SECURITY WITHIN TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS
SECURITY OR THE LAST DATE ON WHICH THIS SECURITY WAS HELD BY CONTINENTAL
AIRLINES, INC. OR ANY AFFILIATE OF CONTINENTAL AIRLINES, INC., THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER
OF SUCH TRANSFER AND SUBMIT THIS SECURITY TO CONTINENTAL AIRLINES, INC. OR ITS
AGENT. 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 INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO
REFUSE TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING
RESTRICTIONS.]*
- -------------------------
* To be included on the face of each Restricted Subordinated Security.
[UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO CONTINENTAL
AIRLINES, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY SECURITY ISSUED IN EXCHANGE FOR THIS SECURITY 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 SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTIONS 2A.5
AND 2A.6 OF THE INDENTURE REFERRED TO HEREIN.]**
- -------------------------
** To be included on the face of each Global Subordinated Security.
No. [__] CUSIP/Common Code No. [___]
$[____]
[[REGULATION S] GLOBAL SUBORDINATED SECURITY]*
[INITIAL] [EXCHANGE] FLOATING RATE SECURED SUBORDINATED NOTE
DUE 2007
This note was issued with "original issue discount." The
total amount of original issue discount is 5% of its
principal amount, the issue date is May 9, 2003, and the
yield to maturity on the issue date would be 10.143%,
compounded quarterly, assuming LIBOR remains at 1.28%
throughout the term of the note.
CONTINENTAL AIRLINES, INC., a Delaware corporation (the "Company"),
promises to pay to [__________], or the registered assignee thereof, the
principal sum of $[_______] Dollars (the "Principal Amount") on December 6,
2007, subject to earlier payment as provided in the Indenture referred to
herein. This Subordinated Security shall bear interest on the unpaid Principal
Amount from time to time outstanding from the most recent Interest Payment Date
to which interest has been paid (or, if no interest has been paid under the
Indenture, from May 9, 2003) at a rate per annum for each Interest Period equal
to the Subordinated Debt Rate for such Interest Period (calculated on the basis
of a year of 360 days and actual days elapsed during the period for which such
amount accrues). The Company shall pay accrued interest in arrears on each March
6, June 6, September 6 and December 6 of each year, commencing June 6, 2003 (or,
if not a Business Day, the next succeeding Business Day) (an "Interest Payment
Date") until the Principal Amount has been paid in full, PROVIDED that if such
payment in full is not made on an Interest Payment Date, accrued interest shall
be paid on the date of such payment in full rather than the next Interest
Payment Date. Interest shall accrue with respect to the first but not the last
day of each Interest Period. This Subordinated Security shall bear interest,
payable on demand, at the Subordinated Payment Due Rate (calculated on the basis
of a year of 360 days and actual days elapsed during the period for which such
amount accrues) on any part of the Principal Amount and, to the extent permitted
by applicable Law, interest and any other amounts payable hereunder not paid
when due, in each case for the period the same is overdue. Amounts shall be
overdue if not paid when due (whether at stated maturity, by acceleration or
otherwise). Notwithstanding anything to the contrary contained herein, if any
date on which a payment under this Subordinated Security becomes due and payable
is not a Business Day, then such payment shall not be made on such scheduled
date but shall be made on the next succeeding Business Day, and such extension
of time shall be included in the computation of interest payable.
1. GENERAL. This Subordinated Security is one of a duly authorized issue of
securities of the Company designated as "[Initial] [Exchange] Floating Rate
- -------------------------
* To be included on the face of each Global Subordinated Security.
Secured Subordinated Notes due 2007" (herein, called the "Subordinated
Securities"), limited in aggregate principal amount to $100,000,000, issued,
authenticated and delivered pursuant to the Amended and Restated Indenture,
dated as of May 9, 2003 (the "Indenture"), among the Company, Wilmington Trust
Company, as Trustee (the "Trustee"), Morgan Stanley Capital Services Inc., as
Liquidity Provider, and MBIA Insurance Corporation, as Policy Provider. To the
extent not otherwise defined herein, the capitalized terms used herein have the
meanings assigned to them in the Indenture. This Subordinated Security is
subject to the terms, provisions and conditions of the Indenture and those made
applicable to the Indenture by the TIA. The indebtedness evidenced by this
Subordinated Security is, to the extent provided in the Indenture, subordinate
and subject in right of payment to the prior payment in full of the Securities,
and this Subordinated Security is issued subject to such provisions. To the
extent any provision of this Subordinated Security conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. Reference is hereby made to the Indenture, the TIA, the Security
Agreement and the other Operative Documents for a complete statement of the
rights and obligations of the holders of, and the nature and extent of the
security for, this Subordinated Security. By virtue of its acceptance hereof the
Subordinated Securityholder of this Subordinated Security assents to and agrees
to be bound by the provisions of the Indenture.
2. RECORD DATES. The Person in whose name any Subordinated Security is
registered at the close of business on the fifteenth day preceding a Scheduled
Interest Payment Date shall be entitled to receive the interest payable on the
applicable Interest Payment Date to the extent provided by such Subordinated
Security, except if and to the extent the Company shall default in the payment
of the interest due on such Interest Payment Date, in which case defaulted
interest shall be paid to the Person in whose name the Subordinated Security is
registered at the close of business on the subsequent record date established by
notice given by mail by or on behalf of the Company to the Holders of
Subordinated Securities pursuant to the Indenture.
3. OPTIONAL REDEMPTION. The Company may not redeem the Subordinated
Securities prior to May 9, 2004. The Company may redeem the Subordinated
Securities on or after such date at any time in whole or (so long as no Payment
Default has occurred and is continuing) in part (in any integral multiple of
$1,000) at its sole option at a redemption price equal to the sum of 100% of the
principal amount of, accrued and unpaid interest on, and Premium, if any, and
Break Amount, if any, with respect to, the redeemed Subordinated Securities to
and including the Redemption Date. "Premium" means, with respect to any
Subordinated Security redeemed pursuant to the Indenture, the following
percentage of the principal amount of such Subordinated Security: (i) if
redeemed before the second anniversary of the Subordinated Issuance Date, 3.0%;
(ii) if redeemed on or after such second anniversary and before the third
anniversary of the Subordinated Issuance Date, 2.0%; and (iii) if redeemed on or
after such third anniversary and before the fourth anniversary of the
Subordinated Issuance Date, 1.0%; PROVIDED that no Premium shall be payable in
connection with a redemption made by the Company to satisfy the Maximum
Subordinated Collateral Ratio or the Minimum Subordinated Rotable Ratio
requirement pursuant to Section 3.1 of the Collateral Maintenance Agreement. The
Trustee shall mail a notice of any redemption at least 15 days but not more than
60 days before the Redemption Date to each Holder whose Subordinated Securities
are to be redeemed at his registered address. If the Trustee gives notice of
redemption but the Company fails to pay when due all amounts necessary to effect
such redemption, such redemption shall be deemed revoked and no amount shall be
due as a result of notice of redemption having been given. Subordinated
Securities called for redemption shall cease to bear interest on and after the
Redemption Date (unless the Company shall fail to pay the redemption price).
Upon surrender to the Paying Agent, such Subordinated Securities shall be paid
the redemption price.
4. METHOD OF PAYMENT. The Paying Agent shall distribute amounts payable to
each Subordinated Securityholder by check mailed to such Subordinated
Securityholder at its address appearing in the Register, except that with
respect to Subordinated Securities registered on the applicable Record Date in
the name of a Clearing Agency (or its nominee), such distribution shall be made
by wire transfer in immediately available funds to the account designated by
such Clearing Agency (or such nominee). The Company shall not have any
responsibility for the distribution of such payments to any Subordinated
Securityholder. Any payment made hereunder shall be made without any presentment
or surrender of this Subordinated Security, except that, in the case of the
final payment in respect of this Subordinated Security, this Subordinated
Security shall be surrendered to the Paying Agent for cancellation against
receipt of such payment.
5. COLLATERAL. The Company's obligations with respect to the Securities and
the Subordinated Securities are secured by a lien on the Pledged Spare Parts and
certain other property of the Company.
6. REGISTRAR AND PAYING AGENT. The Company shall maintain an office or
agency where Subordinated Securities eligible for transfer or exchange may be
presented for registration of transfer or for exchange, and an office or agency
where Subordinated Securities may be presented for payment. Initially, the
Trustee will act as Registrar and Paying Agent. If the Company fails to maintain
a Registrar or Paying Agent, the Trustee shall act as such.
7. DENOMINATIONS, TRANSFER AND EXCHANGE. The Subordinated Securities 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,]*
[in denominations of $1,000 or integral multiples thereof,] ** except that one
Subordinated Security may be issued in a different denomination. The transfer of
Subordinated Securities may be registered and Subordinated Securities may be
exchanged as provided in the Indenture. No transfer shall be effected until, and
such transferee shall succeed to the rights of a Subordinated Securityholder
only upon, final acceptance and registration of the transfer by the Registrar in
the Register. No service charge shall be made to a Subordinated Securityholder
for any registration of transfer or exchange of Subordinated Securities, but the
Company may 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
Subordinated Securities.
- -------------------------
* To be used for Initial Subordinated Securities.
** To be used for Exchange Subordinated Securities.
8. PERSONS DEEMED OWNERS. Prior to the registration of any transfer of a
Subordinated Security by a Subordinated Securityholder as provided in the
Indenture, the Company, the Registrar, the Paying Agent and the Trustee shall
deem and treat the person in whose name the Subordinated Security is registered
on the Register as the absolute owner and holder thereof for the purpose of
receiving payment of all amounts payable with respect to such Subordinated
Security and for all other purposes, and none of the Company, the Registrar, the
Paying Agent or the Trustee shall be affected by any notice to the contrary.
9. AMENDMENTS AND WAIVERS. The Company and the Trustee or the Collateral
Agent, as the case may be, may amend or supplement the Indenture, the
Subordinated Securities, or any of the other Operative Documents, in each case
only with the written consent of the Controlling Party, PROVIDED that certain
amendments, supplements and waivers relating to the Subordinated Securities may
not be made without the consent of each Subordinated Securityholder affected
thereby and, in certain cases, may be made without the consent of the
Controlling Party. Any consent by the Subordinated Securityholder of this
Subordinated Security shall be conclusive and binding on such Subordinated
Securityholder and upon all future Subordinated Securityholders of this
Subordinated Security and of any Subordinated Security issued upon the transfer
hereof or in exchange hereof or in lieu hereof whether or not notation of such
consent is made upon such Subordinated Security. Without the consent of the
Controlling Party or any Holder, the Indenture, the Subordinated Securities and
any of the Operative Documents may be amended to, among other things, cure any
ambiguity, defect or inconsistency or to make any other change not inconsistent
with the provisions of the Indenture, provided that such action does not
materially adversely affect the interests of any Subordinated Securityholder.
10. DEFAULTS AND REMEDIES. Events of Default under the Indenture include
the following: (a) failure by the Company to pay (1) principal of, interest on,
Premium, if any, or Break Amount, if any, with respect to any Note when due, and
such failure shall continue unremedied for a period of 10 Business Days
thereafter (it being understood that any amount distributed to Securityholders
in respect of the foregoing from funds provided by the Policy Provider, the
Liquidity Provider or a Cash Collateral Account shall not be deemed to cure such
Default) or (2) any other amount payable by it to the Holders under the
Indenture or any Operative Document when due, and such failure shall continue
for a period in excess of 10 Business Days after the Company has received
written notice from the Trustee of the failure to make such payment when due;
(b) failure by the Company to observe and perform in any material respect any
other covenant, agreement or obligation set forth in the Indenture or in any
other Operative Documents, with such failure continuing after notice and
specified cure periods; (c) any representation or warranty made by the Company
in the Indenture or any other Operative Document (1) shall prove to have been
untrue or inaccurate in any material respect as of the date made, (2) such
untrue or inaccurate representation or warranty is material at the time in
question and (3) the same shall remain uncured following notice; and (d) the
occurrence of certain events of bankruptcy, reorganization or insolvency of the
Company. Subject to certain limitations in the Indenture, if an Event of Default
occurs and is continuing, the Controlling Party may, by notice to Company and
the Trustee, and the Trustee shall, upon the request of the Controlling Party,
declare all unpaid principal of, accrued interest on, Premium, if any, and Break
Amount, if any, with respect to the Notes Outstanding and other amounts
otherwise payable under the Indenture, if any, to be due and payable
immediately. In the case of an Event of Default arising from certain events of
bankruptcy, reorganization or insolvency, such amounts shall automatically
become and be immediately due and payable without further action or notice.
Under certain circumstances, the Controlling Party by notice to the Trustee may
rescind an acceleration and its consequences.
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, interest on, or Premium, if any, or Break Amount, if any, with
respect to, the Notes or other amounts otherwise payable under the Indenture, if
any. Subject to the Indenture, so long as an Event of Default has occurred and
is continuing, the Controlling Party by notice to the Trustee may authorize the
Trustee to waive an existing Default or Event of Default and its consequences.
The Controlling Party may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee (as Trustee or Collateral
Agent, subject, in the case of any actions based on the status of the Trustee as
Collateral Agent, to any limitations otherwise expressly provided for in the
Operative Documents) or exercising any trust or power conferred on it; provided
that the Trustee may take any other action deemed proper by the Trustee which is
not inconsistent with such direction. Noteholders may not enforce the Indenture
or the Notes except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Notes. The
Trustee may withhold from Noteholders notice of any continuing default (except a
default in payment of principal, interest, Premium or Break Amount) if it
determines in good faith that withholding notice is in their interests. The
above description of Events of Default and remedies is qualified by reference,
and subject in its entirety to the more complete description thereof contained
in the Indenture.
11. NO RECOURSE AGAINST OTHERS. A director, officer, employee or
stockholder, as such, of the Company shall not have any personal liability for
any obligations of the Company under the Securities, the Subordinated
Securities, the Indenture or the other Operative Documents by reason of his or
her status as such director, officer, employee or stockholder. Each Subordinated
Securityholder by accepting a Subordinated Security waives and releases all such
liability. The waiver and release are part of the consideration for the issue of
the Subordinated Securities.
12. AUTHENTICATION. This Subordinated Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose until the
certificate of authentication attached hereto has been executed by the manual
signature of an authorized signatory of the Trustee or an authenticating agent
appointed by the Trustee.
13. UNCLAIMED MONEY. If money deposited with the Trustee or any Paying
Agent in trust for the payment of the principal of, interest on, or Premium, if
any, or Break Amount, if any, with respect to, any Subordinated Security and
unclaimed for two (2) years after such principal, interest, Premium, if any, or
Break Amount, if any, has become due and payable shall be paid to the Company on
its request, subject to any applicable abandoned property law, and the Holder of
such Subordinated Security shall thereafter, as an unsecured general creditor,
look only to the Company for payment thereof.
14. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
15. CUSIP NUMBERS. The Company in issuing this Subordinated Security may
use a "CUSIP" number (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
PROVIDED, HOWEVER, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Subordinated
Securities or as contained in any notice of a redemption and that reliance may
be placed only on the other identification numbers printed on the Subordinated
Securities, and any such redemption shall not be affected by any defect in or
omission of such numbers.
[16. REGISTRATION. The Holder of this Subordinated Security is entitled to
the benefits of the Subordinated Security Registration Rights Agreement. In the
event that no Registration Event (as defined in the Subordinated Security
Registration Rights Agreement) occurs on or prior to the 210th day after the
Subordinated Issuance Date, the Subordinated Debt Rate shall be increased by an
additional margin equal to 0.50%, from and including such 210th day to and
excluding the earlier of (i) the date on which a Registration Event occurs and
(ii) the date on which there ceases to be any Registrable Securities (as defined
in the Subordinated Security Registration Rights Agreement); or if the Shelf
Registration Statement (as defined in the Subordinated Security Registration
Rights Agreement) (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 Subordinated Security Registration Rights Agreement for more than
60 days, whether or not consecutive, during any 12-month period, the
Subordinated Debt Rate shall be increased by an additional margin equal to 0.50%
from and including the 61st day of the applicable 12-month period such Shelf
Registration Statement ceases to be effective to and excluding the date on which
the Shelf Registration Statement again becomes effective (or, if earlier, the
end of the period specified by Section 2(b)(B) of the Subordinated Security
Registration Rights Agreement); PROVIDED that the additional margin added to the
Subordinated Debt Rate pursuant to this section shall never exceed 0.50% at any
time.]*
[17. HOLDERS' COMPLIANCE WITH REGISTRATION RIGHTS AGREEMENT. Each Holder of
a Subordinated Security, by acceptance hereof, acknowledges and agrees to the
provisions of the Subordinated Security Registration Rights Agreement,
including, without limitation, the obligations of the Holders with respect to a
registration and the indemnification of the Company to the extent provided
therein.]*
18. GOVERNING LAW. THIS SUBORDINATED SECURITY SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
- -------------------------
* To be included only on each Initial Subordinated Security.
* To be included only on each Initial Subordinated Security.
The Company will furnish to any Holder of this Subordinated Security, upon
written request and without charge, a copy of the Indenture. Request may be made
to: Continental Airlines, Inc., 1600 Smith Street, Houston, Texas 77002,
Attention: Corporate Secretary.
IN WITNESS WHEREOF, the Company has caused this Subordinated Security to be
duly executed in its corporate name by its officers thereunto duly authorized on
the date hereof.
Dated: May ___, 2003
CONTINENTAL AIRLINES, INC.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
[FORM OF THE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Subordinated Securities referred
to in the Indenture.
WILMINGTON TRUST COMPANY,
not in its individual capacity
but solely as Trustee
By:
--------------------------------------
Authorized Officer
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 Subordinated Security and all rights thereunder, hereby irrevocably
constituting and appointing
- ----------------------------------
attorney to transfer said Subordinated Security on the books of the Registrar
with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL SUBORDINATED SECURITIES,
EXCEPT REGULATION S GLOBAL,
REGULATION S DEFINITIVE SUBORDINATED SECURITIES AND
EXCHANGE SUBORDINATED SECURITIES]
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
Subordinated Security or the last date on which this Subordinated Security was
held by Continental Airlines, Inc. or any affiliate of Continental Airlines,
Inc., the undersigned confirms that without utilizing any general solicitation
or general advertising that:
[CHECK ONE]
[__] (a) this Subordinated Security is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
OR
[__] (b) this Subordinated Security 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 Subordinated Security and the
Indenture.
If neither of the foregoing boxes is checked, the Registrar shall not be
obligated to register this Subordinated Security 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 2A.6 of the Indenture 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 Subordinated Security for its own account or an account with
respect to which it exercises sole investment discretion and that it
and any such account is a "qualified institutional buyer" within the
meaning of Rule 144A under the Securities Act of 1933, 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.
AMENDMENT NO. 1 TO
COLLATERAL MAINTENANCE AGREEMENT
AMENDMENT NO. 1, dated as of May 9, 2003 (this "AMENDMENT"), to Collateral
Maintenance Agreement, dated as of December 6, 2002 (the "AGREEMENT"), between
CONTINENTAL AIRLINES, INC., a Delaware corporation (the "COMPANY"), and MBIA
INSURANCE CORPORATION, a New York insurance company (the "POLICY PROVIDER").
Certain terms used herein have the defined meanings referred to in Section 1
hereof.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Notes due 2007 pursuant to the Original Indenture, the Company and
the Security Agent entered into the Agreement to set forth certain agreements
relating to the Spare Parts Collateral; and
WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Subordinated Notes due 2007 pursuant to the Indenture, the Company
has requested that the Agreement be amended to provide, among other things, for
certain matters with respect to such Subordinated Securities; and
WHEREAS, the Original Indenture, as amended and restated to provide for the
issuance of the Subordinated Securities, provides for the issuance of
$300,000,000 aggregate principal amount of the Notes.
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined or provided herein, terms
used herein that are defined in the Agreement, as amended by this Amendment,
have such respective defined meanings.
SECTION 2. AMENDMENTS. Effective as of the date hereof, the Agreement is
hereby amended as follows:
Section 2.1 CERTAIN REFERENCES TO SECURITIES. Each reference to
"Securities" in the first sentence of Section 2.1 and the first sentence of
Section 2.2 is deleted and replaced with "Notes".
Section 2.2 ANNUAL APPRAISAL. Section 2.1 is amended as follows:
(a) The second sentence of the second paragraph is amended to delete
the phrase "and the Rotable Ratio" and to replace it with the following: ",
the Subordinated Collateral Ratio, the Rotable Ratio and the Subordinated
Rotable Ratio".
(b) The second sentence of the second paragraph is further amended to
delete "and" before the phrase "the principal amount of the Securities
Outstanding" and to insert following such phrase the following: "and the
principal amount of the Subordinated Securities Outstanding".
Section 2.3 SEMIANNUAL APPRAISAL. Section 2.2 is amended as follows:
(a) The first sentence of the second paragraph is amended to delete
the phrase "and Minimum Rotable Ratio" and to replace it with the
following: ", the Maximum Subordinated Collateral Ratio, Minimum Rotable
Ratio and Minimum Subordinated Rotable Ratio".
(b) The second sentence of the second paragraph is amended to delete
the phrase "and the Rotable Ratio" in the two instances where such phrase
appears and to replace it with the following: ", the Subordinated
Collateral Ratio, the Rotable Ratio and the Subordinated Rotable Ratio".
(c) The second sentence of the second paragraph is further amended to
delete "and" before the phrase "the principal amount of the Securities
Outstanding" and to insert following such phrase the following: "and the
principal amount of the Subordinated Securities Outstanding".
Section 2.4 INFORMATION FROM THE TRUSTEE. Section 2.5 is amended to insert
in the second sentence after "Securities Outstanding" the following: ", the
principal amount of the Subordinated Securities Outstanding".
Section 2.5 COLLATERAL RATIO. Subsections (a) and (b) of Section 3.1 are
amended and restated to read in their entirety as follows:
"(a) If the Collateral Ratio, as most recently determined pursuant to
an Appraisal Compliance Report, is greater than the Maximum Collateral
Ratio or the Subordinated Collateral Ratio, as most recently determined
pursuant to an Appraisal Compliance Report, is greater than the Maximum
Subordinated Collateral Ratio, the Company shall within 90 days after the
date of the Appraisal Compliance Report setting forth the calculation of
such Collateral Ratio or Subordinated Collateral Ratio:
(i) subject additional Qualified Spare Parts (the "ADDITIONAL
PARTS") to the Lien of the Security Agreement in accordance with
Section 3.1(c);
(ii) grant a security interest to a Collateral Agent in other
property to secure the Obligations for the benefit of the Holders and
the Indemnitees, provided that the Company shall have received, with
respect to the use for purposes of this Section 3.1(a) of such
additional collateral and the applicable Collateral Agreement, (x)
approval of the Policy Provider and (y) Rating Agency Confirmation
with respect to the Securities and the Subordinated Securities;
(iii) provide additional cash and/or Investment Securities to the
Collateral Agent under the Security Agreement, provided that if the
Continental Cash Balance as of the applicable Valuation Date was less
than $600,000,000, then the amount of Cash Collateral included in the
Collateral, after giving effect to the action taken pursuant to
Sections 3.1(a) and 3.1(b) with respect to such Valuation Date, shall
not exceed $20,000,000;
(iv) deliver Notes to the Trustee for cancellation;
(v) redeem some or all of the Notes pursuant to Article 4 of the
Indenture; or
(vi) any combination of the foregoing;
such that, the Collateral Ratio and the Subordinated Collateral Ratio, as
recalculated giving effect to such action taken pursuant to this Section 3.1(a)
and, in the case of clauses (i), (ii) and (iii) of this Section 3.1(a), using
the Fair Market Value of any such additional Collateral determined pursuant to
Section 3.1(d) (but otherwise using the information used to determine the
Collateral Ratio and the Subordinated Collateral Ratio as most recently
determined pursuant to Article 2), would not be greater than the Maximum
Collateral Ratio or the Maximum Subordinated Collateral Ratio, respectively.
(b) If the Rotable Ratio, as most recently determined pursuant to an
Appraisal Compliance Report, is less than the Minimum Rotable Ratio or the
Subordinated Rotable Ratio, as most recently determined pursuant to an Appraisal
Compliance Report, is less than the Minimum Subordinated Rotable Ratio, the
Company shall within 90 days after the date of the Appraisal Compliance Report
setting forth the calculation of such Rotable Ratio or Subordinated Rotable
Ratio:
(i) subject additional Rotables (the "ADDITIONAL ROTABLES") to
the Lien of the Security Agreement in accordance with Section 3.1(c);
(ii) provide additional cash and/or Investment Securities to the
Collateral Agent under the Security Agreement; PROVIDED that if the
Continental Cash Balance as of the applicable Valuation Date was less
than $600,000,000, then the amount of Cash Collateral included in the
Collateral, after giving effect to the action taken pursuant to
Sections 3.1(a) and 3.1(b) with respect to such Valuation Date, shall
not exceed $20,000,000;
(iii) deliver Notes to the Trustee for cancellation;
(iv) redeem some or all of the Notes pursuant to Article 4 of the
Indenture; or
(v) any combination of the foregoing.
such that, the Rotable Ratio and the Subordinated Rotable Ratio, as recalculated
giving effect to such action taken pursuant to this Section 3.1(b) and, in the
case of clauses (i) and (ii) of this Section 3.1(b), using the Fair Market Value
of any such additional Collateral determined pursuant to Section 3.1(d) (but
otherwise using the information used to determine the Rotable Ratio and the
Subordinated Rotable Ratio as most recently determined pursuant to Article 2),
would not be less than the Minimum Rotable Ratio or the Minimum Subordinated
Rotable Ratio, respectively."
Section 2.6 FLEET REDUCTION. Section 3.3 is amended to insert after the
first sentence the following:
"If at any time after the Subordinated Closing Date so long as any
Subordinated Securities are Outstanding the total number of Aircraft of any
Aircraft Model (as defined below) in the Company's in-service fleet during
any period of 60 consecutive days is less than the Specified Minimum (as
defined below) for such Aircraft Model (other than due to restrictions on
operating such Aircraft imposed by the FAA or any other instrumentality or
agency of the United States), then within 90 days after such occurrence the
Company shall redeem Subordinated Securities pursuant to Article 4 of the
Indenture or deliver Subordinated Securities to the Trustee for
cancellation, or a combination of the foregoing, in an aggregate principal
amount not less than the principal amount of the Subordinated Securities
Outstanding at the end of such 60 day period multiplied by a fraction, the
numerator of which shall be the Appraised Value of the Pledged Spare Parts
that are appropriate for incorporation in, installation on, attachment or
appurtenance to, or use in only Aircraft of such Aircraft Model or Engines
utilized only on such Aircraft, and the denominator of which shall be the
Appraised Value of the Collateral."
