Registration No. 333-61601
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CONTINENTAL AIRLINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 4512 74-2099724
(State or other jurisdiction (Primary standard (I.R.S. employer
jurisdiction of incorporation industrial classification identification
or organization code number) number)
2929 Allen Parkway
Houston, Texas 77019
(713) 324-5000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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Jeffery A. Smisek, Esq. Copies of correspondence to:
Executive Vice President, General
Counsel and Secretary John K. Hoyns, Esq.
Continental Airlines, Inc. Hughes Hubbard & Reed LLP
2929 Allen Parkway, Suite 2010 One Battery Park Plaza
Houston, Texas 77019 New York, New York 10004-1482
(713) 324-2950
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
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Approximate date of commencement of proposed sale to the public:
From time to time after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are so offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
Pursuant to Rule 429 of the Rules and Regulations of the Securities and
Exchange Commission under the Securities Act of 1933, as amended, the form of
Prospectus included in this Registration Statement also relates to an aggregate
remaining amount of $138,282,000 of Pass Through Certificates covered by such
form of Prospectus previously registered under the Company's Registration
Statement on Form S-3 (File No. 333-34545).
(Continued on the following page.)
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
- ---------------------------------------- -------------- ----------------------- ------------------------ ----------------
Proposed Maximum Proposed Amount of
Title of Each Class of Securities Amount to be Offering Price Maximum Aggregate Registration
to be Registered Registered Per Unit Offering Price (1) Fee (2)
======================================== -------------- ----------------------- ------------------------ ---------------
Pass Through Certificates $2,500,000,000 (3) $2,500,000,000 $737,500(4)(5)
======================================== -------------- ----------------------- ------------------------ ---------------
(1) Estimated solely for purposes of determining the registration fee pursuant to Rule 457(o) under
the Securities Act of 1933, as amended.
(2) Pursuant to Rule 457(o), the registration fee has been calculated on the basis of the maximum
aggregate offering price of the securities listed.
(3) Omitted pursuant to Rule 457(o).
(4) A filing fee of $40,793 was previously paid in connection with the Pass Through Certificates
included herein remaining from the Company's Registration Statement on Form S-3 (File No.
333-34545).
(5) Paid on August 14, 1998.
</TABLE>
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>
PROSPECTUS
SUBJECT TO COMPLETION - DATED AUGUST 21, 1998
$2,500,000,000
CONTINENTAL AIRLINES, INC.
PASS THROUGH CERTIFICATES
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Up to $2,500,000,000 aggregate public offering price of Pass Through
Certificates (the "Certificates") (or its equivalent (based on the applicable
exchange rate at the time of sale) in one or more foreign currencies or currency
units) may be offered for sale from time to time pursuant to this Prospectus and
related Prospectus Supplements (as defined below). Certificates may be issued in
one or more series in amounts, at prices and on terms to be determined at the
time of the offering. In respect of each offering of Certificates, a separate
Continental Airlines Pass Through Trust for each series of Certificates being
offered (each, a "Trust") will be formed pursuant to one or more Pass Through
Trust Agreements (each, a "Basic Agreement") and one or more supplements thereto
(each, a "Trust Supplement") relating to such Trust to be entered into between
Continental Airlines, Inc. ("Continental" or the "Company") and the trustee
named therein (the "Trustee"), as trustee under each Trust. Each Certificate in
a series will represent a fractional undivided interest in the related Trust and
will have no rights, benefits or interests in respect of any other Trust. The
property of the Trusts will consist of equipment notes issued (a) on a
nonrecourse basis by one or more owner trustees pursuant to separate leveraged
lease transactions (the "Leased Aircraft Notes") to finance or refinance a
portion of the equipment cost of aircraft, including engines (each, a "Leased
Aircraft" and, collectively, the "Leased Aircraft"), which have been or will be
leased to Continental pursuant to a separate lease agreement (each such lease
agreement, a "Lease") for each Leased Aircraft, or (b) with recourse to
Continental (the "Owned Aircraft Notes" and, together with any Leased Aircraft
Notes, the "Equipment Notes") to finance or refinance all or a portion of the
equipment cost of, or to purchase all or a portion of the outstanding debt with
respect to, aircraft, including engines (each, an "Owned Aircraft" and,
collectively, the "Owned Aircraft"; together with Leased Aircraft, the
"Aircraft"), which have been or will be purchased and owned by Continental. To
the extent that the proceeds of any offering of Certificates are not used to
purchase Equipment Notes on the date of issuance of such Certificates, such
proceeds will be held for the benefit of the holders of such Certificates.
The specific terms of the particular Certificates in respect of which
this Prospectus is being delivered will be set forth in a supplement to this
Prospectus (the "Prospectus Supplement") which will be delivered together with
this Prospectus, including, where applicable, the specific designation, form,
aggregate principal amount, interest rate, final distribution date, ranking in
respect of priority of payment, initial public offering price and distribution
dates relating to such Certificates, the currency in which such Certificates
will be payable, the Trust or Trusts relating to such Certificates, the
Equipment Notes to be purchased by such Trust or Trusts, the Aircraft relating
to such Equipment Notes, the leveraged lease transactions or financing
arrangements, as the case may be, relating to such Equipment Notes and other
special terms relating to such Certificates and the net proceeds from the
offering of such Certificates. The Certificates shall be issued in registered
form only and may, if so specified in the applicable Prospectus Supplement, be
issued in accordance with a book-entry system.
(Continued on the following page.)
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With respect to one or more Aircraft, Equipment Notes may be issued,
each of which may have a different interest rate, final maturity date and
ranking in respect of priority of payment. For each series of Certificates, the
Trustee will purchase one or more Equipment Notes issued with respect to one or
more Aircraft such that all of the Equipment Notes held in the related Trust
will have identical ranking and identical interest rates (in each case equal to
the rate applicable to the Certificates issued by such Trust), and such that the
latest maturity date for such Equipment Notes will occur on or before the final
distribution date for such Certificates. Interest paid on the Equipment Notes
held in each Trust will be passed through to the holders of the Certificates
relating to such Trust on the dates and at the rate per annum set forth in the
Prospectus Supplement relating to such Certificates until the final distribution
date for such Trust, subject to the effect of any cross-subordination provisions
described in the Prospectus Supplement for a series of Certificates. Principal
paid on the Equipment Notes held in each Trust will be passed through to the
holders of the Certificates relating to such Trust in scheduled amounts on the
dates set forth in the Prospectus Supplement relating to such Certificates until
the final distribution date for such Trust, subject to the effect of any
cross-subordination provisions described in the Prospectus Supplement for a
series of Certificates. The Equipment Notes issued with respect to any Aircraft
will be secured by a security interest in such Aircraft and, in the case of the
Leased Aircraft, by a security interest in the Lease relating thereto, including
the right to receive rentals payable by Continental in respect of such Leased
Aircraft. Although neither the Certificates nor the Leased Aircraft Notes will
be direct obligations of, or guaranteed by, Continental, the amounts
unconditionally payable by Continental for lease of Leased Aircraft will be
sufficient to pay in full when due all payments required to be made on the
corresponding Leased Aircraft Notes.
The Certificates may be sold to or through underwriters, through
dealers or agents or directly to purchasers. See "Plan of Distribution". The
Prospectus Supplement will set forth the names of any underwriters, dealers or
agents involved in the sale of the Certificates in respect of which this
Prospectus is being delivered, the proposed amounts, if any, to be purchased by
underwriters and the compensation, if any, of such underwriters or agents. See
"Plan of Distribution" for information concerning secondary trading of the
Certificates.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF CERTIFICATES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is ___________, 1998.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
AVAILABLE INFORMATION
Continental has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with all
amendments, exhibits and schedules, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Certificates offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and to
which reference is hereby made. Statements made in this Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved.
Continental is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports and other information with the
Commission. Such reports and other information, as well as the Registration
Statement may be inspected at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, Room 1024, and at
the regional offices of the Commission located at Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World Trade Center,
13th Floor, New York, New York 10048. Copies of such materials may be obtained
from the Public Reference Section of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. Such material may also be accessed
electronically by means of the Commission's Internet web site
(http://www.sec.gov), which contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission. In addition, reports, proxy statements and other information
concerning Continental may be inspected and copied at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
Continental is the successor to Continental Airlines Holdings, Inc.
("Holdings"), which merged with and into Continental on April 27, 1993. Holdings
had also been subject to the informational requirements of the Exchange Act.
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, 1997, filed on March 20,
1998, (ii) Continental's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1998, filed on May 7, 1998, and June 30, 1998, filed on
August 14, 1998, and (iii) Continental's Current Reports on Form 8-K filed
January 28, March 3, March 6, May 5 and July 30, 1998.
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 Certificates offered hereby shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof from the respective
<PAGE>
dates 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 or contained in the Prospectus Supplement with respect to the
Certificates 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 any person to whom a copy of
this Prospectus has been delivered, upon written or oral request, a copy of any
or all of the foregoing documents incorporated herein by reference (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Requests should be directed to Continental
Airlines, Inc., 2929 Allen Parkway, Suite 2010, Houston, Texas 77019, Attention:
Secretary, telephone (713) 324-2950.
<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 seven months of 1998) and, together with its wholly-owned subsidiaries
Continental Express, Inc. ("Express") and Continental Micronesia, Inc. ("CMI"),
each a Delaware corporation, serves 206 airports worldwide as of August 1, 1998.
The Company operates its route system primarily through domestic hubs
at Newark, George Bush Intercontinental in Houston, Cleveland, and a Pacific hub
on the island of Guam. Each of Continental's three domestic hubs is located in a
large business and population center, contributing to a high volume of "origin
and destination" traffic. The Guam hub is strategically located to provide
service from Japanese and other Asian cities to popular resort destinations in
the western Pacific. Continental is the primary carrier at each of these hubs,
accounting for 59%, 80%, 52% and 79% of average daily jet departures,
respectively, as of August 1, 1998.
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) 324-2950.
USE OF PROCEEDS
Except as set forth in a Prospectus Supplement for a specific offering
of Certificates, the Certificates will be issued in order to facilitate (a) the
financing or refinancing of the debt portion and, in certain cases, the
refinancing of some of the equity portion of one or more separate leveraged
lease transactions entered into by Continental, as lessee, with respect to the
Leased Aircraft as described in the applicable Prospectus Supplement, and (b)
the financing or refinancing of the aggregate principal amount of debt to be
issued, or the purchase of the aggregate principal amount of the debt previously
issued, by Continental in respect of the Owned Aircraft as described in the
applicable Prospectus Supplement. Except as set forth in a Prospectus Supplement
for a specific offering of Certificates, the proceeds from the sale of the
Certificates will be used by the Trustee on behalf of the applicable Trust or
Trusts to purchase either (a) Leased Aircraft Notes issued by the respective
Owner Trustee or Owner Trustees to finance or refinance (as specified in the
applicable Prospectus Supplement) the related Leased Aircraft, or (b) Owned
Aircraft Notes issued by Continental to finance or refinance (as specified in
the applicable Prospectus Supplement) the related Owned Aircraft. To the extent
that the proceeds of any offering of Certificates are not used to purchase
Equipment Notes on the date of issuance of such Certificates, such proceeds will
be held for the benefit of the holders of such Certificates. If any such
proceeds are not subsequently utilized to purchase Equipment Notes by the
relevant date specified in the applicable Prospectus Supplement, such proceeds
will be returned to the holders of such Certificates. See "Description of
Certificates--Delayed Purchase of Equipment Notes".
