As filed with the Securities and Exchange Commission on
August 15, 1996
Registration No. 333-09739
=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
Continental Airlines, Inc.
(Exact name of registrant as specified in its charter)
Delaware 74-2099724
(State or other jurisdiction of) (I.R.S. employer
incorporation or organization identification number)
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
(713) 834-2950
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
______________________
Jeffery A. Smisek, Esq.
Senior Vice President, General Counsel and Secretary
Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
(713) 834-2950
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies of correspondence to:
Michael L. Ryan, Esq.
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
______________________
Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this
Registration Statement.
______________________
If the only securities being registered on this Form are
being offered pursuant to dividend or interest reinvestment
plans, please check the following box: [ ]
If any of the securities being registered on this Form are
to be offered on a delayed or continuous basis pursuant to Rule
415 under the Securities Act of 1933, other than the securities
offered only in connection with dividend or interest reinvestment
plans, check the following box. [ X ]
If this Form is filed to register additional securities for
an offering pursuant to Rule 462(b) under the Securities Act,
please check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and
list the Securities Act registration statement number of the
earlier effective registration statement for the same offering.
[ ]
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box. [ ]
______________________
CALCULATION OF REGISTRATION FEE
=================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
OFFERING AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE PRICE PER OFFERING
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT(2) PRICE(2)
_________________________________________________________________
Class B common stock, par
value $.01 per share, of
Continental Airlines, Inc.
offered by Selling
Securityholders(3) 4,000 $23.4375 $93,750
=================================================================
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
_________________________________________________________________
Class B common stock, par
value $.01 per share, of
Continental Airlines, Inc.
offered by Selling
Securityholders(3) $33
(1) The Company previously registered shares of Class A common stock,
Class B common Stock and Warrants to purchase such stock having a
proposed maximum aggegate offering price of $756,346,920 on which
the applicable fee was paid.
(2) Estimated solely for the purpose of computing the
registration fee in accordance with Rule 457(c) of the
Securities Act of 1933, as amended, and based on the
average high and low trading prices of the Class B common
stock on the New York Stock Exchange, Inc. on August 13, 1996.
(3) Selling Securityholders include principal stockholders of
the Registrant and their partners and affiliates, certain
directors and officers of the Registrant and affiliates of
any of the foregoing.
______________________
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.
=================================================================
<PAGE>
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
X Information contained herein is subject to completion or X
X amendment. A registration statement relating to these securities X
X has been filed with the Securities and Exchange Commission. X
X These securities may not be sold nor may offers to buy be X
X accepted prior to the time the registration statement becomes X
X effective. This prospectus shall not constitute an offer to sell X
X or the solicitation of an offer to buy nor shall there be any X
X sale of these securities in any State in which such offer, X
X solicitation or sale would be unlawful prior to registration or X
X qualification under the securities laws of any State. X
X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X
SUBJECT TO COMPLETION DATED AUGUST 15, 1996
PROSPECTUS
Continental Airlines, Inc.
8,543,868 Shares of
Class A Common Stock
21,669,759 Shares of
Class B Common Stock
3,039,468 Class A Warrants
6,765,264 Class B Warrants
Continental Airlines, Inc., a Delaware corporation
("Continental" or the "Company") may offer from time to time up
to 2,500,000 shares (the "Company Shares") of its Class B common
stock, par value $.01 per share (the "Class B common stock"), in
amounts, at prices and on terms to be determined at the time of
the offering thereof in connection with its obligations under a
Warrant Purchase Agreement dated May 2, 1996 (the "Warrant
Purchase Agreement") with one of its principal stockholders. The
Company Shares may be issued in one or more issuances, the
aggregate net proceeds of which (the net proceeds being the
aggregate offering price decreased by any underwriting discounts
and commissions, any selling discounts and any expenses
incidental to the sale of the Company Shares) will not exceed
$50,000,000. See "Use of Proceeds."
The Selling Securityholders (as defined below) may
offer from time to time up to 8,543,868 shares (3,039,468 shares
of which are issuable pursuant to the exercise of Class A Warrants (as
defined below)) of Class A common stock, par value $.01 per share
(the "Class A common stock" and together with the Class B common
stock, the "Common Stock"), up to 19,169,759 shares (6,765,264
shares of which are issuable pursuant to the exercise of Class B
Warrants (as defined below)) of Class B common stock (collectively,
the "Selling Securityholder Shares"), up to 2,298,134 warrants, each
entitling the holder thereof to purchase one share of Class A
common stock for $7.50 per share and up to 741,334 warrants, each
entitling the holder thereof to purchase one share of Class A
common stock for $15.00 per share (collectively, the "Class A
Warrants"), and up to 5,115,200 warrants, each entitling the
holder thereof to purchase one share of Class B common stock for
$7.50 per share, and up to 1,650,064 warrants, each entitling the
holder thereof to purchase one share of Class B common stock for
$15.00 per share, (collectively, the "Class B Warrants" and
together with the Class A Warrants, the "Warrants"). The
Warrants will expire if not exercised by April 27, 1998. The
Selling Securityholder Shares and the Warrants may also be
offered and sold from time to time by certain principal
stockholders of the Company and their respective partners
and affiliates, certain officers and directors of the Company
and affiliates of any of the foregoing, each as named herein
(collectively, the "Selling Securityholders") pursuant
to this Prospectus. The Class A common stock and the Class B
common stock are listed on the New York Stock Exchange ("NYSE")
under the symbols CAI.A and CAI.B, respectively. The Company
has applied for listing of the Warrants on the NYSE; however,
the Company has been informed by the NYSE that unless and until
the Warrants are held by the requisite number of holders, they
will not be approved for listing. See "Description of Warrants
- -- Listing." The Company does not expect an active trading
market to develop for the Warrants at this time. The Company
Shares, the Selling Securityholder Shares and the Warrants are
collectively referred to herein as the "Offered Securities."
The Offered Securities may be sold by the Company or
the Selling Securityholders from time to time directly to
purchasers or through agents, underwriters or dealers. See "Plan
of Distribution" and "Selling Securityholders." If required, the
names of any such agents or underwriters involved in the sale of
the Offered Securities and the applicable agent's commission,
dealer's purchase price or underwriter's discount, if any, will
be set forth in an accompanying supplement to this Prospectus
(the "Prospectus Supplement"). The Selling Securityholders will
receive all of the net proceeds from their sales of the Offered
Securities and will pay all underwriting discounts and selling
commissions, if any, applicable to any such sale. The Company is
responsible for payment of all other expenses incident to the
offer and sale of the Offered Securities. The Selling
Securityholders and any broker-dealers, agents or underwriters
that participate in the distribution of the Offered Securities
may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commission received by them and any
profit on the resale of the Offered Securities purchased by them
may be deemed to be underwriting commissions or discounts under
the Securities Act of 1933, as amended (the "Securities Act").
See "Plan of Distribution" for a description of indemnification
arrangements.
Prospective investors should carefully consider the
matters discussed under the caption "Risk Factors" commencing on
page 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports,
proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at
the following public reference facilities maintained by the
Commission: Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Suite 1300, Seven World Trade Center, New
York, New York 10048; and The Citicorp Center, Suite 1400, 500
West Madison Street, Chicago, Illinois 60661. Copies of such
material may also be obtained from the Public Reference Section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed
rates. The Commission maintains a Web site at http://www.sec.gov
containing reports, proxy and information statements and other
information regarding registrants that file electronically with
the Commission, including the Company. In addition, reports,
proxy statements and other information concerning Continental may
be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, New York 10005.
Continental is the successor to Continental Airlines
Holdings, Inc. ("Holdings"), which merged with and into
Continental on April 27, 1993. Holdings had also been subject to
the informational requirements of the Exchange Act.
This Prospectus constitutes a part of a registration
statement on Form S-3 (together with all amendments and exhibits,
the "Registration Statement") filed by Continental with the
Commission under the Securities Act with respect to the
securities offered hereby. This Prospectus omits certain of the
information contained in the Registration Statement, and
reference is hereby made to the Registration Statement for
further information with respect to Continental and Holdings and
the securities offered hereby. Although statements concerning and
summaries of certain documents are included herein, reference is
made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission.
These documents may be inspected without charge at the office of
the Commission at Judiciary Plaza, 450Fifth Street, N.W.,
Washington, D.C. 20549, and copies may be obtained at fees and
charges prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission (File
No. 0-9781) are hereby incorporated by reference in this
Prospectus: (i) Continental's Annual Report on Form 10-K for the
year ended December 31, 1995 (as amended by Forms 10-K/A1 and 10-
K/A2 filed on March 8, 1996 and April 10, 1996, respectively),
(ii) the description of Common Stock contained in
Continental's registration statement (Registration No.
0-21542) on Form 8-A, and any amendment or report filed for the
purpose of updating such description, (iii) Continental's
Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996 and June 30, 1996 and (iv) Continental's Current Reports on
Form 8-K, filed on January 31, 1996, March 26, 1996, May 7, 1996,
June 27, 1996 and July 22, 1996.
All reports and any definitive proxy or information
statements filed by Continental pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the
Offered Securities shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated herein by
reference, or contained in this Prospectus, shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not
be deemed, except as so modified or superseded, to constitute a
part of this Prospectus.
Continental will provide without charge to each person
to whom this Prospectus is delivered, upon the written or oral
request of such person, a copy of any or all documents
incorporated herein by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such documents
should be directed to Continental Airlines, Inc., 2929 Allen
Parkway, Suite 2010, Houston, Texas 77019, Attention: Secretary,
telephone (713) 834-2950.
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF THE OFFERED SECURITIES SHOULD
CAREFULLY REVIEW THE INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS AND SHOULD PARTICULARLY CONSIDER THE FOLLOWING
MATTERS.
Risk Factors Relating to the Company
Continental's History of Operating Losses
Although Continental recorded net income of $224
million in 1995 and $255 million in the six months ended June 30,
1996, it had experienced significant operating losses in the
previous eight years. In the long term, Continental's viability
depends on its ability to sustain profitable results of
operations.
Leverage and Liquidity
Continental has successfully negotiated a variety of
agreements to increase its liquidity during 1995 and 1996.
Nevertheless, Continental remains more leveraged and has
significantly less liquidity than certain of its competitors,
several of whom have available lines of credit and/or significant
unencumbered assets. Accordingly, Continental may be less able
than certain of its competitors to withstand a prolonged
recession in the airline industry.
As of June 30, 1996, Continental and its consolidated
subsidiaries had approximately $1.7 billion (including current
maturities) of long-term indebtedness and capital lease
obligations and had approximately $867 million of minority
interest, Continental-obligated mandatorily redeemable
preferred securities of subsidiary trust, redeemable
warrants, redeemable preferred stock and common stockholders'
equity. Common stockholders' equity reflects the adjustment of
the Company's balance sheet and the recording of assets and
liabilities at fair market value as of April 27, 1993 in
accordance with fresh start reporting.
During the first and second quarters of 1995, in
connection with negotiations with various lenders and lessors,
Continental ceased or reduced contractually required payments
under various agreements, which produced a significant number of
events of default under debt, capital lease and operating lease
agreements. Through agreements reached with the various lenders
and lessors, Continental has cured all of these events of default.
The last such agreement was put in place during the fourth
quarter of 1995.
As of June 30, 1996, Continental had approximately $825
million of cash and cash equivalents, including restricted cash
and cash equivalents of $104 million. Continental does not have
general lines of credit and has significant encumbered assets.
Continental had firm commitments with The Boeing
Company ("Boeing") to take delivery of 43 new jet aircraft during
the years 1997 through 2002 with an estimated aggregate cost of
$2.6 billion. Continental has recently amended the terms of its
commitments with Boeing to take delivery of a total of 61 jet
aircraft during the years 1997 through 2003 with options for an
additional 23 aircraft. The estimated aggregate cost of the
firm-committment aircraft is $2.7 billion. These amendments changed
the aircraft mix and timing of delivery of aircraft, in order to
more closely match Continental's anticipated future aircraft needs.
Inaddition, the Company took delivery of three Beech 1900-D
aircraft in the second quarter of 1996 and an additional four
such aircraft are scheduled to be delivered later in 1996. The
Company currently anticipates that the firm financing commitments
available to it with respect to its acquisition of new aircraft
from Boeing and Beech Acceptance Corporation ("Beech") will be
sufficient to fund all new aircraft deliveries scheduled during
1996, and that it will have remaining financing commitments from
aircraft manufacturers of $676 million for jet aircraft
deliveries beyond 1996. However, the Company believes that
further financing will be needed to satisfy the remaining amount
of such capital commitments. There can be no assurance that
sufficient financing will be available for all aircraft and other
capital expenditures not covered by firm financing commitments.
Continental has also entered into letters of intent or agreements
with several outside parties to lease four DC10-30 aircraft and
to purchase three DC10-30 aircraft. These seven aircraft are
expected to be delivered by mid-year 1997, and Continental
expects to finance the aircraft to be purchased from available
cash or from third party sources. The Company's wholly-owned
subsidiary, Continental Express, Inc. ("Express"), is in
discussions with aircraft manufacturers regarding the leasing by
Express of regional jet aircraft, which the Company anticipates
would be accounted for as operating leases.
For 1996, Continental expects to incur cash
expenditures under operating leases relating to aircraft
of approximately $568 million, compared with $521 million for 1995,
and approximately $229 million relating to facilities and other
rentals, the same amount as for 1995. In addition, Continental
has capital requirements relating to compliance with regulations
that are discussed below. See "--Regulatory Matters."
Continental's 91%-indirect owned subsidiary,
Continental Micronesia, Inc. ("CMI"), recently consummated a $320
million secured term loan financing with a group of banks and
other financial institutions. The loan was made in two tranches -
- - a $180 million five-year amortizing term loan and a $140
million seven-year amortization extended loan. Each tranche bears
interest at a floating rate. The loan is secured by the stock of
CMI and substantially all its unencumbered assets, consisting
primarily of CMI's route authorities, and is guaranteed by
Continental and Air Micronesia, Inc. (CMI's parent company).
CMI used the net proceeds of the financing to prepay
$160 million in principal amount of indebtedness to an affiliate
of General Electric Company (General Electric Company and
affiliates, collectively "GE") and to pay transaction costs, and
Continental used the $136 million in proceeds received by it as
an indirect dividend from CMI, together with approximately $28
million of cash on hand, to prepay approximately $164 million in
principal amount of indebtedness to GE. The bank financing does
not contain any restrictive covenants at the Continental parent
level, and none of the assets of Continental Airlines, Inc.
(other than its stock in Air Micronesia, Inc.) is pledged in
connection with the new financing.
The bank financing contains significant financial
covenants relating to CMI, including maintenance of a minimum
fixed charge coverage ratio, a minimum consolidated net worth and
minimum liquidity, and covenants restricting CMI's leverage, its
incurrence of certain indebtedness and its pledge of assets. The
financial covenants also limit the ability of CMI to pay
dividends to Continental.
On July 2, 1996, the Company announced its plan to
expand its gates and related facilities in Terminal B as well as
planned improvements at Terminal C at Continental's Houston
Intercontinental Airport hub. The expansion is expected to cost
approximately $115 million, which the Company expects will be
funded principally by the issuance of tax-exempt debt by the
applicable municipal authority. In connection therewith, the
Company expects to enter into long-term leases (or amendments to
existing leases) with the applicable municipal authority
containing rental payments sufficient to service the related tax-
exempt debt.
Aircraft Fuel
Since fuel costs constitute a significant portion of
Continental's operating costs (approximately 12.5% for the year
ended December 31, 1995 and 12.8% for the six months ended June
30, 1996), significant changes in fuel costs would materially
affect the Company's operating results. Fuel prices continue to
be susceptible to international events, and the Company cannot
predict near or longer-term fuel prices. The Company has entered
into petroleum option contracts to provide some short-term
protection (currently approximately six months) against a sharp
increase in jet fuel prices. In the event of a fuel supply
shortage resulting from a disruption of oil imports or otherwise,
higher fuel prices or curtailment of scheduled service could
result.
Certain Tax Matters
The Company's United States federal income tax return
reflects net operating loss carryforwards ("NOLs") of $2.5
billion, subject to audit by the Internal Revenue Service, of
which $1.2 billion are not subject to the limitations of Section
382 of the Internal Revenue Code ("Section 382"). As a result,
the Company will not pay United States federal income taxes
(other than alternative minimum tax) until it has recorded
approximately an additional $1.2 billion of taxable income
following December 31, 1995. For financial reporting purposes,
Continental began accruing tax expense on its income statement
during the second quarter of 1996. Section 382 imposes
limitations on a corporation's ability to utilize NOLs if it
experiences an "ownership change." In general terms, an
ownership change may result from transactions increasing the
ownership of certain stockholders in the stock of a corporation
by more than 50 percentage points over a three-year period. The
sale of the Company's common stock in the Secondary Offering (as
defined in and described under "Recent Developments") gave rise
to an increase in percentage ownership by certain stockholders
for this purpose. Based upon the advice of its counsel, Cleary,
Gottlieb, Steen & Hamilton, the Company believes that such
percentage increase did not give rise to an ownership change
under Section 382. However, no assurance can be given that
future transactions, whether within or outside the control of the
Company, will not cause a change in ownership, thereby
substantially limiting the potential utilization of the NOLs in a
given future year. In the event that an ownership change should
occur, utilization of Continental's NOLs would be subject to an
annual limitation under Section 382 determined by multiplying the
value of the Company's stock (including both common and preferred
stock) at the time of the ownership change by the applicable
long-term tax exempt rate (which was 5.78% for June 1996).
Unused annual limitations may be carried over to later years, and
the amount of the limitation may under certain circumstances be
increased by the built-in gains in assets held by the Company at
the time of the change that are recognized in the five-year
period after the change. Under current conditions, if an
ownership change were to occur, Continental's NOL utilization
would be limited to approximately $100 million per year.
In connection with the Company's 1993 reorganization
under Chapter 11 of the U.S. bankruptcy code effective April 27,
1993 (the "Reorganization") and the recording of assets and
liabilities at fair market value under the American Institute of
Certified Public Accountants' Statement of Position 90-7--
"Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code" ("SOP 90-7"), the Company recorded a deferred
tax liability at April 27, 1993, net of the amount of the
Company's estimated realizable NOLs as required by Statement of
Financial Accounting Standards No. 109--"Accounting for Income
Taxes." Realization of a substantial portion of the Company's
NOLs will require the completion during the five-year period
following the Reorganization of transactions resulting in
recognition of built-in gains for federal income tax purposes.
The Company has consummated one such transaction, which had the
effect of realizing approximately 40% of the built-in gains
required to be realized over the five-year period, and currently
intends to consummate one or more additional transactions. If the
Company were to determine in the future that not all such
transactions will be completed, an adjustment to the net deferred
tax liability of up to $116 million would be charged to income in
the period such determination was made.
CMI
CMI's operating profit margins have consistently been
greater than the Company's margins overall. In addition to its
non-stop service between Honolulu and Tokyo, CMI's operations
focus on the neighboring islands of Guam and Saipan, resort
destinations that cater primarily to Japanese travelers. Because
the majority of CMI's traffic originates in Japan, its results of
operations are substantially affected by the Japanese economy and
changes in the value of the yen as compared to the dollar.
Appreciation of the yen against the dollar during 1993 and 1994
increased CMI's profitability and a decline of the yen against
the dollar may be expected to decrease it. To reduce the
potential negative impact on CMI's dollar earnings, CMI from time
to time purchases average rate options as a hedge against a
portion of its expected net yen cash flow position. Any
significant and sustained decrease in traffic or yields to and
from Japan could materially adversely affect Continental's
consolidated profitability.
Principal Stockholders
As of July 31, 1996, Air Canada held approximately
10.0% of the common equity interests and 4.0% of the general
voting power of the Company, and Air Partners, L.P. ("Air
Partners") held approximately 9.8% of the common equity interests
and 39.3% of the general voting power of the Company. In
addition, assuming exercise of all of the warrants held by Air
Partners, approximately 23.3% of the common equity interests and
52.1% of the general voting power would be held by Air Partners.