Section 2.7 BENEFITS OF AGREEMENT RESTRICTED. Section 4.1 is amended to
insert at the end of the first sentence the following:
", PROVIDED, FURTHER, that the Trustee on behalf of the Subordinated
Securityholders is an intended third-party beneficiary of the following
provisions of this Agreement (collectively, the "SUBORDINATED SECURITY
PROVISIONS"): (i) the requirement that appraisals of the Collateral be
obtained for purposes of determining the Maximum Subordinated Collateral
Ratio by the fifth Business Day of February and the fifth Business Day of
August in each year, commencing in August 2003; (ii) the requirement that
the Maximum Subordinated Collateral Ratio be complied with in connection
with such appraisals; (iii) the second sentence of Section 3.3; and (iv)
clause (z) of the proviso to Section 4.4 (it being understood that the
other provisions of this Agreement not expressly included within clauses
(i), (ii), (iii) and (iv) of this proviso, including without limitation
defined terms, are not Subordinated Security Provisions). Upon payment in
full of the Securities, the Policy Expenses and the Policy Provider
Obligations, if any Subordinated Securities are then Outstanding, Sections
3.4, 3.5, 3.6, 3.7 and 3.8 and Appendix IV, as then in effect, shall at
such time become Subordinated Security Provisions, except that each
reference therein to the Policy Provider shall be deemed changed to the
Trustee."
Section 2.8 AMENDMENTS. Section 4.4 is amended (i) to insert after
"PROVIDED that" the following: "(x)"; (ii) to insert after "as the case may be"
the following: "(y) the Subordinated Security Provisions may not be amended,
supplemented or waived by the Company and the Policy Provider but may be
amended, supplemented or waived by the Company and the Trustee, with the consent
of the Required Subordinated Holders and without the consent of the Policy
Provider and (z) if Section 3.2 is amended or supplemented, or compliance
therewith waived, any transaction entered into subsequent thereto that would not
be in compliance with the provisions of such sentence as in effect on the
Subordinated Closing Date shall not be permitted if the Subordinated Collateral
Ratio, as recalculated giving effect to such transaction but otherwise using the
information used to determine the Subordinated Collateral Ratio as most recently
determined pursuant to Article 2, would be greater than the Maximum Subordinated
Collateral Ratio."
Section 2.9 DEFINITIONS APPENDIX. Appendix I to the Agreement is amended by
deleting existing Appendix I and substituting therefor new Appendix I attached
as Appendix I hereto.
Section 2.10 APPRAISAL COMPLIANCE REPORT. Appendix II to the Agreement is
amended by deleting existing Appendix II and substituting therefor new Appendix
II attached as Appendix II hereto.
SECTION 3. CONSTRUCTION. All references in the Agreement to the "Agreement"
shall be deemed to refer to the Agreement as amended by this Amendment, and the
parties hereto confirm their respective obligations thereunder. The Agreement is
hereby ratified by the parties hereto and shall remain in all respects unchanged
(except as otherwise expressly specified in this Amendment) and in full force
and effect.
SECTION 4. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.
SECTION 5. COUNTERPARTS. This Amendment may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
[Remainder of this page is blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized, as of the
date and year first above written.
CONTINENTAL AIRLINES, INC.
By
---------------------------------------
Name:
Title:
MBIA INSURANCE CORPORATION
By
---------------------------------------
Name:
Title:
Appendix I
DEFINITIONS APPENDIX
SECTION 1. DEFINED TERMS.
"ACCELERATION" means, with respect to the amounts payable in respect of the
Notes issued under the Indenture, such amounts becoming immediately due and
payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.
"ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.
"ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral
Maintenance Agreement.
"ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral
Maintenance Agreement.
"ADVANCE" means any Advance as defined in the Liquidity Facility.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying
Agent.
"AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.
"AIRCRAFT" means any contrivance invented, used, or designed to navigate,
or fly in, the air.
"AMENDMENT NO. 1 TO COLLATERAL MAINTENANCE AGREEMENT" means Amendment No.
1, dated as of the Subordinated Issuance Date, to the Collateral Maintenance
Agreement.
"AMENDMENT NO. 1 TO REFERENCE AGENCY AGREEMENT" means Amendment No. 1,
dated as of the Subordinated Issuance Date, to the Reference Agency Agreement.
"AMENDMENT NO. 1 TO SECURITY AGREEMENT" means Amendment No. 1, dated as of
the Subordinated Issuance Date, to the Security Agreement.
"ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral, taking at least the following actions: (i)
reviewing the Parts Inventory Report
prepared as of the applicable Valuation Date; (ii) reviewing the Independent
Appraiser's internal value database for values applicable to Qualified Spare
Parts included in the Spare Parts Collateral; (iii) developing a representative
sampling of a reasonable number of the different Qualified Spare Parts included
in Spare Parts Collateral for which a market check will be conducted; (iv)
checking other sources, such as manufacturers, other airlines, U.S. government
procurement data and airline parts pooling price lists, for current market
prices of the sample parts referred to in clause (iii); (v) establishing an
assumed ratio of Serviceable Parts to Unserviceable Parts as of the applicable
Valuation Date based upon information provided by the Company and the
Independent Appraiser's limited physical review of the Spare Parts Collateral
referred to in the following clause (vi); (vi) visiting at least two locations
selected by the Independent Appraiser where the Pledged Spare Parts are kept by
the Company (neither of which was visited for purposes of the last appraisal
under Section 2.1 or 2.2 of the Collateral Maintenance Agreement, whichever was
most recent), PROVIDED that at least one such location shall be one of the top
three locations at which the Company keeps the largest number of Pledged Spare
Parts, to conduct a limited physical inspection of the Spare Parts Collateral;
(vii) conducting a limited review of the inventory reporting system applicable
to the Pledged Spare Parts, including checking information reported in such
system against information determined through physical inspection pursuant to
the preceding clause (vi) and (viii) reviewing a sampling of the Spare Parts
Documents (including tear-down reports).
"ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral
Maintenance Agreement.
"APPLIANCE" means an instrument, equipment, apparatus, a part, an
appurtenance, or an accessory used, capable of being used, or intended to be
used, in operating or controlling Aircraft in flight, including a parachute,
communication equipment, and another mechanism installed in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.
"APPLICABLE MARGIN" means 0.90%.
"APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.
"APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing
information relating to the calculation of the Collateral Ratio, the
Subordinated Collateral Ratio, Rotable Ratio and Subordinated Rotable Ratio,
which shall be substantially in the form of Appendix II to the Collateral
Maintenance Agreement.
"APPRAISED VALUE" means, with respect to any Collateral, the Fair Market
Value of such Collateral as most recently determined pursuant to (i) the report
attached as Appendix II to the Offering Memo or (ii) Article 2 and, if
applicable, Section 3.1 of the Collateral Maintenance Agreement.
"AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment
(as defined in the Liquidity Facility) on such date.
"AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
Section 101 ET SEQ.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of such board duly authorized to act in respect of any particular
matter.
"BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the Applicable Date pursuant to
the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below, is equal to or less than zero or (y) on or in respect of any Applicable
Date that is an Interest Payment Date (or, if such an Interest Payment Date is
not a Business Day, the next succeeding Business Day)
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum of (i) the
amount of the outstanding principal amount of such Note as of the first
day of the then applicable Interest Period plus (ii) interest payable
thereon during such entire Interest Period at then effective LIBOR.
Y = X, discounted to present value from the last day of the then applicable
Interest Period to the Applicable Date, using then effective LIBOR as
the discount rate.
Z = X, discounted to present value from the last day of the then applicable
Interest Period to the Applicable Date, using a rate equal to the
applicable London interbank offered rate for a period commencing on the
Applicable Date and ending on the last day of the then applicable
Interest Period, determined by the Reference Agent as of two Business
Days prior to the Applicable Date as the discount rate.
"BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank Eurodollar market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston, Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with respect to draws under any Policy, the city and state in which the
office of the Policy Provider at which notices, presentations, transmissions,
deliveries and communications are to be made under the Policy is located, and
that, solely with respect to draws under the Liquidity Facility, also is a
"Business Day" as defined in the Liquidity Facility.
"CAPPED INTEREST RATE" means a rate per annum equal to 12%.
"CASH COLLATERAL" means cash and/or Investment Securities deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.
"CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if
it shall so qualify, into which all amounts drawn under the Liquidity Facility
pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be
deposited.
"CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15).
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.
"CLOSING DATE" means the Issuance Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the Spare Parts Collateral and all other collateral in
which the Collateral Agent has a security interest pursuant to the Collateral
Agreements.
"COLLATERAL AGENT" means the Security Agent and each other Person acting as
agent on behalf of the Holders under any other Collateral Agreement.
"COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.
"COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance
Agreement, dated as of the Issuance Date, between the Company and the Policy
Provider.
"COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the
aggregate principal amount of all Securities Outstanding minus the sum of the
Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral), as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.
"COLLECTION ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.
"COMPANY" means the party named as such in the Indenture or any obligor on
the Notes until a successor replaces it pursuant to the Indenture and thereafter
means the successor.
"CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.
"CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.
"CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents that would have been shown on the balance sheet of Continental and
its consolidated subsidiaries prepared in accordance with GAAP as of any
Valuation Date, plus (b) the amount of marketable securities that would have
been reflected on such balance sheet which had, as of such Valuation Date, a
maturity of less than one year and which, but for their maturity, would have
qualified to be reflected on such balance sheet as cash equivalents.
"CONTROLLING PARTY" means the Person entitled to act as such pursuant to
the terms of Section 3.8 of the Indenture.
"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the
office of the Trustee at which at any particular time its corporate trust
business is administered and which, at the Closing Date, is located at
Wilmington Trust Company, as Trustee, Rodney Square North 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
"DEBT BALANCE" means 110% of the principal amount of the Outstanding Notes.
"DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period for the Securities, to 2.32% and, in the case of any subsequent Interest
Period, LIBOR for such Interest Period, as determined pursuant to the Reference
Agency Agreement, plus the Applicable Margin, PROVIDED that, solely in the event
no Registration Event (as defined in the Registration Rights Agreement) occurs
on or prior to the 210th day after the Closing Date, the Debt Rate shall be
increased by an additional margin equal to 0.50% per annum, from and including
such 210th day to and excluding the earlier of (i) the date on which such
Registration Event occurs and (ii) the date on which there ceases to be any
Registrable Securities (as defined in the Registration Rights Agreement)); or if
the Shelf Registration Statement (as defined in the Registration Rights
Agreement) (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 Debt Rate shall be increased by an
additional margin equal to 0.50% per annum from and including the 61st day of
the applicable 12-month period such Shelf Registration Statement ceases to be
effective to and excluding the date on which 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), PROVIDED that the
additional margin added to the Debt Rate pursuant to the preceding proviso shall
never exceed 0.50% at any time, PROVIDED FURTHER that, if a default in the
payment of interest on the Securities occurs and is continuing on any Interest
Payment Date, then the Debt Rate applicable to the Interest Period ending on
such Interest Payment Date shall not exceed the Capped Interest Rate, except
that for purposes of any payment made by the Company intended to cure such
default, this proviso shall not apply.
"DEFAULT" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.
"DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.
"DEFINITIVE SUBORDINATED SECURITIES" is defined in Section 2A.1(e) of the
Indenture.
"DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged Spare Parts may be maintained by or
on behalf of the Company, which initially shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.
"DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a
Payment required to be paid to the Trustee for distribution on such Scheduled
Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time, except for a
defaulted payment of interest that is not paid within five days after the
Scheduled Payment Date therefor), (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv)
the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the
Policy Election Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the
Indenture and not for purposes of any other payment or distribution under the
Indenture, the date established for such payment in accordance with the Policy.
"DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.
"DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c)
of the Indenture.
"DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.
"DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension
Drawing or a Downgrade Drawing, as the case may be.
"DTC" means The Depository Trust Company, its nominees and their respective
successors.
"ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.
"ELIGIBLE ACCOUNT" means an account established by and with an Eligible
Institution at the request of the Security Agent, which institution agrees, for
all purposes of the New York UCC including Article 8 thereof, that (a) such
account shall be a "securities account" (as defined in Section 8-501 of the New
York UCC), (b) such institution is a "securities intermediary" (as defined in
Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash)
credited to such account shall be treated as a "financial asset" (as defined in
Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the
"entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in
respect of such account, (e) it will comply with all entitlement orders issued
by the Security Agent to the exclusion of the Company, (f) it will waive or
subordinate in favor of the Security Agent all claims (including without
limitation, claims by way of security interest, lien or right of set-off or
right of recoupment), and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository institution has a long-term unsecured debt rating or issuer
credit rating, as the case may be, from Moody's of at least A-3 or its
equivalent. An Eligible Deposit Account may be maintained with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution; provided
that such Liquidity Provider shall have waived all rights of set-off and
counterclaim with respect to such account.
"ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any U.S. branch of a
foreign bank), which has a long-term unsecured debt rating or issuer credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.
"ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or
guaranteed by, the U.S. Government having maturities no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any state thereof with a short-term unsecured debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having maturities no later than 90 days following the
date of such investment or (c) investments in negotiable certificates of
deposit, time deposits, banker's acceptances, commercial paper or other direct
obligations of, or obligations guaranteed by, commercial banks organized under
the laws of the United States or of any political subdivision thereof (or any
U.S. branch of a foreign bank) with a short-term unsecured debt rating by
Moody's of at least P-1 and a short-term issuer credit rating by Standard &
Poor's of at least A-1, having maturities no later than 90 days following the
date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments
that are bank obligations shall be denominated in U.S. dollars; and (y) the
aggregate amount of Eligible Investments at any one time that are bank
obligations issued by any one bank shall not be in excess of 5% of such bank's
capital surplus; PROVIDED FURTHER that any investment of the types described in
clauses (a), (b) and (c) above may be made through a repurchase agreement in
commercially reasonable form with a bank or other financial institution
qualifying as an Eligible Institution so long as such investment is held by a
third party custodian also qualifying as an Eligible Institution; PROVIDED
FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code. Notwithstanding the
foregoing, no investment of the types described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates, and no investment
in the obligations of any one bank in excess of $10,000,000, shall be an
Eligible Investment unless written approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.
"ENGINE" means an engine used, or intended to be used, to propel an
Aircraft, including a part, appurtenance, and accessory of the Engine, except a
Propeller.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time
"EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear
System.
"EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.
"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of
the use thereof due to destruction, damage beyond repair or rendition of any of
the Pledged Spare Parts permanently unfit for normal use for any reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged Spare Parts which results in the receipt of
insurance proceeds with respect to such Pledged Spare Parts on the basis of an
actual or constructive loss; or (iii) the loss of possession of any of the
Pledged Spare Parts by the Company for ninety (90) consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section
2.1(a) of the Indenture.
"EXCHANGE FLOATING RATE SECURED SUBORDINATED NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.
"EXCHANGE OFFER" means (i) with respect to the Securities, the exchange
offer which may be made pursuant to the Registration Rights Agreement to
exchange Initial Securities for Exchange Securities and (ii) with respect to the
Subordinated Securities, the exchange offer which may be made pursuant to the
Subordinated Security Registration Rights Agreement to exchange Initial
Subordinated Securities for Exchange Subordinated Securities.
"EXCHANGE OFFER REGISTRATION STATEMENT" means (i) with respect to the
Securities, 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 Securities for Exchange Securities and (ii) with respect to Subordinated
Securities, the registration statement that, pursuant to the Subordinated
Security Registration Rights Agreement, is filed by the Company with the SEC
with respect to the exchange of Initial Subordinated Securities for Exchange
Subordinated Securities.
"EXCHANGE SECURITIES" means the securities substantially in the form of
Exhibit A to the Indenture issued in exchange for the Initial Securities
pursuant to the Registration Rights Agreement and authenticated pursuant to the
Indenture.
"EXCHANGE SUBORDINATED SECURITIES" means the securities substantially in
the form of Exhibit D to the Indenture issued in exchange for the Initial
Subordinated Securities pursuant to the
Subordinated Security Registration Rights Agreement and authenticated pursuant
to the Indenture.
"EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.
"EXPENDABLES" means Qualified Spare Parts other than Rotables.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration or similar regulatory
authority established to replace it.
"FAA FILED DOCUMENTS" means the Security Agreement and Amendment No. 1 to
Security Agreement.
"FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider thereunder, presently located at 1585 Broadway, New
York, New York 10036, or such other office as such Liquidity Provider from time
to time shall notify the Trustee as its "Facility Office" under any such
Liquidity Facility; provided that such Liquidity Provider shall not change its
Facility Office to another Facility Office outside the United States of America
except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity
Facility.
"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market
value determined on the basis of a hypothetical sale negotiated in an arm's
length free market transaction between a willing and able seller and a willing
and able buyer, neither of whom is under undue pressure to complete the
transaction, under then current market conditions, provided that cash shall be
valued at its Dollar amount.
"FEDERAL AVIATION ACT" means Title 49 of the United States Code,
"Transportation", as amended from time to time, or any similar legislation of
the United States enacted in substitution or replacement thereof.
"FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial Liquidity Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.
"FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.
"FINAL LEGAL MATURITY DATE" means December 6, 2009.
"FINAL ORDER" has the meaning assigned to such term in the Policy.
"FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.
"FINANCING STATEMENTS" means, collectively, UCC-1 financing statements
covering the Spare Parts Collateral, by the Company, as debtor, showing the
Security Agent as secured party, for filing in Delaware, Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.
"GLOBAL EXCHANGE SUBORDINATED SECURITY" is defined in Section 2A.1(f) of
the Indenture.
"GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.
"GLOBAL SUBORDINATED SECURITIES" is defined in Section 2A.1(d) of the
Indenture.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Documents or relating
to the observance or performance of the obligations of any of the parties to the
Operative Documents.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Registrar's books.
"INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or additional trustee or security agent appointed pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.
"INDENTURE" means the Amended and Restated Indenture dated as of May 9,
2003, among the Company, the Trustee, the Liquidity Provider and the Policy
Provider under which the Notes are issued.
"INDENTURE DISCHARGE DATE" means the date of the termination of the
effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without
giving effect to Section 9.1(b) thereof).
"INDENTURE TRUSTEE" means the Trustee.
"INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other
Person (i) engaged in a business which includes appraising Aircraft and assets
related to the operation and maintenance of Aircraft from time to time and (ii)
who does not have any material financial interest in the Company and is not
connected with the Company or any of its Affiliates as an officer, director,
employee, promoter, underwriter, partner or person performing similar functions.
"INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an
Independent Appraiser and attached as Appendix II to the Offering Memo or
delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral
Maintenance Agreement.
"INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.
"INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.
"INITIAL FLOATING RATE SECURED SUBORDINATED NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.
"INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.
"INITIAL SECURITIES" mean the securities issued and authenticated pursuant
to the Indenture and substantially in the form of Exhibit A thereto, other than
the Exchange Securities.
"INITIAL SUBORDINATED SECURITIES" means the securities issued and
authenticated pursuant to the Indenture and substantially in the form of Exhibit
D thereto, other than the Exchange Subordinated Securities.
"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.
"INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.
"INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6
of each year so long as any Note is Outstanding (commencing March 6, 2003 in the
case of the Securities and June 6, 2003 in the case of the Subordinated
Securities), PROVIDED that if any such day is not a Business Day, then the
relevant Interest Payment Date shall be the next succeeding Business Day.
"INTEREST PERIOD" means (i) in the case of the first Interest Period, the
period commencing on (and including) the Closing Date (in the case of the
Securities) or the Subordinated Closing Date (in the case of the Subordinated
Securities) and ending on (but excluding) the first Interest Payment Date
following such date and (ii) in the case of each subsequent Interest Period, the
period commencing on (and including) the last day of the immediately preceding
Interest Period, and ending on (but excluding) the next Interest Payment Date.
"INVESTMENT EARNINGS" means investment earnings on funds on deposit in the
Trust Accounts net of losses and investment expenses of the Trustee in making
such investments.
"INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any
obligation which is a direct obligation of or guaranteed by any state of the
U.S. or any subdivision thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's; (c)
any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment instrument relying
upon the credit and backing of any bank or trust company which is a member of
the Federal Reserve System and which has a combined capital (including capital
reserves to the extent not included in capital) and surplus and undivided
profits of not less than $250,000,000 (including the Collateral Agent and its
Affiliates if such requirements as to Federal Reserve System membership and
combined capital and surplus and undivided profits are satisfied), including,
without limitation, certificates of deposit, time and other interest-bearing
deposits, bankers' acceptances, commercial paper, loan and mortgage
participation certificates and documented discount notes accompanied by
irrevocable letters of credit and money market fund investing solely in
securities backed by the full faith and credit of the United States; or (e)
repurchase agreements collateralized by any of the foregoing.
"ISSUANCE DATE" means the date of initial issuance of the Initial
Securities.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"LIBOR" has the meaning specified in the Reference Agency Agreement.
"LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.
"LIEN" means any mortgage, pledge, lease, security interest, encumbrance,
lien or charge of any kind affecting title to or any interest in property.
"LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the
Liquidity Facility.
"LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the
principal amount of any Drawings under the Liquidity Facility and (ii) any
interest accrued on any Liquidity Obligations.
"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
"LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date
of the Original Indenture, providing for the guarantee by the Liquidity
Guarantor of the obligations of the Liquidity Provider under the Liquidity
Facility.
"LIQUIDITY GUARANTOR" means Morgan Stanley.
"LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other
amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee
Letter.
"LIQUIDITY PROVIDER" means Morgan Stanley Capital Services Inc., together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the
Indenture.
"LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.
"LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Documents.
"MAXIMUM COLLATERAL RATIO" means 45%.
"MAXIMUM SUBORDINATED COLLATERAL RATIO" means 67.5%.
"MINIMUM ROTABLE RATIO" means 150%.
"MINIMUM SUBORDINATED ROTABLE RATIO" means 100%.
"MOODY'S" means Moody's Investors Service, Inc.
"MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MSCS" has the meaning specified in the first paragraph of the Indenture.
"NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.
"NONAPPRAISAL COMPLIANCE REPORT" means a report providing information
relating to compliance by the Company with Section 3.2 of the Collateral
Maintenance Agreement, which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.
"NON-CONTROLLING PARTY" means, at any time, the Securityholders, the
Subordinated Securityholders, the Liquidity Provider and the Policy Provider,
excluding whichever is the Controlling Party at such time.
"NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.
"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.
"NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.
"NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the
Indenture.
"NON-PERFORMING" means, with respect to any Security, a Payment Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy proceeding under the Bankruptcy Code in which the
Company is a debtor, any Payment Default existing at the commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy Code or as may apply for the cure of such Payment Default under
Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into
consideration until the expiration of the applicable period.
"NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.
"NON-U.S. PERSON" means any Person other than a U.S. person, as defined in
Regulation S.
"NOTES" means the Securities and the Subordinated Securities.
"NOTEHOLDER" means any holder of one or more Notes.
"NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the
Policy.
"NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined
in the Policy.
"OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.
"OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of
the Company relating to the offering of the Securities.
"OFFICER" means the Chairman of the Board, the President, any Vice
President of any grade, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.
"OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the
Collateral Maintenance Agreement and the Reference Agency Agreement.
"OPINION OF COUNSEL" means a written opinion from the General Counsel of
the Company, legal counsel to the Company or another legal counsel who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days following receipt) of, or its action on,
an opinion of counsel not specifically referred to above shall be sufficient
evidence that such counsel is acceptable to the Trustee.
"OUTSTANDING" or "OUTSTANDING" when used with respect to Notes or a Note,
means all Notes theretofore authenticated and delivered under the Indenture,
except:
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee in trust
for the Holders of such Notes, PROVIDED that, if such Notes are to be redeemed,
notice of such redemption has been duly given pursuant to the Indenture or
provision therefor satisfactory to the Trustee has been made;
(c) Notes for which payment has been deposited with the Trustee or any
Paying Agent in trust pursuant to Article 9 of the Indenture (except to the
extent provided therein); and
(d) Notes which have been paid, or for which other Notes shall have
been authenticated and delivered in lieu thereof or in substitution therefor
pursuant to the terms of Section 2.12 of the Indenture, unless proof
satisfactory to the Trustee is presented that any such Notes are held by bona
fide purchasers in whose hands the Notes are valid obligations of the Company.
A Note does not cease to be Outstanding because the Company or one of its
Affiliates holds the Note; PROVIDED, HOWEVER, that in determining whether the
Holders of the requisite aggregate principal amount of Notes Outstanding have
given any request, demand, authorization, direction, notice, consent or waiver
under the Indenture or any other Operative Document, Section 2.13 of the
Indenture shall be applicable.
"ORIGINAL INDENTURE" has the meaning set forth in the introductory
paragraph of the Indenture.
"OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.
"OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on any
Notes which is not in fact received by the Trustee (whether from the Company,
the Liquidity Provider, the Policy Provider or otherwise) on or within five days
after the Scheduled Payment Date relating thereto and which is not subsequently
paid in connection with the redemption or final maturity of a Note.
"PARTS INVENTORY REPORT" means, as of any date, a list identifying the
Pledged Spare Parts by manufacturer's part number and brief description and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.
"PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.
"PAYMENT" means (i) any payment of principal of, interest on, or Premium,
if any, or Break Amount, if any, with respect to the Notes from the Company,
(ii) any payment of interest on the Securities with funds drawn under the
Liquidity Facility or from a Cash Collateral Account or (iii) any payment of
interest on or principal of Securities with funds drawn under the Policy, or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.
"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the
Indenture.
"PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the
maximum rate permitted by applicable law.
"PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance
Agreement.
"PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the
Collateral Maintenance Agreement.
"PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents; (b) Liens attributable to Security Agent (both in its capacity as
Security Agent and in its individual capacity); (c) the rights of others under
agreements or arrangements to the extent expressly permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being contested in good faith by appropriate proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged Spare Parts or the interest of Security Agent therein or
impair the Lien of the Security Agreement; (e) materialmen's, mechanics',
workers', repairers', employees' or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for more than 60 days or is being contested in good faith by appropriate
proceedings, so long as such Liens and such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award against the Company, so long as
such judgment shall, within 60 days after the entry thereof, have been
discharged or vacated, or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result, or
any such judgment or award does not involve, any material risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent
therein or any impairment of the Lien of the Security Agreement; (g) any other
Lien with respect to which the Company shall have provided a bond, cash
collateral or other security adequate in the reasonable opinion of Security
Agent.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, trustee,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.
"POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance
Policy No. 39753, issued as of the Closing Date, as amended, supplemented or
otherwise modified from time to time in accordance with its respective terms.
"POLICY ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.
"POLICY DRAWING" means any payment of a claim under the Policy.
"POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the
Indenture.
"POLICY EXPENSES" means all amounts (including amounts in respect of
premiums, fees, expenses or indemnities) due to the Policy Provider under the
Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest
accrued on any Policy Provider Obligations, and (iii) reimbursement of and
interest on the Liquidity Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider; provided that if, at the time
of determination, a Policy Provider Default exists, Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.
"POLICY FEE LETTER" means the fee letter, dated as of the Closing Date,
from the Policy Provider to the Company and acknowledged by the Trustee, setting
forth the fees and premiums payable with respect to the Policy.
"POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance
company, and its successors and permitted assigns.
"POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement
dated as of the Closing Date, among the Trustee, the Company and the Policy
Provider, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of Written Notice of such failure to the
Policy Provider or (b) the Policy Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is
final and nonappealable, or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Policy Provider (or taking of possession of
all or any material portion of the Policy Provider's property).
"POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.
"POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity Facility in an amount equal to the amount of interest that would have
accrued on such Interest Drawing if such Interest Drawing had been made in
accordance with Section 2.02(e) of the Liquidity Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.
"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts,
including, without limitation, fees and indemnities (to the extent not included
in Policy Expenses), due to the Policy Provider under the Policy Provider
Agreement but shall not include any interest on Policy Drawings other than
Policy Provider Interest Obligations.
"PREMIUM" means, with respect to any Note redeemed pursuant to Article 4 of
the Indenture, the following percentage of the principal amount of such Note:
(a) with respect to a Security, (i) if redeemed before the first anniversary of
the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and
before the second anniversary of the Issuance Date, 1.0%; and (iii) if redeemed
on or after such second anniversary and before the third anniversary of the
Issuance Date, 0.5%; and (b) with respect to a Subordinated Security, (i) if
redeemed before the second anniversary of the Subordinated Issuance Date, 3.0%;
(ii) if redeemed on or after such second anniversary and before the third
anniversary of the Subordinated Issuance Date, 2.0%; and (iii) if redeemed on or
after such third anniversary and before the fourth anniversary of the
Subordinated Issuance Date, 1.0%; PROVIDED that no Premium shall be payable in
connection with a redemption made by the Company to satisfy the Maximum
Collateral Ratio, Maximum Subordinated Collateral Ratio, Minimum Rotable Ratio
or Minimum Subordinated Rotable Ratio requirement pursuant to Section 3.1 of the
Collateral Maintenance Agreement.
"PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the
Liquidity Facility on such Distribution Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.
"PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the
Indenture.
"PROPELLER" includes a part, appurtenance, and accessory of a propeller.
"PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the
Indenture.
"PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.
"QIB" means a qualified institutional buyer as defined in Rule 144A.
"QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.
"RATING AGENCIES" means, collectively, at any time, and with respect to a
Series of Notes, each nationally recognized rating agency which shall have been
requested by the Company to rate such Series of Notes and which shall then be
rating such Series of Notes. The initial Rating Agency will be Moody's, in the
case of the Securities, and Moody's and Standard & Poor's, in the case of the
Subordinated Securities.
"RATINGS CONFIRMATION" means, with respect to any action proposed to be
taken, a written confirmation from each of the Rating Agencies with respect to
the applicable Series of Notes that such action would not result in (i) a
reduction of the rating for such Series of Notes below the then current rating
for such Series of Notes (such rating, in the case of the Securities, as
determined without regard to the Policy) or (ii) a withdrawal or suspension of
the rating of such Series of Notes.
"RECORD DATE" means the fifteenth (15th) day preceding any Scheduled
Interest Payment Date, whether or not a Business Day.
"REDEMPTION DATE", when used with respect to any Note to be redeemed, means
the date fixed for such redemption by or pursuant to the Indenture and such
Note.
"REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.
"REGISTER" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of December 6, 2002, by and between the Company and the Initial
Purchaser.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"REGULATION S DEFINITIVE SUBORDINATED SECURITIES" is defined in Section
2A.1(e) of the Indenture.
"REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the
Indenture.
"REGULATION S GLOBAL SUBORDINATED SECURITY" is defined in Section 2A.1(d)
of the Indenture.
"RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.
"REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit
agreement (or agreements) 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 with respect to
the Securities to confirm in writing their respective ratings then in effect for
the Securities (before downgrading of such ratings, if any, as a result of the
downgrading of the Liquidity Provider), and be consented to by the Policy
Provider, which consent shall not be unreasonably withheld or delayed, in a face
amount (or in an aggregate face amount) equal to the amount of interest payable
on the Securities (at the Capped Interest Rate, and without regard to expected
future principal payments) on the eight Interest Payment Dates following the
date of replacement of such Liquidity Facility (or if such date is an Interest
Payment Date, on such day and the seven Interest Payment Dates following the
date of replacement of such Liquidity Facility) and issued by a Person (or
Persons) having unsecured short-term debt rating or issuer credit rating, as the
case may be, issued by Moody's and Standard & Poor's which are equal to or
higher than the Threshold Rating. Without limitation of the form that a
Replacement Liquidity Facility otherwise may have pursuant to the preceding
sentence, a Replacement Liquidity Facility for the Securities may have a stated
expiration date earlier than 15 days after the Final Legal Maturity Date so long
as such Replacement Liquidity Facility provides for a Non-Extension Drawing as
contemplated by Section 3.5(d) of the Indenture.
"REQUEST" means a written request for the action therein specified signed
on behalf of the Company by any Officer and delivered to the Trustee. Each
Request shall be accompanied by an Officers' Certificate if and to the extent
required by Section 12.4 of the Indenture.
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of
interest, calculated at the Capped Interest Rate, that would be payable on the
Securities on each of the eight successive Interest Payment Dates immediately
following such day or, if such day is an Interest Payment Date, on such day and
the succeeding seven Interest Payment Dates, in each case calculated on the
basis of the outstanding principal amount of the Securities on such date and
without regard to expected future payments of principal on the Securities.
"REQUIRED HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.
"REQUIRED SUBORDINATED HOLDERS" means from time to time the holders of more
than 50% in aggregate unpaid principal amount of the Subordinated Securities
then Outstanding.
"RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the corporate trust administration department of the Trustee or any other
officer customarily performing functions similar to those performed by the
Persons who at the time shall be such officers or to whom any corporate trust
matter is referred because of his or her knowledge of and familiarity with a
particular subject, (ii) with respect to the Liquidity Provider, any authorized
officer of the Liquidity Provider, and (iii) with respect to the Policy
Provider, any authorized officer of the Policy Provider.
"RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"RESTRICTED DEFINITIVE SUBORDINATED SECURITIES" is defined in Section
2A.1(e) of the Indenture.
"RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.
"RESTRICTED GLOBAL SUBORDINATED SECURITY" is defined in Section 2A.1(c) of
the Indenture.
"RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.
"RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture for
purposes of the Securities and in Section 2A.1(d) for purposes of the
Subordinated Securities.
"RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.
"RESTRICTED SUBORDINATED SECURITIES" are defined in Section 2A.2 of the
Indenture.
"ROTABLE" means a Qualified Spare Part that wears over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which it relates.
"ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market Value of the Rotables, as set forth in the most recent Independent
Appraiser's Certificate delivered by the Company pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities Outstanding minus the sum of the Cash Collateral held
by the Collateral Agent.
"RULE 144A" means Rule 144A under the Securities Act.
"SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.
"SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable thereto, (ii) with respect to any payment
of defaulted interest, the payment date established pursuant to Section 2.16,
(iii) with respect to amounts due on the redemption of any Note, the Redemption
Date applicable thereto, and (iv) with respect to the final maturity of the
Notes, December 6, 2007.
"SEC" means the Securities and Exchange Commission and any government
agency succeeding to its functions.
"SECTION 1110" means Section 1110 of the Bankruptcy Code.
"SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified
in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period, if any, commencing with the trustee or debtor-in-possession in such
proceeding agreeing, with court approval, to perform its obligations under the
Operative Documents within such 60 days (or longer period as agreed) and
continuing until such time as such trustee or debtor-in-possession ceases to
fully perform its obligations thereunder with the result that the period during
which the Collateral Agent is prohibited from repossessing the collateral under
any Collateral Agreement comes to an end.
"SECURITIES" means the Initial Securities and the Exchange Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement until a successor replaces
it in accordance with the provisions of the Security Agreement and thereafter
means the successor.
"SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of
the Issuance Date between the Company and the Security Agent.
"SECURITYHOLDER" means any holder of one or more Securities.
"SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.
"SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral
Maintenance Agreement.
"SERIES" means each of the Securities and the Subordinated Securities,
considered as a separate class.
"SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation in, installation on, attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.
"SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be required to be filed by the Company with the SEC pursuant to (i) with
respect to Securities, the Registration Rights Agreement, other than an Exchange
Offer Registration Statement, and (ii) with respect to Subordinated Securities,
the Subordinated Securities Registration Rights Agreement, other than an
Exchange Offer Registration Statement.
"SPARE PART" means an accessory, appurtenance, or part of an Aircraft
(except an Engine or Propeller), Engine (except a Propeller), Propeller, or
Appliance, that is to be installed at a later time in an Aircraft, Engine,
Propeller or Appliance.
"SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the
Security Agreement.
"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.
"SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy
Event.
"SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the
Indenture.
"SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral
Maintenance Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.
"STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity
Facility).
"STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.
"SUBORDINATED APPLICABLE MARGIN" means 7.50%.
"SUBORDINATED CLOSING DATE" means the Subordinated Issuance Date.
"SUBORDINATED COLLATERAL RATIO" shall mean a percentage determined by
dividing (i) the aggregate principal amount of all Notes Outstanding minus the
sum of the Cash Collateral held by the Collateral Agent by (ii) the Fair Market
Value of all Collateral (excluding any Cash Collateral), as set forth in the
most recent Independent Appraiser's Certificate delivered by the Company
pursuant to Article 2 of the Collateral Maintenance Agreement, as supplemented
pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable.
"SUBORDINATED DEBT RATE" means a rate per annum equal, in the case of the
first Interest Period for the Subordinated Securities, to 8.78% and, in the case
of any subsequent Interest Period, LIBOR for such Interest Period, as determined
pursuant to the Reference Agency Agreement, plus the Subordinated Applicable
Margin, PROVIDED that, solely in the event no Registration Event (as defined in
the Subordinated Security Registration Rights Agreement) occurs on or prior to
the 210th day after the Subordinated Closing Date, the Subordinated Debt Rate
shall be increased by an additional margin equal to 0.50% per annum, from and
including such 210th day to and excluding the earlier of (i) the date on which
such Registration Event occurs and (ii) the date on which there ceases to be any
Registrable Securities (as defined in the Subordinated Security Registration
Rights Agreement)); or if the Shelf Registration Statement (as defined in the
Subordinated Security Registration Rights Agreement) (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 Subordinated Security
Registration Rights Agreement for more than 60 days, whether or not consecutive,
during any 12-month period, the Subordinated Debt Rate shall be increased by an
additional margin equal to 0.50% per annum from and including the 61st day of
the applicable 12-month period such Shelf Registration Statement ceases to be
effective to and excluding the date on which the Shelf Registration Statement
again becomes effective (or, if earlier, the end of the period specified by
Section 2(b)(B) of the Subordinated Security Registration Rights Agreement),
PROVIDED that the additional margin added to the Subordinated Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time.
"SUBORDINATED DOCUMENTS" means the Indenture, Amendment No. 1 to Collateral
Maintenance Agreement, Amendment No. 1 to Reference Agency Agreement and
Amendment No. 1 to Security Agreement.
"SUBORDINATED ISSUANCE DATE" means the date of initial issuance of the
Initial Subordinated Securities.
"SUBORDINATED PAYMENT DUE RATE" means (a) the Subordinated Debt Rate plus
2% or, if less, (b) the maximum rate permitted by applicable law.
"SUBORDINATED ROTABLE RATIO" shall mean a percentage determined by dividing
(i) the Fair Market Value of the Rotables, as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable, by (ii) the
aggregate principal amount of all Notes Outstanding minus the sum of the Cash
Collateral held by the Collateral Agent.
"SUBORDINATED SECURITIES" means the Initial Subordinated Securities and the
Exchange Subordinated Securities.
"SUBORDINATED SECURITY OFFERING MEMO" means the Offering Memorandum, dated
May 2, 2003 of the Company relating to the offering of the Subordinated
Securities.
"SUBORDINATED SECURITY PROVISIONS" is defined in Section 4.1 of the
Collateral Maintenance Agreement.
"SUBORDINATED SECURITY PURCHASE AGREEMENT" means the Purchase Agreement,
dated as of May 2, 2003, by and between the Initial Purchaser and the Company.
"SUBORDINATED SECURITY REGISTRATION RIGHTS AGREEMENT" means the
Registration Rights Agreement dated as of the Subordinated Issuance Date, by and
between the Company and the Initial Purchaser.
"SUBORDINATED SECURITYHOLDER" means any holder of one or more Subordinated
Securities.
"SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.
"SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security
Agreement substantially in the form of Exhibit A to the Security Agreement.
"SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy
Provider Agreement and the Fee Letters.
"TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs incurred or imposed with respect thereto) imposed or otherwise
assessed by the United States of America or by any state, local or foreign
government (or any subdivision or agency thereof) or other taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth and similar charges; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, taxes on goods and services, gains taxes, license, registration and
documentation fees, customs duties, tariffs, and similar charges.
"TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.
"THRESHOLD AMOUNT" means $2,000,000.
"THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by
Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial
Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply
to the Liquidity Guarantor.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is amended after such date, "TIA" means, to the extent
required by any such amendment, the TIA as so amended.
"TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.
"TRUST OFFICER" means any officer in the corporate trust department of the
Trustee, or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"TRUSTEE" means the party named as such in the Indenture until a successor
replaces it in accordance with the provisions of the Indenture and thereafter
means the successor Trustee and if, at any time, there is more than one Trustee,
"Trustee" as used with respect to the Notes of any Series shall mean the Trustee
with respect to the Notes of that Series.
"TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the
Indenture.
"TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral
Maintenance Agreement.
"TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility.
"UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable
Parts.
"U.S." or "UNITED STATES" means the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating certificate issued pursuant
to chapter 447 of title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the option of the issuer thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance
Agreement.
"WARRANTIES" is defined in clause (2) of Section 2.01 of the Security
Agreement.
"WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the
Policy Provider, a written instrument executed by the Designated Representative
of such Person. An invoice delivered by the Liquidity Provider pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing procedures
shall constitute Written Notice under such Section.
"WTC" has the meaning specified in the first paragraph of the Indenture.
SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the
following rules of construction shall apply for all purposes of the Operative
Documents (including this appendix) and of such agreements as may incorporate
this appendix by reference.
(a) In each Operative Document, unless otherwise expressly provided, a
reference to:
(i) each of the Company, the Trustee, the Collateral Agent, the Security
Agent or any other person includes, without prejudice to the
provisions of any Operative Document, any successor in interest to it
and any permitted transferee, permitted purchaser or permitted
assignee of it;
(ii) words importing the plural include the singular and words importing
the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule or
exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Document, that
agreement, instrument or document, or annex, schedule or exhibit, or
part, respectively, as amended, modified or supplemented from time to
time in accordance with its terms and in accordance with the
Operative Documents, and any agreement, instrument or document
entered into in substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as amended,
modified, supplemented, substituted, reissued or reenacted prior to
the Closing Date, and thereafter from time to time;
(v) the words "Agreement", "this Agreement", "hereby", "herein",
"hereto", "hereof" and "hereunder" and words of similar import when
used in any Operative Document refer to such Operative Document as a
whole and not to any particular provision of such Operative Document;
(vi) the words "including", "including, without limitation", "including,
but not limited to", and terms or phrases of similar import when used
in any Operative Document, with respect to any matter or thing, mean
including, without limitation, such matter or thing; and
(vii) a"Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule"
in any Operative Document, or in any annex thereto, is a reference to
a section of, or an exhibit, an annex, an appendix or a schedule to,
such Operative Document or such annex, respectively.
(b) Each exhibit, annex, appendix and schedule to each Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.
(c) Unless otherwise defined or specified in any Operative Document,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Document are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Document.
(e) For purposes of each Operative Document, the occurrence and
continuance of a Default or Event of Default referred to in Section 7.1(d), (e)
or (f) of the Indenture shall not be deemed to prohibit the Company from taking
any action or exercising any right that is conditioned on no Special Default,
Default or Event of Default having occurred and be continuing if such Special
Default, Default or Event of Default consists of the institution of
reorganization proceedings with respect to the Company under Chapter 11 of the
Bankruptcy Code and the trustee or debtor-in-possession in such proceedings
shall have agreed to perform its obligations under the Operative Documents with
the approval of the applicable court and thereafter shall have continued to
perform such obligations in accordance with Section 1110.
Appendix II to the
Collateral Maintenance Agreement
Address to Policy Provider and
to the Trustee]
APPRAISAL COMPLIANCE REPORT UNDER THE COLLATERAL
MAINTENANCE AGREEMENT
Ladies and Gentlemen:
We refer to the Collateral Maintenance Agreement, dated as of December 6,
2002, between Continental Airlines, Inc. (the "COMPANY") and MBIA Insurance
Corporation (as amended, the "AGREEMENT"). Terms defined in the Agreement and
used herein have such respective defined meanings. The Company hereby certifies
that:
1. This Compliance Report is accompanied by an Independent Appraiser's
Certificate (the "RELEVANT APPRAISAL") dated [___________]. The Valuation
Date for purposes of the Relevant Appraisal was [___________] (the
"RELEVANT VALUATION DATE").
2. The following sets forth the calculation of the Collateral Ratio as of the
Relevant Valuation Date:
a. The aggregate principal amount of all
Securities Outstanding as of the
Relevant Valuation Date $[_______]
b. The Fair Market Value of the Cash
Collateral as of the Relevant Valuation
Date $[_______]
c. The Fair Market Value of the Collateral
(excluding Cash Collateral) as of the
Relevant Valuation Date, as set forth in
the accompanying Independent Appraiser'
Certificate $[_______]
d. The Collateral Ratio
((a - b) / c) [_______]%
3. The following sets forth the calculation of the
Subordinated Collateral Ratio as of the Relevant
Valuation Date:
a. The aggregate principal amount of all
Notes Outstanding as of the Relevant
Valuation Date $[_______]
b. The Fair Market Value of the Cash
Collateral as of the Relevant Valuation
Date $[_______]
c. The Fair Market Value of the Collateral
(excluding Cash Collateral) as of the
Relevant Valuation Date, as set forth in
the accompanying Independent Appraiser's
Certificate $[_______]
d. The Subordinated Collateral
Ratio ((a - b) / c) [_______]%
4. The following sets forth the calculation of the Rotable
Ratio as of the Relevant Valuation Date:
a. The Fair Market Value of the Rotables as
of the Relevant Valuation Date, as set
forth in the accompanying Independent
Appraiser's Certificate $[_______]
b. The aggregate principal amount of all
Securities Outstanding as of the
Relevant Valuation Date $[_______]
c. The Fair Market Value of the Cash
Collateral as of the Relevant Valuation
Date $[_______]
d. The Rotable Ratio
(a / b - c) [_______]%
5. The following sets forth the calculation of the
Subordinated Rotable Ratio as of the Relevant Valuation
Date:
a. The Fair Market Value of the Rotables as
of the Relevant Valuation Date, as set
forth in the accompanying Independent
Appraiser's Certificate $[_______]
b. The aggregate principal amount of all
Notes Outstanding as of the Relevant
Valuation Date $[_______]
c. The Fair Market Value of the Cash
Collateral as of the Relevant Valuation
Date $[_______]
d. The Subordinated Rotable Ratio
(a / b - c) [_______]%
6. The Continental Cash Balance as of the Relevant
Valuation Date was $[___________].
Dated: [__________]
Very truly yours,
CONTINENTAL AIRLINES, INC.
By:
----------------------------------
Name:
Title:
AMENDMENT NO. 1 TO
SPARE PARTS SECURITY AGREEMENT
AMENDMENT NO. 1, dated as of May 9, 2003 (this "AMENDMENT"), to Spare Parts
Security Agreement, dated as of December 6, 2002 (the "SECURITY AGREEMENT"),
between WILMINGTON TRUST COMPANY, a Delaware banking corporation, as Security
Agent (the "SECURITY AGENT"), and CONTINENTAL AIRLINES, INC., a Delaware
corporation (the "COMPANY"). Certain terms used herein have the defined meanings
referred to in Section 1 hereof.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company is a certificated air carrier under Section 44705 of
title 49 of the United States Code; and
WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Notes due 2007 pursuant to the Original Indenture, the Company and
the Security Agent entered into the Security Agreement to secure, among other
things, the Company's obligations with respect to such Securities, and the
Security Agreement was recorded by the Federal Aviation Administration on
January 9, 2003 and was assigned Conveyance No. J001986; and
WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Subordinated Notes due 2007 pursuant to the Indenture, the Company
has requested that the Security Agreement be amended to secure, among other
things, the Company's obligations with respect to such Subordinated Securities;
and
WHEREAS, the Original Indenture, as amended and restated to provide for the
issuance of such Subordinated Securities, provides for the issuance of
$300,000,000 aggregate principal amount of the Notes; and
WHEREAS, the Controlling Party has given its written consent to this
Amendment and the Company has obtained Ratings Confirmation with respect to the
issuance of such Subordinated Securities.
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined or provided herein, terms
used herein that are defined in the Security Agreement, as amended by this
Amendment, have such respective defined meanings.
SECTION 2. AMENDMENTS. Effective as of the date hereof, the Security
Agreement is hereby amended as follows:
Section 2.1 CERTAIN REFERENCES TO SECURITIES. Each reference to
"Securities" in (a) the first sentence of Section 2.01, (b) Section 4.05, (c)
Section 6.01(e), (d) Section 6.03, (e) Section 6.04, (f) Section 7.03, (g)
Section 9.02, and (h) the second "Whereas" clause of Exhibit A, is deleted and
replaced with "Notes". The reference to "any one Security" in the third
paragraph of Section 2.01 (which paragraph begins with "TO HAVE AND TO HOLD") is
deleted and replaced with "any one Note".
Section 2.2 RELEASE OF CASH COLLATERAL. Section 7.03(b) is amended and
restated to read in its entirety as follows:
"(b) If the Collateral Ratio is less than the Maximum Collateral
Ratio, the Subordinated Collateral Ratio is less than the Maximum
Subordinated Collateral Ratio, the Rotable Ratio is greater than the
Minimum Rotable Ratio and the Subordinated Rotable Ratio is greater than
the Minimum Subordinated Rotable Ratio, in each case as most recently
determined pursuant to Article 2 or Section 3.1 of the Collateral
Maintenance Agreement, and the Security Agent held any Cash Collateral as
of the Valuation Date for such Collateral Ratio, Subordinated Collateral
Ratio, Rotable Ratio and Subordinated Rotable Ratio (or subsequent date as
of which such ratio was recalculated pursuant to Section 3.1 of the
Collateral Maintenance Agreement), upon written request of the Company the
Security Agent shall pay to the Company an amount of the Cash Collateral
such that the Collateral Ratio would not be greater than the Maximum
Collateral Ratio, the Subordinated Collateral Ratio would not be greater
than the Maximum Subordinated Collateral Ratio, the Rotable Ratio would not
be less than the Minimum Rotable Ratio and the Subordinated Rotable Ratio
would not be less than the Minimum Subordinated Rotable Ratio, giving
effect to such payment (but otherwise using the information used as of such
most recent determination date to determine such ratio)."
Section 2.3 SECURITY AGENT. Article 8 is amended and restated to read in
its entirety as follows:
"ARTICLE 8
SECURITY AGENT
SECTION 8.01 SECURITY AGENT. The Security Agent has been appointed
pursuant to the Indenture as Security Agent hereunder. The Security Agent
shall be obligated, and shall have the right, hereunder to make demands, to
give notices, to exercise or refrain from exercising any rights, and to
take or refrain from taking action (including, without limitation, the
release of Spare Parts Collateral) solely in accordance with this Security
Agreement and the Indenture. The Security Agent agrees to and shall have
the benefit of all provisions of the Indenture and the other Operative
Documents stated therein to be applicable to the Security Agent.
SECTION 8.02 REPLACEMENT OF SECURITY AGENT. (a) The Security Agent may
resign by so notifying the Company, the Trustee (if other than the Security
Agent), the Liquidity Provider and the Controlling Party in writing. The
Controlling Party may remove the Security Agent by so notifying the
Security Agent in writing and may appoint a successor Security Agent with
the Company's consent, which consent shall not be unreasonably refused or
delayed. The Company may remove the Security Agent if:
(i) the Security Agent fails to comply with Section 8.02(e);
(ii) the Security Agent is adjudged a bankrupt or an insolvent;
(iii) a receiver or other public officer takes charge of the
Security Agent or its property;
(iv) the Security Agent becomes incapable of acting; or
(v) no Default or Event of Default has occurred and is continuing
and the Company determines in good faith to remove the Security Agent.
(b) If the Security Agent resigns or is removed or if a vacancy exists
in the office of Security Agent for any reason, the Company shall promptly
appoint a successor Security Agent. Within one year after the successor
Security Agent takes office, the Controlling Party may appoint a successor
Security Agent to replace the successor Security Agent appointed by the
Company.
(c) A successor Security Agent shall deliver a written acceptance of
its appointment to the retiring Security Agent and to the Company.