The Leased Aircraft Notes will be issued under separate trust
indentures (the "Leased Aircraft Indentures") between a bank, trust company or
other institution specified in the related Prospectus Supplement, as trustee
thereunder (in such capacity, herein referred to as the "Loan Trustee"), and an
institution specified in the related Prospectus Supplement acting, not in its
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individual capacity, but solely as owner trustee (an "Owner Trustee") of a
separate trust for the benefit of one or more institutional investors (each, an
"Owner Participant"). With respect to each Leased Aircraft, the related Owner
Participant will have provided or will provide from sources other than the
Leased Aircraft Notes a portion of the equipment cost of the related Leased
Aircraft. No Owner Participant, however, will be personally liable for any
amount payable under the related Leased Aircraft Indenture or the Leased
Aircraft Notes issued thereunder. Each Leased Aircraft will have been or will be
leased by the related Owner Trustee to Continental pursuant to a separate Lease.
The Owned Aircraft Notes will be issued under separate trust indentures (the
"Owned Aircraft Indentures" and, together with any Leased Aircraft Indentures,
the "Indentures") between the applicable Loan Trustee and Continental.
RATIO OF EARNINGS TO FIXED CHARGES
The following information for the period January 1, 1993 through April
27, 1993 relates to Continental's predecessor, Holdings. Information for the
period April 28, 1993 through December 31, 1993, for the years ended December
31, 1994, 1995, 1996 and 1997 and for the three and six months ended June 30,
1997 and 1998 relates to Continental. The information as to Continental has not
been prepared on a consistent basis of accounting with the information as to
Holdings due to Continental's adoption, effective April 27, 1993, of fresh start
reporting in accordance with the American Institute of Certified Public
Accountants' Statement of Position 90-7 -- "Financial Reporting by Entities in
Reorganization Under the Bankruptcy Code" ("SOP 90-7").
For the periods January 1, 1993 through April 27, 1993 and April 28,
1993 through December 31, 1993 and for the year ended December 31, 1994,
earnings were not sufficient to cover fixed charges. Additional earnings of $979
million, $60 million and $667 million, respectively, would have been required to
achieve ratios of earnings to fixed charges of 1.0. The ratio of earnings to
fixed charges for the years ended December 31, 1995, 1996 and 1997 was 1.53,
1.81 and 2.07, respectively. The ratio of earnings to fixed charges for the
three months ended June 30, 1997 and 1998 was 2.48 and 2.66, respectively, and
for the six months ended June 30, 1997 and 1998 was 2.18 and 2.26, respectively.
For purposes of calculating this ratio, earnings consist of earnings before
taxes, minority interest and extraordinary items plus interest expense (net of
capitalized interest), the portion of rental expense representative of interest
expense and amortization of previously capitalized interest. Fixed charges
consist of interest expense and the portion of rental expense representative of
interest expense.
GENERAL OUTLINE OF TRUST STRUCTURE
In respect of each offering of Certificates, one or more Trusts will be
formed, and the related Certificates issued, pursuant to separate Trust
Supplements to be entered into between the Trustee and Continental in accordance
with the terms of the Basic Agreement. Concurrently with the execution and
delivery of each Trust Supplement, the Trustee, on behalf of the Trust formed
thereby, will enter into one or more purchase or refunding agreements (each such
agreement being herein referred to as a "Note Purchase Agreement") pursuant to
which it will agree to purchase one or more Equipment Notes relating to one or
more of the Aircraft described in the applicable Prospectus Supplement. Pursuant
to the applicable Note Purchase Agreement or Note Purchase Agreements, the
Trustee, on behalf of each Trust, will purchase one or more Equipment Notes such
that the Equipment Notes that constitute the property of such Trust will have
<PAGE>
identical interest rates (in each case equal to the rate applicable to the
Certificates issued by such Trust) and identical priority of payment relative to
each of the other Equipment Notes issued under the Related Indentures (as
defined below). The maturity dates of the Equipment Notes acquired by each Trust
will occur on or before the final distribution date applicable to the
Certificates that will be issued by such Trust. The Trustee will distribute the
amount of payments of principal, premium, if any, and interest received by it as
holder of the Equipment Notes to the registered holders of Certificates of the
Trust (the "Certificateholders") in which such Equipment Notes are held, subject
to the effect of any cross-subordination provisions described in the Prospectus
Supplement for a series of Certificates. To the extent that the proceeds of any
offering of Certificates are not used to purchase Equipment Notes on the date of
issuance of such Certificates, such proceeds will be held for the benefit of the
holders of such Certificates. If any such proceeds are not subsequently utilized
to purchase Equipment Notes by the relevant date specified in the applicable
Prospectus Supplement, such proceeds will be returned to the holders of such
Certificates. See "Description of the Certificates" and "Description of the
Equipment Notes".
DESCRIPTION OF THE CERTIFICATES
In connection with each offering of Certificates, one or more separate
Trusts will be formed and one or more series of Certificates will be issued
pursuant to the Basic Agreement and one or more separate Trust Supplements to be
entered into between Continental and the Trustee. The statements made under this
caption are summaries and reference is made to the detailed provisions of the
Basic Agreement, the form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part. The summaries relate
to the Basic Agreement and each of the Trust Supplements, the Trusts to be
formed thereby and the Certificates to be issued by each Trust except to the
extent, if any, described in the applicable Prospectus Supplement. The
Prospectus Supplement that accompanies this Prospectus contains a glossary of
the material terms used with respect to the specific series of Certificates
being offered thereby. The Trust Supplement relating to each series of
Certificates and the forms of the related Note Purchase Agreement, Indenture,
Lease, Trust Agreement, Participation Agreement, intercreditor agreement and
liquidity facility arrangement, as applicable, will be filed as exhibits to a
post-effective amendment to the Registration Statement of which this Prospectus
is a part, a Current Report on Form 8-K, a Quarterly Report on Form 10-Q or an
Annual Report on Form 10-K, as applicable, filed by Continental with the
Commission.
The Certificates offered pursuant to this Prospectus will be limited to
$2,500,000,000 aggregate public offering price (or its equivalent (based on the
applicable exchange rate at the time of sale) in one or more foreign currencies
or currency units).
To the extent that any provision in any Prospectus Supplement is
inconsistent with any provision in this summary, the provision of such
Prospectus Supplement will control.
General
Each Certificate will represent a fractional undivided interest in the
Trust created by the Trust Supplement pursuant to which such Certificate was
issued and all payments and distributions shall be made only from the related
Trust Property (as defined below). The property of each Trust (the "Trust
Property") will include (i) the Equipment Notes held in such Trust and all
<PAGE>
monies at any time paid thereon and all monies due and to become due thereunder,
subject to the effect of any cross-subordination provisions described in the
Prospectus Supplement for a series of Certificates, (ii) funds from time to time
deposited with the Trustee in accounts relating to such Trust and (iii) if so
specified in the Prospectus Supplement related to a series of Certificates,
rights under intercreditor agreements relating to cross-subordination
arrangements and monies receivable under a liquidity facility. Each Certificate
will represent a pro rata share of the outstanding principal amount of the
Equipment Notes held in the related Trust and, unless otherwise specified in the
applicable Prospectus Supplement, will be issued in minimum denominations of
$1,000 or any integral multiple thereof except that one Certificate of each
series may be issued in a different denomination. The Certificates do not
represent an interest in or obligation of Continental, the Trustee, any of the
Loan Trustees or Owner Trustees in their individual capacities, any Owner
Participant, or any affiliate of any thereof. Each Certificateholder by its
acceptance of a Certificate agrees to look solely to the income and proceeds
from the Trust Property as provided in the Basic Agreement and the applicable
Trust Supplement.
The Equipment Notes issued under an Indenture may be held in more than
one Trust and one Trust may hold Equipment Notes issued under more than one
Indenture (each Indenture the Equipment Notes of which are held in a Trust, a
"Related Indenture"). Unless otherwise provided in a Prospectus Supplement, only
Equipment Notes having the same priority of payment (the Equipment Notes of any
such priority, a "Class") may be held in the same Trust.
Interest will be passed through to Certificateholders of each Trust at
the rate per annum payable on the Equipment Notes held in such Trust, as set
forth for such Trust on the cover page of the applicable Prospectus Supplement,
subject to the effect of any cross-subordination provisions described in the
Prospectus Supplement for a series of Certificates.
Reference is made to the Prospectus Supplement that accompanies this
Prospectus for a description of the specific series of Certificates being
offered thereby, including: (1) the specific designation and title of such
Certificates; (2) the Regular Distribution Dates (as defined below) and Special
Distribution Dates (as defined below) applicable to such Certificates; (3) the
currency or currencies (including currency units) in which such Certificates may
be denominated; (4) the specific form of such Certificates, including whether or
not such Certificates are to be issued in accordance with a book-entry system;
(5) a description of the Equipment Notes to be purchased by such Trust,
including (a) the period or periods within which, the price or prices at which,
and the terms and conditions upon which such Equipment Notes may or must be
redeemed or defeased in whole or in part, by Continental or, with respect to
Leased Aircraft Notes, the Owner Trustee, (b) the payment priority of such
Equipment Notes in relation to any other Equipment Notes issued with respect to
the related Aircraft, (c) any additional security or liquidity enhancements
therefor and (d) any intercreditor or other rights or limitations between or
among the holders of Equipment Notes of different priorities issued with respect
to the same Aircraft; (6) a description of the related Aircraft; (7) a
description of the related Note Purchase Agreement and Related Indentures,
including a description of the events of default under the Related Indentures,
the remedies exercisable upon the occurrence of such events of default and any
limitations on the exercise of such remedies with respect to such Equipment
Notes; (8) if such Certificates relate to Leased Aircraft, a description of the
related Leases, Trust Agreements and Participation Agreements, including (a) the
names of the related Owner Trustees, (b) a description of the events of default
under the related Leases, the remedies exercisable upon the occurrence of such
events of default and any limitations on the exercise of such remedies with
respect to such Leased Aircraft Notes, and (c) the rights of the related Owner
Trustee, if any, and/or Owner Participant, if any, to cure failures of
Continental to pay rent under the related Lease; (9) the extent, if any, to
<PAGE>
which the provisions of the operative documents applicable to such Equipment
Notes may be amended by the parties thereto without the consent of the holders
of, or only upon the consent of the holders of a specified percentage of
aggregate principal amount of, such Equipment Notes; (10) cross-default or
cross-collateralization provisions in the Related Indentures, if any; (11)
subordination provisions among the holders of Certificates, including any
cross-subordination provisions among the holders of Certificates in separate
Trusts; and (12) any other special terms pertaining to such Certificates.
If any Certificates are denominated in one or more foreign currencies
or currency units, the restrictions, certain United States federal income tax
considerations, specific terms and other information with respect to such
Certificates and such foreign currency or currency units will be set forth in
the applicable Prospectus Supplement.