As discussed in "Recent Developments," Air Canada has announced
its intention to divest its interest in the Company during December
1996 or early 1997, subject to market conditions. At any time after
January 1, 1997, shares of Class A common stock may be freely converted
into an equal number of shares of Class B common stock. Such conversion
would effectively increase the relative voting power of those Class A
stockholders who do not convert. See "Recent Developments,"
"Principal Stockholders," "Selling Securityholders" and
"Description of Capital Stock."
Various provisions in the Company's Amended and
Restated Certificate of Incorporation (the "Certificate of
Incorporation") and Bylaws (the "Bylaws") currently provide Air
Partners with the right to elect one-third of the directors in
certain circumstances; these provisions could have the effect of
delaying, deferring or preventing a change in control of the
Company. See "Recent Developments" and "Description of Capital
Stock."
Risk Factors Relating to the Airline Industry
Industry Conditions and Competition
The airline industry is highly competitive and
susceptible to price discounting. The Company has in the past
both responded to discounting actions taken by other carriers and
initiated significant discounting actions itself. Continental's
competitors include carriers with substantially greater financial
resources, as well as smaller carriers with lower cost
structures. Airline profit levels are highly sensitive to, and
during recent years have been severely impacted by, changes in
fuel costs, fare levels (or "average yield") and passenger
demand. Passenger demand and yields have been adversely affected
by, among other things, the general state of the economy,
international events and actions taken by carriers with respect
to fares. From 1990 to 1993, these factors contributed to the
domestic airline industry's incurring unprecedented losses.
Although fare levels have increased recently, significant
industry-wide discounts could be reimplemented at any time, and
the introduction of broadly available, deeply discounted fares by
a major United States airline would likely result in lower yields
for the entire industry and could have a material adverse effect
on the Company's operating results.
The airline industry has consolidated in past years as
a result of mergers and liquidations and may further consolidate
in the future. Among other effects, such consolidation has
allowed certain of Continental's major competitors to expand (in
particular) their international operations and increase their
market strength. Furthermore, the emergence in recent years of
several new carriers, typically with low cost structures, has
further increased the competitive pressures on the major United
States airlines. In many cases, the new entrants have initiated
or triggered price discounting. Aircraft, skilled labor and gates
at most airports continue to be readily available to start-up
carriers. Although management believes that Continental is better
able than some of its major competitors to compete with fares
offered by start-up carriers because of its lower cost structure,
competition with new carriers or other low cost competitors on
Continental's routes could negatively impact Continental's
operating results.
Regulatory Matters
In the last several years, the United States Federal
Aviation Administration (the "FAA") has issued a number of
maintenance directives and other regulations relating to, among
other things, retirement of older aircraft, collision avoidance
systems, airborne windshear avoidance systems, noise abatement,
commuter aircraft safety and increased inspections and
maintenance procedures to be conducted on older aircraft. The
Company expects to continue incurring expenses for the purpose of
complying with the FAA's noise and aging aircraft regulations. In
addition, several airports have recently sought to increase
substantially the rates charged to airlines, and the ability of
airlines to contest such increases has been restricted by federal
legislation, U.S. Department of Transportation regulations and
judicial decisions.
Management believes that the Company benefited
significantly from the expiration of the aviation trust fund tax
(the "ticket tax") on December 31, 1995, although the amount of
any such benefit resulting directly from the expiration of the
ticket tax cannot precisely be determined. In early August 1996,
the Congress had approved legislation which would reinstate the
ticket tax until December 31, 1996, and such legislation was
being enrolled for submission to the President of the United
States for his signature. Reinstatement of the ticket tax will
occur seven days after the President signs the authorizing
legislation. Management believes that the reimposition of the
ticket tax will have a negative impact on the Company, although
the amount of such negative impact directly resulting from the
reimposition of the ticket tax cannot be precisely determined.
Additional laws and regulations have been proposed from
time to time that could significantly increase the cost of
airline operations by imposing additional requirements or
restrictions on operations. Laws and regulations have also been
considered that would prohibit or restrict the ownership and/or
transfer of airline routes or takeoff and landing slots. Also,
the availability of international routes to United States
carriers is regulated by treaties and related agreements between
the United States and foreign governments that are amendable.
Continental cannot predict what laws and regulations may be
adopted or their impact, but there can be no assurance that laws
or regulations currently proposed or enacted in the future will
not adversely affect the Company.
<PAGE>
THE COMPANY
Continental Airlines, Inc. is a major United States air
carrier engaged in the business of transporting passengers, cargo
and mail. Continental is the fifth largest United States airline
(as measured by revenue passenger miles in the first six months
of 1996) and, together with Express and CMI, serves 190 airports
worldwide.
The Company operates its route system primarily through
domestic hubs at Newark, Houston Intercontinental and Cleveland,
and a Pacific hub on Guam and Saipan. Each of Continental's
three U.S. hubs is located in a large business and population
center, contributing to a high volume of "origin and destination"
traffic. The Guam/Saipan hub is strategically located to provide
service from Japanese and other Asian cities to popular resort
destinations in the western Pacific. Continental is the primary
carrier at each of these hubs, accounting for 52%, 79%, 53% and
72% of all daily jet departures, respectively.
Continental directly serves 131 U.S. cities, with
additional cities (principally in the western and southwestern
United States) connected to Continental's route system under
agreements with America West Airlines, Inc. ("America West").
Internationally, Continental flies to 59 destinations and offers
additional connecting service through alliances with foreign
carriers. Continental operates 66 weekly departures to six
European cities and markets service to four other cities through
code-sharing agreements. Continental recently announced new
service from Newark to Lisbon, Portugal which is scheduled to
commence May 1, 1997. Continental is one of the leading airlines
providing service to Mexico and Central America, serving more
destinations in Mexico than any other United States airline. In
addition, Continental flies to four cities in South America.
Through its Guam/Saipan hub, Continental provides extensive
service in the western Pacific, including service to more
Japanese cities than any other United States carrier.
The Company is a Delaware corporation. Its executive
offices are located at 2929 Allen Parkway, Suite 2010, Houston,
Texas 77019, and its telephone number is (713) 834-2950.
RECENT DEVELOPMENTS
Stock Split
On June 26, 1996, the Board of Directors of the Company
declared a two-for-one stock split (the "Stock Split") pursuant
to which (a) one share of the Company's Class A common stock was
issued for each share of Class A common stock outstanding on July
2, 1996 (the "Record Date") and (b) one share of the Company's
Class B common stock was issued for each share of Class B common
stock outstanding on the Record Date. Shares issuable pursuant
to the Stock Split were distributed on or about July 16, 1996.
Corporate Governance
On June 26, 1996, at the Company's annual meeting of
stockholders (the "Annual Meeting"), the Company's stockholders
approved changes proposed by the Company to its Certificate of
Incorporation, which, together with amendments to the Company's
Bylaws previously approved by the Company's Board of Directors
(collectively, the "Amendments"), generally eliminate special
classes of directors (except for Air Partners' right to elect
one-third of the directors in certain circumstances as described
below) and supermajority provisions, and make a variety of other
modifications aimed at streamlining the Company's corporate
governance structure. The amendments to the Company's
Certificate of Incorporation included elimination of Class C
common stock, par value $.01 per share (the "Class C common stock"),
of the Company as an authorized class of capital stock and changed
the rights of holders of Class D common stock, par value $.01
per share(the"Class D common stock"), with respect to election of
directors--holders of Class D common stock will now be entitled to
elect one-third of the directors. Pursuant to the Certificate of
Incorporation, Class D common stock is solely issuable to Air
Partners and certain of its affiliates. There is currently no
Class D common stock outstanding. The Amendments, as a whole,
reflect the reduction of Air Canada's equity interest in the
Company, as described below, and the decision of the former
directors designated by Air Canada not to stand for reelection,
along with the expiration of various provisions of the Company's
Certificate of Incorporation and Bylaws specifically included at
the time of the Company's reorganization in 1993.
The Amendments also provide that, at any time after
January 1, 1997, shares of Class A common stock may be freely
converted into an equal number of shares of Class B common stock.
Under agreements put in place at the time of the Company's
reorganization in 1993 and designed in part to ensure compliance
with the foreign ownership limitations applicable to United
States air carriers, in light of the substantial stake in the
Company then held by Air Canada, holders of Class A common stock
were not permitted under the Company's Certificate of
Incorporation to convert their shares to Class B common stock.
In recent periods, the market price of Class A common stock has
generally been below the market price of Class B common stock,
which the Company believes is attributable in part to the reduced
liquidity present in the trading market for Class A common stock.
A number of Class A stockholders requested that the Company
provide for free convertibility of Class A common stock into
Class B common stock, and in light of the reduction of Air
Canada's equity stake, the Company determined that the
restriction was no longer necessary. Any such conversion would
effectively increase the relative voting power of those Class A
stockholders who do not convert.
On April 19, 1996, the Company's Board of Directors
approved certain agreements (the "Agreements") with its two major
stockholders, Air Canada and Air Partners. The Agreements
contain a variety of arrangements intended generally to reflect
the intention that Air Canada has expressed to the Company of
divesting its investment in Continental during December 1996 or
early 1997, subject to market conditions. Air Canada has indicated
to the Company that its original investment in Continental has become
less central to Air Canada in light of other initiatives it has
undertaken --particularly expansion within Canada and exploitation of
the 1995 Open Skies agreement to expand Air Canada's own flights into
theU.S. Because of these initiatives Air Canada has determined it
appropriate to redeploy the funds invested in the Company into
other uses in Air Canada's business. The Agreements also reflect
the distribution by Air Partners, effective March 29, 1996, to
its investors (the "AP Investors") of all of the shares of the
Class B common stock held by Air Partners and the desire of some
of the AP Investors to realize the increase in value of their
investment in the Company by selling all or a portion of their
shares of Class B common stock.
Among other things, the Agreements required the Company
to file a registration statement under the Securities Act to
permit the sale by Air Canada of 2,200,000 shares of Class B
common stock held by it and by certain of the AP Investors of an
aggregate of 1,730,240 (each on a pre-Stock Split basis) such
shares pursuant to an underwritten public offering arranged by
the Company (the "Secondary Offering"). The Secondary Offering
was completed on May 14, 1996. The Agreements provided for the
following additional steps to be taken in connection with the
completion of the Secondary Offering:
o in light of its reduced equity stake in the Company,
Air Canada was no longer entitled to designate nominees
to the Board of Directors of the Company, caused the
four then-present or former members of the Air Canada
board who served as directors of Continental to decline
nomination for reelection as directors and converted
all of its Class A common stock to Class B common
stock;
o Air Canada and Air Partners entered into a number of
agreements restricting, prior to December 16, 1996,
further disposition of the common stock of the Company
held by either of them; and
o each of the existing Stockholders' Agreement and the
registration rights agreement (the ("Original
Registration Rights Agreement") among the parties was
modified in a number of respects to reflect, among
other matters, the changing composition of the
respective equity interests of the parties.
After such sale and the conversion by Air Canada of its
Class A common stock into Class B common stock, Air Canada holds
approximately 10.0% of the common equity interests and 4.0% of
the general voting power of the Company, and Air Partners holds
approximately 9.8% of the common equity interests and 39.3% of
the general voting power of the Company. If all of the warrants
held by Air Partners were exercised, approximately 23.3% of the
common equity interests and 52.1% of the general voting power
would be held by Air Partners.
The Company and Air Canada also entered into a
memorandum of understanding, subject to the fulfillment of
certain conditions, regarding modifications to certain of
the Company's existing "synergy" agreements with Air Canada,
which covered items such as maintenance and ground facilities,
and resolved certain outstanding commercial issues under the
agreements. In May 1996, the Company entered into an agreement
with Air Partners for the sale by Air Partners to the Company
from time to time at Air Partners' election for the one-year
period beginning August 15, 1996, of up to an aggregate of $50
million in intrinsic value (then-current Class B common stock
price minus exercise price) of Air Partners' Class B Warrants
pursuant to the Warrant Purchase Agreement. The purchase price
would be payable in cash. The Board of Directors has authorized
the Company to publicly issue up to $50 million in net proceeds of
Class B common stock in connection with any such purchase.
The Registration Statement of which this Prospectus forms a part
registers the Company Shares for that purpose. In connection
with this agreement, the Company has reclassified $50 million
from common equity to redeemable warrants.
Because certain aspects of the Agreements raised issues
under the change in control provisions of certain of the
Company's employment agreements and employee benefit plans, these
agreements and plans were modified to provide a revised change of
control definition that the Company believes is appropriate in
light of the prospective changes to its equity ownership
structure. In connection with the modifications, payments were
made to certain employees, benefits were granted to certain
employees and options equal to 10% of the amount of the options
previously granted to each optionee were granted (subject to
certain conditions) to substantially all employees holding
outstanding options.
USE OF PROCEEDS
Except as may otherwise be set forth in the applicable
Prospectus Supplement, the net proceeds from the sale of the
Company Shares will be used by the Company to purchase any Class
B Warrants put to the Company under the Warrant Purchase
Agreement. The Company will not receive any of the proceeds from
the sale of the Offered Securities by the Selling
Securityholders.
<PAGE>
MARKET PRICE OF COMMON STOCK AND DIVIDENDS
The Class A common stock and the Class B common stock
are listed for trading on the NYSE, which is its principal
market. As of July 31, 1996, there were approximately 3,740 and
12,431 holders of record of Continental's Class A common stock
and Class B common stock, respectively.
The Company has not paid any cash dividends on its
common stock and has no current intention of paying dividends on
its common stock.
The table below shows the quarterly high and low sales
prices for the Company's Class A common stock and Class B common
stock as reported on the NYSE since January 1, 1994. All such
prices have been adjusted for the Company's Stock Split.
Class A Common Class B Common
Stock Price Stock Price
-------------- --------------
Period High Low High Low
- ------ ---- --- ---- ---
1994
First Quarter $15-3/8 $9-3/8 $13-5/8 $8-7/16
Second Quarter 10-1/2 6-3/4 9-7/8 5-5/8
Third Quarter 11-1/8 7 10-3/4 6-1/2
Fourth Quarter 9-1/4 4-1/16 9-1/16 3-3/4
1995
First Quarter 6-1/16 3-1/2 6-1/8 3-1/4
Second Quarter 12-7/8 5-3/16 12-7/8 5-5/16
Third Quarter 19-7/8 11-9/16 20-1/16 11-11/16
Fourth Quarter 23-7/16 17-3/16 23-3/4 17-3/8
1996
First Quarter 27 19-1/8 28-3/16 19-7/16
Second Quarter 31-1/16 25-7/8 31-7/16 26-9/16
Third Quarter (through 31 22-1/4 31-1/8 22-1/4
August 13)
The last reported sale prices for the Company's Class A
common stock and Class B common stock on the NYSE on August 13,
1996 were $23-1/4 and $23-5/8, respectively.
<PAGE>
SELECTED FINANCIAL DATA
The following tables set forth selected financial data
of (i) the Company for the three and six months ended
June 30, 1996 and 1995, the years ended December 31, 1995 and
1994 and the period from April 28, 1993 through December 31, 1993
and (ii) Holdings for the period from January 1, 1993 through
April 27, 1993. The consolidated financial data of both the
Company, for the years ended December 31, 1995 and 1994 and for
the period from April 28, 1993 through December 31, 1993, and
Holdings, for the period from January 1, 1993 through April 27,
1993, are derived from their respective audited consolidated
financial statements. On April 27, 1993, in connection with the
Reorganization, the Company adopted fresh start reporting in
accordance with SOP 90-7. A vertical black line is shown in the
table below to separate Continental's post-reorganized
consolidated financial data from the pre-reorganized consolidated
financial data of Holdings since they have not been prepared on a
consistent basis of accounting. The consolidated financial data
of the Company for the three and six months ended June
30, 1996 and 1995 are derived from its unaudited consolidated
financial statements, which include all adjustments (consisting
solely of normal recurring accruals) that the Company considers
necessary for the presentation of the financial position and
results of operations for these periods. Operating results for
the six months ended June 30, 1996 are not necessarily indicative
of the results that may be expected for the year ending December
31, 1996. The Company's selected consolidated financial data
should be read in conjunction with, and are qualified in their
entirety by reference to, the consolidated financial statements,
including the notes thereto, incorporated by reference herein.
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
(In millions of dollars, except
per share data)
Statement of Operations Data: (unaudited) (unaudited)
Operating Revenue:
Passenger $1,519 $1,355 $2,894 $2,595
Cargo, mail and other 120 123 234 292
----- ----- ----- -----
1,639 1,478 3,128 2,887
----- ----- ----- -----
Operating Expenses:
Wages, salaries and
related costs 378 357 742 723
Aircraft fuel 180 168 357 337
Aircraft rentals 127 124 251 247
Commissions 137 131 263 250
<PAGE>
Maintenance, materials
and repairs 119 101 231 198
Other rentals and landing 85 93 169 185
fees
Depreciation and 67 65 132 129
amortization
Other 317 330 634 680
----- ----- ----- -----
1,410 1,369 2,779 2,749
----- ----- ----- -----
Operating Income (Loss) 229 109 349 138
----- ----- ----- -----
Nonoperating Income (Expense):
Interest expense (42) (56) (89) (110)
Interest capitalized -- 3 1 4
Interest income 10 8 19 13
Reorganization items, net -- -- -- --
Other, net 9 117 21 108
----- ----- ----- -----
(23) 72 (48) 15
----- ----- ----- -----
Income (Loss) before Income
Taxes, Minority Interest and
Extraordinary Gain 206 181 301 153
Net Income (Loss) $167 $102 $255 $72
Earnings (Loss) per Common and
Common Equivalent Share(4) $2.53 $1.51 $3.90 $1.15
===== ===== ===== =====
Earnings (Loss) per Common
Share Assuming Full Dilution(4)
$2.04 $1.49 $3.25 $1.10
===== ===== ===== =====
Period Period
from from
(April 28, January 1,
1993 1993
Year Ended through through
December 31, December 31, April 27,
------------- ------------ ----------
1995 1994 1993) 1993
---- ---- ----- ----
(In millions of dollars, except per
share data)
Statement of Operations Data:
Operating Revenue:
Passenger $5,302 $5,036 $3,493 $1,622
Cargo, mail and other 523 634 417 235
----- ------- ----- -----
5,825 5,670 3,910 1,857
----- ------- ----- -----<PAGE>
Operating Expenses:
Wages, salaries and
related costs 1,432(1) 1,532 1,000 502
Aircraft fuel 681 741 540 272
Aircraft rentals 497 433 261 154
Commissions 489 439 378 175
Maintenance, materials
and repairs 429 495 363 184
Other rentals and landing 356 392 258 120
fees
Depreciation and 253 258 162 77
amortization
Other 1,303 1,391 853 487
----- ------- ----- -----
5,440 5,681 3,815 1,971
-----
Operating Income (Loss) 385 (11) 95 (114)
----- ------- ----- -----
Nonoperating Income
(Expense):
Interest expense (213) (241) (165) (52)
Interest capitalized 6 17 8 2
Interest income 31 23 14 --
Reorganization items, net -- -- -- (818)
Other, net 101 (439)(2) (4) 5
----- ------- ----- -----
(75) (640) (147) (863)
----- ------- ----- -----
Income (Loss) before Income
Taxes, Minority Interest
and Extraordinary Gain 310 (651) (52) (977)
Net Income (Loss) $224 $(613) $(39) $2,640(3)
Earnings (Loss) per Common
and Common Equivalent $3.60 $(11.88) $(1.17) N.M.(5)
Share(4) ===== ======= =====
Earnings (Loss) per Common
Share Assuming Full
Dilution(4) $3.15 $(11.88) $(1.17) N.M.(5)
===== ======= =====
<PAGE>
As of As of
June 30, December 31,
-------- ------------
1996 1995
---- ----
Balance Sheet Data: (In millions of dollars)
(unaudited)
Cash and Cash Equivalents,
including restricted Cash
and Cash Equivalents of
$104 and $144,
respectively(6) $825 $747
Other Current Assets 702 568
Total Property and Equip-
ment, Net 1,436 1,461
Routes, Gates and Slots, Net 1,502 1,531
Other Assets, Net 485 514
------ ------
Total Assets $4,950 $4,821
====== ======
Current Liabilities $2,108 $1,984
Long-term Debt and Capital
Leases 1,435 1,658
Deferred Credits and Other
Long-term Liabilities 540 564
Minority Interest 28 27
Continental-Obligated
Mandatorily Redeemable
Preferred Securities of
Subsidiary Trust holding
solely Convertible Subord-
inated Debentures(7) 242 242
Redeemable Warrants(8) 50 --
Redeemable Preferred Stock 43 41
Common Stockholders' Equity 504 305
------ ------
Total Liabilities and
Stockholders' Equity $4,950 $4,821
====== ======
- ----------------
(1) Includes a $20 million cash payment in 1995 by the Company
in connection with a 24-month collective bargaining
agreement entered into by the Company and the Independent
Association of Continental Pilots.