Immediately after that, the resignation or removal of the retiring Security
Agent shall become effective, and the successor Security Agent shall
succeed to and become vested with all the rights, powers and duties of the
Security Agent under this Agreement. After any retiring Security Agent's
resignation or removal, the provisions of this Security Agreement shall
inure to its benefit as to any actions taken or omitted to be taken by it
under this Security Agreement while it was Security Agent.
(d) No resignation or removal of the Security Agent and no appointment
of a successor Security Agent, pursuant to this Section, shall become
effective until the acceptance of appointment by the successor Security
Agent under this Section. If a successor Security Agent does not take
office within sixty (60) days after the retiring Security Agent resigns or
is removed, the retiring Security Agent, the Company, the Liquidity
Provider, the Controlling Party or Holders of at least 10% in principal
amount of any series of Notes Outstanding may petition any court of
competent jurisdiction for the appointment of a successor Security Agent.
(e) The Security Agent shall have a combined capital and surplus of at
least $50,000,000, as set forth in its most recent, published annual report
of condition. The Security Agent shall satisfy and comply with any
applicable requirements of the TIA."
Section 2.4 DEFINITIONS APPENDIX. Appendix I to the Security Agreement is
amended by deleting existing Appendix I and substituting therefor new Appendix I
attached as Appendix I hereto.
Section 2.5 EXHIBITS. Exhibit A to the Security Agreement is amended by
inserting in the second parenthetical of the first "Whereas" clause before "the
Security Agreement" the following: "as amended by Amendment No. 1 to Spare Parts
Security Agreement,".
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Trustee, the Liquidity Provider, the Policy Provider and the
Security Agent as follows:
Section 3.1 ORGANIZATION; QUALIFICATION. The Company is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State
of Delaware and has the corporate power and authority to conduct the business in
which it is currently engaged and to own or hold under lease its properties and
to enter into and perform its obligations under the Subordinated Documents. The
Company is duly qualified to do business as a foreign corporation in good
standing in each jurisdiction in which the nature and extent of the business
conducted by it, or the ownership of its properties, requires such
qualification, except where the failure to be so qualified would not give rise
to a Material Adverse Change to the Company.
Section 3.2 CORPORATE AUTHORIZATION. The Company has taken, or caused to be
taken, all necessary corporate action (including, without limitation, the
obtaining of any consent or approval of stockholders required by its Certificate
of Incorporation or By-Laws) to authorize the execution and delivery of each of
the Subordinated Documents, and the performance of its obligations thereunder.
Section 3.3 NO VIOLATION. The execution and delivery by the Company of the
Subordinated Documents, the performance by the Company of its obligations
thereunder and the consummation by the Company on the Subordinated Closing Date
of the transactions contemplated thereby, do not and will not (a) violate any
provision of the Certificate of Incorporation or By-Laws of the Company, (b)
violate any Law applicable to or binding on the Company or (c) violate or
constitute any default under (other than any violation or default that would not
result in a Material Adverse Change to the Company), or result in the creation
of any Lien (other than as permitted under the Security Agreement) upon the
Pledged Spare Parts under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, lease, loan or other material agreement,
instrument or document to which the Company is a party or by which the Company
or any of its properties is bound.
Section 3.4 APPROVALS. The execution and delivery by the Company of the
Subordinated Documents, the performance by the Company of its obligations
thereunder and the consummation by the Company on the Subordinated Closing Date
of the transactions contemplated thereby do not and will not require the consent
or approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any debt of the Company and (b)
any Government Entity, other than the filing of (x) the FAA Filed Documents
(with the FAA) and the Financing Statements (and continuation statements
periodically) and (y) filings, recordings, notices or other ministerial actions
pursuant to any routine recording, contractual or regulatory requirements
applicable to it.
Section 3.5 VALID AND BINDING AGREEMENTS. The Subordinated Documents have
been duly authorized, executed and delivered by the Company and, assuming the
due authorization, execution and delivery thereof by the other party or parties
thereto, constitute the legal, valid and binding obligations of the Company and
are enforceable against the Company in accordance with the respective terms
thereof, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.
Section 3.6 REGISTRATION AND RECORDATION. Except for (a) the filing for
recordation (and recordation) of the FAA Filed Documents with the FAA, (b) the
filing of the Financing Statements (and continuation statements relating thereto
at periodic intervals), and (c) the deposit of the Initial Cash Collateral with,
and the holding and investment of the Initial Cash Collateral by, the Security
Agent in accordance with Article 7 of the Security Agreement, no further action,
including any filing or recording of any document (including any financing
statement in respect thereof under Article 9 of the UCC) is necessary in order
to establish and perfect the Security Agent's security interest in the Pledged
Spare Parts, the Warranties, the Spare Parts Documents and the Initial Cash
Collateral as against the Company and any other Person, in each case, in any
applicable jurisdictions in the United States.
Section 3.7 THE COMPANY'S LOCATION. The Company's location (as such term is
used in Section 9-307 of the UCC) is Delaware. The full and correct legal name
and mailing address of the Company are correctly set forth in Section 9.05 of
the Security Agreement.
Section 3.8 COMPLIANCE WITH LAWS. (a) The Company is a Citizen of the
United States and a U.S. Air Carrier.
(b) The Company holds all licenses, permits and franchises from the
appropriate Government Entities necessary to authorize the Company to lawfully
engage in air transportation and to carry on scheduled commercial passenger
service as currently conducted, except where the failure to so hold any such
license, permit or franchise would not give rise to a Material Adverse Change to
the Company.
(c) The Company is not an "investment company" or a company controlled by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 3.9 BROKER'S FEES. No Person acting on behalf of the Company is or
will be entitled to any broker's fee, commission or finder's fee in connection
with the transactions pursuant to the Subordinated Documents on the Subordinated
Closing Date, other than the fees and expenses payable by the Company in
connection with the sale of the Subordinated Securities.
Section 3.10 SECTION 1110. The Security Agent is entitled to the benefits
of Section 1110 (as currently in effect) with respect to the right to take
possession of the Pledged Spare Parts and to enforce any of its other rights or
remedies as provided in the Security Agreement in the event of a case under
Chapter 11 of the Bankruptcy Code in which the Company is a debtor.
SECTION 4. CONSTRUCTION. All references in the Security Agreement to the
"Security Agreement" shall be deemed to refer to the Security Agreement as
amended by this Amendment, and the parties hereto confirm their respective
obligations thereunder. The Security Agreement is hereby ratified by the parties
hereto and shall remain in all respects unchanged (except as expressly provided
in this Amendment) and in full force and effect.
SECTION 5. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.
SECTION 6. COUNTERPARTS. This Amendment may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
[Remainder of this page is blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized, as of the
date and year first above written.
CONTINENTAL AIRLINES, INC.
By
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY, as
Security Agent
By
---------------------------------------
Name:
Title:
Appendix I
DEFINITIONS APPENDIX
SECTION 1. DEFINED TERMS.
"ACCELERATION" means, with respect to the amounts payable in respect of the
Notes issued under the Indenture, such amounts becoming immediately due and
payable pursuant to Section 7.2 of the Indenture. "ACCELERATE", "ACCELERATED"
and "ACCELERATING" have meanings correlative to the foregoing.
"ACCRUED INTEREST" is defined in Section 3.6(a) of the Indenture.
"ADDITIONAL PARTS" is defined in Section 3.1(a)(i) of the Collateral
Maintenance Agreement.
"ADDITIONAL ROTABLES" is defined in Section 3.1(b)(i) of the Collateral
Maintenance Agreement.
"ADVANCE" means any Advance as defined in the Liquidity Facility.
"AFFILIATE" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"CONTROL" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"CONTROLLING" and "CONTROLLED" have meanings correlative to the foregoing.
"AGENT" means any Registrar, Paying Agent or co-Registrar or co-Paying
Agent.
"AGENT MEMBERS" is defined in Section 2.5(a) of the Indenture.
"AIRCRAFT" means any contrivance invented, used, or designed to navigate,
or fly in, the air.
"AMENDMENT NO. 1 TO COLLATERAL MAINTENANCE AGREEMENT" means Amendment No.
1, dated as of the Subordinated Issuance Date, to the Collateral Maintenance
Agreement.
"AMENDMENT NO. 1 TO REFERENCE AGENCY AGREEMENT" means Amendment No. 1,
dated as of the Subordinated Issuance Date, to the Reference Agency Agreement.
"AMENDMENT NO. 1 TO SECURITY AGREEMENT" means Amendment No. 1, dated as of
the Subordinated Issuance Date, to the Security Agreement.
"ANNUAL METHODOLOGY" means, in determining an opinion as to the Fair Market
Value of the Spare Parts Collateral, taking at least the following actions: (i)
reviewing the Parts Inventory Report
prepared as of the applicable Valuation Date; (ii) reviewing the Independent
Appraiser's internal value database for values applicable to Qualified Spare
Parts included in the Spare Parts Collateral; (iii) developing a representative
sampling of a reasonable number of the different Qualified Spare Parts included
in Spare Parts Collateral for which a market check will be conducted; (iv)
checking other sources, such as manufacturers, other airlines, U.S. government
procurement data and airline parts pooling price lists, for current market
prices of the sample parts referred to in clause (iii); (v) establishing an
assumed ratio of Serviceable Parts to Unserviceable Parts as of the applicable
Valuation Date based upon information provided by the Company and the
Independent Appraiser's limited physical review of the Spare Parts Collateral
referred to in the following clause (vi); (vi) visiting at least two locations
selected by the Independent Appraiser where the Pledged Spare Parts are kept by
the Company (neither of which was visited for purposes of the last appraisal
under Section 2.1 or 2.2 of the Collateral Maintenance Agreement, whichever was
most recent), PROVIDED that at least one such location shall be one of the top
three locations at which the Company keeps the largest number of Pledged Spare
Parts, to conduct a limited physical inspection of the Spare Parts Collateral;
(vii) conducting a limited review of the inventory reporting system applicable
to the Pledged Spare Parts, including checking information reported in such
system against information determined through physical inspection pursuant to
the preceding clause (vi) and (viii) reviewing a sampling of the Spare Parts
Documents (including tear-down reports).
"ANNUAL VALUATION DATE" is defined in Section 2.1 of the Collateral
Maintenance Agreement.
"APPLIANCE" means an instrument, equipment, apparatus, a part, an
appurtenance, or an accessory used, capable of being used, or intended to be
used, in operating or controlling Aircraft in flight, including a parachute,
communication equipment, and another mechanism installed in or attached to
Aircraft during flight, and not a part of an Aircraft, Engine, or Propeller.
"APPLICABLE MARGIN" means 0.90%.
"APPLICABLE PERIOD" is defined in Section 3.2 of the Collateral Maintenance
Agreement.
"APPRAISAL COMPLIANCE REPORT" means, as of any date, a report providing
information relating to the calculation of the Collateral Ratio, the
Subordinated Collateral Ratio, Rotable Ratio and Subordinated Rotable Ratio,
which shall be substantially in the form of Appendix II to the Collateral
Maintenance Agreement.
"APPRAISED VALUE" means, with respect to any Collateral, the Fair Market
Value of such Collateral as most recently determined pursuant to (i) the report
attached as Appendix II to the Offering Memo or (ii) Article 2 and, if
applicable, Section 3.1 of the Collateral Maintenance Agreement.
"AVAILABLE AMOUNT" means, as of any date, the Maximum Available Commitment
(as defined in the Liquidity Facility) on such date.
"AVOIDED PAYMENT" has the meaning assigned to such term in the Policy.
"BANKRUPTCY CODE" means the United States Bankruptcy Code, 11 U.S.C.
Section 101 ET SEQ.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
committee of such board duly authorized to act in respect of any particular
matter.
"BREAK AMOUNT" means, as of any date of payment, redemption or acceleration
of any Note (the "APPLICABLE DATE"), an amount determined by the Reference Agent
on the date that is two Business Days prior to the Applicable Date pursuant to
the formula set forth below; PROVIDED, HOWEVER, that no Break Amount will be
payable (x) if the Break Amount, as calculated pursuant to the formula set forth
below, is equal to or less than zero or (y) on or in respect of any Applicable
Date that is an Interest Payment Date (or, if such an Interest Payment Date is
not a Business Day, the next succeeding Business Day)
Break Amount = Z-Y
Where:
X = with respect to any applicable Interest Period, the sum of (i) the
amount of the outstanding principal amount of such Note as of the first
day of the then applicable Interest Period plus (ii) interest payable
thereon during such entire Interest Period at then effective LIBOR.
Y = X, discounted to present value from the last day of the then applicable
Interest Period to the Applicable Date, using then effective LIBOR as
the discount rate.
Z = X, discounted to present value from the last day of the then applicable
Interest Period to the Applicable Date, using a rate equal to the
applicable London interbank offered rate for a period commencing on the
Applicable Date and ending on the last day of the then applicable
Interest Period, determined by the Reference Agent as of two Business
Days prior to the Applicable Date as the discount rate.
"BUSINESS DAY" means any day that is a day for trading by and between banks
in the London interbank Eurodollar market and that is other than a Saturday or
Sunday or a day on which commercial banks are required or authorized to close in
Houston, Texas, New York, New York, or, so long as any Security is outstanding,
the city and state in which the Trustee maintains its Corporate Trust Office or,
solely with respect to draws under any Policy, the city and state in which the
office of the Policy Provider at which notices, presentations, transmissions,
deliveries and communications are to be made under the Policy is located, and
that, solely with respect to draws under the Liquidity Facility, also is a
"Business Day" as defined in the Liquidity Facility.
"CAPPED INTEREST RATE" means a rate per annum equal to 12%.
"CASH COLLATERAL" means cash and/or Investment Securities deposited or to
be deposited with the Collateral Agent or an Eligible Institution and subject to
the Lien of any Collateral Agreement.
"CASH COLLATERAL ACCOUNT" means an Eligible Deposit Account in the name of
the Trustee maintained at an Eligible Institution, which shall be the Trustee if
it shall so qualify, into which all amounts drawn under the Liquidity Facility
pursuant to Section 3.5(c), 3.5(d) or 3.5(i) of the Indenture shall be
deposited.
"CITIZEN OF THE UNITED STATES" is defined in 49 U.S.C.ss. 40102(a)(15).
"CLEARING AGENCY" means an organization registered as a "clearing agency"
pursuant to Section 17A of the Exchange Act.
"CLEARSTREAM" means Clearstream Banking societe anonyme, Luxembourg.
"CLOSING DATE" means the Issuance Date.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the Spare Parts Collateral and all other collateral in
which the Collateral Agent has a security interest pursuant to the Collateral
Agreements.
"COLLATERAL AGENT" means the Security Agent and each other Person acting as
agent on behalf of the Holders under any other Collateral Agreement.
"COLLATERAL AGREEMENT" means the Security Agreement and any agreement under
which a security interest has been granted pursuant to Section 3.1(a)(ii) of the
Collateral Maintenance Agreement.
"COLLATERAL MAINTENANCE AGREEMENT" means the Collateral Maintenance
Agreement, dated as of the Issuance Date, between the Company and the Policy
Provider.
"COLLATERAL RATIO" shall mean a percentage determined by dividing (i) the
aggregate principal amount of all Securities Outstanding minus the sum of the
Cash Collateral held by the Collateral Agent by (ii) the Fair Market Value of
all Collateral (excluding any Cash Collateral), as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable.
"COLLECTION ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13 of the Indenture which the Trustee shall make
deposits in and withdrawals from in accordance with the Indenture.
"COMPANY" means the party named as such in the Indenture or any obligor on
the Notes until a successor replaces it pursuant to the Indenture and thereafter
means the successor.
"CONSENT PERIOD" is defined in Section 3.5(d) of the Indenture.
"CONTINENTAL BANKRUPTCY EVENT" means the occurrence and continuation of an
Event of Default under Section 7.1(d), (e) or (f) of the Indenture.
"CONTINENTAL CASH BALANCE" means the sum of (a) the amount of cash and cash
equivalents that would have been shown on the balance sheet of Continental and
its consolidated subsidiaries prepared in accordance with GAAP as of any
Valuation Date, plus (b) the amount of marketable securities that would have
been reflected on such balance sheet which had, as of such Valuation Date, a
maturity of less than one year and which, but for their maturity, would have
qualified to be reflected on such balance sheet as cash equivalents.
"CONTROLLING PARTY" means the Person entitled to act as such pursuant to
the terms of Section 3.8 of the Indenture.
"CORPORATE TRUST OFFICE" when used with respect to the Trustee means the
office of the Trustee at which at any particular time its corporate trust
business is administered and which, at the Closing Date, is located at
Wilmington Trust Company, as Trustee, Rodney Square North 1100 North Market
Street, Wilmington, Delaware 19890, Attention: Corporate Trust Administration.
"DEBT BALANCE" means 110% of the principal amount of the Outstanding Notes.
"DEBT RATE" means a rate per annum equal, in the case of the first Interest
Period for the Securities, to 2.32% and, in the case of any subsequent Interest
Period, LIBOR for such Interest Period, as determined pursuant to the Reference
Agency Agreement, plus the Applicable Margin, PROVIDED that, solely in the event
no Registration Event (as defined in the Registration Rights Agreement) occurs
on or prior to the 210th day after the Closing Date, the Debt Rate shall be
increased by an additional margin equal to 0.50% per annum, from and including
such 210th day to and excluding the earlier of (i) the date on which such
Registration Event occurs and (ii) the date on which there ceases to be any
Registrable Securities (as defined in the Registration Rights Agreement)); or if
the Shelf Registration Statement (as defined in the Registration Rights
Agreement) (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 Debt Rate shall be increased by an
additional margin equal to 0.50% per annum from and including the 61st day of
the applicable 12-month period such Shelf Registration Statement ceases to be
effective to and excluding the date on which 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), PROVIDED that the
additional margin added to the Debt Rate pursuant to the preceding proviso shall
never exceed 0.50% at any time, PROVIDED FURTHER that, if a default in the
payment of interest on the Securities occurs and is continuing on any Interest
Payment Date, then the Debt Rate applicable to the Interest Period ending on
such Interest Payment Date shall not exceed the Capped Interest Rate, except
that for purposes of any payment made by the Company intended to cure such
default, this proviso shall not apply.
"DEFAULT" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default.
"DEFINITIONS APPENDIX" means the Definitions Appendix attached as Appendix
I to the Indenture and constituting a part of the Indenture.
"DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the Indenture.
"DEFINITIVE SUBORDINATED SECURITIES" is defined in Section 2A.1(e) of the
Indenture.
"DESIGNATED LOCATIONS" means the locations in the U.S. designated from time
to time by the Company at which the Pledged Spare Parts may be maintained by or
on behalf of the Company, which initially shall be the locations set forth on
Schedule 1 to the Security Agreement and shall include the additional locations
designated by the Company pursuant to Section 4.04(d) of the Security Agreement.
"DESIGNATED REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"DISTRIBUTION DATE" means (i) each Scheduled Payment Date (and, if a
Payment required to be paid to the Trustee for distribution on such Scheduled
Payment Date has not been so paid by 12:30 p.m., New York time, in whole or in
part, on such Scheduled Payment Date, the next Business Day on which the Trustee
receives some or all of such Payment by 12:30 p.m., New York time, except for a
defaulted payment of interest that is not paid within five days after the
Scheduled Payment Date therefor), (ii) each day established for payment by the
Trustee pursuant to Section 7.10, (iii) the Non-Performance Payment Date, (iv)
the Final Legal Maturity Date, (v) the Election Distribution Date, (vi) the
Policy Election Distribution Date, (vii) the date established as a Distribution
Date pursuant to Section 3.6(f) of the Indenture and (viii) solely for purposes
of payments to be made by the Policy Provider pursuant to Section 3.6(d) of the
Indenture and not for purposes of any other payment or distribution under the
Indenture, the date established for such payment in accordance with the Policy.
"DOWNGRADE DRAWING" is defined in Section 3.5(c) of the Indenture.
"DOWNGRADE EVENT" has the meaning assigned to such term in Section 3.5(c)
of the Indenture.
"DOWNGRADED FACILITY" is defined in Section 3.5(c) of the Indenture.
"DRAWING" means an Interest Drawing, a Final Drawing, a Non-Extension
Drawing or a Downgrade Drawing, as the case may be.
"DTC" means The Depository Trust Company, its nominees and their respective
successors.
"ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the Indenture.
"ELIGIBLE ACCOUNT" means an account established by and with an Eligible
Institution at the request of the Security Agent, which institution agrees, for
all purposes of the New York UCC including Article 8 thereof, that (a) such
account shall be a "securities account" (as defined in Section 8-501 of the New
York UCC), (b) such institution is a "securities intermediary" (as defined in
Section 8-102(a)(14) of the New York UCC), (c) all property (other than cash)
credited to such account shall be treated as a "financial asset" (as defined in
Section 8-102(9) of the New York UCC), (d) the Security Agent shall be the
"entitlement holder" (as defined in Section 8-102(7) of the New York UCC) in
respect of such account, (e) it will comply with all entitlement orders issued
by the Security Agent to the exclusion of the Company, (f) it will waive or
subordinate in favor of the Security Agent all claims (including without
limitation, claims by way of security interest, lien or right of set-off or
right of recoupment), and (g) the "securities intermediary jurisdiction" (under
Section 8-110(e) of the New York UCC) shall be the State of New York.
"ELIGIBLE DEPOSIT ACCOUNT" means either (a) a segregated account with an
Eligible Institution or (b) a segregated trust account with the corporate trust
department of a depository institution organized under the laws of the United
States of America or any one of the states thereof or the District of Columbia
(or any U.S. branch of a foreign bank), having corporate trust powers and acting
as trustee for funds deposited in such account, so long as any of the securities
of such depository institution has a long-term unsecured debt rating or issuer
credit rating, as the case may be, from Moody's of at least A-3 or its
equivalent. An Eligible Deposit Account may be maintained with the Liquidity
Provider so long as the Liquidity Provider is an Eligible Institution; provided
that such Liquidity Provider shall have waived all rights of set-off and
counterclaim with respect to such account.
"ELIGIBLE INSTITUTION" means (a) the Security Agent or (b) a depository
institution organized under the laws of the United States of America or any one
of the states thereof or the District of Columbia (or any U.S. branch of a
foreign bank), which has a long-term unsecured debt rating or issuer credit
rating, as the case may be, from Moody's of at least A-3 or its equivalent.
"ELIGIBLE INVESTMENTS" means (a) investments in obligations of, or
guaranteed by, the U.S. Government having maturities no later than 90 days
following the date of such investment, (b) investments in open market commercial
paper of any corporation incorporated under the laws of the United States of
America or any state thereof with a short-term unsecured debt rating issued by
Moody's of at least P-1 and a short-term issuer credit rating issued by Standard
& Poor's of at least A-1 having maturities no later than 90 days following the
date of such investment or (c) investments in negotiable certificates of
deposit, time deposits, banker's acceptances, commercial paper or other direct
obligations of, or obligations guaranteed by, commercial banks organized under
the laws of the United States or of any political subdivision thereof (or any
U.S. branch of a foreign bank) with a short-term unsecured debt rating by
Moody's of at least P-1 and a short-term issuer credit rating by Standard &
Poor's of at least A-1, having maturities no later than 90 days following the
date of such investment; PROVIDED, HOWEVER, that (x) all Eligible Investments
that are bank obligations shall be denominated in U.S. dollars; and (y) the
aggregate amount of Eligible Investments at any one time that are bank
obligations issued by any one bank shall not be in excess of 5% of such bank's
capital surplus; PROVIDED FURTHER that any investment of the types described in
clauses (a), (b) and (c) above may be made through a repurchase agreement in
commercially reasonable form with a bank or other financial institution
qualifying as an Eligible Institution so long as such investment is held by a
third party custodian also qualifying as an Eligible Institution; PROVIDED
FURTHER, HOWEVER, that in the case of any Eligible Investment issued by a
domestic branch of a foreign bank, the income from such investment shall be from
sources within the United States for purposes of the Code. Notwithstanding the
foregoing, no investment of the types described in clause (b) above which is
issued or guaranteed by the Company or any of its Affiliates, and no investment
in the obligations of any one bank in excess of $10,000,000, shall be an
Eligible Investment unless written approval has been obtained from the Policy
Provider and a Ratings Confirmation shall have been received with respect to the
making of such investment.
"ENGINE" means an engine used, or intended to be used, to propel an
Aircraft, including a part, appurtenance, and accessory of the Engine, except a
Propeller.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time
"EUROCLEAR" means Euroclear Bank S.A./N.V., as operator of the Euroclear
System.
"EVENT OF DEFAULT" is defined in Section 7.1 of the Indenture.
"EVENT OF LOSS" means (i) the loss of any of the Pledged Spare Parts or of
the use thereof due to destruction, damage beyond repair or rendition of any of
the Pledged Spare Parts permanently unfit for normal use for any reason
whatsoever (other than the use of Expendables in the Company's operations); (ii)
any damage to any of the Pledged Spare Parts which results in the receipt of
insurance proceeds with respect to such Pledged Spare Parts on the basis of an
actual or constructive loss; or (iii) the loss of possession of any of the
Pledged Spare Parts by the Company for ninety (90) consecutive days as a result
of the theft or disappearance of such Pledged Spare Parts.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time.
"EXCHANGE FLOATING RATE SECURED NOTES DUE 2007" is defined in Section
2.1(a) of the Indenture.
"EXCHANGE FLOATING RATE SECURED SUBORDINATED NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.
"EXCHANGE OFFER" means (i) with respect to the Securities, the exchange
offer which may be made pursuant to the Registration Rights Agreement to
exchange Initial Securities for Exchange Securities and (ii) with respect to the
Subordinated Securities, the exchange offer which may be made pursuant to the
Subordinated Security Registration Rights Agreement to exchange Initial
Subordinated Securities for Exchange Subordinated Securities.
"EXCHANGE OFFER REGISTRATION STATEMENT" means (i) with respect to the
Securities, 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 Securities for Exchange Securities and (ii) with respect to Subordinated
Securities, the registration statement that, pursuant to the Subordinated
Security Registration Rights Agreement, is filed by the Company with the SEC
with respect to the exchange of Initial Subordinated Securities for Exchange
Subordinated Securities.
"EXCHANGE SECURITIES" means the securities substantially in the form of
Exhibit A to the Indenture issued in exchange for the Initial Securities
pursuant to the Registration Rights Agreement and authenticated pursuant to the
Indenture.