Book-Entry Registration
General
If specified in the applicable Prospectus Supplement, the Certificates
will be subject to the provisions described below and under the caption
"--Definitive Certificates". Upon issuance, each series of Certificates will be
represented by one or more fully registered global certificates. Unless
otherwise provided in a Prospectus Supplement, each global certificate will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of CEDE & Co. ("Cede"), the nominee of DTC. No person
acquiring an interest in such Certificates ("Certificate Owner") will be
entitled to receive a certificate representing such person's interest in such
Certificates, except as set forth below under "--Definitive Certificates".
Unless and until Definitive Certificates are issued under the limited
circumstances described herein, all references to actions by Certificateholders
shall refer to actions taken by DTC upon instructions from DTC Participants (as
defined below), and all references herein to distributions, notices, reports and
statements to Certificateholders shall refer, as the case may be, to
distributions, notices, reports and statements to DTC or Cede, as the registered
holder of such Certificates, or to DTC Participants for distribution to
Certificate Owners in accordance with DTC procedures.
DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and
"clearing agency" registered pursuant to section 17A of the Exchange Act. DTC
was created to hold securities for its participants ("DTC Participants") and to
facilitate the clearance and settlement of securities transactions between DTC
Participants through electronic book-entries, thereby eliminating the need for
physical transfer of certificates. DTC Participants include securities brokers
and dealers, banks, trust companies and clearing corporations. Indirect access
to the DTC system also is available to others such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a DTC Participant either directly or indirectly ("Indirect Participants").
Certificate Owners that are not DTC Participants or Indirect
Participants but desire to purchase, sell or otherwise transfer ownership of, or
other interests in, the Certificates may do so only through DTC Participants and
Indirect Participants. In addition, Certificate Owners will receive all
<PAGE>
distributions of principal and interest from the Trustee through DTC
Participants or Indirect Participants, as the case may be. Under a book-entry
format, Certificate Owners may experience some delay in their receipt of
payments, because such payments will be forwarded by the Trustee to Cede, as
nominee for DTC. DTC will forward such payments in same-day funds to DTC
Participants who are credited with ownership of the Certificates in amounts
proportionate to the principal amount of each such DTC Participant's respective
holdings of beneficial interests in the Certificates. DTC Participants will
thereafter forward payments to Indirect Participants or Certificate Owners, as
the case may be, in accordance with customary industry practices. The forwarding
of such distributions to the Certificate Owners will be the responsibility of
such DTC Participants. Unless and until the Definitive Certificates are issued
under the limited circumstances described herein, the only "Certificateholder"
will be Cede, as nominee of DTC. Certificate Owners will not be recognized by
the Trustee as Certificateholders, as such term is used in the Basic Agreement,
and Certificate Owners will be permitted to exercise the rights of
Certificateholders only indirectly through DTC and DTC Participants.
Under the rules, regulations and procedures creating and affecting DTC
and its operations (the "Rules"), DTC is required to make book-entry transfers
of the Certificates among DTC Participants on whose behalf it acts with respect
to the Certificates and to receive and transmit distributions of principal,
premium, if any, and interest with respect to the Certificates. DTC Participants
and Indirect Participants with which Certificate Owners have accounts with
respect to the Certificates similarly are required to make book-entry transfers
and receive and transmit such payments on behalf of their respective customers.
Accordingly, although Certificate Owners will not possess the Certificates, the
Rules provide a mechanism by which Certificate Owners will receive payments and
will be able to transfer their interests.
Because DTC can only act on behalf of DTC Participants, who in turn act
on behalf of Indirect Participants, the ability of a Certificate Owner to pledge
the Certificates to persons or entities that do not participate in the DTC
system, or to otherwise act with respect to such Certificates, may be limited
due to the lack of a physical certificate for such Certificates.
DTC will take any action permitted to be taken by a Certificateholder
under the Basic Agreement only at the direction of one or more DTC Participants
to whose accounts with DTC the Certificates are credited. Additionally, in the
event any action requires approval by Certificateholders of a certain percentage
of beneficial interest in each Trust, DTC will take such action only at the
direction of and on behalf of DTC Participants whose holdings include undivided
interests that satisfy any such percentage. DTC may take conflicting actions
with respect to other undivided interests to the extent that such actions are
taken on behalf of DTC Participants whose holdings include such undivided
interests.
Neither Continental nor the Trustee will have any liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Certificates held by Cede, as nominee for DTC, or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests.
The applicable Prospectus Supplement will specify any additional
book-entry registration procedures applicable to Certificates denominated in a
currency other than United States dollars.
<PAGE>
Same-Day Settlement and Payment
So long as the Certificates are registered in the name of DTC or its
nominee, all payments made by Continental to the Loan Trustee under any Lease or
any Owned Aircraft Indenture will be in immediately available funds. Such
payments, including the final distribution of principal with respect to the
Certificates of any Trust, will be passed through to DTC in immediately
available funds.
Any Certificates registered in the name of DTC or its nominee, will
trade in DTC's Same-Day Funds Settlement System until maturity, and secondary
market trading activity in the Certificates will therefore be required by DTC to
settle in immediately available funds. No assurance can be given as to the
effect, if any, of settlement in same-day funds on trading activity in the
Certificates.
Definitive Certificates
Certificates will be issued in certificated form ("Definitive
Certificates") to Certificate Owners or their nominees, rather than to DTC or
its nominee, only if (i) Continental advises the Trustee in writing that DTC is
no longer willing or able to discharge properly its responsibilities as
depository with respect to such Certificates and Continental is unable to locate
a qualified successor, (ii) Continental, at its option, elects to terminate the
book-entry system through DTC or (iii) after the occurrence of certain events of
default or other events specified in the related Prospectus Supplement,
Certificate Owners with fractional undivided interests aggregating not less than
a majority in interest in such Trust advise the Trustee, Continental and DTC
through DTC Participants in writing that the continuation of a book-entry system
through DTC (or a successor thereto) is no longer in the Certificate Owners'
best interest. Upon the occurrence of any event described in the immediately
preceding sentence, the Trustee will be required to notify all Certificate
Owners through DTC Participants of the availability of Definitive Certificates.
Upon surrender by DTC of the certificates representing the Certificates and
receipt of instructions for re-registration, the Trustee will reissue the
Certificates as Definitive Certificates to Certificate Owners.
Distributions of principal, premium, if any, and interest with respect
to Certificates will thereafter be made by the Trustee directly in accordance
with the procedures set forth in the Basic Agreement and the applicable Trust
Supplements, to holders in whose names the Definitive Certificates were
registered at the close of business on the applicable record date. Such
distributions will be made by check mailed to the address of such holder as it
appears on the register maintained by the Trustee. The final payment on any
Certificate, however, will be made only upon presentation and surrender of such
Certificate at the office or agency specified in the notice of final
distribution to Certificateholders.
Definitive Certificates will be freely transferable and exchangeable at
the office of the Trustee upon compliance with the requirements set forth in the
Basic Agreement and the applicable Trust Supplements. No service charge will be
imposed for any registration of transfer or exchange, but payment of a sum
sufficient to cover any tax or other governmental charge shall be required.
<PAGE>
Payments and Distributions
Subject to the effect of any cross-subordination provisions set forth
in the Prospectus Supplement for a series of Certificates, payments of
principal, premium, if any, and interest with respect to the Equipment Notes
held in each Trust will be distributed by the Trustee, upon receipt, to
Certificateholders of such Trust on the dates and in the currency specified in
the applicable Prospectus Supplement, except in certain cases when some or all
of such Equipment Notes are in default as described in the applicable Prospectus
Supplement. Payments of principal of, and interest on, the unpaid principal
amount of the Equipment Notes held in each Trust will be scheduled to be
received by the Trustee on the dates specified in the applicable Prospectus
Supplement (such scheduled payments of interest and principal on the Equipment
Notes to the Trustee are herein referred to as "Scheduled Payments", and the
dates specified in the applicable Prospectus Supplement for distribution of
Scheduled Payments to the Trustee are herein referred to as "Regular
Distribution Dates"). See "Description of the Equipment Notes--General". Subject
to the effect of any cross-subordination provisions set forth in the Prospectus
Supplement for a series of Certificates, each Certificateholder of each Trust
will be entitled to receive a pro rata share of any distribution in respect of
Scheduled Payments of principal and interest made on the Equipment Notes held in
the Trust.
Payments of principal, premium, if any, and interest received by the
Trustee on account of the early redemption, if any, of the Equipment Notes
relating to one or more Aircraft held in a Trust, and payments, other than
Scheduled Payments received on a Regular Distribution Date or within five days
thereafter, received by the Trustee following default in respect of Equipment
Notes held in a Trust relating to one or more Aircraft ("Special Payments") will
be distributed on the date determined as described in the applicable Prospectus
Supplement (a "Special Distribution Date") except that, if specified in the
applicable Prospectus Supplement, payments received by the Trustee following
default in respect of the Equipment Notes on a Regular Distribution Date as a
result of a drawing under any liquidity facility, as described in the applicable
Prospectus Supplement (each, a "Liquidity Facility"), provided for the benefit
of the specified Certificateholders shall be distributed on such Regular
Distribution Date to such Certificateholders. The Trustee will mail notice to
the Certificateholders of record of the applicable Trust stating any such
anticipated Special Distribution Date.
Pool Factors
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Balance" for each Trust or for the Certificates issued by any Trust
indicates, as of any date, the original aggregate face amount of the
Certificates of such Trust less the aggregate amount of all payments made in
respect of the Certificates of such Trust other than payments made in respect of
interest or premium thereon or reimbursement of any costs and expenses in
connection therewith. The Pool Balance for each Trust as of any Regular
Distribution Date or Special Distribution Date shall be computed after giving
effect to the payment of principal, if any, on the Equipment Notes or other
Trust Property held in such Trust and the distribution thereof to be made on
that date.
Unless otherwise described in the applicable Prospectus Supplement, the
"Pool Factor" for each Trust as of any Regular Distribution Date or Special
Distribution Date is the quotient (rounded to the seventh decimal place)
computed by dividing (i) the Pool Balance by (ii) the aggregate original face
amount of the Certificates of such Trust. The Pool Factor for each Trust as of
<PAGE>
any Regular Distribution Date or Special Distribution Date shall be computed
after giving effect to the payment of principal, if any, on the Equipment Notes
or other Trust Property held in such Trust and distribution thereof to be made
on that date. The Pool Factor for each Trust will initially be 1.0000000;
thereafter, the Pool Factor for each Trust will decline as described herein to
reflect reductions in the Pool Balance of such Trust. The amount of a
Certificateholder's pro rata share of the Pool Balance of a Trust can be
determined by multiplying the original denomination of the holder's Certificate
of such Trust by the Pool Factor for such Trust as of the applicable Regular
Distribution Date or Special Distribution Date. The Pool Factor and the Pool
Balance for each Trust will be mailed to Certificateholders of such Trust on
each Regular Distribution Date and Special Distribution Date.