(2) Includes a provision of $447 million recorded in the fourth
quarter of 1994 associated with the planned early retirement
of certain aircraft and closed or underutilized airport and
maintenance facilities and other assets.<PAGE>
(3) Reflects a $3.6 billion extraordinary gain from
extinguishment of debt.
(4) On June 26, 1996, the Company announced the Stock Split with
respect to the Company's Class A common stock and Class B
common stock. Accordingly, the earnings per share
information has been restated to give effect to the Stock
Split.
(5) Historical per share data for Holdings is not meaningful
since the Company has been recapitalized and has adopted
fresh start reporting as of April 27, 1993.
(6) Restricted cash and cash equivalents agreements relate
primarily to workers' compensation claims and the terms of
certain other agreements. In addition, CMI is required by
loan agreements to maintain certain minimum consolidated net
worth and liquidity levels, which effectively restrict the
amount of cash available to Continental from CMI.
(7) The sole assets of the Trust are Convertible Subordinated
Debentures, with an aggregate principal amount of $250
million, which bear interest at the rate of 8 % per annum
and mature on December 1, 2020. Upon repayment, the
Continental-Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust will be mandatorily redeemed.
(8) The Company has agreed to repurchase up to $50 million of
intrinsic value (then-current Class B common stock price minus
excercise price) of Class B Warrants at the election of Air
Partners during the one year period commencing August 15,
1996.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of July 31, 1996,
certain information with respect to the beneficial ownership of
the outstanding common stock of the Company by persons owning
beneficially (to the knowledge of the Company) more than five
percent of any class of the Company's voting securities. The
table also sets forth the respective general voting power of such
persons. Information set forth in the table is based on reports
filed with the Commission pursuant to the Exchange Act, and
information furnished to the Company by certain of such holders.
In accordance with regulations promulgated by the Commission, the
table reflects for each beneficial owner the exercise of warrants
or the conversion of convertible securities (exercisable or
convertible within 60 days after July 31, 1996) owned by such
beneficial owners, but, in determining the percentage ownership
of such person, does not assume the exercise of warrants or the
conversion of convertible securities owned by any other person.
Amount
and Nature
Name and Address of Beneficial
of Beneficial Holder Title of Class Ownership
- -------------------- -------------- -------------
Air Canada Class B common stock 5,600,000
Air Canada Center
Montreal Int'l Airport
(Dorval)
P.O. Box 14000
Postal Station, St. Laurent
Canada H4Y 1H4
Air Partners, L.P.(2) Class A common stock 8,519,468(3)
2420 Texas Commerce Tower Class B common stock 6,765,264(4)
201 Main Street
Fort Worth, TX 75102
American General Corporation(5) Class A common stock 1,548,992(6)
2929 Allen Parkway Class B common stock 1,230,614(7)
Houston, TX 77019
FMR Corp. Class B common stock 6,875,320(8)
82 Devonshire Street
Boston, MA 02109
General
Name and Address Percent Voting
of Beneficial Holder of Class Power(1)
- -------------------- -------- --------
Air Canada 12.0% 4.0%
Air Canada Center
Montreal Int'l Airport
(Dorval)
P.O. Box 14000<PAGE>
Postal Station, St. Laurent
Canada H4Y 1H4
Air Partners, L.P.(2) 69.2% 52.1%
2420 Texas Commerce Tower 12.7%
201 Main Street
Fort Worth, TX 75102
American General Corporation(5) 15.8% 11.4%
2929 Allen Parkway 2.6%
Houston, TX 77019
FMR Corp. 14.3% 4.9%
82 Devonshire Street
Boston, MA 02109
__________________
(1) Each share of Class A common stock is entitled to ten votes,
and each share of Class B common stock is entitled to one
vote. General Voting Power includes the combined total of
the votes attributable to Class A common stock and Class B
common stock. The persons listed have the sole power to
vote and dispose of the shares beneficially owned by them
except as otherwise indicated.
(2) Based on reports filed with the Commission pursuant to the
Exchange Act, the general partners of Air Partners are 1992
Air GP, managing general partner, and Air II General, Inc.
The general partners of 1992 Air GP are 1992 Air, Inc.,
majority general partner, and Air Saipan, Inc. David
Bonderman is the controlling shareholder of Air II General,
Inc. and 1992 Air, Inc. and accordingly may be deemed the
beneficial owner of shares held by Air Partners. In
addition, Mr. Bonderman holds, directly and indirectly,
limited partnership interests in Air Partners. Mr. Bonderman
also holds director stock options to purchase 9,000 shares
of Class B common stock and may be deemed to own 127,304
shares of Class B common stock owned by 1992 Air, Inc. that
are not included in the amounts shown. Bonderman Family
Limited Partnership, of which David Bonderman is the general
partner, holds 16,400 shares of Class A common stock and
882,450 shares of Class B common stock that are not included
in the amounts shown. The holders of limited partnership
interests in Air Partners, together with Air Partners, may
be deemed to be acting as a group for purposes of the
federal securities laws. Bonderman Family Limited
Partnership holds limited partnership interests in Air
Partners. On the basis of certain provisions of the limited
partnership agreement of Air Partners, Bonderman Family
Limited Partnership may be deemed to beneficially own the
shares of Class A common stock and any Class B common stock
beneficially owned by Air Partners that are attributable to
such limited partnership interests. However, Bonderman
Family Limited Partnership, pursuant to Rule 13d-4 under the
Exchange Act, disclaims beneficial ownership of all such
shares. The estate of Larry L. Hillblom, solely in its
capacity as the sole shareholder of Air Saipan, Inc., may be
deemed the beneficial owner of the shares of Class A common
stock and any Class B common stock held by Air Partners. In
addition, the estate of Mr. Hillblom also holds limited
partnership interests in Air Partners. On the basis of
certain provisions of the limited partnership agreement of
Air Partners, the estate of Mr. Hillblom may be deemed to
beneficially own the shares of Class A common stock and any
Class B common stock beneficially owned by Air Partners that
are attributable to such limited partnership interests.
Bondo Air Limited Partnership ("Bondo Air"), solely in its
capacity as a limited partner of Air Partners, may be deemed
to beneficial own the shares of Class A common stock and any
Class B common stock held by Air Partners that are
attributable to such limited partnership interest. However,
Bondo Air, pursuant to Rule 13d-4 under the Exchange Act,
disclaims beneficial ownership of all such shares. Mr.
Alfredo Brener, through a limited partnership whose
corporate general partner he controls, owns warrants to
purchase a 98.5% limited partnership interest in Bondo Air,
and on the basis of certain provisions of the limited
partnership agreement of Bondo Air, Mr. Brener may be deemed
to beneficially own such limited partnership interests and,
in turn, the shares attributable to Bondo Air's limited
partnership interest in Air Partners. However, Mr. Brener,
pursuant to Rule 13d-4 under the Exchange Act, disclaims
beneficial ownership of all such shares. Donald Sturm, a
director of the Company, holds a limited partnership
interest in Air Partners. On the basis of certain provisions
of the limited partnership agreement of Air Partners, Mr.
Sturm may be deemed to beneficially own the shares of Class
A common stock and any Class B common stock beneficially
owned by Air Partners that are attributable to such limited
partnership interest. However, Mr. Sturm, pursuant to Rule
13d-4 under the Exchange Act, disclaims beneficial ownership
of all such shares.
(3) Includes 3,039,468 shares issuable upon exercise of Class
A Warrants.
(4) Represents shares issuable upon the exercise of
Class B Warrants held by Air Partners.
(5) American General Corporation ("American General") holds
a limited partnership interest in Air Partners. On
the basis of certain provisions of the limited partnership
agreement of Air Partners, American General may be deemed to
beneficially own the shares of Class A common stock and any
Class B common stock beneficially owned by Air Partners that
are attributable to such limited partnership interest. However,
American General, pursuant to Rule 13d-4 under the Exchange
Act, disclaims beneficial ownership of all such shares.
(6) Based upon reports filed with the Commission under the
Exchange Act, the shares reported represent the
proportionate interest in shares beneficially owned by Air
Partners, of which American General is a limited partner,
including 552,630 shares issuable upon exercise of Class A
Warrants held by Air Partners. American General may be
deemed to share voting and dispositive power with respect
to all such shares.
(7) Based on reports filed with the Commission under the
Exchange Act, the reported shares include 566 shares held by
an indirect wholly owned subsidiary of American General and
1,230,048 shares issuable upon exercise of Class B Warrants held
by Air Partners and attributable to the limited partnership
interest of American General in Air Partners. American General
may be deemed to share voting and dispositive power with
respect to all such shares.
(8) Based on reports filed with the Commission under the
Exchange Act, the shares reported include 331,180 shares of
Class B common stock issuable upon conversion of the
Company's 6-3/4% Convertible Subordinated Notes due April
15, 2006 and 1,065,640 shares of Class B common stock
issuable upon conversion of the Continental-Obligated Mandatorily
Redeemable Preferred Securities of Subsidiary Trust. FMR Corp.
("FMR"), together with its wholly owned subsidiaries, Fidelity
Management & Research Company and Fidelity Management Trust
Company, has sole dispositive power with respect to all of the
shares beneficially owned by it and sole voting power with
respect to 4,663,980 of such shares. FMR has no shared voting
or dispositive power. Members of the Edward D. Johnson 3d
family own approximately 49% of the voting power of FMR.
Stockholders' Agreement
Pursuant to the Stockholders' Agreement each of Air
Partners and Air Canada has agreed to certain restrictions on its
ability to enter into transactions before December 16, 1996 that
would, pursuant to Section 382 of the Internal Revenue Code, have
an adverse effect on the Company's ability to fully utilize its
NOLs, if effected prior to that date. Additionally the
Stockholders' Agreement includes certain agreements among the
Company, Air Partners and Air Canada relating to the exercise of
registration rights under the Amended and Restated Registration
Rights Agreement, dated April 19, 1996, among the Company, Air
Partners and Air Canada (the "Registration Rights Agreement").
See "--Certain Rights of Air Partners and Air Canada."
Warrants
In connection with the Reorganization, Air Partners and
Air Canada acquired warrants to purchase shares of Class A common
stock and Class B common stock at exercise prices of $15 and $30
per share, which prices have been adjusted to $7.50 and $15.00,
respectively, as a result of the Stock Split. The warrants held
by Air Canada were repurchased and canceled by the Company on
September 29, 1995. The warrants held by Air Partners expire if
not exercised on or before April 27, 1998. The Company and Air
Partners have entered into the Warrant Purchase Agreement under
which Air Partners, for the one-year period commencing August 15,
1996, can cause the Company to repurchase up to $50 million in
intrinsic value (then-current Class B common stock price minus
exercise price) of Air Partners' Class B Warrants and, at any
time after December 16, 1996, to amend the terms of the Class B
Warrants to permit the "cashless exercise" of Air Partners' Class
B Warrants. Cashless exercise represents the exercise of
warrants and the corresponding delivery by Air Partners to
Continental of warrants with an aggregate intrinsic value equal
to the aggregate exercise price of the warrants so exercised, in
consideration therefor. See "Recent Developments."
Anti-dilution Rights of Air Partners
Air Partners has the right to purchase additional
shares of Class B common stock to preserve its current
proportional ownership of such stock. See "Description of Capital
Stock--Corporate Governance and Control--Anti-dilution Rights of
Air Partners."
Certain Conversion Rights
In specified limited circumstances, Air Partners has
the right to convert its shares of Class A common stock into
Class D common stock. See "Description of Capital Stock--Special Class of
Common Stock" regarding the terms of the Class D common stock, and the
conversion of such stock back into Class A common stock.
Certain Rights of Air Partners and Air Canada
Pursuant to the Registration Rights Agreement, the
Company has granted extensive demand and incidental registration
rights to Air Partners and Air Canada to have their common stock
registered under the Securities Act in connection with proposed
sales of such stock. See "Recent Developments."
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth as of July 31, 1996 the
name of each Selling Securityholder and the amount of Selling
Securityholder Shares and Warrants owned by each such Selling
Securityholder which are subject to being offered hereby from
time to time. The number of Offered Securities subject to
offering and sale by the Selling Securityholders pursuant hereto
constitute all the holdings of such securities by the Selling
Securityholders (including Common Stock issuable upon exercise of
currently outstanding Warrants and options), except as disclosed
in the footnotes to the table. For the respective percentages of
the Company's securities beneficially owned by certain of the
Selling Securityholders (including such ownership as may be
attributed to such securityholders) prior to the offering, see
"Principal Stockholders" and "Description of Capital Stock--
Class B Common Stock and Class A Common Stock."
Each of Air Canada, Air Partners and each of the Selling
Securityholders which is a partner of Air Partners has agreed to
certain restrictions on its ability to enter into transactions
before December 16, 1996 that would, pursuant to Section 382 of
the Internal Revenue Code, have an adverse effect on the
Company's ability to fully utilize its NOLs, if effected prior to
that date.
Securities Owned Prior to the Offering
------------------------------------------------------------------
Selling Securityholder Class of Securities Number
Air Canada Class B common stock 5,600,000
Air Partners(2) Class A common stock 5,480,000
Class A Warrants(3) 2,298,134
($7.50 exercise price)
Class A Warrants(3) 741,334
($15.00 exercise price)
Class B Warrants(4) 5,115,200
($7.50 exercise price)
Class B Warrants(4) 1,650,064
($15.00 exercise price)
American General Corporation Class B common stock 566(5)(6)
Bonderman Family Limited Class A common stock 16,400(5)(6)
Partnership
Class B common stock 882,450(5)(6)
Estate of Larry L. Hillblom (5)(7)(8)
DHL Management Services, Inc. Class B common stock 645,940(5)(8)
SunAmerica Inc. (5)
Eli Broad Class B common stock 57,892(5)
Donald L. Sturm Class B common stock 715,128(5)(9)
Conair Limited Partners, L.P. (5)
Bondo Air, L.P. (5)
Air Saipan, Inc. (11)
1992 Air, Inc. Class B common stock 127,304(11)
Air II General, Inc. (12)
Lectair Partners Class B common stock 449,186(5)
David Bonderman Class A common stock (5)(13)
Class B common stock 194,368(5)(13)(14)
Thomas J. Barrack, Jr. Class B common stock 14,600(15)
Patrick Foley Class B common stock 9,000(16)(17)
Douglas H. McCorkindale Class B common stock 9,000(16)
George G.C. Parker Class B common stock 3,400(18)
Richard W. Pogue Class A common stock 6,000
Class B common stock 9,000(16)
William S. Price III Class B common stock 12,000(19)
Karen Hastie Williams Class B common stock 9,000(16)
Charles A. Yamarone Class B common stock 14,000(20)
Gordon M. Bethune Class B common stock 926,180(21)
Gregory D. Brenneman Class B common stock 873,450(21)
B. Ben Baldanza Class B common stock 224,600(21)
Mark A. Erwin Class B common stock 136,918(21)
Lawrence W. Kellner Class B common stock 326,616(21)
C.D. McLean Class B common stock 244,396(21)
Bonnie S. Reitz Class B common stock 187,986(21)
Barry P. Simon Class B common stock 227,983(21)
David N. Siegel Class B common stock 251,565(21)
Jeffery A. Smisek Class A common stock 2,000
Class B common stock 251,967(21)
Relationship
with the Securities
Selling Securityholder Company Offered Hereby
Air Canada (1) 5,600,000
Air Partners(2) (1) 5,480,000
2,298,134
741,334
5,115,200
1,650,064
American General Corporation (1)(5)(6) 566(5)
Bonderman Family Limited (5)(6) 16,400(5)
Partnership
(5)(6) 882,450(5)
Estate of Larry L. Hillblom (5)(7)(8) (5)
DHL Management Services, Inc. (5)(8) 645,940(5)
SunAmerica, Inc. (5) (5)
Eli Broad (5) 57,892(5)
Donald L. Sturm (5)(10) 715,128(5)
Conair Limited Partners, L.P. (5) (5)
Bondo Air, L.P. (5) (5)
Air Saipan, Inc. (11) (11)
1992 Air, Inc. (11) 127,304(11)
Air II General, Inc. (12) (12)
Lectair Partners (5) 449,186(5)
David Bonderman (5)(6)(10) (5)
194,368(5)
Thomas J. Barrack, Jr. (10) 14,600
Patrick Foley (10) 9,000
Douglas H. McCorkindale (10) 9,000
George G.C. Parker (10) 3,400
Richard W. Pogue (10) 6,000
9,000
William S. Price III (10) 12,000
Karen Hastie Williams (10) 9,000
Charles A. Yamarone (10) 14,000
Gordon M. Bethune (10) (22) 926,180
Gregory D. Brenneman (10) (22) 873,450
B. Ben Baldanza (22) 224,600
Mark A. Erwin (22) 136,918
Lawrence W. Kellner (22) 326,616
C.D. McLean (22) 244,396
Bonnie S. Reitz (22) 187,986
Barry P. Simon (22) 227,983
David N. Siegel 251,565
Jeffery A. Smisek (22) 2,000
251,967
- -------------------
(1) See "Principal Stockholders."
(2) The Offered Securities beneficially owned by Air Partners
may be distributed to its partners. In such event, the
portion of the Offered Securities
attributable to such partner's partnership interest so distributed
may be offered and sold by such partner pursuant to this
Prospectus and any applicable Prospectus Supplement.
(3) 3,039,468 shares of Class A common stock issuable upon
exercise of the Class A Warrants held by Air Parnters
also may be offered and sold pursuant to this Prospectus.
(4) 6,765,264 shares of Class B common stock issuable upon
exercise of the Class B Warrants held by Air Partners
also may be offered and sold pursuant to this Prospectus.
(5) A limited partner of Air Partners. On the basis of certain
provisions of the limited partnership agreement of Air
Partners, such securityholder may be deemed beneficially to own
a portion of the shares of Class A
common stock held by Air Partners, and the Class A common
stock and Class B common stock issuable pursuant to the
Warrants held by Air Partners, that are attributable to such
limited partnership interests. The table above
assumes that all such securities are offered by Air
Partners, however, and no beneficial
interest in the Offered Securities attributable to such
limited partnership interest is shown. See Note (2)
above.
(6) See Note (2) under "Principal Stockholders."
(7) The estate of Larry L. Hillblom is the sole shareholder of Air Saipan,
Inc., which is a general partner of 1992 Air GP, the
managing general partner of Air Partners. See Note (2)
under "Principal Stockholders."
(8) The estate Larry L. Hillblom owns 60.6 percent of one class
of shares and 100 percent of another class of shares of DHL
Corporation. DHL Corporation, in turn, owns 100 percent of
the outstanding shares of DHL Management Services, Inc.
("DHL Management"). Accordingly, the estate of Mr. Hillblom may be
deemed to own beneficially the 645,940 shares of Class B common
stock of the Company held by DHL Management.