"EXCHANGE SUBORDINATED SECURITIES" means the securities substantially in
the form of Exhibit D to the Indenture issued in exchange for the Initial
Subordinated Securities pursuant to the
Subordinated Security Registration Rights Agreement and authenticated pursuant
to the Indenture.
"EXCLUDED PARTS" means Spare Parts and Appliances held by the Company at a
location not a Designated Location.
"EXPENDABLES" means Qualified Spare Parts other than Rotables.
"EXPENSES" means any and all liabilities, obligations, losses, damages,
settlements, penalties, claims, actions, suits, costs, expenses and
disbursements (including, without limitation, reasonable fees and disbursements
of legal counsel, accountants, appraisers, inspectors or other professionals,
and costs of investigation).
"FAA" means the Federal Aviation Administration or similar regulatory
authority established to replace it.
"FAA FILED DOCUMENTS" means the Security Agreement and Amendment No. 1 to
Security Agreement.
"FACILITY OFFICE" means, with respect to any Liquidity Facility, the office
of the Liquidity Provider thereunder, presently located at 1585 Broadway, New
York, New York 10036, or such other office as such Liquidity Provider from time
to time shall notify the Trustee as its "Facility Office" under any such
Liquidity Facility; provided that such Liquidity Provider shall not change its
Facility Office to another Facility Office outside the United States of America
except in accordance with Sections 3.01, 3.02 or 3.03 of any such Liquidity
Facility.
"FAIR MARKET VALUE" means, with respect to any Collateral, its fair market
value determined on the basis of a hypothetical sale negotiated in an arm's
length free market transaction between a willing and able seller and a willing
and able buyer, neither of whom is under undue pressure to complete the
transaction, under then current market conditions, provided that cash shall be
valued at its Dollar amount.
"FEDERAL AVIATION ACT" means Title 49 of the United States Code,
"Transportation", as amended from time to time, or any similar legislation of
the United States enacted in substitution or replacement thereof.
"FEE LETTERS" means, collectively, (i) the Fee Letter dated as of the
Closing Date between the Trustee and the initial Liquidity Provider with respect
to the initial Liquidity Facility and (ii) any fee letter entered into between
the Trustee and any Replacement Liquidity Provider in respect of any Replacement
Liquidity Facility.
"FINAL DRAWING" is defined in Section 3.5(i) of the Indenture.
"FINAL LEGAL MATURITY DATE" means December 6, 2009.
"FINAL ORDER" has the meaning assigned to such term in the Policy.
"FINAL SCHEDULED PAYMENT DATE" means December 6, 2007.
"FINANCING STATEMENTS" means, collectively, UCC-1 financing statements
covering the Spare Parts Collateral, by the Company, as debtor, showing the
Security Agent as secured party, for filing in Delaware, Guam and each other
jurisdiction that, in the opinion of the Security Agent, is necessary to perfect
its Lien on the Spare Parts Collateral.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including those set forth in (i)
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants, (ii) statements and
pronouncements of the Financial Accounting Standards Board, (iii) such other
statements by such other entity as approved by a significant segment of the
accounting profession and (iv) the rules and regulations of the SEC governing
the inclusion of financial statements (including pro forma financial statements)
in periodic reports required to be filed pursuant to Section 13 of the Exchange
Act, including opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
"GLOBAL EXCHANGE SECURITY" is defined in Section 2.1(f) of the Indenture.
"GLOBAL EXCHANGE SUBORDINATED SECURITY" is defined in Section 2A.1(f) of
the Indenture.
"GLOBAL SECURITIES" is defined in Section 2.1(d) of the Indenture.
"GLOBAL SUBORDINATED SECURITIES" is defined in Section 2A.1(d) of the
Indenture.
"GOVERNMENT ENTITY" means (a) any federal, state, provincial or similar
government, and any body, board, department, commission, court, tribunal,
authority, agency or other instrumentality of any such government or otherwise
exercising any executive, legislative, judicial, administrative or regulatory
functions of such government or (b) any other government entity having
jurisdiction over any matter contemplated by the Operative Documents or relating
to the observance or performance of the obligations of any of the parties to the
Operative Documents.
"HOLDER" or "NOTEHOLDER" means the Person in whose name a Note is
registered on the Registrar's books.
"INDEMNITEE" means (i) WTC, the Trustee and the Collateral Agent, (ii) each
separate or additional trustee or security agent appointed pursuant to the
Indenture, (iii) each Liquidity Provider, (iv) the Policy Provider, and (v) each
of the respective directors, officers, employees, agents and servants of each of
the persons described in clauses (i) through (iv) inclusive above.
"INDENTURE" means the Amended and Restated Indenture dated as of May 9,
2003, among the Company, the Trustee, the Liquidity Provider and the Policy
Provider under which the Notes are issued.
"INDENTURE DISCHARGE DATE" means the date of the termination of the
effectiveness of the Indenture pursuant to Section 9.1(a) thereof (without
giving effect to Section 9.1(b) thereof).
"INDENTURE TRUSTEE" means the Trustee.
"INDEPENDENT APPRAISER" means Simat, Helliesen & Eichner, Inc. or any other
Person (i) engaged in a business which includes appraising Aircraft and assets
related to the operation and maintenance of Aircraft from time to time and (ii)
who does not have any material financial interest in the Company and is not
connected with the Company or any of its Affiliates as an officer, director,
employee, promoter, underwriter, partner or person performing similar functions.
"INDEPENDENT APPRAISER'S CERTIFICATE" means a certificate signed by an
Independent Appraiser and attached as Appendix II to the Offering Memo or
delivered thereafter pursuant to Article 2 or Section 3.1 of the Collateral
Maintenance Agreement.
"INITIAL CASH COLLATERAL" shall mean cash in the amount of $13,056,950.
"INITIAL FLOATING RATE SECURED NOTES DUE 2007" is defined in Section 2.1(a)
of the Indenture.
"INITIAL FLOATING RATE SECURED SUBORDINATED NOTES DUE 2007" is defined in
Section 2A.1(a) of the Indenture.
"INITIAL PURCHASER" means Morgan Stanley & Co. Incorporated.
"INITIAL SECURITIES" mean the securities issued and authenticated pursuant
to the Indenture and substantially in the form of Exhibit A thereto, other than
the Exchange Securities.
"INITIAL SUBORDINATED SECURITIES" means the securities issued and
authenticated pursuant to the Indenture and substantially in the form of Exhibit
D thereto, other than the Exchange Subordinated Securities.
"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.
"INTEREST DRAWING" is defined in Section 3.5(a) of the Indenture.
"INTEREST PAYMENT DATE" means March 6, June 6, September 6 and December 6
of each year so long as any Note is Outstanding (commencing March 6, 2003 in the
case of the Securities and June 6, 2003 in the case of the Subordinated
Securities), PROVIDED that if any such day is not a Business Day, then the
relevant Interest Payment Date shall be the next succeeding Business Day.
"INTEREST PERIOD" means (i) in the case of the first Interest Period, the
period commencing on (and including) the Closing Date (in the case of the
Securities) or the Subordinated Closing Date (in the case of the Subordinated
Securities) and ending on (but excluding) the first Interest Payment Date
following such date and (ii) in the case of each subsequent Interest Period, the
period commencing on (and including) the last day of the immediately preceding
Interest Period, and ending on (but excluding) the next Interest Payment Date.
"INVESTMENT EARNINGS" means investment earnings on funds on deposit in the
Trust Accounts net of losses and investment expenses of the Trustee in making
such investments.
"INVESTMENT SECURITY" means (a) any bond, note or other obligation which is
a direct obligation of or guaranteed by the U.S. or any agency thereof; (b) any
obligation which is a direct obligation of or guaranteed by any state of the
U.S. or any subdivision thereof or any agency of any such state or subdivision,
and which has the highest rating published by Moody's or Standard & Poor's; (c)
any commercial paper issued by a U.S. obligor and rated at least P-1 by Moody's
or A-1 by Standard & Poor's; (d) any money market investment instrument relying
upon the credit and backing of any bank or trust company which is a member of
the Federal Reserve System and which has a combined capital (including capital
reserves to the extent not included in capital) and surplus and undivided
profits of not less than $250,000,000 (including the Collateral Agent and its
Affiliates if such requirements as to Federal Reserve System membership and
combined capital and surplus and undivided profits are satisfied), including,
without limitation, certificates of deposit, time and other interest-bearing
deposits, bankers' acceptances, commercial paper, loan and mortgage
participation certificates and documented discount notes accompanied by
irrevocable letters of credit and money market fund investing solely in
securities backed by the full faith and credit of the United States; or (e)
repurchase agreements collateralized by any of the foregoing.
"ISSUANCE DATE" means the date of initial issuance of the Initial
Securities.
"LAW" means (a) any constitution, treaty, statute, law, decree, regulation,
order, rule or directive of any Government Entity, and (b) any judicial or
administrative interpretation or application of, or decision under, any of the
foregoing.
"LIBOR" has the meaning specified in the Reference Agency Agreement.
"LIBOR ADVANCE" has the meaning provided in the Liquidity Facility.
"LIEN" means any mortgage, pledge, lease, security interest, encumbrance,
lien or charge of any kind affecting title to or any interest in property.
"LIQUIDITY EVENT OF DEFAULT" has the meaning assigned to such term in the
Liquidity Facility.
"LIQUIDITY EXPENSES" means all Liquidity Obligations other than (i) the
principal amount of any Drawings under the Liquidity Facility and (ii) any
interest accrued on any Liquidity Obligations.
"LIQUIDITY FACILITY" means, initially, the Revolving Credit Agreement dated
as of the Issuance Date, between the Trustee and the initial Liquidity Provider,
and from and after the replacement of such Revolving Credit Agreement pursuant
hereto, the Replacement Liquidity Facility therefor, if any, in each case as
amended, supplemented or otherwise modified from time to time in accordance with
its terms.
"LIQUIDITY GUARANTEE" means the Guarantee Agreement, dated as of the date
of the Original Indenture, providing for the guarantee by the Liquidity
Guarantor of the obligations of the Liquidity Provider under the Liquidity
Facility.
"LIQUIDITY GUARANTOR" means Morgan Stanley.
"LIQUIDITY OBLIGATIONS" means all principal, interest, fees and other
amounts owing to the Liquidity Provider under the Liquidity Facility or the Fee
Letter.
"LIQUIDITY PROVIDER" means Morgan Stanley Capital Services Inc., together
with any Replacement Liquidity Provider which has issued a Replacement Liquidity
Facility to replace any Liquidity Facility pursuant to Section 3.5(e) of the
Indenture.
"LIQUIDITY PROVIDER REIMBURSEMENT DATE" is defined in Section 3.6(d) of the
Indenture.
"LOANS" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MATERIAL ADVERSE CHANGE" means, with respect to any person, any event,
condition or circumstance that materially and adversely affects such person's
business or consolidated financial condition, or its ability to observe or
perform its obligations, liabilities and agreements under the Operative
Documents.
"MAXIMUM COLLATERAL RATIO" means 45%.
"MAXIMUM SUBORDINATED COLLATERAL RATIO" means 67.5%.
"MINIMUM ROTABLE RATIO" means 150%.
"MINIMUM SUBORDINATED ROTABLE RATIO" means 100%.
"MOODY'S" means Moody's Investors Service, Inc.
"MOVES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"MSCS" has the meaning specified in the first paragraph of the Indenture.
"NEW YORK UCC" is defined in Section 1.01 of the Security Agreement.
"NONAPPRAISAL COMPLIANCE REPORT" means a report providing information
relating to compliance by the Company with Section 3.2 of the Collateral
Maintenance Agreement, which shall be substantially in the form of Appendix III
to the Collateral Maintenance Agreement.
"NON-CONTROLLING PARTY" means, at any time, the Securityholders, the
Subordinated Securityholders, the Liquidity Provider and the Policy Provider,
excluding whichever is the Controlling Party at such time.
"NON-EXTENDED FACILITY" is defined in Section 3.5(d) of the Indenture.
"NON-EXTENSION DRAWING" is defined in Section 3.5(d) of the Indenture.
"NON-PERFORMANCE DRAWING" is defined in Section 3.6(c) of the Indenture.
"NON-PERFORMANCE PAYMENT DATE" is defined in Section 3.6(c) of the
Indenture.
"NON-PERFORMING" means, with respect to any Security, a Payment Default
existing thereunder (without giving effect to any Acceleration); PROVIDED, that,
in the event of a bankruptcy proceeding under the Bankruptcy Code in which the
Company is a debtor, any Payment Default existing at the commencement of such
bankruptcy proceeding or during the 60-day period under Section 1110(a)(2)(A) of
the Bankruptcy Code (or such longer period as may apply under Section 1110(b) of
the Bankruptcy Code or as may apply for the cure of such Payment Default under
Section 1110(a)(2)(B) of the Bankruptcy Code) shall not be taken into
consideration until the expiration of the applicable period.
"NON-PERFORMING PERIOD" is defined in Section 3.6(c) of the Indenture.
"NON-U.S. PERSON" means any Person other than a U.S. person, as defined in
Regulation S.
"NOTES" means the Securities and the Subordinated Securities.
"NOTEHOLDER" means any holder of one or more Notes.
"NOTICE OF AVOIDED PAYMENT" has the meaning assigned to such term in the
Policy.
"NOTICE FOR PAYMENT" means a Notice of Nonpayment as such term is defined
in the Policy.
"OBLIGATIONS" is defined in Section 2.01 of the Security Agreement.
"OFFERING MEMO" means the Offering Memorandum, dated December 2, 2002, of
the Company relating to the offering of the Securities.
"OFFICER" means the Chairman of the Board, the President, any Vice
President of any grade, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, the Secretary, any Assistant Secretary or the Controller of
the Company.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers
satisfying the requirements of Sections 12.4 and 12.5 of the Indenture.
"OPERATIVE DOCUMENTS" means the Indenture, the Collateral Agreements, the
Collateral Maintenance Agreement and the Reference Agency Agreement.
"OPINION OF COUNSEL" means a written opinion from the General Counsel of
the Company, legal counsel to the Company or another legal counsel who is
reasonably acceptable to the Trustee, which Opinion of Counsel shall comply with
Sections 12.4 and 12.5 of the Indenture. The counsel may be an employee of the
Company. The acceptance by the Trustee (without written objection to the Company
during the fifteen (15) Business Days following receipt) of, or its action on,
an opinion of counsel not specifically referred to above shall be sufficient
evidence that such counsel is acceptable to the Trustee.
"OUTSTANDING" or "OUTSTANDING" when used with respect to Notes or a Note,
means all Notes theretofore authenticated and delivered under the Indenture,
except:
(a) Notes theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Notes, or portions thereof, for whose payment or redemption money
in the necessary amount has been theretofore deposited with the Trustee in trust
for the Holders of such Notes, PROVIDED that, if such Notes are to be redeemed,
notice of such redemption has been duly given pursuant to the Indenture or
provision therefor satisfactory to the Trustee has been made;
(c) Notes for which payment has been deposited with the Trustee or any
Paying Agent in trust pursuant to Article 9 of the Indenture (except to the
extent provided therein); and
(d) Notes which have been paid, or for which other Notes shall have
been authenticated and delivered in lieu thereof or in substitution therefor
pursuant to the terms of Section 2.12 of the Indenture, unless proof
satisfactory to the Trustee is presented that any such Notes are held by bona
fide purchasers in whose hands the Notes are valid obligations of the Company.
A Note does not cease to be Outstanding because the Company or one of its
Affiliates holds the Note; PROVIDED, HOWEVER, that in determining whether the
Holders of the requisite aggregate principal amount of Notes Outstanding have
given any request, demand, authorization, direction, notice, consent or waiver
under the Indenture or any other Operative Document, Section 2.13 of the
Indenture shall be applicable.
"ORIGINAL INDENTURE" has the meaning set forth in the introductory
paragraph of the Indenture.
"OUTSTANDING AMOUNT" is defined in Section 3.6(b) of the Indenture.
"OVERDUE SCHEDULED PAYMENT" means any Payment of accrued interest on any
Notes which is not in fact received by the Trustee (whether from the Company,
the Liquidity Provider, the Policy Provider or otherwise) on or within five days
after the Scheduled Payment Date relating thereto and which is not subsequently
paid in connection with the redemption or final maturity of a Note.
"PARTS INVENTORY REPORT" means, as of any date, a list identifying the
Pledged Spare Parts by manufacturer's part number and brief description and
stating the quantity of each such part included in the Pledged Spare Parts as of
such specified date.
"PAYING AGENT" has the meaning provided in Section 2.8 of the Indenture.
"PAYMENT" means (i) any payment of principal of, interest on, or Premium,
if any, or Break Amount, if any, with respect to the Notes from the Company,
(ii) any payment of interest on the Securities with funds drawn under the
Liquidity Facility or from a Cash Collateral Account or (iii) any payment of
interest on or principal of Securities with funds drawn under the Policy, or
(iv) any payment received or amount realized by the Trustee from the exercise of
remedies after the occurrence of an Event of Default.
"PAYMENT DEFAULT" means a Default referred to in Section 7.1(a) of the
Indenture.
"PAYMENT DUE RATE" means (a) the Debt Rate plus 2% or, if less, (b) the
maximum rate permitted by applicable law.
"PERMITTED DAYS" is defined in Section 2.1 of the Collateral Maintenance
Agreement.
"PERMITTED LESSEE" has the meaning provided in Section 3.6(b) of the
Collateral Maintenance Agreement.
"PERMITTED LIEN" means (a) the rights of Security Agent under the Operative
Documents; (b) Liens attributable to Security Agent (both in its capacity as
Security Agent and in its individual capacity); (c) the rights of others under
agreements or arrangements to the extent expressly permitted by the terms of
Section 3.6 of the Collateral Maintenance Agreement; (d) Liens for Taxes of the
Company (and its U.S. federal tax law consolidated group), either not yet due or
being contested in good faith by appropriate proceedings so long as such Liens
and such proceedings do not involve any material risk of the sale, forfeiture or
loss of the Pledged Spare Parts or the interest of Security Agent therein or
impair the Lien of the Security Agreement; (e) materialmen's, mechanics',
workers', repairers', employees' or other like Liens arising in the ordinary
course of business for amounts the payment of which is either not yet delinquent
for more than 60 days or is being contested in good faith by appropriate
proceedings, so long as such Liens and such proceedings do not involve any
material risk of the sale, forfeiture or loss of the Pledged Spare Parts or the
interest of Security Agent therein or impair the Lien of the Security Agreement;
(f) Liens arising out of any judgment or award against the Company, so long as
such judgment shall, within 60 days after the entry thereof, have been
discharged or vacated, or execution thereof stayed pending appeal or shall have
been discharged, vacated or reversed within 60 days after the expiration of such
stay, and so long as during any such 60 day period there is not as a result, or
any such judgment or award does not involve, any material risk of the sale,
forfeiture or loss of the Pledged Spare Parts or the interest of Security Agent
therein or any impairment of the Lien of the Security Agreement; (g) any other
Lien with respect to which the Company shall have provided a bond, cash
collateral or other security adequate in the reasonable opinion of Security
Agent.
"PERSON" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, trustee,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"PLEDGED SPARE PARTS" has the meaning set forth in clause (1) of the first
paragraph of Section 2.01 of the Security Agreement.
"POLICY" means MBIA Insurance Corporation Financial Guaranty Insurance
Policy No. 39753, issued as of the Closing Date, as amended, supplemented or
otherwise modified from time to time in accordance with its respective terms.
"POLICY ACCOUNT" means the Eligible Deposit Account established by the
Trustee pursuant to Section 8.13(a) of the Indenture which the Trustee shall
make deposits in and withdrawals from in accordance with the Indenture.
"POLICY DRAWING" means any payment of a claim under the Policy.
"POLICY ELECTION DISTRIBUTION DATE" is defined in Section 3.6(c) of the
Indenture.
"POLICY EXPENSES" means all amounts (including amounts in respect of
premiums, fees, expenses or indemnities) due to the Policy Provider under the
Policy Provider Agreement other than (i) any Policy Drawing, (ii) any interest
accrued on any Policy Provider Obligations, and (iii) reimbursement of and
interest on the Liquidity Obligations in respect of the Liquidity Facility paid
by the Policy Provider to the Liquidity Provider; provided that if, at the time
of determination, a Policy Provider Default exists, Policy Expenses shall not
include any indemnity payments owed to the Policy Provider.
"POLICY FEE LETTER" means the fee letter, dated as of the Closing Date,
from the Policy Provider to the Company and acknowledged by the Trustee, setting
forth the fees and premiums payable with respect to the Policy.
"POLICY PROVIDER" means MBIA Insurance Corporation, a New York insurance
company, and its successors and permitted assigns.
"POLICY PROVIDER AGREEMENT" means the Insurance and Indemnity Agreement
dated as of the Closing Date, among the Trustee, the Company and the Policy
Provider, as amended, supplemented or otherwise modified from time to time in
accordance with its terms.
"POLICY PROVIDER DEFAULT" shall mean the occurrence of any of the following
events: (a) the Policy Provider fails to make a payment required under the
Policy in accordance with its terms and such failure remains unremedied for two
Business Days following the delivery of Written Notice of such failure to the
Policy Provider or (b) the Policy Provider (i) files any petition or commences
any case or proceeding under any provisions of any federal or state law relating
to insolvency, bankruptcy, rehabilitation, liquidation or reorganization, (ii)
makes a general assignment for the benefit of its creditors or (iii) has an
order for relief entered against it under any federal or state law relating to
insolvency, bankruptcy, rehabilitation, liquidation or reorganization that is
final and nonappealable, or (c) a court of competent jurisdiction, the New York
Department of Insurance or another competent regulatory authority enters a final
and nonappealable order, judgment or decree (i) appointing a custodian, trustee,
agent or receiver for the Policy Provider or for all or any material portion of
its property or (ii) authorizing the taking of possession by a custodian,
trustee, agent or receiver of the Policy Provider (or taking of possession of
all or any material portion of the Policy Provider's property).
"POLICY PROVIDER ELECTION" is defined in Section 3.6(c) of the Indenture.
"POLICY PROVIDER INTEREST OBLIGATIONS" means any interest on any Policy
Drawing made to cover any shortfall attributable to any failure of the Liquidity
Provider to honor any Interest Drawing in accordance with Section 2.02(e) of the
Liquidity Facility in an amount equal to the amount of interest that would have
accrued on such Interest Drawing if such Interest Drawing had been made in
accordance with Section 2.02(e) of the Liquidity Facility at the interest rate
applicable to such Interest Drawing until such Policy Drawing has been repaid in
full.
"POLICY PROVIDER OBLIGATIONS" means all reimbursement and other amounts,
including, without limitation, fees and indemnities (to the extent not included
in Policy Expenses), due to the Policy Provider under the Policy Provider
Agreement but shall not include any interest on Policy Drawings other than
Policy Provider Interest Obligations.
"PREMIUM" means, with respect to any Note redeemed pursuant to Article 4 of
the Indenture, the following percentage of the principal amount of such Note:
(a) with respect to a Security, (i) if redeemed before the first anniversary of
the Issuance Date, 1.5%; (ii) if redeemed on or after such first anniversary and
before the second anniversary of the Issuance Date, 1.0%; and (iii) if redeemed
on or after such second anniversary and before the third anniversary of the
Issuance Date, 0.5%; and (b) with respect to a Subordinated Security, (i) if
redeemed before the second anniversary of the Subordinated Issuance Date, 3.0%;
(ii) if redeemed on or after such second anniversary and before the third
anniversary of the Subordinated Issuance Date, 2.0%; and (iii) if redeemed on or
after such third anniversary and before the fourth anniversary of the
Subordinated Issuance Date, 1.0%; PROVIDED that no Premium shall be payable in
connection with a redemption made by the Company to satisfy the Maximum
Collateral Ratio, Maximum Subordinated Collateral Ratio, Minimum Rotable Ratio
or Minimum Subordinated Rotable Ratio requirement pursuant to Section 3.1 of the
Collateral Maintenance Agreement.
"PRIOR FUNDS" means, on any Distribution Date, any Drawing paid under the
Liquidity Facility on such Distribution Date and any funds withdrawn from the
Cash Collateral Account on such Distribution Date in respect of accrued interest
on the Securities.
"PROCEEDS DEFICIENCY DRAWING" is defined in Section 3.6(b) of the
Indenture.
"PROPELLER" includes a part, appurtenance, and accessory of a propeller.
"PROVIDER INCUMBENCY CERTIFICATE" is defined in Section 3.7(b) of the
Indenture.
"PROVIDER REPRESENTATIVES" is defined in Section 3.7(b) of the Indenture.
"PURCHASE AGREEMENT" means the Purchase Agreement dated December 2, 2002 by
and between the Initial Purchaser and the Company.
"QIB" means a qualified institutional buyer as defined in Rule 144A.
"QUALIFIED SPARE PARTS" has the meaning provided in clause (1) of the first
paragraph in Section 2.01 of the Security Agreement.
"RATING AGENCIES" means, collectively, at any time, and with respect to a
Series of Notes, each nationally recognized rating agency which shall have been
requested by the Company to rate such Series of Notes and which shall then be
rating such Series of Notes. The initial Rating Agency will be Moody's, in the
case of the Securities, and Moody's and Standard & Poor's, in the case of the
Subordinated Securities.
"RATINGS CONFIRMATION" means, with respect to any action proposed to be
taken, a written confirmation from each of the Rating Agencies with respect to
the applicable Series of Notes that such action would not result in (i) a
reduction of the rating for such Series of Notes below the then current rating
for such Series of Notes (such rating, in the case of the Securities, as
determined without regard to the Policy) or (ii) a withdrawal or suspension of
the rating of such Series of Notes.
"RECORD DATE" means the fifteenth (15th) day preceding any Scheduled
Interest Payment Date, whether or not a Business Day.
"REDEMPTION DATE", when used with respect to any Note to be redeemed, means
the date fixed for such redemption by or pursuant to the Indenture and such
Note.
"REFERENCE AGENCY AGREEMENT" means the Reference Agency Agreement, dated as
of the Issuance Date, among the Company, WTC, as the reference agent thereunder,
and the Trustee.
"REGISTER" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRAR" has the meaning provided in Section 2.8 of the Indenture.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of December 6, 2002, by and between the Company and the Initial
Purchaser.
"REGULATION S" means Regulation S under the Securities Act.