Unless there has been an early redemption, a purchase of an issue of
Equipment Notes by the related Owner Trustee after an Indenture Default (as
defined below), a default in the payment of principal in respect of one or more
issues of the Equipment Notes held in a Trust or certain actions have been taken
following a default thereon, as described in the applicable Prospectus
Supplement, the Pool Factor for the Trusts will decline in proportion to the
scheduled repayments of principal on the Equipment Notes held in such Trust as
described in the applicable Prospectus Supplement. In the event of such
redemption, purchase or default, the Pool Factor and the Pool Balance of each
Trust so affected will be recomputed after giving effect thereto and notice
thereof will be mailed to the Certificateholders of such Trust. Each Trust will
have a separate Pool Factor.
Reports to Certificateholders
On each Regular Distribution Date and Special Distribution Date, the
Trustee will include with each distribution of a Scheduled Payment or Special
Payment to Certificateholders of the related Trust a statement, giving effect to
such distribution to be made on such Regular Distribution Date or Special
Distribution Date, setting forth the following information (per $1,000 aggregate
principal amount of Certificate for such Trust, as to (i) and (ii) below):
(i) the amount of such distribution allocable to principal and
the amount allocable to premium, if any;
(ii) the amount of such distribution allocable to interest; and
(iii) the Pool Balance and the Pool Factor for such Trust.
So long as the Certificates are registered in the name of DTC or its
nominee, on the record date prior to each Regular Distribution Date and Special
Distribution Date, the Trustee will request from DTC a securities position
listing setting forth the names of all DTC Participants reflected on DTC's books
as holding interests in the Certificates on such record date. On each Regular
Distribution Date and Special Distribution Date, the applicable Trustee will
mail to each such DTC Participant the statement described above and will make
available additional copies as requested by such DTC Participant for forwarding
to Certificate Owners.
In addition, after the end of each calendar year, the Trustee will
prepare for each Certificateholder of each Trust at any time during the
preceding calendar year a report containing the sum of the amounts determined
pursuant to clauses (i) and (ii) above with respect to the Trust for such
<PAGE>
calendar year or, in the event such person was a Certificateholder during only a
portion of such calendar year, for the applicable portion of such calendar year,
and such other items as are readily available to the Trustee and which a
Certificateholder shall reasonably request as necessary for the purpose of such
Certificateholder's preparation of its federal income tax returns. Such report
and such other items shall be prepared on the basis of information supplied to
the Trustee by the DTC Participants and shall be delivered by the Trustee to
such DTC Participants to be available for forwarding by such DTC Participants to
Certificate Owners in the manner described above.
At such time, if any, as the Certificates are issued in the form of
Definitive Certificates, the Trustee will prepare and deliver the information
described above to each Certificateholder of record of each Trust as the name
and period of ownership of such Certificateholder appears on the records of the
registrar of the Certificates.
Voting of Equipment Notes
Subject to the effect of any cross-subordination provisions set forth
in the related Prospectus Supplement, the Trustee, as holder of the Equipment
Notes held in each Trust, has the right to vote and give consents and waivers
with respect to such Equipment Notes under the Related Indentures. The Basic
Agreement and related Trust Supplement set forth (i) the circumstances in which
the Trustee may direct any action or cast any vote as the holder of the
Equipment Notes held in the applicable Trust at its own discretion, (ii) the
circumstances in which the Trustee shall seek instructions from the
Certificateholders of such Trust and (iii) the percentage of Certificateholders
required to direct the Trustee to take any such action. If specified in the
related Prospectus Supplement, the right of a Trustee to vote and give consents
and waivers with respect to the Equipment Notes held in the related Trust may,
in the circumstances set forth in an intercreditor agreement to be executed by
such Trustee, be exercisable by another person specified in such Prospectus
Supplement.
Events of Default and Certain Rights upon an Event of Default
The Prospectus Supplement will specify the events of default under the
Basic Agreement (an "Event of Default") and the Related Indentures (an
"Indenture Default"). The Indenture Defaults in the case of Leased Aircraft
Indentures will include events of default under the related Leases (a "Lease
Event of Default"). With respect to any Equipment Notes which are supported by a
Liquidity Facility, the Indenture Defaults or Events of Default may include
events of default under such Liquidity Facility. Unless otherwise provided in a
Prospectus Supplement, all of the Equipment Notes issued under the same
Indenture will relate to a specific Aircraft and there will be no
cross-collateralization or cross-default provisions in the Indentures, and
events resulting in an Indenture Default under any particular Indenture will not
necessarily result in an Indenture Default occurring under any other Indenture.
If an Indenture Default occurs in fewer than all of the Indentures,
notwithstanding the treatment of Equipment Notes issued under any Indenture
under which an Indenture Default has occurred, payments of principal and
interest on the Equipment Notes issued pursuant to Indentures with respect to
which an Indenture Default has not occurred will continue to be made as
originally scheduled. As described below under "--Cross-Subordination Issues", a
Prospectus Supplement may provide the terms of any cross-subordination
provisions among Certificateholders of separate Trusts. If such provisions are
<PAGE>
so provided, payments made pursuant to a Related Indenture under which an
Indenture Default has not occurred may be distributed first to the holders of
the Certificates issued under the Trust which holds the most senior Equipment
Notes issued under all Related Indentures.
The ability of the applicable Owner Trustee or Owner Participant under
a Leased Aircraft Indenture to cure Indenture Defaults, including an Indenture
Default that results from the occurrence of a Lease Event of Default under the
related Lease, will be described in the Prospectus Supplement. Unless otherwise
provided in a Prospectus Supplement, with respect to any Certificates or
Equipment Notes entitled to the benefits of a Liquidity Facility, a drawing
under any such Liquidity Facility for the purpose of making a payment of
interest as a result of the failure by Continental to have made a corresponding
payment will not cure an Indenture Default related to such failure by
Continental.
The Prospectus Supplement related to a series of Certificates will
describe the circumstances under which the Trustee of the related Trust may vote
some or all of the Equipment Notes held in such Trust. Such Prospectus
Supplement also will set forth the percentage of Certificateholders of such
Trust entitled to direct the Trustee to take any action with respect to such
Equipment Notes. If the Equipment Notes outstanding under an Indenture are held
by more than one Trust, then the ability of the Certificateholders issued with
respect to any one Trust to cause the Loan Trustee with respect to any Equipment
Notes held in such Trust to accelerate the Equipment Notes under the applicable
Indenture or to direct the exercise of remedies by the Loan Trustee under the
applicable Indenture will depend, in part, upon the proportion of the aggregate
principal amount of the Equipment Notes outstanding under such Indenture and
held in such Trust to the aggregate principal amount of all Equipment Notes
outstanding under such Indenture. In addition, if cross-subordination provisions
are applicable to any series of Certificates, then the ability of the
Certificateholders of any one Trust holding Equipment Notes issued under an
Indenture to cause the Loan Trustee with respect to any Equipment Notes held in
such Trust to accelerate the Equipment Notes under such Indenture or to direct
the exercise of remedies by the Loan Trustee under such Indenture will depend,
in part, upon the Class of Equipment Notes held in such Trust. If the Equipment
Notes outstanding under an Indenture are held by more than one Trust, then each
Trust will hold Equipment Notes with different terms from the Equipment Notes
held in the other Trusts and therefore the Certificateholders of each Trust may
have divergent or conflicting interests from those of the Certificateholders of
the other Trusts holding Equipment Notes issued under the same Indenture. In
addition, so long as the same institution acts as Trustee of each Trust, in the
absence of instructions from the Certificateholders of any such Trust, the
Trustee for such Trust could for the same reason be faced with a potential
conflict of interest upon an Indenture Default. In such event, the Trustee has
indicated that it would resign as Trustee of one or all such Trusts, and a
successor trustee would be appointed in accordance with the terms of the Basic
Agreement.
The Prospectus Supplement for a series of Certificates will specify
whether and under what circumstances the Trustee may sell for cash to any person
all or part of the Equipment Notes held in the related Trust. Any proceeds
received by the Trustee upon any such sale shall be deposited in an account
established by the Trustee for the benefit of the Certificateholders of such
Trust for the deposit of such Special Payments (the "Special Payments Account")
and shall be distributed to the Certificateholders of such Trust on a Special
<PAGE>
Distribution Date. The market for Equipment Notes in default may be very
limited, and there can be no assurance that they could be sold for a reasonable
price. Furthermore, so long as the same institution acts as Trustee of multiple
Trusts, it may be faced with a conflict in deciding from which Trust to sell
Equipment Notes to available buyers. If the Trustee sells any such Equipment
Notes with respect to which an Indenture Default exists for less than their
outstanding principal amount, the Certificateholders of such Trust will receive
a smaller amount of principal distributions than anticipated and will not have
any claim for the shortfall against Continental, any Owner Trustee, Owner
Participant or the Trustee. Furthermore, neither the Trustee nor the
Certificateholders of such Trust could take any action with respect to any
remaining Equipment Notes held in such Trust so long as no Indenture Defaults
exist with respect thereto.
Any amount, other than Scheduled Payments received on a Regular
Distribution Date, distributed to the Trustee of any Trust by the Loan Trustee
under any Indenture on account of the Equipment Notes held in such Trust
following an Indenture Default under such Indenture shall be deposited in the
Special Payments Account for such Trust and shall be distributed to the
Certificateholders of such Trust on a Special Distribution Date. In addition, if
a Prospectus Supplement provides that the applicable Owner Trustee may, under
circumstances specified therein, redeem or purchase the outstanding Equipment
Notes issued under the applicable Indenture, the price paid by such Owner
Trustee to the Trustee of any Trust for the Equipment Notes issued under such
Indenture and held in such Trust shall be deposited in the Special Payments
Account for such Trust and shall be distributed to the Certificateholders of
such Trust on a Special Distribution Date.
Any funds representing payments received with respect to any Equipment
Notes in default held in a Trust, or the proceeds from the sale by the Trustee
of any such Equipment Notes, held by the Trustee in the Special Payments Account
for such Trust shall, to the extent practicable, be invested and reinvested by
the Trustee in Permitted Investments pending the distribution of such funds on a
Special Distribution Date. "Permitted Investments" will be specified in the
related Prospectus Supplement.
The Basic Agreement provides that the Trustee of each Trust shall,
within 90 days after the occurrence of a default in respect of such Trust, give
to the Certificateholders of such Trust notice, transmitted by mail, of all
uncured or unwaived defaults with respect to such Trust known to it, provided
that, except in the case of default in the payment of principal, premium, if
any, or interest on any of the Equipment Notes held in such Trust, the Trustee
shall be protected in withholding such notice if it in good faith determines
that the withholding of such notice is in the interests of such
Certificateholders. The term "default" as used in this paragraph only means the
occurrence of an Indenture Default with respect to Equipment Notes held in a
Trust as described above, except that in determining whether any such Indenture
Default has occurred, any grace period or notice in connection therewith shall
be disregarded.
The Basic Agreement contains a provision entitling the Trustee of each
Trust, subject to the duty of the Trustee during a default to act with the
required standard of care, to be offered reasonable security or indemnity by the
Certificateholders of such Trust before proceeding to exercise any right or
power under the Basic Agreement at the request of such Certificateholders.