(9) Includes 9,000 shares subject to vested director stock options.
Also includes 60,400 shares held in trusts for the
benefit of Mr. Sturm's children, 30,200 shares held in a charitable
trust for which Mr. Sturm acts as trustee, and 8,600 shares held by a
corporation of which Mr. Sturm is the principal stockholder.
(10) Director of the Company.
(11) General partner of 1992 Air GP, one of the general partners
of Air Partners. See Note(2) above and Note (2) under "Principal
Stockholders."
(12) General partner of Air Partners. See Note (2)
above and Note (2) under "Principal Stockholders."
(13) Mr. Bonderman may be deemed to beneficially own the Offered Securities
held by Bonderman Family Limited Partnership, for which he
acts as general partner, and Air II General, Inc. and 1992
Air, Inc., for which he is, in each case, the controlling
shareholder. By virtue of his position as controlling
shareholder of Air II General, Inc. and 1992 Air, Inc., he
also may be deemed to beneficially own the Offered
Securities held by Air Partners. See Note (2) under
"Principal Stockholders."
(14) Include 9,000 shares subject to vested director stock
options, and 185,368 shares.
(15) Includes 6,000 shares subject to vested director stock
options, and 3,000 shares held in trust for the benefit of
Mr. Barrack's children, as to which shares Mr. Barrack
disclaims beneficial ownership.
(16) Represents shares subject to vested director stock options.
(17) Mr. Foley, as President of DHL Management, also may be
deemed to own the shares held by DHL Management shown above.
(18) Includes 3,000 shares subject to a vested director stock
option.
(19) Includes 9,000 shares subject to vested director stock
options. Also includes 3,000 shares held by Mr. Price's
spouse, as to which shares Mr. Price disclaims beneficial
ownership. Mr. Price, as Managing Director of Air Partners,
also may be deemed to beneficially own the Warrants and
shares of Common Stock held by Air Partners.
(20) Includes 6,000 shares subject to vested director stock
options.
(21) Includes shares subject to vested and unvested stock
options.
(22) Executive officer of the Company.
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The current authorized capital stock of the Company
consists of 50,000,000 shares of Class A common stock,
200,000,000 shares of Class B common stock and 50,000,000 shares
of Class D common stock (such classes of common stock referred to
collectively as the "common stock"), and 10,000,000 shares of
preferred stock, $.01 par value (the "Preferred Stock"). On June
26, 1996, the Company announced the Stock Split with respect to
the Company's Class A common stock and Class B common stock,
which was distributed on July 16, 1996 to stockholders of record
as of July 2, 1996. As of July 31, 1996, there were 9,280,000
outstanding shares of Class A common stock, 46,653,176
outstanding shares of Class B common stock and 421,717
outstanding shares of Series A 12% Cumulative Preferred Stock.
Pursuant to the Reorganization (and giving effect to
the recent Stock Split), on April 27, 1993 the Company issued
3,800,000 shares of Class A common stock and 10,084,736 shares of
Class B common stock to a distribution agent for the benefit of
the Company's general unsecured nonpriority prepetition creditors
("Prepetition Creditors"). As of July 31, 1996, there remained
582,906 shares of Class A common stock, 1,524,548 shares of
Class B common stock (after giving effect to the recent Stock
Split), and approximately $1 million of cash available for
distribution. Pending resolution of certain disputed claims, a
distribution agent will continue to hold undistributed Class A
common stock and Class B common stock and will vote such shares
of each class pro rata in accordance with the vote of all other
shares of such class on any matter submitted to a vote of
stockholders. Also pursuant to the Reorganization (and giving
effect to the recent Stock Split), the Company issued 987,242
shares of Class B common stock to its retirement plan.
The following summary description of capital stock
accurately describes the material matters with respect thereto,
but is not intended to be complete and reference is made to the
provisions of the Company's Certificate of Incorporation and
Bylaws and the agreements referred to in this summary
description. As used in this section, except as otherwise stated
or required by context, each reference to Air Canada or Air
Partners includes any successor by merger, consolidation or
similar transaction and any wholly owned subsidiary of such
entity or such successor.
Common Stock--All Classes
Holders of common stock of all classes participate
ratably as to any dividends or distributions on the common stock,
except that dividends payable in shares of common stock, or
securities to acquire common stock, are paid in common stock, or
securities to acquire common stock, of the same class as that
upon which the dividend or distribution is being paid. Upon any
liquidation, dissolution or winding up of the Company, holders of
common stock of all outstanding classes are entitled to share
ratably the assets of the Company available for distribution to
the stockholders, subject to the prior rights of holders of any
outstanding Preferred Stock. Holders of common stock have no
preemptive, subscription, conversion or redemption rights (other
than the conversion rights of holders of Class A common stock
described under "--Class B Common Stock and Class A Common Stock"
and the anti-dilution rights described under "--Corporate
Governance and Control"), and are not subject to further calls or
assessments. Holders of common stock have no right to cumulate
their votes in the election of directors. All classes of common
stock vote together as a single class, subject to the right to a
separate class vote in certain instances required by law and to
the rights of holders of Class D common stock to vote separately
as a class to elect directors as described under "--Special
Classes of Common Stock."
Class B Common Stock and Class A Common Stock
The holders of Class B common stock are entitled to one
vote per share, and the holders of Class A common stock are
entitled to ten votes per share, on all matters submitted to a
vote of stockholders, except that voting rights of non-U.S.
citizens are limited as set forth below under "--Limitation on
Voting by Foreign Owners" and no holder of Class D common stock
can vote any of its Class B common stock for the election of
directors (see "--Special Classes of Common Stock").
Air Canada and Air Partners owned as of July 31, 1996
in the aggregate approximately 19.8% of the outstanding Class A
common stock and Class B common stock, representing approximately
43.3% of total voting power excluding the exercise of Warrants
held by Air Partners) and Air Partners has Warrants to acquire an
additional 6,765,264 shares of Class B common stock and 3,039,468
shares of Class A common stock (together representing
approximately 21% of total voting power, assuming exercise of
such Warrants).
At any time after January 1, 1997, shares of Class A
common stock may be freely converted into an equal number of
shares of Class B common stock. Because the Class A common stock
has ten votes per share and the Class B common stock has one vote
per share, any such conversion would effectively increase the
relative voting power of those Class A stockholders who do not
convert.
Limitation on Voting by Foreign Owners
The Company's Certificate of Incorporation defines
"Foreign Ownership Restrictions" as "applicable statutory,
regulatory and interpretive restrictions regarding foreign
ownership or control of U.S. air carriers (as amended or modified
from time to time)." Such restrictions currently require that no
more than 25% of the voting stock of the Company be owned or
controlled, directly or indirectly, by persons who are not U.S.
Citizens ("Foreigners") for purposes of the Foreign Ownership
Restrictions, and that the Company's president and at least two-
thirds of its other managing officers and directors be U.S.
Citizens. For purposes of the Certificate of Incorporation, "U.S.
Citizen" means (i) an individual who is a citizen of the United
States; (ii) a partnership each of whose partners is an
individual who is a citizen of the United States; or (iii) a
corporation or association organized under the laws of the United
States or a State, the District of Columbia, or a territory or
possession of the United States, of which the president and at
least two-thirds of the board of directors and other managing
officers are citizens of the United States, and in which at least
75% of the voting interest is owned or controlled by persons that
are citizens of the United States. The Certificate of
Incorporation provides that no shares of capital stock may be
voted by or at the direction of Foreigners, unless such shares
are registered on a separate stock record (the "Foreign Stock
Record") maintained by the Company for the registration of
ownership of voting stock by Foreigners. The Company's Bylaws
further provide that no shares will be registered on the Foreign
Stock Record if the amount so registered would exceed the Foreign
Ownership Restrictions or adversely affect the Company's
operating certificates or authorities. Registration on the
Foreign Stock Record is made in chronological order based on the
date the Company receives a written request for registration,
except that certain shares acquired by Air Partners in connection
with its original investment in the Company that are subsequently
transferred to any Foreigner are entitled to be registered prior
to, and to the exclusion of, other shares. Shares currently owned
by Air Canada and registered on the Foreign Stock Record
constitute a portion of the shares that may be voted by
Foreigners under the Foreign Ownership Restrictions.
Corporate Governance and Control
Board of Directors
The Certificate of Incorporation provides that the
Company's Board of Directors shall consist of such number of
directors as may be determined from time to time by the Board of
Directors in accordance with the Bylaws. The Board of Directors
currently consists of 12 directors to be elected by holders of
common stock, subject to the rights of holders of preferred
stock to elect additional directors as set forth in any preferred
stock designation.
Business Combinations
The Certificate of Incorporation provides that the
Company is not governed by Section 203 of the General Corporation
Law of Delaware which, in the absence of such provisions, would
have imposed additional requirements regarding mergers and other
business combinations.<PAGE>
Anti-dilution Rights of Air Partners
Pursuant to the Certificate of Incorporation, Air
Partners has the right to purchase from the Company additional
shares of Class B common stock to the extent necessary to
maintain its pro rata ownership of the outstanding Class B common
stock. Such anti-dilution rights terminate as to Air Partners if
the total voting power of the common stock beneficially owned by
it is less than 20% of the total voting power of all of the
outstanding common stock. Because Air Partners currently does
not own any Class B common stock, such anti-dilution rights are
not operative.
Procedural Matters
The Company's Bylaws require stockholders seeking to
nominate directors or propose other matters for action at a
stockholders' meeting to deliver notice thereof to the Company
certain specified periods in advance of the meeting and to follow
certain other specified procedures.
Change in Control
The cumulative effect of the provisions of the
Certificate of Incorporation and Bylaws referred to under this
section "Description of Capital Stock," and the Stockholders'
Agreement is to maintain certain rights of Air Partners to elect
directors and otherwise to preserve its relative ownership and
voting positions. These provisions may have the effect of
delaying, deferring or preventing a change in control of the
Company.
Special Class of Common Stock
The Certificate of Incorporation authorizes Class D
common stock as a mechanism to provide, under certain
circumstances, a specified level of Board representation for Air
Partners. No shares of Class D common stock are currently
outstanding, and they may only be issued in limited circumstances
upon conversion of Class A common stock held by Air Partners.
Air Partners has the option, which may be exercised only once, to
convert all (but not less than all) shares of Class A common
stock held by it into an equal number of shares of Class D common
stock. Such right of conversion is further conditioned upon Air
Partners' holding common stock having at least 20% of the total
voting power of all classes of common stock.
After such conversion, Air Partners is entitled to
elect one-third of the number of directors determined by the
Board of Directors pursuant to the Bylaws (rounded to the nearest
whole number), voting as a separate class. When shares of Class D
common stock are outstanding, Air Partners may not vote any of
its shares of Class B common stock for the election of directors;
and if Air Partners becomes the beneficial owner of any
additional shares of Class A common stock during such time, such
shares will automatically be converted into Class D common stock.
Each share of Class D common stock has ten votes and, as to
matters other than the election of directors, votes together with
all other classes of common stock as a single class. In the event
the voting power of all common stock held by Air Partners
represents less than 20% of the voting power of all classes of
common stock, all Class D common stock held by Air Partners will
automatically convert into an equal number of shares of Class A
common stock. Shares of Class D common stock also convert
automatically into an equal number of shares of Class A common
stock upon the transfer of record or beneficial ownership of such
Class D common stock to any person other than certain related
parties of the original holder. Air Partners may also at any time
voluntarily convert all (but not less than all) shares of Class D
common stock held by it into an equal number of shares of Class A
common stock. All shares of Class D common stock surrendered by
Air Partners for conversion into Class A common stock will be
canceled and may not be reissued.
Redeemable Preferred Stock
The Company has authorized and issued a class of
preferred stock, designated as Series A 12% Cumulative Preferred
Stock.
Holders of the Series A 12% Preferred are entitled to
receive, when, as and if declared by the Board of Directors,
cumulative dividends payable quarterly in additional shares of
such preferred stock for dividends accumulating through December
31, 1996. Thereafter dividends are payable in cash at an annual
rate of $12 per share; provided, however, that to the extent net
income (as defined in the certificate of designation for the
preferred stock) for any calendar quarter is less than the amount
of dividends due on all outstanding shares of the Series A 12%
Preferred for such quarter, the Board of Directors may declare
dividends payable in additional shares of Series A 12% Preferred
in lieu of cash. At any time, the Company may redeem, in whole or
in part, on a pro rata basis among the stockholders, any
outstanding shares of the Series A 12% Preferred. All outstanding
shares of the Series A 12% Preferred are mandatorily redeemable
on April 27, 2003 out of legally available funds. The redemption
price is $100 per share plus accrued and unpaid dividends. Shares
of the Series A 12% Preferred are not convertible into shares of
common stock and such shares do not have voting rights, except
under limited circumstances described in the following two
paragraphs. Shares of the Series A 12% Preferred have a
liquidation preference of $100 per share plus accrued and unpaid
dividends, senior to any distribution on shares of common stock.
In the event the Company violates certain covenants set
forth in the certificate of designation relating to the Series A
12% Preferred, or fails to pay the full amount of dividends on
the preferred stock for nine consecutive quarterly payment dates
or shall not have redeemed the preferred stock within five days
of the date of any redemption of which the Company has given, or
is required to give, notice (a "Default"), the holders of the
Series A 12% Preferred as to which a Default exists, voting
(subject to the Foreign Ownership Restrictions) together as one
class, are entitled to elect one member of the Board of
Directors. In the event the Company pays in full all dividends
accrued on the preferred stock for three consecutive payment
dates following such Default (and no dividend arrearages exist as
to such stock), or otherwise cures any other default that gives
rise to such voting rights, the holders of the Series A 12%
Preferred will cease to have the right to elect a director.
The consent or approval of the holders of a majority of
the then-outstanding shares of Series A 12% Preferred is required
for the creation of certain classes of senior or parity stock,
certain mergers or sales of substantially all of the Company's
assets, the voluntary liquidation or dissolution of the Company
and amendments to the terms of the preferred stock that would
adversely affect the Series A 12% Preferred.
The Board of Directors of the Company has the
authority, without any vote by the stockholders, to issue
additional shares of preferred stock, up to the number of shares
authorized in the Certificate of Incorporation, as it may be
amended from time to time, in one or more series, and to fix the
number of shares constituting any such series, the designations,
preferences and relative rights and qualifications of such
series, including the voting rights, dividend rights, dividend
rate, terms of redemption (including sinking fund provisions),
redemption price or prices, conversion rights and liquidation
preferences of the shares constituting any series.
Limitation of Director Liability and Indemnification
The Company's Certificate of Incorporation provides, to
the fullest extent permitted by Delaware law as it may from time
to time be amended, that no director shall be liable to the
Company or any stockholder for monetary damages for breach of
fiduciary duty as a director. As required under current Delaware
law, the Company's Certificate of Incorporation and Bylaws
currently provide that such waiver may not apply to liability (i)
for any breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions not in good faith
or that involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation
Law (governing distributions to stockholders), or (iv) for any
transaction from which the director derived any improper personal
benefit. However, in the event the Delaware General Corporation
Law is amended to authorize corporate action further eliminating
or limiting the personal liability of directors, then the
liability of a director of the Company shall be eliminated or
limited to the fullest extent permitted by the Delaware General
Corporation Law, as so amended. The Certificate of Incorporation
further provides that the Company will indemnify each of its
directors and officers to the full extent permitted by Delaware
law and may indemnify certain other persons as authorized by law.
The foregoing provisions do not eliminate any monetary liability
of directors under the federal securities laws.
SHARES ELIGIBLE FOR FUTURE SALE
As of July 31, 1996, Continental had a total
of 9,280,000 shares of Class A common stock and 46,653,176
shares of Class B common stock outstanding. As of such date,
approximately 582,906 shares of Class A common stock and
approximately 1,524,548 shares of Class B common stock
were held in trust by a distribution agent pending resolution of
certain disputed claims and subsequent distribution to, or sale
for the benefit of, Prepetition Creditors. Upon distribution to
Prepetition Creditors, these shares will also be freely tradable.
An independent investment manager has discretion over the
continued holding or sale of the 100,000 shares of Class B common
stock held in trust for the benefit of the Company's retirement
plan. All of the above numbers of shares of Class A common stock
and Class B Common Stock give effect to the Stock Split.
Shares of Class A common stock held by Air Partners and
the Class B common stock held by Air Canada are "restricted"
securities within the meaning of Rule 144 under the Securities
Act and may not be sold in the absence of registration under the
Securities Act, unless an exemption from registration is
available, including the exemption provided by Rule 144. The
Company has granted Air Partners and Air Canada extensive demand
and incidental registration rights to have their common stock
registered under the Securities Act in connection with proposed
sales of such stock. Each of Air Canada and Air Partners has
entered into agreements with Continental restricting, prior to
December 16, 1996, the disposition of Continental stock held by
either of them. Air Canada has indicated its intention to
dispose of its remaining equity interest in the Company during
December 1996 or early 1997, subject to market conditions. See
"Recent Developments."
<PAGE>
DESCRIPTION OF WARRANTS
General
The Warrants were issued under a Warrant Agreement
dated April 27, 1993 (the "Warrant Agreement") between the
Company and Continental Airlines, Inc., as warrant agent (the
"Warrant Agent"). The material terms of the Warrants and the
Warrant Agreement are summarized below. The statements herein
relating to the Warrants and the Warrant Agreement are summaries
only, however, and do not purport to be complete and reference is
made to the Warrant Agreement, which has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part.
All section references under this heading are references to
sections of the Warrant Agreement.
2,298,134 of the Class A Warrants offered hereby
entitle the holder thereof to purchase one share of Class A
common stock for $7.50 per share, 741,334 Class A Warrants
entitle the holder thereof to purchase one share of Class A
common stock for $15.00 per share, 5,115,200 Class B Warrants
entitle the holder thereof to purchase one share of Class B
common stock for $7.50 per share, and 1,650,064 Class B Warrants
entitle the holder thereof to purchase one share of Class B
common stock for $15.00 per share, in each case, subject to
adjustment as provided in the Warrant Agreement. The Warrants
are exercisable by the holders at any time on or before April 27,
1998 (the "Expiration Date"). (Section 3.01)
Certain Terms of the Warrants
Exercise of Warrants. Warrants may be exercised by
surrendering the Warrant Certificate evidencing such Warrants at
the Warrant Agent's Office with the Election to Exercise form
duly completed and executed. Surrendered Warrant Certificates
must be accompanied by payment in full to the Warrant Agent for
the account of the Company (i) in cash, (ii) by certified or
official bank check or (iii) by any combination of (i) or (ii) of
the exercise price for each share of Common Stock as to which
Warrants are exercised and any applicable taxes that the Company
is not required to pay as set forth in Sections 4.08 or 6.01.
(Section 3.02(a)).
The Company will not be required to issue fractional
shares of Common Stock upon the exercise of the Warrants. In
lieu thereof, the Company, at its option, may purchase the
fraction for an amount in cash equal to the then-current market
value of the fraction (as defined in Section 4.01(d)) or issue
scrip of the Company that is non-dividend bearing, non-voting and
exchangeable in combination with other similar scrip for the
number of full shares of Common Stock represented thereby.
(Section 3.03)<PAGE>
The Company has the right, except as limited by law or
other agreement, to purchase or otherwise acquire Warrants at
such times, in such manner and for such consideration as it may
deem appropriate. (Section 3.04)
The Company will, at all times, reserve and keep
available free of preemptive rights out of its authorized and
unissued Common Stock, the full number of shares of Common Stock,
if any, issuable if all outstanding Warrants then exercisable
were to be exercised. Any shares of Common Stock issued upon a
Warrant holder's exercise of any Warrant shall be validly
authorized and issued, fully paid, non-assessable, and free from
all taxes (other than those required to be paid by the holder or
its transferees). (Sections 3.02(b); 4.06; 4.08)
For a description of the Company's agreement to amend
the terms of the Class B Warrants after December 16, 1996 upon
the request of Air Partners to permit cashless exercises, see
"Principal Stockholders--Warrants."