"REGULATION S DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"REGULATION S DEFINITIVE SUBORDINATED SECURITIES" is defined in Section
2A.1(e) of the Indenture.
"REGULATION S GLOBAL SECURITY" is defined in Section 2.1(d) of the
Indenture.
"REGULATION S GLOBAL SUBORDINATED SECURITY" is defined in Section 2A.1(d)
of the Indenture.
"RELEVANT DATE" is defined in Section 3.6(c) of the Indenture.
"REPLACEMENT LIQUIDITY FACILITY" means an irrevocable revolving credit
agreement (or agreements) 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 with respect to
the Securities to confirm in writing their respective ratings then in effect for
the Securities (before downgrading of such ratings, if any, as a result of the
downgrading of the Liquidity Provider), and be consented to by the Policy
Provider, which consent shall not be unreasonably withheld or delayed, in a face
amount (or in an aggregate face amount) equal to the amount of interest payable
on the Securities (at the Capped Interest Rate, and without regard to expected
future principal payments) on the eight Interest Payment Dates following the
date of replacement of such Liquidity Facility (or if such date is an Interest
Payment Date, on such day and the seven Interest Payment Dates following the
date of replacement of such Liquidity Facility) and issued by a Person (or
Persons) having unsecured short-term debt rating or issuer credit rating, as the
case may be, issued by Moody's and Standard & Poor's which are equal to or
higher than the Threshold Rating. Without limitation of the form that a
Replacement Liquidity Facility otherwise may have pursuant to the preceding
sentence, a Replacement Liquidity Facility for the Securities may have a stated
expiration date earlier than 15 days after the Final Legal Maturity Date so long
as such Replacement Liquidity Facility provides for a Non-Extension Drawing as
contemplated by Section 3.5(d) of the Indenture.
"REQUEST" means a written request for the action therein specified signed
on behalf of the Company by any Officer and delivered to the Trustee. Each
Request shall be accompanied by an Officers' Certificate if and to the extent
required by Section 12.4 of the Indenture.
"REQUIRED AMOUNT" means, for any day, the sum of the aggregate amount of
interest, calculated at the Capped Interest Rate, that would be payable on the
Securities on each of the eight successive Interest Payment Dates immediately
following such day or, if such day is an Interest Payment Date, on such day and
the succeeding seven Interest Payment Dates, in each case calculated on the
basis of the outstanding principal amount of the Securities on such date and
without regard to expected future payments of principal on the Securities.
"REQUIRED HOLDERS" means from time to time the Holders of more than 50% in
aggregate unpaid principal amount of the Securities then Outstanding.
"REQUIRED SUBORDINATED HOLDERS" means from time to time the holders of more
than 50% in aggregate unpaid principal amount of the Subordinated Securities
then Outstanding.
"RESPONSIBLE OFFICER" means (i) with respect to the Trustee, any officer in
the corporate trust administration department of the Trustee or any other
officer customarily performing functions similar to those performed by the
Persons who at the time shall be such officers or to whom any corporate trust
matter is referred because of his or her knowledge of and familiarity with a
particular subject, (ii) with respect to the Liquidity Provider, any authorized
officer of the Liquidity Provider, and (iii) with respect to the Policy
Provider, any authorized officer of the Policy Provider.
"RESTRICTED DEFINITIVE SECURITIES" is defined in Section 2.1(e) of the
Indenture.
"RESTRICTED DEFINITIVE SUBORDINATED SECURITIES" is defined in Section
2A.1(e) of the Indenture.
"RESTRICTED GLOBAL SECURITY" is defined in Section 2.1(c) of the Indenture.
"RESTRICTED GLOBAL SUBORDINATED SECURITY" is defined in Section 2A.1(c) of
the Indenture.
"RESTRICTED LEGEND" is defined in Section 2.2 of the Indenture.
"RESTRICTED PERIOD" is defined in Section 2.1(d) of the Indenture for
purposes of the Securities and in Section 2A.1(d) for purposes of the
Subordinated Securities.
"RESTRICTED SECURITIES" are defined in Section 2.2 of the Indenture.
"RESTRICTED SUBORDINATED SECURITIES" are defined in Section 2A.2 of the
Indenture.
"ROTABLE" means a Qualified Spare Part that wears over time and can be
repeatedly restored to a serviceable condition over a period approximating the
life of the flight equipment to which it relates.
"ROTABLE RATIO" shall mean a percentage determined by dividing (i) the Fair
Market Value of the Rotables, as set forth in the most recent Independent
Appraiser's Certificate delivered by the Company pursuant to Article 2 of the
Collateral Maintenance Agreement, as supplemented pursuant to Section 3.1 of the
Collateral Maintenance Agreement, if applicable, by (ii) the aggregate principal
amount of all Securities Outstanding minus the sum of the Cash Collateral held
by the Collateral Agent.
"RULE 144A" means Rule 144A under the Securities Act.
"SALES" is defined in Section 3.2 of the Collateral Maintenance Agreement.
"SCHEDULED INTEREST PAYMENT DATE" means each Interest Payment Date, without
giving effect to the proviso to the definition of Interest Payment Date.
"SCHEDULED PAYMENT DATE" means (i) with respect to any payment of interest,
the Interest Payment Date applicable thereto, (ii) with respect to any payment
of defaulted interest, the payment date established pursuant to Section 2.16,
(iii) with respect to amounts due on the redemption of any Note, the Redemption
Date applicable thereto, and (iv) with respect to the final maturity of the
Notes, December 6, 2007.
"SEC" means the Securities and Exchange Commission and any government
agency succeeding to its functions.
"SECTION 1110" means Section 1110 of the Bankruptcy Code.
"SECTION 1110 PERIOD" means the continuous period of (i) 60 days specified
in Section 1110(a)(2)(A) of the Bankruptcy Code (or such longer period, if any,
agreed to under Section 1110(b) of the Bankruptcy Code), plus (ii) an additional
period, if any, commencing with the trustee or debtor-in-possession in such
proceeding agreeing, with court approval, to perform its obligations under the
Operative Documents within such 60 days (or longer period as agreed) and
continuing until such time as such trustee or debtor-in-possession ceases to
fully perform its obligations thereunder with the result that the period during
which the Collateral Agent is prohibited from repossessing the collateral under
any Collateral Agreement comes to an end.
"SECURITIES" means the Initial Securities and the Exchange Securities.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time.
"SECURITY AGENT" means the Trustee acting in the capacity of security agent
on behalf of the Holders under the Security Agreement until a successor replaces
it in accordance with the provisions of the Security Agreement and thereafter
means the successor.
"SECURITY AGREEMENT" means the Spare Parts Security Agreement dated as of
the Issuance Date between the Company and the Security Agent.
"SECURITYHOLDER" means any holder of one or more Securities.
"SEMIANNUAL METHODOLOGY" means the Annual Methodology, excluding actions
referred to in clauses (iii) and (iv) of the definition of Annual Methodology.
"SEMIANNUAL VALUATION DATE" is defined in Section 2.2 of the Collateral
Maintenance Agreement.
"SERIES" means each of the Securities and the Subordinated Securities,
considered as a separate class.
"SERVICEABLE PARTS" means Pledged Spare Parts in condition satisfactory for
incorporation in, installation on, attachment or appurtenance to or use in an
Aircraft, Engine or other Qualified Spare Part.
"SHELF REGISTRATION STATEMENT" means the shelf registration statement which
may be required to be filed by the Company with the SEC pursuant to (i) with
respect to Securities, the Registration Rights Agreement, other than an Exchange
Offer Registration Statement, and (ii) with respect to Subordinated Securities,
the Subordinated Securities Registration Rights Agreement, other than an
Exchange Offer Registration Statement.
"SPARE PART" means an accessory, appurtenance, or part of an Aircraft
(except an Engine or Propeller), Engine (except a Propeller), Propeller, or
Appliance, that is to be installed at a later time in an Aircraft, Engine,
Propeller or Appliance.
"SPARE PARTS COLLATERAL" has the meaning specified in Section 2.01 of the
Security Agreement.
"SPARE PARTS DOCUMENTS" has the meaning set forth in clause (6) of the
first paragraph of Section 2.01 of the Security Agreement.
"SPECIAL DEFAULT" means a Payment Default or a Continental Bankruptcy
Event.
"SPECIAL RECORD DATE" has the meaning provided in Section 2.10 of the
Indenture.
"SPECIAL VALUATION DATE" is defined in Section 2.4 of the Collateral
Maintenance Agreement.
"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.
"STATED AMOUNT" means the Maximum Commitment (as defined in the Liquidity
Facility).
"STATED EXPIRATION DATE" is defined in Section 3.5(d) of the Indenture.
"SUBORDINATED APPLICABLE MARGIN" means 7.50%.
"SUBORDINATED CLOSING DATE" means the Subordinated Issuance Date.
"SUBORDINATED COLLATERAL RATIO" shall mean a percentage determined by
dividing (i) the aggregate principal amount of all Notes Outstanding minus the
sum of the Cash Collateral held by the Collateral Agent by (ii) the Fair Market
Value of all Collateral (excluding any Cash Collateral), as set forth in the
most recent Independent Appraiser's Certificate delivered by the Company
pursuant to Article 2 of the Collateral Maintenance Agreement, as supplemented
pursuant to Section 3.1 of the Collateral Maintenance Agreement, if applicable.
"SUBORDINATED DEBT RATE" means a rate per annum equal, in the case of the
first Interest Period for the Subordinated Securities, to 8.78% and, in the case
of any subsequent Interest Period, LIBOR for such Interest Period, as determined
pursuant to the Reference Agency Agreement, plus the Subordinated Applicable
Margin, PROVIDED that, solely in the event no Registration Event (as defined in
the Subordinated Security Registration Rights Agreement) occurs on or prior to
the 210th day after the Subordinated Closing Date, the Subordinated Debt Rate
shall be increased by an additional margin equal to 0.50% per annum, from and
including such 210th day to and excluding the earlier of (i) the date on which
such Registration Event occurs and (ii) the date on which there ceases to be any
Registrable Securities (as defined in the Subordinated Security Registration
Rights Agreement)); or if the Shelf Registration Statement (as defined in the
Subordinated Security Registration Rights Agreement) (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 Subordinated Security
Registration Rights Agreement for more than 60 days, whether or not consecutive,
during any 12-month period, the Subordinated Debt Rate shall be increased by an
additional margin equal to 0.50% per annum from and including the 61st day of
the applicable 12-month period such Shelf Registration Statement ceases to be
effective to and excluding the date on which the Shelf Registration Statement
again becomes effective (or, if earlier, the end of the period specified by
Section 2(b)(B) of the Subordinated Security Registration Rights Agreement),
PROVIDED that the additional margin added to the Subordinated Debt Rate pursuant
to the preceding proviso shall never exceed 0.50% at any time.
"SUBORDINATED DOCUMENTS" means the Indenture, Amendment No. 1 to Collateral
Maintenance Agreement, Amendment No. 1 to Reference Agency Agreement and
Amendment No. 1 to Security Agreement.
"SUBORDINATED ISSUANCE DATE" means the date of initial issuance of the
Initial Subordinated Securities.
"SUBORDINATED PAYMENT DUE RATE" means (a) the Subordinated Debt Rate plus
2% or, if less, (b) the maximum rate permitted by applicable law.
"SUBORDINATED ROTABLE RATIO" shall mean a percentage determined by dividing
(i) the Fair Market Value of the Rotables, as set forth in the most recent
Independent Appraiser's Certificate delivered by the Company pursuant to Article
2 of the Collateral Maintenance Agreement, as supplemented pursuant to Section
3.1 of the Collateral Maintenance Agreement, if applicable, by (ii) the
aggregate principal amount of all Notes Outstanding minus the sum of the Cash
Collateral held by the Collateral Agent.
"SUBORDINATED SECURITIES" means the Initial Subordinated Securities and the
Exchange Subordinated Securities.
"SUBORDINATED SECURITY OFFERING MEMO" means the Offering Memorandum, dated
May 2, 2003 of the Company relating to the offering of the Subordinated
Securities.
"SUBORDINATED SECURITY PROVISIONS" is defined in Section 4.1 of the
Collateral Maintenance Agreement.
"SUBORDINATED SECURITY PURCHASE AGREEMENT" means the Purchase Agreement,
dated as of May 2, 2003, by and between the Initial Purchaser and the Company.
"SUBORDINATED SECURITY REGISTRATION RIGHTS AGREEMENT" means the
Registration Rights Agreement dated as of the Subordinated Issuance Date, by and
between the Company and the Initial Purchaser.
"SUBORDINATED SECURITYHOLDER" means any holder of one or more Subordinated
Securities.
"SUCCESSOR COMPANY" is defined in Section 5.4(a)(i) of the Indenture.
"SUPPLEMENTAL SECURITY AGREEMENT" means a supplement to the Security
Agreement substantially in the form of Exhibit A to the Security Agreement.
"SUPPORT DOCUMENTS" means the Liquidity Facility, the Policy, the Policy
Provider Agreement and the Fee Letters.
"TAX" and "TAXES" mean any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, loss, damage, liability, expense, additions to tax and additional
amounts or costs incurred or imposed with respect thereto) imposed or otherwise
assessed by the United States of America or by any state, local or foreign
government (or any subdivision or agency thereof) or other taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth and similar charges; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added, taxes on goods and services, gains taxes, license, registration and
documentation fees, customs duties, tariffs, and similar charges.
"TERMINATION NOTICE" has the meaning assigned to such term in the Liquidity
Facility.
"THRESHOLD AMOUNT" means $2,000,000.
"THRESHOLD RATING" means the short-term unsecured debt rating of P-1 by
Moody's and A-1 by Standard & Poor's; PROVIDED that so long as the initial
Liquidity Provider is the Liquidity Provider, the Threshold Rating shall apply
to the Liquidity Guarantor.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the Indenture; PROVIDED, HOWEVER, that
in the event the TIA is amended after such date, "TIA" means, to the extent
required by any such amendment, the TIA as so amended.
"TRUST ACCOUNTS" is defined in Section 8.13(a) of the Indenture.
"TRUST OFFICER" means any officer in the corporate trust department of the
Trustee, or any other officer or assistant officer of the Trustee assigned by
the Trustee to administer its corporate trust matters.
"TRUSTEE" means the party named as such in the Indenture until a successor
replaces it in accordance with the provisions of the Indenture and thereafter
means the successor Trustee and if, at any time, there is more than one Trustee,
"Trustee" as used with respect to the Notes of any Series shall mean the Trustee
with respect to the Notes of that Series.
"TRUSTEE INCUMBENCY CERTIFICATE" is defined in Section 3.7(a) of the
Indenture.
"TRUSTEE PROVISIONS" is defined in Section 4.1 of the Collateral
Maintenance Agreement.
"TRUSTEE REPRESENTATIVES" is defined in Section 3.7(a) of the Indenture.
"UCC" means the Uniform Commercial Code as in effect in any applicable
jurisdiction.
"UNAPPLIED PROVIDER ADVANCE" is defined in the Liquidity Facility.
"UNSERVICEABLE PARTS" means Pledged Spare Parts that are not Serviceable
Parts.
"U.S." or "UNITED STATES" means the United States of America.
"U.S. AIR CARRIER" means any United States air carrier that is a Citizen of
the United States holding an air carrier operating certificate issued pursuant
to chapter 447 of title 49 of the United States Code for aircraft capable of
carrying 10 or more individuals or 6000 pounds or more of cargo.
"U.S. GOVERNMENT" means the federal government of the United States, or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.
"U.S. GOVERNMENT OBLIGATIONS" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the option of the issuer thereof.
"U.S. PERSON" means any Person described in Section 7701(a)(30) of the
Code.
"VALUATION DATES" is defined in Section 2.4 of the Collateral Maintenance
Agreement.
"WARRANTIES" is defined in clause (2) of Section 2.01 of the Security
Agreement.
"WRITTEN NOTICE" means, from the Trustee, the Liquidity Provider or the
Policy Provider, a written instrument executed by the Designated Representative
of such Person. An invoice delivered by the Liquidity Provider pursuant to
Section 3.1 of the Indenture in accordance with its normal invoicing procedures
shall constitute Written Notice under such Section.
"WTC" has the meaning specified in the first paragraph of the Indenture.
SECTION 2. RULES OF CONSTRUCTION. Unless the context otherwise requires, the
following rules of construction shall apply for all purposes of the Operative
Documents (including this appendix) and of such agreements as may incorporate
this appendix by reference.
(a) In each Operative Document, unless otherwise expressly provided, a
reference to:
(i) each of the Company, the Trustee, the Collateral Agent, the Security
Agent or any other person includes, without prejudice to the
provisions of any Operative Document, any successor in interest to it
and any permitted transferee, permitted purchaser or permitted
assignee of it;
(ii) words importing the plural include the singular and words importing
the singular include the plural;
(iii) any agreement, instrument or document, or any annex, schedule or
exhibit thereto, or any other part thereof, includes, without
prejudice to the provisions of any Operative Document, that
agreement, instrument or document, or annex, schedule or exhibit, or
part, respectively, as amended, modified or supplemented from time to
time in accordance with its terms and in accordance with the
Operative Documents, and any agreement, instrument or document
entered into in substitution or replacement therefor;
(iv) any provision of any Law includes any such provision as amended,
modified, supplemented, substituted, reissued or reenacted prior to
the Closing Date, and thereafter from time to time;
(v) the words "Agreement", "this Agreement", "hereby", "herein",
"hereto", "hereof" and "hereunder" and words of similar import when
used in any Operative Document refer to such Operative Document as a
whole and not to any particular provision of such Operative Document;
(vi) the words "including", "including, without limitation", "including,
but not limited to", and terms or phrases of similar import when used
in any Operative Document, with respect to any matter or thing, mean
including, without limitation, such matter or thing; and
(vii) a"Section", an "Exhibit", an "Annex", an "Appendix" or a "Schedule"
in any Operative Document, or in any annex thereto, is a reference to
a section of, or an exhibit, an annex, an appendix or a schedule to,
such Operative Document or such annex, respectively.
(b) Each exhibit, annex, appendix and schedule to each Operative
Document is incorporated in, and shall be deemed to be a part of, such Operative
Document.
(c) Unless otherwise defined or specified in any Operative Document,
all accounting terms therein shall be construed and all accounting
determinations thereunder shall be made in accordance with GAAP.
(d) Headings used in any Operative Document are for convenience only
and shall not in any way affect the construction of, or be taken into
consideration in interpreting, such Operative Document.
(e) For purposes of each Operative Document, the occurrence and
continuance of a Default or Event of Default referred to in Section 7.1(d), (e)
or (f) of the Indenture shall not be deemed to prohibit the Company from taking
any action or exercising any right that is conditioned on no Special Default,
Default or Event of Default having occurred and be continuing if such Special
Default, Default or Event of Default consists of the institution of
reorganization proceedings with respect to the Company under Chapter 11 of the
Bankruptcy Code and the trustee or debtor-in-possession in such proceedings
shall have agreed to perform its obligations under the Operative Documents with
the approval of the applicable court and thereafter shall have continued to
perform such obligations in accordance with Section 1110.
AMENDMENT NO. 1 TO
REFERENCE AGENCY AGREEMENT
AMENDMENT NO. 1, dated as of May 9, 2003 (this "AMENDMENT"), to Reference
Agency Agreement, dated as of December 6, 2002 (the "REFERENCE AGENCY
AGREEMENT"), among CONTINENTAL AIRLINES, INC., a Delaware corporation (the
"COMPANY"), WILMINGTON TRUST COMPANY, a Delaware banking corporation ("WTC"), as
Trustee under the Indenture referred to below, and WTC, as reference agent under
the Reference Agency Agreement (the "REFERENCE AGENT"). Certain terms used
herein have the defined meanings referred to in Section 1 hereof.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, in connection with the issuance and sale of the Company's Floating
Rate Secured Notes due 2007 pursuant to the Original Indenture, the Company, the
Trustee and the Reference Agent entered into the Reference Agency Agreement to
provide, among other things, for the determination of the Debt Rate with respect
to such Securities; and
WHEREAS, concurrently with the execution and delivery of this Amendment,
the Company is entering into the Amended and Restated Indenture, dated as of the
date hereof (the "INDENTURE"), with WTC, as Trustee, Morgan Stanley Capital
Services Inc., as Liquidity Provider, and MBIA Insurance Corporation, as Policy
Provider, providing for the issuance of Company's Floating Rate Secured
Subordinated Notes due 2007 (the "SUBORDINATED SECURITIES"); and
WHEREAS, in connection with the issuance and sale of the Subordinated
Securities pursuant to the Indenture, the Company has requested that the
Reference Agency Agreement be amended to provide, among other things, for the
determination of the Subordinated Debt Rate with respect to such Subordinated
Securities; and
WHEREAS, the Company and the Initial Purchaser have entered into the
Subordinated Security Purchase Agreement, which provides for the issuance of the
Subordinated Securities; and
WHEREAS, the Indenture provides that the Notes to be issued thereunder bear
interest at a rate per annum based on LIBOR, as determined pursuant to the
Reference Agency Agreement.
NOW, THEREFORE, in consideration of the premises and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined or provided herein, terms
used herein that are defined in or pursuant to the Reference Agency Agreement,
as amended by this Amendment, have such respective defined meanings.
SECTION 2. AMENDMENTS. Effective as of the date hereof, the Reference
Agency Agreement is hereby amended as follows:
Section 2.1 PREAMBLE. The following in the second "Whereas" clause shall be
deleted: "(the "INDENTURE")".
Section 2.2 DEFINITIONS. Section 1 is amended as follows:
(a) The first sentence is amended to delete "Indenture" and replace it with
the following: "Amended and Restated Indenture, dated as of May 9, 2003 (the
"INDENTURE"), among the Company, WTC, as Trustee, Morgan Stanley Capital
Services Inc., as Liquidity Provider, and MBIA Insurance Corporation, as Policy
Provider".
(b) The definition of "Interest Payment Date" is amended and restated to
read in its entirety as follows:
"'INTEREST PAYMENT DATE' means March 6, June 6, September 6 and
December 6 of each year so long as any Note is outstanding (commencing on
March 6, 2003 in the case of the Securities and June 6, 2003 in the case of
the Subordinated Securities), PROVIDED that if any such day is not a
Business Day, then the relevant Interest Payment Date shall be the next
succeeding Business Day."
(c) Clause (i) of the definition of "Interest Period" is amended and
restated to read in its entirety as follows:
"(i) in the case of the first Interest Period for the Securities, the
period commencing on (and including) the Closing Date or, in the case of
the first Interest Period for the Subordinated Securities, the period
commencing on (and including) the Subordinated Closing Date, and ending on
(but excluding) the first Interest Payment Date following such date and".
Section 2.3 CERTAIN REFERENCES TO SECURITIES. Each reference to
"Securities" in Section 3, Section 7, Section 8 and Section 9, is deleted and
replaced with "Notes".
Section 2.4 DUTIES OF REFERENCE AGENT.
(a) The first sentence of Section 6(b) prior to clause (i) thereof is
amended and restated to read in its entirety as follows:
"(b) For the purpose of calculating the Debt Rate payable on the
Securities or the Subordinated Debt Rate payable on the Subordinated
Securities, "LIBOR" for each Interest Period that commences after (x) in
the case of the Securities, the Closing Date (it being understood that the
Debt Rate for the Interest Period commencing on the Closing Date shall be
determined pursuant to the Purchase Agreement) or (y) in the case of the
Subordinated Securities, the Subordinated Closing Date (it being understood
that the Subordinated Debt Rate for the Interest Period commencing on the
Subordinated Closing Date shall be determined pursuant to the Subordinated
Security Purchase Agreement), shall mean the rate determined in accordance
with the following provisions:".
(b) Section 6(c) is amended and restated to read in its entirety as
follows:
"(c) As soon as practicable after 11:00 a.m. (London time) on each
Interest Rate Determination Date, the Reference Agent will calculate the
Debt Rate and the Subordinated Debt Rate for such Interest Period, which
shall be applicable to the Securities and the Subordinated Securities,
respectively. The Reference Agent's determination of LIBOR, the Debt Rate
and the Subordinated Debt Rate (in the absence of negligence, willful
default, bad faith or manifest error) shall be conclusive and binding upon
all parties."
(c) Section 6(d) is amended to insert after "the Debt Rate" the following:
", the Subordinated Debt Rate".
Section 2.5 MISCELLANEOUS. Section 13(a) is amended to delete the phrase
"or the Debt Rate" and to replace it with ", the Debt Rate or the Subordinated
Debt Rate".
SECTION 3. CONSTRUCTION. All references in the Reference Agency Agreement
to the "Agreement" shall be deemed to refer to the Reference Agency Agreement as
amended by this Amendment, and the parties hereto confirm their respective
obligations thereunder. The Reference Agency Agreement is hereby ratified by the
parties hereto and shall remain in all respects unchanged (except as expressly
provided in this Amendment) and in full force and effect.
SECTION 4. GOVERNING LAW. This Amendment shall be governed by, and
construed in accordance with, the law of the State of New York.
SECTION 5. COUNTERPARTS. This Amendment may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
[Remainder of this page is blank.]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized, as of the
date and year first above written.
CONTINENTAL AIRLINES, INC.
By
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY, as
Reference Agent
By
---------------------------------------
Name:
Title:
WILMINGTON TRUST COMPANY, as
Trustee
By
---------------------------------------
Name:
Title:
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement on Form S-4 and related Prospectus of
Continental Airlines, Inc. for the registration of $200,000,000 of Floating Rate
Secured Notes Due 2007 and to the incorporation by reference therein of our
reports dated January 15, 2003, with respect to the consolidated financial
statements and schedule of Continental Airlines, Inc. included in its Annual
Report (Form 10-K), as amended, for the year ended December 31, 2002, filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Houston, Texas
June 2, 2003
Registration No.: 333-104689
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2)
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
CONTINENTAL AIRLINES, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 74-2099724
(State of incorporation) (I.R.S. employer identification no.)