The Prospectus Supplement for a series of Certificates will specify the
percentage of Certificateholders entitled to waive, or to instruct the Trustee
to waive, any past Event of Default with respect to such Trust and its
consequences. The Prospectus Supplement for a series of Certificates also will
specify the percentage of Certificateholders (and whether of such Trust or of
any other Trust holding Equipment Notes issued under Related Indentures)
<PAGE>
entitled to waive, or to instruct the Trustee or the Loan Trustee to waive, any
past Indenture Default under any Related Indenture and thereby annul any
direction given with respect thereto.
Merger, Consolidation and Transfer of Assets
Continental will be prohibited from consolidating with or merging into
any other corporation or transferring substantially all of its assets as an
entirety to any other corporation unless (i) the surviving, successor or
transferee corporation shall (a) be validly existing under the laws of the
United States or any state thereof, (b) be a "citizen of the United States" (as
defined in Title 49 of the United States Code relating to aviation (the
"Transportation Code")) holding an air carrier operating certificate issued by
the Secretary of Transportation pursuant to Chapter 447 of Title 49, United
States Code, if, and so long as, such status is a condition of entitlement to
the benefits of Section 1110 of the Bankruptcy Code, and (c) expressly assume
all of the obligations of Continental contained in the Basic Agreement and any
Trust Supplement, the Note Purchase Agreements, any Owned Aircraft Indentures
and, with respect to the Leased Aircraft, the applicable Participation
Agreements and Leases, and any other operative documents; and (ii) Continental
shall have delivered a certificate and an opinion or opinions of counsel
indicating that such transaction, in effect, complies with such conditions.
Modifications of the Basic Agreement
The Basic Agreement contains provisions permitting Continental and the
Trustee of each Trust to enter into a supplemental trust agreement, without the
consent of the holders of any of the Certificates of such Trust, including among
other things (i) to provide for the formation of such Trust and the issuance of
a series of Certificates, (ii) to evidence the succession of another corporation
to Continental and the assumption by such corporation of Continental's
obligations under the Basic Agreement and the applicable Trust Supplement, (iii)
to add to the covenants of Continental for the benefit of holders of such
Certificates, or to surrender any right or power in the Basic Agreement
conferred upon Continental, (iv) to cure any ambiguity or correct or supplement
any defective or inconsistent provision of the Basic Agreement or the applicable
Trust Supplement or to make any other provisions with respect to matters or
questions arising thereunder, provided such action shall not materially
adversely affect the interests of the holders of such Certificates, or to cure
any ambiguity or correct any mistake or (without limitation of the foregoing),
to give effect or provide for replacement liquidity facilities, if applicable to
such Certificates, (v) to comply with any requirement of the Commission, any
applicable law, rules or regulations of any exchange or quotation system on
which any Certificates may be listed or of any regulatory body, (vi) to modify,
eliminate or add to the provisions of the Basic Agreement to the extent as shall
be necessary to continue the qualification of the Basic Agreement (including any
supplemental agreement) under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act") and to add to the Basic Agreement such other provisions
as may be expressly permitted by the Trust Indenture Act, (vii) to provide for a
successor Trustee or to add to or change any provision of the Basic Agreement as
shall be necessary to facilitate the administration of the Trusts thereunder by
more than one Trustee and (viii) to make any other amendments or modifications
to the Basic Agreement, provided such amendments or modifications shall only
apply to Certificates issued thereafter; provided, in the case of clauses (i)
through (viii) above, that no such supplemental trust agreement shall adversely
affect the status of any Trust as a grantor trust for U.S. federal income tax
purposes.
<PAGE>
The Basic Agreement also contains provisions permitting Continental and
the Trustee of each Trust, with the consent of the Certificateholders of such
Trust evidencing fractional undivided interests aggregating not less than a
majority in interest of such Trust, and, with respect to any Leased Aircraft,
with the consent of the applicable Owner Trustee (such consent not to be
unreasonably withheld), to execute supplemental trust agreements adding any
provisions to or changing or eliminating any of the provisions of the Basic
Agreement, to the extent relating to such Trust, and the applicable Trust
Supplement, or modifying the rights of the Certificateholders, except that no
such supplemental trust agreement may, without the consent of each
Certificateholder so affected thereby, (a) reduce in any manner the amount of,
or delay the timing of, any receipt by the Trustee of payments on the Equipment
Notes held in such Trust or distributions in respect of any Certificate related
to such Trust, or change the date or place of any payment in respect of any
Certificate, or make distributions payable in coin or currency other than that
provided for in such Certificates, or impair the right of any Certificateholder
of such Trust to institute suit for the enforcement of any such payment when
due, (b) permit the disposition of any Equipment Note held in such Trust, except
as provided in the Basic Agreement or the applicable Trust Supplement, or
otherwise deprive any Certificateholder of the benefit of the ownership of the
applicable Equipment Notes, (c) reduce the percentage of the aggregate
fractional undivided interests of the Trust provided for in the Basic Agreement
or the applicable Trust Supplement, the consent of the holders of which is
required for any such supplemental trust agreement or for any waiver provided
for in the Basic Agreement or such Trust Supplement, (d) modify any of the
provisions relating to the rights of the Certificateholders in respect of the
waiver of events of default or receipt of payment, (e) alter the priority of
distributions specified in any applicable intercreditor agreement in a manner
materially adverse to the interests of the Certificateholders of such Trust or
(f) adversely affect the status of any Trust as a grantor trust for U.S. federal
income tax purposes.
Modification of Indenture and Related Agreements
The Prospectus Supplement will specify the Trustee's obligations in the
event that the Trustee, as the holder of any Equipment Notes held in a Trust,
receives a request for its consent to any amendment, modification or waiver
under the Indenture or other documents relating to such Equipment Notes
(including any Lease with respect to Leased Aircraft Notes) or any Liquidity
Facility.
Cross-Subordination Issues
The Equipment Notes issued under an Indenture may be held in more than
one Trust and one Trust may hold Equipment Notes issued under more than one
Related Indenture. Unless otherwise provided in a Prospectus Supplement, only
Equipment Notes of the same Class may be held in the same Trust. In such event,
payments made on account of a subordinate class of Certificates issued under a
Prospectus Supplement may, under circumstances described in such Prospectus
Supplement, be subordinated to the prior payment of all amounts owing to
Certificateholders of a Trust which holds senior Equipment Notes issued under
any Related Indentures. The Prospectus Supplement related to an issuance of
Certificates will describe any such "cross-subordination" provisions and any
related terms, including the percentage of Certificateholders under any Trust
which are permitted to (i) grant waivers of defaults under any Related
Indenture, (ii) consent to the amendment or modification of any Related
Indenture or (iii) direct the exercise of remedial actions under any Related
Indenture.
<PAGE>
Termination of the Trusts
The obligations of Continental and the Trustee with respect to a Trust
will terminate upon the distribution to Certificateholders of such Trust of all
amounts required to be distributed to them pursuant to the Basic Agreement and
the applicable Trust Supplement and the disposition of all property held in such
Trust. In no event shall any Trust continue beyond 110 years following the date
of the execution of the applicable Trust Supplement (or such other final
expiration date as may be specified in such Trust Supplement). The Trustee will
send to each Certificateholder of record of such Trust notice of the termination
of such Trust, the amount of the proposed final payment and the proposed date
for the distribution of such final payment for such Trust. The final
distribution to any Certificateholder of such Trust will be made only upon
surrender of such Certificateholder's Certificates at the office or agency of
the Trustee specified in such notice of termination.
Delayed Purchase of Equipment Notes
In the event that, on the issuance date of any Certificates, all of the
proceeds from the sale of such Certificates are not used to purchase the
Equipment Notes contemplated to be held in the related Trust, such Equipment
Notes may be purchased by the Trustee at any time on or prior to the date
specified in the applicable Prospectus Supplement. In such event, the proceeds
from the sale of such Certificates not used to purchase Equipment Notes will be
held under an arrangement described in the applicable Prospectus Supplement
pending the purchase of the Equipment Notes not so purchased. The arrangements
with respect to the payment of interest on funds so held will be described in
the applicable Prospectus Supplement. If any such proceeds are not subsequently
utilized to purchase Equipment Notes by the relevant date specified in the
applicable Prospectus Supplement, such proceeds will be returned to the holders
of such Certificates.
Liquidity Facility
The related Prospectus Supplement may provide that one or more payments
of interest on the Certificates of one or more series will be supported by a
Liquidity Facility issued by an institution identified in the related Prospectus
Supplement. The provider of such Liquidity Facility may have a claim senior to
the Certificateholders' as specified in the related Prospectus Supplement.
The Trustee
Unless otherwise provided in the Prospectus Supplement for any series
of Certificates, the Trustee for each series of Certificates will be Wilmington
Trust Company. With certain exceptions, the Trustee makes no representations as
to the validity or sufficiency of the Basic Agreement, the Trust Supplements,
the Certificates, the Equipment Notes, the Indentures, the Leases or other
related documents. The Trustee shall not be liable with respect to any series of
Certificates for any action taken or omitted to be taken by it in good faith in
accordance with the direction of the holders of a majority in principal amount
of outstanding Certificates of such series issued under the Basic Agreement.
Subject to such provisions, such Trustee shall be under no obligation to
exercise any of its rights or powers under the Basic Agreement at the request of
any holders of Certificates issued thereunder unless they shall have offered to
the Trustee indemnity satisfactory to it. The Basic Agreement provides that the
Trustee in its individual or any other capacity may acquire and hold
<PAGE>
Certificates issued thereunder and, subject to certain conditions, may otherwise
deal with Continental and, with respect to the Leased Aircraft, with any Owner
Trustee with the same rights it would have if it were not the Trustee.
The Trustee may resign with respect to any or all of the Trusts at any
time, in which event Continental will be obligated to appoint a successor
trustee. If the Trustee ceases to be eligible to continue as Trustee with
respect to a Trust or becomes incapable of acting as Trustee or becomes
insolvent, Continental may remove such Trustee, or any Certificateholder of such
Trust for at least six months may, on behalf of himself and all others similarly
situated, petition any court of competent jurisdiction for the removal of such
Trustee and the appointment of a successor trustee. Any resignation or removal
of the Trustee with respect to a Trust and appointment of a successor trustee
for such Trust does not become effective until acceptance of the appointment by
the successor trustee. Pursuant to such resignation and successor trustee
provisions, it is possible that a different trustee could be appointed to act as
the successor trustee with respect to each Trust. All references in this
Prospectus to the Trustee should be read to take into account the possibility
that the Trusts could have different successor trustees in the event of such a
resignation or removal.
The Basic Agreement provides that Continental will pay the Trustee's
fees and expenses and indemnify the Trustee against certain liabilities.
DESCRIPTION OF THE EQUIPMENT NOTES
The statements made under this caption are summaries and reference is
made to the entire Prospectus and detailed information appearing in the
applicable Prospectus Supplement. Where no distinction is made between the
Leased Aircraft Notes and the Owned Aircraft Notes or between their respective
Indentures, such statements refer to any Equipment Notes and any Indenture.
To the extent that any provision in any Prospectus Supplement is
inconsistent with any provision in this summary, the provision of such
Prospectus Supplement will control.