Adjustment of Warrant Price. The exercise price for
the Warrants and the number of shares of Common Stock purchasable
upon exercise of each Warrant are subject to adjustment in
certain events, including (a) the payment of a dividend or a
distribution to all holders of Common Stock or any class thereof
in Common Stock or any class thereof or combinations or
subdivisions of the Common Stock, (b) the issuance to all holders
of Common Stock or any class thereof of rights or warrants
entitling the holders thereof to purchase Common Stock at a price
per share less than the then-current market price per share
thereof, and (c) certain distributions by the Company to holders
of Common Stock of evidences of its indebtedness or assets
(excluding any cash dividend or distribution) or shares of
capital stock of any class other than Common Stock, all as
described in the Warrant Agreement. The Company is not required
to make any adjustment to the exercise price unless such
adjustment would require an increase or decrease of at least $.05
in the exercise price then subject to adjustment; provided,
however, that any adjustments that are not made for this reason
must be carried forward and taken into account in any subsequent
adjustment. (Section 4.01) The Company may, at its option,
reduce the exercise price at any time.
Rights Upon Consolidation, Merger, Sale, Transfer or
Reclassification. In the event of certain consolidations with or
mergers of the Company into another corporation or in the event
of any lease, sale or conveyance to another corporation of the
property of the Company substantially as an entirety, the holder
of each outstanding Warrant shall have the right to receive, upon
exercise of the Warrant, the kind and amount of shares,
securities, property or cash receivable upon such consolidation,
merger, lease, sale or conveyance by a holder of one share of
Class B Common Stock. (Section 4.05(a))<PAGE>
In the event of any liquidation, dissolution or winding
up of the affairs of the company, each holder of a Warrant may
receive, upon exercise of such Warrant in accordance with the
Warrant Agreement, the same kind and amount of any stock,
securities or assets as may be issuable, distributable or payable
on any such dissolution, liquidation, or winding up with respect
to each share of Class B common Stock of the Company. (Section
4.05(b))
Rights as Warrantholders. A holder of Warrants does
not have any rights whatsoever as a stockholder of the Company,
either at law or equity, including but not limited to the right
to vote at, or to receive notice of, any meeting of stockholders
of the Company. No consent of any holder of Warrants is required
with respect to any action or proceeding of the company, nor do
holders, by reason of the ownership or possession of a Warrant,
have any right to receive any cash dividends, stock dividends,
allotments or rights, or other distributions paid, allotted or
distributed or distributable to the stockholders of the Company.
A holder of a Warrant shall not have any rights unless the right
is expressly conferred by the Warrant Agreement or by a Warrant
Certificate held by the holder. (Section 5.01)
Transfer Agent
The transfer agent for the Warrants is currently
Continental Airlines, Inc.
Listing
The Company has applied for listing of the Warrants on
the NYSE; however, the Company has been informed by the NYSE that
unless and until the Warrants are held by 400 holders, they will
not be approved for listing. The Company does not expect an
active trading market to develop for the Warrants at this time.
<PAGE>
PLAN OF DISTRIBUTION
The Company or the Selling Securityholders may from
time to time sell the Offered Securities directly to purchasers
or may from time to time offer the Offered Securities to or
through underwriters, broker/dealers or agents, who may receive
compensation in the form of underwriting discounts, concessions
or commissions from the Company or the Selling Securityholders or
the purchasers of such securities for whom they may act as
agents. The Selling Securityholders and any underwriters,
broker/dealers or agents that participate in the distribution of
Offered Securities may be deemed to be "underwriters" within the
meaning of the Securities Act and any profit on the sale of such
securities and any discounts, commissions, concessions or other
compensation received by any such underwriter, broker/dealer or
agent may be deemed to be underwriting discounts and commissions
under the Securities Act.
The Offered Securities may be sold from time to time in
one or more transactions at fixed prices, at prevailing market
prices at the time of sale, at varying prices determined at the
time of sale or at negotiated prices. The sale of the Offered
Securities may be effected in transactions (which may involve
crosses or block transactions) (i) on any national securities
exchange or quotation service on which the Offered Securities may
be listed or quoted at the time of sale, (ii) in the over-the-
counter market, (iii) in transactions otherwise than on such
exchanges or in the over-the-counter market or (iv) through the
writing of options. At the time a particular offering of the
Offered Securities is made, a Prospectus Supplement, if required,
will be distributed which will set forth the aggregate amount and
type of Offered Securities being offered and the terms of the
offering, including the name or names of any underwriters,
broker/dealers or agents, any discounts, commissions and other
terms constituting compensation from the Company or the Selling
Securityholders pertaining to those securities sold by them and
any discounts, commissions or concessions allowed or reallowed or
paid to broker/dealers.
To comply with the securities laws of certain
jurisdictions, if applicable, the Offered Securities will be
offered or sold in such jurisdictions only through registered or
licensed brokers or dealers. In addition, in certain
jurisdictions the Offered Securities may not be offered or sold
unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification
is available and is complied with.
Under the Exchange Act and applicable rules and
regulations promulgated thereunder, any person engaged in a
distribution of any of the Offered Securities may not
simultaneously engage in market making activities with respect to
the Securities for a period, depending upon certain
circumstances, of either two days or nine days prior to the
commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Securityholders will be
subject to applicable provisions of the Exchange Act and the
rules and regulations promulgated thereunder, including without
limitation Rules 10b-6 and 10b-7, which provisions may limit the
timing of purchases and sales of any of the Offered Securities by
the Selling Securityholders. The foregoing may affect the
marketability of such securities.
Pursuant to the Registration Rights Agreement and as
otherwise agreed by the Company, all expenses of the registration
of the Offered Securities will be paid by the Company, including,
without limitation, Commission filing fees and expenses of
compliance with state securities or "blue sky" laws; provided,
however, that the Selling Securityholders will pay all
underwriting discounts and selling commissions pertaining to
those securities sold by them, if any. Subject to certain
conditions, the Selling Securityholders will be indemnified by
the Company, jointly and severally against certain civil
liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith.
Subject to certain conditions, the Company will be indemnified by
the Selling Securityholders, severally against certain civil
liabilities, including certain liabilities under the Securities
Act, or will be entitled to contribution in connection therewith.
LEGAL MATTERS
Unless otherwise specified in the applicable Prospectus
Supplement, the validity of the Warrants and certain United States
Federal income taxation matters with respect to Section 382 will
be passed upon for the Company by Cleary, Gottlieb, Steen &
Hamilton, New York, New York. The validity of the Continental
Class A common stock and Class B common stock, including the common
stock underlying the Warrants, will be passed upon for the Company
by Scott R. Peterson, Managing Attorney of Continental.
EXPERTS
The consolidated financial statements (including
schedules) of Continental Airlines, Inc. appearing in Continental
Airlines, Inc.'s Annual Report (Form 10-K) as of December 31,
1995 and 1994, and for the two years ended December 31, 1995
and the period April 28, 1993 through December 31, 1993, and the
consolidated statements of operations, redeemable and non-
redeemable preferred stock and common stockholders' equity and
cash flows of Continental Airlines Holdings, Inc. for the period
January 1, 1993 through April 27, 1993, incorporated by reference
in this Prospectus have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference, in
reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
<PAGE>
No dealer, salesperson or other individual has been authorized
to give any information or to make any representations other than
those contained in this Prospectus. If given or made, such information
or representations must not be relied upon as having been authorized by
the Company, any Selling Securityholder or any underwriter.
This Prospectus does not constitute an offer to sell or the solicitation
of an offer to buy any of the securities offered hereby in any
jurisdiction where, or to any person to whom, it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any
implication that there has not been any change in the facts set forth in
this Prospectus or in the affairs of the Company since the date hereof.
_______________
TABLE OF CONTENTS
Page
Available Information 2
Incorporation of Certain Documents by Reference 2
Risk Factors 3
The Company 8
Recent Developments 8
Use of Proceeds 10
Market Price of Common Stock and Dividends 11
Selected Financial Data 12
Principal Stockholders 14
Selling Securityholders 17
Description of Capital Stock 20
Shares Eligible for Future Sale 24
Description of Warrants 25
Plan of Distribution 27
Legal Matters 27
Experts 28
Continental Airlines, Inc.
8,543,868 Shares of
Class A common stock
21,665,759 Shares of
Class B common stock
3,039,468 Class A
Warrants
6,765,264 Class B
Warrants
PROSPECTUS
Dated , 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with the
distribution of the securities being registered hereunder, other
than underwriting discounts and commissions, are:
Securities and Exchange Commission $ 260,844
registration filing fees
Blue Sky qualification fees and expenses, 15,000
including legal fee
Printing and engraving expenses 1,000
Accounting fees and expenses 4,000
Legal fees and expenses 50,000
Miscellaneous 256
---------
Total $ 331,100
=========
Item 15. Indemnification of Directors and Officers of the
Company.
The Company's Certificate of Incorporation and Bylaws
provide that the Company will indemnify each of its directors and
officers to the full extent permitted by the laws of the State of
Delaware and may indemnify certain other persons as authorized by
the Delaware General Corporation Law (the "GCL"). Section 145 of
the GCL provides as follows:
"(a) A corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that
he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
(b) A corporation may indemnify any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee
or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred
to in subsections (a) and (b) of this section, or in defense of
any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b)
of this section (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer,
employee or agent is proper in the circumstances because he has
met the applicable standard of conduct set forth in subsections
(a) and (b). Such determination shall be made (1) by a majority
vote of the board of directors who are not parties to such
action, suit or proceeding, even though less than a quorum, or
(2) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (3)
by the stockholders.
(e) Expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal,
administrative, or investigative action, suit or proceeding may
be paid by the corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section.
Such expenses (including attorneys' fees) incurred by other
employees and agents may be so paid upon such terms and
conditions, if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses
provided by, or granted pursuant to, the other subsections of
this section shall not be deemed exclusive of any other rights to
which those seeking indemnification or advancement of expenses
may be entitled under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office.
(g) A corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to "the
corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have
had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director,
officer, employee or agent for such constituent corporation, or
is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall
stand in the same position under this section with respect to the
resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had
continued.
(i) For purposes of this section, references to "other
enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving
at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director,
officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted
in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to
in this section.
(j) The indemnification and advancement of expenses
provided by, or granted pursuant to, this section shall, unless
otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The Court of Chancery is hereby vested with
exclusive jurisdiction to hear and determine all actions for
advancement of expenses or indemnification brought under this
section or under any bylaw, agreement, vote of stockholders or
disinterested directors, or otherwise. The Court of Chancery may
summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).
The Certificate of Incorporation and bylaws also limit
the personal liability of directors to the Company and its
stockholders for monetary damages resulting from certain breaches
of the directors' fiduciary duties. The bylaws of the Company
provide as follows:
"No Director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a Director, except for
liability (i) for any breach of the Director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the . . .
GCL, or (iv) for any transaction from which the Director derived
any improper personal benefit. If the GCL is amended to authorize
corporate action further eliminating or limiting the personal
liability of Directors, then the liability of Directors of the
Corporation shall be eliminated or limited to the full extent
permitted by the GCL, as so amended."
The Company maintains directors' and officers'
liability insurance.
Item 16. Exhibits.
Exhibit Exhibit Description
No.
1.1* Form of Purchase Agreement
4.1 Warrant Agreement dated April 27, 1993
between Continental Airlines, Inc., as
issuer, and Continental Airlines, Inc., as
Warrant Agent (incorporated by reference
to Exhibit 4.7 to the Company's Current
Report on Form 8-K (File No. 0-09781)
dated April 16, 1993)
4.2 Form of Class A Warrant (included in Exhibit 4.1)
4.3 Form of Class B Warrant (included in Exhibit 4.1)
4.4** Warrant Purchase Agreement between
Continental Airlines, Inc. and Air
Partners, L.P. dated as of May 2, 1996
5.1* Opinion of Scott R. Peterson, Managing
Attorney of Continental Airlines, Inc., as to
the validity of the Class A common stock and
Class B common stock being registered hereby
5.2* Opinion of Cleary, Gottlieb, Steen &
Hamilton as to the validity of the Warrants
being registered hereby
23.1** Consent of Ernst & Young LLP
23.2* Consent of Scott R. Peterson, Managing
Attorney of Continental Airlines, Inc.
(included in his opinion filed as Exhibit 5.1)
23.3* Consent of Cleary, Gottlieb, Steen &
Hamilton (included in its opinion filed as
Exhibit 5.2)
23.4** Consent of Cleary, Gottlieb, Steen &
Hamilton
24.1** Powers of Attorney
- ------------
*Filed herewith
** Previously filed
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
To file, during any period in which offers or
sales are being made, a post-effective amendment to
this Registration Statement:
(i) To include any prospectus
required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus
any facts or events arising after the
effective date of the registration (or the
most recent post-effective amendment thereof)
which, individually or in the aggregate,
represent a fundamental change in the
information set forth in the registration
statement. Notwithstanding the foregoing,
any increase or decrease in volume of
securities offered (if the total dollar value
of securities offered would not exceed that
which was registered) and any deviation from
the low or high 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 20 percent change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in
the effective Registration Statement;
(iii) To include any material
information with respect to the plan of
distribution not previously disclosed in the
registration statement or any material change
to such information in the registration
statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall
not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the registrant pursuant to section 13 or section
15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of
a post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as the indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) for the purposes of determining any
liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed
as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed
by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be
part of this registration statement as of the time it
was declared effective; and
(2) for the purpose of determining any
liability under the Securities Act of 1933, each post-
effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement
relating to the securities offered therein, and the
offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Amendment No. 1 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
August 15, 1996.
CONTINENTAL AIRLINES, INC.
By: /s/ Jeffery A. Smisek
---------------------
Jeffery A. Smisek
Senior Vice President
Pursuant to the requirements of the Securities Act of
1933, this Amendment No. 1 to the Registration Statement has been
signed by the following persons in the capacities indicated, on
August 15, 1996.
Signature Title
*
- ---------------------
Gordon M. Bethune President, Chief
Executive Officer
(Principal Executive
Officer) and Director
*
- ---------------------
Lawrence W. Kellner Senior Vice President
and Chief Financial
Officer (Principal
Financial Officer)
*
- ---------------------
Michael P. Bonds Vice President and
Controller
(Principal Accounting
Officer)
*
- ---------------------
Thomas J. Barrack, Jr. Director
*
- ---------------------
David Bonderman Director
*
- ---------------------
Gregory D. Brenneman Director
*
- ---------------------
Patrick Foley Director
*
- ---------------------
Douglas H.McCorkindale Director
*
- ---------------------
George G.C. Parker Director
*
- ---------------------
Richard W. Pogue Director
*
- ---------------------
William S. Price III Director
*
- ---------------------
Donald L. Sturm Director
*
- ---------------------
Karen Hastie Williams Director
*
- ---------------------
Charles A. Yamarone Director
*By: /s/ Scott R. Peterson
----------------------
Scott R. Peterson, Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Description
1.1* Form of Purchase Agreement
4.1 Warrant Agreement dated April 27, 1993 between
Continental Airlines, Inc., as issuer, and
Continental Airlines, Inc., as Warrant Agent
(incorporated by reference to Exhibit 4.7 to the
Company's Current Report on Form 8-K (File No. 0-
09781) dated as of April 16, 1993)
4.2 Form of Class A Warrant (included in Exhibit 4.1)
4.3 Form of Class B Warrant(included in Exhibit 4.1)
4.4** Warrant Purchase Agreement between Continental
Airlines, Inc. and Air Partners, L.P. dated as of May
2, 1996
5.1* Opinion of Scott R. Peterson, Managing Attorney of
Continental Airlines, Inc., as to the validity of
the Class A common stock and Class B common
stock being registered hereby
5.2* Opinion of Cleary, Gottlieb, Steen & Hamilton as
to the validity of the Warrants being registered
hereby
23.1** Consent of Ernst & Young LLP
23.2* Consent of Scott R. Peterson, Managing Attorney of
Continental Airlines, Inc. (included in his opinion
filed as Exhibit 5.1)
23.3* Consent of Cleary, Gottlieb, Steen & Hamilton
(included in its opinion filed as Exhibit 5.2)
23.4** Consent of Cleary, Gottlieb, Steen & Hamilton
24.1** Powers of Attorney
- ---------------
*Filed herewith
** Previously filed
Exhibit 1.1
CONTINENTAL AIRLINES, INC.
(a Delaware corporation)
[ ] Shares
Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
_______________________
__________ __, 199_
Ladies and Gentlemen:
Continental Airlines, Inc., a Delaware corporation (the
"Company"), confirms its agreement with the Underwriters named in
Schedule A to the Pricing Agreement (as defined below), for whom
you ____________________________ are acting as representatives
(in such capacity, the "Representatives"), with respect to (a)
the sale the numbers of shares of common stock, par value $.01
per share of the Company (the "Common Stock") (the shares to be
so sold referred to herein as the "Initial Securities") and the
purchase by the Underwriters, acting severally and not jointly,
of the respective number of shares of Common Stock reflected in
Schedule A hereto; and (b) grant by the Company to the
Underwriters, acting severally and not jointly, of the option
described in Section 2(b) hereof to purchase all or any part of
the Option Securities (as defined herein) to cover over-
allotments except, in each case, as may otherwise be provided in
the Pricing Agreement. The Initial Securities and the Option
Securities are collectively hereinafter called the "Securities."
Each Underwriter shall purchase the number of shares of
the Initial Securities set forth opposite such Underwriter's name
in Schedule A to the Pricing Agreement.
Prior to the purchase and public offering of the
Securities by the several Underwriters, the Company and the
Representatives, acting on behalf of the several Underwriters,
shall enter into an agreement substantially in the form of
Exhibit A hereto (the "Pricing Agreement"). The Pricing
Agreement may take the form of an exchange of any standard form
of written telecommunication between the Company and the
Representatives and shall specify such information as is required
by Exhibit A hereto. The sale to the several Underwriters of the
Securities by the Company will be governed by this Agreement, as
supplemented by the Pricing Agreement. From and after the date
of the execution and delivery of the Pricing Agreement, this
Agreement shall be deemed to incorporate the Pricing Agreement.
The Company has filed with the United States Securities
and Exchange Commission (the "Commission") a registration
statement on Form S-3 (No. 333-09739) and related preliminary
prospectuses for the registration of the Securities under the
Securities Act of 1933, as amended (the "1933 Act"), has filed
such amendments thereto and such amended preliminary prospectuses
as may have been required to the date hereof and will file such
additional amendments thereto and such amended prospectuses as
may hereafter be required. Such registration statement (as
amended) at the time it became effective and the prospectus
constituting a part thereof (including in each case all documents
incorporated or deemed to be incorporated by reference therein
and the information, if any, deemed to be part thereof pursuant
to Rule 430A(b) or Rule 434 of the rules and regulations of the
Commission under the 1933 Act (the "1933 Act Regulations")), as
such prospectus may from time to time be amended or supplemented
pursuant to the 1933 Act or the Securities Exchange Act of 1934,
as amended (the "1934 Act"), are hereinafter referred to as the
"Registration Statement" and the "Prospectus," respectively,
except that if any revised prospectus shall be provided to the
Underwriters by the Company for use in connection with the
offering of the Securities which differs from the Prospectus on
file at the Commission at the time the Registration Statement
became effective (whether or not such revised prospectus is
required to be filed by the Company pursuant to Rule 424(b) of
the 1933 Act Regulations), the term "Prospectus" shall refer to
such revised prospectus from and after the time it is first
provided to the Underwriters for such use. Additionally, if the
Company has elected to rely upon Rule 434 of the 1933 Act
Regulations, the Company will prepare and file a term sheet (a
"term sheet"), in accordance with the provisions of Rules 434 and
424(b) of such Regulations, promptly after execution of the
Pricing Agreement. All references in this Agreement to financial
statements and schedules or other information which is
"contained," "included" or "stated" in the Registration Statement
or the Prospectus (and all other references of like import) shall
be deemed to mean and include all such financial statements and
schedules or other information which is or is deemed to be
incorporated by reference in the Registration Statement or the
Prospectus, as the case may be; and all references in this
Agreement to amendments or supplements to the Registration
Statement or the Prospectus shall be deemed to mean and include
the filing of any document under the 1934 Act which is or is
deemed to be incorporated by reference in the Registration
Statement or the Prospectus, as the case may be.