1600 SMITH STREET, DEPT. HQSEO
HOUSTON, TEXAS 77002
(Address of principal executive offices) (Zip Code)
FLOATING RATE SECURED NOTES DUE 2007
(Title of the indenture securities)
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation:
Based upon an examination of the books and records of the trustee
and upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes
the certificate of authority of Wilmington Trust Company to
commence business and the authorization of Wilmington Trust
Company to exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the ___ day
of _______________, 2003.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: By:
----------------------- -----------------------
Assistant Secretary Name: Donald G. MacKelcan
Title: Vice President
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
AMENDED CHARTER
OR
ACT OF INCORPORATION
OF
WILMINGTON TRUST COMPANY
Wilmington Trust Company, originally incorporated by an Act of the
General Assembly of the State of Delaware, entitled "An Act to Incorporate the
Delaware Guarantee and Trust Company", approved March 2, A.D. 1901, and the name
of which company was changed to "Wilmington Trust Company" by an amendment filed
in the Office of the Secretary of State on March 18, A.D. 1903, and the Charter
or Act of Incorporation of which company has been from time to time amended and
changed by merger agreements pursuant to the corporation law for state banks and
trust companies of the State of Delaware, does hereby alter and amend its
Charter or Act of Incorporation so that the same as so altered and amended shall
in its entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of
Delaware is at Rodney Square North, in the City of Wilmington, County
of New Castle; the name of its resident agent is Wilmington Trust
Company whose address is Rodney Square North, in said City. In
addition to such principal office, the said corporation maintains and
operates branch offices in the City of Newark, New Castle County,
Delaware, the Town of Newport, New Castle County, Delaware, at
Claymont, New Castle County, Delaware, at Greenville, New Castle
County Delaware, and at Milford Cross Roads, New Castle County,
Delaware, and shall be empowered to open, maintain and operate branch
offices at Ninth and Shipley Streets, 418 Delaware Avenue, 2120 Market
Street, and 3605 Market Street, all in the City of Wilmington, New
Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or
agencies of the government of the State of Delaware empowered to
confer such authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation
are to do any or all of the things herein mentioned as fully and to
the same extent as natural persons might or could do and in any part
of the world, viz.:
(1) To sue and be sued, complain and defend in any Court of law
or equity and to make and use a common seal, and alter the seal
at pleasure, to hold, purchase, convey, mortgage or otherwise
deal in real and personal estate and property, and to appoint
such officers and agents as the business of the Corporation shall
require, to make by-laws not inconsistent with the Constitution
or laws of the United States or of this State, to discount bills,
notes or other evidences of debt, to receive deposits of money,
or securities for money, to buy gold and silver bullion and
foreign coins, to buy and sell bills of exchange, and generally
to use, exercise and enjoy all the powers, rights, privileges and
franchises incident to a corporation which are proper or
necessary for the transaction of the business of the Corporation
hereby created.
(2) To insure titles to real and personal property, or any estate
or interests therein, and to guarantee the holder of such
property, real or personal, against any claim or claims, adverse
to his interest therein, and to prepare and give certificates of
title for any lands or premises in the State of Delaware, or
elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the
purchase, sale, management and disposal of property of all
descriptions, and to prepare and execute all papers which may be
necessary or proper in such business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every
description, and to carry on the business of conveyancing in all
its branches.
(5) To receive upon deposit for safekeeping money, jewelry,
plate, deeds, bonds and any and all other personal property of
every sort and kind, from executors, administrators, guardians,
public officers, courts, receivers, assignees, trustees, and from
all fiduciaries, and from all other persons and individuals, and
from all corporations whether state, municipal, corporate or
private, and to rent boxes, safes, vaults and other receptacles
for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or
underwriting the stock, bonds or other obligations of any
corporation, association, state or municipality, and may receive
and manage any sinking fund therefor on such terms as may be
agreed upon between the two parties, and in like manner may act
as Treasurer of any corporation or municipality.
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in
conjunction with any other person or persons, corporation or
corporations.
(8) To guarantee the validity, performance or effect of any
contract or agreement, and the fidelity of persons holding places
of responsibility or trust; to become surety for any person, or
persons, for the faithful performance of any trust, office, duty,
contract or agreement, either by itself or in conjunction with
any other person, or persons, corporation, or corporations, or in
like manner become surety upon any bond, recognizance,
obligation, judgment, suit, order, or decree to be entered in any
court of record within the State of Delaware or elsewhere, or
which may now or hereafter be required by any law, judge, officer
or court in the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity in the receiving, holding, managing, and
disposing of any and all estates and property, real, personal or
mixed, and to be appointed as such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian or bailee by any persons, corporations,
court, officer, or authority, in the State of Delaware or
elsewhere; and whenever this Corporation is so appointed by any
person, corporation, court, officer or authority such trustee,
trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian, bailee, or in any
other trust capacity, it shall not be required to give bond with
surety, but its capital stock shall be taken and held as security
for the performance of the duties devolving upon it by such
appointment.
(10) And for its care, management and trouble, and the exercise
of any of its powers hereby given, or for the performance of any
of the duties which it may undertake or be called upon to
perform, or for the assumption of any responsibility the said
Corporation may be entitled to receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities,
obligations, contracts and evidences of indebtedness, of any
private, public or municipal corporation within and without the
State of Delaware, or of the Government of the United States, or
of any state, territory, colony, or possession thereof, or of any
foreign government or country; to receive, collect, receipt for,
and dispose of interest, dividends and income upon and from any
of the bonds, mortgages, debentures, notes, shares of capital
stock, securities, obligations, contracts, evidences of
indebtedness and other property held and owned by it, and to
exercise in respect of all such bonds, mortgages, debentures,
notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and
all the rights, powers and privileges of individual owners
thereof, including the right to vote thereon; to invest and deal
in and with any of the moneys of the Corporation upon such
securities and in such manner as it may think fit and proper, and
from time to time to vary or realize such investments; to issue
bonds and secure the same by pledges or deeds of trust or
mortgages of or upon the whole or any part of the property held
or owned by the Corporation, and to sell and pledge such bonds,
as and when the Board of Directors shall determine, and in the
promotion of its said corporate business of investment and to the
extent authorized by law, to lease, purchase, hold, sell, assign,
transfer, pledge, mortgage and convey real and personal property
of any name and nature and any estate or interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred
by the laws of the State of Delaware, it is hereby expressly provided
that the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of
the world.
(2) To acquire the good will, rights, property and franchises and
to undertake the whole or any part of the assets and liabilities
of any person, firm, association or corporation, and to pay for
the same in cash, stock of this Corporation, bonds or otherwise;
to hold or in any manner to dispose of the whole or any part of
the property so purchased; to conduct in any lawful manner the
whole or any part of any business so acquired, and to exercise
all the powers necessary or convenient in and about the conduct
and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and
to lease, sell, exchange, transfer, or in any manner whatever
dispose of property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and,
without limit as to amount, to draw, make, accept, endorse,
discount, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures, and other negotiable or
transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent
as natural persons might or could do, to purchase or otherwise
acquire, to hold, own, to mortgage, sell, convey or otherwise
dispose of, real and personal property, of every class and
description, in any State, District, Territory or Colony of the
United States, and in any foreign country or place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except
where otherwise expressed in said paragraph) be nowise limited or
restricted by reference to or inference from the terms of any
other clause of this or any other paragraph in this charter, but
that the objects, purposes and powers specified in each of the
clauses of this paragraph shall be regarded as independent
objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock");
and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one
or more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every
particular, except that there may be different dates from which
dividends, if any, thereon shall be cumulative, if made cumulative.
The voting powers and the preferences and relative, participating,
optional and other special rights of each such series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time outstanding;
and, subject to the provisions of subparagraph 1 of Paragraph (c) of
this Article Fourth, the Board of Directors of the Corporation is
hereby expressly granted authority to fix by resolution or resolutions
adopted prior to the issuance of any shares of a particular series of
Preferred Stock, the voting powers and the designations, preferences
and relative, optional and other special rights, and the
qualifications, limitations and restrictions of such series,
including, but without limiting the generality of the foregoing, the
following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number
may be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares
thereof then outstanding) from time to time by like action of the
Board of Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall
be paid, the extent of the preference or relation, if any, of
such dividends to the dividends payable on any other class or
classes, or series of the same or other class of stock and
whether such dividends shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares
of any other class or classes or of any series of the same or any
other class or classes of stock of the Corporation and the terms
and conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption, and the redemption price or prices and the
time or times at which, and the terms and conditions on which,
Preferred Stock of such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase
account, if any, to be provided for the Preferred Stock of such
series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under
such circumstances and on such conditions as the Board of
Directors may determine.
(c) (1) After the requirements with respect to preferential dividends
on the Preferred Stock (fixed in accordance with the provisions of
section (b) of this Article Fourth), if any, shall have been met and
after the Corporation shall have complied with all the requirements,
if any, with respect to the setting aside of sums as sinking funds or
redemption or purchase accounts (fixed in accordance with the
provisions of section (b) of this Article Fourth), and subject further
to any conditions which may be fixed in accordance with the provisions
of section (b) of this Article Fourth, then and not otherwise the
holders of Common Stock shall be entitled to receive such dividends as
may be declared from time to time by the Board of Directors.
(2) After distribution in full of the preferential amount, if
any, (fixed in accordance with the provisions of section (b) of
this Article Fourth), to be distributed to the holders of
Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation, the holders of the Common Stock
shall be entitled to receive all of the remaining assets of the
Corporation, tangible and intangible, of whatever kind available
for distribution to stockholders ratably in proportion to the
number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted by
the Board of Directors pursuant to section (b) of this Article
Fourth, each holder of Common Stock shall have one vote in
respect of each share of Common Stock held on all matters voted
upon by the stockholders.
(d) No holder of any of the shares of any class or series of stock or
of options, warrants or other rights to purchase shares of any class
or series of stock or of other securities of the Corporation shall
have any preemptive right to purchase or subscribe for any unissued
stock of any class or series or any additional shares of any class or
series to be issued by reason of any increase of the authorized
capital stock of the Corporation of any class or series, or bonds,
certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of the Corporation of any
class or series, or carrying any right to purchase stock of any class
or series, but any such unissued stock, additional authorized issue of
shares of any class or series of stock or securities convertible into
or exchangeable for stock, or carrying any right to purchase stock,
may be issued and disposed of pursuant to resolution of the Board of
Directors to such persons, firms, corporations or associations,
whether such holders or others, and upon such terms as may be deemed
advisable by the Board of Directors in the exercise of its sole
discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and
rights of each other series of Preferred Stock shall, in each case, be
as fixed from time to time by the Board of Directors in the resolution
or resolutions adopted pursuant to authority granted in section (b) of
this Article Fourth and the consent, by class or series vote or
otherwise, of the holders of such of the series of Preferred Stock as
are from time to time outstanding shall not be required for the
issuance by the Board of Directors of any other series of Preferred
Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to, or on a
parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors
may provide in the resolution or resolutions as to any series of
Preferred Stock adopted pursuant to section (b) of this Article Fourth
that the consent of the holders of a majority (or such greater
proportion as shall be therein fixed) of the outstanding shares of
such series voting thereon shall be required for the issuance of any
or all other series of Preferred Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of
Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the
Board of Directors of the Corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of
Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased
from time to time by the affirmative vote of the holders of a majority
of the stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more
than twenty-five as fixed from time to time by vote of a majority of
the whole Board, provided, however, that the number of directors shall
not be reduced so as to shorten the term of any director at the time
in office, and provided further, that the number of directors
constituting the whole Board shall be twenty-four until otherwise
fixed by a majority of the whole Board.
(b) The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors
constituting the whole Board permits, with the term of office of one
class expiring each year. At the annual meeting of stockholders in
1982, directors of the first class shall be elected to hold office for
a term expiring at the next succeeding annual meeting, directors of
the second class shall be elected to hold office for a term expiring
at the second succeeding annual meeting and directors of the third
class shall be elected to hold office for a term expiring at the third
succeeding annual meeting. Any vacancies in the Board of Directors for
any reason, and any newly created directorships resulting from any
increase in the directors, may be filled by the Board of Directors,
acting by a majority of the directors then in office, although less
than a quorum, and any directors so chosen shall hold office until the
next annual election of directors. At such election, the stockholders
shall elect a successor to such director to hold office until the next
election of the class for which such director shall have been chosen
and until his successor shall be elected and qualified. No decrease in
the number of directors shall shorten the term of any incumbent
director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding
the fact that some lesser percentage may be specified by law, this
Charter or Act of Incorporation or the By-Laws of the Corporation),
any director or the entire Board of Directors of the Corporation may
be removed at any time without cause, but only by the affirmative vote
of the holders of two-thirds or more of the outstanding shares of
capital stock of the Corporation entitled to vote generally in the
election of directors (considered for this purpose as one class) cast
at a meeting of the stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board
of Directors or by any stockholder entitled to vote for the election
of directors. Such nominations shall be made by notice in writing,
delivered or mailed by first class United States mail, postage
prepaid, to the Secretary of the Corporation not less than 14 days nor
more than 50 days prior to any meeting of the stockholders called for
the election of directors; provided, however, that if less than 21
days' notice of the meeting is given to stockholders, such written
notice shall be delivered or mailed, as prescribed, to the Secretary
of the Corporation not later than the close of the seventh day
following the day on which notice of the meeting was mailed to
stockholders. Notice of nominations which are proposed by the Board of
Directors shall be given by the Chairman on behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name,
age, business address and, if known, residence address of each nominee
proposed in such notice, (ii) the principal occupation or employment
of such nominee and (iii) the number of shares of stock of the
Corporation which are beneficially owned by each such nominee.
(f) The Chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he should so
determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual
or special meeting of stockholders of the Corporation may be taken
without a meeting, and the power of stockholders to consent in
writing, without a meeting, to the taking of any action is
specifically denied.
Sixth: - The Directors shall choose such officers, agents and servants
as may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same
powers, rights and privileges as may be conferred upon corporations
organized under the Act entitled "An Act Providing a General
Corporation Law", approved March 10, 1899, as from time to time
amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of
the whole Board, may designate any of their number to constitute an
Executive Committee, which Committee, to the extent provided in said
resolution, or in the By-Laws of the Company, shall have and may
exercise all of the powers of the Board of Directors in the management
of the business and affairs of the Corporation, and shall have power
to authorize the seal of the Corporation to be affixed to all papers
which may require it.
Eleventh: - The private property of the stockholders shall not be
liable for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the
world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by
a vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may
be adopted only by the affirmative vote of the holders of two-thirds
or more of the outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors (considered
for this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside of the
State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by
law, and except as otherwise expressly provided in sections (b) and
(c) of this Article Fifteenth:
(A) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with or into (i) any
Interested Stockholder (as hereinafter defined) or (ii) any other
corporation (whether or not itself an Interested Stockholder),
which, after such merger or consolidation, would be an Affiliate
(as hereinafter defined) of an Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of related
transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of any assets of the
Corporation or any Subsidiary having an aggregate fair market
value of $1,000,000 or more, or
(C) the issuance or transfer by the Corporation or any Subsidiary
(in one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or
more, or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any
merger or consolidation of the Corporation with any of its
Subsidiaries or any similar transaction (whether or not with or
into or otherwise involving an Interested Stockholder) which has
the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any
Subsidiary which is directly or indirectly owned by any
Interested Stockholder, or any Affiliate of any Interested
Stockholder,
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall be
required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to in
any one or more of clauses (A) through (E) of paragraph 1 of
the section (a).
(b) The provisions of section (a) of this Article Fifteenth shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as
is required by law and any other provisions of the Charter or Act
of Incorporation or By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual, firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary)
who or which as of the record date for the determination of
stockholders entitled to notice of and to vote on such business
combination, or immediately prior to the consummation of any such
transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within
two years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have
occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the
Securities Act of 1933.
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any
other Voting Shares which may be issuable pursuant to any agreement,
or upon exercise of conversion rights, warrants or options or
otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings
given those terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on December
31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as in
effect on December 31, 1981) is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the
definition of Investment Stockholder set forth in paragraph (2) of
this section (c), the term "Subsidiary" shall mean only a corporation
of which a majority of each class of equity security is owned,
directly or indirectly, by the Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis
of information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an
Affiliate or Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as to the
matters referred to in paragraph (3) of section (c), or (4)
whether the assets subject to any business combination or the
consideration received for the issuance or transfer of securities
by the Corporation, or any Subsidiary has an aggregate fair
market value of $1,000,000 or more.
(e) Nothing contained in this Article Fifteenth shall be
construed to relieve any Interested Stockholder from any
fiduciary obligation imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act
of Incorporation or the By-Laws of the Corporation (and in addition to
any other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of
at least two-thirds of the outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of
directors (considered for this purpose as one class) shall be required
to amend, alter or repeal any provision of Articles Fifth, Thirteenth,
Fifteenth or Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be
amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or
omission occurring prior to the time of such repeal or
modification."
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
AS EXISTING ON FEBRUARY 20, 2000
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
STOCKHOLDERS' MEETINGS
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each share of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
DIRECTORS
Section 1. The authorized number of directors that shall constitute the
Board of Directors shall be fixed from time to time by or pursuant to a
resolution passed by a majority of the Board within the parameters set by the
Charter of the Bank. No more than two directors may also be employees of the
Company or any affiliate thereof.
Section 2. Except as provided in these Bylaws or as otherwise required by
law, there shall be no qualifications for election or service as directors of
the Company. In addition to any other provisions of these Bylaws, to be
qualified for nomination for Election or appointment to the Board of Directors
each person must have not attained the age of sixty-nine years at the time of
such election or appointment, provided however, the Nominating and Corporate
Governance Committee may waive such qualification as to a particular candidate
otherwise qualified to serve as a director upon a good faith determination by
such committee that such a waiver is in the best interests of the Company and
its stockholders. The Chairman of the Board of Directors shall not be qualified
to continue to serve as a director upon the termination of his or her services
in that office for any reason.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
Section 5. The Board of Directors shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board of Directors or by the President, and shall be
called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its election
by the stockholders shall appoint an Executive Committee, a Trust Committee, an
Audit Committee and a Compensation Committee, and shall elect from its own
members a Chairman of the Board of Directors and a President who may be the same
person. The Board of Directors shall also elect at such meeting a Secretary and
a Treasurer, who may be the same person, may appoint at any time such other
committees and elect or appoint such other officers as it may deem advisable.
The Board of Directors may also elect at such meeting one or more Associate
Directors.
Section 11. The Board of Directors may at any time remove, with or without
cause, any member of any Committee appointed by it or any associate director or
officer elected by it and may appoint or elect his successor. Section 12. The
Board of Directors may designate an officer to be in charge of such of the
departments or divisions of the Company as it may deem advisable.
ARTICLE III
COMMITTEES
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than
nine members who shall be selected by the Board of Directors from its own
members and who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the
Board of Directors when it is not in session to transact all business for and in
behalf of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The majority
of its members shall be necessary to constitute a quorum for the transaction of
business. Special meetings of the Executive Committee may be held at any time
when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be
kept and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time for that purpose, and any provisions of these
By-Laws (other than this Section) and any resolutions which are contrary to the
provisions of this Section or to the provisions of any such implementary
Resolutions shall be suspended during such a disaster period until it shall be
determined by any interim Executive Committee acting under this section that it
shall be to the advantage of the Company to resume the conduct and management of
its affairs and business under all of the other provisions of these By-Laws.
Section 2. Audit Committee
(A) The Audit Committee shall be composed of five members who
shall be selected by the Board of Directors from its own members, none of whom
shall be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the
Audit Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the
majority of its members shall deem it to be proper for the transaction of its
business, and a majority of its Committee shall constitute a quorum.
Section 3. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any
time by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 4. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all
directors meetings and participate in the discussion of all matters brought to
the Board, with the exception that he would have no right to vote. An associate
director will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 5. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any
Committee created under Article III of the By-Laws of this Company, the member
or members thereof present at any meeting and not disqualified from voting,
whether or not he or they constitute a quorum, may unanimously appoint another
member of the Board of Directors to act at the meeting in the place of any such
absent or disqualified member.
ARTICLE IV
OFFICERS
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. THE VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
of Directors shall preside at all meetings of the Board of Directors at which
the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to the
office of the President conferred or imposed upon him by statute or assigned to
him by the Board of Directors. In the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated by
the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
Section 7. The Treasurer shall have general supervision over all assets and
liabilities of the Company. He shall be custodian of and responsible for all
monies, funds and valuables of the Company and for the keeping of proper records
of the evidence of property or indebtedness and of all the transactions of the
Company. He shall have general supervision of the expenditures of the Company
and shall report to the Board of Directors at each regular meeting of the
condition of the Company, and perform such other duties as may be assigned to
him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general supervision
over the internal operations of the Company, including accounting, and shall
render to the Board of Directors at appropriate times a report relating to the
general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in charge
of the Audit Division of the Company with such title as the Board of Directors
shall prescribe, shall report to and be directly responsible only to the Board
of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
STOCK AND STOCK CERTIFICATES
Section 1. Shares of stock shall be transferrable on the books of the
Company and a transfer book shall be kept in which all transfers of stock shall
be recorded.
Section 2. Certificates of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall recite
that the stock represented thereby is transferrable only upon the books of the
Company by the holder thereof or his attorney, upon surrender of the certificate
properly endorsed. Any certificate of stock surrendered to the Company shall be
cancelled at the time of transfer, and before a new certificate or certificates
shall be issued in lieu thereof. Duplicate certificates of stock shall be issued
only upon giving such security as may be satisfactory to the Board of Directors
or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
SEAL
Section 1. The corporate seal of the Company shall be in the
following form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
FISCAL YEAR
Section 1. The fiscal year of the Company shall be the calendar year.
ARTICLE VIII
EXECUTION OF INSTRUMENTS OF THE COMPANY
Section 1. The Chairman of the Board, the President or any Vice President,
however denominated by the Board of Directors, shall have full power and
authority to enter into, make, sign, execute, acknowledge and/or deliver and the
Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
COMPENSATION OF DIRECTORS AND MEMBERS OF COMMITTEES
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
INDEMNIFICATION
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust,
enterprise or non-profit entity, including service with respect to employee
benefit plans, against all liability and loss suffered and expenses reasonably
incurred by such person. The Corporation shall indemnify a person in connection
with a proceeding initiated by such person only if the proceeding was authorized
by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending
any proceeding in advance of its final disposition, PROVIDED, HOWEVER, that the
payment of expenses incurred by a Director or officer in his capacity as a
Director or officer in advance of the final disposition of the proceeding shall
be made only upon receipt of an undertaking by the Director or officer to repay
all amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under
this Article X is not paid in full within ninety days after a written claim
therefor has been received by the Corporation the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation shall have the burden of proving that the claimant was
not entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X shall
not be exclusive of any other rights which such person may have or hereafter
acquire under any statute, provision of the Charter or Act of Incorporation,
these By-Laws, agreement, vote of stockholders or disinterested Directors or
otherwise.
(E) Any repeal or modification of the foregoing provisions of
this Article X shall not adversely affect any right or protection hereunder of
any person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
AMENDMENTS TO THE BY-LAWS
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
EXHIBIT C
SECTION 321(b) CONSENT
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: By:
----------------------- -----------------------
Name: Donald G. MacKelcan
Title: Vice President
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has
not been approved by any state banking authorities. Refer to
your appropriate state banking authorities for your state
publication requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- ---------------------------------- ------------------
Name of Bank City
in the State of DELAWARE , at the close of business on September 30, 2002.
------------
ASSETS
Thousands of dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins.................237,157
Interest-bearing balances............................................... 0
Held-to-maturity securities......................................... 14,523
Available-for-sale securities.....................................1,257,664
Federal funds sold in domestic offices..............................257,890
Securities purchased under agreements to resell.....................105,350
Loans and lease financing receivables:
Loans and leases held for sale ......................... 0
Loans and leases, net of unearned income ...............5,476,762
LESS: Allowance for loan and lease losses ............. 78,510
Loans and leases, net of unearned income, allowance,
and reserve ......................................................5,398,252
Assets held in trading accounts...........................................0
Premises and fixed assets (including capitalized leases)............128,457
Other real estate owned................................................ 334
Investments in unconsolidated subsidiaries and associated
companies.............................................................1,597
Customers' liability to this bank on acceptances
outstanding...............................................................0
Intangible assets:
a. Goodwill........................................................... 157
b. Other intangible assets.......................................... 7,633
Other assets....................................................... 133,873
Total assets......................................................7,542,887
CONTINUED ON NEXT PAGE
LIABILITIES
Deposits:
In domestic offices....................................................6,032,697
Noninterest-bearing.......... 946,803
Interest-bearing.............5,085,894
Federal funds purchased in domestic offices............................. 203,600
Securities sold under agreements to repurchase.......................... 245,410
Trading liabilities (from Schedule RC-D).......................................0
Other borrowed money (includes mortgage indebtedness
and obligations under capitalized leases:................................423,673
Bank's liability on acceptances executed and outstanding.......................0
Subordinated notes and debentures..............................................0
Other liabilities (from Schedule RC-G)................................... 71,704
Total liabilities......................................................6,977,084
EQUITY CAPITAL
Perpetual preferred stock and related surplus..................................0
Common Stock.................................................................500
Surplus (exclude all surplus related to preferred stock)..................62,118
a. Retained earnings...................................................490,313
b. Accumulated other comprehensive income.............................. 12,872
Total equity capital.....................................................565,803
Total liabilities, limited-life preferred stock, and
equity capital.........................................................7,542,887
LETTER OF TRANSMITTAL
CONTINENTAL AIRLINES, INC.
OFFER TO EXCHANGE
FLOATING RATE SECURED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
FOR ANY AND ALL OUTSTANDING
FLOATING RATE SECURED NOTES DUE 2007
Pursuant to the Prospectus, dated ____________, 2003.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
____________, 2003, UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME,
ON THE EXPIRATION DATE.
BY MAIL: BY OVERNIGHT DELIVERY OR HAND:
Wilmington Trust Company Wilmington Trust Company
DC-1615 Reorg Services Corporate Trust Reorg Services
PO Box 8861 1100 North Market Street
Wilmington, Delaware 19899-8861 Wilmington, Delaware 19890-1615
FACSIMILE TRANSMISSION:
(302) 636-4145
CONFIRM BY TELEPHONE:
(302) 636-6472
Delivery of this instrument to an address other than as set forth above, or
transmission of instructions via facsimile other than as set forth above, will
not constitute a valid delivery.