General
Equipment Notes will be issued under Indentures either (a) between the
related Owner Trustee of a trust for the benefit of the Owner Participant who is
the beneficial owner of the related Aircraft, and the related Loan Trustee, or
(b) between Continental and the related Loan Trustee. The Equipment Notes issued
pursuant to clause (a) of the preceding sentence will be nonrecourse obligations
of the applicable Owner Trust. Each Equipment Note will be authenticated under
an Indenture by the Loan Trustee. All Equipment Notes issued under the same
Indenture will relate to, and be secured by, one or more Aircraft identified and
described in the related Prospectus Supplement and which, in the case of
Equipment Notes issued as described in such clause (a), are leased to
Continental pursuant to a Lease between the Owner Trustee under the applicable
Owner Trust and Continental or, in the case of Equipment Notes issued as
described in clause (b), owned by Continental.
With respect to each Leased Aircraft, the related Owner Trustee has
acquired or will acquire such Aircraft, will grant a security interest in such
Aircraft to the related Loan Trustee as security for the payments of the related
Leased Aircraft Notes, and has leased or will lease such Aircraft to Continental
<PAGE>
pursuant to the related Lease which has been or will be assigned to the related
Loan Trustee. Pursuant to each such Lease, Continental will be obligated to make
or cause to be made rental and other payments to the related Loan Trustee on
behalf of the related Owner Trustee.
Principal and Interest Payments
Interest received by the Trustee on the Equipment Notes held in each
Trust will be passed through to the Certificateholders of such Trust on the
dates and at the rate per annum set forth in the applicable Prospectus
Supplement until the final distribution for such Trust. Principal payments
received by the Trustee on the Equipment Notes held in each Trust will be passed
through to the Certificateholders of such Trust in scheduled amounts on the
dates set forth in the applicable Prospectus Supplement until the final
distribution date for such Trust.
If any date scheduled for any payment of principal, premium, if any, or
interest with respect to the Equipment Notes is not a Business Day, such payment
will be made on the next succeeding Business Day without any additional
interest.
Redemption
The applicable Prospectus Supplement will describe the circumstances,
whether voluntary or involuntary, under which the Equipment Notes may be
redeemed or purchased prior to the stated maturity date thereof, in whole or in
part, the premium, if any, applicable upon certain redemptions or purchases and
other terms applying to the redemptions or purchases of such Equipment Notes.
Security
The Leased Aircraft Notes will be secured by (i) an assignment by the
related Owner Trustee to the related Loan Trustee of such Owner Trustee's rights
(except for certain rights, including those described below) under the Lease or
Leases with respect to the related Aircraft, including the right to receive
payments of rent thereunder, and (ii) a mortgage granted to such Loan Trustee in
such Aircraft, subject to the rights of Continental under such Lease or Leases.
Under the terms of each Lease, Continental's obligations in respect of each
Leased Aircraft will be those of a lessee under a "net lease". Accordingly,
Continental will be obligated, among other things and at its expense, to cause
each Leased Aircraft to be duly registered, to pay all costs of operating such
Aircraft and to maintain, service, repair and overhaul (or cause to be
maintained, serviced, repaired and overhauled) such Aircraft. With respect to
the Leased Aircraft, the assignment by the related Owner Trustee to the related
Loan Trustee of its rights under the related Lease will exclude, among other
things, rights of such Owner Trustee and the related Owner Participant relating
to indemnification by Continental for certain matters, insurance proceeds
payable to such Owner Trustee in its individual capacity and to such Owner
Participant under liability insurance maintained by Continental pursuant to such
Lease or by such Owner Trustee or such Owner Participant, insurance proceeds
payable to such Owner Trustee in its individual capacity or to such Owner
Participant under certain casualty insurance maintained by such Owner Trustee or
such Owner Participant pursuant to such Lease and any rights of such Owner
Participant or such Owner Trustee to enforce payment of the foregoing amounts
and their respective rights to the proceeds of the foregoing.
The Owned Aircraft Notes will be secured by a mortgage granted to the
related Loan Trustee of all of Continental's right, title and interest in and to
such Owned Aircraft. Under the terms of each Owned Aircraft Indenture,
Continental will be obligated, among other things and at its expense, to cause
<PAGE>
each Owned Aircraft to be duly registered, to pay all costs of operating such
Aircraft and to maintain, service, repair and overhaul (or cause to be
maintained, serviced, repaired and overhauled) such Aircraft.
The Prospectus Supplement will describe the required insurance coverage
with respect to the Aircraft.
Continental will be required, except under certain circumstances, to
keep each Aircraft registered under the Transportation Code, and to record the
Indenture and the Lease, if applicable, among other documents, with respect to
each Aircraft under the Transportation Code. Such recordation of the Indenture,
the Lease, if applicable, and other documents with respect to each Aircraft will
give the related Loan Trustee a perfected security interest in the related
Aircraft whenever it is located in the United States or any of its territories
and possessions; the Convention on the International Recognition of Rights in
Aircraft (the "Convention") provides that such security will also be recognized,
with certain limited exceptions, in those jurisdictions that have ratified or
adhere to the Convention. Continental will have the right, subject to certain
conditions, at its own expense to register each Aircraft in countries other than
the United States. Each Aircraft may also be operated by Continental or under
lease, sublease or interchange arrangements in countries that are not parties to
the Convention. The extent to which the related Loan Trustee's security interest
would be recognized in an Aircraft located in a country that is not a party to
the Convention, and the extent to which such security interest would be
recognized in a jurisdiction adhering to the Convention if the Aircraft is
registered in a jurisdiction not a party to the Convention, is uncertain.
Moreover, in the case of an Indenture Default, the ability of the related Loan
Trustee to realize upon its security interest in an Aircraft could be adversely
affected as a legal or practical matter if such Aircraft were registered or
located outside the United States.
Unless otherwise specified in the applicable Prospectus Supplement, the
Equipment Notes will not be cross-collateralized and consequently the Equipment
Notes issued in respect of any one Aircraft will not be secured by any other
Aircraft or, in the case of Leased Aircraft Notes, the Lease related thereto.
Unless and until an Indenture Default with respect to a Leased Aircraft has
occurred and is continuing, the related Loan Trustee may exercise only limited
rights of the related Owner Trustee under the related Lease.
Funds, if any, held from time to time by the Loan Trustee with respect
to any Aircraft, prior to the distribution thereof, will be invested and
reinvested by such Loan Trustee. Such investment and reinvestment will be at the
direction of Continental (except, with respect to a Leased Aircraft, in the case
of a Lease Event of Default under the applicable Lease or, with respect to an
Owned Aircraft, in the case of an Indenture Default under the applicable
Indenture), in certain investments described in the applicable Indenture. The
net amount of any loss resulting from any such investments will be paid by
Continental.
Section 1110 of the U.S. Bankruptcy Code provides in relevant part that
the right of lessors, conditional vendors and holders of security interests with
respect to "equipment" (as defined in Section 1110 of the U.S. Bankruptcy Code)
to take possession of such equipment in compliance with the provisions of a
lease, conditional sale contract or security agreement, as the case may be, is
not affected by (a) the automatic stay provision of the U.S. Bankruptcy Code,
which provision enjoins repossessions by creditors for the duration of the
reorganization period, (b) the provision of the U.S. Bankruptcy Code allowing
the trustee in reorganization to use property of the debtor during the
<PAGE>
reorganization period, (c) Section 1129 of the U.S. Bankruptcy Code (which
governs the confirmation of plans of reorganization in Chapter 11 cases) and (d)
any power of the bankruptcy court to enjoin a repossession. Section 1110
provides, however, in relevant part that the right of a lessor, conditional
vendor or holder of a security interest to take possession of an aircraft in the
event of an event of default may not be exercised for 60 days following the date
of commencement of the reorganization proceedings (unless specifically permitted
by the bankruptcy court) and may not be exercised at all if, within such 60-day
period (or such longer period consented to by the lessor, conditional vendor or
holder of a security interest), the trustee in reorganization agrees to perform
the debtor's obligations that become due on or after such date and cures all
existing defaults (other than defaults resulting solely from the financial
condition, bankruptcy, insolvency or reorganization of the debtor). "Equipment"
is defined in Section 1110 of the U.S. Bankruptcy Code, in part, as an aircraft,
aircraft engine, propeller, appliance, or spare part (as defined in Section
40102 of Title 49 of the U.S. Code) that is subject to a security interest
granted by, leased to, or conditionally sold to a debtor that is a citizen of
the United States (as defined in Section 40102 of Title 49 of the U.S. Code)
holding an air carrier operating certificate issued by the Secretary of
Transportation pursuant to chapter 447 of Title 49 of the U.S. Code for aircraft
capable of carrying 10 or more individuals or 6,000 pounds of more of cargo
(subject to certain limitations in the case of equipment first placed in service
on or prior to October 22, 1994).
In connection with any issuance of Certificates under this Prospectus
and the applicable Prospectus Supplement, it is a condition to the Trustee's
obligation to purchase Equipment Notes with respect to each Aircraft that
outside counsel to Continental provide its opinion to such Trustee that (i) if
such Aircraft is a Leased Aircraft, the Owner Trustee, as lessor under the Lease
for such Aircraft, and the Loan Trustee, as assignee of such Owner Trustee's
rights under such Lease pursuant to the applicable Indenture, will be entitled
to the benefits of Section 1110 of the U.S. Bankruptcy Code with respect to the
airframe and engines comprising such Aircraft or (ii) if such Aircraft is an
Owned Aircraft, the Loan Trustee will be entitled to the benefits of Section
1110 with respect to the airframe and engines comprising such Owned Aircraft, in
each case so long as Continental continues to be a "citizen of the United
States" as defined in Section 40102 of Title 49 of the U.S. Code holding an air
carrier operating certificate issued by the Secretary of Transportation pursuant
to Chapter 447 of Title 49 of the U.S. Code for aircraft capable of carrying 10
or more individuals or 6,000 pounds or more of cargo. Such opinion will not
address the possible replacement of an Aircraft after an Event of Loss (as
defined in the Indenture) in the future.
Ranking of Equipment Notes
Some of the Equipment Notes related to one or more Aircraft, as
described in the related Prospectus Supplement, may be subordinated and junior
in right of payment to other Equipment Notes related to the same Aircraft. The
terms of such subordination, if any, will be described in the related Prospectus
Supplement.
Payments and Limitation of Liability
Each Leased Aircraft will be leased by the related Owner Trustee to
Continental for a term commencing on the delivery date thereof to such Owner
Trustee and expiring on a date not earlier than the latest maturity date of the
<PAGE>
related Leased Aircraft Notes, unless previously terminated as permitted by the
terms of the related Lease. The basic rent and certain other payments under each
such Lease will be payable by Continental and will be assigned by the related
Owner Trustee under the applicable Indenture to the related Loan Trustee to
provide the funds necessary to pay principal of, premium, if any, and interest
due from such Owner Trustee on the Leased Aircraft Notes issued under such
Indenture. In certain cases, the basic rent payments under a Lease may be
adjusted, but each Lease will provide that under no circumstances will rent
payments by Continental be less than the scheduled payments on the related
Leased Aircraft Notes. The balance of any basic rent payment under each Lease,
after payment of amounts due on the Leased Aircraft Notes issued under the
Indenture corresponding to such Lease, will be paid over to the applicable Owner
Trustee. Continental's obligation to pay rent and to cause other payments to be
made under each Lease will be general obligations of Continental.