The Company understands that the Underwriters propose
to make a public offering of the Securities as soon as the
Representatives deem advisable after the Registration Statement
becomes effective and the Pricing Agreement has been executed and
delivered.
SECTION 1. Representations and Warranties.
(a) The Company represents and warrants to each
Underwriter as of the date hereof and as of the date of the
Pricing Agreement (such latter date being hereinafter referred to
as the "Representation Date") as follows:
(i) The Registration Statement has become effective
and at the Representation Date and complies in all material
respects with the requirements of the 1933 Act and the 1933
Act Regulations and does not contain an untrue statement of
a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein not misleading. The Prospectus, at the
Representation Date (unless the term "Prospectus" refers to
a prospectus which has been provided to the Underwriters by
the Company for use in connection with the offering of the
Securities which differs from the Prospectus on file at the
Commission at the time the Registration Statement became
effective, in which case at the time it is first provided to
the Underwriters for such use) and at Closing Time referred
to in Section 2 hereof, will not include an untrue statement
of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; and if Rule 434 is used, the Prospectus shall
not be "materially different," as such term is used in Rule
434 of the 1933 Act Regulations, from the Prospectus first
provided to the Underwriters for their use in connection
with the sale of the Securities; provided, however, that the
representations and warranties in this subsection shall not
apply to statements contained in or omissions from the
Registration Statement or Prospectus made in reliance upon
and in conformity with information furnished to the Company
in writing by any Underwriter through the Representatives
expressly for use in the Registration Statement or
Prospectus.
(ii) The accountants that examined and certified the
audited consolidated financial statements and supporting
schedules of the Company included or incorporated or deemed
to be incorporated in the Registration Statement are
independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iii) The audited and unaudited financial statements
included or incorporated or deemed to be incorporated in the
Registration Statement and the Prospectus, together with the
related notes thereto, present fairly in all material
respects the financial position, results of operations and
cash flows of the Company and its consolidated subsidiaries
as at the dates and for the periods to which they relate;
except as otherwise stated in the Registration Statement,
said financial statements have been prepared in conformity
with United States generally accepted accounting principles
applied on a consistent basis; and the supporting schedules,
if any, included or incorporated or deemed to be
incorporated in the Registration Statement present fairly in
all material respects the information required to be stated
therein.
(iv) Since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, except as otherwise stated therein, (A) there
has been no material adverse change in the business,
financial condition, assets or results of operations of the
Company and its consolidated subsidiaries, taken as a whole,
whether or not arising in the ordinary course of business (a
"Material Adverse Change"), (B) there has been no
transaction entered into by the Company or any of its
consolidated subsidiaries, other than those in the ordinary
course of business, that is material to the Company and its
consolidated subsidiaries, taken as a whole, and (C) there
has been no dividend or distribution of any kind declared,
paid or made by the Company on its capital stock (other than
declarations or scheduled payments of dividends on the
Company's outstanding preferred stock in additional shares
of such preferred stock).
(v) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware with corporate power and
authority to own, lease and operate its properties and to
conduct its business as now conducted and as described in
the Prospectus and to enter into and perform its obligations
under this Agreement and the Pricing Agreement; and the
Company is duly qualified as a foreign corporation to
transact business and is in good standing in each
jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure to so
qualify would not have a material adverse effect on the
business, financial condition, assets or results of
operations of the Company and its consolidated subsidiaries,
taken as a whole (a "Material Adverse Effect").
(vi) The only subsidiaries of the Company that are
"significant subsidiaries" within the meaning of Rule 1-
02(w) of Regulation S-X under the 1933 Act as of the date
hereof are those subsidiaries listed in the Company's most
recent Annual Report on Form 10-K (the "Subsidiaries").
Each Subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has corporate power
and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectuses and
is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in
which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of
business, except where the failure to so qualify would not
have a Material Adverse Effect. Except as set forth in the
Registration Statement, all of the outstanding capital stock
of each Subsidiary has been duly authorized and validly
issued, is fully paid and non-assessable and except as set
forth in the Registration Statement is owned by the Company,
directly or through subsidiaries, free and clear of any
security interest, mortgage, pledge, lien, encumbrance,
claim or equity.
(vii) All of the outstanding capital stock of the
Company has been duly authorized and validly issued and is
fully paid and nonassessable; the authorized capital stock
of the Company conforms in all material respects to all
statements relating thereto in the Prospectuses.
(viii) Neither the Company nor any of the Subsidiaries
is in violation of its charter or in default (or, with
notice or lapse of time or both, would be in default) in the
performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other instrument to
which the Company or any of the Subsidiaries is a party or
by which it or any of them is bound, or to which any of the
property or assets of the Company or any of the Subsidiaries
is subject, which violation or default would have a Material
Adverse Effect; and the execution, delivery and performance
of this Agreement, the Pricing Agreement, the consummation
of the transactions contemplated herein and therein and
compliance by the Company with its obligations hereunder and
thereunder have been duly authorized by all necessary
corporate action and will not conflict with or constitute or
result in a breach or violation by the Company or any of the
Subsidiaries of (A) any of the terms or provisions of, or
constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) by the
Company or any of the Subsidiaries, or give rise to any
right to accelerate the maturity or require the prepayment
of any indebtedness under, or result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of the Subsidiaries
under, any contract, indenture, mortgage, deed of trust,
loan agreement, note, lease, or other instrument to which
the Company or any of the Subsidiaries is a party or by
which any of them may be bound, or to which any of them or
any of their respective assets or properties is subject,
which individually or in the aggregate would (1) have or
result in a Material Adverse Effect, or (2) materially
affect the consummation of the transactions contemplated
hereby; (B) the respective charters or by-laws of the
Company and the Subsidiaries or (C) any applicable law,
administrative regulation or administrative or court decree
which would have or result in a Material Adverse Effect, or
materially affect the consummation of the transactions
contemplated hereby.
(ix) Except as disclosed in the Registration
Statement, to the knowledge of the Company, no material
labor problem, dispute or disturbance with the employees of
the Company or any of the Subsidiaries exists or is
threatened.
(x) Except as disclosed in the Registration Statement,
there is no legal action, suit or proceeding before or by
any court or governmental agency or body, domestic or
foreign, now pending, or, to the knowledge of the Company,
threatened, against the Company or any of the Subsidiaries,
which is required to be disclosed in the Registration
Statement, or which would, individually or in the aggregate,
have a Material Adverse Effect, or which could reasonably be
expected to materially and adversely affect the consummation
of the transactions contemplated by this Agreement and the
Pricing Agreement. Except as disclosed in the Registration
Statement, neither the Company nor any of the Subsidiaries
has received any notice or claim of any default (or event
which with notice or lapse of time or both would result in a
default) under any of its respective material contracts or
has knowledge of any breach of any of such contracts by the
other party or parties thereto, except such defaults or
breaches as would not result in a Material Adverse Effect.
There are no contracts or documents of the Company or any of
its subsidiaries which are required to be filed as exhibits
to the Registration Statement by the 1933 Act or by the 1933
Act Regulations which have not been so filed.
(xi) No authorization, approval or consent of any
court or governmental authority or agency of the United
States is necessary in connection with the offering or sale
of the Securities hereunder, except such as may be required
and have been obtained under the 1933 Act, the 1933 Act
Regulations, the 1934 Act, the 1934 Act Regulations or as
may be required by the National Association of Securities
Dealers, Inc. ("NASD") or under state securities laws.
(xii) The Company (i) has been subject to the
requirements of Section 12 of the 1934 Act for a period of
at least 12 calendar months, (ii) has filed in a timely
manner all reports required to be filed during the 12
calendar months preceding the Representation Date, and (iii)
the aggregate market value of the voting stock held by non-
affiliates of the Company is $75 million or more.
(xiii) Except as could not reasonably be expected to
have a Material Adverse Effect, the Company and the
Subsidiaries possess such certificates, authorizations or
permits issued by the appropriate state, federal or foreign
regulatory agencies or bodies necessary to conduct the
business now conducted by them in the manner described in
the Registration Statement, and neither the Company nor any
of the Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such
certificate, authority or permit which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling
or finding, would have a Material Adverse Effect.
(xiv) This Agreement and, at the Representation Date,
the Pricing Agreement will have been, duly authorized,
executed and delivered by the Company.
(xv) There are no persons with registration or other
similar rights to have any securities registered pursuant to
the Registration Statement by the Company under the 1933
Act, except such as have been waived in writing.
(xvi) Except as disclosed in the Registration
Statement, there is no claim pending or to the knowledge of
the Company threatened under any Environmental Law (as
defined below) against the Company or any of the
Subsidiaries which could reasonably be expected, singly or
in the aggregate, to result in a Material Adverse Effect; to
the knowledge of the Company there are no past or present
actions, conditions, events, circumstances or practices,
including, without limitation, the release of any Hazardous
Material (as defined below) that could reasonably be
expected to form the basis of any such claim under any
Environmental Law against the Company or any of the
Subsidiaries which would, singly or in the aggregate, result
in a Material Adverse Effect. The term "Environmental Law"
means the common law and any federal, state, local or
foreign law, rule or regulation, code, order, decree,
judgment or injunction, issued, promulgated, approved or
entered thereunder relating to pollution or protection of
public or employee health or the environment, including,
without limitation, the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as
amended, the Resource Conservation and Recovery Act, as
amended, the Toxic Substance Control Act, as amended, the
Clean Air Act, as amended, and the Federal Water Pollution
Act, as amended, and their foreign, state and local
counterparts or equivalents and any other laws relating to
(i) releases of any Hazardous Material into the environment
(including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), (ii) the
manufacture, processing, distribution, use, treatment,
storage, disposal, transport, presence or handling of any
Hazardous Material, or (iii) underground storage tanks and
related piping, and releases therefrom. The term "Hazardous
Material" means any pollutant, contaminant, chemical,
hazardous material, or industrial, toxic or hazardous
substance or waste (including, without limitation,
petroleum, including crude oil or any fraction thereof or
any petroleum product) regulated by or the subject of any
Environmental Law.
(xvii) The Securities are listed on the New York Stock
Exchange and have been registered under Section 12(b) of the
1934 Act.
(xviii) The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time
they were or hereafter are filed with the Commission,
complied and will comply in all material respects with the
requirements of the 1934 Act and the rules and regulations
of the Commission under the 1934 Act (the "1934 Act
Regulations"), and, when read together with the other
information in the Prospectus, at the time the Registration
Statement and any amendments thereto became effective and at
the Closing Time, will not contain an untrue statement of a
material fact or omit to state a material fact required to
be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they
were made, not misleading.
(c) Any certificate signed by any officer of the
Company and delivered to the Underwriters or to counsel for the
Underwriters pursuant to the terms of this Agreement shall be
deemed a representation and warranty by the Company to each
Underwriter as to the matters covered thereby.
SECTION 2. Sale and Delivery to the Underwriters;
Closing.
(a) On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein
set forth, the Company, agrees to sell to each Underwriter,
acting severally and not jointly, and each Underwriter, acting
severally and not jointly, agrees to purchase from the Company,
at the purchase price per share set forth in the Pricing
Agreement (subject to subparagraph (b) hereof), (i) the number of
Initial Securities from the Company set forth in Schedule A
opposite the name of such Underwriter, plus (ii) any additional
number of Initial Securities which such Underwriter may become
obligated to purchase pursuant to the provisions of Section 10
hereof.
(1) If the Company has elected not to rely upon Rule
430A under the 1933 Act Regulations, the public offering
price and the purchase price per share to be paid by the
several Underwriters for the Securities have each been
determined and set forth in the Pricing Agreement, dated the
date hereof, and an amendment to the Registration Statement
and the Prospectus containing such information will be filed
before the Registration Statement becomes effective.
(2) If the Company has elected to rely upon Rule 430A
under the 1933 Act Regulations, the purchase price per share
to be paid by the several Underwriters for the Securities
shall be an amount equal to the public offering price, less
an amount per share to be determined by agreement between
the Underwriters and the Company. The public offering price
per share of the Securities shall be a fixed price to be
determined by agreement between the Underwriters and the
Company. The public offering price and the purchase price
shall be set forth in paragraph 2 of the Pricing Agreement.
In the event that such prices have not been agreed upon and
the Pricing Agreement has not been executed and delivered by
all parties thereto by the close of business on the fourth
business day following the date of this Agreement, this
Agreement shall terminate forthwith, without liability of
any party to any other party, unless otherwise agreed to by
the Company and the Representatives.
(b) In addition, on the basis of the representations
and warranties herein contained and subject to the terms and
conditions herein set forth, the Company hereby grants an option
to the Underwriters, severally and not jointly, to purchase up to
________ additional shares of Common Stock (the "Option
Securities") at the price per share set forth in the Pricing
Agreement. The option hereby granted will expire 30 days after
(i) the date the Registration Statement becomes effective, if the
Company has elected not to rely on Rule 430A under the 1933 Act
Regulations, or (ii) the Representation Date, if the Company has
elected to rely on Rule 430A under the 1933 Act Regulations, and
may be exercised in whole or in part from time to time only for
the purpose of covering over-allotments which may be made in
connection with the offering and distribution of the Initial
Securities upon notice by the Representatives to the Company,
setting forth the number of Option Securities as to which the
several Underwriters are then exercising the option and the time
and date of payment and delivery for such Option Securities. Any
such time and date of delivery (a "Date of Delivery") shall be
determined by the Representatives, but shall not be later than
seven full business days after the exercise of said option, nor
in any event prior to the Closing Time, as hereinafter defined,
unless otherwise agreed by the Representatives. If the option is
exercised as to all or any portion of the Option Securities, each
of the Underwriters, acting severally and not jointly, will
purchase that proportion of the total number of Option Securities
then being purchased which the number of Initial Securities set
forth in Schedule A opposite the name of such Underwriter bears
to the total number of Initial Securities (except as otherwise
provided in the Pricing Agreement), subject in each case to such
adjustments as the Representatives in their discretion shall make
to eliminate any sales or purchases of fractional shares.
(c) Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at
____________, or at such other place as shall be agreed upon by
the Representatives and the Company, at 10:00 A.M. on the third
or fourth business day (unless postponed in accordance with the
provisions of Section 10) following the date the Registration
Statement becomes effective (or, if the Company has elected to
rely upon Rule 424 or Rule 430A of the 1933 Act Regulations, the
third or fourth business day after execution of the Pricing
Agreement), or such other time not later than ten business days
after such date as shall be agreed upon by the Representatives
and the Company (such time and date of payment and delivery being
herein called "Closing Time"). In addition, in the event that
any or all of the Option Securities are purchased by the
Underwriters, payment of the purchase price for and delivery of
certificates for such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be
agreed upon by the Representatives and the Company, on each Date
of Delivery as specified in the notice from the Representatives
to the Company. Payment for Initial Securities shall be made to
the Company (upon the written instructions of the Custodian) by
wire transfer to an account to be designated by the Company at
least one business day prior to the Closing Time of immediately
available funds, payable to the order of the Company, against
delivery to the Representatives for the respective accounts of
the Underwriters of certificates for the Securities to be
purchased by them. Payment for Option Securities, if any, shall
be made to the Company in accordance with the preceding sentence.
Certificates for the Initial Securities and the Option
Securities, if any, shall be in such denominations and registered
in such names as the Representatives may request in writing to
the transfer agent at least two business days before Closing Time
or the relevant Date of Delivery, as the case may be. It is
understood that each Underwriter has authorized the
Representatives, for its account, to accept delivery of, receipt
for, and make payment of the purchase price for, the Initial
Securities and the Option Securities, if any, which it has agreed
to purchase. The certificates for the Initial Securities and the
Option Securities, if any, will be made available by the transfer
agent for examination and packaging by the Representatives not
later than ____ on the last business day prior to Closing Time or
the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company
covenants with each Underwriter as follows:
(a) The Company will, for so long as the Underwriters
are required to deliver a prospectus in connection with the
offer and sale of the Securities, notify the Representatives
promptly, and confirm the notice in writing, (i) of the
effectiveness of the Registration Statement and any
amendment thereto (including any post-effective amendment),
(ii) of the receipt of any comments from the Commission,
(iii) of any request by the Commission for any amendment to
the Registration Statement or any amendment or supplement to
the Prospectus or for additional information, and (iv) of
the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company
will make every reasonable effort to prevent the issuance of
any stop order and, if any stop order is issued, to obtain
the lifting thereof at the earliest possible moment. The
obligations of the Company pursuant to this Section 3(a)
shall be deemed to terminate ___ days after the date of the
Pricing Agreement unless the Representatives shall notify
the Company in writing that the Underwriters continue to be
subject to prospectus delivery requirements with respect to
offers and sales of the Securities, and in the event of any
such notice the obligations of the Company under this
Section 3(a) shall be deemed to terminate ___ days after the
date of such notice unless a further notice to such effect
is so provided.
(b) The Company will, for so long as the Underwriters
are required to deliver a prospectus in connection with the
offer and sale of the Securities, give the Representatives
notice of its intention to file or prepare any amendment to
the Registration Statement (including any post-effective
amendment) or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes
for use by the Underwriters in connection with the offering
of the Securities which differs from the prospectus on file
at the Commission at the time the Registration Statement
becomes effective, whether or not such revised prospectus
are required to be filed pursuant to Rule 424(b) of the 1933
Act Regulations), whether pursuant to the 1933 Act, the 1934
Act or otherwise, will furnish the Representatives with
copies of any such amendment or supplement a reasonable
amount of time prior to such proposed filing or use, as the
case may be, and will not file any such amendment or
supplement or use any such prospectus to which the
Representatives or counsel for the Underwriters shall
reasonably object. In the event (a) the Underwriters shall
object to any such amendment, supplement or prospectus and
(b) the Company shall have determined (based upon the
written opinion of outside counsel) that the failure to file
with the Commission, or use in connection with the sale of
the securities included in the Registration Statement, any
such amendment, supplement or prospectus would make the
Prospectus include a material misstatement or omit to state
a material fact in light of the circumstances existing at
the time it is delivered to a purchaser, then the Company
may file with the Commission any such amendment, supplement
or prospectus. The obligations of the Company pursuant to
this Section 3(b) shall be deemed to terminate ___ days
after the date of the Pricing Agreement unless the
Representatives shall notify the Company in writing that the
Underwriters continue to be subject to prospectus delivery
requirements with respect to offers and sales of the
Securities, and in the event of any such notice the
obligations of the Company under this Section 3(b) shall be
deemed to terminate ___ days after the date of such notice
unless a further notice to such effect is so provided.
(c) The Company will deliver to the Representatives as
many signed copies of the Registration Statement as
originally filed and of each amendment thereto (including
exhibits filed therewith or incorporated by reference
therein and documents incorporated or deemed to be
incorporated by reference therein) as the Representatives
may reasonably request and will also deliver to the
Representatives a conformed copy of the Registration
Statement as originally filed and of each amendment thereto
(without exhibits) for each of the Underwriters.
(d) The Company will furnish to each Underwriter, from
time to time during the period when the Prospectus is
required to be delivered under the 1933 Act or the 1934 Act,
such number of copies of the Prospectus (as amended or
supplemented) as such Underwriter may reasonably request for
the purposes contemplated by the 1933 Act or the 1934 Act or
the respective applicable rules and regulations of the
Commission thereunder.