The undersigned acknowledges receipt of the Prospectus, dated
[____________], 2003 (the "Prospectus"), of Continental Airlines, Inc., a
Delaware corporation (the "Company"), and this Letter of Transmittal (this
"Letter"), which together constitute the offer (the "Exchange Offer") to
exchange an aggregate principal amount of up to $200,000,000 of the Company's
Floating Rate Secured Notes due 2007, which have been registered under the
Securities Act of 1933, as amended (the "New Notes"), for an equal principal
amount of the Company's outstanding Floating Rate Secured Notes due 2007 (the
"Old Notes"). The Exchange Offer is being made in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement, dated as of December 6, 2002, between the Company and the Initial
Purchaser named therein (the "Registration Rights Agreement").
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note. New Notes will accrue interest at the variable rate per annum set
forth on the cover page of the Prospectus (plus, if applicable, 0.50% during the
period specified in the Registration Rights Agreement), subject to a maximum
rate of 12% applicable only for periods as to which the Company has failed to
pay accrued interest when due and failed to cure such nonpayment, from the most
recent date to which interest has been paid on the Old Notes or, if no interest
has been paid, from the date on which the Old Notes surrendered in exchange
therefor were originally issued (the "Issuance Date"). Interest on the New Notes
is payable on March 6, June 6, September 6 and December 6 of each year,
commencing on March 6, 2003. In the event that the declaration of the
effectiveness by the Securities and Exchange Commission of the registration
statement relating to the Exchange Offer or the shelf registration statement
relating to the sale of the Old Notes (each, a "Registration Event") does not
occur on or prior to the 210th calendar day following the Issuance Date, the
interest rate borne by the Notes shall be increased by 0.50% from and including
such 210th day to but excluding the earlier of (i) the date on which a
Registration Event occurs and (ii) the date on which all of the Notes otherwise
become transferable by Noteholders (other than affiliates or former affiliates
of Continental) without further registration under the Securities Act. In the
event that such 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 borne by the 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 such shelf registration statement again becomes
effective (or, if earlier, the end of such period specified by the Registration
Rights Agreement). The Company reserves the right, at any time or from time to
time, to extend the Exchange Offer at its discretion, in which event the term
"Expiration Date" shall mean the latest time and date to which the Exchange
Offer is extended. The Company shall notify the holders of the Old Notes of any
extension by means of a press release or other public announcement prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
This Letter is to be completed by a holder of Old Notes if Old Notes are to
be forwarded herewith or if a tender of Old Notes, if available, is to be made
by book-entry transfer to the account maintained by Wilmington Trust Company
(the "Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the
procedure set forth in "The Exchange Offer" section of the Prospectus and an
Agent's Message (as defined below) is not delivered. Tenders by book-entry
transfer may also be made by delivering an Agent's Message in lieu of this
Letter. The term "Agent's Message" means a message, transmitted by DTC and
received by the Exchange Agent and forming a part of a Book-Entry Confirmation
(as defined below), that states that DTC has received an express acknowledgment
from a participant tendering Old Notes that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by this
Letter, and that the Company may enforce this Letter against such participant.
Holders of Old Notes whose certificates are not immediately available, or who
are unable to deliver their certificates or confirmation of the book-entry
tender of their Old Notes into the Exchange Agent's account at DTC (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Guaranteed Delivery Procedures" section of the Prospectus. See
Instruction 1. Delivery of documents to DTC does not constitute delivery to the
Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
List below the Old Notes to which this Letter relates. If the space
provided below is inadequate, the certificate numbers and principal amount of
Old Notes should be listed on a separate signed schedule affixed hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES
- --------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESS(ES) CERTIFICATE PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF REGISTERED HOLDER(S) NUMBER(S) OF OLD NOTE(S) TENDERED
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
------------ ------------ ------------
- --------------------------------------------------------------------------------
Need to be completed by Holders of Notes being tendered by book-entry transfer
(see below).
Unless otherwise indicated in this column, it will be assumed that all Notes
represented by certificates delivered to the Exchange Agent are being tendered.
See Instruction 1.
- --------------------------------------------------------------------------------
_
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution:
-----------------------------------------------
Account Number: Transaction Code Number:
------------------ ------------------
By crediting the Old Notes to the Exchange Agent's account at DTC's
Automated Tender Offer Program ("ATOP") and by complying with applicable
ATOP procedures with respect to the Exchange Offer, including transmitting
to the Exchange Agent a computer-generated Agent's Message in which the
holder of the Old Notes acknowledges and agrees to be bound by the terms
of, and makes the representations and warranties contained in, this Letter,
the participant in DTC confirms on behalf of itself and the beneficial
owners of such Old Notes all provisions of this Letter (including all
representations and warranties) applicable to it and such beneficial owner
as fully as if it had completed the information required herein and
executed and transmitted this Letter to the Exchange Agent.
_
|_| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Holder(s):
------------------------------------------------
Window Ticket Number (if any):
--------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------
Name of Institution which Guaranteed Delivery:
----------------------------------
If Delivered by Book-Entry Transfer, Complete the Following:
Account Number: Transaction Code Number:
------------------ ------------------
_
|_| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
---------------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount of Old
Notes indicated above. Subject to, and effective upon, the acceptance for
exchange of the Old Notes tendered hereby, the undersigned hereby sells, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as agent and attorney-in-fact (with full knowledge that the Exchange Agent
also acts as Trustee under the Indenture (each as defined in the Prospectus))
with respect to the tendered Old Notes with full power of substitution to (i)
deliver certificates for such Old Notes to the Company, or transfer ownership of
such Old Notes on the account books maintained by DTC, together, in either such
case, with all accompanying evidences of transfer and authenticity to, or upon
the order of, the Company and (ii) present such Old Notes for transfer on the
books of the registrar and receive all benefits and otherwise exercise all
rights of beneficial ownership of such Old Notes, all in accordance with the
terms of the Exchange Offer. The power of attorney granted in this paragraph
shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Old Notes
tendered hereby and that the Company will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim when the same are accepted by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the holder of such Old Notes nor any such other
person is engaged in, or intends to engage in a distribution of such New Notes,
or has an arrangement or understanding with any person to participate in the
distribution of such New Notes, and that neither the holder of such Old Notes
nor any such other person is an "affiliate", as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company.
The undersigned also acknowledges that this Exchange Offer is being made
based upon the Company's understanding of an interpretation by the staff of the
Securities and Exchange Commission (the "Commission"), as set forth in no-action
letters issued to third parties, that the New Notes issued in exchange for the
Old Notes pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by holders thereof (other than a broker-dealer who
acquires such New Notes directly from the Company for resale pursuant to Rule
144A under the Securities Act or any other available exemption under the
Securities Act or any such holder that is an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act), without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes 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 Notes and have no arrangement with any person to
participate in the distribution of such New Notes. If a holder of Old Notes is
engaged in or intends to engage in a distribution of the New Notes or has any
arrangement or understanding with respect to the distribution of the New Notes
to be acquired pursuant to the Exchange Offer, such holder could 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 resale transaction. If the undersigned is a broker-dealer
that will receive New Notes for its own account in exchange for Old Notes, it
represents that the Old Notes to be exchanged for the New Notes were acquired by
it as a result of market-making activities or other trading activities and
acknowledges that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer -- Withdrawal of Tenders"
section of the Prospectus.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at DTC. Similarly,
unless otherwise indicated under the box entitled "Special Delivery
Instructions" below, please send the New Notes (and, if applicable, substitute
certificates representing Old Notes for any Old Notes not exchanged) to the
undersigned at the address shown above in the box entitled "Description of Old
Notes".
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
- ----------------------------------- -----------------------------------
SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4) (SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if To be completed ONLY if
certificates for Old Note not certificates for Old Notes not
exchanged and/or New Notes are to exchanged and/or New Notes are to
be issued in the name of and sent be sent to someone other than the
to someone other than the person(s) person(s) whose signature(s)
whose signature(s) appear(s) on appear(s) on this letter below, or
this Letter below, or if Old Notes to the undersigned at an address
delivered by book-entry transfer other than shown in the box
which are not accepted for exchange entitled "Description of Old Notes"
are to be returned by credit to an on this Letter above. indicated
account maintained at DTC other above.
than the account indicated above.
Issue New Notes and/or Old Notes to: Mail New Notes and/or Old Notes to:
Name(s): Name(s):
---------------------------- ----------------------------
(Please Type or Print) (Please Type or Print)
---------------------------- ----------------------------
(Please Type or Print) (Please Type or Print)
Address: Address:
---------------------------- ----------------------------
---------------------------- ----------------------------
(Including Zip Code) (Including Zip Code)
- ------------------------------------
Social Security or Employer
Identification Number
Credit unexchanged Old Notes
delivered by book-entry transfer to
DTC account set forth below.
- ------------------------------------
(DTC Account Number,
if applicable)
- ----------------------------------- -----------------------------------
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU
THEREOF (TOGETHER WITH THE CERTIFICATES FOR OLD NOTES OR A BOOK-ENTRY
CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED
DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE.
PLEASE READ THIS LETTER OF TRANSMITTAL CAREFULLY
BEFORE COMPLETING ANY BOX ABOVE.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
Dated: , 2003
-----------------------------
- -------------------------------------------------------------------------------x
- -------------------------------------------------------------------------------x
(Signature(s) of Owner) (Date)
Area Code and Telephone Number:
-------------------------------------------------
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old
Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. See Instruction 3.
Name(s):
------------------------------------------------------------------------
------------------------------------------------------------------------
(Please Type or Print)
Capacity:
-----------------------------------------------------------------------
Address:
------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Including Zip Code)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by an Eligible Institution:
-----------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Title)
- --------------------------------------------------------------------------------
(Name and Firm)
Dated: , 2003
------------------------------
- --------------------------------------------------------------------------------
INSTRUCTIONS
Forming part of the Terms and Conditions of
the Offer to Exchange
Floating Rate Secured Notes due 2007,
which have been registered under the Securities Act of 1933,
for any and all outstanding Floating Rate Secured Notes due 2007.
1. DELIVERY OF THIS LETTER AND OLD NOTES; GUARANTEED DELIVERY PROCEDURES.
This Letter is to be completed by holders of Old Notes if certificates are
to be forwarded herewith or if tenders are to be made pursuant to the procedures
for delivery by book-entry transfer set forth in "The Exchange Offer--Book-Entry
Transfer" section of the Prospectus and an Agent's Message is not delivered.
Tenders by book-entry transfer may also be made by delivering an Agent's Message
in lieu of this Letter. Certificates for all physically tendered Old Notes, or
Book-Entry Confirmation, as the case may be, as well as a properly completed and
duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof)
and any other documents required by this Letter, must be received by the
Exchange Agent at the address set forth herein on or prior to the Expiration
Date, or the tendering holder must comply with the guaranteed delivery
procedures set forth below. Old Notes tendered hereby must be in integral
multiples of $1,000.
Holders of Old Notes whose certificates for Old Notes are not immediately
available or who cannot deliver their certificates and all other required
documents to the Exchange Agent on or prior to the Expiration Date, or who
cannot complete the procedure for book-entry transfer on a timely basis, may
tender their Old Notes pursuant to the guaranteed delivery procedures set forth
in "The Exchange Offer--Guaranteed Delivery Procedures" section of the
Prospectus. Pursuant to such procedures, (i) such tender must be made through an
Eligible Institution (as defined below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or 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 Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within three New York Stock
Exchange trading days after the date of execution of the Notice of Guaranteed
Delivery, the certificates for all physically tendered Old Notes, or a
Book-Entry Confirmation, as the case may be, together with a properly completed
and duly executed Letter (or facsimile thereof or Agent's Message in lieu
thereof) and any other documents required by this Letter will be deposited by
the Eligible Institution with the Exchange Agent, and (iii) the certificates for
all physically tendered Old Notes, in proper form for transfer, or Book-Entry
Confirmation, as the case may be, together with a properly completed and duly
executed Letter (or facsimile thereof or Agent's Message in lieu thereof) and
all other documents required by this Letter, are received by the Exchange Agent
within three New York Stock Exchange trading days after the date of execution of
the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that the mailing be made
sufficiently in advance of the Expiration Date to permit delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section of the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS OF OLD NOTES WHO TENDER BY
BOOK-ENTRY TRANSFER).
If less than all of the Old Notes evidenced by a submitted certificate are
to be tendered, the tendering holder(s) should fill in the aggregate principal
amount of Old Notes to be tendered in the box above entitled "Description of Old
Notes--Principal Amount Tendered". A reissued certificate representing the
balance of nontendered Old Notes will be sent to such tendering holder, unless
otherwise provided in the appropriate box on this Letter, promptly after the
Expiration Date. All of the Old Notes delivered to the Exchange Agent will be
deemed to have been tendered unless otherwise indicated.
3. SIGNATURES ON THIS LETTER, BOND POWERS AND ENDORSEMENTS; GUARANTEE OF
SIGNATURES.
If this Letter is signed by the registered holder of the Old Notes tendered
hereby, the signature must correspond exactly with the name as written on the
face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder of the Old Notes
specified herein and tendered hereby, no endorsements of certificates or
separate bond powers are required. If, however, the New Notes are to be issued,
or any untendered Old Notes are to be reissued, to a person other than the
registered holder, then endorsements of any certificates transmitted hereby or
separate bond powers are required. Signatures on such certificates must be
guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder of
any certificates specified herein, such certificates must be endorsed or
accompanied by appropriate bond powers, in either case signed exactly as the
name of the registered holder appears on the certificates and the signatures on
such certificates must be guaranteed by an Eligible Institution.
If this Letter or any 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,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Old Notes or signatures on bond powers
required by this Instruction 3 must be guaranteed by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., by a commercial bank or trust company
having an office or correspondent in the United States or by an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934 (an "Eligible Institution").
Signatures on this Letter need not be guaranteed by an Eligible
Institution, provided the Old Notes are tendered: (i) by a registered holder of
Old Notes (which term, for purposes of the Exchange Offer, includes any
participant in the DTC system whose name appears on a security position listing
as the holder of such Old Notes) who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on this Letter, or
(ii) for the account of an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS.
Tendering holders of Old Notes should indicate in the applicable box the
name and address to which New Notes issued pursuant to the Exchange Offer and/or
substitute certificates evidencing Old Notes not exchanged are to be issued or
sent, if different from the name or address of the person signing this Letter.
In the case of issuance in a different name, the employer identification or
social security number of the person named must also be indicated. A holder of
Old Notes tendering Old Notes by book-entry transfer may request that Old Notes
not exchanged be credited to such account maintained at DTC as such holder of
Old Notes may designate hereon. If no such instructions are given, such Old
Notes not exchanged will be returned to the name or address of the person
signing this Letter.
5. TAXPAYER IDENTIFICATION NUMBER.
Federal income tax law generally requires that a tendering holder whose Old
Notes are accepted for exchange must provide the Exchange Agent with such
Holders correct Taxpayer Identification Number ("TIN") on Substitute Form W-9
below, which, in the case of a tendering holder who is an individual, is his or
her social security number. If a tendering holder does not provide the Exchange
Agent with its current TIN or an adequate basis for an exemption, such tendering
holder may be subject to backup withholding in an amount currently equal to 30%
of all reportable payments made after the exchange. If withholding results in an
overpayment of taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, (ii) the holder
has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must give the Exchange Agent a completed Form W-8 BEN,
Certificate of Foreign Status. These forms may be obtained from the Exchange
Agent. If the Old Notes are in more than one name or are not in the name of the
actual owner, such holder should consult the W-9 Guidelines for information on
which TIN to report. If such holder does not have a TIN, such holder should
consult the W-9 Guidelines for instructions on applying for a TIN, check the box
in Part 1 of the Substitute Form W-9 and write "applied for" in lieu of its TIN.
Note: checking this box and writing "applied for" on the form means that such
holder has already applied for a TIN or that such holder intends to apply for
one in the near future. If such holder does not provide its TIN to the Exchange
Agent within 60 days, backup withholding will begin and continue until such
holder furnishes its TIN to the Exchange Agent.
6. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the transfer
of Old Notes to it or its order pursuant to the Exchange Offer. If, however, New
Notes and/or substitute Old Notes not exchanged 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 Notes tendered hereby, or if tendered Old Notes are registered
in the name of any person other than the person signing this Letter, or if a
transfer tax is imposed for any reason other than the transfer of Old Notes to
the Company or its order pursuant to the Exchange Offer, 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 herewith, the amount of such
transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it is not necessary for transfer
tax stamps to be affixed to the Old Notes specified in this Letter.
7. WAIVER OF CONDITIONS.
The Company reserves the absolute right to waive satisfaction of any or all
conditions enumerated in the Prospectus.
8. NO CONDITIONAL TENDERS.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of Old Notes, by execution of this Letter, shall
waive any right to receive notice of the acceptance of their Old Notes for
exchange.
Neither the Company, the Exchange Agent nor any other person is obligated
to give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above for further
instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent, at the address and telephone number indicated above.
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
- --------------------------------------------------------------------------------
SUBSTITUTE FORM
W-9
Requestfor Taxpayer Identification Number (TIN) and Certification
Give form to the requester. Do not send to the IRS.
- --------------------------------------------------------------------------------
NAME
---------------------------------------------------------------------------
BUSINESS NAME, IF DIFFERENT FROM ABOVE
-----------------------------------------
CHECK APPROPRIATE BOX:
_ _ _
|_| Individual/Sole proprietor |_| Corporation |_| Partnership
_
|_| Other
----------------------------------------------
ADDRESS:
-----------------------------------------------------------------------
ADDRESS (LINE 2):
--------------------------------------------------------------
_
CHECK THE BOX IF YOU ARE EXEMPT FROM WITHHOLDING |_|
- --------------------------------------------------------------------------------
PART 1 - PLEASE PROVIDE YOUR TIN IN THE BOX BELOW AND CERTIFY BY SIGNING AND
DATING BELOW. For individuals, your TIN is your social security number. However,
for a resident alien, sole proprietor, or disregarded entity, see the W-9
Guidelines. For other entities, it is your employer identification number (EIN).
If you do not have a number, see HOW TO GET A TIN in the W-9 Guidelines.
Tax Identification Number (SSN or EIN)
- ------------------------------------------
NOTE: If the account is in more than one name, see the chart in the W-9
Guidelines on whose number to enter.
- --------------------------------------------------------------------------------
PART 2 - CERTIFICATION
Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer identification number
(or I am waiting for a number to be issued to me), AND
2. I am not subject to backup withholding because: (A) I am exempt from backup
withholding, or (B) I have not been notified by the Internal Revenue
Service (IRS) that I am subject to backup withholding as a result of a
failure to report all interest or dividends, or (C) the IRS has notified me
that I am no longer subject to backup withholding, AND
3. I am a U.S. person (including a U.S. resident alien).
CERTIFICATION INSTRUCTIONS. You must cross out item 2 above if you have been
notified by the IRS that you are currently subject to backup withholding because
you have failed to report all interest and dividends on your tax return.
Signature Date
----------------------------------- -----------------
- --------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN
BACKUP WITHHOLDING OF 30% OF ANY REPORTABLE PAYMENT MADE TO YOU. PLEASE REVIEW
THE W-9 GUIDELINES FOR ADDITIONAL DETAILS.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER--
Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer Identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the Payer.
- ------------------------------------------------------------ ------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE FOR THIS TYPE OF ACCOUNT: GIVE THE EMPLOYER
SOCIAL SECURITY IDENTIFICATION NUMBER OF--
NUMBER OF -- NUMBER OF--
- ------------------------------------------------------------ ------------------------------------------------------------
1. Individual The individual. 6. Sole proprietorship or The owner
single-owner LLC
2. Two or more individuals The actual owner of the 7. A valid trust, trust, The legal entity
(joint account) account or, if combined estate, or pension trust
funds, any one of the
individuals
3. Custodian account of a The minor 8. Corporate or LLC electing The corporation
minor (Uniform Gift to corporate status of Form
Minors Act) 8832
4. a.The usual revocable The grantor-trustee 9. Association, club, The organization
savings trust grantor religious, charitable,
is also trustee) educational or other
tax-exempt organization
b.So-called trust The actual owner
account that is not a
legal or valid trust
under state law
5. Sole proprietorship or The owner 10. Partnership The partnership
single-owner LLC
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as State
or local government,
school district, or
prison) that receives
agricultural program
payments
List first and circle the name of the person whose number you furnish. If only one person on a joint account has an SSN,
that person's number must be furnished.
Circle the minor's name and furnish the minor's social security number.
YOU MUST SHOW YOUR INDIVIDUAL NAME, but you may also enter your business or "DBA" name. You may use either your SSN or EIN
(if you have one).
List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal
representative or trustee unless the legal entity itself is not designated in the account title.)
NOTE:If no name is circled when there is more than one name, the number will be considered to be that of the first name
listed.
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Section references are to the Internal Revenue Code.
HOW TO GET A TIN 1. The treaty country. Generally,
this must be the same treaty under
If you don't have a taxpayer If you which you claimed exemption from
don't have a taxpayer tax as a nonresident alien.
identification number or you don't 2. The treaty article addressing
know your number, obtain Form SS-5, the income.
Application for a Social Security 3. The article number (or
Card, from your local Social location) in the tax treaty that
Security Administration office or contains the saving clause and its
get this form on-line at exceptions.
WWW.SSA.GOV/ONLINE/SS5.HTML. You 4. The type and amount of income
may also get this form by calling that qualifies for the exemption
1-800-772-1213. Use Form W-7 to from tax.
apply for an ITIN (for resident 5. Sufficient facts to justify
aliens not eligible for an SSN), or the exemption from tax under the
Form SS-4, Application for Employer terms of the treaty article.
Identification Number, to apply for
an EIN. You can get Forms SS-4 and PAYEES EXEMPT FROM BACKUP WITHHOLDING
W-7 from the IRS by calling Backup withholding is not required
1-800-TAX-FORM or from the IRS on any payments made to the
website at WWW.IRS.GOV. following payees:
1. An organization exempt from
NONRESIDENT ALIEN WHO BECOMES A tax under section 501(a), any IRA,
RESIDENT ALIEN or a custodial account under
Generally, only a nonresident alien section 403(b)(7) if the account
individual may use the terms of a satisfies the requirements of
tax treaty to reduce or eliminate section 401(f)(2);
U.S. tax on certain types of 2. The United States or any of
income. However, most tax treaties its agencies or instrumentalities;
contain a provision known as a 3. A state, the District of
"saving clause." Exceptions Columbia, a possession of the
specified in the saving clause may United States, or any of their
permit an exemption from tax to political subdivisions or
continue for certain types of instrumentalities;
income even after the recipient has 4. A foreign government or any of
otherwise become a U.S. resident its political subdivisions,
alien for tax purposes. agencies, or instrumentalities; or
5. An international organization
If you are a U.S. resident alien or any of its agencies or
who is relying on an exception instrumentalities.
contained in the saving clause of a
tax treaty to claim an exemption Payments made to the following
from U.S. tax on certain types of payees MAY BE EXEMPT from backup
income, you must attach a statement withholding:
that specifies the following five
items:
6. A corporation; payee, the acquisition or
7. A foreign central bank of abandonment of secured property,
issue; cancellation of debt, or
8. A dealer in securities or contributions made to an IRA or
commodities required to register in Archer MSA. The IRS uses the
the United States, the District of numbers for identification purposes
Columbia, or a possession of the and to help verify the accuracy of
United States; tax returns. The IRS may also
9. A futures commission merchant provide this information to the
registered with the Commodity Department of Justice for civil and
Futures Trading commission; criminal litigation, and to cities,
10. A real estate investment states, and the District of
trust; Columbia to carry out their tax
11. An entity registered at all laws. The IRS may also disclose
times during the tax year under the this information to other countries
Investment Company Act of 1940; under a Tax Treaty or to Federal
12. A common trust fund operated and state agencies to enforce
by a bank under section 584(a); Federal nontax criminal laws and to
13. A financial institution; combat terrorism.
14. A middleman known in the
investment community as a nominee Payees must provide taxpayer
or custodian; or identification numbers whether or
15. A trust exempt from tax under not they are required to file a tax
section 664 or described in return. Payers must generally
section 4947. withhold 30.5% of taxable interest,
INTEREST AND DIVIDEND PAYMENTS. All dividend, and certain other
of the payees listed above, except payments to a payee who does not
for that listed in item 9, are furnish a taxpayer identification
exempt from backup withholding for number to a payer. Certain
interest and dividend payments. penalties may also apply.
BROKER TRANSACTIONS. All of the
payees listed in items 1 through 13 PENALTIES
are exempt if the payment is for (1) FAILURE TO FURNISH TIN. If a
broker transactions. A person payee fails to furnish the
registered under the Investment correct TIN to a payer, he or
Advisors Act of 1940 who regularly she is subject to a penalty of
acts as a broker is also exempt. $50 for each such failure
PAYMENTS REPORTABLE UNDER SECTIONS unless the failure is due to
6041 AND 6041A. These payments are reasonable cause and not to
generally exempt from backup willful neglect.
withholding only if made to payees (2) CIVIL PENALTY FOR FALSE
listed in items 1 through 7. INFORMATION WITH RESPECT TO
BARTER EXCHANGE TRANSACTIONS AND WITHHOLDING A payee who makes
PATRONAGE DIVIDENDS. Only payees false statements with no
listed in items 1 through 5 are reasonable basis that results
exempt from backup withholding on in no backup withholding is
these payments. subject to a $500 penalty.
(3) CRIMINAL PENALTY FOR
Exempt Payees described above FALSIFYING INFORMATION
should file a Substitute Form W-9 Willfully falsifying
to avoid possible erroneous backup certifications or affirmations
withholding. EXEMPT PAYEES SHOULD may subject a payee to
FURNISH THE APPROPRIATE TIN, CHECK criminal penalties including
THE BOX FOR TAXPAYERS EXEMPT FROM fines and/or imprisonment.
BACKUP WITHHOLDING, AND SIGN AND (4) MISUSE OF TINS. If the payer
RETURN THE FORM TO THE PAYER. discloses or uses TINs in
violation of Federal law, the
PRIVACY ACT NOTICE payer may be subject to civil
Section 6109 requires a payee to and criminal penalties.
give his or her correct TIN to
persons who must file information FOR ADDITIONAL INFORMATION CONTACT
returns with the IRS to report YOUR TAX CONSULTANT OR THE INTERNAL
interest, dividends, and certain REVENUE SERVICE
other income paid to the payee,
mortgage interest paid by the