With respect to the Leased Aircraft Notes, except in certain
circumstances involving Continental's purchase of a Leased Aircraft and the
assumption of the Leased Aircraft Notes related thereto, the Leased Aircraft
Notes will not be obligations of, or guaranteed by, Continental. With respect to
the Leased Aircraft Notes, none of the Owner Trustees, the Owner Participants or
the Loan Trustees shall be personally liable to any holder of such Leased
Aircraft Notes for amounts payable under such Leased Aircraft Notes, or, except
as provided in the Indentures relating thereto in the case of the Owner Trustees
and the Loan Trustees, for any liability under such Indentures. Except in the
circumstances referred to above, all amounts payable under any Leased Aircraft
Notes (other than payments made in connection with an optional redemption or
purchase by the related Owner Trustee or the related Owner Participant) will be
made only from (i) the assets subject to the lien of the applicable Indenture
with respect to such Aircraft or the income and proceeds received by the related
Loan Trustee therefrom (including rent payable by Continental under the related
Lease) or (ii) if so provided in the related Prospectus Supplement, the
applicable Liquidity Facility.
With respect to the Leased Aircraft Notes, except as otherwise provided
in the applicable Indenture, no Owner Trustee shall be personally liable for any
amount payable or for any statements, representations, warranties, agreements or
obligations under any such Indenture or under such Leased Aircraft Notes except
for its own willful misconduct or gross negligence. None of the Owner
Participants shall have any duty or responsibility under the Leased Aircraft
Indentures or under such Leased Aircraft Notes to the related Loan Trustee or to
any holder of any such Leased Aircraft Note.
Continental's obligations under each Owned Aircraft Indenture and under
the Owned Aircraft Notes will be general obligations of Continental.
Defeasance of the Indentures and the Equipment Notes in Certain Circumstances
Unless otherwise specified in the applicable Prospectus Supplement, the
applicable Indenture provides that the obligations of the related Loan Trustee
and, with respect to any Leased Aircraft Notes, the related Owner Trustee or,
with respect to any Owned Aircraft Notes, Continental under the applicable
Indenture shall be deemed to have been discharged and paid in full (except for
certain obligations, including the obligations to register the transfer or
exchange of Equipment Notes, to replace stolen, lost, destroyed or mutilated
Equipment Notes and to maintain paying agencies and hold money for payment in
trust) on the 91st day after the date of irrevocable deposit with the related
Loan Trustee of money or certain obligations of the United States or any agency
<PAGE>
or instrumentality thereof the payment of which is backed by the full faith and
credit of the United States which, through the payment of principal and interest
in respect thereof in accordance with their terms, will provide money in an
aggregate amount sufficient to pay when due (including as a consequence of
redemption in respect of which notice is given on or prior to the date of such
deposit) principal of, premium, if any, and interest on all Equipment Notes
issued thereunder in accordance with the terms of such Indenture. Such discharge
may occur only if, among other things, there has been published by the Internal
Revenue Service a ruling to the effect that holders of such Equipment Notes will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit, defeasance and discharge and will be subject to federal income
tax on the same amount and in the same manner and at the same time as would have
been the case if such deposit, defeasance and discharge had not occurred.
Upon such defeasance, or upon payment in full of the principal of,
premium, if any, and interest on all Equipment Notes issued under any Indenture
on the maturity date therefor or deposit with the applicable Loan Trustee of
money sufficient therefor no earlier than one year prior to the date of such
maturity, the holders of such Equipment Notes will have no beneficial interest
in or other rights with respect to the related Aircraft or other assets subject
to the lien of such Indenture and such lien shall terminate.
Assumption of Obligations by Continental
Unless otherwise specified in the applicable Prospectus Supplement with
respect to Leased Aircraft, upon the exercise by Continental of any purchase
options it may have under the related Lease prior to the end of the term of such
Lease, Continental may assume on a full recourse basis all of the obligations of
the Owner Trustee (other than its obligations in its individual capacity) under
the Indenture with respect to such Aircraft, including the obligations to make
payments in respect of the related Leased Aircraft Notes. In such event, certain
relevant provisions of the related Lease, including (among others) provisions
relating to maintenance, possession and use of the related Aircraft, liens,
insurance and events of default will be incorporated into such Indenture, and
the Leased Aircraft Notes issued under such Indenture will not be redeemed and
will continue to be secured by such Aircraft.
Liquidity Facility
The related Prospectus Supplement may provide that one or more payments
of interest on the related Equipment Notes of one or more series or
distributions made by the Trustee of the related Trust will be supported by a
Liquidity Facility issued by an institution identified in the related Prospectus
Supplement. Unless otherwise provided in the related Prospectus Supplement, the
provider of the Liquidity Facility will have a senior claim upon the assets
securing the Equipment Notes.
Intercreditor Issues
Equipment Notes may be issued in different Classes, which means that
the Equipment Notes may have different payment priorities even though they are
issued by the same borrower and relate to the same Aircraft. In such event, the
related Prospectus Supplement will describe the priority of distributions among
such Equipment Notes (and any Liquidity Facilities therefor), the ability of any
<PAGE>
Class to exercise and/or enforce any or all remedies with respect to the related
Aircraft (and, if the Equipment Notes are Leased Aircraft Notes, the Lease
related thereto) and certain other intercreditor terms and provisions.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
General
Unless otherwise indicated in the applicable Prospectus Supplement,
the following summary describes the principal U.S. federal income tax
consequences to Certificateholders of the purchase, ownership and disposition of
the Certificates offered hereby and in the opinion of Hughes Hubbard & Reed LLP,
special tax counsel to Continental ("Tax Counsel"), is accurate in all material
respects with respect to the matters discussed therein. Except as otherwise
specified, the summary is addressed to beneficial owners of Certificates ("U.S.
Certificateholders") that are citizens or residents of the United States,
corporations, partnerships or other entities created or organized in or under
the laws of the United States or any state therein, estates the income of which
is subject to U.S. federal income taxation regardless of its source, or trusts
that meet the following two tests: (a) a U.S. court is able to exercise primary
supervision over the administration of the trust and (b) one or more U.S.
fiduciaries have the authority to control all substantial decisions of the trust
("U.S. Persons") that will hold the Certificates as capital assets. This summary
does not address the tax treatment of U.S. Certificateholders that may be
subject to special tax rules, such as banks, insurance companies, dealers in
securities or commodities, tax-exempt entities, holders that will hold
Certificates as part of a straddle or holders that have a "functional currency"
other than the U.S. Dollar, nor does it address the tax treatment of U.S.
Certificateholders that do not acquire Certificates at the initial offering
price as part of the initial offering thereof. The summary does not purport to
be a comprehensive description of all of the tax considerations that may be
relevant to a decision to purchase Certificates. This summary does not describe
any tax consequences arising under the laws of any state, locality or taxing
jurisdiction other than the United States.
The summary is based upon the tax laws and practice of the United
States as in effect on the date of this Prospectus, as well as judicial and
administrative interpretations thereof (in final or proposed form) available on
or before such date. All of the foregoing are subject to change, which change
could apply retroactively. Prospective investors should note that no rulings
have been sought from the Internal Revenue Service (the "IRS") with respect to
the federal income tax consequences, discussed below, and no assurances can be
given that the IRS will not take contrary positions. The Trusts are not
indemnified for any federal income taxes that may be imposed upon them, and the
imposition of any such taxes on a Trust could result in a reduction in the
amounts available for distribution to the Certificateholders of such Trust.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE,
OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
Tax Status of the Trusts
In the opinion of Tax Counsel, each Trust will be classified as a
grantor trust for U.S. federal income tax purposes.
Taxation of Certificateholders Generally
A U.S. Certificateholder will be treated as owning its pro rata
undivided interest in each of the Equipment Notes and any other property held by
the related Trust. Accordingly, each U.S. Certificateholder's share of interest
paid on the Equipment Notes will be taxable as ordinary income, as it is paid or
<PAGE>
accrued, in accordance with such U.S. Certificateholder's method of accounting
for U.S. federal income tax purposes, and a U.S. Certificateholder's share of
premium, if any, paid on redemption of an Equipment Note will be treated as
capital gain. In the event that a Trust is supported by a Liquidity Facility,
any amounts received by the Trust under the Liquidity Facility with respect to
unpaid interest will be treated for U.S. federal income tax purposes as having
the same characteristics as the payments they replace. If Continental were to
assume an Owner Trust's obligations under Leased Aircraft Notes, such assumption
would be treated for federal income tax purposes as a taxable exchange of such
Leased Aircraft Notes, resulting in recognition of gain or loss by the U.S.
Certificateholder.
Each U.S. Certificateholder will be entitled to deduct, consistent with
its method of accounting, its pro rata share of fees and expenses paid or
incurred by the corresponding Trust as provided in Section 162 or 212 of the
Internal Revenue Code of 1986, as amended (the "Code"). Certain fees and
expenses, including fees paid to the Trustee and the provider of the Liquidity
Facility (if applicable), will be borne by parties other than the
Certificateholders. It is possible that such fees and expenses will be treated
as constructively received by the Trust, in which event a U.S. Certificateholder
will be required to include in income and will be entitled to deduct its pro
rata share of such fees and expenses. If a U.S. Certificateholder is an
individual, estate or trust, the deduction for such holder's share of such fees
or expenses will be allowed only to the extent that all of such holder's
miscellaneous itemized deductions, including such holder's share of such fees
and expenses, exceed 2% of such holder's adjusted gross income. In addition, in
the case of U.S. Certificateholders who are individuals, certain otherwise
allowable itemized deductions will be subject generally to additional
limitations on itemized deductions under applicable provisions of the Code.
Effect of Subordination of Subordinated Certificateholders
In the event that any Trust (such Trust being a "Subordinated Trust"
and the related Certificates being "Subordinated Certificates") is subordinated
in right of payment to any other Trust and the Subordinated Trust receives less
than the full amount of the receipts of interest, principal or premium paid with
respect to the Equipment Notes held by it (any shortfall in such receipts being
the "Shortfall Amounts") because of the subordination of such Trust, the
corresponding owners of beneficial interests in the Subordinated Certificates
(the "Subordinated Certificateholders") would probably be treated for federal
income tax purposes as if they had (1) received as distributions their full
share of such receipts, (2) paid over to the relevant preferred class of
Certificateholders an amount equal to their share of such Shortfall Amount, and
(3) retained the right to reimbursement of such amounts to the extent of future
amounts payable to such Subordinated Certificateholders with respect to such
Shortfall Amount.
Under this analysis, (1) Subordinated Certificateholders incurring a
Shortfall Amount would be required to include as current income any interest or
other income of the corresponding Subordinated Trust that was a component of the
Shortfall Amount, even though such amount was in fact paid to the relevant
preferred class of Certificateholders, (2) a loss would only be allowed to such
Subordinated Certificateholders when their right to receive reimbursement of
such Shortfall Amount becomes worthless (i.e., when it becomes clear that funds
will not be available from any source to reimburse such loss), and (3)
<PAGE>
reimbursement of such Shortfall Amount prior to such a claim of worthlessness
would not be taxable income to Subordinated Certificateholders because such
amount was previously included in income. These results should not significantly
affect the inclusion of income for Subordinated Certificateholders on the
accrual method of accounting, but could accelerate inclusion of income to
Subordinated Certificateholders on the cash method of accounting by, in effect,
placing them on the accrual method.