(e) During the period when the Prospectus is required
to be delivered under the 1933 Act or the 1934 Act, if any
event shall occur as a result of which it is necessary, in
the reasonable opinion of counsel for the Representatives or
counsel to the Company, to amend or supplement the
Prospectus in order that the Prospectus, as then amended or
supplemented, will not include an untrue statement of
material fact or omit to state a material fact necessary to
make the statements therein, in the light of the
circumstances existing at the time it is delivered to a
purchaser, not misleading or, in the reasonable opinion of
the Representatives or counsel to the Representatives, such
amendment or supplement is necessary to comply with
applicable law, the Company will, subject to paragraph (b)
of this Section 3, promptly prepare such amendment or
supplement as may be necessary to correct such untrue
statement or omission or to effect such compliance (in form
and substance reasonably satisfactory to counsel for the
Representatives), so that as so amended or supplemented, the
Prospectus will not include an untrue statement of a
material fact or omit to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a
purchaser, not misleading, or so that such Prospectus as so
amended or supplemented will comply with applicable law, as
the case may be, and the Company will furnish to the
Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request. The
Company agrees to notify the Underwriters in writing to
suspend use of the Prospectus as promptly as practicable
after the occurrence of an event specified in this paragraph
(e), and the Underwriters hereby agree upon receipt of such
notice from the Company to suspend use of the Prospectus
until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission or to effect such
compliance.
(f) The Company, during the period when the Prospectus
is required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the 1934 Act
within the time periods required by the 1934 Act and the
1934 Act Regulations.
(g) The Company will endeavor, in cooperation with the
Underwriters, to qualify the Securities for offering and
sale under the applicable securities laws of such states and
other jurisdictions of the United States as the
Representatives may reasonably designate; provided, however,
that the Company shall not be obligated to (i) qualify as a
foreign corporation in any jurisdiction in which it is not
so qualified, (ii) file any general consent to service of
process in any jurisdiction where it is not at the Closing
Time then so subject or (iii) subject itself to taxation in
any such jurisdiction if it is not so subject. In each
jurisdiction in which the Securities have been so qualified,
the Company will file such statements and reports as may be
required by the laws of such jurisdiction to continue such
qualification in effect for a period of not less than one
year from the effective date of the Registration Statement
or such shorter period that will terminate when all Initial
Securities and any Option Securities to be sold subject to
such qualification have been sold or withdrawn. The Company
shall promptly advise the Representatives and counsel to the
Representatives of the receipt by the Company of any
notification with respect to the suspension of the
qualification or exemption from qualification of the
Securities for offering or sale in any jurisdiction or the
institution of any proceeding for such purpose. The Company
will inform the Florida Department of Banking and Finance if
prior to the completion of the distribution of the
Securities by the Underwriters the Company commences
engaging, other than as set forth in the Registration
Statement, in business with the government of Cuba or with
any person or affiliate located in Cuba. Such information
will be provided within 90 days of the commencement thereof
or after a change to any such previously reported
information.
(h) The Company will make generally available to its
security holders as soon as practicable, but not later than
90 days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of
Rule 158 of the 1933 Act Regulations) covering a twelve-
month period beginning not later than the first day of the
Company's fiscal quarter next following the "effective date"
(as defined in said Rule 158) of the Registration Statement.
(i) If, at the time that the Registration Statement
became effective, any information shall have been omitted
therefrom in reliance upon Rule 430A of the 1933 Act
Regulations, then immediately following the execution of the
Pricing Agreement, the Company will prepare, and file or
transmit for filing with the Commission in accordance with
such Rule 430A and Rule 424(b) of the 1933 Act Regulations,
copies of an amended Prospectus, or, if required by such
Rule 430A, a post-effective amendment to the Registration
Statement (including amended Prospectus), containing all
information so omitted.
(j) The Company will use its commercially reasonable
best efforts to cause the continued listing of the
Securities on the New York Stock Exchange.
(k) The Company will not, directly or indirectly, for
a period of ___ days from the Representation Date, except
with the prior written consent of the Representatives,
offer, sell, contract to sell, or otherwise dispose of any
shares of common stock of the Company or any interests
therein, or any securities that are convertible into or
exchangeable for shares of common stock or other equity
interests of the Company, except that the Company may issue
shares of common stock or other equity interests of the
Company (i) pursuant to the exercise or conversion of
options, warrants or other securities outstanding on the
date hereof, (ii) pursuant to the grant of stock options or
other stock-based awards (and the exercise thereof) to
directors, officers, and employees of the Company or its
subsidiaries, and (iii) as may be required pursuant to the
certificate of incorporation of the Company.
(l) Immediately following the execution of the Pricing
Agreement, the Company will prepare, and file or transmit
for filing with the Commission in accordance with Rules 434
and 424(b) of the 1933 Act Regulations, copies of amended
Prospectus supplements and term sheet, if any, to the
Registration Statement, containing all omitted information.
(m) If the Company uses Rule 434 of the 1933 Act
Regulations, it will comply with the requirements of Rule
434 of such regulations and the U.S. Prospectus will not be
"materially different," as such term is used in Rule 434 of
the 1933 Act Regulations, from the Prospectus first given to
the Underwriters for their use.
SECTION 4. Payment of Expenses. The Company will pay
all expenses incident to the performance of its obligations under
this Agreement, including (i) the printing and filing of the
Registration Statement as originally filed and of each amendment
thereto, (ii) the preparation and delivery of the certificates
for the Securities to the Underwriters, (iii) the fees and
disbursements of the Company's counsel and accountants, (iv) the
qualification of the Securities under securities laws in
accordance with the provisions of Section 3(g) hereof, including
filing fees and the fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the
preparation of the Blue Sky Survey, (v) the printing and delivery
to the Underwriters of copies of the Registration Statement as
originally filed and of each amendment thereto (excluding
exhibits, except to the Representatives), of each preliminary
prospectus, and of the Prospectus and any amendments or
supplements thereto, (vi) the printing and delivery to the
Underwriters of copies of the Blue Sky Survey, (vii) the fee of
the National Association of Securities Dealers, Inc. and (ix) the
fees and expenses of continuing the listing of the Securities on
the New York Stock Exchange, Inc.
If after the execution of a Pricing Agreement this
Agreement is terminated by the Representatives in accordance with
the provisions of Section 5 or Section 9(a)(i) hereof, the
Company shall reimburse the Underwriters promptly upon demand for
all of their reasonable out-of-pocket expenses that shall have
been incurred by them in connection with the proposed purchase
and sale of the Securities, including the reasonable fees and
disbursements of counsel for the Underwriters.
SECTION 5. Conditions of Underwriters' Obligations.
The obligations of the Underwriters hereunder are subject to the
accuracy of the representations and warranties of the Company
herein contained, to the performance by the Company of its
obligations hereunder, and to the following further conditions:
(a) The Registration Statement shall have become
effective and at Closing Time, no stop order suspending the
effectiveness of the Registration Statement shall have been
issued under the 1933 Act or proceedings therefor initiated or
threatened by the Commission. If the Company has elected to rely
upon Rule 430A of the 1933 Act Regulations, the price of the
Securities and any price-related information previously omitted
from the effective Registration Statement pursuant to such Rule
430A shall have been transmitted to the Commission for filing
pursuant to Rule 424(b) of the 1933 Act Regulations within the
prescribed time period and, prior to Closing Time, the Company
shall have provided evidence satisfactory to the Representatives
of such timely filing, or a post-effective amendment providing
such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A of the
1933 Act Regulations.
(b) At Closing Time the Representatives, as
representatives of the Underwriters, shall have received:
(1) The favorable opinion, dated as of Closing Time,
of counsel for the Company, in form and substance
satisfactory to counsel for the Underwriters, to the effect
that:
(i) The Company is validly existing as a
corporation in good standing under the laws of the
State of Delaware.
(ii) The Company has corporate power to own its
properties and conduct its business as described in the
Registration Statement and to enter into and perform
its obligations under this Agreement the Pricing
Agreement.
(iii) The execution and delivery of this
Agreement and the Pricing Agreement have each been duly
authorized by all necessary corporate action of the
Company.
(iv) The statements set forth under the headings
______________________________________________________
and ____________________ in the prospectus provide a
fair summary of such provisions.
(v) No authorization, approval, consent or order
of any governmental authority of the United States or
the State of New York is required as of the date of
such opinion in connection with the offering and sale
of the Securities to the Underwriters in the United
States pursuant to the Purchase Agreement, except such
as may have been obtained under the 1933 Act or the
1933 Act Regulations or the 1934 Act (but we express no
opinion as to any such authorization, approval, consent
or order that may be required under state securities or
Blue Sky laws).
(2) The favorable opinion, dated as of Closing Time,
of Jeffery A. Smisek, Esq., Senior Vice President and
General Counsel of the Company, in form and substance
satisfactory to counsel for the Underwriters, to the effect
that:
(i) To the best of his knowledge, the Company is
duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction
in the United States in which such qualification is
required, except in jurisdictions where the failure to
be so qualified could not reasonably be expected to
have a Material Adverse Effect.
(ii) Each of the Subsidiaries has been duly
incorporated and is validly existing as a corporation
in good standing under the laws of the jurisdiction of
its incorporation, has all requisite corporate power
and authority to own, lease and operate its properties
and to conduct its business as described in the
Registration Statement and, to the best of his
knowledge, is duly qualified as a foreign corporation
to transact business and is in good standing in each
jurisdiction in the United States in which such
qualification is required, except as could not
reasonably be expected to have a Material Adverse
Effect; all of the issued and outstanding capital stock
of each such Subsidiary has been duly authorized and
validly issued, is fully paid and nonassessable and,
except as disclosed in the Prospectuses or except as
would not have a Material Adverse Effect, is owned
beneficially and of record by the Company, directly or
through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or
equity.
(iii) To the best of his knowledge, there are no
legal or governmental proceedings pending or threatened
to which the Company or any Subsidiary is a party or to
which the assets of the Company or any Subsidiary are
subject which are required to be disclosed in the
Registration Statement, other than those disclosed
therein, or those which individually or in the
aggregate would not have a Material Adverse Effect.
(iv) To the best of his knowledge, none of the
Company or any of the Subsidiaries is in default (or,
with notice or lapse of time or both, would be in
default) in the performance or observance of any
material obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of
trust, loan agreement, note, lease or other instrument
to which it is a party or by which it is bound, or to
which any of its respective assets is subject, or in
violation of any law, statute, judgment, decree, order
rule or regulation of any domestic or foreign court
with jurisdiction over the Company or any of the
Subsidiaries or any of their respective assets, or
other governmental or regulatory authority, agency or
other body, other than such defaults or violations
which, individually or in the aggregate, would not have
a Material Adverse Effect.
(v) To the best of his knowledge, the execution,
delivery and performance of this Agreement and the
Pricing Agreement and the consummation of the
transactions contemplated herein and therein and
compliance by the Company with its obligations
hereunder and thereunder will not conflict with or
constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company
or any of the Subsidiaries pursuant to, any material
contract, indenture, mortgage, loan agreement, note,
lease or other instrument to which the Company or any
of the Subsidiaries is a party or by which it or any of
them is bound, or to which any of the property or
assets of the Company or any of the Subsidiaries is
subject, except as would not, individually or in the
aggregate, have a Material Adverse Effect, nor will
such action result in any violation of the provisions
of the charter or by-laws of the Company, or any
applicable law, administrative regulation or
administrative or court decree.
(vi) To the best of his knowledge there are no
contracts, indentures, mortgages, loan agreements,
notes, leases or other instruments required to be
described or referred to in the Registration Statement
other than those described or referred to therein. The
descriptions thereof or references thereto are correct
in all material respects, and to his actual knowledge
no default exists in the due performance or observance
of any material obligation, agreement, covenant or
condition contained in any contract, indenture,
mortgage, loan agreement, note, lease or other
instrument so described, referred to or filed as an
exhibit to a document filed under the 1934 Act or the
1934 Act Regulations, except as could not reasonably be
expected to have a Material Adverse Effect.
(vii) At the time the Registration Statement
became effective and at the Representation Date, the
Registration Statement (other than the financial
statements and supporting schedules included therein
and the Exhibits thereto, as to which no opinion need
be rendered) complied as to form in all material
respects with the requirements of the 1933 Act and the
1933 Act Regulations. Each document filed pursuant to
the 1934 Act (other than the financial statements and
supporting schedules included therein, as to which no
opinion need be rendered) and incorporated or deemed to
be incorporated by reference in the Prospectus complied
when so filed as to form in all material respects with
the 1934 Act and the 1934 Act Regulations.
(viii) The shares of issued and outstanding Class
A Common Stock and Class B Common Stock, including the
Securities to be sold by the Selling Stockholders, have
been duly authorized by all necessary corporate action
and validly issued and are fully paid and
nonassessable.
(ix) The issuance and sale of the Securities was
not subject, at the date of issue, to preemptive or
other similar rights arising under the certificate of
incorporation or by-laws of the Company or under the
Delaware General Corporation Law.
(3) The favorable opinion, dated as of Closing Time,
of ________________, counsel for the Underwriters, with
respect to the matters set forth in (i) and (iii) of
subsection (b)(1) of this Section.
(4) In giving their opinions required by subsections
(b)(1) and (b)(4), respectively, of this Section, counsel
for the Company and counsel for the Underwriters shall each
additionally state that they have participated in
conferences with officers and other representatives of the
Company, representatives of the independent public
accountants for the Company and representatives of the
Underwriters at which the contents of the Registration
Statement and the Prospectus and related matters were
discussed and, although they are not passing upon, have not
made any independent verification of and do not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement and
the Prospectus (except to the extent expressly set forth in
their opinion), on the basis of the foregoing (relying as to
materiality to a large extent upon the opinions of officers
and other representatives of the Company), no facts have
come to their attention that lead them to believe that the
Registration Statement at the time it became effective or at
the Representation Date contained an untrue statement of a
material fact or omitted to state a material fact necessary
in order to make the statements therein not misleading, or
that the Prospectuses, as of their dates and as of the date
of such opinion, contained an untrue statement of a material
fact or omitted to state a material fact necessary in order
to make the statements therein, in light of the
circumstances under which they were made, not misleading (it
being specifically understood that they have not been
requested to and do not express any statement with respect
to the financial statements and schedules and other
financial and statistical data included or incorporated by
reference in the Registration Statement). In addition, such
counsel shall confirm that based solely upon telephonic
confirmation from a representative of the Commission, the
Registration Statement is effective under the 1933 Act and,
to the best of their knowledge, no stop order with respect
thereto has been issued, and no proceeding for that purpose
has been instituted or threatened, by the Commission.
(c) At Closing Time there shall not have been, since
the date hereof or since the respective dates as of which
information is given in the Registration Statement and the
Prospectus except as stated therein, any Material Adverse Change
or any development resulting in a prospective Material Adverse
Change, and the Representatives shall have received a certificate
of the President or a Vice President of the Company and of the
principal financial or principal accounting officer of the
Company, dated as of Closing Time, addressed to the
Representatives, as representatives of the Underwriters to the
effect that (i) there has been no such Material Adverse Change or
development resulting in a prospective Material Adverse Change,
(ii) the representations and warranties of the Company in this
Agreement are true and correct with the same force and effect as
though expressly made at and as of Closing Time, (iii) the
Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior
to Closing Time, and (iv) no stop order suspending the
effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been initiated or threatened
by the Commission.
(d) At the time that this Agreement is signed, Ernst &
Young LLP shall have furnished to the Representatives a letter
addressed to the Representatives, as representatives of the
Underwriters, and the Company, dated as of the date of this
Agreement, in form and substance satisfactory to the
Representatives, confirming that they are independent auditors
with respect to the Company and its subsidiaries within the
meaning of the 1933 Act and the 1933 Act Regulations and stating
in effect that:
(i) in their opinion the audited financial
statements and supporting schedules included in the
Registration Statement or incorporated or deemed to be
incorporated by reference therein comply as to form in
all material respects with the applicable accounting
requirements of the 1933 Act and the 1933 Act
Regulations;
(ii) on the basis of a reading of the latest
unaudited financial statements made available by the
Company; carrying out certain procedures specified in
such letter (but not an examination in accordance with
generally accepted auditing standards) which would not
necessarily reveal matters of significance with respect
to the comment set forth in such letter; a reading of
the minutes of the meetings of the stockholders, the
board of directors and committees thereof of the
Company; and inquiries of certain officials of the
Company who have responsibility for financial and
accounting matters of the Company as to transactions
and events subsequent to ____________, and such other
inquiries and procedures as may be specified in such
letter, nothing has come to their attention which
causes them to believe that:
(A) the unaudited financial statements of
the Company and its subsidiaries included in the
Registration Statement or incorporated or deemed
to be incorporated by reference therein do not
comply as to form in all material respects with
the applicable accounting requirements of the 1933
Act and the 1933 Act Regulations or are not
presented in conformity with generally accepted
accounting principles applied on a basis
substantially consistent with the audited
financial statements incorporated by reference
therein; or
(B) the unaudited amounts of revenues, net
income and net income per share set forth under
"Selected Financial Data" in the Prospectus were
not determined on a basis substantially consistent
with what is used in determining the corresponding
amounts in the audited financial statements
incorporated by reference in the Registration
Statement; or
(C) with respect to the period subsequent to
________________, that at a specified date not
more than five days prior to the date of this
Agreement, there has been any change in the
capital stock of the Company or any increase in
the consolidated long term debt or consolidated
net current liabilities of the Company and its
subsidiaries or any decrease in common
stockholders' equity as compared with the amounts
shown in the ____________ balance sheet
incorporated by reference in the Registration
Statement and Prospectuses, or for the period from
____________ to such specified date, there were
any decreases, as compared with the corresponding
period in the preceding year, in consolidated
operating revenues, net income or primary or fully
diluted income per common share or any increases
in net loss or primary or fully diluted loss per
common share of the Company and its subsidiaries,
except in all instances for changes, increases or
decreases that are described in such letter or
that the Registration Statement and the Prospectus
disclose have occurred or may occur; and
(iii) in addition to the examination referred to
in their opinion and the limited procedures referred to
in clause (ii) above, they have performed certain other
specified procedures, not constituting an audit, with
respect to certain amounts, percentages and financial
information that are derived from the general
accounting records of the Company and are included in
the Registration Statement and Prospectus, and have
compared such amounts, percentages and financial
information with such records of the Company and with
information derived from such records and have found
such amounts, percentages and financial information to
be in agreement with the relevant accounting, financial
and other records of the Company and its subsidiaries
identified in such letter.
(e) At the Closing Time the Representatives shall have
received from Ernst & Young LLP a letter addressed to the
Representatives, as representatives of the Underwriters, and the
Company, dated as of Closing Time, to the effect that they
reaffirm the statements made in the letter furnished pursuant to
subsection (d) of this Section, except that the specified date
referred to shall be a date not more than five days prior to
Closing Time and, if the Company has elected to rely on Rule 430A
of the 1933 Act Regulations, to the further effect that they have
carried out procedures as specified in clause (iii) of subsection
(d) of this Section with respect to certain amounts, percentages
and financial information specified by the Representatives and
deemed to be a part of the Registration Statement pursuant to
Rule 430A(b) and have found such amounts, percentages and
financial information to be in agreement with the records
specified in such clause (iii).
(f) At Closing Time, and at each Date of Delivery, the
Securities shall continue to be listed on the New York Stock
Exchange.
(g) At Closing Time and at each Date of Delivery, if
any, counsel for the Underwriters shall have been furnished with
such documents as they may reasonably require and have
specifically requested prior to such time for the purpose of
enabling them to pass upon the issuance and sale of the
Securities as herein contemplated and related proceedings, or in
order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein
contained; and all proceedings taken by the Company in connection
with the sale of the Securities as herein contemplated shall be
satisfactory in form and substance to the Representatives and
counsel for the Underwriters.