Original Issue Discount
The Equipment Notes may be issued with original issue discount ("OID").
The Prospectus Supplement will state whether any Equipment Notes to be held by
the related Trust will be issued with OID. Generally, a holder of a debt
instrument issued with OID that is not de minimis must include such OID in
income for federal income tax purposes as it accrues, in advance of the receipt
of the cash attributable to such income, under a method that takes into account
the compounding of interest.
Sale or Other Disposition of the Certificates
Upon the sale, exchange or other disposition of a Certificate, a U.S.
Certificateholder generally will recognize capital gain or loss equal to the
difference between the amount realized on the disposition (other than any amount
attributable to accrued interest which will be taxable as ordinary income) and
the U.S. Certificateholder's adjusted tax basis in the related Equipment Notes
and any other property held by the corresponding Trust. Any gain or loss will be
long-term capital gain or loss to the extent attributable to property held by
the Trust for more than one year. In the case of individuals, estates, and
trusts, the maximum rate of tax on long-term capital gains generally is 20%.
Foreign Certificateholders
Subject to the discussion of backup withholding below, payments of
principal and interest on the Equipment Notes to, or on behalf of, any
beneficial owner of a Certificate that is not a U.S. Person (a "Non-U.S.
Certificateholder") will not be subject to U.S. federal withholding tax;
provided, in the case of interest, that (i) such Non-U.S. Certificateholder does
not actually or constructively own 10% or more of the total combined voting
power of all classes of the stock of an Owner Participant or Continental, (ii)
such Non-U.S. Certificateholder is not a controlled foreign corporation for U.S.
tax purposes that is related to an Owner Participant or Continental and (iii)
either (A) the Non-U.S. Certificateholder certifies, under penalties of perjury,
that it is not a U.S. Person and provides its name and address or (B) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") and holds the Certificate certifies, under penalties of
perjury, that such statement has been received from the Non-U.S.
Certificateholder by it or by another financial institution and furnishes the
payor with a copy thereof. The IRS issued final regulations on October 6, 1997,
which modify the certification requirements described in clause (iii) with
respect to certain payments after December 31, 1999.
Any capital gain realized upon the sale, exchange, retirement or other
disposition of a Certificate or upon receipt of premium paid on an Equipment
Note by a Non-U.S. Certificateholder will not be subject to U.S. federal income
<PAGE>
or withholding taxes if (i) such gain is not effectively connected with a U.S.
trade or business of the Non-U.S. Certificateholder and (ii) in the case of an
individual, such Non-U.S. Certificateholder is not present in the United States
for 183 days or more in the taxable year of the sale, exchange, retirement or
other disposition or receipt.
Backup Withholding
Payments made on the Certificates and proceeds from the sale of
Certificates will not be subject to a backup withholding tax of 31% unless, in
general, the Certificateholder fails to comply with certain reporting procedures
or otherwise fails to establish an exemption from such tax under applicable
provisions of the Code.
ERISA CONSIDERATIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Certificates may, subject to certain legal restrictions, be purchased and held
by an employee benefit plan (a "Plan") subject to Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or an individual
retirement account or an employee benefit plan subject to section 4975 of the
Code. A fiduciary of a Plan must determine that the purchase and holding of a
Certificate is consistent with its fiduciary duties under ERISA and does not
result in a non-exempt prohibited transaction as defined in section 406 of ERISA
or section 4975 of the Code. Employee benefit plans which are governmental plans
(as defined in section 3(32) of ERISA) and certain church plans (as defined in
section 3(33) of ERISA) are not subject to Title I of ERISA or section 4975 of
the Code. The Certificates may, subject to certain legal restrictions, be
purchased and held by such plans.
PLAN OF DISTRIBUTION
Certificates may be sold to one or more underwriters for public
offering and sale by them or to investors or other persons directly or through
one or more dealers or agents. Any such underwriter, dealer or agent involved in
the offer and sale of the Certificates will be named in an applicable Prospectus
Supplement.
The Certificates may be sold at a fixed price or prices, which may be
changed, or from time to time at market prices prevailing at the time of sale,
at prices related to such prevailing market prices or at negotiated prices.
Dealer trading may take place in certain of the Certificates, including
Certificates not listed on any securities exchange. Continental does not intend
to apply for listing of the Certificates on a national securities exchange.
Continental also may, from time to time, authorize underwriters acting as
Continental's agents to offer and sell the Certificates upon the terms and
conditions as shall be set forth in any Prospectus Supplement. In connection
with the sale of Certificates, underwriters may be deemed to have received
compensation from Continental in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Certificates for
whom they may act as agent. Underwriters may sell Certificates to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions or commissions from the underwriters and/or commissions (which may
be changed from time to time) from the purchasers for whom they may act as
agent.
If a dealer is used directly by Continental in the sale of Certificates
in respect of which this Prospectus is delivered, such Certificates will be sold
to the dealer, as principal. The dealer may then resell such Certificates to the
<PAGE>
public at varying prices to be determined by such dealer at the time of resale.
Any such dealer and the terms of any such sale will be set forth in the
Prospectus Supplement relating thereto.
Certificates may be offered and sold through agents designated by
Continental from time to time. Any such agent involved in the offer or sale of
the Certificates in respect of which this Prospectus is delivered will be named
in, and any commissions payable by Continental to such agent will be set forth
in, the applicable Prospectus Supplement. Unless otherwise indicated in the
applicable Prospectus Supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
Offers to purchase Certificates may be solicited directly by
Continental and sales thereof may be made by Continental directly to
institutional investors or others who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales will be described in the Prospectus Supplement relating
thereto. Except as set forth in the applicable Prospectus Supplement, no
director, officer or employee of Continental will solicit or receive a
commission in connection with direct sales by Continental of the Certificates,
although such persons may respond to inquiries by potential purchasers and
perform ministerial and clerical work in connection with any such direct sales.
Any underwriting compensation paid by Continental to underwriters,
dealers or agents in connection with the offering of Certificates, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in an applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Certificates may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Certificates may be deemed to
be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements with
Continental, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act, and to
reimbursement by Continental for certain expenses.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, Continental and its subsidiaries in the ordinary course of
business.
If so indicated in an applicable Prospectus Supplement and subject to
existing market conditions, Continental will authorize dealers acting as
Continental's agents to solicit offers by certain institutions to purchase
Certificates at the public offering price set forth in such Prospectus
Supplement pursuant to Delayed Delivery Contracts ("Contracts") providing for
payment and delivery on the date or dates stated in such Prospectus Supplement.
Each Contract will be for an amount not less than, and the aggregate principal
amount of Certificates sold pursuant to Contracts shall not be less nor more
than, the respective amounts stated in such Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of Continental. Contracts will not be subject to any conditions
except the purchase by an institution of the Certificates covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject. A
commission indicated in the applicable Prospectus Supplement will be granted to
<PAGE>
underwriters and agents soliciting purchases of Certificates pursuant to
Contracts accepted by Continental. Agents and underwriters will have no
responsibility in respect of the delivery or performance of Contracts.
If an underwriter or underwriters are utilized in the sale of any
Certificates, the applicable Prospectus Supplement will contain a statement as
to the intention, if any, of such underwriters at the date of such Prospectus
Supplement to make a market in the Certificates. No assurances can be given that
there will be a market for the Certificates.
The place and time of delivery for the Certificates in respect of which
this Prospectus is delivered will be set forth in the applicable Prospectus
Supplement.
LEGAL OPINIONS
Unless otherwise indicated in the applicable Prospectus Supplement, the
validity of the Certificates will be passed upon for Continental by Hughes
Hubbard & Reed LLP, New York, New York. Unless otherwise indicated in the
applicable Prospectus Supplement, Hughes Hubbard & Reed LLP will rely on the
opinion of counsel for the Trustee as to certain matters relating to the
authorization, execution and delivery of such Certificates by, and the valid and
binding effect thereof on, such Trustee.
EXPERTS
The consolidated financial statements (including financial statement
schedule) of Continental Airlines, Inc. appearing in Continental Airlines,
Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1997, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon included therein and incorporated herein by reference. Such
consolidated financial statements are, and audited consolidated financial
statements to be included in subsequently filed documents will be, incorporated
herein by reference in reliance upon the reports of Ernst & Young LLP pertaining
to such consolidated financial statements (to the extent covered by consents
filed with the Commission) given upon the authority of such firm as experts in
accounting and auditing.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with this offering, other than
underwriting discounts and commissions, are:
Securities and Exchange Commission registration filing fee........ $737,500
Printing and engraving expenses................................... 400,000*
Trustee fees and expenses......................................... 25,000*
Accounting fees and expenses...................................... 100,000*
Rating Agency fees................................................ 85,000*
Legal fees and expenses........................................... 500,000*
Miscellaneous..................................................... 152,500*
-----------
Total..................................................... $2,000,000*
===========
-----------------
* Estimates.
Item 15. Indemnification of Directors and Officers.
The Company's Certificate of Incorporation and Bylaws provide that the
Company will indemnify each of its directors and officers to the full extent
permitted by the laws of the State of Delaware and may indemnify certain other
persons as authorized by the Delaware General Corporation Law (the "GCL").
Section 145 of the GCL provides as follows:
"(a) A corporation shall have power to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
(b) A corporation shall have power to indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
<PAGE>
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 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 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
<PAGE>
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 of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this section with respect to the
resulting or surviving corporation as 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 of the Company 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 Certificate of Incorporation of the Company provides 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
<PAGE>
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the GCL, as so amended".
The Company maintains directors' and officers' liability insurance.
ITEM 16. EXHIBITS
Reference is made to the Exhibit Index which immediately precedes the
exhibits filed with this Registration Statement, which is incorporated herein by
reference.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed 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.
<PAGE>
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
have been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities 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 such 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 and will be governed by the final
adjudication of such issue.
<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 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 21,
1998.
CONTINENTAL AIRLINES, INC.
By: /s/ Jeffery A. Smisek
-------------------------------
Jeffery A. Smisek
Executive Vice President, General
Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed by the following persons
in the capacities indicated on August 21, 1998.
Signature Title
--------- -----
* Chairman of the Board, Chief Executive
----------------------------------- Officer (Principal Executive Officer)
Gordon M. Bethune and Director
* Executive Vice President and Chief
- ----------------------------------- Financial Officer
Lawrence W. Kellner (Principal Financial Officer)
* Vice President and Controller
- ----------------------------------- (Principal Accounting Officer)
Michael P. Bonds
* Director
- -----------------------------------
Thomas J. Barrack, Jr.
- ----------------------------------- Director
Lloyd M. Bentsen, Jr.
* Director
- -----------------------------------
David Bonderman
* Director
- -----------------------------------
Gregory D. Brenneman
* Director
- -----------------------------------
Patrick Foley
* Director
- -----------------------------------
Douglas H. McCorkindale
<PAGE>
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
*By: /s/ Scott R. Peterson
-------------------------------
Scott R. Peterson
Attorney-in-fact