(h) In the event that the Underwriters exercise their
option provided in Section 2(b) hereof to purchase all or any
portion of the Option Securities, the obligations of the several
Underwriters to consummate such purchase are subject to the
further conditions that the representations and warranties of the
Company contained herein and the statements in any certificates
furnished by the Company hereunder shall be true and correct as
of each Date of Delivery and, at the relevant Date of Delivery,
the Representatives shall have received:
(1) A certificate, dated such Date of Delivery, of the
President or a Vice President of the Company and of the
chief financial or chief accounting officer of the Company
addressed to the Representatives, as representatives of the
Underwriters, and the Company confirming that the
certificate delivered at the Closing Time pursuant to
Section 5(c) hereof remains true and correct as of such Date
of Delivery.
(2) The favorable opinions of (A) counsel for the
Company and (B) Jeffery A. Smisek, Esq., General Counsel of
the Company in form and substance satisfactory to counsel
for the Underwriters, dated such Date of Delivery, relating
to the Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinions
required by Sections 5(b)(1), 5(b)(2) and 5(b)(5), as the
case may be, hereof.
(3) The favorable opinion of ______________, counsel
for the Underwriters, dated such Date of Delivery, relating
to the Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinion
required by Sections 5(b)(3) and 5(b)(4) hereof.
(4) A letter from Ernst & Young LLP, in form and
substance satisfactory to the Representatives and dated such
Date of Delivery, substantially the same in form and
substance as the letter furnished to the Representatives
pursuant to Section 5(e) hereof, except that the "specified
date" in the letter furnished pursuant to this Section
5(h)(4) shall be a date not more than five days prior to
such Date of Delivery.
(i) Each Selling Stockholder shall have executed
and delivered to the Underwriters a -day lock-up
agreement in the forms attached hereto as Exhibit A.
If any condition specified in this Section shall not
have been fulfilled in all material respects when and as required
to be fulfilled, this Agreement may be terminated by the
Representatives by notice to the Company at any time at or prior
to Closing Time, and such termination shall be without liability
of any party to any other party except as provided in Section 4
hereof.
SECTION 6. Indemnification.
(a) The Company agrees to indemnify and hold harmless
each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the
1933 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, including any amounts paid in
settlement of any investigation, litigation, proceeding or
claim, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including
the information deemed to be part of the Registration
Statement pursuant to Rule 430A(b) of the 1933 Act
Regulations, if applicable, or the omission or alleged
omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged
untrue statement of a material fact contained in any
preliminary prospectus or the Prospectus (or any amendment
or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading, provided, that the
Company shall not be liable under this clause (i) for any
settlement of any action effected without its written
consent, which consent shall not be unreasonably withheld;
and
(ii) against any and all expense whatsoever, as
incurred (including, subject to Section 6(d) hereof, the
reasonable fees and disbursements of counsel chosen by
__________________ to represent the Underwriters, which
counsel; provided, however, that this indemnity agreement
shall not apply to any loss, liability, claim, damage or
expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in
reliance upon and in conformity with written information
furnished to the Company by any Underwriter expressly for
use in the Registration Statement (or any amendment thereto)
or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto). The foregoing
indemnification with respect to any preliminary prospectus
shall not inure to the benefit of any Underwriter, or any
person who controls a Underwriter within the meaning of
Section 15 of the 1933 Act, from whom the person asserting
any such losses, claims, damages or liabilities purchased
Securities if a copy of the Prospectus (as then amended or
supplemented if the Company shall have furnished to the
Underwriters for their use any amendments or supplements
thereto) was not sent or given by or on behalf of such
Underwriter to such person, if such is required by law, at
or prior to the written confirmation of the sale of such
Securities to such person and to the extent that delivery of
the Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or
liability.
(b) Each Underwriter severally agrees to indemnify and
hold harmless the Company, its directors, each of its officers
who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the
1933 Act against any and all loss, liability, claim, damage and
expense described in the indemnity contained in subsection (a) of
this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or
omissions, made in the Registration Statement (or any amendment
thereto) or any preliminary prospectuses or the Prospectus (or
any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by
such Underwriter expressly for use in the Registration Statement
(or any amendment thereto) or such preliminary prospectuses or
the Prospectuses (or any amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to
each indemnifying party of any action commenced against it in
respect of which indemnity or contribution may be sought
hereunder, but failure to so notify an indemnifying party shall
not relieve it from any liability which it may have otherwise
than on account of this indemnity agreement. An indemnifying
party may participate at its own expense in the defense of such
action. If it so elects within a reasonable time after receipt
of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the
defense of such action with counsel chosen by it and approved by
the indemnified parties defendant in such action, unless such
indemnified parties reasonably object to such assumption on the
ground that there may be legal defenses available to them which
are different from or in addition to those available to such
indemnifying party. If an indemnifying party assumes the defense
of such action, the indemnifying parties shall not be liable for
any fees and expenses of counsel for the indemnified parties
incurred thereafter in connection with such action. In no event
shall the indemnifying party be liable for the fees and expenses
of more than one counsel (separate from its own counsel) for each
of the Company and the Underwriters (taken as a whole), as
applicable, in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances.
SECTION 7. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnity
agreement provided for in Section 6 hereof is for any reason held
to be unenforceable by the indemnified parties although
applicable in accordance with its terms, the Company and the
Underwriters shall contribute to the aggregate losses,
liabilities, claims, damages and expenses of the nature
contemplated by said indemnity agreement incurred by the Company
and one or more of the Underwriters, in such proportion that the
Underwriters are responsible for that portion represented by the
percentage that the underwriting discount appearing on the cover
page of the Prospectus bears to the public offering price
appearing thereon and the Company; provided, however, that no
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation; and provided, further, that the
contribution provisions of this Section 7 shall not inure to the
benefit of any Underwriter to the extent that the aggregate
losses, liabilities, claims, damages and expenses result from the
circumstances described in the first proviso in Section 6(a)(ii).
For purposes of this Section, each person, if any, who controls
an Underwriter within the meaning of Section 15 of the 1933 Act
shall have the same rights to contribution as such Underwriter,
and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as the Company.
No party shall be liable for contribution with respect to any
action, suit, proceeding or claim settled without its written
consent.
SECTION 8. Representations Warranties and Agreements
to Survive Delivery. All representations, warranties and
agreements contained in this Agreement and the Pricing Agreement,
or contained in certificates of officers of the Company submitted
pursuant hereto, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of
any Underwriter or controlling person, or by or on behalf of the
Company, and shall survive delivery of the Securities to the
Underwriters.
SECTION 9. Termination of Agreement.
(a) The Representatives may terminate this Agreement,
by notice to the Company, at any time at or prior to Closing Time
(i) if there has been, since the date of this Agreement or since
the respective dates as of which information is given in the
Registration Statement, except as stated therein, any Material
Adverse Change, (ii) if there has occurred any material adverse
change in, the financial markets in the United States or
elsewhere or any outbreak of hostilities or escalation thereof or
other calamity or crisis the effect of which is such as to make
it, in the judgment of the Representatives, impracticable to
market the Securities or to enforce contracts for the sale of the
Securities, or (iii) if trading in the Common Stock has been
suspended by the Commission, or if trading generally on either
the American Stock Exchange or the New York Stock Exchange has
been suspended, or minimum or maximum prices for trading have
been fixed, or maximum ranges for prices for securities have been
required, by either of said exchanges or by order of the
Commission or any other governmental authority, or if a banking
moratorium has been declared by either Federal, New York or Texas
authorities.
(b) If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party
to any other party except as provided in Section 4 hereof.
Notwithstanding any such termination, the provisions of Sections
6 and 7 shall remain in effect.
SECTION 10. Default by One or More of the
Underwriters. If one or more of the Underwriters shall fail at
Closing Time to purchase the Initial Securities which it or they
are obligated to purchase under this Agreement and the Pricing
Agreement (the "Defaulted Securities"), the Representatives shall
have the right, within 24 hours thereafter, to make arrangements
for one or more of the nondefaulting Underwriters, or any other
underwriters, to purchase all, but not less than all, of the
Defaulted Securities in such amounts as may be agreed upon and
upon the terms herein set forth; if, however, the Representatives
shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not
exceed 10% of the number of Initial Securities, each of the non-
defaulting Underwriters shall be obligated, severally and not
jointly, to purchase the full amount thereof in the proportions
that their respective underwriting obligations hereunder bear to
the underwriting obligations of all non-defaulting Underwriters,
or
(b) if the number of Defaulted Securities exceeds 10%
of the number of Initial Securities, this Agreement shall
terminate without liability on the part of any non-defaulting
Underwriter.
No action taken pursuant to this Section shall relieve
any defaulting Underwriter from liability in respect of its
default.
In the event of any such default which does not result
in a termination of this Agreement, either the Representatives or
the Company acting unanimously shall have the right to postpone
Closing Time for a period not exceeding seven days in order to
effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements.
SECTION 11. Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
to have been duly given if mailed or transmitted by any standard
form of telecommunication. Notices to the Underwriters shall be
directed to the Representatives at _________________ and notices
to the Company shall be directed to it at 2929 Allen Parkway,
Suite 2010, Houston, Texas 77019-4607, attention of Chief
Financial Officer, with a copy to the attention of General
Counsel.
SECTION 12. Information Supplied by the Underwriters.
The statements set forth in the last paragraph on the front cover
page and under the heading "Underwriting" in the Prospectus or
the Registration Statement (to the extent such statements relate
to the Underwriters) constitute the only information furnished by
the Underwriters to the Company for the purposes of Sections 1
and 6 hereof.
SECTION 13. Parties. This Agreement and the Pricing
Agreement shall each inure to the benefit of and be binding upon
the Underwriters, the Company and their respective successors.
Nothing expressed or mentioned in this Agreement and the Pricing
Agreement is intended or shall be construed to give any person,
firm or corporation, other than the Underwriters, the Company and
their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right,
remedy or claim under or in respect of this Agreement or the
Pricing Agreement or any provision herein or therein contained.
This Agreement and the Pricing Agreement and all conditions and
provisions hereof and thereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and their
respective successors, and said controlling persons and officers
and directors and their heirs and legal representatives, and for
the benefit of no other person, firm or corporation. No
purchaser of Securities from any Underwriter shall be deemed to
be a successor by reason merely of such purchase.
SECTION 14. Governing Law and Time. This Agreement
and the Pricing Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State. Specified
times of day refer to New York City time.
<PAGE>
If the foregoing is in accordance with your
understanding of our agreement, please sign and return to the
Company a counterpart hereof, whereupon this instrument, along
with all counterparts, will become a binding agreement among the
Underwriters and the Company in accordance with its terms.
Very truly yours,
CONTINENTAL AIRLINES, INC.
By:_________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
By: __________________________
Authorized Signatory
For themselves and as Representatives of the other Underwriters
named in Schedule A to the Pricing Agreement.
<PAGE>
Shares
CONTINENTAL AIRLINES, INC.
(a Delaware corporation)
Common Stock
(Par Value $.01 Per Share)
PRICING AGREEMENT
______________________
____________ __, 199
Dear Sirs:
Reference is made to the Purchase Agreement dated __________
__, 199_ (the "Purchase Agreement") relating to the purchase by
the several U.S. Underwriters named in Schedule A hereto, for
whom ___________________________ are acting as representatives
(the "Representatives"), of the above shares of Common Stock (the
"Securities") of Continental Airlines, Inc., a Delaware
corporation (the "Company"), to be sold by the Company.
Capitalized terms used herein have the meanings provided in the
U.S. Purchase Agreement.
Pursuant to Section 2 of the Purchase Agreement, the Company
agrees with each Underwriter as follows:
1. The initial public offering price per share for the
Securities, determined as provided in said Section 2, shall
be $_______.
2. The purchase price per share for the Securities to
be paid by the several Underwriters shall be $_____, being
an amount equal to the initial public offering price set
forth above less $____ per share; provided that the purchase
price per share for any Option Securities (as defined in the
Purchase Agreement) purchased upon exercise of the over-
allotment option described in Section 2(b) of the Purchase
Agreement shall be reduced by an amount per share equal to
any dividends declared by the Company and payable on the
Initial Securities (as defined in the Purchase Agreement)
but not payable on the Option Securities.
3. The number of Option Shares is _______ shares of
Common Stock.
If the foregoing is in accordance with your under-
standing of our agreement, please sign and return to the Company
a counterpart hereof, whereupon this instrument, along with all
counterparts, will become a binding agreement among the
Underwriters and the Company in accordance with its terms.
Very truly yours,
CONTINENTAL AIRINES, INC.
By: ______________________
Title:
<PAGE>
SCHEDULE A
Number
Name of Underwriter of Securities
___________________ _____________
[Letterhead of Continental Airlines, Inc.]
August 15, 1996
Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Ladies and Gentlemen:
I am Managing Attorney and Assistant Secretary of
Continental Airlines, Inc., a Delaware corporation (the
"Company"). You have requested my opinion in connection with the
registration under the Securities Act of 1933, as amended (the
"Act"), of (i) the sale of up to 2,500,000 shares (the "Company
Shares") of the Company's Class B common stock, par value $.01
per share (the "Class B common stock"), by the Company, (ii) the
sale of up to 5,504,400 shares of the Company's Class A common
stock, par value $.01 per share (the "Class A common stock"), and
the sale of up to 12,404,495 shares of the Company's Class B
common stock (including shares of Class B common stock issuable
upon the exercise of options granted therefor by the Company)
(collectively, the "Secondary Shares") by Air Partners, L.P., a
Texas limited partnership ("Air Partners"), and its partners and
affiliates, Air Canada, a Canadian corporation, and certain
directors and officers of the Company, (iii) the sale of up to
3,039,468 shares of Class A common stock issuable upon exercise
of the Class A Warrants (as defined below) and the sale of up to
6,765,264 shares of Class B common stock issuable upon exercise
of the Class B Warrants (as defined below) (collectively, the
"Warrant Shares") by Air Partners and its partners, and (iv) the
sale of up to 3,039,468 warrants to purchase Class A common stock
(the "Class A Warrants") and the sale of up to 6,765,264 warrants
to purchase Class B common stock (the "Class B Warrants" and
together with the Class A Warrants, the "Warrants") by Air
Partners and its partners. The Warrants were issued pursuant to
a Warrant Agreement dated April 27, 1993 between the Company and
Continental Airlines, Inc., as warrant agent. The Company
Shares, the Secondary Shares, the Warrant Shares and the Warrants
are being registered under the Act pursuant to a registration
statement of the Company on Form S-3 (the "Registration
Statement") (File No. 333-09739) filed with the Securities and
Exchange Commission.
I have participated in the preparation of the
Registration Statement and have reviewed the originals or copies
certified or otherwise identified to my satisfaction of all such
instruments and other documents, and I have made such
investigations of law, as I have deemed appropriate as a basis
for the opinions expressed below.
Based on the foregoing, it is my opinion that:
(1) The execution and delivery of the Warrants have
been duly authorized by all necessary corporate action of the
Company, and the Warrants have been duly executed and delivered
by the Company.
(2) The Company Shares have been duly authorized by
all necessary corporate action of the Company and reserved for
issuance and, upon issuance of the Company Shares against payment
therefor by the purchasers thereof pursuant to a sale in the
manner described in the Registration Statement, will be validly
issued, fully paid and nonassessable.
(3) The Secondary Shares have been duly authorized by
all necessary corporate action of the Company and the outstanding
Secondary Shares are and, upon issuance of the Secondary Shares
reserved for issuance upon exercise of options against payment
therefor by the optionees in the manner contemplated in the
respective option agreements such Secondary Shares will be,
validly issued, fully paid and nonassessable.
(4) The Warrant Shares have been duly authorized by
all necessary corporate action of the Company and reserved for
issuance upon exercise of the Warrants and, upon issuance thereof
on exercise of the Warrants in accordance with the terms of the
Warrant Agreement at exercise prices at or in excess of the par
value of such shares, will be validly issued, fully paid and
nonassessable.
I express no opinion other than as to the General
Corporation Law of the State of Delaware.
The opinions expressed herein are rendered solely for
the benefit of the Company in connection with the filing of the
Registration Statement. This opinion may not be used or relied
upon by any other person, nor may this letter or any copy hereof
be furnished to a third party, filed with a governmental agency,
quoted, cited or otherwise referred to without my prior written
consent.
I hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to me
under the caption "Legal Matters" therein. In so doing, I do not
admit that I am in the category of persons whose consent is
required under Section 7 of the Act or the rules and regulations
thereunder.
Very truly yours,
-----------------------------
/s/ Scott R. Peterson
[Letterhead of Cleary, Gottlieb Steen & Hamilton]
Writer's Direct Dial: (212) 225-2520
August 15, 1996
Continental Airlines, Inc.
2929 Allen Parkway, Suite 2010
Houston, Texas 77019
Re: Continental Airlines, Inc.
Registration Statement on Form S-3
(File No. 333-09739)
Ladies and Gentlemen:
We have acted as your counsel in connection with the
Registration Statement on Form S-3 (the "Registration Statement")
filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Act"), for the
registration of (i) the sale of up to 2,500,000 shares of the
Company's Class B common stock, par value $.01 per share (the
"Class B common stock"), by the Company, (ii) the sale of up to
5,504,400 shares of the Company's Class A common stock, par value
$.01 per share (the "Class A common stock"), and the sale of up
to 12,404,495 shares of the Company's Class B common stock
(including shares issuable upon the exercise of options granted
therefor by the Company) by Air Partners, L.P., a Texas limited
partnership ("Air Partners"), and its partners and affiliates,
Air Canada, a Canadian corporation, and certain directors and
officers of the Company, (iii) the sale of up to 3,039,468 shares
of Class A common stock issuable upon exercise of the Class A
Warrants (as defined below) and the sale of up to 6,765,264
shares of Class B common stock issuable upon exercise of the
Class B Warrants (as defined below) by Air Partners and its
partners, and (iv) the sale of up to 3,039,468 warrants to
purchase Class A common stock (the "Class A Warrants") and the
sale of up to 6,765,264 warrants to purchase Class B common stock
(the "Class B Warrants" and together with the Class A Warrants,
the "Warrants") by Air Partners and its partners. The Warrants
were issued pursuant to a Warrant Agreement, dated April 27,
1993, between the Company and Continental Airlines, Inc., as
warrant agent.
We have participated in the preparation of the
Registration Statement and have reviewed originals or copies
certified or otherwise identified to our satisfaction of such
documents and records of the Company and such other instruments
and other certificates of public officials, officers and
representatives of the Company and such other persons, and we
have made such investigations of law, as we have deemed
appropriate as a basis for the opinion expressed below.
In rendering the opinion expressed below, we have
assumed the authenticity of all documents submitted to us as
originals and the conformity to the originals of all documents
submitted to us as copies.
Based on the foregoing, and subject to the further
assumptions and qualifications set forth below, it is our opinion
that the Warrants are the legal, valid, binding and enforceable
obligations of the Company.
Insofar as the foregoing opinion relates to the
legality, validity, binding effect or enforceability of any
agreement or obligation of the Company, we have assumed (a) that
each other party to such agreement or obligation has satisfied
those legal requirements that are applicable to it to the extent
necessary to make such agreement or obligation enforceable
against it, and (b) such opinion is subject to applicable
bankruptcy, insolvency and similar laws affecting creditors'
rights generally and to general principles of equity. In
rendering the foregoing opinion, we have relied on the opinion of
Scott R. Peterson, Managing Attorney and Assistant Secretary to
the Company, as to the due authorization, execution and delivery
of the Warrants, which has been filed as Exhibit 5.1 to the
Registration Statement.
The foregoing opinion is limited to the law of the
State of New York.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to the reference to
this firm under the heading "Legal Matters" in the Prospectus
included in the Registration Statement. In giving such consent,
we do not thereby admit that we are "experts" within the meaning
of the Act or the rules and regulations of the Securities and
Exchange Commission issued thereunder with respect to any part of
the Registration Statement, including this exhibit.
Very truly yours,
CLEARY, GOTTLIEB, STEEN & HAMILTON
By /s/ Michael L. Ryan
-------------------------------
Michael L. Ryan, a Partner
